Ladies and gentlemen, good morning and welcome to Paysafe's Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matthew Parker, Investor Relations. Please go ahead.

Thank you and welcome to Paysafe's earnings conference call for the second quarter of 2024. Joining me today are Bruce Lowthers, Chief Executive Officer; and Alex Gersh, Chief Financial Officer. Before we begin, a reminder that this call will contain forward-looking statements and should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent SEC reports. These statements reflect management's current assumptions and expectations and are subject to factors that could cause actual results to differ materially from forward-looking statements. You should not place undue reliance on these statements. Forward-looking statements during this call speak only to the date of this call and we undertake no obligation to update them. Today's presentation also contains non-GAAP financial measures. You can find additional information about these non-GAAP measures and reconciliations to the most direct comparable GAAP financial measures in today's press release and in the appendix of this presentation which are all available on the Investor Relations website. With that, I'll turn the call over to Bruce.

Great. Thanks, Matthew, and thank you all for joining us today. First, I want to take a moment and thank the Paysafe team for all their hard work and determination over the last two years. It is great to see their efforts driving our outstanding Q2 results. On today's call, Alex and I will walk through the results for Q2 and the first half of the year and update our full-year guidance. Then I'll close with a reflection on the last two years of our transformation journey. While we're not done, we are excited about the progress and focused on getting better every day. We delivered strong Q2 results which reflect an acceleration of higher quality revenue. We achieved $440 million in revenue, growing 9% year-over-year, $119 million in adjusted EBITDA, growing approximately 5% year-over-year, and we further reduced our net debt ratio to 4.8x, a 14% reduction from Q2 2023. These results reinforce our conviction that we have the right strategy and execution is working. In the first half of 2024, revenue grew 8.5% year-over-year, driven by a 12% increase in Merchant Solutions fueled by higher volumes across e-commerce and progress on our portfolio optimization efforts. Digital Wallets also grew 5.4% in the first half of 2024 from the same period in 2023, attributed to improvements in our eCash business, the return to double-digit growth in our LatAm businesses, and continued growth of our classic wallet product. Additionally, adjusted EBITDA grew 4.6% year-over-year, while adjusted EBITDA margins declined by 100 basis points due to our planned incremental investments which we outlined at the beginning of the year. Adjusted net income grew 5.7% year-over-year, and we recorded positive GAAP net income of $1.6 million in the first half of 2024. We also returned $25 million of value to our shareholders through our stock repurchase program. As part of our portfolio optimization and a move to higher quality revenue which will deliver higher long-term shareholder value, we are taking actions to limit volumes or exit relationships with certain higher-risk merchants. These steps will reduce risk in our business but create a short-term headwind to our revenue growth rate in the second half of 2024. The strength of our sales initiatives, which has led us to increase our original revenue guidance for the year, will allow us to overcome the short-term headwind quickly. We believe these actions are the right steps to take for long-term sustainable growth as we refocus on our ideal customer profile. This brings me to our revised full year 2024 guidance. We are pleased to raise our full-year revenue outlook range to 7% to 8%, up from our previous guidance of 5.5% to 7%, a 125 basis point increase at the midpoint, moving the high end of our former guidance to the bottom end of our range. We now expect adjusted EBITDA margins to be between 27.5% and 28%. Our updated guidance includes the impacts of the actions I previously mentioned. Alex will walk you through our quarterly results and guidance in more detail in just a moment. In Q4, we laid out four strategic priorities for the 2024 calendar year. And I'm pleased to say that we made great progress and remain on track or coming in ahead of expectations. Let's start with expanding our sales capabilities. We have hired 104 new sales reps year-to-date or 61% of our full-year target. Our new hires in Q1 are ramping up as expected and we are pleased with the talent we've recruited. As a reminder, these sales reps take approximately six months to fully ramp up. The additional sales reps have allowed us to expand our vertical and geographic sales coverage, giving us more pathways than ever before. In the quarter, we logged 74 enterprise wins which is over two times greater than the prior year and executed SMB deals in 30 different states, a 58% increase versus that number last year. Our portfolio optimization efforts are coming along better than expected. Year-to-date, we have generated approximately $26 million of in-year revenue or 52% of our full-year target. As you may recall, we initially expected the revenue to be weighted more to the second half of the year. During the quarter, we launched value-added services such as an integrated loan program to our offerings. This loan program provides flexible short-term working capital for our partners and merchants to invest in and grow their businesses. Our ability to sell value-added services like these helped increase our take rate in Merchant Solutions from 0.78% to 0.74% in the prior quarter. Our third priority for the year was to revamp our consumer acquisition efforts which remain on track. Towards the end of the quarter, we entered a new partnership with Riot Games, becoming the main sponsor of the Valorant Esports tournaments. This tournament was broadcast across the EMEA region and generated an audience of 1.2 million viewers. This partnership allows gamers to use paysafecard for a seamless and secure transaction experience during checkout. We've incorporated these sponsorships into our strategy and we're seeing nice results as we move through July. Finally, our efforts to deliver innovation and experiences to consumers remain on track. This next example could probably go under either customer acquisition or innovation experiences. As you may have probably read, we recently announced a partnership with Revolut. What's great about this partnership is it lets us bring our eCash services to Revolut's 9 million U.K. customers, in turn, providing Revolut's customers access to 12,000 of our eCash network locations. We expect this service to eventually roll out to other European markets. This product innovation is helping us generate revenue in new and exciting ways. This quarter, the amount of revenue generated from new product innovation grew by 50% over last year. Turning to our merchant business, we saw solid growth led by e-commerce which now represents just over 30% of our merchant portfolio by volume. Last quarter, we discussed that our SMB direct book was being impacted by one portfolio and we have taken a number of steps to stabilize that portfolio throughout the quarter. This stabilization along with volume increase and take rate improvement, have led our SMB direct book to grow 10% in Q2, roughly in line with our SMB ISO book. Our ISO book continues to show strength with another double-digit growth quarter. Our efforts to rebalance the portfolio continue to progress, expanding our sales presence across the U.S. and moving upstream to higher-value merchants is continuing to pay off. We saw a 5% increase in the revenue per new merchant signed in Q2. Acceleration of our enterprise sales continued as we executed 74 enterprise wins in Q2 across our key verticals and geographies, up from approximately 30 in Q2 2023. Approximately 30% of these deals were with our existing customers, highlighting the success of our cross-selling efforts which was almost zero two years ago. Additionally, our net revenue retention in the quarter was 103%, further proving that our efforts to sell additional products and services to existing customers drive higher revenue per merchant. A quick update on iGaming which saw another strong quarter. Global iGaming revenue grew 15% year-over-year, accelerating from 14% in Q1 2024 as we executed 64% more deals in the Q2 2024 quarter versus Q2 2023. North America iGaming revenue grew over 50% year-over-year from merchant wins that occurred in Q3 and Q4 of last year and assisted by seven additional states that legalized last year that came online this year. Our iGaming sales continue to find opportunities to cross-sell into our customer base with 44% of the deals won in the quarter coming from existing clients. These cross-sells allow us to take a larger piece of the payments cash register. As our merchants work to grow their revenue through product improvements, additional offerings and geographic expansion, we stand ready to help them be successful. In Q1, we started reporting digital wallet KPIs based on the segment to provide investors with a more holistic view of Digital Wallets' performance. In Q2, we saw transactions per active user grow 20%, driven by our core wallet, quick checkout and eCash. Additionally, average revenue per user grew by 6%, largely driven by the eCash product initiatives and more revenue attributed to iGaming. This marks the sixth consecutive quarter of year-over-year growth on both of those metrics. We saw three-month active users remain flat year-over-year and we acquired approximately 1.2 million users in the quarter. This is in line with the seasonality we experienced in Q2 for active users, given the reduction of sporting events during the quarter. While our user base remains stable, this is not our goal. We are focused on returning our user base to growth. Overall, our current users are conducting more transactions and generating a higher average revenue per user, which is a solid foundation as we focus on driving additional consumer adoption and engagement. So in summary, Paysafe had a strong Q2 by every financial metric. Year-over-year, we delivered quality revenue growth of 9%, adjusted EBITDA growth of 5%, net leverage reduced to 4.8x, 7% volume growth and a 3% take rate expansion, just to name a few. The strategy that we laid out two years ago of focusing on client experience, sales transformation and product innovation are taking hold and allowing us to build momentum, enabling us to raise our revenue guidance for the full year 2024 by 125 basis points at the midpoint to 7% to 8% from our original guidance of 5.5% to 7% and puts us in a great position for consecutive 7-plus-percent revenue growth years. With that, I'll ask Alex to review the Q2 results in more detail.

Thank you, Bruce. Let's move to Slide 9 for the summary of our second quarter results. Total volume increased 7% year-over-year to $38.1 billion. Total revenue grew 9% to $439.9 million or 10% on a constant currency basis. Revenue growth accelerated ahead of our expectations, led by double-digit volume and revenue growth in the e-commerce channel within Merchant Solutions as well as new product initiatives within Digital Wallets. Our take rate increased slightly to 1.2% from 1.1% in the prior quarter. Adjusted EBITDA was $119 million for the quarter, an increase of 5% year-over-year or 6% on a constant currency basis. Adjusted EBITDA margin was 27.1%, a decline of 100 basis points, primarily reflecting our incremental investment in sales and portfolio optimization. As Bruce mentioned, our initiatives remain on track and we expect to invest approximately $12.5 million throughout the remainder of the year. On an LTM basis, unlevered free cash flow grew 16% to $339.1 million, reflecting a 72% conversion rate. Adjusted net income increased 5% year-over-year to $36.3 million and adjusted EPS increased 5.3% to $0.59 per share. Let's move to Slide 10 to discuss the segment results. Starting with Merchant Solutions, volume increased 8% year-over-year to $32.7 billion, and revenue increased 13% to $255 million. Growth was driven by strong volume and take rate growth within our e-commerce business, led by contribution from iGaming. The remainder of the segment, our SMB business, grew revenue 10% year-over-year, reflecting our strategic initiatives to expand our sales capabilities and optimize the portfolio. Adjusted EBITDA was $56.5 million, an increase of 1%. Margin declined 250 basis points to 22.2%, reflecting continuous progress on our 2024 investment initiatives. Turning to the Digital Wallets segment, volume increased 6% to $5.7 billion and revenue increased 6% or 7% on a constant currency basis to $189.7 million. Segment's performance was driven by strong results within iGaming and ongoing product and engagement initiatives. Adjusted EBITDA was $82.4 million, an increase of 7% or 8% on a constant currency basis. And adjusted EBITDA margin expanded 30 basis points, driven by improved digital wallet KPIs which drove revenue growth in the quarter. Turning to Slide 12 for the summary of our capital allocation. At the end of the quarter, total debt was just under $2.5 billion. During the quarter, net debt decreased by $26 million. Our leverage ratio stands at 4.8x adjusted EBITDA compared to 5.6x in Q2 2023. Additionally, during the second quarter, we repurchased approximately 686,000 shares for approximately $11 million at an average cost of $16.03 per share, leaving us with $25 million remaining on our repurchase program at the end of Q2. To recap, since Q2 of last year, we have reduced our debt to EBITDA by 14%, while repurchasing $25 million of our shares in the first half of 2024. We remain confident that our solid cash flow generation and capital allocation discipline will allow us to continue investing in the business while also continuing to delever and return capital to the shareholders. Before going into the guidance, let me just remind you that in FY '23, excluding interest income and FX tailwinds, our top line growth was approximately 3.5%. In the first six months of this year, even with headwinds from FX and interest rates, growth accelerated to 9%. Now, let's turn to the full year guidance. We are pleased with our results and the ongoing progress of our strategic investments. Therefore, we are raising our revenue growth outlook to the range of 7% to 8%, which implies a second half growth rate of 6.5% at the midpoint. The former top end of our range is now the bottom end. Our updated revenue outlook includes the impact of our portfolio rationalization efforts Bruce mentioned earlier. Excluding those impacts, we would have expected revenue to grow between 8% to 9%, which is well ahead of our initial expectations. Despite these short-term impacts, we believe these actions will benefit the company in the long run as we reduce the risk associated with our business. We now expect adjusted EBITDA margin to come in between 27.5% to 28%, a reduction of 50 basis points from our prior guidance. Excluding our portfolio rationalization effort and severance-related costs, our full-year margins would have been between 28.2% to 28.7%, still ahead of what we initially expected at the beginning of the year. Additionally, our updated guidance implies 170 basis points of margin expansion versus the first half of this year. We expect that our adjusted EBITDA margin exit for the year will be unchanged heading into 2025. Also, we now expect our net leverage to be between 4.6x to 4.7x at the end of the year. Finally, please see our appendix for other below-the-line assumptions. Now, I'll turn the call back to Bruce for closing remarks before we take questions.

Thank you, Alex. Just over two years ago, I was fortunate to join Paysafe and we've put forward a bold and aggressive plan to turn the company around. I stated it would take us three years: year one to stabilize the company; year two to return to growth; and year three to accelerate to our normalized growth profile. At our Investor Day in 2023, I reiterated that we would focus on client experience, sales transformation, and product innovation. In addition, I stated that we would focus on recruiting talent to create the right culture and allow us to be competitive. I would like to offer some thoughts on our progress over the last couple of years. When I joined the company, we were a decentralized organization working in silos. We streamlined the structure and brought in the right talent who are eager to work as a unified team. We embraced metrics and became focused on improvement. Specifically, we reduced the layers of management by 22% and we had a 56% change in our operational leadership team. We brought our people together by reducing our office footprint by 43%. As a result, our offices have become a vibrant place where employees can build relationships, collaborate on our strategy and vision, and deliver operational excellence. Finally, together, we've been able to drive efficiencies and reduce our back office expense, using these savings to help grow our front office. The lifeblood of any business is to provide an experience that customers enjoy. We ranked number two in the J.D. Power 2024 U.S. merchant satisfaction study, a study we weren't even part of just two years before. Our focus on client experience and automation has helped reduce our call center interactions by 41%, reduced merchant onboarding times by 85%, and increased our digital wallet merchant checkout conversion by 10%. These are just some examples of the improvements that we've been able to help drive consumer and merchant satisfaction, but there's still much for us to do. Sales transformation gets a lot of attention. So I'll just point out that we have more than doubled our quota-carrying sales force and expanded our geographic footprint. We focused on cross-selling. And as a result, 30% of our Q2 2024 enterprise deals were sold into existing customers. We needed to rebalance our merchant portfolio while making good progress with our e-commerce book and now our SMB direct book, which will help with margin expansion. We have a lot of momentum building. Product innovation must be a never-ending focus. In 2023, we focused on improving the usability of our wallet to drive better usage, more transactions, and more average revenue per user. In Q4 2023, we wanted to take advantage of our wallet platform and help our community come together with the launch of our merchant wallet for SMBs. This wallet allows merchants to receive acquiring settlements, use their phone as a point-of-sale device, and manage their business finances in one place. We see this as a growing opportunity in a fragmented market. Success with the merchant wallet will help drive growth in our direct business and rightsize the revenue mix, which would be margin-accretive. We are just beginning in our innovation and feel that we're positioned well in the emerging experiential economy. It's worth remembering that before these changes, many of our business lines were declining. Our actions have had a decisive positive impact on our financial results. On a two-year CAGR basis, volume grew 7%, while revenue grew 8%, driven by the turnaround of the classic digital wallet, SMB and e-commerce. This improvement in revenue plus improved utilization and headcount led to a 23% increase in revenue per employee and adjusted EBITDA growth of 7% on a two-year CAGR basis. These improved financial results helped us drive down our net debt leverage ratio by 16%, while returning $25 million in value back to our shareholders. More importantly, these actions taken by the Paysafe team are positioning us for the future, building the foundation we need to scale and compete. It starts here. Another fun part of the job is seeing the team be recognized by outside organizations. We recently were added to CNBC's list of the world's top 250 fintech companies. We're also named Payments Company of the Year by EGR and Software Company of the Year by Tech Elite. To close, we are not the same company we were two years ago. Our team is excited about the new possibilities. Today, we have grown revenues faster than many expected. Even in the high interest rate environment over the last couple of years, our strong free cash flow generation enables us to invest in our business, return capital to our shareholders, and reduce our leverage. As we continue to deleverage, we believe the value of the business will increasingly be reflected in our share price. We see a significant upside in the future as we continue to execute on our strategic initiatives. With that, we will take your questions.

Our first question is from the line of Andrew Harte with BTIG.

On the merchant side, you mentioned several drivers. Solid e-commerce growth was a key factor, along with the uptake in value-added services, charge-back protection, backup terminals, and loan offerings. Additionally, the acceleration of SMB direct growth at 10% was impressive. Can you rank some of those growth drivers for this quarter and identify which ones stood out the most? Looking ahead, how will sales change with the increased sales team not yet in effect? What aspects from this quarter do you believe will drive growth in future quarters? Will we likely start to see the impact of the increased sales headcount contributing to growth in Q4?

Yes, Andrew. Thank you very much. And I'll start this off and then Alex can add some color as we go along. But first, what I would just say is, look, I think overall, we're very pleased with the quarter. Triple beat, we had really strong revenue versus consensus, EBITDA versus consensus, and adjusted net income, all those things for the second quarter in a row. So we're building some good momentum. In regard to the merchant business, obviously, the e-commerce business continues to show really solid growth, really driven in part by the iGaming growth in North America. So you're seeing a lot of growth there. I think the other piece that's driving a lot of the activity, we've got nice solid continuous volume but our optimization programs are really coming to bear and working out as we hoped, providing a lot of that take rate expansion. So the projects that we started, if you recall, we started talking about this in, I don't know, Q4, maybe Q1. We started talking about the optimization program and that we were going to invest both in optimization and our sales force, driving a $25 million investment with a $50 million return, right? So it was a great project. We're seeing great results from that through the halfway point. We look like we're right on target for the full year, maybe a bit more for the full year on that initial project. So we're feeling very good about that. I think when you talked about and touched on the direct SMB business kind of accelerating back up a little bit, that was a nice balance for us. So we'll continue to look at that and continue to hope that as we take these actions, to your last part of the question, with the sales force, that those things start really accelerating as we move into '25 and then ultimately to '26. So yes, we should see a little bit of activity in that cadence. What I would say, in the first half of the year, what Rob and his team were able to do is they hired a lot of the enterprise salespeople first. And so we should start seeing that towards the back half of the year, probably late Q4 as those people start coming on board. So we should see an acceleration really going into Q1 '25 from that team. I think as we touched on in the deck, we're seeing good progress there. We feel like they're right on track and so far, so good. So I appreciate the questions. Alex, anything?

Yes. The only thing I would say is that the portfolio optimization that Bruce talks about is showing great acceleration. So I think if you remember, we said in the first quarter that it delivered about $8 million of revenue or so, right? In the second quarter, it delivered $18 million of revenue. So the total of $26 million, you could see the acceleration from the first quarter to the second which is why when Bruce talks about the fact that we certainly would expect to make the $50 million target and maybe it's even slightly better than acceleration from $8 million to $18 million from the first quarter to the second quarter is proof that that's exactly what's happening.

Hopefully, that answers everything, Andrew.

Yes. No, it's nice to see how quickly the portfolio optimization kind of flows through on the revenue side. And then on the high-risk merchant relationships that you're exiting, Alex, I just want to make sure we're quantifying that right. You said it's about a 2% headwind to growth, so about $32 million to revenue impact. I guess, can you just walk through the EBITDA impact as well?

No. All of this is included in our guidance. We anticipate this will occur in the second half of the year. I am unclear on the source of the $32 million in revenue. For the second half of the year, we expect the impact to be approximately $15 million. Additionally, on the EBITDA side, this is already factored into our guidance. It represents a higher-margin business, but it is necessary for our sustainability. While we are not providing specific EBITDA figures, it is included in our guidance for the second half of the year and will contribute to higher margin revenue.

Our next question is from the line of Trevor Williams with Jefferies.

Great. Bruce, Alex, yes, if we could just go back to the decision to exit some of the higher-risk verticals. If you could just expand on why now, if there was any specific catalyst to spur that, would be helpful.

Thank you, Trevor. I appreciate your question. Historically, Paysafe has been quite reactive to market changes, including regulatory shifts. Moving forward, we aim to be more proactive. We’ve noticed some global movements regarding consumer benefits, and given our growth and accelerating sales, we feel confident in making adjustments now to position ourselves for sustainable revenue growth in the years ahead. This involves examining higher-risk businesses, particularly those with elevated chargeback rates, and ensuring we can foster sustainable growth. We are optimizing our portfolio with a more proactive approach than we have taken in the past. I hope this clarifies things, Trevor.

Yes. No, that's great. I appreciate that. And then, Bruce, I want to go back to the comments on the Digital Wallets and how the main focus there being on getting back to growing the user base. If you could just distill down maybe the two or three things that you think are most important there? And as we think about the next year or so, kind of how you see the path playing out to getting the user base back to growth?

Yes. In hindsight, I made an error in my earlier comment. What I want to convey is that we've seen consistent growth in our digital wallet product over the past three months, marking the third consecutive quarter of growth. We aim to accelerate that momentum. When looking at the user numbers, we transitioned to the Digital Wallets segment, which may be a bit confusing compared to the digital wallet product. Currently, we have 7 million users in that segment, and we are eager to enhance that figure through eCash and partnerships, such as with Revolut and Excela. These collaborations will enable us to expand our consumer base. Our marketing team has made significant strides as well, and we've had success with new initiatives. We now have a clearer understanding of our customer acquisition costs, and we'll provide more updates on that in the latter half of the year. We're more confident regarding our investments and the positive outcomes we're observing since transforming our marketing team, which is performing admirably. As we advance into Q3, our customer acquisition efforts are beginning to accelerate. We believe we can achieve growth beyond the current 7 million users.

Our next question is from the line of Timothy Chiodo with UBS.

The chargeback protection and value-added services mentioned, which contribute to the approximately $50 million in revenue, raise questions about the types of clients utilizing this service. I assume it primarily targets the e-commerce segment. Can you discuss whether this service relies more on internal capabilities or third-party providers? Additionally, as e-commerce increasingly adopts payment solutions like Apple Pay, Google Pay, and click-to-pay options that shift liability back to the issuer, do you foresee these services evolving or becoming less necessary? I would appreciate your insights on the potential implications of this shift for chargeback services.

Thank you, Tim. Great question. So what I would say is the chargeback offering that we have is predominantly being taken by our SMB clients, not our e-commerce clients. And so these are a lot of small businesses that are just trying to stabilize their revenue stream and not be exposed to anything that may appear in the chargeback arena. I think to your broader question, I do think that as technology continues to evolve and you see more and more regulatory scrutiny around consumer, whether it be the way the CFPB refers to it or the way FCA or any of the other global regulatory bodies refer to a consumer duty, you're going to see more and more emphasis around mitigating chargebacks. And I think technology will allow that over time. And I think you'll see revenue streams over an extended period of time probably diminish from chargeback but that's just my own theory on how technology will impact that as we're moving forward.

Okay. I appreciate that context, Bruce. The follow-up is around another value-added service. So the working capital loans you mentioned which are contributing to the year-over-year increase in take rate. Can you just talk a little bit about the structure of that program on balance sheet, off balance sheet, and how you went about that decision?

Yes. Tim, I apologize for not addressing part of your previous question. This is a third-party product, similar to our loan product. We take no risks here; it's essentially an origination fee for the loan. As you know, many of our large competitors provide a similar program to their customers. We plan to introduce more of these types of programs as we expand our product offerings to align more closely with our peers. This program is beneficial for our merchants and helps create good balance in our offerings, especially in the SMB sector. We've seen positive engagement in the first 30 days. It's still too early to assess its overall impact, but the initial results have been very encouraging.

Our next question is from the line of Paul Obrecht with Wolfe Research.

This is Paul Obrecht on for Darrin. Can you just start by touching on the success you're seeing with cross-selling to existing merchants? Maybe just how you're approaching conversations with the existing merchant base and really driving adoption of these further products would be great.

Thank you, Paul. When I started a couple of years ago, I highlighted that Europe was largely focused on wallets while the U.S. was more about acquiring. Our separate sales teams were not collaborating or sharing information about our products or clients. Over the past couple of years, Rob Gatto, our Chief Revenue Officer, has unified these teams. We now have account managers assigned to our largest clients who oversee their growth. For instance, all our wallet customers were using e-commerce gateways from other providers, and we weren't leveraging our own solutions. Now, we are. Last quarter, we introduced a new product, Pay by Bank, which allows us to revisit our existing customers and capture more of their revenue and market share in both North America and Europe. This remains our strategy, and as Nicole Carroll's team develops more products for us, we will continue engaging with our existing customers. We have a strong customer base that is highly desirable, and we aim to provide them with all the payment solutions they need to succeed in their business.

Great. And then as a follow-up, can you just provide some color on the e-commerce growth and any trends you're seeing there? And then have you seen any shifts in consumer spend patterns, maybe both in the second quarter and thus far in Q3?

Yes. Regarding our e-commerce business, we are experiencing solid growth across all areas. We're seeing positive developments from states that have recently come online in North America. Additionally, we benefited from some momentum from the euro this quarter, which is encouraging. As we move into the second half of the year, we typically experience a busier period due to the Premier League and other sports in Europe. Overall, the e-commerce sector is showing steady performance and strong results, with some broadening in our growth. Regarding consumer spending in July, while there may be some shifts, we are not observing significant changes. Instead, we are looking at a solid quarter for Q3, with July results aligning with our expectations. We feel optimistic about our sales momentum and our position as we approach Q3.

Our next question is from the line of Aditya Buddhavarapu with Bank of America.

I have a few questions. First, could you discuss the direct business in Merchant Solutions? I understand you're working to improve growth in that area, and it saw a 10% increase in SMB in Q2. Could you elaborate on the initiatives in place and your outlook? Additionally, reflecting on the CMD last year, you indicated a midterm growth target of high single-digit to low double-digit. Excluding the impact of the merchant portfolio optimization, you noted that growth would have been 8% to 9% for 2024. Can you explain how you aim to achieve low double-digit growth from current levels as we approach 2025 and maybe 2026? Lastly, regarding the partnership with Revolut on eCash, could you provide more details on how that works in terms of the shared economics? Do you view this partnership model as a potential path for future growth in the eCash business, particularly with other fintech companies?

I will try to address those points. The first question was about our Merchant Solutions direct business. We have made significant changes to the management of those teams, and we have a new leader overseeing that area. We have implemented several initiatives to strengthen this business, and we are optimistic about its potential. We are adding numerous salespeople to support this effort. Historically, we have felt that this segment was underdeveloped. We value the direct aspect of our business and appreciate all of our operations. The emphasis on expanding the direct portion of our portfolio is driven by its potential for higher margins. We are actively working to grow our sales force in this area, introducing new products for the direct team, and enabling them to cross-sell. We hope to see positive outcomes from these initiatives. Regarding the second question about achieving double-digit growth in 2025 and 2026, we cannot provide specific comments on that.

Maybe I can repeat that.

Yes.

Sorry, I was just going back to the CMD at the beginning of last year when you did speak about the ability to go back to high single-digit to low double-digit growth over the midterm. Now this year, you've raised the guidance but without the merchant termination impact, it does seem to be you're getting closer to that midterm growth range. Just wanted to see what could drive you to get there as you head into '25, what's going to be the key drivers?

Yes. If I understand the question correctly, it refers to my midterm guidance from Investor Day about a year ago. We're still making progress, and I want to focus on this quarter first. We have significant momentum and are striving for better execution every day. While there's still much to be done, we're pleased with the company's progress and feel we're heading in the right direction. We'll provide guidance for 2025 at the appropriate time. There's no doubt that when reflecting on previous years, we've accelerated quite a bit. We've previously mentioned our quality revenue growth accelerating from 3.5% to over 7% this year, showing a nice growth increase from last year to this year. We'll keep doing what we’re doing, as we're seeing good results, and we'll offer guidance for 2025 and 2026 as we usually do during our Q4 guide. Did you have another question?

Yes. Just on the partnership with Revolut and on the eCash product. Is that the sort of growth opportunity you would look at for eCash going forward, similar types of partnerships?

Yes, I believe the Revolut program is an excellent initiative. While it's still in the early stages, it certainly offers a potential framework to engage with partners and consumers, which can help us boost our growth. This applies not only to our current operations with paysafecard and other eCash products but also represents another avenue for growth acceleration. I think Alisa Barber and her team are making significant strides with their marketing efforts. However, it's still early to determine the full impact. We feel optimistic about this. Our LatAm business also showed strong double-digit growth, reflecting many positive developments in eCash. Looking back to the end of Q4, we mentioned the necessity for eCash to gain momentum, and we are starting to witness that acceleration now. We are very excited about it.

Our next question is from the line of Dan Perlin with RBC Capital Markets.

I wanted to discuss the new KPI you introduced, the customer acquisition cost of $17.60. It seems that this includes marketing expenses, sales, and third-party costs. Could you provide some context regarding the rank order of those three components so we can understand how they scale? Additionally, I believe you mentioned that the payback period is around two months, which is quite fast. My question is whether this two-month timeframe is your target, or are you open to increasing the customer acquisition cost to extend that period in order to ultimately boost ARPU and activation?

Yes, Dan, thank you for the question. I think we're currently focusing on consumer acquisition and trying to understand where to allocate our resources and how to transform our marketing strategy. We are sharing metrics related to our ideal customer profile, and we plan to provide more information as we move into Q3 and Q4. We agree that the payback on the consumers we are acquiring is strong, and we are determining how to build on that success. We have several test programs in place that are producing promising results, but it is still early days. Alex, would you like to add anything?

In our digital wallet and eCash business, we have two approaches to drive revenue. One is attracting new customers, and we will evaluate the effectiveness and costs associated with this. The other approach is converting our unregistered customers—those who may only use our services occasionally—into registered customers. We know that the average revenue per user for registered customers is significantly higher. Therefore, the cost to acquire a new customer differs from the cost of converting existing unregistered customers. As Bruce mentioned, if customer acquisition costs need to rise slightly, I don't see that as an issue. We are exploring new, more efficient ways to invest in growing that revenue, and this metric will indicate our progress moving forward.

It seems like there's significant potential for continued expansion to drive growth, which is encouraging. Additionally, regarding the take rate, it continues to rise. There's been a lot of discussion about value-added services, but there's also a shift towards enterprise customers. As we look towards the second half of the year, considering the portfolio adjustments and the removal of higher-risk customers, it appears that this could affect EBITDA. Are there any specific factors you want to highlight that might indicate a decline, or is it expected to remain stable despite the ongoing portfolio optimizations and the shift towards larger enterprises?

Yes. Look, I think our guidance covered all that, Dan. So we don't have any additional margin impact than what we already had in our guidance. So we feel very good about the guidance where we're at. I think, candidly, we are accelerating a little bit faster on our top line. That's allowing us probably, just being totally transparent, the luxury of being proactive and making these right decisions for the long-term stability of the company. So we think it's a great thing for us to be doing. And I think it's fairly contained and I think we'll grow over it very quickly because of the strength of the sales organization.

Ladies and gentlemen, this concludes our question-and-answer session. I would now hand the conference over to Bruce Lowthers for his closing comments. Bruce?

Yes. Thank you. So first of all, a really strong first half of the year as we start gearing up for the second half of the year. We're very excited about the possibilities. I just want to thank everyone here for all the preparation into pulling the quarterly call together; Matthew Parker, a great job of getting us here and everybody involved at Paysafe, everybody contributes. It starts here and we really appreciate it. So, thank you very much.

Thank you.

The conference of Paysafe has now concluded. Thank you for your participation. You may now disconnect your lines.