Payoneer Global Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Unaudited consolidated financial statements; amounts below are in U.S. dollars. Payoneer operates a global payments platform serving businesses in more than 190 countries and territories.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $158.9m | $122.7m | $444.1m | $334.2m |
| Operating loss | $(5.1)m | $(6.5)m | $(13.7)m | $(26.0)m |
| Net income (loss) | $(26.5)m | $0.8m | $(1.8)m | $(15.1)m |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $44.3m | $10.8m |
| Adjusted EBITDA | $12.7m | $6.1m | $37.9m | $14.6m |
- Q3 revenue grew 30%; nine-month revenue grew 33%. Transaction volume rose 11% in Q3 and 9% year to date, to $15.1bn and $44.4bn, respectively.
- Transaction costs were $28.0m in Q3 and $79.8m year to date. Revenue less transaction costs was $130.9m for Q3 (about 82% of revenue) and $364.3m year to date (about 82%). These are simple calculations, not a separately reported GAAP margin.
- Operating expenses rose 27% in both the quarter and year-to-date periods. Research and development and sales and marketing increased notably, principally from higher staffing and business-support spending.
- Q3 net loss included a $15.1m loss from the change in warrant fair value, compared with an $11.3m gain in Q3 2021. For nine months, the warrant fair-value gain was $28.9m. Adjusted EBITDA is a non-GAAP measure.
Financial position, liquidity and cash flow
- At September 30, cash and cash equivalents were $507.9m; restricted cash was $7.6m, and customer funds reported on the balance sheet were $5,039.6m. Customer funds were matched by $5,039.6m of outstanding operating balances. Customer funds are not the same as unrestricted corporate cash.
- Total assets were $5,759.5m, total liabilities $5,226.8m, and shareholders’ equity $532.6m. The large balance-sheet totals primarily reflect customer funds and corresponding operating balances.
- Long-term related-party debt was $15.7m, up from $13.7m at year-end 2021. The revolving facility finances capital-advance activity, is secured by eligible receivables, and has a stated interest-rate cap of 10.5%. The company reported compliance with applicable covenants.
- Nine-month investing cash outflow was $13.9m, including purchases of property, equipment and software and capitalized internal-use software. Financing cash inflow was $655.7m, largely reflecting a $638.4m increase in outstanding operating balances; this should be considered alongside the customer-funds model.
- Management stated that cash and cash equivalents and operating cash flows should be sufficient for operating and capital expenditure needs for at least the next 12 months.
Changes, outlook and risks
- Revenue growth reflected customer growth, emerging-market activity, higher interest income as rates rose and enterprise/marketplace services. Interest income from sources other than customer contracts was $15.0m in Q3 versus $0.6m a year earlier, and $19.4m for nine months versus $1.8m.
- Management cited improved commercial terms, platform efficiencies and scale benefits as factors that helped transaction costs grow more slowly than volume. It also plans continued investment in platform development, product expansion, regulatory reach, automation, customer growth and potential acquisitions. No numerical revenue or earnings guidance is provided in the supplied filing text.
- Management said higher interest rates may support interest income, while weaker economic growth, consumption and e-commerce trends could pressure customer sales and transaction volumes. Travel recovery was a positive factor; its trajectory and broader macroeconomic conditions remain uncertain.
- Ukraine, Russia and Belarus together represented slightly less than 10% of revenue in each 2022 comparison period; Russia and Belarus together were below 3%. The reported revenue impact was immaterial year over year, but further conflict escalation could materially affect results. Payoneer said it was reducing payment services to Russia and Belarus and monitoring sanctions compliance.
- A banking entity used by the company lost its license in Mexico, leaving funds inaccessible. Payoneer recorded a $2.25m reserve for potential losses, recovered $140,000 through deposit insurance and said recovery of the remaining claim in liquidation was uncertain. The company also disclosed ordinary-course disputes and regulatory inquiries, with possible costs, penalties, operational restrictions and reputational effects.
- The company adopted the expected-credit-loss standard in 2022, recording a $2.5m cumulative adjustment. The allowance for capital-advance losses was $3.6m at September 30. A $614,000 internal-use software impairment was recorded during the nine months due to abandoned projects.
- Stock-based compensation was $38.3m for the nine months, versus $23.6m a year earlier. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. The filing reported no material changes to the risk factors in the prior Form 10-K.
Investor verification priorities
- Assess whether transaction-volume growth and customer growth translate into durable revenue and margin improvement, particularly as interest-rate and e-commerce conditions change.
- Review operating-expense growth, stock-based compensation and the assumptions underlying Adjusted EBITDA; reconcile non-GAAP performance with GAAP losses.
- Distinguish corporate liquidity from customer funds and outstanding operating balances; review cash-flow effects of these customer-related balances.
- Monitor capital-advance receivable quality, charge-offs and allowance adequacy, along with the related-party warehouse facility’s terms and covenant compliance.
- Track warrant fair-value volatility, the unresolved Mexican bank-fund recovery, sanctions exposure and material regulatory or legal developments.