Nayax Reports Q1 2026 Results: Full Earnings Call Transcript

Nayax (NASDAQ:NYAX) reported first-quarter financial results on Tuesday. The transcript from the company's first-quarter earnings call has been provided below. This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation. View the webcast at https://viavid.webcasts.com/starthere.jsp?ei=1758629&tp_key=90f1d26fd7 Summary Nayax Ltd reported a strong start to 2026 with a 32% revenue growth to $107 million, driven by 26% organic growth and a 13% adjusted EBITDA margin. The company surpassed 1.5 million installed devices and expanded its customer base to 120,000, reinforcing its recurring revenue model. Key growth areas include higher transaction value verticals like EV charging, with significant hardware demand and geographic expansion in Brazil. Nayax Ltd continues to invest in strategic initiatives such as embedded banking and AI integration, aiming to enhance customer engagement and operational efficiency. The company maintains a solid balance sheet with cash equivalents of $306 million and reaffirms its 2026 financial guidance, expecting $510-$520 million in revenue and a 17% adjusted EBITDA margin. Full Transcript OPERATOR Hello everyone and welcome to Nayax Ltd's first quarter 2026 earnings conference call. All participants at present or in listen only mode following Management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded. I would now like to turn the call over to Mr. Aaron Greenberg. Please go ahead Aaron. Aaron Greenberg Thank you operator and everyone for joining us today on this conference call. With me on the call today are Yair Nikhmad, Nayax Ltd's co founder and Chief Executive Officer and Sagit Manor, Chief Financial Officer. Following Management's prepared remarks, we will open the call for the question and answer session. Our press release and supplementary investor presentation are available on our investor relations website@ir.niecs.com As a reminder, during this call we will be making forward looking statements. All forward looking statements on our call today are based on assumptions and therefore subject to risks and uncertainties that may cause results to differ materially from those projected. We have no obligation to update these statements except as required by law. You can read about these risks and uncertainties in our supplementary investor presentation released earlier today in our regulatory filings. In addition, today's call will include a discussion of non IFRS measures. Management believes non IFRS results are useful in order to enhance our understanding of our ongoing performance. However, these measures should be considered as a supplement to and not as a substitute for IFRS financial measures. A reconciliation between Nayax Ltd's non IFRS to IFRS measures can be found in our earnings press release issued earlier today. All key performance indicators are intended to evaluate our business and properly measure factors in a macroeconomic environment to guide and support our decision making. These key performance indicators may be calculated in a manner different from the industry standards. And finally, please note that all figures in today's call will be reported in US Dollars unless stated otherwise. Yair will start the call with key financial and operational highlights. Following that, SAGIT will go through the details of financial results and discuss the outlook. And with that, I would like to turn over the call to Nayaxa's CEO Yair Nakhmad. Yair Nikhmad (Co-founder and Chief Executive Officer) Yair thank you Aaron. And thank you everyone for joining us today to discuss our results for the first quarter and the progress we are making across the business. We had an Excellent start to 2026 with strong operational and financial results. Across the business, revenue grew 32% to $107 million with organic revenue growth of 26%. Adjusted EBITDA margin expanded to 13%. The quarter results reflect the continued confidence and execution of our strategy and we are reaffirming our financial guidance for the year. This quarter our installed base surpassed 1 1/2 million devices, an important milestone that drives our recurring revenue model. Our customer base reached 120,000 which is truly exciting and reflecting continuing opportunities in the market. The more customers we onboard, the more devices they buy, the more transactions flow through our platform and the more our recurring revenue compounds. It is clear that our growth algorithm is working to this end. Let me highlight a couple of KPIs first, total transaction value grew 33% with average transaction value continue to expand as we shift further into higher value vertical such as EV charging, amusement and car wash. Second, our ARPU is growing reflecting both the trend in cash to cashless conversion with our existing customers base and our deeper presence in this high value segment. Hardware sales were strong this quarter with growth of 46% driven by strong demand for our product across all markets in the unattended space. The rollout of our pin on glass VIPOs media devices drove significant hardware demand in Europe and is unlocking higher ATP verticals where local regulation requires PIM verification for transactions. In the EV charging vertical, we made our first joint appearance as the combined Axe and Linkwell brand at the EVCS conference which is the largest conference in the EV space and received strong customer receptions. Our pipeline of mid sized network moving on to Linkwell's white label platform continue to grow with respect to geographic expansion in Brazil, we continue to invest and are making significant strides in in the region. Following the successful integration of VM Technologia and Uppay, we have fully rebranded its operation to the Nayax brand which is now operating as Nayax Brazil. In addition, we have started onboarding newer customers as payment facilitator in the country and we will soon be bringing the VIPOs media to the Brazilian market which will allow us to address the market with a unified Pin on Glass product. We are also making great progress with our platform expansion initiatives. As stated last quarter, our Yellow account, our embedded banking offering for the US Market in partnership with Adyen is in pilot phase and advancing well. We believe embedded banking can become an important additional monetization layer across our platform, leveraging our existing customer relationship and transactions data. This is a long term strategic initiative that can strengthen customer engagement and increase revenue per customer. Over time we expect to have more to share in Q2 about our embedded banking initiatives. Not surprisingly, AI is becoming an increasingly more meaningful driver across our business as we are embedding AI across our platform as well as throughout the entire organization. For example, R&D is advancing faster with AI assisted development. On the product side, we are launching in Q2 a new AI layer in MoMa, our mobile management app. This will give operators a conversational assistance for business insight, AI driven chef strategy suggestion and rapid merchandising plan setup using visual recognition. These initiatives and many more reinforce both our OPEX discipline and our long term margin expansion strategy on M and A. Our pipeline is active and growing and we are engaging on several opportunities in what is becoming a biomarket. We are disciplined about finding the right opportunity for NIACs, those that fit our strategy, our culture and our long term growth profile. Our strong balance sheet position us to act decisively when we find them. In summary, our growing installed base of connected device, the strength of our recurring revenue model and the disciplined execution of our team continue to position us well for sustained, profitable growth. With one and a half million devices on the platform and with the flywheel accelerating, we are well positioned to capture the opportunities ahead. I want to thank our employees for their continued dedication and our customers, partners and shareholders for your trust. With that, I'll turn it over to our CFO Sagit Mano who will review our financial results in greater detail and walk through the outlook. Sagit Manor (Chief Financial Officer) Sagit thank you Yair and good morning. Good evening everyone. We appreciate having our shareholders, analysts and the entire Nayax team with us today as we review our financial performance. We are very pleased with our results for the first quarter as we continue to scale our platform, expand our installed base and drive transaction activity. All of which reinforces the more predictable and profitable recurring revenue contribution to our business. As Yair stated, revenue grew 32% to approximately $107 million, including 26% organic revenue growth over the prior year's quarter. Recurring revenue grew 27% and represented approximately 74% of total revenue. We ended the quarter with an installed base of more than 1.5 million managed and connected devices while serving 120,000 customers globally. As a result, total dollar transaction value grew an impressive 33% to approximately $1.8 billion. Consistent with more recent quarters, we continue to see a favorable mix shift towards higher value verticals. Average transaction value or ATV increased to $2.36 from $2.06 while take rate remained strong at 2.66%. Combined, these indicators show that growth is coming from deeper engagement and higher value usage across the platform, which is a leading contributor to our success. We also saw a continued increase in the revenue generated from each connected device. Average revenue per unit or ARPU increased to $247, up 14% year over year, which again demonstrates improved unit economics and deeper engagement of customers with our platform. This increase continues to be driven by two main factors. First, the ongoing conversion of existing machines from cash to cashless transactions and second, our strategic expansion into higher value verticals such as EV charging, amusement and car wash. Turning now to hardware revenue, we saw a significant increase of 46% over the prior year quarter to approximately $28 million driven by strong demand for products across all markets. Importantly, we continued taking market share, adding over 5,500 new customers and 41,000 managed and connected devices, proving that our gross algorithm is working. Moving now to profitability and margin for the quarter, gross margin was impressive and in line with the prior year's quarter at 49% driven by higher processing and SaaS margin, slightly offset by lower order margin in the quarter primarily because of product mix. More specifically, our recurring margin increased to 54% from 52% in the prior year's quarter, driven by additional improvement in processing margin that reached nearly 40% from 36% in the prior year quarter. Reflecting the ongoing benefits of renegotiated contracts with several bank acquirers and the company's improved smart routing capabilities. SaaS margin improved as well to 76.5% from 75.9%. Both processing and SaaS margins reflect the company's growing scale and increasing transaction volumes. Household margin was 33.1% compared to 39.5% in Q1 2025 due to marketing promotions for our newly released Pin on Glass VPOS media media devices in Europe. Adjusted opex of $39 million was 36% of revenue, an improvement over the prior year period and included a full quarter of Link 1 expenses. Adjusted OpEx had an unfavorable impact of $1.2 million in the quarter compared sequentially to Q4 2025 due to foreign currency volatility. Adjusted EBITDA increased 43% to $14 million representing 13% of revenue compared to 12% in Q1 2025 and again demonstrating the operating leverage of the business. Operating profit was $4 million compared to $1.8 million in prior year period, excluding a one time gain of approximately $6.1 million related to Nayax Ltd's share repurchase of T Gapo in Q1 2025. Financial expenses net for the quarter increased by $2.9 million as a result of interest expenses related to the two bond offerings completed in 2025 at the Tel Aviv Stock Exchange, which raised a total of nearly 1 billion shekels. Net income for the quarter was $1.3 million compared to net income of $1.1 million in the prior year period, excluding the one time gain associated with Tigapo. Turning now to our balance sheet. On March 31, 2026, cash and cash equivalents and short term deposit totaled $306 million, while short and long term debt were $325 million. Maintaining a solid balance sheet, looking at cash flow, we generated $3.6 million from operating activities. Free cash flow for the quarter was negative at $6 million, mainly due to increased infrastructure investment and the timing of cash settlement from processing activities. Turning now to our outlook and referring to our forward looking information disclosure in our press release. As Yair mentioned, we are reaffirming our financial outlook for 2026. Our revenue guidance for the year remains 510 to 520 million dollars. Inclusive of organic revenue growth of 22 to 25%. We expect an adjusted EBITDA margin of approximately 17% which represents a RA of 85 to 90 million dollars. Turning to free cash flow, we continue to expect free cash flow conversion from adjusted ebitda of approximately 40% for the year. In closing, we are well positioned for future growth in 2026 and beyond as we continue to grow our installed base globally and capture market share. We'll also continue to focus on scaling our recurring revenue streams, in particular our payment processing capabilities which benefit from the conversion trend of cash to cash transactions. I want to thank all of our NIECS colleagues for their hard work. And with that, I will now turn the call over to the operator for our Q and A session. Operator. OPERATOR Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question today, please press Star one from your telephone keypad and and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Thank you. And our first question is from the line of Raina Kumar with Oppenheimer. Please proceed with your questions. Raina Kumar (Equity Analyst) Good morning. Can you discuss your EV strategy and like the EV contribution in the quarter just given the rise in fuel prices? Thank you. OPERATOR Your lines are open for questions. Please stand by for one moment. Your line is open for questions. Please stand by. We're experiencing technical difficulties. Please remain on the line. We will resume momentarily. Okay, I see that everyone has a technicality, so I'll take it. Is it working? It sounds like we could hear you now. Please try again and see if I can hear you now. Can you hear me? Yes, I can hear you, Aaron. Yes. Aaron Greenberg Okay. Sorry for the technical difficulties. I can take the question. Reyna, thank you for the question. This is Aaron. So with regards to the EV strategy, obviously we bought LinkWell at the end of last year after eight years of investing in the EV industry, you know, and that was us doubling down on our strategy of really trying to penetrate this industry and both on the software and the payment side. And as we see, you know, over the last few months, the gas prices rising, we see this as a potential secular tailwind for the EV penetration, particularly in the US because you know, as it's not going to necessarily impact the number of EV drivers today. It should impact, as long as this continues, the number of EV drivers in the future, people buying or switching from ICE vehicles over to ev, which should increase the utilization of EV chargers in the us. As we look at this, our EV strategy right now is to be connected to as many public DC fast chargers as possible, which is where these new EV drivers are going to be charging their car. And with the purchase of LinkWell we have a better opportunity to go after a lot of these mid sized networks with a full end to end solution, expanding our payment business. And we believe the strategy is already working. We signed the partnership with Charge Smart before the LinkWell acquisition, we signed the partnership with ePlug after the LinkWell acquisition and we expect to sign more networks on over the coming quarters. Raina Kumar (Equity Analyst) Extremely helpful Erin. And then just one more follow up. Can you talk a little bit about what you're seeing in terms of hardware costs and how we should think of hardware gross margin potential for the remainder of the year. Thank you. Hi Reyna. So hardware is supposed to stay as we've guided, which again I remind that we've just reaffirmed the guidance of 5, 10 to 5 $20 million of revenue and adjusted EBITDA of 85 to 90. Q1 specifically had lower household margins as a result of promotion that we have done in Europe with the bringing into the market the VIPass media, our new pin on glass products that are very relevant to our Europe as well as Latin America and Australia's regions. However, I'm expecting that to stay around that level the remaining of the year a little bit higher with beautiful margins. Gross margin overall of around 49% as we've shown in Q1. Appreciate all the color. Thank you. OPERATOR Thank you. Our next question is from the line of Josh Nichols with B. Riley Securities. Please Proceed with your question. Josh Nichols (Equity Analyst) Yeah, thanks for taking my question. I mean great to see the processing margins. They're nearly 40% record for the company. Can you just give us a little bit more detail, walk us through like what's driving that expansion and how should we think about, you know, what the ceiling is for processing margins because they continue to go higher over the last few years by pretty significant amount. Sagit Manor (Chief Financial Officer) Hi Josh, thank you. So yes, we are very proud of the processing margins that continue to improve to nearly 40% compared to 36% last quarter or even around 38.5% in Q4. There's two main reasons for processing margins to improve as we've continued to explain that last year is couple of things that we have done. One is the renegotiation with every major acquirer that we work with in order to improve the fees and therefore our margins as well as the smart routing capabilities that we've implemented. So we know how to where to send any transaction that comes in to the acquirers that make sense from us. But still the customer gets its Coke or the service on the massage chair in a nanosecond. Specifically this quarter, it's a matter of geographically mixed. You can also see that the take rate went down however from 275 last quarter to previous quarters to 266. It's a geographical mix. What do I mean by that? The higher the transactions are in Europe, the take rate is a little bit lower than the U.S. but the margins are higher. So we're continuing to push everything we can in order to improve margins in all aspects, both in processing as well as in the improved margin that we saw this quarter in the SaaS area and Q1 margins. I just spoke about that as well. Josh Nichols (Equity Analyst) Thanks. And then just one follow up for me. Nice to see the ARPU growth accelerated from 11% year over year last quarter to 14%. We've talked about mix before. How much of that is being driven by like EV and amusement? And is there still room to continue to scale that up pretty significantly as those verticals become bigger over time? Sagit Manor (Chief Financial Officer) Yeah, so thank you for asking about that because this is the first quarter that we actually showing ARPU on a quarterly basis. Again, it's a 12 month trade, but you know, we saw that after showing it for 24 and 25 and have enough kind of historical quarters to continue to show that now on a quarterly basis. There's two main reasons for the output to go down or up. One is about our existing machines and how much you can see there the shift from cash to cashless. So this is one impact. And the second thing is obviously the entrance into higher transactional verticals, like ev. Exactly as you said, like car wash and amusement. So as long as we continue, and that's the plan to invest in higher transactional verticals, ARPU should continue to improve. Aaron Greenberg Hi Josh, I just want to add, this is Aaron, that on the arpu, as you've seen over the last several quarters, the processing growth, as SAGIT mentioned, has been the main driver of the ARPU growth and we expect this to continue to grow as it has. I want to flag though that this has been, as I said, predominantly from the processing side, the SaaS side. We've kept relatively the same across the business as we look forward over the coming years. This is where I think that the embedded banking and some of these other services that we're bringing to the table really have the opportunity as a catalyst to grow the ARPU even further, which we'll talk about here over the coming quarters. But adding additional services like lending, issuing and E commerce to our existing customers should continue to accelerate the ARPU growth. Josh Nichols (Equity Analyst) Appreciate it. Thank you. OPERATOR The next questions are from the line of Chris Kennedy with William Blair. Please proceed with your questions. Chris Kennedy (Equity Analyst) Great. Thanks for taking the questions. Just wanted to follow up on the pilot of Yellow. I know it's very early and we'll get additional information, but any initial learnings or kind of use cases that you're that are resonating with your customers? Aaron Greenberg Yes. Hi Chris, this is Aaron again. Yeah, so we've started the pilots on the Yellow account. We launched the marketing of it at the National Automatic Merchandising Association conference back last month. And so far things are going well. You know, we're learning a lot along the way with it, but I would say that general perception that we, you know, that we see is that customers want to have this product. And I think there's a few reasons and many reasons, but I think the most important thing is ease of getting the payout at the end of the day. So one of the things that we're marketing is getting a faster payout into their account. They get to see it right away as opposed to having to wait that extra, potentially couple of days in order to go and get it transferred from our account into an external account. So this is huge for businesses that live day to day on cash flow, which a lot of these nano merchants do. The other part though, that is really important for us is this is the foundation for being able to add the other services over time. So the first step is to get people onto the yellow account. The second step here is once they have the application and they're using on a daily basis, the fund flows are happening. So they get the pay ins and payouts from this account and all the processing coming through us, then we can start layering in the other services and provide curated offers to them which really personalizes what the customer needs are, which we don't believe can be served by external parties as easily because an external bank that is going and working with these customers, they don't get the daily payment flows that are happening with these customers. We're seeing by the minute how their flows are happening, which allows us to either accelerate or decelerate the offers to these individual customers, which is a win win for both of us. Chris Kennedy (Equity Analyst) Great, very clear. Thank you for that. And then just a quick update on Brazil. It sounds like you had a lot of momentum there. Can you just remind us of what the opportunity is in that market? Thanks for taking the questions. Aaron Greenberg Yeah, this is Aaron again. Brazil has been amazing for us so far over the last couple of years since we bought VM Technologia and then last year buying Uppay. This is a couple hundred million person country larger than most of the rest of Latin America combined and we see a huge opportunity there especially for the unattended industry. And we're expanding into many different verticals there right now as we speak. We've aligned the branding now with, with Nayax and we've moved and are continuing to move the infrastructure over to unified Nayax infrastructure. We'll be bringing the VPOS media there over the coming months as well. The pin on glass device. And we see a huge opportunity from a penetration side of, you know, some of these industries that histor we didn't really have a cash list unattended and unattended is relatively newer there in the last 10, 15 years. So there weren't really incumbents prior to VM Technologia entering and now obviously us inheriting VM Technologia. I think that there's still a lot of opportunity to penetrate there and we're seeing a lot of it's mostly a rental business there with regards to the devices which is amazing for us because this is a gross margin that is more comparable to our SaaS gross margin today and generally you're seeing five, seven plus years of life on the devices. So a lot to come there in Brazil and we intend to continue to invest there and in the rest of Latin America. We talked about the, the Integral Vending acquisition and really making our penetration on both sides of Latin America and then moving to the rest of the countries. Sagit Manor (Chief Financial Officer) And also to add Chris, is that this is a great example of an acquisition that we have done in the past that now translates into strong organic growth that we also showed in Q1.32% growth on the revenue, 26% organic revenue growth. So that's again another example of translation into our day to day and create the growth machine. Chris Kennedy (Equity Analyst) Understood, thank you. OPERATOR The next questions are from the line of Hans Leitner with Jefferies. Please proceed with your questions. Hans Leitner (Equity Analyst) Yes, thanks for letting me on. I got those a couple of questions. The first one would be if you could talk about the FX impact for Q1. I think there was quite some movement in the US dollar and the Israeli Shekel and then maybe just like, you know, based on your definition, organic growth track trends ahead of your annual guidance. So maybe you can just talk a little bit about how you see the rest of the year shaping up. And then just in the backdrop of the hardware contribution, which was quite healthy, U4 has a quite tough comp in hardware sales. So maybe you can just give there a little bit of context. Thank you. Sagit Manor (Chief Financial Officer) Thanks Anis. So with regard to fx, actually, you know, I'll give ourselves a compliment that we're doing a great job of monitoring all of the currencies that we work with. Not just the Israeli shekers, but the Euro and the pounds. And as you know, we're selling our product in more than 120 countries. So FX is part of our day to day. We're doing a great job on hedging, whether it's a natural hedging or actually working with the banks to do that. Specifically this quarter we had a 1.2 negative effect on the opex. But as we said, we are reaffirming our guidance which takes into account a lot of things, including some of the unknown of the effects. So I don't foresee there is an effect, but I don't foresee a significant effect when it comes to currency volatility. Again with the current information that we have right now on the organic growth. You're absolutely right. A beautiful organic growth in the quarter. And we did guide last year on 22 to 25% overall that will come from a lot of other things that are happening in the next quarter. So we're not changing the guidance, but we are different from last year, but we have a very hockey stick towards the second half of 2025, especially in Q4 this year I'm expecting a better split between the quarters that will Impact both the growth as we talked about as well as the organic from the hardware contribution. To your question. Yes, very proud of 46% hardware revenue growth. As I said, this is exactly what I just said about kind of better split between the quarters rather than and hockey stick in in the next in the Q4 numbers. Having said that, H1 is always around 45% of our revenue. H2 is around 55. So our quarterly, you know, we have a very common cycle because of the predictability of the business. The high revenue recurring revenue that we have that this quarter was 74%. So with that we kind of know what's the rhythm of the quarters and the ability to predict gets easier as we go along. OPERATOR Our next question is from the line of Sanjay Sakarani with kbw. Please receive with your question. Yvonne Jay Hi, this is Yvonne Jay on for Sanjay, thanks for taking my question. With regards to the question earlier on hardware gross margins, are you seeing any impact to hardware costs from the conflicts in the Middle east and how are you managing inventory levels as a result? Thank you. Hi Vaughan, thank you for the question. We actually don't see a margin impact as a result of the conflict. You know, we have a very strong operational team that's working on from a component cost standpoint to improvement in the supply chain infrastructure and processes. So I don't see any impact necessarily on that. Inventory level are really good. And as we've intended to have basically flat from last quarter to this quarter, despite the 46% increase on the revenue for the hardware as we continue the year, we're expecting that to see around those level of gross margin a little bit, maybe a little bit higher on the hardware. Okay, thank you, that's really helpful. And just a follow up on M and A. Can you provide any color on how the pipeline is shaping up and whether we should expect any activity in the near term? Thank you. Sagit Manor (Chief Financial Officer) Yes, this is Aaron. The pipeline has been great and we're seeing, you know, this is really in the last, especially the last 6 to 12 months I've been mentioning this last few quarters. But Aaron Greenberg there's really a pickup of this becoming a buyer's market with AI disruption happening. It's freaked out the markets in a lot of different ways. And private companies especially have been having trouble getting liquidity for multiple years now basically since 2022. And a lot of these companies need growth capital to continue even if they're very profitable businesses. And they're in a conundrum of what do they want to do going forward. And you know, we're having many bilateral conversations now with companies and companies that have started, you know, sell side processes, you know, with that in mind of, you know, they need to sell the company or want to sell the company and we can get much more favorable terms than what a competitive process might have been, you know, three or four years ago. You know, as I said, you know, previously, you know, we're generally targeting founder led or founder owned businesses and there are many opportunities that are on the table. We're actively in processes with several companies and I still expect that we will complete the roughly few acquisitions that we have been projecting on our long term cycle on a year to year basis. So more to come there over the coming months. But there definitely will be contribution from inorganic growth this year. And as we go towards the 2028 target of getting a billion dollars of revenue, I remind that we still expect to see a couple hundred million of inorganic contribution to that and this year will be a part of that. Yvonne Jay Okay, thank you for the color. OPERATOR Thank you. The next question is from the line of Chris Chang with ubs. Please receive your questions. Chris Chang Hi, thanks for taking our question. So I wanted to ask about the potential for a rental or installment based model. And then you were asked about Brazil. So I guess it was a pretty good intro to that topic. Just wanted to get your thoughts or updates on the potential introduction of rental or lease based model elsewhere outside of the Brazil market. And what do you think the opportunities and some of the unlocks are there? That's my first question and I have a quick follow up. Thank you. Sagit Manor (Chief Financial Officer) Hey Chris, thanks for the question. So maybe I'll start with a little bit, you know, on the margin side and then Erin can take kind of the strategic view of rental in general. So yes, margins are amazingly better when it comes to, to the rental business one, because you kind of bundle the hardware, the processing and the services to one, you know, 20, 20 bucks a month, 25 bucks a month. And if you analyze it over time, usually, you know, those customers stays as a, you know, as a regular customer, stay for the 5, for the 10, for the 15 years and continue to pay that. Which brings the margins overall to around 80% from everything, right? While now we have hardware margins 40% and recurring revenue of 54% overall. It's an amazing margin. Having said that, one, it takes time to transition, right, from hardware sale to kind of a rental model standpoint. And it's sometimes relevant to some geographies, geographies versus others. It's also more relevant in my opinion to the small businesses need to small and not necessarily to the large customer that like to buy the hardware and manage it in a way themselves. So there's a few specific rental to the rental market but we are very excited about it. I also say, you know, it's not just the transition, it's also the infrastructure investment. Right. It's basically a fixed asset that you need to make. So you, you know, the cost is on us today. The revenue will come over time but we all understand that now obviously with the balance sheet, with the strong balance sheet we have, we can afford that to make the transitions as I said over time. Aaron Greenberg So I'll add on the just on the strategy side, you know, as we look at the rental business I see it as two different sets of end customers actually. So the best way to think about it is, you know, the customers that we're purchasing are probably still going to purchase the hardware up front. I think that it opens up a new segment, a new serviceable market for people that want unattended devices and people that might want to swap out from existing devices but don't necessarily have the capex to go and make the flip out so easily. So it accelerates their transition over to our products. So if anything we're seeing that this increases the SAM over time and for some markets like in Brazil, we see it being the dominant market opportunity to do rental overselling. So yeah, more to come there. But you know, we're definitely seeing a pickup in rental and we expect that over the coming years that rental will continue to be a larger portion of the overall sales. All right, thank you so much again Aaron. And my follow up is just look at the free cash flow conversion and trying to think where that should be or where you see that to be in 2027 and beyond from the 40% level this year. Sagit Manor (Chief Financial Officer) Thank you. So first maybe to talk about that operating cash flow improved year over year and it's kind of the normal first quarter cycle that we have that the free cash flow was negative million. We made a lot of infrastructure investments and it's always the processing, settlement, timing that you know that impact the Q1 free cash flow. As I said, we're still expecting that. You know, with the unit economics improved and with our ability to increase significantly the adjusted EBITDA this year right from the to around 17% that's our guidance that it will translate into cash and into cash flow and obviously to a free cash flow. We haven't provided guidance for 2027 and beyond about cash flow and free cash flow. But I would love to think about it if it's something that we would like to provide for the market in the future. Chris Chang All right, Thanks a lot and appreciate it and look forward to catching up on the call back in the next quarter. OPERATOR Thank you. At this time, I'd like to turn the floor back over to Yair for closing comments. Yair Nikhmad (Co-founder and Chief Executive Officer) Thank you for joining us today and for your interest in Nayax Ltd. Q1 was a strong start to 2026. We grew our customers base at an accelerating pace and continue to compound profitability across the business. I want to thank our employees for their hard work and dedication and our customers, partners and shareholders for your continuing trust. Thank you very much. Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.