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 third quarter ending September 30, 2022.
"We delivered outstanding results in the third quarter, with revenue growth of 53% over the prior year quarter, reaching a record high that was driven primarily by our organic growth initiatives," Yair Nechmad, chief executive officer and chairman of the board, said in the announcement. "Similar to last quarter, we continued to see strong demand for our comprehensive solutions and broad-based customer momentum across our global and diverse footprint, with new customer growth of 56% over the prior year quarter, and a 48% increase over the prior year quarter in our managed and connected devices. Importantly, we achieved these results while executing our growth initiatives, such as our international expansion and winning large customers globally.
“The strength of our results, combined with our market position and the many opportunities we see across the Nayax businesses, reinforce our confidence in our ability to achieve our committed growth trajectory and continue to execute against our mid-term and long-term growth aspirations."
Third-quarter financial highlights
Total revenue was $47.2 million, an increase of 53% over Q3 2021.
During Q3, foreign currency exchange rate fluctuations had a negative impact of about $1.4 million on revenues compared to Q2 2022.
Recurring revenue from monthly SaaS and payment processing fees grew 39% compared to Q3 2021 and represented 58% of total revenue in Q3 2022.
Q3 2022 results included a consolidated P&L of On Track Innovations (OTI), which had a favorable impact on hardware revenue ($3.7 million) while gross margin was in line with Nayax's margins. OTI operating expenses had an overall impact of 8% on total operating expenses, with 6% negative impact on operating loss and minor impact on adjusted EBITDA.
Q3 2022 gross margin of 34% remained stable compared to the previous quarter and decreased in comparison to prior year quarter. Gross margin was impacted by higher hardware revenue and higher processing fees which have lower gross margin. The company continues to expect hardware gross margins to be temporarily impacted by the global component shortages.
Gross profit reached almost $16 million, an increase of 28% over Q3 2021.
Operating loss was $9.2 million, compared to an operating loss of $6.4 million in Q3 2021.
Net loss for Q3 2022 was $9.9 million, or ($0.3004) per diluted share, compared to a net loss of $6.7 million, or ($0.2065) per diluted share for Q3 2021.
Adjusted EBITDA was a negative $3.7 million compared to negative $1.6 million in Q3 2021 largely due to increase in operating expenses from strategic investments mentioned above that support our growth strategy.
Third-quarter business highlights
Completed direct listing on Nasdaq in September 2022.
Expanded diverse customer base, adding 4,000 new customers (including 300 of OTI) across global footprint, bringing total customer base to 42,000, as of September 30, 2022, an increase of 56% over Q3 2021.
Dollar-based net retention rate stayed elevated at 127%, reflecting the high satisfaction and loyalty that customers place on its comprehensive solutions to increase their revenue and improve their operations.
Added 90,000 managed and connected devices during the quarter, driven by growing customer demand, execution of market expansion strategy and the addition of 47,000 OTI devices included for the first time in Q3 2022. The total of 685,000 managed and connected devices represents an increase of 48% compared to Q3 2021.
Number of processed transactions grew 56% over Q3 2021 to 341 million.
Total transaction value increased 51% from prior year quarter to $616 million.
Established a new customer relationship in the US with Atlanta Food and Beverage. This new customer will use Vendsys as their vending management system and will place Nayax cashless on all their machines requiring cashless.
Signed an agreement to partner with Tiba Parking to bring the Nayax's solutions to all of its North America parking operators.
In Australia, partnered with 7-Eleven Group to supply cashless solutions for the 7-Eleven Group's "Unattended Go-To-Market" strategy.
Scored another successful win in Austria with UKO, which has entered a partnership with Nayax to provide a market disruptive solution that does not require an additional hardware age verification solution. This will enable operators to significantly reduce their operational costs.
Outlook
“Looking forward, 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
The company is reaffirming its mid-term revenue projection of $220 million, driven by organic growth and strategic M&A. It is also reaffirming the revenue growth rate target of 35% in the medium term, with customer growth, increased market penetration and continued expansion of its platform serving as the main growth drivers.
Long-term outlook
The company expects gross margin in the long-term to reach 50% by providing leasing options for IoT POS and by growing the SaaS and payment processing revenue sources. Its long-term adjusted EBITDA margin guidance is set around 30%.
