Paysafe Ltd. — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022; this is an annual report, not a standalone Q4 filing. Financial statements are prepared under U.S. GAAP. Comparative 2021 segment figures were recast after a fourth-quarter 2022 reporting-segment change. Paysafe also effected a 1-for-12 reverse stock split in December 2022; share and per-share figures are adjusted for it.
Business context and financial performance
Paysafe provides payment processing, digital wallets, eCash and related services to merchants and consumers in more than 120 countries. It reported $130.1 billion in payment volume and approximately 19 million active users in 2022. Digital Wallets has significant exposure to online gambling and other regulated entertainment markets.
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Revenue | $1,496.1 million | $1,487.0 million | Up 0.6% |
| Payment volume | $130.1 billion | $122.4 billion | Up $7.8 billion |
| Adjusted EBITDA | $410.0 million | $443.9 million | Down 7.6% |
| Operating loss | $1,871.9 million | $269.3 million | Loss increased |
| Net loss | $1,862.3 million | $110.3 million | Loss increased |
| Net interest expense | $126.6 million | $165.8 million | Down 23.6% |
| Operating cash flow | $924.1 million | $224.5 million | Up $699.6 million |
| Cash and cash equivalents | $260.2 million | $313.4 million | Down $53.2 million |
Adjusted EBITDA is a non-GAAP measure, not a measure of cash flow or liquidity. It equaled approximately 27.4% of revenue in 2022 versus 29.9% in 2021, calculated from reported figures. The filing does not provide a comparable GAAP operating margin that would reflect the unusually large impairment charges.
Segments
| Segment | FY2022 revenue | FY2021 revenue | FY2022 Adjusted EBITDA | FY2021 Adjusted EBITDA |
|---|---|---|---|---|
| Merchant Solutions | $817.4 million | $745.3 million | $200.3 million | $186.9 million |
| Digital Wallets | $686.2 million | $750.0 million | $289.4 million | $332.1 million |
Merchant Solutions revenue rose 9.7%, supported by higher volume and inflation-related increases in processing fees. Digital Wallets revenue fell 8.5%, reflecting foreign exchange, exposure to war-affected regions, European regulatory changes and lower promotional activity, partly offset by acquisitions.
Liquidity, debt and cash flow
- Principal debt totaled approximately $2.658 billion at year-end, down from $2.794 billion. It included $990 million of U.S.-dollar term loans, €701 million of euro term loans, $370 million of U.S.-dollar secured notes and €421 million of euro secured notes. Term loans mature in 2028; secured notes mature in 2029.
- The $305 million revolving credit facility had $21.4 million drawn and $283.6 million available at year-end. A separate $75 million settlement-related line of credit was outstanding.
- Cash and cash equivalents were $260.2 million. Customer accounts and other restricted cash were a separate $1.867 billion; these safeguarded funds should not be treated as freely available corporate liquidity.
- Operating cash flow of $924.1 million included a $698.9 million inflow from movements in funds payable and amounts due to customers. Paysafe notes that corresponding customer funds are largely reflected in restricted cash, so the reported operating cash flow warrants careful interpretation.
- Investing cash outflow was $575.6 million, including $424.7 million for business acquisitions. Financing cash outflow was $80.5 million.
- Management said available cash, borrowing capacity and expected operating cash flows were sufficient to fund operations and plans for the next 12 months. The company reported compliance with its debt covenants at year-end.
Material changes, outlook and notable items
- Goodwill impairment: Paysafe recorded $1.882 billion of goodwill impairment and $1.887 billion in total impairment expense on goodwill and intangible assets in 2022, following a sustained decline in share price and market capitalization and challenging market conditions. Goodwill stood at $2.0 billion at year-end. Certain reporting units had only 3% to 9% fair-value headroom in the latest test, leaving further impairment risk if assumptions weaken.
- Customer remediation: Following a review of foreign-exchange-rate disclosures for the period January 2018 to August 2022, Paysafe recorded a $33.6 million provision in 2022. The remaining accrual was $18.5 million at year-end; the company said it did not expect additional liability from this matter.
- Acquisition and leadership: Paysafe acquired SafetyPay in January 2022 for $449.8 million in cash consideration. The filing reports $31.4 million of acquired-business revenue and a $21.3 million net loss included from the acquisition date. A new CEO took office in May 2022 and a new CFO in October 2022.
- Legal contingency: A consolidated securities class action alleges misleading statements about financial outlook, Digital Wallets performance and eCommerce agreements. Damages sought are unspecified; Paysafe intends to defend the case and said it could not estimate a potential loss or range. The filing reports a $10.3 million provision for certain litigation proceedings overall.
- Strategy and outlook: Management emphasized sales acceleration, cross-selling, product and platform development, international expansion and selective acquisitions. The filing gives no quantified revenue, earnings or cash-flow guidance.
- Principal risks: High leverage and variable-rate debt; competition and macroeconomic, currency and interest-rate exposure; regulatory uncertainty, particularly in gambling and financial services; reliance on sponsor banks, payment networks and third parties; cyberattacks, fraud, chargebacks and safeguarding customer funds; privacy compliance; and execution and integration risks.
- Other reporting matters: Management and the independent auditor concluded internal control over financial reporting was effective at December 31, 2022. The financial statement audit opinion was unqualified.
Key facts for investors to verify
- How much of 2022 operating cash flow is repeatable after separating movements in customer funds and settlement balances from cash available to Paysafe.
- Debt principal, interest-rate exposure, hedging coverage, refinancing needs and covenant headroom; variable-rate borrowing makes results sensitive to rate changes.
- Whether the reporting units with limited goodwill headroom meet future cash-flow assumptions, and the potential for additional impairment.
- Progress, final cost and customer outcomes from the foreign-exchange disclosure remediation, and developments in the securities class action.
- Underlying Digital Wallets performance after currency, regulatory and promotional impacts, and the durability of Merchant Solutions growth and margins.