Q4 2023 Nuvei Corp Earnings Call

Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Newgate Corporation's fourth quarter 2023 earnings call. As a reminder, this conference call is being recorded. I'll now turn the conference call over to Chris Mammone, head of IR. Please go ahead, Mr. Mammone.

Good morning, ladies and gentlemen, and thank you for standing by.

Welcome to <unk> Corporation's fourth quarter 2023 earnings call.

As a reminder, this conference call is being recorded.

I'll now turn the conference call over to Krishna <unk> head of IR, He's going to hate me for my money.

Thank you operator, and thanks to everyone for joining us this morning.

Christopher Mammone: Thank you, Operator, and thanks to everyone for joining us this morning. With us today are Philip Fayer, Chair and CEO, and David Schwartz, CFO. As a reminder, this conference call is being recorded for webcast and is the copyrighted property of Nuvei. Rep Broadcasting this information in whole or in part without the written consent of Nuvei is prohibited.

Today, our fill up their chairman and CEO and David Schwartz CFO.

A minor this conference call is being recorded and webcast and is copyrighted property of New Bank. We bought rebroadcast of this information in whole or in part without written consent is prohibited.

Christopher Mammone: Prior to this call, we published a shareholder letter for the fourth quarter and full year. We encourage everyone to read it if they haven't done so already. The shareholder letter contains commentary that otherwise would have been included during our prepared remarks for this conference call and allows us to spend more time on today's call answering questions. We would also encourage investors that the shareholder letter be read in conjunction with our press release, MD&A, and consolidated financial statements, all of which are available in the events and financial information sections on our investor relations website, investors.nuvea.com.

I heard of this call, we published a shareholder letter for the fourth quarter and full year, we encourage everyone to read it if you haven't done so already.

The shareholder letter contains commentary that otherwise would've been included during our prepared remarks for this conference call and allowed them to spend more time on today's call answering questions.

Also encourage investors that the shareholder letter be read in conjunction with our press release MD&A and consolidated financial statements all of which are available in the events and financial information section on our Investor Relations website investors Dot New Bay Dot com.

During this call we may make certain forward looking statements within the meaning of the applicable security laws.

Christopher Mammone: During this call, we may make certain forward-looking statements within the meaning of the applicable security laws. Such forward-looking statements involve risks, uncertainties, and other factors that may cause actual results, performance, or achievements of the business or developments in a new-phase 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 in new base filings with the Canadian Security and Regulatory Authority and on the company's website. Our discussions today will include non-IFRS measures, including but not limited to adjusted EBITDA, adjusted net income, and adjusted net income per share. Management believes non-IFRS 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 IFRS financial measures. Reconciliation of these measures to IFRS measures is available in our earnings release and MDMA. We'll just have some brief prepared remarks here before opening up the call for your questions, in order to get to as many people in the queue within the allotted Q&A time.

Such forward looking statements involve risks uncertainties and other factors that may cause 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.

All were performance can be found in todays filings with the Canadian Securities regulatory authority and on the company's website.

Our discussion today will include non ifr, if measures, including but not limited to adjusted EBITDA adjusted net income and adjusted net income per share.

Management believes the non Ifr S results are useful in order to enhance our understanding and our ongoing performance, but they are not a supplement to and should not be considered in isolation from a substitute for ifr S financial matters.

A reconciliation of these measures to Ifr S measures is available in our earnings release and M. D N a.

Well just have some brief prepared remarks here before opening up the call for your questions.

In order to get to as many people in queue with any a lot of Q&A time.

Christopher Mammone: We ask that you limit yourself to one question and one follow-up. And with that, I'd like to turn the call over to Phil. Thank you, Chris.

We ask that you limit yourself to one question and one follow up.

I'd like to turn the call over to Phil.

Thank you Chris and thank you all for joining US. This morning, as you've now seen we've reported strong fourth quarter and full year results.

Philip Fayer: And thank you all for joining us this morning. As you've now seen, we've reported strong fourth-quarter and full-year results near the high end of our range for revenue and above the range we provided for total volume, revenue, and cost of currency at Justity.com. Highlights for the quarter include strong growth across the board, with total volume increasing 53 percent, revenue increasing 46 percent, and adjusted EBITDA increasing 40 percent. On a Performa basis, fourth-quarter revenue growth was 11%, and in line with our expectations, our leadership and challenger positions across our markets drove 19% growth in organic total volume accounts and currency. Adjusted EBITDA margins expanded sequentially by 100 basis points to 37.3% as we're Our board has authorized and declared a cash dividend of 10 cents per share.

High end of our range for revenue and above the range. We provided for total volume revenue at constant currency adjusted EBITDA.

For the quarter include strong growth across the board with total volume, increasing 53% revenue, increasing 46% and adjusted EBITDA increasing 40%.

On a pro forma basis fourth quarter revenue growth was 11%.

And in line with our expectations, our leadership and challenge our positions across our end markets drove 19% growth organic total volume at constant currency.

Adjusted EBITDA margins expanded sequentially by 100 basis points to 37, 3% as we were driving efficiencies throughout our business.

And on capital allocation, we continue to prioritize debt repayment deleveraging to two five times as at December 31st 2023.

Our board has authorized and declared a cash dividend of 10 cents per share since 'twenty 'twenty. Two we have returned $251 million to shareholders in the form of share repurchases and dividends.

Philip Fayer: Since 2022, we have returned $251 million to shareholders in the form of share repurchases and dividends. This year is off to an exciting start as we are executing on our strategic priority. We're looking forward to another year of growing with our customers, driving product innovation, and expanding our geographic footprint, all the while staying disciplined on cost management. This concludes my prepared remarks, and we're now ready to take your questions. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star and then 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press the star and then 2 if you would like to remove your question from the queue.

This year is off to an exciting start.

We are executing on our strategic priorities.

Going forward to another year of growing with our customers driving product innovation and expanding our geographic footprint all the while staying disciplined on cost management. This.

This concludes my prepared remarks, and we're now ready to take your questions.

Yeah.

Thank you.

We'll now be conducting a question and answer session.

If you'd like to ask a question. Please fish star and then one on your telephone keypad.

Confirmation tone will indicate your line is in the question queue.

You May press Star and then two if you would like to remove your question from the queue.

But participants using speaker equipment, it may be necessary to pick up your handset before pressing the stock east.

William Alfred Nance: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. The first question we have is from Will Nance of Goldman Sachs; please go ahead. Hey guys, good morning, appreciate you taking the questions. Phil, maybe just a question on some of the moving pieces in the segments.

The first question. We have is from one month of Goldman Sachs. Please go ahead.

Okay.

Hey, guys. Good morning, appreciate taking the questions.

So maybe just a question on some of the moving pieces in the segments.

Philip Fayer: I think the S&B business had a nice improvement, I think, in the shareholder letter you mentioned finding ways to kind of improve the performance. So just any color on some of the opportunities that you guys have uncovered more recently there. And then I thought it was interesting to see kind of like the Heritage Paya business growing in high teens. It's a nice acceleration from what it had done historically. So just any color on what's been driving that. And then maybe some color on the TIL payments.

The SMB business had a nice improvement I think in the shareholder letter you mentioned, you know finding ways to kind of improve the performance. So just any color on some of the opportunities that you guys are have uncovered more recently there and then you know I thought it was interesting to see kind of like that the heritage pie of business growing at high teens.

Nice acceleration from what it had done historically, so just any color on whats been driving that and then you know maybe any color on the til payments I think you mentioned that was kind of geared towards our international expansion on the IC business, maybe just thoughts on the strategy there.

Philip Fayer: I think you mentioned that it was kind of geared towards international expansion in the ISV business. Maybe just thoughts on the strategy there. Thanks. Thanks, Will. Good morning.

Thanks, Bill Good morning, Great question, you know as.

Philip Fayer: Great questions. You know, as we stated, we're investing in all of our channels. We're really excited about what they provide to us. If we double click, global commerce grew volume by 30 plus percent, which we continuously believe is category-leading. We've made investments and executed our thesis around our B2B, government, and ISV channels. If we look back, that went from 13 percent, 16 percent, and 19 percent.

As we stated we're investing in all of our channels. We're really excited about what they provide to us if he doubleclick global Commerce grew volume by 30 plus percent, which we continue we believe that as category meeting we've made investments in executing our thesis around our <unk> government I E channels. If we look back that went from 13%.

16% and 19% and we do believe our SMB is going to remain relatively flat and certainly driven that the performance of our business with a continuous momentum we see in our global Commerce and B to B is the channels with.

Philip Fayer: And we do believe RSMB is going to remain relatively flat and certainly drive the performance of our business with the continuous momentum that we see in our global commerce and B2B ISV channels. With respect to TIL, I'm very excited to welcome the TIL team to Nuvei, a really small but killer business with, you know, very exciting capabilities with respect to engaging with ISVs and ISV partners around the world. Fantastic onboarding tools for seamless and instant merchant onboarding, great partner tools, and APIs for us to accelerate our ISV strategy.

With respect to tell very excited to welcome the Philippines. The genes are new they are real small, but chiller business with a very.

Citing capabilities with respect to engaging with Isps in Ais and partners around the world Fantastic Onboarding tool for seamless and instant merchant Onboarding, great partner tools and a b is perhaps accelerate EIS in strategy. It is growth accretive in our b to B golf and IC channel and certainly drives a footprint. We're also.

Philip Fayer: It is growth accretive in our B2B, government, and ISV channel and certainly drives a footprint for us to accelerate ISV engagements around the world. What's interesting about TIL, while small on acquisition, is big on capability and certainly will be very interesting for us as a platform for continued growth. They have relevance in Australia and New Zealand but also in the U.S., just about 50-50 with respect to where they're focused today

Salary ICD engagements around the world, what's interesting about til, while small on acquisition based on the Capes.

Ability and certainly will be very interesting for us as a platform for continued growth.

They have relevance in Australia, and New Zealand, but also in the U S. Just about 50 50 with respect to where they're focused at a wonderful team.

Philip Fayer: wonderful team, certainly margin diluted initially for the first couple quarters, but we believe we'll bring it to break even by the end of the year and will be accretive in the years to come. The next question we have is from Darrin Peller of Wolf Research. Please go ahead.

Certainly margin dilutive initially for the first couple of quarters, and we believe will bring it to breakeven by the end of the year and <unk> and will be accretive in the years to come.

Yeah.

The next question, we have is from Darrin Peller of Wolfe Research. Please go ahead.

Darrin David Peller: Guys, hey, thanks. You know, in the prepared remarks or in the shareholder letter, if you talk through the rigor you applied to guidance, maybe just expand on that a little more in terms of what you actually included in terms of conservatism and the outlook and then, I think, as a follow-up, just understanding the acceleration. A little better, just the moving parts of the driving forces of that acceleration as the year progresses to exit the year in that 15 to 20% would be a great place to start. Yeah, absolutely. Good morning, Darren.

Guys Hey, thanks.

No no.

Repaired remarks, or any really in the shareholder letter if you talked through the rigor applied to guidance, maybe just expand on that a little more in terms of what you actually included in terms of conservatism in the outlook and then.

I think as a follow up just understanding the acceleration.

Little better just the moving parts are the driving forces of that acceleration as the year progresses to exit the year in that 15 to 20 per cent.

He'd be a great place to start.

Yeah, absolutely. Good morning, Darren you know the biggest thing process, we wanted to set ourselves up for success there.

Philip Fayer: You know, the biggest thing for us is that we want to set ourselves up for success, Darren, and that is really what is reflected in the guidance. We took a prudent approach. We want to remain conservative.

And that that is really what is reflected in the guidance, we took a prudent approach.

We want to remain conservative.

Philip Fayer: We're quite excited about how this year has started. But we've used our typical building blocks with respect to what we see in the business, what we see from a new customer, a very active pipeline, but being conservative on activation timelines from customers to, essentially, provide what we think is a better engagement with our shareholders with deeper visibility. With respect to the exit of Q4, very good momentum in all of our channels, you know, keeping in mind that we lapped global commerce in global commerce, the World Cup, which is a significant event the previous year. And in the first half of the year, we're taking consideration of lapping the afforded customer. We have taken some thoughtful views on timing for new customers and, most certainly, thoughtful views on voluntary expansion opportunities, which we're excited about. With respect to starting the year, we're seeing great momentum in January and February; we're seeing really strong engagement with customers, both existing and new. And we feel like this year, this year will be another transformative year for Nuvei.

We're quite excited to how this year has started but we've used our typical building blocks with respect to what we've seen in the business and what we see from a new customer a very active pipeline, but being conservative on activation timelines from customers.

Essentially provide.

Provide what we think is a better engagement with our shareholders with deeper visibility.

With respect to the exit of Q4.

Very good momentum in all of our channels, we're keeping in mind that we lacked global calmer in global Commerce. The World Cup, which is a significant event the previous year and in the first half of the year, we're taking consideration of lapping the all for the customer.

We have taken some thoughtful views on timing for new customers and most certainly thoughtful views on wallet share expansion opportunities, which we're excited Paul with respect to starting the year, we're seeing great momentum in January and February we're seeing really strong engagement with customers, both existing and new and we feel like this year this year.

<unk> will be another transformative year for new bank from our building blocks perspective, we're building it slowly so organic growth building throughout the year, while we exit Q4.

Sanjay Harkishin Sakhrani: From a building block perspective, we're building it slowly. So organic growth, building throughout the year while we exit Q4 in the range of our midterm growth targets. The next question we have is from Sanjay Sakhrani of KBW. Please go ahead. Thanks. Good morning.

In the range of our mid term growth targets.

Yeah.

The next question, we have we saw him Sanjay <unk> of <unk>. Please go ahead.

Thanks, Good morning.

Philip Fayer: Maybe I could just drill down on Darrin's question just a little bit, Phil. You know, when we think about that $100 million of revenue in the pipeline at the end of the second quarter, how much of that should translate into revenue as we move through the year? And maybe you could just talk about how much of the new wins are sort of baked into the 2024 guidance. Yeah, without double-clicking on a customer specific, I think the most important thing to remember is when you sign a new customer, Sanjay, that's the implementation timeframe, right? It typically takes six months to a year to see the full volume, just depending on how many countries and how long they have from an implementation standpoint.

If I could just drill down on Dan's question, just a little bit Phil when.

So when we think about that $100 million of revenue in the pipeline.

End of the second quarter, how much of that.

Should translate into revenues as we move through the year and maybe you could just talk about how much of the new wins are sort of baked into the 2020 for guidance.

Yeah without without double click on a customer specific I think the most important thing to remember is when you sign a new customer Sanjay that's implementation timeframe right. It typically takes six months to a year to see the full volume just depending on how many countries and how long that for them from an implementation standpoint. So historically, what you do in the previous year or actually in the year.

Philip Fayer: So historically, what you do in the previous year or actually in the year before is garden for full implementation the following year, provided that the customers go live throughout that period, if that makes sense. So we've taken those historical trends into consideration for the year, we have a really deep pipeline, as you mentioned, many of you have seen the press releases that have come out with companies and partnerships like Adobe, or our win with Microsoft, or, you know, us establishing a real foothold in the travel space, expanding further in the retail space with some of the, you know, global retail pioneers. So from an overall perspective, very excited about what we're seeing implementation is something that we focused on last year; we have changed the way we manage client onboarding, created tiger teams to drive, you know, attention to all the relevant departments for client activations, and that is starting to yield results. So I think, all in all, putting it all together, the building blocks for us remain the same, you know, certainly, what's happening in the end markets.

<unk> is gardening for full implementation of the following year provided that the customers went live throughout that period, if that makes sense. So we've taken those historical trends into consideration for the year. We have a really deep pipeline. As you mentioned many of you have seen the press releases that have come out with companies partnerships with adobe or our win with Microsoft.

Or are you know us establishing a real foothold in the travel space expanding greater in the retail space with some of that glue.

Global retail pioneers so from an overall perspective very excited about what we're seeing implementation is.

Something that we have focused on last year, we have changed the way we manage client onboarding created tiger teams to drive.

Attention to all the relevant departments for client Activations and that is starting to yield results. So I think all in all putting it all together the building blocks less remain the same you know certainly what's happening in the end markets and so GDP related end markets that we're operating with both DDB Gov is these.

Philip Fayer: So GDP related and the markets that we're operating in with both B2B, Gov, ISVs, and global commerce, we have wallet share opportunities within our existing customers, which are fairly significant as our customers execute on their own journeys and utilize our capabilities to grow their business. There is the annualization of the previous year's new business, the ones that have activated, and then net new business, which all combined, we've taken a fairly conservative approach with respect to the outlook that we provided for 2020. I got it.

In global Commerce, we have the wallet share opportunities within our existing customers, which are fairly significant as our customers execute on their own journeys and utilize our capability scrubber business. There is the annualized <unk> of the previous year's new business. The ones that have activated and then net new business, which all.

And we've taken a fairly conservative approach with respect to the outlook we provided for 2024.

Got it and then just on a related note I know you had these cost synergies from <unk> as well as other initiatives like in sourcing the backend processing.

Philip Fayer: And then just on a related note, I know you have these cost synergies from Paya, as well as other initiatives, like in sourcing, and back end processing. Could you just talk about the timing of that? And does any of that sort of factor into the guide for 2020? No, it does not.

Could you just talk about sort of the timing of that and then does any of that sort of.

Factor into the guide for 2024.

It does not so if you remember we talked a lot about synergies by the end of 2024, we're really comfortable with the synergies that we've executed so far both on a cost perspective, but more interesting to me on a revenue perspective, we have less backend as an upside to margin expansion for this year and the reason being Sanjay is that.

Philip Fayer: So, if you remember, we talked a lot about synergies by the end of 2024. We're really comfortable with the synergies that we've executed so far, both on a cost perspective, but more interestingly, on a revenue perspective. We have left backend as an upside to margin expansion for this year. And the reason is that, Sanjay, backends are never all in one and done.

Back ends are never all in one and done so certainly we plan on the migration of Canada within the second and third quarter there.

Philip Fayer: So you know, certainly we plan on the migration of Canada within the second and third quarters. Thereafter, we'll look at the migration of the US. That has, you know, enormous benefits for the organization, not just from the cost perspective from third parties, but also internal process efficiencies, meaning that we have one process for onboarding, one process for data, one set of data that comes back. And then we have the element with respect to wallet share opportunities. So in our own clearing and settlement, we do interchange prediction, which is maturely different from how many North American operators and processors do it today, meaning that we can price transactions in real time.

They're asking will look at the migration of the U S that has enormous benefits into the organization not just a cost perspective from third parties.

But also internal process efficiencies, meaning that we have one process for onboarding one process for data one set of data that comes back and then we have the elements with respect of wallet share opportunities. So on our own clearing and settlement, we do interchange predictions, which is materially different from how many of the north American operators and processors to it today, meaning that we can price transactions.

In real time, and that opens up a world of opportunities with our Ais B and reselling partners because we can pay them daily competitor weekly we can provide merchants greater depth on cost analysis and reporting for them on a per transaction basis in near real time. So it's very very important but we have left that as an upside opportunity.

Philip Fayer: And that opens up a world of opportunities with our ISVs and reselling partners because we can pay them daily, we can pay them weekly, and we can provide merchants with greater depth on cost analysis and reporting for them on a per transaction basis in near real time. So it's very, very important, but we have left that as an upside opportunity. It's predominantly going to be for 25.

It's predominantly going to be for twenty-five. However, we will see minor implementations and testing as we are doing right now.

Philip Fayer: However, we will see minor implementations and testing, as we are doing right now. We are live in Canada with a handful of merchants and pretty excited about what we see. So overall, from what we've baked in from an insurance perspective, we've kept a very conservative view. We have upsides on our back end, and we have upsides on debit routing capabilities, which is going to be specific around PIA. And then we have just general scale opportunities within the business. You know, we took an approach late last year, and this is from my entire executive team, to explore AI opportunities before we create the requisition for new hires. And this is yielding wonderful opportunities for us to continue driving greater efficiencies across the org. You know, don't don't mince that for headcount reduction.

We have we are live in Canada.

With that with a handful of merchants and pretty excited about what we see so overall from that from what we've baked in combinations perspective.

We've kept a very conservative view, we have upsides in our back end, we have upsides on debit routing capabilities, which is going to be specific around <unk> and then we have just general scale opportunities within the business. We have taken an approach last late last year and this is for my entire executive team to explore AI opportunities before we create the requisition for.

New hires and this is yielding wonderful opportunities for us to continue driving greater efficiencies across Europe.

Don't mean stat for head count reductions more opportunities as we continue to scale to continue driving and enabling our workforce do more and be more efficient.

Philip Fayer: It's more opportunities as we continue to scale to continue driving and enabling our workforce to do more and be more efficient and help margins expand to our long-term targets. The next question we have is from Dan Perlin of RBC Capital Markets. Please go ahead. Thanks. Good morning.

And help margins expand to our long term targets over time.

Yeah.

Okay.

The next question, we have is from Dan Perlin of RBC capital markets. Please go ahead.

Thanks, Good morning, I I wanted to just ask a question that you know it feels to me like the.

Daniel Rock Perlin: I wanted to ask a question. You know, it feels to me like the sales motion, almost like the go-to-market motion, has been accelerated. And I think we also saw that kind of indication in the current quarter. So, I'm just wondering, are there some nuanced changes that you've been, you know, pushing in place?

The sales motion almost like a go to market motion is and has been accelerating and I think we also saw that kind of an indication in the current quarter. So I'm. Just wondering are there some nuanced changes that you've been pushing in place I know you were talking about implementation teams in tires, but this is kind of more of the forward sales motion and then the second part of the question a little bit different but.

Philip Fayer: I know you're talking about implementation teams and tigers, but this is kind of more about the forward sales motion. And then the second part of the question is a little bit different, but just expectations around gross margins as we think about into next year, given some of the mixed dynamics that are at play in the business. Thank you. Yeah, thanks. I'll take the first question.

Expectations around gross margins.

You know as we think about into next year given some of the mixed dynamics that are at play the business. Thank you.

Yes, Thanks, I'll take the first question and I'll pass it over on the margin side to date from a sales motion perspective, if we if we just double click on we did last year you know last year, we created our sales enablement group.

David S. Schwartz: I'll pass it over on the margin side today. From a sales motion perspective, if we just double-click on what we did last year, you know, last year, we created our sales enablement group, a wonderful team that has created real structure around our global commercial operations. And what we mean by that is, you know, if you can have 200 sales folks sell one way versus 200 folks sell 200 ways, it creates a lot better visibility into the organization and the performance that we are seeing from the headcount that we have. And, you know, from an ROI standpoint, the commercial team has become really attractive, with respect to cost of acquisition, certainly understanding the time of implementation, we shorten. We've also added an SDR team, which is now our breeding ground for talent as we continue expanding into it.

Wonderful team that that has created real structure around our global commercial operations and we mean by that is you know if you can have 200 sales folks sell one way versus 200 folks L 200 ways creates a lot better visibility into the org and the performance that we're seeing from the head count that we have and you know from an ROI standpoint, the commercial.

Team has become really attractive with respect to cost of acquisition certainly understanding the timing of implementations. We showed that we shortened we've also added an SDR team, which is now a breeding ground for talent as we continue expanding into it.

We think that this there is an opportunity certainly keeping in mind the margin of the business the continuum spanning our sales capabilities. We're very excited about what we see in our global Commerce. If you think about it volume growth of over 30 plus percent certainly we're lapping.

David S. Schwartz: And we think that this is an opportunity, certainly keeping in mind the margin of the business to continue expanding our sales capabilities. We're very excited about what we see in our global commerce. If you think about it, volume growth of over 30 plus percent, certainly, you know, we're lapping, you know, the off-boarded customer and the World Cup. But it's a fascinating business, guys, with so much opportunity in so many different countries. You know, even at our current scale this year of touching $250 billion in volume, we still have so much more to go. So we really like where we're sitting both in global commerce and in our B2B, ISV, and Gov. wonderful job from the team, from the sales motion aspect, to energize our B2B group. We feel that this can be another significant lever for growth for us in the business. We have accelerated our government business as well.

The all for the customer and World Cup, but it is a Canadian business guys with so much opportunity in so many different countries and even at our current scale. This euro touching $250 billion of volume.

We saw so much more to go so we really like where we're sitting both in global commerce and in our <unk> IV and golf wonderful job from the team from a sales motion aspect to energize, our b to B group.

We feel that this can be a another significant lever for growth for us in the business, we have accelerated our government business as well and we are putting focus this year on ICD Tankful pass kill as part of this both from a capability perspective, and a leadership perspective, and all combined just gives us the tools to continue transforming the business.

David S. Schwartz: And we are focusing this year on ISV, and we're thankful to have Till as part of this, both from a capability perspective and a leadership perspective. And all combined just gives us the tools to continue transforming the business into the player that we are today and the one that we're going to. Hey, good morning. Good morning, Dan. It's David.

The player that we are today and the one that we're going to.

Hey, good morning, Good morning, Dan its David so as it relates to gross margin.

It's a good question I mean, it's really dependent on mix of course, and what we you know how we rollout.

And the relative mix within target markets, but what I would say if you look back at the last eight.

Eight quarters. The range has been really really tight from a gross margin perspective, it's ranged from about 77% to about 83%.

David S. Schwartz: So as it relates to gross margin, it's a good question. I mean, it's really dependent on mix, of course, and what we, you know, how we roll out and, and the relative mix within market markets. But what I'd say if you look back at the last, you know, eight quarters, the range has been really, really tight. From a gross margin perspective, it's ranged from about 77% to about 83%. So the range has been really tight the last two quarters sequentially; we're at that 81.7%. So pretty much flat.

So the range isn't really tied at the last two quarters sequentially, where at that 81, 7% so pretty much flat.

The quarter before that Q2 was 82% so.

I'd say the variability you shouldn't expect much variability, but of course dependent on mix and because we drive.

Expansion from a wallet share perspective with existing customers and that always helps but then there's some offset as you think about it as we go up market to larger customers. So there's many puts and takes but ultimately we haven't seen much.

David S. Schwartz: And the quarter before that, Q2 was 82%. So, I'd say the variability, you shouldn't expect much variability, but, of course, dependent on mix. And look, as we drive Transcribed by https://otter.ai, you know, variability, and I wouldn't expect to see any significant variability on a go forward basis either. Great, thank you.

Variability and I wouldn't expect to see a.

Significant variability on a go forward basis either.

Great. Thank you.

The next question we have is from John Coffey of Barclays. Please go ahead.

Hi, Thanks, Thanks, Phil Thanks, Dave for taking my question. My question. My first question just on the revenue cadence. So given that your guide for Q1 and for the full year and also saying that you might leave a 'twenty 'twenty four at that 15% to 20% level I was wondering if there's any insight you could give us into what the cadence would be our revenue growth was over.

John Kimbrough Davis: The next question we have is from John Coffey of Barclays; please go ahead. Hi, thanks. Thanks, Phil.

David S. Schwartz: Thanks, Dave, for taking my question. My question, my first question, is on revenue cadence. So given that you guys for Q1 and for the full year and also said that you might leave 2024 at that 15 to 20% level, I was wondering if there's any insight you could give us into what the cadence would be revenue growth wise over the year. Because, you know, you know a lot of the ins and outs as far as that large customer leaving. So any kind of insight you could give us there? And then my second question is, as I understand it, I don't think Brazil is open to gaming yet. But it seems like, from what I've read, that might be happening soon.

For the year, because you know you know a lot of the ins and outs of as far as that large customer, leaving so any kind of insight you could give us there and then my second question is as I understand I think I don't think Brazil was open for gaming yet, but it seems like from what I've read that that might be happening. Soon is there any kind of I don't know view, if not sizing that you could give us on what you.

Think the Brazilian gaming revenue opportunity could be for you. Thanks.

Good morning, I'll take I'll take the first part then I'll pass it back to Phil for Brazil.

Philip Fayer: Is there any kind of view, if not sizing, that you could give us on what you think the Brazilian gaming revenue opportunity could be for you? Thanks. Good morning, I'll take I'll take the first part, then I'll pass it back to Phil for Brazil on the revenue cadence. So I guess what you'll see is there are a few factors to think about, especially in the first quarter and the first half. So in the first quarter, certainly, we'll expect strong revenue growth, you know, 26 to 29%. But that's really driven by, of course, a full full quarter of paya in 2024, and only partially in 2023. And then, as we get into Q2 and the rest of the year, it'll be comparable on a year-to-year basis.

On the revenue cadence so.

So I guess, what you'll see there's a there's a few factors to think about especially.

In the first quarter and the first half so in the first quarter, certainly, we'll expect strong revenue growth of 26% to 29%.

But that's really driven by of course.

Full quarter of <unk>, and 'twenty 'twenty, four and only partial in 'twenty three.

And then as we get into Q2.

And the rest of the Europe player will be it'll be comparable on a year to year basis.

The other factor to think about for sure for the first half and slightly into Q3 is really around the customer grow over so that's a that's a headwind that we that we're facing.

Philip Fayer: The other factor to think about for sure for the first half and slightly into Q3 is really around customer growth. So that's a headwind that we're facing, and then, You know, high level, what I'd say, if you kind of think about it from an organic perspective, kind of think about mid to high digit growth., and Mark Goldberg.

And then you know.

The high level, what I would say if you kind of think about it.

From an organic perspective kind of think about mid to high digit growth.

First couple of quarters, and then kind of a low double digit into Q3, and then like we said exiting Q4.

As you know in line with our medium term target of 15 to 20 per cent. So there'll be a ramp throughout the year as we go see partly because of some of those headwinds.

David S. Schwartz: We want to execute in the first couple of quarters and then kind of low double-digit into Q3 and then, like we said, exiting Q4 in line with our median term target of 15 to 20%. So there will be a ramp throughout the year as we go, partly because of some of those headwinds I mentioned and just the dynamics around Playa in the first quarter, but that's really how we see it. And we want to make sure that we execute it. Thank you. I'll take the second question.

Headwinds I mentioned and just the dynamics around fire in the first quarter, but but that's that's really how we how we see that and we think that we've set up our 'twenty 'twenty four for success and we want to make sure that we execute.

Yes.

Thank you all.

The second question gaming is a global vertical and it is part of our ethos to make sure that we support every new market that comes online. So we are focused on multiple geographies that are that have pending legislation to enable gaming Latam as a whole is a big gaming opportunities certainly Brazil is topical.

Philip Fayer: You know, gaming is a global vertical, and it is part of our ethos to make sure that we support every new market that comes online. So we are focused on multiple geographies that have pending legislation to enable gaming. LATAM as a whole is a big gaming opportunity.

Philip Fayer: Certainly, Brazil is topical for our customers and one that we are gearing up to supporting, from a side of the market perspective. You know, we try to stay away from individual markets for gaming. We look at it more holistically from a customer perspective of where their journeys take them and what opportunities that drives for our customers. We do think it's topical for our customers and certainly something that they are investing in, but not just the only market, if that makes sense. So I wouldn't just double-click on saying one market.

Our customers and one that we are gearing up to supporting from our side of the market perspective.

Yeah, we try to stay away from individual markets for gaming, we look at it more holistically from a customer perspective of where their journeys take them and what opportunities that drives for our end customers. We do think it's topical for our customers and certainly something that they are investing into but not just the only market. If that makes sense. So I wouldn't just doubleclick on saying one market. It is.

As a new market, that's coming online and it is certainly a top of mind for our customers, but over the last three or four years. There has been there have been several key new markets that are enabled including we think what's happening in the United States and last year in Canada. So there are a lot of tentacles for additional growth in that end vertical Brazil being one of them yes.

Rufus Hone: It is a new market that's coming online, and it is certainly top of mind for our customers. But over the last three or four years, there have been several key new markets that have emerged, including, we think, what's happening in the United States and last year in Canada. So there are a lot of pentacles for additional growth in that, and vertical Brazil is one of them. The next question we have is from Rufus Hone of BMO Capital Markets. Please go ahead. Very good morning. Thanks very much.

The next question. We have is from the society of BMO capital markets. Please go ahead.

Great. Good morning, Thanks, very much maybe coming back to the EBITDA margin trajectory you've got this target out there of 50% plus over the next five to seven years and sort of implies a couple of hundred basis points of margin expansion each year and just given what you've guided to for 2024 slightly down margin.

David S. Schwartz: Coming back to the EBITDA margin trajectory, you've got this target out there of 50% plus over the next five to seven years, and that sort of implies a couple hundred basis points of margin expansion each year. And just given where you've guided for 2024, slightly lower margins year over year, how should we think about the margin ramp going into 2025? Is there going to be some kind of margin for error? Just how are you thinking about that? Thank you. Yeah, good morning, Rufus.

<unk> year over year, how should we think about the margin ramp going into 2025 is it going to be some kind of margin catch up just how are you thinking about that thank you.

Yeah, good morning requests.

So I think we've talked a little bit about it but we can drill down a bit more so when you think about.

No margin and what the impact is we'll talk about I guess 2024 first.

David S. Schwartz: So I think we've talked a little bit about it, but we can drill down a bit more. So when you think about it, No margin and what the impact is. We'll talk about, I guess, 2024 first, then we can kind of go into 2025. So, you know, exiting a full year of 2023 at 36.8%. Our outlook, as you saw for the full year 36 to 37% range, there's really a few, you know, core, I guess, building blocks that you think about from a bridge perspective. One is around till, like Phil said earlier in the call, it's a business that we're really excited about. It brings us capabilities on the ISP side, but it is early stage, high revenue growth, but there is a drag from an EBITDA margin perspective. So that does have an impact in 2024. Again, we plan to exit 2024 with till at break even or better. So that's one component.

And then we can kind of go into 2025. So you know exiting a full year of 23 of 36, 8%.

Our outlook as you saw for the full year of 36% to 37% range Theres really a few core I guess building blocks that you're thinking about from a from a bridge perspective.

One is around till like Phil said earlier in the call. It's a business that we're really excited about it brings those capabilities on the ISP side, but it is early stage high revenue growth, but there is a drag from an EBITDA margin perspective, so that does.

<unk> have an impact in 2024 again, we plan to exit 'twenty 'twenty four with Tel at.

Break even or better.

So that's one component the other component on the downside is the customer Grover.

That we experienced.

Late last year, so that's going to be an impact certainly for the first part of the year.

And then the offset to that is really around scale, so as our business scales.

We are at scale, but as it continues to scale and as those are those two items a lot. It really sets us up well from a you know from a not from a margin perspective.

David S. Schwartz: The other component on the downside is the customer grover. That's going to have an impact, certainly for the first part of the year. And then the offset to that is really around scale.

And that brings us to the 36% to 37% range. Then there is the upside that was mentioned earlier on the call around the various initiatives and they're still touched upon some of them you know theres backend and sourcing are there.

David S. Schwartz: So as our business scales, and we are at scale, but as it continues to scale, and as those two items overlap, it really sets us up well from a margin perspective. And that brings us kind of to the 36 to 37% range. Then there's the upside that was mentioned earlier on the call around the various initiatives. And I've still touched upon some of them.

The overall cost savings initiatives, there's plenty of synergies.

What I'd say is you know on the cost saving initiatives in addition to.

Now what we've tasked ourselves to do on the AI.

On the AI front is also just looking across the board at all of our costs looking at vendors trying to understand you know where the opportunities are from a vendor consolidation perspective from a pricing perspective with vendors.

David S. Schwartz: You know, there's back-end insourcing, there's the overall cost savings initiatives, there's Plius Synergies. What I'd say is, you know, on the cost savings initiatives, in addition to, you know, what we've tasked ourselves to do on the AI front, is also just looking across the board at all of our costs, looking at vendors, trying to understand, you know, where the opportunities are from a And so we've taken a prudent approach to how we think about execution on those. We're really driving them hard.

And so we've taken a prudent approach of how we think about.

Execution on those we're really driving them hard I think we mentioned on the last call.

That we do have a tiger team that we you know weekly are looking at cost and I think were driving the organization and making sure that that culture is instilled across every level within the organization. We've taken a prudent approach in terms of what we have baked into our outlook.

I'd say.

There's much more upside than what's baked in and we're executing well we achieve at all that we have laid out and know that our team has been really really thoughtful and great around looking under every rock to just say hey, what about this what about that and so we're really really driving the execution on those things I think that's another part of the upside that can help drive us towards that EBITDA.

David S. Schwartz: I think we mentioned on the last call that we do have a tiger team that we, you know, are looking at costs every week. And I think we're driving the organization and making sure that that culture isn't spilled across every level within the organization. We've taken a prudent approach in terms of what we have baked into our outlook. But I would say, you know, there's much more upside than what's baked in, and we're executing. Will we achieve all that we've laid out? No, but our team has been really, really thoughtful and great at looking under every rock to just say, "hey, what about this?" What about that?

Margin expansion into 'twenty into 'twenty, five and beyond.

And I think you've seen over the past three quarters, we have had good margin expansion.

That's something to consider too about how we can you know leverage leverage the revenue leverage the scale to drive towards that 15 plus percent target.

Great. Thanks.

The next question we have is from Richard Tse of National Bank. Please go ahead.

Yes. Thank you just wondering if you could maybe elaborate a little bit more on your acquisition strategy. So shall we think about this as youre looking for solutions to expand geographies and I guess sort of related it was till just.

David S. Schwartz: And so we're really, really driving the execution on those savings. So I think that's another part of the upside that, you know, can help drive us towards that EBITDA margin expansion of 25 and beyond. And I think you've seen over the past three quarters, we have had good margin expansion. And I think that's something to consider, too, about how we can, you know, leverage the revenue, leverage the scale to drive towards that 50 plus percent target. Great, thanks. The next question we have is from Richard Tsai of National Bank; please go ahead. Yes, thank you.

Opportunistic given sort of the valuation of that asset.

Good morning.

Our base case as we as we've talked about in the past few quarters from a capital allocation perspective is debt repayment. So our leverage profile has changed our cash flow generation is extremely strong and that is our base case and that's what we should think about them, we really like til.

Richard Tsai: Just wondering if you can maybe elaborate a little bit more on your acquisition strategy. So should we think about this as you're looking for solutions to expand geographies and, I guess, sort of related, was it just opportunistic given sort of the valuation of that asset? Good morning.

As it ran through the process, we like their capabilities, but just as a background the process, we werent there on price.

Philip Fayer: You know, our base case, as we've talked about for the past few quarters, from a capital allocation perspective, is debt repayment. So our leverage profile has changed. Our cash regeneration is extremely strong. And that is our base case. And that's what we should think about.

Or a price expectations, we did give our best and final. One is you guys could see it was not a significant acquisition just from the size of our overall business, but the capabilities with very compelling. So we have a lot of rigor I wouldn't expect acquisitions.

Philip Fayer: We really liked till, as it ran through the process; we'd like the capabilities, but just as a background for the process, we weren't there on price and or on price expectations. We did give our best and final, and as you guys could see, it was not a significant acquisition just in the size of our overall business, but the capabilities were very compelling. So we have a lot of rigor; I wouldn't expect acquisitions, as we stand today, to be our priority. It will be much more focused on debt repayment, but we will remain opportunistic until it is exactly that. The more we dug, the more we found relevance to our business. We love the team.

As we stand today to be our priority it will be much more focus on debt repayment, but we will remain opportunistic until was exactly that the more we dug the more we found relevance for our business. We love. The team. We think this is additive to our <unk> Z and government strategies, and we do think theres tentacles of opportunities around or S&P.

As well specifically around the simplicity and the cleanliness that they have around merchant onboarding, that's relevant for our businesses. So from a capital allocation perspective base cases debt repayments.

We're very fortunate with our free cash flow profile, our business has hit another inflection point as we continue scaling and this is just going to open up opportunities. So.

Philip Fayer: We think this is additive to our B2B ISV and government strategies. And we do think there are tentacles of opportunities around our SMB as well, specifically around the simplicity and the cleanliness that they have around virtual onboarding that's relevant for our businesses. So from a capital allocation perspective, base cases, debt repayment, you know, we're very fortunate with our free cash flow profile.

With respect to potential opportunistic future M&A, but more importantly, just improving our leverage profile over the next few quarters.

Okay.

A follow up question.

Talked about wallet share increases.

I don't know if you can sort of elaborate on this but perhaps you can maybe talk about you're getting the most share from.

It just depends on the area, there's not one particular folk.

I can highlight just depends on what merchants are looking for and what solutions. We offer we compete against great companies right. If you think about some of our large global peers, we've established a position where substantial player today and that allows us to earn our fair share driven by our technology stack and the flexibility that we didn't.

Philip Fayer: Our business has hit another inflection point as we continue to scale, and this is just going to open up opportunities both with respect to potential opportunities for future M&A and, more importantly, just improving our leverage profile over the next few quarters. Okay, and then my follow-up question. I talked about wallet share increases. I don't know if you can sort of elaborate on this, but perhaps you can maybe talk about getting a little share of it here. It just depends on the area.

And into it so it depends on the region. It depends on what merchants are looking for we don't certainly from a global Commerce perspective, there are five major competitors and we compete really well on feature functionality and capability and ultimately that's what's driving that 30 plus percent growth in global commerce and 19% for the overall organization.

Philip Fayer: There's not one particular folk that I could highlight, you know; it just depends on what merchants are looking for and what solutions we offer. You know, we compete against great companies, right? If you think about some of our large global peers, we've established a position, you know, we're a substantial player today. And that allows us to earn our fair share driven by our technology stack and the flexibility that we've embedded into it. So it depends on the region, it depends on what merchants are looking for. You know, certainly from a global commerce perspective, there are five major competitors.

The next question, we have from Reggie Smith of Jpmorgan. Please go ahead.

Hey, good morning, everyone. This is Charlie on for Rajeev.

You've announced a number of marquee wins over the last couple of months.

Hoping you could step back and kind of compare 2023 to 2020 two.

In terms of how these deals are stacking up against one another are there any appreciable changes in the size and scope of new deals any demand or changes in demand of specific services or offerings. Thank you.

Reginald Lawrence Smith: And we compete really well on feature functionality and capability. And ultimately, that's what's driving that 30 plus percent growth in global commerce and 19% for the overall organization. The next question we have is from Reggie Smith of KP Morgan. Please go ahead. Hey, morning, everyone. This is Charlie on behalf of Reggie.

Great questions. So if you think about 2022 is the onset building blocks of our global commercial team that we started building in 'twenty, one I think.

The machine is becoming really well oiled. So it's just the journey between building a commercial organization I I would just as a side note.

The machine is becoming really well oiled. So it's just the journey between building a commercial organization I I would just as a side note.

Philip Fayer: We've announced a number of marquee wins over the last couple months. I was hoping you could step back and kind of compare 2023 to 2022, in terms of how these deals are stacking up against one another. Are there any appreciable changes in the size and scope of new deals? Any demand or changes in demand for specific services or offerings? Thank you.

He says that.

Apologies, great, but you need a commercial organization to enable it and scale it and that's really where we.

We have been investing into yes, continuing the momentum in our feature and keep abilities as we highlighted.

40, plus capability enhancements in the fourth quarter alone, but it's all about bringing it to market screening on top of the rooftops of your solutions and making sure that customers here you and consider you and that is really what the transformation of the business and driven the transformation of the business between 'twenty, one 'twenty two and 'twenty three.

Philip Fayer: So if you think about it, 2022 is the beginning building blocks of our global commercial team that we started building in 21. I think the machine is becoming really well oiled. So it's just the journey of building a commercial organization. I would, just as a side note, preface that, you know, technology is great, but you need a commercial organization to enable it and scale it. And that's really where we have been investing. Yes, continuing the momentum in our features and capabilities, as we've highlighted, you know, 40 plus capability enhancements in the fourth quarter alone. But it's all about bringing it to market, you know, screaming from the rooftops about your solutions and making sure that customers hear you and consider you.

Pipelines are also in global Commerce, specifically never over if that makes sense right. Sometimes you can speak to a customer for years, depending on where they go sometimes it can be for a quarter, sometimes they're writing an RFP and all scenarios in between but our pipeline today, what's wonderful about it it's not just the size and depth of it but also the end mark.

And customer profiles.

From winning Microsoft to partnership with Adobe to the partnerships that we've seen across the board and you guys have seen just the level of Prs and activity that's coming through we are going from very much. If we think about five years ago, a single vertical focus to.

Philip Fayer: And that is really what the transformation of the business has driven the transformation of business between 21, 22, and 23. Pipelines are also in global commerce, specifically, never ending, if that makes sense, right? Sometimes you can speak to a customer for years, depending on where they go, sometimes it could be for a quarter, sometimes they're running an RFP, and all scenarios in between.

Our capabilities now in seven or eight core verticals and new use cases with respect to be to be ICD government and new end markets and our global pharmacy. So we're still at the very early innings of it it's an important building block.

Philip Fayer: But our pipeline today, what's wonderful about it, it's not just the size and depth of it, but also the end markets and customer profiles, you know, from winning Microsoft to partnership with Adobe, to the partnerships that we've seen across the board, and you guys have seen just the level of PRs and activities that are coming through. We are going from, very much, if you think about five years ago, a single vertical focus to our capabilities now in seven or eight core verticals and new use cases with respect to B2B, ISV, government, and new end markets in our global commerce team. So we're still in the very early innings of it, but it's an important building block.

It's one that transforms the business and drive organic growth. So we're quite excited about what that means for us and it's one that ultimately.

We feel there is more room, obviously, considering and focus on EBITDA margins, but there's one that there is more room for us to continue making thoughtful expansion as the commercial team into new regions with southern areas, such as Latam than we've done in Australia, but from the quality of the pipeline the depth of the pipeline.

The sheer opportunities that these merchants bring to us.

We're in a very unique place and we think that sets us up for success in 2004.

Great. Thank you.

Thanks, Charlie.

The next question we have is from Timothy Chen of UBS. Please go ahead.

Great. Thank you for taking the question I wanted to dig into is that that was in the shareholder letter around the 19% growth with customers that are doing a 1 billion or more in volume. If you could just elaborate a little bit more on that it sounds like a lot of it was wallet share gains, which is great and also if you could talk a little bit about the the vertical mix of those those large.

Philip Fayer: It's one that transforms the business and drives organic growth, so we're quite excited about what that means for us. And it's one that, ultimately, we feel there's more room, you know, obviously, considering and focusing on EBITDA margins, but there's one that there is more room for us to continue making thoughtful expansions of the commercial team into new regions and other areas, such as LATAM, and will be done in Australia. But from the quality of the pipeline, the depth of the pipeline, the sheer opportunities that these merchants bring to us, Great, thank you. Thanks, Charlie.

1 billion plus customers.

Thanks, Tim good to hear your voice I think whats fascinating for US is the fact that we have historically focused very much on mid market or mid market customers have grown and we've grown with us.

And certainly just the breadth of new wins that we've on boarded.

Fascinating place to be and ultimately it's a humbling place you know I started this business 20, plus years ago to help customers accept payments and break down barriers with respect to how they operate their own businesses and to close your eyes and to think about where we are today the customers that we support and the end markets that we're enabling its just a wonderful journey and I'm incredibly proud of the team.

Timothy Edward Chiodo: The next question we have is from Timothy Chiodo of UBS. Please go ahead. Great, thank you for taking the question. I wanted to dig into a stat that was in the shareholder letter around 19% growth with customers that are doing a billion or more in volume. If you could just elaborate a little bit more on that.

But from the end market perspective nicely diversified we've always talked about.

I'll know customer from a customer concentration perspective, and certainly the mix of our own end markets that we support with the addition of BBB government is D and.

Philip Fayer: It sounds like a lot of it was wallet share gains, which is great. And also, if you could talk a little bit about the vertical mix of those large billion plus customers. Thanks, Tim.

And the acceleration from being a leader a category leader in a particular vertical to now being the challenger in many verticals. So what are the big takeaway wasn't when we put that stat out there.

Philip Fayer: Good to hear your voice. You know, I think what's fascinating for us is the fact that we have historically focused very much on the mid market; our mid market customers have grown, and we've grown with them. And certainly just the breadth of new wins that we've onboarded. It's a fascinating place to be. And, ultimately, it's a humbling place.

I'm going to see that customers empower us and trust us that we're winning volume from customers. If you think about 19%, it's typically faster than the end customer growth itself, which means that it's wallet share that we're gaining and it sets us up well for us to continue executing going forward and all of that is driven by a couple of big building blocks here. The first is weakening.

Philip Fayer: You know, I started this business 20 plus years ago to help customers accept payments and break down barriers with respect to how they operate their own businesses. And to close your eyes and think about where we are today, the customers that we support, and the end markets that we're enabling, it's just a wonderful journey.

With category, leading net promoter score listening and embedding our customers until our own roadmap in terms of their requirements and being relentlessly focused on their execution and the output is really what we're seeing today is.

Philip Fayer: And I'm incredibly proud of the team. But from the end market perspective, nicely diversified, you know, we've always talked about no customers from a customer concentration perspective, and certainly the mix of our own end markets that we support with the addition of B2B government and ISV and the acceleration from being a leader, a category leader in a particular vertical to now being a challenger in many verticals. So what the big takeaway was, when we put that stat out there, it's humbling to see that customers empower us and entrust us with winning volume from customers. You know, if you think about 19%, it's typically faster than end customer growth itself, which means that it's wallet share that we're gaining. And it sets us up well for us to continue executing going forward. And all that is driven by a couple of big building blocks.

His great engagements.

Very good visibility into where they're going with us and ultimately a significant building block for our growth trajectory.

Great. Thank you, Phil and to your point, but to your point you've been doing this for a long time and I wanted to see if we could.

And in the question.

Whether it relates to your platforms business or working with Isps in general I think many investors appreciate that the role that the I S V tag in the process, meaning how much they want to take on in terms of responsibilities and risks et cetera. Those can all have impacts on the various unit economics either to the ICB.

Or to the payments company in your years of doing this have you seen any kind of a meaningful shift in those commissions I mean generally what the thought is that they've gone up over time, what has been the trend over the last 10 years in your view and has there been anything different over the last call. It two to three.

Philip Fayer: And the first is, we think, category leading in terms of listening and embedding our customers into our own roadmap in terms of their requirements and being, you know, relentlessly focused on their execution. And the output is really what we're seeing today, which is great engagement, very good visibility into where they're going with us, and ultimately, a significant building block for our growth trajectory. Great. Thank you, Phil.

And you're putting me on the spot with everyone here, but it's fascinating right. If you think about it Tim is you go back to the early or late two thousands where the ICU was a referral model right, where they're earning 20, 30% of the commission and then all of a sudden the EIS, we realize that the softer part of their own business is nice, but the greater upside is in payments.

Timothy Edward Chiodo: And to your point, you've been doing this for a long time, and I wanted to see if we could squeeze in an interesting question. Whether it relates to your platform's business or working with ISVs in general, I think many investors appreciate that the role that the ISV takes in the process, meaning how much they want to take on in terms of responsibilities and risk, those can all have impacts on the various unit economics, either to the ISV or to the payments company. In your years doing this, have you seen any kind of meaningful shift in those commissions? I mean, generally, the thought is that they've gone up over time. What has been the trend over the last 10 years, in your view? And has there been anything different over the last, call it two to three? And you're putting me on the spot with everyone here. But it's fascinating, right?

And many of them were breakeven at best businesses. If you think about some of the even public companies the relevance of payments and that includes shopify Lightspeed and many others is a critical aspect of it to their own strategies and that has evolved over the last 15 years, where payments is a must do and then you have the tangible benefits of what the IC.

Can do is a simpler onboarding single sign on for both service and payments.

Cleanliness and data and greater stickiness with respect to the merchant. So it's a no brainer that we've evolved to where we sit today, but not every isd is alike and I think that that's something that gives us a really good position because we're entering into.

Fairly mature market, where folks have moved from referral to.

ISO to potentially pay back when we're entering right at the right time.

Philip Fayer: If you think about it, Tim, go back to the early or late 2000s, where the ISB was a referral model, right, where they're earning 20-30% of the commission. And then all of a sudden, the ISB realized that the softer part of their own business is nice, but the greater upside is in payments. And many of them were breakeven at best.

But not every isd wants to be taking a liability not every isd wants to have that journey or at least once I have that journey upfront. So payment companies need to realize that we have to adapt our solution stack to the growing needs of eyes. These and their requirements are going to change over time.

Philip Fayer: If you think about some of the even public companies, the relevance of payments, and that includes Shopify, Lightspeed, and many others, is a critical aspect of their own strategies. And that has evolved over the last 15 years, where payment is a must. And then you have the tangible benefits of what the ISB can do, such as simpler onboarding, single sign-on for both service and payments, cleanliness of data, and greater stickiness with respect to the in motion. So it's a no brainer that we've evolved to where we sit today.

Certainly the biggest focus on profitability from is these will be around payments and as such I think that bodes well for us as we continue investing in the IC market that allows us to enter the market with.

Effectively every incremental gross profit dollar falls to the bottom line. So it puts us in a nice position versus protecting revenue that may have changed in commissions from a commission standpoint, yes, it's evolved.

Philip Fayer: But not every ISB is alike. And I think that's something that gives us a really good position, because we're entering into a fairly mature market where folks have moved from referral to ISO to potentially payback, and we're entering right at the right time. But not every ISB wants to be taking on liability; not every ISB wants to have that journey, or at least wants to have that journey up front. So payment companies need to realize that we have to adapt our solutions back to the growing needs of ISBs, and their requirements are going to change over time. Certainly, the biggest focus on profitability from ISVs will be around payments. And as such, I think that bodes well for us as we continue investing in the ISV market, which allows us to enter the market with effectively every incremental gross profit dollar falling to the bottom line. So it puts us in a nice position versus protecting revenue that may have changed in commissions. From a commission standpoint, yes, it's evolved. It's gone from what I remember the 20-30% higher up.

It's gone from what I remember, the 20, 30% higher up but what youre seeing a lot of payment companies and we've seen that everywhere is allocating capital to buyback commissions to keep them at that particular level that has been an industry trend and I'm assuming that will continue.

The next question, we have is from Todd Coupland of CIBC. Please go ahead.

Hi, great. Thanks, Good morning, everyone I wanted to ask about market conditions.

Phil you talked about having a prudent outlook with Oh and I see the economy for 2024. It seems like some of your peers certainly in that in the second half of 'twenty three add improving results and and I was just wondering if you could talk.

Talk about your view of current market conditions. Thanks.

The only I can double click Todd is on volume and activity from our customers and volume year to date.

With respect to January and February and first few days of March has been very strong.

Philip Fayer: But what you're seeing a lot of pain in companies, and we've seen that everywhere, is allocating capital to buyback commissions to keep them at that particular level. That has been an industry trend, and I'm assuming that will continue. The next question we have is from Todd Coupland of CRBC. Please go ahead. Great. Thanks. Good morning, everyone.

We're seeing we're seeing continuous engagement across all of our end markets.

Last year, we saw some moving around on same store sales and surprisingly we thought after the first quarter.

Second quarter had more headwinds on the same store sales perspective, and that has improved so I would say market conditions, so far fairly stable.

Todd Adair Coupland: I wanted to ask about market conditions. Phil, you talked about having a prudent outlook with an eye to the economy for 2024. It seems like some of your peers, certainly in the second half of 2023, had improving results, and I was just wondering if you could talk about your view of current market conditions. Thanks.

Yeah.

I wanted to follow up on your AI point.

See the payments companies.

Companies have access to the customer data for trading models or will it simply be using AI to be more efficient with your own operations talk about some of the possibilities and where it might go for a new hi, Thanks a lot.

Philip Fayer: The only thing I can double-click Todd is on volume and activity from our customers, and volume year to date with respect to January and February and the first few days of March has been very strong. And we're seeing continuous engagement across all of our markets. You know, last year, we saw some movement around on same store sales.

Yeah were initially so very very good question Todd you have merchant facing products for AI and then you have internal certainly for merchant facing that's part of our regular roadmap. So if you think about like even basic reporting incentive building Ken templates for reporting you can just ask what you want from a control panel and provide the data out so there's there's a tremendous amount of opportune.

Philip Fayer: And surprisingly, we thought after the first quarter, the second quarter had more headwinds on the same store sales perspective, and that has improved. So I would say market conditions so far are fairly stable. And I wanted to follow up on your AI point. Do the payment companies have access to the customer data for training models?

He is around that there's opportunities around transaction routing, which we had been spending time on to drive greater authorizations and improvements and learning patterns to drive transactions.

From a fraud and approval perspective, so that is merchant facing we're focused very much as internal how do we make their lives easier for our folks how do we become more efficient.

Philip Fayer: Or will it simply be using AI to be more efficient with your own operations? Talk about some of the possibilities and where it might go for a new bay. Thanks a lot. Yeah, we're initially so very, very good question, Todd. You have merchant facing products for AI, and then you have internal, you know, certainly for merchant facing, that's part of our regular roadmap. So if you think about, like, even basic reporting, instead of building a can template for reporting, you could just ask what you want from a control panel and get the data out.

Great analysis that we've done with a third party was how do we get all the customer service data to take the call time from say 11 minutes to seven minutes. So from 11 minutes to five minutes. These are things that we find really really compelling and there are great use cases across every single department.

To drive greater efficiencies greater engagement with our employees and more satisfaction, while helping us continue scaling on a profitability perspective.

The next question we have is some John Davis of Raymond James. Please go ahead.

Philip Fayer: So there's a tremendous amount of opportunities around that. There's opportunities around transaction routing, which we have been spending time on to drive greater authorizations and improvements and learning patterns to drive transactions from a fraud and approval perspective. So that is merchant facing. We're focused very much on internal: how do we make the lives easier for our folks? How do we become more efficient?

Hey, good morning, guys still really appreciate the color on the strategic fit of pill, but hoping you can give us a little bit more on the financial impact specifically on EBITDA kind of in one court and <unk> and what's baked in for the full year.

Hey, John It's David.

Yeah.

So till like like we said, it's a it was a capability by.

Philip Fayer: You know, some great analysis that we did with a third party was, how do we get all the customer service data to take the call time from, say, 11 minutes to seven minutes, or from 11 minutes to five minutes? These are things that we find really, really compelling. And there are great use cases across every single department for us to drive greater efficiencies, greater engagement with our employees, and greater satisfaction while helping us continue to scale on our profitability. The next question we have is from John Davis of Raymond James. Please go ahead. Hey, good morning, guys. So really appreciate the color on the strategic fit of till, but I'm hoping you can give us a little bit more on the financial impact specifically on EBITDA, kind of on one call, in one swoop, and what's baked in for the full year. Hey John, it's David.

Something that we liked in terms of what they did for RSV b to B channel.

So certainly from a revenue perspective, although it's small and growing it as a nice growth rate.

And I'd say that from you.

You know what we're seeing in terms of kind of a go forward.

It's like we said, it's a drag on.

On EBITDA margin and that's why you see flat throughout the year.

But effectively what we see as we exit the year is really to kind of be able to improve that and be breakeven.

And look there's all the other items, we talked about here from an EBITDA margin perspective that we're driving we're very much EBITDA margin focus. So you can imagine that what we really liked until where the capabilities of it like we understood that it would be a drag but those capabilities outweighed.

From a from a short term financial perspective, we were very.

John Kimbrough Davis: So Till, like we said, it was a capability buy, something that we liked in terms of what they did for our ISB B2B channel. So certainly from a revenue perspective, although it's small and growing, it has a nice growth rate. And I'd say that from what we're seeing in terms of kind of a go forward, it's, like we said, it's a drag on EBITDA margin, and that's why you see flat growth throughout the year.

Very much focused on the medium and longer term and we think that it really will help us drive the ISP space.

You know in the U S and globally, but also be part of a part of our expansion plan within within APAC. So it's like a double whammy that really brought US a couple of things. We're really excited about so I think that's the way to think about it merch margin progression.

Throughout the year similar to revenue will will improve.

Okay. So maybe to put a finer point Oh, it's equal on an organic basis, you would expect margin expansion. This year that it really is just till that's driving margins down on a year over year.

David S. Schwartz: But effectively, what we see as we exit the year is really to kind of be able to improve that and be break even. And look, there's all the other items we talked about, too, from a margin perspective that we're driving. We're very much market focused. So you can imagine that what we really liked until the capabilities, like we understood that it would be a drag, but those capabilities outweighed, you know, from a short-term financial perspective. We are very much focused on, you know, the medium and longer term. And we think that it really will help us drive the ISV space, you know, in the US and globally, but also be part of, part of our expansion plan within APAC. So it's like a double whammy; it brings us a couple things we're really excited about.

Exactly exactly you got it exactly right.

Okay, Great and then just on global Commerce.

The World Cup, and lapping or kind of the customer loss.

Help us Dimensionalize, because obviously world Cup is in the fourth quarter that will go away, but with love culture will offer a few more quarters. So I think we detailed for you desalt about 300 basis points from 25 to 12. So I'm just trying to break that diesel out with World Cup and cultural clause.

Yeah.

I'll take that I think we wouldn't want to doubleclick, specifically into it honestly World Cup was a significant event.

David S. Schwartz: So I think that's the way to think about it. Margin progression, throughout the year, similar to revenue, will improve. Okay, so maybe just a finer point: all is equal on an organic basis; you would expect margin expansion this year, though, it really is just till that's driving margins down on a year over year basis at that point. Exactly, exactly. You got it exactly right. Okay, great. And then just on global commerce, you know, appreciate the World Cup and lapping or kind of customer loss. Can you help us dimensionalize?

<unk> was a top 10 customer that we off boarded where in our lap that in the first half of the year. So from a building block perspective, what I love to point to is continuous scaling in our global Commerce, a 30 plus percent volume, we're going to continue seeing volume growth across the organization accelerate so for 'twenty 'twenty four will see between 20 and 24% based on the outlook.

Exiting at 19% so really good momentum in the business. The two headwinds that we have in in global Congress, specifically, we'll have for Q4 and just lapping the customer.

Philip Fayer: Because obviously, the World Cup is in the fourth quarter, that'll go away, but we'll still have the customer loss for a few more quarters. So I think we decelled, or you decelled about 1300 basis points from 25 to 12. So just trying to break that decel out between the World Cup and customers, I'll take that. I think we wouldn't want to double-click specifically on it.

That will happen in the first half of the year.

Okay I appreciate the color thanks, guys.

Thank you.

The next question we have is from Jason Kupferberg of Bank of America. Please go ahead.

Yeah.

Good morning, guys and I appreciate the conservatism in the outlook sounds like that's the case both.

Philip Fayer: Obviously, the World Cup was a significant event. The customer was a top 10 customer that we offloaded. We're going to lap that in the first half of the year. So from a building block perspective, what I'd love to point to is continuous scaling in our global commerce. With 30 plus percent volume, we're going to continue seeing volume growth across the organization accelerate. So for 2024, we'll see between 20 and 24% based on the outlook versus exiting at 19%. So really good momentum in the business. The two headwinds that we have in global commerce are specifically the World Cup for Q4 and just lapping the customer. That will happen in the first half. Okay, I appreciate it.

Revenue and EBITDA wise.

I wanted to follow up on your comments around the vertical integration like you said, you've now obviously open the aperture a bit in terms of the number of verticals that you actively participate and pursue can you just give us a sense right now what you're seeing in terms of demand and pipeline on a relative basis across those verticals, which ones are particularly Roe.

Boston, and which ones, perhaps our lifestyle.

Certainly thanks, Jason we focus on mid market to enterprise clients that operate and specifically we're talking about the global commerce to like if it would be to be in a second.

But we focus on customers that are mid market.

<unk> enterprise that have.

Jason Alan Kupferberg: Thanks, guys. The next question we have is from Jason Kupferberg of Bank of America. Please go ahead. Good morning, guys. I appreciate the conservatism and the outlook.

International presence right and with that then we break it down to specific verticals, where we build a vertical team from a commercial perspective, an account management perspective naturally embedded with our product team to build solutions that are bespoke and changing from those end markets, we spend equally Jason and every single one of them and we're pretty excited about.

Jason Alan Kupferberg: Sounds like that's the case for both revenue and EBITDA-wise. Phil, I wanted to follow up on your comments around verticalization. Like you said, you've now obviously opened the aperture a bit in terms of the number of verticals that you actively participate in and pursue. Can you just give us a sense right now of what you're seeing in terms of demand and pipeline on a relative basis across those verticals? Which ones are particularly robust, and which ones, perhaps, are less so?

Going from a leadership position in one market to the challenger position in others.

Urge you to take a double click on the sheer amount of press releases from the wins that we've been having across the board I Couldnt tell you just one off because when we end up looking at the pipeline, we really see it across.

Philip Fayer: Thanks. Certainly. Thanks, Jason. You know, we focus on mid market to enterprise clients that operate and specifically, we're talking about global commerce. Because I'll get to B2B in a second. But we focus on customers that are mid market to enterprise that have an international presence, right? And with that, then we break it down to fixative verticals, where we build a vertical team from a commercial perspective and account management perspective, naturally embedded with a product team to build solutions that are bespoke and changing with those end markets. We spend equal time on every single one of them.

Across all major verticals with significant tailwind opportunities really across travel digital goods.

Marketplaces and platforms.

Yeah.

Obviously on the social games perspectives, we continue helping our current customers and naturally in our leadership position with gain would be extended so we're excited to see the opportunities none of our customers are.

Standing still and I think that's the other thing that's very interesting is they all have their own growth trajectories that we get to execute all of them. So you have your pipeline with respect to new business, Jason but you certainly have your pipeline from your own customers on their own journeys, which is often equally if not more exciting than the new business in years. So all combined.

Philip Fayer: And we're pretty excited about going from a leadership position in one market to the challenger position and others. You know, I'd really urge you to take a double click on the sheer number of press releases from the wind that we've been having across the board. I couldn't tell you just one because when we end up looking at the pipeline, we really see it across all major verticals with significant tailwind opportunities, really across, you know, travel, digital goods, marketplaces, and platforms. You know, obviously, on the social gains perspective, we continue helping our current customers and, naturally, in our leadership position with gaming as we extend it. So we're excited to see the opportunities; none of our customers are standing still. I think that's the other thing that's very interesting is that they all have their own growth trajectories that we get to execute on.

Very good momentum.

I can call out our momentum in travel I could certainly call out our momentum with marquee customers.

Microsoft and others that we've on boarded even to mention the family pre opportunity here in Quebec, which is one of our major retailers and that success is certainly parlaying into all other end markets with respect to be to be spin.

Specifically.

We have signed.

Significant expansion with respect to the ERP platforms that we support so if you think about <unk> as we enable the platform at the verticals that we support are driven by where the platform have success.

We don't actually drive the end customer target, we drive the enablement and that has been on a wonderful journey as we've gone from a handful of partners to multi partners from U S only to expanding into Canada last year with a fantastic roadmap to go international and really good engagement with our partner. So we're just sorry.

Philip Fayer: So you have your pipeline with respect to new business, Jason, but you certainly have your pipeline from your own customers on their own journeys, which is often equally, if not more exciting, than the new business in years. So all combined, very good momentum. You know, I could call out our momentum and travel; I could certainly call out our momentum with marquee customers, be it Microsoft and others that we've onboarded, even, you know, to mention the family pre-school opportunity here in Quebec, which is one of our major retailers. And that success is certainly parlaying into all other end markets. With respect to B2B, specifically, we have signed a significant expansion with respect to the NERP platforms that we support. So if you think about B2B, we enable the platform, but the verticals that we support are driven by where the platform has been successful. So we don't actually drive the end customer target.

On <unk> less vertical specific more platform specific because it is a and a direct sales engagement integration to the ERP and then a direct sales to the bar and then an indirect sales to the end merchant if that makes sense.

It does I appreciate the color just a quick one for David can you quantify the tail revenue contribution both for Q1 and full year 'twenty four thanks guys.

Hey, Jason.

It's.

Like we said, it's it's it's an early stage so it's not a significant amount of revenue.

Overall, you know its going to contribute really from a capabilities perspective in the near term and longer term, it's really what's going to drive drive revenue on the ISP side. So I'll leave it at that for now at this point Jason. Thank you.

Philip Fayer: We drive the B2B enablement. And that has been a wonderful journey as we've gone from, you know, a handful of partners to multi-partners from the U.S. only to expanding into Canada last year with a fantastic roadmap to go international and really good engagement with our partners. So we're just starting on B2B, but B2B is less vertical specific, more platform specific, because it is a direct sales engagement integration to DRP and then a direct sale to the bar, and then an indirect sale to the end merchant.

Yeah.

This aims to have lots of time for Q&A and I'll turn it back to Chris My money.

Thanks again for joining us today, please reach out to the IR team with your follow up questions. In the next few weeks, we're planning to attend Investor conferences hosted by Wolfe and Bank of America, and we hope to see many of you during those appearances bye for now.

This concludes today's conference. Thank you for joining US you may now disconnect your lines.

Philip Fayer: I appreciate the caller. Just a quick one for David. Can you quantify the tail revenue contribution both for Q1 and full year 24? Thanks, guys. Hey, Jason. It's, Like we said, it's it's it's in an early stage. So it's not a significant amount of revenue.

Okay.

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David S. Schwartz: Overall, you know, it's going to contribute really from the capabilities perspective in the near term and in the longer term, it's really what's going to drive revenue on the ISP side. So I'll leave it at that for now at this point. This is the allotted time for Q&A, and I'll turn it back to Christopher Mammone. Thanks again for joining us today. Please reach out to the IR team with your follow-up questions. In the next few weeks, we're planning to attend investor conferences hosted by Wolf and Bank of America, and we hope to see many of you at those events. Bye for now. This concludes today's conference. Thank you for joining us. You may now disconnect your lines. Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music