Nayax Ltd., a global commerce enablement, payments and loyalty 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 third quarter 2023.
Yair Nechmad, chief executive officer and chairman of the board, said in the announcement: “Our strong third quarter performance was highlighted by a 48% increase in recurring revenue and overall gross margin, which continued trending higher to 38%, mostly driven by ongoing hardware gross margin improvement. Based on the strength of our operating leverage from high recurring revenue growth coupled with ongoing cost discipline, we saw marked improvement in our net income (loss) and adjusted EBITDA. In Q3, adjusted EBITDA surpassed the lower end of our full year 2023 guidance range, further accelerating our profitability. Based on our strong performance to date and confidence in our growth aspirations, we are raising the lower end of our adjusted EBITDA guidance range.”
Nechmad added: “We continue to support our employees in Israel during this difficult time, with the ongoing war in Israel. Our global business continues to operate without any material disruption due to the unyielding commitment of our employees in executing our mission, with a diverse supply chain, local offices that support sales and operations in their market and business continuity planning. We are thankful for the support and thoughtfulness that we have received from our customers, partners, and the financial community.”
Third-quarter financial highlights
Total revenue of $60.3 million, grew 27.8%.
Recurring revenue from monthly SaaS and payment processing fees grew 47.8% and represented 67% of total revenue in Q3 2023.
Overall gross margin continued to trend higher. Q3 2023 gross margin of 38% was higher compared to Q2 2023 of 37% and Q3 2022 of 34%. The increase was mainly attributed to our hardware gross margin improvement. In Q3, hardware gross margin improved to 21% from 19% in Q2 2023 and 12% in Q1 2023. Year-to-date September 30, 2023, hardware gross margin was 17%, within the annual target range, previously communicated.
Gross profit reached $23.0 million, an increase of 46%.
Q3 2023 operating loss was $1.5 million, compared to an operating loss of $9.2 million in Q3 2022, representing a significant improvement, driven mostly by revenue growth outpacing expense growth.
Net loss for Q3 2023 improved significantly from a net loss of $9.9 million or ($0.300) per diluted share to a net loss of $3.1 million, or ($0.093) per diluted share, an improvement of almost $7 million.
EBITDA was a positive $3.5 million, a marked improvement of $7.2 million to adjusted EBITDA compared to negative $3.7 million in Q3 2022. Q3 adjusted EBITDA more than doubled compared to Q2 2023 adjusted EBITDA of $1.3 million.
In Q3 2023, the company recorded strong growth in its recurring revenue from SaaS and payment processing, reflecting 67% of total revenue. This increase in recurring revenue represents growth in both the number of transactions processed through its devices as well as an increase in total transaction value, in addition to an increase in SaaS revenue. This growth is a result of the company’s growing install base of managed and connected devices as well as the continued rapid adoption of cashless payments by consumers.
Third-quarter business and operational highlights
Customer expansion continued this quarter, with an additional 4,000 new customers across global, diverse footprint. This brings the company’s total customer base to 60,000, as of September 30, 2023, an increase of 43%.
Dollar-based net retention rate increased to 145%.
Added 50,000 managed and connected devices during the quarter, driven by robust customer demand, bringing the total number of managed and connected devices to 874,000 for Q3 2023. This represents an increase of 27.6%.
Number of processed transactions grew by 39% to 473 million.
Total transaction value increased by 61% to $989 million.
Signed a strategic partnership with Turkey’s Duzey, the largest Koç Holding company in the fast-moving consumer goods sector. The partnership was initiated with the installation of Nayax devices on vending machines in public locations and factory locations throughout Turkey and will eventually expand to other locations in Europe.
Nayax Coinbridge entered into a strategic partnership with Giift, a global leader in loyalty technology solutions. The collaboration marks a significant milestone for the loyalty industry by introducing the world’s first open-loop Loyalty to Payments solution, powered via CoinBridge by Nayax’s patented technology.
Signed partnership agreement with a leading U.S. car manufacturer for EV chargers in each dealership for public use.
On October 30, 2023, Nayax announced a definitive agreement to acquire Retail Pro International. The proposed transaction is expected to close in Q4 2023, subject to the satisfaction of customary closing conditions.
Full-year 2023 outlook
Reaffirming revenue on a constant currency basis to be in the range of $235 million to $240 million, representing year-over-year growth of at least 35%.
Revising adjusted EBITDA to a range between $4 to $7 million in FY 2023 from $3 to $7 million.
Full-year 2023 assumptions
Continued execution of strategic growth plans and benefits of secular trends in digital payments.
Customer demand continues to be strong.
Assumes no material changes in macroeconomic conditions.
Mid-term outlook
The company is reaffirming its mid-term revenue outlook of 35% annual growth, driven by organic growth initiatives, with customer growth, market penetration and continued expansion of our integrated payments platform as well as our emerging growth engines and strategic M&A.
Long-term outlook
The company is reaffirming its long-term outlook of 35% annual growth, driven by organic growth initiatives and strategic M&A.
Long-term gross margin target of 50% is driven by leasing options for IoT POS, growing SaaS revenue and payment processing fees along with services offering through its emerging growth initiatives.
Long-term adjusted EBITDA margin target is 30%.
