Fintech company Nayax (TASE: NYAX) is expected to become listed on Nasdaq within the next few weeks, about eighteen months after its IPO on the Tel Aviv Stock Exchange in the second largest flotation on the local stock market, involving an overseas underwriter and international investors. As far as the company was concerned, the Tel Aviv Stock Exchange was a springboard for a flotation on Wall Street, but that move has apparently been somewhat delayed because of the situation on international stock markets. Nevertheless, Nayax has not given up on a Wall Street listing, and is now making progress towards one.
Nayax was founded in 2005 by brothers Yair Nechmad (CEO) and Amir Nechmad, together with David Ben-Avi. The company provides cashless payment solutions for operators of vending machines and other automated points of sale.
The underwriter for Nayax’s IPO in May 2021 was US investment bank Jefferies, together with Oppenheimer and Leader Capital Markets. The share price in the offering was NIS 10.5, reflecting a company valuation of NIS 3.3 billion. By last May, the share price had sunk to NIS 4.8, giving a market cap of NIS 1.6 billion, but it has partially recovered to a current price of NIS 8.89, giving a market cap of NIS 2.9 billion, 15% below the IPO valuation .
Since it was reported that Nayax had confidentially filed a draft registration statement seven months ago, the Nasdaq index has fallen 18%, and the KBW Nasdaq Financial Technology Index, which monitors fintech companies, has fallen 20%.
Yair Nechmad, co-founder and CEO of Nayax, is this a good time for a fintech company to go to Nasdaq?
“It’s true that the market dictates the right time to make an offering, because of the company valuation, but in the current situation we’re not raising money but only listing for trading. As far as we are concerned, the main criterion is what we always tell our investors: we give a great deal of information about the company, including customer parameters, deals in our system, numbers of repeat customers – indicators of the trend at the company.
“On this basis, we think that there’s no reason that we shouldn’t win investors’ confidence, and we’ll be able to continue our development on a larger market. Many Americans cannot, for technical reasons, invest in Nayax in Israel, because of things to do with their internal authorizations. We want to be on a market that is relevant to investors like these.”
In your view, will you be able to obtain a higher valuation in the US, more generous multiples?
“I can’t define how investors see valuations at the level of revenue multiples or forward earnings multiples. We have no control over that. I can control what we do, and I feel comfortable with Nayax’s performance.”
In retrospect, was the Tel Aviv Stock Exchange IPO the right thing for the company?
“Yes. It was a very nice offering, a listing with international investors, and it suited Nayax’s strategy.”
In the first half of this year, Nayax recorded revenue of $75.3 million, 40% more than in the corresponding period of 2021. The company is not yet profitable, and for the first half year it posted a loss of $20.1 million, which compares with $8 million in the corresponding period last year.
At the end of June this year, Nayax had 595,000 sales points, 15% more than at the beginning of the year, and its customer base had grown by 26.7% to 30,000.
Transactions via Nayax systems in the first half year amounted to $1.07 billion, which compares with $590 million in the first half of 2021. Nechmad estimates that in 2023 there will be an improvement in the supply chain, and that the company’s gross margin on hardware will consequently rise. At the end of the first half, Nayax had $49 million in cash, after completing the acquisition of OTI (On Track Innovations), an Israeli competitor that was in financial difficulties, for $4.5 million.
Looking for complementary technologies
“Globes” has learned that Nayax is currently in the process of buying another company in Israel, at a price that is apparently not material to it. Nayax is buying Roseman Engineering, a privately-held company that deals in fuel station management systems, automated fueling systems, vehicle fleet systems, and systems for managing electric vehicle charging. The company was founded in 1978 by Bruria and Yechiel Roseman, and employs 55 people at Kiryat Atidim. Among its customers are fuel companies Dor Alon and Paz, and bus companies Egged and Dan.
“We’re looking for acquisitions all the time,” says Nechmad, “technologies and companies that complement our activity. OTI brought us access to OEM customers and to the fuel sector, and in that sector Roseman increases our capabilities in the US and Israeli markets.” According to him, a trend of replacement of payment terminals at fuel stations is on the way, requiring large investment, against a background of regulatory changes.
Where will Nayax be in another year or two?
“In the medium term, we estimate a sales turnover of $200 million. In the long term, 6-7 years, we’re talking about $1 billion with a gross margin of 50% and EBITDA of 30%. As far as profitability is concerned, we estimate that we’ll break even in 2023, and that by 2024 we’ll be posting profits.”
Published by Globes, Israel business news – en.globes.co.il – on September 8, 2022.
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