PSFE (2025 - Q1)

Greetings. Welcome to Paysafe 's First Quarter 2025 Earnings Conference Call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kirsten Nielsen, Head of Investor Relations. Thank you. Please go ahead. Kirsten

Thank you, and Welcome to Paysafe 's earnings conference call for the first quarter of 2025. Joining me today are Bruce Lowthers, Chief Executive Officer, and John Crawford, 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 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 non-GAAP financial measures. 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 in the Investor Relations section of our website. Now I'll turn the call over to Bruce.

Good morning and thank you for joining us today. We had a solid quarter to start the year with organic revenue growth of 5%. Our results were driven by strong growth from existing customers while we continue advancing our new product and new sales initiatives and kicked off exciting new partnerships. Adjusted EBITDA was $95 million for the first quarter, compared to $112 million in the first quarter of last year, or roughly flat when normalizing for inorganic impacts. In February, we closed on the sale of our direct marketing business, which creates some noise in the financial results. So John will take you through those numbers in more detail. In terms of new business, the enterprise side of our expanded sale organization is ramping up and winning more deals. In Q1, we signed over 100 enterprise level contracts, which was broad based across gaming, Latin America and broader e-commerce within our core verticals. Overall, we're pleased to start the year-off on a strong note, slightly ahead of our expectations. As you know, we anticipated a lower growth rate and margin profile during the first half of the year. We remain confident that we see acceleration in the second half as we deliver our existing contracts, execute on our sales pipeline, and drive revenue from product initiatives that are already in market. Turning to Slide 4, we've discussed during prior calls how we've evolved our focus and delivery of the Paysafe wallet platform, enabling us to unlock geographic expansion and strategically market to new complementary consumer groups. Traditionally, we've offered single-use consumer wallet solutions, which has transitioned into a more unified platform for two primary segments, with all users able to leverage the functionality of the entire platform. Collectively, these solutions leverage the breadth of our shared capabilities and assets such as LPM integration, API access, and issuing cards supported by a more streamlined delivery and go-to-market approach. Today, I want to share a few examples, starting with our consumer brand in Latin America on Slide 5. In Peru, our PagoEfectivo brand is already a leading cash and bank transfer payment solution. Peru's high-growth payments landscape is rapidly evolving with digital wallets and account-to-account payments projected to become the leading payment methods in the coming years. Our new product launch combines this trusted local brand with Paysafe 's wallet platform, a natural extension designed for a streamlined, user-friendly experience. The PagoEfectivo wallet simplifies payments via eCash and digital wallet peer-to-peer transfers and is the only digital payment experience in the region to offer instant payouts. Turning to Slide 6, I'll highlight our target consumers in the region. First is the consumer who enjoys online gambling, video gaming, and e-sports. This group already comprises nearly 60%of our PagoEfectivo user base in Peru. This is often a cash-based user who wants a safe and seamless transition from cash to digital gaming, and it places a lot of value on fast access to his winnings. On Slide 7, you'll have another example, which would be an everyday consumer who wants to participate in e-commerce, ranging from paying bills to P2P payments to entertainment and streaming services with a preference for cash or non-bank solutions. They often send and receive remittance and P2P payments and desire cash to use digital solutions that are simple, secure, and cost-effective. The launch of our PagoEfectivo wallet demonstrates how we're evolving our payment solutions to resonate with local consumer behavior and market dynamics in the region, underpinned by the rise of digital payments and financial inclusion. We believe this user group represents an expansion of our addressable market in Peru, where e-commerce transaction value is expected to grow at 12% CAGR, reaching $29 billion by 2030. Let's shift gears with a merchant example on Slide 8. Here we're offering merchants the same benefit of a wallet relationship with their consumers by embedding our wallet platform and enabling seamless pay-in and pay-out solutions integrated within the merchant's customer experience. An ideal client profile as a merchant who aims to drive engagement through their own brand and maintain their own front-end while offering payouts and other wallet services delivered by Paysafe 's APIs and embedded into their web and mobile applications. This is applicable across a number of our core verticals, such as gambling, video gaming, travel, or cash-intensive business models that require digital solutions to enable payouts. I'll wrap up the product discussion here, but we'll continue to share more on our product developments and user profiles throughout the year. And as we've said before, while the average revenue per user will vary across products and user profiles, our focus on building an expanded wallet platform steers us towards a more scalable model to create value for Paysafe , our merchants, and consumers. Let's move to Slide 9. Having invested in the expansion of our sales team and capabilities last year, we're turning our focus to execution and productivity. While we are happy with the progress on the enterprise side of the sales organization and pipeline, our growth in e-commerce continues to be very strong at 31% for the first quarter, with our processing growth in the iGaming up over 50% year-over-year, and all other verticals combined growing in the mid-teens. Importantly, we're seeing improved productivity with a 20% year-over-year increase in the annual contract value per active rep in the first quarter. Additionally, as we continue to expand both our go-to-market and product capabilities, we've opened a new door to win acquiring deals in the PayFac space. For example, in Q1, we signed a deal with WireBloom, a payment facilitator operating across Europe and the UK. By addressing the specific needs required by the PayFac business model and establishing a partner centered on trust, flexibility, and risk management, we successfully displaced one of their existing acquirers. So, as our investment in the enterprise side matures, we're seeing that payoff in investment in both growth and rep productivity. On the SMB side, we began our investment late in Q1 in 2024. So we're still in the process of optimizing both our direct and partner expansion. While we are seeing pockets of productivity improvements, such as in our direct tele-sales area and new partner acquisitions, as well as good progress on deal size and quality, the ramp up and consistency is not where it needs to be across all the investment and growth has been tempered by the slower ramp in our in-market direct sellers. We have more work to do as we continue to rebalance and optimize the SMB team and go to market channels in 2025. We have a number of programs underway to improve resource allocation training and lead generation in order to drive higher productivity along with new tools to support relationship management, communication, and customer service. We are also launching a new partnership to enhance our product offering and growth in the SMB space. That brings me to Slide 10. You'll hear us talk more about the new partnership agreements throughout the year, and we kicked-off a couple of exciting collaborations already in Q1. First is an expansion of our long-term relationship with Fiserv, starting with the integration of Fiserv's Clover Capital Solution, providing SMBs with improved access to capital to help them scale and grow. Our broader plans include several initiatives focused on empowering SMBs while supporting international expansion and product strategies for Paysafe and Fiserv. And then on the enterprise side, in Q1, we've expanded our partnership with Tilled to deliver frictionless payments and PayFac solutions to ISVs across the US and Canada. Lastly, as an example with our consumer brands, we're now live with Selfpay's self-checkout kiosk, improving the quality and reach of our distribution network in Ireland. We've also expanded our online distribution of our eCash products across several countries through new integrations with video gaming voucher marketplaces, such as [Start Select and scheme] (ph). We're excited to build upon these relationships in the coming months. Our strategy around partnerships has been in an area that we haven't fully leaned into and leveraged in the past. So this is great momentum as we revamp our approach and focus on partnering for growth. I'll wrap up here. You can see we're off to a good start. We've had a very active quarter and a lot of change, and we're excited to deliver on our priorities for 2025. With that, I will ask John to review the financial results.

Thank you, Bruce. Let's move to Slide 12 for a summary of our first quarter results. On a reported basis, revenue declined by 4% to $401 million. When we exclude the inorganic headwinds from FX, interest and the divestiture, revenue increased 5% organically. This was a little better than we originally expected, driven by modest outperformance from the ISO sales channel. Overall organic growth in Q1 reflects continued double-digit growth in e-commerce and 3% organic growth in digital wallets. This was partly tempered by flat performance in SMB. Adjusted EBITDA was $95.2 million and adjusted EBITDA margin was 23.7%, which was also slightly ahead of our expectations due to the timing of certain cost items that fell into Q2. When we exclude the impact of the divestiture, adjusted EBITDA would have been down 3% on a constant currency basis, driven by 190 basis point decline in gross margin, primarily due to two factors, lower interest revenue, which accounts for 40 basis points of the decline, and business mix, which accounts for 150 basis points. Specifically on the business mix, we were mainly referring to an unfavorable mix within the merchant solution segment due to growth in the ISO channel. To summarize, The underlying EBITDA was impacted by $17 million of inorganic items, 70% of which were attributable to the divestiture, and would have been roughly flat year-over-year, excluding those impacts, with the margin decline reflecting business mix. Turning to cash flow, we generated $57 million in unlevered free cash flow for the quarter with a 60% conversion of adjusted EBITDA and relatively inline Q1 of last year, which was 62%. On an LTM basis, unlevered free cash flow was $288 million, reflecting 66% conversion and in-line with our expected conversion range. Adjusted net income was $20.9 million, or $0.34 per share, down from $0.57 in Q1 of last year, as the adjusted effective tax rate increased to 25% compared to 21% in the prior period. Absent the inclusion of the BEAT tax provision this period, the tax rate would have been 22% roughly in-line with last year. Turning to Slide 13 for a breakdown of our Q1 revenue drivers. Existing customers contributed 13% to our growth and embedded in this category is also the remaining contribution of direct marketing, which was about $5 million, and more than offset by the headwind from interest revenue and FX. As you can see, this offset the impact of attrition, which reduced revenue by approximately 12% in the quarter, slightly higher than what we expect for the full year. We also had modest growth from new customers and NPI, contributing 2% to revenue growth, which we expect to accelerate to double digits as the year progresses, given our new sales pipeline, recent product launches, expanded partnerships, and other initiatives. Turning to Slide 14 to discuss the segment results. Merchant Solutions volume increased by 11% to $34.3 billion, reflecting strong growth in e-commerce, resulting in organic revenue growth of 6%. As a reminder, e-commerce verticals such as North America iGaming bring a lower take rate profile, and this is largely why volume growth outpaced revenue. Adjusted EBITDA for the segment was $29.4 million, with an adjusted EBITDA margin of 13.5%. There's a lot of noise here, but looking past the impact of the divestiture, the main drivers, the mix had win due to softer performance in SMB direct channels versus the ISO channel. Aside from that, SG&A for the segment was elevated in Q1, largely explained by the hiring across the sales organization in 2024, as well as some stranded costs related to the divestiture. Going forward, as the sales productivity improves and we lack the investments, we expect the margin to increase throughout the year. Turning to the digital wallet segment on Slide 15. Volume increased by 5% to $5.9 billion, and revenue from digital wallets was $187.6 million, an increase of 3% on an organic basis, with a stable user base of $7.3 million. Adjusted EBITDA was $82.5 million, down 1% year-over-year, reflecting a $6 million headwind from interest in FX while the margin increased slightly to 44%. Turning to Slide 16 for an update on our capital allocation. At the end of the quarter, total debt was just under $2.4 billion, reflecting principal prepayments of $23 million during the quarter. Net leverage increased slightly to 4.9 times, driven by the divestiture of our direct marketing business, as well as the strengthening of the euro at quarter end. The stronger euro at the end of March impacts our euro debt balances translated back to U.S. Dollars. Our average interest rate is just north of 5%, which is 70 basis points below the interest rate at this time last year. Lastly, we repurchased 613,000 shares during the first quarter and an additional 693,000 shares in April, returning approximately $20 million to shareholders year-to-date. That brings me to our 2025 guidance on Slide 17. We are pleased with our first quarter results, which came in slightly ahead of our expectations and growth in April trending largely in-line with growth in Q1. We remain confident in delivering our full year guidance while also being mindful of macroeconomic dynamics. We've had some puts and takes since the time of our initial guidance. FX rates have been volatile and while the euro is somewhat stronger than we saw at the beginning of the quarter, this modest potential tailwind is partly offset by a decrease in interest revenue given where the rates have moved and the fact that interest revenue contribution flows straight through to EBITDA. The attrition in SMB has been slightly higher than our original assumption, But as we drive our initiatives and implement new tools for relationship management and service with SMBs, we expect this to improve. With that said, we remain confident in our full year guidance, which you'll see on this page is a repeat of what we said on our Q4 call. Finally, turning to Slide 18, we're providing additional color on what we expect for the rest of the year, appreciating that we've already guided to an acceleration for the second half. Based on our year-to-date results and what we see for the remainder of the second quarter, we expect the second quarter organic revenue growth to be similar to Q1, with adjusted EBITDA margins in the first half to be around 24%. So that leads to organic growth in the second half, accelerating to the range of 8% to 10%, as we said on the Q4 call, with adjusted EBITDA margins exceeding the guidance range in the second half. We expect the fourth quarter to be our strongest quarter for reported growth, organic growth, and margin performance. So let me walk you through the drivers. First is the overall growth and operating leverage as we deliver on our existing contracts, execute on our sales pipeline, and drive revenue from partnership collaborations, as well as product initiatives that are already in market, as we continue to make progress towards our long-term target to generate annual revenue contributions of at least 10% from products released in the last three years. The second driver would be a slight mix improvement at the segment level, where we expect a stronger contribution from digital wallets in the second half. The third major driver is margin improvement in merchant solutions with an expectation that our initiatives to improve the growth profile, attrition, and channel mix will lead to an acceleration of gross margins in the second half. Finally, we continue to be focused on operating expenses. Fortunately, we completed our key investments last year. And with that behind us, we're focused on being very disciplined on the cost side. With that, I will turn it over to Bruce for final remarks.

Thank you, John. I want to thank our team for staying focused in executing our strategy while successfully completing the sale of our direct marketing business. We remain confident that we'll see acceleration in the second half as we deliver on our product and sales pipeline, launch new partnerships, and drive greater scale and efficiency throughout the organization. Now, let's begin the Q&A session.

Thank you. The floor is now open for questions. [Operator Instructions] Today's first question is coming from Andrew Harte of BTIG. Please go ahead.

Hey, thanks for the question. It's good to hear how the sales pipeline remains strong. I think last quarter you called it record levels. I guess, Bruce, can you frame up how much of that pipeline you would consider booked but yet to go-live. I guess ultimately how much visibility do you have in that pipeline of actually achieving the second half acceleration, and that's embedded in guidance? Thanks.

Yeah, Andrew, good morning. And I'm a little bit under the weather, so bear with me if I cough here. But what I would say, we have pretty good visibility. We had a really strong quarter, as you heard, in the prepared remarks from a sales perspective. Right now in Q1, we had really strong enterprise sales. Even as we looked into April, we had the strongest SMB sales that we've had in over a year. So we have really nice visibility as we onboard these merchants and really start ramping up the production of those. So I think it's really a nice chart that John and Kirsten put together talking about the revenue walk and you can see very clearly where you had the existing customer base performing a little better than anticipated, which is really a good sign for the back half of the year. And then you can see the new customers coming on. That obviously will ramp up as the year goes through. So we feel very good and have very good visibility so far. Strong pipeline as we headed into Q2. So overall, it's looking very good.

Thanks. And then, John, appreciate the comments about EBITDA margin moving parts throughout the year. Some of it I think segment mix. The other part you talked about SMB versus the ISO channel. Can you just maybe share with us your early expectations for 2Q EBITDA margin and kind of where you think it could be exiting the [year at] (ph) based on those different moving parts? Thanks.

Sure. So, I think our expectation is Q2, EBITDA margin is going to look largely as it did in Q1. And then in the second half of the year, we think we ramped to levels both in Q3 and Q4 that are kind of above our full year guide. So think, also think about it as, you know, we continue to say it's a little bit more Q4 weighted than Q3. So our expectation is Q3, the margins are going to be a little above our guide and Q4 higher than that. So probably closer to a [28 to 30] (ph) range.

Thank you.

And that's maybe give a little color there. Probably obvious based on our discussion of the cost structures, but we see the elevated costs in the merchant segment in Q1 largely working out in Q2 and Q3. As the gross margin improves that we're talking about, that should start to flow through with gross margins in the merchant business going up from the low 40s into the mid-40s.

Oh, well, thank you.

Thank you. The next question is coming from Trevor Williams of Jefferies. Please go ahead.

Great. Thanks. Hey, guys. I wanted to ask on e-commerce within merchant, if we could just get an update on what the e-com mix is within the merchant segment today. And then bigger picture, clearly you're still having a lot of success within the iGaming vertical. But if you could remind us just on how you're primarily coming to market both within iGaming and kind of more broadly and the key points of differentiation, what sets you guys apart? Thanks.

John, do you want to just give a revenue mix of the e-com?

Sure. Thanks, Bruce. I'd say it's about, you know, about a quarter on a revenue basis in Q1 of the merchant segment. And that is slightly higher than that on a gross profit basis, if that's helpful.

Right. And then within the e-commerce, just to click in on that, you've got iGaming is one of the biggest single verticals, right? Probably half-ish of that e-com, and then the rest would be really split amongst our other core verticals.

Okay, terrific. And then maybe if we could go back to some of the new distribution partnerships within merchant, Bruce, maybe if you could frame for us just the significance kind of at the partnership level, if any of those in isolation are expected to be at a needle moving over the course of the year. Yeah. And if you could just kind of frame the longer-term significance of some of those with Clover and Tilled. Thanks.

Yeah, look, I think as we moved into this year, we really were focused on a few things. One of those were really our product initiatives or MPI initiatives, new product initiatives. And part of that is the build out of our partner or organization and trying to drive more product into our salespeople's hands to go help our merchants really be successful. So as we looked at this function, we see things like Tilled, which open up new TAMs for us that allow us to go after some of these PayFac that we didn't really have the products for now that we do. We've got great partnerships and expansion. I think probably everybody saw some of the announcements in recent days with Fiserv and expanding our capabilities with them and offering their capital product to extend loans to the SMBs. So we think that all of these things are going to contribute as we move forward in a significant way and very optimistic about this is part of kind of TAM expansion as we look at it as things that we have not done historically but were needed and really part of that long-term driver of driving revenue from products released in the prior 3 years to north of 10 percent. So this is really going to be a focus for us as we go forward and something that we view as a critical component of our growth strategy.

Great. Okay. Thank you, guys.

Thank you. The next question is coming from Darrin Peller of Wolfe Research. Please go ahead.

Guys, thank you. First, maybe we could just go back and hone in a little more onto the SMB side you touched on it just a moment ago with incremental product you're putting in their hands and in the hands of your reps, but thinking about you know what you what the strategy is for the SMB piece of the business now going forward and what you – what kind of prospects you see for it. And if it has enough product, whether it's Clover Capital or – like you just mentioned, what other needs do you have to find to really provide the best service, the best offerings that can compete effectively. And what should we expect as investors and analysts in the SMB side of the business in terms of market share going forward?

Sure, Darrin. So let me back up. And, you know, when we look at the SMB space, traditionally we have, or historically we have been a reseller of other solutions. We're very fortunate to have the opportunity to sell Clover. Clover does very well for us from a growth profile. We've also talked about the fact that when you look at our SMB portfolio, we are subscale from a sales perspective historically, And we were really driving the vast majority of our revenue through the ISO channel. And what we were trying to do is rebalance to sell more direct on the SMB side. So we made an investment last year to really increase the size, which we'd still be on the small side in comparison to others, but build up that small side to really drive the SMB direct versus the ISO. It's not that we're trying to move away from the ISO. We love the ISO organization that's doing a great job. We just want to be more balanced. And the reason of that going direct is the margin is much greater for us if we're going direct than through the ISO channel. And so we're really focused on a couple of things. One, building up that SMB direct side. We also, if you remember last year, we talked a little bit about when you looked at our SMB direct channel, we were really driving a lot of micro merchants, and we've started moving upstream a little bit on that. And so you can see that our revenue for mid has increased and the team is really repurposing or refocusing our sales efforts on channels that are still small businesses, but they're bigger than the micro merchants that we had before. Another reason for that, one, obviously the revenue is larger, but two, that little larger SMB is a more stable merchant base for us. So it doesn't turn over as much. So we feel like we're making some good progress. We've tried some things candidly that were very new to us, didn't pan out the way we wanted. We regrouped and made some adjustments to what we were doing. As I alluded to earlier or stated earlier, we had a really strong March and April. April was the best SMB mid-month that we've had in well over a year. So it's nice to see that the actions that we're taking are starting to come to fruition. So we feel very good about the SMB space. We have a very small market share, but we have a world-class product that we can go sell, and we feel very good about our opportunities to sell in that space.

Yeah, it's good to hear about April and the strong bookings and sales. I guess just to be clear, it sounds like what you're saying is you believe you have the product now you need to have to go-to-market and be as differentiated as you need to be. I mean, that's still sounds like just because we hear more and more about competition at the point-of-sale with newer POS systems, obviously, Global's trying Squares now, saying they're going to allow others to resell. So does Clover still have what it takes for you guys to be a differentiated asset, I guess is my question. And I mean, are there areas you still need to invest further from a tax standpoint in that piece of business. Thanks again, guys.

Yeah, again, I'm a big believer in Clover. I think when you look at the growth profile of Clover is a mid-team kind of growth profile for the mid-term. We think we can continue to get better at selling that and expand our footprint. So we feel that Clover's got a great product. They're investing a lot into the product. We love the fact that they're adding surround services. We're adding some surround services in as well. And we feel very good with that product. Not to say that there aren't others. Not everybody is going to want Clover. I think that is a differentiator for us is that we have other point of sale systems as well. So it allows us to compete on the optionality standpoint, but we feel very good about the product sets that we have as we line-up in the SMB space today.

Thank you. The next question is coming from Timothy Chiodo of UBS. Please go ahead.

Great. Thank you. Also want to hit on the Clover. Hey, good morning. Thank you. I also want to touch a little bit on the Clover Partnership. So clearly capital is one of the offerings, right? But there's also software packages and there's payroll. There's their recent partnership with [ADP] (ph) there's the whole cash flow central offering. So there's a lot more there to Clover than just a point of sale. And now that you're adding the Clover Capital aspect, can you talk about what of the other aspects that I mentioned? Are some of those available to merchants that receive Clover through Paysafe ? Are those other software packages available? Are those on the come? That would be really helpful.

Yeah, Tim, a great question. What I would continue to say is we have a very strong relationship with Fiserv. They're wonderful partners. We look to continue to expand our product offerings from them. I think just last week we did a press announcement about doing a digital wallet for Clover customers. So you'll start to see us pushing some of our product into the Clover base as well. So, but overall, I would expect to continue to see that evolve and strengthen. And we will be hopefully talking about this relationship for a very long time. They're just an outstanding partner. And we are delighted to have the opportunity to be one of their primary resellers of the Clover solution.

Okay, all right. Thank you, Bruce. The follow-up is more of a, I mean, it's a Paysafe question, but it's also sort of an industry question. And you talked about direct and indirect and talking about how the margins are much better for you on direct, but could you talk about the commission payout slash the unit economics? So on the indirect side, I gather there's an upfront bounty and then there's this kind of residual that gets paid out for some period of time. And I don't know if that period is forever, if it's a certain amount of years, but until that merchant churns or how the time is agreed to there. And then how that's different on the direct side, meaning a salesperson, I'm assuming has a salary and some commissions, but what is the balance of upfront commission versus trailer and how do the timing differences look across direct versus indirect, meaning you get one forever, you get one for a certain period of time, that sort of thing.

Yeah, excuse me. On the residual, the ISO channel, the ISOs do have a payment. Each one of them is different, So it's difficult to say just the exact construct of them and probably don't want to go into too much detail to be candid with you, just everybody has a different spin on how they do it. But there is an upfront piece that happens with each deal and there is a residual that goes over an extended period of time on their book of business. On the direct side, the amount is very different. So the residual is usually, if there is a residual is very short-term. These commissions on the direct side of the house are all paid just as the ISO, they are all paid on actual revenue process, not ACV. So this is just, they only get paid a piece of what actually happens with the deals that they sign. So the commission structures are very different from ISO structure versus the direct channel, largely because the ISO is handling a variety of different functions around the go-to-market strategy, versus on the direct channel, we're handling all of those things ourselves. So there is more opportunity for us as we drive that. I don't know if John wants to comment any further on the commission structures?

Yeah, Bruce, I would just say it's probably obvious based on what Bruce said, but to put a math point on it, that you're going to then see the margin flow through on the direct business accelerates as the commission payouts roll off because those are shorter term than the residual structures on the ISO side. So obviously your commissions will continue to build as sales are growing, but over time that should benefit margins.

Perfect, that was really helpful. Thank you both.

Thank you. The next question is coming from Matthew Inglis of RBC Capital Markets. Please go ahead.

Hey, good morning. This is Matthew Inglis on for Dan at RBC. So on the 10% growth for the full year from new customers and products, can you give us a deeper sense and maybe some specific examples for what gives you the most conviction for growth to ramp specifically within the new products part of that 10%?

Well, yes. So a couple things I would say. One, we're having a very strong sales start to the year. We had a very strong Q1 on sales that happened. Obviously, in that column, everything was really driven off of new sales. The product gives us things to go sell, but it is really all sales driven. We have a bigger sales team. As we pointed out, we've been more productive with the sales team on the enterprise side. They're producing more per rep and producing more in aggregate. So that gives us a great visibility into how things are moving forward. We are also adding a lot of new product, either through partnerships, as we just talked about a little bit on the partnership side, things direct. One thing that we just launched is the PagoEfectivo wallet. We feel very excited about the opportunity with our team in Peru to really expand our product offering down there. We see a lot of activity around our wallet platform. So there's a lot of growth opportunities there as we're signing up new customers, new opportunities, like with Fiserv on the Clover side. So we feel very good about the products that we have and the opportunities that are emerging for us as we go into the back half of the year. But I would say that we have very good visibility right now on kind of the sales and product side as we go, we're halfway through Q2. So we feel pretty solid about the products that we have, what's on our roadmap, and what's coming in Q2 and Q3 to kind of finish out the year from a product standpoint.

Got it. Thanks. And on the Pago wallet in Peru, can you give us any sort of expected timeline and maybe a magnitude for growth contribution from it? And I guess more broadly, how much of LatAm is part of that 10% expected growth from new customers and products in full year 2025?

Yeah, so I think LatAm has been a nice producer for us in mid to upper single digits in Q1. I think as we go forward, we are looking at to expand in the kind of low double digits, mid-teen double-digit growth as we go through the year. So, you know, overall, that's a nice growth business for us. It's doing very well. And we are excited about Pago as far as what, PagoEfectivo Wallet, what that'll add to that dimension down in that market. So as you know, we also got license in Brazil. So the LatAm market is 1 that we're very bullish on, we feel like solid growth opportunities in the LatAm market. John, anything you want to add?

No, I think that's clear.

Got it, thanks guys.

[Operator Instructions] Our next question is coming from Jamie Friedman of Susquehanna. Please go ahead.

Hi. Good morning. Good morning, Bruce. I'll let you save your voice. John, I'll ask you a couple of financial ones. I want to ask you about this slide 23, the merchant KPIs that you're introducing, excluding direct marketing. I was just wondering -- I think this is a new slide, it's new to me at least. So I'm wondering how you would have thought of this prior to the direct marketing disposition versus now. And yeah, maybe if you could just elaborate on a couple of these, like the billable mids-target and the revenue per merchant.

Apologies, Jamie. I'm trying to make sure I'm on the right slide. This is what it says, KPI is Q1 2025. It's Page 23.

Okay. So, I think, look, this is what you're seeing is, like a couple of things that were mentioned in the call earlier around, you know, where we're doing some work. The billable mids number In the low single digits down is a number we obviously need to move the other direction. And that's largely driven by the attrition being a little higher than we thought as well as the SMB sales being a little less than we thought so far. Those are -- those tend to be big chunk, chunky groups of merchants. As Bruce mentioned, sometimes on the much smaller end. We think the net revenue retention level is still very healthy. That's something that we're looking at as we think about each different subsegments of our business as a health indicator. And then on the revenue per merchant and revenue per new merchant, these are metrics, as Bruce was talking about, is trying to go a little bit upmarket, not really upmarket outside of SMB, but into the larger of the small. Those are metrics we're going to be looking at there too.

Okay. And then maybe midway through your prepared remarks, it sounded like you had or are introducing some additional incentives or systems to the sales force to accelerate production. Could you just elaborate on what those are and how the investment that you had made in sales in -- I think the second half of 2024 is returning relative to what you had expected?

Sure, so I think the, and I guess I think of it as really the investment for the whole of 2024, but also including the first quarter because we had a number of hires in Q1 of 2024 as well. So, as we look at that, I probably want to be a little general about the specific things we're doing in that area, but I think as Bruce mentioned, we tried a number of things late in 2024 on the marketing side, lead-gen side. Some of those things were going to potentially get us, you know, better productivity at lower costs. Those things didn't work. We moved back to some of the metrics that we know and have worked. I think that's shown, as Bruce mentioned in April, it showed as we got through Q1 as well. But those are the kinds of things that tend to have a tail for several months into the beginning of 2025. I think we're also, you know, to be specific, doing some things on the personnel side in the mix over there on the SMB piece and where they're deployed, how we're hiring, that sort of thing. So I'm not sure it's a -- I'm not sure we should think about it as a change in, a major change in comp structure or incentives in the sense that we think our financials are going to be different is really just trying to find the right dials to turn to get those different sort of subsegments of SMB performing, as well as the pieces that are performing very well.

Yeah, Jamie, I just add, you know, when you look at the enterprise side from the investment of salespeople, that has worked wonderfully, right? So that is, not only are we seeing expansion of our ACV that we've signed up, but we're seeing expansion of the ACV per rep that we've signed up. When you look at our tele sales or direct sales in SMB, we're seeing the same thing. We're seeing really nice production out of that group, or seeing expansion within that group. We have an in-market group that we also invested in that still worked under process, but we have a lot of confidence around what we've been doing, how we're redeploying some of the assets where they didn't work in particular markets into markets that work perhaps better than we anticipated, such as Latin America and some of the enterprise things, or even in the tele sales. So I would say as we look at it, we are probably at expectation, but with the possibility of outperforming what our expectation was on the return on the investment as we move forward.

Got it. Thanks, Bruce. Thanks, John. I'll drop back in the queue.

Thank you. At this time, I'd like to turn the floor back over to Mr. Lowthers for closing comments.

Yeah, thank you. And first of all, I just want to thank our team for the wonderful job this quarter. Really a lot of distractions whenever you're divesting a particular asset or business. The team did a remarkable job working their way through that, and we have really a nice clear path for growth as we're going forward. So really solid quarter. I want to thank everyone and look forward to talking to everyone soon. Thank you very much.

Yeah, thank you. And first of all, I just want to thank our team for the wonderful job this quarter. Really a lot of distractions whenever you're divesting a particular asset or business. The team did a remarkable job working their way through that, and we have really a nice clear path for growth as we're going forward. So really solid quarter. I want to thank everyone and look forward to talking to everyone soon. Thank you very much.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.