Paysafe (PSFE) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In 2024, the company achieved 7% organic revenue growth, with full-year revenue reaching $1.7 billion, a 6% increase year-over-year [7][9] - Adjusted EBITDA for Q4 was$ 103 million, leading to a full-year total of $452 million, down 1% compared to the previous year [10][11] - The company generated strong unlevered free cash flow of$ 300 million in 2024, reflecting a 66% conversion of adjusted EBITDA [11] - For the first time since going public, the company reported a positive GAAP net income of $22 million for the full year of 2024, compared to a net loss of$ 20 million in the previous year [11] Business Line Data and Key Metrics Changes - Merchant Solutions revenue increased 1% year-over-year in Q4 to $230.1 million, with full-year revenue up 9% to$ 957.6 million [40] - Digital Wallet revenue grew 2% in Q4 to $194.4 million, leading to a full-year growth of 4% [43] - The company reported double-digit growth in e-commerce and mid-single-digit growth in the SMB segment [40][43] Market Data and Key Metrics Changes - The company experienced high single-digit growth from its top 20 countries, indicating broad-based growth across key regions [19] - The total number of enterprise-level merchants increased by 6% in 2024, reflecting improved market penetration [19] Company Strategy and Development Direction - The company completed its portfolio rationalization by divesting its direct marketing payment processing business, focusing on ideal customers and verticals [7][8] - The strategic initiatives include expanding sales capabilities and enhancing product offerings, with a focus on the experienced economy [30][52] - The company aims to drive greater scale and interoperability of its products to improve customer experiences [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's turnaround and growth potential, highlighting significant progress in financial performance and operational efficiency [52] - The outlook for 2025 includes expected revenue growth between flat and 2%, with organic growth projected at 6.5% to 8% [46] - Management anticipates improved adjusted EBITDA margins and strong operating leverage as the sales organization matures [39][48] Other Important Information - The company repurchased 2.6 million shares in 2024, with an average price of$ 16.23 per share, and announced a $70 million increase to its share repurchase program [45][46] - The company expects to reduce its net leverage ratio to 4.4% or lower by the end of 2025, with a long-term target of 3.5% by the end of 2026 [45] Q&A Session Summary Question: What are the growth drivers for the SMB channel in 2025? - Management highlighted solid growth in Clover sales and an increase in revenue per merchant, with a focus on larger SMB clients [56][57] Question: Can you provide details on the direct marketing business sale? - The impact of the sale will be below the EBITDA line, and it is expected to have a minimal effect on adjusted EPS in 2025 [58][65] Question: What is the outlook for the Merchant segment's gross profit growth? - Management expects robust growth in the Merchant segment, particularly in the second half of 2025 [78] Question: What are the expectations for attrition in FY '25? - Management anticipates a reduction in attrition rates as the company has completed its derisking strategy [104][106] Question: Can you elaborate on the new product contributions to revenue? - The accounting card and ePIN are significant contributors to new product revenue, with continued expansion expected [112][114] Question: What competitive advantages does the company have in the white-labeled wallets market? - The company emphasizes its regulatory strength and AML capabilities as key differentiators in the market [116]