- Revenue: $440 million, growing 9% year over year.
- Adjusted EBITDA: $119 million, growing approximately 5% year over year.
- Net Debt Ratio: Reduced to 4.8 times, a 14% reduction from Q2 2023.
- First Half 2024 Revenue Growth: 8.5% year over year.
- Merchant Solutions Revenue Growth: 12% increase in the first half of 2024.
- Digital Wallets Revenue Growth: 5.4% in the first half of 2024.
- Adjusted EBITDA Margin: Declined by 100 basis points due to planned incremental investments.
- Adjusted Net Income: Grew 5.7% year over year.
- GAAP Net Income: $1.6 million in the first half of 2024.
- Stock Repurchase Program: Returned $25 million to shareholders.
- Full-Year Revenue Guidance: Raised to 7% to 8% from previous 5.5% to 7%.
- Adjusted EBITDA Margin Guidance: Expected to be between 27.5% and 28%.
- Total Volume: Increased 7% year over year to $38.1 billion.
- Take Rate: Increased to 1.2% from 1.1% in the prior quarter.
- Unlevered Free Cash Flow: Grew 16% to $339.1 million.
- Adjusted Net Income: Increased 5% year over year to $36.3 million.
- Adjusted EPS: Increased 5.3% to $0.59 per share.
- Merchant Solutions Volume: Increased 8% year over year to $32.7 billion.
- Merchant Solutions Revenue: Increased 13% to $255 million.
- Digital Wallet Volume: Increased 6% to $5.7 billion.
- Digital Wallet Revenue: Increased 6% to $189.7 million.
- Net Debt: Decreased by $26 million.
- Leverage Ratio: 4.8 times adjusted EBITDA.
- Share Repurchase: Approximately 686,000 shares for $11 million.
Release Date: August 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 strong Q2 2024 results with $440 million in revenue, growing 9% year over year.
- Adjusted EBITDA grew approximately 5% year over year to $119 million.
- Net debt ratio reduced to 4.8 times, a 14% reduction from Q2 2023.
- Digital wallets grew 5.4% in the first half of 2024, driven by improvements in the eCash business and growth in LatAm markets.
- Paysafe Ltd (PSFE) raised its full-year revenue outlook to 7% to 8%, up from the previous guidance of 5.5% to 7%.
Negative Points
- Adjusted EBITDA margins declined by 100 basis points due to planned incremental investments.
- Actions to limit volumes or exit relationships with higher-risk merchants will create a short-term headwind to revenue growth in the second half of 2024.
- Adjusted EBITDA margin guidance for the full year was reduced by 50 basis points to 27.5% to 28%.
- Three-month active users for digital wallets remained flat year over year.
- The company faces challenges in accelerating the growth of its user base for digital wallets.
Q & A Highlights
Q: On the merchant side, you called out a lot of drivers. Can you rank order some of those drivers of growth for us in this quarter, and how is sales going to look different going forward?
A: The e-commerce business continues to show solid growth, driven by iGaming growth in North America. Our optimization programs are working well, providing take rate expansion. The direct SMB business is also accelerating. We expect to see more activity from our sales force in Q4 and into Q1 2025.
Q: On the high-risk merchant relationships that you're exiting, can you quantify the revenue and EBITDA impact?
A: We expect the impact to be roughly $15 million in the second half of the year. It is higher-margin revenue, but these actions are necessary for long-term sustainability. The impact is already included in our guidance.
Q: Can you expand on why you decided to exit some of the higher-risk verticals now?
A: Historically, Paysafe has been reactive to market changes. Now, we are being proactive to ensure sustainable revenue growth. We are exiting higher-risk businesses with higher chargeback rates to drive sustainable growth into 2024 and beyond.
Q: What are the key initiatives to get the Digital Wallets user base back to growth?
A: We are partnering with companies like Revolut and focusing on marketing initiatives. Our acquisition of customers is accelerating, and we are seeing positive results from new initiatives like Riot Games partnerships.
Q: Can you provide more details on the chargeback protection and working capital loans?
A: The chargeback protection is predominantly used by SMB clients to stabilize their revenue streams. The working capital loans are a third-party product, offering origination fees without taking on risk. Both services are contributing to our take rate increase.
Q: How are you approaching cross-selling to existing merchants?
A: We have account managers responsible for the growth of our largest accounts. We are now offering our e-commerce gateway and new products like Pay by Bank to existing customers, which is driving more market share and revenue.
Q: Can you talk about the success of the e-commerce growth and any shifts in consumer spend patterns?
A: E-commerce continues to show solid growth, driven by iGaming in North America and seasonal events like the Premier League. We are not seeing any material changes in consumer spend patterns; July results are in line with expectations.
Q: Can you provide more color on the partnership with Revolut and its impact on eCash?
A: The Revolut partnership is a great opportunity to access more consumers and accelerate growth. It serves as a blueprint for future partnerships, allowing us to expand our eCash offerings and drive double-digit growth in regions like LatAm.
Q: Can you explain the new KPI for customer acquisition cost and its implications?
A: The customer acquisition cost is $17.60, with a two-month payback period. This metric helps us understand where to invest in marketing and sales. We are seeing good results from new initiatives and will continue to refine our approach to drive growth.
Q: How will the portfolio optimization and mix shift to larger enterprises impact take rates and margins?
A: Our guidance already includes the impact of portfolio optimization. We are accelerating faster on the top line, allowing us to make proactive decisions for long-term stability. We expect to grow over any short-term impacts quickly due to the strength of our sales organization.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
