Q3 2023 Nuvei Corp Earnings Call
Minder This conference call is being recorded.
I'll now turn the conference over to Chris Maloney head of Investor Relations. Please go ahead Mr. <unk>.
Thank you operator, and thanks to everyone for joining us this morning with US today are Philip there chair and CEO and David Swartz CFO.
Reminder, this conference call is being recorded and webcast and is copyrighted property of New Bay rebroadcast of this information in whole or in part without written consent, a new bacon is prohibited.
Prior to this call we published a shareholder letter for the third quarter.
We encourage everyone to read it if you haven't done so already.
Letter contained commentary that otherwise would've been included during our prepared remarks the conference call.
This new format allows us to spend more time on today's call answering questions.
We started to make this change in part based on feedback from investors.
We hope you find the shareholder letter informative and of course, we welcome your feedback.
We would also encourage investors that the shareholder letter you read in conjunction with our press release MD&A and Capella.
The financial statements all of which are available in the events and financial information section on our Investor Relations website investors <unk> 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 in new ways 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 can be found new based filings with the Canadian securities regulatory authorities and on the company's website.
Discussions today will include non ifr at measured.
But not limited to adjusted EBITDA, adjusted net income and adjusted net income per share.
Management believes non-GAAP 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.
Reconciliation of these measures to RF measures is available in our earnings release and MD&A.
We'll just have some brief prepared remarks before opening up the call to your questions in order to get to as many people in queue within the allotted Q&A time.
Ask that you limit yourself 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 thank you all for joining US. This morning, as you've now seen we reported solid third quarter results in line with our growth objectives highlights for the quarter include strong growth across the board with total volume increased 72% revenue, increasing 55% and adjusted EBITDA increasing 36%.
On a pro forma basis third quarter revenue growth was 14%. This was a 550 basis points greater than our growth rate in the second quarter.
Pro forma per channel revenue growth improved sequentially as well.
Global Congress increased 25% accelerating by 890 basis points. We continue to believe this represents category making growth.
Our BTB government and IC channel increased 16%, which represented 360 basis points of growth acceleration and SMB declined three 8%, which was 170 basis points better sequentially.
We are driving efficiencies throughout our business and expand our adjusted EBITDA margin sequentially by 40 basis points to 36, 3%.
On capital allocation, we continued to Delever, we think $36 million of debt and reducing our leverage by <unk> two turns to two six times at September 32023.
Our board has authorized and declared a cash dividend of <unk> 10 per share. It is worth noting that since 2022, we have returned 237 million to shareholders in form of share repurchases and dividends.
With these results we are raising our full year financial outlook for 2023.
This concludes my prepared remarks, and we're now ready to take your questions.
Thank you well now be conducting a question and answer session.
I would like to ask a question at this time. Please press star one from your telephone keypad and a confirmation tone will indicate that your lines in the question queue.
You May press Star two if you like to remove your question from the queue.
For participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.
So as we've made those questions as many participants as possible. We ask that you. Please limit yourself to one question and one follow up.
One moment, please we poll for questions.
Thank you. Our first question is from the line of Sanjay <unk> with <unk> W. Please proceed with your questions.
Thank you and good morning.
Pro forma growth across all the three channels accelerated.
Talk about what were the drivers of that acceleration.
Good morning, Sanjay, Yes, happy to I think the first and foremost for US is the way we've been managing the business. So we've created tiger teams to look at how we engage with our current customers and how we execute on new customers <unk> been able to bridge the gap to help them go from signing to life faster by embedding sales enablement.
And executive leadership to every single factor from client Onboarding and that has been seeing some great results early momentum now across our core channel, which is our global commerce, our VW governments and F&B.
In our global Commerce channel, we've been activating the pipeline that we've been building obviously, we saw a very significant pipeline and we've been monetizing across our regions of operation as well as naturally continuing on driving product innovation.
In our <unk> government.
Business, we've been applying our playbook is really was one of the thesis of why we acquired buyer and you guys are starting to see the results actually up sequentially.
Mid three hundreds of basis points, and we see there's a lot more drivers there when you unpack that taking our <unk> operators globally cross selling our value added services beyond pure play acquiring and from our continued growth perspective, we find that there's opportunities around off balance factoring.
And a key in our <unk> business in particular.
We're seeing momentum in government as we move from a direct sales channel to an indirect by allowing our citizens pool to bolt on existing software platforms and then naturally on Z is relatively new channel for us, but we're seeing great momentum in being able to authorize these omnichannel global commerce solutions for them to service their customers and all pockets of the world.
Our SMB channel, we're seeing progress as well as you guys can see some some great recovery, we're quite bullish about what this will do.
Over the course of 2024 on one end product innovation like we talked about from a backend perspective from simplifying clearing and settlement.
On the second side to be able to provide more tools to our resellers and ultimately on the third side is just driving some focus.
And when you bring it altogether, we see 14% pro forma growth quite confident in our two high growth channels and quite confident in terms of bridging the gap from the SMB to bring us in line to our midterm growth targets.
Next year as we continue driving the building blocks.
Okay. Thank you.
And if I think about the revenue growth into next quarter. As you think maybe subsequent David when you think about the slight deceleration from the third quarter, how much of that is related to conservatism versus the client loss I'm just trying to think about.
Continuing the revenue growth and seasonality. So maybe you can help us with that.
Yeah sure good morning, good morning Sanjay.
Look from a revenue perspective, let.
Let me start off you know thinking about just overall assumptions I guess for Fred.
In the fourth quarter, you think about you know.
From a volume perspective look we're seeing it's early in the month of November but for the month of October and so far in the month of November we're seeing good progress in terms of the trends that we're seeing on a volume perspective.
Remember that Q4 on the volume side, there is a fair amount of seasonality.
You've seen that in the past.
So there is a from a from a sequential perspective, when we will see volume step up sequentially in the fourth quarter, but keep in mind that volume isn't necessarily the same doesn't necessarily yield the same from a revenue perspective, there is a lower yielding some of that volume.
Keep in mind that we do a fair amount of government payments as it relates to kind of real estate taxes donations also so those are more large sized transactions with fixed fees associated with them. So that results in a lower yield you'll see that in the outlook that our outlook from a yield perspective comes down from the 63.
This quarter.
Kind of to the mid fifties next quarter.
Then from an EBITDA perspective, you know the outlook is really around that 36, and a half $36 three very similar to what we saw in Q3.
So we feel good about that margin, we continue to focus on margin expansion.
Feel that we're at an inflection point from a platform perspective and that Theres certainly as we move forward there is certainly opportunity to expand.
EBITDA margins and ultimately get to that long term target of 50 plus percent.
So overall I think I don't think there's anything different season seasonally that you'd see in the past and into Q4, but again and Phil highlighted from a channel perspective, the channels are performing quite well each of the three channels. So continue to drive that background that they'll just outlined.
Okay, Great is there any way to quantify that like large client loss headwinds.
We so what I'd say is that most of the impact happened in Q3. It wasn't it wasn't a full impact in Q3 Q4 will be a quarter with the full impact.
But like we said it was a it was a top 10 customer.
We've talked about in the past no customer represents more than about 5% of total revenue. So that can kind of give you a sense of size.
But certainly there's some impact into Q4, I'm still of that customer from a sequential perspective and year over year.
Okay, great. Thank you guys.
Our next questions come from the line of John Davis with Raymond James. Please proceed with your question.
Hey, good morning, guys. Phil I just wanted if you could touch on some macro or competitive landscape. You know obviously you had added in talk about competition worldwide macro fears. So just want to get your perspective on what youre seeing from a macro perspective, but also competitively.
Yeah. Thank you John Yes, it's it's been quite quite the topic. There as you are in terms of world nine an audience from our perspective, I think it's important to understand where we sit within the ecosystem.
And on one hand, we are not necessarily touching.
The Mega merchants, we're really focus on mid market to enterprise.
That's the first market, meaning that we're targeting different merchants from an audio perspective I think the second thing that is really important is that we're the challenger, meaning incumbents typically have these stresses from a margin compression where challenger. If you guys look at new ways history coming from a single vertical focus now to supporting multi verticals in multi markets with multi jurisdiction.
This allows us to naturally have a more dynamic opportunity and we think that this is an upside opportunity for us as our product continues to evolve those with what we're doing on the authorization side, we're doing on clearing and settlement and what we're doing just in general from the geographies that we support.
We feel quite good from a macro perspective, we feel while some of the companies. You mentioned are world class companies, we feel like we now have a great seat at the table and we have upside natura.
Naturally from our and every incremental dollar that we process creates gross profit dollars and because we're at scale today. Those gross profit dollars fall the majority of them to EBITDA. So we really like what's out there today, we think this macro in terms of merchants focusing internally as well as still managing the growth is an opportunity for us.
In terms of pricing and take rate.
We have not actually seen not per se, we are seeing as merchants moving faster and being more thoughtful in terms of how we monetize and connect with their customers and that's been boding well for us because we're not just a pure play acquire right. We provide our modules as is required for our customers and we're seeing them being really thoughtful in terms of what they need is a different market.
So in general that is what we're seeing we're seeing great momentum in our core channel and global Commerce, we're seeing some great movement in volume.
From a macro perspective, we're not seeing any significant deterioration from a consumer standpoint, and naturally we are very different to our peers is we do have other end markets and we've been very thoughtful of bringing our use cases into beta be into government and into software as well. So our makeup of our end customers is different the size of our.
Customers is different and I think the last part is we don't have a 100% wallet share in fact, some of these new end markets for us we're still very much the challenger with strong product offering and that gives us upside.
Okay. Thanks, I appreciate all the color. There. This is a quick follow up can you help us with the crypto contribution on three fewer what's implied in the <unk> guide.
Be helpful. Thanks, guys.
Okay.
Yes, I'm happy to we seen sequential decline in the second quarter.
For the third quarter, so it's its decline.
Around a mid single digit from Q2 into Q3 and and that's about the same it was more mid to high single digit from a year over year perspective. So again, it's no longer we've locked it we lap the larger part of it but he is still a declining vertical for us.
Okay. Thanks, guys.
The next question is from the line of Darrin Peller with Wolfe Research. Please proceed with your questions.
Hey, guys. Thanks, you know, it's obviously great to see the acceleration of the business and it's just it's interesting coming off last quarter was.
It was one where investors were concerned on the guide change and there was a second guide change and so I really just want to make sure. We understand the visibility that you have when you. When you look forward. It was a nice acceleration you beat numbers, obviously, you guided conservatively after last quarter and so help us understand your philosophy in guiding now and making sure that the next <unk>.
<unk> is properly set and what you really have going into it in terms of macro assumptions also.
Hey, good morning, I can I can start off its David.
So.
The last quarter, we certainly had some call. It one off one off events that really resulted in the guide down.
Those things are now we understand those are gone we kind of learned.
On the delays in implementation, where you'd like to leave it there. So in terms of the guide that we gave.
Last quarter Youre seeing the results and you know where basically you know happy with the results in line and slightly above so we're happy with what we saw in Q3.
We're also pleased with what we're seeing in Q4 like I said earlier, our October and November trends are good.
Obviously, we have more visibility into Q4 now than we did a few months ago.
We wanted to take a position where we're.
Trying to be very mindful of the macro at the same time like that's you know theres certainly some challenges there we think that from a macro perspective, we're pretty well insulated, but it's it's there's always some level of.
You know.
Let's say.
Items that we want to think about as it relates to macro so that's always top of mind, but we're trying to be mindful and be reasonable in terms of the guidance and the outlook that we're giving both for the quarter and for the medium term and now as we as we exit the year. There's you know a key.
Couple of months left in the year, we will be working and we've already started to work on next year.
And looking forward to giving our 2024 outlook when we give our Q4 results in March but overall, we're taking we're trying to be mindful reasonable.
And how we give outlook and make sure that we're achieving what we set out to achieve and internally the execution has been great I mean, where.
We're really happy with how the business is performing from a revenue growth perspective, the margins are great. The cash generation was great we're being.
Mindful around capital allocation. So we internally things are really humming.
You know, we just got to make sure that we're that the expectations we set it externally.
Our reasonable and ER and that we that we achieve them.
The approach we're taking.
So when we we spent some time in meetings with you recently it was pretty clear that some of the differentiation is resonating as really the vertical differentiation you guys have on.
On the especially on the digital side or the E com side.
Spike competitive questions that came up earlier on this call. So I mean can you just revisit their verticals like airlines and others that were pretty exciting that we're coming into a much bigger way can you just revisit what's what's actually.
Sort of insulated versus the competitive dynamics in the digital side and then on a quick follow up just the improvements that you could make from here on SMB to get that flat to better.
Yes.
Yeah. Thanks, Eric Great question I think the first the first thing to keep in mind is our customers are never knew customers. There right. So we're always entering the wallet share with our customers because of their particular needs. So we're not we're not servicing an Uber for example in there just to start up so customers are coming to us for a very particular need and that is true across all the verticals.
As we continue amending and building innovation around helping our customers grow their business do things better and execute on their own journeys, we focus on verticals that have the propensity to operate multi country in multiple currencies and require multiple payment mediums that is where we focus predominantly cross border or local to local depending on the biz.
This model that our customers execute on and we think Theres a lot of tailwind across the board. So obviously starting from gaming, which is a no nonsense always on.
No latency vertical that our customers are sometimes spending millions of dollars a day in marketing and we deliver and we've taken that skill set into social gaming into marketplaces and to travel into retail while building out our capabilities to improve authorization rates lower the latency provide greater conversion for them. So what we're seeing today.
Is our focus on execution nationally in retail.
What we're doing around travel with specific working with global Airlines with respect to local acquiring and access to local domestic interchange around the world by utilizing our platform.
And then naturally looking at the overlap between our solutions that we require from a multi vertical perspective very much like <unk>, we think about virtual card issuance that's relevant from both a loyalty perspective to our payout perspective.
Two and accounts payable perspective, so in general from a roadmap perspective, we.
We have made meaningful inroads into airlines I mentioned last time that we're supporting for the top 20, we think there is a lot more to do there spin.
Specifically of how other acquirers have treated airlines during the pandemic, we think that that has left a bad taste and they are seeking alternatives with greater technology. So we think we're well positioned there retail ultimately was a low single digit vertical for us and we've been meaningfully accelerating our position with custom.
Like <unk> and Tmall and capture amongst many others.
And naturally a very significant pipeline as we help our merchants go from market to market and the same is true of strengthening our position in the markets that we have leadership position in like gaming. So we're very bullish of our end markets. We try being industry experts are where we operate in global Commerce and I think we mentioned this in the shareholder letter right. The days of companies just meaning.
Vendor are long gone right they need partners they need people to pull up a chair, there's always challenges and opportunities and I think that's where my team shines to be able to be that partner for our mid market to enterprise customers. So that is on the vertical side.
SMB <unk> chatted about this when we were in Boston, we've seen some sequential improvements of S&P, we think theres more to come.
Actually to achieve our mid term targets F&B has.
It has to be between a zero and minus 5%. So we feel very comfortable with what we set out from our mid term growth targets.
<unk> said, we think there's opportunities to improve in SMB and a lot of that is going to be driven by one applying the resources of our global capabilities. So today with our omni we are able to expand our SME footprint and expand the tools that our sales channels can consume but I think the second thing is things that we're seeing right now in Canada.
As we implemented our backend Darrin, we're doing interchange prediction, meaning that we see now entertain prices on a per transaction basis, which is what's required from our global customers, but that allows us to have great tentacles for for example, instant commission funding and instant payments for <unk> and ISO partners and reseller partners. So theres a law.
Lots of tentacles of improvement from a product perspective, specifically when you look at this macro where we're able to change the lives of both our resellers and end customers. So theres more to come we think theres opportunities to continue improving in all of that comes back to utilizing our product stack, our technology to drive feature functionality to execute on both our customers and our reseller.
In the case of raising channels journeys.
Very helpful.
Yeah.
Our next questions are from the line of Dan Perlin with RBC capital markets. Please proceed with your questions.
Thanks, Good morning, I just wanted to ask you about the kind of $100 million of annualized revenue you identified last quarter for that for the enterprise clients.
Obviously, we're not going to see a bunch of conversions over the holiday season, but I'm really more interested in the conversations that you've had with those clients and then kind of your level of conviction that that can still kind of close over the next 12 months. Obviously, you got a lot of great momentum in the business. So.
I suspect that that's not going to be an issue, but any color there would be helpful.
Thank you Dan Great question I think the biggest thing that could leave you guys. It's just the overall momentum. So we saw this year versus last year was client conversions, we're running.
Behind last year, not because of the pipeline with smaller just ultimately from time from signing to closing so the biggest thing that we've done internally is created tiger teams and we've changed the way we operate and run the business to make sure that we have a really clear set of visibility in terms of the opportunities and how we can help as an organization to drive those conversions and whats happened.
Since doing that is quite interesting so we've gone from being down year over year to being 15% up year over year from a new business perspective, we look at.
Our overall sales conversion so we're starting to see really good progress on that but also let me. There is also this comment around macro and naturally end market. So we have signed and once in great large enterprise customers that Theyre scheduled to go live in 2020 for late 2024, which is very different from other customers I think I have an issue in Brazil.
And I need to go right now so it's a matter of us having learning experiences between the different verticals that we operate in some of them are planned implementations in front of them and have to go like yesterday and these are things that as an organization, we have improved dramatically and something that we're going to continue to focus on in terms of overall timing.
I think certain verticals are continuing on the regular pace that we've seen over the last three or four years, new verticals are just longer and so it doesn't mean that we're going to see the $100 million lap immediately next year plus net new I think just in general Darrin the download the way to view. This is that everything has been pushed out and we're going to get back on cadence.
Now that we've pushed it out and will start being on that regular cadence on a quarterly basis from a new business activation.
That's great.
Just one quick follow up it's a metric I might've missed it in all the materials.
But I found it to be helpful. Over the past couple of quarters, which is really your organic global E. Com constant currency ex crypto growth. So by definition I think last quarter. It was 34% I'm just wondering if you could.
Ah providing that for this quarter. Thanks.
We havent provided that metric for the quarter.
I think you know there's there's there's we're trying to simplify our disclosures and and you know.
And improved disclosure and such you see kind of in the shareholder letter.
I guess, the you know some of the metrics to point out.
Organic growth at 16%.
Organic growth at constant currency or 13% keep in mind.
What I'm, what we mentioned earlier that the revenue from digital assets did decrease sequentially, both year over year and a quarter over quarter by.
By kind of mid single digit percentage.
In both cases.
And then the other metric I'd point to is the 14% pro forma growth rate I think those are kind of the key metrics.
And then all the improvements that we.
That we have made and continue to make from a channel perspective, but you've seen that will drive us forward to our medium term target of 15% to 20%.
And that's something that you know we we.
Well, obviously give our 2024.
And in early next year.
But thinking about exiting 2024 at that medium term target of 15% to 20% is kind of the way to think about it.
Hey.
Thank you.
Excellent.
Yeah.
Our next questions come from the line of Jason Kupferberg with Bank of America. Please proceed with your questions.
Hey, this is Kathy on for Jason I, just want to ask if you're seeing any different in China Berry began most recently, particularly in EMEA given everything going on in the Middle East there. Thank you.
Not specifically no we didn't seem consistent volume trends as.
As we'd expected between October and November so we have not seen any different trends to highlight.
We're seeing great momentum in in North America, If you look at the reach and disclosures that we've made so good growth in North America.
Yeah.
EMEA had 17% growth last quarter, and then naturally good momentum that we're seeing in APAC, certainly smaller, but great momentum and in Latam as well.
Okay got it and just wanted to ask I mean margins obviously came in nicely. This quarter can you just talk about where the incremental gross margins will come from going forward. I know you guys have made some progress with that North American cost I think being in sourced them. You know are you seeing more opportunities in head count in our tech efficiencies et cetera.
Thank you.
From a margin perspective.
Yeah, No we're quite pleased with our both the gross margin and the adjusted EBITDA margins.
Business that generates 80, plus or minus 80% gross margin. It gives a lot of.
Flexibility and especially when you think about the platform that it's built on and yes at the gross the gross margin level there'll be puts and takes as it relates to just kind of what we what we launched from a new product perspective.
The the way to think about it though is every incremental gross profit dollar has a high propensity to fall down to the bottom line and generate incremental EBITDA.
On the clearing and settlement you're right there has been.
Very good progress in that regard.
And we continue to make progress there there'll be more progress into 2020 for rest of this year and into 2024.
Specifically in the in North America for will.
In source and so that creates.
It certainly creates cost efficiencies and cost effectiveness, which I think was the core of your question, but the other thing that it drives it drives a greater connection to our customers because we can do certain things that we weren't able to do in the past because we are reliant on a third party.
Improved settlement time as an example, the port speed of reporting.
Allows us to do things quicker.
And then things quicker for our customers. So there's a lot of.
I'd say intangible or non quantifiable benefits more than just the cost savings that it drives from a sourcing perspective, and then if you think about it on the Opex side.
We have a great platform, we have the people, there's certainly always enhancements that we make but we feel really good about where our where opex is today, where the margins are today, we think we can expand from here.
The other area on an SG&A, we've pointed out of the passengers on share based compensation that continues to decrease as a percentage of revenue.
And that that is a large item the other thing I'd point out is commissions so as.
If you think about our channel distribution.
And you think about the global Commerce channel specific and that's being the highest growth channel.
Most of the commissions are driven by our B to B of IFC channel and so as that as the global Commerce Channel grows again commission as a total percentage of revenue.
Do have some opportunities there so there's.
And there's many many.
Perfect cost initiatives that we have internally that both effects.
Gross margin as well as Opex.
And similar is it similarly to how we're driving.
New implementations that Phil talked about earlier, where have a similar cadence with respect to.
With respect to cost and we have a regular cadence internally without a tiger team as well, but we're driving through a lot of the initiatives that are that we identify them and the fact is we keep identify anymore as we kind of go down and hit the larger items and the lower hanging fruit. There is still more that we that we see.
So we're driving margins as we go forward.
Thanks, guys.
Our next question is from the line of Matt Coad with Autonomous Research. Please proceed with your question.
Hey, good morning, guys. Thank.
Thank you for taking the question wanted to double click on your commentary around the retail vertical it earlier I thought that was pretty interesting.
Wanted to better understand the land and expand opportunity here. So you have some great clients and she entertainment, though how do you kind of expand that wallet share over time.
Great question.
What's interesting about Shin chemo Kashi and a lot of these merchants is that they are global brands and date you have their own journeys of expansion. So for example, with some of them were looking at new countries in particular regions. We're looking at new alternative payment methods.
We're always looking with them and piloting with them trends with respect to authorization rate improvement. So we are not the vendor to them. We are a partner with one in particular has been a big driver to help us in terms of cascading and driving better authorization rates in the U S, which is a very interesting project for us.
And then actually using them as key pillars.
Since they are than what some of the most recognizable names as you kind of enter with the market leaders and helping us gain credibility as we continue building out our retail capabilities around the world within that as well on retail which is really important is the army.
Applications that we're building so we're launching that into three markets. So that we can provide multichannel journeys for our end customers, but we started at the top with retail with some great brands that they themselves are growing we're seeing opportunity within those to capture more wallet share and transparency, we're still small on the wallet share. So there was one.
Of opportunity, we think to continue expanding our our relevancy with these big brands, both from a country from a capability.
And then from a payment application in terms of what we provide to them. So retail is something that we are just entering we're lapping somewhat of our first year and a half in retail and we think we're starting to build some really strong momentum.
Hi.
Really helpful. Then just for my follow up here.
The growth in the margin expansion that you guys talk to free cash flow improvements should follow so just curious the incremental dollars of free cash flow that you'll get.
How are you thinking about that from a capital management perspective.
I think your base cases that we're going to continue focusing on debt repayment and to de lever. We're quite excited just the performance of the business right from from when we acquired pie out sub three times just under three times to today to $2 six that is kind of the cadence that we'd like to be at two or less.
We think not that that's going to open up opportunities.
Higher backfile, this changing and from our perspective in terms of building blocks and opportunity around M&A. We think the second half of next year will yield some quite compelling opportunities both domestically and globally and we want to remain opportunistic. So our base case will be continued to.
To focus on debt repayment.
Lower interest expense, and then have the ability and flexibility and optionality to execute on potential M&A, but naturally we have so much optionality with our cash flow and our balance sheet and we will execute on that as is appropriate and remain opportunistic.
Thanks, Phil.
Okay.
Next questions come from the line of Bob Napoli with William Blair.
As you see with your question.
Thank you and good morning, good to see the solid quarter and guidance.
A question on on Pie I guess in integrated payments, how is that acquisition performing versus your expectations.
And what are your thoughts around.
Being able to leverage the integrated payments strat.
Strategy from <unk> and from elsewhere within New day.
Over the next few years.
Thank you great question.
We are super pleased with Pi.
For one wonderful people.
Sure the thing values and culture, we hit the ground running and you can see ultimately pilot is our b to B government and most of our integrated payments business and we are accelerating the growth of the business, we're creating more dependency on new base technology stack and we're executing ultimately not just expect.
Patients, but I think we've exceeded patients with respect to where we're at right. Now we firmly believe this channel can and will be a 15% to 20% grower where nationally now above that from from.
Pro forma basis, and there's a lot more to come with each providing very unique tentacles for continuing growth in <unk>.
We're gonna be beating factoring off balance sheet naturally with a partner.
We're going to be driving applicability around our card issuing for virtual card issuing and then expanding into the AP side as well. So there is a lot of tentacles and then naturally kind of our bread and butter on the BD side with respect to pie is bringing and internationalize and these relationships with kickstarted that now with Canada.
And you're going to be taking these partnerships around the world. So we're very pleased with pilot.
The performance of the business has been strong.
Been executing thoughtfully on the cost side.
And we're actually very pleased.
Both from a technology and the gap that we are able to plug from what <unk> had.
And more importantly from a relevance from our own use cases to pilot customers.
Turns of integrated payments, you'll see us spend a lot of time here Bob.
We wanted to naturally focus on Kickstarting, our government and <unk> business, which is what we've done and being really thoughtful in terms of mining management time and now we're turning our focus around integrated payments. It is the slower growth out of.
Our <unk> government and <unk> channel.
But we think theres a lot of pent up opportunity, where we're focused on right now naturally is plugging in our omni.
In Q that offering into the three markets that we're servicing that and then driving our ICT capabilities to the use cases that we have in the markets that we support them we believe integrated.
Integrated payments will be that last piece of the puzzle to accelerate this channel to the high end of what our internal targets all around the integrated payments.
Vertical for us.
Great. Thank you and then just maybe.
I'm not sure if it's a fair question, but what has that changed since last quarter I mean as far as visibility.
I mean, certainly that's the tone in the quarter as it is a.
What is it that.
It seems to have led to more stability clarity and overall in your business.
I wouldn't say that's a good question I think it's a fair question I wouldn't say, it's it's toner or visibility I think the biggest thing in payments is that it's never built just quarter to quarter, we report quarter to quarter, but customers live.
And they they have their own journeys that we are trying to manage our way too.
We are quite bullish last quarter as well, it's just a matter of.
Client Activations and timeframe around Activations, and then naturally what ends up happening around the end markets that we're operating in so I think we're really bullish but if we look at our own metrics.
Be it per channel organic growth you know the health of our financial profile. The fact, how quickly we are delivering.
Our ability to continue executing and the fact that we have low capex and very very high cash flow profile, allowing us to be thoughtful in terms of where we're investing and more importantly that the investments that we have already made have hit an inflection point, we like where we are and we.
We think our core global Commerce channel has so much opportunity ahead that one is a bit chunkier in terms of when it comes in and out we think we've now have some great stability and momentum in <unk> and we're executing on the SMB side. So I wouldn't call. It a visibility question or tone. It's just a matter of great businesses are not built overnight and they're not necessarily.
Fairly measured quarterly we understand your job is measured quarterly and we totally get shareholder sentiment with respect to the quarterly side, but we really do love what we have going on and we think this is a platform from a profitability perspective to be at a multiple of where we are now so we still think we're on the ground floor.
Great. Thank you I appreciate it.
Our next question is coming from the line of Todd Copeland with CIBC. Please proceed with your question.
Yes, good morning, everyone.
Phil I wanted to have you comment on how much you think is in your control or do you think about 'twenty four and getting back to your midterm guidance of 15% from 13 or 14%.
And talk about what's in your control.
And what needs to happen.
What might be a factor out of your control. Thanks a lot.
Good morning, Tom Great question, I mean, I think the biggest thing that I would leave here is that we have the building blocks.
People, the technology and the World class sales organization to execute and that's exactly what we're focused on and you can see that as we look at the sequential improvement in AR in Q3.
Do we really do love the conversations that we're having with customers.
Pretty meaningful conversations and flight actually those take time and as a matter of understanding that taking the time and those are the things that we're working hard on and for that we have changed the way I operate the business in terms of being really really focused pulling up a chair and making sure that my entire ELT is extremely focused on the five pillars, which are.
Current customers or new customers product innovation and cost efficiencies in our people and those are the things that are in our control.
And we're gonna be continuously focusing on those and they give us visibility great building blocks that we have today in our our focus is on delivering so that we exit Q4.
In the range of our midterm growth targets and Q4 2024.
Thanks, Paul and as a follow up.
How should we think about I guess combined with Pi.
The seasonality in 2024, and I know youre, not giving specific guidance, but what will be the rhythm of the business sort of Q1 to Q4 any qualitative discussion there would be helpful. Thanks a lot.
It's been very interesting when you think about seasonality in our business Todd because over the last three years historically from Newwave sweating pie on there has been noise right.
21, you had COVID-19 in 'twenty two comparison, we had world Cup, which was a significant event both in Q3 and Q4 when you compare new they.
In 2003 to 222 in the next year, we will have more of a normal year, so from a new perspective.
It's actually going to be a normal year.
And then you have kind of the dribs and drabs of each of the verticals that we can getting momentum into Q1.
Have.
Football season in Q2.
You have to build up for the summer season in Q3, our travel and then Q4 you have the holiday specials, and we kind of build our end market exposure to have.
Naturally some focus on each of them and Thats kind of what new agent building out we like where we sit.
From a normal year perspective from the New Bay you typically have.
Q1 ramp into Q2 slight flattish down into Q3, and a step up into Q4 slightly.
Slightly different we seen in pioneer looking historically.
Pi had a softer Q1 and an acceleration in Q2, and then flattish Q3 Q4, what's changed for us around it.
It's just the momentum of new business in the pipeline that we have you know I mentioned it last quarter that we had a 27% increase in <unk> that will be opportunity that we will see processing next year. So we actually think our emerging channel, which is our government b to B and obviously, we'll see some some step ups predominantly driven by new business.
Thanks, Bill appreciate it.
Thanks, a lot.
Thank you next.
Next question is from the line of Joe <unk> with Canaccord Genuity. Please proceed with your question.
Good morning. This is let us any on for Joel Thanks for taking our question.
First off on the emerging business last quarter, you added 28 ERP platforms in four and S&P can you maybe give us an update on the progress there and any update on Microsoft dynamics.
Yeah, Great. Great question, Yes, we have activated in for that is already in process and part of our on boarding teams doing a great job at not not just do you think about the steps is first you integrate and partner with ERP and then you drive through the var network, we've seen great progress around that.
SAP, so early and Microsoft were expecting this quarter or early next quarter's activates the great thing here guys is we now have access.
So about 3 million and merchants in all parts of the world and that's what we're executing on so each ERP typically runs through its journey from an integration to activation, but what we found is side aside from the ERP. So that a lot. There's some overlap between the vars underneath that we may or may not already have relationships with so it's an interesting environment that we want to make sure that.
Our use cases, and our technology is applicable.
Accessible for every one of the bars that endo touching those 3 million merchants since that's what that's what we're focused on.
Great got it thanks and.
It would be good to get an update on on the gaming business in the U S. Thanks.
Yeah.
Yes, I would say on the gaming business, we're continuously moving forward with new States I think just last week, we had Maine.
We're progressing in terms of each of the state to come up we've done a great job in Ontario were waiting to see what happens around Alberta in North America as well, but.
There is nothing to flag from the gaming business, obviously, we welcome Caesars.
To bring one of our European customers 88 into North America, and we're continuously head down focus on helping our current operators in market go from state to state our foreign operators enter the market and our current offer.
In the U S exiting the market in terms of global I think the most interesting that I leave in gaming has become a global vertical and it's.
Not just what's happening within the four quarters.
The United States, it's what's happening in every single market lots of tailwind and interest in South America.
Still continued momentum in North America.
We still see continued momentum in Europe. So.
Significant tam with with still even though we have a great position in gaming, but a lot of opportunity for us to continue expanding and growing.
Thanks, a lot.
Thank you.
At this time, we've reached the end of our allotted time for questions and answers I'll turn the floor back to Chris Maloney for closing remarks.
Thank you Rob Thanks, again to everyone for joining us today, please reach out to the IR team with your follow up question will be on the road in the next few weeks, we're planning to attend Investor conferences hosted by RBC Wells Fargo and UBS among others. So we hope to see many of you during those appearances bye for now.
This concludes today's conference you may disconnect your lines at this time and thank you for your participation.