Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Nuvei Corporation's Third Quarter 2022 Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions.

[Operator Instructions] As a reminder, this conference call is being recorded. I will now turn the conference call over to Anthony Gerstein, Vice President and Head of Investor Relations for Nuvei. Please go ahead, Mr. Gerstein..

Thank you, Operator, and good morning, everyone, and thank you for joining us. With me today are Philip Fayer, Chair and CEO; and David Schwartz, CFO.

As a reminder, this conference call is being recorded and webcast and is copyrighted property of Nuvei and rebroadcast of this information in whole or in part without written consent Nuvei is prohibited. This morning Nuvei issued a press release announcing financial results for the three month and nine-month period ended September 30th, 2022.

The release as well as an accompanying presentation is available in the Investor Relations section of the company's Web site www.nuvei.com under Events and Presentations. During this call we may make certain forward-looking statements within the meaning of the applicable securities laws.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the business or developments in Nuvei's industry to differ materially from anticipated results, performance, achievements and developments expressed or implied by such forward-looking statements.

Information about these factors that could cause actual results to differ materially from anticipated results or performance can be found in Nuvei's filings with the Canadian Securities Regulatory Authority and on the company's Web site.

Our discussions today will include non-IFRS measures, including adjusted EBITDA, adjusted net income, adjusted net income per share.

Management believes non-IFRS results are useful in order to enhance our understanding and our ongoing performance, but they are not a supplement to and should not be considered in isolation from a substitute for IFRS financial measures. Reconciliation of these measures to IFRS measures is available in our earnings release and MD&A.

We will open up the call for your questions after our prepared remarks. And with that, I'd like to now turn the call over to Phil..

Thank you, Anthony, and good morning, everyone. I am pleased with our results for the quarter as we execute on our strategic initiatives and with continued momentum in the business, we are increasing portions of our outlook for the full-year 2022.

Before we dive into the details and as we celebrate two years of being a publicly listed company, I thought it worthwhile to highlight our performance and evolution over the last four years. I hope you appreciate from where we've come from, where we are today and why we're so excited about our future.

First, in terms of volume, we tripled from 14 billion in 2018 to 43 billion in 2020, and we expect to triple once again to an estimated 121 billion in 2022 based on the midpoint of our full-year outlook.

In terms of profitability, we started with adjusted EBITDA of $51 million in 2018, which we more than tripled to $163 million in 2020 and now expect to more than double the $345 million -- based on the midpoint of our outlook for this year.

This is even more compelling when you consider that we continue to make large investments to scale the business and support our long-term growth while always focusing on profitability and cash flow generation.

And as an organization, we've grown from 386 colleagues in 2018 to 869 in 2020 to 1,636 at the end of this year's third quarter and our business and product offering has also dramatically changed over the last four years.

Starting as a small North American small business focused organization and transforming into a leading global omni-channel payment technology platform, powering enterprise clients with a comprehensive and modern modular solution offering, enabling them to execute on their own global expansion initiatives.

While I'm very proud of our progress and momentum over the last four years, which has been truly exceptional, we're even more excited about the next four years. We continue to execute to innovate and grow with the same passion and focus you have seen over the last four years, the best is truly yet to come.

Before turning to our financial performance for this quarter, I think it's important to talk about consumer discretionary spending and how it relates to Nuvei, while I completely understand the difficulty for investors given the backdrop of the macro environment.

In our view, there's so much opportunity from wallet share expansion, new client wins, and new geographies driven by our innovative technology that has the potential to offset any slow in consumer discretionary spending. Turning now to our financial performance for the third quarter, overall, the quarter developed ahead of plan on all metrics.

Total volume increased 30% to 28 billion or 38% on a constant currency base over the same period last year. Revenue increased 7% to $197.1 million and 13% on a constant currency basis. Adjusted EBITDA increased to $81 million with a margin of 41% and this includes approximately $5 million of foreign exchange headwind.

Free cash flow was strong at $68.5 million for the quarter. Adjusted net income was $62.4 million and adjusted net income per share at $0.43.

Expanding further on our results, we beat on all our outlook metrics, including total volume, revenue, constant currency revenue, and adjusted EBITDA due to higher volumes and wallet share expansion from existing customers as this reflects in our constant currency volume growth of 38%. New client wins, which I'll dive into momentarily.

Our continued investment in technology and product offering and our geographic expansion namely LATAM and APAC which look small for us today are really seeing some good momentum, especially as we continue to simplify global commerce for existing customers.

Highlighting several observations of interest for the quarter, the US dollar continued to strengthen driving additional 1.5 million unfavorable FX headwind compared to our outlook for the quarter and impacted revenue by 11.5 million compared to last year's third quarter.

Digital assets continued to decline in the quarter, but we did however start to see some degree of stabilization in September and October. Nevertheless for the third quarter same-store sales and digital assets were down almost 70% year-over-year.

With respect to the performance of several other of our verticals in the third quarter, online gaming revenue grew by 21%, online retail grew by 141%, social gaming revenue increased 16%, and travel revenue increased 86%. In summary, and very important to recognize is that our performance outgrew both FX and digital asset headwinds.

As you can appreciate our underlying business is performing really well. Turning now to an update on our go-to-market efforts, we continue to focus on enhancing our go-to-market investments across all regions, ensuring we're local and accessible to our customers, while remaining presence around the world.

Year-to-date, we increase our go-to-market spend to $27 million up from $10 million for the same period of last year. We've expanded our sales force in every region and results are very encouraging. Naturally, these are long-term investments and we have more to do, but remain disciplined in managing profitability and EBITDA margins.

With deep and growing pipeline, we've gone from being under-penetrated in our markets to now having much more meaningful and visible presence. Breaking it down by region, in North America, revenue grew 9% in this year's third quarter.

And while it may appear low, it is important to recognize that our e-commerce business is outgrowing a large and declining small business channel in the region.

In this year's third quarter, our ecommerce direct channel in North America represented 31% of revenue and grew 40% compared to last year's third quarter, while small business represented 42% of revenue and declined approximately 1% for the same period.

With an estimated TAM for commerce of 12 trillion, North America clearly represents a large opportunity for us, but it's still very early days.

Looking at EMEA with revenue growth of 4% in the quarter, it is important to recognize that year's performance has been negatively impacted by foreign exchange fluctuations as well as volatility in digital assets, since a significant portion of our digital asset portfolio originates from European operators.

With an estimated TAM of 9.3 trillion, there's so much more opportunity for us are growing in EMEA especially as we continue to diversify across our focus verticals.

Turning now to LATAM, which still growing from a smaller base, saw revenue increased 28% in this year's third quarter as we reached an inflection point in our business in the region is accelerating rapidly.

Our investments in both technology and distribution are allowing us to strengthen engagements with both current and new clients exploring the region. We continue to invest in our infrastructure and licensing with multiple applications across all key markets.

With an estimated TAM of 1.5 trillion we believe LATAM as an attractive avenue for continued growth. In APAC, revenue grew 47% in the quarter, as we're scaling in Singapore and Hong Kong and starting to see real momentum attraction in the region.

We're also in the process of launching our third market in the region, Australia, which is an important market for Nuvei's future. Since activating our own licenses, we've been focused on scaling and go-to market efforts in APAC, including recently opening a sales office in China.

With an estimated TAM of 28 trillion, we continue expanding across the region with new markets like Australia and others to come, which provides us with significant opportunities going forward. Bringing it all together, we are making the right investments to remain local and available to our customers as they expand around the world.

And we're heads down executing on a very large and growing TAM. When considering regions, it's important to highlight the customer relationships can be bought in a certain region or process in another.

If for this reason they're building out our global go-to market efforts are so critical to our growth and driving very compelling opportunities globally.

This quarter in particular saw a meaningful uptick in new business wins and wallet share expansion across regions and verticals including the Virgin Atlantic Group, Turkish Airlines, SHEIN, Entain, Kaizen, 888, Lottomatica, [indiscernible] Arcadier, Epic Games, Rappi, Coda Payments, Mary Kay Cosmetics amongst many, many others.

As you can appreciate, our investments in go-to market are yielding marquee brand wins and driving a solid foundation for long-term growth.

Moving on now to our specific advancements in technology and product capabilities in the quarter, I'd like to highlight several achievements; as a technology first company, we're always innovating and continuously releasing enhancements to help our customers execute on their own growth initiatives.

With respect to our platform this year, we've made architectural enhancements and infrastructure investments to allow us to support and exceed 2000 transactions per second. A multiple of what we're seeing today giving us ample opportunity for continued growth and scale.

We've also enhanced our infrastructure to accommodate local data protection residency rules, further enabling Nuvei to expand in more countries around the world. Additionally, our infrastructure investments now allows us to offer segregated environments for large clients should this be a requirement.

In terms of acquiring the payouts, we are scaling and normalizing our offering in Hong Kong and Singapore with the addition of visa direct payouts and other functionality since launching self-processing last quarter.

We're actively working on Australia, an important market for our verticals and Colombia as we continue to target launching three to five new markets per year.

Turning to alternative payment methods, we continue to place efforts to make sure that our customers accept every form of local alternative payment method that is applicable to their business model; now, increasing our portfolio to 586 different APMs at the end of the quarter.

We enhanced our payment orchestration platform introducing our self-service routing manager allowing our customers to choose the routing of transactions amongst different acquirers based on their preferences using our data analytics.

We recently launched Nuvei for Platforms accelerating our marketplace offering with our fully customizable solution supporting complete functionality of our modular platform via single integration.

In addition, we had so many other product rollouts in the quarter including launching account updater in Europe supporting MasterCard tokenization enabling Visa Account Funding Transaction Support enabling a partnership with Visa in Canada for buy now pay later. We enhanced our risk services and reporting offerings amongst many others.

But the takeaway here is that as a company we are never standing still. We're constantly evolving and enhancing our solution stack to advance a competitive positioning.

It's worth mentioning that each new product solution expands our TAM and offers us a platform to grow with our customers as we remain focused on relentlessly helping them execute on their own growth initiatives.

Turning now to our financial profile and capital allocation strategy, we are in an enviable position with our balance sheet and the attractive cash generation nature of our business. This provides us with flexibility and leverage capacity. Our preference and primary focus for the time being is to preserve capital for M&A.

As a reminder, we are highly disciplined with our M&A methodology and continue to look for strategic opportunities, reflecting appropriate valuations to expand our capabilities, scale and our geographies.

We are particularly interested in North America, APAC and LATAM as priority geographies to expand our reach drive greater value to our customers and naturally to our shareholders.

However, we will also consider becoming more active with our stock buybacks as we have been earlier in the year, given the current market dislocation and in our view, our depressed valuation.

With respect to other more recent corporate developments, I want to welcome Vicky Bindra who joined Nuvei in the newly created position of Chief Operating and Product Officer In this role, Vicky brings years of global [indiscernible] industry experience having held senior leadership positions including at MasterCard, where he was the President of APAC and Middle East and Africa.

At Visa where he led product solutions globally and most recently at FIS where he served as Chief Product Officer responsible for the strategic product function identifying and creating competitive products and propositions for its customers.

Because Nuvei's own growth strategy starts with beautiful products driving real world solutions that accelerate our customers' businesses, Vicky is a perfect addition to our team, especially as he knows our markets understand our differentiated product offerings and the needs of our global customers. I look forward to working with him.

I would also like to take the opportunity to welcome our 66 new colleagues who joined us in the third quarter. We are delighted to have you part of the Nuvei family.

Turning now to our expectations for the fourth quarter, we see three things, continued strong momentum in the business, additional FX headwind of 5 million and approximately 7 million of headwind from digital assets beyond our prior expectations.

But because of the continued momentum in the business year-to-date through October, we are increasing certain metrics of our previous outlook as well as reaffirming the guidance of the full-year 2022 and reiterating our medium and long-term targets. In closing, we had a really active quarter and we're pleased with our results.

We're excited about the momentum in the business and the investments we're making. The opportunities are meaningful for the company.

We continue to have an excellent profile amongst the high growth technology peers highlighted by our disciplined and highly profitable growth, focusing on the right verticals, continuously diversifying both regions and verticals, generating cash and maintaining a solid balance sheet.

As always, I want to thank all our team members for their tireless efforts in supporting our customers. You guys are rock stars. And with that, I'm going to turn the call over to Dave to discuss the financials and our financial outlook for the fourth quarter and full-year..

Thanks, Phil, and good morning, everyone. We are pleased with our third quarter results which exceeded the high end of the outlook across all four metrics. Total volume, revenue, revenue at constant currency and adjusted EBITDA.

Total volume for the quarter was $28 billion, which was above the top of our previously provided outlook range of between 25 billion and 26 billion. Total volume, which is a key measure of our performance, increased year-over-year by 30%. On a constant currency basis, total volume increased by 38%.

Revenue for the quarter increased 7% to $197 million, which was above our outlook range of between $185 million and $195 million. This overachievement is despite the incremental headwinds from foreign currency.

On a year-over-year basis, the unfavorable revenue impact and currency fluctuations was $11.5 million, which was $1.5 million greater than we expected. On a constant currency basis, revenue was $208.6 million, which was above our outlook range of $195 million to $205 million.

Revenue at constant currency growth was 13%, which was 600 basis points higher than reported revenue growth. I have still mentioned during the quarter, we saw revenue growth across all four regions, including EMEA, which was most impacted by fluctuating currency rates.

In the third quarter, our take rate was 70 basis points compared to 85 basis points in last year's third quarter, primarily due to volume mix. On a sequential basis, this quarter's take rate is consistent with the second quarter take rate.

As you know, our approach is to provide our customers the solutions they need to accelerate their growth irrespective of the resulting yield. We focus on driving incremental gross profit dollars by expanding our solution set and winning wallet share.

In terms of gross profit for the quarter, we generated $159 million, which represents more than a $13 million increase or 9% growth compared to the prior year. Gross margin in the third quarter was 81% compared to 79% in the third quarter of 2021.

Selling, general and administrative expenses increased by $43 million or 41% to $149 million as a result of organic growth as we continue to grow and invest in the business, as well as the acquisitions of Simplex, Paymentez, Mazooma which were all completed in the third quarter of last year.

Share-based payments represented more than half of the SG&A increase as an increase by almost $23 million to $34 million due to awards to employees who joined as part of the acquisitions we completed last year as well as other grants.

Of the $34 million of share based expense in the quarter, approximately 44% or $15 million relates to awards with an exercise price or share price performance condition in excess of $100. As a result of the high exercise price and share price performance threshold, a large proportion of the outstanding units are significantly out of the money.

Approximately 4.7 million incentive units, representing 38% of the total units outstanding of an exercise price or share price performance condition in excess of $100 or relate to awards with a non-market performance condition that were not achieved at the end of the third quarter.

As a result, these 4.7 million units are not considered dilutive in terms of diluted shares outstanding. Employee compensation other than share based payments increased by almost $13 million.

The increase year-over-year reflects our investment in our global team growth from an organic and acquisition perspective, including those in direct sales and account management to drive future growth and execute on our strategy.

Adjusted EBITDA in the quarter was $81 million, which was above the outlook range we previously provided between 70 million and 75 million. The overachievement on adjusted EBITDA in the quarter was due to higher revenue and lower SG&A costs as we continue to be disciplined in our investments and expenditures.

Adjusted EBITDA margin was 41% in the quarter, compared to 44% in the prior year period. I'd also note that the foreign exchange and digital asset headwinds experienced during the quarter also impacted our adjusted EBITDA. On a constant currency basis, adjusted EBITDA would have been approximately $5 million higher than reported.

Net finance costs was $3.7 million, compared to $4.6 million in last year's third quarter. The decrease was primarily due to higher finance income of 3.6 million from interest income earned on our larger cash balance, offset by an increase in finance costs of about 2.7 million, primarily related to higher interest rates on our outstanding debt.

Income tax expense in the quarter was $5.4 million. This represents an effective tax rate of 29%, which was slightly above the Canadian statutory rate of 26.5% mainly due to share based payments that are non-deductible in most jurisdictions, partially offset by favorable impact of lower income tax rates in other jurisdictions.

Net income for the quarter was $13 million or $0.08 per share, compared to $28 million or $0.19 per share in the third quarter of last year. As I mentioned earlier, this year's third quarter included a $23 million increase in non-cash share based payments, which on its own represented approximately $0.16 per share.

Adjusted net income was $62.4 million or $0.43 per diluted share, compared to $62.3 million or $0.42 per diluted share in the third quarter of 2021. Looking at our balance sheet and liquidity, our cash position and cash generation remain strong.

Due to the operating leverage in our business and relatively low capital requirements, we have a strong financial profile. This is demonstrated in our adjusted EBITDA, less capital expenditures, which was $68.5 million for the quarter. A unique financial profile gives us flexibility with respect to capital allocation.

As a result, we continue to invest in the organic growth of our business while remaining strategic and disciplined in our capital allocation approach. At the end of the quarter, we had cash and cash equivalents of $754 million.

We also had term debt of $499 million, resulting in a net cash position of $255 million with access to an additional $385 million available under our revolving credit facility. I will now turn to our fourth quarter and full-year 2022 outlook.

Our financial outlook for the fourth quarter and full-year 2022 is as follows and I'll refer you to our forward-looking information disclosure in our press release and MD&A.

For the fourth quarter, we expect total volume of between $33 billion and $35 billion, revenue of between $197 million and $227 million, revenue at constant currency of between $210 million and 234 million and adjusted EBITDA of between $75 million and $84 million.

For the full-year 2022 due to our third quarter performance, we're increasing certain components of our outlook and now expect total volume of between $120 billion and $122 billion, revenue of between $820 million and $850 million, revenue at constant currency of between $861 million and 885 million and adjusted EBITDA of between $341 million and $350 million.

The outlook specifically adjusted EBITDA reflects our strategy to continue to invest in our business in key areas such as distribution, technology and marketing. Our outlook also takes into consideration a cautious approach considering the current volatile and uncontrollable unique macro environment.

With our strong balance sheet and cash generation, we are well positioned to not only manage through the current environment, but also take advantage of opportunities as it relates to organic growth, acquisitions and capital allocation. With that, we will now open the line to take your questions..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Sanjay Sakhrani with KBW. Please go ahead..

Thanks. Good morning. Maybe, Dave, we could start off where you ended just on the fourth quarter expectations. Just curious if we look at it relative to what maybe the implied number was last quarter. What are the puts and takes here? I know you mentioned you're assuming a cautious outlook.

That didn't seem as apparent in the numbers in the third quarter. Maybe you could just talk about that and maybe the incremental headwinds maybe from FX or not and some of the other pluses and minuses. Thanks..

Sure. Good morning, Sanjay, and thanks for the question. So, in terms of our fourth quarter outlook, it's certainly factoring in the macro environment is certainly something that we've been doing, you know, consistent with what we did last quarter. That's an important factor.

When you think about some of the key components, we talked about the 3Cs last time. Those still are relevant this quarter. So, when you think about currency from an FX perspective, we assumed current rates going forward, but those current rates that we are at today are different than what we saw we last spoke to you back in August.

So, there's about a $5 million additional impact on revenue from an FX perspective and then digital assets as well. There's certainly some volatility there that we've seen over the past couple of quarters that has about a $7 million impact on Q4 from a revenue perspective. And then the last C is caution.

And I'd point you back to looking at our full-year. We're still really proud of what we're coming in on a full-year basis, which is revenue growth on a constant currency basis of about 20% at the midpoint between 19% and 22%. So, those are pretty much the puts and takes. We continue to invest in the business as well.

So, from an EBITDA perspective, we continue to invest and grow for the future. So, that's kind of the high level of how we see the rest of this year playing out..

And I appreciate that. And you both mentioned capital management, a decent amount. And I'm just curious if we could just maybe drill down a little bit deeper on that and talk through some of the opportunities that might be out there from an M&A standpoint. And it sounds like you might be more aggressive on the share buyback.

Maybe we could just talk a little bit more about that, Phil. Thanks..

Yes, certainly. Sanjay, thanks. Appreciate it.

I think what I'd like to highlight is that we have ultimate flexibility because of our balance sheet and our cash flow generation, and that really allows us to drive and focus on building shareholder value, building solutions that expand our relationships with our customers and just being really good from a capital allocation perspective.

And that flexibility is something that we are unpacking as we start looking at opportunities specifically with the dislocation valuations in the market today. So, we are being opportunistic. I think we're also being patient. It's worthwhile highlighting that we are lapping one year since the last acquisition which closed I think at the end of August.

So, again, we're being highly disciplined. In terms of market for us, the US is an area that I would put on top of our list, but certainly LATAM and APAC as well as we want to continue growing our business.

What's unique about Nuvei, we start thinking about M&A opportunities is that out of all of our modules, all of them have their own TAM and associated opportunities, which is fascinating.

So, as we are growing our issuing businesses, as we're growing our open banking businesses, as we're growing our acquiring business and our orchestration business and our risk businesses and opportunities and products that we offer to our customers, it creates a pretty nice platform for unique capability expansion and monetization with our customers.

So, we have a far greater list than many of our peers of areas that interest us, and certainly we're heads down executing on that..

Thank you..

Thanks, Sanjay..

The next question comes from Scott Wurtzel with Wolfe Research. Please go ahead..

Hey, good morning, guys, and thanks for taking my questions. Thanks for the disclosure on some of the growth metrics you saw in some of your key verticals.

I was just wondering maybe if you can maybe give a little bit more color on how some of those verticals, whether it was online gaming or travel or financial services, how those verticals performed relative to your expectations? Thanks..

Thanks, Scott. You know, we're seeing really good momentum across the board. And we talked about the verticals. There's ultimately the three components that really are playing for Nuvei. The first one actually is wallet share expansion with our customers as we add capabilities and as we add geographies.

And the second right behind that is as we continue scaling, new client wins. So, the new client wins, we have a tremendous pipeline really across the board of all of our verticals, which are reflective of our go-to market investments. We have taken a cautious approach on activation.

Certainly that is something in the fourth quarter that we expect post November of clients that don't activate, that will fall back into the first quarter. So, we're very excited with the brands. We are winning marquee names across the board. So, for example, Virgin Atlantic Group and Travel, which is a marquee name.

We have done significant expansions with Entain in Europe within new countries and now engaged in gaming with the top ten providers across the board in US gaming; the same thing with social games with the win of Epic, which we're really excited about and ultimately good momentum building across all of our verticals.

What we have seen in our verticals from a same-store sales perspective is, as we expected, the things that we found noteworthy was digital assets declined year-over-year, about 70%, which I mentioned in the prepared remarks. We have seen a floor on that which is interesting.

But to give additional color on that, it's not just the digital asset volume that declined. It's also our appetite in terms of one, expanding relationships in that vertical. We think today our exposure to digital assets is appropriate.

We felt it a little bit high last year and certainly that's something that we're going to unpack over the next few quarters. But in general, as we sit today, very little concentration by merchant, which we really think is a great attribute to Nuvei from a profile perspective and really good momentum across all of our key verticals..

Great. Thanks. That's very helpful. And then just a follow up here on the -- on free cash flow, I mean, I think, you know, the conversion ratio or free cash flow margin was maybe a little bit light of what we were expecting. So, just wondering, I mean, it seems like CapEx is running a little bit elevated.

David, I don't know if you can give a little bit of color on what sort of driving that and how we should think about it going forward? Thanks..

Yes. Hey, yes, for the most part. I mean, our CapEx is still pretty low and our cash conversion is still pretty high. It is a little bit lower. We did in the last couple of quarters have some investments and some new offices. We mentioned in the prepared remarks as well. So, that's part of it.

But you will see some fluctuations, but there's nothing significant from an investment perspective on the CapEx side that we need to make or have been making. It's really just supporting a bit of the growth, and so, some of that is one-time in nature. So, nothing I'd specifically call it there..

Got it, great. Thanks, guys..

Our next question comes from Jason Kupferberg with Bank of America. Please go ahead..

Hey, guys, this is Cassie on for Jason. Congrats on the quarter. I just wanted to ask kind of a clarification question, so I know you guys said that the crypto piece of the business is relatively stabilized in September and October.

Would you say that same characterization holds for the rest of the business in terms of the kind of trends that you're seeing in October?.

Good morning and thank you. What we have actually seen and I mentioned that in the prepared remarks, we've seen really good momentum year-to-date, including October across the board in our business. From a crypto perspective, we haven't seen continuous declines and that has stabilized in September and October.

And we've taken that view in terms of what we expect in the fourth quarter. But in general, if you really unpack the business, you're talking about 38% constant currency volume growth. You could appreciate the momentum that we're having in all our core channels as we're growing massive headwinds around FIs and crypto.

So, our business is really performing and we're excited at where we sit..

Okay, got it. Thanks. And then a follow-up and I guess I know it's too early to talk about 2023, but kind of have to ask a little bit about it at least. I know you guys reiterated the medium term guidance of the 30% plus. Is there any way you can help us think through some of the pieces that would take that down, right.

So, if the current FX headwind cold, what could be the impact on 2023? And then if the crypto pieces kind of hold steady to where we are now, what that could mean and any other puts and takes that we should think about as we're modeling out 2023? Thanks..

Yes, certainly, certainly. And I would look at the building blocks for 2022 as consistent as they've always been historically. You know, the first building block is growth with our own customers and 80% of our growth comes from our current customer journey. And that has two tentacles to it.

The first is geographies, as we continue building an open new markets and allowing us to expand wallet share with them in new geographies. And the second is capabilities as we're building additional capabilities that allow us to kind of enhance the experience for our customers. So, that is kind of the existing customer base.

And right behind that is new client wins and new client wins naturally is what we see in year, which what we've done in 2022, which we have the full benefit for next year. So, those three combined is what we what we expect in terms of the mid-term growth targets of around 30%.

I think something to point out today is we are seeing approximately 20% constant currency growth this year with a total collapse of the digital asset market, which was around 13% of our revenue. Certainly we expect to unlap that over the next few quarters and we don't expect digital assets to be that level of concentration in our future.

So, we feel quite strongly about how 2023 will perform; pipeline, client activations, new geographies and our execution..

Thank you. Appreciate it..

Our next question comes from Todd Coupland with CIBC. Please go ahead..

Good morning, everyone. I wanted to ask about seasonality into the fourth quarter. In the past, you had talked about the gaming business, specifically gaming in North America around some of the sports betting and the World Cup. And I'm wondering if your expectations for that have been adjusted in the current macro environment.

Just give us an update on those trends. Thanks a lot..

Thank you, Todd. If you look at historical seasonality, obviously the COVID year had a distortion just because certain leagues were delayed and how they were slipping from Q3, from one quarter to the other.

This year is more of a normal year, with the exception, naturally of the World Cup in the fourth quarter, which we believe will be a pretty significant uptick in our gaming vertical. But, in general, what you end up seeing is you see momentum from Q1 to Q2.

Typically Q3 is flat to slightly down from Q2 and Q4 an uptick and we expect the same this year..

Okay. And we saw some sports books calling out elevated activity and betting around the World Series in the NFL season. Is your US business material enough for you to see that trend as well? Comment on that, please..

Yes and no. I would say that our US business momentum is really strong as clients are activating and integrating. So, I think it's going to be more of a 2023, 2024 opportunities. We do building blocks. Last quarter, Todd, we mentioned run rate of about 25 million from effectively zero. So, really good uptick and that has obviously continued to progress.

So, we're very excited about what we see in the US. But in our industry it's typically sign, integrate, test, make sure that we do AB testing, make sure that we drive the best possible authorization rate et cetera with operators. And then we continue scaling wallet share expansion. So, we're in that last stage right now.

We think next year will be a pivot for us in US gaming..

Great. Last question for me on M&A you've talked about how your deal pipeline has been very active. I think you've said in the past you looked at 70 deals this year. Could you just update us on the activity there and what you think about current state of valuation expectations? Thanks a lot..

Yes, thanks, Todd. We constantly look at opportunities. I think our M&A pipeline is rich and has quite a lot of depth to it. I think the takeaway here is that we have enormous discipline in making sure that what we buy is truly a creative for our shareholders, drives value for our customers and expands our geographic reach, which is our area of focus.

So, we're going to continue down that line. I can't tell you anything pops up of me that's worth kind of unpacking further. From an evaluation perspective, I think it fits into two buckets. So, we're typically looking at larger opportunities within regions, specifically as the further away they are, we need more infrastructure versus small tuck-ins.

And they in terms of valuation, depends on where they are within their journey, in terms of how much cash they have on the balance sheet, are they profitable or not, and can they wait it out? We haven't seen the private market necessarily adjust to the public market. But then again it's still early days.

We haven't gotten further than that with respect to the valuations and opportunities that we're exploring. So, it's TBD to see how valuations will continue shifting towards opportunities that we're reviewing..

Great. Thanks a lot, Phil..

The next question comes from Paul Treiber with RBC Capital Markets. Please go ahead..

Good morning. You announced some really great new customer wins on this call.

Can you just elaborate on the nature of these wins in terms of like, is it focused on specific geographies or APMs or use cases? And then what do you see as the fundamental underlying driver of Nuvei seeing perhaps a larger brand name wins than in the past?.

Thanks, Paul, great questions. I think wins and I'll lump them both together. It's directly related to our go-to market efforts. We always felt that we had the best technology.

We compete toe-to-toe with a lot of the larger players out there with our flexible and modular solutions stack that go well beyond acquiring, that truly create differentiated revenue drivers for our customers as they continue executing on their global expansion strategy.

So, one of the things that Nuvei is doing as a public company is making these investments to make sure that we're local and present, meaning that we're engaged, speaking to them, and making sure that they know about Nuvei and evaluate Nuvei within their own technology stack requirements.

And that is what's been driving a lot of the engagements that we're seeing I mean marquee names that we're winning in each of the verticals that we're focused on. So, why they choose us really just depends on where they're at within their own journey both from an initial onboarding perspective, but also cross-sell and up-sell.

So, you know, a great example is one of our social game clients has been a large client for many years now selected us for Pix in Brazil. So, you have multiple tentacles for continued adding new countries and adding new geographies within our existing base as we continue expanding our solution stack.

And the second is that we are truly out there now and as clients are thinking about where to take their payments and drive their future Nuvei is part of the mix. So, very excited of where we started and, by the way, it's just the beginning of that journey. Our go-to market efforts are continuous investments for us.

It's going to be a focus for the next three to five years, but we're really pleased with the initial momentum..

And just related to new customer momentum, last quarter, I think last quarter, you launched the Simply Connect, which is an SDK, and it seems like you're going more directly to developers and self-service perhaps, and what you've done in the past.

What's been the early uptake of that? And then in terms of self-service in general, how much does that tie into your branding campaign?.

I think they're both. They're both uniquely tied to it. So, we now offer four distinct integration methodologies, some that are really simple, right? If they want to use our Cashier or Simply Connect, that gives them the flexibility of using our services with low code all the way down to full API integration.

So, we really have the level of requirement that is appropriate for the business from an integration perspective and allows us to go up and down market. So, typically Tier 1 merchants will have more complicated needs, smaller merchants will have less complicated needs, and all of these continue to expand our TAMs.

So, as an enterprise focused platform for large institutions and operating globally, we typically have long, complex integration requirements and now we've been able to bring that down.

And ultimately what that drives for is from signing to times of revenue is really what we're focused on to make it easy for clients to onboard and makes it also easier for us to execute on partnerships across the development community with that has just started.

But you know, from UATP to other Arcadier that we announced and other partnerships, it's really driven by the flexibility of how people can integrate and consumer based solutions..

Okay. Thank you. I'll pass the line..

Thanks, Paul..

The next question comes from Bob Napoli with William Blair. Please go ahead..

Good morning. Phil, David, good to talk to you. Nice to see the rebound, you know, the results. And I know it's too early to talk about 2023, but just broadly reiterating your guidance and this is maybe a play on what is your visibility.

How do you feel about being within, you know, generally within your medium term targets around those ranges? And you know, what looks, you know, most promising, I guess, if you would, as you go into next year? And what areas are most challenging verticals, if you would?.

Good morning, Bob, always great to hear your voice. I think this is true for every CEO across North America. It's difficult to forecast next year, right? We're in an unprecedented macro environment. We feel really good with our business. If you think about 2023, we will unlock crypto.

That will be a headwind for the first few quarters as we continue driving momentum. So, I would probably suggest that the medium term targets are probably more appropriate for the second-half of 2023 forward. But when we end up looking at the underlying performance of our business, we're really bullish. We love the new clients that we're onboarding.

We love the momentum that we're seeing across. We think the engagements that Nuvei is having today are exceptional and we're just heads down, plugging away, Bob.

This is not a sprint, right, to help our customers is not like, what do you do next quarter? And unfortunately, sometimes we lose the narrative because you're always thinking about quarter-to-quarter, but we're really thinking about the momentum over the next four years. And to match what we've done over the last four years.

So, we think there's a lot to come. It's not just about 2023, but 2023 we're pretty bullish about, but it's really about the next four or five years that keeps us really, really excited..

Thank you. And then some of the newer products or efforts that you have, like, open banking, card issuing fraud.

I think some of them what is, you know, what areas, what new investment areas, you know, are going to really be able to move the needle over the next few years for you?.

I think it's all encompassing, right? Omni, we think, is a meaningful market opportunity for us within most of our verticals, card issuing for on/offs. For loyalty, we have some pilots that were in the launch in the first-half of next year. Our marketplace solutions, we just launched Nuvei for platforms and we're continuously making investments there.

Our fraud services as we have been doing some AB testing in Mexico of all markets and seeing a really nice uptick from fraud. And you know, in fraud, it's easy to turn away all sales and get no fraud. It's really about maximizing the authorization. So, we really like what we have coming.

And one thing I would highlight, Bob, is that as a tech company, there is no conclusion of products.

And that's really important to highlight guys, because you're constantly enabling them and expanding them, so, from account updater having the flexibility of doing batch updates or real time updates or from the issuing of consolidating authorization paths.

So, that there is no breakage fee, that you get 100% of the value on the car that you're able to drive through. All of these little things from a product roadmap, make differences to our customers, and they all have the intent of helping them authorize more, help them sell more, help them grow their businesses and simplify their technology stack..

Great, thank you..

Thanks, Bob..

The next question comes from John Davis with Raymond James. Please go ahead..

Hey, good morning, guys. I just wanted to quickly touch on the margins, David. Just obviously quite a bit better than your guidance in the third quarter. But full-year still kind of largely unchanged.

Just timing, you know, did you kind of tighten the belt a little bit given kind of the currency headwinds in the third quarter? Just a little bit of help on margins 3Q, 4Q would be helpful?.

Yes. Good morning, John. So, look, from a margin perspective. Part of it relates to, of course, in the quarter the beat we had on revenue. So, that's part of it. And obviously it's a business that has operating leverage. And then as we look forward into Q4, we continue to take a cautious approach and we continue to invest in the business.

I mean, our margins are, we think, quite strong and we do see so much whitespace ahead of us from every region and in the various verticals we play in.

And so investing back in the business it kind of comes back to our capital allocation discussion too, investing back in the business is something that's really important to us and we think it's the right thing to do. So, that kind of is kind of how to think about the Q4 margin as well as we look forward..

Okay. And then just to clarify, Phil, called out first-half next year. You're still lapping crypto. So, I would just assume kind of margins follow the similar cadence where second-half margins will be better than first-half next year.

But just any color there as we kind of contemplate models for '23?.

Yes, I mean, we'll lap crypto really after the first quarter, digital assets after the first quarter. So, that will be helpful. That will be very helpful from a revenue growth perspective. In terms of margins, we haven't we'll obviously kind of give you more information as we come into next quarter in terms of what next year looks like.

But we still see good opportunity, like I said, in terms of just investing back in the business and capturing some of that market share and whitespace that's out there. So, we'll continue to invest and continue to grow the business. But that said, we're -- we've been very disciplined and you can see some of that reflected in this quarter's margin.

We've been very disciplined in how we're investing. We're -- it's always been in our nature to be that way to make sure that we see a return before we just throw money at certain projects. So, we'll continue to take that same approach as we look forward into the next year, into the future. But we're really, really excited about the whitespace.

And so that's really going to going to help us grow into next year..

Okay. Appreciate it. Thanks, guys..

Our next question comes from Andrew Bauch with SMBC. Please go ahead..

Hey, good morning, guys, and thanks for taking the question. Phil, I just want to ask a higher level question in the context of macro deteriorating and potential recession.

You mentioned a healthy pipeline, but just trying to get a sense like even historically are there more opportunities that surface amid economic uncertainty or is there a pullback in deal activity as far as not necessarily what you can win, but how many opportunities are there to go get when the macro kind of softens?.

Hey, Andrew, nice to hear from you. I'm assuming you're talking about M&A, because honestly, the pipeline in this type of macro from a new customer perspective actually opens up as well. So, the reality is, I think, we need to lap the 52 week high across the board from our public peers for reality to set in.

So, I would say from a public perspective, that is that journey and from a private perspective, it will address and it will adjust. Some have happened faster, some depending on their needs, but we think next year will be a pretty fundamental year for M&A..

I would add one other thing..

I was actually was speaking on the merchant side like more merchants willing to look for more efficient solutions for their payment needs in times of uncertainty or how do you kind of see those dynamics playing out being from a demand environment for next-gen payment solutions?.

Yes, I would; great question. So, we'd actually see two things. Yes, we've seen merchants look at their overall holistic payment solutions to how to drive better authorization rates and how to simplify their stack. That's one. We've also seen time to implement actually extend right as merchants themselves are kind of working through their own business.

They're not necessarily as fast as converting and activating that we've seen historically and we've taken that into consideration for this year. But engagements across the board have been very, very strong for Nuvei and those have increased. So, from a pipeline perspective, active discussions at over 80% have never been higher..

It's great to hear. Thanks..

This concludes our question-and-answer session. I would like to turn the conference back over to Anthony Gerstein for any closing remarks..

Thanks, everyone, for participating today. As you know, we're around and available and just feel free to reach out. But thanks for your time today and we look forward to speaking with you shortly. Thanks..

Thanks, everybody..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..