Nayax Ltd. Q1 FY2026 Earnings Call

Hello, everyone, and welcome to Nayax's First Quarter 2026 Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to turn the call over to Mr. Aaron Greenberg. Please go ahead, Aaron.

Thank you, operator, and everyone, for joining us today on this conference call. With me on the call today are Yair Nechmad, Nayax's Co-Founder and Chief Executive Officer; and Sagit Manor, Chief Financial Officer. Following management's prepared remarks, we will open the call for the question-and-answer session. Our press release and supplementary investor presentation are available on our Investor Relations website at ir.nayax.com. As a reminder, during this call, we'll be making forward-looking statements. All forward-looking statements on our call today are based on assumptions and therefore subject to risks and uncertainties that may cause results to differ materially from those projected. We have no obligation to update these statements, except as required by law. You can read about these risks and uncertainties in our supplementary investor presentation released earlier today and our regulatory filings. In addition, today's call will include a discussion of non-IFRS measures. Management believes non-IFRS results are useful in order to enhance our understanding of our ongoing performance. However, these measures should be considered as a supplement to and not as a substitute for IFRS financial measures. A reconciliation between Nayax's non-IFRS to IFRS measures can be found in our earnings press release issued earlier today. All key performance indicators are intended to evaluate our business and properly measure factors in a macroeconomic environment to guide and support our decision-making. These key performance indicators may be calculated in a manner different from industry standards. And finally, please note that all figures in today's call will be reported in U.S. dollars unless stated otherwise. Yair will start the call with key financial and operational highlights. Following that, Sagit will go through the details of financial results and discuss the outlook. With that, I would like to turn the call to Nayax's CEO, Yair Nechmad.

Thank you, Aaron, and thank you, everyone, for joining us today to discuss our results for the first quarter and the progress we are making across the business. We had an excellent start to 2026 with strong operational and financial results across the business. Revenue grew 32% to $107 million with organic revenue growth of 26%. Adjusted EBITDA margin expanded to 13%. The quarter results reflect the continued confidence and execution of our strategy, and we are reaffirming our financial guidance for the year. This quarter, our installed base surpassed 1.5 million devices, an important milestone that drives our recurring revenue model. Our customer base reached 120,000, which is truly exciting and reflects continuing opportunities in the market. The more customers we onboard, the more devices they buy, the more transactions flow through our platform and the more our recurring revenue compounds; it is clear that our growth algorithm is working. To this end, let me highlight a couple of KPIs. First, total transaction value grew 33%, with average transaction value continuing to expand as we shift further into higher-value verticals such as EV charging, amusement and car wash. Second, our ARPU is growing, reflecting both the trend in cash-to-cashless conversion with our existing customer base and our deeper presence in the high-value segments. Hardware sales were strong this quarter with growth of 46%, driven by strong demand for our products across all markets. In the unattended space, the rollout of our PIN-on-glass VPOS Media devices drove significant hardware demand in Europe and is unlocking higher ATV verticals where local regulation requires PIN verification for transactions. In the EV charging vertical, we made our first joint appearance as the combined Nayax and Lynkwell brand at the EVCS conference, which is the largest conference in the EV space, and received strong customer reception. Our pipeline of midsized networks moving onto Lynkwell's white label platform continues to grow. With respect to geographic expansion, in Brazil, we continue to invest and are making significant strides in the region. Following the successful integration of VMtecnologia and UPPay, we have fully rebranded its operation to the Nayax brand, which is now operating as Nayax Brazil. In addition, we have started onboarding new customers as a payment facilitator in the country, and we will soon be bringing the VPOS Media to the Brazilian market, which will allow us to address the market with a unified PIN-on-glass product. We are also making great progress with our platform expansion initiatives. As stated last quarter, our Yellow account, our embedded banking offering for the U.S. market in partnership with Adyen, is in pilot phase and advancing well. We believe embedded banking can become an important additional monetization layer across our platform, leveraging our existing customer relationships and transactions data. This is a long-term strategic initiative that can strengthen customer engagement and increase revenue per customer over time. We expect to have more to share in Q2 about our embedded banking initiatives. Not surprisingly, AI is becoming an increasingly meaningful driver across our business as we are embedding AI across our platform as well as throughout the entire organization. For example, R&D is advancing faster with AI system development. On the product side, we are launching in Q2 a new AI intelligence layer in MoMa, our mobile management app. This will give operators conversational assistance for business insight, AI-driven shelf strategy suggestion and rapid merchandising plan setup using visual recognition. These initiatives and many more reinforce both our OpEx discipline and our long-term margin expansion strategy. On M&A, our pipeline is active and growing, and we are engaging on several opportunities in what is becoming a buyer market. We are disciplined about finding the right opportunity for Nayax, those that fit our strategy, our culture and our long-term growth profile. Our strong balance sheet positions us to act decisively when we find them. In summary, our growing installed base of connected devices, the strength of our recurring revenue model and the disciplined execution of our team continue to position us well for sustained profitable growth. With 1.5 million devices on the platform and with the flywheel accelerating, we are well positioned to capture the opportunities ahead. I want to thank our employees for their continued dedication and our customers, partners and shareholders for your trust. With that, I'll turn it over to our CFO, Sagit Manor, who will review our financial results in greater detail and walk through the outlook.

Thank you, Yair, and good morning, good evening, everyone. We appreciate having our shareholders, analysts and the entire Nayax team with us today as we review our financial performance. We are very pleased with our results for the first quarter as we continue to scale our platform, expand our installed base and drive transaction activity, all of which reinforces the more predictable and profitable recurring revenue contribution to our business. As Yair stated, revenue grew 32% to approximately $107 million, including 26% organic revenue growth over the prior year's quarter. Recurring revenue grew 27% and represented approximately 74% of total revenue. We ended the quarter with an installed base of more than 1.5 million managed and connected devices while serving 120,000 customers globally. As a result, total dollar transaction value grew an impressive 33% to approximately $1.8 billion. Consistent with more recent quarters, we continue to see a favorable mix shift towards higher-value verticals. Average transaction value, or ATV, increased to $2.36 from $2.06, while take rate remained strong at 2.66%. Combined, these indicators show that growth is coming from deeper engagement and higher-value usage across the platform, which is a leading contributor to our success. We also saw a continued increase in the revenue generated from each connected device. Average revenue per unit, or ARPU, increased to $247, up 14% year-over-year, which again demonstrates improved unit economics and deeper engagement of customers with our platform. This increase continues to be driven by two main factors: first, the ongoing conversion of existing machines from cash to cashless transactions; and second, our strategic expansion into higher-value verticals such as EV charging, amusement and car wash. Turning now to hardware revenue. We saw a significant increase of 46% over the prior year's quarter to approximately $28 million, driven by strong demand for our products across all markets. Importantly, we continued taking market share, adding over 5,500 new customers and 41,000 managed and connected devices, proving that our growth algorithm is working. Moving now to profitability and margin for the quarter. Gross margin was impressive and in line with the prior year's quarter at 49%, driven by higher processing and SaaS margins, slightly offset by lower hardware margin in the quarter, primarily because of product mix. More specifically, our recurring margin increased to 54% from 52% in the prior year's quarter, driven by additional improvement in processing margin that reached nearly 40% from 36% in the prior year's quarter, reflecting the ongoing benefits of renegotiated contracts with several bank acquirers and the company's improved smart routing capabilities. SaaS margin improved as well to 76.5% from 75.9%. Both processing and SaaS margins reflect the company's growing scale and increasing transaction volumes. Hardware margin was 33.1% compared to 39.5% in Q1 2025 due to marketing promotions for our newly released PIN-on-glass VPOS Media devices in Europe. Adjusted OpEx of $39 million was 36% of revenue, an improvement over the prior year period and included a full quarter of delinquent expenses. Adjusted OpEx had an unfavorable impact of $1.2 million in the quarter sequentially to Q4 2025 due to foreign currency volatility. Adjusted EBITDA increased 43% to $14 million, representing 13% of revenue compared to 12% in Q1 2025 and again demonstrating the operating leverage of the business. Operating profit was $4 million compared to $1.8 million in the prior year period, excluding a one-time gain of approximately $6.1 million related to Nayax share repurchase of Tigapo in Q1 2025. Financial expenses net for the quarter increased by $2.9 million as a result of interest expenses related to the two bond offerings completed in 2025 at the Tel Aviv Stock Exchange, which raised a total of nearly ILS 1 billion. Net income for the quarter was $1.3 million compared to net income of $1.1 million in the prior year period, excluding the one-time gain associated with Tigapo. Turning now to our balance sheet. On March 31, 2026, cash and cash equivalents and short-term deposits totaled $306 million, while short- and long-term debt were $325 million, maintaining a solid balance sheet. Looking at cash flow, we generated $3.6 million from operating activities. Free cash flow for the quarter was negative $6 million, mainly due to increased infrastructure investment and the timing of cash settlements from processing activities. Turning now to our outlook and referring to our forward-looking information disclosure in our press release. As Yair mentioned, we are reaffirming our financial outlook for 2026. Our revenue guidance for the year remains $510 million to $520 million, inclusive of organic revenue growth of 22% to 25%. We expect an adjusted EBITDA margin of approximately 17%, which represents a range of $85 million to $90 million. Turning to free cash flow, we continue to expect free cash flow conversion from adjusted EBITDA of approximately 40% for the year. In closing, we are well positioned for future growth in 2026 and beyond as we continue to grow our installed base globally and capture market share. We'll also continue to focus on scaling our recurring revenue streams, in particular our payment processing capabilities, which benefit from the conversion trend of cash-to-cashless transactions. I want to thank all of our Nayax colleagues for their hard work. And with that, I will now turn the call over to the operator for our Q&A session.

Our first question is from the line of Rayna Kumar with Oppenheimer.

Can you discuss your EV strategy and the EV contribution in the quarter, just given the rise in fuel prices? (technical difficulty)

Okay. Sorry for the technical difficulties. I can take the question. Rayna, thank you for the question. So with regards to the EV strategy, obviously we bought Lynkwell at the end of last year after eight years of investing in the EV industry. That was us doubling down on our strategy of really trying to penetrate this industry end-to-end, both on the software and the payment side. As we see over the last few months with gas prices rising, we see this as a potential secular tailwind for EV penetration, particularly in the U.S. Because while it may not necessarily impact the number of EV drivers today, if this continues it should impact the number of drivers in the future, people switching from ICE vehicles to EV, which should increase the utilization of EV chargers in the U.S. Our EV strategy right now is to be connected to as many public DC fast chargers as possible, which is where these new EV drivers are going to be charging. With the purchase of Lynkwell, we have a better opportunity to go after a lot of these midsized networks with a full end-to-end solution, expanding our payment business. We believe the strategy is already working. We signed the partnership with ChargeSmart before the Lynkwell acquisition. We signed the partnership with E-Plug after the Lynkwell acquisition, and we expect to sign more networks over the coming quarters.

Extremely helpful, Aaron. And then just one more follow-up. Can you talk a little bit about what you're seeing in terms of hardware costs and how we should think of hardware gross margin potential for the remainder of the year?

Hardware is expected to stay as we've guided, and I remind you we have reaffirmed the guidance of $510 million to $520 million of revenue and adjusted EBITDA of $85 million to $90 million. Q1 specifically had lower hardware margins as a result of promotions that we have done in Europe bringing the VPOS Media, our new PIN-on-glass product, to market. These products are very relevant to our Europe as well as Latin America and Australia regions. I expect margins to remain around that level for the remainder of the year, a little bit higher, with an overall gross margin around 49% as shown in Q1.

Our next question is from the line of Josh Nichols with B. Riley Securities.

Great to see the processing margins, they're nearly 40%, a record for the company. Can you give a little bit more detail, walk us through what's driving that expansion? And how should we think about what the ceiling is for processing margins because they've continued to go higher over the last few years by a pretty significant amount?

Josh, we are very proud of the processing margins that continue to improve to nearly 40% compared to 36% in the prior year quarter and around 38.5% in Q4. There are two main reasons for processing margin improvement. One is the renegotiation with every major acquirer that we work with in order to improve the fees and therefore our margins. The second is the smart routing capabilities we've implemented, so we know where to send any transaction that comes in to the acquirers that makes sense from our standpoint while the customer gets the service in a fraction of a second. Specifically this quarter, it's a matter of geographic mix. You can also see that the take rate went down from 2.75% in the previous quarter to 2.66%; that's driven by geographic mix. Higher transactions in Europe tend to have a slightly lower take rate than the U.S., but margins can be higher. We are continuing to push everything we can to improve margins in processing as well as the improved SaaS margins we saw this quarter.

And then just one follow-up for me. Nice to see the ARPU growth accelerated from 11% year-over-year last quarter to 14%. We've talked about mix before. How much of that is being driven by EV and amusement? And is there still room to continue to scale that up significantly as those verticals become bigger over time?

This is the first quarter that we're actually showing ARPU on a quarterly basis. It is a 12-month metric, but after showing it for 2024 and 2025 we have enough historical quarters to present it on a quarterly basis. There are two main reasons for ARPU to move. One is the conversion of existing machines from cash to cashless. The second is entrance into higher-transaction verticals like EV, car wash and amusement. As long as we continue to invest in higher-transaction verticals, ARPU should continue to improve.

Josh, I just want to add that over the last several quarters the processing growth that Sagit mentioned has been the main driver of ARPU growth, and we expect this to continue. The SaaS side has been relatively stable across the business. Looking forward, embedded banking and other services we introduce have the opportunity to be catalysts to grow ARPU further. Adding services like lending, issuing and e-commerce to our existing customers should continue to accelerate ARPU growth, which we'll discuss over the coming quarters.

The next question is from the line of Chris Kennedy with William Blair.

Just wanted to follow up on the pilot of Yellow. I know it's very early and we'll get additional information, but any initial learnings or use cases that are resonating with your customers?

Yes, Chris. We've started the pilots on the Yellow account. We launched the marketing of it at the NAMA conference last month. So far, things are going well and we're learning a lot along the way. The general perception is that customers want this product. There are a few important reasons. One is ease of getting the payout at the end of the day. One of the things we're marketing is faster payout into their accounts. They get to see it right away instead of waiting potentially a couple of days for a transfer from our accounts to an external account. This is huge for businesses that live day-to-day on cash flow, which many of these nano merchants do. The other important part is this is the foundation for adding other services over time. The first step is to get people on the Yellow account. The second step is once they have the application and they're using it daily, with pay-ins and payouts flowing through this account and processing coming through us, we can start layering in other services and provide curated offers. That personalizes what each customer needs, which is difficult for external parties to do because they don't see the daily payment flows. We see the flows by the minute, which allows us to accelerate or decelerate offers to individual customers, which is a win-win.

Great. Very clear. And then just a quick update on Brazil. It sounds like you had a lot of momentum there. Can you remind us of what the opportunity is in that market?

Brazil has been amazing for us over the last couple of years since we bought VMtecnologia and then UPPay. This is a country of a couple hundred million people, larger than most of the rest of Latin America combined, and we see a huge opportunity there, especially for the unattended industry. We're expanding into many verticals there now. We've aligned the branding with Nayax and continue to move the infrastructure to a unified Nayax platform. We'll be bringing the VPOS Media, the PIN-on-glass device, there over the coming months. We see a huge opportunity from penetration in industries that historically did not have cashless unattended payments; unattended is relatively newer there in the last 10 to 15 years. VMtecnologia entered the market earlier, and we inherited that position. There's still a lot of opportunity. It's mostly a rental business there, which is favorable because that rental model has gross margins more comparable to our SaaS gross margin today, and devices often have five to seven-plus years of life. We intend to continue to invest in Brazil and the rest of Latin America. We discussed the Integral Vending acquisition and our penetration across Latin America as we expand into other countries.

To add, this is a great example of an acquisition that has translated into strong organic growth. We showed 32% revenue growth in Q1 and 26% organic revenue growth. This is another example of how acquisition integrates into our day-to-day operations and contributes to our growth machine.

The next question is from the line of Hannes Leitner with Jefferies.

I have a couple of questions. First, could you talk about the FX impact for Q1? I think there was quite some movement between the U.S. dollar and the Israeli shekel. And based on your definition, organic growth trends ahead of your annual guidance, could you talk a little about how you see the rest of the year shaping up? Also, in the backdrop of the hardware contribution, which was quite healthy and Q4 has a tough comp in hardware sales, can you give a little more context?

Regarding FX, I'll give ourselves a compliment for monitoring currencies—we monitor the Israeli shekel, the euro and the pound. We sell our product in more than 120 countries, so FX is part of our day-to-day operations. We're doing a great job on hedging, whether via natural hedging or working with banks. Specifically this quarter, we had a $1.2 million negative effect on OpEx. As we said, we are reaffirming our guidance, which takes into account many factors, including some of the unknowns of FX. I do not foresee a significant effect from currency volatility with the current information we have. On organic growth, we had strong organic growth this quarter and we guided last year to 22% to 25% overall. We expect different quarter-to-quarter dynamics this year compared to last year, when we saw a very strong back half of the year, especially in Q4. This year I'm expecting a better split between the quarters, which will impact growth and organic results. Regarding hardware contribution, we are proud of 46% hardware revenue growth. Our revenue split historically is about 45% in H1 and 55% in H2. Our business cycle is predictable due to a high recurring revenue component—recurring revenue was 74% this quarter—so we understand the rhythm of the quarters and our ability to predict gets easier as we go along.

Our next question is from the line of Sanjay Sakhrani with KBW. The caller for this question is Yvonne Jeng.

With regard to the question earlier on hardware gross margins, are you seeing any impact to hardware costs from the conflicts in the Middle East? And how are you managing inventory levels as a result?

We do not see a margin impact as a result of the conflict. We have a very strong operational team working on component cost management and improvements in the supply chain infrastructure and processes. Inventory levels are in good shape and essentially flat from last quarter to this quarter despite the 46% increase in hardware revenue. As we continue through the year, we expect hardware gross margin to be around the levels we discussed, maybe a little higher.

That's really helpful. And just a follow-up on M&A. Can you provide any color on how the pipeline is shaping up and whether we should expect any activity in the near term?

The pipeline has been strong, especially over the last six to twelve months. This is becoming a buyer's market. AI disruption has impacted markets and private companies have had trouble accessing liquidity since 2022. Many private companies need growth capital even if they are profitable, and that constrains options. We are having many bilateral conversations and seeing sell-side processes. We can get more favorable terms than a highly competitive process would have offered a few years ago. We generally target founder-led or founder-owned businesses. We are actively in processes with several companies and I expect we will complete the few acquisitions we've projected on our long-term cadence. I still expect inorganic contribution this year, and looking toward our 2028 target of $1 billion of revenue, we still expect a couple hundred million of inorganic contribution toward that. This year will be part of that.

The next question is from the line of Chris Zhang with UBS.

I wanted to ask about the potential for a rental or installment-based model, and you mentioned Brazil earlier. Could you share your thoughts or updates on introducing rental or lease-based models outside of Brazil? What are the opportunities and unlocks? And I have a quick follow-up after that.

On the margin side, rental business margins are significantly better because you bundle hardware, processing and services into a monthly fee—$20 or $25 a month, for example. Over time those customers often remain for five, ten, or even fifteen years and continue to pay, which drives overall margins to around 80% on those contracts. Today our hardware margin is around 40% and recurring revenue margin is 54%, so rental is very attractive. However, transitioning to a rental model takes time and can be more relevant in some geographies than others. It is generally more relevant to small and mid-size customers rather than large customers who prefer to buy hardware outright. Also, rental requires infrastructure investment and is a fixed-asset business for us; we incur cost today and realize revenue over time. With our strong balance sheet, we can make those transitions over time.

Strategically, the rental business opens up two different customer segments. Many customers will still purchase hardware upfront, but rental opens a new addressable market for customers who want unattended devices but lack the CapEx to switch immediately. It accelerates their transition to our products and increases our TAM. In markets like Brazil, rental is a dominant model and we expect it to be a larger portion of overall sales over the coming years.

My follow-up is about free cash flow conversion. You're targeting approximately 40% conversion of adjusted EBITDA to free cash flow this year. How should we think about free cash flow conversion in 2027 and beyond?

Our operating cash flow improved year-over-year. The negative $6 million free cash flow in Q1 reflects our normal first-quarter cycle with infrastructure investments and the timing of processing settlements. We still expect our improved unit economics and the increase in adjusted EBITDA to translate into cash flow and free cash flow as guided. We haven't provided guidance for 2027 and beyond on free cash flow, but it's something we can consider communicating to the market in the future.

At this time, I'd like to turn the floor back over to Yair for closing comments.

Thank you for joining us today and for your interest in Nayax. Q1 was a strong start to 2026. We grew our customer base at an accelerating pace and continue to compound profitability across the business. I want to thank our employees for their hard work and dedication and our customers, partners and shareholders for your continuing trust. Thank you very much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful day.