Paysafe Limited

Hello, and welcome to the Paysafe fourth quarter and full year 2021 earnings call and webcast. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Kirsten Nielsen, Head of Investor Relations. Please go ahead.

Thank you, and good morning. Welcome to Paysafe's fourth quarter 2021 earnings conference call. With me today are Philip McHugh, Chief Executive Officer, and Izzy Dawood, Chief Financial Officer. Before we begin, a friendly reminder that this call will contain forward-looking statements and should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent periodic SEC reports. These statements reflect management's current beliefs, assumptions, and expectations and are subject to factors that could cause actual results to differ materially from those forward-looking statements. You should not place undue reliance on these statements. Forward-looking statements during this call speak only as of the date of this call, and we undertake no obligation to update them. Today's presentation also contains information that will constitute non-GAAP financial measures under SEC rules. You can find additional information about these non-GAAP measures and reconciliations to the most directly comparable GAAP financial measures in today's press release and in the appendix of this presentation, which are available in the investor relations section of our website. With that, I'll turn the call over to Philip.

Thanks, Kirsten, and thanks, everyone, for joining. I'll begin with an update on the business and then turn the call over to Izzy to review the financial results and guidance. Starting with a few key messages, our fourth quarter revenue of $372 million and adjusted EBITDA of $105.5 million both exceeded the high end of our revised guidance range for the quarter. The turnaround of our digital wallet business is well underway, with the team taking decisive action to improve the core wallet, reduce costs, and deliver on our growth opportunities. I'll share more on this in a moment, but we're seeing good signs of early progress. Across our broader digital commerce strategy, we're winning exciting deals with our new partnership with Binance, initially launching a newly developed white label wallet solution. In iGaming, we launched in new states, including New York, and announced new partnerships, including Hard Rock and Bollies. Overall, our digital commerce pipeline continues to grow and reflect merchants plugging into Paysafe to access full end-to-end solutions across card processing, digital wallets, e-cash, and real-time banking. So more and more, we are selling our solutions as a single competitive offering. In our U.S. acquiring business, we continue to see solid growth in the U.S. S&B market, and our direct marketing vertical is recovering in line with our expectations. On our cost savings program, we delivered $40 million in savings in 2021, ahead of our initial target of $30 million, and have plans for incremental savings in 2022. Lastly, on our third quarter earnings call, we provided a preliminary outlook for 2022 based on the headwinds we were seeing in Europe, coupled with our expectations for a reset of our digital wallet business. Based on our progress to date and current expectations, we are confident in maintaining that outlook. Turning to digital wallets on slide four. On our last earnings call, we unpacked the market headwinds and challenges in digital wallets and the actions we were taking to reposition the business for long-term success. First, we said the core wallet needs to be more competitive in terms of customer user experience, in terms of pricing of mature markets. Second, the digital wallet business had become too complex over time, and we needed to refocus on our core product features and right size of division. Finally, we talked about midterm initiatives to strengthen our relationships with our top merchants and to deliver on the bigger growth opportunities in front of us. Our team acted quickly, making tough decisions, and the results are starting to show. Starting with the short-term initiatives, our actions to optimize pricing and improve user experience are delivering some positive early data points. particularly in regions where we have implemented changes. Across 19 targeted countries in Europe, we saw monthly bank deposits increase more than 50%, and total deposits increased more than 10% by implementing the changes from October to February. Additionally, we completed a right-sizing of the organization in Q4, improving our cost position and focusing the organization on our core products. Turning to the midterm priorities, two main things to highlight here. First, in North America, our Skrill digital wallet continues to progress with strong proof points, including volumes tripling from Q3 to Q4. And now we're ready to drive increased awareness for the launch of a marketing campaign with Barstool Sports, one of the biggest U.S. sports betting focused and social content producers in the world. Second, we continue to expand our crypto presence, where in addition to our new partnership with Binance, we have a strong pipeline of other crypto platforms as our unique combination of card processing, open banking, wallet pay-in, pay-out capabilities continue to generate excitement with new and existing clients. To summarize, we're making strong progress in the turnaround of digital wallets. We're winning very competitive deals and remain very excited about the business. Our expectations for 2022 as a transitional year remain largely the same, with the actions we are taking now enabling us to absorb market risks in Europe. We'll continue to keep you posted and updated on our progress. Now turning to slide five, I'll now take a moment to highlight our differentiated offering and why we win in digital commerce. First is ease of connectivity through a single API. Basically, we're easy to plug into. Second is more ways to pay in addition to traditional card processing. We have a scaled global gateway. We provide powerful pay-in and pay-out capabilities through our digital wallets. We digitize cash, and we offer real-time bank payment rails, along with 100-plus APMs. Third, we have very deep risk and regulatory management capabilities, along with deep bank relationships, which help us to service, specialize, and demanding verticals. Lastly, we are focused on specific industries, including iGaming, crypto, digital goods, financial services, and travel. This combination of our single API and multiple payment types, risk management and industry focus is a combination we're really focused on in terms of driving growth going forward. So let's bring this to life on the next slide. We've been very active in crypto, and now we're starting to work with crypto exchanges in a more holistic way. More importantly, we see the combination of crypto, NFTs, and the fast-emerging Web 3.0 as a major trend, unleashing a new generation of digital entrepreneurs as well as creating new ways for people to buy and sell in a virtual environment. PaySafe is uniquely positioned to support the full end-to-end product needs, demanding growth requirements, and complex risk and regulatory challenges in the space. We're excited to partner with Binance, the largest crypto exchange in the world, to help their business grow in the right way, leveraging the depth and breadth of our payment offering. We're starting off with an embedded finance solution in Europe and the U.K., where Binance is leveraging our wallet platform effectively as a white-label wallet, allowing pay-in and pay-out capabilities with their own app, real-time banking, and the ability to plug into other payment types. This will be phased rollout on a country-by-country basis. We're taking a steady approach, but we're excited about the long-term potential and expansion of services, which should develop into a large relationship over time. Additionally, we're seeing strong interest from other cryptocurrency exchanges, as well as large e-commerce organizations. So we really like the emerging pipeline. Again, it's a great example of what our teams can do when we bring our products together as a single solution. Turn to another key vertical for Paysafe North America iGaming. In 2021, we saw strong growth in North America, including 58% volume growth year-on-year, driven by expansion in new states and continued growth in existing states. We are now live in 21 out of 22 legal jurisdictions across the U.S. that allow some form of iGaming, including all seven states that enacted legislations during 2021. In 2022, we're off to a strong start, having launched in New York with four operators, Caesars, DraftKings, PointsBet, and WinBet. We also went live in Oregon with DraftKings and in Louisiana with multiple operators. In addition to expanding our relationship with existing clients, we announced new customer wins strengthening our position as a leader in North America iGaming payments. Last week, we announced a multi-state partnership with Bollies, starting off in Arizona and New Jersey, with plans to expand into more states over time. We also announced a new partnership with Hard Rock Digital to support its iGaming and sports betting brands with payment solutions in New Jersey, which is a really nice competitive takeaway. We're excited about the breadth of PaySafe solutions, that we can offer HardRock both in existing and future markets. Turning to Canada, Ontario will launch its long-awaited iGaming market for private operators on April 4th. With a population of 15 million, Ontario will be the fifth largest North American jurisdiction. We look forward to launching in Ontario where we've signed multiple deals with Tier 1 operators, building on 10 years of market leadership with the provincial lotteries, delivering the full stack of processing, and local APMs with market-leading acceptance rates. Lastly, as I mentioned earlier, we continue to advance our Skrill wallet revamp in the U.S. and are very happy with early results. Although the initial baseline remains small, volumes are growing very fast. We are seeing repeat VIP users. We now represent a material share of the cashier with some of our pilot customers. As a next step in our expansion, we have signed an exciting deal with Barstool Sports to promote the Skrill brand in the U.S., utilizing a variety of Barstool's most popular media assets. We're excited to be a unique payments partner with Barstool and see great synergies between their incredible customer base and the Skrill value proposition to make sports betting fun and engaging. Now turning to U.S. acquiring on slide eight, we continue to see solid growth in the U.S. S&B market, including 20% year-on-year revenue growth in the fourth quarter and 15% growth compared to 2019. PaySafe is a scaled US small and medium business player, serving approximately 200,000 merchants with a strong mix of card-present and card-not-present solutions. We focus on a single platform for onboarding with multiple processing options, enabled by multiple sales channels, including direct internal sales, ISO partnerships, and ISV integrations. The team has done a great job executing against their plan, focused on automation and self-service capabilities, cost management, and very strong customer service. Lastly, our direct marketing vertical is recovering in line with our expectations, and we continue to be uniquely positioned to service the market with a strong capability set. Now turning to slide nine, we've delivered very well against our cost program, taking out more than $40 million of repeatable costs in 2021, and we're targeting an additional $20 million in 2022. We made a lot of progress last year consolidating our tech platforms, migrating to cloud, upgrading our bank relationships, and further improving our risk management capabilities. We will continue to benefit from these upgrades in 2022 while also delivering our new cost opportunities. On our recent acquisitions, we are well on track with integrations. As an example, in the fourth quarter, we completed our product integration with Pago Efectivo and are currently live in Latin America with about 20 of Paysafe's global clients So the team is executing at a fast pace there. Safety Pay closed at the end of January, which is about a month later than we planned for, but our product integration plans are well underway, including our global real-time banking initiative. Overall, we remain enthusiastic about the interest we're seeing from both existing and prospective clients, particularly across iGaming and crypto. With that, I'll turn the call over to Izzy.