Paysafe Limited (NYSE:PSFE) Q4 2023 Earnings Call Transcript

Paysafe Limited (NYSE:PSFE) Q4 2023 Earnings Call Transcript March 7, 2024

Paysafe Limited isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings. Welcome to the Paysafe fourth quarter 2023 earnings 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, you may begin.

Kirsten Nielsen: Thank you and welcome to Paysafe’s earnings conference call for the fourth quarter and full year 2023. Joining me today are Bruce Lowthers, Chief Executive Officer, and Alex Gersh, 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. Forward-looking statements during this call speak only as of the date of this call, and we undertake no obligation to update them.

Today’s presentation also contains non-GAAP financial measures. You can find additional information about these measures and reconciliations to the most directly comparable GAAP financial measures in today’s press release and in the appendix to this presentation, which are available in the Investor Relations section of our website. With that, I’ll turn the call over to Bruce.

Bruce Lowthers: Great, thanks Kirsten, and thank you all for joining us today. We’re pleased with our fourth quarter and full year ’23 performance, which reflects the achievement of our financial guidance. 2023 marked a year of continued improvement for Paysafe with better growth and better execution. Our team has a lot to be proud of and I want to thank them for their hard work and dedication. While we’ve made progress in many areas of the business, there is more to be done and we are excited to deliver on our goals for 2024, which are well underway. Alex will take you through the financial results in more detail, but the headline is that we delivered a strong fourth quarter with 8% revenue growth, or 6% on a constant currency basis, resulting in full year revenue of $1.6 billion, a 7% increase compared to 2022 and 6% on a constant currency basis.

Fourth quarter adjusted EBITDA increased 13%, leading to full year adjusted EBITDA of $459 million, an increase of 12% compared to 2022 or 11% on a constant currency. This resulted in adjusted EBITDA margin of 28.6% for 2023, an increase of 120 basis points. We also reduced our net leverage, which was 5.0 at quarter end, over-achieving our original target for 2023 and down from 5.8 at the end of last year. Turning to Slide 4, I’ll recap the highlights of our achievements in 2023, which provide us with a solid foundation to build upon on 2024. First starting with enterprise sales, we closed roughly 160 enterprise deals in 2023. This was supported by a 58% decrease in our quota-carrying sales reps to 71 team members, which is nearly double the comparable headcount from the second half of 2022, when the plans for our sales transformation were first established, and this drove a strong contribution to in-year revenue growth from new deals signed.

We also recorded double-digit ecommerce growth, which increased 29% for 2023. On customer experience, after coming up in JD Power rankings and reaching third place last year, I’m thrilled that Paysafe has now reached among the top two brands, outperforming the industry average for all study dimensions. Another highlight on the merchant side is our improved deal efficiency, including faster on-boarding. In Q4, our average contract to launch timeframe was about 30 days faster than what we were delivering in Q1, driven by continued process improvement, system consolidation, and the creation of a focused customer success team. On the consumer side, we improved the customer experience by building self-serve tools into web and mobile journeys, resulting in a 20% reduction in customer service contacts.

We also increased our customer service NPS score by implementing enhanced automation and next-gen customer service tools. These improvements throughout 2023 have resulted in increased growth and engagement in our classic digital wallet. We closed out the year seeing growth in three-month actives with encouraging progress in key conversion metrics, including payment success rates and converting sign-ups to first usage in the wallet. Lastly, in addition to improving the customer experience, we’ve sharpened our focus on new product development. We’ve made a number of organizational changes in 2023 and adapted our capital spend to support this renewed commitment to innovation. During the year, we optimized and expanded the payment methods available to our merchants and increased the number of payment methods that are available enterprise-wide.

In summary, we’ve made great progress across the board, resulting in growth in our key financial metrics while also reducing our debt and leverage. Moving to Slide 5, this is the same supplemental view that we provided last quarter, demonstrating our growth by each business unit. As you’ve seen in our results, we’ve improved revenue growth to 7% in 2023, driven by double-digit growth across the classic digital wallet business, ecommerce solutions, and our SMB third party channel. This growth was partially offset by softer performance from two areas of the business: our direct channel in the U.S. acquiring, as well as our e-cash business. I’ll come back to this in a moment when I discuss our focus for 2024. Turning to Slide 6, in Q4 we booked 50 new enterprise wins with balanced deal activity across our target verticals.

Additionally, we are pleased to have expanded our relationship with Hard Rock Bet into the newly re-launched Florida market, which is now the largest state with legalized sports betting and anticipated to be one of the largest sports betting markets in the U.S. We look forward to continuing to grow our relationship with Hard Rock supporting online payments for its players. For our 2024 sales priorities, we’re moving into an important phase of execution and continued investment to support future growth and scale. In 2024, we plan to add 170 additional sales people to our headcount while expanding the scope of this initiative beyond the enterprise level to also include our SMB business. This will also include territory expansion to about four new states this year where we already have hired 25 SMB agents primarily in states not covered today by us.

As we’ve touched on during prior calls, we will be focused on optimization of the SMB portfolio in 2024, particularly to improve the growth of our direct channel. At the same time, we are focused on the entire portfolio to drive a more favorable business mix, partly supported by the expansion of acquisition channels and agent recruitment programs. Also, we’re rolling out expanded capabilities and value-added services to further enhance client satisfaction and support retention. Importantly, we’ll continue to deliver on the progress we made into 2023, including continued cross-selling into our client base. During 2023, we cross-sold our products into 19% of our enterprise client base of more than 800 merchants, which is up from very little cross-selling in prior years, and this continues to reflect a key opportunity with a lot of runway to grow with our existing merchants.

Turning to Slide 7, we are rolling out a phased approach of our merchant wallet to SMBs in the U.S. with a planned road map that leverages our digital wallet for SMBs to receive acquiring settlement and manage their business finances in one place. We see this as a growing opportunity in a market where SMB needs are currently being met by fragmented solutions for U.S. banks, wallets and various checking and software service solutions. For Paysafe, this represents an opportunity to bring together our B2B and B2C capabilities with a mission to help businesses with easy and convenient ways to move money through simple intuitive digital experiences. Moving to Slide 8, we continue to show progress in our classic digital wallets, ending the year with approximately 930,000 three-month actives.

This reflects 7% growth from the prior year and two quarters of consecutive growth in active users following the stabilization in the first half of ’23. In the fourth quarter, we saw constant currency revenue growth of 14% from classic wallets. This was supported by product and client experience initiatives such as pricing promotions, engagement activities such as promotion calendars and revamping our loyalty program, VIP campaigns, and the launch of prepaid virtual cards in Brazil. This was further supported by the growth from interest revenue on consumer deposits, new merchant relationships, as well as ongoing improvement to the merchant checkout conversion. In 2024, we look forward to expand this view to also demonstrate progress in our e-cash solutions, providing a more comprehensive view of the consumer side of the business.

Turning to Slide 9, as we move forward, improving our marketing and customer acquisition strategy is key to delivering sustainable growth on the consumer side of our business. Here as one example, we recently conducted a test campaign for our Skrill digital wallet in two European markets. The key point is that we expanded our outreach to new channels while delivering more effective, localized messaging. We also implemented improved incentives and rewards to encourage new sign-ups to fund their accounts and perform subsequent transactions, driving improved conversion and engagement. The initial results are promising. We contributed to double-digit growth year-over-year in new accounts funded and the strongest sign-up activity in more than 20 months.

While this campaign was focused on our Skrill wallet in select markets, we also had a solid quarter for consumer acquisition of registered e-cash users in Q4 as a result of promotions across various new marketing channels, such as influencer collaborations with key gaming partners, the roll-out of country-specific promotions, and the sponsoring of an e-tournament. This is just the start of what we’re working on as part of our broader goals to drive higher consumer acquisition. Turning to Slide 10, let’s bring all this together to summarize our priorities for 2024. First, we will advance our new go-to-market strategies on both sides of the ecosystem to expand our reach with new and existing merchants to strengthen consumer acquisition. As I touched on earlier, we also have a number of initiatives underway to optimize the portfolio, particularly to address the mix dynamics we’ve experienced in the SMB business.

Here, we are enhancing our product offering and capabilities, expanding our merchant acquisition program, and adding additional headcount with a sharper focus on moving up-market and expanding territories. Lastly, we continue to drive our initiatives around product innovation and customer experience. About half of our projects this year are focused on consumer solutions such as scaling new products and e-cash, including our new online account features and deposit methods. We are also continuing to improve the digital wallet payment experience and loyalty programs while expanding local payment methods and payouts in key regions such as Latin America. The other half of our product initiatives are focused on the merchant side, such as continuing to expand our authorization acceptance and advancing our unbranded solutions.

Turning to Slide 11, in 2024 we are making important investments to drive growth in our target verticals while enhancing operational efficiencies. The two key investment areas are sales initiatives and portfolio optimization. Overall, this will reflect $25 million of incremental investment in 2024, about half of which represents one-time expense with the remaining half reflecting a short term marketing headwind from our new sales hires in 2024, prior to their full revenue and margin contribution in ’25. We expect the contribution of these initiatives to deliver at least $50 million in in-year revenue and approximately $100 million in 2025, coupled with improved operating leverage as the benefits are realized over the next two years. With that, I’ll ask Alex to review the financial results.

Alex Gersh: Thank you Bruce. Let’s move to Slide 13 for the summary of our fourth quarter financial results. Volume was $35.8 billion in the fourth quarter, an increase of 8% year-over-year, and total revenue of $414.5 million increased 8% or 6% on a constant currency basis. Growth was led by double-digit volume in revenue growth in ecommerce within the merchant solutions segment as well as classic digital wallets, included interest revenue on consumer deposits which was a year-on-year benefit of $6 million in Q4 or $32 million for the full year compared to 2022. Excluding the year-on-year benefit from tax and interest, Paysafe revenue growth was approximately 4% for both the fourth quarter and full year. Adjusted EBITDA for the fourth quarter was $121.7 million, an increase of 13% year-over-year or 11% constant currency.

Adjusted EBITDA margin was 29.4%, an increase of 140 basis points primarily driven by operating leverage, including lower credit losses which more than offset a decline in gross margin. Our total SG&A was 30.2% of revenue in the fourth quarter, down from 35.7% of revenue in the prior year quarter. We generated $89.6 million in unlevered free cash flow for the fourth quarter, reflecting 74% conversion of adjusted EBITDA. I’ll note that we have changed our naming convention from free cash flow to unlevered free cash flow for clarity purposes. Additionally, we elected to re-classify the presentation of settlement receivable and funds payable due to customers from operating activities to present them as financing activities within the cash flow statement.

As a result, the reconciling item related to movement in customer accounts and other restricted cash is no longer required in our non-GAAP unlevered cash flow reconciliation. You can find more information on our non-GAAP definitions and reconciliations in the appendix of our presentation. Adjusted net income for the fourth quarter increased 23% year-over-year to $40.9 million, and adjusted EPS increased 22% to $0.66 per share as our growth and margin improvements more than offset increase in depreciation and amortization and tax expense. Overall, our fourth quarter results were in line with our expectations, resulting in the achievement of our full year guidance for 2023. Let’s move to Slide 14 for the summary of the full year. Volume in 2023 increased 8% to $140 billion and full year revenue was $1.6 billion, an increase of 7% compared to 2022 or 6% constant currency.

Our largest region, North America, grew approximately 7% for the full year 2023. Europe, our second-largest region grew approximately 3%. Overall, our growth and performance trends have been consistent throughout the year, reflecting strength in ecommerce, including in classic digital wallets, and continued resilience in the U.S. SMB market driven by our third party channel. We saw softer performance in the e-cash business and the SMB direct business, which are a key focus for improvement in 2024. Adjusted EBITDA for the full year increased 12% to $459 million, resulting in adjusted EBITDA margin of 28.6%, an increase of 120 basis points. Our full year total SG&A was 31.7% of revenue, down from 35.7% in 2022. Our unlevered free cash flow for 2023 was $318 million, an increase of 8% compared to 2022 and reflecting 59% conversion of adjusted EBITDA, in line with our expected conversion range of 65% to 70%.

Adjusted net income for the full year increased 5% to $144 million, and adjusted EPS increased 4% to $2.33 per share as growth in adjusted EBITDA was partially offset by an increase in depreciation and amortization expense, as well as a $24 million increase in interest expense. In 2024, we expect to see a reduction in interest expense reflecting debt repayments and current rates for FX and interest. Let’s move to Slide 15 to discuss the segment results. In fourth quarter, merchant solutions volume was $30.2 billion, an increase of 8% year-over-year, resulting in full year volume of $118.7 billion, also up 8%. Fourth quarter revenue increased 9% year-over-year to $227.3 million, and the full year revenue increased 7% year-over-year to $878.3 million.

Performance was led by ecommerce, which increased 29% for the full year with strong momentum in North America and i-gaming. In the SMB market, we saw continued growth in verticals such as eating and drinking places, grocery and petrol, and personal services. Merchant solution fourth quarter and full year adjusted EBITDA both increased 11% to $56.6 million and $222.2 million respectively. Fourth quarter adjusted EBITDA margin expanded by 40 basis points and the full year margin expanded by 80 basis points, reflecting operational improvements including lower credit losses which more than offset a gross margin headwind from channel mix, as SMB growth was stronger in our lower margin third party channel. Out of Q4, our revenue mix within merchant solutions was roughly 15% ecommerce or enterprise-level merchants, 40% SMB direct channel, and 45% SMB third party channel.

In 2024, we expect this segment to grow revenues between 8% to 10%, supported by strong growth in ecommerce, the annualization of our 2023 wins, and the optimization of the SMB portfolio. Turning to the digital wallet segment on Slide 16, fourth quarter volume increased 13% to $6 billion and full year volume increased 9% to $22.4 billion. Revenue for the fourth quarter was $191.3 million, an increase of 8% year-over-year and 3% constant currency. Digital wallet revenue for the full year was $734.7 million, an increase of 7% or 5% constant currency. Fourth quarter adjusted EBITDA for the digital wallet segment was $82.4 million, an increase of 7% year-over-year and up 2% on a constant currency basis and reflecting a 43.1% margin, down 40 basis points mainly due to product mix.

Full year adjusted EBITDA was $318.7 million, an increase of 10% or 8% constant currency, with margins improving by 120 basis points to 43.4%. In 2024 for the digital wallet segment, we expect growth in the low single digits, reflecting growth in active users, the roll-out of new products in e-cash such as online account features and deposit methods, cross-selling and the expansion of our merchant wallet in Europe, while expanding in key regions such as Latin America. We expect growth to be partly offset by a modest headwind from interest revenue. Turning to Slide 17 for the summary of debt and leverage, at the end of fourth quarter, total debt was $2.5 billion, reflecting debt repayment and repurchases of $62 million during the quarter. In 2023, we repaid approximately $174 million of our debt as we continued to take advantage of the market opportunity to buy back debt at discounts to par.

At year end, net debt was $2.3 billion and our leverage ratio was further reduced to 5.0 times compared to 5.8 times at the end of 2022. We will remain focused on reducing net leverage in 2024 and will continue to work towards our midterm target net leverage of 3.5 times. Additionally, as of December, the average interest rate on our debt was 5.8%. We also earned interest on our customer deposits at a rate of 3.7%, which is recognized in revenue. As you saw in our last earnings in November, Paysafe’s board authorized a $50 million share repurchase program which we expect to commence in the coming weeks. We continue to expect a majority of our excess cash flow to be committed to deleveraging while we continue to invest in innovation to drive long term growth.

Moving to the full year outlook on Slide 18, for 2024 we expect revenues to be in the range of $1.688 billion to $1.712 billion, reflecting growth above 6% at the midpoint with the largest contribution coming from our existing client base, including new enterprise wins in 2023. We believe that this growth outlook reflects continued improvement with higher quality of revenue growth, particularly when you consider the benefits of interest and a tax tailwind that we saw in 2023. We expect adjusted EBITDA to be within the range of $473 million to $488 million, and while we expect to see a continued decline in gross margin in 2024 as a result of business mix, we are offsetting this headwind with cost discipline and operational efficiencies. As Bruce highlighted, we are also planning for incremental opex investments of approximately $25 million to support the expansion of our sales team and portfolio optimization, which has an impact of approximately 150 basis points on adjusted EBITDA margin.

Excluding these investments, adjusted EBITDA would be greater than $500 million and reflect margin expansion. We expect the cadence of growth throughout the year to follow our normal seasonal patterns, which typically reflect a modest seasonal decline from Q4 to Q1, as well as seasonal uplift from Q3 to Q4. As with prior years, we expect Q4 to be our strongest quarter, also reflecting the timing of our sales and product initiatives, including the pace of revenue contribution from new sales hires, which can take about six months to on-board and start producing. We expect the $25 million of incremental cost to be phased roughly 60% in the first half of the year and 40% in the second half. Adjusted EBITDA margins are expected to be stronger in the second half as well, largely due to the same drivers which will influence our operating leverage.

Looking ahead to 2025, we expect revenue growth to accelerate from 2024 and for adjusted EBITDA margins to reflect a more normalized margin. Excluding these investments, we’re at least 100 basis above the high end of our 2024 outlook, including enhanced operating leverage as the new hires are on-boarded this year and generating annualized revenue contribution in 2025 and beyond. Now I will turn the call back to Bruce for closing remarks before we take questions.

Bruce Lowthers: Thank you Alex. In closing, I’d like to reiterate that we see significant value potential in Paysafe with a lot of runway to accelerate growth. We maintain strong market positions in high value markets. We serve a premier global client base with significant cross-selling opportunities across our geographies. We are entering 2024 in a solid financial position with strong cash generation while also deleveraging the business to create shareholder value. By continuing to prioritize client experience, product innovation and execute our go-to-market strategy, we believe that we can unlock meaningful opportunities and stakeholder value. Now let’s begin the Q&A session.

A – Kirsten Nielsen: Thank you Bruce. We’ll take a couple questions from the Say Technologies platform, which allows shareholders to submit and upvote questions. After that, we’ll turn to questions from our research analyst community. As a reminder, we may pass over questions that were already addressed on this call or in prior recent quarters. We may also group together questions that share a common theme. Our first question is from Matthew, who asks, what goals have we set in order to restore investor confidence in Paysafe? Bruce, could you take this one?

Bruce Lowthers: Sure. Thank you Kirsten. Look, I think the question that Matthew’s posed, what goals have we set, I think we clearly said that as we started out, going back a couple years, we’d stabilize the company, we would then begin to grow our revenue streams and then accelerate growth once we had done that. I think as you look back at the achievements and the financial results that we highlighted in our remarks, we can see that our results of improved growth in ’23 across essentially all key metrics, while also reducing our debt and net leverage ratio, we continue to deliver on that progress in ’24. We’re really advancing our go-to-market strategies on both sides of our ecosystem to expand the reach with new and existing merchants to kind of strengthen our consumer and merchant acquisition.

We’ve gone under significant operating changes during the past year and I’m highly confident that we are in a stronger position today and well positioned for the future.

Kirsten Nielsen: Okay, thank you Bruce. Our next question is from Daniel, who asks about adding Web3 or cryptocurrency capabilities, and asks if Skrill users will be able to invest in equity markets. Bruce, do you want to address this one as well?

Bruce Lowthers: Yes, happy to, and Daniel, thanks for the question. I think we have the right talent, assets and regulatory experience to enable new ways to buy and sell in a virtual environment and to serve the new generation of digital entrepreneurs in the experiential economy. The combination of crypto and Web3 is part of that, I would say. We’re very focused across the entertainment space and we do think about the future functionality quite a bit as to how that’s going to evolve over time. To address the question more directly, crypto is today a very small piece of our business, less than 2% of our revenue. Our wallet does offer crypto trading with 50 different cryptocurrencies available in over 80 countries globally, including features complementary with Web3, but we don’t really have any interest at this point of offering equity trading, as we’re looking at our feature functionality as we’re moving forward.

We feel very strongly about the emergence of crypto and Web3, especially in the gaming space on Web3, and we do plan to be part of–have that as part of our offering as we’re moving forward.

Kirsten Nielsen: Okay, thanks Bruce. Lastly, we did have a couple questions on the nature of capital allocation from Ganesh (ph) and Viknaswaram (ph), who ask about the strategy for repaying debt, and had another question on our plans to initiate the recently approved stock buyback program. Alex, can you take this one?

Alex Gersh: Sure, happy to take the question. Just to recap what we’ve shared in our prepared remarks, at year end our leverage ratio was reduced to 5.0 times compared to 5.8 times at the end of 2022. In 2023, we repaid approximately $174 million of our debt, and this was actually better than what we initially targeted for the year. We remain focused on reducing net leverage in 2024 and we’ll continue to work towards our midterm target net leverage of 3.5 times. As you saw in our last earnings release in November, the board authorized a $50 million share repurchase program which we expect to commence in the coming weeks. We plan to maintain flexibility and continue to focus on reducing leverage while we continue to invest in innovation to drive long term growth.

Kirsten Nielsen: Thanks Alex. Let’s open up the line for our analyst Q&A. Operator?

Operator: Thank you, we will now be conducting a question and answer session. [Operator instructions] Our first question is coming from the line of Dan Perlin with RBC Capital Markets. Please proceed with your questions.

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Q&A Session

Dan Perlin: Thanks, good morning. I just wanted to touch on the payback period, so to speak, on the $50 million of in-year revenues. I appreciate the cadence commentary on the investments – I think you said 60% of the $25 million will happen in the first half. I guess this implies kind of a second half ramp, but it also seems to be a pretty quick turnaround, so I’m just wondering the efficiencies that you’re expecting from the sales team, and maybe just putting a finer point, is that something that we would see really ramp aggressively in the fourth quarter or should we be thinking third, and maybe even before that?

Alex Gersh: Okay, well I think you’re right, Dan, that we do expect this to be a pretty quick payback, and obviously with $50 million this year and $100 million next year, the payback occurs somewhere within the 12 months of incurring the cost. It is a no-brainer, quite frankly, from our perspective.

Dan Perlin: Yes, okay. Then just a follow-up on gross margins, I know you said there’s going to continue to be a headwind there. Is there any way to kind of quantify or help us with the pacing of that and maybe what that might look like in totality, given some of the moving parts? Thank you.

Alex Gersh: I think on the gross margin, and I think we’ve said this before, we’re very much focused on the obviously revenue growth and EBITDA margin. As you see us moving into different verticals and to different customer bases, both in digital wallets–particularly in digital wallets, we could see and we have seen some deterioration in margin. It’s really–I would almost call it deterioration that is really expanding our wallet capabilities significantly from where it was a few years ago, so that may continue. But what we’ve also said is we will continue to focus on efficiencies in terms of SG&A costs to make sure that we continue to improve operating leverage and EBITDA margins. On the merchant solution side, of course, we’ve already mentioned that what we really need to do is really ramp up the SMB direct channel, which is a higher margin channel than the third party channel.

We are working on this, as you can see right now. We still have a lot of work to do and we will be reporting on this on a quarterly basis, and as you see that turn around, you should see some improvements in the SMB margin, gross margin.

Dan Perlin: Got it, thank you.

Bruce Lowthers: Thank you.

Operator: Thank you. Our next question is coming from the line of David Togut with Evercore ISI. Please proceed with your questions.

David Togut: Thank you, good morning. Could you discuss the drivers of digital wallet take rate compression in the fourth quarter, and what are your expectations for digital wallet take rate for this year as a whole? Thank you.

Bruce Lowthers: Yes, Alex, do you want to go ahead?

Alex Gersh: Sure Bruce. I think as we’ve said, I think in our remarks, and as I’ve just alluded to the strength, we are–we have significant growth in our digital wallet segment, right, and we are re-accelerating that segment. We are looking at different products and are targeting different parts of the ecosystem to drive that growth. Some of those products–and therefore the simple answer is gross margin–take rate deterioration is the product mix. But again, we see it as a really good story because what we’re really expanding is the use case for the digital wallet, but with some of those customers and some of those products, it does come with a little lower take rate.

David Togut: Got it.

Bruce Lowthers: Probably just to clarify for you, we’re not seeing pricing pressure with our existing product. What we’re seeing is, as Alex has said, us bringing new product to market at different price points and different margin profiles, so when we look at our take rates on an apples-to-apples basis, we’re seeing stability within our rates, but we’re introducing new things at different price points and different margin profiles.

David Togut: Understood, thanks for that clarification. Just as a follow-up, what are your 2024 expectations for unlevered free cash flow and then year-end 2024 leverage targets?

Alex Gersh: Again, what we are–you know, because of the buyback and because of the–you know, we’re really focusing and optimizing our balance sheet as much as possible, it would include the buyback, it would include the leverage. We aren’t really giving a target for 2024 in terms of the net leverage, but we continue to focus on reducing the net leverage. The midterm target, as we said, is 3.5 times, and we stand behind that target. The expectation would be that our EBITDA increases, so I would expect our unlevered cash flow to continue to stay stable, maybe increase a bit from where it is now, so overall we continue to see 2024 as a very strong cash generating year where we are able to invest in our business, deleverage, and execute on the buyback.

David Togut: Thank you.

Bruce Lowthers: Thank you David.

Operator: Thank you. Our next questions come from the line of Scott Wurtzel with Wolfe Research. Please proceed with your questions.

Scott Wurtzel: Thanks, good morning guys, and thank you for taking my questions here. Just wanted to start off on the SMB side of the business. You talked about introducing value-added services to your merchant base, and I know you’re rolling out the merchant wallet, but just wondering if you can maybe share some color on any of the other value-added services and products you could be introducing into the ecosystem this year.