Payoneer Global Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. Comparisons are with Q1 2021 unless stated otherwise. Amounts are in U.S. dollars; financial statement figures are in millions unless noted.
Business context
Payoneer provides cross-border payment and commerce services to businesses, marketplaces and SMBs in more than 190 countries and territories. It reported $14.62 billion in platform volume, up 10% year over year. Revenue is generated primarily when customers use, withdraw or make payments with funds in their Payoneer accounts.
Key financial metrics
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $137.0 | $100.6 |
| Transaction costs | $25.6 | $20.2 |
| Operating expenses | $143.3 | $101.8 |
| Operating loss | $(6.3) | $(1.1) |
| Net income (loss) | $20.2 | $(3.5) |
| Adjusted EBITDA (non-GAAP) | $10.4 | $7.8 |
| Operating cash flow | $2.4 | $(16.5) |
- Revenue grew 36%; management attributed growth to customer acquisition, expansion in developing markets and higher non-volume-based services for enterprise and marketplace customers.
- Operating loss widened despite revenue growth. Operating margin was approximately (4.6)% versus (1.1)% in Q1 2021.
- Net income included a $31.2 million noncash gain from the change in fair value of warrants. Without that gain, reported net income would not represent underlying operating profitability; operating loss remained $6.3 million.
- Adjusted EBITDA rose approximately 33%. It excludes, among other items, $12.9 million of stock-based compensation and the warrant fair-value gain.
- Expenses increased substantially: R&D 56%, sales and marketing 49%, G&A 72%, and other operating expenses 31%. Stock-based compensation was $12.9 million versus $4.3 million in Q1 2021.
Liquidity, debt and cash flows
- Cash and cash equivalents were $465.7 million at March 31, 2022, nearly unchanged from year-end 2021. This excludes $4.63 billion of customer funds, which are matched by outstanding operating balances and are not equivalent to corporate cash available for general use.
- Total cash, restricted cash and customer funds reported in the cash flow statement was $5.10 billion. Total assets were $5.31 billion and shareholders’ equity was $522.0 million.
- Outstanding related-party warehouse-facility debt was $14.3 million. The facility finances capital advances, is secured by eligible receivables, and had a $25 million initial commitment, with potential increases subject to lender consent. The company reported covenant compliance.
- Operating cash flow was $2.4 million. Investing cash flow was $28.0 million, including a $34.4 million inflow related to customer funds in transit. Financing cash flow was $233.6 million, predominantly reflecting a $229.3 million increase in outstanding operating balances. Total cash, restricted cash and customer funds increased $263.9 million; that increase should not be read as an equivalent increase in corporate liquidity.
- Management said existing cash and operating cash flows were expected to cover working capital and capital expenditures for at least the next 12 months.
Changes, outlook and risks
- Transaction costs rose 27%, slower than revenue growth, but management cited $3.5 million less in payment-network incentives; excluding that factor, costs increased 10%, in line with volume growth.
- Management reported returning travel activity and a 25-basis-point U.S. rate increase in March 2022 as potential benefits to travel-related activity and interest income. It also noted uncertainty around travel recovery, inflation, supply-chain disruptions and softening e-commerce growth. The filing provides no specific forward revenue or earnings guidance.
- Russia and Belarus together represented less than 3% of Q1 revenue; with Ukraine, the three countries represented slightly less than 10%. Payoneer reduced services to Russia and Belarus and said the conflict’s impact was difficult to assess; escalation could materially affect results.
- Foreign-exchange movements are a risk; management stated that a hypothetical 10% exchange-rate change could materially affect financial results. A hypothetical 1% interest-rate change was not expected to have a material effect based on period-end borrowings.
- A Mexican banking entity used by the company lost its license, leaving funds inaccessible. Payoneer reserved $2.25 million for potential losses after recovering $140,000 through deposit insurance; recovery of remaining funds through liquidation was uncertain.
- The company cited potential regulatory, legal and compliance costs, and ordinary-course disputes and inquiries. It reported no material changes to the risk factors in its 2021 Form 10-K. Disclosure controls were concluded to be effective as of March 31, 2022.
Important facts for investors to verify
- How much of the $20.2 million GAAP profit depended on the noncash warrant remeasurement, and how operating performance compares using recurring measures.
- Whether revenue growth and volume growth continue, and whether expense growth—especially employee, marketing and stock-based compensation—moderates.
- The availability and restrictions on corporate cash versus customer funds, and the drivers of reported operating-balance cash flows.
- Collections and expected credit losses on capital advances: net CA receivables were $42.5 million, with a $4.4 million allowance at quarter-end.
- Developments in the Russia-Ukraine conflict, the Mexican banking liquidation, and regulatory or litigation matters, including any resulting financial impact.