Paysafe Limited

Greetings and welcome to the Paysafe third quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A 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 conference over to your host, Kirsten Nielsen, Head of Investor Relations for Paysafe. Thank you. You may begin.

Thank you and welcome to Paysafe's third quarter 2022 earnings conference call. 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 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. Joining me today are Bruce Lothers, Chief Executive Officer, Izzy Dawood, Advisor, and Alex Gersh, Chief Financial Officer. After our prepared remarks, we will address questions received from shareholders through the Say Technologies platform. After that, we'll take questions from the analyst community. With that, I'll now turn the call over to Bruce.

Thanks, Kirsten. Good morning, everyone, and thank you for joining us today. Let's start with slide three. On the last earnings call, which was my first quarter as CEO of Paysafe, I shared my early observations on the state of the company and the path forward. We discussed the initial steps we were taking to return to our roots of product innovation, rebuild a strong sales engine, and to improve efficiency. I'll share more on our progress in these areas later in my remarks. With that in mind, I'd like to first welcome Alex Garsh to Paysafe as our CFO. Alex brings highly relevant experience, having served as CFO of major brands in gaming and entertainment, most recently as the CFO of SportsRadar. Alex has a great track record of driving results in financial discipline for public companies, and I'm very excited to have him on board. Next, I want to thank our employees for their contributions during this period of change, and I'm pleased to share our financial results for the quarter. Our third quarter revenue of $366 million and adjusted EBITDA of $95.5 million exceeded our financial expectations communicated in August. Excluding the impact of movement in foreign exchange rates, revenue increased 10% year-over-year, reflecting growth from both the U.S. acquiring and digital commerce. As for the rest of the year, we are maintaining and tightening our full-year outlook, which Izzy will take you through in more detail. I want to reiterate that Paysafe maintains a healthy financial position with transaction volume exceeding $128 billion, revenue approaching $1.5 billion, and adjusted EBITDA exceeding $400 million over the last 12 months. We also maintain strong liquidity and financial flexibility while we continue to prioritize reducing our debt and leverage ratio. Before I move on to our strategic updates, I'll quickly touch on the planned reverse stock split which is announced this morning. As stated in our press release, we plan to hold a special meeting in December to seek shareholder approval for a one for 12 reverse stock split. Once effective, our total number of shares outstanding will be reduced from approximately 727 million to approximately 61 million shares, which is more in line with the companies of our size and scope. Additionally, the board believes that affecting a reverse stock split will help us appeal to a broader range of investors and improve the perception of our stock with the investment community, new talent, and other stakeholders. Turning to slide four. During the quarter, we made good progress across the long-term growth accelerators. As part of our focus to drive innovation, we executed a cost reallocation and changes to the organizational structure which will fund sales and product investment. Additionally, As we're going through our 2023 planning, we are allocating a larger percentage of our investment towards new revenue products and improving operational efficiency to improve stakeholder engagement. In the third quarter, we also welcomed Rob Gatto as Paysafe's first Chief Revenue Officer with the responsibility for building our global sales organization focused on existing customers, new account acquisition, and business development opportunities. Next, our focus on customer experience, including improvements and fixes to our wallet, which were rolled out over the summer, are yielding positive results with consumers, including increased deposit conversion rates from Q2 to Q3. In Latin America, we continue to see great progress while supporting our merchants from other countries looking to expand into Latin America and tap into the high growth potential of the region. During the third quarter, we launched with 10 merchants from Paysafe portfolio into Latin America, including with Bet365 in Mexico. Additionally, we saw volume from Paysafe customers that we have launched into LATAM more than double from Q2 to Q3. Supported by Paysafe's single API, which enables seamless connection to multiple countries in the region. Lastly, in North America iGaming, we continue to see robust growth in the regulated iGaming market with more than 45% revenue growth in Q3. We are currently live in 23 states following our third quarter launch in Kansas with DraftKings, Caesars, and PointsBet. We look forward to upcoming launches in new states including Maryland and Ohio. Moving to slide five for an update on our sales function. We're building out our new go-to-market structure which organizes the sales function by our core verticals, consolidates our systems for better KPIs and visibility, and will provide a sales enablement support function for this sales team. This new model will improve our ability to sell PaySafe as a broader strategic payments offering, improve pre and post deal execution, and greatly increase our global pipeline and average deal size. I spent a lot of time with Rob and the team and remain excited about what we can achieve when we align our product direction and enable our teams to efficiently go after sales. Turning to slide six, I'll expand upon this a bit more. PaySafe has a unique proposition for both merchant acquiring as well as consumer wallets, which comprises our eCash and digital wallet solutions. And this slide illustrates where we play in those constructs, both regionally and across our verticals. We have a unique network and many of our assets to power end-to-end payments for our core verticals. We have seen strong performance in our merchant business in North America with double-digit growth year-to-date. That's performed well relative to the market. Where we have seen headwinds is in Europe, where we have FX impacts as well as a softer market in the verticals we're in. And we have not done as well here cross-selling to our merchants. For example, we historically have had a bifurcated strategy across iGaming, where we have a strong acquiring presence in North America, but not in Europe, where we play mostly with wallets and e-cash with many of the same merchants. We now have organized a vertical under one leader to drive a holistic sales effort and offer a better solution to our merchants. We also have a great emerging digital asset solution in our wallet business. With strong offering in Europe, we are focused on bringing to the Americans. Overall, we have a lot of opportunity to expand or deepen our presence both geographically and across our verticals to fully leverage our assets to better serve our merchants, and consumers. Let's turn to slide seven for an update on digital wallet. In Q3, we saw continued signs of stabilization and progress. We recorded constant currency revenue growth of 2% from the digital wallet business, an improvement from the year-over-year declines we saw through the first half. Total deposits on our digital wallet were up 9% year-over-year. Lastly, it's worth pointing out on average that we saw roughly 100,000 new accounts funded monthly in Q3, reflecting continued relevancy of our wallets to consumers. There's still work to do, but we're seeing signs of stabilization despite ongoing market headwinds in Europe, and I'm confident that the changes we are implementing will drive further improvement and lead to greater customer loyalty and engagement. Now I'll turn the call over to Izzy to discuss the financial results.