Nayax Stock (NYAX): Growth at What Cost?

by Robert Lakin

Sifting through Nayax’s (NYAX) first-quarter 2025 earnings, it’s clear management of the Herzylia-based fintech is making some headway toward profitability. 

Yet, despite significant revenue growth, management continues to rely on acquisitions to fuel growth. Further, its debt levels raise concerns.

My reading of this report tells me that it's not clear if that growth is truly sustainable or profitable in the long term. While recurring revenue looks good, the underlying metrics and the company's appetite for M&A deserve a closer look.

Numbers Require Closer Inspection

Nayax reported total revenue of $81.1 million for Q1 2025, up 26.7% year-over-year. Recurring revenue, that is SaaS and payment processing, jumped 34.6% to $62.2 million, making up 77% of total revenue. 

Yes, this sounds positive. Recurring revenue is the Holy Grail for payment companies. It indicates sticky customer relationships, however let’s dig a little deeper.

However, much of the revenue growth is inorganic. About $5.5 million of Q1 2025 revenue came from recent acquisitions like VMtecnologia and Roseman. Organic revenue growth for the period was a more modest 18%. While acquisitions can accelerate market share, they also introduce integration risks and often come at a premium. Investors need to question the true organic growth trajectory.

Nayax reached over 100,000 customers globally, a 31% increase year-over-year, and managed and connected devices grew 20% to 1.33 million. This customer and device expansion is a key driver for recurring revenue. However, around 4,300 new customers and 55,700 devices in Q1 were from acquisitions. 

Management needs to demonstrate it can continue to attract and retain customers organically at this rate, independent of acquisitions.

I’d be remiss if I failed to mention that gross margin improved to 49.2% from 43.8% year-over-year. This is a positive development, driven by improved payment processing margins and optimized supply chain for POS devices. Adjusted EBITDA reached $9.7 million, a significant improvement from last year. 

However, net income was $7.2 million. This figure includes a one-time $6.1 million gain from the purchase of additional shares in Tigapo. Without this one-time boost, net income would have been a meager $1.1 million. That tells me that NYAX is still just on the edge of consistent profitability from core operations.

Organic Growth Target Seems (Too) Aggressive

CEO Yair Nechmad and CFO Sagit Manor reaffirmed full-year 2025 guidance of revenue growth of 30-35% (constant currency, $410 million-$425 million), with at least 25% organic growth. Adjusted EBITDA guidance stands at $65 million-$70 million. They also project a 50% free cash flow conversion from Adjusted EBITDA.

That organic growth target seems aggressive, with at least 25% for the full year, especially given the Q1 organic growth was 18%. At 25%, they’ll need a significant acceleration in the remaining quarters.

After completing a notes and warrants offering in Israel, NYAX raised about $133 million. While this boosted cash to $176.8 million, short-term and long-term debt balances stood at $142.4 million as of March 31, 2025. This debt raises questions about financial flexibility, especially if those ambitious organic growth targets are missed or if further acquisitions are planned.

Despite beating EPS estimates, Nayax's stock fell post-earnings, primarily due to the revenue miss compared to analyst consensus. Clearly, investors are skeptical. They want to see tangible, sustained organic growth and clear profitability, not just acquisition-fueled expansion.

Bottom Line: Management Has Much to Prove

Nayax is a player in the growing cashless and unattended retail space. I’ve long respected their approach and their product strategy.

They clearly aim for market dominance. But NYAX stock’s latest report reveals the company is still heavily reliant on M&A for top-line expansion, with core profitability being a work in progress.

The one-time gain inflating net income is a red flag. The reaffirmed full-year guidance, particularly the organic growth component, sets a high bar. Nayax must prove it can achieve this without continuous acquisition sprees or taking on excessive debt. Until then, caution remains warranted. Investors should demand consistent, organic profit.

Disclaimer: The author did not hold a position in any of the securities mentioned above. The information provided in this article is for educational and informational purposes only and should not be construed as investment advice. Always conduct your own research or consult with a licensed financial professional before making any investment decisions. Past performance is not indicative of future results.

Robert Lakin, writing as TLV Strategist, is one of the founding contributors to this newsletter. His primary focus is on Israel-based stocks held by the iShares MSCI Israel ETF (EIS), VanEck Israel ETF (ISRA), Amplify Bluestar Israel Technology ETF (ITEQ), and ARK Israel Innovative Technology ETF (IZRL). He covers these names here, on Seeking Alpha and on Fintel.io.

Robert was previously Bloomberg's Tel Aviv-based Emerging Markets editor and sell-side equities research editor at Keybank’s McDonald & Co.

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