Paysafe Group plc (LSE: PAYS, "Paysafe" or the "Group"), a leading global provider of payment solutions, announces its unaudited interim results for the six months ended 30 June 2017.
- 12% organic constant currency revenue growth in H1 2017 (11% statutory revenue growth), representing a return to low double-digit growth compared with the exceptional performance seen in 2016
- 31.4% adjusted EBITDA margin in H1 2017, compared to 30.5% in H2 2016 and 29.6% in H1 2016, the increase driven by improved gross margins in the Payment Processing and Digital Wallets divisions
- Capitalised development cost was $16.9m, or 3.1% of sales, vs $13.0m (2.7% of sales) in H1 2016 and $14.5m (2.8% of sales) in H2 2016, driven by work on core platform development
- The adjusted tax rate was 12.3% in H1 2017, compared to 11.1% in H1 2016 and 12.7% in H2 2016 (statutory tax rate H1 17 17.2%, H1 16 13.4%, H2 16 17.1%). The adjusted rate is lower than anticipated driven by the short-term effect of a tax ruling on the transfer of intellectual property from the Isle of Man to the UK. Excluding this, the adjusted tax rate would have been approximately 14%
- Adjusted cash conversion remained strong at 77%/98% before/after payments working capital ("PWC") compared to 122%/97% in H2 2016
- Leverage ratio, expressed as net debt to LTM adjusted EBITDA7 was 0.8x, compared to 0.9x at 31 December 2016. The reduction in leverage would have been more pronounced but for the impact of the translation of euro denominated debt into dollar reporting currency, the share buyback programme, and unusually high cash tax paid as described in the operating review
- The largest customer represented 19% of H1 2017 group revenue, compared to 20% in H1 2016
· On 21 July 2017 Paysafe announced the acquisition of Merchants' Choice Payment Solutions ("MCPS") for $470m in an all-cash deal
· Headcount increased by 9% to 2,299 from 2,116 at 31 December 2016, driven by Hyderabad, India (platform development) and Sofia, Bulgaria (operations, compliance, risk)
· The Prepaid division launched "paysafecard direct", a QR code-based e-commerce platform enabling consumers to complete online purchases with a cash payment
· Paysafe teamed up with Google to be one of the first payment service providers to launch in-app Android Pay capabilities to Paysafe merchants in Canada
· Spain's state-owned postal company Correos chose Paysafe as a recommended payment provider for businesses using Comandia, its e-commerce platform
· On 1 August 2017 Paysafe Group plc migrated its tax residence from the Isle of Man to the UK
Additional H1 2017 financial disclosure
In H1 2017, on a pro-forma basis assuming MCPS had been acquired for the period financed by $380m of debt, Paysafe Group revenue would have increased by $167m, adjusted EBITDA by $25m, adjusted EBIT by $18m, adjusted profit before tax by $9m, and adjusted profit after tax by $6m, representing approximately 5% of Paysafe adjusted profit after tax. MCPS consolidated revenue in H1 2017 increased 3% year-on-year. Paysafe continues to anticipate $7.5m per annum of cost synergies to be achieved by the end of 2018.
In light of the recommended offer for Paysafe by Blackstone and CVC and their entry into an agreement to sell the Asia Gateway business, Paysafe is publishing additional financial information on the Asia Gateway business. In H1 2017, the Asia Gateway revenue was $76m, up 20% year-on-year, adjusted EBITDA $30m, adjusted EBIT $29m and adjusted profit after tax $29m, representing approximately 23% of Paysafe adjusted profit after tax.
Given the restrictions placed on forward-looking statements as a result of the recommended offer by Blackstone and CVC for Paysafe, it is not appropriate to provide the usual full-year 2017 guidance. For this reason, there will not be a conference call for analysts and investors. The usual finance slides on the H1 2017 results are available at https://www.paysafe.com/investors/results-presentations/
Commenting on the results, Paysafe Chairman Dennis Jones said:
"After exceptional trading in 2016, Paysafe Group has returned to a more sustainable level of low-double-digit revenue growth in the first half of 2017. This reflects our increasingly diversified set of businesses as the management team continues to build a stable and robust global payments platform. To that end, we were pleased to announce the acquisition of US-based MCPS in July, which strengthens our processing business, increases Paysafe Group's scale in North American acquiring and helps us to continue re-balancing our portfolio away from online gambling."