Slide 1

Nuvei Corp is a provider of payment technology solutions to merchants and partners. The solutions provided are mobile payments, online payments, and In-store payments.

The stock trades under the symbol NVEI at roughly $55.80 Canadian on the TSX and $40.80 US on the Nasdaq up 60% year to date but 70% from pandemic highs.

Slide 2

The company released its Q4 and Fiscal 2022 results on March 7th. Reporting an increase in transaction volume of 34% to $127.7 billion. Revenue increased 16% to 843.3 Million but was unfavourably impacted by the foreign exchange as it reports its earnings in US dollars, which strengthened in 2022 compared to effectively all currencies. On a constant currency basis, revenue increased 22%, so a 6% drag occurred due to foreign exchange.

They are becoming less dependent on cryptocurrencies, with revenue from the segment only making up 8.7% of revenue for Q4 2022 down from 21.8% in Q4 2021. Excluding the impact of Fx and cryptocurrency revenue grew by 26%.

Adjusted EBITDA increased 11% to $351.3 million. Due to higher revenue and removing the core increased expense of share compensation.

On the other hand, Net income fell by 42% to 62 million, share compensation was the core reason for the decrease. On a diluted per-share basis, it fell $45% to $0.39 per share from $0.71.

Slide 3

Additionally, the company reports adjusted net income, which increased 10% per share to $1.86 from $1.69, a significant difference from GAAP EPS. The company removes the impact of acquisition-related expenses, foreign exchange and a couple of other things, but most importantly share based compensation. These types of adjustments generally reflect operations better than GAAP but reflect the earnings attributable to a shareholder worse.

We’ve commented on this a few times before, but Nuvei is a perfect example of where you shouldn’t ignore share compensation. They are actively buying back shares in excess of their share compensation in the last year. So effectively they issue shares to their employees in lieu of cash and instead use that cash to buy back on the open market ultimately impacting the financials in effectively the same manner as a normal salary. Management does claim that share compensation will stay relatively flat at these levels and fall as a percentage of revenue going forward, this is something we will track.

Slide 4

After the 2022 fiscal year-end, Nuvei finished its acquisition of PAYA for $1.3 billion in cash, which has significantly altered its forward earnings and balance sheet. PAYA processed $50 billion in payments in 2022, roughly 39% of the amount Nuvei did just to give you an idea of the size of the integration.

To fund the purchase Nuvei entered into an $800 million credit facility. After the acquisition, the company is now in a net debt position of approximately $1.06 billion. So, the company is in a more financially risky position than it was before. Nuvei forecasts fiscal 2023 adjusted EBITDA of $455 million to $477 million, using the midpoint of $466 million the company has a net debt to adjusted EBITDA ratio of 2.3 times. The debt is floating so if interest rates do rise it will impact the company negatively or positively if they fall.

Additionally, Nuvei renewed its normal course issuer bid which could if used as it did in 2021 put more pressure on its balance sheet.

Slide 5

Using the guidance midpoint EBITDA, we can find the Enterprise to adjusted EBITDA of 14.5 times. This is quite a high valuation metric, the trailing adjusted PE is more reasonable at 22 times, but does not account for the change in leverage. This is why in this case I would rely on the EV/EBITDA over PE in this case.

Concluding, Nuvei’s operations are improving and less risky as it has distanced itself from the volatility of cryptocurrencies while maintaining strong growth, BUT has significantly increased its financial leverage and risk. Combined with the high valuation I would stay away, but that said if Nuvei is able to navigate through the risk in the short term and leverage its acquisition of Paya it could potentially have a bright future, so by no means am I completely writing them off.

The Star of the week is: Caledonia Mining Corp. (CMCL:NYSE)

Gained approximately 19% in the last week and is up about 75% in the past 6 months.

Where it now trades at:

Price: $16.70

Market Cap: $280.2 Million

Dividend Yield: 4%


Caledonia Mining is a gold producer with its primary asset, the Blanket Mine in Zimbabwe, which has an 11-year life of mine.

We originally recommended Caledonia in December of 2021 at $11.12, because of its cash rich balance sheet, it has paid a nice 5% yield, and has a runway of growth following the sinking of its new Central shaft at the Blanket Mine which boosted gold production from:

2022 Actual 2021 Actual
Gold Ounces 80,775 67,476


Plus, Caledonia remains on the path to become a multi-asset gold producer in Zimbabwe:

  • Completing the transaction of the Bilboes Gold project in January 2023, which has a feasibility study (DRA) indicating the potential for an open-pit gold mine producing an average of 168,000 ounces of gold per year over a 10-year life of mine. And Caledonia is now in the process of putting together its own feasibility study before it commences the full mine but has started the preliminary oxide project which entails the stripping of overburden.
  • The Motapa gold project (adjacent to the Bilboes project) in November 2022
  • and recently completed an updated mineral resource estimate at the Maligreen project.

Driving the share price Gains:

(Slide 2)

  1. The business’ strong financial performance – releasing consolidated Fiscal 2023 guidance which represents growth of 14% in gold ounces over Fiscal 2022.
  2. The fact that the business is on the path to become a multi-asset gold producer. Even though this does increase operational risk in the near to midterm.

(Slide 3)

  1. The price of Gold has been on a rally in recent months, driven by fears of the overall economy and banking contagion, with gold up 7.7% in the last month and 18.8% over the past 6 months. Just look at how correlated Caledonia’s stock is in relation to the price of gold.

Caledonia is not a BOYD, or an XPEL which can grow sustainably over the long term. And we tread lightly in these types of stories, as if Caledonia does everything right and the price of gold moves lower, the stock will likely perform poorly. So we expect the stock to remain volatile.

We did recently update Caledonia for clients, giving them our thoughts on the business going forward, we provided a fair value sensitivity table in relation to the price of gold, and indicated that generally speaking, while you’re up in a cyclical business it may not be a bad idea to take some profit.

The Dog of the week is: Quarterhill Inc. (QTRH:TSX)

Down 16% today and over 29% in the last year.

Where its currently trading at:

Price: $1.54

Market Cap: $176.5 million


Quarterhill Inc is focused on the acquisition, management, and growth of companies in the intelligent transportation systems (ITS) and innovation and licensing industries. The company operates in two segments: Licensing, which includes companies that count licensing as their principal business activity; and Intelligent Transportation Systems, which include companies that provide integrated systems and solutions to the ITS industry and its adjacent markets.



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