Paysafe stabilises on earnings growth

Paysafe stabilises on earnings growth

Wednesday, March 8, 2017
Gambling remains central to payments firm’s revenues

The latest results from payments giant Paysafe show the company has recovered its poise after being attacked by a short-seller which caused a 20 percent-plus fall in the share price in December and caused questions to be asked regarding its biggest client bet365.

For 2016, Paysafe saw revenues rise an impressive 63 percent to just over $1bn while EBITDA was up 97 percent to $300.8m. Of the revenue total, 46 percent comes from Paysafe’s online gambling customers and a further 6 percent comes from gaming, which includes daily fantasy sports.

Breaking it down by product, online gambling represents only 29 percent of payment processing revenues but 61 percent of both digital wallet revenues and the same figure for prepaid cards.

The short-selling research made much of Paysafe’s reliance on bet365 for a large slice of its fee revenues. Although not mentioned by name in this week’s results statement, Paysafe says the percentage of revenues from its “major merchant” represented 20 percent of total fees, down from 23 percent in 2015. Paysafe also said that the majority of its major merchant’s revenues were derived from Asia.

The dependency on bet365 and the potential exposure to China, in particular, formed much of the argument from December’s short selling report but analysts from UBS suggested the regulatory fears were “overdone.”

Separately, at the end of February rival payments provider Safecharge announced it was expanding its presence in the Asia-Pacific region, opening offices in Singapore and Hong Kong and announcing it had become a member of the UnionPay International network. Alongside the moves, the company announced a new regional director Willy Kwa who will spearhead the company’s efforts to “establish and maintain relationships with local and international technology, payment and banking partners.”

Paysafe, which comprises the Skrill and Neteller payments brands, increased its exposure to the gambling world when it bought affiliate marketing experts Income Access for an initial $21.4m. It said this week that further acquisitions would be contemplated in the year ahead. “We continue to review and research companies that we believe can accelerate growth opportunities, diversify our merchant and product base, and fortify our strong position in the payments space, against our clearly defined criteria of accretion to shareholders and advancing and accelerating the strategic initiatives of the overall business,” the company said.

Paul Leyland, partner at gambling consultancy Regulus Partners, said Paysafe was now the “preeminent service provider to the remote gambling sector” handling a material volume of payments and especially a very significant proportion of wallet services.

“On the one hand, its scale and FTSE250 credibility should give comfort that this key part of the value chain is well capitalised and relatively visible,” he added. “However, with many mainstream banks (increasingly) uncomfortable with remote gambling, probity issues with some ‘darker grey’ payments choices, and Paysafe’s acquisition trail likely continuing, many of the industry’s eggs are now in this basket.”

This week was a big week for payments companies as WorldPay also released its annual results showing 15 percent growth in net revenue to £1.12bn and the same percentage growth in underlying EBITDA to £467.6m. WorldPay is active in the gambling space but has nowhere near the exposure of Paysafe.

Totally Gaming says: Leyland is right to point to the importance of Paysafe to the gambling world. Alongside WorldPay and Safecharge, it remains at the top of the payments ecosystem as far as the gambling sector is concerned with the only question being the degree of reliance, particularly when it comes to Asian gaming.

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