Release Date: November 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Paysafe Ltd (PSFE, Financial) reported an 8% year-over-year revenue increase to $427 million, with Merchant Solutions growing 11% and Digital Wallets growing 4%.
- The company achieved an adjusted EBITDA of $117.8 million, marking a 1% increase year-over-year, and expanded its adjusted EBITDA margin by 70 basis points compared to the first half of 2024.
- Paysafe Ltd (PSFE) successfully reduced its net leverage by 8% from Q3 2023, reaching 4.7 times by the end of Q3 2024.
- The company booked 83 enterprise wins during the quarter, demonstrating strong momentum in cross-selling and acquiring new clients.
- Paysafe Ltd (PSFE) is ahead of schedule in its hiring initiative, having welcomed 170 new sales reps, which is expected to enhance sales capabilities and drive future growth.
Negative Points
- Adjusted EBITDA margin declined by 170 basis points due to incremental investments and client exits related to derisking the portfolio.
- Adjusted net income decreased to $31.4 million, with adjusted EPS dropping from $0.57 to $0.51 per share, primarily due to an increased adjusted effective tax rate.
- Unlevered free cash flow declined by 3% to $318.7 million, mainly due to timing and tax-related items.
- The SMB direct book growth decelerated to 5% from 10% last quarter, reflecting decisions to exit risky merchants.
- The company faces potential revenue impact from currency fluctuations, with every 1% weakening of the Euro against the US dollar having an unfavorable impact of approximately $6 million to $7 million on revenue annualized.
Q & A Highlights
Q: Bruce, you mentioned the portfolio optimization efforts being ahead of schedule, including the $50 million revenue benefit this year. Is that still the case for 2025, and what has been the key to being ahead of schedule?
A: Yes, we are trending positively against the $50 million target. We have excellent visibility into revenue growth and EBITDA margins for 2025. Our hiring initiative is also ahead of schedule, which will benefit us in 2025 and 2026. These efforts are driving long-term growth and are on track.
Q: Regarding the Revolut partnership, you mentioned 28,000 transacting users in the UK. What are your expectations for growth with these customers, and when might you expand to other regions?
A: We expect continued expansion through 2025. We also announced a partnership with Deutsche Bank, which has a larger client base. This initiative leverages our European assets, and we anticipate adding more institutions to this model.
Q: With higher-risk merchants rolling off, did this impact the merchant gross margin this quarter? How should we think about the merchant gross margin mix going forward?
A: Yes, the exit of high-margin but unsustainable merchants impacted gross margin. We focus on revenue and EBITDA, and John will continue to drive efficiency to improve EBITDA margins. We expect margin expansion as we move into 2025.
Q: Can you provide an update on the health of the pipeline in the context of achieving growth targets for next year?
A: Our pipeline is strong, with 83 enterprise deals this year, double from last year. We see solid growth and have good visibility into 2025. The sales and product teams are performing well, and we are confident in our growth trajectory.
Q: Could you expand on the integrated loan program for short-term working capital support and any unit economics or impact on take rate?
A: The loan program is beneficial for our 900,000 merchants globally. We have a referral arrangement with no underwriting risk. We plan to add more solutions and services to help merchants run their businesses effectively.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
