Q1 2021 Paysafe Ltd Earnings Call
Please continue to stay and by the pace with Q1, 2021 earnings call will begin momentarily.
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Greetings and welcome to pay States first quarter 2021 earnings conference call.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host will Maina Investor Relations with pay safe. Please go ahead.
Thank you and good morning, welcome to the <unk> first quarter 2021 earnings Conference call with me today are Philip Mchugh, Chief Executive Officer, and Nancy <unk>, Chief Financial Officer before we begin I'd like to remind everyone that this call will contain forward looking statements and should be considered in conjunction with cautionary statements contained in our earnings release.
And the company's most recent periodic SEC reports these statements reflect management's current beliefs assumptions and expectations and are subject to a number of factors that could cause actual results day purely from those forward looking statements. During today's call management will provide certain information that will constitute non-GAAP financial measures under GAAP.
These reconciliations.
Filiation to GAAP measures and uncertainty.
And we're also inclusion and today's earnings press release and.
Our supplemental earnings presentation, which are available and the Investor Relations section of our company website I will now turn and turn the call over to Phil.
Thanks, well and thanks for that well first of all welcome and thank you to everyone for joining our first public earnings announcement to stay safe.
Today I'm going to cover some of the strategic highlights and key deliverables from our first quarter and then turn it over to Izzy Dawood, our CFO to review our financial performance to.
To say the least it's been an eventful and successful quarter for pay space first we successfully listed out and the New York Stock Exchange on March 31st following the successful spak with strong return to investors, we raised $2 $1 billion and successfully dis back to go public 114 days after our initial announcement.
We were able to pay down more than a billion dollars of debt strengthening our balance sheet and our credit rating along the way.
We also have a new board in place with Bill Foley is our chairman and we've already started our implementation, but fully transformation plant and lots of activity on that front and.
As a team we've been able to execute against our strategy driving growth and scale across the company and delivering on our key initiatives. We're starting this new chapter with strong momentum across the business and the markets that we want to win.
And from an overall market view, we continue to continue to see lots of strong activity online and E. Commerce volumes continue to remain strong we're.
We're seeing rapid growth and lots of market activity in North America, I gaming with the legalization of sports betting and four new states planned in 2021 and several other states not far behind.
We're also seeing the emergence of a strong recovery and the U S SMB market, where and the first quarter, we saw 18% increase and volumes year on year, and our U S acquiring business and we're seeing much higher growth in April.
Finally, we're also seeing a continued adoption and <unk>.
Openness to using new payment methods, which should serve us well over time. According to our recent proprietary research nearly 60% of consumers have tried a new payment method and the last 12 months.
Moving onto our strategy.
For anyone new to pay safe and our story I really encourage you to review our recent analyst day presentation. We provided ample detailed you and that event back in March which I won't repeat today, but I do think it's important to recap a few points first pay safe and the scale and truly unique payments company with a goal to be the.
Leading specialized payment platform.
Do I mean by that we're a company with differentiated products and both the consumer and the merchant side, creating a powerful two sided network.
Moreover, our powerful script net tell her and pace a card brands provide millions of consumers valuable ways to make payments and said money and all forms of digital commerce, we match our products with strong risk management expertise, it's very hard to replicate along with scale global technology platforms that allow us to do.
Payment solutions and hundreds of markets lastly, and very importantly, we like to approach the market focused and deep verticals like high gaming requires knowledge of multiple Atms strong risk management and ease of integration when that combination is required we know that pay safe has the right to win it.
And so how we deploy that strategy and we're really focused on four key growth pillars. First we are positioned to be the true winter and high gaming, which includes online sports betting casino and poker fantasy and E sports and.
Particularly we have a strong position to win the fast emerging U S. Ah I gave me market.
Second the strength of our products, including Scrilla net Taylor and R. E cash solutions combined with our strong e-commerce capabilities position us well to win beyond I gaming, including digital goods trading and financial services travel entertainment and some select integrated verticals with 75% of our revenue to come.
From online payments and our folks and specific industry verticals were exposed to the fastest swim lanes of growth and the payments market.
The third pillar, which we spoke about in great detail during our analyst day is our transformation plan, which is well underway and we are already delivering rising operating leverage across all areas of the company.
And finally, we see multiple consolidation opportunities and the market to enhance our position in North America, I gaming digital wall expansion and E Commerce verticals.
So that's a bit of a summary of what we said during the last analyst day in terms of our strategy and so now let me move on to what we actually did and the first quarter.
Let me first start with North American by gaining at the Analyst day, we talked a lot about the I gaming market and how pay safe as the de facto payments partner of choice serving the majority of regulated I gaming industry with more than a thousand gaming operators, who use one or more of our products around the world.
We also talked about our strategy to grow the emerging U S market, where we already have integrations into approximately 75% of all operators. So.
So let me provide some key updates and our activity and the first quarter revenues from North America, I gave and grew 66% and the first quarter.
Hey, safe launched and both Michigan, and Virginia, and the first quarter now we are alive and 15 states across the U S. We also expanded and deepened our presence with a number of exciting wins during the first quarter and early second quarter.
Our U S lottery business has enjoyed significant growth buoyed by our expanded partnership with Jac pocket and recently launched and New York in March we expanded our U S partnerships with points back and Michigan.
We're also expanding our relationship with our relationship with parks casinos.
Bridging our Playtech integration, where we are alive, and Michigan with plans to expand and other states and Virginia, We have gone live with wind bet on the back from our relationship with bat ball, which is power and their business. Additionally, we also expanded our strong presence in Colorado with our launch of play out.
And moving on to Canada, we continue to have a dominant position and as announced and our recent press release, we now support out there just only regulated online gambling website.
In addition to expanding our payments integrations and multiple states. We also talked about making key product enhancements, specifically with our squirrel digital wallet, we focus on driving instant funding and the wallet, where we think there's a material GAAP and the market the feedback from our product from early discussions with key merchants.
Has been very positive and we are.
And on track for upcoming pilots with several major brands.
Overall, we're incredibly pleased with the traction here, both from an execution and a market perspective.
Now, let me turn to how we're growing and emerging verticals, we have seen strong growth and trading and financial services as well as and digital goods such as online gaming. A particular note has been the overall strength of our E cash business growing 60% year on year as it expands into new markets as well as crypto trading in our script wallet.
And online gaming, we continue to gain traction we're live in 20 countries with Microsoft and we continue to expand that relationship and our presence as an active sponsor and E. Sports League continues to drive true user engagement.
We've been very active and other emerging markets, particularly with making good strides across crypto and trading supporting near banks and other financial services, we saw strong Q1 growth and crypto and FX trading volumes within digital wallets.
Particularly note in March we expanded our partnership with Coinbase to include the ability to trade crypto currencies and the U S market, we are alive and twenty-seven crypto sites and exchanges for digital wallets with seven of those sites also life of processing as well a good example of the two sided network.
And eat cash will becoming a meaningful player support and financial services, including partnerships with banks and the banks. It includes the pilot with TSB and Diebold Nixdorf building on some of our prior announcements, including Moonies. Additionally, we continue to see progress and integrated software verticals with ascend and can't Minder as too recent.
Wins.
Now, let me move on from the emerging verticals into the transformation proof points. We've also made progress on our transformation initiatives and the Foley playbook to ex celebrate global scale and unlocked value, we are well on track to meet or exceed our target to migrate 70% of our business across pay state for the cloud by year and effectively.
And 100% migration by early 2022.
We're seeing improvement across both risk and banking as a service. These actions are lower and our loss rates and bank fees as we improve risk analytics and part and with more tier one banks. We've also kicked off a number of initiatives to capture further cost savings across multiple functions and Q1, our SG&A costs were down approximately 4%.
Versus prior year, and we see a continued path to driving positive operating leverage.
Now moving on to the last pillar, we remain active and the market regarding deals and assessing potential opportunities to enhance I gaming consolidated digital wallet and expand our e-commerce footprint.
Before we move on and I'll make a quick comment on the financial result is he will take you through the details while we are seeing growth and strong underlying trends across the business and all the right places. This growth has been somewhat tampered by measures to improve the overall risk reward profile and certain markets and channels.
As we mentioned during the analyst day. The majority of these actions took place in 2020, and we expect to truly lap these issues and the second half of this year.
As a last point I want finally, thank my pay sales team members around the world. Our success to getting this moment is a true testament of the hard work and dedication from every body.
We're really pleased to have given all the employees equity and the company.
Really instilling an ownership culture across pay safe as we start this new chapter as a public company.
With that introduction I'll now turn it over to Izzy.
Thanks Philip.
Now, let's turn to slide six and start with a brief summary of our performance versus our guidance for the first quarter.
Revenue and EBITDA came in at the higher end of our guidance.
Gross profit and expenses were right in line.
Overall, we delivered solid performance versus our expectations for the quarter.
Now, let's turn to slide seven.
Williams are up 8% year over year, driven by integrated processing and eat cash.
Total revenue for the first quarter was $377 4 million up 5% year over year, driven by strong growth and our E cash segment.
Excluding the impact of the paid later business, which was divested and July of 2020 revenue would have increased approximately 7%.
Further adjusting for the actions we have discussed in our analyst day and continued risk word optimization and of our business model. Our revenue growth would have been and the mid to high teens.
Adjusted EBITDA for the quarter was $113 2 million essentially flat compared to the prior year, resulting in and the and adjusted EBITDA margin of 30% compared to 31, 4% the prior year.
The decrease in margin, primarily reflects business makes and integrated processing and digital wallet, partially offset by E. K E cash margin expansion.
Lastly, free cash flow was 109 million or 96% conversion and and.
Adjusted EBITDA basis, which included a $45 million benefit from the utilization of bank guarantees at the end of Q1.
Next quarter, we expect free cash flow conversion in line with typical levels.
Moving to slide eight I will quickly touch and a few additional line items, including our GAAP results.
Appreciated and amortization was $65 5 million, which is 6% lower than last year.
Interest expense was $58 5 million at 53% higher than last year, driven by the acceleration of deferred debt financing expense as you pay down debt at the end of Q1.
For Q1, 2020 one our net loss was also impacted by share based compensation charge relating to the shares that vested under completion of the transaction.
Moving to slide number nine and for a discussion of the segment results starting with integrated processing.
Volume growth was strong up 17% and the processing business led by the U S market.
Increased volumes across most of our industry verticals, while travel and hospitality are still subdued relative to Q1, 2020.
Revenue for the first quarter was $176 9 million, a decrease of 5% compared to the prior year.
Excluding the pay later business revenue declined 1% as growth from U S payments processing and I gaming was offset by lower revenue from our direct marketing channel.
Adjusted EBITDA was $44 9 million compared to $55 2 million and the prior year.
Adjusted EBITDA margin of 25, 4% decrease due to merchant and channel mix, partially offset by lower credit losses due to a onetime event and the prior year.
Excluding the impact of pay later and the discrete actions that we've taken to improve our risk reward profile revenue and integrated processing whatever increased approximately 5%.
Now, let's turn to cash and slide 10.
Your cash revenue for the first quarter was $112 9 million and increased up 63% compared to prior year driven by extended Lockdowns in Europe and associated and increase in spending more online and all verticals.
Adjusted EBITDA was $48 1 million more than double Q1 of 2020, resulting in an adjusted EBITDA margin of 42, 6% and increase of 950 basis points year over year.
Moving to slide 11, we shift our focus and digital wallets.
Revenue and digital wallet segment for the first quarter was $94 9 million a decrease of 13% compared to the prior year and performance was impacted by the targeted actions and country exits from last year that we have discussed and our prior analyst day.
Excluding this impact digital wallets revenue would have grown approximately 6% driven by higher I gaming and crypto and FX trading activity.
Adjusted EBITDA was $37 8 million compared to $53 7 million and the prior year.
Adjusted EBITDA margin of 39, four and 8% decrease year over year, driven by the changes and gross profit margin due to the business mix and increased investment and marketing and operations.
Moving on to slide 12.
Total debt outstanding at the end of the quarter was $2 1 billion as of March 31, and our net debt to last 12 month adjusted EBITDA ratio was 4.2 ex reflecting repayment.
Payment of approximately $1 2 billion of debt post closing of the merger.
And April Moody's upgraded our corporate and first lien lean rating to two notches by two notches to be one S&P also upgraded.
Our rating by two notches to B plus.
We expect leverage to decrease to approximately $3 seven ex by yearend as well.
Finally, we continue to evaluate whether our current debt profile and it.
Patiently be refinanced, which will further improve our leverage profile and create additional flexibility.
Moving on to Slide 13, we did now discuss our outlook for Q2.
For Q2, 2021, we expect revenue and the range of 365 to 385 million on a reported basis with strong growth across all our businesses.
Gross profit is expected to be between $225 million to $235 million and adjusted EBITDA between $110 million to $120 million.
On slide 14, we move to onto the full year, our expectations as a whole remain in line with guidance provided the analyst day.
For revenue. However, we are lifting the low end of the guidance and now expect revenue and the range of 1.53 billion to one point and five 5 billion district.
This reflects year over year growth and a range from 9% to 10%.
Which excludes pay later from 2020 and.
And the second half of the year, you'll see our revenue growth reflect the strength of our business model as we lap the legacy issues that impacted our growth and Q1.
We continue to expect gross profit of 930 million to $970 million.
For adjusted EBITDA, We continue to expect 480 million to $495 million.
With that I'll now turn the call back over to Philip for closing remarks.
Thanks, Stacy in summary, we're executing well against our strategy, we are lapping our key legacy issues.
We're winning deals in the U S I gaming market at a rapid pace.
We're expanding and high growth emerging verticals across digital wallets and cash and e-commerce.
We're seeing strong recovery and our U S SMB business.
We're delivering against the transformation plan.
And we're well positioned for consistent organic and inorganic growth.
With that said I think we can now move to the Q&A section. Thank you very much.
Thank you Sir.
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One moment, please while we poll for questions.
Our first question today come from Darrin Peller of Wolfe Research. Please proceed with your question.
Alright, Hey, guys. Good morning. Thanks, you know when we look at your results and I think you called out that revenue growth would have been I think you said mid to high teens. If you were to back out the impacts from the network partners referral partners and the digital side and then merchant obviously, you had a portfolio change to derisk.
Can you just touch on is that the normalized growth we should expect as we start to grow and the next couple of quarters. Obviously, you have comps that impact a lot, but just remind us you know.
On a segment basis, perhaps and then overall what do you guys see this company growing at again per segment more normalized when you anniversary and these changes.
And a per segment basis as well as company wide.
Hey, Darren.
Phil It's good to talk is always a good chat.
Yeah look so in terms of in terms of the change that you know there are basically three components worth calling out.
That is he laid out right. So one is the disposal of pay later last year and Thats, just simple kind of pro forma math. The second one is as you called out was on digital Wallets, where you know we were very consistently talking about that through the pipe res and non analyst day.
We exited our second lift kind of channels and markets, which we didn't think were good for our clients or for US those are kind of Q2 and Q3 actions of last year, and we see ourselves starting to lap that in Q2 and Q3 of this year and.
And the direct marketing vertical.
We are we are you know we are a significant player there and more recently at the end of the year. We strategically took a decision to to anticipate some upcoming scheme rules and views on that market and as a result of that we wanted to get out ahead, and we we exited a discrete set of Klein.
And so it's a very ring fence piece, we did that in late December and we work through that are basically still kind of early Q1 as we stand here today, we're very well positioned and that business. We have one of the broadest set of capabilities and capacity to manage direct marketing volumes.
Trading and May is strong and go and the right direction and we'll lap that specific issue in Q3 of this year. So those are the three components.
We're all kind of capture the impact of those decisions wall and our are broadly and on March 9th guidance.
And as you kind of call out a week.
We've highlighted we're really happy with the growth trends.
Of the business and in the right place and so we see ourselves lapping those issues through Q2 and Q3.
And we won't have the very high pay safe card volume growth as well with so that they will taper down a little bit on a year on year when that all kind of blends through we definitely see ourselves and you know that kind of 11 and 12, 13% range of growth.
And as a consistent business, but let me turn it over to his he kind of if you want to add anything else to that sure. Thanks, Phil So darrin and putting a finer point on Q1, specifically do.
And to help you guys kind of do the math and how we get to the mid teens.
And so specific to some of the scheme changes have both talked about we believe and Q1, that's roughly a $10 million impact year on year.
And the network accounts and the channels that we exited a year on year is roughly $20 million. So if you add the two it's about $30 million impact year on year and and if you wanted to adjust for those that's how you see how do we get to the mid teens growth overall for the company.
And I just want to iterate and.
Yes, Phillips Edwards and these are items, we have obviously discussed talked we feel comfortable with and are comfortable with where we are reaffirming our full year guidance. So these are things we are aware of and you'll see the real performance kind of starts taking shape as you lap these legacy issues and the second half of the year.
Okay, and so that partly explains the yield compression you're seeing and the integration side and also we're just getting some questions on the bone exactly percentage yep.
When we look at it and then just my follow ups really around the strategy on that as well.
And what side and revisiting all the new initiatives. He built out I mean, it's a lot of what I know investors are excited about the stocking and the story overall. So if you could just update us on what kind of progress has been made over whether it's the expansion into areas like crypto, how that's going or remittance and then any progress on partnerships with U S gaming specifically to bring the.
Wallet.
Thanks again guys.
Yeah, and make a couple of comments on digital wallets.
One is in.
In regards to scale and net Tyler and the other one star E cash business too, which has a very strong wallet profile, it's effectively and emerging as another wallet business, so and and both those are are driving driving growth and a lot of upside force going forward. So in terms of initiatives. We've certainly been really pleased with our with crypto trading.
As we said and our announcement.
And we're live and 27 sites, we get very strong and consistent sign ups now not just from gambling operators, but from.
FX and crypto trading sites with a partnership and Coinbase and March.
We expanded our ability to trade crypto.
In the U S and 27 states. So today, we could do multiple functions to Fiat to crypto clipped, our crypto trading we could do advanced orders and we could trade 15 currencies and 90 countries. Now. So we think we are building a wallet that can really enable crypto trading and over Oh.
Time will be looking at expanding crypto to merchant capability and on a limited basis. We'll go slow and this is crypto to fund the wallet, but there those will take some changes and some by its views to build that out but we have a roadmap where we think we can be a player and not only and gaining but and trading that strong women's continues.
To be strong, especially as we move up to tier one bank relationships and our cost to serve goes down and that creates more and.
More kind of tailwind for snack business, and then most importantly, and and and Scrilla net Taylor is the U S market.
And we've been really focused on driving instant funding and the wall that we mean literally on the spot instant funding with a focus on the VIP client base, that's a GAAP in the U S market.
And we've built the product.
We have pilot set up with four five are very large brands that we plan to test over the summer and anticipation of the NFL season. So we're really pleased with that and we're pleased with how we develop that product. We're very pleased with how partners have reacted to it and.
And and and reaffirmed the view that a a gaming focused wallet focused on their VIP players who drive a large part of the cashier volume is a need in the market and net pay safe is a is really uniquely placed as a company to solve that so those are those are some of the flavors, where and when we think about the wallet.
And the trajectory we were walking through some of these legacy issues. They are painful youre not you know, we we spoken about that before and so we think we're well positioned there also just to call out on our E cash business that.
And that business. We are we called this out at analyst day as well, we started really moving to the my pay Safecard App, where you can store the funds on an app price, there's no longer stay a pre or post paid transactional accounts, but it's a stored value a P M.
We're also once we have that done and that will be expanding and I ban accounts and other payment forms into that into that and it's effectively a digital wallet. We've gone from a standing start on that progress to where we will have 80% of our revenues will go through that might pay safecard app and by the end of this year. So we also see.
That is one of the drivers of the cash growth.
As it becomes another wallet serve and more Gen Z and millennial type customers versus the more sophisticated digital traders and gamers on script.
Alright, that's great. Thanks, guys.
Thanks Darren.
The next question is from Dan Perlin of RBC capital markets. Please proceed with your question.
Thanks, and good morning, guys I wanted to I wanted to just talk a bit about it looks like within the digital wallets and you just explained a bunch of these things. So this might be the reason, but the take rate there versus the integrated place where we saw the more degradation here, we saw it actually expanding quite substantially.
And so I'm wondering a couple of things one is just making sure we understand how to reconcile that lift on a year over year basis, and and secondly is this kind of the run rate that we should be modeling is there any cadence and do we think about it I know you talked about the second half of the year, having some lapping effect. So could you just speak.
To that 0.1st thank you.
Sure Hey, Dan Nice to hear from you. So I'll turn it over to Andy to talk about the take rate and mix and what's going on there.
Yeah. So let's start then with the.
And with digital wallet and say, yeah, a pretty meaningful we think and meaningful uplift and take rates and the combination of two factors again, we love. The fact that you know are our users or consumers use the wallet for multiple things.
So first up near the exit of the channels, we discussed which impacted revenue also kind of impact and take rate on a downward basis.
But in and flip side.
Increased crypto volume FX trading volume that we saw combine them with call. It a crypto FX volume actually increased take rates for digital wallets, because that's a big big driver.
I mean, a higher take rates and the journal wallet transaction. So that explains kind of day to take rate bump versus the revenue decline and digital wallets. So again, just a mix of how our consumers are using the wallet too.
To do their activities on the integrated processing and it really is a pretty simplistic.
Scheme rules and the likes that Philip mentioned earlier, I really and as our direct marketing business, which have higher take rates as a matter of fact, if you saw our volumes there and integrated processing growth pretty solid year on year.
And here is primarily e-commerce, driven I would lower take rates. So a combination of you know.
The decline and the direct marketing piece and just the general E Commerce growth contributed to the take rate difference on the integrate process and.
So overall as a company I believe our take rate was impacted by roughly 10 basis are actually was kind of flat year on year and offer the most part and to kind of balance those two out.
Okay, No that's really helpful.
And then my follow up question is you know is on U S I gaming.
There's a lot of things that are taking place there it sounds like you've gone into some additional markets and there's others that are expected to open up I'm wondering if you could just kind of help us understand how you're envisioning that playing out throughout the year.
The amount of investments that are necessary to truly drive brand awareness.
You mentioned you know.
Some of the things Youre doing and the squirrel and net to our wallets, but I'm just trying to make sure I understand the cadence of how that is expected to rollout and and the investments behind that and then just secondarily on the transformation piece, where does where do you guys stand I know we're early in the year, but where do you stand on on achieving that are I think it was $26 million of kind of cost take.
Out that you were expecting from 'twenty one thank you.
Yeah, Thanks, Dan So and the U S. I gaming piece, let me, let me break out the two pieces. So one is in terms of what we expect to happen one in terms of the market. Obviously anyone that follows can see there's a tremendous amount of activity both from online and casino players, but also from state. So we currently see tens.
States are with real activity, we see Arizona, Maryland, and New York, and Wyoming, all with pretty advanced.
Legislation and plans to go live as early as the second half of this year.
But also Florida, and Louisiana, Ohio, Connecticut, and Massachusetts, and Maine and also the active legislation with plans to go live at some times some as early as this year, if not early 2020. Two so we see a path where you could have up to 25 of the 50 states are opening up gaming and so that that's.
That's a very nice tailwind.
To the playbook that we've consistently talked about is one integrate integrate integrate now you have to integrate with your online gaming players you have to integrate with the player account management platforms like scientific games and Playtech.
And you you you you you you're gaining that ground bye bye bye servicing the the processing side like I said, that's debit and credit card processing, plus ACTH connectivity, so where we're winning in that space, where we have a we have a large share of the players are.
They open up states, where there we mentioned parks.
Which is you had a big Playtech play we've mentioned when that and Beth Bowl. So we you know we and we're we're live in those states and multiple states. So well, we'll be well positioned there. So that's the first part of the Formula is drive that and grow the second part of the Formula, which we've seen and other markets is to really develop a the.
Digital wallet play.
Over time now that's a second follow up and our view is to attack that V. I T segment, that's why the instant funding capability that we've done we've.
We've got and integration on the back and with Plaid to to power that we pilot through the summer, we'll start to see pick up as well on that piece as we go into the fall and that becomes a second engine of growth on top of the payment processing growth, where we really are integrating and and and leading the market. There so that that's a.
Little bit how we see.
How do we see that playing out in terms of marketing dollars, we will be doing some pieces, but his script takes off and the pilot takes off you'll see it start to ramp up some of the marketing on the squirrel brand towards the end of the year and into 2020. Two so that's a that's a little bit there we feel really good about that and then the last part.
In terms of the cost take outs.
We have had a strong program are we we've also worked with all of that kind of fully family of companies on on the kind of transformation projects, they have and specific incentives and so we've implemented a lot of pieces to fall or the bill Foley playbook, we have $30 million of cost of repeatable.
Cost take out and are in our kind of guidance numbers for this year, that's about a $45 million exit run rate for next year and there are several other activities that we're building and the pipe to augment that into 2020. Two so we do expect EBITDA margins.
To expand and the back half of the year to continue and it kind of a steady drumbeat going into next year as well. So it's a lot a lot a lot of focus activity there.
That's great. Thank you so much.
The next question is from Jamie Friedman of Susquehanna Financial Group. Please proceed with your question.
Hi, Good morning, let me Echo the congratulations Philip I went and asked in your prepared remarks.
You had commented about strength in April I think I was wondering if you could elaborate that either qualitatively or quantitatively.
Yeah. So no we're definitely seeing you know as we look at the the early results for for April and even some very good early results and Mei Ah Yeah. We we continue to be pleased with where the top line trends are going are we've had some actual record a record days and he can.
<unk> processing and historical records, not just recovery records and the historical records as we've.
Expanded our E com and to some crypto trading sites, we're seeing travel come back.
And so we're seeing some some really nice proof points across the board I E cash continues to remain very strong.
Not only in terms of online adoption, but also the move to the my pay say FAP as well I don't know if you want to add anything to that yeah, I'll, just and I know numerically a let's just say some things, but I'll tell you April last year was probably very depressed April this year has been incredibly solid so we have I'll say pretty significant growth at least.
And the month of April and our volumes.
And how that will play into May and June we will see you know fingers crossed as.
And as the World goes through different a different speeds of COVID-19 recovery, right and but so far off April off to a really solid start from all the metrics that we track and see.
And then as my follow up.
And they'll begin yet and I think in your prepared remarks, you had observed that 75% of the volume is on line.
Can you dimensionalize the growth of the online versus the.
Offline at least.
Quantitatively again.
Well, we what we've seen is outside of of course, the direct marketing vertical are we seeing strong very strong double digit growth generally speaking and our E. Commerce business is now obviously, the I gaming businesses and ecommerce business, that's growing at an extremely high double digits, but across the board where.
We're very happy with our ecommerce business and we've we've been investing in and sales and and capacity on that front.
Got it I'll drop back in the queue. Thank you.
Thanks, Jamie it's good to hear from you.
The next question is from Josh Levine of Autonomous Research. Please proceed with your question.
Hi, Good morning, I have two questions number one of the you called out 66% growth and North America I gaming can you tell us how much came from processing versus digital wallet versus the cash and then the active users for digital wallet and three 5 million and that number it looks unchanged from the last reported is that is that a current number or is the day to it or if it is.
The current number why has it not changed thank you.
And you wanted to grab that one yeah, hey, Joshua and good through good to hear from you as well.
On the North America I gaming.
Predominantly all of volume right now is gateway or e-commerce related the wallet really doesn't rollout and full force. So the second half of the year and this is the comment around the incident.
And some funding up a program that we're rolling out with and concert with Plaid supporting us so pretty much all the growth is and e-commerce activity, which kind of.
Pretty much in line and what kind of what the market would have expected, maybe a little better as well and.
In terms of $3 five moving attribute theres no. Its a static it's unchanged from the end of Q4.
So it's an updated number as we're still like I said, we're still lapping through the the channel exits and the like obviously the muted in Q1 impact in Q1, 'twenty, one it's less but there's still some impact.
And then we'll continue to update that as that as the quarters go along.
Thank you.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next question is from Mike del Grosso of Compass point. Please proceed with your question.
Good morning, Thanks for taking my question.
Question on the on the integrated processing volume growth this quarter, 17% and I know there was some channel exits and there, but could you kind of help us out as far as some of the other verticals how those performed relative to your expectations, whether it's S M b or travel or some of the other segments. Thanks.
Yeah, generally I hate and Mike. Thanks for the question. So generally across the board. What we're seeing is a really a really robust recovery across our SMB portfolio and that that's strong and that tends to be on the smaller side of F. N B, a which is where we like to operate.
There's a lot of kind of a restaurant and retail in that space, which has been very good two we have a petro business, which is also continues to perform extremely.
Extremely well on that front, but across the board the U S. S. N V recovery is a nice tailwind force across.
Two we are seeing some return to travel we actually had a decent amount of health and wellness are actually camps as well.
So those are those are and other sectors, which we we see continued and emerging tailwind and then finally, we did mention that you know why we're available on twenty-seven crypto trading sites with a digital wallet, where also available and we're also processing on seven of the sites and and.
That's a great stores and pay safe working together are really you know we've got a client you you get a hook and with a product and then be able to introduce the wider relationship and that's really walked and both FX trading and crypto trading where we'd been very working very closely the teams and they're working very closely and grabbing not only wallet share.
Processing share and we see that as a really nice growth engine for us and we will continue to develop easy I think you went out and.
And I and Mike one of the quake and things that are interesting.
Mentioned and still have mentioned really good strength across multiple sectors.
And hospitality piece is really interesting because we really start seeing that pick up more and April right.
Some of your state restrictions came down and things start opening up so and that kind of also supports the strong growth in April as retail and restaurants, and Petro and health and wellness continue into Q2 as well so far I mean.
Knock on wood here, but we see really a strong green shoots across our integrated processing business almost across everywhere vertical.
Great. Thanks, and then I guess my follow up is on the U S. I gaming opportunity I know you've had a lot of qualitative comments today on it and then you've got the 66% revenue growth and Q1, but just stepping back you know as we think about the incremental state legalization.
Thank you mentioned 25 of the 50, you know maybe you know legalized here and the next.
12 to 18 months like how is that how does that compare to your initial presentation.
Last March and and kind of your your existing.
Existing expectations relative to what they were then.
Is this upside to do and that's it.
You know the story.
And to get up.
And I think there too I think there are two ways to answer that generally speaking, it's it's a it's happening.
Better and faster than than when we spoke about you know kind of if you look back and kind of Q3 and Q4 or Q4, when we were talking about it initially so January it's going it at a strong clip we did believe that COVID-19 and state budgets might be and accelerating force and we are we think we're seeing that happen and New York is a great example.
<unk> of that so overall, that's a that's a positive trend and.
And slightly more optimistic than what we would've said are they the only the only caveat is we go through and a state by state basis, not every state opens up the staying way. Some are opening up for multiple operators. Some will open up for lottery first and then sports betting sack and some.
Some states like New York will be very specific and only allow a very select few of operators. So if your integrated into that operator, that's great. If youre not you might miss out on more of a chance of that state so and so theres a little bit of a nuance and Mike as you drill down on it but generally speaking you know we are very well at it.
Integrated across the the big important player account management systems.
And we're very well integrated with all the big names are the majority of the big names. So that does serve as well as as a as the states open up at a more accelerated pace.
Great helpful color. Thank you.
Thanks, Mike.
The next question is from Timothy Ciano of Credit Suisse. Please proceed with your question.
Great. Thanks for taking the question. This morning on F N b within integrated processing rougher.
Roughly half or so of the segment revenue and maybe you could just talk about the component there that is the Clover business I understand you guys are one of the largest resellers of cover maybe just talk about the relationship there and how large that business is for you and how that group, maybe compared to the overall and compared to the rest of the SMB portfolio.
Thanks, Tim and I know we've talked.
<unk> talked in the past that we're we're definitely one of the larger.
And our resellers of Clover smart devices and in and in the country. It's a great relationship with first data.
Which we continue to have so that's been a strength I don't have to hand, the exact cut of clover terminals and the and the share we could certainly follow up you know and and assessment called it and get you that breakdown.
Where the real focus for us has been weak.
We've really been focusing on driving scale and operational efficiency are improving our auto surf and we're very focused on having a single boarding capability, where you can order board onto the back end of either T system first day to north or Omaha, that's actually a pretty powerful capability and.
This market and drive some extra extra pop it attracts lots of agents and I says there are two we're also working closely with our with our E.
E Commerce gateway and integrating that more and more into our SMB offering as well. So there are a couple of nice developments happening on that front beyond beyond the smart pass sales, but we can follow up on that.
Yes.
Okay, Great and then just related to the yield on the Cobra business in general would you describe that as relative to the overall segment's yield would you describe that is roughly in line slightly higher or slightly lower.
Tim I'm, sorry, you said the yield on which business I didn't pick that up apologies.
And the Clover portion of the SMB business.
Oh is there a higher yield on the Clover portion.
Well, we have to double check, but I would suspect there's not a meaningful delta and yield between selling a part and what's going to really drive the yield is the size of the merchant and and the vertical more than the actual pause at the end of the day. So so that's certainly the way we've approached from pricing, but what we can come back with that.
And the confirmation of that.
Okay, great. Thank you so much for taking the questions.
Thanks, Justin from.
There are no additional questions at this time I would like to turn the call back to Philip Mchugh for closing remarks.
Thanks.
We have a large crowd on the phone. So thank you for everyone for joining thanks for the questions. We look up to look forward to some follow up sessions and to updating on the performance and growth of where were taking pace day. Thanks everybody.
Okay.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
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