Paysafe (US:PSFE)2023-08-15 14:54Financial Data and Key Metrics - Q2 revenue increased 6% YoY to $402 million, with 5% growth on a constant currency basis [9] - Digital Wallet segment revenue grew 6% YoY to $179.1 million, with adjusted EBITDA increasing 11% YoY to $77.2 million [10] - Merchant Solutions segment revenue increased 6% YoY to $225.7 million, with adjusted EBITDA up 1% to $55.8 million [13] - Total adjusted EBITDA for Q2 was $113 million, a 10% YoY increase, with a margin of 28.1%, up 90 basis points [60] - Free cash flow in Q2 was $95 million, reflecting 84% conversion of adjusted EBITDA [54] Business Line Data and Key Metrics - Digital Wallet segment portal volume increased 6% YoY to $5.4 billion, driven by user experience improvements and product innovation [10] - Merchant Solutions segment volume grew 7% YoY to $30.3 billion, supported by strong growth in the e-commerce pipeline and direct sales channel [13] - Classic digital wallets saw stabilization with 900,000 three-month active users and 12% constant currency revenue growth [4] Market Data and Key Metrics - North American iGaming showed strong growth, with high-teens growth in e-commerce led by iGaming [9] - Latin America attracted strong interest with regional payment methods like Pix in Brazil and MB Way in Portugal [12][39] - Canada enabled Interac e-transfer payment capability with clients like Bally's and Canadian lotteries [12] Company Strategy and Industry Competition - Focus on sales transformation, customer experience, and product innovation to drive growth in strategic verticals like Gaming, Digital Assets, Travel, and Leisure [25][26] - Expansion of unbranded and co-branded wallet strategies to leverage platforms in verticals like gaming and digital assets [35] - Cross-selling initiatives resulted in nearly 150 wins across the existing client base, compared to minimal cross-selling a year ago [30] Management Commentary on Operating Environment and Future Outlook - Management expects 7% growth in 2023 based on the midpoint of guidance, with resilient end markets providing significant growth opportunities [5] - Full-year 2023 revenue growth outlook raised to 6.5%-7.5%, with adjusted EBITDA margin expansion of over 100 basis points [47] - Confidence in achieving midterm double-digit growth profile, driven by strategic initiatives and market tailwinds [11] Other Important Information - Total debt at the end of Q2 was $2.6 billion, with a leverage ratio of 5.6x, down from 5.8x at the end of 2022 [46] - Network tokenization introduced to enhance security, increase authorization rates, and reduce fraud [36] Q&A Session Summary Question: Headwinds to growth - Headwinds included FX impacts, the war in Russia, and gambling regulations in Europe, but the company has returned to growth while absorbing these impacts [48] Question: Plans to reduce debt - Year-to-date net debt repayments of $91 million, with a target leverage ratio of 5.1x-5.3x by year-end and a long-term goal of 3.5x [76] Question: Active user growth in Digital Wallet - Focus on stabilizing the platform and improving functionality before expanding the user base, with mechanisms in place to drive user growth [84] Question: Merchant Solutions gross profit growth - Q2 gross profit impacted by business mix, with strong growth in the e-commerce business expected to balance margins over time [32][87] Question: Direct channel growth - Direct channel growth in the mid-single digits, with optimism for future progress as sales transformation takes effect [83] Question: Mid-term growth trajectory - The company is ahead of expectations from a year ago, with confidence in achieving double-digit growth in the mid-term [81]