Paysafe (US:PSFE)2021-11-11 18:30Financial Data and Key Metrics Changes - The third quarter adjusted EBITDA was $106 million, in line with expectations, while revenues were $354 million, below expectations primarily due to weaker results from digital wallets [5][27] - Total revenue for the third quarter decreased by 1% year-over-year, with adjusted EBITDA margin remaining approximately 30% [28] - Free cash flow for the quarter was $70 million, representing a 66% conversion on an adjusted EBITDA basis, with year-to-date free cash flow conversion around 70% [28] Business Line Data and Key Metrics Changes - The eCash segment saw a volume of $1.3 billion and revenue of $90.2 million, both up 10% year-over-year, indicating strong momentum [31] - The digital wallet segment experienced a volume of $4 billion, down 70% year-over-year, with revenue decreasing by 15% compared to the prior year [32] - Integrated processing volume was $26 billion, up 28% year-over-year, with revenue of $186.9 million, an increase of 4% compared to the prior year [33] Market Data and Key Metrics Changes - North America iGaming revenues grew by 50% year-to-date, reflecting strong market momentum [20] - The company is now live in 19 of the 21 legal jurisdictions across the U.S., with plans for further expansion [20] - The regulatory environment in Germany and the Netherlands has negatively impacted market activity, leading to a decline in digital wallet performance [12][60] Company Strategy and Development Direction - The company is focused on repositioning its digital wallet business for success, with a strong growth plan and new leadership in place [8][18] - There is an emphasis on combining wallet capabilities with e-commerce solutions to capture growth opportunities in fast-growing markets [9][26] - The company aims to streamline operations and improve customer experience in the digital wallet segment while addressing pricing issues [15][56] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the digital wallet business, citing both internal and external factors affecting performance [8][12] - The outlook for 2022 is expected to be transitional for digital wallets, with a focus on resetting the business and delivering on growth initiatives [17][40] - Management remains optimistic about the company's future, citing strong engagement with clients and a robust pipeline of opportunities [42] Other Important Information - The company is on track to meet or exceed all cost takeout and tech platform milestones, with significant progress in migrating to cloud technology [24][25] - Total debt outstanding was approximately $2.2 billion, with a net debt to LTM adjusted EBITDA ratio of 4.4 times [35] Q&A Session Summary Question: Why is the company still confident in the long-term potential of the digital wallet? - Management highlighted recent changes and improvements in client engagement, as well as the utility of the digital wallet for clients, indicating a positive outlook despite current challenges [45][48] Question: What changes are being made to address customer experience issues? - Management acknowledged some share loss in mature markets and emphasized the need for better engagement with clients and adjustments to pricing strategies [54][56] Question: What is the timeline for the take rate to return to long-term guidance? - The take rate is not expected to revert to 1.8% in the near term, with adjustments taking a couple of quarters to implement [65] Question: How will the company approach debt pay-down in light of revised guidance? - The company plans to prioritize debt pay-down with excess cash flow while maintaining a long-term commitment to reducing the net debt to EBITDA ratio [66] Question: Can you provide details on the WorldPay partnership in North America? - The partnership with WorldPay is not exclusive, and the company is expanding its acquiring relationships to meet market demand [81]