Nuvei disappoints on margins and outlook

Nuvei disappointed investors with its Q2 results. Despite healthy growth in processing volume, margins narrowed and the company lowered its guidance for the remainder of 2022. Headwinds include “volatility in digital assets and cryptocurrencies and caution with regard to global economic conditions.”

The company was formed in 2019 when the original Nuvei – Canadian listed and focused on SMBs in North America – acquired Safecharge, a UK listed Israeli acquirer/processor with strength in high-risk sectors such as gambling and gaming. The merger gave Nuvei international exposure and a strong foothold in some of the fastest growing eCommerce verticals. 

Three years on, Nuvei now claims global availability of all its capabilities from a single API. This allows merchants to access all they need on a single stack rather than using different vendors for acquiring, gateways, fraud prevention tools and business analysis/reconciliation software. Smaller, fast growing, internationally minded merchants will find this one stop shop approach attractive.

Global payment volume was up 37% to $30.1 bn in Q2 with c.$4bn from POS transaction. Take rate fell 11bps to 0.71% although remains very healthy reflecting the proportion of high-risk business in Nuvei’s portfolio.

Revenue was up 19% to $211.3m. Strong growth in EMEA (+28%) and Latin America (+29%) was offset by underperformances in North America (+8%) and Asia Pacific (-45%). “New business in the regulated online gaming vertical is progressing well” and there has been evidence of cross-selling between customer bases in Europe and North America, and between eCommerce and POS. 

Adjusted EBITDA, the company’s preferred measure of performance, was up 17% to $92.9m with margins falling by 100bps to 44%. Staff numbers grew a further 100 to 1,570.

Net income was down 10% to $35.5m hit by a generous $27.7m increase in share-based payments to employees joining from newly acquired companies. Capex rose from 4% to 6% of revenue.

In a busy quarter for product news, launches included:

  • Enhanced and expanded payout options. These are critical in winning and retaining gambling merchants. New features include SEPA Instant in Europe and Visa Direct in Canada. 
  • A new “Nuvei Simply Connect” SDK will make it easier for merchants to integrate their shopping carts/CMS with Nuvei’s front end. 
  • Omnichannel availability “with a single integration” covering multiple channels and multiple geographies including unified tokens. New customers include Canadian eco-rain gear brand Hatley that will use Nuvei for in-store payments at 40 retail outlets in North America as well as online processing for sales in Europe.
  • A further 20 Alternative Payment (AP) types to bring the total to 570. This sounds impressive but AP’s are not really a numbers game and, unless they bring significant volume, can quickly put pressure on overheads. 

Leave a Reply