CAB Payments revenue growth slows amid FX impacts in 2023

CAB Payments revenue growth slows amid FX impacts in 2023

London-based B2B payments provider CAB Payments saw revenues rise 25% to £137.1m in 2023, in line with revised expectations but lower than those made during the company’s highly publicised IPO last year. Policy shifts across some of the company’s major currency corridors affected its income in H2 2023, which led to a further decline in its share price. 

CAB Payments revenues rise 25% YoY in 2023
CAB Payments full-year revenues and adjusted EBTIDA margin, 2020-2023

Adjusted EBITDA was up 17% to £64.6m, giving CAB Payments an adjusted EBITDA margin of 47%, down from 50% in 2022. However, profit before tax was down 14% compared to the prior year, at £37.6m, which the company linked to IPO-related fees as well as some non-performance staff bonuses. 

CAB Payments has continued to build up its client base, with total active clients growing 12% to 509. Overall, it added 83 new clients, of which 42 generated income in 2023, with 41 expected to trade in 2024. This includes remittance companies, international development organisations and financial institutions in emerging and major markets. The company also increased its number of banking partners by 16% to 331, which included 17% growth in payment partners. 

The reported growth comes after a somewhat tumultuous year for CAB Payments. At its IPO in July 2023, the company was valued at £851m, but this was reduced to £152m after executives revised down FY 2023 revenue growth forecasts in October to be “at least” 20% ahead of 2022 (around 17% below previously issued guidance for 2023). This was due to changing market conditions around the Nigerian naira, which impacted the company’s volumes. 

The company’s stock price fell by over 72% in the immediate wake of this announcement, and though it has since been recovering the price is still down significantly from last July; its latest earnings saw CAB Payments’ share price fall by over 9% on the day of announcement. As announced in January, CAB Payment’s CEO Bhairav Trivedi is stepping down this month to be replaced by former Vanquis Banking Group CFO Neeraj Kapur.

FX impacts affect CAB Payments’ revenues

While revenues in H1 2023 rose by 94% to £71.8m, in H2 2023 they declined by 10% to £65.3m. Adjusted EBITDA in H2 2023 also declined by 39% to £24.5m, giving an adjusted EBITDA margin of 37.5% (compared to 55.2% in H2 2022). 

These results show the impact of central bank interventions on CAB’s FX services, which contributed around £30.6m in H2 2023, down from £43.1m in H2 2022. In particular, the company attributed this to Q4 results not being as expected and Nigerian naira income being down year-on-year. 

Executives noted in the company call that CAB Payments saw particular weakness in Q4 as a result of central bank interventions in two currency corridors: the West African franc and the Central African franc. Meanwhile, income from the naira corridor was down in 2023 to £18m (compared to £27.5m in 2022), with £15.2m coming in the first half. 

However, the company did note an increase in net interest income from cash management, which provided £31.7m, up from £10.1m – this reflected the impact of interest rate rises from the Federal Reserve and the Bank of England, which led to gains from the company’s investments.

It also said that, excluding the naira, the growth in transactional Wholesale FX and Payments FX income would have been 28% (including it, this figure grew 7% YoY to £88.4m). 

Key product and segment drivers for CAB Payments in 2023

CAB Payments feels impact of declining FX segment in H2 2023
CAB Payments half-year revenues by product, 2022-2023

In terms of how different products contributed to income in 2023 overall, Banking Services and Other Income saw the highest growth, contributing £34.3m (up 179% compared to £12.3m in 2022). FX service remains the largest contributor, with £68.5m over the year, an 8% increase despite the H2 decline. Meanwhile, the company’s payments segment rose just 1.7% to £34.2m. 

Across specific clients, emerging market financial institutions clients contributed the highest revenue growth in 2023 vs 2022 at 65%, followed by non-bank financial institutions and fintechs (11%), international development organisations (IDO) (8%) and major market banks (6%). However, IDOs had notably contracted in terms of revenues from H2 2022 (£23m) to H2 2023 (£13m), which the company linked again to FX impacts. 

Aside from the company forecasting growth in 2023, there was no specific revenue guidance. CFO Richard Hallett noted that it was still early in the year and the company was focused on building out its business model with new clients, so it was not trying to encourage or adapt any market expectations.

CAB Payments sees flat volumes, rising take rate in 2023
CAB Payments yearly volume and take rate, 2021-2023

However, CAB Payments did publish its annual volumes and take rates for 2023. Volumes were flat compared to last year, driven by the aforementioned central bank interventions. Meanwhile, the company’s take rate rose slightly from 24 bps in 2022 to 26 bps, which the company said reflected “competitive access to liquidity over competitors”. 

Investing to diversify and expand CAB Payments’ salesforce

CAB is continuing to invest in headcount, with a focus on growing its sales force worldwide. Its number of full-time equivalent employees rose to 310, against 234 in 2022, which led to a 27% rise in staff costs to £45.6m. Other operating costs rose from £8.2m to £26.5m. This includes recruitment fees, software licenses and support costs, as well as fees to support expansion plans in Europe and the US. 

On this expansion, Trivedi said that the company was hoping to receive its EU license very soon, “probably within the next month”, and is expecting its US licence to be granted in the second half of the year. These licences could open up significant new sales channels amongst development organisations and remittance providers in the region, the company said. It also mentioned further developing its presence in LatAm and eventually establishing a presence in APAC. 

By extending its client and network reach through adding more nostro accounts, liquidity providers and payment partners, CAB is hoping to diversify its services so that it reduces the impact of a single event significantly impacting financial performance. With the company’s share price still considerably lower than last year and the cost of growth still high, this diversification could be important for getting investors back on side. 

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