Follow-up to Nayax: the 2026 cash target now requires a sharp catch-up over the next three quarters
Nayax reaffirmed its 2026 outlook, including free cash conversion of about 40% of Adjusted EBITDA. After Q1 free cash flow was negative $6.0 million, the remaining three quarters now need roughly $40 million to $42 million of free cash flow.
The first quarter did not break Nayax's growth story, but it moved the 2026 test to a narrower place: cash conversion. Revenue grew 32%, organic revenue grew 26%, and Adjusted EBITDA rose to $13.9 million, so the business is still scaling at a strong pace. The problem is that free cash flow, under the company's own definition, was negative $6.0 million despite $3.6 million of operating cash flow. Once the company keeps a full-year target of $85 million to $90 million of Adjusted EBITDA and about 40% free cash conversion, Q1 already creates a catch-up requirement of roughly $40 million to $42 million over the next three quarters. That is not impossible, especially if settlement timing and infrastructure investment normalize, but it makes revenue growth only a partial proof point. The next reports need to show operating cash flow rising faster than capitalized development, property and equipment investment, and interest, otherwise the 2026 cash target will depend on too much of a second-half catch-up.
The annual target is no longer tested by revenue alone
The company opened the year with growth numbers that are hard to dismiss: $106.9 million of revenue, $79.3 million of recurring revenue equal to 74% of total revenue, $1.8 billion of total transaction value, and 1.5 million managed and connected devices. Adjusted operating profitability also kept improving, with $13.9 million of Adjusted EBITDA and a 13% margin, compared with 12% in the year-earlier quarter.
A cash-focused follow-up should not stop at adjusted profitability. The company reaffirmed 2026 guidance of $510 million to $520 million of revenue, $85 million to $90 million of Adjusted EBITDA, and free cash conversion of about 40% of Adjusted EBITDA. Under its definition, free cash flow is operating cash flow minus capitalized development costs and purchases of property and equipment. A 40% target on that EBITDA range implies annual free cash flow of about $34 million to $36 million.
That is where Q1 changes the reference point. Negative free cash flow of $6.0 million does not only lower the year-to-date result. It forces the remaining three quarters to deliver the full annual target and close the hole opened at the start of the year.
| 2026 cash-conversion test | Amount or ratio | Meaning |
|---|---|---|
| Full-year Adjusted EBITDA target | $85 million to $90 million | Base for the conversion target |
| Full-year FCF target at 40% | $34 million to $36 million | What the company needs to produce for the year |
| Q1 free cash flow | negative $6.0 million | A negative opening instead of a positive contribution |
| FCF required for the rest of the year | $40 million to $42 million | Roughly $13.3 million to $14.0 million per remaining quarter |
| Required conversion in the rest of the year | about 55% to 56% | Assuming full-year EBITDA lands inside the target range |
The last line is why the rest of the year can no longer be judged by the growth rate alone. If Adjusted EBITDA keeps rising but most of the improvement is absorbed by investment, working capital, or settlement timing, the conversion target becomes harder faster than the revenue line suggests.
Negative free cash flow did not come from a weaker business
A weak cash quarter can come from a weak business, but that is not the case here. The business is still growing and adjusted profitability is improving. The gap opened elsewhere: $3.6 million of operating cash flow was not enough to cover $7.8 million of capitalized development costs and $1.8 million of property and equipment purchases. That produced negative free cash flow of $6.0 million, compared with negative $5.7 million in the year-earlier quarter.
The company ties the gap to higher infrastructure investment and settlement timing. That is a reasonable counterpoint: if part of the timing reverses in later quarters, cash flow can improve without a dramatic change in sales. Still, for the 2026 target, timing is not enough as an explanation on its own. The full-year target already covers the whole year, so every dollar that did not arrive in Q1 has to show up later.
The balance-sheet movement in processing activity adds another layer. Restricted cash transferable to customers rose to $98.1 million, receivables in respect of processing activity rose to $73.1 million, and payables in respect of processing activity rose to $216.8 million. These numbers do not prove a new problem on their own, but they explain why cash flow at a payments company is not the same as cash flow at a clean software company: between revenue and cash sits a layer of customer funds, settlement flows, and timing.
Interest sits outside FCF, but not outside the cash account
The direct continuation of the 2025 free-cash analysis is the distinction between the company's free cash flow metric and the all-in cash picture. The 40% conversion target refers to the company's free cash flow definition: operating cash flow less capitalized development and property and equipment. That is a legitimate definition, but it does not include all cash uses in the period.
In Q1, the company paid $9.8 million of interest, while also attributing the increase in finance expenses to the two 2025 bond offerings. Interest is classified under financing activities, so it is not part of the FCF calculation the company presents. For shareholders, it is still cash leaving the company. On an all-in cash basis for the quarter, meaning after operating activity, investing activity, interest, repayments, leases, and acquisition-related payments, cash movements were negative by about $17.5 million before proceeds from option exercises.
This is not a criticism of the FCF definition itself. It is a warning about how to read it. The 2025 covenant analysis already showed that the bond market reopened, but did not give the company full capital-allocation freedom. Q1 adds the cash-flow version of that point: the debt helped fund the expansion phase, but from now on it also raises the cash bar the business needs to clear.
The next three quarters need cash, not only revenue
The current judgment is fairly sharp: the 2026 target is still possible, but after Q1 it now requires a much stronger cash year, not merely a strong revenue year. Organic revenue growth of 22% to 25%, strong customer demand, and higher Adjusted EBITDA can explain why the company reaffirmed guidance. They are not enough to prove the conversion target.
The next proof point is easy to measure. In Q2 through Q4, operating cash flow needs to step up materially, capitalized development and property and equipment need to weigh less relative to operating cash flow or receive better coverage from it, and settlement timing needs to stop deferring cash. If that happens, Q1 will look like an investment-heavy and timing-heavy opening quarter. If it does not, the 40% target will look less like a natural extension of operating leverage and more like a catch-up requirement that keeps getting steeper.
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