Paysafe Q3 Earnings Call Highlights

Key Points

• Paysafe lowered its full-year outlook to approximately 4% revenue growth as volume growth slowed amid regulatory, banking and market headwinds. Q3 revenue rose 1% to $439.6 million, while adjusted EBITDA fell 17% to $105.7 million.
• Profitability was pressured by lower gross margins and higher expenses: adjusted EBITDA margin declined to 24% from 29.2%, and adjusted EPS fell to $0.44 from $0.70. Digital wallet active users grew 14%, but average revenue per user dropped 10%.
• Paysafe ended the quarter with net leverage of 5.5 times and expects a similar level at year-end, while targeting debt reduction of about half a turn annually over the next two to three years. Newer products are growing, including PaysafeWallet, which rose more than 30%.

Paysafe NYSE: PSFE lowered its full-year outlook after third-quarter growth slowed and regulatory, banking and market pressures weighed on activity across its digital wallet and e-commerce businesses. The payments company now expects approximately 4% revenue growth for 2026.

Third-quarter revenue rose 1% from a year earlier to $439.6 million, while adjusted EBITDA fell 17% to $105.7 million. Chief Executive Officer Bruce Lowthers said volume growth began the quarter in the upper single digits in July but slowed in August and September, with the weaker activity continuing into October.

“The second half has been more challenging than we expected,” Lowthers said. He cited regulatory and banking headwinds, market softness and a shift in foreign exchange from a tailwind to a headwind. Data licensing transactions also did not materialize to the extent needed to offset volume pressure, he said.

Margins Fall as Costs Rise

Third-quarter adjusted EBITDA margin narrowed to 24% from 29.2% a year earlier. Chief Financial Officer John Crawford attributed roughly 190 basis points of the decline to lower gross margin, mainly from client mix in merchant solutions. The remainder reflected a 13% increase in selling, general and administrative expenses.

That increase included $5 million in additional marketing and technology investment and roughly $7 million in net one-off or timing items, including severance costs and the effect of a bonus accrual release in the prior year, Crawford said.

Adjusted earnings per share fell to $0.44 from $0.70 a year earlier, reflecting lower adjusted EBITDA and higher interest expense following the company’s refinancing. Paysafe reported a GAAP net loss of $247.5 million, including a $203 million noncash goodwill impairment largely triggered by declines in the market value of its equity and debt.

The company generated $50.2 million in unlevered free cash flow during the quarter. Crawford said the result was affected primarily by the timing of receivables and higher taxes paid.

Wallet User Growth Offset by Lower Revenue Per User

Digital wallets revenue was $208.1 million, up 2% on a constant-currency basis, while volume increased 1% to $6.7 billion. Growth in Latin America and PaysafeWallet in Europe partly offset regulatory pressure in areas including crypto and financial trading, Crawford said.

Three-month active users rose 14% year over year to 8.1 million. However, average revenue per user declined 10%, reflecting regional and product mix, including strong user growth in Latin America.

Lowthers said he expects average revenue per user to remain around $25 to $30 for the foreseeable future, although quarterly figures could vary with the number of new active users. Crawford said the company’s wallet products in its two largest eCash markets generate two to three times the average revenue per user of its cash-in offering, but remain smaller businesses.

In merchant solutions, revenue rose 2% to $236.7 million and volume grew 3% to $36 billion. Segment adjusted EBITDA fell 5% to $45.2 million, with margin pressured by client mix, including faster growth from larger partners earning higher residuals.

Lowthers said small and midsize business revenue grew 4%, helped by direct and agent channels. He also cited double-digit growth in iGaming e-commerce, while noting slower growth in non-iGaming e-commerce.

Outlook and Debt Reduction

Crawford said the reduction in expected revenue has a disproportionate effect on adjusted EBITDA because much of the pressure is in higher-margin areas. He also cited $5 million in unplanned severance expense. Despite that cost, Paysafe remains on track for a $25 million reduction in operating expenses in the second half compared with the first, he said.

Management expects regulatory, crypto and financial trading headwinds to have a greater impact in the fourth quarter than in the third, particularly in digital wallets. Crawford said it was unclear how much of that pressure would carry into 2027 and declined to provide a detailed outlook for the following year.

Paysafe ended the quarter with net leverage of 5.5 times and expects to finish the year at approximately the same level. The company incurred $77 million in fees and related cash costs from its August refinancing and expects to pay a $39 million litigation settlement in the fourth quarter. Crawford said total net debt was down nearly $100 million year to date.

Over the next two to three years, Crawford said reducing leverage by approximately half a turn annually was a good target. He added that the company was seeking to free up cash through working capital and banking arrangements.

New Products and Commercial Leadership

Lowthers said newer products are growing but are not yet large enough to fully offset existing headwinds. PaysafeWallet grew more than 30% in the quarter, while revenue from products introduced over the past three years represented 20% of total revenue, he said.

The company launched Paysafe Arena, a gaming discovery and commerce platform, in August. Lowthers said it had attracted nearly 400,000 unique fans and more than 1 million sessions since launch.

Paysafe also named Rob Schonfeld as chief revenue officer. Lowthers said Schonfeld will focus on commercial strategy, customer relationships and opportunities to better monetize the company’s consumer base.

About Paysafe (NYSE:PSFE)

Paysafe Limited is a payments technology company that provides services to businesses and consumers. Its offerings include payment processing and merchant solutions, digital wallets, and prepaid payment products designed for online and in-person transactions. The company's consumer brands include Skrill and NETELLER digital wallets and paysafecard, a prepaid option that lets customers pay online without using a traditional payment card. Paysafe also supports merchants with tools for accepting and managing payments across digital channels.

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