Paysafe Limited

Greetings, and welcome to the Paysafe fourth quarter 2025 earnings conference call and webcast. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star 1 on your telephone keypad, and we ask that you please ask one question and one follow-up, then return to the 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.

Thank you, and welcome to Paysafe's earnings conference call for the fourth quarter and full year 2025. Joining me today are Bruce Lothers, Chief Executive Officer, and John Crawford, 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 may 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 the website. With that, I'll turn the call over to Bruce.

Good morning, everyone, and thank you for joining us today. I'll start off with a few key messages. In 2025, we delivered our third consecutive year of organic revenue growth, while continuing to sharpen our focus on experience-driven commerce. While our business mix led to a different margin outcome than the original outlook called for, I want to reiterate that we've made incredible progress in 2025. For the last three years, we have made deep structural changes, modernizing our platform, upgrading our talent, and positioning Paysafe for its next phase of growth. During this timeframe, we renewed our focus on product innovation, which is reflected in the progress of our Vitality Index. I'm confident that the positive impact of this work will become increasingly evident through our financial results as we move forward. I'm grateful for the dedication of our 2,800 colleagues worldwide whose resilience has driven us through the challenges and laid a foundation of accelerated growth and exceptional experiences for both customers and employees. Let's move to slide four. The full year, we reported $1.7 billion in revenue, growth of 6%, excluding the disposition. While we saw softer results in the SMB business, this was offset by double-digit growth from e-commerce, including record iGaming volumes across the U.S. football season. We also saw a strong demand for our local payment solutions in Latin America, and increasingly, consumer engagement from product initiatives across Europe. Importantly, our digital wallet consumers reached $7.8 million at quarter end, our highest level in three years. We generated an impressive $298 million in unlevered free cash flow in 2025, despite divesting a business line that generated $40 million in EBITDA the prior year. This provided us with the flexibility to return more than $90 million to shareholders in 2025, as valuation levels were a compelling opportunity. As John will discuss later, we expect to continue to return capital through open market purchases, but reducing our leverage ratio will be a higher priority in 2026. Turning to the full year revenue walk on slide five. Revenue growth was balanced across the existing client base and our new sales and product initiatives. which contributed 8% and 10% to revenue growth respectively. Revenue attrition ended up at 12%, slightly higher than our original expectation for the full year. We continue to see improvement throughout the year. In Q4, attrition was 11%. When we put all of this together, our performance reflects strong cross-selling and growth with existing clients as well as new clients and new products. On slide six, We've shared our regional performance for the full year. Our largest market North America grew 5% in 2025, excluding the disposition and Europe grew 7% normalized for FX. Latin America was flat for the year, but after lapping and the impact of a large customer renewal, we saw more than 20% growth from the region in Q4 and continued strength in January. The non-core rest of world region, we saw a decline from our consumer wallets as a function of both the market dynamics and our own actions to trim this exposure over the years. This gives you a sense of our balanced regional profile, which we'll plan to provide on an annual basis going forward. Slide seven is a look back on our 2025 priorities. Having shifted our focus to the key growth engines of the company, Our aim was to drive more revenue from new products, deliver on our longer-term innovation roadmap, and mature the sales organization, bolstering both areas through new partnerships. Despite strong progress, we had a bit more groundwork to complete, including advancement of our wallet platform, such as our business wallet and white-label wallets, and monetizing our pipeline and targeted e-commerce verticals. Overall, we are confident that the operational and strategic progress that we made in 2025 is already enabling us to improve execution in 2026 by reaching new merchants and consumers and expanding our product and service delivery across our core regions. Moving to slide eight. For us enterprise-level merchants, our growth in e-commerce continues to be strong, reaching 24% in the fourth quarter and 27% for the full year. North America iGaming had a standout year with 50% growth in processing revenue. As we discussed on the last call, total e-commerce growth did moderate compared to the more than 30% growth in the first half and compared to what we planned for the year, driven by softer performance across other verticals. Just to take a step back, we delivered $196 million in e-comm revenue for 2025, an impressive three-year CAGR of 29%. Turning to the enterprise bookings, we increased our total deal count by 38% compared to 2024, along with 10% growth in larger size deals. Cross-selling was a strong component overall with 40% of our total bookings from existing clients. We also wanted to highlight the evolution of our enterprise sales function, which was built over 2023 and 2024, and now generating a meaningful revenue contribution from those cohorts since inception, driving nearly $260 million in revenue in 2025. On the SMB side of the business, we saw a total new mid-growth of 6%, driven by 18% year-over-year growth in the second half led by our direct sales channels, along with positive growth in revenue per merchant. S&B revenue growth for the year was a modest 1%, coupled with a margin headwind due to the ongoing mix shift to our lower margin ISO channel. Throughout 2025, we have focused on retooling and optimizing our S&B portfolio and believe we have a stronger foundation to improve growth in 2026. supported by the expansion of our agent programs and value-added services. Turning to the consumer snapshot on slide nine, I mentioned at the start of the call that our digital wallet active users reached 7.8 million at quarter end, reflecting a growth of 6% year-over-year, with notable strength in Latin America across iGaming and broader e-commerce. In Europe, we saw continued growth from product initiatives and expansion of Paysafe's digital banking partnerships. Other KPIs remained healthy with 6% growth in transactions per user, while ARPU was relatively stable. Additionally, we believe our classic wallet Skrill remains a high-value asset, despite not accelerating to the level we planned for in 2025. As a stable user base, exceeding 900,000 actives for the last five quarters, we focused on reducing friction and improving user experience. At the same time, our product initiatives have effectively elevated both new and existing eCash users to our wallet platform. We continue to believe higher growth and value can be created here as we deliver on our initiatives to deepen consumer engagement coupled with successful rollout of our business wallet and white label solutions. Turning to slide 10. One of the clearest measures of our progress is our new product vitality index. This is how we measure the health of our organization and the momentum we have around innovation that directly addresses our customers' evolving needs. 2025, we reached $270 million of vitality revenue, representing 16% of the total company revenue. It has fueled mainstream sustainable revenue, enabling us to reduce high-risk, non-core revenue streams while improving our overall growth profile. As we continue to innovate and launch new solutions, we expect this momentum to carry Paysafe towards industry-leading benchmarks, So let's look at how one recently launched product is contributing to this progress on slide 11. As you may recall, as highlighting growth from new products within our eCash business or account and card product, which we've recently rebranded as PaySafe Wallet, this began as an initiative to cross-sell and shift eCash users towards online account-based distributions. SafeWallet serves as a full-service consumer solution, including a personal bank account and a debit card, allowing customers to send, receive, spend, and withdraw money. We first launched in a few European markets to offer cash and store-valued consumers the benefits of a wallet and later expanding into banking services. What we saw was a strong adoption with signups surpassing 500,000 by October 2025. reaching a scale that took some of the leading digital banks nearly two years, despite their broader offerings and large marketing budgets. So what's different here and advantageous is that we already have a sizable base of users we can target, which allows us to scale at a much lower cost of acquisition, which is around $21 for Paysafe. Today, we are live in 18 countries and continue to drive functionality and regional expansion. SafeWallet is built to deliver innovative and value-added services at each step of the consumer journey, ranging from cash solutions to prepaid cards to digital banking and wallet solutions. On slide 12, we share the key priorities and outcomes that we're driving in 2026. Starting with consumer business, We will continue to enhance our classic wallet user experience, including loyalty programs and value added features and services. Our Paysafe wallet and Pago Efectivo wallet in Latin America will continue to expand on core capabilities with the goal in both regions focused on building a simple, everyday digital banking wallet that customers can rely on to manage their daily spend. To support user growth, we will scale our marketing strategy, leveraging our expanding wallet portfolio and localized go-to-market plays to drive acquisition, retention, and lifetime value. Coming to our merchant priorities, we are focused on capturing opportunities in existing and target e-commerce verticals, supported by enhancements to our gateway and bank network to incrementally offer more flexibility. For both large merchants and SMBs, we will focus on elevating customer experience with faster onboarding and activation with seamless access to evaluated services. Success with these top initiatives will support continued growth in our vitality index company-wide, which we see as one of the most important markers of our success. Turning to slide 13. Before I hand the call over to John, I want to take a moment and reflect on the transformation we've driven over the last few years and how it's positioning Paysafe for the future. I joined nearly four years ago. I shared with the team my vision for building a truly modern payments company. It wasn't just about adopting new technologies like AI or eventually quantum computing. It is about fundamentally reimagining our business processes for scale, adaptability, and resilience in a high-volume, always-on payments infrastructure. We've made meaningful progress. Our go-to-market motion has strengthened. We've launched innovative products, and we've opened new revenue streams in adjacent markets, such as our Paysafe wallet, which offers a modern, consumer-friendly solution comparable to what other players like Revolut and Chime have delivered in digital banking and embedded finance. Clear measure of this innovation momentum is our vitality index, the percentage of revenue from new product initiatives. We've grown this from less than 2% in 2022 to 16% in 2025. Looking ahead, our long-term aspiration is to reach over 30% in line with world-class innovative companies that consistently drive sustained growth through fresh offerings. Every core function has felt this impact, We've stayed disciplined, focusing on process improvement first and deploying tools only where there is a clear ROI. Over the last three years, we've reduced aggregated FTEs by approximately 20% through automation and efficiency gains. More importantly, we've reallocated those savings to fuel growth, investing in higher impact areas. We've upgraded our talent significantly, eliminating about 30% of our senior executive roles from three years ago. And of the remaining executive team, roughly 77% are new additions, bringing fresh perspectives and expertise. Our capital allocation has shifted dramatically from roughly 90% maintenance focused to now 80% directed towards growth initiatives. This reflects a deliberate move from sustaining the status quo to building for the future. For me, Modernization goes beyond just any single tool like AI. It's about re-engineering processes that enable us to operate at scale in a complex 24-7 payments environment while staying agile and cost-effective. That's the foundation that we're building. Embedded AI across the enterprise, not as experiments, but as operating system powering how we work. It accelerates decision-making, enhancing experiences for merchants and consumers, and strengthens our position in sectors like gaming, digital entertainment, travel, and e-commerce, where seamless, personalized, trust-building interactions are increasingly the standard. In operations, we've automated high-volume workflows and customer support that spews reconciliations, and back office functions driving higher productivity and improved service levels. In product development, AI is now end-to-end shortening cycles and enabling smarter adaptive solutions that boost engagement and modernization. We've reduced integration times for new payment methods by approximately 80%, putting us in line with industry leaders. In risk and compliance, AI drives real-time onboarding monitoring, fraud detection, and reporting, listing auto-decisioning on direct applications to around 50%, cutting false positives by over 20%. And in our tech stack, modernization has delivered strong results. Over 30% of the code generated via AI in 2025, speeding time to market while maintaining quality. Across the board, we're moving faster, deciding with better data, scaling with tighter controls, and doing it at a lower cost. This has made intelligent systems foundational to how we compete. Looking ahead on slide 14, our AI strategy is structured around three clear pillars. Product innovation, scaling AI-native offerings like our embedded wallet and intelligent tools, Modern wallet platform enables merchants to deploy commercially ready, fully brandable embedded wallets, delivering white label solutions they own end-to-end for seamless deposits, withdrawals, identity verification, and enriched user experiences. Identic commerce, aligning with emerging standards by leveraging protocols like model context protocol, MCP, agent payment protocol, AP2, and Universal Commercial Commerce Protocol, UCP, to ensure agent-driven protocols remain secure, compliant, and governed by clear financial policies. AI-driven automation, continuing to deliver structural efficiency gains while enhancing quality controls and fraud prevention. We see AI and agentic commerce as a meaningful expansion of our addressable market, and a structural opportunity for platforms that bring together scale, regulatory expertise, and orchestration capabilities. That's where Paysafe is differentiated. Stop here and turn it over to John.