Hello, everyone, and welcome to the Nayax Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded. [Operator Instructions]. I would now like to turn the call over to Mr. Aaron Greenberg, Chief Strategy Officer. Please go ahead..

Thank you, operator and everyone, for joining us today on this conference call. With me on the call today are Yair Nechmad, Nayax Co-Founder and Chief Executive Officer; and Sagit Manor, Chief Financial Officer. Following management's prepared remarks, we will open the call for the question-and-answer session.

Our press release and supplementary investor presentation are available on our Investor Relations website at ir.nayax.com. As a reminder, during this call, we will be making forward-looking statements.

All forward-looking statements on our call today are based on assumptions and therefore, subject to risks and uncertainties that may cause results to differ materially from those projected. We have no obligation to update these statements, except as required by law.

You can read about these risks and uncertainties in our supplementary investor presentation released earlier today and our regulatory filings. In addition, today's call will include a discussion of non-IFRS measures. Management believes known IFRS results are useful in order to enhance our understanding and our ongoing performance.

However, these measures should be considered as a supplement to and not as a substitute for IFRS financial measures. A reconciliation between Nayax's non-IFRS to IFRS measures can be found in our earnings release issued earlier today.

All key performance indicators are intended to evaluate our business and properly measure factors in a macroeconomic environment to guide and support our decision-making. These key performance indicators may be calculated in a matter different from the industry standards.

And finally, please note that all figures in today's call will be reported in U.S. dollars from unless stated otherwise. Yair will start the call with key financial and operational highlights. Following that, Sagit will go through the details of financial results and discuss the outlook.

And with that, I would like to turn the call over to Nayax's CEO, Yair Nechmad.

Yair?.

regional expansion into new markets consolidation of channels when it strategically makes sense and acquiring technologies that will bring significant synergies. I would now like to move to our growth in device count and take rates.

At the end of 2023, we managed to break the 1 million managed and connected devices milestone, which is a big achievement for our team. This is a growth of 171,000 devices or 44% year-over-year, which includes both organic and inorganic growth.

Additionally, our total transaction value rose by 33% between Q4 2023 and Q4 2022 to $975 million, and we continue to see an increase to our take rate throughout the year. We increased it to 2.66% in Q4 2023 versus 47% in Q4 2022.

Nayax is a fast-growing global financial institution with high pricing power and our increased scale is providing an ability to negotiate better processing fees. As we continue to scale, we expect to improve our processing costs while providing us with additional sales channel through acquiring partners.

Lastly, I'd like to provide our progress on our new product initiatives. We have spent significant amount of time over the past couple of years, highlighting new products where we see rapid growth potential. And I'm pleased to say that they are where we expect them to be.

One of the fastest-growing unattended segments for Nayax is the EV charging space. Payment solutions for the EV charging space is a strategic end market in our self-service business, where we see a significant total addressable market growing over the next several years.

EV charging is a complex market where Nayax strives being one of the only global supplier that can easily integrate card-present payment solution in this segment.

Nayax's investment in the development of payment infrastructure on EV charging-related protocol over the past several years paid off in 2023 with year-over-year growth in payment devices in this segment growing rapidly. Nayax is jumping on the opportunity to play in the clean energy transition and expect to capitalize on it.

To date, several dozens of OEM manufacturers in the EV charging segment are integrated with Nayax payment devices, and that number continued to grow due to our strong reputation in this space.

I would now like to provide an update on CoinBridge, our patent platform developed to seamlessly convert loyalty assets such as points, miles, stars, vouchers and gift cuts and other [non-Cat] currency into a real transaction at any short worldwide. CoinBridge has been developing on the R&D side at a rapid pace.

This promise CoinBridge generated some initial revenue in Q4 2023, and we expect to see this solution as a significant asset for our company and an important revenue generator in the future.

As a reminder, CoinBridge is a technology platform that Nayax built from ground up, allowing loyalty clouds and retailers to offer their customers a greater freedom of choice by redeeming their loyalty assets anywhere outside of the brand as a similar payment method anywhere.

CoinBridge technology is seamlessly implemented into existing loyalty app, turning those into a loyalty wallet providing retailers with a new tool to better engage customers increased loyalty basket size and their revenue.

Coupled with new transactional data outside their brand, they now can enjoy new insights and optimize on customers' behavior and needs. We have already managed to announce a strategic partnership with Giift, a global leader in loyalty technology solution as a major distribution channel and expect to have exciting development over the coming quarters.

In summary, we had many important drivers of profitable growth for Nayax. A significant investment in automation in improving operational efficiency is staying more faster than expected marching in both our hardware and software side of the business continued to improve with strong operational leverage in our business.

And we are at that key inflection point for strong and profitable growth into the years ahead. Our technology platform allows us to not only expand within the region we already are operating but also expand to new regions with limited additional investments.

In 2024, we expect to make a concerted effort to expand into new regions such as Latin America, where we see tremendous opportunity for cashless solutions.

Our strong operational leverage allow us to continue to expand profitably with our ability to utilize our technology on a global platform being differentiator that will carry our company into the years ahead. I would like to now turn it over to our CFO, Sagit Manor, who will go into greater detail on the businesses, 2023 financial and 2024 outlook.

Sagit?.

Thank you, Yair, and good morning, good evening, everyone. It's a pleasure to welcome shareholders, analysts and members of the Nayax community to our earnings call today. As we reflect on the past year and look forward to the future, it's clear that 2023 has been a peaceful year for Nayax.

Our journey through the year has been characterized by robust growth strategic expansion and a strong focus on innovation, which have collectively propels our company forward.

We ended the year with revenue growth of 36% over last year, and we have an exciting beat on adjusted EBITDA for the fiscal year 2023 of $8.2 million versus our guidance of $4 million to $7 million.

We are focused on profitable growth as we move forward with reaching our long-term annual revenue growth target of at least 35% while improving the bottom line. I'm going to walk you through some key financial highlights and then share some color on our financial outlook.

Starting with an overview of our annual performance has been a remarkable year for our company. Our total revenue for fiscal year 2023 reached $235.5 million, an increase of 36% and from 2022 with high dollar net retention rate of 144%, showcasing the strength and scalability of our SaaS-based business model.

This reflects our deeper penetration into existing markets and successful entry into new ones for the first service or understanding the industry. Our expansion of our core business line and our growth engine allowed us to tap into new revenue streams and bolster our market position.

The current revenue, a critical component of our business model saw a significant increase, reaching $151 million, an increase of 44% year-over-year. As a reminder, recurring revenue is comprised of our SaaS subscription and payment processing fees, both a bedrock of our platform.

This represents 64% of our total revenue as we continue to drive a larger percentage of our business from SaaS and payments. Our Q4 2023 recurring revenue were $42.2 million compared to $29.6 million in Q4 2022, over 42.6% increase.

The increase in recurring revenue is a testament to the high dollar net retention rate of 144% as well as the compounding effect of continuing to add new connected and managed devices. We also saw a high increase in transaction value growing to $975 million in Q4 2023 from $681 million in 2022, a 43.2% increase into margins.

Over the past year, we have made significant improvements to our hold margins and supply chain infrastructure. As a result, overall gross margins continue to improve. In Q4 2023, gross margins were 40% compared to last quarter of 38% and 33% in Q4 of 2022.

In Q4 2023, we saw another increase in our hardwood margin reaching 24% compared to last quarter of 21% and with our 2023 full year hardware gross margin at 19%, which was above the annual target range of mid-teens communicated earlier this year. Our recurring revenue margin stayed high at 49% in Q4 2023.

Looking past the gross margin, the high operating leverage in our SaaS-based business model demonstrated a tower with Q4 2023 OpEx as a percentage of revenue improving significantly down to 41% of revenue compared to 47% in Q4 2022.

We expect this ratio to continue to improve in 2024 and as we continue to automate processes and scale our SaaS reprocessing revenue. As mentioned, our adjusted EBITDA for 2023 was $8.2 million marking a $20.9 million improvement from 2022.

It also represents 34% in adjusted EBITDA on the new revenues in 2023, which exemplifies the direction we are heading, which is to hit 30% adjusted EBITDA by 2028. Q4 2023 adjusted EBITDA was $4 million compared to negative $0.5 million in Q4 2022, which represents a $6.5 million of improvement.

This achievement is particularly noteworthy as it reflects our commitment to operational efficiency and cost management, even as we continue to invest in growth opportunities. Our customer base has grown significantly, reaching more than 72,000 customers at the end of 2023. In Q4 2023, total customers grew by 53% compared to Q4 2022.

The number of customers include 7,500 retail to customers included for the first time in Q4 2023. This growth displays our expanding footprint and the track that the new customers place in our platform.

As Yair mentioned earlier, we have put an emphasis on customer success with investments in customer support and success teams to ensure our customers can maximize the value they derive from our solution. The number of management connected devices is adjustment to our scale and the robustness of our platform.

By the end of 2023, we managed over 1,044,000 devices, marking a 44% increase year-over-year. The number of devices include 130,000 generated by Retail Pro included for the first time in Q4 2023.

The -- this metric is crucial as it directly correlates with our ability to generate transaction-based revenue and underscores the scalability of our infrastructure. Our financial health remains sound. Operating cash flow generated $8.8 million in 2023.

Our cash and cash equivalents stood at $38.4 million at the end of 2023, without ending the year at $52.8 million out of which approximately $20 million were used to acquire Retail Pro International.

Looking ahead, we plan to continue our disciplined investment in R&D, marketing and sales to fuel our long-term revenue growth target of at least 35% a year, while continuing to improve our adjusted EBITDA margin. Let me finish with our outlook for 2024. As 9we look to 2024, we are excited about the opportunities that lie ahead.

We anticipate revenue to grow at least 38% and be in the range of $325 million to $335 million reflecting our confidence in the underlying strength of our business and the efficacy of our growth strategy. Focus will remain on the regional market share, driving innovation and enhancing our operational efficiency.

We expect our gross margin to improve as we continue to benefit from economies of scale, pricing strategies and cost optimization initiatives. Our improvement in halo gross margin back to the pre-pandemic time in the range of 25% to 27% will support the overall margin improvement.

Our goal is to achieve an adjusted EBITDA of $30 million to $35 million as we continue to scale our business with strong operational leverage. Finally, we expect to be free cash flow positive for the 2020 full year as a whole. As for long-term outlook, we are reaffirming our outlook and remain confident about reaching this target.

We expect our revenue to continue to grow at least 35% CAGR as we target $1 billion of revenues in 2028.

Our gross margin in the long-term target is expected to reach 50%, which we aim to reach through operational leverage in the business by providing leasing and rental options for how well increasing software offerings and adding embedded finance services to our product suite. Our long-term adjusted EBITDA margin guidance target is at around 30%.

In closing, I would like to express my sincere gratitude to our employees whose dedication and hard work have been instrumental to our success. So customers and partners, thank you for your trust and collaboration, which is fire us to continue innovating and striving for excellence.

And to our shareholders, thank you for your continued support and confidence in our vision and strategy. 2023 has been an extraordinary year for Nayax, and we believe it's just the beginning. We are well positioned to capitalize on the opportunities ahead and we remain committed to delivering long-term value to all of our stakeholders.

Thank you for joining today's call. We look forward to sharing our continued progress in the quarters to come. I would like now to turn the call to the operator so we can take your questions.

Operator?.

[Operator Instructions] Our first question comes from Dominick Gabriele of Oppenheimer..

And obviously, great results with really strong guidance here. I wanted to talk to you about -- it looks like the incremental revenue that you are seeing versus at least what we were forecasting in 2024 is actually moving right down to adjusted EBITDA, which is excellent, basically a $10 million increase across the board.

Is there something specific that you're seeing on the revenue growth leading you to 38% versus $35 million is that the acquisition? How should we think about that extra kind of outperformance in the revenue growth versus your long-term target? And then I just have a follow-up..

Dominick, thank you for the question and for joining us. So regarding the 38% increase year-over-year as an overall yes, it is organic and inorganic. Inorganic will be still a small portion of it yet helps us to increase our guidance from a revenue perspective.

On the recurring revenue, in general, the growth in the revenue and how that's being cascaded to the bottom line, you're absolutely right.

I mean we've also showed that in 2023, how the incremental revenue of $60 million compared to last year, right, showing a $20 million improvement in the adjusted EBITDA around the 30% adjusted EBITDA that we are aiming to achieve as we grow to a $1 billion revenue company..

Great. Great. And just maybe some more detail on Retail Pro. It looks like it added 130,000 devices, which is pretty great. And congrats on the over $1 million. I know that's been a really big target for you guys over the last number of years.

Maybe just talk to us about if there's any different economics that come with the retail pro platform? Or does it pretty much match the long-term profitability metrics that you're targeting within the total business..

Thank you, Dominick. This is Aaron Greenberg speaking. Thank you for the question. So with regards to Retail Pro, we see Retail Pro is a similar business model in the sense of POS-based platform. It's a software-driven business. that charges a monthly subscription fee, similar to our business model.

The key differentiator, at least historically, prior to the acquisition, is that Retail Pro did not do their own payments platform.

While they had a partnership in the United States for a referral base partnership eventually for payments, they never did payments themselves to the company, and that's where we see the most synergies coming from this relationship as we go forward and should see some significant synergies over the coming years as we are able to move our payments platform across their 130,000 POS systems and the thousands of customers that they have..

Our next question comes from Cris Kennedy of William Blair..

Yair, you talked about expanding into Latin America.

Can you give any details on the competitive environment there? And then I guess, how much can it move the needle as you think about the business towards your $1 billion goal?.

Chris, thank you for the question. When you're looking at the world and we have a footprint in Europe, North America, Middle East, we are trying to strengthen ourselves in 2 regions into the future. One is Latin America in the future, more to the future is APAC. We think that Latin America is more opportunity for what we see right now.

And we're seeing the market in terms of movement from cashless and with our business model of one-stop solution end-to-end has been 1 of the key drivers for the SMB market in Latin America.

We do have some visibility into the market because it is a huge market beyond the, what we call Mid-America, which is Mexico, which we operate, all the South America is a huge market, and we see the opportunity there in multiple countries. And we have some good visibility that we can succeed in the next 3, 4 years that this can be meaningful.

It will not be just, I believe, a neglectable number. It should be a very strong part of our growth..

Great. And then it's great to see revenue from Coin bridge.

Is there any way to think about how material that could be this year or over the next couple of years?.

I think the question over here is the TAM. We're starting with a very, very big time on this business. So in terms of bringing potential of the market, we're talking about hundreds of billions of dollars.

Since it is a novelty patent solution of Nayax and we are, in some cases, educating some of the customers how to treat this product and what is the benefit from this. We'll have to go for the first few customers that are really succeeding with this and creating a lot of value.

And then we can project what the potential of this to carry out big, big numbers for Nayax. As you know me, I'm always optimistic, and this is a very, very strong potential growth of the company. And I think the scale of this business because it's not just a software business. It is also onboarding software business, very easy to do with.

I think once we get into a few big customers that are rolling in, it can fly very fast..

Our next question comes from Joseph Vafi of Canaccord Genuity..

Terrific 2023. I thought maybe we drilled down on finance and lease a little bit and how that played out in '23 and how you see that contributing in '24? And then I have a follow-up..

Joe, and great to hear you. So yes, indeed, the great results for 2023 with recurring revenue growing significantly as basically as we've shown for the last few years.

Revenue from our leasing or our IST capital, as we call it, are growing, continue to grow -- we're not disclosing exactly how much that is, but they are growing in pretty much where we're expecting them to be..

Great.

And then obviously, the leasing and finance solutions help revenue in other ways also, obviously, because your customers are buying more devices, right?.

That's exactly the idea, right, to help them monetize it earlier in the game and later and instead of the pace of buying and then another 5 and 6 months, et cetera, to buy that in advance as they have that opportunity to pay in installments..

Sure. And then maybe we drill down a little bit on EV. Do you -- EV -- like any metrics you could perhaps provide there? Is it growing faster than the rest of payment volume? And obviously, the per transaction charge is going to be probably higher than some of your other verticals.

Just trying to get a feel for growth and perhaps take rate there [indiscernible]. And how that mix contributes in '24 and beyond..

Thank you for the question. With regards to EV, we see the EV side of our business as 1 of the core future -- current and future drivers of growth for our business. There's a huge total addressable market, as everyone knows is growing at a very fast rate in some of our core markets like the U.S. and Europe overall.

We're seeing significant tailwinds over the last couple of years in the EV payment side, specifically related to 2 things. One is the number of EV chargers that are hitting the market and are being deployed.

And the other is regulation, which over the last couple of years, there's been more regulation in the EU and the United States and grants that are contingent on having a physical credit card reader at the location, which has been a tailwind for us as we've gone through the 2023 year as we look ahead.

With regards to -- as we look forward, EV has a higher ATV than the rest of our business currently. We're not -- we don't disclose the number. But it is significantly higher on an ATV basis than the traditional unattended business that we have. And the take rate is roughly similar currently to the rest of the unattended segments that we have..

Our next question comes from Trevor Williams with Jefferies..

This is Spencer James on for Trevor Williams. It was good to hear about the expectations for gross margin improvement in '24. I was wondering if you could provide some more color on your expectations for cadence of gross margin in '24..

Of course, thank you for the question. So throughout 2023, we actually spoke about how low margins, how in 2023, they're going to reach to the mid-teens. However, in 2024, we are expecting it to go back to the pre pandemic time, which is 25% to 27%. So that's one of the significant reasons why gross margin and would improve in 2024.

As we continue and even improve our margins under the carry revenue, which are high already. So -- and the reason for the house improvement is a few things. One is component cost reduction and many initiatives that we have in the supply chain area to continue to improve our margins..

That's great. And then maybe as a follow-up, I was wondering if you could provide any expectations you have for growth in '24 coming from new customer go-lives versus your existing customer base maybe relative to '23..

So we do not provide this guidance from that perspective. But as we've shown in the past few years with a very high net retention rate of between 135% to 145%.

We are expecting to see the same level of net retention rate continue to be in 2024 because of our very strong business model that is based on those recurring revenue and expansion with our existing customers..

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

Thank you very much to everyone for joining us on the call. I'd like to thank the Global Nayax team for their [indiscernible] commitment to executing our live vision and mission into our partners and customers who continue to be an important part of our success as a leading integrated payment company.

We are very, very proud of what we achieved in 2023 and looking forward to continuing our expansion in 2024. Thank you..

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day..