Payoneer Global Inc. (NASDAQ:PAYO) Q3 2021 Earnings Conference Call November 10, 2021 5:30 PM ET Company Participants Ignatius Njoku - Vice President of Investor Relations Scott Galit - Chief Executive Officer Michael Levine - Chief Financial Officer Conference Call Participants Sam Salvas - Needham & Company Sanjay Sakhrani - KBW Josh Siegler - Cantor Fitzgerald Robert Napoli - William Blair Ashwin Shirvaikar - Citigroup Operator Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to P ...

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Presents unaudited condensed consolidated financial statements for Q3 and nine months ended September 30, 2021, reflecting the Reverse Recapitalization impact [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20consolidated%20balance%20sheets) Balance sheet as of September 30, 2021, shows significant increases in cash, total assets, and shareholders' equity due to the Reverse Recapitalization Balance Sheet Comparison (in thousands) | Metric | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $448,955 | $102,988 | | **Total assets** | $4,360,204 | $3,669,684 | | **Total liabilities** | $3,868,280 | $3,479,850 | | **Warrant liability** | $48,304 | $0 | | **Total shareholders' equity** | $491,924 | $24,299 | [Condensed Consolidated Statements of Income (Loss)](index=7&type=section&id=Condensed%20consolidated%20statements%20of%20income%20(loss)) Q3 2021 revenues grew 35% to $122.7 million, but net income decreased due to a 44% rise in operating expenses Income Statement Summary (in thousands) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $122,651 | $90,537 | $334,184 | $250,885 | | **Operating income (loss)** | $(6,506) | $941 | $(26,016) | $(7,871) | | **Gain from change in fair value of Warrants** | $11,321 | $0 | $23,397 | $0 | | **Net income (loss)** | $837 | $1,608 | $(15,085) | $(12,531) | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20consolidated%20statements%20of%20cash%20flows) Nine-month cash flow shows decreased operating cash, significant financing inflow from Reverse Recapitalization, and $4.5 million used in investing Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $10,788 | $18,873 | | **Net cash provided by (used in) investing activities** | $(4,539) | $(45,880) | | **Net cash provided by financing activities** | $686,881 | $960,587 | - Net contributions from the Reverse Recapitalization and PIPE financing totaled **$388.8 million**[41](index=41&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20the%20condensed%20consolidated%20financial%20statements) Notes detail significant events like the Reverse Recapitalization, OFAC settlement, and a $2.25 million reserve for funds at a Mexican bank - On June 25, 2021, the company consummated its Reverse Recapitalization with FTOC, becoming a publicly traded company, Payoneer Global Inc. The transaction was accounted for as a reverse recapitalization, with Legacy Payoneer as the accounting acquirer[47](index=47&type=chunk)[50](index=50&type=chunk) - The company reached a final settlement with the U.S. Office of Foreign Assets Control (OFAC) for **$1.4 million** regarding payments to sanctioned regions, which was paid prior to September 30, 2021[128](index=128&type=chunk) - The company reserved **$2.25 million** for potential losses after a banking partner in Mexico had its license revoked by regulators, rendering funds inaccessible[134](index=134&type=chunk) - The company terminated its Loan and Security Agreement on September 14, 2021, and repaid the outstanding balance of **$40.0 million** during the nine months ended September 30, 2021[124](index=124&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 2021 operational performance, highlighting 35% revenue growth, an operating loss due to higher expenses, and strengthened liquidity post-Reverse Recapitalization [Results of Operations](index=39&type=section&id=Results%20of%20Operations) Q3 2021 revenues increased 35% to $122.7 million, but a 44% rise in operating expenses led to a $6.5 million operating loss Q3 2021 vs Q3 2020 Performance (in thousands) | Metric | Q3 2021 | Q3 2020 | % Change | | :--- | :--- | :--- | :--- | | **Revenues** | $122,651 | $90,537 | 35% | | **Total operating expenses** | $129,157 | $89,596 | 44% | | **Operating income (loss)** | $(6,506) | $941 | (791)% | - Transaction costs remained relatively flat, increasing only **0.6%** in Q3 2021 despite a **16% increase in volume**, due to improved commercial terms, platform optimizations, and payment network incentives[193](index=193&type=chunk) - The increase in operating expenses across R&D, Sales & Marketing, and G&A was primarily driven by higher employee compensation and benefits resulting from increased headcount to support business growth[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity significantly enhanced by $874.5 million from Reverse Recapitalization, resulting in $449 million cash and no debt as of September 30, 2021 - The company raised gross proceeds of **$874.5 million** from the Reverse Recapitalization and PIPE financing[206](index=206&type=chunk) - As of September 30, 2021, the company held **$449 million** in cash and cash equivalents and had no outstanding borrowings[212](index=212&type=chunk) - On October 28, 2021, the company entered into a new Receivables Loan and Security Agreement to provide external financing for its capital advance activities, with an initial borrowing commitment of **$25 million**[209](index=209&type=chunk)[211](index=211&type=chunk) [Key Metrics and Non-GAAP Financial Measures](index=46&type=section&id=Key%20Metrics%20and%20Non-GAAP%20Financial%20Measures) Q3 2021 Volume grew **16%** to **$13.6 billion**, while Adjusted EBITDA more than doubled to **$6.1 million** from Q3 2020 Volume Growth (in millions) | Period | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | **Three months ended Sep 30** | $13,615 | $11,716 | 16% | | **Nine months ended Sep 30** | $40,535 | $30,531 | 33% | Adjusted EBITDA Reconciliation (in thousands) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | **Net income (loss)** | $837 | $1,608 | | **Stock based compensation expenses** | $8,590 | $3,023 | | **Gain from change in fair value of Warrants** | $(11,321) | $0 | | **Other adjustments** | $8,223 | $3,745 | | **Adjusted EBITDA** | $6,129 | $2,576 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are foreign currency fluctuations and interest rate changes, with a hypothetical 10% exchange rate change potentially having a material impact - The company is exposed to market risks from interest rate changes and foreign currency fluctuations[237](index=237&type=chunk) - Foreign currency exposure exists for currencies in which it operates and serves customers. A hypothetical **10%** change in exchange rates could materially impact financial results[239](index=239&type=chunk) - As an emerging growth company under the JOBS Act, Payoneer can delay the adoption of new or revised accounting standards applicable to public companies[240](index=240&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[243](index=243&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[244](index=244&type=chunk) [PART II - OTHER INFORMATION](index=50&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings) The company is periodically involved in various litigation matters incidental to its business, with further details provided in Note 11 of the financial statements - The company is party to various litigation matters incidental to its business, with further details provided in Note 11 of the financial statements[246](index=246&type=chunk) [Item 1A. Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's Registration Statement dated August 6, 2021, have occurred - As of the filing date, there have been no material changes to the risk factors previously disclosed in the company's Registration Statement[248](index=248&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q3 2021, the company issued unregistered securities, including 409,988 restricted stock units/options and 218,798 common shares for the Optile acquisition - A total of **409,988** restricted stock units and options were settled or exercised during the quarter pursuant to the company's equity incentive plans[249](index=249&type=chunk) - The company issued **218,798** shares of common stock as deferred consideration related to the Optile acquisition from 2020[251](index=251&type=chunk) [Other Information Items](index=50&type=section&id=Items%203%2C%204%2C%205%2C%20and%206) The company reported no defaults on senior securities, confirmed mine safety disclosures are not applicable, and listed exhibits filed with the report - The company reported no defaults on senior securities[253](index=253&type=chunk) - Mine safety disclosures are not applicable to the company[254](index=254&type=chunk)

Financial Data and Key Metrics Changes - The company reported a record revenue of $111 million for Q2 2021, representing a 42% year-over-year increase, exceeding internal targets [26][49] - Processed volume reached $13.6 billion, reflecting a 29% year-over-year growth [26][49] - The two-year compounded annual growth rate (CAGR) from 2019 to 2021 was 45%, consistent with the previous quarter [26][50] - The take rate improved to 82 basis points, up from 75 basis points in Q2 2020 [27][52] - Transaction costs were 26% of revenues, down from 30% in the same quarter last year, indicating improved efficiency [28][53] Business Line Data and Key Metrics Changes - The B2B accounts payable and receivable (AP/AR) segment is growing faster than the overall business, contributing positively to growth [20][105] - New services, including working capital and MasterCard Virtual Commercial Cards, exceeded targets for the first half of the year [38][105] Market Data and Key Metrics Changes - The company noted a decline in volume expectations due to changes in consumer behavior post-COVID and challenges in global logistics [31][35] - The introduction of new VAT requirements in Europe has impacted operations, particularly for cross-border sellers [35] Company Strategy and Development Direction - The company aims to leverage strong market momentum to grow marketplace ecosystems and B2B AP/AR offerings [19][20] - Plans to expand the Payoneer platform ecosystem through partnerships with banks and mobile wallets [21] - Continued investment in new services and M&A strategy to enhance capabilities in e-commerce enablement and B2B payments [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about long-term growth in digital commerce despite short-term challenges [25][41] - The company raised its full-year revenue guidance to $442 million to $448 million, reflecting a year-over-year growth of 28% to 30% [61] - Management acknowledged the impact of COVID-19 on short-term performance but remains confident in the company's growth trajectory [31][35] Other Important Information - The company added a record number of new customers in the quarter, maintaining a net volume retention rate of over 100% [36] - Significant investments were made in R&D and product teams to support growth and enhance service offerings [56][60] Q&A Session Summary Question: What trends might rebound sooner? - Management indicated that e-commerce is likely to rebound faster than international travel, with ongoing positive trends in customer sign-ups [72][76] Question: What drove the decline in concentration in China? - The company noted stronger growth outside of China, with e-commerce showing some weakness impacting the geographic mix [83][86] Question: How is the M&A pipeline looking? - Management sees both high valuations and good opportunities in the market, focusing on diverse targets for potential acquisitions [87][90] Question: How does the company view growth between new customers and existing base? - The company is experiencing strong new customer acquisition while also expanding services for existing customers, indicating a balanced growth strategy [94][98] Question: What is driving the reduction in transaction costs? - Management highlighted efficiency and business mix as key drivers for improved transaction costs, contributing to variable profitability [100][102]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Payoneer Global Inc. (Exact name of registrant as specified in its charter) Delaware 001-40547 86-1778671 (State or other jurisdiction of incorpora ...