August 9, 2023
Nuvei Corporation
2H/23 guide disappoints; will need to rebuild trust
Our view: Despite underlying core organic, CC, ex. crypto growth of 20% y/y in 2Q23, which was broadly in line with our estimate, 2H23 guidance was materially reduced given 1) longer lag times in converting new larger clients (increasingly winning larger enterprise clients) and 2) the company’s decision to exit a relationship with a large client. In addition, as the company continues to reposition itself and absorb Paya’s initially slower growth profile, management pulled in its medium-term revenue growth targets to 15%-20% vs. its prior 20%.
Key points:
2Q23 results. NVEI reported $307M/$110M in revenue/adj. EBITDA compared to RBCe of $307M/$109M and the Street at $306M/$109M on total volume of $50.6B, +68% y/y, vs. RBCe of $50B, the Street at $50.2B and 45% y/y growth last quarter. Excluding cryptocurrency and at constant currency, Nuvei organic revenue grew 20% to $212M.
FY23 guidance reduced and 3Q23 below expectations. FY23 guidance calls for volume of $193B–$197B, revenue of $1.17B–$1.195B and adj. EBITDA of $417M–$432M, compared to prior guidance of $196B–$202B, $1.225B– $1.264B and $456M–$477M, respectively. 3Q23 guidance is for revenue of $300M–$308M and adj. EBITDA of $105M–$110M, compared to prior RBCe of $318M/$121M and the Street at $313M/$120M, on volume of $47.5B–$49.5B, versus prior RBCe of $48.6B and the Street at $48.3B. In addition, management expects organic revenue growth excluding digital assets and at constant currency between 16%–20% y/y for FY23.
Core Global Commerce continues to anchor growth. 2Q23 revenue growth was 45% y/y to $307M (pro forma = 9% y/y), and when excluding crypto and on a constant currency basis, revenue growth was 20% y/y to $212M. Management called out that NVEI faced >$15M in revenue headwinds from digital assets in 2Q23 but has now lapped the tough comparisons for a cleaner 3Q23. The company announced that it has changed its Global eCommerce channel to Core Global Commerce, reflecting the omnichannel aspect of the business. The Core Global Commerce channel grew 16% y/y, to $172M, and 35% y/y when excluding crypto, representing ~56% of total revenue in the quarter.
Adjusting estimates, lowering price target, maintaining Outperform.
Incorporating results and updated guidance, we are adjusting our FY23/ FY24 revenue/adj. EBITDA/adj. EPS estimates to $1.2B/$423M/$1.72 and $1.3B/$487M/$1.95 from $1.2B/$470M/$2.00 and $1.5B/$599M/$2.58, respectively. Given the revised out-year estimates, we are lowering our price target to $29 from $42, or 11x our revised FY24E adj. EBITDA, which is a discount to it historical ranges, and in line with slower growth peers, which we believe is appropriate, as management will need to rebuilt investor trust following the disappointing guide down.