Nuvei Corp Stock May Have Finally Turned The Corner (NASDAQ:NVEI)

Nuvei Corporation (NASDAQ:NVEI)(TSX:NVEI:CA) is a Canadian-based fintech company that provides technological payment solutions to merchants and other businesses around the world.

The stock has taken a beating since it topped out at approximately $160 per share on October 4, 2021, then plunging to its 52-week low of $24.73 per share on October 13, 2022, also the lowest it has traded since going public a couple of years ago.

While it was getting punished, the company has been fundamentally sound, with management noting in its most recent earnings call that the 14 billion in volume of 2018 is now over eight times that at an estimated 121 billion in 2022. Adjusted EBITA was at $51 million in 2018, and now is projected to reach $345 million for full-year 2022.

At the same time, the company has been investing in order to sustainably scale the business over the long term.

In this article we’ll look at some of the numbers from its latest earnings call, some of the investments it has made to improve the business, and what the future potential of the company looks like.

Some of the numbers

The company makes it clear that its top metric used to measure its performance is total volume, so I’ll go with that, with the caveat that increasing volume doesn’t move in alignment with revenue, as I’ll get to in a moment.

That doesn’t mean measuring volume isn’t important, because it offers insight into how much business is being done using its payment services, and momentum concerning usage.

As for total volume in the third quarter, it came in at $28 billion, up by 30 percent from the $21.6 billion in volume from the third quarter of 2021. By definition of the company, total volume reflects the overall dollar value of the transactions processed by the merchants it has contractual agreements with.

Total volume for the first nine months of 2022 was $87.4 billion, up 36 percent from the $64.1 billion in the first nine months of 2021.

Revenue in the third quarter was $197.1 million, up 7 percent from the $183.9 million in revenue generated in the third quarter of 2021. So while volume grew by 30 percent, revenue only grew by 7 percent.

Revenue for the first nine months of 2022 was $623 million, up 22 percent from the $512.7 million in revenue generated in the first nine months of 2021.

Among the top vertical for revenue growth in the third quarter were online retail, which was up 141 percent; travel, which jumped by 86 percent; online gaming revenue, which climbed by 21 percent; and social gaming revenue, which was up 16 percent.

Net income in the quarter was $13 million, down 54 percent from the net income of $28 million in the same reporting period of 2021. Once again, the reason for that was from an increase in share-based payments.

Net income in the first nine months of 2022 was $52.6 million, down from the $94.7 million in net income in the first nine months of 2021. That was also attributed to an $83.4 million boost in share-based payments.

Adjusted EBITDA in the quarter was $81.2 million, slightly up from the $80.9 million in the third quarter of 2021. FX had a $5 million unfavorable effect on adjusted EBITDA. Net income per share dropped to $0.08, down 58 percent from net income per share of $0.19 last year in the same quarter.

Adjusted EBITDA for the first nine months was $265.6 million, up 18 percent from the $225.8 million in Adjusted EBITDA from the first nine months of 2021.

At the end of the reporting period NVEI had $754 million in cash and cash equivalents.

Performance by geography

By geography, North American revenue was $83.1 million in the third quarter, up 9 percent year-over-year; revenue in Europe, the Middle East and Africa was up 4 percent to $105.5 million; revenue from Latin America was $7.6 million, up 28 percent from last year in the same quarter, and revenue from Asia Pacific reached $1 million, a gain of 47 percent year-over-year.

Something I wanted to point out in North America is, while revenue growth was modest, e-commerce growth was up 40 percent, and accounted for 31 percent of revenue in the market. At the same time small business revenue was down 1 percent, and represented 42 percent of North American revenue.

That’s the type of trend I’m looking for in a fintech company like NVEI, as e-commerce continues to take a bigger bite out of the overall retail sector.

As for total addressable commerce market (TAM) by geography, management estimates the North American to be valued at about $12 trillion, stating it’s in the early days of expanding its footprint there.

In Europe, the Middle East and Africa (EMEA) the TAM is estimated to be at approximately $9.3 trillion. The company sees a lot of potential growth in that market as it diversifies across its verticals.

In the Latin American (LATAM) market the company estimates the TAM to be worth around $1.5 trillion. Revenue in the third quarter was up 28 percent there, and since it was working from small base, it has a lot of upside potential.

In Asia Pacific (APAC), the company is just getting started. Some specific markets that are starting to gain momentum are Australia, Hong Kong, and Singapore. The company said it had also recently opened a sales office in China, in a bid to grab share in that lucrative market. TAM in APAC is estimated to be a huge $28 trillion.

Tech and product innovation in the quarter

The company made a number of innovations in the quarter concerning its tech and products, and I wanted to highlight a couple of them I think are important.

The first one I mention here is probably the most important as far as how much immediate impact it could have on the performance of the company, and that is concerning the improvement of its platform so it could offer far more transactions per second than in the past.

A major problem in online payment processing has been the time it takes to complete a transaction with certain payment options. So, increasing the speed at point-of-sale (POS) should be a nice tailwind for the company over the long term.

Somewhat related to that was NVEI adding a number of new alternative payment methods for customers, bringing the total to 586 at the end of the third quarter.

This will not only allow more options to consumers, but will empower its business customers to accept payment options familiar to customers at the regional level, which should drive more sales for the businesses and make NVEI’s solution more sticky. There were a number of other innovations and solutions initiated in the quarter, but those above will probably have the most immediate impact on the performance of the company.

Conclusion

Even while NVEI continues to grow share, increase volume and do well across many of its metrics, the company continues to be punished, I believe, because of the sector it competes in, and the overall umbrella of the tech industry, which has been out of favor with investors for some time.

The fundamentals of the company are sound, it has a lot of momentum going for it in most markets around the world, and it’s innovating at different points in the market to offer quality products and services that improve the customer experience.

Taking into consideration the current economic times we live in, it’s difficult to get short-term reads on how fintech companies like NVEI will do, but based upon momentum, execution, and end-markets that are in the trillions, it won’t take a lot of market share to turn NVEI into a long-term high-growth company that generates solid returns for its shareholders.

With the company seeming to have found a bottom at a little above $25.00 per share, it’s positioned well for the turnaround eventually comes. In the near term the stock could go either way, but with a strong balance sheet and growing adoption, this looks like it’s going to be a long-term winner for patient investors.