A sign displays a Nuvei logo at the Toronto Stock Exchange.Mark Blinch/Globe and Mail
Nuvei Corp. NVEI-T, which processes digital payments and is one of Canada’s best-known financial technology companies globally, watched its shares plummet 39 per cent to a record low Wednesday after slashing its revenue outlook for the rest of the fiscal year – and for the near future.
Nuvei’s shares, which closed at $24.30 Wednesday, are now down 86 per cent from their pandemic peak, echoing a similar fall from grace by industry peer – and Canada’s own – Lightspeed Commerce Inc LSPD-T.
Founded in Montreal in 2003, Nuvei manages payments across a variety of sectors, including online retail and travel, but its largest block of revenue comes from online gambling and sports betting companies. The company was worth more than $20-billion at the height of the pandemic stock market bubble, but like many technology stocks, Nuvei’s share prices started to tumble in the fall of 2021.
After a deep sell-off, the shares seemed to stabilize in recent months and Nuvei started marketing itself globally as a leading payments player, signing a multiyear sponsorship agreement in February with the Mercedes-AMG PETRONAS Formula One team. Its logo is now front and centre on driver Lewis Hamilton’s helmet.
Two months later, in April, Canadian actor and budding businessman Ryan Reynolds publicly announced that he had invested in the company and formed a creative partnership with Nuvei, though details were scarce.
None of that has benefited Nuvei’s shares in the near term. It hasn’t helped that in late April, short seller Spruce Point Capital Management bet against its stock and publicly criticized the company. Before Wednesday’s earnings report, Nuvei’s shares had fallen 28 per cent since the short-seller report was released.
As for the latest earnings, not only were Nuvei’s quarterly earnings lower than expectations, with adjusted earnings 15 per cent lower than analyst estimates, but the company trimmed its revenue outlook for the second half of the fiscal year and also lowered its medium-term sales guidance to 15 per cent to 20 per cent annually, down from more than 20 per cent annually.
Nuvei attributed the slower growth to longer-than-anticipated lag times in connecting new clients to its technology platform once they’ve signed contracts, as well as a decision to end its relationship with a top 10 client for reasons that were not disclosed.
Asked on a conference call why the client was cut off, chief executive officer Philip Fayer would only say the unnamed company “was no longer a fit for Nuvei.”
Before Wednesday’s slump, Nuvei’s shares had also struggled because of a sector-wide chill after the sale of industry giant WorldPay in July. The company was acquired by Jacksonville, Fla.-based Fidelity National Information Services Inc. at a US$43-billion valuation in 2019, a time when payments companies were garnering extremely frothy valuations.
Fidelity National recently took a US$17.6-billion writedown on the business and also sold 55 per cent of it at a valuation that was less than half what it had originally paid.
The sale price amounted to only 9.8 times expected earnings before interest, taxes, depreciation and amortization in fiscal 2023, and the low multiple has limited the valuations of some rivals.