Nayax Ltd., a global commerce enablement and payments platform designed to enable retailers to provide consumers with digital, cashless, connected commerce experiences, and enhance consumer loyalty and conversion, announced its financial results for the second quarter ending June 30, 2022.
Yair Nechmad, chief executive officer and chairman of the board, stated in the announcement: "We again delivered strong financial and operating performance for the second quarter, led by the continued pace of double-digit revenue growth and high customer adoption and satisfaction for our comprehensive, market-leading payment solutions. We delivered another quarter with excellent revenue performance driven by higher recurring revenues. Recurring revenues, comprised of SaaS subscription revenue and processing fees, grew 47% over the prior year quarter and accounted for more than 60% of our total revenue. During the second quarter, we continued to demonstrate the high level of customer satisfaction for our comprehensive solutions by maintaining an industry-leading net retention rate greater than 130%. Also, in Q2, we saw broad-based customer momentum across all geographies, with new customer growth of 58% over the prior year quarter and increasing scale from significantly growing both the number of transactions processed and the transaction value.
“Looking ahead, based on our strong second quarter and first half results, our higher recurring revenue and continued business momentum, we remain confident about executing against our growth trajectory and our mid-term and long-term growth aspirations. Our continued momentum is a result of the value proposition we bring to our customers, the accelerating acceptance for cashless payments globally and the consistent execution of our strategies by the dedicated Nayax team.”
Nayax reports in U.S dollars and according to IFRS.
Second-quarter financial highlights
- Total revenue was $41.2 million, an increase of 33% over Q2 2021. During Q2, foreign currency exchange rate fluctuations had little impact on revenues.
- Recurring revenue from monthly SaaS and payment processing fees grew 47% compared to Q2 2021.
- Recurring revenue represented 61% of total revenue in Q2 2022 compared to 55% of total revenue in Q2 2021.
- Added 42,000 managed and connected devices during the quarter, for a total of 595,000 devices, driven by growing customer demand and execution of our market expansion strategy. This represents an increase of 38% compared to Q2 2021.
- The number of processed transactions grew 70% over Q2 2021 to 316 million.
- Transaction value increased 70% from prior year quarter to $585 million.
- Q2 gross margin decreased to 34% in comparison to prior year quarter, tracking in-line with the direction communicated previously. Gross margin was impacted mainly due to the mix of higher hardware revenue which has lower gross margin. The company continues to expect hardware gross margins to be temporarily impacted by the ongoing disruption caused by the global component shortage.
- Gross profit reached $14 million, an increase of 6% over Q2 2021.
- Operating expenses, including research and development, share-based compensation expenses, as well as depreciation and amortization amounted to $21.2 million, an increase of 34% over Q2 2021. This reflects an increase of investment in talent acquisition, customer base expansion and product innovation. Other investments included higher go-to-market expenses and enhanced infrastructure to support global growth as it gains scale and become a much larger company. During Q2, operating expenses had a favorable impact from foreign currency exchange rate fluctuations of $1 million compared to Q1 2022.
- Operating loss was $8.6 million, compared to an operating loss of $4.1 million in Q2 2021.
- Adjusted EBITDA was a negative $3.2 million compared to positive $1.4 million in Q2 2021 largely due to higher cost of goods sold, as a result of global component shortage, and an increase in operating expenses from strategic investments mentioned above that support growth strategy. On a like for like basis, excluding Q2 2022 bonus expenses for non-sales employees that was introduced in Q3 2021 for the first time, and excluding the impact of product costs, Q2 2022 adjusted EBITDA on a like for like basis, would have been a positive $1.3 million.
- Net loss for Q2 2022 was $10.3 million, or ($0.0315) per diluted share, compared to a net loss of $5.9 million, or ($0.0192) per diluted share for Q2 2021.
Nayax generates revenue from the sale of its POS devices, a monthly subscription fee for access to its SaaS solutions and payment processing fees for transactions made at the point-of-sale and through its global platform.
The company provides payment processing and business operations software solutions and services through its global cashless payment platform. In Q2 2022, the company recorded strong growth in its recurring revenue from SaaS and payment processing, reflecting 61% of total revenue. This increase in recurring revenue represents growth in both the number of transactions processed through our devices as well as an increase in transaction value. This is contributed by growing install base of managed and connected devices as well as the continued rapid adoption of cashless payments by consumers.
Second-quarter business highlights
- Expanded diverse customer base, adding 4,000 new customers across our global footprint, bringing its total customer base to 38,000, as of June 30, 2022, growing 58% over Q2 2021.
- Dollar-based net retention rate stayed elevated at 132%, reflecting the high satisfaction and loyalty its customers place on comprehensive solutions to increase their revenue and improve their operations.
- Continued to execute on our market expansion strategy by entering the New Zealand unattended retail market with our contactless card reader and cashless payment solutions.
- Extended customer relationship with Five Star Food Service, a leading U.S. unattended operator and the largest of the Canteen franchise. Five Star will deploy Nayax's comprehensive payments solutions initially across their fleet of 20,000 vending machines and will also use Nayax's VendSys, a leading vending management system.
- Successfully closed the acquisition of On Track Innovations (OTI) in June 2022.
Outlook
“Looking ahead, we remain excited about our strong long-term growth drivers and the large market opportunities, we see ahead. In the near term, we expect to continue to see disruption in supply chain which will delay immediate improvements in hardware gross margin of our POS devices due to the global shortage in components.
Our durable business model is demonstrated by our diverse customer base, verticals, and geographies. With strong secular tailwind and with our industry-leading net revenue retention rate, we believe we have a clear opportunity to drive revenue growth in the future.”
Mid-term outlook
“We are reaffirming our mid-term revenue projection of $220 million, driven by organic growth and strategic M&A. We are also reaffirming the growth rate target of 35% in the medium term, with customer growth, increased market penetration and continued expansion of our platform serving as the main growth drivers.”
Long-term outlook
Gross margin in the long-term is expected to reach 50% by providing leasing options for IoT POS and by growing the SaaS and payment processing revenue segments.
Long-term adjusted EBITDA margin guidance is set around 30%.
