Q2 2024 Paysafe Ltd Earnings Call

Operator: James Friedman, Paul Obrecht, Paul Obrecht, Paul Obrecht, Paul Obrecht, Paul Obrecht [inaudible] Ladies and gentlemen, good morning and welcome to Paysafe's second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode.

Speaker Change: Ladies and gentlemen, good morning and welcome to Paysafe's second quarter 2024 earnings conference call.

Operator: A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on the telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matthew Parker, Investor Relations. Please go ahead.

Speaker Change: At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad.

Speaker Change: As a reminder, this conference is being recorded.

Speaker Change: It is now my pleasure to introduce your host, Matthew Barker, Investor Relations. Please go ahead.

Matthew Parker: Thank you and welcome to Paysafe's earnings conference call for the second quarter of 2024. Joining me today are Bruce Lowthers, Chief Executive Officer, and Alex Gersh, Chief Financial Officer. Before we begin, a reminder that this call will contain forward-looking statements and should be considered in conjunction with cautionary statements contained in our earnings release, the company, and the company's most recent SEC report. These statements reflect management's current assumptions and expectations and are subject to factors that could cause actual results to differ materially from forward-looking statements.

Speaker Change: Thank you, and welcome to Paysafe's Earnings Conference Call, the second quarter of 2024. Joining me today are Bruce Lowthers, Chief Executive Officer, and Alex Gersh, Chief Financial Officer.

Speaker Change: Before we begin, a reminder that this call will contain forward-looking statements and should be considered in conjunction with cautionary statements contained in our earnings release, the company and the company's most recent SEC reports.

Speaker Change: These statements reflect management's current assumptions and expectations and are subject to factors that could cause actual results to differ materially from forward-looking statements. You should not place undue reliance on these statements. Forward-looking statements during this call

Matthew Parker: Forward-looking statements during this call, speak only to the date of this call, and we undertake no obligation to update them. Today's presentation also contains non-GAAP financial measures. You can find additional information about these non-GAAP measures and reconciliations of the most direct comparable GAAP financial measures in today's press release and in the appendix of this presentation, which are all available on the Investor Relations website. With that, I'll turn the call over to Bruce.

Speaker Change: speak only to the date of this call, and we undertake no obligation to update them.

Speaker Change: Today's presentation also contains non-GAAP financial measures. You can find additional information about these non-GAAP measures and reconciliation to the most direct comparable GAAP financial measures in today's press release and in the appendix of this presentation.

Bruce Lowthers: Great. Thanks, Matthew, and thank you all for joining us today. First, I want to take a moment and thank the Paysafe team for all their hard work and determination over the last two years. It is great to see their efforts driving our outstanding Q2 results. On today's call, Alex and I will walk through the results for Q2 and the first half of the year and update our full year guidance. Then I'll close with a reflection on the last two years of our transformation journey. While we're not done, we're excited about the progress and focused on getting better every day.

Speaker Change: which are all available on the Investor Relations website. With that, I'll turn the call over to Bruce. Great. Thanks, Matthew, and thank you all for joining us today. First, I want to take a moment and thank the Paysafe team for all their hard work and determination over the last two years.

Bruce Lowthers: It is great to see their efforts driving our outstanding Q2 results.

Bruce Lowthers: On today's call, Alex and I will walk through the results for Q2 and the first half of the year and update our full year guidance.

Speaker Change: Then, I'll close with a reflection on the last two years of our transformation journey.

Alex Gersh: While we're not done, we're excited about the progress and focused on getting better every day. We delivered strong Q2 results, which reflect an acceleration of higher quality revenue.

Bruce Lowthers: We delivered strong Q2 results, which reflect an acceleration of higher quality revenue. We achieved $440 million in revenue, growing 9% year over year, $119 million in adjusted EBITDA, growing approximately 5% year over year, and we further reduced our net debt ratio to 4.8 times, a 14% reduction from Q2 2023. These results reinforce our conviction that we have the right strategy and execution is working. In the first half of 2024, revenue grew 8.5% year-over-year, driven by a 12% increase in merchant solutions, fueled by higher volumes across e-commerce, and progress on our portfolio optimization efforts.

Alex Gersh: We achieved $440 million in revenue.

Alex Gersh: growing 9% year-over-year, 119 million in adjusted EBITDA, growing approximately 5% year-over-year.

Alex Gersh: And we further reduced our net debt ratio to 4.8 times, a 14% reduction from Q2 2023. These results reinforce our conviction that we have the right strategy and execution is working.

Alex Gersh: In the first half of 2024, revenue grew 8.5% year-over-year, driven by a 12% increase in merchant solutions, fueled by higher volumes across e-commerce, and progress on our portfolio optimization efforts.

Bruce Lowthers: Digital wallets also grew 5.4% in the first half of 2024 from the same period in 2023, attributed to improvements in our e-cash business, the return to double-digit growth in our LATAM businesses, and continued growth of our classic wallet product. Additionally, adjusted EBITDA grew 4.6% year-over-year, while adjusted EBITDA margins declined by 100 basis points due to our planned incremental investments, which we outlined at the beginning of the year, adjusted net income through 5.7% year-over-year and we recorded positive gap net income of $1.6 million in the first half of 2024. We also returned $25 million of value to our shareholders through our stock repurchase program.

Alex Gersh: Digital wallets also grew 5.4% in the first half of 2024, from the same period in 2023, attributed to improvements in our e-cash business, the return to double-digit growth in our LATDAM businesses, and continued growth of our classic wallet product.

Alex Gersh: Additionally, adjusted EBITDA grew 4.6% year-over-year, while adjusted EBITDA margins declined by 100 basis points due to our planned incremental investments which we outlined at the beginning of the year.

Alex Gersh: Adjusted net income grew 5.7% year-over-year and we recorded positive gap net income of $1.6 million in the first half of 2024. We also returned $25 million of value to our shareholders through our stock repurchase program.

Bruce Lowthers: As part of our portfolio optimization and a move to higher-quality revenue, which will deliver higher long-term shareholder value, we are taking actions to limit volumes or exit relationships with certain higher-risk merchants. These steps will reduce risk in our business but create a short-term headwind to our revenue growth rate in the second half of 2024. The strength of our sales initiatives, which has led us to increase our original revenue guidance for the year, will allow us to overcome the short-term headwind quickly.

Alex Gersh: As part of our portfolio optimization and a move to higher quality revenue which will deliver higher long-term shareholder value, we are taking actions to limit volumes or exit relationships with certain higher risk merchants.

Alex Gersh: These steps will reduce risk in our business but create a short-term headwind to our revenue growth rate in the second half of 2024.

Alex Gersh: The strength of our sales initiatives, which has led us to increase our original revenue guidance for the year, will allow us to overcome the short-term headwind quickly.

Bruce Lowthers: We believe these actions are the right steps to take for long-term sustainable growth as we refocus on our ideal customer profile. This brings me to our revised full year 2024 guidance. We are pleased to raise our full-year revenue outlook range to 7 to 8 percent, up from our previous guidance of 5.5 to 7 percent. 125 basis point increase at the midpoint, moving the high end of our former guidance to the bottom end of our range. We now expect adjusted dividend margins to be between 27.5% and 28%.

Alex Gersh: We believe these actions are the right steps to take for long-term sustainable growth as we refocus on our ideal customer profile.

Alex Gersh: This brings me to our revised full year 2024 guidance.

Alex Gersh: We are pleased to raise our full-year revenue outlook range to 7 to 8 percent, up from our previous guidance of 5.5 to 7 percent.

Alex Gersh: 125 basis point increase at the midpoint, moving the high end of our former guidance to the bottom end of our range.

Alex Gersh: We now expect adjusted EBITDA margins to be between 27.5% and 28%. Our updated guidance includes the impacts of the actions I previously mentioned. Alex will walk you through our quarterly results and guidance in more detail in just a moment.

Bruce Lowthers: Our updated guidance includes the impacts of the actions I previously mentioned. Alex will walk you through our quarterly results and guidance in more detail in just a moment. Slide four.

Bruce Lowthers: In Q4, we laid out four strategic priorities for the 2024 calendar year. And I'm pleased to say that we made great progress and remain on track or coming in ahead of expectations. Let's start with expanding our sales capability. We have hired 104 new sales reps year-to-date, or 61% of our full-year target.

Alex Gersh: Slide four.

Speaker Change: In Q4, we laid out four strategic priorities for the 2024 calendar year, and I'm pleased to say that we made great progress and remain on track or coming in ahead of expectations. Let's start with expanding our sales capabilities.

Alex Gersh: We have hired 104 new sales reps year-to-date, or 61% of our full-year target. Our new hires in Q1 are ramping up as expected, and we are pleased with the talent we've recruited. As a reminder, these sales reps take approximately six months to fully ramp up.

Bruce Lowthers: Our new hires in Q1 are ramping up as expected, and we are pleased with the talent we've recruited. As a reminder, these sales reps take approximately six months to fully ramp up. The additional sales reps have allowed us to expand our vertical and geographic sales coverage, giving us more at-bats than ever before. In the quarter, we logged 74 enterprise wins, which is over two times greater than the prior year, and executed S&V deals in 30 different states, a 58% increase versus that number last year.

Alex Gersh: The additional sales reps have allowed us to expand our vertical and geographic sales coverage, giving us more at-bats than ever before.

Alex Gersh: In the quarter, we logged 74 enterprise wins, which is over two times greater than the prior year, and executed S&V deals in 30 different states, a 58% increase versus that number last year.

Bruce Lowthers: Our portfolio optimization efforts are coming along better than expected. Year-to-date, we have generated approximately $26 million of in-year revenue, or 52% of our full-year target. As you may recall, we initially expected the revenue to be weighted more to the second half of the year. During the quarter, we launched value-added services, such as Integrated Loan Program, to our offerings.

Alex Gersh: Our portfolio optimization efforts are coming along better than expected. Year to date we have generated approximately 26 million of in-year revenue or 52 percent of our full year target.

Alex Gersh: As you may recall, we initially expected the revenue to be weighted more to the second half of the year. During the quarter, we launched value-added services such as integrated loan program to our offerings.

Bruce Lowthers: This loan program provides flexible, short-term working capital for our partners and merchants to invest in and grow their business. Our ability to sell value-added services like these help increase our take rate in merchant solutions from 0.78% from 0.74% in the prior quarter. Our third priority for the year was to revamp our consumer acquisition efforts, which remain on track. Towards the end of the quarter, we entered a new partnership with Riot Games, becoming the main sponsor of the Valorant Esports Tournament. This tournament was broadcast across the MIA region and generated an audience of 1.2 million viewers.

Alex Gersh: This loan program provides flexible short-term working capital for our partners and merchants to invest in and grow their businesses.

Alex Gersh: Our ability to sell value-added services like these help increase our take rate in merchant solutions from 0.78% from 0.74% in the prior quarter.

Alex Gersh: Our third priority for the year was to revamp our consumer acquisition efforts, which remain on track. Towards the end of the quarter, we entered a new partnership with Riot Games, becoming the main sponsor of the Valorant eSports tournaments.

Alex Gersh: This tournament was broadcasted across the media region and generated an audience of 1.2 million viewers.

Bruce Lowthers: This partnership allows gamers to use the Paysafe card for a seamless and secure transaction experience during checkout. We've incorporated these sponsorships into our strategy, and we're seeing nice results as we move through July. Finally, our efforts to deliver innovation and experiences to consumers remain on track. This next example could probably go under either customer acquisition or innovation experiences. As you may have probably read, we recently announced a partnership with Revolution. What's great about this partnership is it lets us bring our eCash services to Revolute's 9 million UK customers, in turn providing Revolute's customers access to 12,000 of our eCash network locations. We expect this service to eventually roll out to other European markets.

Alex Gersh: This partnership allows gamers to use the PaySafe card for a seamless and secure transaction experience during checkout. We've incorporated these sponsorships into our strategy, and we're seeing nice results as we move through July.

Alex Gersh: Finally, our efforts to deliver innovation and experiences to consumers remain on track.

Alex Gersh: This next example could probably go under either customer acquisition or innovation experiences. As you may have probably read, we recently announced a partnership with Revolut.

Speaker Change: What's great about this partnership is it lets us bring our eCash services to Revolute's 9 million UK customers, in turn providing Revolute's customers access to 12,000 of our eCash network locations.

Bruce Lowthers: This product innovation is helping us generate revenue in new and exciting ways. This quarter, the amount of revenue generated from new product innovation grew by 50% over last year. Turning to our merchant business on slide five, we saw a solid growth led by e-commerce, which now represents just over 30% of our merchant portfolio by volume. Last quarter, we discussed that our SMB direct book was being impacted by one portfolio, and we have taken a number of steps to stabilize that portfolio throughout the quarter.

Speaker Change: We expect this service to eventually roll out to other European markets.

Speaker Change: This product innovation is helping us generate revenue in new and exciting ways.

Speaker Change: This quarter, the amount of revenue generated from new product innovation grew by 50% over last year.

Speaker Change: Turning to our merchant business on slide 5, we saw a solid growth led by e-commerce, which now represents just over 30% of our merchant portfolio by volume.

Speaker Change: Last quarter we discussed that our SMB direct book was being impacted by one portfolio and we have taken a number of steps to stabilize that portfolio throughout the quarter.

Bruce Lowthers: This stabilization, along with volume increase and take rate improvement, have led our SMB direct book to grow 10 percent in Q2, roughly in line with our SMB ISO. Our ISO book continues to show strength with another double-digit growth quarter.

Speaker Change: This stabilization, along with volume increase and take rate improvement, have led our S&B direct book to grow 10% in Q2. Roughly in line with our S&B high sop book.

Speaker Change: Our ISO book continues to show strength with another double-digit growth quarter.

Bruce Lowthers: Our efforts to rebalance the portfolio continue to progress, expanding our sales presence across the U.S. and moving upstream to higher value merchants is continuing to pay off. We saw a 5% increase in the revenue per new merchant signed in Q2. Acceleration of our enterprise sales continued as we executed 74 enterprise wins in Q2 across our key verticals in geography, up from approximately 30 in Q2 2023. Approximately 30% of these deals were with our existing customers, highlighting the success of our cross-selling efforts, which was almost zero two years ago. Additionally, our net revenue retention in the quarter was 103%, further proving that our efforts to sell additional products and services to existing customers drives higher revenue per merchant. Slide 6.

Speaker Change: Our efforts to rebalance the portfolio continue to progress. Expanding our sales presence across the U.S. and moving upstream to higher value merchants is continuing to pay off. We saw a 5% increase in the revenue per new merchant signed in Q2.

Speaker Change: Acceleration of our enterprise sales continued as we executed 74 enterprise wins in Q2 across our key verticals and geographies, up from approximately 30 in Q2 2023.

Speaker Change: Approximately 30% of these deals were with our existing customers, highlighting the success of our cross-selling efforts, which was almost zero two years ago.

Speaker Change: Additionally, our net revenue retention in the quarter was 103%, further proving that our efforts to sell additional products and services to existing customers drives higher revenue per merchant.

Bruce Lowthers: A quick update on iGaming, which saw another strong quarter. Global Eye Gaming revenue grew 15% year-over-year, accelerating from 14% in Q1 2024, as we executed 64% more deals in the Q2 2024 quarter versus Q2 2023. North America Eye game, revenue grew over 50% year over year from merchant winds that occurred in Q3 and Q4 last year and assisted by seven additional states legalized last year that came online this year.

Speaker Change: Slide 6. A quick update on iGaming, which saw another strong quarter. Global iGaming revenue grew 15% year-over-year, accelerating from 14% in Q1 2024.

Speaker Change: as we executed 64% more deals in the Q2 2024 quarter versus Q2 2023.

Speaker Change: North America iGaming revenue grew over 50% year-over-year from merchant wins that occurred in Q3 and Q4 of last year and assisted by seven additional states legalized last year that came online this year.

Bruce Lowthers: Our iGaming sales continue to find opportunities to cross sell into our customer base with 44% of the deals won in the quarter coming from existing clients. These cross sells allow us to take a larger piece of the payment cash register. As our merchants work to grow their revenue through product improvements, additional offerings, and geographic expansion, we stand ready to help them be successful. Slide seven.

Speaker Change: Our iGaming sales continue to find opportunities to cross-sell into our customer base with 44% of the deals won in the quarter coming from existing clients. These cross-sells allow us to take a larger piece of the payment's cash register.

Speaker Change: As our merchants work to grow their revenue through product improvements, additional offerings, and geographic expansion, we stand ready to help them be successful.

Bruce Lowthers: In Q1, we started reporting digital wallet KPIs based on this segment to provide investors with a more holistic view of digital wallets' performance. In Q2, we saw transactions per active user grow 20%, driven by our Core Wallet, Quick Checkout, and eCash. Additionally, average revenue per user grew by 6%, largely driven by the eCash product initiatives and more revenue attributed to iGaming. This marks the sixth consecutive quarter of year-over-year growth on both of those metrics.

Speaker Change: Slide seven.

Speaker Change: In Q1, we started reporting digital wallet KPIs based on this segment to provide investors with a more holistic view of digital wallets' performance.

Speaker Change: In Q2, we saw transactions per active user grow 20%.

Speaker Change: Driven by our cool wallet, quick checkout, and eCash.

Speaker Change: Additionally, average revenue per user grew by 6%, largely driven by the eCash product initiatives and more revenue attributed to iGaming.

Speaker Change: This marks the sixth consecutive quarter of year-over-year growth on both of those metrics.

Bruce Lowthers: We saw three month active users remain flat year over year and we acquired approximately 1.2 million users in the quarter. This is in line with the seasonality we experienced in Q2 for active users given the reduction of sporting events during the quarter.

Speaker Change: We saw three-month active users remain flat year-over-year and we acquired approximately 1.2 million users in the quarter. This is in line with the seasonality we experienced in Q2 for active users given the reduction of sporting events during the quarter.

Bruce Lowthers: While our user base remains stable, this is not our goal. We are focused on returning our user base to grow. While we no longer break out our classic wallet, we did see three-month active users grow 4% year over year. And we have had three consecutive quarters now of growth, reflecting continued momentum growing our user base. We are also introducing a new KPI, Consumer Acquisition Cost, which was $17.60 in the quarter.

Speaker Change: While our user base remains stable, this is not our goal. We are focused on returning our user base to growth.

Speaker Change: While we no longer break out our classic wallet, we did see three-month active users grow four percent year-over-year. And we have had three consecutive quarters now of growth, reflecting continued momentum growing our user base.

Speaker Change: We are also introducing a new KPI, Consumer Acquisition Costs, which was $17.60 in the quarter.

Bruce Lowthers: When comparing ARPU and consumer acquisition costs, this provides this within an approximate two-month revenue payback, which is why this opportunity is highly attractive and highlights why returning our user base to growth continues to remain a priority. Overall, our current users are conducting more transactions and generating a higher ARPU, which is a solid foundation as we focus on driving additional consumer adoption and engagement. So, in summary, Paysafe had a strong Q2 by every financial metric.

Speaker Change: When comparing ARPU and consumer acquisition costs, this provides us with an approximate two-month revenue payback, which is why this opportunity is highly attractive and highlights why returning our user base to growth continues to remain a priority.

Speaker Change: Overall, our current users are conducting more transactions and generating a higher R-food, which is a solid foundation as we focus on driving additional consumer adoption and engagement.

Bruce Lowthers: Year over year, we've delivered quality revenue growth of 9%, adjusted EBITDA growth of 5%, net leverage reduced to 4.8 times, 7% volume growth, and a 3% take rate expansion, just to name a few. The strategy that we laid out two years ago of focusing on client experience, sales transformation, and product innovation is taking hold and allowing us to build momentum, enabling us to raise our revenue guidance for the full year 2024 by 125 basis points at the midpoint to 7 to 8 percent from our original guidance of 5.5 to 7 percent and puts us in a great position for consecutive 7 plus percent revenue growth years. With that in mind, I'll ask Alex to review the Q2 results in more detail. Thank you, Bruce.

Speaker Change: So, in summary, PaySafe had a strong Q2 by every financial metric.

Speaker Change: Year-over-year, we've delivered quality revenue growth of 9%.

Speaker Change: Adjusted EBITDA growth of 5%, net leverage reduced to 4.8 times, 7% volume growth, and a 3% take rate expansion, just to name a few.

Speaker Change: The strategy that we laid out two years ago of focusing on client experience, sales transformation, and product innovation.

Speaker Change: are taking hold and allowing us to build momentum.

Speaker Change: enabling us to raise our revenue guidance for the full year 2024 by 125 basis points at the midpoint to seven to eight percent.

Speaker Change: from our original guidance.

Speaker Change: of 5.5% to 7% and puts us in a great position for consecutive 7-plus percent revenue growth years.

Speaker Change: With that, I'll ask Alex to review the Q2 results in more detail. Thank you, Bruce. Let's move to slide 9 for the summary of our second quarter results.

Alex Gersh: Let's move to slide nine for the summary of our second quarter results. Total volume increased 7% year over year to 38.1 billion. So the revenue grew 9% to 439.9 million or 10% on a constant currency base. Revenue growth accelerated ahead of our expectations, led by double-digit volume and revenue growth in the e-commerce channel within merchant solutions, as well as new product initiatives within digital wallets. Our take rate increased slightly to 1.2% from 1.1% in the prior quarter. Adjusted EBITDA was $119 million for the quarter, an increase of 5% year-over-year or 6% on a constant currency basis.

Alex Gersh: Total volume increased 7% year-over-year to $38.1 billion. Total revenue grew 9% to $439.9 million, or 10% on a constant currency basis.

Alex Gersh: Revenue growth accelerated ahead of our expectations, led by double-digit volume and revenue growth in the e-commerce channel within merchant solutions, as well as new product initiatives within digital wallet. Our take rate increased slightly to 1.2% from 1.1% in a prior quarter.

Alex Gersh: Adjusted EBITDA was $119 million for the quarter, an increase of 5% year-over-year, or 6% on a constant currency basis.

Alex Gersh: Adjusted EBITDA margin was 27.1%, a decline of 100 basis points, primarily reflecting our incremental investment in sales and portfolio optimization. As Bruce mentioned, our initiatives remain on track and we expect to invest approximately twelve and a half million dollars throughout the remainder of the year. On a LTM basis, unleavered free cash flow grew 16% to $339.1 million, reflecting a 72% conversion rate.

Speaker Change: Adjusted EBITDA margin was 27.1%, a decline of 100 basis points.

Alex Gersh: primarily reflecting our incremental investment in sales and portfolio optimization.

Alex Gersh: As Bruce mentioned, our initiatives remain on track and we expect to invest approximately twelve and a half million dollars throughout the remainder of the year.

Bruce Lowthers: On a LTM basis, unlevered free cash flow grew 16% to $339.1 million, reflecting a 72% conversion rate.

Alex Gersh: Adjusted net income increased 5% year over year to $36.3 million and adjusted EPS increased 5.3% to $0.59 per share. Let's move to slide 10 to discuss the segment results. Starting with the merchant solutions volume increased 8% year over year to $32.7 billion, and revenue increased 13% to $255 million. The growth was driven by strong volume and take great growth within our e-commerce business, led by contribution from iGames. The remainder of the segment, our SMB business, grew revenue 10% year-over-year, reflecting our strategic initiatives to expand our sales capability, and Optimize the Portfolio. Adjusted EBITDA was $56.5 million, an increase of 1%.

Alex Gersh: Adjusted net income increased 5% year-over-year to $36.3 million and adjusted EPS increased 5.3% to $0.59 per share.

Alex Gersh: Let's move to slide 10 to discuss the segment results.

Speaker Change: Starting with the Merchant Solutions, volume increased 8% year-over-year to $32.7 billion and revenue increased 13% to $255 million.

Speaker Change: Growth was driven by strong volume and take rate growth within our e-commerce business.

Speaker Change: led by contribution from iGaming.

Speaker Change: The remainder of the segment, our SMB business, grew revenue 10% year over year, reflecting our strategic initiatives to expand our sales capabilities and optimize the portfolio.

Alex Gersh: Margin declined 250 basis points to 22.2%, reflecting continuous progress on our 2024 investment initiative. Turning to the digital wallet segment on slide 11, volume increased 6% to $5.7 billion, and revenue increased 6% or 7% on a constant currency basis, to 189.7 million. Segment's performance was driven by strong results within iGaming, an ongoing product and engagement initiative. Adjusted a bit that was 82.4 million in increase of 7% or 8% on a constant currency base, and adjusted it with our margin, expanded 30 basis points, driven by improved digital wallet KPIs which grow revenue growth in the quarter. Turning to slide 12 for the summary of our capital allocation. At the end of the quarter, total debt was just under $2.5 billion. During the quarter, net debt decreased by $26 million.

Speaker Change: Adjusted EBITDA was $56.5 million, an increase of 1%.

Speaker Change: Margin declined 250 basis points to 22.2% reflecting continuous progress on our 2024 investment initiatives.

Speaker Change: Turning to the digital wallet segment on slide 11.

Speaker Change: Volume increased 6% to $5.7 billion and revenue increased 6% or 7% on a constant currency basis to $189.7 million.

Speaker Change: Segment's performance was driven by strong results within iGaming and ongoing product and engagement initiatives.

Speaker Change: Adjusted EBITDA was $82.4 million, an increase of 7% or 8% on a constant currency basis.

Speaker Change: adjusted it without margin, expanded 30 basis points, driven by improved digital wallet KPIs, which drove revenue growth in the quarter.

Speaker Change: Turning to slide 12 for the summary of our capital allocation.

Speaker Change: At the end of the quarter, total debt was just under $2.5 billion.

Alex Gersh: Our leverage ratio stands at 4.8 times adjusted EBITDA compared to 5.6 times in the Q2 2023. Additionally, during the second quarter, we repurchased approximately 686,000 shares for approximately $11 million at an average cost of $16.03 per share, leaving us with $25 million remaining on our repurchase program at the end of Q2. To recap, since Q2 of last year, we have reduced our debt to EBITDA by 14% while repurchasing $25 million of our shares in the first half of 2024.

Speaker Change: During the quarter, net debt decreased by $26 million.

Speaker Change: Our leverage ratio stands at 4.8 times adjusted EBITDA compared to 5.6 times in the Q2 2023.

Speaker Change: Additionally, during the second quarter, we repurchased approximately 686,000 shares for approximately $11 million at an average cost of $16.03 per share, leaving us with $25 million remaining on our repurchase program at the end of Q2.

Speaker Change: To recap, since Q2 of last year, we have reduced our debt to EBITDA by 14% while repurchasing 25 million of our shares in the first half of 2024.

Alex Gersh: We remain confident that our solid cash flow generation and capital allocation discipline will allow us to continue investing in the business while also continuing to de-lever and return capital to the shareholders. Before going into the guidance, let me just remind you that in FY23, excluding interest income and FX tailwinds, our top line growth was approximately 3.5%. In the first six months of this year, even with headwinds from FX and interest rates, growth accelerated to 9.

Speaker Change: We remain confident that our solid cash flow generation and capital allocation discipline will allow us to continue investing in the business while also continue to deliver and return capital to the shareholders.

Speaker Change: Before going into the guidance, let me just remind you that in FY23, excluding interest income and FX tailwinds, our top-line growth was approximately three and a half percent.

Speaker Change: In the first 6 months of this year, even with headwinds from FX and interest rates, growth accelerated to 9%.

Alex Gersh: Now let's turn to the full year guide. We are pleased with our results and the ongoing progress of our strategic investment. Therefore, we are raising our revenue growth outlook to the range of 7% to 8%, which implies a second half growth rate of 6.5% at the mid-plus. The former top end of our range is now the bottom end.

Speaker Change: Now, let's turn to the full year guidance.

Speaker Change: We are pleased with our results and the ongoing progress of our strategic investments.

Speaker Change: Therefore, we are raising our revenue growth outlook to the range of 7 to 8 percent, which implies a second-half growth rate of 6.5 percent at the midpoint.

Alex Gersh: Our updated revenue outlook includes the impact of our portfolio rationalization efforts Bruce mentioned earlier. Excluding those impacts, we would have expected revenue to grow between 8-9%, which is well ahead of our initial expectations. Despite these short-term impacts, we believe... These actions will benefit the company in the long run, as we reduce the risk associated with our business. We now expect the adjusted EBITDA margin to come in between 27.5% to 28%, a reduction of 50 basis points from our prior guidance.

Speaker Change: The former top end of our range is now the bottom end.

Speaker Change: Our updated revenue outlook includes the impact of our portfolio rationalization efforts Bruce mentioned earlier.

Bruce Lowthers: Excluding those impacts, we would have expected revenue to grow between 8-9%, which is well ahead of our initial expectation.

Bruce Lowthers: Despite these short-term impacts, we believe these actions will benefit the company in the long run as we reduce the risk associated with our business.

Speaker Change: We now expect the adjusted EBITDA margin to come in between 27.5% to 28%. A reduction of 50 basis points from our prior guidance.

Alex Gersh: Excluding our portfolio rationalization effort and severance-related costs, our full-year margins would have been between 28.2 to 28.7%, still ahead of what we initially expected at the beginning of the year. Additionally, our updated guidance implies 170 basis points of margin expansion versus the first half of this year. We expect that our adjusted EBITDA margin exit for the year will be unchanged heading into 2025. Also, we now expect our net leverage to be between 4.6 to 4.7 times at the end of the year. Finally, please see our appendix for other Below the Line assumptions. Now I'll turn the call back to Bruce for closing remarks before we take questions. Thank you, Alex.

Bruce Lowthers: Excluding our portfolio rationalization effort and severance-related costs, our full-year margins would have been between 28.2 to 28.7 percent, still ahead of what we initially expected at the beginning of the year.

Bruce Lowthers: Additionally, our updated guidance implies 170 basis points of margin expansion versus the first half of this year. We expect that our adjusted EBITDA margin exit for the year will be unchanged heading into 2025.

Bruce Lowthers: Also, we now expect our net leverage to be between 4.6 to 4.7 times at the end of the year.

Bruce Lowthers: Finally, please see our appendix for other below-the-line assumptions.

Bruce Lowthers: Just over two years ago, I was fortunate to join Paysafe. We've put forward a bold and aggressive plan to turn the company around. I stated it would take us three years, year one to stabilize the company, year two to return the growth, and year three to accelerate to our normalized growth profile. At our investor day in 2023, I reiterated that we would focus on client experience, sales transformation, and product innovation. In addition, I stated that we would focus on recruiting talent to create the right culture and allow us to be competitive.

Bruce Lowthers: Now, I'll turn the call back to Bruce for closing remarks before we take questions.

Bruce Lowthers: Thank you, Alex. Just over two years ago, I was fortunate to join Paysafe. We've put forward a bold and aggressive plan to turn the company around.

Matthew Parker: Ladies and gentlemen, good morning and welcome to Paysafe's second quarter, 2024 Oning's conference call At this time, all participants are in a listen only mode A brief question and answer session will follow the formal presentation If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad As a reminder, this conference is being recorded It is now my pleasure to introduce your host Matthew Parker Investor relations, please go ahead Thank you and welcome to Paysafe's earnings conference call, the second quarter of 2024 Joining me today are Bruce Lowthers, Chief Executive Officer and Alice Gersh, Chief Financial Officer Before we begin, a reminder that this call will contain forward-looking statements and should be considered in conjunction with cautionary statements contained in our earnings release The company and the company's most recent SEC reports These statements reflect management's current assumptions and expectations are subject to factors that could cause actual results to differ materially from forward-looking statements You should not place under reliance on these statements, forward-looking statements during this call speak only to the data this call and we undertake no obligation to update them Today's presentation also contains non-gap financial measures You can find additional information about these non-gap measures and reconciliation to the most direct comparable gap financial measures in today's press release and in the appendix of this presentation Which are all available on the investor relations website With that, I'll turn the call over to Bruce Great, thanks Matthew and thank you all for joining us today First, I want to take a moment and thank the Paysafe team for all their hard work and determination over the last two years It is great to see their efforts driving our outstanding Q2 results On today's call, Alex and I will walk through the results for Q2 in the first half of the year and update our full-year guidance Then I'll close with a reflection on the last two years of our transformation journey While we're not done, we're excited about the progress and focused on getting better every day We delivered strong Q2 results which reflect an acceleration of higher quality revenue We achieved 440 million in revenue growing 9% year-over-year, 419 million in adjusted dividends growing approximately 5% year-over-year And we further reduced our net debt ratio to 4.8 times a 14% reduction from Q2 2023 These results reinforce our conviction that we have the right strategy and execution is working In the first half of 2024, revenue grew 8.5% year-over-year, driven by a 12% increase in merchant solutions Fueled by higher volumes across e-commerce and progress on our portfolio optimization efforts Digital wallets also grew 5.4% in the first half of 2024 from the same period in 2023 Attributed to improvements in our e-cash business, the return to double-digit growth in our lat-dam businesses And continued growth of our classic wallet product Additionally, adjusted dividend grew 4.6% year-over-year While adjusted a bit of margins declined by 100 basis points due to our planned incremental investments which we outlined at the beginning of the year Adjusted net income to 5.7% year over year, and we recorded positive gap net income of 1.6 million in the first half of 2024. We also returned 25 million of value to our shareholders through our stock repurchase program.

Bruce Lowthers: I stated it would take us three years, year one to stabilize the company, year two to return the growth, and year three to accelerate to our normalized growth profile.

Bruce Lowthers: At our Investor Day in 2023, I reiterated that we would focus on client experience, sales transformation, and product innovation. In addition, I stated that we would focus on recruiting talent to create the right culture and allow us to be competitive.

Bruce Lowthers: I would like to offer some thoughts on our progress over the last couple of years. When I joined the company, we were a decentralized organization working in silos. We streamlined the structure and brought it in the right talent where eager to work is a unified team. We embraced metrics and became focused on improvement. Specifically, we reduced the layers of management by 22%, and we had a 56% change in our operational leadership team. We brought our people together by reducing our office footprint by 43%.

Bruce Lowthers: As a result, our offices have become a vibrant place where employees can build relationships, collaborate on our strategy and vision, and deliver operational excellence. Finally, together, we've been able to drive efficiencies and reduce our back office expense using these savings to help grow our front office. The lifeblood of any business is to provide an experience that customers enjoy. We ranked number two in the J.D.

Bruce Lowthers: I would like to offer some thoughts on our progress over the last couple of years.

Speaker Change: When I joined the company, we were a decentralized organization working in silos.

Speaker Change: We streamlined the structure and brought it in the right talent. We're eager to work as a unified team.

Speaker Change: We embraced metrics and became focused on improvement.

Speaker Change: Specifically, we reduced the layers of management by 22 percent and we had a 56 percent change in our operational leadership team. We brought our people together by reducing our office footprint by 43 percent.

Speaker Change: As a result, our offices have become a vibrant place where employees can build relationships, collaborate on our strategy and vision, and deliver operational excellence.

Speaker Change: Finally, together, we've been able to drive efficiencies and reduce our back office expense using these savings to help grow our front office.

Speaker Change: The lifeblood of any business is to provide an experience that customers enjoy.

Bruce Lowthers: Power 2024 U.S. Merchant Satisfaction Study, a study we weren't even part of just two years before. Our focus on client experience and automation has helped reduce our call center interactions by 41 percent, reduced merchant onboarding times by 85 percent, and increased our digital wallet merchant checkout conversion by 10 percent. These are just some examples of the improvements that we've been able to help drive consumer and merchant satisfaction, but there's still much for us to do.

Speaker Change: We rank number two in the J.D. Power 2024 U.S. Merchant Satisfaction Study, a study we weren't even part of just two years before.

Speaker Change: Our focus on client experience and automation has helped reduce our call center interactions by 41 percent, reduced merchant onboarding times by 85 percent, and increased our digital wallet merchant checkout conversion by 10 percent.

Speaker Change: These are just some examples of the improvements that we've been able to help drive consumer and merchant satisfaction, but there's still much for us to do.

Bruce Lowthers: Sales transformation gets a lot of attention. So I'll just point out that we have more than doubled our quota carrying sales force and expanded our geographic footprint. We focused on cross-selling, and as a result, 30% of our Q2 2024 enterprise deals were sold into existing customers.

Speaker Change: Sales transformation gets a lot of attention, so I'll just point out that we have more than doubled our quota carrying sales force and expanded our geographic footprint.

Speaker Change: We focused on cross-selling, and as a result, 30% of our Q2 2024 enterprise deals were sold into existing customers.

Bruce Lowthers: We needed to rebalance our merchant portfolio, and we're making good progress with our e-commerce book and now our SMB direct book, which will help with margin expansion. We have a lot of momentum build. Product innovation must be a never-ending focus.

Speaker Change: We needed to rebalance our merchant portfolio, and we're making good progress with our e-commerce book and now our SMB direct book, which will help with margin expansion.

Speaker Change: We have a lot of momentum building.

Bruce Lowthers: In 2023, we focused on improving the usability of a wallet to drive better usage, more transactions, and more ARPA. In Q4 2023, we wanted to take advantage of our wallet platform and help our community come together with the launch of our Merchant Wallet for SMBs. This wallet allows merchants to receive acquiring settlements, use their phone as a point-of-sale device, and manage their business finances in one place.

Speaker Change: Product innovation must be a never-ending focus. In 2023, we focused on improving the usability of our wallet to drive better usage, more transactions, and more ARPU.

Speaker Change: In Q4 2023, we wanted to take advantage of our wallet platform and help our community come together with the launch of our Merchant Wallet for SMBs. This wallet allows merchants to receive acquiring settlements, use their phone as a point of sale device, and manage their business finances in one place.

Bruce Lowthers: We see this as a growing opportunity in a fragmented market. Success with the Merchant Wallet will help drive growth in our direct business and right-size the revenue mix, which would be margin accretive. We are just beginning in our innovation and feel that we're positioned well in the emerging experiential economy. It's worth remembering that before these changes, many of our business lines were declining. Our actions have had a decisive positive impact on our financial results. On a two-year CAGR basis, volume grew 7% while revenue grew 8% driven by the turnaround of the classic digital wallet, SMB, and e-commerce.

Speaker Change: We see this as a growing opportunity in a fragmented market.

Speaker Change: Success with the Merchant Wallet will help drive growth in our direct business and right-size the revenue mix which would be margin accretive. We are just beginning in our innovation and feel that we're positioned well in the emerging experiential economy.

Speaker Change: It's worth remembering that before these changes, many of our business lines were declining.

Speaker Change: Our actions have had a decisive, positive impact on our financial results.

Speaker Change: On a two-year CAGR basis, volume grew 7% while revenue grew 8%, driven by the turnaround of the classic digital wallet, SMB, and e-commerce.

Bruce Lowthers: This improvement in revenue plus improved utilization and headcount led to a 23% increase in revenue per employee and adjusted dividend growth of 7% on a two-year CAGR basis. These improved financial results helped us drive down our net debt leverage ratio by 16% while returning $25 million in value back to our shareholders. More importantly, these actions taken by the Paysafe team are positioning us for the future, building the foundation we need to scale and compete. It starts here.

Speaker Change: This improvement in revenue plus improved utilization and headcount led to a 23% increase in revenue per employee and adjusted dividend growth of 7% on a two-year CAGR basis.

Matthew Parker: As part of our portfolio optimization and a move to higher quality revenue which will deliver higher long term shareholder value, we are taking actions to limit volumes or exit relationships with certain higher risk merchants. These steps will reduce risk in our business but create a short-term headwind to our revenue growth rate in the second half of 2024. The strength of our sales initiatives which has led us to increase our original revenue guidance for the year will allow us to overcome the short-term headwind quickly. We believe these actions are the right steps to take for long-term sustainable growth as we refocus on our ideal customer profile.

Speaker Change: These improved financial results helped us drive down our net debt leverage ratio by 16% while returning $25 million in value back to our shareholders.

Speaker Change: More importantly, these actions taken by the Paysafe team are positioning us for the future, building the foundation we need to scale and compete. It starts here.

Bruce Lowthers: Another fun part of the job is seeing the team be recognized by outside organizations. We recently were added to the CNBC's list of the world's top 250 fintech companies. We're also named Payments Company of the Year by EGR and Software Company of the Year by TechElite. To close, we're not the same company we were two years ago. Our team is excited about the new possibilities. Today, we've grown revenues faster than many expected, even in the high interest rate environment of the last couple of years. Our strong free cash flow generation enables us to invest in our business, return capital to our shareholders, and reduce our leverage.

Speaker Change: Another fun part of the job is seeing the team be recognized by outside organizations. We recently were added to the CNBC's list of the world's top 250 fintech companies.

Bruce Lowthers: This brings me to our revised full year 2024 guidance. We are pleased to raise our full year revenue outlook range to 7 to 8% up from our previous guidance of 5.5 to 7%. 125 basis point increase at the midpoint moving the high end of our former guidance to the bottom end of our range. We now expect adjusted EBITDA margins to be between 27.5% and 28%. Our updated guidance includes the impacts of the actions that previously mentioned. Alex will walk you through our quarterly results and guidance in more detail in just a moment.

Speaker Change: We're also named Payments Company of the Year by EGR and Software Company of the Year by TechElite.

Speaker Change: To close, we're not the same company we were two years ago. Our team is excited about the new possibilities.

Speaker Change: Today, we have grown revenues faster than many expected, even in the high interest rate environment of the last couple of years. Our strong free cash flow generation enables us to invest in our business, return capital to our shareholders, and reduce our leverage.

Bruce Lowthers: As we continue to deleverage, we believe the value of the business will increasingly be reflected in our share price. We see a significant upside in the future as we continue to execute on a strategic initiative. With that. We will take your questions. Operator, if you would open the lines.

Speaker Change: As we continue to deleverage, we believe the value of the business will increasingly be reflected in our share price. We see a significant upside in the future as we continue to execute on our strategic initiatives.

Bruce Lowthers: Slide 4. In Q4 we laid up four strategic priorities for the 2024 calendar year and I'm pleased to say that we made great progress and remain on track or coming in ahead of expectations. Let's start with expanding our sales capabilities. We have hired 104 new sales reps year to date or 61% of our full year target. Our new hires in Q1 are ramping up as expected and we are pleased with the talent we've recruited.

Speaker Change: With that.

Speaker Change: We will take your questions. Operator, if you would open the lines, please.

Operator: Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2 if you'd like to remove your question from the queue.

Speaker Change: Thank you.

Speaker Change: Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad.

Speaker Change: A confirmation tone will indicate your line is in the question queue.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question is from the line of Andrew Harte with BTIG. Please go ahead.

Speaker Change: You may press star and 2 if you'd like to remove your question from the queue.

Bruce Lowthers: As a reminder, these sales reps take approximately six months to fully ramp up. The additional sales reps that allow us to expand our vertical and geographic sales coverage, giving us more bats than ever before. In the quarter, we logged 74 enterprise wins, which is over two times greater than the prior year and executed SMV deals in 30 different states of 58% increase versus that number last year. Our portfolio optimization efforts are coming along better than expected.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Ladies and gentlemen, we will wait for a moment while we poll for questions.

Speaker Change: Our first question is from the line of Andrew Hart with BTIG. Please go ahead.

Andrew Harte: Hey guys, nice quarter. On the merchant side, you called out a lot of drivers. I think solid e-comm growth was the one main one, but there was other things that the pickup on value-added services, you called out the chargeback protection, backup terminals, loan offerings, and then obviously S&P direct growth accelerating at 10% was really nice too. I guess, can you kind of rank order some of those drivers of growth for us in this quarter, which ones really stuck out the most?

Andrew Hart: Hey guys, nice quarter. On the merchant side, you called out a lot of drivers, I think.

Andrew Hart: Solid Ecom growth was the one main one, but there was other things that the pickup on value-added services You called out the chargeback protection backup terminals loan offerings

Bruce Lowthers: Year to date, we have generated approximately 26 million of in-year revenue or 52% of our full year target. As you may recall, we initially expected the revenue to be weighted more to the second half of the year. During the quarter, we launched value added services such as integrated loan program to our offerings. This loan program provides flexible short-term working capital for our partners and merchants to invest in and grow their business. Our ability to sell value-added services like these helped increase our take rate in merchant solutions from 0.78% from 0.74% in the prior quarter.

Andrew Hart: Obviously, S&B direct growth accelerating at 10% was really nice, too. I guess, can you kind of rank order some of those drivers of growth for us in this quarter? Which ones really stuck out the most? And I guess going forward, we're still yet to have this increased sales team.

Speaker Change: kick in. So, you know, I guess how is sales going to look different? What are the things this quarter that you saw that will drive future quarters? And then is it still kind of maybe 4Q, we'll start to see the increased sales headcount begin to contribute to growth there as well.

Andrew Harte: And I guess going forward, we're still yet to have this increased sales team kick in. So I guess, how is sales going to look different? What are the things this quarter that you saw that will drive future quarters? And then is it still kind of maybe 4Q, we'll start to see the increased sales headcount begin to contribute to growth there as well. Yeah, Andrew, thank you very much. And I'll start us off, and then Alex can add some color as we go along.

Alex Gersh: Yeah, Andrew, thank you very much and I'll start us off and then Alex can add some color as we go along.

Bruce Lowthers: But, you know, first, what I would just say is, look, I think overall, we're very pleased with the quarter. Triple B, we had really strong revenue versus consensus, HIPAA versus consensus, and adjusted net income, all those things for the second quarter in a row. So we're building some good momentum. In regard to the merchant business, obviously, the e-com business continues to show really solid growth, really driven in part by the iGaming growth in North America.

Bruce Lowthers: Our third priority for the year was to revamp our consumer acquisition efforts, which remain on track towards the end of the quarter we entered a new partnership with Riot Games, becoming the main sponsor of the Ballard eSports tournaments. This tournament was broadcast across the media region and generated an audience of 1.2 million viewers. This partnership allows gamers to use the Paysafe card for a seamless and secure transaction experience during checkout. We've incorporated the sponsorship into our strategy and we're seeing nice results as we move through July.

Alex Gersh: But, you know, first, what I would just say is, look, I think overall, we're very pleased with the quarter. Triple B, we had really strong revenue versus consensus, HIPAA versus consensus, and adjusted net income, all those things.

Alex Gersh: for the second quarter in a row, so we're building some good momentum.

Alex Gersh: In regard to the merchant business, obviously the e-com business continues to show really solid growth, really driven in part by the iGaming growth.

Bruce Lowthers: So you're seeing a lot of growth there. I think the other piece that's driving a lot of the activity, we've got nice, solid, continuous volume, but our optimization programs are really coming to bear and working out, as we hoped, providing a lot of that take rate expansion. So the projects that we started, if you recall, we started talking about this in Q4, maybe Q1. We started talking about the optimization program and that we were going to invest both in optimization and our sales force, driving a $25 million investment with a $50 million return, right? So it was a great, great project.

Alex Gersh: in North America, so you're seeing a lot of work there.

Bruce Lowthers: Finally, our efforts to deliver innovation experiences to consumers remain on track. This next example could probably go under either customer acquisition or innovation experiences. As you may have probably read, we recently announced the partnership with Revolut. What's great about this partnership is it lets us bring our eCache services to Revolut's 9 million UK customers. In turn, providing Revolut's customers access to 12,000 of our eCache network locations. We expect this service to eventually roll out to other European markets. This product innovation is helping us generate revenue and new and exciting ways. This quarter, the amount of revenue generated from new product innovation grew by 50% over last year.

Alex Gersh: I think the other piece that's driving a lot of the activity, we've got nice solid continuous volume, but...

Alex Gersh: Our optimization programs are really coming to

Alex Gersh: and working out as we hoped, providing a lot of that take rate expansion. So the projects that we started, if you recall, we started talking about this in...

Alex Gersh: I don't know, Q4, maybe Q1, we started talking about the optimization program and that we were going to invest

Alex Gersh: both

Alex Gersh: in optimization and our sales force.

Alex Gersh: driving a $25 million investment.

Bruce Lowthers: We're seeing great results from that through the halfway point. We look like we're right on target for the full year, maybe a quick more for the full year on that initial project. So we're feeling very good about that. I think when you talked about and touched on... The direct SMB business kind of accelerating back up a little bit. That was a nice balance for us.

Alex Gersh: with a $50 million return, right? So it was a great...

Alex Gersh: We're seeing great results from that through the halfway point. We look like we're right on target for the full year, maybe a click more for the full year on that initial project. So we're feeling very good about that.

Bruce Lowthers: Turning to our merchant business on slide 5, we saw a solid growth led by e-commerce, which now represents just over 30% of our merchant portfolio by volume. Last quarter, we discussed that our SMB direct book was being impacted by one portfolio and we have taken a number of steps to stabilize that portfolio throughout the quarter. This stabilization, along with volume increase and take rate improvement, have led our SMB direct book to grow 10% in Q2, roughly in line with our SMB ISO book.

Speaker Change: I think when you talked about and touched on

Speaker Change: the direct

Bruce Lowthers: So we'll continue to look at that and continue to hope that as we take these actions to your last part of the question with the sales force, that those things start really accelerating as we move into 25 and then ultimately to 26. So yes, we should see a little bit of activity in that cadence. What I would say in the first half of the year, what Rob and his team were able to do is they hired a lot of the enterprise salespeople first.

Speaker Change: S&B business kind of accelerating back up a little bit. That was a nice balance for us so we'll continue to look at that and continue to hope that as we take these actions to your to your last part of the question.

Speaker Change: with the Salesforce.

Speaker Change: that those things start really accelerating as we move into 25 and then ultimately

Bruce Lowthers: Our ISO book continues to show strength with another double digit growth quarter. Our efforts to rebalance the portfolio continue to progress, expanding our sales presence across the US and moving upstream the higher value merchants is continuing to pay off. We saw a 5% increase in the revenue per new merchant signed in Q2. Acceleration of our enterprise sales continued as we executed 74 enterprise wins in Q2 across our key verticals and geographies, up from approximately 30 in Q2 2023.

Bruce Lowthers: And so we should start seeing that towards the back half of the year, probably late Q4 as those people start coming on board. So we should see an acceleration really going into Q1 25 from that team.

Bruce Lowthers: I think as we touched on in the deck, we're seeing good progress there. We feel like they're right on track and so far, so good. So I appreciate the questions, Alex, anything?

Bruce Lowthers: Approximately 30% of these deals were with our existing customers highlighting the success of our cross selling efforts which was almost 0 to years ago. Additionally, our net revenue retention in the quarter was 103%. Further proving that our efforts to sell additional products and services to existing customers drives higher revenue permer.

Alex Gersh: Yeah, the only thing I would say is that the portfolio optimization that Bruce talks about is showing great acceleration. So I think if you remember, we said in the first quarter that he delivered about 8 million of revenue or so, right? In the second quarter, he delivered 18 million of revenue, so the total of 26 million.

Speaker Change: The only thing I can say is that the portfolio optimization that Bruce talks about is showing great acceleration. So I think if you remember we said in the first quarter that delivered about $8 million of revenue or so right in the second quarter <unk> delivered 18 million of writing and sold a total of $26 million you could see the acceleration of the first quarter to the second which is why when Bruce <unk>.

Alex Gersh: You could see the acceleration from the first quarter to the second, which is why when Bruce talks about the fact that we certainly would expect to make the 50 million target that maybe even slightly better than acceleration from 8 to 18 million from the first quarter to the second quarter is a proof that that's exactly what's happening. Yeah, no, it's nice to see how quickly the portfolio optimization kind of flows through on the revenue side.

Bruce Lowthers: Clyde Six, a quick update on eye gaming which saw another strong quarter. Global eye gaming, revenue grew 15% year-over-year, accelerating from 14% in Q1 2024. As we executed 64% more deals in the Q2 2024 quarter versus Q2 2023. North America eye gaming revenue grew over 50% year-over-year from merchant winds that occurred in Q3 and Q4 last year and assisted by seven additional states legalized last year that came online this year. Our eye gaming sales continue to find opportunities to cross sell into our customer base with 44% of the deals one in the quarter coming from existing clients.

Speaker Change: About the fact that we have.

Speaker Change: Certainly you would expect to make the $50 million target, maybe even slightly better than acceleration from $8 million to $18 million from the first quarter for the second quarter.

Speaker Change: Prove that that's exactly what's happening.

Yes that answers everything Andrew Yeah, Yeah, Yeah, no. It's nice to see how quickly the portfolio optimization kind of flows through on the revenue side and then on the.

Alex Gersh: And then on the high-risk merchant relationships that you're exiting, Alex, I just want to make sure we're quantifying that right. You said it's about a 2% headwind to growth, so about $32 million to revenue impact. I guess, can you just walk through the EBITDA impact as well? So all of this is based on our guidance. We expect it to be in the second half of the year.

Speaker Change: The higher risk merchant relationships that you're that you're exiting Alex I just want to make sure.

Speaker Change: Quantifying that right you said, it's about a 2% headwind to growth of about $32 million.

Speaker Change: To revenue impact I guess can you just walk through the EBITDA impact as well.

Speaker Change: So no so.

Speaker Change: All of this is baked in our guidance, we expect it to be in the second half of the year I don't know where the $32 million is revenue revenue coming from we expect the second half of the year to be at the edge.

Alex Gersh: I don't know where the $32 million is revenue coming from. We expect for the second half of the year to be, in fact, to be roughly $15 million. And again, I mean, the downside, it is in our guidance already. It is a higher margin stuff, but it is something that we need to get on the, you know, we need to do these things to make us more sustainable. So it will have, you know, we're not disclosing specifics after this. It's in our guidance for the second half of the year, but it is a higher margin revenue. Very helpful.

Bruce Lowthers: These cross sells allow us to take a larger piece of the payments cash register. As our merchants work to grow their revenue through product improvements, additional offerings and geographic expansion we stand ready to help them be successful.

Speaker Change: That impact to be roughly $15 million and it is.

Speaker Change: Then on the EBITDA side it is in our guidance already.

Speaker Change: Higher margin stuff, but it is something that we need to.

Speaker Change: We need to do these things to make us more sustainable so it will have.

Bruce Lowthers: Slide 7. In Q1 we started reporting digital wall at KPIs based on the segment to provide investors with a more holistic view of digital wallets performance. In Q2 we saw transactions for active user growth 20% driven by our core wallet, quick checkout and eCache. Additionally average revenue per user grew by 6% largely driven by the eCache product initiatives and more revenue attributed to eye gaming. This marks the sixth consecutive quarter of year-over-year growth on both of those metrics.

Speaker Change: We're not disclosing specific EBITDA numbers, it's in our guidance.

Speaker Change: Guidance for the second half of the year, but it is a higher margin revenue.

Bruce Lowthers: Thanks, guys, and nice quarter. Thank you. Our next question is from the line of Trevor Williams with Jeffries. Please go ahead.

Speaker Change: Very helpful. Thanks, guys and nice quarter.

Speaker Change: Thank you.

Speaker Change: Our next question is from the line of Trevor Williams with Jefferies. Please go ahead.

Trevor Williams: Great. Thanks. Hey, Bruce. Hey, Alex.

Trevor Williams: Great. Thanks, Hey, Bruce Alex Yeah, if we could just go back to the decision to exit some of the higher risk verticals. If you could just expand on why now if there was any specific catalyst.

Speaker Change: That would be helpful. Thanks.

Bruce Lowthers: Yeah, if we could just go back to the decision to exit some of the higher risk verticals, if you could just expand on why now, if there was any specific catalyst to spur that would be helpful. Thanks. Sure. Thank you, Trevor.

Speaker Change: Sure. Thank you Trevor I appreciate the question. So look I think when we look at the.

Bruce Lowthers: We saw three month active users remain flat year-over-year. And we acquired approximately 1.2 million users in the quarter. This is in line with the seasonality we experienced in Q2 for active users given the reduction of sporting events during the quarter. While our user base remains stable, this is not our goal.

Bruce Lowthers: I appreciate the question. So, look, I think when we look at Paysafe historically, we've been very reactive to changes in the marketplace, whether they be market changes or regulatory changes. And so what we're trying to do here as we look at going forward is be proactive. We can clearly see that there are some movements around consumer benefit across the globe.

Speaker Change: <unk> historically, we've been very reactive.

Speaker Change: Two changes in the marketplace, whether they'd be market changes regulatory changes.

Speaker Change: And so what we're trying to do here as we look at the.

Speaker Change: Going forward as being proactive we can clearly see that there is some movements around consumer benefit.

Bruce Lowthers: We are focused on returning our user base to growth. While we no longer break out our classic wallet, we did see three month active users grow 4% year-over-year. And we have had three consecutive quarters now of growth reflecting continued momentum growing our user base. We are also introducing a new KPI consumer acquisition cost which was $17.60 in the quarter. When comparing our food and consumer acquisition cost, this provides us with an approximate two month revenue payback which is why this opportunity is highly attractive.

Bruce Lowthers: And we have some businesses that we just feel now because we're growing and our sales are accelerating at such pace, we have the confidence to take these out now, putting ourselves in a position for sustainable revenue growth as we're going forward in to 24, 25, back out 24, 25. So this is really about us driving, Yeah, this is really about us looking at these higher risk businesses, higher risk to us are things that have higher chargeback rates.

Speaker Change: Across the globe and we have some businesses that we just feel.

Speaker Change: Now because we are growing and our sales are accelerating at such a pace we have the confidence to take these out.

Speaker Change: Now putting ourselves in a position for sustainable revenue growth as we're going forward in 'twenty four 'twenty five back half 'twenty four 'twenty five so.

Speaker Change: This is really about us driving.

Speaker Change:

Speaker Change: Yeah. This is really about us looking at these higher risk businesses higher risk to us are things that have higher charge back rates.

Bruce Lowthers: And highlights why returning our user base to growth continues to remain the priority. Overall, our current users are conducting more transactions and generating a higher output which is a solid foundation as we focus on driving additional consumer adoption and engagement.

Bruce Lowthers: And so we're trying to put ourselves in a position that we can drive sustainable growth as we go forward. And this is just part of that portfolio optimization as we look at it, trying to be aware of what the market's doing and us now taking a different stance than we have historically and being proactive in our portfolio. Okay, yeah. Hope that helps, Trevor. Yeah, no, that's great.

Speaker Change: And so we're trying to.

Speaker Change: Put ourselves in a position that we can drive sustainable growth as we go forward.

Speaker Change: This is just part of that portfolio optimization as we look at it trying to be aware of what the market's doing and us now being.

Speaker Change: Taking a different stance than we have historically and being proactive.

Bruce Lowthers: So in summary, Pace, they've had a strong Q2 by every financial metric. Year over year, we delivered quality revenue growth of 9%. Adjust the dividend growth of 5%. Net leverage reduced to 4.8 times, 7% volume growth, and at 3% take rate expansion just to name a few. The strategy that we laid out two years ago of focusing on client experience, sales transformation and product innovation are taking hold and allowing us to build momentum, enabling us to raise our revenue guidance for the full year 2024 by 125 basis points at the midpoint to 7% to 8% from our original guidance of 5.5% to 7% and puts us in a great position for consecutive 7% revenue growth year.

Speaker Change: On our on our portfolio.

Speaker Change: Okay, Yeah, Okay, I hope that times Trevor Yeah, Yeah, no no that's great I appreciate that and then first I want to go back to the comments on the digital wallets and the main focus there being on getting back to growing the user base. If you could just distill down maybe you did a two or three things that you think are most important there and as we think about the next.

Bruce Lowthers: I appreciate that. And then, Bruce, I wanna go back to the comments on the digital wallets and the main focus there being on getting back to growing the user base. If you could just distill down maybe to the two or three things that you think are most important there, and as we think about the next, year or so, kind of how you see the path playing out to getting the user base back to growth. Yeah. So, look, I think, you know, in hindsight, I probably messed up my comment there.

Speaker Change: Year, or so kind of how you see the path playing out to getting the user base back to growth.

Speaker Change: Yes, so look I think.

Speaker Change: In hindsight, it probably messed up my comment there what I would say is in the digital wallet product.

Bruce Lowthers: What I would say is, in the digital wallet product, we had a solid continuous growth there. So, in our three-month actives, it's a third quarter in a row that we've had growth in that. We'd like that to accelerate. When you look at the number of users, so what we did is we switched to the digital wallet segment. So, this is probably a little bit confusing versus the digital wallet product.

Speaker Change: We had.

Speaker Change: Solid continuous growth there, so and our three month actives, it's a third quarter in a row.

Speaker Change: That growth in that we'd like that to accelerate when you look at the number of users. So what we did is we switched to the digital wallet segment. So this is probably a little bit confusing versus the digital wallet product, but the digital wallet segment is what we're seeing with $7 million at $7 million.

Alex Gersh: with that I'll ask Alex to review the Q2 results in more detail. Thank you Bruce.

Alex Gersh: Let's move to slide 9 for the summary of our second quarter results. Total volume increased 7% year over year to 38.1 billion. Total revenue grew 9% to 439.9 million or 10% on a constant currency basis. Revenue growth accelerated ahead of our expectations led by double digit volume and revenue growth in the e-commerce channel within merchant solutions as well as new product initiatives within digital wallet. Our take rate increased slightly to 1.2% from 1.1% in a prior quarter.

Bruce Lowthers: But the digital wallet segment is what we're saying with $7 million to $7 million. And really, for us, we want to accelerate that with eCash, our products partnering with others like we did with Revolut, what we're doing with Exala. Those type of partnership opportunities are going to allow us to grow and accelerate the number of consumers. We've also done a lot with our marketing team. And as I think I mentioned in the opening, we've had really good success with some of the new initiatives that we've taken. We've got a better handle under what our cost of acquisition is.

Speaker Change: Really for us.

Speaker Change: We want to accelerate that with E cash our products.

Speaker Change: Partnering with others like we did with resolute, what we're doing with exalt those those type of.

Speaker Change: Partnership opportunities are going to allow us to grow and accelerate.

Speaker Change: The number of consumers, we've also done along with our marketing team.

Speaker Change: I think I mentioned.

Speaker Change: In the opening.

Alex Gersh: Adjusted a bit that was 119 million for the quarter and increased a 5% year over year or 6% on a constant currency basis. Adjusted a bit on margin was 27.1%, a decline of 100 basis points, primarily reflecting our incremental investment in sales and portfolio optimization. As Bruce mentioned, our initiatives remain on track and we expect to invest approximately 12.5 million dollars throughout the remainder of the year. On a LTM basis, Unleavert Free Casulo grew 16% to 339.1 million reflecting a 72% conversion rate. Adjusted net income increased 5% year over year to 36.3 million and adjusted EPS increased 5.3% to 59% per share.

Speaker Change: Had really good success with some of the new initiatives that we've taken we've got a better handle under what are our cost of acquisition is we'll continue to shed more light on that as we go forward through the back half of the year, but we feel much better about where we're spending our money and the results that we're seeing as we've transformed our marketing group as well.

Bruce Lowthers: We'll continue to shed more light on that as we go forward through the back half of the year. But we feel much better about where we're spending our money and the results that we're seeing as we've transformed our marketing group as well. And I think they're doing a really nice job when you look at the results from Riot Games and some of the other things we're doing.

Speaker Change: And I think they're doing a really nice job when you look at the results from right gains in some of the other things we're doing.

Bruce Lowthers: Our acquisition of customers is starting to accelerate as we move into Q3. So, I think we're taking a lot of good steps. I think we're in a position where we can see that $7 million number grow a little bit. Okay, great. Thanks. Appreciate it, a person.

Speaker Change: Our acquisition of customers is.

Speaker Change: Starting to accelerate as we move into Q3 so.

Speaker Change: I think we're taking a lot of good steps I think.

Speaker Change: We're in a position where we can see those that 7 million number grow a little bit.

Speaker Change: Okay, great. Thanks, I appreciate it.

Alex Gersh: Let's move to slide 10 to discuss the segment results. Starting with the merchant solutions volume increased 8% year over year to 32.7 billion and revenue increased 13% to 255 million. Growth was driven by strong volume and take rate growth within our e-commerce business led by contribution from iGaming. The remainder of the segment, our SMB business, grew revenue 10% year over year reflecting our strategic initiatives to expand our sales capabilities and optimize the portfolio. Adjusted EBITDA was 56.5 million and increased a 1%, margin decline 250 basis points to 22.2%, reflecting continuous progress on our 2024 investment initiatives.

Trevor Williams: Thank you Trevor.

Speaker Change: Thank you.

Trevor Williams: Thank you, Trevor. Our next question is from the line of Timothy Chiodo with UBS, please go ahead. Great. Thank you so much for taking the question. The chargeback protection and part of the value-added services listed in the slides with the roughly $50 million revenue figure reference there. For the chargeback protection, maybe you could just talk a little bit about the types of clients that are taking that. I'm assuming that's more in the e-commerce segment.

Speaker Change: Next question is from the line of Timothy Chiodo with UBS. Please go ahead.

Timothy Chiodo: Great. Thank you so much for taking the question the chargeback protection and part of the value added services listed in the slides with the roughly 50 million revenue figure referenced there for the Chargeback protection, maybe you could just talk a little bit about the types of clients that are taking that I'm, assuming that's more on the E Commerce segment and if this is.

Trevor Williams: And if this is something that you're leveraging, a combination of internal capabilities or third-party providers. And then a related follow-up is... As more and more of the e-commerce world moves towards the likes of Apple Pay, Google Pay, and Click-to-Pay from the card networks, meaning aspects that basically shift the liability back to the issuer, do these services maybe take on a different form, or maybe they're less needed?

Speaker Change: Something that you're leveraging a combination of internal capabilities third party providers and then a related follow up is Ed.

Speaker Change: As more and more of the E Commerce world moves towards the likes of Apple pay and Google pay.

Speaker Change: And click to pay from the card networks, meaning aspects that basically shift of liability back to the issuer do these services.

Alex Gersh: Turning to the digital wallet segment on slide 11, volume increased 6% to 5.7 billion and revenue increased 6% or 7% on a constant currency to 189.7 million. Segment's performance was driven by strong results within iGaming and ongoing product and engagement initiatives. Adjusted EBITDA was 82.4 million and increased of 7% or 8% on a constant currency basis. Adjusted EBITDA margin expanded 30 basis points driven by improved digital wallet KPIs which grow revenue growth in the quarter.

Ed: Maybe take on a different form or maybe they're less needed or just was hoping you could shed some light on what that mix shift may or may not mean for charge back services.

Timothy Chiodo: I just was hoping you could shed some light on what that makeshift may or may not mean for chargeback services. Thank you, Tim.

Bruce Lowthers: So what I would say is the Chargeback offering that we have is predominantly being taken by our S&B clients, not our e-comm clients. And so these are a lot of small businesses that are just trying to stabilize their revenue stream and not be exposed to anything that may appear in the Chargeback arena. I think to your broader question, I do think that as technology continues to evolve and you see more and more regulatory scrutiny around consumer, whether it be the way the CFPB refers to it or the way FCA or any of the other global regulatory bodies refer to a consumer duty, you're going to see more and more emphasis around mitigating Chargebacks.

Speaker Change: Thank you Tim Great question, So what I would say is the the charge.

Speaker Change: Offering that we have is predominantly being taken by our SMB clients not our E comm clients.

Speaker Change: And so these are a lot of small businesses that are just trying to stabilize the revenue stream and not be exposed to anything that.

Alex Gersh: Turning to slide 12 for the summary of our capital allocation. At the end of the quarter, total debt was just under 2.5 billion. During the quarter, net debt decreased by 26 million. Our leverage ratio spans at 4.8 times adjusted EBITDA compared to 5.6 times in the Q2 2023. Additionally, during the second quarter, we purchased approximately 686,000 shares for approximately 11 million dollars at an average cost of $16.3 per share, leaving us with 25 million remaining and our purchase program at the end of Q2.

Bruce Lowthers: And I think technology will allow that over time, and I think you'll see revenue streams over an extended period of time probably diminish from Chargeback, but that's just my own theory on how technology will impact that as we go forward. Okay, thank you for that. I appreciate that context, Bruce.

Speaker Change: It may appear in that chart back arena I think to your broader question.

Speaker Change: I do think that as technology continues to evolve and you see more and more.

Speaker Change: Regulatory scrutiny around consumer whether it be the <unk>.

Speaker Change: The CFPB refers to it or the way.

Speaker Change: Or any of the other global regulatory.

Speaker Change: Toward bodies referred to a consumer duty.

Speaker Change: Youre going to see more and more emphasis around mitigating charge backs and I think technology will allow that overtime and I think youll see revenue streams over.

Alex Gersh: To recap, since Q2O last year, we have reduced our debt to EBITDA by 14% while we're purchasing 25 million of our shares in the first half of 2024. We remain confident that our solid cashflow generation and capital allocation discipline will allow us to continue investing in the business while also continue to deal ever and return capital to the shareholders.

Speaker Change: Overtime over an extended period of time, probably diminish from chargeback, but that's just my own theory on how technology will impact that as we're moving forward.

Bruce Lowthers: The follow up is around another value added service to the working capital loans you mentioned, which, which are contributing to the year over year increase in take rate. Could you just talk a little bit about the structure of that program on balance sheet, off balance sheet and how you went about that decision? Yeah. And Tim, I apologize.

Okay. Thank you for that I appreciate that context, Bruce the follow up is around another value added service to the working capital loans, you mentioned, but she which are contributing to the year over year increase in take rate could you just talk a little bit about the structure of that program on balance sheet off balance sheet and how you went about that decision.

Alex Gersh: Before going into the guidance, let me just remind you that in FY23, excluding interest income and FX tailwinds, our top line growth was approximately 3.5%. In the first six months of this year, even with headwinds from FX and interest rates growth accelerated to 9%.

Bruce Lowthers: I think I forgot to answer part of your other question. That is a third-party product that we are using, just like this loan product. So, this is a third-party product. We take no risk here.

Speaker Change: Yes.

Speaker Change: I apologize I think I forgot to answer part of your question.

Speaker Change: It does.

Alex Gersh: Now let's turn to the full year guidance. We are pleased with our results and the ongoing progress of our strategic investments. Therefore, we are raising our revenue growth outlook to the range of 78%, which implies a second half growth rate of 6.5% at the midpoint. The former top end of our range is now the bottom end. Our updated revenue outlook includes the impact of our portfolio rationalization efforts Bruce mentioned earlier. Excluding those impacts, we would have expected revenue to grow between 8% to 9%, which is well ahead of our initial expectation.

Speaker Change: Third party product that we.

Speaker Change: Are using just like this loan products. So this is the third party.

Bruce Lowthers: This is really just an origination fee for the loan. Tim, as you well know, most of our large competitors offer a similar type program to their customers. You'll see us start bringing more and more of these type programs as we start filling up our product suite to be more commensurate with our peer groups. So, for us, it's a great program to offer to our merchants. It creates a good parity in what our offering is for, in particular, the S&B world.

Speaker Change: We take no risk here. This is really just an origination fee for the loan.

Tim: Tim as you well know most of.

Tim: Our large competitors offer a similar type program to their customers Youll see us start, bringing more and more of these type programs.

Tim: We start.

Tim: Filling up our product suite to be more commensurate with our with our peer group so far.

Tim: For us it's a it's a great program to offer to our merchants creates good parity in what our offering is for in particular, the SMB world and.

Alex Gersh: Despite the short term impacts, we believe these actions will benefit the company from a long run as we reduce the risk associated with our business. We now expect adjusted EBITDA margin to come in between 27.5% to 28%. A reduction of 50 basis points from our prior guidance. Excluding our portfolio rationalization efforts and severance related costs, our full year margins would have been between 28.2 to 28.7%. Still ahead what we initially expected at the beginning of the year.

Bruce Lowthers: And we're having a good uptake in the first 30 days. Too early to see what it ends up from a materiality perspective, but the first 30 days was very positive. Excellent. Thank you for taking both of those.

Tim: We're having some good uptake in the first 30 days early.

Tim: Too early to see what it ends up from a materiality perspective, but.

Tim: The first 30 days is very positive.

Speaker Change: Excellent. Thank you for taking both of those I appreciate that.

Tim: Thank you Tim.

Timothy Chiodo: Thank you. Our next question is from the line of Paul Obrecht with Wolf Research. Please go ahead. Hi, thanks. This is Paul Obrecht on for Darrin.

Speaker Change: Thank you.

Paul <unk>: Our next question is from the line of Paul <unk> with Wolfe Research. Please go ahead.

Alex Gersh: Additionally, our updated guidance implies 170 basis points of margin expansion versus the first half of this year. We expect that our adjusted EBITDA margin exit for the year will be unchanged heading into 2025. Also, we now expect our net leverage to be between 4.6 to 4.7 times at the end of the year.

Paul Obrecht: Can you just start by touching on the success you're seeing with cross-selling to existing merchants, maybe just how you're approaching conversations with the existing merchant base and really driving adoption of these further products would be great. Thanks. Yeah, Paul, thank you. So, look, if you go back to the very beginning, when I came in a couple years ago, I think one of the first presentations I did is I talked about how we had Europe was predominantly wallet, and we had the US was predominantly acquiring, and because we had all these siloed organizations, sales organizations, nobody was really talking to each other with the products that we had. No one was talking to each other's clients.

Paulo: Hi, Thanks. This is Paulo, Brett on for Darren can you just start by touching on the success Youre seeing with cross selling to existing merchants, maybe just how youre approaching conversations with existing merchant base and really driving adoption of these further products would be great. Thanks.

Speaker Change: Yeah, Paul Thank you.

Speaker Change: So look if you go back to the very beginning when I came in a couple of years ago.

Speaker Change: One of the first presentation I did as I talked about.

Speaker Change: How we had Europe was predominantly wallet and we had the U S was predominantly acquiring them and because we had all of these siloed organizations.

Alex Gersh: Finally, please see our appendix for other below-the-line assumptions.

Bruce Lowthers: Now, I'll turn the call back to Bruce for closing remarks before we take questions. Thank you, Alex.

Speaker Change: Sales organizations, nobody was really talking to each other with the products that we had.

Bruce Lowthers: So, as we've mentioned over the last couple years, Rob's team, our Chief Revenue Officer, Rob Ghetto, has brought those organizations together. We now have account managers on our largest accounts. They're going in, and they're responsible for the growth of that account. And so, what we're seeing is every one of our wallet customers, for example, certainly we're using Ecom Gateway of someone, and we weren't taking the opportunity to bring ours forward, and now we're doing that.

Speaker Change: No one was talking to each other clients so.

Speaker Change: As we've mentioned over the last couple of years Rob's team.

Speaker Change: Our Chief revenue Officer, Rob Gatto has.

Rob Gatto: Brought those organizations together, we now have account managers on our largest accounts, they're going in and they are responsible for the growth of that account.

Rob Gatto: And so what we're seeing is every one of our wallet customers. For example, certainly were using E comm gateway of someone and we werent, we werent taking opportunity to bring <unk> forward and now we're doing that.

Bruce Lowthers: Just over two years ago, it's fortunate to join PACEF. We've put forward a bold and aggressive plan to turn the company around. I stated it would take us three years. You're one to stabilize the company year two to return the growth and year three to accelerate to our normalized growth profile. At our investor day in 2023, I reiterated that we would focus on client experience, sales transformation, and product innovation. In addition, I stated that we would focus on recruiting talent to create the right culture and allow us to be competitive.

Bruce Lowthers: I would like to offer some thoughts on our progress over the last couple of years. When I joined the company, we were a decentralized organization working in silos. We streamlined the structure and brought it in the right talent where eager to work is a unified team. We embraced metric and became focused on improvement. Specifically, we reduced the layers of management by 22%. And we had a 56% change in our operational leadership team.

Rob Gatto: We also added new products pay by bank last quarter.

Bruce Lowthers: We also added new products, Paid by Bank, last quarter. And so, those things give us the opportunity to go back to our existing customers, take more of the register, and gain more market share of that register, whether it be in North America or Europe. So, that'll continue to be our strategy as we add. Nicole Carroll's team adds more products into the mix for us.

Rob Gatto: And so those things give us the opportunity to go back to our existing customers take more of the register.

Bruce Lowthers: We brought our people together by reducing our office footprint by 43%. As a result, our offices have become a vibrant place where employees can build relationships, collaborate on our strategy and vision, and deliver operational excellence. Finally, together, we've been able to drive efficiencies and reduce our back-office expense, using these savings to help grow our front office.

Rob Gatto: Dave.

Rob Gatto: Market share of that register whether it be in North America or Europe. So that'll continue to be our strategy as we add.

Bruce Lowthers: We'll be going back to our existing customers. We have a great customer base. We've got a customer base that anybody would want, and we really want to make sure that we're offering everything they need from a payment perspective to be successful with their respective businesses. Great, thanks.

Rob Gatto: Nicole Carroll team adds both products into the mix for us will be going back to our existing customers. We have a great customer base, we've got a customer base that anybody would want.

Rob Gatto: And we really wanted to make sure that we're offering everything they need from a payment perspective to be successful with their respective businesses.

Bruce Lowthers: The lightblood of any business is to provide and experience the customers enjoy. We ranked number two in the JD Power 2024 US merchant satisfaction study. A study we weren't even part of just two years before. Our focus on client experience and automation has helped reduce our call center interactions by 41%, reduced merchant onboarding times by 85%, and increased our digital wallet merchant checkout conversion by 10%. These are just some examples of the improvements that we've been able to help drive consumer and merchant satisfaction, but there is still much for us to do.

Paul Obrecht: And then, as a follow-up, can you provide some color on the e-com growth and any trends you're seeing there? And then have you seen any shifts in consumer spending patterns, maybe both in the second quarter and thus far in Q3?

Speaker Change: Great. Thanks, and then as a follow up can you just provide some color on the E com growth and any trends youre seeing there and then have you seen any shifts in consumer spend patterns, maybe both in the second quarter and thus far in Q3.

Bruce Lowthers: So, you know, on the economics business, it's kind of what we said in the prepared remarks. I think we see solid growth in our economics business across the board. We are seeing the calendarization of some of the states that came online in North America.

Speaker Change: Yeah. So.

Speaker Change: On the E comm business.

Speaker Change: Kind of what we said in the prepared remarks I think it's.

Speaker Change: We see solid growth.

Speaker Change: In our E com business across the board.

Speaker Change: We are seeing the calendar and realization of some of the states.

Speaker Change: It came online in North America.

Bruce Lowthers: Sales transformation gets a lot of attention, so I'll just point out that we have more than doubled our quota-carrying sales force and expanded our geographic footprint. We've focused on cross-selling, and as a result, 30% of our Q2 2024 enterprise deals were sold into existing customers. We needed to rebalance our merchant portfolio when we were making good progress with our e-commerce book and now our SMB direct book, which will help with margin expansion. We have a lot of momentum building.

Speaker Change: So you're seeing some lift from that we had a little bit of lift from the euros.

Bruce Lowthers: So, you're seeing some lift from that. We had a little bit of lift from the euros in the quarter, which was great. And now we're going into the back half of the year, which is our normal, busier part of the year due to the Premier League in sports in Europe. So, econ overall, just steady performance, continued really good results, maybe broadening out a little bit. But overall, it's doing very well in that regard.

In the quarter, which was which was great.

Speaker Change: Now we're going into the back half of the year, which is our normal busier part of the year due to the Premier League in sports in Europe. So.

Speaker Change: E Comm overall, just steady performance continued.

Speaker Change: Really good results, maybe broadening out a little bit, but overall, it's doing very well in that regard I think in regard to the consumer spend.

Bruce Lowthers: I think in regard to consumer spend in July, look, we. There may be something there in consumer spend, but we're not seeing it. We're seeing a pretty solid quarter lined up for Q3, with the July results being in line with expectations. So nothing is really materializing for us. I think we have a lot of good sales momentum, so we feel pretty good about where we are heading into Q3.

Bruce Lowthers: Product and invasion must be a never-ending focus. In 2023, we focused on improving the usability of a wallet to drive better usage, more transactions, and more output. In Q4 2023, we wanted to take advantage of our wallet platform and help our community come together with a launch of our merchant wallet for SMBs. This wallet allows merchants to receive acquiring settlements, use their phone as a pointed sale device, and manage their business finances in one place.

Speaker Change: And July look.

Speaker Change: We.

Speaker Change: There may be something there on consumer spend but we're not seeing it we're seeing a pretty solid.

Speaker Change: Quarter lining up for Q3 with the July results being in line with expectations. So.

Speaker Change: Nothing really materializing for us I think we have a lot of good sales momentum so.

Speaker Change: We feel pretty good about where we are heading into Q3.

Bruce Lowthers: We see this as a growing opportunity in a fragmented market. Success with the merchant wallet will help drive growth in our direct business and right-size the revenue mix, which would be margin accreted. We are just beginning in our innovation and feel that we're positioned well in the emerging experiential economy.

Speaker Change: Got it. Thank you I appreciate you taking the questions.

Paul Obrecht: Thank you. Appreciate you taking the question. Thank you. Our next question is from the line of Aditya Buddhavarapu with Bank of America. Please go ahead.

Speaker Change: Thank you our next.

Speaker Change: Next question is from the line of Budd.

Speaker Change: <unk>.

With Bank of America. Please go ahead.

Budd: Hey, Thanks for taking my question.

Speaker Change: Couple of them already but I do have a few.

Bruce Lowthers: It's worth remembering that before these changes, many of our business lines were declining. Our actions have had a decisive positive impact on our financial results. On a two-year-kager basis, volume grew 7% while revenue grew 8% driven by the turnaround of the classic digital wallet, SMB, and e-commerce. This improvement in revenue plus improved utilization and headcount led to a 23% increase in revenue per employee and adjusted a bit of growth of 7% on a two-year-kager basis.

Aditya Buddhavarapu: Hey, thanks, but I'm already been asked. Firstly, could you just talk about... Direct Business. I know you've been, at that business back growth and that was up 10%. So maybe just talk a bit more about the initiatives there and how you're looking at that. And then maybe just taking a step back.

Budd: Firstly could you just talk about in much installations, the direct business I know you've been trying to.

Budd: Get that business back to growth and that was up 10% in SMB in Q2, So maybe just talk a bit more about the initiatives there and how you're looking at that.

Speaker Change: And then maybe just taking a step back going to the CMT last year, you mentioned, the midterm target of high single digit to low double digit.

Bruce Lowthers: Last year [inaudible] MetaMGrow target of high single ledger to low double ledger. If you look at the impact of the merchant portfolio optimization, it is- Thank you all. Current levels heading into 25. And maybe just one last question, the partnership with Revolut on e-cash, color in that in terms of how that works. Economics, and General News, so to see that as the future growth model for their recache business. All right, that was what I will try to work my way through those.

Speaker Change: The impact of the much and portfolio optimization.

Bruce Lowthers: These improved financial results helped us drive down our net debt leverage ratio by 16% while returning 25 million in value back to our shareholders. More importantly, these actions taken by the PASIF team are positioning us for the future, building the foundation we need to scale and compete.

Speaker Change: It's sort of an 89% for 2024. So could you talk about you know how you get to that sort of let's say a.

Speaker Change: Low double digit growth from.

Speaker Change: Kevin's heading into 'twenty, five and maybe maybe 26.

Speaker Change: And then maybe just one last question perhaps for revenue.

Bruce Lowthers: It starts here. Another fun part of the job is seeing the team be recognized by outside organizations. We recently were added to the CNBC's list of the world's top 250 Fintech companies. We're also named Payments Company the Year by EGR and Software Company of the Year by Tech Elite.

Speaker Change: On the cash because you just add some color on that in terms of how.

Speaker Change: Books in terms of the sharing of comics and generally do you sort of see that as the future growth I'm wondering if without any cash business partnering with more of those.

Speaker Change: It's only a fintech players.

Speaker Change: Alright that was what I will try to work our way through those so I take the first one was around.

Bruce Lowthers: To close, we're not the same company we were two years ago. Our team is excited about the new possibilities. Today, we have grown revenues faster than many expected. Even in the high interest rate environment of the last couple years, our strong free cash flow generation enables us to invest in our business, return capital to our shareholders, and reduce our leverage. As we continue to leverage, we believe the value of the business will increasingly be reflected in our share price.

Bruce Lowthers: So I think the first one was around our Merchant Solutions direct business. We have changed a lot of the management of those teams. We have a gentleman running that for us now.

Speaker Change: Our merchant solutions direct business.

Bruce Lowthers: We see a significant upside in the future as we continue to execute on our strategic initiatives.

Speaker Change: We.

Speaker Change: We have changed a lot of the.

Speaker Change: The management of those teams.

Speaker Change: We have a gentleman running that for us now.

Bruce Lowthers: We see that we've taken a lot of steps to bolster that business. We feel good about that. We have a lot of salespeople that we're adding into that. As I mentioned, historically, it's a place where we felt we were subscale.

Speaker Change: We see that we've taken a lot of steps to bolster that business.

Speaker Change: We feel good about that we have a lot of salespeople that we're adding into that.

Speaker Change: And historically, it's a place where we felt we were subscale.

Bruce Lowthers: We like the direct part of our business. We like all of our business. I want to be very clear.

Speaker Change: Like the direct part of our business, we like all of our business I want to be very clear, we like all of the business that we have.

Matthew Parker: With that, we will take your questions, operator, if you would open the lines, please. Thank you.

Bruce Lowthers: We like all the business that we have. The reason that we're focusing on growing the direct part of that portfolio is it gives us much better margin. And so that's really what drives that for us. So we're taking steps to scale up that sales force. We're adding new product into the direct team, and allowing them to cross sell, and so hopefully we'll see results from that. The second question I didn't quite understand was about the double-digit growth in in 25-26. Sorry, I was just going back to the CMD at the beginning of last year when you did speak about.., back to Heist. Crote or the Meta.

Speaker Change: The reason that we're focusing on.

Speaker Change: Growing the direct part of that portfolio is it gives us much better margin. So that's really what.

Operator: Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions.

Speaker Change: It drives that for us so.

Speaker Change: We're we're taking steps.

Speaker Change: The scale up that sales force, we're adding new product into the direct.

Speaker Change: Team.

Speaker Change: And.

Allowing them to cross sell and so hopefully we will see results from that.

Speaker Change: The second question.

Speaker Change: Didn't quite understand was about double digit growth.

Speaker Change: And 'twenty five 'twenty six.

Andrew Hart: Our first question is from the line of Andrew Hart with BTIG. Please go ahead. Hey guys, Mitch Corner. On the merchant side, you called out a lot of drivers. I think Solid Ecom growth was the one main one, but there was other things that the pickup on value added services. You called out the charge back protection, backup terminals, loan offerings, and obviously SMB Direct Growth Accelerating is 10% was really nice too.

Speaker Change: Honestly I can repeat that.

Speaker Change: Yes.

Speaker Change: Alright.

Speaker Change: Just going back to the C. M D. At the beginning of last year than you did speak about the ability to go back to high single digits to low double digit growth over the midterm not.

Bruce Lowthers: Love this year, raised the guidance, but without the much, impact you would have been closer to eight to nine percent. We are getting closer to that, you know, mid-term growth range, drive you to get there. Yeah, look, so if I understand the question, it was really going back to what my midterm guidance was when we did Investor Day, I guess, a year ago. Look, we're still, we're still progressing. I want to, I want to enjoy this quarter first.

Speaker Change: Sure.

Speaker Change: You've raised the guidance, but without the much in combination impact you would've been closer to eight 9%.

Speaker Change: Seems to be getting closer to that.

Andrew Hart: Can you kind of rank order some of those drivers of growth for us in this quarter, which ones really stuck out the most? I guess going forward, we're still yet to have this increased sales team kick in. I guess how the sales going to look different? What are the things this quarter that you saw that will drive future quarters? Then it's still kind of maybe 4Q. We'll start to see the increased sales hike count begin to contribute to growth there as well.

Speaker Change: But protein just wanted to ask you what you know what could drive you to get there.

Speaker Change: 225.

Speaker Change: What's sort of the key drivers.

Yes look.

Speaker Change: So if I understand the question it was really going back to what my midterm guidance was when we did investor day, I guess a year ago.

Bruce Lowthers: And then, you know, we have a lot of momentum, we're trying to execute better each day, we still have a lot of work to do. But we feel good about the progress of the company, and we feel good that we're moving in the right direction. And we'll give guidance on 25 in due course.

Speaker Change: Look we're still they're still progressing.

Speaker Change: I wanted to enjoy this quarter first and then.

Speaker Change: We have a lot of momentum we're trying to execute.

Bruce Lowthers: Yeah Andrew, thank you very much. I'll start us off and then Alex can add some color as we go along. But first what I would just say is, I think overall we're very pleased with the quarter. Triple B, we had a really strong revenue versus consensus, a bit of versus consensus and adjusted that income, all those things for the second quarter in a row, so we're building some good momentum. In regard to the merchant business, obviously the Ecom business continues to show really solid growth, really driven in part by the eye gaming growth in North America, so you're seeing a lot of growth there.

Speaker Change: Better each day, we still have a lot of work to do.

Speaker Change: But we feel good about the progress of the company and we feel good that we're moving in the right direction and we will give guidance on on 25 in due course.

Bruce Lowthers: But there's no question, when you look back over the prior years, which we've had an opportunity to do now, we've accelerated quite a bit. We've talked about growing from a high, our quality revenue growing from three and a half to seven plus percent this year. So we see nice growth acceleration from last year to this year. So we'll continue to just keep doing what we're doing. We're seeing good results, and we'll give the guidance for 25, 26, like we always do it in our Q4 guide. And you had another question? Or no? Yeah, it's just on the patch with Revolut.

Speaker Change: There's no question when you look back over.

Speaker Change: Prior years, which we've had an opportunity to do now.

Speaker Change: We've accelerated quite a bit.

Speaker Change: We've talked about.

Speaker Change: Growing from.

Speaker Change: Hi.

Speaker Change: Quality revenue growing from three five to.

Speaker Change: The seven plus percent.

Speaker Change: This year, so we see nice.

Speaker Change: Growth acceleration from last year to this year.

Speaker Change: So we'll continue to just keep doing what we're doing we're seeing good results in.

Bruce Lowthers: I think the other piece that's driving a lot of the activity, we've got nice solid, continuous volume, but our optimization programs are really coming to bear and working out as we hope providing a lot of that take rate expansion. So the projects that we started, if you recall, we started talking about this in Q4, maybe Q1. We started talking about the optimization program and then we were going to invest both in optimization and our sales force driving a $25 million investment with a $50 million return.

Speaker Change: We'll give the guidance for 'twenty five 'twenty six.

Speaker Change: Like we always do it.

Speaker Change: Q4 guide.

Speaker Change: Right.

Speaker Change: And you had another question.

Speaker Change #100: Yeah. It was just.

Speaker Change #101: Just on the potash with revenue and you.

Bruce Lowthers: [inaudible] cash product, is that the sort of growth opportunity you would look at for e-cash going forward? Yeah, I think the Revolut program is a great program. It's very early, but it certainly creates the opportunity for a blueprint to access partners, consumers, allowing us to accelerate growth, not only from what we do normally with our Paysafe card and other products in eCash, But there's another way to accelerate that growth. So I think Alisa Barber and her team are doing some great things with the marketing efforts they're putting forward. So, you know, but it's early.

Speaker Change #102: And on the cash product is that a sort of a growth opportunity you would look at free cash going forward you know similar types of partnerships.

Speaker Change #103: Yes, I think the program is.

Speaker Change #104: Great program, it's very early but it certainly creates the opportunity for a blueprint to access partners consumers are allowing us to accelerate growth not only from what we do normally with a prepaid card and other products.

Bruce Lowthers: So it was a great project. We're seeing great results from that through the halfway point. We looked like we're right on target for the full year, maybe a quick more for the full year on that initial project, so we're feeling very good about that. I think when you talked about and touched on The direct SMB business kind of accelerating back up a little bit. That was a nice balance for us, so we'll continue to look at that and continue to hope that as we take these actions to your last part of the question with the sales force, that those things start really accelerating as we move into 25 and then ultimately to 26.

Speaker Change #104: Cash.

Speaker Change #104: Yeah.

Speaker Change #104: But it's another way to accelerate that growth so.

Speaker Change #104: I think Lisa Barbara and her team are doing.

Speaker Change #104: <unk> some great things.

Speaker Change #104: With the marketing efforts that we're putting forward so but it's early we'll see how all that plays out but we feel very good about that we had nice.

Bruce Lowthers: We'll see how all that plays out, but we feel very good about it. We had nice double-digit growth in our LATCAM business. So

Speaker Change #104: Double digit growth in our.

Speaker Change #104: Latam business so we.

Bruce Lowthers: I'm seeing a lot of positive things starting to emerge in e-cash, and I think if you reflect back on the end of Q4, we talked about e-cash having to accelerate, and we're now seeing some of that acceleration come to bear. So, very excited about it. Alright, thank you, Bruce. I appreciate the color.

Speaker Change #104: A lot of positive things starting to emerge and need cash and I think if you reflect back on at the end of Q4, we've talked about a cash having to accelerate and we're now seeing some of that acceleration come to bear so.

Bruce Lowthers: So, yes, we should see a little bit of activity in that cadence. What I would say in the first half of the year, what Robin and his team were able to do is they hired a lot of the enterprise, the salespeople first. And so we should start seeing that towards the back half of the year, probably late Q4 as those people start coming on board. So we should see an acceleration really going into Q1, 25 from that team.

Speaker Change #104: Very excited about it.

Speaker Change #104: Alright, Thank you Bruce I appreciate the color.

Aditya Buddhavarapu: Yep, my pleasure. Thank you. Our next question is from the land of Dan Perlin with RBC Capital Markets. Please go ahead. Thanks. Good morning.

Bruce Lowthers: Yes, my pleasure.

Bruce Lowthers: Thank you.

Speaker Change #105: Our next question is from the line of Dan Perlin with RBC capital markets. Please go ahead.

Dan Perlin: I wanted to touch on this, the new KPI you brought out, the customer acquisition cost, $1760. And it looks like there's, you're including like marketing expense and sales and third party. So a couple things. One is, can you contextualize kind of the rank order of those three so we can think about how that scales?

Dan Perlin: Thanks, Good morning, I wanted to touch on this.

Speaker Change #107: The new Kpis, you brought out the customer acquisition cost $17 60.

Bruce Lowthers: I think as we touched on in the deck, we're seeing good progress there. We feel like they're right on track and so far, so good. So I appreciate the questions Alex. Yeah, the only thing I would say is that the portfolio optimization that Bruce talks about is showing great accelerations. So I think if you remember, we said in the first quarter that he delivered about 8 million of revenue or so, right, in the second quarter, he delivered 18 million of revenue.

Bruce Lowthers: And then secondly, I think you said the payback period implies like a two month payback, which is incredibly fast. So my question on that is, is that where you kind of want to be on the two-month period? Are you willing to kind of lean into the customer acquisition cost to expand that a little bit in order to ultimately drive increasing ARPU and activation there? Thanks. Yeah, Dan, thanks for the question. Look, I think I'll let Alex also chime in on this, but I think what we're trying to do here is just as I mentioned in Q1, we're digging in more to consumer acquisition, trying to understand what's going on there, where we're putting our money, how do we kind of revolutionize our marketing approach.

Speaker Change #108: And it looks like there's you include like marketing expenses sales and third party so that helps.

Speaker Change #109: Full of things one is.

Speaker Change #110: Can you just contextualize kind of the rank order of those three so we can think about how that scales and then secondly.

Bruce Lowthers: So the total of 26 million, you could see the acceleration from the first quarter to the second, which is why when Bruce talks about the fact that we certainly would expect to make the 50 million target that maybe even slightly better than acceleration from 8 to 18 million from the first quarter to the second quarter is approved that that's exactly what's happening. Yeah, I know it's nice to see how quickly the portfolio optimization kind of flows through on the revenue side.

Speaker Change #111: Secondly, I think you said the payback period implies like a two months payback, which is incredibly fast.

Speaker Change #112: So my question on that is is.

Speaker Change #113: Is that where you kind of want to be on the two months period are you willing to kind of lean into the <unk>.

Speaker Change #113: As for acquisition cost to expand that a little bit in order to ultimately drive increasing ARPA and activation.

Bruce Lowthers: And and so some of these metrics that we're bringing the market as we focus on on our deal customer profile. This is what we wanted to share with you, we'll share more as we go forward into Q3 and Q4 around this, but we agree that payback is a great payback on the consumers that we're acquiring. And you know, now it's it's how to do we lean into it is what we're sorting through. We've got a series of test programs that are out there that seem to be having very good results, but it's very early innings at the stage, I don't know Alex, we want to add to me.

Dan Perlin: Yes, Dan Thanks for the question.

Speaker Change #113: Okay.

Speaker Change #113: I'll, let Alex also chime in on this but I think what we're trying to do here is just.

Speaker Change #113: As I mentioned in Q1, we're digging in more to consumer acquisition trying to understand.

Speaker Change #114: What's going on there, where we're putting our money how do we.

Speaker Change #113: <unk>.

Bruce Lowthers: And then on the the high risk merchant relationships that you're exiting Alex, I just want to make sure we're quantifying that right. You said it's about a 2% headwind to grow so about 32 million to revenue impact. I guess can you just walk through the EBITDA impact as well. So no, so we if all of this is based on our guidance, we expect it to be the second half of the year.

Speaker Change #115: Revolutionized our marketing approach.

Alex Gersh: And so some of these metrics that.

Alex Gersh: Where we're bringing to market as we focus on our ideal customer profile.

Alex Gersh: What we wanted to share with you we'll share more as we go forward into.

Speaker Change #116: Q3 and Q4.

Speaker Change #116: Around this but we agree the payback is a great payback on the consumers that we're acquiring.

Bruce Lowthers: I don't know where the 32 million is revenue coming from. We expect for the second half of the year to be that impact to be roughly 15 million and it is a and again, I mean, the dot side, it is in our guidance already. It is a higher margin stuff, but it is something that we need to get on the, you know, we need to do these things to make us more sustainable. So it will have a, you know, we're not we're not disclosing specifically that after this, it's in our guidance for the second half of the year, but it is a higher margin revenue.

Speaker Change #116: And.

Speaker Change #116: Now it's it's.

Speaker Change #117: How do we lean into it is what we're sorting through.

We've got a series of test programs that are out there that seem to be having very good results, but it is very early innings at this stage I don't know Alex.

Alex Gersh: Alex do you want to add any.

Alex Gersh: I mean, the only thing that I would say is that in our digital wallet, in our e-cash business, in that division, right, we have two ways of driving revenue. One is attracting new customers, right, and that, you know, we'll see how that goes and how expensive that is. But the other thing is converting our unregistered customers, customers who maybe use us once or maybe in the whole year, to registered customers. We know that the R-pool of somebody who's registered with us starts using us more, is much, much higher. So the cost of acquisition of acquiring a new customer could be very different than the cost of acquisition of having an existing customer converting from being unregistered to being registered.

Alex Gersh: The only thing that I would say is that in our digital wallet and now can eat cash business in that division right. We have two ways of driving revenue one is tracking.

Alex Gersh: Tracking new customers right. The net we will see how that goes and how expensive that is but the other thing is converting our unregistered customers customers, who may be use us once or maybe in the whole year. Two registered customers. We know that would be our pool of somebody who's retrospect with us stopped using us more is much much higher so.

Andrew Hart: Very helpful. Thanks guys and nice quarter.

Bruce Lowthers: Thank you.

Trevor Williams: Our next question is from the line of Trevor Williams with Jeffries. Please go ahead. Great. Thanks. Hey, Bruce Alex. Yeah, if we could just go back to the decision to exit some of the higher risk verticals. If you could just expand on why now, if there was any specific catalyst to spur that would be helpful. Thanks.

Alex Gersh: Cost of acquisition of acquiring a new customer could be very different than a cost of acquisition of having existing customer converting from being unregistered to being registered so.

Alex Gersh: So as Bruce said, we will, you know, I, you know, it's a great payback if it has to increase a little bit. I don't think it's a problem. I think we would certainly do that. And we have the opportunity, what we're doing right now is finding new ways, more efficient ways to try to invest to grow that revenue. And that metric will show you that as our progress going forward. Yeah, yeah, it seems like you've got plenty of room to continue to expand that and drive growth there. That's great to see. The other, just a quick follow-up on take rate. You know, it continues to march higher. I heard a lot about value-added services, but you're also kind of mix-shifting more to enterprise.

Bruce Lowthers: Sure. Thank you, Trevor. I appreciate the question. So look, I think when we look at pay safe historically, we've been very reactive to changes in the marketplace, whether they be market changes, regulatory changes. And so what we're trying to do here is we look at the going forward is being proactive. We can clearly see that there's some movements around consumer benefit across the globe. And we have some businesses that we just feel now because we're growing and our our sales are accelerating at such pace, we have the confidence to take these out.

Alex Gersh: As Bruce said, we will.

Bruce Lowthers: It's a great payback if it has to increase a little bit I don't think it's a problem I think we can certainly do that and we have the opportunity.

Bruce Lowthers: We are doing right now is finding new ways more efficient ways to try to invest to grow that revenue and that metric will show you that progress going forward.

Speaker Change #118: Yeah, Yeah. It seems like you've got plenty of room to to continue to expand that to drive growth. There that's great to see the other just a quick follow up on take rate.

Speaker Change #119: It continues to March higher I heard a lot about value added services, but you also kind of mix shifting more to enterprise and then I guess just optically as we think about the second half given the portfolio pruning and getting rid of the kind of higher risk profile.

Dan Perlin: And then I guess just optically, as we think about the second half, given the portfolio pruning and getting rid of the kind of higher-risk profile customers, and it does sound like that impacts EBITDA, are there gonna be some dynamics you just wanna call out for us that maybe that's going down a little bit, or is that kind of expected to kind of hold state even though you're doing all these portfolio optimizations and then, again, kind of mix-shifting to some of these larger enterprises? Thank you.

Bruce Lowthers: Now putting ourselves in a position for sustainable revenue growth is we're going forward into 24, 25 back up 24, 25. So there's really about us driving. Yeah, this is really about us looking at these higher risk businesses, higher risk to us are things that higher charge back rates. And so we're trying to put ourselves in a position that we can drive sustainable growth as we go forward. And this is just part of that portfolio optimization as we look at it, trying to be aware of what the market's doing. And us now being taking a different stance than we have historically and being proactive on our portfolio. Okay, yeah. Yeah, no, no, that's great. I appreciate that.

Speaker Change #119: Customers.

Speaker Change #120: And it does sound like that impact EBITDA are there going to be some dynamics you just want to call out for us that maybe that's going down a little bit or is that kind of expect it to kind of hold state, even though youre doing all these portfolio optimizations and again kind of mix shifting to some of these larger enterprises.

Speaker Change #120: Thank you.

Dan Perlin: Yeah, look, I think our guidance covered all that, Dan. So we, we, we don't have any additional, Margin Impacts and what we already had in our guidance. So we feel very good about the guidance where we're at. I think, candidly, we are accelerating a little bit faster on our top line.

Speaker Change #120: Yes.

Speaker Change #122: I think our guidance covered all of that Dan.

Speaker Change #122: <unk>.

Speaker Change #123: We don't have any additional.

Speaker Change #122:

Speaker Change #122: Margin impacts and what we already had in our guidance. So we feel very good about the guidance where we're at.

Speaker Change #122: I think candidly we we.

Speaker Change #122: We are accelerating a little bit faster than our top line, that's allowing us probably.

Bruce Lowthers: That's allowing us probably just being totally transparent, the luxury of being proactive and making these right decisions for the long-term stability of the company. So we think it's a great thing for us to be doing, and I think it's fully contained and I think we'll grow over it very quickly because of the strength of the sales organization. Got it.

Speaker Change #122: Just being totally transparent the luxury.

Bruce Lowthers: And then for someone to go back to the comments on the digital wallet and the main focus there being on getting back to growing the user base. If you could just distill down maybe to the two or three things that you think are most important there. And as we think about the next year or so, kind of how you see the path playing out to getting the user base back to growth.

Speaker Change #122: Of being proactive in making these right decisions for the long term stability of the company. So we think it's a great.

Speaker Change #122: Thing that for us to be doing.

Speaker Change #122: And.

Speaker Change #122: I think it's it's fairly contained and.

Speaker Change #122: I think we'll over.

Speaker Change #122: We're all over it very quickly because of the strength of the sales organization.

Bruce Lowthers: Thanks. Yeah, so look, I think, you know, in hindsight, I probably messed up my comment there. What I would say is we in the digital wallet product, we had the solid continuous growth there. So in our three month act as it's a third quarter on a row that we've had growth in that we'd like that to accelerate when you look at the number of users. So what we did is we switched to the digital wallet segment.

Got it thank you very much.

Danielle: Thank you Danielle.

Dan Perlin: Thank you very much. Thank you, Jeff. Ladies and gentlemen, this concludes our question and answer session. I would now hand the conference over to Bruce Lowthers for his closing comments. Bruce?

Danielle: Ladies and gentlemen, this concludes our question and answer session I would now hand, the conference over to Blue, Florida for his closing comments Bruce.

Bruce Lowthers: Yes, thank you. So, first of all, a really strong second half of our first half of the year. As we start gearing up for the second half of the year, we're very excited about the possibilities. I just want to thank everyone here for all the preparation into pulling the quarterly call together. Matthew Parker, great job of getting us here. And everybody involved at Paysafe, everybody contributes. It starts here and we really appreciate it.

Bruce Lowthers: Yes. Thank you so first of all.

Bruce Lowthers: Really strong second half the first half of the year as well.

Bruce Lowthers: So this is probably a little bit confusing versus the digital wallet product, but the digital wallet segment is what we're saying with $7 million and $7 million. And really for us, we want to accelerate that with eCache, our products partnering with others like we did with Revolut while we're doing with Exola, those type of partnership opportunities are going to allow us to grow and accelerate the number of consumers. We've also done a lot with our marketing team.

Bruce Lowthers: We start gearing up for the second half of the year.

Speaker Change #125: Very excited about the possibilities, but just want to thank everyone here for all the preparation into pulling the quarterly call together back.

Speaker Change #125: Matthew Parker, great job of getting this year.

Speaker Change #125: And everybody involved.

Speaker Change #125: At page save everybody contributes.

Speaker Change #125: It starts here and we really appreciate it so thank you very much. Thank.

Speaker Change #125: Thank you.

Bruce Lowthers: And as I think I mentioned in the opening, we've had really good success with some of the new initiatives that we've taken. We've got a better handle under what our cost of acquisition is. We'll continue to shed more light on that as we go forward through the back half the year, but we feel much better about where we're spending our money and the results that we're seeing as we've transformed our marketing group as well.

Bruce Lowthers: So, thank you very much. The conference of Paysafe has now concluded. Thank you for your participation. You may now disconnect your line. James Friedman, Paul Obrecht, Paul Obrecht, Paul Obrecht, Paul Obrecht, Paul Obrecht James Friedman, Paul Obrecht, Paul Obrecht, Paul Obrecht, Paul Obrecht James Friedman, Paul Obrecht, Paul Obrecht, Paul Obrecht, Paul Obrecht, [inaudible] David Togut, Paul Obrecht, Paul Obrecht, Paul Obrecht, Paul Obrecht, Thanks for watching. [music]

The conference of Basi has now concluded. Thank you for your participation you may now disconnect your lines.

Speaker Change #125: [music].

Bruce Lowthers: And I think they're doing a really nice job when you look at the results from right games and some of the other things we're doing our acquisition of customers is starting to accelerate as we move into Q3. So I think we're taking a lot of good steps. I think we're we're in a position where we can see those that 7 million number grow a little bit. Okay. Great. Thanks. Appreciate it. Thank you, Trevor. Thank you.

Timothy Kyoto: Our next question is from the line of Timothy Kyoto with UBS. Please go ahead. Great. Thank you so much for taking the question. The chargeback protection and part of the value added services listed in the slides with the roughly 50 million revenue figure reference there for the chargeback protection. Maybe you could just talk a little bit about the types of clients that are taking that I'm assuming that's more in the e-commerce segment.

Timothy Kyoto: And if this is something that you're leveraging a combination of internal capabilities or third party providers. And then a related follow up is as more and more of the e-commerce world moves towards the likes of app pay and click to pay from the card networks. Meaning aspects that basically shift the liability back to the issue work to these services maybe take on a different form or maybe they're less needed. We're just was hoping you could shed some light on what that mix shift may or may not mean for chargeback service. Thank you, Tim.

Bruce Lowthers: Great question. So what I would say is the charge-reck offering that we have is predominantly being taken by our SMB clients, not our econ clients. And so these are a lot of small businesses that are just trying to stabilize their revenue stream and not be exposed to anything that may appear in the chart back arena. Aditya, your broader question. I do think that as technology continues to evolve and you see more and more regulatory scrutiny around consumer, whether it be the way the CFPB refers to it or the way FCA or any of the other global regulatory bodies refer to a consumer duty, you're going to see more and more emphasis around mitigating charge backs.

Bruce Lowthers: And I think technology will allow that over time. And I think you'll see revenue streams over extended period of time probably diminished from charge back, but that's just my own theory on how technology will impact that as we're moving forward. Okay, thank you for that. I appreciate that context Bruce.

Bruce Lowthers: The follow-up is around another value-rated service to the working capital loans. You mentioned which are contributing to the year-rear increase in take rate. You just talk a little bit about the structure of that program on balance sheet off balance sheet and how you went about that decision. Yeah, and Tim, I apologize. I think I forgot to answer a part of your other question. That is a third-party product that we are using just like this loan product.

Bruce Lowthers: So this is the third party. We take no risk here. This is really just an origination fee for the loan. Tim, as you well know, most of our large competitors offer a similar type program to their customers. You'll see us start bringing more and more of these type programs. As we start filling up our products, we'd to be more commensurate with our peer groups. So, for us, it's a great program we'll offer to our merchants.

Bruce Lowthers: It creates a good parity in what our offering is for in particular, the SMB world, and we're having some good uptake in the first 30 days early, you know, too early to see what it ends up from a materiality perspective, but the first 30 days are very positive. Excellent. Thank you for taking both of those. I appreciate that. Thank you.

Paul Obrecht: Our next question is from the line of Paul Obrecht with Wolf Research. Please go ahead. Hi, thanks. This is Paul Obrecht on for Darren. Can you just start by touching on the success you're seeing with cross-selling to existing merchants? Maybe just how you're approaching conversations with the existing merchant base and really driving adoption of these products to be great. Thanks. Yeah, Paul, thank you.

Bruce Lowthers: So, look, if you go back to the very beginning when I came in a couple of years ago, I think one of the first presentations I did is I talked about how we had Europe was predominantly wallet and we had the US was predominantly acquiring and because we had all these siloed organizations, sales organizations, nobody was really talking to each other with the products that we had, no one was talking to each other clients. So, as we've mentioned over the last couple of years, Roth's team, our chief revenue officer, Ron Ghetto, has brought those organizations together.

Bruce Lowthers: We now have account managers on our largest accounts. They're going in and they're responsible for the growth of that account. And so, what we're seeing is every one of our wallet customers, for example, certainly we're using eCom gateway of someone and we weren't taking the opportunity to bring ours forward and now we're doing that. We also added new products paid by bank class order. And so, those things give us the opportunity to go back to our existing customers, take more of the register and gain more market share of that register, whether it be in North America or Europe.

Bruce Lowthers: So, that'll continue to be our strategy as we add the Cole Carroll's team, adds more products into the mix for us. We'll be going back to our existing customers. We have a great customer base. We've got a customer base that anybody would want and we really want to make sure that we're offering everything they need from a payment perspective to be successful with their respective business. Paul Obrecht, Paul Obrecht, Paul Obrecht, Paul Obrecht[inaudible] Thank you, I appreciate your technical questions. Thank you.

Aditya Buddhavarapu: Our next question is from the line of Aditya Buddhavarapu with Bank of America, please go ahead. Hey, thanks for taking my question. Most couple of them already been asked, but you have a few. Firstly, can you just talk about, in much institutions, the direct business, I know you've been trying to, you know, get that business back growth and that was up 10% in SMB and Q2. So maybe just talk a bit more about the initiatives there and how you're looking at that.

Aditya Buddhavarapu: And then maybe just taking a step back going to the CMD last year, you mentioned the metham growth target of high single digit to low double digit. If you take out the impact of, you know, the much in portfolio optimization, you did say, you know, growth would have been 89% for 2024. So, could you talk about, you know, how you get to that sort of, let's say that low double digit growth from, you know, for the current level, setting it at 25 and maybe, maybe 26.

Aditya Buddhavarapu: And then maybe just one last question, the part of the revenue on the cash could just add some color in that in terms of how that works in terms of be sharing of economics. And generally, do you sort of see that as the future growth model for that cash business, partnering with more of those, you know, this lonely off intake players.

Bruce Lowthers: All right, that was what I will try to work my way through those. So I think the first one was around our merchant solutions direct business. We have changed a lot of the management of those teams. We have the gentleman running that for us now. We see that we've taken a lot of steps to bolster that business. We feel good about that. We have a lot of sales people that we're adding into that way.

Bruce Lowthers: As I mentioned historically, it's a place where we felt we were sub-scale. We liked the direct part of our business. We liked all of our business. I want to be very clear. We like all the business that we have. The reason that we're focusing on growing the direct part of that portfolio is it gives us much better margin. That's really what drives that for us. We're taking steps to scale up that sales force.

Bruce Lowthers: We're adding the product into the direct team and allowing them to cross-sell. Hopefully, we'll see results from that. The second question I didn't quite understand was about the double-digit growth in 25, 26. Not this year. You raised the guidance, but without the much-and-domination impact, you would have been closer to 8-9%. So it seems to be a good enclosure to that metam growth range. Just wanted to give you what could drive you to get there as you head into 25.

Bruce Lowthers: What's going to be the key drivers? If I understand the question, it was really going back to what my mid-term guidance was and we did investor-day, I guess a year ago. Look, we're still progressing. I want to enjoy this quarter first. We have a lot of momentum. We're trying to execute better each day. We still have a lot of work to do, but we feel good about the progress of the company and we feel good that we're moving in the right direction, and we'll give guidance on 25 and do course.

Bruce Lowthers: But there's no question when you look back over the prior years, which we've had an opportunity to do now. We've accelerated quite a bit. We've talked about growing from our quality revenue growing from 3.5 to 7 plus percent this year. So we see nice growth acceleration from last year to this year. So we'll continue to just keep doing what we're doing.

Bruce Lowthers: We're seeing good results, and we'll give the guidance for 25, 26, like we always do in our Q4 guide. You had another question? Or no? Yeah. It was just a partnership with Revalute on E-Cache product. Is that the sort of growth opportunity you would look at for E-Cache going forward, similar types of partnerships? Yeah, I think the Revalute program is a great program. It's very early, but it certainly creates the opportunity for a blueprint to access partners, consumers, allowing us to accelerate growth not only from what we do normally with our pay safe card and other products in E-Cache.

Bruce Lowthers: But there's another way to accelerate that growth. So I think Elizabeth Barber and her team are doing some great things with the marketing efforts that are putting forward. So, you know, but it's early. We'll see how all that plays out, but we feel very good about that. We had nice, a double digit growth in our, our Latin business. So we've seen a lot of positive things starting to emerge. In the cash and I think if you reflect back on the end of the queue for we talked about the cash having to accelerate and we're now seeing some of that acceleration come to bear.

Bruce Lowthers: So very excited about it. All right, thank you Bruce, appreciate the color. Yep, my pleasure. Thank you.

Dan Poland: Our next question is from the land of a Dan Poland with the RBC capital markets. Please go ahead. Thanks.

Dan Poland: Good morning. I wanted to touch on this the new KPI. You brought out the customer acquisition costs 1760. And it looks like there's you're including like marketing expense and sales and third party. So couple things. One is to use contextualize kind of the rank order of those three. So we can think about how that scales and then. Secondly, I think the payback period implies like a two month payback, which is incredibly fast.

Dan Poland: So my question on that is, is that where you kind of want to be on the two month period, are you willing to kind of lean into the customer acquisition cost to expand that a little bit in order to ultimately drive increasing our food and activation there. Thanks. Yeah, Dan. Thanks for the question. Look, I think I'll let Alex also chime in on this. But I think what we're trying to do here is just where as I as I mentioned in Q1, we're digging in more to consumer acquisition, trying to understand what's going on there, where we're putting our money.

Dan Poland: How do we kind of revolutionize our marketing approach. And so some of these metrics that we're bringing the market as we focus on our deal customer profile. This is what we wanted to share with you. We'll share more as we go forward into Q3 and Q4 around this, but we agree the payback is a great payback on the consumers that we're acquiring. And you know, now it's it's how to do we lean into it is what we're sorting through.

Dan Poland: We've got a series of test programs that are out there that seem to be having very good results, but it's very early innings at the stage. I don't. I mean, the only thing that I would say is that in our digital wallet and our key cash business in that division, right, we have two ways of of driving revenue. One is attracting new customers, right? And that, you know, we'll see how that goes and how expensive that is.

Dan Poland: But the other thing is converting our unregistered customers, customer who maybe use us once or maybe in the whole year to register customers. We know that the R pool of somebody who's registered with us starts using us more is much, much higher. So the cost of acquisition of acquiring a new customer could be very different than the cost of acquisition of having existing customer. We're converting from being unregistered to being registered.

Dan Poland: So as Bruce said, we will, you know, it's a great payback. If it has to increase a little bit, I don't think it's a problem. I think we would certainly do that. And we have the opportunity to what we're doing right now is finding new ways, more efficient ways to try to invest a girl that revenue. Yeah, it seems like you've got plenty of room to continue to expand that drive growth there.

Dan Poland: That's great to see. The other just a quick follow-up on take rate, you know, it continues to march higher. I heard a lot about value added services, but you're also kind of mixed shifting more to enterprise. And then I guess just optically as we think about the second half given the portfolio pruning and get rid of the kind of higher risk profile customers. And it does sound like that impact EBITDA. Are there going to be some dynamics you just want to call out for us that maybe that's going down a little bit or is that kind of expected to kind of hold state even though you're doing all these portfolio optimizations.

Dan Poland: And then again, kind of mixed shifting to some of these larger, larger enterprises. Thank you. Yeah, look, I think our guidance covered all that Dan, so we don't have any additional margin impacts on what we already had in our guidance. So we feel very good about the guidance where we're at. I think candidly we are accelerating a little bit faster on our top line. That's allowing us probably just being totally transparent, the luxury of being proactive and making these right decisions for the long term stability of the company.

Dan Poland: So we think it's a great thing for us to be doing. And, you know, I think it's it's feeling contained and, you know, I think we'll over, I will go over it very quickly because of the strength of the sales organization.

Bruce Lowthers: Thank you very much.

Bruce Lowthers: Thank you.

Operator: Ladies and gentlemen, this concludes our question and answer session.

Bruce Lowthers: I would now hand the conference over to Bruce Lotus for his closing comments. Bruce? Yes, thank you. So first of all, really strong second half of our first half of the year as we start gearing up for the second half of the year. We're very excited about the possibilities. I just want to thank everyone here for all the preparation into pulling the order we call together. Matthew Parker, a great job of getting us here and everybody involved at pay safe, everybody contributes. It starts here and we really appreciate it. So thank you very much. Thank you.

The conference of pay safe has now concluded. Thank you for your participation. You may now disconnect your lines. [inaudible]