Nayax Ltd. (NYAX) Earnings

Management highlights

- Core Business Growth * The company's business flywheel model is working: new installed devices compound high-margin recurring revenue, with net revenue retention holding at ~120% and historically low churn * Growth is increasingly driven by both device expansion and higher value per connected device, supported by the ongoing industry tailwind of cash-to-cashless conversion * Strong growth was seen across all geographies (North America, Europe, Latin America, Asia) and all core verticals, with particularly strong traction in higher-value verticals including EV charging - Embedded Financial Services & Bank Charter Initiative * NIACS filed an application for a non-depository innovation bank charter with the Connecticut Department of Banking, following a year of preparation and regulatory engagement * The charter will eliminate the need for state-by-state financial service licensing, strengthen the core business foundation, and enable the expansion of in-house embedded financial services (lending, card issuing, loyalty) for existing merchant customers * NIACS has already built full in-house issuing infrastructure (licensed in the EU, UK, Israel) and brought NIEX Capital (lending/installment technology) fully in-house; underwriting will use real-time transaction data from the NIACS platform for lower-risk, faster lending decisions, with automated collections via existing settlement flows * Regulatory review is expected to take ~6 months, with an operational target of 2027 if approved; the bank will initially be funded with $10 million from existing balance sheet, with off-balance sheet warehouse funding planned after proof of concept - EV Growth Strategy * Following the Linkwell acquisition, DC fast charger deployment is proceeding at more than double the pre-acquisition pace; the company is intentionally accelerating deployment to capture EV market share faster and build future recurring revenue streams * Bundled payments + Linkwell OCP management solutions have driven strong customer demand, and first half 2026 EV-related revenue beat internal estimates - M&A Strategy * The company maintains a robust M&A pipeline and continues to target 2-3 acquisitions per year, with several active opportunities expected to be announced in 2026 * The repeatable acquisition playbook focuses on vertical-specific software companies where payment and software integration creates value; acquired assets are scaled globally on NIACS' existing infrastructure (successfully executed with Linkwell in EV and Tagapo in family entertainment) * Current high-priority target verticals for future acquisitions include public transit (buses/trains) and laundry solutions - Management Incentive Alignment * A new five-year long-term management incentive plan (Diamond Plan) was implemented, tied to 2028 strategic milestones aligned with the goal of building a multi-billion-dollar revenue company; additional long-term incentives were granted to co-founders tied to total shareholder return

Guidance

- Full year 2026 revenue guidance is reaffirmed at $510 million to $520 million, including 22% to 25% organic revenue growth, in line with initial full-year guidance - Full year 2026 adjusted EBITDA guidance is reaffirmed at $85 million to $90 million, representing an adjusted EBITDA margin of ~17%, supported by operational efficiencies from AI implementation and process automation - Full year 2026 free cash flow guidance is revised downward to 5% to 10% conversion from adjusted EBITDA, reflecting accelerated near-term investments aligned with long-term growth strategy. The downward revision does not reflect a change in underlying operating performance - Adjusted OPEX is expected to be ~$42 million per quarter in Q3 and Q4 2026 (excluding foreign exchange impact), driven by productivity improvements and operational efficiencies - Hardware gross margins are expected to rebound to near Q1 2026 levels in the second half of 2026, supporting overall gross margins in the high 40s - 2026 full year stock-based compensation is expected to total ~$27 million, representing approximately 5% of full year revenue - Management expects free cash flow performance to improve in 2027

Segment performance

Total Q2 2026 revenue grew 28% year-over-year (YoY) to $123 million, with 21% organic revenue growth. Recurring revenue grew 24% YoY and represented 72% of total revenue. Hardware revenue grew 40% YoY to $35 million, with approximately two-thirds of the YoY increase coming from the acquired Linkwell EV business. Overall gross margin for the quarter was 47%. Processing gross margin increased to 41% (up from 39% YoY), SaaS gross margin expanded to 76% (up from 74% YoY), and hardware gross margin came in at 28.1%, pressured by Linkwell's lower hardware margin and higher freight/logistics costs. Adjusted EBITDA increased 12% YoY to $14 million. Total transaction value grew 29% YoY to $2.1 billion, Average Transaction Value (ATV) increased to $2.52 from $2.20 YoY, average revenue per unit (ARPU) increased 13% YoY to $251, and take rate remained strong at 2.62%. As of quarter-end, NIACS had 1.55 million connected devices globally and served 125,000 customers.

Risks & headwinds

- Approval of the Connecticut bank charter is not guaranteed; there is no assurance it will be granted, or that it will be granted on acceptable terms - The appreciation of the Israeli shekel against the U.S. dollar created a $2.3 million headwind to operating expenses in Q2 2026, and foreign exchange volatility can continue to impact financial results - Accelerated EV deployment and financial services investments pressure near-term free cash flow, though they are expected to drive long-term value - 70% of the addressable unattended machine market remains cash-only, representing a persistent execution challenge to capture conversion growth - Upcoming memory component supply constraints are expected to emerge in the second half of 2027, requiring proactive sourcing and cost management

Analyst Q&A

• Q: What is driving top-line growth, and how is growth tracking across geographies and the EV vertical? /

  A: Growth is broad-based across all geographies and verticals. EV growth is accelerating in the U.S. post-Linkwell acquisition, driven by successful bundling of NIACS payments with Linkwell's operating management platform. Large recent RFP wins in Europe are also driving EV growth there, with broader acceleration expected globally moving forward. Linkwell's large first half 2026 revenue beat internal estimates, with hardware serving as the foundation for future recurring payment revenue. All regions (U.S., Europe, Latin America, Asia) delivered strong growth in the quarter.

• Q: What opportunity size does financial services represent, and how does it fit into NIACS' core strategy? /

  A: Management does not provide specific size guidance yet, but frames financial services as a value-added add-on for the company's existing 125,000 merchant customers, not a standalone core business. It will not become the majority of revenue, but will improve margins, reduce churn, and support growth by adding pay-out capabilities alongside existing pay-in processing, and improve merchants' working capital access. NIACS' real-time transaction data allows lower-risk, faster underwriting than traditional banks, creating a competitive advantage.

• Q: Why pursue a bank charter in-house instead of partnering with an existing sponsor bank, and why now? /

  A: The charter has been multi-years in planning, with technology investments in lending and issuing dating back to 2022. Now is the right time because NIACS has reached sufficient scale to offer these services, and improved data/AI capabilities create a clear opportunity to add customer value. Doing it in-house preserves full control of customer data, risk management, and customer relationships, which would be lost if relying on third-party sponsor banks.

• Q: What is the M&A outlook for the remainder of 2026, and what verticals are targeted? /

  A: The M&A pipeline remains robust, and the company still expects to announce 2-3 acquisitions in 2026, continuing the proven playbook of buying vertical-specific software companies with tied payment opportunities. High-priority new verticals for future acquisitions include public transit (buses and trains) and laundry solutions, with most opportunities focused on core North America/Europe markets, or assets that can be scaled into core markets.