Nayax in the first quarter: growth is working, cash proof still lags

Nayax opened 2026 with a quarter that strengthens the growth story, but still does not close the question left open after 2025: cash quality. Revenue rose 32% to $106.9 million, organic growth was 26%, the installed base crossed 1.5 million devices, and adjusted EBITDA rose 43% to $13.9 million. Those are strong numbers, especially because they came with better processing and SaaS margins and a reaffirmed annual outlook. Still, the quarter does not yet prove that the engine funds itself: free cash flow was negative $6.0 million, interest payments jumped after the 2025 bond offerings, and net income barely improved versus a prior-year quarter excluding the one-time Tigapo gain. The lower hardware margin also shows that part of the growth still came with a commercial cost, in this case marketing promotions for VPOS Media devices in Europe. The current read is positive but incomplete: the platform works, demand exists, but 2026 needs to move from a growth year to a cash, collection, and capital-discipline proof year.

The company is no longer judged only by device count

Nayax is a payments and software company built around three connected layers: POS devices, SaaS subscriptions for management and operations, and processing fees from every transaction that flows through the platform. Hardware opens the door, but the economics sit in the active device base, recurring revenue, and transaction volume. A strong quarter is therefore not only about how many devices were sold, but whether each device increases recurring revenue without dragging too much credit, inventory, and financing cost behind it.

In the first quarter, the company already looks like a larger-scale business than it did a year ago. Recurring revenue from SaaS and processing rose to $79.3 million and represented 74% of revenue. Customers reached 120,035, managed and connected devices rose to 1.504 million, and total transaction value increased to $1.79 billion. ARPU, annual average revenue per connected device, rose 14% to $247, showing better monetization of each connected device.

The pressure point is that the stock is no longer judged as an early-stage demand proof story. Since the previous annual analysis, the question has shifted to growth quality: how quickly recurring revenue becomes reported profit, how quickly profit becomes cash, and whether the debt raised in 2025 buys a real step-up or mainly time. Short-interest data illustrates that shift. Short interest as a percentage of float rose from 1.78% on December 18, 2025 to 3.57% on May 1, 2026, and SIR rose to 7.78, compared with a sector average of 1.420. That is not an extreme position, but it is clear skepticism around number quality, not around the existence of demand.

The quarter proves demand, not free cash flow yet

The most important point in the quarter is the gap between growth rate and cash conversion quality. Revenue rose 32%, and 26% organic growth means the core business is still growing quickly even after $4.5 million of contribution from recent acquisitions. POS device revenue rose 46% to $27.6 million, payment processing fees rose 29% to $47.7 million, and SaaS revenue rose 25% to $31.6 million. On demand, this quarter gives skeptics little to work with.

But the quarter also sharpens the cost of that growth. Operating cash flow was only $3.6 million, and free cash flow, as defined by the company, was negative $6.0 million after capitalized development and property and equipment. Management attributes this mainly to infrastructure investment and the timing of cash settlement from processing activities. That is a reasonable explanation for a single quarter, but it does not close the main checkpoint. If annual adjusted EBITDA is expected at $85-90 million and the company expects free cash conversion of about 40%, the guidance implies about $34-36 million of 2026 FCF. After negative $6.0 million in Q1, the next three quarters need to produce roughly $40-42 million.

The all-in cash picture is tighter than reported FCF. Under all-in cash flexibility, meaning cash left after the period's actual cash uses, the quarter was more negative: $3.6 million of operating cash flow, less $7.8 million of capitalized development, $1.8 million of property and equipment, $2.8 million of deferred acquisition consideration, $9.8 million of interest paid, $0.8 million of loan repayment, and $0.9 million of lease principal. Before employee option exercise proceeds, that adds up to about $20.3 million of net cash use. This does not mean the company has a liquidity problem, but it does mean the first quarter has not yet proven the annual cash-conversion target.

Profitability is improving, but not in every layer

The strong side of the quarter is margin quality in the recurring engine. Processing margin rose to 39.8% from 35.8%, due to improved contracts with acquirers and smart-routing capabilities. SaaS margin rose slightly to 76.5%, and total recurring margin rose to 54.4%. These are exactly the layers the market wants to see grow, because they increase the value of devices already in the field.

Hardware tells a different story. POS device revenue jumped 46%, but margin fell to 33.1% from 39.5%. The explanation is marketing promotions for PIN-on-glass VPOS Media devices in Europe. That is not necessarily a problem, because promoting new devices can expand the installed base and create future recurring revenue. But from a growth-quality perspective, it is a yellow flag: part of the quarter's growth was bought through a commercial concession in hardware. If those devices lead to more processing and SaaS, the cost will be justified. If not, the revenue jump will look lower-quality.

The income statement also requires a careful read. Operating income fell to $4.1 million from $7.9 million, but the prior-year quarter included a one-time gain of about $6.1 million related to Tigapo share purchases. Excluding that item, operating performance improved. On the other hand, net finance expense rose to $3.4 million, mainly due to the two 2025 TASE bond offerings, and net income was only $1.3 million. The company notes that compared with prior-year net income excluding the Tigapo gain, net income increased from about $1.1 million to $1.3 million. That is an improvement, but not a step-change in the bottom line.

This creates the central gap of the quarter: adjusted EBITDA shows operating leverage, while net income and cash still absorb the cost of debt, investment, and expansion. That is why the market is likely to focus less on the 32% revenue-growth headline and more on the path from EBITDA to free cash flow.

The outlook makes 2026 a proof year

The company reaffirmed full-year guidance for $510-520 million of revenue, 22%-25% organic growth, and $85-90 million of adjusted EBITDA, or a margin of about 17%. It also continues to hold its 2028 framework: $1 billion of revenue, 50% gross margin, and a 30% adjusted EBITDA margin. That is an ambitious framework, but the first quarter supports it mainly on the revenue side. On cash, the proof has not arrived yet.

The partnership with E-Plug and Energy Plus illustrates the logic behind the Lynkwell acquisition. Combining the company's payment technology with the charging-management platform is meant to let Energy Plus manage and monetize a U.S. charging network through a single integrated solution. This is a useful example of the cross-selling management wants to build. The weak point is that the quarter still does not give investors a way to measure how much Lynkwell contributes to revenue, margin, or cash flow. For now, it is an early commercial proof point, not a full economic proof point.

The equity-to-assets ratio barely improved. Equity rose to $235.4 million from $231.0 million at year-end 2025, but total assets rose to $871.8 million. The ratio stayed around 27.0%, almost unchanged from year-end. So even after a profitable quarter, the company did not materially expand its equity cushion relative to balance-sheet size. This is not an immediate risk, but it keeps the bond-market checkpoint alive: is equity growing faster than the balance sheet, or is growth still expanding both sides together?

Conclusions

The first quarter for Nayax is better operationally than it is in cash terms. It strengthens the argument that the platform is growing, customers are using it more, and the processing and SaaS layers are producing better margins. It does not yet prove that this growth converts into free cash flow at a pace that fully settles the balance-sheet discussion.

The next 2-4 quarter proof point is clear: free cash flow needs to turn positive, hardware margin needs to stabilize without damaging device growth, and Lynkwell needs to appear in numbers rather than only partnerships. If that happens, 2026 will look like a bridge year into a more profitable business. If EBITDA keeps rising while cash remains negative and debt absorbs a meaningful part of the improvement, the market will keep treating growth with caution.