Q3 2023 Paysafe Limited Earnings Call

Hello, and welcome to the P. C Q3, 2023 earnings conference call and webcast. If anyone should require operator assistance. Please press star zero on your telephone keypad. A question answer session will follow the formal presentation.

Maybe placing the question sure at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded its now my pleasure to turn the call over to Kirsten Nielsen head of Investor Relations. Please go ahead Kristen.

Thank you and welcome to pay say earnings conference call for the third quarter of 2023 joining.

Joining me today are Bruce <unk>, Chief Executive Officer, and Alex Kurtz, Chief Financial Officer.

Before we begin a reminder, that this call will contain forward looking statement and should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent FCC report.

These statements reflect management's current assumptions and expectations that are subjective factors that could cause actual results could differ materially from those forward looking statements you should not place undue reliance on these statements forward looking statements. During this call speak only as of the date of this call and we undertake no obligation to update them today's presentation.

So contains non-GAAP financial measures you can find additional information about these measures and reconciliations to the most directly comparable GAAP financial measures in today's press release and in the appendix of this presentation, which are available on the Investor Relations section of our website with that I'll turn the call over to Bruce.

Thanks, Kirsten and thank you all for joining us today, let's jump right in this marks our fifth consecutive quarter of year over year revenue growth.

<unk> progress on our turnaround and strategic initiatives.

Our third quarter performance shows growth across our key metrics, including volume revenue and adjusted EBITDA.

Adjusted EPS for the last 12 months free cash flow building upon a strong first half of the year.

Third quarter revenue of $396 million increased 8% year over year or 5% on a constant currency basis with trends consistent with what we discussed in the second quarter.

We recorded 6% growth in the merchant solutions segment led by double digit growth from E Commerce.

And the digital wallet segment revenue increased 12% on a reported basis and 5% constant currency driven by double digit growth in classic digital wallets, which was partially offset by softer performance in cash.

Third quarter, adjusted EBITDA of $116 million increased 22% year over year, and 18% constant currency, reflecting the 320 basis points of margin improvement.

Our net leverage ratio was five one at the end of the quarter down.

Down from $5 eight at the end of last year and well ahead of our original target for 'twenty three.

<unk> on our strong progress and financial results to date, we're pleased to reaffirm our full year guidance for 2023.

We also announced today that our board has authorized a share repurchase program, giving the company the opportunity to repurchase up to $50 million of common stock.

We remain highly focused on investing in our business to support growth while continue to reduce leverage.

I would also like to congratulate our team for receiving several awards during the third quarter.

First pay safe one best digital wallet at the digital bankers global payments Innovation Awards.

And we're also highly acclaimed for best payments led financial inclusion initiative.

And the I gaming vertical for the third straight year, we were recognized as the payment service provider of the year at the prestigious American gambling awards from gambling Dot com.

We were also recognized on Cnbc's list of top Fintech companies in the digital payments category.

It's always great to see our teams recognized for their dedication to delivering exceptional payment experiences.

Turning to slide four.

I'll reiterate that we continue to make progress across our strategic focus areas.

Starting with sales transformation in the third quarter, we closed 45 enterprise deals, which we define as agreements with more than 100000, each in annual contract value.

As we've discussed previously our wins with both new and existing clients were supported by our new vertically focused go to market structure, which has improved our ability to sell Pcs.

Is it strategic payments partner.

We have also been committed to improving the customer experience for both sides of our ecosystem.

On the merchant side, one of our focus here has been to drive greater deal efficiency, including faster Onboarding.

There's just one highlight when we look at merchants onboard in September our average contract to launch timeframe was 10 days earlier than what we were delivering in Q2.

Which reflects 14% improvement over the previous quarter.

Continued focus on process improvement system consolidation in the creation of targeted customer success team is driving the optimization in this area.

On the consumer side, we continue to see ongoing progress in our funnel optimization and improvements to the gateway experience.

For example, our merchant checkout conversion is up more than six percentage points year over year, reflecting a number of enhancements such as the optimization of merchant integrations simplified log in and registration flows better analytics and better payment method selection.

On product innovation. In addition to the improvements to product usability, we've talked about leveraging our wallet platform to drive value for our clients and bring together merchants and consumers.

In Q4, we are conducting the initial launch of the PC business wallet.

Digital wallet for U S. SMB that uses the digital wallet to collect merchant acquiring settlement.

Over time, the range of money movement capabilities and services will be expanded.

With a longer term product vision to combine foundational capabilities, along with addressing the underserved needs of our SMB clients.

Ultimately, we're focused on driving the wallet here in the U S. In a way that adds value for our merchants, while also creating a flywheel effect.

Lastly, we recognize the unique opportunity to enhance and broaden our wallet platform for unbranded solutions.

Our foremost objectives are to enrich the capabilities of our wealth platform.

<unk> facilitate the growth and success of our merchant partners.

Our focus is on empowering businesses to create customer experiences aligned with their brand by leveraging the advanced features of our platform.

We are well versed in the regulatory landscape in licensing requirements, which our clients and prospective clients appreciate and <unk> offering.

We are enthusiastic about advancing these initiatives with a number of key deals in the near term pipeline.

Moving to slide five.

I'll provide some additional color on the progress that we're seeing across the sales initiatives.

In the third quarter, we saw balanced deal activity across our target verticals with including new merchants.

Continued strength in cross selling to our client base and expanding geographically with our clients.

We now have doubled our sales headcount and direct sellers versus the same time last year and we saw a 103% net revenue retention through Q3 year to date, which has been supported by the work we've done to realign our account management resources.

As another highlight we're very pleased to announce a new partnership with fanatics betting and gaming a major brand here in the U S.

<unk> is providing fanatics with an all inclusive payment solution implemented through a single streamlined integration offerings sports betters and unprecedented range of options for making deposits and receiving payouts.

Moving to slide six.

We've talked about our unique advantage in the North American gaming, which is a small but high growth market for paces.

We are very strong in card acquiring and gateway currently live in 30 states with over 50 operators. In addition to our strong position in Canada.

So again through one integration and online gambler at a merchant a gaming margin can access to any form of payment for money in and money out.

In addition to that we also have very deep industry relationships and expertise.

Including high conversion rates and faster state entries, which is also how we attract and retain customers.

Now with our new sales organization, we're even in better position to replicate this success across other key verticals.

Moving to slide seven.

For an update on our classic digital wallets, which is again consistent with the update we provided in our most recent earnings calls.

In the third quarter, we saw constant currency revenue growth of 17% from classic wallets.

Resulting in five quarters of consecutive growth for digital wallets.

Much of this revenue growth comes from <unk> continued work to improve the customer and checkout experience by reducing friction.

While we also focus on expanding the use cases of our unique wallet platform.

This stronger engagement has resulted in double digit growth in both transactions per active user and average revenue per user.

Digital wallets is seeing ongoing stabilization in our active user base base with approximately 900003 month actives.

And in this quarter, we can report growth of around 3% from the prior year.

Moving to slide eight.

As you've seen in our results, we have improved to 7% revenue growth year to date compared to flat performance for the same period last year as well as a 120 basis point improvement in adjusted EBITDA margin.

Here, we have broken out the puts and takes across our year to date results.

We have seen double digit revenue growth across the classic digital wallet business as well as our E. Commerce business are high priority and high value focus areas as part of the transformation.

Additionally, our SMB ISO channel continues to excuse me continues to perform well supported by strong demand for our differentiated offering for partners.

While we've made progress in the areas, we set out to turnaround and continue to execute that playbook.

We still have the opportunity to pursue focused growth in other areas.

We have seen softer performance this year.

From the direct channels in the U S acquiring as well as our <unk> solutions, which I'll discuss next on slide nine.

As we focus on 2024, we are addressing the softness on the direct side by one enhancing our product offering.

Two expanding our acquisition strategy and three adding additional sales head count, including the focus on moving upmarket in the direct business, which is more consistent with our customer profile of our ISO channel.

Any cash in.

In addition to enhancements to marketing and customer acquisition, we will focus on unifying our E cash technologies and distribution network, while continuing to upgrade our customer experience by integrating our wallet features into the platform for more engaging relationship to support user engagement and the graduation too.

Branded wallets.

We believe both of these businesses should be roughly mid single digit growers over the mid term, while we expect our digital wallet in E Comm solutions to continue to see relatively stronger growth.

With that I'll ask Alex to review the financial results.

Thank you Bruce let's move to slide 11 for a summary of our financial results.

Volume was $35 1 billion in the third quarter, an increase of 8% year over year and total revenue of $396 4 million also increased 8% or 5% on a constant currency basis.

Growth was led by double digit volume and revenue growth in e-commerce within the merchant solutions segment as well as classic digital wallets, including the benefit of interest revving up consumer deposits.

This was largely in line with our expectations for the quarter with the exception of FX, mainly the weakening of the euro.

The rate trended lower during the quarter. This lowered revenue growth by roughly $1 7 million or roughly half of a percent.

Adjusted EBITDA for the third quarter was $116 1 million, an increase of 22% year over year or 18% constant currency.

Adjusted EBITDA margin was 29, 3% an increase of 320 basis points, primarily driven by lower credit losses and continued operating leverage our total SG&A was 36% of revenue in the third quarter down from 36, 1% of revenue in the pre.

Our year quarter.

We generated $105 million in free cash flow for the third quarter, reflecting 91% conversion of adjusted EBITDA.

The LTM basis free cash flow was $362 million, reflecting the conversion of 81%.

And for the full year, we wouldn't expect to be in the range of 65% to 70%.

Adjusted net income for the third quarter increased 21% year over year to $35 3 million and adjusted EPS increased 19% to <unk> 57 per share as our growth and margin improvements more than offset increase in depreciation and amortization expense interest expense and taxes.

Let's move to slide 12 to discuss the segments results starting with merchant solutions.

Third quarter volume and merchant solution was solutions was $29 6 billion, an increase of 7% year over year and revenue for the third quarter was $216 8 million an increase of 6%.

Performance was led by E Commerce, which continues to see strong momentum in North American gaming, while also seeing growth from other verticals, including travel and Fintech services in.

In the SMB market, we saw continued growth in vertical such as eating and drinking places grocery and petrol and personal services.

Adjusted EBITDA in merchant solution increased 26% to $57 5 million, an increase of 410 basis points, reflecting operational improvements, including lower credit losses, which more than offset a margin headwind from the channel mix as growth in the SMB segment was again, particularly strong in our third party partner channel.

Turning to digital wallet segment on slide 13, third quarter volume and digital Wallets was $5 6 billion, 18% increase year over year did.

Digital wallets revenue for the third quarter was $182 9 million, an increase of 12% year over year, and a 5% increase on a constant currency basis as a modest decline for me cash solutions was more than offset by double digit growth from our classic digital wallet.

Growth from the digital wallet segment.

It was.

Also supported by the new product features launched in Q2, contributing one 8% to growth as well as interest revenue on consumer deposits.

Adjusted EBITDA in the digital wallet segment was $79 9 million, an increase of 17% year over year or 7% constant currency and reflecting a 43, 7% margin up 190 basis points.

Turning to slide 14 for a summary of debt and leverage.

At the end of the third quarter total debt was $2 5 billion, reflecting debt repayments and repurchases totaling $22 million during the quarter.

Year to date through September we have repaid approximately $112 million of our debt as we continue to take advantage of the market opportunity to buy back debt at discount to par at quarter end net debt was $2 3 billion and our leverage ratio was further reduced to five one times compared to five eight times at the end of last year.

I'll reiterate that we remain highly focused on reducing leverage and we now believe that our net leverage will be approximately five times by the year end well ahead of our target for this year.

As you saw in our earnings release pace of announced today that our board has authorized a $50 million share repurchase program with our healthy cash flow generation and consistent progress towards reducing our net leverage ratio over the last several quarters. We believe now is the appropriate time to include share repurchases as part of our capital allocation.

<unk>.

We continue to expect the majority of our excess cash flow to be committed to deleveraging. While we also continue to invest in innovation to drive long term growth.

Moving to the full.

Our full year outlook on slide 15.

Based on our strategic progress and results to date, we are maintaining our revenue and adjusted EBITDA guidance for 2023, just to reiterate our guidance reflects full year reported revenue to be in the range of $1 $5 95 billion to $1 $6 8 billion and adjusted EBITDA coming in between 454 million to 462.

Reflecting adjusted EBITDA margin between 28, 5% to 29%.

Please note that the euro to USD exchange rate was around one one at the beginning of August and has averaged approximately 1.06 quarter to date in Q4.

As a reminder, given our geographical mix every 1% weakening of the euro versus U S. Dollar has an unfavorable unfavorable impact of approximately $7 million in revenue annualized so while the business is performing in line with our expectation.

If euro remains at the current level or trend lower through the end of the year. This could put us towards the low end of the range.

Now I will turn the call back to Bruce for closing remarks, before we take questions.

Thank you Alex <unk>.

In closing we are on track to achieve stronger growth and meaningful margin improvement in 'twenty, three while reducing leverage delivering on our strategic initiatives and preparing for the next phase of our turnaround.

Over the last four consecutive quarters, we've created momentum improving year over year EBITDA growth starting in Q4, 22, 2% Q1, 234% Q2, 10%.

Now Q3, 22% growth.

This strong progress has us excited about the opportunities ahead, and we are driving towards our mid term outlook of high single digit to low double digit revenue growth with further margin expansion.

Now, let's begin the Q&A session.

Thank you Bruce.

Okay, and a couple of questions from let's say technology platform, which allows shareholders to submit.

After that I will turn to questions from our research analyst community.

As a reminder, we may pass over any questions that we already addressed on this call are prior recent quarters. We may also grouped together question the share count.

Thanks.

Okay. Our first question is from Mike who App.

APAC get board representation for retail shareholders accompany things were getting better all the stock is trading near loud.

Why don't you take that one.

Thanks Kristen.

Sure Mike Great question and thank you for the question first I'll emphasize.

I believe the PCF is very strong board of directors.

With a diverse perspectives and many decades of experience across finance capital markets E Com.

Gaming legal and compliance.

And overall corporate governance.

They are highly engaged and focused on doing the right thing for our shareholders.

They do not believe that our current share price reflects.

The quality of our business or the opportunities ahead, which is why they have authorized the buyback program, which we announced today. So this gives us an opportunity to repurchase up to $50 million worth of our stock, while we continue to generate healthy cash flow and prioritize reducing debt and investing.

And our organic growth.

Alright, Thanks, Chris Yeah.

I received a couple of questions regarding the profitability or a financial viability of the company as well as that.

Competitive dynamics.

Philip asks how do you set yourself apart from the increasingly competitive field and reverse losses, Bruce would you like to take this one as well.

Sure.

The question and thank you Philip.

For the question I think it is important to correct any misunderstanding as both the company's profitability of solvents.

Safe is a healthy financial position, our third quarter performance demonstrated growth across our key metrics, including volume revenue adjusted EBITDA margin adjusted EPS and.

The last 12 months free cash flow when I first joined <unk> in May.

May of last year.

We said that it would be about a year to stabilize and to start turning around the performance of our higher value assets, such as E Commerce and digital wallets.

And as we move into kind of year two of my term.

Seeing great results with 7% year to date growth of 120% basis.

EBITDA margin improvement.

And led by double digit growth in these areas, specifically e-commerce and our classic digital wallet.

While we're certainly not done.

As we discussed in our prepared remarks.

Moving to the next phase of the turnaround and positioning the company for stronger growth in the future. When we look at the competitive deals we're winning with our customers. Appreciate about PC comes down the three key things customer service deep expertise.

Across both regulatory and compliance landscape and breadth of treatment solutions, which enables our merchants to reach new customers.

And markets through a single integration.

We're also very excited about our product innovation initiatives.

Such as our pace.

Business wallet, which is launching in Q4, and we believe that we will bring additional value to our customers and to pay safe, while expanding the scale and use cases of our wallet platform.

Okay. Thanks, Brett.

Operator can you. Please open the line for the analyst Q&A.

Certainly so that can be placed in the question queue. Please press star one at this time one moment. Please while we poll for questions. Our first question is coming from David <unk> from Evercore ISI. Your line is now live.

Thank you good morning looking.

Looking at slide nine on actions taken in 2024 plans.

Which of these actions do you expect to have the biggest impact on 2020 for revenue growth and just to clarify the midterm growth target you called out for both businesses in the mid single digit.

Does that apply to 2024 specifically.

Hey, David Good morning.

So let me start with.

The slide nine so what we tried to highlight here is we've really focused but here in 'twenty three on the digital wallet E. Comm side two of our businesses that as I came in were.

Really identified as our high value businesses really that drove the valuation of the company.

When I came in both of these were were struggling.

Declining businesses, we've been able to focus on those as we've outlined.

And drive them into double digit growth.

So we expect that to continue as.

As we move forward.

We also have some other businesses that.

As we look at those and try to address those in 24, we've done some things here in the back half of 'twenty three to put us in position to execute of bringing those businesses. The SMB direct and need cash businesses back in line with what we think they should be performing and so those businesses.

<unk>.

As we've said in the prepared remarks.

<unk> are not performing to what we expected and have similar trend lines, where as we came in.

We're kind of underperforming and now we're focused on getting those back together. So we have done a number of things to start moving the ball.

On those and we remain optimistic that those will become.

Mid single digit kind of growth.

Profiles for those two businesses. So I think as we talk about.

Mid term when we did the Investor day.

We were talking more not so much about 'twenty four but further out.

And we were looking at 'twenty.

25 being.

Low double digit growth profile.

Got it and just as a follow up.

Could you talk about expense management initiatives and operating leverage targeted for 2024.

Yes, I'll, let Alex jump in on that while I think.

If you saw what we talked about when we talked about the G&A as a percentage of revenue from 36% to 30% you'll see that we continue very much to focus on the expense management I think one of the things that Bruce has highlighted many times before is that as we bring.

Desperate businesses that the business has been operated separately together that drives a lot of that efficiency right. So we as we create a sales organization and product organization marketing organization.

That's sort of the entire business. So those trends continue and we would expect to continue to to.

So we see those operating efficiencies in terms of the targets when we at the end of the year. When we give you the guidance for 2024, we will talk about the targets at that point.

Understood. Thank you.

Thank you.

Thank you. Your next question today is coming from Scott <unk> from Wolfe Research. Your line is now live.

Great. Good morning, guys. Thanks for taking my questions first wanted to start off on the wallet user base.

C b transactions per active <unk>, increasing both sequentially and year over year basis, but just wanted to talk a little bit more about the user base and expectations. There and maybe if you can give us some color on sort of how churn versus adds kind of trended in the quarter and how we should be thinking about sort of balancing engagement growth versus active user.

Going forward. Thank you.

Yes, Scott good morning, and thank you for the question. So look I think as I said in the earnings call last quarter we.

We were hoping to see some growth start to emerge in our three month actives.

As we moved into the back half of the year.

So as we've.

We reported in the prepared remarks.

We saw a little bit of that growth start to emerge.

In Q3, with a 3% growth rate, we expect that to continue I can tell you that.

About halfway through Q4, we see continued acceleration with the three month actives.

So what.

What we've done is we as Alex just mentioned as we kind of regrouped with our marketing initiatives under Nicole Carroll.

Our chief growth officer, so it really kind of focused on consumer acquisition, we're excited about going forward into 'twenty four because.

Not only did we consolidated our marketing efforts, we do have.

New wallet is coming to market both.

With our business wallet.

And we have some deals in our pipeline that we'll be rolling out in 24 that are around our non branded so white label wallets that'll be coming so we can see a clear path.

Three months <unk>, continuing to expand as we move into 'twenty four.

Got it that's helpful and just as a follow up on the cash side of things and your plans. There for 2024 as I think about cash and going back to sort of the last couple of years kind of even as maybe the wallet side was declining if we go back 18 24 months cash was still more of a steady grower. So just wondering if kind of if we do like a look back look forward what.

Cosby cash business to decelerate.

Sorry, if I missed 1% growth rate and maybe just expand a little bit more on your initiatives there to reaccelerate the growth in that business.

Yes, so just to kind of level set.

When you had.

Cash is a business last year in 'twenty two it had declined 3%.

From 'twenty, one 'twenty, one if you look back.

Cash is in essence, a prepaid business, which usually it does very well in recessionary timeframes or.

Timeframes.

Such as Covid as you were hitting in 2020. One so we had a significant amount of growth in 2021.

We knew that that was back then we knew that.

That kind of growth profile was not.

Sustainable growth profile. So you saw a pull back in 2002.

And youre seeing it improve from kind of a minus 3% to a 1%.

Year to date in 'twenty three so while we're moving it back in the right direction.

Those businesses typically.

In my experience at least.

Really kind of always gravitated around.

Mid mid single digit growth profiles.

Got it I appreciate it thank you.

Thank you. Your next question is coming from Jamie Friedman from Susquehanna. Your line is now live.

Hi, good morning, Jamie.

Good morning, Nice improvement here.

So I wanted to.

First about your call out Bruce.

The acceleration in boarding new merchants.

<unk>.

I'm just trying to fund page.

Yes.

I think it was page.

So yes, so when youre seeing that the merchant your expedited in 10 days.

Yes. It is may 23.

That's 14%.

Firstly I never heard that metric before it sounds important I'm just wondering operationally how it is that you've been able to deliver that and what it may mean in terms of your financial results.

Yes, great question so.

One of the things that.

We've talked a lot about this year is around operational excellence.

And as Alex mentioned.

Little bit earlier.

When you looked at our company going back a year.

<unk>.

What we had was a series of organizations kind of operating independently.

Those things created some inefficiencies within our organization and what we've really tried to do here is get after the business processes and the technology stacks that allow us to accelerate our revenue streams and so when we look at this 10 Day example, it's just.

Another example of.

How we're focusing on improving the business processes that we have to accelerate our time to revenue.

I think we talked about in the.

Earnings sorry in the.

The analyst day that we did we talked about.

Time to market for our enterprise deals being close to nine months and trying to drive that down.

From 270 days down too.

58 is just in a couple of months so a lot of.

A lot of positive movement on process review and.

Kind of what we're doing.

Okay, Great and then Bruce if I could follow up with just a higher level question, which we get sure.

How would you compare the competitive position of merchant solutions versus digital wallets I know, it's a very hard thing to answer because the.

Dominated the market environment for both is different but it looks like merchant is.

<unk> is doing.

How about if not better than the market.

<unk> I know, it's a very competitive world, but just at a high level.

How would you compare the positioning of both of those big products for you.

Yes.

Pink.

In the merchant side, we've got a very competitive product, we see strong growth in.

Our SMB space.

<unk>.

We resolved some other products like Clover, we've had strong 20% growth in sales of Clover.

Our E com component of the merchant is also very competitive in the verticals that we're in so what we're really trying to do is.

On the spaces that we play in we're not trying to.

Go upstream and go after E comm for.

Apple or Amazon, we're trying to stay in the verticals that we play in and we.

Tremendous amount of domain expertise and so that's really worked for us and that's allowed us to really reaccelerate the.

The growth engine on merchant acquiring I think when you look on the wallet side.

We feel very good about.

What we do with the wallet again I think the platform is.

Itself.

As we start moving into the non branded or white label wallet.

Component of the wallet platform.

We feel like there's a tremendous amount of opportunity because of the regulatory.

Compliance things that fraud management that we're exceptional at we really feel like we compete very well again in our wallet space. We're trying to really focus on owning a couple of verticals that we play exceptionally well in the gaming space the gambling space.

We're not trying to become.

Is it just a horizontal wallet the.

Compete necessarily with.

Apple or or some of the other more horizontal brands.

Got it thanks for that I'll jump back in the queue.

Thank you Jamie.

As a reminder, that star one to be placed in the question queue. Our next question is coming from Tim <unk> from UBS. Your line is now live.

Okay.

Great. Thanks, a lot I wanted to ask about the competitive environment in the North American gaming e-commerce or online market.

Braintree, clearly a large competitor.

The overall e-commerce merchant acquiring and knew they had made some public comments in the past about seeing them in that space are you running into them much how much of a competitor are they to your online processing, our merchant acquiring capabilities in that space.

Sure Good morning, Tim.

<unk>.

This is a highly competitive space, we we have lots of competitors in North America.

Braintree being one of them.

Do we do run into them and probably.

Most deals that we compete in.

But we have been very strong value proposition, we continue to win.

In this space or space.

As for US is led by Zach Cutler and his team they do an exceptional job.

Highlighting what.

The value proposition for us is and.

And they've been very successful as you can see so it's early early days, but we remain very optimistic about.

Our opportunities within gaming not just in North America, but globally.

Right. Thank you in part of your approach. There is right you had the wallets and the processing would you say that that is the same for them in other words do you see the Paypal.

Wallet or button, if you will being cross sold in the same way that you might cross sell the <unk>.

Processing capabilities and your digital wallets in other words do you see the button for.

For Paypal as much in.

On the online gambling space.

We we do so I would say when you look at the competitors in our stack.

The most similar to us in value proposition I think what distinguishes us versus them is when you really think about our VIP heritage.

With the wallet.

Just simply don't do that and so we really do stand out again years' of experience years of regulatory experience and fraud experience.

We like our chances competing.

Perfect. If you don't mind, if I can just a very quick numbers one just on the SMB direct a portion of the business that you talked about focusing on more in 2024 can you just give us the most recent contribution to that segment revenue from SMB direct.

How big is that portion that Oh, we're going to focus on.

Hmm.

Christine do you have now.

Sure.

At our company, it's a little north of 20% call. It 23.

You can get the math on what that is from a cancellation.

And that's going to give or take a little bit depending on.

The next each quarter, but I would assume the auto market.

Full company.

North of 20 for the full company, Okay that meaningfully higher for the merchant segment. Okay. Thank you.

Thank you Tim.

Thank you. Our next question is from <unk> from Bank of America. Your line is now live.

Hey.

Alex Thanks for taking my questions.

Yes.

From my side.

Could you just maybe give us a quick update on what you've seen so far in Q4, I think you've touched upon that a bit on the rollout.

So user growth, but much more broadly across the business, what you've seen so far running mission thoughts on 'twenty. Four I know you said you have a few.

Things too.

<unk> prioritize but any initial thoughts on that that's the first question.

Second quarter, I think I'm, sorry, I think in terms of.

What we've seen so far we keep our guidance unchanged for the year.

And we've highlighted the FX issue right, which would take us to the bottom end of the guidance. So that's that's what we see we see the business continue to perform well.

Our expectations, but.

But we need to keep it and be mindful.

Mind full of FX and on 2024 at the end of the year. When we give you. The results for 2023, we will talk about 2004 and give guidance at this point, we don't really have anything else to say on 24.

Alright understood Okay.

Okay.

And then just going back to I gaming So your volumes grew 15%.

I'm sure some of that is driven by our initiatives, but just trying to understand.

Is that coming through how much of that is coming through the market.

As you know maybe some.

Maybe youre getting share from some of the other players there.

Well look yes, I mean, absolutely. We're we're live in 30 states.

Up.

Fair amount from last year.

But I would again say we were winning in this market.

We're driving great deals.

Obviously, adding fanatics to the portfolio this quarter has been out.

A great win for us.

I think the team continues to execute well, but yes. There is some great tailwind in this space as well.

It's certainly in North America.

I would again just call out.

It is a small part of our business.

But it is growing and growing rapidly E. Comm overall is growing rapidly we feel very good about our E comm space.

Great.

And then just going back to the midterm guidance. So the bridge to that low double digit growth is that something you think you can do even if let's say cash.

Our.

The direct sales in SME and much of that somebody doesn't really pick up.

We think those need to start accelerating as well for you to get to that.

'twenty five 'twenty six.

Midterm guide.

We are talking about midterm guidance correct.

So we havent we havent.

At all moved away from the midterm guidance that we talked about high single digit low double digits, we still believe that to be the case.

There is lots of irons in the fire some things will work better some things will not work better but overall, we think that there is this is still where we are targeting to be.

Yes, I'll just add.

Have.

Yes.

Complete confidence, we will be able to get.

The SMB direct business.

Cash business in the right growth profile.

Okay. That's okay. Thank you.

Thank you we've reached end of our question and answer session I'd like to turn the floor back over to management for any further closing comments.

Yes look I just want to thank everyone for joining us today.

I want to thank Chris and the team here for all your help putting this together.

Yet again.

Really appreciate all the efforts that has gone into Q.

Q3, and look forward to talking to everybody at.

At the end of the year and the exciting times ahead for 24. Thank you very much. Thank you.

Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day.

Thank you for your participation today.

Yes.