Earnings Call Transcript - PSFE Q3 2022

Operator, Operator

Greetings, and welcome to the Paysafe Third Quarter 2022 Earnings Call. 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. I would now like to turn the conference over to your host, Kirsten Nielsen, Head of Investor Relations for Paysafe. Thank you. You may begin.

Kirsten Nielsen, Head of Investor Relations

Thank you, and welcome to Paysafe's third quarter 2022 earnings conference call. 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 SEC reports. These statements reflect management's current beliefs, assumptions and expectations and are subject to factors that could cause actual results to differ materially from those forward-looking statements. You should not place undue reliance on these statements. Forward-looking statements during this call speak only as of the date of this call, and we undertake no obligation to update them. Today's presentation also contains 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 on the Investor Relations section of our website. Joining me today are Bruce Lowthers, Chief Executive Officer; Izzy Dawood, Advisor; and Alex Gersh, Chief Financial Officer. After our prepared remarks, we will address questions received from shareholders through the Say Technologies platform. After that, we'll take questions from the analyst community. With that, I'll now turn the call over to Bruce.

Bruce Lowthers, CEO

Thanks, Kirsten. Good morning, everyone, and thank you for joining us today. Let's start with slide 3. On the last earnings call, which was my first quarter as CEO of Paysafe, I shared my early observations on the state of the Company and the path forward. We discussed the initial steps we were taking to return to our roots of product innovation, rebuild a strong sales engine and to improve efficiency. I'll share more on our progress in these areas later in my remarks. With that in mind, I'd like to first welcome Alex Gersh to Paysafe as our CFO. Alex brings highly relevant experience, having served as CFO of major brands in gaming and entertainment, most recently as the CFO of Sportradar. Alex has a great track record of driving results and financial discipline for public companies, and I'm very excited to have him on board. Next, I want to thank our employees for their contributions during this period of change, and I'm pleased to share our financial results for the quarter. Our third quarter revenue of $366 million and adjusted EBITDA of $95.5 million exceeded our financial expectations communicated in August. Excluding the impact of movement in foreign exchange rates, revenue increased 10% year-over-year, reflecting growth from both the US Acquiring and Digital Commerce. As for the rest of the year, we are maintaining and tightening our full-year outlook, which Izzy will take you through in more detail. I want to reiterate that Paysafe maintains a healthy financial position with transaction volume exceeding $128 billion, revenue approaching $1.5 billion and adjusted EBITDA exceeding $400 million over the last 12 months. We also maintained strong liquidity and financial flexibility while we continue to prioritize reducing our debt and leverage ratio. Before I move on to our strategic updates, I'll quickly touch on the planned reverse stock split, which was announced this morning. As stated in our press release, we plan to hold a special meeting in December to seek shareholder approval for a 1-for-12 reverse stock split. Once effective, our total number of shares outstanding will be reduced from approximately 727 million to approximately 61 million shares, which is more in line with the companies of our size and scope. Additionally, the Board believes that effecting a reverse stock split will help us appeal to a broader range of investors and improve the perception of our stock with the investment community, new talent and other stakeholders. Turning to slide 4. During the quarter, we made good progress across the long-term growth accelerators. As part of our focus to drive innovation, we executed a cost reallocation and changes to the organizational structure, which will fund sales and product investment. Additionally, as we're going through our 2023 planning, we are allocating a larger percentage of our investment towards new revenue products and improving operational efficiency to enhance stakeholder engagement. In the third quarter, we also welcomed Rob Gatto as Paysafe's first Chief Revenue Officer, with the responsibility for building our global sales organization focused on existing customers, new account acquisition and business development opportunities. Next, our focus on customer experience, including improvements and fixes to our wallet, which were rolled out over the summer, are yielding positive results with consumers, including increased deposit conversion rates from Q2 to Q3. In Latin America, we continue to see great progress while supporting our merchants from other countries looking to expand into Latin America and tap into the high growth potential of the region. During the third quarter, we launched with 10 merchants from Paysafe portfolio into Latin America, including with bet365 in Mexico. Additionally, we saw volume from Paysafe customers that we have launched into LatAm more than double from Q2 to Q3, supported by Paysafe's single API, which enables seamless connection to multiple countries in the region. Lastly, in North America iGaming, we continue to see robust growth in the regulated iGaming market with more than 45% revenue growth in Q3. We are currently live in 23 states following our third quarter launch in Kansas with DraftKings, Caesars and PointsBet. We look forward to upcoming launches in new states, including Maryland and Ohio. Moving to slide 5 for an update on our sales function. We're building out our new go-to-market structure, which organizes the sales function by our core verticals, consolidates our systems for better KPIs and visibility, and will provide a sales enablement support function for the sales team. This new model will improve our ability to sell Paysafe as a broader strategic payments offering, improve pre and post-deal execution and greatly increase our global pipeline and average deal size. I spent a lot of time with Rob and the team and remain excited about what we can achieve when we align our product direction and enable our teams to efficiently go after sales. Turning to slide 6, I'll expand upon this a bit more. Paysafe has a unique proposition for both merchant acquiring and consumer wallets, which comprises our eCash and digital wallet solutions. And this slide illustrates where we play in those constructs, both regionally and across our verticals. We have a unique network, and many of our assets power end-to-end payments for our core verticals. We have seen strong performance in our merchant business in North America with double-digit growth year-to-date. That's performed well relative to the market, where we have seen headwinds in Europe, as we have FX impacts as well as a softer market in the verticals we're in. And we have not done as well here cross-selling to our merchants. For example, we historically have had a bifurcated strategy across iGaming, where we have a strong acquiring presence in North America, but not in Europe, where we play mostly with wallets and eCash with many of the same merchants. We now have organized the vertical under one leader to drive a holistic sales effort and offer a better solution to our merchants. We also have a great emerging digital asset solution in our wallet business, with a strong offering in Europe, which we are focused on bringing to the Americas. Overall, we have a lot of opportunity to expand or deepen our presence, both geographically and across our verticals to fully leverage our assets to better serve our merchants and consumers. Let's turn to slide 7 for an update on digital wallet. In Q3, we saw continued signs of stabilization and progress. We recorded constant currency revenue growth of 2% from the digital wallet business, an improvement from the year-over-year declines we saw through the first half. Total deposits on our digital wallet were up 9% year-over-year. Lastly, it's worth pointing out that on average we saw roughly 100,000 new accounts funded monthly in Q3, reflecting the continued relevance of our wallets to consumers. There's still work to do, but we're seeing signs of stabilization despite ongoing market headwinds in Europe. And I'm confident that the changes we are implementing will drive further improvement and lead to greater customer loyalty and engagement. Now, I'll turn the call over to Izzy to discuss the financial results.

Izzy Dawood, Advisor

Thanks, Bruce, and welcome, Alex. I would like to add, it has been great working with you on the transition over the last several weeks as well. Let's start with slide 9. Paysafe delivered a solid quarter versus our expectations, with revenue and adjusted EBITDA slightly above our third quarter guidance ranges. This was driven by continued strong growth from US Acquiring, while the Digital Commerce segment performed in line with our expectations. Moving to slide 10 for a summary of our third quarter results. Volume was $32.5 billion, an increase of 5% year-over-year, reflecting continued strength in the Americas, where we saw resiliency in the U.S. SMB market; as well as strong momentum in regulated iGaming and Latin America. As a reminder, volume does not include our embedded finance solution as the majority of the embedded finance volumes exchange or peer-to-peer transactions, which are not revenue drivers. Total revenue for the third quarter increased 4% to $366 million. Excluding the impact from changes in foreign exchange rates, revenue increased 10%, reflecting growth in both US Acquiring and Digital Commerce. Compared to the prior year, the Russia-Ukraine war impacted growth by approximately $4 million or roughly 1%. Adjusted EBITDA for the quarter was $95.5 million, resulting in an adjusted EBITDA margin of 26.1%, primarily reflecting lower margins in the Digital Commerce segment; business mix; as well as one-off items, including a prior year VAT release. During the quarter, we generated $170 million in free cash flow, bringing our last 12 months free cash flow to $259 million or 64% conversion. As we end the year, we fully expect the full-year free cash flow conversion to be in line with our target range of 60% to 70%. Moving to slide 11, I will briefly touch on our GAAP results. Interest expense was $34.6 million, an increase of roughly $6 million from Q2. The comparison of interest expense of prior year reflects additional debt to fund the acquisitions of SafetyPay as well as increased rates and higher amortization of debt issuance costs. Our GAAP net income for the third quarter was $1 million compared to a net loss of $147 million in the prior year period. The increase in net income is largely a result of the intangible impairment expense recognized in the prior year. Adjusted net income for the third quarter was $29.2 million compared to adjusted net income of $39.4 million in the prior year, largely attributable to the higher interest expense and the decline in adjusted EBITDA. Let's move to slide 12 for a discussion on the segment results, starting with US Acquiring. Q3 volume in US Acquiring was $21.8 billion, an increase of 5% year-on-year. Consistent with our expectations, we've seen a slight moderation of growth versus Q2. Revenue for the third quarter was $185.4 million, an increase of 12% compared to the prior year. Adjusted EBITDA increased 24% to $50.3 million, reflecting a 27% EBITDA margin. Overall, our results for the US Acquiring segment reflect continued resiliency in the U.S. SMB market, recovery of the direct marketing vertical and strong operational performance. Turning to slide 13. In our Digital Commerce segment, volumes were $10.7 billion, an increase of 3% year-over-year, reflecting growth from the acquisitions. Revenue was $180.6 million, a decrease of 4% year-over-year. Excluding the impact from changes in foreign exchange rates and Russia-Ukraine, revenue would have increased 10% year-over-year, reflecting growth in both Digital Wallets and eCash, primarily driven by contributions from acquisitions and our new embedded finance offering. As a reminder, in September, we lapped the closing of the PagoEfectivo acquisition completed last year. And in November, we will lap the closing of the viafintech deal. Adjusted EBITDA for the Digital Commerce segment was $63.5 million in the third quarter compared to $80 million in the prior year, down 7% on a constant currency basis. Adjusted EBITDA margin of 35.1% was down year-over-year, reflecting one-offs, including a prior year VAT release as well as a small impact from foreign exchange rates. Moving to slide 14 for a quick update on segment reporting. We will be making a couple of changes in Q4. First, the US Acquiring segment will be renamed to Merchant Solutions, and the Digital Commerce segment will be renamed to Digital Wallets. Second, we are transitioning our integrated and e-commerce solutions, or IES, to the Merchant Solutions segment. For reference, the IES business line provides e-commerce payment processing for enterprise merchants and represents revenue of $91 million on an LTM basis. These changes better align our segment reporting with our consumer and merchant propositions and our strategic focus moving forward. Our external reporting will reflect the two new segments beginning in Q4 of this year, and a recast version of the segment financial information is included in the appendix section of this presentation. On slide 15, we will look to our balance sheet and liquidity. Cash and cash equivalents were $220 million at quarter-end. Net debt was $2.3 billion and our net debt to LTM-adjusted EBITDA ratio was 5.5 times, down from 5.7 times at the end of Q2, driven by FX movement in our euro-denominated debt as well as debt repayment. In Q3, we completed debt payments and repurchases of approximately $31 million in notional debt, and we continue to monitor pricing of both our term debt and notes and will act opportunistically to take advantage of current trading levels. Depending on interest rate movements, we expect Q4 interest expense to be between $33 million and $35 million. Let's move to slide 16 to discuss the outlook. As we close out the year, we expect Q4 revenue in the range of $370 million to $378 million and adjusted EBITDA in the range of $105 million to $109 million, which reflects flat to modest growth year-over-year on a reported basis for both metrics. Excluding an expected 1% headwind from the Russia-Ukraine war and a 67% headwind from FX, this reflects high-single-digit growth year-over-year in Q4. At the segment level, on a year-on-year basis, we expect Merchant Solutions to grow high single digits and Digital Wallets to increase sequentially. Similarly, based on the prior segment structure, this would reflect high-single-digit growth from US Acquiring and a sequential increase from Digital Commerce. Turning to the full year on Slide 17. For the full year, we expect revenue to be roughly flat year-over-year on a reported basis and mid-single-digit growth on a constant currency basis. We expect Merchant Solutions to grow high single digits year-over-year and Digital Wallets to be up low single digits, excluding the headwind from FX and the Russia-Ukraine war. For the total company, adjusted EBITDA is expected to be between $407 million and $411 million, reflecting lower margins, primarily driven by the business mix. Overall, this reflects a tightening towards the higher end of our most recent full-year guidance communicated on our Q2 earnings call. Now, I'll turn the call back to Bruce for closing remarks.

Bruce Lowthers, CEO

Thank you, Izzy. To summarize, we're pleased with the third quarter results and with the progress our team has made over the last five months. We have simplified the organization and go-to-market model while adding new talent to help us regain momentum and accelerate growth. We also have refined and improved our strategic focus and priorities while fostering a more collaborative culture. I'll conclude by reiterating that I continue to feel excited by the potential I'm seeing in the Company. So much so that in September, I personally purchased 1.2 million shares of Paysafe stock on the open market, which is my earliest opportunity to purchase shares since joining the Company. While we are facing an uncertain economic environment and have changes in the business to address, I'm confident that the actions we are taking will set us up for growth in 2023 and beyond. Now, let's begin with the Q&A session.

Kirsten Nielsen, Head of Investor Relations

Thank you, Bruce. We are partnering with Say Technologies for the first time with this event to open up a new shareholder Q&A forum, which allows all of our shareholders to submit and upvote questions. We plan to skip questions that were already addressed in our presentation, and we'll also group together questions that share a common theme. After that, we'll turn to questions from our research analyst community. Our first question is from Jason, who would like to know if we have plans for a share buyback.

Bruce Lowthers, CEO

I'll take that question. So, I think as we've said, we don't have any plans for a share buyback at this time. Considering the current trading levels of our debt and the rising interest rate environment, as we've said in the last quarter as well, reducing our debt is a priority. So, our leverage ratio is higher than we want it to be, focused on reducing leverage by driving EBITDA growth and debt reduction.

Kirsten Nielsen, Head of Investor Relations

Thank you, Bruce. Next, we have a couple of questions asking about our growth next year and overall opportunities in this competitive market. What actions is Paysafe taking to differentiate and drive customer engagement? I think we've touched upon this in our presentation, but is there anything you'd like to add or reiterate, Bruce?

Bruce Lowthers, CEO

Sure. Look, thanks for the questions. We're still finalizing our budget for 2023. We need to kind of work through that process, see where we exit the year. And then, we'll provide guidance as we normally do in the next earnings call for the 2023 year. As I addressed in the prepared remarks, we're taking a lot of action to reinvigorate growth. And I expect to support improvement next year. Paysafe, as I talked about last quarter, serves massive TAMs across entertainment verticals with attractive tailwinds over the long term. We're a small player today with plenty of runway to grow in our core markets, and we must do a better job of executing product innovation and sales. We have lots of opportunities to expand and deepen our presence, both geographically and across our verticals to fully leverage our unique network to better serve merchants and consumers. So, we feel very, very bullish on the opportunities in front of us.

Kirsten Nielsen, Head of Investor Relations

Okay. Thanks, Bruce. Let's take one more question from the Say platform today. Pietro asks, when will Paysafe become profitable? Izzy, could you help clarify this one?

Izzy Dawood, Advisor

Yes. Sure, Kirsten. First, let's clarify that we are profitable today based on the key metrics that we follow and share. We generated adjusted EBITDA of $408 million over the last 12 months, along with positive free cash flow. When we look at the bottom line, we also generated positive adjusted net income for the last two quarters, which is when we introduced the metric. Even this quarter, we had positive net income on a GAAP basis, and this figure will vary due to nonoperational and noncash items. If you like any further clarification on these metrics, I welcome you to reach out to your IR department. That could follow up as well.

Kirsten Nielsen, Head of Investor Relations

All right. Thanks, Izzy, and thanks, Bruce. And with that, I would now like to turn the call back over to the operator to open up the phone lines and take questions.

Operator, Operator

Our first question comes from the line of David Togut with Evercore ISI.

David Togut, Analyst

Thank you. Good morning. Could you drill down into what drove the strength in SMB retail payments in the quarter?

Bruce Lowthers, CEO

I believe we had a strong quarter in the SMB sector. As you have observed throughout the year, Afshin and his team in our US Acquiring business have delivered exceptional performance. We are seeing continued growth, and that team is consistently operating at a high level. When compared to competitors, the team's performance this year has been impressive. Sales are doing well, and we are optimistic about the future of our Acquiring business.

David Togut, Analyst

Got it. Just as a quick follow-up, with net debt-to-EBITDA at 5.5x LTM EBITDA, how much headroom do you have until you reach your loan covenant ratios?

Izzy Dawood, Advisor

Hey David, it's Izzy. Thanks for the question. Yes, we got a fair amount of headroom. I mean, for our first lien, I don't think we can get anywhere close to we get like a 7-plus in terms of our debt covenants. So, a fair amount of capacity there.

Operator, Operator

Our next question comes from the line of Jamie Friedman with Susquehanna.

Jamie Friedman, Analyst

Good quarter. Greetings. I wanted to ask about the rebuilding our sales organization slide. Bruce, it's slide 5. You're moving into this new structure verticalized. I was hoping you could share any context about the rationale and what you hope to achieve with the new sales structure.

Bruce Lowthers, CEO

Yes, Jamie. Good morning. Thank you for your question. As I mentioned in the call last quarter, it was clear that our sales teams were operating in silos, which resulted in lost opportunities. Now, we are organizing our teams around verticals rather than just by product. This will allow our team to sell a complete solution suite instead of only individual products. We've already seen some success, and you will hear more about it in the next quarter. We have brought in some excellent talent, and Rob has done a remarkable job organizing us in a short period, creating a sales structure and a plan for how we will sell to those merchants. I believe we have made a significant transition in a brief time, and I anticipate we will see results from this fairly soon, although there is still much work to be done. Importantly, we have successfully introduced our e-commerce solution into the gaming sector. Previously, due to the silos, we did not sell it in Europe, but now, with Rob's new organizational structure, it has become much easier for us to sell to those clients. I am very optimistic about these changes and believe the results will be promising.

Jamie Friedman, Analyst

For my follow-up on slide 7, I wanted to inquire about the improvement in the wallet, which seems to be stabilizing and possibly growing for the first time in a while. Can you explain the reasons behind this improved performance, Bruce? Is it due to the total deposits you mentioned, or the new interface you developed? Some high-level insights on this would be beneficial.

Bruce Lowthers, CEO

Yes, that's a great question. I believe Chirag and his team have performed exceptionally well. They have introduced new talent and have focused on improving the product's usability. We've shifted our mindset to enhance the experience within the wallet, and we're prioritizing the addition of new features to create better user experiences. The improvements made by his team have positively impacted that experience, leading to tangible benefits. As a result, we've lessened some of the friction associated with the wallet, which has resulted in a higher conversion rate of deposits. The initial indications are very encouraging. Although there is still much work to do on the product, the efforts of Chirag and his team are showing positive results. It appears to be stabilizing, and we now need to build on this progress.

Operator, Operator

Our next question comes from the line of Darrin Peller with Wolfe Research.

Darrin Peller, Analyst

Maybe we could just follow up on the wallet side because the stability was nice to see, and I think the initiatives you guys have been working on seems to be paying off. Maybe we could just remind us what exactly the strategic vision is for the segment? And then I know there's also been some partnership with Binance and some others in an industry that's been at least perceived as a little bit more risky now. So, if you could just comment on exposure there?

Bruce Lowthers, CEO

Certainly. First, regarding the wallet, it has traditionally focused on the iGaming sector and has performed well for the past 20 years. Now, we are shifting towards enhancing the user experience. Our goal is to increase the wallet's usage and expand its applicability within the broader entertainment sector, making it more user-friendly for a wider audience. This is shaping our strategy moving forward. Additionally, we aim to integrate more of our e-commerce payment solutions with the wallet. You will hear more about this as we approach our Investor Day and Q4. As for the cryptocurrency side, we have established a solid crypto business, having been involved since 2012, particularly with Binance. They are a valued partner, and we provide a private label wallet for them, but we do not perceive significant exposure from this relationship.

Izzy Dawood, Advisor

And Darrin, it's Izzy. Overall, the crypto business that we have is less than 3% of our overall revenue base as well. There has been for the last couple of days, obviously, increased volatility, which had a small short-term benefit. But at the end of the day, it's a relatively small exposure.

Darrin Peller, Analyst

Okay. Are those Binance downloads or apps, are those in your number, your accounts for digital wallet growth at all, or is that separated out? Because I know it's a different model to some degree. But just a quick follow-up, if you don't mind, I'd just add on. I'll put it all together at once. The profitability of the story, it looks like you found a place that makes sense from an EBITDA standpoint. It's great to see the guidance where it was narrowed and really maintained. And when we look at what you're thinking about going forward, I mean, Izzy, if you could just remind us on the levers you guys have in different kinds of environments throughout the next year or so, profitability-wise and expense management-wise, would be great.

Izzy Dawood, Advisor

Yes. I'm not going to get much into next year. As Bruce mentioned, at the Investor Day after the Q4 call, we'll get into it. But I think just going into next quarter, a couple of levers to think about. First and foremost, it is a seasonally more active quarter for sports betting in Q4. On top of that, there's World Cup, and third, initiatives and stuff that Chirag and the team have been working on. So, as a result, our Digital Commerce business will show a sequential increase. And that business also has a higher EBITDA margin. So, a combination of those two gives us the outlook and confidence into Q4 in terms of levers that will be driving improved profitability.

Darrin Peller, Analyst

And just on the Binance, is that included in the numbers or...

Izzy Dawood, Advisor

It's not the accounts. We don't have any volume accounts because all the volume that comes through is really peer-to-peer exchanges in wallets, which do not generate revenue.

Operator, Operator

Our next question comes from the line of Tim Chiodo with Credit Suisse.

Tim Chiodo, Analyst

Great. I know we hit on this before, but I want to circle back on the strength in U.S. SMB retail. If you could just do a recap of maybe how large that portion is within the current segment of US Acquiring? And also just a recap on the means of distribution. How much of that is a direct sales force selling into someone else's software? How much is indirect? How much of that might relate to Clover or others? In other words, what is being sold into the SMBs that seems to be gaining a good bit of traction?

Bruce Lowthers, CEO

About half of the company focuses on U.S. Acquiring. When you look closer, there's an approximately 50% split between direct and indirect sales. The team is performing very well. They sell various platforms, including Clover and others. This offers a unique value proposition because we have a team that is flexible regarding the POS software or devices. Our clients can choose what best suits their needs. I believe Afshin and the team are doing an excellent job. They are performing among the best in the industry this year, and we expect that to continue.

Tim Chiodo, Analyst

Thank you. I have a second question related to your previous comments about certain gaming markets in Europe where bank-based payment methods, such as ATMs or LPMs, were potentially creating some price competition, possibly through account-to-account transactions. Could you provide an update on whether that situation has changed, if the competition has lessened, or if it is still ongoing? In other words, are there more options available and/or pricing pressures in the European online gaming sector?

Bruce Lowthers, CEO

Yes. From my perspective, all those things are occurring, and I believe that's just a typical aspect of competition. Payment methods and execution channels are evolving. However, none of this is hindering our growth; we are the ones holding ourselves back, and we need to execute better. We have reorganized the sales team to tackle that market. There is no reason to think we can't grow alongside our competitors as we advance our transformation. This is a significant market opportunity with natural advantages. We possess the resources to compete, and we will continue to do so as we move forward.

Operator, Operator

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

Dan Perlin, Analyst

I wanted to explore your international expansion, particularly in Latin America. What specific actions are you taking in that market? We've heard from others that the Latin American market has been quite strong. So, is the recent significant sequential growth mainly driven by market dynamics, or are there specific developments in your products that are helping you gain market share? Any insights would be appreciated.

Bruce Lowthers, CEO

Let me begin, and I’ll let Izzy share more about the history. As you know, we made a couple of acquisitions in that region over the past year, and they are performing very well. Our growth rate from those acquisitions is strong and in line with our expectations based on our business case. We feel very positive about this part of the business. While these are small businesses compared to the overall size of the company, the product is well-received in that market, and we see significant growth opportunities. We are introducing some of our existing products to Latin America, which will allow us to cross-sell more effectively. Additionally, we have established natural channels between Europe and Latin America, bringing our European customers into the market. This strategy is expected to help accelerate our revenue in Latin America, presenting us with numerous opportunities, and we feel very optimistic about it.

Izzy Dawood, Advisor

Yes, Bruce, I want to elaborate on that. One of the main advantages is bringing our European gaming operators to Latin America, a rapidly growing market. The interest in this region stems from Pago's strong brand recognition in Peru, and we are effectively utilizing this recognition to drive performance. Additionally, SafetyPay offers excellent technology and connections in the real-time banking space, which enhances the effectiveness of that payment method in various Latin American markets. When you combine this with our robust operator base in Europe, which has a global presence, it results in a successful set of acquisitions that are boosting our growth.

Dan Perlin, Analyst

Yes, that's a very good point about the corridor. Thank you for that. Just my quick follow-up. Are you seeing any consumer behavior dynamics as we consider gaming as a discretionary category versus nondiscretionary? Is there any weakness there that you can identify? Also, how do you think that market or business will perform if we enter a recession or face more challenging times ahead?

Bruce Lowthers, CEO

Thank you for the question. Alex is also here, and he can share his insights on the gaming experience shortly. Currently, we are not observing any issues with spending. October was a strong month for us, so we feel confident. I want to emphasize that we have numerous growth opportunities to align ourselves with our peers’ performance. While some of the rapidly growing companies may face challenges, we see plenty of potential to continue improving and accelerating, and we intend to do so. We are not experiencing significant concerns regarding discretionary spending. From our perspective in the gaming sector, the recession does not appear to have a substantial impact. Alex, with his background in that area, can provide further clarification.

Alex Gersh, CFO

Bruce, I can only echo your comments. Certainly, if you've seen what some of the operators have been reporting globally and in the U.S., particularly those that are growing in the U.S., and we have the opportunity to work with some of the operators in the U.S., you could see that.

Dan Perlin, Analyst

Yes. No, it seems to be holding up pretty well. I'm a little surprised by it, quite frankly. So, thank you so much. I appreciate it.

Bruce Lowthers, CEO

Yes. Thank you.

Operator, Operator

Thank you. Ladies and gentlemen, that concludes our time allowed for questions. I'll turn the floor back to Mr. Lowthers for any final comments.

Bruce Lowthers, CEO

Great. Well, look, thank you everyone for your time today. I also want to make sure that we thank Izzy, who has been a great partner with me here over these last six months. Thank you for all your contributions here at Paysafe. And we all wish you well as you move on to your future endeavors, and thank you very much. So, that's it from here. We really appreciate it, and look forward to talking to everyone soon.

Operator, Operator

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