Paysafe Limited (PSFE) Q1 2024 Earnings Report, Transcript and Summary

Hello, and welcome to the Paysafe First Quarter 2024 Earnings Conference Call. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] As a remainder, this conference is being recorded. It’s now my pleasure to turn the call over to, Kirsten Nielsen, Head of Investor Relations. Please go ahead, Kirsten.

Thank you, and welcome to Paysafe’s earnings conference call for the first quarter of 2024. Joining me today are Bruce Lowthers, Chief Executive Officer; and Alex Gersh, Chief Financial Officer. Before we begin, a reminder that this call will contain forward-looking statements and should be considered in conjunction with cautionary statements contained in our earnings release and the Company’s most recent SEC reports. These statements reflect management’s current assumptions and expectations and are subject to factors that may 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 non-GAAP financial measures. You can find additional information about these measures and reconciliations to the most directly comparable GAAP financial measures in today’s press release and in the appendix to this presentation, which are available on the Investor Relations section of our website. With that, I’ll turn the call over to Bruce.

Thanks, Kirsten, and good afternoon. Thank you all for joining us today. We kicked-off the year with a great start, delivering strong results in the first quarter, reinforcing that our strategy and associated investments are driving momentum in the business and setting us up for long-term success.I’m especially pleased with the progress we’ve made against our established priorities for 2024, including robust hiring across our sales organization as part of our initiative to double the sales team headcount this year. More on this in a moment. In the first quarter, revenue increased 8% year-over-year to $418 million. Our growth outlook for this year reflects stronger underlying revenue performance and we’re seeing this in the first quarter anchored by improved operational execution. In the Merchant Solutions segment, revenue increased 11% and in the Digital Wallets segment, revenue increased 5% or 4% constant currency. Across the business, we saw a strong revenue contribution from our 2023 new client wins, as well as early progress towards our priorities to expand our sales capabilities, optimize the SMB business, drive consumer acquisition and advance our product initiatives. The first quarter adjusted EBITDA increased 4% to $112 million or 3% on a constant currency basis. As expected, margin declined from Q1 of last year, reflecting our planned incremental investments that we previewed with you on our last earnings call and we also had roughly $3 million of severance expense for the quarter. We recorded positive GAAP net income as well as growth across GAAP earnings, adjusted earnings and free cash flow. We further reduced our net leverage ratio and also returned $14 million to our shareholders through our stock repurchase program which we initiated in March. Overall, these are strong results and we’re happy with how the year is evolving. So, we’re pleased to reaffirm our full-year outlook for 2024. Turning to Slide 4. I’ll share an update on our initiatives to expand our sales organization and optimize the portfolio. Starting with SMB, we welcomed 29 new hires to the direct sales team, which is a 40% increase from the comparable headcount at the end of 2023. We also established our referral partners, which will drive more targeted and cost effective approach to Merchant acquisition. One example, we’ve entered into a new partnership with Dun & Bradstreet, becoming one of their preferred payment partners to enhance our lead generation efforts, leveraging their extensive subscriber database and marketing capabilities. This partnership will provide us with access to over 30,000 new Dun & Bradstreet subscribers each month. Additionally, we continue to deploy value-added services to our existing and new customers, which has helped strengthen our take rates in the Merchant Solutions segment to 75 bps in the quarter from 73 bps in Q1 of last year. This complements the work being done to hire direct sales personnel, supporting growth and retention. In Q1, we rolled out a chargeback protection and back-up terminals program to help safeguard merchants against downtime, so they can better serve their consumers. Our key objective within the SMB portfolio is to improve the balance towards our direct channel, so that our mix is less influenced by the lower margin third-party business. Driving down further, there are basically two sub-books within the direct channel of the SMB business. The attrition challenges that we experienced are mostly isolated to one of those portfolios. However, our recruitment efforts and other initiatives to expand the presence across the U.S. and grow upstream to higher value merchants are starting to pay off. We saw a 10% increase in revenue per new merchant signed in Q1 in this direct business. Additionally, we signed new business across more than 20 states, increasing our state presence by roughly 50% compared to what we typically book. We will continue to build upon this progress to drive growth in our direct SMB channel along with the enhanced retention activities. Shifting to our Enterprise business. In the first quarter, we had 67 enterprise wins, which was broad-based across our core geographies and verticals. Roughly 30% of these deals were with existing clients as we continue to focus on opportunities to expand and cross-sell within our existing client base. In summary, we welcomed a total of 55 new team members to the Paysafe sales team in the first quarter across both SMB and Enterprise, which represents nearly a third of our goal to hire 170 people in 2024 and we’ve continued with a strong hiring pace in the second quarter. Our investment spend is tracking with our expectations for the full-year. And, while the revenue benefit is weighted more to the second half, we are progressing well and encouraged by the contributions to-date. Turning to Slide 5 for a quick update on iGaming, which saw another strong quarter of growth and deal activity. Globally, iGaming represents about 30% of our revenue base, which saw revenue growth of 6% in Q1. This was led by North America, which continues to grow by more than 50% in Q1. This included 48% growth in our March Madness volumes and more than 60% growth in our Super Bowl volumes compared to 2023. We also expanded to new states in Q1 including Vermont and North Carolina. We continue to expand our product suite with the launch of our Pay by Bank solution, allowing U.S. online bettors to instantly fund deposits at operator's cashiers directly from their bank account. This further enhances the capabilities of Paysafe’s Gateway, the iGaming payment solution that connects operators to the most comprehensive range of payment methods. Turning to Slide 6. As an example of our white label wallet strategy, in Q1, we kicked-off our partnership with Xsolla, a global game commerce company. Through this relationship, we’re enabling game creators and influencers to receive pay-outs directly into their wallets, supporting seamless spending through an Xsolla branded prepaid Mastercard and facilitating a convenient withdrawal into their bank account. The Xsolla Wallet will be available through a staged rollout across the U.S. and Europe and will soon be offered to gamers who can top up their wallets with a wide range of payment options or send peer-to-peer payments. We are excited about these types of partnerships and the broader market opportunity, including a near-term pipeline of more than 10 merchants. Let’s move to Slide 7. This is an overview of how we’ve evolved our focus and delivery of the PaySafe Wallet Platform. Traditionally, we’ve offered single-use consumer wallet solutions which is now transitioning to a more unified platform for three primary customer segments with all users able to leverage the functionality of the entire platform. Our branded wallets, historically represented by our Skrill and NETELLER consumer Digital Wallets is extending to our prepaid or eCash solutions known as Paysafecard, now offering these users similar online and account features available to our Skrill and NETELLER users. This strategy will continue to create a roadmap for all Paysafe consumer products to transition or graduate into a wallet relationship, while reducing complexity and enhancing customer satisfaction. Leveraging the same functional technology we’re offering merchants our white label wallet to try the same benefit of wallet relationship to their consumers. Xsolla is a key example of this strategy enabling seamless pay-in and pay-out solutions for their merchants and consumers powered by Paysafe. Lastly, the Paysafe business wallet is now offering empowering SMBs to receive acquiring settlement and manage their business finances easily in one place. Collectively, these solutions leverage the breadth of our shared capabilities and assets such as LPM integration, API access and issuing cards and will be supported by a more streamlined delivery and global market approach. Turning to Slide 8. To provide a little more color on this, as we touched on during the last earnings call, we’re driving a more targeted approach to marketing and consumer acquisition, driving our outreach to new channels while delivering more effective localized messaging. As we broaden our wallet portfolio, this will allow Paysafe to strategically market to its new consumer groups and unlock market expansion. And, now that we’ve established three continuous quarters of growth in our classic digital wallet active users, we feel it’s important to transition our metrics to a broader view of the portfolio consistent with how we’re looking at the consumer segment going forward. Here, we’re showing a consumer acquisitions for the first quarter, which is approximately 1.4 million comprising new users from all consumer products and revenue streams. This led to 7.5 million active users for the quarter. While ARPU will vary across products, our focus on building an expanded wallet platform steers us towards a stronger scalable model to drive sustainable growth and value for Paysafe, our merchants and our consumers. Let’s expand upon this on Slide 9. Taking a broader view of what we’ve previously shared, highlighting our progress in wallets, we now represent the entire segment, comprising all revenue and users. This user base of 7.5 million actives was stable year-over-year. Where we’re seeing softness is mainly isolated within the non-account holding users, which is a subset of our users within our prepaid product. We tend to be more one-time in nature and have significantly lower ARPU. We’re focused on converting more of these non-account holding users to account holding wallet consumers, where we’re seeing growth of approximately 5% year-over-year. ARPU for the expanded view of the user base was $26 for the period, which increased 5% year-over-year. This is naturally a lower absolute figure than what we shared previously for the classic wallet such as Skrill, which reflects a higher value user such as gamblers and traders with higher activity and spend levels in a given period. Overall, I would say the message is that we’ve seen stability in the broader consumer base with improvement in engagement. We’re sharpening our strategy and enhancing our wallet platform, paving the way for a more scalable model that drives sustainable growth and greater value for merchants and consumers. As we continue throughout the year, we’ll provide you with more color on the entire consumer businesses. With that, I’ll ask Alex to review the financial results.

Thank you, Bruce. Let’s move to Slide 11, for the summary of our first quarter results. Total volume was over $36 billion an increase of 7% year-over-year. Total revenue was $417.7 million, an increase of 8% or 7% excluding favorable impact from FX and interest revenue. Revenue came in slightly ahead of our expectations for Q1 and included strong contribution from the ramp-up of clients on boarded in 2023 and the overall take rate was largely stable at 1.2%. We continue to have a strong geographical mix with approximately 55% of revenue coming from North America, where we saw the strongest growth, 35% of revenue coming from Europe and 10% from Latin America and rest of the world. Adjusted EBITDA was $111.9 million for the first quarter, an increase of 4% year-over-year or 3% constant currency. Adjusted EBITDA margin was 26.8%, a decline of 100 basis points, primarily reflecting our incremental investment in sales and portfolio optimization. As a reminder, the investment in these initiatives is expected to be roughly $25 million in 2024 weighted to the first half of the year and our spend year-to-date is tracking in-line with these expectations. Adjusted EBITDA also included severance expense of $2.9 million excluding severance expense, adjusted EBITDA margin would have been 27.5%. We expect to continue severance expense as we optimize the business throughout the year. On the LTM basis, we generate unlevered free cash flow of $345 million reflecting 75% conversion and growth of 28%, driven by growth in adjusted EBITDA as well as the timing of bonus payments and one-off tax items. Adjusted net income for the quarter increased 7% year-over-year to $35.3 million and adjusted EPS increased 6% to $0.57 per share reflecting our growth in adjusted EBITDA as well as a $2.5 million reduction in interest expense despite higher interest rates year-over-year reflecting our progress towards reducing debt. Let’s move to Slide 12 to discuss the segment results. Starting with Merchant Solutions, volume was $30.8 billion for the first quarter, an increase of 8% year-over-year and revenue increased 11% to $231.4 million. Growth was driven by strong volume in e-commerce we saw revenue increase of 27% year-over-year reflecting continuous strength in iGaming. The remainder of the segment which is our SMB business increased revenue by 8% year-over-year reflecting our strategic initiatives to expand our sales capabilities and optimize the portfolio as Bruce highlighted earlier. Adjusted EBITDA in Merchant Solutions declined 6% or 5% constant currency to $49.2 million with a margin of 21.3% reflecting those incremental investments we have spoken about. Turning to the Digital Wallet segment on Slide 13, volume increased 4% to $5.7 billion and revenue increased 5% to $190.5 million reflecting 4% growth on a constant currency basis. Performance in the segment largely reflects growth across gambling and ongoing product and engagement initiatives. Adjusted EBITDA for Digital Wallets was $83.3 million in the first quarter, an increase of 5% or 4% on a constant currency basis and adjusted EBITDA margin for the segment was 43.7% consistent with Q1 of last year. Turning to Slide 14 for the summary of our capital allocation. At the end of the quarter, total debt was just under $2.5 billion reflecting debt repayments and repurchases of $15 million during the quarter. Net debt was $2.3 billion and our leverage ratio was further reduced to 4.9 times compared to five times at the end of 2023. Additionally, during the first quarter, we repurchased 989,000 shares for $14 million at an average cost of $14.15 a share leaving us with a $36 million remaining on our repurchase program at the end of Q1. We remain confident that with our solid cash flow generation and disciplined approach to capital allocation, we will continue to reduce leverage while investing in the business and returning capital to the shareholders. That brings me to our 2024 guidance on Slide 15. We are pleased with our first quarter results, which came in ahead of our expectations on revenue. We believe our performance also reinforces that our strategic initiatives and associated investments are working and supporting momentum in the business. We remain confident in delivering our full-year guidance, while also being mindful of microeconomics uncertainty including the potential for unfavorable movement in FX. We continue to expect revenue to be within the range of $1.688 billion to $1.712 billion and adjusted EBITDA in the range of $473 million to $488 million reflecting the adjusted EBITDA margin between 28% and 28.5%. We expect the cadence of growth throughout the remainder of the year to follow our normal seasonal patterns with Q4 expected to be our strongest quarter. We continue to expect adjusted EBITDA margin to be stronger in the second half with some additional severance expected through the first half and at the base of our investment spend moderates. Now, I will turn the call back to Bruce, for closing remarks before we take questions.

Thank you, Alex. To wrap things up, I’ll reiterate that we’re off to a solid start this year with these results. We remain confident in our financial outlook, which reflects stronger underlying revenue growth, anchored by improved operational execution. We are investing in the business to support long-term growth, positioning us for margin improvement as we exit the year. At the same time, we are also strengthening our balance sheet with leverage now below five times. I want to thank our exceptional employees for their unwavering commitment to delivering great customer experiences every day. Thank you very much.

All right. Thanks, Bruce and Alex. Operator, we’re ready for Q&A.

We’ll now be conducting a question-and-answer session. [Operator Instructions] Our first question is coming from David Togut from Evercore ISI.

Could you walk through the take rate dynamics that are embedded in your 2024 revenue guidance? Good to see the uptick year-over-year and the stability sequentially, but any more thoughts there would be helpful?

Alex, do you want to walk through kind of the tick rate? Obviously, we’ve had good stability this year as we started out. So, kind of right what we thought was happening over the last certainly three, four quarters, which had a pretty stable run. Alex, you want to add?

Yes. I mean, the overall take rate for the quarter was 1.16%. And in terms, if you look, if you break it out, between the two businesses, we’ve said that the Merchant Solution business is 0.75%, which is improving from 0.73% in the quarter one of 2023. And, for the Digital Wallet business, the rate went from 3.33% in Q1 of 2023 to 3.36% in Q1 2024. So, you could see that the rates are basically stable and we would expect that stability to continue.

And then, could you just unpack the strategy around sales force expansion? Bruce, you mentioned at the beginning you intend to double headcount overall. Can you dimension what that means for revenue growth once the sales force is fully up and running with new hires?

Yes. So, look, I think as we talked about in the last quarter, we’re really looked at our sales organization being sub-scale. We went, in ’23, we went and hired some people in ‘23. We saw really good metrics around that sales organization and the people that we brought on-board. So, we felt very confident about doubling the size of the organization as we’re moving in through ‘24 to set up growth going into ‘25. And so, I think we’ll stick with the guidance today. Obviously, we’re feeling confident about the guidance we are at, but we’re really looking to set up a great ‘25 from a growth perspective. I don’t necessarily want to give much more metric than that, but we feel very good about the contribution, especially early contribution of the sales people that we brought on board. Feeling very good about what Rob’s doing with that team and very excited to see that team get up to speed quickly and fully for us as we start moving to the back-half of ‘24.

Next question today is coming from Dan Perlin from RBC Capital Markets.

Just, I wanted to maybe parse in a little bit in terms of the strength that you’re continuing to see build in merchant. You talked a lot about it so far. But I’m trying to understand net new business that was signed in, kind of, last year versus the sales and go-to-market motion that you’re changing. And, I know it’s both, but how do we think about what kind of, the early success you’re seeing certainly in this quarter? How much would you attribute to kind of either of those just as we think about building forward throughout the year? Thanks.

I’ll give you kind of my view if Alex had some things he wants to throw in as well. He can certainly jump in as well into the conversation. But we looked at the Merchant Acquiring business last year. We really took some effort to get things operating in a much better way. You heard us talk about reducing time to on-board, building out sales organization, really working on kind of, the product offerings and we feel very good about that. So, we see really a couple of different components of the business. On our e-com side of the business that continues to really perform very well. We’re very excited about that business. We continue to grow our 50% in Q1 here year-over-year. We added two more states. Keep in mind that we added seven states, I believe, Kirsten last year, so that was those states haven’t fully calendarized yet. So, you’ve got some nice tailwinds coming with that business. So, we’re excited about our e-com business, both in iGaming and outside of iGaming. We’re seeing some good wins with that group. When we break down into the SMB space, we see a continued strength in our ISO. And, as we mentioned last quarter, we’re really trying to focus on the direct team. The reason we wanted to focus on the direct team quite candidly is we get much better margins out of that business. So, we’re excited about rebalancing that SMB portfolio with the direct organization. We were also going to focus on driving a little larger merchant, still SMB, just to be very clear. But, when we looked at our direct book versus our ISO book, our direct book was much smaller merchant. So, we’re trying to build that up a little bit. We’ve had good success with that. We also talked about geographic expansion within our states and we made the comment here in Q1 that we saw a nice expansion within that group. So, overall, I think from the sales perspective, with Rob’s team being able to double the SMB sales team, being able to expand the enterprise team, the driving the e-commerce stuff for us, we feel like we’re building a lot of momentum with that sales organization.

And is there any update that you can give us April or early May trends that you’re seeing just in terms of line-of-sight like has the momentum continued? And, are there anything specific you could call out about the more recent data points? Thanks.

We can say that April has only has strengthened our view that we are doing the right things.

Our next question is coming from Aditya Buddhavarapu from Bank of America.

Firstly, you spoke a bit about the SMB direct segment and your efforts to improve the growth there. Could you touch on what you’re doing there and how you think about that for the rest of the year? And then second, just on the investments you’re putting in this year and the benefits you expect about $50 million of revenues for the second half. What’s the, I would say, the line-of-sight and it gives you confidence in delivering those benefits for 2H? Thank you.

Yes. So, a couple of questions there. So, let me, the first one around SMB. Look, I think we as we talked about last quarter, we had very clear insight as to what we thought was going on with SMB and what we needed to fix. I think we have a very good plan in place. We’re executing against that plan and we’re starting to see some return to growth on that direct SMB book in particular. I think we have a little color of that in the earnings materials in the supplemental slides. So, you’re seeing that focus on that group, and we feel very good about the prospects of that as we’re moving through the year that that will continue. We’re putting a lot of sales people in that area. So, we’re obviously convinced that we’re going to get a payoff in that SMB direct area and that will really help continue to give us strong confidence in our ability to execute in Merchant Acquiring as we’re going forward. I think on the second question really around visibility on the Merchant business and Enterprise in particular, we feel very good about it. We see nice tailwinds. We’re seeing the conversion rate of revenue from deals from last year converting at a very high level. So, we have a nice tailwind coming under the deals that we’ve won and we feel very good about our opportunity to go out and compete and win, in the merchant space. And, you’re seeing that, in a couple of different ways. One, in the volume of deals, we’re up 100% over the number of deals quarter-over-quarter in the Enterprise side. And, you’re also seeing a lot of good activity from our team in the market on larger deals as well. So, we’re seeing a nice pipeline of larger deals, deals over $1 million. So, we feel very good about that. And again, just the natural tailwind that we have of the deals that we signed are calendarizing through ‘24 gives us good visibility into what’s happening for ‘24. We feel pretty confident on ‘24.

[Operator Instructions] Thank you. Our next question is coming from Paul Obrecht from Wolfe Research.

This is Paul Obrecht on for Darrin. Can you just start by providing some color on the rollout of the Merchant Wallet domestically? I know it’s still early days, but what is the initial customer response been? Which offerings are seeing traction? And, I guess based on feedback thus far, what are the future opportunities within the pipeline?

Yes, so on the Merchant Wallet side, we have started to roll that out. Feedback has all been positive. We shared some of the feedback, I believe, last quarter as well that the merchants really seem to like the idea. And so, as we’re working through that, we’re seeing really good strength. I think Nicole Carroll and her team are doing a nice job. The app looks really strong. They’ve got some really good functionality, that are starting to pull together for that, that the merchants are excited about being able to manage their business through this business wallet. So, feel good about the wallet and we’ll continue to see that roll out to the front book here throughout the year and then beginning the back book conversion probably towards the end of the year. So, feel very good about the business wallet and kind of how that’s evolving. As far as other insights into the pipeline, our pipeline is probably the strongest that we’ve had since I’ve been here. Certainly, our pipeline is up significantly for us from when we came in two years ago. Again, I think Rob and Chris Petersen and Zak Cutler and Micah, they’re all doing a great job driving that business. We feel very good about the opportunities that we have and certainly the deal sizes that we have are increasing at that enterprise level. So, we feel very good that we’re in deals that we probably wouldn’t have been in two years ago. So, we’re definitely getting more bets and where you’ve got a pretty good close rate. I’d always like it to be higher, but we’re hitting a lot of the pitches that are getting thrown. So, we feel pretty good about the visibility of ‘24 and a really strong pipeline as we’re looking at in the end of Q1.

And, then as a follow-up within Digital Wallets, you talked about the divergence activity between the non-account holding users and the broader user base. Can you just touch on what your approach would be going forward to convert these prepaid users into account holders?

So, what we’ve really started looking at it, we’ve got a lot of energy around these wallet-type features that we’re now offering to our unregistered users. So, the way we looked at it is that the everyday Paysafecard user that is uses it much like a gift card or something like that. We wanted to try to market to them to get them to convert and use the features that were more wallet like, like Skrill and NETELLER offer. And so, that’s where really what we’re doing is we’ve got a whole new marketing approach around consumer marketing. We’re very excited about what we’ve been able to do there. We’re bringing more of the feature functionalities from the wallet to those Paysafecard users and we’re looking at that as a group to really convert them into these higher ARPU type of wallet, the wallet platform from the lower ARPU, Paysafecard. So, very excited about looking at something we were doing before, which was really trying to get people to use Paysafecard, but using that now as a graduation or an opportunity to bring them into the wallet platform and get them to be long-term customers, recurring users and driving more transactions, driving a higher ARPU. So, that’s really been the focus on driving those [wallet activities] [indiscernible] getting those guys converted in.

Next question today is coming from Trevor Williams from Jefferies.

Hi, this is Spencer James on for Trevor. Thank you for taking the question. Are you guys able to hear me?

Hey, Spencer. Yes.

Good to see the inflection in gross margin in the Merchant business. I was wondering if you could talk through some of the drivers behind the inflection to year-over-year growth and any rest of your expectations you have for that line?

Alex, do you want to?

Yes, I think Bruce had mentioned some of the value-added services that we’ve added to the products, right. So, I think this is the idea, that ultimately that’s the idea. What we need to do is we need to make it more valuable and upsell customers on new services. We started doing that and I think, in fact, Bruce mentioned in his remarks and we’ll continue to expand that hopefully that will continue to drive the take rate up and therefore the margin higher. The big thing that we are and again, Bruce had said that many times need to focus on is to drive the direct channel acquisitions and the direct channel versus the ISO channel. ISO is still today the largest growing channel for us, but with a focus on the sales force and the focus on the sales team, that’s the second step of business to drive more direct acquisition. Combination of value-added services and direct acquisition should drive the margin.

And look, I don’t want to lose sight of two that when you look at the wallet side, our margin on the wallet side is very good margin. We’ve got a 70% plus margin on that side and you’re now seeing growth returning to that side of the business. So, very excited about that and that certainly changes a lot of the dynamics that we have within the business. If we can continue to get that growing, we’ve now had three quarters in a row of growth there on that side of the business and as we continue to get that business growing that certainly helps our gross margin profile.

And, as a follow-up, it’s good to see the continued pace of new states opening. I wanted to ask how far along you think you are in getting up and running in these new states and how or put differently, how far, how much more room do you have to run with getting new states up and running?

Well, look, we’re just over 30 states now. We think over time every state is going to allow for sports betting and we’re excited about that. I think, we’re as I’ve said a number of times over the prior few quarters, we’re in the early innings of this whole thing. I think, when you’re seeing really solid growth, I think March Madness is a great example. As we’re starting to get more and more people online, really solid growth year-over-year with March Madness, really solid growth with Super Bowl, everything that we see, we would expect that to continue for quite some time. I think, this is really just the early innings of this whole vertical.

Next question is coming from Timothy Chiodo from UBS.

I have one that is related to distribution for Paysafe specifically and the second one that is more of an industry question around U.S. iGaming. So, for the Paysafe distribution question, the call out of new referral partners on Slide 4, I wanted to see if you could give us some additional context on these referral partners. Are they independent resellers and agents, ISOs? Are we talking about bank partners? And in general, what type of revenue share do some of these partners get? And, then related to that, are they exclusive partnerships often? Are these generally referral partners that are working with multiple, different payments companies and Paysafe would be one of their referral partners?

Yes, Tim. Hey, great question, big question. So, I’ll try to work my way through it. Look, I think on the referral partners, Dun & Bradstreet is a great example of big referral partners, something that we’re really trying to drive is going out to places that we historically had not been looking to increase the span of referrals. So, I think what you’ll see Tim is us continuing to look for those type of relationships. Certainly, we have been building out some of our own agents as well. And, those candidly are very different relationships than what we and more beneficial from a margin perspective to then our traditional ISOs that we’ve done before. We’ve signed a number of ISOs this quarter, so I don’t want to give any impression that we’re not continuing to sign ISOs. We still signed a large number of ISOs for the quarter. We still signed a significant number of for us, a significant number of ISVs for the quarter. But, we’re just being much more aggressive in going out and finding partners to drive business to us. And so, I think you’ll see us kind of looking around at all places. Even my old banking background, you may see us poke our nose there too.

Excellent. I really appreciate that context. The other question was around more of an industry question, not exactly specific to Paysafe, but related to the competitive environment. So, I gather that when a new state opens up for sports betting, right, Merchant Acquirers need to have special licenses to operate in that area of the payments market. How many companies would you say are generally applying for these licenses? I mean, is it a handful? Is it 10? Is it 20? Is it 30? And, clearly, the answer is a much smaller number than the total number of PSPs out there. Only a select portion are applying for these licenses, but was hoping you could give us a sense of the relative degree of competition in this specific niche end market relative to something like restaurants or retail where essentially every PSP is playing?

Yes. I think that’s a great question. I would say there’s not a lot of a large number of people applying for those licenses. Obviously, we’ve been kind of a leader in this vertical, a vertical we played in for over 20 years. There’s just not a lot of folks that have the regulatory framework, competence, understanding of risk frameworks to play in the space. So, it’s a little more limited than your example of restaurants or kind of general retail.

Our final question today is coming from Andrew Harte from BTIG.

Hey, nice quarter. Thanks for the question. Just wanted to follow-up on the white label announcements. It was nice to see Xsolla. Can you just kind of help us size that up and then talk about the pipeline of 10 plus near-term opportunities? How should we be thinking about when we see some of those wins come through? Are they needle moving? Are they smaller size deal, larger size deals? Anything helpful there would be appreciated? Thanks.

Yes, Andrew. Look, when you think about us, one of the nice things is we have a lot of diversity within our client base. So, we don’t really have any singular client that’s over 1.5%. So, it’s all of our clients are relatively small in the grand scheme of things. We love the new partnership with Xsolla. We’re very excited about the opportunity. They have a really strong footprint in the video gaming space. And I think as that continues to progress, they could certainly be a large customer for us with the given context I just gave you on, we don’t really have any that are significant in relation to the total company. So, it could be certainly a top 100 customer for us. We’re very excited about it in that regard, excited about what it can do and excited about what we can do together with them. So, what was the --

And then the other part just on what the pipeline looks like in the white label and I guess how you see that space for the business over time?

Yes, I think the white label pipeline for us is strong. We’ve got probably 10, 12 deals that are relatively in the short timeframe that we’re looking at, working through a lot of them on a daily basis. Actually talked about two of them right before I walked into the room today. So, a lot of activity there. I think there’s a tremendous amount of interest. What we’re trying to do is make sure we pick the right ones, especially here early to get the programs up and running and running efficiently. So, we’re being very selective about how we move forward with the white label wallet, but there’s definitely no lack of interest, I will say that.

Thank you. We’ve reached the end of our question-and-answer session. I’d like to turn the floor back over for any further or closing comments.

Yes. Thank you very much. Well, look, thank you everyone for your questions and participation in the call today. We feel confident in how we’re executing our priorities for 2024. We look forward to keeping you updated on our progress. But, before I sign off, I’d like to mention that today we also published our first Sustainability Report demonstrating continued progress as an organization and formalizing our focus areas and commitments to the sustainability topics that matter most to Paysafe and our stakeholders. You can find a copy of the report within the Governance section of our Investor Relations website. So, once again, thank you. We appreciate your continued interest in Paysafe. We’ll speak to you again soon. Don’t forget Alex, has got a conference tomorrow as well. So, have a great evening and thank you very much.

Thank you. That does conclude today’s teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.