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Operator
Greetings and welcome to Paysafe's second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Kirsten Nielsen, Head of Investor Relations. Thank you. You may begin.
Kirsten Nielsen
Thank you and good morning. Welcome to Paysafe's second quarter 2022 earnings conference call. With me today are Bruce Lothers, 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 report. 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 reconciliation 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 Bruce.
Bruce Lothers
Great. Thanks, Kirsten. Good morning, everyone, and thank you for joining us today. It's been an extremely active first three months for me, meeting with hundreds of employees, customers, and shareholders. while I've traveled to all of the major offices around the world. Our team has been highly engaged, and we're already taking some initial steps to simplify and improve the company. On today's call, I'll start with an overview of the quarter, then I'll share my early observations on the state of Paysafe, and then I'll turn it over to Izzy to review the financial results and guidance. So with that, let's start on slide three. Our second quarter revenue of $379 million and adjusted EBITDA of $103 million were in line with our guidance range for the quarter, despite greater than expected FX headwinds. Growth continues to be led by our Americas region, driven by our safety pay and pago efectivo acquisitions and U.S. acquiring, which recorded double-digit revenue and EBITDA growth in Q2. At the same time, We are seeing progress across our key areas as we focus on improving our customers' experience and innovation. Recently, our team won Payment Innovation of the Year at the 2022 SBC Awards, recognizing our Squirrel Wallet as a game changer for US iGaming brands and their players, especially VIP customers. In addition, we continue to roll out user experience improvements in our wallet that are being positively received by our customers, such as our new dashboard, which allows customers to personalize their wallet experience. Solid expansion into Ontario's new private iGaming market, providing traditional and alternative payments through PaySafe's gateway, where our card approval rates are greater than 90%. and we are now live or onboarding with a total of 14 merchants in the province. We continue to see robust growth in the US regulated iGaming market and have processed more than 2 billion in gateway volumes in the first half of 2022. We are currently live in 22 states and look forward to the upcoming launches in several states and jurisdictions where recent legislation is passed. With Ohio being the most noteworthy, We also remain excited about our upcoming Skrill wallet integration with Penn National's Barstool Sports app, which is Skrill's first tier one operator in North America. During the second quarter, we held our largest merchant partner conference to date. These channel partners were great to meet and I received very positive feedback on our year over year operational improvements. So a lot of good progress in the quarter. As for the rest of the year, I want to state upfront that we'll be updating our 2022 outlook to align with our current expectations, which Izzy will walk you through in more detail. When we reiterated our outlook in May, we felt comfortable that we could absorb the anticipated impacts from the stronger dollar, the Russian Ukraine war, and the regulatory headwinds impacting the European gambling market. While we've been able to absorb those headwinds through the first half, We now have further FX pressure, as well as the added uncertainty related to macroeconomic environment, both in the US and Europe. In particular, gambling merchants are reporting a weaker consumer environment than Europe. Due to these factors, we believe it's prudent to revise our guidance. I'll touch on the actions we've taken already in my first 90 days in a minute, but I'm confident that the changes we're making over the next few months will set us up for growth in 2023. Moving to slide four. It's been over three months since I joined Paysafe, and I continue to feel excited by the potential I'm seeing in the company. I first want to thank the team for all of their feedback and engagement. which has been instrumental in the changes we have made and will make going forward. A particular highlight for me so far has been visiting our offices around the world and meeting our teams and clients in person to discuss the opportunities ahead. While we are still in the process of developing our future plan and priorities, we've made great strides, and today I'll share my initial views on Paysafe and the path forward. PaySafe has a unique position with both an acquiring and issuing construct. When I look at our revenue streams today, we're broadly focused on the right verticals, which have a large market opportunity and high growth rates. However, While we have many of our assets to power end-to-end payments for our target markets, we have a lot of opportunity to improve cross-selling and fully leverage our assets to monetize and better serve our merchant and consumer customers. With a strong history, marquee clients, and focus on improving in a couple areas, I believe we can be very competitive in these verticals as we move forward. Turning to slide five for a snapshot of revenue segmentation. While you look at the markets we serve, we can describe ourselves as largely entertainment-focused, which we broadly define as recreational or discretionary spend, such as iGaming, digital asset trading, video gaming, travel, retail, and hospitality. This comprises about 80% of our revenue today. And overall, we have a good geographical mix balanced across North America and Europe and with a small but fast-growing presence in Latin America. So when I think about our focus and who we are as a company, we power the safe movement of money or digital assets for the sector around the world. It's in our DNA as a company, and it's where we have great capabilities, attractive TAMs, and the right to win as long as we remain focused on helping our customers by delivering a holistic value proposition. Plainly, we need to act as one team with a common goal. Turning to slide six, this is how we look at our addressable markets today. This isn't particularly new for those of you who have been following Paysafe, but I think it's worth reiterating that we like where we play. We serve massive TAMs with attractive tailwinds over a long term, growing at double-digit rates. So, it's not a matter of repositioning Paysafe into entirely new verticals. We have plenty of runway to grow in our core markets today, but we must do a better job of executing product innovation and sales to drive growth within these verticals. With that backdrop, let's move to slide seven. PaySafe has a unique two-sided network that brings consumers and merchants together, with many products needed to power the end-to-end payments of entertainment. We have a scaled global offering which serves 250,000 merchants and 25 million consumers. Additionally, we have more than a million access points today. The challenge for our team is not only to improve the value proposition on each side of the network, but to focus on the synergy opportunities that bring the two sides together. I have had success in my past in locking value on these two-sided networks, and I believe those opportunities exist here as well. On to slide eight. Now I'll add some additional observations following my first 90 days here at Paysafe. I want to recognize that certain areas of the business have performed quite well. Across the Americas, we've seen strong growth from LATAM, US acquiring, as well as our regulated iGaming market. This region grew 18% in the first half of 22. Additionally, when we look across our top accounts, or roughly our top 800 merchants, we are generating healthy double-digit growth at the end of 2001. And we have the opportunity to do much more with those clients to help them drive their revenue. Lastly, Our average monthly users are also increasing, driven by growth in the Americas, fueled by our strategic acquisitions, which has more than offset the decline in users in Europe, which has faced challenges from the regulatory environment, as well as the Russian Ukraine war. We continue to see underlying improvements and positive trends in the funnel optimization, conversion rates, and pricing optimization in target markets. On the other hand, there are a few areas that frankly were not working well today. But this also represents a significant opportunity to drive improvement and ultimately future value for our stakeholders. First, despite the progress in recent years to drive platform consolidation, cloud migration and savings, the organization is still too complex and is operated in silos. Streamlining the business and improving operational efficiency will allow us to fund our sales and product innovation. The team has responded quickly and we have already made a number of organizational updates to simplify our structure and improve our go-to-market model. User experience is critical for our success and these changes will allow us to improve our focus on employee, consumer, and merchant experiences and all interactions with our products and our organization. Second, We have a lot of opportunity to enhance our product innovation. Bluntly, we have lost our way here. For example, PaySafe was truly a pioneer in the wallet industry, but our focus has been heavily weighted to the merchant side of the network and less so on the consumer side. What's now clear is we need to bring a balance to our product innovation. From a product side, we have a great opportunity to really help our customers in a time of dynamic change within the verticals as the world of entertainment moves to mixed reality. It is past time to return to our early entrepreneurial days, driving innovation to market, developing products that deliver great experience to our users, and helping our merchants grow. Finally, we will also rebuild a strong sales engine focused on existing customers, new account acquisition, and business development opportunities. These rebuilt organizations will get the full support of our business lines and operational teams, reducing the friction in doing business with us. We will be hiring additional talent in both of these functions as we move forward and establishing metrics for us to drive growth. Turning to slide nine. We are making several organizational changes to our leadership team and structure with a focus on driving better client experience and enabling our teams to efficiently go after sales and aligning product direction. At the same time, I've been recruiting new talent, and I'm very pleased to welcome Rob Gatto as Paysafe's Chief Revenue Officer. Rob brings decades of experience driving growth for both private and public businesses of all sizes. His commercial acumen and deep understanding of both market and customer needs will make him an invaluable member to the team as we transform our business. We will continue to add talent in the next couple of months. We have also centralized operations under Roy Astin, who's been appointed to the Chief Operating Officer role. This is a meaningful change and will be something we talk about further next quarter. Additionally, we're in the creation stage of a project that will drive significant operational efficiency. We're not ready to announce yet, but more to come on that next quarter. We also plan to provide additional metrics on the transformation and updates in terms of where we are. Importantly, we're putting in place an expanded and simplified wallets division as we bring together our digital wallets and e-cash capabilities into one team led by Chirag Patel to bring a unique customer-centric proposition to market. Afshin Yazdian has also taken a broader role leading our global merchant acquiring business. We view that we have tremendous opportunity with our merchant business as we look at our existing customer base and the potential for future growth. Turning to the path forward on slide 10, as you can see from the prior slides, I believe we are in position to take advantage of being in great verticals. We have many things working well, and now with a focus on just a couple of areas, returning to our roots of product innovation aligned on user experience and sales, we are excited about our future. Acting as one organization operationally will improve efficiency and allow us to reinvest for growth. I am convinced that we will return to growth in 2023. With that, I'll turn the call over to Izzy to discuss our results.
Squirrel Wallet
Thanks, Bruce. Let's start with slide 12 for a snapshot of our performance versus guidance. Revenue came into the high end of our guidance range, driven by strong growth from U.S. acquirements. while EBITDA was towards the lower end of the range, primarily reflecting business mix and currency. Moving to slide 13 for a summary of our Q2 results. Volume was $33.4 billion, an increase of 7% sequentially, and an increase of 3% year over year. Volume growth reflects continued strength in North America, where we saw strong growth from the U.S. SMB market, as well as continued momentum in the regulated iGaming market. In Europe, as expected, we saw continued weakness across iGaming, as well as softer activity in financial markets and crypto trading. As a reminder, volume does not include our embedded finance solution as a significant portion of the volume's exchange or peer-to-peer transactions, which are not revenue drivers. Therefore, we have excluded it as to not skew the overall take rate. Total revenue for the second quarter was $379 million, down 1% year-over-year. Excluding the impact from changes in foreign exchange rates, revenue increased 3% as growth from U.S. acquiring more than offset the decline in digital commerce. Compared to Q2 2021, the regulatory changes in Europe, the Russia-Ukraine conflict, and currency impacted revenue by roughly $35 to $40 million. So excluding these headwinds, revenue growth would have been roughly 8%. The recently acquired businesses are performing well and growing more than 30% year-to-date on a pro forma basis. Adjusted EBITDA for the quarter was 103 million, resulting in an adjusted EBITDA margin of 27%. The lower margin primarily reflects business mix. Lastly, free cash flow was 222 million on a 12-month basis, or 53% conversion, reflecting higher working capital outflows due to the lower utilization of bank guarantees and growth in LATAM, as well as higher CapEx spend and taxes paid. We currently expect a full-year free cash flow conversion to be around 60 percent, which is at the lower end of our targeted range. On slide 14 is a year-over-year walk for Q2 revenue by geography. As Bruce touched on earlier, our performance reflects the ongoing softness in European markets, while the rest of our regions continue to grow. In Q2, our results included an $18 million impact from a stronger dollar. Turning to slide 15, I'll briefly touch on our GAAP results. In Q2, we had a GAAP net loss of $631.5 million. Similar to Q1, our net loss was driven by an impairment of goodwill due to the sustained decline in our stock price and market capitalization, as well as current market and macroeconomic conditions. As a reminder, This is a non-cash charge, which has no impact on cash flow, liquidity, or our debt covenants. Beginning this quarter, we are introducing adjusted net income and adjusted EPS in our reporting, which aligns with our peers' reporting as well as feedback from the investment community. You can find additional information on these non-GAAP measures in the appendix of the presentation. Adjusted net income for Q2 was $37.5 million. compared to adjusted net income of $66.4 million in the prior year period. The change in adjusted net income was largely attributable to the same factors impacting adjusted EBITDA, as well as an increase in depreciation and amortization expense and higher interest expense, excluding amortization required intangibles and acceleration of deferred debt financing expense. Let's move to slide 16 for a discussion on the segment results, starting with digital commerce. 111.2 billion, a decline of 5% year-over-year. Revenue was 191.8 million, a decrease of 13% compared to the prior year, reflecting FX and soft iGaming activity in Europe, which we have also seen in the results from gambling operators who continue to report declines in the region through the first half. In addition, the impact from the Russia-Ukraine war and softer financial trading activity. Excluding these impacts from Germany, Netherlands, Russia, Ukraine, Revenue would have increased mid-single digits in constant currency. Lastly, as a reminder, the e-cash business faced a tougher comparison of year-over-year growth relative to the prior year, which benefited from COVID lockdowns in Europe. Adjusted EBITDA for the digital commerce segment was $71.7 million in the second quarter and down 16% on a constant currency basis, reflecting lower revenue, business mix, and SG&A from recent acquisitions. On slide 17, we will move to the U.S. acquiring segment. Overall, results in this segment reflect continued strength in the U.S. SMB market, recovery from direct marketing vertical, and operational efficiency. Q2 volume in U.S. acquiring was $22.1 billion, an increase of 8% year-on-year. Consistent with market trends, we've seen continued strong growth from verticals such as restaurants, retail, and petrol. Revenue for the second quarter was $187.2 million, an increase of 14% compared to the prior year. Adjusted EBITDA increased 30% to $53 million. Let's turn to slide 18 to look at our balance sheet and liquidity. Cash and cash equivalents were $244 million at quarter end. Net debt was $2.4 billion, and our net debt to LTM adjusted EBITDA ratio was 5.7 times. Our primary use of excess cash is to pay down our debt and start moving towards our target of 3.5 times adjusted EBITDA, targeting roughly $100 million of debt reduction annually. In Q2, we completed voluntary debt repayments and buybacks, totaling $22 million, and we continue to monitor pricing of both our term debt and notes, and we'll act opportunistically in the second half to take advantage of current trading levels. Let's move to slide 19. When providing our original guidance for 2022, we believe we had taken a conservative approach, factoring the potential for market and regulatory risk, particularly those related to our digital commerce business in Europe. When we reiterated the outlook in May, we felt confident that we could absorb the direct impacts from the Russia-Ukraine war, as well as a stronger dollar against the euro, which had then declined from our original guidance assumption of 1.17 to our revised assumption in May of 1.12. for the full year 2022. Between the Russia conflict and the stronger US dollar in the first half, we've absorbed 35 million in revenue impacts from those headwinds year over year. As we sit here today, we have additional FX pressure as well as uncertainty related to the macro environment and its impact on consumer spending in the US and internationally. Particularly, we're seeing negative signals from European gambling merchants reflecting a softer macro environment and an associated reduction in customers' rate of spend, in addition to the expected impacts from regulatory headwinds in markets like Germany and Netherlands. Looking ahead, we also expect FX parity versus the Euro for the second half, leading to a 1.05 exchange rate for a full year, which is a 10% decline versus our original expectation of 1.17, and a 5% decline from our expectation in May of roughly $40 million in revenue. For Q3, We expect revenue in the range of $350 to $365 million and adjusted EBITDA in the range of $90 to $95 million, reflecting a moderation of growth rate from U.S. acquiring, largely offset by a decline in digital commerce driven by adverse FX movements, in addition to economic uncertainty, including persistent inflation and its impact on consumer behavior in the second half of the year. Now turn to slide 20. For the full year, on a reported basis, we expect revenue between $1.47 billion and $1.49 billion, or roughly flat year over year. We expect U.S. acquiring revenue to grow roughly 10% for the full year. Digital commerce is now expected to be down high single digit, not adjusted for FX, or roughly flat on a constant currency basis. For the total company, adjusted EBITDA is expected to be between $400 million and $415 million, reflecting lower margins year over year, primarily driven by business mix. To summarize, while we continue to expect improvements in second half, our expectations are lower than our prior guidance, reflecting FX and macroeconomic uncertainty, which we expect to partly offset with the growth from our acquisition synergies and seasonal activity in Q4. Now, I'll turn the call back to Bruce for closing remarks.
Bruce Lothers
Great Thank you is the i'll conclude by reiterating that I continue to feel excited by the potential i'm seeing in the company. While we're facing an uncertain economic environment and have changes in the business to address i'm confident that the changes that we make over the next few months will set us up for growth in 2023 we're committed to keeping you updated on our progress. And we expect to share a financial and strategic update at our investor day in Q1 2023. With that, let's open the call for questions. Operator?
Operator
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for your questions. Our first questions come from the line of Jason Kupferberg with Bank of America. Please proceed with your questions.
Jason Kupferberg
Good morning, guys. Thanks for taking the question. Just on the new revenue guide for the year, obviously you highlighted European gaming and some of the emerging softness there. But does the new revenue guide assume softening trends and verticals outside of European gaming? And if so, if you can just detail that a little bit. Thanks.
Squirrel Wallet
Yeah, Jason, it's Izzy. Thanks for the question. No, it's predominantly European gaming because that's a majority of our digital commerce revenue. And we start seeing the weakness in late May into June. We're assuming it's because of just higher cost of fuel, higher cost of food. That's just causing slowdown discretionary spending. So it's predominantly what we see lower activity in the iGaming segment as a whole.
Jason Kupferberg
Okay. And then I was just curious on your interest expense expectations for the year, how those may be changing just given some of the floating rate that you have in your stack. And where would you tell us to expect leverage to end the year at? I think it ticked off a hair here in the second quarter, so just wanted to get a sense of where you think you'll be by the end of this year as you pursue the longer-term target. Thank you.
Squirrel Wallet
Yeah, Jason, I think it ends up in the 0.5556 range. We don't expect much of a change in interest expense because I think if you look at page 18, we're basically 100% hedged against a European rate change and 70% against USD. So, effectively, we're in a pretty good position there from an overall interest expense. Now, the base rate does increase. Again, we'll have a little impact, but not a meaningful change.
Jason Kupferberg
Okay. Terrific. Thank you for the comments.
Operator
Thank you. Our next questions come from the line of Darren Pella with Wolf Research. Please proceed with your questions.
Darren Pella
Hey, guys. Thanks. Bruce, I'd love to hear your perspectives after having now been there a few months. If you really look at the businesses that you're operating now, in terms of the medium to long-term opportunity, I know not to front-run the investor too much, but You know, what are your key takeaways in terms of what this business is versus what you maybe thought it was coming in, you know, after coming out a couple more months to look?
Bruce Lothers
Yeah, Darren, look, I would say, you know, coming in, I had a pretty good beat on what I was stepping into and what the company was doing. So, you know, over the first 90 days, it was really kind of going around, talking to customers, employees, trying to get an understanding of, where they were in the process. So it's quite simply a look at the business. We have a merchant acquiring business platform, and then we've got an issuing platform where we drive our wallet business out of. So as I look at that construct, I like those spaces. I think we're in very good verticals. I think we have some issues around product innovation and sales, which we can address. We've had a lot of success with that in the past, and so I think these things are things that we can get back on the right track. And so I feel very good, you know, 90 days in of I had a pretty good beat of what we did as a company. I feel like we've got a great brand to build off of and excited about. Our team, our employees are very passionate about what we do, so I feel very good about where we are.
Darren Pella
Thanks. Let me ask you a follow-up, which is a little bit of two parts. One of them is just when we're looking at the digital wallet business, that was a business that when we first looked at the story, we thought would be worth, grow quite a bit more and be potentially valuation-wise worth quite a bit more than it seems to be performing and trading at. and you're still seeing annual actives that are sequentially, you know, they're not really, I think they're down again. So when we think about what can cause an inflection there, I'd be curious to hear your view. And then really a bigger picture thought would be if there's anything in the business, maybe in the merchant acquiring business in the U.S. that should be separated out, given the potential valuation opportunity in some of those businesses. When looking at the different parts, could some of the parts really be worth more and something be done about that?
Bruce Lothers
Yes, let me take the first question just around wallet. You know, again, I think we had a pretty good understanding as I was coming into where wallet was and what the impacts were. So we obviously saw the Russian-Ukraine war having a significant impact on our revenue stream there. FX was having an impact on the revenue stream. And we also had some regulatory issues, most notably in Netherlands and Germany, which created some headwinds for the business on the European side. As I said in the prepared remarks, my assessment is that we became very much merchant-centric with our wallet. We weren't balanced in... our experience and focusing on the consumers that were using the product. So I think if we can bring a little more balance to our product innovation around that, we can, uh, we can get a pretty good run with the wallet part of our business. Um, uh, the second part of your question, uh, around some of the parts in the, in the valuation, I think, you know, where we are today, um, I think the board is very supportive of what we have as an organization and our ability to turn this around and get it to grow. And so I think that's what we're going to focus on is focusing on growing our business. We do see a lot of commonality between the verticals and the consumers that we have on the merchant side and the consumers we have on the wallet side. So I think there's a lot of opportunity there for us really exploit the synergy between those two-sided markets.
Operator
All right. Thank you. Our next questions come from the line of Josh Levin with Autonomous Research. Please proceed with your questions.
Josh Levin
Hi. Good morning. I have two questions. Bruce, you talked about the need to enhance product innovation and and rebuild a strong sales engine. How long do you think that will take to do?
Bruce Lothers
Yeah, Josh, thank you. Look, it's not going to happen in a quarter, but I think we'll be back in return to a solid growth rate in 23. So, you know, I think as we look at the back half of this year, we'll have a series of changes, but we'll come out of the year with a solid growth rate and looking to not to get too far ahead of ourselves, but to have 23 be a return to growth for the company. So I don't think it's a long-term problem.
Josh Levin
Okay. The second question regarding weakness in European gambling, you talked about it being macro. I know last year there was some increasing competition from account-to-account players. I guess Trustly was one of them. Is any of the weakness in Europe due to increasing competition or changes in the competitive landscape, or is it really entirely macro?
Squirrel Wallet
Hey, Josh or Tessie, I'll take that question. Yeah, what we see is macro. As a matter of fact, a couple of the gambling operators have come out, especially in Europe. You can probably read up on them. They're showing 30-plus percent declines in Q2 year-over-year. I mean, we also did decline, but not to that magnitude. And their point is just software weakness. Part of it regulatory-driven, but part of it also lower economic activity that impacts gambling capacity for the consumers. So from the best we can see and what we've read, what we've heard, what we've talked to, it's more a macro-driven event as opposed to anything from a pure competitive environment.
Josh Levin
Just one mini follow-up on that, if I might. You mentioned regulations. This is just sort of the residual effect of the regulations that went into effect last year? They're also part of what's going on?
Squirrel Wallet
Yeah, there are a couple of things. So clearly in Q2, we had the Netherlands and Germany overlapping items. But looking at the rest of the year, there was still a fair amount of uncertainty around Germany in terms of operators getting their licenses or relinquishing them. And the second one is more recent. We've talked about it, but where the UK white paper comes out on affordability as well. And as you know, both Germany and UK are relatively sizable markets.
Josh Levin
Thank you.
Squirrel Wallet
Thank you, Josh.
Operator
Thank you. Our next question has come from the line of Timothy Chiodo with Credit Suisse. Please proceed with your questions.
Timothy Chiodo
Good morning. Great. Thanks a lot for taking the question. Hey, good morning. On the U.S. acquiring business, so the volumes were up 8% in the quarter. I believe the prior guidance for the full year was for mid to high single digits, but with an aim towards more of the high single digits. Izzy, I believe in the prepared remarks you mentioned that maybe there's a little bit of a moderating of that expectation. Can you update us on what the expectations are for full year 2022 U.S. acquiring volumes?
Squirrel Wallet
Yeah, Tim, thanks for the question. Yeah, it's probably going to be in the high single digits still. You know, growth is moderating year on year.
Timothy Chiodo
We are being cautious around... Okay, so still in the high singles, so that would imply exiting the year, call it in the... Oh, go ahead, sorry. Please, go ahead.
Squirrel Wallet
Okay, from a revenue perspective, we should be around also at 10% full year on year growth as well.
Timothy Chiodo
Okay, thanks a lot, Izzy. I appreciate that. I just want to clarify that that would imply just call it a Q4 exit rate of maybe approaching the mid-single digits or so. Does that sound about right?
Squirrel Wallet
Yeah, mid-single digits, probably in the higher end of that mid-single digits, but yeah, that sounds right.
Timothy Chiodo
Okay, great. Thanks a lot. And then a final follow-up on the U.S. acquiring business. Granted, you've mentioned in the past that you're a large distributor of Clover. Is there any comment you can make around how the Clover business is doing and if that's gaining share within your mix of U.S. SMB volumes?
Bruce Lothers
Yeah. As far as the Clover business, I've listened to Frank's call just like everybody else. I think it sounded like he was doing pretty well. But from our perspective of reselling it, I don't see any – real changes in what we've had in Q2 versus what they had prior to. So there's not an increased demand or decrease in demand. It seems like it's a steady state for us.
Timothy Chiodo
Okay, excellent. Thank you for taking both of those questions.
Operator
Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next questions come from the line of Jamie Friedman with Susquehanna. Please proceed with your questions.
Jamie Friedman
Hi. Thank you. Good morning. Good morning. So, Bruce, in your prepared remarks, you commented on the general progress in the iGaming segment. You had some really good proof points there. I was wondering if you could elaborate on that Did you happen to give the growth rate in that segment this quarter? I think it was 40% last quarter.
Bruce Lothers
I don't believe we gave it in the prepared remarks. Izzy probably has the number.
Squirrel Wallet
Yeah, year on year we saw 25% volume growth in Q2 in our iGaming segment. If you go just regulate iGaming, it's probably close to 70%. It's a pretty strong volume growth year on year.
Jamie Friedman
Okay, got it. And then, you know, you mentioned the 22 states, Bruce, but I think that was the same as last quarter. It's always hard to track. I realize you have your, you're pretty disciplined on what you announced in that segment. But is there, you know, are we closer to the middle than the beginning? Or is there a lot more to do in terms of the footprint in the U.S.? ?
Bruce Lothers
Oh, I think we're still in the beginning of the game here in the U.S. on iGaming. So I think you've probably read Massachusetts just had a positive move with some legislation in the last week. You know, it's a priority for us is what I would say, and we expect to lead the U.S. in the iGaming market.
Jamie Friedman
Okay.
Bruce Lothers
I think the partner who leads that for us is doing a great job.
Jamie Friedman
Yeah. I appreciate these bridges that you guys are doing, by the way, in the PowerPoints. These are helpful. But I wanted to ask about the assumption in digital on page 20. Did I hear you right that you're – I don't want to mess it up, Izzy, but I thought you said that The digital assumption for the year now is flat on a constant currency basis, down high singles on an as-reported basis. I apologize if I heard that wrong.
Squirrel Wallet
No, that's right. Jamie, you got that spot on. Basically, the currency impact is pretty meaningful. That runs all through the digital commerce business.
Jamie Friedman
Got it. Okay, I'll drop back in the queue. Thank you.
Squirrel Wallet
Thank you.
Operator
Thank you. Our next question has come from the line of Dan Carlin with RBC Capital Markets. Please proceed with your questions.
Dan Carlin
Thanks. How are you? Good morning. I wanted to just ask, I guess it's a little bit of a broader question in the context that the product innovation, you know, being very merchant-centric, and you need to pivot a little more towards consumer-centric, that makes total sense. But it sounds like a lot of the – a lot of the headwinds are just very macro-centric in Europe. And so I'm wondering, as you think about trying to create some kind of non-cyclical product innovation that can help, are you leaning more towards, you know, pivoting away from some of the high-frequency users? You know, some of the services that you've provided historically have tilted towards, you know, the... Again, I can just call them the high-frequency users, typically larger gaming consumers. And so I'm wondering... Is there something about the incremental engineering and innovation that also dovetails into the type of user that you might start to attract that you think could help as a counterbalance to some of these macro issues?
Bruce Lothers
Yeah, Dan, great question. So, no, we still are going to absolutely have a focus on those VIP users. I think what we want to recognize is there are a lot of choices out there today for consumers. We want to make sure that we have a very distinct value proposition to drive velocity to our app. And that's really what we're going to focus on is great user experiences to broaden out why people are using that. But the VIP customer is still very important to us, will continue to be very important to us. But we think there's a lot of opportunity to broaden that. the usage and create additional velocity in the app, which will, by default, bring value to the merchants.
Dan Carlin
Yep, absolutely. I wanted to just also ask a question around the kind of top accounts. I think you said the top 800 merchants are growing healthy double digits, which made me think, you know, how should we be thinking about the other merchants? And to the extent that those other merchants are maybe obviously not producing the same level of growth, are they or should they be pruned a bit? Like, is there a balance that needs to be set here for the types of merchants that fit into your new strategy? Thank you.
Bruce Lothers
Yeah, let me start off and I'll let Izzy add in as well. But, you know, one, I wouldn't say it's very unusual. So when you look at our top accounts and the percentage of revenue that they they drive, that's probably not very unusual compared to any other company out there. So we are going to have clients that are highly engaged, highly active, have the opportunity to cross-sell more products into them. And so that makes a lot of sense to me. On the other end of the spectrum, we've got 250,000 small merchants. Some of those are not going to be growing anywhere near some of the larger organizations that are really driving growth. And so that growth rate by default is going to be a lower growth rate. So I think we're in a good balance. What I would say really my overarching point about it was is that we didn't really have a keen focus on our top accounts. It just kind of happened. And now what we're going to do is bring a focus to what those accounts need to help them grow. And that's really what we're going to really dial in on.
Dan Carlin
That's great. Thank you so much.
Operator
Thank you. We have reached the end of the question and answer session. I would now like to turn the call back over to Bruce Lovelace for any closing comments.
Bruce Lothers
Thank you very much. Look, Thank you for joining us this morning. Greatly appreciate it. I want to thank the team for pulling everything together for the call here today and all of the team at Paysafe for all of their efforts in my first 90 days and look forward to building on the momentum we've started here in the first 90 days. So thank you very much.
Operator
Thank you. This does conclude today's teleconference. We appreciate your participations. You may disconnect your lines at this time. Enjoy the rest of your day.
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