Paysafe Ltd. Q1 FY2026 earnings call

• Overall Financial Performance

  • Q1 2026 total reported revenue was $442.7 million, a 10% increase year-over-year, with 6% underlying organic growth after normalizing for the $7 million data licensing deal and FX impacts. Adjusted EBITDA increased 4% to $99.2 million, with a 130 basis point margin decline driven by $6 million in higher marketing/IT investments and $10 million in increased credit losses from the new risk management platform transition. Adjusted EPS grew 21% to $0.41, and unlevered free cash flow increased 17% to $67 million, with a 67% conversion rate of adjusted EBITDA in line with targets. The net leverage ratio improved to 5.2x from 5.5x in Q4 2025.

• Strategic & Product Progress

  • Digital wallet adoption is strong across Europe, with the product live in 18 countries and additional launches planned for 2026. Nearly 60% of consumer support contacts are now resolved via digital virtual assistants, a 25% increase year-over-year, improving customer experience and operating efficiency. The company positioned itself to support AI-native agentic commerce via a new partnership with Norwegian Air, built on open payment protocols that enable any AI assistant to process end-to-end payments for merchants.
  • Latin America is a core growth market, with active users reaching a record 3.3 million in Q1 2026. The region is seeing strong growth from gaming and e-commerce, driven by local product enhancements (including the Pago Efectivo Wallet launched in 2025), targeted marketing, and successful cross-selling enterprise initiatives. The company expects continued double-digit growth in the region throughout 2026.
  • iGaming remains a key growth driver, with global revenue up 20% year-over-year, including 28% growth in the merchant segment. The quarter saw robust activity during the NFL playoffs, Super Bowl, and March Madness. New partnerships were announced, including a collaboration with MoonPay to enable crypto and stablecoin deposits for U.S. iGaming brands (with 5 operator pilots underway), and new/expanded merchant agreements with Hard Rock, Golden Nugget, and Cheddar. The company also secured high-profile esports sponsorships to build brand visibility.
  • The two-year brand unification transformation (shifting from a fragmented siloed structure to a cohesive focused model) is delivering measurable results in priority growth markets, including Spain, France, and Latin America. AI is being leveraged to improve marketing efficiency via automated segmentation, smarter targeting, and personalized customer experiences. Revenue per FTE increased 13% year-over-year (FX-normalized), demonstrating productivity gains from prior transformation work.

1. Digital Wallets: Q1 2026 transaction volume was $7.1 billion, a 19% increase (9% in constant currency) year-over-year. Revenue increased 15% to $216.3 million, representing 48.9% of total company revenue. Organic growth was 7%, driven by a 9% year-over-year increase in 3-month active users, led by strong performance in Latin America. Average revenue per user increased 6% (aided by foreign exchange), while transactions per active user remained flat. Adjusted EBITDA for the segment was $94.9 million, up 15% year-over-year (4% in constant currency), with an adjusted EBITDA margin of 43.9%, a 10 basis point decline year-over-year despite higher consumer marketing investments.
2. Merchant Solutions: Q1 2026 transaction volume increased 9% to $37.2 billion. Organic revenue growth was 9% (approximately 5% when excluding the $7 million one-time data licensing deal), and the segment contributed the remaining 51.1% of total company revenue. Adjusted EBITDA for the segment was $28.1 million, down from $29.4 million in Q1 2025. Underlying gross margins declined after normalizing for the data deal benefit, due to a business mix shift toward stronger growth in the lower-margin ISO channel.

• Management reaffirmed its full-year 2026 guidance, expecting total revenue and adjusted EBITDA to grow in the 5% to 8% range, with double-digit growth in adjusted EPS.
• Q2 2026 revenue growth is expected to be moderately below the full-year guidance range at approximately 4%, due to lapping Q1's one-time data licensing deal, strong FX tailwinds, and seasonally high sports volumes, bringing first half 2026 expected growth to 7%.
• Full-year operating expenses are weighted to the first half, with a $14 million year-over-year increase for marketing and IT investments. Adjusted EBITDA for the first half is expected to be roughly flat year-over-year, while second half adjusted EBITDA is expected to come in ahead of consensus, supported by a seasonally strong Q4 and investments already made in consumer marketing.
• Reducing net leverage is the company's top capital allocation priority for 2026, with the net leverage ratio expected to impact valuation meaningfully over the next 24 months.

• Increased credit losses were incurred during the transition to a new risk management platform in Q1 2026. Management noted these losses were contained within a few weeks starting in March, and do not expect the issue to have a lasting impact on business as risk models mature.
• Lower-margin ISO channel growth has pulled down aggregate merchant segment margins in the first half of 2026, creating pressure on overall adjusted EBITDA margins near-term.
• The impact of the 2026 World Cup on consumer acquisition and revenue is uncertain, so management has taken a conservative approach to modeling any incremental benefit from the event, given the company's larger current scale compared to prior tournaments.
• Forward-looking statements are subject to unknown factors that could cause actual results to differ materially from management's current expectations.

Q: What is the expected cadence of merchant segment margins for the rest of 2026, and how will business mix impact this trend?

A: Management expects merchant margins to improve slowly starting in the second half of the year, reaching the upper teens percent or higher by the end of 2026. Q2 margins are expected to look similar to Q1, as the outperformance of the lower-margin ISO channel that pressured margins early in the year will gradually be offset by improvements in the direct merchant channel that are expected to materialize in H2.

Q: What is the customer acquisition strategy for LATAM ahead of the 2026 World Cup, and what impact does management expect?

A: Management has built an active joint marketing campaign with merchant partners in LATAM and North America, a new initiative for the company that leverages its much larger current scale in LATAM compared to the prior World Cup. While initial campaigns have performed well and the company expects a moderate revenue pop in LATAM and some upside in North American merchant acquiring, it has kept World Cup-related upside conservative in official guidance given the lack of historical experience with the event at the company's current size.

Q: What is driving recent PaySafe Wallet momentum in Europe, and what is the outlook for SMB growth for the rest of the year?

A: Strong performance is driven by more aggressive, data-driven targeted consumer acquisition campaigns in core markets like Spain and France, with AI-powered bots optimizing lead generation at scale. Product engagement is strong: transactions per active user for the new PaySafe Wallet match the levels of the company's established Skrill and Neteller wallets. For SMB, attrition has improved more than expected, leading to 2% Q1 growth, but management does not expect significant full-year upside from the segment, and has not incorporated the lower attrition trend into official full-year forecasts yet.

Q: What is the nature of the episodic data licensing deals, are they included in full-year guidance, and what is their long-term potential?

A: Data deals involve sales of anonymized aggregated transaction data, primarily used for fraud modeling by third parties. The $7 million Q1 deal was slightly larger than planned, but management had already incorporated expected data deal revenue into its full-year 2026 guidance. The business is still early stage, so deal flow is lumpy for now, but management expects it to become a steady recurring source of incremental revenue as the data infrastructure investment the company has made continues to scale.