Greetings. Welcome to the Paysafe Q1 2022 Earnings Conference Call. Please note this conference is being recorded. I will now turn the conference over to your host, Kirsten Nielsen, Head of Investor Relations. You may begin..

Thank you and good morning. Welcome to Paysafe’s first quarter 2022 earnings conference call. Before we begin, a friendly reminder that this call will contain forward-looking statements and should be considered in conjunction with cautionary statements contained in our earnings release and the company’s most recent periodic SEC reports.

These statements reflect management’s current beliefs, assumptions and expectations and are subject to factors that could cause actual results to differ materially from those forward-looking statements. You should not place undue reliance on these statements.

Forward-looking statements during this call speak only as of the date of this call and we undertake no obligation to update them. Today’s presentation also contains information that will constitute non-GAAP financial measures under SEC rules.

You could find additional information about these non-GAAP measures and reconciliations to the most directly comparable GAAP financial measures in today’s press release and in the appendix of this presentation, which are available on the Investor Relations section of our website.

With me today are Bruce Lowthers, who joined Paysafe as CEO on May 1; and Izzy Dawood, our CFO. While many of you are already familiar with Bruce from his 15-year tenure at FIS, I am delighted to have him with us on the call today to introduce himself to you directly.

Following a few remarks from Bruce, Izzy will discuss our strategic highlights and financial results in more detail. With that, I will turn the call over to Bruce..

Thanks, Kristen. Good morning, everyone and thank you for joining us today. Before I jump into the quarter, I want to acknowledge the ongoing tragic events in Europe following Russia’s invasion of Ukraine in February. We are committed to helping our European teammates through this tragedy.

Izzy will discuss the impact of the wars having on our results a little later. Having started last week and visiting our major European offices, I appreciate the warm welcome from the Paysafe team and for the trust the Board has placed in me to lead Paysafe at such a pivotal time.

I also want to thank Philip for his leadership over the past few years during this time. He not only took Paysafe public, he also navigated the company through the pandemic and laid important foundations for us to build upon.

Having been in this role for 10 days now, I am mostly in listen-mode today, but I am happy to share a few observations and background on why I have joined the company. Coming to Paysafe was a compelling next step in my career and a great fit personally. As most of you already know, I have spent the last 15 years at FIS, most recently as President.

I am grateful for not only my time there, but the wonderful teammates I had the opportunity to work with. While there, I was focused on accelerating growth and modernizing the company to drive the efficiency needed for FIS to compete in today’s marketplace.

I have always had a strong focus on client experience, innovative products, technology and sales. ESG is also very important to me and something that will remain at the forefront for us. Earlier in my career, I was involved in a number of startups and consider myself an entrepreneur at heart.

I see Paysafe as a pioneer and innovator at the forefront of enabling improved payment experiences for both businesses and consumers around the world with a lot of growth potential to unleash.

I was very attracted to the fast pace entrepreneurial spirit and I believe my experience leading both a Fortune 250 company in the payment space as well as co-founding startups positions me to reaccelerate growth in Paysafe.

I am already enjoying the early days of working with the talented and passionate Paysafe team discussing the opportunities ahead. Before I turn the call over to Izzy, I will touch on a few highlights for the quarter.

First quarter revenue was $368 million and adjusted EBITDA was $104 million both exceeding the high-end of Paysafe’s guidance range for the quarter, including a strong performance from the U.S. acquiring segment, which grew revenue and adjusted EBITDA by 10% and 20% respectively.

The turnaround of the digital wallet business continues to show early progress while absorbing impacts from FX as well as market pressures in Europe.

More broadly, across digital commerce, Paysafe continues to demonstrate leadership in North America iGaming, including a successful launch in Ontario’s new private market with multiple leading operators. I have been impressed with the overall pipeline as merchants come to Paysafe to access full end-to-end payment solutions.

Additionally, Paysafe’s expansion into embedded finance is progressing well and we recently went live with FTX, another leading crypto exchange. I look forward to meeting with the team members, partners, clients and shareholders over the coming months and providing a more detailed perspective of the business on our next earnings call.

But for now, I’d like to turn the call over to Izzy to share an update on the business and review of our results for the quarter.

Izzy?.

Thanks, Bruce. Before we go through the financial results, I will provide a few updates on our strategic priorities, starting on Slide 4.

We continue to see a lot of traction across our key digital commerce verticals, where merchants trust Paysafe to help them navigate payments and support growth in complex verticals, delivering a broad set of global payment options across card processing, real-time banking, digital wallets and online cash solutions.

In crypto, activity remains very strong, including our recent go-live with Vitana for card processing. Additionally, we are now partnering with FTX to optimize instant payments for crypto purchases for customers in the European economic area by facilitating open banking based payments as well as step-up payment transfers.

This is another exciting win as part of our embedded finance pipeline, where in addition to recent wins with FTX and Binance, we continue to see strong interest on cryptocurrency exchanges as well as large e-commerce organizations. We also continue to see a lot of demand across the financial services vertical.

Our eCash business has become a meaningful player supporting neobanks and is now partnering with Solarisbank and Tomorrow Bank. Additionally, we are driving incremental growth with several of our ForEx trading merchants having recently expanded our service offering beyond digital wallets.

Lastly, we are seeing good progress in iGaming outside of North America. As one example, we are extending our collaboration with Playtech into the UK and Europe following our successful integration across multiple U.S. states.

Through a single global streamlined integration with Paysafe’s API, operators in UK and Europe will now also be able to leverage Playtech’s platform to access a range of Paysafe payment solutions, starting with payment acquiring and card processing with Paysafe digital wallet services set to follow.

In Latin America, we continue to be pleased with the traction of our recent acquisition and I will also touch more on that later in the presentation. Now, turning to Slide 5 for an update on North America iGaming, starting with Canada, we successfully launched in Ontario on April 4, which opened its long-awaited iGaming market for private operators.

Ontario is estimated to be the fifth largest North American jurisdiction that reached $4.4 billion in gross gaming revenue at market maturity. We are live with multiple operators, which builds on 10 years of market leadership with the provincial lotteries, delivering the full stack of processing and local APMs.

We are supporting exciting brands, including PointsBet, theScore Bet, BetRivers, Caesars, bet365, amongst others, providing traditional and alternative payments through Paysafe’s Gateway, including card processing, electronic funds transfer, Visa Direct, eCash and Interac e-transfer, which is a popular and widely accepted payment method used by Canadian consumers.

Turning to the U.S., we are now live in 22 legal jurisdictions that allow some form of iGaming having recently added Arkansas and we are prepared to go live in the coming months in an additional four jurisdictions where legislation has recently passed, including Ohio, Maryland, Puerto Rico and Washington.

We are also seeing continued strong results out of our revamped Skrill Digital Wallet, including volumes up more than double sequentially and strong growth in new user sign-ups. As we shared with you on our last call, we are prepared to launch our media campaign with Barstool Sports in Q2 to promote the Skrill brand in the U.S.

utilizing a variety of Barstool’s popular media assets. Importantly, we are thrilled to be integrating Skrill with Penn National’s Barstool Sportsbook app, which is Skrill’s first Tier 1 operator in North America and a key milestone for the team.

Lastly, we have had a number of recent wins across the U.S., including our expansion to Colorado with Betsson, a longstanding partner across Europe. Overall, we are seeing very strong momentum in 2022, expanding our presence with both new and existing clients.

Volumes have grown over 40% year-over-year and we expect our revenues to be up over 30% year-over-year for 2022. Now, turning to digital wallet on Slide 6.

On our last earnings call, we discussed our initial progress in the digital wallet business as a result of the actions we are taking to improve competitiveness in European markets, refocus the organization and deliver on our long-term growth opportunities. What we are seeing today is continued signs of progress.

Our actions to optimize pricing continue to show positive data points in regions where we have implemented changes. Across the 19 targeted countries in Europe, we continue to see steady improvement in deposits with monthly bank deposits up more than 80% and total deposits up 14% from September to March.

As a result, we are now rolling out these changes to additional European markets. We are also seeing positive trends in funnel optimization and improvement in the conversion of sign-ups to first deposit.

Additionally, our initiatives to reduce friction and improve the checkout experience have resulted in a 5% increase in conversion rate at merchant checkout from Q4 to Q1.

Since we have already discussed our progress on longer term growth drivers such as our embedded finance wins and progress at Skrill in the U.S., the last piece I have mentioned is the continued investment in key talent. We recently welcomed Elbruz Yilmaz who joined us from Bitpanda and brings deep experience in all things crypto.

We are excited to have him on board to drive our crypto strategy. We also welcome Megan Oxman, who joins us from Amazon’s payments teams to drive new product development for digital wallets, including our embedded finance solution.

To summarize, excluding impact of FX and market challenges in Europe, including Russia and Ukraine, the underlying digital wallet business is improving and we are seeing the proof points in key metrics such as deposits, conversion rates and the stabilization of 1-month actives.

We expect 2022 to be a transitional year, building momentum in the second half and with the actions we are taking now, enabling us to absorb market risks in Europe. Turning to Slide 7, we are also executing against our cost program, targeting an additional $20 million in 2022 and we have delivered $5 million towards it in Q1 already.

On our banking partnerships, we have added a new relationship with Citizens as the new Tier 1 sponsor bank, which enhances our banking portfolio, including expansion of processing capacity. On the recent acquisitions, the team continues to deliver on our integration plans and synergy targets.

We are live with more than 20 eCash merchants with PagoEfectivo and we are expanding to additional countries in Latin America through SafetyPay.

We have completed the integration to load SafetyPay and PagoEfectivo into our digital wallets, currently live in 6 countries, which enables consumers to deposit money into the Skrill or NETELLER wallet and then transact from there.

Overall, performance is exceeding our expectations and we are uniquely positioned for growth and cross-selling opportunities with online merchants are looking to expand into new markets. Moving to Slide 8 for a snapshot of our performance versus our guidance.

Revenue and adjusted EBITDA came in higher than our guidance range, mainly due to somewhat stronger-than-expected performance of U.S. acquiring and continued cost management discipline. Digital commerce performance also slightly better than expected, but was impacted by the FX rate.

Moving to Slide 9 for a summary of our Q1 results, volume was $31.2 billion, an increase of 13% year-on-year, driven by 21% growth from U.S. acquiring. I will point out that the volume does not include our embedded finance solution as a significant portion of the volumes are exchanged or P2P, which are not revenue drivers for us.

Therefore, we have excluded it as not to skew the overall take rate. Total revenue for the first quarter was $368 million, down 3% compared to Q1 of last year.

Excluding the unfavorable impact from year-over-year changes in foreign exchange rates, which partly offset the inorganic benefit from the recent acquisitions, revenue was approximately flat compared to Q1 of last year as growth from U.S. acquiring was offset by digital commerce.

Adjusted EBITDA for the quarter was $104 million, resulting in adjusted EBITDA margin of 28.3%, which is stable sequentially, but down compared to adjusted EBITDA margin of 30% in Q1 of last year. That change primarily reflects business mix and increase in SG&A related to the recent acquisitions.

Lastly, free cash flows can fluctuate meaningfully at quarter end. And as I mentioned on our last call, it is best evaluated for Paysafe on a trailing 12-month basis. Conversion on a 12-month basis was 55%, reflecting an increase in working capital related to growth in U.S.

acquiring volumes as well as cash taxes paid, including a withholding tax payment in Q3 of 2021, expected to be recovered in the second half of this year. Additionally, the prior year benefited from utilization of bank guarantees. Consistent with our last call, we expect the full year free cash flow conversion between 60% to 70%.

In Q2, we expect free cash flow conversion closer to 50% before recovering in Q3 and Q4 on a trailing 12-month basis. Turning to Slide 10, I will briefly touch on our net loss of $1.2 billion.

This was driven by an impairment of goodwill due to the sustained decline in our stock price and market capitalization as well as current market and macroeconomic conditions. This is a non-cash charge, which has no impact on cash flow, liquidity or our debt covenants.

Our tax rate for the quarter was 3.2%, which was lower than our effective tax rate of 8.9% at Q1 of last year, primarily as a result of the discrete deferred tax impact on the goodwill impairment. Ignoring discrete items and gains and losses on warrants, we estimate our effective tax rate will range between 23% and 26%.

Moving to Slide 11 for a summary of the take rate trend, as you can see from the graph, Paysafe total take rate is stable sequentially and down year-over-year, and this is predominantly mix driven as the U.S.

acquiring business, which has a lower take rate has become a larger portion of our volume mix increasing from 60% in Q1 of last year to 64% this period. The digital commerce take rate has decreased sequentially, largely reflecting mix within the segment, while U.S. acquiring has improved sequentially.

As I mentioned earlier, total volume does not include the volumes from embedded finance. Moving to Slide 12 for a discussion on the segment results, starting with digital commerce. Volumes were up $11.3 billion and up 2% year-over-year.

Revenue was $198.5 million, a decrease of 11% compared to prior year, reflecting unfavorable FX and business mix, including the impact of regulatory headwinds in Europe, which you have also seen in the results from European operators, who are reporting double-digit declines in the region for Q1.

Additionally, the eCash business faced a tougher growth comparable to the prior year, which benefited from COVID-related lockdowns in Europe. Excluding the unfavorable impact of FX, which partly offset the inorganic benefit from the recent acquisitions, revenue was down 6%.

Adjusted EBITDA was down $75.8 million in the first quarter and down 17%, reflecting lower revenue and additional SG&A from the acquisitions. As we discussed earlier, the turnaround of our digital wallet business continues to show progress with improvement in deposits, conversion rates and other metrics.

Overall, the results in digital commerce were slightly ahead of expectations, excluding the FX impact. Moving to Slide 13 for the U.S. acquiring segment. Volume in U.S. acquiring increased 21% year-on-year to $19.8 billion in the first quarter. Revenue for the first quarter was $169 million, an increase of 10% compared to the prior year.

Take rate was lower year-over-year, primarily reflecting volume and channel mix within U.S. acquiring. Adjusted EBITDA increased 20% to $47.2 million and adjusted EBITDA margin increased more than 200 basis points to 27.9% compared to the prior year. Lastly, our direct marketing vertical within the U.S.

acquiring segment is recovering on track and our growth year-over-year as expected and is beginning to contribute to margin expansion as well. Turning to Slide 14 to look at our balance sheet and liquidity. Cash and cash equivalents were $258 million at the quarter end.

Net debt was $2.4 billion, and our net debt to LTM adjusted EBITDA ratio was 5.6x, reflecting the SafetyPay acquisition we closed on January 31. Our primary use of excess cash is to pay down our debt and start moving towards our target of 3.5x adjusted EBITDA. Let’s now move to Slide 15 to discuss our guidance.

Since our last call, we have continued to see unfavorable movement in the USD-euro exchange rate and macroeconomic uncertainty. However, we remain confident in maintaining our full year outlook based on the continued momentum we are seeing in U.S.

acquiring, strong performance of our recent acquisition and our pipeline across digital commerce, enabling us to absorb and mitigate those headwinds based on what we are seeing today. On a full year, on a reported basis, we expect revenue between $1.53 billion and $1.58 billion. U.S.

acquiring revenue is expected to grow high single digits to low double digits, and digital commerce revenue is expected to be flat to up low single digits. For the total company, adjusted EBITDA is expected to be between $440 million and $460 million. Since our call on November 11, when the outlook was first provided, the U.S.

dollar has strengthened approximately 10% against the euro, which negatively impacts revenue by $70 million and adjusted EBITDA by $20 million on an annual basis. Additionally, we’re also assuming no revenue for the remainder of the year from Russia, Belarus and sanctioned parts of Ukraine.

These areas contribute approximately $20 million in revenue and $12 million in adjusted EBITDA on a full year basis in 2021.

For Q2, we expect revenue in the range of $370 million to $380 million and adjusted EBITDA in the range of $100 million to $110 million, which reflects adverse movement exchange rates and assumes a USD-euro rate stays at $1.08 for the remainder of Q2, consistent with what we saw in April. We expect high single-digit growth in U.S.

acquiring offset by a decline in digital commerce driven by year-over-year adverse FX movements and the ongoing impact of gambling regulations in Europe, as expected, in addition to Russia Ukraine impacts.

Looking at the second half of the year, we to exit the year at a double-digit growth rate in Q4 as you will see the growing impact of our acquisition synergies and embedded finance growth. To summarize, Paysafe is off to a good start this year, posting first quarter results ahead of our expectations.

Despite macro headwinds, we remain optimistic in our full year outlook driven by good momentum in U.S. acquiring and our pipeline across digital commerce. We expect growth and margins to improve in the second half of the year as we start to lap the impact of some of the regular changes in Europe and continue to see the progress in digital wallet.

With that, let’s open the call up for questions..

Our first question is from George Mihalos with Cowen. Please proceed with your question..

Great. Good morning, everyone, and thanks for taking my questions. Bruce, welcome aboard, looking forward to working with you..

Thank you, George..

Maybe a bit premature, but just wanted to ask again early days at Paysafe, what are sort of the initial priorities that you’re sort of focused on, whether that be from a from a vertical perspective, from a product perspective, just sort of where are you focused now in your early days, sir?.

Yes, George, thanks for the question. As we look here the first week behind me, getting the opportunity to go around and meet some of the organization still have a fair amount of that in front of me. But I think it’s pretty obvious. We’ve got to get focused on how do we grow this business again. We have a lot of great tools.

We have a lot of great strengths. The technology organization really has done a nice job over the last couple of years. You see a lot of great technology, cloud-based for the vast majority of what we do. Really a lot of emphasis around the single API focus on new innovative technologies like RTP, great advances in automation around risk compliance.

Obviously, a great base of licenses and on a global basis. So a lot of great assets to work with. And now it’s really about just kind of pulling them together and really driving a growth culture and that I think we can do..

Perfect. Appreciate the color. And then Izzy, quickly, the U.S. acquiring that outperformed, as you mentioned, that sort of grew double-digit. Just curious if you can kind of callout where the upside came from, what surprised you to the upside? And maybe trends through April if you are willing to share that? Thanks, again, guys..

Yes. Sure, George. Thanks for the question. On the U.S. acquiring really after like a soft start in January post-Omicron. We just saw retail, hospitality really take off, which contributes to the strength. On top of that, Ascend has been doing a great job on the overall margin improvement as well.

So you saw the 10% revenue increase, 20% EBITDA margin increase. So continue to find areas of synergies in the businesses that have been acquired over the years. And April is right now coming in as expectations remains strong, like you’ve probably seen in other acquirers as well..

Great. Thank you..

Our next question is from Dan Perlin with RBC Capital Markets. Please proceed with your question..

Thanks. Good morning. I just wanted to go back to some of the final comments you were making. You’re absorbing – absorbing a lot of FX headwinds and obviously Russia and Ukraine.

So in taking all that into consideration and thinking about the second half ramp that’s implied, can you just walk us through again maybe in a little more detail what gives you so much confidence, I mean you called out acquisitions and in synergies in the embedded finance.

But maybe if you could go a little deeper on how that maps out and why you feel so confident that second half can meet these levels of expectations. Thanks..

Sure. So maybe – thanks for the question. Maybe I’ll take it back to kind of how we develop the guidance right. When we developed it, we did take a more risk-based approach to as many things could go right as many things could go wrong throughout the year. So that is giving us the capacity to absorb some of these unforeseen headwinds.

The second thing we did was just took a view that our ramp-up on our pipeline, especially for embedded finance, some of the larger enterprise sales would take a little longer. Now they are coming through, we feel pretty good about that. But specifically, as we get to the second half, a couple of things occur.

One is, as you know, for embedded finance, we started with finance in January slowly, and that’s ramping up as we add additional payment methods into the embedded finance solution. We signed FX and went live with them very recently, actually in April. So that starts ramping up second half of the year.

We have our North America iGaming, really excited about the integration to Barstool and seeing Skrill start making a contribution plus is in the state – ramping up of the states and other integrations that we’ve been talking about and announcing so that adds to second half relative to again, first half run rate – and then finally, we also have the World Cup that should help in Q4 as well.

So there are a couple of building blocks that kind of build up to that second half kind of ramp up from where we are from Q1.

Does that help you get the color behind it?.

Yes. No, I think that’s a great roadmap for you guys. Just to follow-up real quick, you talked about average ticket, I think in U.S. acquiring as being a reason for some outperformance, I think on one of the slides.

I am just wondering, is that your callout for inflation or are you seeing like an underlying mix shift that we ?.

So I’ll break out two things on our – in our general retail hospitality, we’ve seen average tickets go up about 4% year-on-year, right? So maybe it’s inflation, maybe it’s not, but it’s an increase year-on-year and average ticket. In our Petro services, we’ve actually seen something higher, closer to 18%.

So we’re really seeing the – what you call the higher gas prices kind of show up in the average ticket that we’re seeing. Again, it’s a smaller part of U.S. acquiring, but we’re seeing that a little bit impact the overall volumes for the business.

So not a big call out of inflation but just something that – it’s more than we’ve probably seen in prior years in terms of year-on-year increases..

Yes. We will take it. Awesome. Thank you both..

Thank you..

Our next question is from Jason Kupferberg with Bank of America. Please proceed with your question..

Hey, guys. Good morning. Just wanted to start picking up or down left off on U.S. acquiring, can you just elaborate a little bit on the mix factors that drove the take rate there up a little bit quarter-over-quarter, but down year-over-year? And then can you just tell us what your revenue mix is in U.S.

acquiring between volume-based revenue and per transaction revenue?.

There is two things there, right, Jason. So on the acquiring side, the increase in take rate is predominantly just driven by we’re just seeing a greater uptick in some of our retail and hospitality volume, which we have slightly higher take rates. And by the way, it’s a 10 basis point increase in the chart, but it’s more of a rounding thing.

That’s a much smaller increase. So we’re seeing it more stable and not being impacted like got impacted year-over-year, that’s a view on the take rates and in your second question, again, Jason, just remind me..

About the transaction..

Yes, we are probably about 70% to 75% more volume driven than what you call it transaction driven..

Okay. That’s helpful. And then just to follow-up on some of the comments you made around the balance sheet leverage. I think last quarter, you had said you expect it to be in the low 5s by the end of this year.

Is that still the case? And any sort of kind of roadmap you would want to share on the potential pace of deleveraging beyond this year? Thank you..

Yes. We were expecting low-5s, potentially we are hitting 5% or maybe just below by the end of the year. We are actively using our excess cash every quarter to either buyback our debt or pay down some of our loans. So, that focus on de-levering is pretty important for us..

Thank you..

Our next question is from David Togut with Evercore ISI. Please proceed with your question..

Thank you and congratulations, Bruce..

Thank you. Good morning David..

On Slide 5, you called out Skrill winning its first Tier 1 operator, which is very encouraging.

Can you speak to why that operator chose Skrill and comment on the pipeline for other Tier 1 operators adding Skrill in the near future?.

Sure. Yes. Barstool and us, I would say we have to do a lot of credit to Zak that we brought onboard last summer. He has built a really strong relationship with the Barstool team in terms of our capabilities, what we can do with them.

And it’s really kind of using not just their sportsbook or really their overall media prowess across all social media channels and really building that brand, that Skrill brand through them, and then integrating it obviously into their – into the payment platform as well.

So, pretty excited about the whole relationship, all through those goes exactly and the team driving it. And yes, we are actually talking to a couple of other operators that we just kind of announced it yet. But no, Skrill takes – Skrill has a lot of momentum. We have seen some great proof points. Volumes doubled sequentially. It’s up 10x year-on-year.

It’s still small, but growing at a really good rate as the enhancements we have made, the VIP and the high dollar amounts that we are allowing some of the VIP customers to go through Skrill USA. So, all that momentum is just helping us with our conversations with Tier 1 operators. This Barstool campaign starts in Q2, everything is signed.

And hopefully, in the coming quarters, we are able to talk about other Tier 1 operators..

Appreciate that.

Just as a follow-up, what was the organic growth in the quarter? And is your expectation for fiscal ‘22 still to see 4% organic revenue growth and five points of organic adjusted EBITDA growth?.

And now being organic, David, just to be clear, you mean around the acquisitions?.

Yes.

So, ex-acquisitions, what was the organic revenue to EBITDA growth in the quarter? And what’s your expectation for the year as a whole, organic ex-acquisition?.

Sure. So, for effectively our organic growth, our – the FX impact year-on-year was offset by the M&A. So, you can probably calculate roughly 3% overall growth for the quarter. was M&A driven. And like we said in the past that we are pretty consistent with it.

We expect pre-synergies about $60 million in revenue contribution and $20 million in EBITDA contribution from the three deals we have done that’s a contribution in 2022. So, we are still on track with that..

Got it. Thank you very much..

Thank you..

Our next question is from Scott Wurtzel with Wolfe Research. Please proceed with your question..

Hey, good morning guys. This is Scott on for Darren. I just wanted to touch on the digital wallet segment for a second. It was good to see some of the progress that you made on deposit pricing and increased conversions. But I just wanted to touch on the user growth.

We noticed it continue to decline sequentially during the quarter and thinking about the potential for an inflection in user growth, just wanted to get your thoughts on what the drivers of that potential inflection would be? Thanks..

Yes. Sure. Scott, good question. And one of the things we are seeing across gaming in Europe, which where digital wallets and e-cash primarily operate, and you have seen from other operators as well. It’s in Germany and Netherlands regulations that are driving year-on-year decreases. Obviously, our wallet reset also impacted that going into 2022.

So, we have seen the 12-month active decline. We will expect that to decline through Q2 with the challenging comps and we are really targeting Q4 kind of where that stabilizes. That being said, on the one-month active, so for the last two months or three months, we have seen that relatively stable.

So, that gives us a little bit of comfort that again, it’s stabilizing. We are not declaring victory on an inflection point rise up just yet. Chirag and the team are doing the right things to get the business where it is where some of the core metrics are again stabilizing and slightly improving..

I would just add initial view on it. I really like the team building that Chirag is doing. He is really hiring some great talent. And I think you are going to see some outcomes of that pretty quickly..

Great. Thanks. And then just as a follow-up, going back to guidance here.

Outside of the FX headwinds and the impacts from Russia, Belarus and Ukraine, can you maybe just talk about some of your higher-level macro assumptions that are embedded in the guidance?.

Yes. I think probably the largest macro assumption right now – two probably, two macro assumptions that there isn’t an unknown regulatory change in Europe that impacts us. Right now, we don’t see anything happening in Q2 or even for the balance of the rest of the year is that we see imminent.

And the other macro one is any recessionary impact either in Europe or in the U.S. that would impact volumes. Those are probably the two. Right now, we are not planning based on what we see today, any of that impacting our guide. But those will be the two items that we keep an eye on..

Great. Thanks guys..

Thank you..

Our next question is from Jamie Friedman with Susquehanna. Please proceed with your question..

Hi. Let me echo the greetings, Bruce..

Yes, thank you..

So, I think in your prepared remarks, you did disclose the growth in the North American Gaming segment, but you were going kind of quick there. If you did say, I apologize, but if you could or if you have that, that would be great..

Yes. We had 40% year-over-year volume growth in the North America iGaming segment. Pretty happy with that. And again, expecting a 30% plus volume revenue growth for all of 2022. Hopefully, we outperformed that based on what we are seeing..

In the last question in terms of the monthly actives I would be to say, I don’t see that in the appendix or maybe I am just missing it, but did you disclose what the wallet monthly actives were?.

Yes. In the appendix, Jamie, there was a 12-month active for e-cash and for additional wallet that we have shared that every quarter. So, yes, I….

Okay. So, that $2.8 million I found it is, I got it.

So, that’s down, why is that a constant currency number, though?.

No, it’s not. The active users is all the way to the right, that’s just a metric. The constant currency is the revenue metric..

Got it. Okay.

So, how would that is compared to the previous period?.

It’s down. I believe first period was about 3.1..

Correct. Yes. $3.1 million..

Okay. And then Bruce, I was just wondering at a high level, what kind of like measurement you are going to run the company on. You said in your prepared remarks that growth is a priority. And we saw you deliver that at your prior shop.

But how are you thinking about what to focus on here?.

Yes. Look, I think it’s a great question. Obviously, a weekend, not prepared to kind of change the metrics that the company has been presenting. But – we will work on that this quarter.

We will come back and be very transparent as how we look at the business, so that everybody can kind of follow along and see the proof points that we have as we are making progress to our pivot to growth. So, a lot to come here probably in the next 90 days.

I would expect you are going to see some more disclosures in the second quarter about how we are looking at the business, how we are measuring the business and how we are going to be able to demonstrate that we are growing the business..

Got it. Thank you again guys. I will jump back in the queue..

Our next question is from Timothy Chiodo with Credit Suisse. Please proceed with your question..

Great. Thank you. Good morning. I wanted to also talk about U.S. acquiring. So, specifically, the volumes, they were really strong at about 21%. And I know that previously we had talked about for the full year volumes in that segment being up in the 4% to 7% range.

I just want to see if that number has changed much? And what changed since you last guided? That was a really big beat on volume specifically. Related to that, what does this imply for an exit rate heading into 2023 in terms of the volumes again for U.S.

acquiring?.

Sure, Tim, a couple of questions there. So, no, we are still thinking it will be – for the full year, we are looking at mid to high-single digits in terms of volume growth. The year-over-year compare for Q1 was a little easier comp they saw some really solid growth. So, that’s one. The other aspect in terms of the exit rate of 2023, it’s still early.

Inflation, recessionary talk, I think right now, we are seeing the momentum on the volume side that and the team are pretty excited about. We are growing our stick count. We are growing our revenue per merchant through our servicing and our offering. So, right now, again, we look pretty good about it for the rest of the year.

And then we will talk about 2023 as we get closer to Q3, Q4..

Okay. Great. And then you also made the comment on – there was a question earlier around April, and you mentioned that the trends were consistent in terms of U.S. acquiring. Did you mean that the trends were consistent in terms of roughly 20% volume growth or….

Relative to internal expectations, we are probably expecting year-on-year volume growth in the high-single digit, maybe low-double digits for acquiring for 20 – for Q2..

Right. Okay. Alright. I am glad we clarified that. Great. And then the last one is around – you had mentioned on prior calls around Netherlands, just some of the regulatory changes around iGaming.

Is there any update to mention there, or is that sort of status quo?.

Yes. Tim, great question. Yes, we – the decree was reversed where operators could accept payments from e-money license providers. The next step is for these operators are actually go through an application process back with the licensing agency to get approved and many of the operators going through that.

I should have mentioned I think with the earlier question that’s another element that we are expecting Q4 to start contributing to our run rate. And that’s what we are planning for. So, the operators again are going to the licensing to be able to accept the e-money license providers, eCash being the big one for us.

And we should see that hopefully starting in like late Q3 to Q4 as the operators get approved..

Okay. Great. Izzy, thank you for taking all those. I appreciate it..

Our next question is from Andrew Hummel with WestPark Capital. Please proceed with your question..

Hey guys. Thanks for taking my question. Just wanted to double back on the embedded finance opportunities you guys have. And when you talk about not including the volume in the base.

But I just wanted to see how you guys are thinking of monetizing those transactions and how you are expecting that to ramp through the year and particularly into the back half?.

Sure. Just to give you a flavor of a couple of things here. So, we had $4 billion in volume in our embedded financial relationship. That’s a lot in Q1. But how we effectively are working with our better finance partners are. We are getting – we get compensated on money in and money out, not the P2P or the in-wallet transactions that occur.

Now, the great news is for every one transaction we process from external to internal, there is about six transactions internally. So, the ecosystem of our embedded finance partners is very strong, right. We are enabling more activity for them which get better engagement from their consumers, which drives their revenue.

So, as a result, that’s the reason the volumes are not included because it’s not a fair reflection of kind of how the revenue is driven. Now, we have started with bank transfers, rapid transfer into the wallet.

As the year goes on, our plans are to include other payment options into the wallet and to the embedded finance wallet, which would be our eCash solution as well as card processing. But again, that’s slowly country-by-country, we make sure that we have our KYC, our risk parameters are all set.

You have also noticed at least a Binance recently them being accepted as an asset provider regulated asset provider in France, they are taking compliance speeds very seriously as well. So, all things are pointing to you, we are going to continue to grow with our embedded finance partners as the quarters go along.

Does that give you enough color?.

Yes, that’s pretty helpful. I appreciate it..

We have reached the end of the question-and-answer session. And I will now turn the call over to Bruce for closing remarks..

Yes. Thank you. Look, thank you, everyone, for joining us this morning. And I want to also thank my team for such a great warm welcome. It was fantastic to visit everybody in Europe and get to meet so many people in the last week. I remain very excited about the opportunity here at Paysafe.

As I mentioned earlier, we have a tremendous amount of strength that we will be able to build on and really get laser-focused on growth. I think we have some great foundational items to build off of. We will drive product innovation and client experience. We will really get after creating a strong sales culture.

We have a lot of opportunities around geographic expansion and also moving into adjacent markets with strong TAM expansion. So, I appreciate everybody joining us today and to our team, if you are listening, let’s recommit to our values and courageously work as one team to get this growth engine back on track. Thank you..

This concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation..