Greetings and welcome to Paysafe’s Second Quarter 2022 Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to turn the call over to Kirsten Nielsen, Head of Investor Relations. Thank you. You may begin..

Thank you and good morning. Welcome to Paysafe’s second quarter 2022 earnings conference call. With me today are Bruce Lowthers, Chief Executive Officer and Izzy Dawood, Chief Financial Officer.

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 can 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 that, I will turn the call over to Bruce..

Great. Thanks, Kirsten. Good morning, everyone and thank you for joining us today. It’s been an extremely active first 3 months for me, meeting with hundreds of employees, customers and shareholders who have traveled to all of the major offices around the world.

Our team has been highly engaged and we are already taking some initial steps to simplify and improve the company. On today’s call, I will start with an overview of the quarter, then I will share my early observations on the state of Paysafe, and then I’ll turn it over to Izzy to review the financial results and guidance.

So with that, let’s start on Slide 3. Our second quarter revenue of $379 million and adjusted EBITDA of $103 million were in line with our guidance range for the quarter, despite greater than expected FX headwinds. Growth continues to be led by our Americas region driven by our SafetyPay and PagoEfectivo acquisitions and U.S.

Acquiring, which recorded double-digit revenue and EBITDA growth in Q2. At the same time, we are seeing progress across our key areas as we focus on improving our customers’ experience and innovation. Recently, our team won Payment Innovation of the Year at the 2022 SBC Awards, recognizing our Score wallet as a game changer for U.S.

iGaming brands and their players, especially VIP customers. In addition, we continue to rollout user experience improvements in our wallet that are being positively received by our customers, such as our new dashboard, which allows customers to personalize their wallet experience.

Solid expansion into Ontario’s new private iGaming market, providing traditional and alternative payments through Paysafe’s gateway, where our card approval rates are greater than 90% and we are now live or onboarding with a total of 14 merchants in the province. We continue to see robust growth in the U.S.

regulated iGaming market and have processed more than 2 billion in gateway volumes in the first half of 2022. We are currently live in 22 states and look forward to the upcoming launches in several states and jurisdictions where recent legislation is passed.

With Ohio being the most noteworthy, we also remain excited about our upcoming Skrill wallet integration with Penn National’s Barstool Sports app, which is Skrill’s first Tier 1 operator in North America. During the second quarter, we held our largest merchant partner conference to-date.

These channel partners were great to meet and I received very positive feedback on our year-over-year operational improvements. So, a lot of good progress in the quarter.

As for the rest of the year, I want to state upfront that we will be updating our 2022 outlook to align with our current expectations, which Izzy will walk you through in more detail.

When we reiterated our outlook in May, we felt comfortable that we could absorb the anticipated impacts from the stronger dollar, the Russian-Ukraine war and the regulatory headwinds impacting the European gambling market.

While we have been able to absorb those headwinds through the first half, we now have further FX pressure as well as the added uncertainty related to macroeconomic environment both in the U.S. and Europe. In particular, gambling merchants are reporting a weaker consumer environment in Europe.

Due to these factors, we believe it’s prudent to revise our guidance. I will touch on the actions we have taken already in my first 90 days in a minute, but I am confident that the changes we are making over the next few months will set us up for growth in 2023. Moving to Slide 4.

It’s been over 3 months since I joined Paysafe and I continue to feel excited by the potential I am seeing in the company. I first want to thank the team for all of their feedback and engagement which has been instrumental in the changes we have made and will make going forward.

A particular highlight for me is so far has been visiting our offices around the world and meeting our teams and clients in person to discuss the opportunities ahead. While we are still in the process of developing our future plan and priorities, we have made great strides. And today, I will share my initial views on Paysafe and the path forward.

Paysafe has a unique position with both in acquiring and issuing construct. When I look at our revenue streams today, we are broadly focused on the right verticals, which have a large market opportunity and high growth rates.

However, while we have many of our assets to power end-to-end payments for our target markets, we have a lot of opportunity to improve cross-selling and fully leverage our assets to monetize and better serve our merchant and consumer customers.

With the strong history, marquee clients and focus on improving in a couple of areas, I believe we can be very competitive in these verticals as we move forward. Turning to Slide 5 for a snapshot of revenue segmentation.

While you look at the markets we serve, we can describe ourselves as largely entertainment focused, which we broadly define as recreational or discretionary spend such as iGaming, digital asset trading, video gaming, travel, retail and hospitality. This comprises about 80% of our revenue today.

And overall, we have a good geographical mix balanced across North America and Europe and with a small, but fast growing presence in Latin America. So, when I think about our focus and who we are as a company, we power the safe movement of money or digital assets for this sector around the world.

It’s in our DNA as a company and it’s where we have great capabilities, attractive TAMs and the right to win as long as we remain focused on helping our customers by delivering a holistic value proposition. Plainly, we need to act as one team with a common goal. Turning to Slide 6. This is how we look at our addressable markets today.

This isn’t particularly new for those of you who have been following Paysafe, but I think it’s worth reiterating that we like where we play. We serve massive TAMs with attractive tailwinds over a long-term, growing at double-digit rates. So, it’s not a matter of repositioning Paysafe into entirely new verticals.

We have plenty of runway to grow in our core markets today, but we must do a better job of executing product innovation and sales to drive growth within these verticals. With that backdrop, let’s move to Slide 7.

Paysafe has a unique two-sided network that brings consumers and merchants together, with many products needed to power the end-to-end payments of entertainment. We have a scaled global offering, which serves 250,000 merchants and 25 million consumers. Additionally, we have more than 1 million access points today.

The challenge for our team is not only to improve the value proposition on each side of the network, but to focus on the synergy opportunities that bring the two sides together. I have had success in my past unlocking value on these two-sided networks and I believe those opportunities exist here as well. On to Slide 8.

Now I will add some additional observations following my first 90 days here at Paysafe. I want to recognize that certain areas of the business have performed quite well. Across the Americas, we have seen strong growth from LatAm, U.S. Acquiring as well as our regulated iGaming market. This region grew 18% in the first half of ‘22.

Additionally, when we look across our top accounts or roughly our top 800 merchants, we are generating healthy double-digit growth at the end of 2001 and we have the opportunity to do much more with those clients to help them drive their revenue.

Lastly, our average monthly users are also increasing, driven by growth in the Americas, fueled by our strategic acquisitions, which has more than offset the decline in users in Europe, which has faced challenges from the regulatory environment as well as the Russian-Ukraine war.

We continue to see underlying improvements and positive trends in the funnel optimization, conversion rates and pricing optimization in target markets. On the other hand, there are few areas that, frankly, were not working well today.

But this also represents a significant opportunity to drive improvement and ultimately future value for our stakeholders. First, despite the progress in recent years to drive platform consolidation, cloud migration and savings, the organization is still too complex and is operated in silos.

Streamlining the business and improving operational efficiency will allow us to fund our sales and product innovation. The team has responded quickly and we have already made a number of organizational updates to simplify our structure and improve our go-to-market model.

User experience is critical for our success and these changes will allow us to improve our focus on employee, consumer and merchant experiences and all interactions with our products and our organization. Second, we have a lot of opportunity to enhance our product innovation. Bluntly, we have lost our way here.

For example, Paysafe was truly a pioneer in the wallet industry, but our focus has been heavily weighted to the merchant side of the network and less so on the consumer side. What’s now clear is we need to bring a balance to our product innovation.

From a product side, we have a great opportunity to really help our customers in a time of dynamic change within the verticals as the world of entertainment moves to mixed reality.

It is past time to return to our early entrepreneurial days, driving innovation to market, developing products that deliver great experience to our users and helping our merchants grow. Finally, we will also rebuild a strong sales engine focused on existing customers, new account acquisition and business development opportunities.

These rebuilt organizations will get the full support of our business lines and operational teams, reducing the friction in doing business with us. We will be hiring additional talent in both of these functions as we move forward and establishing metrics for us to drive growth. Turning to Slide 9.

We are making several organizational changes to our leadership team and in structure with a focus on driving better client experience and enabling our teams to efficiently go after sales and aligning product direction. At the same time, I have been recruiting new talent and I am very pleased to welcome Rob Gatto as Paysafe’s Chief Revenue Officer.

Rob brings decades of experience driving growth for both private and public businesses of all sizes. His commercial acumen and deep understanding of both market and customer needs will make him invaluable member to the team as we transform our business. We will continue to add talent in the next couple of months.

We have also centralized operations under Roy Aston, who has been appointed to the Chief Operating Officer role. This is a meaningful change and will be something we talk about further next quarter. Additionally, we are in the creation stage of a project that will drive significant operational efficiency.

We are not ready to announce yet, but more to come on that next quarter. We also plan to provide additional metrics on the transformation and updates in terms of where we are.

Importantly, we are putting in place an expanded and simplified wallets division as we bring together our Digital Wallets and eCash capabilities into one team led by Chirag Patel, to bring a unique customer-centric proposition in the market. Afshin Yazdian has also taken a broader role leading our global merchant acquiring business.

We view that we have tremendous opportunity with our merchant business as we look at our existing customer base and the potential for future growth. Turning to the path forward on Slide 10. As you can see from the prior slides, I believe we are in a position to take advantage of being in great verticals. We have many things working well.

And now with a focus on just a couple of areas, returning to our roots of product innovation, aligned on user experience and sales, we are excited about our future. Acting as one organization operationally will improve efficiency and allow us to reinvest for growth. I am convinced that we will return to growth in 2023.

With that, I’ll turn the call over to Izzy to discuss our results..

Thanks, Bruce. Let’s start with Slide 12 for a snapshot of our performance versus guidance. Revenue came in at the high end of our guidance range driven by strong growth from U.S. Acquiring, while EBITDA was towards the lower end of the range, primarily reflecting business mix and currency. Moving to Slide 13 for a summary of our Q2 results.

Volume was $33.4 billion, an increase of 7% sequentially and an increase of 3% year-over-year. Volume growth reflects continued strength in North America, where we saw strong growth from the U.S. SMB market as well as continued momentum in the regulated iGaming market.

In Europe, as expected, we saw continued weakness across iGaming as well as softer activity in financial markets and crypto trading. As a reminder, volume does not include our embedded finance solution as a significant portion of the volumes exchange or peer-to-peer transactions, which are not revenue drivers.

Therefore, we have excluded it as not to skew the overall take rate. Total revenue for the second quarter was $379 million, down 1% year-over-year. Excluding the impact from changes in foreign exchange rates, revenue increased 3% as growth from U.S. Acquiring more than offset the decline in Digital Commerce.

Compared to Q2 2021, the regulatory changes in Europe, the Russia-Ukraine conflict and currency impacted revenue by roughly $35 million to $40 million. So excluding these headwinds, revenue growth would have been roughly 8%. The recently acquired businesses are performing well and growing more than 30% year-to-date on a pro forma basis.

Adjusted EBITDA for the quarter was $103 million, resulting in an adjusted EBITDA margin of 27%. The lower margin primarily reflects business mix.

Lastly, free cash flow was $222 million on a 12-month basis or 53% conversion, reflecting higher working capital outflows and due to the lower utilization of bank guarantees and growth in LatAm as well as higher CapEx spend and taxes paid.

We currently expect the full year free cash flow conversion to be around 60%, which is the lower end of our targeted range. On Slide 14 is a year-over-year walk for Q2 revenue by geography. As Bruce touched on earlier, our performance reflects the ongoing softness in European markets, while the rest of our regions continue to grow.

In Q2, our results included an $18 million impact from a stronger dollar. Turning to Slide 15, I’ll briefly touch on our GAAP results. In Q2, we had a GAAP net loss of $631.5 million.

Similar to Q1, our net loss 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. As a reminder, this is a non-cash charge, which has no impact on cash flow, liquidity or our debt covenants.

Beginning this quarter, we are introducing adjusted net income and adjusted EPS in our reporting, which aligns with our peers reporting as well as feedback from the investment community. You can find additional information on these non-GAAP measures in the appendix of the presentation.

Adjusted net income for Q2 was $37.5 million compared to adjusted net income of $66.4 million in the prior year period.

The change in adjusted net income was largely attributable to the same factors impacting adjusted EBITDA as well as an increase in depreciation and amortization expense and higher interest expense excluding, amortization required intangibles and acceleration of deferred debt financing expense.

Let’s move to Slide 16 for a discussion on the segment results, starting with Digital Commerce. Volumes were $111.2 billion, a decline of 5% year-over-year.

Revenue was $191.8 million, a decrease of 13% compared to the prior year, reflecting FX and soft iGaming activity in Europe, which we have also seen in the results from gambling operators who continue to report declines in the region through the first half. In addition, the impact of the Russia-Ukraine war and softer financial trading activity.

Excluding these impacts from Germany, Netherlands, Russia, Ukraine revenue would have increased mid-single digits in constant currency. Lastly, as a reminder, the eCash business faced a tougher comparison than of year-over-year growth relative to the prior year, which benefited from COVID lockdowns in Europe.

Adjusted EBITDA for the Digital Commerce segment was $71.7 million in the second quarter and down 16% on a constant currency basis, reflecting lower revenue, business mix and SG&A from recent acquisitions. On Slide 17, we will move to the U.S. Acquiring segment. Overall, results in this segment reflect continued strength in the U.S.

SMB market, recovery from direct marketing vertical and operational efficiency. Q2 volume in U.S. Acquiring was $22.1 billion, an increase of 8% year-on-year. Consistent with market trends, we’ve seen continued strong growth in verticals such as restaurants, retail and petrol.

Revenue for the second quarter was $187.2 million, an increase of 14% compared to the prior year. Adjusted EBITDA increased 30% to $53 million. Let’s turn to Slide 18 to look at our balance sheet and liquidity. Cash and cash equivalents were $244 million at quarter end. Net debt was $2.4 billion, and our net debt to LTM adjusted EBITDA ratio was 5.7x.

Our primary use of excess cash is to pay down our debt and start moving towards our target of 3.5x adjusted EBITDA, targeting roughly $100 million of debt reduction annually.

In Q2, we completed voluntary debt repayments and buybacks totaling $22 million, and we continue to monitor pricing on both our term debt and notes and will act opportunistically in the second half to take advantage of current trading levels. Let’s move to Slide 19.

When providing our original guidance for 2022, we believe we have taken a conservative approach factoring the potential for market and regulatory risk, particularly those related to our Digital Commerce business in Europe.

When we reiterated the outlook in May, we felt confident that we could absorb the direct impacts from the Russia-Ukraine war as well as a stronger dollar against the euro, which has then declined from our original guidance assumption of 1.17 to a revised assumption in May of 1.12 for the full year 2022.

Between the Russia conflict and the stronger U.S. dollar in the first half, we’ve absorbed $35 million in revenue impacts from those headwinds year-over-year. As we sit here today, we have additional FX pressure as well as uncertainty related to the macro environment and its impact on consumer spending in the U.S. and internationally.

Particularly, we’re seeing negative signals from European gambling merchants, reflecting a softer macro environment and an associated reduction in customers’ rate of spend addition to the expected impact from regulatory headwinds in markets like Germany and Netherlands.

Looking ahead, we also expect FX parity versus the euro for the second half, leading to a 1.05 exchange rate for full year, which is a 10% decline versus our original expectation of 1.17 and a 5% decline from our expectation in May or roughly $40 million in revenue.

For Q3, we expect revenue in the range of $350 million to $365 million and adjusted EBITDA in the range of $90 million to $95 million, reflecting a moderation of growth rate from U.S.

Acquiring, largely offset by a decline in Digital Commerce, driven by adverse FX movements in addition to economic uncertainty, including persistent inflation and its impact on consumer behavior the second half of the year. Now turning to Slide 20.

For the full year, on a reported basis, we expect revenue between $1.47 billion and $1.49 billion or roughly flat year-over-year. We expect U.S. Acquiring revenue to grow roughly 10% for the full year. Digital Commerce is now expected to be down high single digits, not adjusted for FX or roughly flat on a constant currency basis.

For the total company, adjusted EBITDA is expected to be between $400 million and $415 million, reflecting lower margins year-over-year, primarily driven by business mix.

To summarize, while we continue to expect improvements in the second half, our expectations are lower than our prior guidance, reflecting FX and macroeconomic uncertainty, which we expect to partly offset with the growth from our acquisition synergies and seasonal activity in Q4. Now I’ll turn the call back to Bruce for closing remarks..

Great. Thank you, Izzy. I’ll conclude by reiterating that I continue to feel excited by the potential I’m seeing in the company. while we’re facing an uncertain economic environment and have changes in the business to address, I’m confident that the changes that we make over the next few months will set us up for growth in 2023.

We’re committed to keeping you updated on our progress, and we expect to share a financial and strategic update at our Investor Day in Q1 2023. With that, let’s open the call for questions.

Operator?.

Thank you. Our first questions come from the line of Jason Kupferberg with Bank of America. Please proceed with your questions..

Good morning, guys. Thanks for taking the question. Just on the new revenue guide the year. Obviously, you highlighted European gaming and some of the emerging softness there. But does the new revenue guide assume softening trends in verticals outside of European gaming? And if so if you can just detail that a little bit? Thanks..

Yes, Jason, it’s Izzy. Thanks for the question. No, it’s predominantly European gaming because that’s the majority of our digital commerce revenue. and we start seeing the weakness in late May into June. We’re assuming it’s because of just higher cost of fuel, higher cost of food, just causing slowdown discretionary spending.

So it’s predominantly what we see lower activity in the iGaming segment as a whole..

Okay. And then I was just curious on your interest expense expectations for the year, how those may be changing just given some of the floating rate that you have in your stack? And where would you tell us to expect leverage to end the year at. I think it ticked up a hair here in the second quarter.

So just wanted to get a sense of where you think you will be by the end of the year as you pursue the longer-term target? Thank you..

Yes, Jason, I think it ends up in the 0.55556 range. We don’t expect much of a change in interest expense because I think if you look at Page 18, we are basically a 100% hedged against the European rate change and 70% against USD. So effectively in a pretty good position there from an overall interest expense. Now, the base rate does increase.

Again, it will have a little impact, but not a meaningful change..

Okay, terrific. Thank you for the comments..

Thank you. Our next questions come from the line of Darrin Peller with Wolfe Research. Please proceed with your questions..

Hey, guys. Thanks. Bruce, I’d love to hear your perspectives after having now been there a few months.

If you really look at the businesses that you’re operating now, in terms of the medium and long-term opportunity, I know not to front run the Investor Day too much, but what are your key takeaways in terms of what this business is versus what you maybe thought it was coming in after coming out a couple of more months look?.

Hey, Darrin. Look, I would say coming in, I had a pretty good beat on what I was stepping into and what the company was doing. So over the first 90 days, it was really kind of going around talking to customers, employees, trying to get an understanding of where they were in the process. So quite simply I look at the business.

We have a merchant acquiring business platform. And then we’ve got an issuing platform where we drive our wallet business out of. So as I look at that construct I like those spaces, I think we’re in very good verticals. I think, we had some issues around product innovation and sales, which we can address.

We’ve got a lot of success with that in the past. And so I think these things are things that we can get back on the right track. And so I feel very good. 90-days had a pretty good beat of what we did this company. I feel like we have got a great brand to build off of and excited about our team, our employees are very passionate about what we do.

So, I feel very good about where we are..

Thanks. Let me ask you a follow-up, which is a little bit of two parts. One of them is just when we are looking at the digital wallet business, that was a business that when we first looked at the story, thought would be worth grow quite a bit more and be potentially valuation-wise worth quite a bit more than it seems to be performing and trading at.

And you are still seeing annual actives that are sequentially – they are not really – I think they are down again. So, when we think about what can cause an inflection there, I would be curious to hear your view.

And then really, a bigger picture thought would be if there is anything in the business maybe in the merchant acquiring business in the U.S. that should be separated out given the potential valuation opportunity in some of those businesses.

When looking at the different parts, could some of the parts really be worth more and some may be done about that..

Yes. So, let me take the first question just around wallet. Again, I think we had a pretty good understanding as I was coming into where wallet was and what the impacts were. So, we obviously saw the Russian-Ukraine war having a significant impact on our revenue stream there. FX is having an impact on the revenue stream.

And we also had some regulatory issues, most notably in Netherlands and Germany, which created some headwinds for the business on the European side. As I said in the prepared remarks, what I would – my assessment is that we became very much merchant-centric with our wallet.

We didn’t – we weren’t balanced in our experience and focusing on the consumers that we are using the product. So, I think if we can bring a little more balance to our product innovation around that, we can get a pretty good run with the wallet part of our business.

The second part of your question around some of the parts in the valuation, I think where we are today, I think the Board is very supportive of what we have as an organization and our ability to turn this around and get it to grow. And so I think that’s what we are going to focus on is focusing on growing our business.

We do see a lot of commonality between the verticals and the consumers that we have on the merchant side and the consumers we have on the wallet side. So, I think there is a lot of opportunity there for us to really exploit the synergy between those two-sided markets..

Alright. Thank you. All the best..

Thank you. Our next questions come from the line of Josh Levin with Autonomous Research. Please proceed with your questions..

Hi, good morning. I have two questions. Bruce, you talked about the need to enhance product innovation and we built a strong sales engine.

How long do you think that will take to do?.

Yes. Josh, thank you. Look, it’s not going to happen in a quarter, but I think we will be back in return to a solid growth rate in ‘23.

So, I think as we look at the back half of this year, we will have a series of changes, but we will be – we will come out of the year with a solid growth rate and looking to – not to get too far ahead of ourselves, but to have ‘23 be a return to growth for the company. So, I don’t think it’s a long-term problem..

Okay. The second question with regarding weakness in your European gambling, you talked about it being macro. I know last year, there was some increasing competition from account-to-account players. I guess, Trustly was one of them.

Is any of the weakness in Europe due to increase in competition or changes in the competitive landscape, or is it really entirely macro?.

Hey Josh, it’s Izzy. I will take that question. Yes, what we see is macro as a mater of fact a couple of the gambling operators have come out especially in Europe, read-up on them. They are showing 30%-plus declines in Q2 year-over-year.

I mean we also did decline, but not to in that magnitude and their point of software weakness is part of it regulatory driven, but part of it also lower economic activity that impacts gambling capacity for the consumers.

So, from the best we can see and what we have read, what we have heard or we talk to, it’s more a macro-driven event as opposed to anything from a pure competitive environment..

Just one mini follow-up on that, if I might. You mentioned regulations.

This is just sort of the residual effect of the regulations that went into effect last year, they are also part of what’s going on?.

Yes. There are a couple of things. So, clearly, in Q2, we have the Netherlands and Germany overlapping items. But looking at the rest of the year, there was still a fair amount of uncertainty around Germany in terms of operators getting their licenses or relinquishing them. And the second one is more recent.

We have talked about it about where the UK white paper comes out on affordability as well. And as you know, both Germany and UK are relatively sizable markets..

Thank you..

Thank you, Josh..

Thank you. Our next questions come from the line of Timothy Chiodo with Credit Suisse. Please proceed with your questions..

Good morning..

Great. Thanks for taking the question. Hi, good morning. On the U.S. acquiring business, so the volumes were up 8% in the quarter.

I believe the prior guidance for the full year was for mid to high-single digits, but with an aim towards more of the high-single digits is, I believe in the prepared remarks, you mentioned that maybe there is a little bit of a moderating of that expectation. Can you update us on what the expectations are for full year 2022 U.S.

acquiring volumes?.

Yes. Tim, thanks for the question. Yes, it’s probably going to be in the high-single digits still. Growth is moderating year-on-year. We are being cautious around….

Okay. So, still in the high-single, so that would imply exiting the year or call it in the – go ahead, sorry, please, go ahead..

Okay. From a revenue perspective, we should be around also a 10% full year-on-year growth as well..

Okay. Thanks a lot Izzy, I appreciate that. I just want to clarify that, that would imply just call it, a Q4 exit rate of maybe approaching the mid-single digits or so.

Does that sound about right for volume?.

Yes, mid-single digits, probably in the higher end of the mid-single digits, but yes, that sounds right..

Okay. Great. Thanks a lot. And then a final follow-up on the U.S. acquiring business, you have mentioned in the past that you are a large distributor of Clover. Is there any comment you can make around how the Clover business is doing and if that’s gaining share within your mix of U.S.

SMB volumes?.

Yes. As far as the Clover business, I have listened to Frank’s call, live everybody else. I think it’s just like you do them pretty well. But from our perspective of reselling it, I don’t see any real changes in what we have had in Q2 versus what they had prior to. So, there is not an increased demand or decrease in demand.

It seems like it’s a steady state for us..

Okay. Excellent. Thank you for taking both of those questions..

Our next questions come from the line of Jamie Friedman with Susquehanna. Please proceed with your questions..

Hi. Thank you..

Good morning..

Good morning. So, Bruce, in your prepared remarks, you commented on the general progress in the iGaming segment. You had some really good proof points there. I was just wondering if you could elaborate on that a bit. Did you happy to give the growth rate in that segment this quarter? I think it was 40% last quarter..

We – I don’t believe we gave it in the prepared remarks, Izzy probably has the number….

Yes, we – year-on-year, we saw a 25% volume growth in Q2 in iGaming segment. If we go just regulated iGaming is probably – it’s probably close to 70%. So, pretty strong volume growth year-on-year..

Okay. Got it. And then you mentioned the 22 states Bruce, but I think that was the same as last quarter. So, it was to track. I realize you have your – you are pretty disciplined on what you announced in that segment.

But is there – are we closer to the middle than the beginning, or is there a lot more to do in terms of the footprint in the U.S.?.

I think we are still in the beginning of the game here in the U.S. on iGaming. So, I think you probably read Massachusetts just had a positive move with some legislation in the last week. It’s a priority for us is what I would say, and we expect to lead the U.S. in the iGaming market. Probably who leads that for us is doing a great job..

Yes. I appreciate these bridges that you guys are doing, by the way, in the PowerPoint. These are helpful. But I wanted to ask about the assumption in digital on Page 20.

Did I hear you right that you are – I don’t want to mess it up, Izzy, but I thought you said that the digital assumption for the year now is flat on a constant currency basis, down high singles on an as-reported basis. I apologize if I heard that wrong..

That’s right. Jamie, you got that spot on. It’s basically, the currency impact is pretty meaningful that runs all through the digital commerce business..

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

Thank you..

Thank you. Our next questions come from the line of Dan Perlin with RBC Capital Markets. Please proceed with your question..

Thanks. How are you? Good morning. I wanted to just ask, I guess it’s a little bit of a broader question in the context that the product innovation being very merchant-centric and you need to pivot a little more towards consumer centric. That makes total sense.

But it sounds like a lot of the – a lot of the headwinds are just very macro-centric in Europe. And so I am wondering, as you think about trying to create some kind of non-cyclical product innovation that can help.

Are you leaning more towards pivoting away from some of the high-frequency users? Some of the services that you provided historically have tilted towards the – again, I guess I just call them the high-frequency users, typically larger gaming consumers.

And so I am wondering, is there something about the incremental engineering and innovation that also dovetails into the type of user that you might start to attract that you think could help us to counterbalance some of these macro issues?.

Yes. Dan, great question. So, no, we still are going to absolutely have a focus on those VIP users. I think what we want to recognize is the – there are a lot of choices out there today for consumers. We want to make sure that we have a very distinct value proposition to drive velocity to our app.

And that’s really what we are going to focus on is great user experiences to broaden out why people are using that. But the VIP customer is still very important to us, will continue to be very important to us.

But we think there is a lot of opportunity to broaden the usage and create additional velocity in the app, which bring value to the merchants..

Yes, absolutely. I wanted to just also ask a question around the kind of top accounts.

I think you said the top 800 merchants are growing healthy double digits, which made me think – how should we be thinking, actually we are thinking about the other merchants? And to the extent that those other merchants are may be obviously not producing the same level of growth? Are they – or should they be pruned a bit.

Like is there a balance that needs to be set here for the types of merchants that fit into your new strategy? Thank you..

Yes. Let me start off, and I will let Izzy add in as well. But one, I wouldn’t say it’s very unusual. So, when you look at our top accounts and the percentage of revenue that they drive, that’s probably not very unusual compared to any other company out there.

So, we are going to have clients that are highly engaged, highly active, have the opportunity to cross-sell more products into them. And so that makes a lot of sense to me. On the other end of the spectrum, we have got 250,000 small merchants.

Some, of those are not going to be growing anywhere near some of the larger organizations that are really driving growth. And so that growth rate by default is going to be a lower growth rate. So, I think we are in a good balance. What I would say really my overarching point about it is that we didn’t really have a keen focus on our top accounts.

It just kind of happened. And now what we are going to do is bring a focus to what those accounts need to help them grow. And that’s really what we are going to really dial in on..

That’s great. Thank you so much..

Thank you. We have reached the end of the question-and-answer session. I would now like to turn the call back over to Bruce Lowthers for any closing comments..

Thank you very much. Look, thank you for joining us this morning. Greatly appreciate it. I want to thank the team for pulling everything together for the call here today and all of the team at Paysafe for all of their efforts in my first 90 days and look forward to building on the momentum we have started here in the first 90 days.

So, thank you very much..

Thank you. This does conclude today’s teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day..