Paysafe Group |
Strong H215 for the combined group |
Trading update |
Software & comp services |
15 January 2016 |
Share price performance
Business description
Next events
Analysts
Paysafe Group is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||
Paysafe’s FY15 trading update confirms that the newly combined group saw strong growth in H2, beating both our expectations and the market’s for revenue and EBITDA. Integration is progressing well with cost synergies at the top of the recently announced range for H215. We have raised our forecasts to reflect faster achievement of cost synergies, as well as better growth in processing revenues. Further revenue and cost synergies could be possible, although at this stage of the integration process we maintain a conservative stance.
Year end |
Revenue |
EBITDA* |
EPS* |
DPS |
P/E |
EV/EBITDA |
12/13 |
253.4 |
53.1 |
15.1 |
0.0 |
38.5 |
57.4 |
12/14 |
365.0 |
83.0 |
22.0 |
0.0 |
26.4 |
36.7 |
12/15e** |
601.5 |
149.9 |
25.1 |
0.0 |
23.2 |
20.6 |
12/16e |
882.7 |
250.9 |
34.7 |
0.0 |
16.8 |
12.2 |
Note: *EBITDA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Includes Skrill from 10 August 2015.
Positive FY15 update – revenue and EBITDA beaten
Paysafe expects to report FY15 revenues of c $600m (our forecast $589m), with H215 revenues of c $380m. Adjusted EBITDA is expected to be c $150m, including cost synergies at the top end of the company’s recently disclosed $5-10m range (our forecast was $135m with no cost synergies factored in). The group saw strong growth across the board, and noted the strength of the North American payment processing business (the implication being that the largest customer’s Asian business was not the driver of upside).
Upgrading forecasts
We have revised our FY15 forecasts to take account of stronger Processing revenues and cost synergies (we estimate $10m). Rolling forward the stronger Processing revenues, we raise our FY16 revenue forecast by 3.1% and EBITDA by 4.3% to $250.9m. On slightly higher tax rates (as the mix shifts to the US), our EPS forecast increases by 1.7%. For FY17, we increase revenues by 3.6%, EBITDA by 5.2% and EPS by 3.3%.
Valuation: Cash generation supports growth strategy
The stock trades broadly in line with peers on an EV/EBITDA basis, but trades at a discount on a P/E basis for FY16e and FY17e. The recent Skrill acquisition has expanded Paysafe’s product offering and balanced out its geographical exposure, while reducing exposure to its largest merchant. In addition to those cost synergies already targeted, the enlarged group has the potential to generate additional revenue and cost synergies in excess of our forecasts. Strong cash generation should quickly reduce the group’s debt position; the CEO has stated that assuming the integration of Skrill progresses well, the company would consider making further acquisitions. Now listed on the Main Market, Paysafe expects to be eligible for inclusion in the FTSE 250 and should be considered at the March 2016 quarterly review.
Exhibit 1: Financial summary
$'000s |
2011 |
2012 |
2013 |
2014 |
2015e |
2016e |
2017e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||||
Revenue |
|
|
127,972 |
179,072 |
253,367 |
364,954 |
601,505 |
882,725 |
943,173 |
Cost of Sales |
(53,868) |
(89,648) |
(121,484) |
(175,830) |
(297,369) |
(422,686) |
(454,273) |
||
Gross Profit |
74,104 |
89,424 |
131,883 |
189,124 |
304,137 |
460,038 |
488,900 |
||
EBITDA |
|
|
18,738 |
28,275 |
53,106 |
83,044 |
149,871 |
250,861 |
270,214 |
Company EBITDA |
|
|
17,453 |
27,563 |
52,213 |
86,063 |
149,871 |
250,861 |
270,214 |
Operating Profit (before amort acq intang, SBP and except.) |
6,698 |
20,599 |
42,888 |
71,257 |
131,225 |
224,315 |
238,668 |
||
Amortisation of acquired intangibles |
(4,700) |
(4,100) |
(3,300) |
(9,200) |
(16,700) |
(14,700) |
(14,700) |
||
Exceptionals |
(25,675) |
(7,123) |
(1,368) |
7,219 |
(47,190) |
(6,000) |
0 |
||
Share-based payments |
(1,007) |
(3,931) |
(4,512) |
(8,274) |
(14,000) |
(14,000) |
(14,000) |
||
Operating Profit |
(24,684) |
5,445 |
33,708 |
61,002 |
53,335 |
189,615 |
209,968 |
||
Net Interest |
(1,540) |
(1,800) |
(995) |
(2,024) |
(11,714) |
(17,436) |
(15,970) |
||
Profit Before Tax (norm) |
|
|
5,158 |
18,799 |
41,893 |
69,233 |
119,511 |
206,879 |
222,698 |
Profit Before Tax (FRS 3) |
|
|
(26,224) |
3,645 |
32,713 |
58,978 |
41,621 |
172,179 |
193,998 |
Tax |
27 |
(2,461) |
(1,235) |
(1,303) |
(4,162) |
(25,827) |
(29,100) |
||
Profit After Tax (norm) |
5,185 |
16,338 |
40,311 |
67,703 |
107,560 |
175,847 |
189,293 |
||
Profit After Tax (FRS3) |
(26,197) |
1,184 |
31,478 |
57,675 |
37,459 |
146,352 |
164,898 |
||
Average Number of Shares Outstanding (m) |
216.8 |
221.6 |
252.2 |
277.7 |
400.6 |
480.7 |
483.9 |
||
EPS - normalised (c) |
|
|
2.4 |
7.0 |
15.1 |
22.0 |
25.1 |
34.7 |
37.4 |
EPS - FRS 3 (c) |
|
|
(12.1) |
0.5 |
12.5 |
20.8 |
9.4 |
30.4 |
34.1 |
DPS (c) |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
||
Gross Margin (%) |
57.9% |
49.9% |
52.1% |
51.8% |
50.6% |
52.1% |
51.8% |
||
EBITDA Margin (%) |
14.6% |
15.8% |
21.0% |
22.8% |
24.9% |
28.4% |
28.6% |
||
Company EBITDA Margin (%) |
13.6% |
15.4% |
20.6% |
23.6% |
24.9% |
28.4% |
28.6% |
||
Operating Margin (before am and except.) (%) |
5.2% |
11.5% |
16.9% |
19.5% |
21.8% |
25.4% |
25.3% |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
72,672 |
67,393 |
65,551 |
294,837 |
1,646,459 |
1,635,712 |
1,622,966 |
Intangible Assets |
63,337 |
58,526 |
53,231 |
281,479 |
1,630,177 |
1,617,977 |
1,605,777 |
||
Tangible Assets |
9,335 |
8,867 |
12,320 |
13,358 |
16,282 |
17,735 |
17,189 |
||
Other Fixed Assets |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
172,743 |
219,167 |
184,490 |
177,275 |
125,413 |
253,711 |
403,524 |
Cash & cash equivalents |
|
|
57,956 |
82,174 |
164,379 |
109,893 |
45,069 |
157,958 |
304,458 |
Restricted NETELLER cash |
|
|
108,925 |
123,514 |
6,198 |
8,777 |
8,777 |
8,777 |
8,777 |
Cash held as reserves & settlement assets |
|
|
0 |
0 |
0 |
38,607 |
38,607 |
38,607 |
38,607 |
Receivable from Members & Merchants |
|
|
608 |
796 |
0 |
0 |
0 |
0 |
0 |
Trade and other debtors |
|
|
5,254 |
12,683 |
13,913 |
19,998 |
32,960 |
48,370 |
51,682 |
Current Liabilities |
|
|
143,957 |
192,104 |
117,634 |
113,618 |
144,095 |
144,095 |
142,063 |
Creditors |
44,234 |
81,639 |
107,524 |
57,448 |
58,125 |
58,125 |
56,093 |
||
Payable to Members/Merchant liability |
97,741 |
110,248 |
0 |
30,591 |
30,591 |
30,591 |
30,591 |
||
Short term borrowings |
1,982 |
217 |
10,110 |
25,579 |
55,379 |
55,379 |
55,379 |
||
Long Term Liabilities |
|
|
31,340 |
9,394 |
801 |
150,173 |
521,373 |
451,573 |
383,805 |
Long term borrowings |
8,440 |
9,394 |
801 |
107,205 |
493,405 |
438,605 |
383,805 |
||
Other long term liabilities |
22,900 |
0 |
0 |
42,968 |
27,968 |
12,968 |
0 |
||
Net Assets |
|
|
70,118 |
85,062 |
131,606 |
208,321 |
1,106,404 |
1,293,755 |
1,500,621 |
CASH FLOW |
|||||||||
Operating Cash Flow |
|
|
36,319 |
31,869 |
94,542 |
51,469 |
90,396 |
229,451 |
264,870 |
Net Interest |
0 |
0 |
(158) |
(1,873) |
(11,714) |
(17,436) |
(15,970) |
||
Tax |
424 |
(932) |
(1,191) |
(1,564) |
(4,162) |
(25,827) |
(29,100) |
||
Capex |
(11,222) |
(6,467) |
(13,567) |
(11,094) |
(18,000) |
(18,500) |
(18,500) |
||
Acquisitions/disposals |
(25,833) |
(1,667) |
(5,281) |
(169,192) |
(1,197,448) |
0 |
0 |
||
Financing |
(2,755) |
3,294 |
1,188 |
(13,689) |
660,104 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
(3,067) |
26,097 |
75,533 |
(145,943) |
(480,824) |
167,689 |
201,300 |
||
Opening net (debt)/cash |
|
|
64,207 |
58,718 |
85,829 |
118,389* |
(22,891) |
(503,715) |
(336,026) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
(2,422) |
1,014 |
(1,697) |
4,663 |
0 |
0 |
0 |
||
Closing net (debt)/cash |
|
|
58,718 |
85,829 |
159,665* |
(22,891) |
(503,715) |
(336,026) |
(134,726) |
Source: Paysafe, Edison Investment Research. Note: *Difference based on new basis for reporting cash.
|