Nuvei Corporation Q1 2023 Earnings Call
Good morning, ladies and gentlemen, thank you for standing by and welcome to New way corporations first quarter 2023 earnings call. As a reminder, this conference is being recorded.
I'd now like to turn the conference over to Chris Maloney head of IR. Please go ahead Mr Memorial.
Thank you operator, and thanks to everyone for joining us this morning with US today are Phil Fair, Chairman and CEO and David Swartz CFO . As a reminder, this conference call is being recorded and webcast and is copyrighted property of New Bay.
The broadcast of this information in whole or in part without written consent of <unk> is prohibited.
Earlier this morning, <unk> issued a press release announcing financial results for the three months period, ending March 31, 2023, the release as well as an accompanying supplemental slide deck is available on the events section of our Investor Relations website investors <unk> Dot com.
During this call we may make certain forward looking statements within the meaning of the applicable securities laws.
Such forward looking statements involve risks uncertainties and other factors that may cause the actual results performance or achievements of the business or developments of new base industry to differ materially from anticipated results performance achievements and developments expressed or implied by such forward looking statements information about these factors that could cause actual results to differ materially from anticipated results or performance.
It can be found antibodies filings with the Canadian Securities regulatory authority and on the company's website.
Our discussions today will include non <unk> measures, including but not limited to adjusted EBITDA adjusted net income and adjusted net income per share.
At the lead non Ifr's results are useful in order to enhance our understanding of our ongoing performance, but they are not a supplement to and should not be considered in isolation from a substitute for <unk> financial matters. Reconciliations of these measures to ifr S measures is available in our earnings release and MD&A.
Open up the call for your questions. After our prepared remarks during that portion of the call in order to get to as many people in queue with any a lot of time, we ask that you limit to one question and one follow up and with that I'd like to now turn the call over to Phil.
Thank you, Chris and good morning, everyone. We have a lot to share with you today, So I'll jump right in.
As you've now seen new way is off to an excellent start in 2023, delivering first quarter results ahead of our financial outlook as we remain heads down executing our strategic initiatives growing our market share winning new customers and expanding with existing customers driving innovation and extending our geographic reach.
As we celebrate our 20th year, it's incredible to reflect everything we've accomplished today.
They knew they enables leading discretionary and non discretionary use cases, all over the world with tremendous white space for continued to grow in a very large and addressable market and.
And naturally we fully intend on continuing to scale the business and grow both organically and inorganically.
And yet even after all the growth innovation learnings, we're still very much on the ground floor with the best is yet to come.
Great businesses are not built overnight and our success is directly attributable to our people and culture and I wanted to take a moment to thank our more than 2000 colleagues around the world for their tireless efforts passion and dedication to growing our business and supporting our customers you guys are rock stars and it's truly a privilege.
To be working with you.
So this morning I'm excited to share two recent changes to our leadership team.
First is it promotional Scott Callahan, Chief strategy Officer, a newly created global role reporting to me Scott who has led M&A efforts. Since 2018, we will now lead strategy integration and M&A.
Second is welcoming Caitlin shutter previously highest chief people officer, as our new global Chief people officer, replacing the keys, and we think Nicky for her many contributions during her time and moving and wish her well in her future endeavors, I look forward to partnering with Scott and Caitlin.
Turning now to pile.
As a reminder of the deal rationale adds BTB government and IC three highly attractive growing non discretionary and largely underpenetrated channels to our business.
We completed the acquisition in February and the integration is on plan as we've combined two fantastic teams into a single organization and are now focused on applying additional resources towards accelerating the go to market strategy, which I'll touch upon later in my prepared remarks.
<unk> CEO , Jeff <unk> and CFO , Glenn runs Oni will be departing the company over the next few weeks I can thank Jeff and Glen enough for their professionalism and operating with such class and dignity throughout the entire process.
Looking further at our progress with the integration. We've now retired one of highest legacy payment gateways and we had a deliberate plan in place to sunset. The rest over time freeing up additional resources for continued investments.
Having now aligned our leadership team and eliminated public company costs, we start to execute on our estimated $21 million cost synergy target.
As we have stated previously the majority of the cost synergies are expected to be recognized towards the end of the 24 month period. Following the completion of the acquisition.
Furthermore, by plugging pyre into new based tech stack, we've identified between 50 and $100 million of new revenue synergy opportunities above highest standalone base case by 2027, consistent with our thesis of accelerating <unk> growth trajectory.
We see ample opportunity to achieve this revenue growth by enabling global opportunities and implementing our go to market playbook.
The key takeaways I'll leave you with on payouts are that we're on plan, we feel really good about the acquisition and the deal rationale and are confident in our ability to accelerate the growth of the business.
Turning now to our financial results, which above all else indicate that we continued to scale the platform and win market share.
Total volume for the first quarter was 42 billion, increasing 45% on a reported basis and 48% on a constant currency basis over the prior year's first quarter total volume on an organic constant currency basis grew 29%.
Revenue for the first quarter was $256 million, increasing approximately 20% on a reported basis and 22% on a constant currency basis.
Organic revenue growth on a constant currency basis, excluding digital assets in crypto currencies grew 26%.
Taking it one step further that 26% growth rate means that we face are approximately $32 million of revenue headwinds in the quarter, which comprised of $5 million from changes in foreign exchange rates and $27 million from digital assets and crypto currencies on a constant currency basis.
Remember that because we are an at scale platform. The majority of these associate dollars flow to adjusted EBITDA and free cash flow. We believe this helps frame the operating scalability of our business.
Adjusted EBITDA increased 5% to $96 million with a 38% margin in the quarter and free cash flow was $84 million also an increase in prior year.
We continue to believe that we are a fintech. Unlike any other with our differentiating compelling financial profile, which features a unique combination of growth.
Stability, low capex and high free cash flow generation.
As you May recall, we manage our go to market effort in three distribution channels global ecommerce.
E Commerce resellers.
And small medium sized businesses.
With <unk>, we've now added three new channels, including <unk> government and agency <unk>.
Double clicking on our results for the quarter by channel Global E Commerce, which is our primary focus and core value proposition grew 37% at constant currency, excluding digital assets in crypto currencies.
And I can't stress this enough.
We believe this is class lean growth and shows that we are truly winning market share and more importantly, growing faster than our high growth peers.
Beyond global ecommerce Novae continues to support our legacy channels.
With E Commerce resellers and SMB, both of which are predominantly driven by independent sales organizations in North America.
And on a combined basis represent a smaller percentage of revenue compared to global E. Commerce for the quarter revenue at constant currency increased 8% for e-commerce retailers and declined 1% in SMB.
I'll expand on SMB and what we're seeing there later on in my prepared remarks.
So there should be no surprise and as we've been saying we continue to see high growth in global ecommerce winning market share and driving category leading performances.
<unk> is being offset somewhat by slower growth in our legacy reseller in SMB channels.
Naturally as e-commerce continues to grow and becomes a greater percentage of our business. The smaller legacy channels will become less relevant to our growth profile.
Now looking at our <unk> government in ICU channels on a pro forma basis for the first quarter <unk> grew 15% government grew 15% and <unk> fees grew 17%.
Just outlined we're encouraged by this baseline performance and expect to accelerate growth in these channels over the coming quarters and years.
<unk> also has a lower growth legacy channel, which is a mix of reseller and Smbs and declined 1% on a pro forma basis in the first quarter.
So the key takeaway here is with respect to our channels is that by leveraging our technology. Our global E. Commerce business has exhibited best in class growth benefiting from our focused investments and strategy and we expect to accelerate performance in our newer BTB government and <unk> channels, which overtime will render our smaller retail and SME channels less meaningful.
And less of a headwind to our overall growth.
With this additional information we hope you can appreciate the momentum of the business the opportunities that lie ahead of us and hopefully you can share the excitement of why we continue to feel that we're very much on the ground floor.
Taking a closer look at our results by region.
North America revenue grew 55% in the first quarter to 125 million from $81 million <unk>.
Excluding <unk> revenue in the region grew 17% driven by continued growth in our global ecommerce channel, which grew by approximately 51% over last year's first quarter.
In EMEA revenue declined 4% to $120 million from $125 million. However, revenue excluding digital assets in crypto currencies grew 27% as the majority of that exposure originates from European operators.
Latam revenue increased 68% to $11 million from $6 million as we continued to see our business accelerating rapidly driven by investments in the region.
In APAC, while revenue decreased to $1 1 million from $2 9 million. It is important to note that our actual costs as volume has increased as we continue moving our customers from international for local and see a lot of opportunity to continue accelerating our business in the region.
Turning now to operating trends for the first quarter, our observations Echo earlier comments made by others, but underscores strong results and performance in our global ecommerce meet any government and IV channels and slowdown in domestic smbs.
Double clicking for the quarter certain organic revenue trends, we saw by vertical include.
Online retail grew by 84% travel grew by 65%.
Online gaming grew by 53% video and social gains grew by 51%.
And our SMB channel, which I discussed earlier and it's largely our card present business in North America, which includes consumer retail restaurants, and other verticals declined 3% on a reported basis and 1% on a constant currency basis.
Digital assets in crypto currencies were down approximately 61% compared to last year's quarter.
And declined 10% sequentially.
As we stated previously this vertical is immaterial to moving and going forward is expected to continue to decline and represented approximately 5%.
Moving on now to an update on our go to market efforts.
As you can appreciate from the commentary I just provide our sales channels. We're really excited about the momentum of our sales efforts.
Our capabilities give us the right to win our fair share of new business and we're winning as demonstrated by our global E. Commerce revenue growth of 37% at constant currency, excluding visualizing crypto currencies in this year's first quarter.
And with our new <unk> government and IFC channels, we are applying our playbook knowledge and experience to build out our class leading go to market effort globally.
While it's early new in your business, excluding digital assets in crypto currencies for the first quarter was promising up more than 125% comparable same period last year.
We also have some very large implementations launching the second and third quarters, which should contribute to our results in the second half of the year.
Turning now to an update on product and innovation, we are a technology company at heart and never standing still as we continue to accelerate our differentiated feature functionality globally.
Our technology investments increased by approximately 40% year over year, while keeping capital expenditures within our medium term target range as we continue to grow we will favor purposeful investments that propel our differentiated value proposition for this is how we stay ahead of the competition and we're progressing nicely across our strategic initiatives.
Namely our unified Commerce embedded finance and open banking offerings.
Finally in an area that it's clearly fastening for everyone. We continue to test and implement new use cases of artificial intelligence to enhance internal support channels customer support merchant Onboarding risk management underwriting and compliance we look forward to seeing this developed hurdle.
Turning now to our disciplined capital allocation strategy.
As we said previously assigned from debt repayment and continuing to be opportunistic with strategic M&A, we expect to prioritize our excess cash towards share buybacks to this end in March we renewed our normal course issuer bid pursuant to which we may purchase up to 10% of our public float over 12 month period.
We've also implemented an automatic share repurchase plan, which allows us to purchase shares during blackout periods under predefined terms.
Subsequently, we purchased 135 million shares in the first quarter or roughly 2% of the public float for a total consideration of $56 million.
As stewards of capital and the young public company. We've returned a total of $223 million to shareholders in the form of stock buybacks.
I will now discuss recent market trends and how that informs our views in the current quarter and the rest of the year.
So far it's been a continuation of what we talked about before with positive momentum in our global ecommerce coupled with stability in <unk> government and IC consistency in our reseller channel and light headwinds in SMB.
When it comes to our second quarter, there is seasonality sequentially when considering events such as Super Bowl March Madness spring break charitable, giving and tax payments in the first quarter.
Nevertheless volume in both April and the first week of May is in line with our expectations.
With respect to the full year, we continue to take a balanced tone as the macro environment remains challenging to predict even though we haven't seen any significant changes so far.
I'll leave Dave to discuss the outlook for the second quarter and full year in 2023 in greater detail, but we continue to expect.
<unk> organic growth rate at constant currency, excluding digital access in crypto currencies to be between 23 and 28% for the full year.
We are raising the low end of our full year outlook by the amount we beat in Q1 as we remain cautious on the macro for the remainder of the year.
We are also reiterating our medium and long term targets for revenue adjusted EBITDA and Capex.
I am confident that new base growing leadership position within the payment ecosystem global scale product innovation talent and platform advantages will allow us to continue to deliver sustainable profitable and durable growth.
With that I'll now turn the call over to David.
Thanks, Phil and good morning, everyone I'll start by reviewing our financial performance for the first quarter I will then discuss our outlook for the second quarter and fiscal year 2023.
Looking at our performance during the March quarter, I am pleased to say that we're off to a strong start to the year.
Total volume for the first quarter increased by 45% to 42 billion, which was 3% above the high end of our outlook range.
The stronger than expected results were driven by our focused investments and execution within our global E Commerce direct channel.
Our E Commerce volume represented 90% of total volume in the period.
On a constant currency basis total volume increased by 48%.
That's really the inclusion of <unk> for approximately five weeks during the quarter was a meaningful contributor to our growth.
Excluding <unk> total volume on a constant currency basis grew organically by 29%.
Revenue for the quarter was $256 million up.
Up 20% year over year.
On a constant currency basis revenue grew 22%.
And also exceeded the high end of our outlook range.
<unk> contributed $30 million of revenue from the date of acquisition through the end of Q1.
On a pro forma basis prior generated $70 million in total revenue for the first quarter up 10% year over year.
All revenue figures for player our express net of interchange to be consistent with new <unk> definition of revenue on a net basis.
<unk> performance for the quarter was driven primarily by mid teens growth across <unk> ISP and government channels.
<unk> legacy reseller channel experienced same store sales headwinds in the quarter.
This is consistent with what we saw on an organic basis, and our legacy SMB channel and seems to be indicative of an industry wide trend.
Consistent with our focus on driving incremental gross profit dollars through our land and expand approach gross profit increased by $34 million compared.
Compared to last year's first quarter of 202 million, representing gross margin of approximately 79%.
Selling general and administrative costs in the first quarter increased by $48 million or 33% year over year to $195 million.
The vast majority of this can be attributable to two components both relating to pilot.
The first item relates to one time professional fees during the quarter, which were higher primarily due to the acquisition and integration related costs in conjunction with a prior acquisition.
The second component relates to the contribution of SG&A from pioneer for the period since the acquisition date.
In particular commissions paid during the quarter were higher.
Mostly due to players operating model, which places a high reliance on indirect partner distributions.
Employee compensation other than share based payments for the quarter increased by almost $8 million versus the comparable period.
Here again, the increase year over year reflects the inclusion of <unk> for a partial quarter.
Other main driver was investments such as in our product technology and commercial teams to drive growth.
Share based payments decreased 4% versus last year and I'll revisit this topic towards the end of my remarks.
Adjusted EBITDA for the quarter was $96 million, which was slightly above the top end of our outlook range, representing an adjusted EBITDA margin of 37, 5% in the quarter.
Looking at other line items on the income statement net finance costs was $13 million compared to $7 million in last year's first quarter.
We earned higher finance income of $5 million, primarily due to a higher interest rate environment.
It was more than offset by an increase in finance costs of about $11 million to service our outstanding debt inclusive of the new 800 million dollar credit facility. We entered into in late February in connection with the closing of the <unk> acquisition.
Net loss for the quarter was $8 million or <unk> <unk> per share compared to net income of $4 5 million or <unk> <unk> per share.
As I mentioned earlier.
The results include one time prior related to acquisition and integration costs of approximately $20 million.
Each represented approximately <unk> 12 per diluted share.
Adjusted net income was $64 million or <unk> 44 per diluted share for the first quarter.
Turning to the balance sheet and cash flow as at March 31, 2023, we had cash and cash equivalents of $133 million.
We also had term debt of $1 3 billion.
Meanwhile, our cash generation remains strong.
<unk> flow from operating activities for the three month period was $57 million compared.
Compared to 66 million for the comparable period last year.
Importantly, this year's figure was impacted by some of the onetime acquisition related fees paid during the period primarily related to the <unk> acquisition.
During the first quarter as part of our capital allocation strategy. Shortly after renewing our normal course issuer bid, we deployed $56 million towards repurchasing 135 million shares representing approximately 2% of our public float.
In addition to share repurchases, we intend to use excess cash to further reduce our leverage from current levels, while still maintaining the flexibility to invest in our business in pursuit of both organic and inorganic growth.
I will now turn to our outlook and would refer you to our forward looking information disclosure in our press release and MD&A.
As a reminder, our revenue growth profile. This year will be a tale of two halves.
The first half of the year, we expect our growth to be impacted by challenging comparables and digital assets than in the second half, we expect our growth rates to accelerate as we lap those factors.
Excluding digital assets in crypto currencies, we continue to expect our organic revenue growth rate to be between 23, and 28% on a full year basis.
Our first quarter growth rate was 26% positioning us favorably to achieve this objective.
That said, we do expect some variability within the remaining quarters, specifically, we expect the second quarter to be below the full year expectation.
We are confident with our full year organic revenue growth rate, excluding digital assets in crypto currencies of between 23 and 28%.
For the second quarter, which will represent the first full quarter, including <unk>. We expect total volume of between 50 and 52 billion.
Revenue of between 300 and $308 million revenue of constant currency between 301, 9 million and adjusted EBITDA of between 105 and $110 million.
As you can see we expect the second quarter to include several milestones as we expect to achieve in excess of $50 billion in total volume.
$300 million in revenue and $100 million and adjusted EBITDA.
These quarterly milestones speak to our success in scaling our global platform.
For the full year 2023, we are marginally raising our previously announced outlook to reflect our first quarter results.
But as our view of the macro environment has remained relatively consistent during the two months that have elapsed since we first issued our full year outlook, we are keeping our outlook mostly intact.
It follows that we now expect total volume of between 196 and $202 billion revenue of between 123, and $1 6 billion and adjusted EBITDA of between 456 and $477 million representing.
And adjusted EBITDA margin of approximately 37% to 38%.
We continue to believe our outlook is appropriately balanced between the global macro environment and the strong business momentum year to date specifically.
Specifically, the first quarter's organic revenue growth on a constant currency basis, excluding digital assets in crypto currencies of 26% drill.
Driven by the momentum in our global E Commerce channel, which grew 37% in constant currency and excluding digital assets and cryptocurrencies.
Before concluding I'd like to briefly discuss share based compensation from both a dilutive and expense perspective.
In terms of dilution there are two important takeaways first there is a significant portion of outstanding awards, almost 25%, which are significantly out of the money.
Failing to meet their performance conditions.
We expect to continue purchasing shares through our normal course, issuer bid, which will exceed dilution, resulting from the settlement of awards during the year.
From an expense perspective. It is notable that share based payments have been relatively stable within a range of $33 million to $37 million over the past six consecutive quarters.
However, as a percentage of revenue.
Share based expense decreased from approximately 16% on average through the five quarters ended Q4 2022.
14% from the first quarter of this year.
All else being equal as our revenue continues to increase and as some of the larger onetime grants start to anniversary such as our 2020 IPO grant to all employees.
Share based payments as a percentage of revenue is expected to continue to trend down over time.
Considering our 20% medium term revenue growth target share based compensation could be in the single digits as a percentage of revenue over the next three to five years.
I'll now turn the call back over to Phil for some closing remarks.
Thanks, Dave before opening up to questions I would like to reiterate the key takeaways from today's call first organic revenue at constant currency, excluding digital items in crypto currencies was 26% in the quarter second global ecommerce revenue growth of 37%, excluding visualizes in crypto currencies at constant currency.
Third the integration of pie is going according to plan and we've identified $50 million to $100 million of new revenue synergy opportunities above and loan base case by 2027.
Fourth we continue to invest in the business as appropriate including in our commercial technology and product teams and fifth we will continue our disciplined focus towards capital allocation with that operator, we're ready to take questions.
Thank you at this time, we'll be conducting a question and answer session.
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A confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue. As a reminder, we ask that you. Please limit to one question and one follow up for.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Our first question is from will Nance with Goldman Sachs. Please proceed with your question.
Hey, guys I appreciate you taking the question.
Go ahead and follow up on some of the stuff that you are seeing on the the reseller and F&B business.
Detect a note of caution in some of your remarks. There I was just wondering if you could maybe size the combined total.
How big are those as a percentage of the combined organization right now and.
Is your expectation that those will continue to be relatively flattish over the next the remainder of the year.
Good morning real itself.
I think we've been pretty.
Pretty clear on our investment focus on e-commerce for the past.
Three to four years and really love the momentum that we're building in our global ecommerce business and that's why we wanted to unpack.
What we're seeing in e-commerce, what we're seeing and resellers and what we're seeing in SMB and we've been seeing very good momentum in E Commerce and cross border along with some interesting momentum in pious channels.
<unk>.
In government from an SMB standpoint, as we continue scaling our core channels, which on an organic basis for new they will.
It will be Congress is over 70% today.
<unk> continues to drive the majority of our growth.
Headwinds that we may see in SMB and retailers will continue to decline. So we are investing in our growth we are maintaining our small business and reseller channels.
Overall, if you look at the business in the medium term.
Fast majority will continue to be globally Congress <unk> government.
Understood and then I know there was some commentary on <unk> and that being a little bit below where you're targeting kind of for the full year can you walk through some of the puts and takes on the second quarter Guide and just how youre thinking about the acceleration in the back half of the year I know you mentioned, some some big wins that are coming into the numbers.
Maybe one for David if you could just touch on the seasonality of yields over the course of the year. I know you guys don't manage to that number but it seems like the guidance implies a step up in yields in the back half of the year and I know historically, there's been some negative seasonality in the fourth quarter. So I'm just wondering if you could talk through some of the moving pieces there. Thank you.
Certainly he snuck in another question well I'm happy to answer it I think we never provided a Q2 guide right. So we're very confident with our full year. So from a second quarter perspective, as we continue diversifying the business. We do have some seasonality. When you think about Super Bowl March madness, or spring break and some of the tax payments as well as charitable payments that we see out there.
Through the first quarter. Nevertheless, we see really good momentum I want to remind everyone that every year, we start effectively a new sales journey. So our mid market and large client implementations typically go from the second quarter to third quarter, and then certainly ramp in the fourth quarter, So nothing to flag.
Normal normal business process in the second quarter late we will see a pick up of travel and.
And certainly other verticals I would pick up as well. So we are diversifying the base we are building up.
Exposure in each quarter with respect to opportunities from a sales perspective.
The momentum is strong and there is no surprise is ultimately to flag for the second quarter I will turn it over to Dave.
Hey, good morning, Ralph So, yes, I mean, just to add onto what Phil said with respect to the second half.
The year, we said that if you recall last last quarter. When we spoke to you not that long ago, we talked about the tale of two halves.
For 2023.
Certainly part of that is the headwinds that we faced in the first half on digital assets, so that that will lap in the second half.
What you saw in Q4, and what you see again in Q1 is 26% organic growth ex digital assets from crypto currency. So two consecutive quarters that are within that guidance, we gave for the full year.
23 of $23 to 28%.
And if you think if you kind of do the math, you'll see that from a second half perspective. If you. If you take Q2 is kind of our base case, and then kind of see what growth we need to have in the second half to get to the full year revenue range. It's about a three 5% increase in the second half over that kind of that Q2 base. So we feel we feel confident with it.
I'd like Phil mentioned, the new business, we saw really good granted it's early it's just the first quarter, but we saw new business.
So pick up right, 125% higher.
Then last year's first quarter, so thats going to contribute as well.
As we get later in the year.
The other things I would point to.
Certainly with respect to the synergies that will take some time, so that obviously hasn't kicked in yet but that will take some time and with respect to take rate.
Like you said, we don't manage specifically to take rate.
There is fluctuations certainly what we do see is we see typically Q4 being a little bit lower and then it steps up in Q1, we saw that last year and you see that again.
Yet again this year.
And then I guess from a go forward perspective, certainly we will have a full quarter of <unk>.
In the second quarter, so that'll have an impact slightly on take rate that will be a little bit lower but for the most part don't expect much variability.
On the take rate from a take rate perspective.
Okay.
Okay.
Our next question is from Darrin Peller with Wolfe Research. Please proceed with your question.
Yes.
Hey, guys.
The first quarter, obviously did underscore the strength of the E com business. When we look at April May trends I know you made a quick comment on that just maybe reiterate or just touch again on what youre seeing now is that more importantly.
Just looking through the rest of the year now that you have a little more insight into the pie.
If you could help us understand what the updated expectations are for the different sub segments within that business going forward as well as.
Monetization rates and it's really good to hear on the revenue synergies also Phil.
So anything more on what those are and how you think youre going to recognize those thanks Scott.
Yes, Thanks, Darren I'll echo previous comments that we've seen.
We've seen strong momentum e-commerce throughout the first quarter, So January and February strong results.
We did see some slowdown in March but thats predominantly some seasonality of that picked up at the end of March in E Commerce and interestingly enough. We saw daily average volume increase in April. So total ecommerce volume was higher in April even though it ended on a weekend and had the less days. So we actually really like what's happening around e-commerce in the <unk>.
Higher business.
We saw again strong January February softer March with stronger uptake in April . So overall, it's just allowed us to form your opinion and we broke it down you see certain verticals have strong stability, which we're quite excited about and some have really good momentum I think the other element that's interesting from our book of business is that.
We see different C.
Different events in different countries that we operate around the world as long as well as our our end markets. So we see really good momentum across all of our core verticals and we believe that strengthen strengthens our view for the full year.
In terms of Pi.
Without doubleclick and too much I want to give a good sense of the baseline that we have with buyer.
And something that we're really proud of right pie has done an excellent and although the resources. They have like just just a great group of folks that have executed really well what we find is interesting as we are bringing our playbook now and we've unpacked all the pious core channels at <unk>, what we're doing in government, what we're doing in <unk> and obviously you spent a lot of time with our.
Current partners and customers and from Unpacking global opportunities to unpacking product capabilities that that new base hits that <unk> had on our roadmap.
As well as looking at some cross sell opportunities certainly not tomorrow, but something that as we integrate <unk> into new age slow and we connect and technically there are a lot of tentacles for continued growth so, bringing our playbook from sales enablement from marketing from account management from distribution that we do in the highly competitive sphere of e-commerce.
The powerful into verticals that we think are largely underpenetrated is very exciting for us.
Okay.
Thank you I guess very quick follow up just on the gaming online gaming.
I think we saw over 50% growth and Thats, obviously, a meaningful part of the story so just.
Any comment on what's happening and driving that magnitude of strength and then.
I'll leave it there thanks guys.
Yes pleasure I think online gaming is more about executing our playbook. So we are seeing now really good momentum in North America.
We are seeing new markets coming online as well. So overall, it's about executing with our customers. We've always said that we're going to kind of crawl walk run in North America, we're running now.
Lots of good opportunities that we're executing on across.
Across the entire market not just the U S. What we've done in Ontario.
There is talk of Alberta coming online Theres been some new states that are activated in the U S.
That will that will continue driving its journey as well as real meaningful opportunity that we see in 2004 with respect to some proposals around UAE and what's happening in Brazil, and other markets. So gaming is more of extending our position investing wisely, having resources and technology that are relevant for the markets that we're operating in and we're just at that inflection.
Now.
Our next question is from Sanjay SEC Ronnie with <unk>. Please proceed with your question.
Thanks, Good morning.
All the commentary on the macro obviously, that's front and center with the investment community.
I'm just curious if.
The lack of seeing anything on the macro is a function of you guys taking share inside your merchant base or is it that your margins are just not seeing a significant impact related to the macro yet and I'm. Just could you just elaborate a little bit on that balanced view you are taking into the forward look.
Certainly thanks, Sanjay I think from R&D, it's not just the linear market. So many of the other peers that you follow or talking about the U S. Only and so we have that global footprint some of our verticals have high growth in new markets.
That does give us some tailwind.
In general there's two rules of thumb certainly is we sign up a customer and we participate in keeping in mind that none of our customers are new customers, meaning they come to us for specific issue that they're trying to resolve and thereafter, we grow with them and we grow with them by adding capabilities adhering to the roadmap or adding geographies and we think theres lots of up.
Side in our own customer base to continue driving greater wallet share by executing with them and being the partner that they need thereafter in terms of what their business journey and what their environment looks like we think there's greater opportunity within our customers to continue growing wallet share versus the exposure from a macro perspective within our own <unk>.
In a general basis, certainly there is some serious to that.
But on the SMB side, we're taking a more cautious approach.
We are seeing same store sales decline.
So we are watching that I think it was different in our SMB versus the peers that you follow us we've elected not to do significant repricing. So you end up seeing here is true same store sales.
And that is probably a different lever that we're seeing in others. So we're watching it carefully to.
To date on F&B. Besides volume slowdowns, we have not seen any delta in terms of merchant bankruptcies or losses or other so from a macro perspective.
Some headwinds in SMB really good momentum in global ecommerce and we think Boston opportunity in <unk>, and specifically golf as well.
Our next question is from Joseph <unk> with Canaccord Genuity. Please proceed with your question.
Hey, guys. Good morning nice results.
For the year just wanted to circle back on <unk> real quick to begin I know you indicated you're going to be closing for those payment gateways. There was that contemplated in the cost synergies.
Before the acquisition or should we look at that as incremental.
A good question and it is part of the cost synergies for us.
The overall plant actually is to utilize the API and rich library of integrations wherever possible and connecting them into new based tech stack. So.
Empire has multiple gateways, so they had a little bit of technical debt from M&A that they've done in the past and they were all in that journey as consolidating so from our perspective maintain them really good adding to what <unk> brings to the table and then reallocating the resources because <unk> got a great workforce to help us accelerate growth and capabilities.
<unk> got so it's all of the above is retiring is refocusing and accelerating.
Great and then I know you mentioned that new.
New business in.
In the quarter was up over 100% year over year, so anything to call out there in terms of <unk>.
Size of some of those customers in the new incremental adds versus a year ago.
How that trajectory of new business could expand.
Attribute during the year, thanks, a lot.
Yes, it's a great question Sheila I think the biggest thing that I would highlight for everyone is every year, we build a new portfolio of customers and it takes a while I think building blocks right January starts at zero and at the end of the year. It drives a momentum until the following year. So it is a big part of the following year's growth. It is the gardening in year.
I wouldn't I wouldn't tally too much about the first quarter, it's a nice place to start but it's more about what's going to happen in terms of this momentum into the second third and fourth quarter that we're excited about I wouldn't call anything out in terms of specific customers because we'd like to do that when they actually go live.
And they as they worked through implementations, but it's been a good start to the year.
Our next question is from Jason Cooper Berg with Bank of America. Please proceed with your question.
Thanks, guys I just wanted to come back to the comments around Q2 organic growth ex crypto being below the full year range of 23 to 28.
Why is that the case and what drives that second half re acceleration that you referenced.
Hey, Hey, Jason its David.
We expected some seasonality.
So really nothing out of the ordinary.
So no surprise there.
Really what we saw in Q1 than Q4.
Correct that to continue at that rate within the 23% to 8% so really nothing out of the ordinary part of it certainly also as the new new new business that we see that will grow in the latter half of the year.
But like I said earlier.
Do the math kind of on the on the core it's a three 5% second.
Second half versus first half so we feel really good about about the full year numbers and.
And we always try and take a balanced view right. That's always been our approach considering the macro and just considering overall.
Just.
Just by our nature to take a more conservative view, so we feel good about it.
And.
And there is great momentum that we're building both as we see kind of month to month and the volumes that Phil talked about but also on the new business. So both new and existing businesses are performing well.
Understood and then just as a follow up so on volumes you basically raised the midpoint of our full year guidance by the amount that you beat Q1 midpoint by but then on revenue. It looks like you beat the midpoint in Q1 by a solid 4 million I think you only picked up the low end of the full year range by 1 million so essentially the midpoint.
Really changed there I know these are small numbers, but just kind.
It kind of jumped out at us. So I'm wondering if this is a function of mix or take rates or other dynamics. Thanks.
Yes, it's always going to be a function of mix like you said.
You can call it take rate you can call it mix.
So it's certainly moved Directionally in line.
But not necessarily the same magnitude. So we feel we feel good about both the volume and the revenue guidance. We gave we've given for the full year.
Our next question is from John Davis with Raymond James. Please proceed with your question.
Hey, good morning, guys.
David I wanted to clarify.
That despite kind of the incremental opportunity from a revenue perspective of revenue synergies with the full year kind of Rev and EBITDA guidance still includes very limited if any pyatt synergies just wanted to confirm that.
That's correct that's correct that's more of a.
It's a longer build on the revenue side for sure.
On the cost side, which will be like we said in our prepared remarks more towards the latter half of that 24 month period.
And to the extent there are certainly there are some that are more current on the cost side with public company costs, but.
But others take more time, so yeah, that's no.
No significant impact from a synergy perspective on our current year outlook correct.
Okay, and then Phil earlier in response.
<unk> question, you talked about pricing.
Trends in that you guys have elected not to kind of increase as we've seen a lot of your larger peers kind of raise price across the board. So curious there just pricing philosophy.
Not just SMB, we've seen price increases we've seen them in E comm as well. So just curious have you guys raise price at all like how do you think about it as a lever that you have to pull in the future just any comments there would be helpful.
Yes, certainly I think you have to break it down by groups. So large enterprise clients pricing is not a lever.
So it's never been an eager just because certainly how they operate.
<unk> is a potential lever.
I think we'll watch and see how the year kind of progresses, but from our perspective now we typically follow and pass pass through increases that are happening from card associations and may be opportunistic on those in terms of what happens.
Twice, a year increases, but nothing to flag John .
From our standpoint pricing is always a short term lever right. It's more we're more interested in investing into the future and driving growth with our customers.
Our next question is from Spencer James with William Blair. Please proceed with your question.
Hi, This is Spencer on for Bob Napoli. Thank you for taking the question I was wondering if you could comment on the evolution of the mix.
Two parts of volume payouts and cross border as a percentage of mix and talk about any influence those might've had on take rate.
Or might take rate over time.
Yes, there is.
Nothing to flag in terms of payoffs and or cross border I mean naturally we are cross border business. When you think about global E Commerce, our customers operate.
In a mirrored in markets all around the world. So that is our core in terms of payouts.
Unpack our modules, we provide our customers with a myriad of capabilities, which includes pain and payouts.
Globally I wouldn't break that down I think its irrelevant in terms of doubleclick and breaking down the volume.
Assuming this comes from a recent disclosure from from day local but in our perspective.
Payouts cross border pay in our entire ethos is to help our customers connect with their customers regardless of solution and regardless of payment much Allen.
Thank you for taking the question.
Our next question is from Paul <unk> with RBC capital markets. Please proceed with your question.
Oh, thanks, very much and good morning, just wanted to if you can elaborate on some of the larger indications you talked about that you expect to deploy Q2 and Q3.
Specifically in terms of large deals are you seeing more large deal momentum in the path versus the past and then what fundamentally is driving your traction there.
I would tell you it's about our protection of our go to market. So we talked a little bit about this last time, but we've built out our sales enablement teams, we really protected the commercial teams.
<unk> realigned the organizational structure.
On a regional basis and on a country basis, and that is allowing us to be present and relevant.
Also built out brand awareness and that is now, allowing us to be included and ultimately some very very compelling rfps and then just blocking and tackling with our current customers and our current technology partners that is driving the sales momentum so overall.
Very significant pipeline.
A lot of discussions on an advanced stage and we think just in general from a macro perspective, this bodes well to new very right as customers are evaluating payment efficiencies and technical efficiencies.
We think that just bodes well from an opportunity for a new bank.
And.
In regards to the Tech investments you mentioned up 40% year over year is that organic or does that include pie and then can you elaborate on the key priorities here, which one is the most impactful tier.
To your near term pipeline.
Yeah, I think the tech investments do and it's a good question. The tech investments do include <unk>, but just keeping in mind right now as we retire pie as tech stack those resources will be real line for new base. So we're excited to have that in terms of priorities, we put them into two key buckets, Ryan it's the roadmap to execute on our customers' journey themselves.
So that is bucket, one and we see lots of opportunities there and the second is about our own product capabilities that we've prioritized based on vertical customer.
And geography, so we believe for example, IV requirement.
In terms of the BD deal with my life in global ecommerce as we prioritize them.
I Wouldnt doubleclick on any of them, but just reminding everyone that we do well over 150 different product releases, a year and we're really excited about maintaining and expanding our leadership position in our current verticals, where we have them and building up a greater challenge your position on the ones that we aspire to be larger.
Our next question is from Todd Coupland with CIBC. Please proceed with your question.
Yes, good morning, everyone.
Wanted to ask about EBITDA margins a.
A little bit lighter in Q2.
And then implied stronger in the second half of the year could you just walk us through the puts and takes.
The down couple of points and in Q2, and then what brings us back up in the second half of the year.
Hey, good morning, Todd.
So good question.
I'll start off by just saying like we've always said we're building for the future. So we're certainly investing in the company Q2, specifically if you're talking about.
It's going down a bit.
So about 35%, 36% EBITDA margin.
It includes the first it's the first full quarter of fire.
Pablo did have a lower EBITDA margin, if you look back historically about 26% or so so there is a <unk>.
<unk> drag from an EBITDA margin perspective.
As we continue to invest in the business not just on fire, but just to build incremental growth such as brand awareness that we have been doing just increasing our sales distribution team. So that's part of it too and then as you think about kind of later in the year.
Going back up for a full year to be at about 37, 38% margin.
In line with where we were Q1, certainly as we build from a new business perspective that certainly has an impact as well as we.
Put in some of the.
The synergies related to supplier.
Some of that will flow and as well as we go later on in the year. So that was really kind of are the building blocks as you think about the step step down from Q2, and then it steps back up in the latter part of the year and overall, we think about our long term margin like I said at the beginning we are building for the future on that long term target of 50% plus is still something we feel strongly about.
Okay.
Okay. That's helpful and then as a follow up if we think about North America very strong up 55%.
In the quarter lot of new business I assume is ramping and then in the second half of the year.
Are there margin headwinds as that new business comes on as well is that something to keep in mind or is it simply just the mix shift and.
Higher synergies et cetera in the second half.
I would say.
Todd as you remember right we are in the business of generating growth profit dollars. So ultimately as those businesses onboard.
They will improve operating margin, but we're investing for the long term. So we feel very confident the pipeline.
And the journey that we take with our customers. They don't just onboard in one country. It starts the birth of one country and allows us to go from country to country. So nothing nothing predominantly different to flag for you.
Our next question is from Kyle Lindgren with Credit Suisse. Please proceed with your question.
Hi, This is Kyle on for Tim Thanks for taking the question.
So <unk> is obviously gaining share and you guys operate across a diverse set of verticals and geographies, but I was wondering if you could maybe just Scott.
Underlying industry or end market growth, that's implied versus the medium term guidance that you've given.
Yes.
Thanks, Tom I think.
Urge you to go back to my comments in terms of industry growth that we've seen in the last quarter.
I think we wouldn't go down by vertical by vertical, but we actually build we build our business case by customer and the journey of the customers, but overall were seeing great momentum across all of our focus verticals.
We're expanding our market share in new vertical like marketplaces online retail and travel and extending what we believe is a leadership position in our core verticals as well so I wouldn't flag anything different I would urge you to double click on the disclosure in my prepared remarks.
Our next question is from Richard Tse with National Bank Financial. Please proceed with your question.
Hi, This is mihir, calling in for Richard Congrats on the quarter. So I just wanted to ask on <unk>. You mentioned commissions were up due to higher sales model. How should we think about that going forward will that model be changed more to leveraging Newberry Zurich salesforce or how should we think about that.
Yeah.
Hey, good morning.
I think part of the model that that interest reductions just the relationships they have with Isps and other partners. So certainly as a percentage of our overall it will change because obviously this wasn't a Q1 wasn't a full quarter of <unk>. So we'll have a full quarter in Q2, but from a strategic perspective, and how we go to <unk>.
<unk>.
As it relates to those channels, we don't expect anything to significantly change.
In terms of the.
How do we go to market.
Okay, and then just one follow up.
Is there a room to increase yields on highest volumes.
Basically by selling payment types like virtual cards or other higher yielding premium notebooks for <unk> transactions.
It's a good question, we grouped that more into account payable opportunity, but so far I would I would urge you to continue understanding pious current business.
The mix today in terms of growing that current business and as we add product capabilities there'll be driven by water beta fee partners require and those will be prioritized.
Our final question is from Kevin Christiani with Scotiabank. Please proceed with your question.
Hey, good morning, Thanks for fitting me in just a question on <unk>.
They're mid teens I think you called it.
Do we think about how much of that is land versus expand and he also mentioned 125% growth in new business growth I think that was at the company level. How does that look for for Pi and then I did want to ask on any sort of seasonality to think about there given the government in terms of new customer wins.
And pipeline build thanks.
Kevin I lost track with all of your questions ill try answering as many of them.
Okay.
Yeah.
This is slightly different because we partner with a municipality or we partner with an IV or we partner with the B to B B.
The municipality announced lease on one on one relationship. So as you implement it yes, you may extend some additional value proposition from a product perspective, but that is certainly our land.
<unk> those land and expand where we create a partnership we integrate with them and then we cross sell within the var network and that typically has a longevity of multi years to generate a significant base and position within the BDC platform and the same is true for Isd.
Where you partner with that ISP for a particular need and then you're able to expand that relationship as the ICD codes.
One country to the other.
I got two out of your three thank you Kevin.
We have reached the end of the question and answer session I would now like to turn the conference back over to Chris <unk> for closing comments.
Thanks, Dave again, thanks again for joining us this morning.
And I are both available to follow up please reach out to Investor relations with your questions. We look forward to seeing many of you on the upcoming Investor Conference Circuit, we're planning to be at events hosted by Barclays JP Morgan CIBC and William Blair on the in the upcoming weeks among others. So.
Bye for now.
This concludes today's conference you may disconnect your lines at this time.
Thank you for your participation.