Tuesday , December 5, 2023

Eye on Earnings: Paya Pursues Integrated Commerce; Paysafe Looks to Recover Momentum

Paya Holdings Inc., which has been acquisitive in recent years, isn’t done doing deals. Chief executive Jeff Hack won’t name names, but multiple acquisition targets have clearly been scoped out. “We’re busy doing due diligence on a variety of deals. We see attractive opportunities for inorganic growth. You should expect us to act on these without hesitation,” he told stock analysts on an earnings call early Wednesday.

On a nearly simultaneous earnings call, the new chief executive of Paysafe Ltd. admonished his executives and employees to stress growth as the company seeks to recover from weakness in its digital-wallet business.

At Paya, Hack is clearly enthusiastic about the company’s most recent deal, that for VelocIT Business Solutions, acquired earlier this year for an undisclosed price. “I couldn’t be more pleased,” he said. VelocIT, a provider of business software covering a wide scope of applications, has strengthened Paya’s foothold in the market for corporate payments, Hack added. 

Hack: “We’re busy doing due diligence on a variety of deals…You should expect us to act on these without hesitation.”

The deal could prove particularly valuable as the company pursues ambitious goals in its relationships with independent software vendors, the entities that code payments into overall business software. “Our penetration rate with ISV partners runs the gamut,” Hack said. “Our objective is to double that penetration on average. The VelocIT acquisition brought some incredible talent to Paya that will accelerate our [business-to-business] initiatives.”

In case analysts were eager to see quick results, however, Hack counseled patience. “It’s relatively early innings,” he said.  “Digitizing the [accounts-payable] experience is a big decision for an organization. We’ll be talking about this opportunity for years.”

Meanwhile, Paya is mining its markets in both its business and government sectors, with automated clearing house transactions claiming a growing share of its business. ACH accounted for 44% of the company’s $11.7 billion in first-quarter payment volume, up a few ticks from 41% a year earlier. ACH volume grew by one-third in that span of time, outpacing card-volume growth of 15%. That volume totaled $6.5 billion for the quarter.

Overall, integrated payments—payments capability embedded in business software—plus ACH processing accounted for 78% of Paya’s revenue for the period, with ACH alone producing 15%, according to the company. Four years ago, the revenue share for integrated payments plus ACH was nearly 10 points lower. The growing share for ACH in particular comes as that payment method’s same-day clearing capability continues to expand its reach among financial institutions.

For the quarter, Paya generated $66 million in revenue, up 19% over 2021’s first quarter.

At Paysafe, CEO Bruce Lowthers admonished his employees to redouble their efforts to pursue growth strategies. “Get laser-focused on growth,” he said. “Let’s re-commit to our values to get the growth engine back on track.”

Lowthers, who took over as the company’s top executive on May 1 after arriving from the mega-processor FIS Inc., spoke as the company reported continuing progress in its wallet business, which consists chiefly of its Skrill and Neteller products. Payment volume for the company totaled $31.2 billion in the quarter, up 13% year-over-year, as revenue dipped 3%, to $367.7 million. Its digital-commerce business grew 2% to $11.3 billion in volume, but revenue fell 11% to $198.5 million.

Lowthers replaced Philip McHugh, who had taken over as the company’s chief executive in 2019.

Check Also

Small Businesses Are Falling Down Online, Gen Zers And Millennials Say

Small businesses are failing to offer the online experiences Gen Zers and Millennials expect, especially …

Digital Transactions