Hello, and welcome to the PaySafe, Third Quarter 2021 Teleconference and webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, 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.

Thank you, and good morning. Welcome to PaySafe's Third Quarter 2021 Earnings Conference Call. With me today are Philip McHugh, Chief Executive Officer, and Izzy Dawood, Chief Financial Officer. Before we begin, a friendly reminder that this call will contain forward-looking statements and should be considered in conjunction with cautionary statements contained in our earnings release, and the Company's most recent periodic SEC reports. These statements reflect management's current beliefs, assumptions, expectations, and are subject to factors that could cause actual results to differ materially from those forward-looking statements. You should not place undue reliance on these statements. Forward-looking statements during this call speak only as of the date of this call, and we undertake no obligation to update them. Today's presentation also contains information that will constitute non-GAAP financial measures under SEC rules. You can find additional information about these non-GAAP measures and reconciliations to the most directly comparable GAAP financial measures in today's press release, and in the appendix of this presentation, which are available in the Investor Relations section of our website. With that, I'll turn the call over to Philip.

Thanks, Kirsten, and thanks everyone for joining us. On today's call, I'll provide an update on the business, and then turn the call over to Izzy to review the financial results and guidance in more detail. Starting with a few key messages, our third quarter adjusted EBITDA of $106 million was in line with our expectations, despite revenues of $354 million coming in below our expectations for the quarter, primarily reflecting softer than expected results from digital wallets. We continue to see strong momentum across our strategic priorities that we set out at the time of going public as we grow with some of the true leading-edge companies in faster-growing segments of the market. In North America, we announced several customer wins in the third quarter across multiple states, and we're excited about our positions in new states and online players coming online. Additionally, the Skrill wallet, while still small in the U.S., continues to show good progress. Outside of iGaming, we continue to position ourselves as a disruptive, specialized games platform with our combination of card processing, eCash, wallet pay-in and pay-out, and real-time banking solutions. In particular, our pipeline across crypto, digital wallets, and financial services continues to build. The U.S. acquiring business continues to perform well with solid growth, and our direct marketing vertical now shows strong signs of recovery. Lastly, we're on track to meet or beat all of our cost takeout tech platform milestones. At the same time, we are facing challenges within the digital wallet business, which has performed below our expectations. We've identified the cause of the headwinds, both internal and external. We're taking action to improve the core wallet and to pursue the real growth opportunities in front of us. However, with the headwinds we're seeing in our markets coupled with the low exit rate in 2021, we believe it's going to take another year to reset the Digital Wallet business and get us back on a path to growth. As a result, we are lowering full-year guidance for 2021. In that context, we are also providing a preliminary update on 2022. While this is disappointing, we have a strong growth plan, exceptional talent under new divisional leaders in Wallets, and the right core assets in place to reposition Digital Wallets for success. We will combine wallet capabilities with our e-commerce and e-cart solutions. We are winning deals with leading players in fast-growth markets. Turning to Slide 4 of the presentation. While Izzy will provide more detail on financial results and guidance, I want to share some context in what we're seeing today compared to what we discussed on our last earnings call. When we reaffirmed the outlook back in August, we expected a return to double-digit growth and strong margin performance in the fourth quarter. At that time, our confidence was supported by four main drivers. First, we expected the direct marketing headwind would start to improve in the second half. It is recovering as expected with revenue up sequentially and continued strong growth of new merchants in the third quarter and early fourth quarter. Next, we expect continued execution on cost savings. We've delivered $26 million year-to-date and expect to deliver $35 million in 2021, 17% higher than our original target. Third, we had signed agreements in place on large deals in our e-commerce pipeline. These are still in progress; however, the scope and timing will differ from our initial agreements, meaning volumes will be more spread out versus the ramp we initially expected in the fourth quarter. Finally, we had an expectation that digital wallets would see a soft third quarter followed by improvements in Q4. As I've mentioned, the performance of digital wallets has been lower than expected in the second half of the third quarter, and we see this continuing into the fourth quarter, driven by market softness and performance challenges that are being addressed. Turning to digital wallet from Slide 5. I'll start by unpacking the headwinds here, and specifically our current expectations relative to what we last discussed. Earlier in the year, we saw the fundamentals improving with a stronger firm baseline following our exit of network referral accounts, and solid indications that we were lapping these headwinds as we approached the second half of the year. Turning to the summer, we are seeing quiet European activity, coinciding with the removal of most lockdown restrictions. This softness, coupled with our expectations for return to normal seasonality, informed our outlook for Q3 as communicated on previous calls. At that time, we expected improvement in Q4 driven by seasonal growth as well as uplift from prior marketing incentive programs. However, what we're seeing is continued market softness, particularly due to the regulatory environment this year. Overall, the third quarter came in below our expectations for wallets, and we see extending into the fourth quarter. For example, in Germany, the adoption of new regulations had a more meaningful impact than we anticipated, with several operators reducing activity or leaving the market. Additionally, in the Netherlands, we're seeing a medium-term impact related to local licensing requirements. To put some numbers around this, we characterize the impacts of our headwinds in 2021 as follows: first is the network impact which is $20 million. We are lapping this at the end of the year. We expect this to be partially offset by growth in the core business, as discussed on prior calls. However, since then, our expectations have changed. First, the softness in the European market, including the regulatory impacts, has dampened the uplift we had anticipated in the back half of Q3 and in Q4. These factors, combined with the impact of some counterproductive customer pricing and tiering, brought us to a lower base business as we sit here today. We are actively driving changes to strengthen our core proposition, particularly in more mature markets. As you recall, we transitioned to new leadership within our digital wallets business in Q3, bringing on T-reg Patel, who brings extensive global payments experience to PaySafe. Together we're moving quickly to reset the business and respond to the real growth opportunities that we have. Let's now go to the next level of detail on Slide 6. First, what are the challenges? One, we had the legacy issue of network counts and we are lapping those items. Two, the core wallet has to be more competitive in terms of customer use experience and pricing in more mature markets. Three, the digital wallets have become too complex over time. We have to simplify the product offering, right-size the organization, and clean up the balance sheet. Lastly, we have to deliver on the bigger initiatives in front of us. Moving to the right-hand side of the page, you'll see we're taking immediate short-term and mid-term steps to address these challenges. First, we've taken action to address customer experience and pricing to be more in line with the market. As an example, we are overpriced in certain deposit forms, which has had some counter-productive outcomes. Equally, we are underpriced in other parts of the market where we see opportunity. We have tangible actions underway and are already seeing some positive results. Additionally, we will streamline the organization by optimizing sub-scale product features. We are also taking steps to resize the division as we concentrate on the core wallet. In the mid-term, we have multiple initiatives in progress that highlight our belief in digital wallets as a key differentiator, with opportunities to partner with some of the most innovative players in the industry. We are actively working to enhance our relationships with our key merchants. We have re-engaged with all our top clients, having productive conversations about our challenges, collaboration opportunities, and strategies for better conversion and growth. Recently, we have seen positive results from expanding into several new markets with one of our largest and oldest clients. In North America, we expect iGaming to continue growing and to enhance the Skrill Digital Wallet, where current numbers are small but promising. We are pleased with the early developments, including our reach to 11 brands, strong conversion rates, above-average deposit sizes, and solid indicators from emerging operators. We are now capturing a significant share of their cash. Lastly, we will continue to invest in expanding our crypto presence, where we are not only expanding in terms of our ability to trade more cryptocurrencies within the wallet, but we are also seeing very tangible interest from some of the top crypto platforms due to our unique combination of card processing, real-time banking capabilities, and wallet pay-in and pay-out capabilities. Although these initiatives all drive real value next year, we expect 2022 to be a transitional year for digital wallet, followed by strong growth as we reset the division and deliver on initiatives. To summarize, while we have challenges to address, we have a strong plan, exceptional talent, and the right core assets in place to reset the business and unlock value that exists within our digital wallets. We're a leading provider of a highly functional digital wallet for a large active customer base of gamers and traders. Additionally, our pay-in and pay-out functionality across the globe continues to create excitement with some large disruptive players. That combination of capabilities continues to drive my personal excitement for our digital wallets as the most unique and highest value asset within PaySafe. Turning to Slide 7, I'll now quickly touch on direct marketing. As we discussed in our last two earnings calls, we exited a discrete set of clients and referral channels as we entered 2021 based on our views of the market and our anticipation of compliance changes. So we've been in a transition period this year as the market adjusted to these new rules. The recovery is well underway and in line with our expectations. In June, net new merchants turned positive, and we saw this progress continuing into the third quarter. Additionally, we expect a strong fourth quarter, with net new merchants for the month of October already exceeding the levels for the entire third quarter. Overall, we're on track for the direct marketing vertical to return to growth. Moving onto Slide 8, when we look at the rest of our business across eCash, and Integrated Processing, representing 70% of our revenues, we see continued strong momentum with high-teens growth this year, as well as strong trends relative to pre-pandemic levels. Looking ahead, we expect continued normalization of the growth rates in eCash, as well as continued double-digit growth in Integrated Processing. Now, let me dive deeper into some of our strategic pillars. Turning to Slide 9, starting with North America iGaming, we've grown revenues 50% year-to-date in North America, reflecting strong momentum as the market continues to open up. Within this growth, we are expanding relationships with new and existing Operators who trust PaySafe to provide customers with all the ways they want to pay. We're now live in 19 of the 21 legal jurisdictions across the U.S., having recently launched in Arizona, Wyoming, Connecticut, as well as Louisiana, which is live for deposits ahead of the full launch expected in early 2022. We are also looking forward to upcoming launches in Maryland, Florida, and New York. We're seeing multiple operators signing up for the full suite of our payment options with several more tier-1 Operators on the way. Turning to Canada, we're building on 10 years of market leadership as the exclusive payments provider for regulated online gaming traffic. We are well positioned to be the dominant player as the Canadian market opens up to private Operators, specifically in Ontario where we have signed multiple deals with Tier-1 Operators. This is a testament to our deep industry relationships and our superior offering, including an acceptance rate of more than 90% and multiple acquiring options. Lastly, as mentioned earlier, we continue to advance our Skrill wallet revamp and add new brands for our pilot in the U.S. Although the volume is small today, we are pleased with the early results for the 11 brands, strong conversion rates, higher average deposits, and achieving double-digit share with some of our early operators. Overall, I'm really pleased with our progress. We have a number of key announcements on the horizon, and we're really happy to have Zak Cutler on board leading this highly focused team dedicated to winning North America in gaming. Turning to our other key digital commerce verticals. In eCash, we continue to see a lot of traction and exciting use cases across financial services. We are further expanding our network supported financial inclusion, enabling cash consumers to pay bills at more than 4,600 Walmart stores across the U.S. In partnership with income, building on some of our prior announcements, our eCash businesses now partner with the largest Neobanks in Europe, including Monique, bunk, and n26. In crypto, we continue to add cryptocurrencies available to trade in digital wallets, and we're seeing very compelling pipeline opportunities with crypto operators interested in our global risk management and pay-in to pay-out capabilities. Lastly, with our partnership with Visa, we've launched Visa Direct, further enhancing more payment options. Now, turning to slide 10, we are on track to meet or beat all of our cost takeout and tech platform milestones, which will set us up for 2022 with a more efficient cost position. We've been focused on migrating the business to the cloud, and we've already achieved our target for 2021 with 70% of our business across PaySafe now on our new Tech SEC, from effectively 0% two years ago. We've also made strong progress in our cost savings program, taking out $26 million year-to-date, and we expect to deliver $35 million for the full year ahead of our initial target. On our recent acquisitions, we're well on track with integrations, and we're enthusiastic about the interest we're seeing from both existing and prospective new clients, particularly across iGaming and crypto. While it's early days, we already have several cross-sell initiatives underway. Before I hand the call over to Izzy, I would reiterate a few points. Our strategy remains intact. We continue to see the unique combination of payment solutions as a real differentiator, particularly in more demanding markets and with more disruptive clients for alternate payment methods and risk management. We're winning deals in North America, we really like our pipeline and growth opportunities in emerging verticals like crypto, we're delivering against our cost and tech milestones, and we're very happy with the initial progress on our recent deals. However, there is work to do in digital wallet, but the combination of our capabilities positions us well to win in the right markets with the right players. With that, I'll turn the call over to Izzy.

Thank you, Philip. Let's turn to Slide 12 for a quick summary of our performance versus our guidance. Revenue and gross profit came in lower than our expectations due to market softness and challenges in the digital wallets segment as Philip described earlier. Integrated Processing was also lower than our expectations, reflecting lower activity in our ISO channel. On a positive note, expenses were better than expected, including strong performance on cost savings, and adjusted EBITDA was in line with our guidance range. Turning to slide 13, volume for the third quarter was $31.1 billion, up 19% year-over-year, with growth in integrated processing and eCash, partially offset by a decline in digital wallet. Total revenue for the third quarter was $354 million, down 1% year-over-year with take rate compression reflecting business fix. Excluding the impact of the pay later business, which was divested in October 2020, revenue would have increased approximately 2%. Adjusted EBITDA for the quarter was $106.4 million, down 1% versus the prior year, resulting in an adjusted EBITDA margin of approximately 30%, consistent with the prior year. Excluding the impact of pay later, adjusted EBITDA would have been flat last year. Lastly, free cash flow was $70 million or 66% conversion on an adjusted EBITDA basis. Year-to-date, our free cash flow conversion is approximately 70%, and we currently expect free cash flow conversion for the full year to end up around 70% as well. On Slide 14, we've provided the same supplemental view as we did last quarter, demonstrating growth excluding the divestiture of pay later and the direct marketing verticals. With these adjustments, year-to-date revenue for the rest of PaySafe's business grew 13% and adjusted EBITDA grew 16%. We provided the same view on the Integrated Processing segment in the appendix as well. On Slide 15, I'll touch on a few additional line items, including our GAAP results. Interest expense was $19 million for the quarter and we expect interest expense to increase in Q4 to approximately $27 million as a result of the completion of our debt rates in early October. For Q3, our net loss was $147.2 million, which included an impairment charge of $322 million relating to intangible assets within our digital wallets business. This was partially offset by a fair value gain of $94 million resulting from the re-measurement of warrant liability at quarter-end. Our effective tax rate with an income tax benefit for the third quarter was 34.3%, compared to 27% in the third quarter of last year, due to the tax impact of the impairment charge recognized in the quarter, as well as the impact of deferred tax balances from the increase in the UK statutory rate. Moving to segment results on Slide 16. Starting with eCash, volume of $1.3 billion and revenue of $90.2 million, both increased 10% compared to the prior year, as we see continued strength in the business as we enter a post-COVID environment. Excluding Germany and Netherlands, which have been impacted by recent regulatory changes, revenue growth was greater than 20%. During COVID, many merchants and specialized e-commerce verticals enhanced their cash capabilities. Compared to Q3 2019, our current revenue run rate is approximately 26% higher on a constant currency basis. Adjusted EBITDA was $36.3 million, an increase of 18%, resulting in an adjusted EBITDA margin of 40.3%, an increase of 270 basis points year-over-year. Moving next to additional wallet on Slide 17. Volume for the third quarter was $4 billion, down 70% year-over-year. Revenue in the additional wallet segment for the third quarter was $83.7 million, a decrease of 15% compared to the prior year. Take rates remained elevated compared to historical levels, yet stable. The year-over-year decline, which is worse than expected, reflects a combination of regulatory impacts in Europe and performance challenges that we're addressing, including the unfavorable impact from pricing and tiering initiatives from late Q2 2021. Adjusted EBITDA was $39.9 million compared to $48.1 million in the prior year. Now, moving to Slide 18 Integrated processing, volume of $26 billion was strong, up 28% led by the U.S. market, and up 39% versus Q3 2019. Revenue for the third quarter was $186.9 million, an increase of 4% compared to the prior year. During the pay later divestiture, revenue increased 8% with growth from our U.S. acquiring and e-commerce merchants, partially offset by lower revenue from our direct marketing channel. Take rate was roughly 70 basis points, down from Q3 2020; flat sequentially, which we discussed on our prior call. Adjusted EBITDA was $44.4 million compared to $48.7 million the prior year. Adjusted EBITDA margin of 23.8% decreased year-on-year due to merchant and channel mix, in addition to the decline in our direct marketing channel. Excluding the impact of pay later and direct marketing, revenue grew 16% and adjusted EBITDA grew 19%, reflecting margin expansion. Our North America iGaming activities, which are predominantly driven by the Integrated Processing segment today, grew by more than 30% year-over-year and is up approximately 50% year-to-date. Moving next to Slide 19, I will review the components of our consolidated take rate, which continued to be driven by business mix and remained consistent over time within our business segments. eCash continues to generate a take rate over 7% in line with long-term expectations. Digital wallet has increased its take rate over time as we build up functionality and access to new markets such as FX trading and crypto trading. We anticipate long-term take rates to be around 1.8%. Finally, the take rate in our processing segment has decreased for the last few quarters to roughly 70 basis points, primarily driven by the business mix within Integrated Processing. As you can see from the pie chart on the bottom left of the page, the meaningful growth of integrated processing volume as a percent of total is driving the overall take rate lower for the Company. On the bottom right, we dig a little deeper into our integrated processing volumes and take rates. The meaningful increase in volume for U.S. acquiring and integrated e-commerce continues to impact the overall take rate for integrated processing. Now, let's turn to slide 20 to look at our balance sheet and liquidity. Total debt outstanding was approximately $2.2 billion as of September 30th. And our net debt to LTM adjusted EBITDA ratio was 4.4 times. We expect our pro forma leverage to be approximately 5.7 times by year-end, reflecting the additional debt raised and the LTM adjusted EBITDA of the three deals, excluding synergies. We have been focused on the levering and moving toward the target of 3.5 times adjusted EBITDA. Let's move to slide 21 to discuss our guidance for Q4 and the full-year. For Q4, we expect revenue of $355 million to $365 million on a reported basis, with minimal impact from the smaller acquisitions we recently closed, PagoEfectivo and Viafintech. We expect mid-to-high single-digit growth in Integrated Processing and a 10% to 15% decline in both eCash and digital wallet. For eCash, I'll point out that Q4 of 2020 was an exceptionally strong period driven by COVID-19 restrictions across Europe. So Q4 is a tough comparable period for that segment. For gross profit, we expect to be between $205 million and $215 million and adjusted EBITDA between $90 million to $100 million. As a result of our revised outlook for Q4, we expect full-year revenue in the range of $1.47 billion to $1.48 billion, reflecting growth from eCash and Integrated Processing, partially offset by decline from digital wallet. We expect adjusted EBITDA in the range of $425 million to $435 million. We understand this is a meaningful change from our prior guidance. I'll reiterate why our expectations have changed. In early August, we expected four major drivers that gave us confidence in our full-year outlook. First, we expected to pick up momentum in direct marketing, and we are seeing the recovery in our performance in Q3 and October. Second, we expected to continue driving efficiencies in our cost-savings program, which we are exceeding. Third, we expected that digital wallets would grow double digits, but clearly, the current and expected performance is lower than we expected. Finally, we anticipated onboarding meaningful clients in our e-commerce verticals and invested to create the necessary capacity. Expanding further, we have signed agreements in place that supported our confidence in onboarding the clients in early October. We remain excited about working with them, but the scope and timing will differ from our initial agreements, meaning volumes will be more spread out with components going live throughout 2022 instead of the ramp we initially expected in Q4. Now, turning to Slide 22; while we will provide formal 2022 guidance on our next call, we believe it's important to provide an update on preliminary expectations for next year, given the meaningful reset of our Q4 and full-year 2021 guidance. For 2022 on a reported basis, we expect revenue in the range of $1.53 to $1.5 billion. Integrated Processing is expected to grow double digits, and eCash is expected to grow in the mid-teens, including the inorganic contribution from our three acquisitions. Digital wallets are expected to decline in the mid to highs as we reset the business. Adjusted EBITDA is expected to be in the range of $440 million to $460 million, resulting in flat margins year-over-year. At our Q4 call, I will be able to provide additional color on volumes, gross profit, and other variables. At this time, we anticipate Q1 being down year-on-year or roughly flat sequentially, given our current expectation for the Q4 run rate this year. Overall, there is no sugarcoating that our financial results are disappointing and not up to our expectations. We have a strong plan to get digital wallet back to double-digit growth, but we have to go through the necessary transition in 2022. We remain excited about PaySafe outlook as we continue to deliver on our strategy and see strong growth and execution across the majority of our businesses, which continue to exhibit strong momentum.

Now, I will turn the call back to Philip for closing remarks. Thanks, Izzy. Although we are revising our financial outlook, we have a strong plan to turn around digital wallet. I'm very optimistic about our future as a leading specialized platform. To put this in perspective, last week I met with my wider global leadership team; we went through our performance and the road ahead. Despite the revised financial outlook, the level of energy and engagement was just at an all-time high. Next, because we see the deals we're winning, we see the pipeline that we're building, and we see the combination of our API connectivity, the multiple payment types, and risk management being the real difference maker in the market. While it will take us longer to accomplish the financial goals that we had planned, the team and I firmly believe that PaySafe is absolutely positioned to be a winner in the marketplace, partnering with leading-edge companies and in some incredibly exciting markets. This concludes today's presentation. Now, let's open up the call for questions. Thank you.

Thank you. We'll now be conducting a question-and-answer session. Our first question is coming from Jamie Friedman from Susquehanna. Your line is now live.

Hi. Good morning, everyone. Good afternoon. Philip, I was hoping to get your perspective on why you are still confident in the long-term potential of the digital wallet, despite the reset. Is it your conversations when you go into the accounts, the strategic position-wise? Why do you think digital wallet can turn around?

It's the right question to ask, Jamie. The way I look at it is we made some changes last year. We attacked those network accounts and felt really good that we'd baseline the business. Then, we're focusing on getting to that next level of growth. So this recent step-down was clearly unwelcome and a sign that there's more to do to fix digital wallets that we can't escape. In terms of what we've done, we have done really three things: First, we've run multiple scenarios country-by-country, client-by-client to assure the baseline and clear out our forward view on risk to the business. That's the first thing we've done. The second thing we did was we started making management changes in mid-summer. GRight joined in September, so we made quite a few changes there, and we did that because we certainly felt there was always more to do with the wallet in terms of streamlining it, getting rid of sub-scale products and initiatives that were being invested, and frankly re-engaging more proactively with our larger clients. Where we are right now is a few things. We have made some quick changes to the pricing and tiering campaigns that weren't effective, and we're already seeing positive results. We are also making small adjustments to improve the client user experience by eliminating non-core elements and reducing complexity. Additionally, we will be resizing the organization. Our focus is on returning to the basics and concentrating on our core wallet business. We believe this business remains high-growth and viable for the future because, in recent months, we have significantly increased our engagement with top-tier clients at the executive level. Especially with Shera coming on board to introduce into all of our largest clients. The conversations have been great. There has been recognition that we need to do more. They liked some of the quick changes we're making, but they like the focus, they like the breadth of payment options within the wallet, and what we're doing in the U.S. with the wallet. One of our largest and oldest clients actually opened up eight new markets to us in the last month on the back of those conversations. So that's the first piece: real utility for our clients. They need us, they like us, and we focus on them. They react very positively. The second one, while still small, is Skrill U.S. We have 11 operators now. What we're starting to see is a higher average ticket versus the market. We're able to do very large one-off bank deposits for high rollers. The conversion rates are now what we consider top tier versus the best payment options there. With two of our smaller operators in more up-and-coming markets, we have double-digit share of the cash here. We had always wondered if we could get there. We have got to keep proving these proof points and then start working with the larger Tier-1 operators to prove to them that this product has that type of cutting-edge utility for them in the U.S. market. And probably the most interesting to me is we're starting to, not only in terms of selling Skrill but taking the capabilities of the digital wallet platform. We are able to integrate into our digital wallet platform, leveraging our pay-in pay-out capability, leveraging our KYC and bank network, and frankly our EMI licenses in some cases, and create some really unique solutions for some pretty fast-growing companies in iGaming, in travel, and especially in crypto. So we're still working on those deals. Some are signed and ready to go, and then we'll look forward to announcing those in the coming months. Those give me the excitement that we can win deals, combine our e-commerce, the wallet capabilities, and our eCash. We have a set of solutions that we are winning deals with some great names in the disruptive areas where we need to be. At the same time, as I described earlier, there's a lot of blocking and tackling for us to do on some of the legacy parts of the wallet. That's where we are today.

Okay, that was a thorough response. Thank you. I will just drop back in the queue.

Next question today is coming from Dan Perlin from RBC Capital Markets. Your line is now live.

Thanks. Good morning, guys. Tough data quarter for you. A couple of questions, obviously on digital wallet. So you called out you're seeing issues around the customer experience. So I wanted to dig into that a little bit. To me, that sounds like share loss, just to hear. What you're changing there? Where are these consumers going if there still remains demand in the market? 2. You spoke on the pricing. In particular in more mature markets, which means that someone got that wrong. So what's the reset there? How big is it? And then can you just define what you're talking about when you say your core wallet? Because I think I've always thought of Europe as being an incredibly strong market for you guys and yet this is where we're seeing all the weakness. So if you can address those, that'd be great. Thank you.

Yeah. Let me unpack, there are a couple of things to unpack on that one. In terms of the share, the UX, and the pricing; I think they are all related pieces. Are we losing some share in the mature markets in Europe? The answer is, we have lost some mild share, certainly. And we see that as both external pressures and also internal. On the external side, we're not losing to other wallets. The biggest driver is going to be real-time banking or the open banking network, which is creating an attractive option where the digital wallet used to feel disproportionately beneficial for some of our operators. So that's probably the biggest external pressure point we have in terms of volumes in Europe in particular. The second piece is much more internal, and it goes back to that part about being much more engaged with our clients, working more closely with them on campaigns, and making sure we market and bring the types of customers where it's a win-win for both of us. The re-engagement we've been having, we are absolutely seeing dividends from that re-engagement, and those were some of the drivers for some of the changes we made starting in mid-summer from the management level as well. In terms of the pricing in the U.S., in the opening comments we touched on that. In certain areas, the team has a good and long history of pricing and tiering. Essentially, you get certain rights to board, the more you use the wallet, the more you deposit. They had a really good track record over the last few years. The campaigns that were done in the first half of the year overshot the mark on some deposit costs and undershot the markets in other fees where, frankly, there's more opportunity in terms of wall-to-wall transfer with withdrawals. As we track those campaigns on a campaign-by-campaign basis, we saw that they weren't working as well, and we've reset those. We've reset 85% of them. We have a few more tweaks to do through the quarter, and we're already seeing the benefits and positive impacts in terms of actives, conversion rates, and deposits coming into the wallet. So those are the factors there. When I talk about core wallet, what I'm referencing is the following. It's not a reference to Europe, it's a reference to adding too many side initiatives. We think about the remittance business; there are initiatives to put in stock trading. There are just too many small initiatives that we were pushing back on. When we made the management change, we've stripped out a lot of those pieces, and really focused on the core wallet. Fund the wallet in and make sure that the pay and payout experience with a merchant works extremely well. Add more APMs and make that as smooth and competitive a process as possible, versus adding other shiny new initiatives on the side. Did that help explain?

Yes, that's very helpful. Regarding the regulatory issues you mentioned in a couple of countries, they seem quite burdensome. I must admit I'm not an expert in the regulatory environment there. Can you explain how stringent these regulations are that would lead some operators to exit the market?

You've seen some highlights from operators in Europe for Q3 that reflect common themes. We've noticed a significant wave of new European regulations. While we expected some of these changes, the effects have been more pronounced than we anticipated. Specifically, in Germany, two regulatory changes stand out. One is a limit on the amount a single individual can bet, which applies across all platforms rather than on a single operator. This cap has a considerable impact, especially for those who typically cater to higher-end bettors. The other issue has been the tax on many casino and poker games that made them frankly unprofitable for Operators. You've seen a few operators, I think Betfair recently publicly announced today they are actually outright exiting. You've seen some other Operators talk about 70% drops. So there is a big adjustment happening in Germany, and that's an extremely large market for us. We do believe this is a point in time. The Operators are all getting locally licensed. They're getting adjusted to these new regulations. They're understanding which payment forms work. So we do think over the next six to eight months, there'll be an adjustment and a settlement and then get back to growth but it has been an impact. Then in Holland, which is also a meaningful market for us, there really created a surprisingly small number of operators to be licensed in Holland, and they absolutely outright and limited lots of payment types initially. We're confident that will be reversed over the next four to five months. It feels like an unexpected overreach from regulators, and there's a lot of activity to reverse that. So just two examples.

Hope that's very helpful. Thank you and good luck.

Thanks, Dan.

Thank you. Your next question is coming from David Togut from Evercore. Your line is now live.

Thank you. Good morning. Just on the topic of re-pricing in digital wallets, your take rate was 2.1% in the third quarter. Your long-term guide is 1.8%. Once you go through all of the re-pricing initiatives that you've discussed, what's the timeline to go from a 2.1% take rate to 1.8%? In other words, is 1.8% embedded in your fourth quarter in 2022 guidance for digital wallets?

Hey David, it's Izzy. I'll hop on that one and nice to hear from you. It's not embedded in Q4. We actually our take rates have been stable yet higher. The pricing element is more driving volume, but the overall take rates are really being driven by our mix, especially around our crypto business, which is still growing very well year-on-year although small, that's part of it. The return to the long-term rate of 1.8% will be discussed in more detail during our Q4 call. However, we do not anticipate this changing in the near term; it will likely take a few quarters to achieve that rate.

Understood. And then, if you could talk about your strategy to reduce that. Your net debt to EBITDA is just over 4 times. When you look at the revised guidance on EBITDA for this year and 2022, are you more inclined to accelerate the pace of debt pay-down and slow the acquisition pace, just to shore up the balance sheet?

Yes. David, clearly obviously with the revisions of our debt to EBITDA ratio does go up and does put pressure on the leverage ratio. Obviously, no impact on any covenants or operations. Our free cash flow conversion is still pretty high. I feel pretty good about that. As we mentioned before, we will pay down debt as fast as we can with the excess cash flow to bring that down. So obviously our long-term commitment to 3.5 times is still there. It's just going to take us longer to get there.

Understood. Thank you.

Thank you. Your next question is coming from Jason Kupferberg from Bank of America. Your line is now live.

Good morning, guys. Just given where we are with digital wallet, it sounds like you're going to have to make a lot more investments there to get back to growth. And you talked about some of the pricing adjustments. I guess I'm just trying to think through what the EBITDA margin assumptions for that segment should be in 2022. Like what's baked into that overall EBITDA guide for next year?

Hey, good question there, Jason. Like I mentioned, I'll probably get to more details on our Q4 call. But when we guide and gigabyte mid-to-high teens decline, I think from an EBITDA margin perspective, we're still going to be safe in the mid-30s EBITDA for the business.

Okay, got it. And I guess, just coming back to the regulatory question, because it sounds like that caught you off guard. But what percent of the European digital wallet business is Germany plus Netherlands, just so we have an idea how to draw a box around this?

Good question there. I don't have it at my fingertips, but given Germany's size relative to Europe, it's a pretty large market. Obviously, the UK is a big market as well, along with other places we operate in. But Jason, we can follow up offline. I cannot provide any more information on there.

Okay, I appreciate that. Thank you.

The next question today is coming from Timothy Chiodo from Credit Suisse. Your line is now live.

Great. Thanks a lot. 1. on the WorldPay partnership in the U.S. But first, I wanted to see if we can just hit on a couple of numbers real quick. The 2021 in Q4, I believe two of the three acquisitions you have, you mentioned a minimal revenue impact, but I was hoping you could give the dollar amount in Q4. And then also more importantly, perhaps for the 2022 revenue guide. Are you able to provide the inorganic contribution from the three acquisitions?

Yes. So Tim, I think there are two questions. On Q4, I think roughly $5 million would be the contribution, right? And going into 2022, the $60 million figure I quoted prior basically includes all three; the Viafintech is a smaller tuck-in. So there will be a little bit of impact but not as meaningful.

Great. Okay. And 60 and 20, meaning?

Yes. Correct, yeah.

Great. I really appreciate that. Thank you, Izzy. The next one is on the WorldPay partnership in North America. Just thought it would be a good topic to revisit. If you could just talk a little bit about the history of that partnership and then the forward-looking in terms of how long is this partnership? Do you always go to market together for North America Integrated Processing? In other words, is it the entirety of your business? Do you have separate? Do they have separate, those types of mechanics would be really helpful. Those are common questions we get from investors.

Yes. We do have a long and fruitful partnership with WorldPay, and we continue to do great business together. The partnership is not exclusive, and we are currently already a multi-acquirer provider. Our gateway locks in about 75% of the Operators. We do the card processing wallets, cash. We're adding other APMs to be as complete as possible. We currently acquire with WorldPay. We have some active deals with Fiserv, and we have one or two other acquiring relationships that we will be expanding over the next six months. This is absolutely a demand from the market. Operators want that. They want that resilience; they want that breadth, and it's a priority for us. So we're building that out. It's still the vast majority of WorldPay and still a great relationship, but we're definitely following the customer here, so we've got the integrations and adding more products, but we're also adding more acquirers. In Canada, it's the same thing; we have a multi-acquirer solution already, and that drives kind of best-in-class 90% conversion rates there.

Excellent. Thank you for taking both of the questions.

Next question today is coming from George Mihalo from Cowen. Your line is now live.

Great. Thanks for taking my questions, guys. I guess first one for me, as it relates to some of the delta is third quarter expectations. I think you guys highlighted some contracts; some was timing, some was scope. I was hoping you can delve a little bit into the scope commentary. Should we be thinking that maybe the total contract value is a little bit different than what was originally signed?

Yes, so we obviously can't go into too much detail. We had a few contracts; two in particular that were sizeable, we had signed agreements with them, but as we went through with both clients, the timing to ramp up definitely changed. Then, in some cases, the product mix in terms of how much is card processing, how much is bank payments has changed. What we're seeing is actually we are building pretty deep integrations with some of these players. We look forward to making some announcements in the coming weeks to give people a sense, but we do see them as larger clients and are being more conservative in our outlook in forecasting those until we see them really come to fruition and grow.

Okay, that's helpful. And if I could ask one also on the digital wallet side, you highlighted some of the regulatory changes, I guess in Germany. Curious how you guys are thinking about or how concerned you are about that maybe spreading to some other markets in the future, if you're hearing any rumblings around that. And then again, related to the wallet, your confidence in the pricing algorithm. You were sort of at a point where you're testing different things and maybe that long-term pricing outlook of 1.8% maybe that changes as things progress, just trying to get some clarity around that. Thank you, guys.

Yes. So two things. On the regulatory front, Europe definitely has a wave of regulatory change. Some of that's smaller pieces; Italy and the U.K. have also had some items that have restricted, but the Germany and Netherlands are certainly the two biggest ones. So as we cascade across the globe, I'd break it down as a file, and we've certainly exited what we consider the very high-risk markets which could create a lot of volatility. We've exited the U.S. and Canada very clearly. They are regulated openings with state and province by province. In Europe, as we look forward, we're not seeing any new regulation in any major states and major countries right now. Even early-stage regulation that's coming through. So we do see that this wave is pretty much a good base slide for where we are over the next six to seven months, the Operators will adjust, and we'll get back to kind of a good predictable growth pattern there. When we look around the rest of the world across Latin America, Asia, and Africa, there's a long tail of countries, and of course, those trends just can have ups and downs against gaming regulation. We think it's a tailwind across Latin America. We think it's mixed across Eastern Europe and in Asia. So as we stand here today, there's probably about $20 million to $30 million of total net exposure if you were to take all of the negatives and add them up. At the same time, we certainly would never expect that to happen, but in our go-forward forecast, we are now being more prudent, expecting some of that to happen just to be cautious. You had a second question, George; I forgot the second question. Apologies.

Your confidence in that long-term 1.8% take rate for the digital wallet?

Yes, I believe that deposit options, especially in Europe, have become significantly more competitive. This is a clear fact, and we are responding accordingly, which will put downward pressure on the forecast and lead to a reduction in some take rates. Simultaneously, we are noticing an increase in withdrawal charges. We remain optimistic about the crypto business, as these factors also contribute to revenue growth, creating a balancing effect. Overall, I anticipate that the competitive landscape regarding deposit fees will increase compared to where we are now, and we've incorporated that into our outlook. Additionally, acquiring SafetyPay enhances our real-time banking capabilities across 19 markets, including seven in Europe, and we are definitely seeing demand for those services, making it a valuable addition to our resources.

Thank you.

Next question today is coming from Josh Levin from Autonomous. Your line is now live.

Hi, good morning. I have two questions. The first is, what role is Bill fully playing these days with regards to the Company and the ongoing issues? And then the second, you said that 2022 is a reset year and that you expect growth to come back in 2023 as you right the ship. But instead of having shareholders wait until 2023 to see if the ship can be righted and you are raising some serious issues that the Company is facing, have you considered that at this juncture the best way to create shareholder value is to potentially explore selling the Company. Thank you.

Yes. Thanks, Josh. So I'll answer on the role Bill is playing, and regarding the same question. Bill and I, we speak on a weekly basis. He is engaged. He is aware of all the issues, good and bad. The board is also very active across the board in terms of all the points. Look, in terms of the conversations, he is clearly disappointed in the performance and the fact of the cleanup that we have that we got more to do. I have both working very closely on the actions we're taking: the right-sizing, the organization, the stripping out of some areas. So he's involved in those pieces quite a bit. He’s equally involved in the upside we get from both the inorganic and the organic deals that we're pushing and seeing the opportunity, the momentum there. You'll have to speak to him personally, but I think it's definitely not happy with the outlook and performance but also sees the value of where we are growing in iGaming, in crypto, and some of the disruptive areas that were always the attraction of PaySafe. So that's the conversation with Bill. We don't have a conversation on selling; we know it, starting for myself to the board, don't see us at this value. We know there are low points, we know there's credibility to rebuild. But as I said in my comments, we see the deals that we are signing, we see the areas that we can fix, and we see a way forward, simple as that.

Thank you.

The next question is coming from Darrin Peller of Wolfe Research. Your line is now live.

I would like to understand what you can do to improve the digital wallet side, particularly regarding customer acquisition. It seems that some of the challenges you face may stem from regulatory issues or trust in open banking, which might be beyond your control. Given that this is a two-sided network, could you clarify what specific actions you are taking to engage consumers? Just give us examples of what you can and what you can't do to actually change that course. Maybe a little more on the timing. It sounds like you'd expect, I guess '23 to be that change in inflection.

Thank you, Darrin, for your questions. At the overall PaySafe level, our eCash business is experiencing a growth rate of 17%-18% year-to-date, and Integrated Processing is also expected to grow at about the same rate. We have several strong growth drivers within the business, although we recognize that our digital wallets need improvement. You mentioned some key points. First, client engagement is crucial. We have been successful in some higher-risk markets, but we haven’t focused enough on more mature and regulated markets, particularly in Europe. Re-engaging with these markets is essential, and we are dedicating time to this effort by integrating the right alternative payment methods, establishing co-marketing agreements, and having those necessary discussions. I have personally met with all of the top 10-20 C-suite clients, and their feedback has been very positive and receptive. They appreciate Skrill, our customer base, and our focus. They specifically noted that it's encouraging to see this renewed engagement, which definitely influenced some of the management changes we made in mid-summer. This engagement has been the primary source of customer sign-ups from our merchants. Therefore, maintaining that focus is crucial. The second aspect involves the pricing tiers we've discussed. As the market has become more competitive, we recognize that these are not complex issues to address. Many of the necessary adjustments are already in place and are yielding some improvements in sign-ups and conversions. We will continue to monitor this closely, as it is an important factor. The third one is really that point about exposing the wallet capabilities to clients versus pushing just a pure Skrill brand, but almost allowing the wallet capabilities to be embedded with some of our clients. That's where we're seeing some opportunity as well that could drive lots of volume and customer growth. We think that's very unique; we have a platform that already has two brands on it, Skrill and Neteller, and we're seeing lots of interest in that capability as well.

It would be helpful to provide some intangible examples. When considering the percentage of your offerings that impact customers, it's important to highlight how significant Skrill is for your merchant customers and operators. The VIP customer base you bring is a key value proposition. How well is that still resonating with customers, as it would provide some assurance for investors? Additionally, regarding the digital aspect in the U.S., we were hoping to see some major brand names announced over time. Do you still expect that to happen for our U.S. reach?

Yes. In Europe, it depends on the Operator, but in general, we cover about 7% to 10% of the cash share with the Skrill wallet. So it is an incredibly important part of the proposition. It does tend to skew towards the high roller as well. So that's again having those client-by-client conversations; it absolutely resonates. It absolutely resonates but I do think our client engagement focus did weaken in Europe. We were making, like I said, lots of money in much less regulated places, and our earnings are key in more competitive markets, and we lost a little bit of touch there. There is engagement and openness; they recognize the reach we have, and it is effective. In the U.S., it has taken time, so we are not pursuing a large-scale campaign; the lifetime values and above-the-line marketing costs in the U.S. are very high. We are working on evidence that demonstrates we are achieving top-tier conversion rates, outperforming the market. The average transaction values are higher, and we are now processing some larger transactions. With two smaller operators, we now capture a 10% to 15% share of cash transactions. We value this data point because those operators can utilize any payment method, not just ours, but we have focused on proving to them that our product works and attracts the type of customers we need. We are actively engaging in conversations with them.

And just one last question is about the eCash side of the business. How are the wallet capabilities and the digitization of that progressing? I know you seem more optimistic about that part of the story. From an organic standpoint, could you provide us with more insight into your expectations and why that's improving? Thank you.

80% of the revenues now go through our PaySafe card apps. So we basically moved 12 million customers to an active stored value, effectively a wallet. Obviously a very different profile, more underbanked and younger. We will be adding some banking capabilities of virtual debit accounts, and be able to move money back and forth. The back-end capabilities of that product are the same as Skrill and Neteller. So when we talked about being a multi-wallet company, that has absolutely great proof point of where it is. So we remain very, very positive on that point.

All right. Thank you.

Go ahead.

Looks like we've reached the end of both the question-and-answer session and I want to turn the floor back over to management for any further or closing comments.

Thanks everyone for the questions. Clearly, it's not the result we're looking for. There are issues to address and improvements to make. However, as I mentioned in my closing remarks, we had a team meeting with my top 80 leaders. We discussed this, reviewed the adjusted financial outlook, and the path forward. It's difficult to convey just how high the energy and enthusiasm were because the team recognizes our capabilities. They acknowledge the actions we're taking, the changes we've implemented in the digital wallets team, and our success with clients and the pipeline we're building. It's going to take us longer than expected. Although it's not where we aimed to be, we are fully committed to executing the strategy we discussed from the start, which includes excelling in iGaming, succeeding in other areas, managing our costs effectively, and really bringing our recent transactions to fruition. We will certainly be available for everyone's questions and to explore this further in the first session. Thank you all.

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.