Paysafe Earnings Call Highlights Growth Amid Margin Strain

Paysafe Ltd ((PSFE)) has held its Q1 earnings call. Read on for the main highlights of the call.

Paysafe’s latest earnings call struck a cautiously upbeat note as management balanced solid growth with near‑term margin pressure. Revenue, cash flow and earnings per share all improved at a healthy clip, powered by Digital Wallets, iGaming and Latin America, while leverage ticked down again. Yet investors were reminded of headwinds from higher credit losses, thinner margins and a back‑loaded growth cadence for 2026.

Top-Line Growth and Quality of Revenue

Paysafe posted Q1 revenue of $442.7 million, up 10% year over year and 8% on an organic basis. Management noted that underlying organic growth was closer to 6% once a $7 million data licensing benefit is stripped out, signaling a solid but not breakneck core trajectory.

Profitability and EPS Expansion

Adjusted EBITDA rose 4% to $99.2 million, but the real standout was adjusted EPS, which jumped 21% to $0.41 on $21 million of adjusted net income. The EPS gain reflects both operating progress and a reduced share count, demonstrating how capital structure moves are amplifying per‑share earnings.

Cash Generation and Deleveraging Progress

The company generated $67 million of unlevered free cash flow in Q1, up 17% year over year with a 67% conversion of adjusted EBITDA and $307 million over the last 12 months at 71% conversion. Paysafe used this cash to cut total debt to just under $2.5 billion, improving net leverage to 5.2x from 5.5x and underscoring deleveraging as a central priority.

Digital Wallets Momentum

Digital Wallets remained a growth engine, with volumes reaching $7.1 billion, up 19% reported and 9% in constant currency. Revenue in the segment climbed 15% to $216.3 million (7% organic), while three‑month actives grew 9% and ARPU 6%, supporting adjusted EBITDA of $94.9 million and a nearly steady 43.9% margin.

iGaming and E-commerce Outperformance

iGaming revenue surged 20% year over year globally in Q1, helped by strong sports betting tied to the NFL playoffs, the Super Bowl and March Madness. E‑commerce revenue also impressed, rising 17%, reinforcing Paysafe’s position in high‑growth, transaction‑rich verticals.

Latin America as a Key Growth Engine

In Latin America, active users reached a record 3.3 million, highlighting growing penetration in the region. Management pointed to LATAM as a major growth engine and continues to expect strong double‑digit expansion into 2026 as digital payments adoption accelerates.

Data Monetization and AI-Focused Investments

Paysafe signed another data licensing deal in Q1, adding $7 million in revenue and showcasing the early potential of data monetization. The company is scaling its data infrastructure and a team of more than 150 data engineers to support anonymized data products and AI‑enabled use cases like fraud modeling and marketing optimization.

Operational Productivity and Automation Gains

Operationally, revenue per full‑time employee increased 13% year over year when normalized for FX, signaling better productivity and smarter resource allocation. Nearly 60% of consumer contacts are now resolved through digital assistance, a 25% year‑over‑year increase that lowers support costs and adds scalability.

Margin Compression From Investment and Risk Costs

Despite EBITDA growth, Paysafe’s overall adjusted EBITDA margin fell about 130 basis points year over year as it stepped up marketing and IT spending and absorbed higher credit losses. The company framed these investments as essential for future growth, but they are temporarily weighing on profitability metrics.

Higher Credit Losses from Risk Platform Transition

Credit loss expense rose by $10 million in Q1 as Paysafe converted to a new risk management platform, with elevated losses concentrated over a few weeks. Management described the issue as contained yet acknowledged it is a key reason why first‑half adjusted EBITDA is expected to be roughly flat versus last year.

Merchant Solutions Profitability and Mix Pressure

Merchant Solutions adjusted EBITDA slipped to $28.1 million from $29.4 million a year earlier as underlying gross margin declined. The company cited an ongoing mix shift toward its lower‑margin ISO channel, which is supporting volume growth but dampening profitability in the segment.

Front-Loaded Operating Investments

Operating expenses excluding bad debt increased about 6% year over year in Q1, and Paysafe plans roughly $14 million of additional marketing and IT spending, mostly in the first half. This front‑loaded investment strategy is expected to pressure near‑term margins, with benefits intended to accrue later in the year and beyond.

Back-Loaded Growth Cadence and Q2 Risk

Management signaled that Q2 revenue growth should run moderately below the full‑year range at about 4%, with first‑half growth around 7% and EBITDA roughly flat. That guidance implies a back‑loaded 2026 performance, leaving less room for execution missteps in the second half and adding some cadence risk for investors to monitor.

Data Revenue Volatility and Modest SMB Contribution

The company emphasized that data licensing revenue remains lumpy and early‑stage, with no clear recurring pattern yet despite a growing pipeline. Meanwhile, SMB revenue grew just 2% in Q1, and management expects only modest improvement from this segment, limiting its impact on overall growth in the near term.

Leverage Still High Despite Improvement

While net leverage improved to 5.2x, management acknowledged that the level remains elevated and is a key focus for the next 24 months. The company is prioritizing further debt reduction over large share repurchases, with only 588,000 shares bought back in January as a rollover from December.

Forward-Looking Guidance and Outlook

Paysafe reaffirmed its 2026 guidance for 5–8% full‑year revenue and adjusted EBITDA growth and double‑digit adjusted EPS growth, reiterating confidence in its trajectory. Management expects first‑half EBITDA to be flat year over year due to higher credit losses and front‑loaded spending, but sees a stronger second half and a seasonally robust Q4 ahead of current expectations.

Paysafe’s earnings call sketched a story of disciplined growth in attractive niches, strong cash generation and steady progress on deleveraging, set against near‑term margin and risk costs. For investors, the key watchpoints will be execution on the back‑half ramp, stabilization of credit losses and sustained momentum in Digital Wallets, iGaming and Latin America.