Hi, everyone. Welcome to the call today. With me is Yair Nechmad and Sagit Manor, the CEO and CFO of Nayax. We are really excited today to talk about the proposed acquisition of IPS Group, which is part of a strategy that we've been working on for a while now. I've been talking about this, as well as Yair and Sagit, on how we want to transition and move more into, and accelerate more into the mobility space as one of the divisions. The purpose of this call is to give some key highlights in terms of the proposed acquisition, why we're doing this, what the strategy looks like going forward for Nayax, and what it means for us from a financial point of view. With that, I'm going to start with Sagit, and let's begin.
Just one second. Okay. Can you see my screen?
Yes.
Okay. Good morning, good afternoon, everyone. We are excited to share about the acquisition or the definitive agreement that we've entered into with IPS. I'll share a little bit about the transaction summary. IPS is a known company in the parking space, in the mobility parking space, we should say. The technology goes, and their customers are municipalities, private operators, and universities. They founded in 2000. They're in San Diego, where Yair and I are currently here as well. They have more than 550 customers. They have more than 250,000 parking space. Most of their operation is in the U.S., around 80%. However, they were able to expand into the U.K., Ireland, and Canada. A little bit about their financials. The expected revenue for 2026 is over $90 million.
They have a very strong recurring revenue mix, over 60%, representing 20% organic revenue growth, which is really nice, and we like that, compared to obviously 2025. They have an adjusted EBITDA or expected adjusted EBITDA of $21 million. They have a very strong free cash flow generation and around 80% conversion rate. A little bit about the transaction. The price will be $350 million on a cash-free, debt-free basis. It represents a 17x multiplier on 2026 adjusted EBITDA. However, if we take into account the really high and nice synergies that we've come into, when we did the analysis and we came into the realization, we believe that there's a 12x multiplier, and I'll talk about the synergies later. Transaction will be mostly funded by cash on hand. However, there's $150 million new committed debt that we're going to take for it.
The leverage is expected to be, at the time of the acquisition, around 3.8x. However, we're expecting to improve it significantly by the end of 2027. IPS management is planned to continue to manage the company and the business together with us, obviously after the closing, and we expect that the closing will be around Q4.
Yair?
Hi. Can you hear me?
Yes.
As Sagit said, we're very excited about these acquisitions, and still it is signing but not closing, but we believe that everything will be on track. The thing that Aaron and we thought, which is reasonable to take this acquisition, is mostly because we're seeing a great TAM of $85 billion in terms of potential. In strategy, to my opinion, there are always two layers. One is, I'm calling this, the right to play, and the other is the right to win. I think Nayax as a platform has what you call a lot of access to right to play, but to become what you call right to win, you have to really hold something very strong and to scale with this.
I think this deal or this transaction help us a lot to build ourself into a position that will be one of the leaders in the parking industry, starting from the U.S. and then moving onwards to the rest of the world. I think as we see ourself as a payment company and we see ourself as a payment platform, plugging in a company like this makes a lot of sense to our belief regarding the ability of us exercising payment within this customer base. Taking from the other side of the equation, taking the customer motivation, we see a lot of customer motivation to have a one-stop solution, putting a lot of services into one position. I think this is a very strong position for Nayax to have the right to play with the right to win and take a front seat in this market.
It is, to my opinion, not a very high complicated in synergies because it is payment synergies, and payment synergies are the core of our business. We actually were lucky that IPS was not really flying on what you call total ownership of payment. So adding up a payment from Nayax side and adding up the IPS customer base make a lot of sense that this one plus one will be much more than three and four. This is, I think, the summaries of what I believe make a lot of sense to this acquisition.
Maybe just one thing to add here is that, first of all, this is aligned with our progress towards the $2 billion revenue company we are inspired to build with 50% margin and 30% adjusted EBITDA. Their financials and their strong financials are creative to our gross margin, to our adjusted EBITDA margin, to the adjusted EPS, and to the free cash flow conversion. So very strong financial profile and creative to ours.
I think this is, again, a summary of what we see it is and how we see the market. It is always important for us to see that we are having what you call a strong position and a long-term view on the TAM, and that we are coming to play in one of the leaders in the market. You can see over here that we are now growing to a TAM of $342 billion, which is amazing to my opinion. The ability of us to accelerate the growth of the company with the 20% organic growth that they have and the 25% organic growth that we have, and the extra mile that we are looking to unorganic growth, it fits to our strategy and to make this business very strong and successful from our perspective. I want to add one more thing that important to emphasize.
In the payment, we all see what is going on regarding the cash conversion to cashless and the cashless and mobile. We believe that the combination of what we have in terms of cashless card present and cashless card-not-present on top of their customers will be very prominent in their business.
I always like to say that this just talks about this market or the market opportunity or the addressable market. It is only about the payment. It does not take into account the services side of the business, and it does not take into account the hardware.
Yeah, absolutely. I just wanted to add on the TPV expansion. This has been part of our strategy of expanding more into omnichannel solutions. So historically, we have been a card present business, card present cashless. As we continue to expand and now be able to provide a full management suite with card present, card-not-present, mobile application, enforcement, et cetera, this is what is helping us also significantly expand the TAM. So from the card present side, just card present paying at the meter is somewhere around $15 billion of additional TAM. You start adding all the other services that we get as a result of the IPS acquisition, that is how you get to the $85 billion of TPV expansion.
Which as we will start to expand into other verticals over the coming years and continue to bring more omnichannel into EV, into arcade gaming, into some of the other verticals that we have talked about and will continue to talk about, the TPV TAM will continue to expand from what we have been historically projecting as a card present business. If you could go to the next slide, please. Thank you. So just at a glance in terms of what IPS is, it is one of the leaders of parking, specifically in North America, the United States. As Sagit mentioned, about 80% of the revenues in IPS is coming from the United States . They have been around for about 25 years now. The focus of IPS has been to build a full management suite for the city around the parking meter and kiosk for the spaces.
So having a physical platform for the consumer to be able to come up to, which is very traditional to Nayax. We have been doing this now for 20 years across all of our verticals. Then being able to expand on the software management, so being able to help the city operate better in a cheaper way, be able to be more efficient, and then be able to provide additional value-added services. Then on the payment side, being able to have an integrated payment solution. Now, why is this interesting for Nayax? It is very traditional to how we have been doing M&A, especially in the last few years. We are finding leaders in each of these unattended verticals. We find a management platform with some sort of connection generally to hardware as well.
We are bringing our payment platform, which we have now been building for more than 20 years, which is our expertise, and being able to help the customer better operate their business, be able to give them the optionality and the ability to have higher reliability, higher uptime. Because a fully integrated payment solution generally results in a higher reliability for the end customer. They have one person that they have to call if something goes wrong as opposed to having to make multiple phone calls. I think what is really important here to understand is that currently today in the parking industry, particularly in the U.S., most of the cities are working with four or five different providers for parking solutions. The trend is moving to one or two providers, and to have someone who has the system of record.
We are seeing this in other verticals as well, by the way, especially with the advent of moving towards an AI world, is that customers want to talk to one person as much as possible to be able to go and handle core operational needs. By being able to combine IPS and Nayax, we are hoping to be able to provide customers with a very competitive solution. Something that fits the customer really well and provides them the best possible customer support, reliability, uptime, and additional feature functionality for the business. I believe Sagit already mentioned the numbers. A couple of other things that I just wanted to mention. The managed spaces are about 250,000 spaces. They currently have about 180 or so thousand physical POSs in the field. The delta there is they have the single space meters that obviously are one space per one meter.
They have kiosks that generally are managing between six and 10 parking spaces. The total ends up being about 250,000. Generally, customers are looking at the business on a per space business in the parking industry, which is why we presented it this way. We will continue to provide more details as we move forward. If you could go to the next page, please. Thank you. I mentioned most of it. IPS has a full suite of software services. It is really a full platform for the city operator. One other thing that I wanted to mention is IPS are municipalities or cities. Why is this really interesting for Nayax? Because this is an ecosystem that we historically have not penetrated into and been able to build revenues and to reach the serviceable market. We have historically worked with SMBs.
We have a lot of enterprise customers as well, as everyone knows. Cities in general are a very different sales cycle, very different type of way to go and sell. What we have realized as well is that our payment platform is perfect for the government, for the city location that wants to have a full ecosystem of parking, and eventually EV charging and transportation and other services. We believe that this is a market that we will be able to do really well in with the potential acquisition of IPS. Obviously IPS is bringing the expertise in this space for now 25 years. I will pass it over to Yair for the next slide.
What we see in terms of how we see the thing, and this is like a round of segments that we are offering around the world, putting now the parking in the high spot. Nayax and IPS, I think what we look at as a strategy, we call it the land and expand. The way that we can operate together now will make, I believe, according to what you just hear from Aaron and Sagit, will bring a lot of value to the customer, but it's not a value that we push the customer, it's a value that's been requested by customers. It's important to understand, after a lot of research, in every segment there is what you call a timing for the segment.
This timing is now from customer point of view that want to have what we call one solution, because it's becoming to be much more complex with all the payment things, all the payment processes, and all the enforcement around this, and they would like to have what we call one-stop solution. The ability of Nayax to support the scale and the size of the payment, and the ability to work with the municipalities on a broader solution, which include a lot of other values that you want to bring in, like the EV within the scope of their service is kind of a thing that IPS and Nayax will be uniquely positioning to the customers. That's a summary of what we call in this segment the land and expand.
Absolutely. As we go over to page 11, we're going to go past nine and 10 here. Just one reminder, as some are asking, we will open up to Q&A here very shortly. Please just hold the questions for a few more minutes, and we're getting through the last few slides, and then we're obviously happy to take questions afterwards. Yair, if you can continue, please. Thank you.
We always look at the world in the yellow colors, and over here you see that it's overlapping already existing position with Nayax. All the North America and U.K. already Nayax already has a presence in the market, have a relationship in the market, has operation in the market. IPS is now coming on top of this, so being helped by Nayax. You see the opportunities over here. Not all markets are the same, but at least we have now a strong arm to deal with what you call B2G. This is a different way of acquisitions, but we know how to manage this through the IPS team. With that, we can see the long-term growth of our business come to life.
The opportunity to continue and to expand both solutions into the regions, whether it is the verticals we already have to the parking industry and take that internationally.
I think it is important to mention that we did a significant amount of due diligence on the software platform specifically because the key part to us when we look at acquisitions is: Is this a software platform that we can take globally, right? They might be specializing in the U.S. or the U.K. or Brazil or wherever it is, but can we really scale that platform globally? Because our goal is to be able to take to 200 countries, not to four countries.
We believe firmly, after the two years of research that we have now done on the parking industry and what the best way to accelerate our entry into the space, we saw that IPS was by far the best fit for us and the best platform for being able to allow us to go and expand in places like continental Europe, for example, where we already have an electronic money institution license, into Latin America eventually, and then obviously places like Australia as well, which we have a very good presence in.
Couple of more items here. One is that it is not just about the software and how easy it is to expand that. It is also can it be easily or quite easily be connected to our payment infrastructure, and being able to take the payment, as Yair mentioned, that we know how to do very well, and add that to the mix. So what the one plus one equal three, the land and expand, etc .
Maybe let me go over to the synergies that I have talked about. So there is significant revenue and cost synergies that we have seen. If I go in the $8 million run rate that I said is at the adjusted EBITDA level. It is not on the revenue level or on the cost level, it is really the accretive to the adjusted EBITDA. So first and foremost is the payment processing. Today, they have a rev share.
They have some payment processing. We know how to take that to the levels that we know with the beautiful take rate that we are able to achieve and the profitability that comes with the processing revenue and margins. We've spoken about the international expansion that we are in 120 countries. We know we have either an office or a great partnership over there that we know how to take the solutions into those markets. The idea is to take the parking internationally. Maybe something to say here that Aaron mentioned that we've looked about several opportunities, and IPS was by far the best parking opportunity.
This is the reason why we've spoken to some of you about some opportunities in 2025 that we had to pass and not take because it wasn't the right fit, it wasn't the right company to acquire. We're very excited about IPS and the opportunity that comes with it. There's also cross-sell with the EV charging back to the synergies. This is different from EV. Parking is a capital light. It's already an established vertical, but we believe that as EV is being sold into municipalities as well as parking, there's a lot of cross-sell opportunities. Of course, cost synergies that we see, whether it's by creating some cost savings opportunity at the manufacturing level and as well as in other areas. Lastly, a little bit about the accretive financial profile and the performance.
If we look at IPS in 2026, around more than $90 million of revenue with adjusted EBITDA of $21 million. We are talking about the guidance of 2026 of $510 million- $520 million and $85 million- $90 million. You can see that this is accretive to our portfolio. This is, again, aligned with our 2028 strategic goal that we put in place a long time, and it's relevant for us, especially on the land and expand opportunities. With that, I would like to open the call for questions.
If you have a question, you should be typing into the Q&A section of the webinar, please, and I'll read the questions as they come out.
One question, and I received a few questions, so maybe we'll start with them. Yair, maybe that's for you. Why are we willing to pay $350 million for IPS that represent a 17x multiplier on the adjusted EBITDA?
I think to frame the question is not about potentially the past. I'm looking always present future, and I think that we just mentioned around this presentation shows the risk reward to what we believe in. Even in 2027, what you call the multiple action will be much lower in terms of the present that you see right now. I think it's not what you call a big expectation to understand that payment integration to those, to IPS existing customer is a viable way to grow the business. I think the important part to understand that, as I said, it's a customer base of government or municipalities, which is very hard to get. So the right to play in this game, you have to have what you call a very strong team around this and ability to succeed and to win this market.
I think the opportunity and the risk/reward is amazing to this point. Actually, it's the opposite. I believe that this is a very good price, that firm, that this is a good company, and we want to buy good companies. We don't want to buy a turnaround company. We want to actually accelerate a very good team and very good company with a very good customer base. With that, I believe the return is much better than risking a turnaround company that you buy cheap maybe, or you buy in a stress mode, and then you depend on a lot of what they call execution, which should be way and above excellent. Over here, this is a very strong fit to Nayax payment and ability to go all the way as a one-stop solution.
Maybe if I can just add that the key to getting synergies is to, obviously the two biggest parts, which is the payment integration, which is what Yair mentioned, and then the international expansion. A lot of companies that are in unattended, they struggle to go more internationally, and the biggest reason why is difficulty with payment integration. It's really hard in a lot of these countries, especially as you start moving into Continental Europe, into other parts of the world. This is what we've built expertise on over the last two decades. We have licenses in many jurisdictions. We have people that are on the ground, offices already there. This is really where we see huge opportunity as we move forward and something that we can accelerate relatively quickly.
A question that came, is that the large strategic acquisition that we previously talked about? How should investors think about M&A and capital allocation following this transaction?
We will not hold back of what you call looking. The team of Aaron still have a long and big funnel. Of course, we have to digest this transaction. We will not really jump the gun and again, buy such a big company. But we are now showing that we are serious about what we are going and how we want to position ourselves into the next not five years, 10 years ahead. Of course, we will find ways that the capital will justify a new acquisition, and we will keep providing more acquisitions, maybe not in this size in the early stage right now. But we will do acquisitions. We will keep doing acquisition, of course, under a very strong, tight capital management.
Maybe the last question is that are we planning to raise equity soon? I can answer that obviously our first priority is to deleverage where we are today through the combined company's own cash flow and adjusted EBITDA. We are right now, as we said, around 3.8x leverage, but we are expecting that to go significantly down over the time. We all the time continue to evaluate all kinds of financing tools that are available. But future equity raise is a question of the opportunity, the timing, the attractive valuation, and other funding necessity. With that, I believe that we will continue to our next call. Thank you so much for joining.
Sagit, I think there is a few questions from Anthony.
I actually don't see any. I actually don't see anything in the.
Really?
Yep.
Yeah.
Do you want to give it just one sec? Let's just wait.
I think we're good.
Okay.
I think that the majority of the questions were answered. Thank you so much for joining our call.
Thank you.
Thank you, everyone.
We're excited about this.
Thank you.