Paysafe Limited

Hello, and welcome to the Paysafe Q1 2023 Earnings Conference Call and Webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may press star one at any time to be placed into question queue. 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, Kirsten.

Thank you, and welcome to Paysafe's earnings conference call for the first quarter of 2023. Joining me today are Bruce Lothers, Chief Executive Officer, and Alex Gersh, Chief Financial Officer. Before we begin, a 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 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 non-GAAP financial measures. 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 Bruce.

Thanks, Kirsten, and thank you, everyone, for joining us today. If you're following along our webcast, let's begin on slide three. After returning to growth in the back half of 22, we kicked off 2023 by delivering our strongest quarter revenue since the IPO. First quarter revenue of $388 million exceeded our guidance range and increased 7% year over year on a constant currency basis. We recorded 8% growth in the merchant solution segment, including double-digit e-commerce growth. In digital wallets, revenue increased 6% on a constant currency basis, including strong performance from our classic digital wallets. In first quarter, adjusted EBITDA of 108 million was at the high end of our guidance and increased 5% year-over-year on a constant currency basis. Excluding one-off personnel expenses related to executive severance, adjusted EBITDA would have increased approximately 7% in line with our constant currency revenue growth. Throughout the turbulence in the banking market, Paysafe has been unaffected by the failures of SBB, Signature, Silvergate, or First Republic, and we have no direct relationships with these institutions. We operate a network of roughly 100 banks globally and always look to build resilience into our payment flows so that we can route payments through other partners as needed. We have robust safeguarding in place to ensure the ring fencing of customer funds and we operate our acquiring business in the U.S. through FBO accounts to further manage any risk of our customers. Our U.S. customer balances are supported by pass-through FDIC insurance. Turning to a few business highlights, in April, we welcome Nicole Carroll, who joins us from Experian, to lead our strategy and innovation for PaySafe, where she will support a key strategic vision that links our extensive set of APMs with our wallet technology across our core geographies and verticals. As I mentioned in our recent investor day, PaySafe was recently ranked third and well above the industry standard on the JD Powers Merchant Services Satisfaction Survey, a testament to the team's focus on the customer experience. We continue to see strong activity in regulated North American iGaming including the launch of three states in Q1, expanding our payments partnerships with several major brands, including DraftKings, Caesars, and PointsBet, among others. PaySafe now powers payments for 27 states, which is up from 22 states at the end of Q1 last year. Outside of regulated iGaming, we're seeing strong growth in other sub-verticals, such as fantasy sports, social and skill gaming. In Ontario, we launched three new merchants who are leveraging both our card acquiring and interact e-transfer capabilities. We also activated e-cash for several existing clients and are excited about our Q2 launch of our Skrill digital wallet in Ontario. We also continue to make progress on our sales transformation to reinvigorate growth with a focus on building out our enterprise sales function. maintaining our plan to double the team's headcount in 2023. In the first quarter, we closed 30 enterprise deals with more than 100,000 each in annual contract value and 20 deals that included multiple Paysafe products. We also expanded our pipeline of cross-selling and geographic expansion opportunities from the prior quarter. I'll also highlight that we've improved our deal integration process. resulting in a 50 reduction in the average time to integrate a new murder a new merchant from the point of contract signing turning to slide four for a few examples of recent wins at our investor day we outline three key focus areas as part of our our sales transformation first cross-selling new paysafe products to existing merchants second expanding our existing merchant base into new geographies, and third, pursuing new merchants in our key verticals. While these specific examples are not material in size, they provide some color around the momentum we're seeing and why we're winning. Merchants are coming to Paysafe for the extensive set of payment options across our global footprint, available through a single API along with our ability to manage risk and deliver better customer experience. With our European gaming merchant base, we closed three smaller deals to add card acquiring to existing digital wallet clients, highlighting our progress in upselling into our large customer base, leveraging our longstanding relationships and brand recognition across the region. In the financial trading vertical, we expanded our relationship with ATFX, an existing digital wallet client and leading Forex merchant in the UK to support their growth aspirations in Latin America. As a final example, we recently entered into a partnership with Crypto Orange to provide an entire suite of Paysafe products, including our digital wallet as their main pay-in, pay-out infrastructure as well as our key payment methods, including credit card processing and eCash across the entire geographical footprint. These wins were supported by our new go-to-market structure, which organizes the sales function by our core verticals and has improved our ability to sell PaySafe as a strategic payments offering, while also improving deal execution and increasing the average deal size global pipeline, and win rates. Moving to slide five, consistent with the update we provided last quarter, this view is focused on our classic digital wallets. One of the repeated questions I was asked a year ago was could we get our classic wallet to grow again? Well, in Q1, not only did we see continued stabilization in our underlying active user base, but we recorded constant currency revenue growth of 10% from classic wallets, supported by stronger engagement, including double-digit growth in transactions per active user and average revenue per user following a more pronounced seasonal uptick in Q4. Consumer deposits in classic digital wallets were also up double digits again compared to Q1 of last year, excluding the Russian-Ukraine war and FX. As we mentioned on the prior call, drivers of improvement include ongoing initiatives to enhance the user experience and reduce friction, such as improvements related to onboarding, KYC, personalization and customer service, as well as deposit success rates and merchant checkout conversion rates. We are also piloting new features that are resonating well with consumers, including new loyalty and rewards enhancements to support adoption and retention. Looking ahead, we will leverage our progress in user experience and product enhancements, broadening the appeal and the use cases of our wallet platform to adjacent markets, which may temper growth across our TPA and average revenue user metrics while driving growth. With that, I'll ask Alex to review the financial results.