Greetings. Welcome to the Paysafe third quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Kirsten Nielsen, head of investor relations. Thank you, Kirsten.

You may begin. Thank you and welcome to Paysafe's earnings conference call for the third quarter of 2026. Joining me today are Bruce Lowthers, Chief Executive Officer, and John Crawford, Chief Financial Officer. Before we begin, a reminder that this call will contain forward-looking statements and should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent SEC reports. These statements reflect management's current assumptions and expectations and are subject to factors that may cause actual results to differ materially from those forward-looking statements. You should not place undue reliance on these statements. Good morning, everyone.

If you're following along with the webcast, let's start on slide three. Through the first nine months of the year, we've made good progress across several important areas of the business. Revenue has grown 5%, we've continued to expand our consumer base, and we're seeing strong growth across Latin America, North America iGaming, and PaySafe Wallet in Europe. Three-month active users reached 8.1 million in the third quarter, up 14% year-over-year. We've also strengthened our financial foundation by completing our refinancing and resolving the legacy legal matter in the third quarter. With those milestones behind us, we can sharpen our focus on growing the business and using our cash flow to reduce net leverage, and we believe this will be a key driver of value over the next 24 months. The second half has been more challenging than we expected. We started the third quarter with good momentum with volume growth of upper single digits in July, but activity slowed in August and September, and that continued into October. That reflected a combination of greater regulatory, banking, and market headwinds affecting activity across digital wallets and e-commerce. Foreign exchange also shifted from a tailwind to a headwind. As a result, we're updating our full year outlook. We also saw opportunities to offset some of these headwinds in the second half, including continued strength in Latin America and potential data licensing transactions. While Latin America continues to deliver strong growth, the market conditions have become more challenging, limiting any material outperformance or upside from the region. Lastly, the data deals which we've discussed would be inherently lumpy, have not materialized in the second half to the extent needed to offset the volume pressure. Our focus is on what we can control, executing more consistently, strengthening the capabilities and partnerships that support our commercial strategy, and converting more of the opportunities already in front of us. Moving to slide four, I want to put some additional context around our performance because the underlying business continues to have real growth engines. On the consumer side, our marketing initiatives continue to bring us more users into the platform, with particularly strong performance in areas where we've concentrated our investments. Consumer acquisitions across these markets are up 8% year-to-date. Our focus is now on expanding ARPU with this growing consumer base, including the adoption of new solutions to drive greater value, higher volumes, and revenue over time. We're also seeing good progress on our newer products. Paysafe Wallet grew more than 30% in quarter and has continued to expand into additional European markets. In Latin America, our user base for Pargo Efectivo Wallet has grown more than 40%. We've also enhanced our offerings across our video gaming space, leading to over 20% growth in the vertical in the quarter. More broadly, Our vitality index, defined as revenue from new products over the last three years, now represents 20% of our revenue. On the merchant side, SMB grew 4% in the third quarter, led by our direct and agent channels, where combined revenue increased 8% in the third quarter. That growth was supported in part by the expansion of our agent program, with the number of active agents increasing by 17% this year. On the enterprise side, we're enhancing our network and banking relationships in the coming months, which should improve our ability to accelerate onboarding new merchants and capture more of the demand we're seeing across the targeted e-commerce verticals. So overall, the new products and initiatives underpinning our vitality index are delivering strong growth, but they're not yet at the size and scale needed to fully offset the headwinds we're experiencing. Going forward, we need to continue the momentum from our marketing investment, driving more activity at the top of the funnel, and deepen engagement across our existing consumer and merchant bases. But let's take a step back on slide five. Over the last three years, we've reactivated our consumer base, with three-month active surpassing eight million in the quarter. This marks six quarters of year-on-year growth At the same time, transactions for active consumer are higher, giving us both larger base and healthy underlying transaction activity. Our product strategy is evolving to broader consumer groups across different spending and engagement patterns. The opportunity is now to do more with that base and our distribution network, and the results of our initial marketing investment indicate strong consumer reception. Part of monetizing the larger consumer base is extending Paysafe into more of the places where our consumers are already spending their time and money. On slide 6, I'll highlight two recent examples of how we're broadening our network across gaming and entertainment. We have long-standing relationships across these industries and millions of consumers already using our products. The opportunity is to connect these assets with broader audiences, merchants, and experiences, creating more value for our partners and consumers while expanding the role Paysafe can play. We launched Paysafe Arena in August, building on our strong position in video gaming. Paysafe Arena connects gamers with publishers through discovery, rewards, content, and commerce. For gamers, Arena delivers seamless purchasing, funding, and checkout experiences. For developers and publishers, Arena offers a new way to discover customers and reach Paysafe's global gaming audience of 19 million annual consumers. We're encouraged by the early engagement with nearly 400,000 unique fans and over a million sessions since launch. As we highlighted last quarter, Our partnership with Envision Racing creates a compelling platform at the intersection of motorsport, gaming, digital payments, and next-generation fan engagement. It introduces Paysafe to a broader global fan base and creates opportunities over time to connect those fans more directly with the experiences they care about, from the events themselves to the merchandise, travel, and other digital experiences. PaySafe Arena and PaySafe Envision Racing demonstrate how we can expand the ecosystem around PaySafe and bring more consumers into our network. We see significant opportunity to bring together our consumer reach, merchant network and payment capabilities to create a new fan ecosystem that delivers richer experiences and greater transaction and revenue potential for PaySafe.

With that, I'll turn it over to John. Thank you, Bruce. Let's move to slide 8 for a summary of our third quarter results. Total revenue for Q3 was $439.6 million, up 1% compared to prior year, or 2% on a constant currency basis. Growth continues to be led by Latin America, Paysafe Wallet in Europe, and North America iGaming. Growth moderated compared to Q2 in the first half of the year as regulatory headwinds stepped up in the second half. In particular, verticals such as crypto and financial trading saw both market softness and regulatory impacts. Our planning and guidance accounts for some level of headwinds, but the impact has been more pronounced than we expected. At the same time, new client sales and growth from same-store sales have not ramped as quickly as we planned. Finally, the drop in EURUSD exchange rate and the grow-over from last year's larger data licensing deal have also impacted us. Adjusted EBITDA for the third quarter decreased 17% to $105.7 million, and adjusted EBITDA margin was 24% compared to 29.2% in the prior year. Roughly 190 basis points of the decline reflects lower gross margin, mainly due to the client mix in merchant solutions. The rest reflects a 13% increase in SG&A, driven by two main items. First, $5 million of higher investment in marketing and IT to support our consumer strategy and Technology Platforms, and second, roughly $7 million of net one-offs or timing items, primarily last year's bonus accrual release, which creates a tougher comparison, in addition to severance costs this year. Compared to Q2, adjusted EBITDA margin improved 100 basis points. Excluding severance costs, operating expenses remain on track with our outlook, including a $25 million reduction in the second half compared to the first half. We'll see most of that improvement in Q4. Turning to cash flow, we generated $50.2 million unlevered free cash flow. The 48% conversion of adjusted EBITDA was influenced primarily by the timing of receivables and higher taxes paid. On an LTM basis, unlevered free cash flow was $265 million, roughly flat compared to the prior year, reflecting a 65% conversion, which is within our target range. Adjusted net income for the third quarter was $23.8 million, and adjusted EPS was $0.44 a share compared to $0.70 a share in the prior year. The decline reflects lower adjusted EBITDA and a $7.5 million increase in interest expense, driven by higher effective interest rates following the refinancing. This was partially offset by a lower effective tax rate and reduced share count. On a GAAP basis, we reported a $247.5 million net loss for the quarter, including a $203 million goodwill impairment, largely triggered by the declines in market value of our equity and debt. This charges a non-cash accounting adjustment that does not impact cash flow. Turning to the segment results on slide nine. Starting with digital wallets, volume in Q3 was $6.7 billion, up 1%. and Revenue was $208.1 million, an increase of 2% on a constant currency basis. Growth was driven by continued momentum and active user growth in Latin America and Paysafe Wallet in Europe. This partially offset the regulatory pressures in certain geographies and sub-verticals, such as crypto and financial trading, though not at the pace we expected. Three-month actives increased 14% year-over-year to $8.1 million, and transactions per active user were stable. Average revenue per user decreased 10%, reflecting regional and product mix, including strong user growth in Latin America. Adjusted EBITDA for digital wallets was $85 million, down 9%, with a margin of 40.9%, compared to 45.4% last year. The decline was driven by the product and regional business mix, which influenced gross margins, coupled with higher SG&A as expected, including 4.5 million of additional marketing and IT investment. And as I mentioned earlier, last year benefited from the bonus accrual release, which was 4.8 million in digital wallets, making the margin comparison tougher this quarter. Turning to merchant solutions, volume increased 3% to $36 billion, and revenue increased 2% to $236.7 million. We saw revenue growth across all business lines in the segment, including double-digit growth for MyGaming and our direct SMB sale channel, and continued growth in the agent channel. Adjusted EBITDA for the segment was $45.2 million, down 5%, and adjusted EBITDA margin was 19.1%, compared to 20.6% in the prior year. The margin decline reflects client mix, including faster growth from larger partners earning higher residuals, partly offset by a decrease in SG&A expense, including lower credit losses. Excluding the impact of lower data licensing revenue, adjusted EBITDA margin would have improved year on year, even with the mixed headwind. Turning to slide 10 for an update on debt and leverage. As a quick reminder, in August we successfully refinanced a significant portion of our debt, upsized our revolver, and extended the maturities of our term loans. Our net leverage ratio at quarter end was 5.5 times. The refinancing resulted in $77 million of fees and related cash costs in the quarter. While the majority of those costs are deferred for accounting purposes, they represented a meaningful use of cash during the period. I'd also note that our total net debt is down almost $100 million year to date, and the reduction of debt remains a key focus. Looking ahead, we expect net leverage of approximately 5.5 times at year end, reflecting our updated adjusted EBITDA outlook, as well as the $39 million litigation settlement payment expected in the fourth quarter. While these exceptional cash uses have constrained principal reduction this year, we are glad to have them behind us, and our underlying cash generation remains healthy. That brings me to slide 11 and why we remain confident in our ability to delever from here. We continue to have a strong cash flow profile that provides us with sufficient capacity to pay down debt and invest for growth. We've demonstrated the durability of our cash profile through a period of meaningful change. Over the last several years, we've rationalized parts of the portfolio and navigated a number of external headwinds We also have flexibility within the model Disciplined management of capital spending and further opportunities to optimize our banking network, partner contracts, and legal entity structures to unlock cash. Turning now to our full-year outlook on slide 12. Putting this all together, our updated outlook reflects the trends we've discussed, with approximately 4% top-line growth expected for the full year. The modest reduction in revenue flows through disproportionately to adjusted EBITDA, because much of the revenue pressure is in our highest margin areas. And we also had 5 million of unplanned severance expense. Despite the severance, we remain on track for a $25 million reduction in operating expenses in the second half compared to the first half. With that, I'll turn the call back to Bruce for closing remarks.

Thank you, John. To wrap up, we continue to grow despite the challenges we've discussed today, extending what has now been several years of mid-single digit organic growth. We have a clear view of where we need to improve. Our focus is on more consistent execution, continuing to drive innovation and product vitality, and translating that growth into strong cash flow and lower leverage. As an important part of that is strengthening our commercial execution. and I'm very pleased to welcome Rob Schoenfeld as our new Chief Revenue Officer. Rob brings more than 25 years of experience across gaming, entertainment and strategic partnerships and we've focused on sharpening our commercial strategy, deepening customer relationships and helping us capture more of the growth opportunities across our core markets. I want to thank our employees around the world for their hard work and continued commitment to Paysafe. With that, John and I are happy to take your questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Please wait while we poll for questions. And our first question comes from Andrew Hart with BTIG. Please go ahead.

Hi, thanks for taking my question. On the headwinds that's in the deck, I think market regulatory in the banking environment, when do you expect those to subside and is there anything you can do to combat them? And I guess, how should we be thinking about growth headed into 2027 when we kind of look at the implied fourth quarter guidance? Thanks.

Yeah, good morning, Andrew. I'll start off, I'll let John talk about and many more. So, we're in a full year direction. But I think for us, when we look at the headwinds around the regulatory changes, that's something we've talked about over the last couple of years. So, we see that this is something that we're solving by diversifying our data, diversifying our product offering by increasing products coming to market and really focusing on the vitality index to kind of diversify the portfolio. So for us, that's really what we're focused on. We don't see the regulatory environment changing in any particular way going forward. We think this is something that's going to continue to evolve. We think AI is going to drive more regulatory change and we will just have to continue to adapt with it. And that's why it's really important for us to diversify through our product offerings. As we've talked about, we're having a lot of success with our new products. We feel very good about that. When we look at the revenue streams of those new products, they're now up to about 20% of Q3 revenue for the product lines that are growing upper single digit, double digit profiles. So we feel very good about what's happening with Paysafe Wallet, with Pago Wallet, our data business, and really the improved or re-energy around the video game vertical as well. So those things are doing exceptionally well as John talked about. The margin is really good with those businesses. We just need more of it. We need it to accelerate, to offset kind of the regulatory headwinds that we've talked about. You can see within the crypto space overall, the general macro environment Crypto transactions are down pretty meaningfully year over year. That's kind of finally started to impact us when we got into August, but really more so into September and October is really when it started to hit. We had a really, to be honest, pretty solid July. We came out of July looking pretty good and volume started trading or sloping down once we got into August and September. So we probably have a little bit of a headwind here for the coming months, but we really like the product offerings that we have and the revenue energy that it's bringing. John, anything you want to add as far as... You have to say, to put a little bit of math on it, as Bruce just discussed, it's somewhat

The inverse of where we were seeing things in August when we were on the phone. We were seeing the trends coming into the quarter as positive, and this quarter we're actually seeing them negative. So I think the Q clearly, as you implied in the question, we think we're going to see more in Q4 than we saw in Q3, especially on the wallet side of the business from the standpoint of the regulatory headwinds and the headwinds in crypto and financial trading. also the impact from FX just looking at it now under 111 on the euro that was happening into Q3 but you know but now we're seeing it well into Q4 we're not looking you know I don't want to get into a lot of 27 yet but we're unclear how much these flow into to 27 but we're not seeing anything new on the horizon these these came up you know, kind of into the early mid part of Q3.

Okay, thanks. And then it was good to see the S&B stable and there's improvements in the direct and agent channels. I think the stat was agent channels or active agents were up 17% year to date. I guess if we pair that with the broader merchant portfolio, would just love to kind of hear some granular detail on the puts and takes of what's driving growth and detracting from growth in the merchant segment. Thanks.

Yeah, I think on the merchant side of the house, we continue to see really nice, solid double-digit growth in the iGaming e-commerce piece. That continues to do well. We expect that that will continue to have a strong year throughout the end of the year. On the S&B side, it's been candidly a battle throughout the year, and it was great to see The direct and agent side of that business kind of rebound, had a strong quarter. There's some good momentum there. So we feel good about the SMB kind of returning to that. Again, steady state for that is kind of a mid single digit growth profile. You know, for us, as we look at that, that's typically a three to five percent kind of growth profile is a great growth profile for SMB. And I think on the on the e-comm side, you know, it has probably slowed a little bit on the non iGaming side. That probably brings that down to a more of a upper single digit kind of growth profile for us. but we really still have good solid growth in the iGaming piece.

As Bruce mentioned, the non-gaming econ piece has been bouncing around for us much of the year and we've been slower than we would have liked on both the banking front and in some cases the product front and we don't see that changing in Q4 but On the SMB side, you know, that is an area where we're seeing, you know, we're not expecting dramatic upside. We're expecting that to continue to perform well in that mid-single digit area. And the recent months in that business have been very good.

Thank you.

Our next question comes from Matthew Inglis with RBC Capital Markets. Please go ahead.

Hey, good morning. This is Matthew on for Dan Perlin over at RBC. So I just want to touch with the new CRO coming in, and you touched on this a little bit before, but what are the biggest opportunities to improve commercial execution? And it might be too early, but what's maybe the strategy change to accelerate both merchant wins and improve the monetization in both segments? Thanks.

Yeah, Matthew, thank you, and good morning. Yeah, great question. So look, we're really excited about Rob being on the team. Brings a great background, as we talked about in the call. I think the opportunities for us is really to monetize the consumer side of our business better, and he brings a tremendous amount of experience in that. So we'll see, or you will see us really talking a lot more about the consumer side of our business There's a couple of reasons for that. One, we've really been pushing on that business, as you've seen with the product releases like Pago Wallet, like the Paysafe Wallet. So we really want to amplify that. Arena is really our first marketplace. We're excited about what's happening there. You know, again, having a million sessions in the first 45 days for us is really a nice way market for us because it gives us clear evidence that our consumers are receptive to more offerings from us. And so I think Rob is really going to help with that. He has a tremendous understanding of the consumer space and coming from that space with Activision background. I think it's just a tremendous benefit for us. So we'll see a lot more business development efforts coming around the consumer side of the business.

I also think he, in his prior experience, has a lot of exposure to businesses that we're seeing transition from physical to digital in their business models and where we've been talking about our e-cash to pay safe wallet and pago efectivo to the pago wallet stories in Europe and Latin America, respectively, that is largely a physical to digital Story, where consumers are going from buying a card to funding a wallet. And he has very obviously significant global markets expertise and running global teams. Got it.

Super helpful. I guess kind of in that vein, when we look at this slide here with the three-month actives and the ARPU, three-month actives obviously trending really, really well. But then we look at the ARPU and that's been kind of trending down for the past, call it a year. and you called out LATAM influencing the overall ARPU so should we think about kind of with headwinds and LATAM like is the ARPU inverting back upward is that going to have to come from outside of LATAM or like is LATAM kind of structurally going to be lower ARPU just given the macro?

Yeah so let me Take a swing at the ARPU. What I would say about the ARPU is when you look at that particular chart, I guess slide five, what I see is basically ARPU has been somewhat range bound around $25 across the time span of the last three years. And so I would expect, you know, my initial thesis when I came in, our hypothesis was that that the ARPU would decline as we continue to start building a broader use case for our consumers. I now think it's probably going to stay closer to stable because we're adding in new features, new functionality to drive the wallets and new product offerings. We're also seeing really solid ARPU with our new products. So when you look at Paysafe Wallet, it's got a really nice ARPU related to that. The Pago Wallet has a solid ARPU as well. So I feel like we're finding our way along, adding in new functionality, and each of these products will help drive it. But I do think you're going to get a little bit of variability quarter to quarter based on the sheer number of people that you put on. and a quarter for a three-month active. That may cause the ARPU to kind of bounce around just a little bit, but my expectation is it's going to hang around that $25 to $30 range for the foreseeable future.

The exciting thing for us, Matthew, is the ARPU on The wallet solutions in our two big eCash markets are two to three times the ARPU of the cash-in solution. They're just smaller. They're growing very fast, but they're smaller. And so the other solutions continue to grow too. So they've got to grow exceptionally fast to drive that ARPU in the near term. Super helpful. Thanks, guys.

Thank you.

Once again, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from Timothy Kyoto with UBS. Please go ahead.

Great. Thanks a lot for taking the question and the really helpful slides 10 and 11 around debt and leverage and some of the prepared remarks around the focus there. I know that you said you wanted to stop short a little bit of 27 initial outlook. I totally appreciate that. This is quasi-related, but ending the year around five and a half times levered. If you could just give some even directional context around the plan for debt pay down into 27 and how we should just think about the 5.5 and the trajectory of that over, let's even call it the next maybe two to three years. Thanks.

Honestly, there's probably lenders on this call, too. So there's one area where I'd like to be firm and say we are going to be delevering significantly over the next two to three years. And I think we're, you know, while we're not finished with budgets and those kind of things yet, I'd say our anticipation is a half a turn a year as a good target and trying to be aggressive and wringing out cash in working capital and our

Thank you. I really appreciate that. And as a follow-up, the point around the ringing out cash from the banking partners, what does that mean mechanically? What are some of the tools that you could employ there?

On the banking side, it's moving to banks that have more of a fintech focus and where we have lower requirements for keeping deposits with the banks that aren't doing anything relative to the portfolio. And also continuing to work with more strategic partners there where we can get the cash out of the system faster.

I follow. Thank you so much. Appreciate you taking the questions.

Once again, ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad. It looks like we have reached the end of the question and answer session. I would like to turn the floor back over to Bruce for closing comments.

Great. Thank you very much. Look, I just want to thank all of the Paysafe employees for all of their efforts this year. We really appreciate all the hard work that everyone's put forward. We're very excited about the new products that are coming to market. Certainly very excited about Paysafe Remina. and the consumer business as a whole. So we'll continue to drive new products and trying to drive our vitality index up further to accelerate our growth rate. So with that, thank you for joining us this morning. Thanks to the team here as well.

And this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.