Paysafe Limited

Ladies and gentlemen, greetings and welcome to the PaySafe 3rd Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on a telephone keypad. As a reminder, this conference is being recorded. I would now like to hand the call over to Kirsten Nielsen, Head of Investor Relations, please go ahead.

Thank you, and welcome to PaySafe's earnings conference call for the third quarter of 2024. Joining me today are Bruce Others, Chief Executive Officer, John Crawford, Chief Financial Officer, and Alex Gersh. 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 gap 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 all for joining us today. Before I discuss our fantastic quarter, I want to start by saying that our hearts and thoughts are with our colleagues, customers, and partners in Florida and the southeastern U.S. who are impacted by the recent hurricane. And I want to especially thank our business continuity team for their efforts to quickly support our employees who live in the affected regions. Next, I'm excited to welcome John Crawford, our new CFO. As you read in our press release, John brings with him more than 25 years of financial leadership experience with a strong background in the payments industry. I am confident that John's partnership will be extremely valuable as we move into the Paysafe's next phase of growth. I'll ask John to say hello and share his initial thoughts towards the end of today's call. We sincerely thank Alex for the work he's done over the past two years as CFO. I've really enjoyed working with him, and he's been an instrumental partner in stabilizing the business and improving our financial performance. Alex will stay with us through the end of the year, working closely with John to ensure a smooth transition. Now, let's review our Q3 results. We have continued our momentum, accelerating our higher-quality revenue growth from the prior year, with revenue increasing 8% year-over-year, or 7% on a constant currency basis, to $427 million, with merchant solutions growing 11% and digital wallets growing 4%, slightly offset by lower interest revenues. Adjusted EBITDA of $117.8 million was up 1% year over year, and our adjusted EBITDA margin expanded 70 basis points in the third quarter compared to the first half of 2024, while making planned incremental investments as well as actions to reduce risk in the business. Additionally, we continue to focus on net leverage. reducing 8% from Q3 2023 to 4.7 times at the end of Q3 2024. Overall, our third quarter and year-to-date results highlight a strong year with our continued execution on our strategic priorities and our focus on delivering higher quality revenue growth, strengthening the business, and progressively reducing net leverage. With that said, we're pleased to reaffirm our full-year financial outlook for 2024 with revenue growth in the expected range of 7% to 8% and adjusted EBITDA margin in the range of 27.5% to 28%. Let's turn to slide four for an update on our four strategic priorities for 2024. I remain pleased with the progress that we've made this year as all of our initiatives remain on track or ahead of expectations. Let's start with the expansion of our sales capabilities. During the quarter, we booked 83 enterprise wins, which was up meaningfully from last year, demonstrating our continued momentum in cross-selling and winning new clients. On our hiring initiative year to date, we've welcomed 170 new sales reps, reaching our target ahead of schedule. As a reminder, this is a critical initiative to expand our reach and sales capabilities across both enterprise merchants and S&B merchants. Second, on our portfolio optimization, we continue to perform better than we expected, supported by our actions to grow the direct sales team and enhance our products with value-added solutions and partnerships. Year-to-date, we've generated over 40 million revenue related to these initiatives, ahead of schedule to reach our target of 50 million for the year. Our investments in these initiatives are tracking to our expectations with some remaining spend expected in Q4. Our third priority for the year was to revamp our consumer acquisition efforts. Our marketing team continues to utilize new market testing strategies with the goal of building a scalable blueprint to drive user growth. Beyond our traditional acquisition efforts, we've also expanding our reach to new users through B2B to C partnerships. Last quarter, we announced a collaboration with Revolut to bring our eCash service to Revolut's 10 million UK customers. Through this relationship, we're enabling their customers to deposit and withdraw cash seamlessly to and from their bank accounts at any of our 12,000 point-of-sale partner locations in the UK. Within the first three months, we've transacted with 28,000 unique Revolut consumers, and we expect this to increase over time through further adoption in the UK, along with expansion to other markets. We look forward to launching a similar collaboration with a marquee client in the coming months. Finally, while still relatively small numbers, our revenue generated from new product introductions continues to be up significantly compared to last year, reflecting our sharpened focus on innovation and consumer experience. Turning to our merchant business on slide five, we saw solid performance led by double-digit growth in e-commerce, which represents about 15% of our merchant portfolio by revenue. North American iGaming revenue grew over 50%, reflecting merchant wins in the prior year and industry growth. we also continue to see strength in our cross-selling efforts. Out of the 83 enterprise deals booked in Q3, 28% of those were with existing clients, and our net revenue retention with enterprise merchants remains above 100%. Fillable mids were down slightly in Q3, mainly reflecting our focus on the ideal customer profiles and de-risking the portfolio. Revenue per new merchant was up double digits, and the SMB direct book grew 5%, reflecting the benefit of our investments to optimize the portfolio and our focus on driving stickier merchant relationships with greater lifetime value. Turning to digital wallets on slide six. In Q3, we saw transactions per active user grow 16% year over year, with positive trends across all products and average revenue per user grew 5%, supported by product initiatives and the ramp-up of merchants onboarded in 2023. This marks the seventh consecutive quarter of year-over-year growth for both metrics. We acquired 1.3 million users in the quarter, slightly up from the 1.2 and Q2, and stable year-over-year. Our active user base was 7 million and consumer acquisition costs also stable at approximately $17 in Q3. Again, we're seeing stability here with active users along with improvement in the user engagement and experience. As I touched on earlier, we continue to improve our consumer acquisition strategies while targeting a broader consumer base and enhancing our wallet platform to offer a scalable model that supports sustainable growth. With that, I'll ask Alex to review the Q3 results in more detail.