Over the last four quarters, the company has surpassed consensus EPS estimates three times. Paysafe Limited, which belongs to the Zacks Financial Transaction Services industry, posted revenues of $417.74 million for the quarter ended March 2024, surpassing the Zacks Consensus Estimate by 2.49%. This compares to year-ago revenues of $387.85 million. The company has topped consensus revenue estimates just once over the last four quarters. The sustainability of the stock's immediate price movement based on the ...

Financial Performance - Revenue reached $418 million, an increase of 8% year-over-year (YoY), or 7% on a constant currency (cc) basis[8] - Adjusted Net Income was $35 million, with Adjusted Earnings Per Share (EPS) at $057, up 6% YoY[9] - Paysafe reported a positive GAAP net income of $31 million, compared to a GAAP net loss of $38 million in Q1 2023[10] - Adjusted EBITDA was $112 million, with a margin of 268%[22] - Volume increased by 7% YoY, reaching $36 billion[21] Strategic Initiatives and Investments - Sales and portfolio optimization initiatives are on track, including significant year-to-date hiring in the sales function[10] - The company is doubling its direct sales team in FY24, with 29 new hires in Q1[11] - Paysafe is expecting ~$50 million benefit in FY24 from investment hiring revenue[14] Segment Performance - Merchant Solutions revenue increased by 11%, while Digital Wallets revenue grew by 5%[10] - Digital Wallets added approximately 14 million consumers[42] - Digital Wallets segment metrics show 75 million 3-month active users, stable YoY, with an Average Revenue Per User (ARPU) of $26, up 5% YoY[42] Leverage and Capital Allocation - Net leverage reduced to 49x, compared to 50x in December 2023[23] - The company repurchased approximately 989k shares for $14 million[24] Outlook - Paysafe reaffirmed its 2024 revenue guidance of $1688 million - $1712 million, representing >6% revenue growth at midpoint[10, 61] - Adjusted EBITDA guidance for 2024 is $473 million - $488 million, with a margin of 280% to 285%[80]

[Q1 2024 Financial & Operational Highlights](index=1&type=section&id=First%20Quarter%202024%20Financial%20Highlights) Paysafe reported an 8% revenue increase to **$417.7 million**, achieving a net income of **$3.1 million** and reducing net leverage to **4.9x**, alongside key operational advancements Q1 2024 Key Financial Metrics (vs. Q1 2023) | Metric | Q1 2024 | Change (YoY) | | :--- | :--- | :--- | | Revenue | $417.7 million | +8% | | Total Payment Volume | $36.1 billion | +7% | | Net Income | $3.1 million | N/A (from loss) | | Diluted EPS | $0.05 | N/A (from -$0.06) | | Adjusted EBITDA | $111.9 million | +4% | | Adjusted Diluted EPS | $0.57 | +5.6% | - Net leverage decreased to **4.9x** as of March 31, 2024, down from **5.0x** at the end of 2023, indicating progress in deleveraging[5](index=5&type=chunk) - Strategic and operational progress in Q1 2024 includes expanding sales team, repurchasing **$14 million** of common shares, partnering with Xsolla, launching Pay by Bank for U.S. iGaming, and completing network tokenization offering[5](index=5&type=chunk) [Q1 2024 Consolidated Financial Results](index=2&type=section&id=First%20Quarter%20of%202024%20Summary%20of%20Consolidated%20Results) Total revenue grew 8% to **$417.7 million**, driven by both segments, resulting in a net income of **$3.1 million** and a significant increase in operating cash flow Q1 2024 Consolidated Results Summary (in thousands) | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $417,738 | $387,849 | +8% | | Gross Profit (excl. D&A) | $247,365 | $228,910 | +8% | | Net Income / (Loss) | $3,056 | $(3,808) | N/A | | Adjusted EBITDA | $111,916 | $107,815 | +4% | - Revenue growth was driven by an **11%** increase in Merchant Solutions and a **5%** increase in Digital Wallets[6](index=6&type=chunk) - The shift from a net loss to net income was primarily due to an increase in other income and a decrease in interest expense, which offset higher depreciation, amortization, and tax expenses[7](index=7&type=chunk) - Operating cash flow significantly increased to **$58.8 million** from **$20.0 million** in the prior year, mainly driven by lower taxes paid and the timing of bonus payments[10](index=10&type=chunk) [Segment Performance](index=3&type=section&id=Summary%20of%20Segment%20Results) Merchant Solutions revenue grew **11%** to **$231.4 million** with a **6%** EBITDA decline, while Digital Wallets saw **5%** growth in both revenue and EBITDA Q1 2024 Segment Results (in thousands) | Segment | Revenue | Revenue YoY Change | Adjusted EBITDA | Adjusted EBITDA YoY Change | | :--- | :--- | :--- | :--- | :--- | | Merchant Solutions | $231,398 | +11% | $49,178 | -6% | | Digital Wallets | $190,457 | +5% | $83,274 | +5% | - The decline in Merchant Solutions' Adjusted EBITDA occurred despite strong revenue growth, while Digital Wallets showed balanced growth in both top-line revenue and profitability[15](index=15&type=chunk) [Full Year 2024 Financial Guidance](index=3&type=section&id=Full%20Year%202024%20Financial%20Guidance) Paysafe reaffirmed its full-year 2024 guidance, projecting revenue between **$1,688 million** and **$1,712 million**, and Adjusted EBITDA from **$473 million** to **$488 million** Full Year 2024 Guidance (in millions) | Metric | Full Year 2024 Range | | :--- | :--- | | Revenue | $1,688 - $1,712 | | Adjusted EBITDA | $473 - $488 | [Balance Sheet and Cash Flow](index=2&type=section&id=Balance%20Sheet%20and%20Cash%20Flow) As of March 31, 2024, Paysafe held **$202.1 million** cash, reduced total debt to **$2.5 billion**, and generated strong operating cash flow of **$58.8 million** Balance Sheet Summary (as of March 31, 2024) | Metric | Amount (in millions) | | :--- | :--- | | Cash and cash equivalents | $202.1 | | Total debt | $2,457.4 | | Net debt | $2,255.3 | - Total debt decreased by **$44.5 million** compared to December 31, 2023, reflecting net repayments and favorable foreign exchange rate movements[11](index=11&type=chunk) Q1 Cash Flow Summary (in millions) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Operating Cash Flow | $58.8 | $20.0 | | Unlevered Free Cash Flow | $69.2 | $42.2 | [Corporate Updates](index=2&type=section&id=Corporate%20Updates) Paysafe published its inaugural Sustainability Report, outlining a new strategy based on four pillars: trusted technology, engaged employees, thriving society, and responsible business principles - The company published its inaugural Sustainability Report, demonstrating its commitment to acting as a responsible fintech company[12](index=12&type=chunk) - The sustainability strategy is built on four pillars: Trusted technology, Engaged employees, Thriving society, and Responsible business practices[16](index=16&type=chunk) [Financial Statements and Non-GAAP Reconciliations](index=6&type=section&id=Financial%20Statements%20and%20Non-GAAP%20Reconciliations) This section provides detailed unaudited financial statements for Q1 2024, including Statements of Operations, Balance Sheets, and Cash Flows, along with reconciliations for key non-GAAP measures [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2024 revenue reached **$417.7 million**, with operating income of **$33.0 million**, resulting in a net income of **$3.1 million** or **$0.05** per diluted share Q1 2024 Statement of Operations Highlights (in thousands) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue | $417,738 | $387,849 | | Operating income | $32,965 | $34,980 | | Income before taxes | $10,355 | $71 | | Net income / (loss) | $3,056 | $(3,808) | | Diluted EPS | $0.05 | $(0.06) | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2024, total assets were **$5.05 billion**, total liabilities **$4.18 billion**, and total shareholders' equity **$873.9 million** Balance Sheet Summary (in thousands) | Line Item | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $1,792,093 | $1,906,493 | | Total assets | $5,054,153 | $5,227,701 | | Total current liabilities | $1,596,050 | $1,712,668 | | Total liabilities | $4,180,247 | $4,344,388 | | Total shareholders' equity | $873,906 | $883,313 | [Condensed Consolidated Statements of Cash Flow](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flow) Q1 2024 saw **$58.8 million** net cash from operating activities, **$13.8 million** used in investing, and **$142.4 million** used in financing, leading to an overall cash decrease Q1 2024 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $58,835 | $20,014 | | Net cash used in investing activities | $(13,825) | $(32,543) | | Net cash used in financing activities | $(142,376) | $(194,558) | [Non-GAAP Reconciliations](index=12&type=section&id=Non-GAAP%20Reconciliations) This section details reconciliations of GAAP net income of **$3.1 million** to Adjusted EBITDA of **$111.9 million**, Adjusted Net Income of **$35.3 million**, and operating cash flow to Unlevered Free Cash Flow of **$69.2 million** Reconciliation of Net Income to Adjusted EBITDA (Q1 2024, in thousands) | Line Item | Amount | | :--- | :--- | | Net income | $3,056 | | Adjustments (Taxes, Interest, D&A, etc.) | $108,860 | | **Adjusted EBITDA** | **$111,916** | Reconciliation of Net Income to Adjusted Net Income (Q1 2024, in thousands) | Line Item | Amount | | :--- | :--- | | Net income | $3,056 | | Adjustments (Amortization, SBC, Tax items, etc.) | $32,250 | | **Adjusted net income** | **$35,306** | Reconciliation of Operating Cash Flow to Unlevered Free Cash Flow (Q1 2024, in thousands) | Line Item | Amount | | :--- | :--- | | Net cash inflows from operating activities | $58,835 | | Capital expenditure | $(24,425) | | Cash paid for interest | $31,331 | | Payments for Restructuring | $3,453 | | **Unlevered Free Cash Flow** | **$69,194** |

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 20-F (Mark One) ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 19 ...

Financial Data and Key Metrics Changes - The company reported a strong fourth quarter with an 8% revenue growth, or 6% on a constant currency basis, resulting in full year revenue of $1.6 billion, a 7% increase compared to 2022 [10][34] - Fourth quarter adjusted EBITDA increased 13%, leading to full year adjusted EBITDA of $459 million, an increase of 12% compared to 2022 [10][35] - Adjusted EBITDA margin for 2023 was 28.6%, an increase of 120 basis points [10][35] - Net leverage was reduced to 5.0 at quarter end, down from 5.8 at the end of the previous year [10][40] Business Line Data and Key Metrics Changes - The classic digital wallet business and ecommerce solutions experienced double-digit growth, with ecommerce growing 29% for 2023 [11][15] - Merchant solutions volume was $30.2 billion in Q4, an increase of 8% year-over-year, with full year volume also up 8% to $118.7 billion [36] - Digital wallet segment saw fourth quarter volume increase of 13% to $6 billion, with full year volume increasing 9% to $22.4 billion [38] Market Data and Key Metrics Changes - North America, the largest region, grew approximately 7% for the full year 2023, while Europe grew approximately 3% [34] - The company noted softer performance in the e-cash business and the SMB direct business, which are key focus areas for improvement in 2024 [34] Company Strategy and Development Direction - The company plans to add 170 additional salespeople in 2024, expanding the scope of initiatives to include the SMB business [16] - A phased approach for rolling out a merchant wallet to SMBs in the U.S. is underway, aiming to consolidate B2B and B2C capabilities [17] - The company is focused on optimizing the SMB portfolio and enhancing product offerings to improve growth in the direct channel [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's stronger position and ability to restore investor confidence through improved growth metrics and reduced debt [53][54] - The outlook for 2024 includes expected revenues in the range of $1.688 billion to $1.712 billion, reflecting growth above 6% at the midpoint [42] - Adjusted EBITDA for 2024 is expected to be within the range of $473 million to $488 million, with a focus on cost discipline and operational efficiencies [42][43] Other Important Information - The company has authorized a $50 million share repurchase program expected to commence soon [41][59] - The average interest rate on the company's debt was 5.8%, with plans to reduce interest expenses through debt repayments [40][35] Q&A Session Summary Question: What goals have been set to restore investor confidence in Paysafe? - Management highlighted the stabilization of the company, growth in revenue streams, and a focus on expanding reach with new and existing merchants [52][54] Question: Are there plans to add Web3 or cryptocurrency capabilities? - Management confirmed that while crypto is a small part of the business, they are focused on expanding offerings in the crypto and Web3 space, particularly in gaming [56][57] Question: What is the strategy for repaying debt and initiating the stock buyback program? - The company plans to maintain flexibility while focusing on reducing leverage and investing in innovation [58][59] Question: What are the expectations for digital wallet take rate compression? - Management indicated that take rate compression is due to product mix, with stability in existing product pricing [72][75] Question: What are the drivers of growth divergence between the direct and ISO channels? - The company noted that the direct channel serves smaller merchants compared to the ISO channel, impacting growth dynamics [126]

Improved execution with stronger core business to leverage our assets $millions assumptions for Adj. EPS Statement regarding non-GAAP financial measures Reconciliation of GAAP net income (loss) to Adj. net income 20 Other operating Income Three Months Ended December 31, Three months ended (1) During the fourth quarter of 2023, the Company elected to change its presentation of "Settlement receivables, net" and "Funds payable due to customers" from operating activities, to present them as financing activities ...

Exhibit 99.1 Bruce Lowthers, CEO of Paysafe, commented: "We closed out 2023 strong with 8% revenue growth in Q4 and full year growth of 7%, reflecting our best year since coming public. We have undergone significant operating changes during this past year which has allowed us to deliver on the commitments that we set last March, driving revenue growth, Adjusted EBITDA expansion and a reduction in our net debt leverage ratio. Our team is excited about the opportunities ahead, and we look forward to building ...

[Condensed Consolidated Interim Financial Statements (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Interim%20Financial%20Statements%20%28Unaudited%29%20%E2%80%93%20September%2030%2C%202023) This section presents Paysafe's unaudited interim financial statements, including comprehensive income, financial position, shareholders' equity, and cash flows, along with detailed notes [Condensed Consolidated Statement of Comprehensive Income / (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Comprehensive%20Income%20%2F%20%28Loss%29) Paysafe reported a net loss of **$2.5 million** for the three months and **$8.1 million** for the nine months ended September 30, 2023, a substantial reduction from the **$1.8 billion** net loss in the prior year Net Income / (Loss) and Revenue (USD in thousands) | Metric | 3 Months Ended Sep 30, 2023 (USD in thousands) | 3 Months Ended Sep 30, 2022 (USD in thousands) | 9 Months Ended Sep 30, 2023 (USD in thousands) | 9 Months Ended Sep 30, 2022 (USD in thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Revenue | $396,410 | $365,988 | $1,186,597 | $1,112,569 | | Net (Loss) / Income | $(2,549) | $978 | $(8,122) | $(1,828,573) | | Net (Loss) / Income per share – basic | $(0.04) | $0.02 | $(0.13) | $(30.24) | | Operating income / (loss) | $43,229 | $4,662 | $112,375 | $(1,890,172) | - Operating income for the three months ended September 30, 2023, increased significantly to **$43.2 million** from **$4.7 million** in the prior year, and for the nine months, it turned positive to **$112.4 million** from a loss of **$1.89 billion**[14](index=14&type=chunk) [Condensed Consolidated Statement of Financial Position](index=7&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) Paysafe's total assets decreased to **$5.27 billion** as of September 30, 2023, from **$5.96 billion** at December 31, 2022, primarily due to reduced customer accounts and restricted cash Financial Position Highlights (USD in thousands) | Metric | September 30, 2023 (USD in thousands) | December 31, 2022 (USD in thousands) | | :----------------------------------- | :------------------------------------ | :----------------------------------- | | Total Assets | $5,273,373 | $5,957,056 | | Total Liabilities | $4,395,466 | $5,097,419 | | Total Shareholders' Equity | $877,907 | $859,637 | | Cash and cash equivalents | $226,451 | $260,219 | | Customer accounts and other restricted cash | $1,291,662 | $1,866,976 | | Funds payable and amounts due to customers | $1,464,102 | $1,997,867 | - Current assets decreased from **$2.49 billion** to **$1.92 billion**, largely due to a decrease in customer accounts and other restricted cash. Current liabilities also saw a significant reduction from **$2.29 billion** to **$1.72 billion**[17](index=17&type=chunk) [Condensed Consolidated Statement of Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statement%20of%20Shareholders%27%20Equity) Shareholders' equity increased to **$877.9 million** as of September 30, 2023, from **$859.6 million** at January 1, 2023, driven by share-based compensation and liability conversions, partially offset by net losses Shareholders' Equity Changes (USD in thousands) | Item | January 1, 2023 (USD in thousands) | September 30, 2023 (USD in thousands) | | :------------------------------------ | :--------------------------------- | :------------------------------------ | | Total Shareholders' Equity | $859,637 | $877,907 | | Net loss (9 months) | - | $(8,122) | | Share-based compensation (9 months) | - | $23,061 | | Conversion of liability classified award to equity | - | $6,276 | | Gain on foreign currency translation (9 months) | - | $1,525 | | Loss on foreign currency translation (3 months) | - | $(8,853) | - Share-based compensation contributed **$23.1 million** to additional paid-in capital for the nine months ended September 30, 2023[19](index=19&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) Paysafe experienced a **$355.4 million** net cash outflow from operating activities for the nine months ended September 30, 2023, a significant shift from a **$1.37 billion** inflow in the prior year Cash Flow Summary (USD in thousands) | Activity | 9 Months Ended Sep 30, 2023 (USD in thousands) | 9 Months Ended Sep 30, 2022 (USD in thousands) | | :---------------------------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net cash flows (used in) / provided by operating activities | $(355,368) | $1,373,219 | | Net cash flows used in investing activities | $(125,561) | $(533,588) | | Net cash flows used in financing activities | $(120,344) | $(91,604) | | Effect of foreign exchange rate changes | $(7,809) | $(284,334) | | (Decrease) / increase in cash and cash equivalents, including customer accounts and other restricted cash | $(609,082) | $463,693 | | Cash and cash equivalents, including customer accounts and other restricted cash, at end of period | $1,518,113 | $2,435,411 | - The substantial decrease in operating cash flow was primarily due to a **$529.9 million** outflow from movements in funds payable and amounts due to customers in 2023, compared to a **$1.21 billion** inflow in 2022[23](index=23&type=chunk)[241](index=241&type=chunk)[243](index=243&type=chunk) - Investing cash outflow decreased significantly, mainly due to the absence of a large acquisition like SafetyPay (**$424.7 million**) which occurred in the prior year[23](index=23&type=chunk)[244](index=244&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies, segment information, and various financial instrument details [1. Basis of presentation and summary of significant accounting policies](index=12&type=section&id=1.%20Basis%20of%20presentation%20and%20summary%20of%20significant%20accounting%20policies) Paysafe, a global payment solutions provider, operates through Merchant Solutions and Digital Wallets segments, effected a **1-for-12 reverse stock split** in December 2022, and adopted new accounting guidance in 2023 - Paysafe operates two reportable segments: **Merchant Solutions** (card not present/present solutions for SMBs) and **Digital Wallets** (wallet-based online payments, eCash, pay-by-bank solutions)[29](index=29&type=chunk)[121](index=121&type=chunk) - A **1-for-12 reverse stock split** was effected on December 12, 2022, adjusting all share and per-share amounts for all periods presented[30](index=30&type=chunk)[31](index=31&type=chunk) - The company adopted new guidance for Business Combinations (**ASU 2021-08**) and Supplier Finance Programs (**ASU 2022-04**) effective January 1, 2023, with no material impact on financial statements[46](index=46&type=chunk)[47](index=47&type=chunk) [2. Net loss per share attributable to the Company](index=14&type=section&id=2.%20Net%20loss%20per%20share%20attributable%20to%20the%20Company) Basic and diluted net loss per share was **$(0.04)** for the three months and **$(0.13)** for the nine months ended September 30, 2023, with potentially dilutive instruments excluded due to their antidilutive effect Net Loss Per Share (USD) | Metric | 3 Months Ended Sep 30, 2023 (USD) | 3 Months Ended Sep 30, 2022 (USD) | 9 Months Ended Sep 30, 2023 (USD) | 9 Months Ended Sep 30, 2022 (USD) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net (loss) / income attributable to the Company - basic | $(2,549) | $978 | $(8,122) | $(1,828,944) | | Weighted average shares – basic | 61,623,820 | 60,592,461 | 61,349,985 | 60,471,705 | | Basic EPS | $(0.04) | $0.02 | $(0.13) | $(30.24) | | Diluted EPS | $(0.04) | $0.02 | $(0.13) | $(30.24) | - All potentially dilutive restricted stock units, stock options, warrants, and LLC units were excluded from diluted EPS calculations due to their **antidilutive effect**[50](index=50&type=chunk) [3. Taxation](index=14&type=section&id=3.%20Taxation) The effective tax rate was **117.6%** for three months and **142.0%** for nine months ended September 30, 2023, significantly higher than the U.K. statutory rate due to valuation allowances and discrete items Effective Tax Rates | Period | Effective Tax Rate | | :--------------------------- | :----------------- | | 3 Months Ended Sep 30, 2023 | 117.6% | | 3 Months Ended Sep 30, 2022 | 88.2% | | 9 Months Ended Sep 30, 2023 | 142.0% | | 9 Months Ended Sep 30, 2022 | 2.8% | - The U.K. statutory tax rate increased from **19% to 25%** effective **April 1, 2023**, with a weighted average of **23.5%** applied for the full year 2023[53](index=53&type=chunk) - The higher effective tax rates in 2023 compared to 2022 are mainly due to the **valuation allowance on restricted interest carryforwards** and **discrete items**, contrasting with the deferred tax impact of goodwill impairment in the prior year[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) [4. Goodwill](index=15&type=section&id=4.%20Goodwill) Goodwill decreased slightly to **$1.99 billion** as of September 30, 2023, with no impairment recognized for the nine months, following a **$1.88 billion** impairment in the prior year Goodwill Carrying Value (USD in thousands) | Segment | Sep 30, 2023 (USD in thousands) | Dec 31, 2022 (USD in thousands) | | :---------------- | :---------------------------- | :---------------------------- | | Merchant Solutions | $637,446 | $637,446 | | Digital Wallets | $1,353,157 | $1,361,686 | | Total Goodwill | $1,990,603 | $1,999,132 | - In the prior year (2022), a goodwill impairment of **$1.88 billion** was recognized across both Merchant Solutions and Digital Wallets segments due to a sustained decline in stock price and market conditions[57](index=57&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk) - The annual goodwill impairment test as of October 1, 2023, did not result in any **impairment**[59](index=59&type=chunk) [5. Intangible assets](index=16&type=section&id=5.%20Intangible%20assets) Net intangible assets decreased to **$1.19 billion** as of September 30, 2023, with **$192.5 million** in amortization expense and a minor **$275 thousand** impairment recognized on software development costs Intangible Assets, Net (USD in thousands) | Metric | Sep 30, 2023 (USD in thousands) | Dec 31, 2022 (USD in thousands) | | :-------------------- | :---------------------------- | :---------------------------- | | Intangible assets, net | $1,188,622 | $1,291,458 | | Total Gross carrying value | $2,567,339 | $2,497,471 | | Total Accumulated amortization | $1,378,717 | $1,206,013 | - Amortization expense for intangible assets was **$192.5 million** for the nine months ended September 30, 2023, slightly down from **$194.1 million** in the prior year[64](index=64&type=chunk) - Impairment expense of **$275 thousand** was recognized on software development costs for the nine months ended September 30, 2023, significantly lower than **$4.0 million** in the prior year[65](index=65&type=chunk) [6. Allowance for credit losses](index=16&type=section&id=6.%20Allowance%20for%20credit%20losses) The allowance for credit losses decreased to **$20.9 million** as of September 30, 2023, with credit loss expense for the nine months decreasing to **$13.6 million** due to merchant type changes and a recovery Allowance for Credit Losses (USD in thousands) | Metric | Dec 31, 2022 (USD in thousands) | Sep 30, 2023 (USD in thousands) | | :------------------------------------ | :---------------------------- | :---------------------------- | | Balance at period end | $28,022 | $20,945 | | Credit loss expense (9 months) | - | $13,581 | | Write-Offs (9 months) | - | $(20,489) | - Credit loss expense decreased by **$11.2 million** for the nine months ended September 30, 2023, compared to the prior year, partially due to changes in merchant type and a credit loss recovery in the Merchant Solutions segment[69](index=69&type=chunk)[70](index=70&type=chunk) - Write-offs increased to **$20.5 million** for the nine months ended September 30, 2023, from **$18.3 million** in the prior year, driven by an increase in write-off of aged receivables within the Merchant Solutions segment[70](index=70&type=chunk) [7. Derivative Instruments](index=17&type=section&id=7.%20Derivative%20Instruments) Paysafe uses an interest rate swap to manage interest rate risk on its variable rate Term Loan Facility, measured at fair value, with the reference rate converting from LIBOR to Term SOFR during Q3 2023 Derivative Financial Instrument Details (USD in thousands) | Metric | Sep 30, 2023 (USD in thousands) | Dec 31, 2022 (USD in thousands) | | :-------------------- | :---------------------------- | :---------------------------- | | Notional amount | $321,168 | $367,490 | | Fair value (asset) | $16,053 | $17,321 | | Fair value (loss) / gain (3 months) | $(682) | $9,360 | | Fair value (loss) / gain (9 months) | $(1,268) | $18,148 | - The reference rate index for the Company's derivative financial instrument converted from **LIBOR to the term SOFR reference rate** during the quarter ended September 30, 2023[72](index=72&type=chunk) [8. Debt](index=17&type=section&id=8.%20Debt) Paysafe's total principal outstanding debt decreased to **$2.53 billion** as of September 30, 2023, from **$2.66 billion** at December 31, 2022, with interest expense increasing due to higher variable rates despite debt repurchases Debt Overview (USD in thousands) | Metric | Sep 30, 2023 (USD in thousands) | Dec 31, 2022 (USD in thousands) | | :-------------------------- | :---------------------------- | :---------------------------- | | Total Principal Outstanding | $2,531,159 | $2,658,023 | | Short-term debt | $10,190 | $10,190 | | Non-current debt | $2,504,498 | $2,633,269 | | Interest expense, net (3 months) | $38,421 | $34,631 | | Interest expense, net (9 months) | $112,639 | $89,013 | - On April 13, 2023, the company entered into a debt amendment agreement to replace **LIBOR with SOFR** for its USD Term Loan Facility and USD Revolving Credit Facility[76](index=76&type=chunk) - During the nine months ended September 30, 2023, the company repurchased **$24.8 million** of Secured Loan Notes and **$109.1 million** under the Term Loan Facility, resulting in a gain on repurchase of **$9.6 million**[82](index=82&type=chunk) - Paysafe was in **compliance with its financial covenants**, including the Consolidated First Lien Debt Ratio, as of September 30, 2023[85](index=85&type=chunk) [9. Contingent and deferred consideration payable](index=19&type=section&id=9.%20Contingent%20and%20deferred%20consideration%20payable) Contingent and deferred consideration payable decreased to **$19.0 million** as of September 30, 2023, from **$27.1 million** at December 31, 2022, primarily due to **$9.2 million** in payments made Contingent and Deferred Consideration Payable (USD in thousands) | Metric | Dec 31, 2022 (USD in thousands) | Sep 30, 2023 (USD in thousands) | | :------------------------------------ | :---------------------------- | :---------------------------- | | Balance at period end | $27,146 | $19,017 | | Payments made during the period | - | $(9,210) | | Additions in the period | - | $658 | | Fair value loss and other | - | $423 | | Current portion | - | $10,639 | | Non-current portion | - | $8,378 | - The contingent consideration arose from merchant buyouts and prior year acquisitions, payable in cash subject to future financial performance[87](index=87&type=chunk) [10. Share-based Compensation](index=19&type=section&id=10.%20Share-based%20Compensation) Share-based compensation expense decreased significantly to **$4.9 million** for three months and **$23.1 million** for nine months ended September 30, 2023, due to forfeitures and performance adjustments, with an Employee Share Purchase Plan introduced in April 2023 Share-based Compensation Expense (USD in thousands) | Period | Share-based Compensation Expense (USD in thousands) | | :--------------------------- | :------------------------------------------------ | | 3 Months Ended Sep 30, 2023 | $4,938 | | 3 Months Ended Sep 30, 2022 | $13,542 | | 9 Months Ended Sep 30, 2023 | $23,061 | | 9 Months Ended Sep 30, 2022 | $45,248 | Restricted Stock Unit Activity (9 Months Ended Sep 30, 2023) | Activity | Restricted Stock Units | | :-------------------------- | :--------------------- | | Nonvested as of Dec 31, 2022 | 2,859,385 | | Granted | 2,007,475 | | Vested | (1,326,243) | | Forfeited | (625,158) | | Performance adjustments | 75,183 | | Nonvested as of Sep 30, 2023 | 2,990,642 | - An **Employee Share Purchase Plan** was introduced on April 1, 2023, allowing employees to purchase shares with a matching RSU award that vests one year from the offering period[98](index=98&type=chunk)[99](index=99&type=chunk) [11. Fair Value Measurements](index=21&type=section&id=11.%20Fair%20Value%20Measurements) Paysafe measures financial instruments using a three-level fair value hierarchy, with derivative assets as Level 2, contingent consideration and share-based compensation as Level 3, and warrant liabilities as Level 1 Fair Value Hierarchy of Financial Instruments (USD in thousands) | Instrument | Level 1 (Sep 30, 2023, USD in thousands) | Level 2 (Sep 30, 2023, USD in thousands) | Level 3 (Sep 30, 2023, USD in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Derivative financial asset | - | $16,053 | - | | Contingent consideration payable | - | - | $19,017 | | Warrant liabilities | $2,264 | - | - | | Liability for share-based compensation | - | - | $5,470 | Valuation Techniques and Unobservable Inputs for Level 3 Instruments | Financial instrument | Valuation technique used | Significant unobservable inputs | | :-------------------------------- | :----------------------- | :------------------------------ | | Contingent consideration payable | Discounted cashflow | Discount rate of 7.5% | | Liability for share-based compensation | Market and income approach | Discount rate of 16.5% | - The carrying value of debt approximated fair value (a **Level 2 measurement**) based on market yields for similar debt facilities and observable trading data[109](index=109&type=chunk) [12. Commitments, Contingencies and Guarantees](index=22&type=section&id=12.%20Commitments%2C%20Contingencies%20and%20Guarantees) Paysafe maintains a litigation provision of **$2.2 million**, is involved in a class action lawsuit, manages credit risk from merchant chargebacks, and has an accrual of **$3.3 million** for foreign exchange rate disclosures - A litigation provision of **$2.2 million** was recognized as of September 30, 2023, down from **$10.3 million** at December 31, 2022, due to a settlement[110](index=110&type=chunk) - The company is vigorously defending against a **consolidated class action lawsuit** alleging false and misleading statements, with potential losses currently unable to be estimated but could be material[111](index=111&type=chunk)[112](index=112&type=chunk) - An accrual of **$3.3 million** remains for customer payments related to foreign exchange rate disclosures in the Digital Wallets business, with no additional provision recorded for the three and nine months ended September 30, 2023[118](index=118&type=chunk) [13. Other income, net](index=23&type=section&id=13.%20Other%20income%2C%20net) Other income, net, significantly decreased to **$9.7 million** for three months and **$19.6 million** for nine months ended September 30, 2023, primarily due to reduced foreign exchange gains and lower fair value gains on warrant liabilities Other Income, Net (USD in thousands) | Metric | 3 Months Ended Sep 30, 2023 (USD in thousands) | 3 Months Ended Sep 30, 2022 (USD in thousands) | 9 Months Ended Sep 30, 2023 (USD in thousands) | 9 Months Ended Sep 30, 2022 (USD in thousands) | | :------------------------------------ | :------------------------------------------- | :------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Other income, net | $9,661 | $38,230 | $19,584 | $97,863 | | Foreign exchange gain / (loss) | $4,460 | $20,680 | $(244) | $57,304 | | Fair value (loss) / gain on contingent consideration | $(220) | $147 | $(620) | $(7,742) | | Fair value (loss) / gain on derivative instruments | $(682) | $9,360 | $(1,268) | $18,148 | | Fair value gain on warrant liability | $313 | $6,435 | $830 | $27,489 | | Gain on debt repurchases | $1,680 | $6,760 | $9,632 | $9,752 | - The nine-month period saw a foreign exchange loss of **$244 thousand** in 2023, a stark contrast to a **$57.3 million** gain in 2022[119](index=119&type=chunk) [14. Operating segments](index=23&type=section&id=14.%20Operating%20segments) Paysafe operates in Merchant Solutions and Digital Wallets segments, with performance evaluated by the CODM based on Adjusted EBITDA, and shared costs allocated using drivers like headcount and revenue - Paysafe's operating segments are **Merchant Solutions** (card not present/present solutions for SMBs) and **Digital Wallets** (wallet-based online payments, eCash, pay-by-bank solutions)[121](index=121&type=chunk) - The CODM (CEO, CFO, COO) evaluates performance and allocates resources based on **Adjusted EBITDA** for each operating segment[121](index=121&type=chunk)[122](index=122&type=chunk) Revenue and Adjusted EBITDA by Segment (3 Months Ended Sep 30, 2023 vs 2022, USD in thousands) | Segment | 2023 Revenue (USD in thousands) | 2022 Revenue (USD in thousands) | 2023 Adj. EBITDA (USD in thousands) | 2022 Adj. EBITDA (USD in thousands) | | :---------------- | :------------------------------ | :------------------------------ | :---------------------------------- | :---------------------------------- | | Merchant Solutions | $216,847 | $203,733 | $57,467 | $45,631 | | Digital Wallets | $182,855 | $162,992 | $79,930 | $68,142 | | Corporate | $0 | $0 | $(21,321) | $(18,303) | | Total | $396,410 | $365,988 | $116,076 | $95,470 | Revenue and Adjusted EBITDA by Segment (9 Months Ended Sep 30, 2023 vs 2022, USD in thousands) | Segment | 2023 Revenue (USD in thousands) | 2022 Revenue (USD in thousands) | 2023 Adj. EBITDA (USD in thousands) | 2022 Adj. EBITDA (USD in thousands) | | :---------------- | :------------------------------ | :------------------------------ | :---------------------------------- | :---------------------------------- | | Merchant Solutions | $651,066 | $608,848 | $165,572 | $149,282 | | Digital Wallets | $543,382 | $509,024 | $236,350 | $212,286 | | Corporate | $0 | $0 | $(65,000) | $(59,178) | | Total | $1,186,597 | $1,112,569 | $336,922 | $302,390 | [15. Related party transactions](index=25&type=section&id=15.%20Related%20party%20transactions) Paysafe engages in related party transactions, which are not significant to the financial statements, including a lease with a director's affiliate with a **$3.0 million** right-of-use asset - Related party transactions, including services provided and purchased from affiliates, are **not significant** to the financial statements[128](index=128&type=chunk) - A lease with an affiliate of one of the directors had a right-of-use asset of **$3.0 million** and a lease liability of **$3.4 million** as of September 30, 2023[129](index=129&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Paysafe's financial condition, operational results, and key factors influencing future performance, including market risks and liquidity [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=26&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section provides a standard disclaimer emphasizing that forward-looking statements involve **significant risks and uncertainties**, and actual results may differ materially from expectations - Forward-looking statements involve **significant risks and uncertainties**, and actual results may differ materially from expectations[132](index=132&type=chunk)[133](index=133&type=chunk) - Readers are cautioned **not to place undue reliance** on these statements, and the company does not undertake to update them except as required by law[133](index=133&type=chunk) [Our Company](index=26&type=section&id=Our%20Company) Paysafe, a global digital commerce pioneer, processed **$35 billion** in volume for three months and **$104 billion** for nine months ended September 30, 2023, offering a full spectrum of payment solutions across two segments - Paysafe processed **$35 billion** in volume for the three months and **$104 billion** for the nine months ended September 30, 2023[134](index=134&type=chunk) Revenue (USD in thousands) | Period | Revenue (USD in thousands) | | :--------------------------- | :------------------------- | | 3 Months Ended Sep 30, 2023 | $396,410 | | 3 Months Ended Sep 30, 2022 | $365,988 | | 9 Months Ended Sep 30, 2023 | $1,186,597 | | 9 Months Ended Sep 30, 2022 | $1,112,569 | - The company operates through two business segments: **Merchant Solutions** (merchant acquiring, transaction processing, fraud management) and **Digital Wallets** (NETELLER, Skrill, paysafecard, Paysafecash, Rapid Transfer)[136](index=136&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) [Trends and Factors Affecting Our Future Performance](index=28&type=section&id=Trends%20and%20Factors%20Affecting%20Our%20Future%20Performance) Paysafe's future performance is influenced by **global economic conditions** and foreign currency fluctuations, with recent executive changes and the LIBOR to SOFR transition also impacting operations - **Global and regional economic conditions**, including acts of war and terrorism, significantly impact operations and performance[142](index=142&type=chunk) - **Foreign currency fluctuations**, particularly against the U.S. dollar, can materially impact results, with the **Digital Wallets segment** being affected by unfavorable foreign exchange during the three and nine months ended September 30, 2023[143](index=143&type=chunk) - Recent company events include **Chirag Patel** stepping down as President of Digital Wallets (Feb 2023), **Afshin Yazdian** stepping down as President of Merchant Solutions (July 2023), and the replacement of **LIBOR with SOFR** in debt agreements (April 2023)[144](index=144&type=chunk)[145](index=145&type=chunk) [Key Performance Indicators](index=28&type=section&id=Key%20Performance%20Indicators) Paysafe monitors **gross dollar volume** and **take rate** as key performance indicators, with gross dollar volume increasing to **$35.1 billion** for three months and **$104.4 billion** for nine months, while the overall take rate remained stable at **1.1%** - **Gross dollar volume** (volume) is a key indicator, reflecting the dollar value of payment transactions processed, and is used to generate revenue based on per transaction fees[148](index=148&type=chunk) - **Take rate**, calculated as operating segment revenue divided by gross dollar volume, indicates the percentage of revenue collected by Paysafe on processed transactions[150](index=150&type=chunk) Gross Dollar Volume and Take Rate (USD in millions) | Metric | 3 Months Ended Sep 30, 2023 (USD in millions) | 3 Months Ended Sep 30, 2022 (USD in millions) | 9 Months Ended Sep 30, 2023 (USD in millions) | 9 Months Ended Sep 30, 2022 (USD in millions) | | :-------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Total Gross dollar volume | $35,102 | $32,495 | $104,393 | $97,025 | | Total Take Rate | 1.1% | 1.1% | 1.1% | 1.1% | | Merchant Solutions Volume | $29,644 | $27,826 | $88,516 | $82,080 | | Digital Wallets Volume | $5,645 | $4,786 | $16,482 | $15,325 | [Non-GAAP Financial Measure](index=29&type=section&id=Non-GAAP%20Financial%20Measure) Paysafe uses **Adjusted EBITDA** as a non-GAAP financial measure to assess performance and reflect underlying business trends, acknowledging its limitations despite its usefulness for management and investors - **Adjusted EBITDA** is a **non-GAAP measure** used by management to assess performance and reflect underlying business trends, improving comparability across reporting periods[153](index=153&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) - Adjusted EBITDA is defined as **net income/(loss) before income tax, interest expense, depreciation and amortization, share-based compensation, impairment expense, restructuring and other costs, loss/(gain) on disposal of subsidiaries, and other (expense)/income, net**[156](index=156&type=chunk) - Limitations of Adjusted EBITDA include **not reflecting cash expenditures, working capital needs, interest/principal payments on debt, income tax payments, or cash requirements for asset replacements**[159](index=159&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) This section analyzes Paysafe's financial performance for the three and nine months ended September 30, 2023, comparing key metrics like revenue, operating income, and net loss to prior periods [Three months ended September 30, 2023 compared to three months ended September 30, 2022](index=31&type=section&id=Three%20months%20ended%20September%2030%2C%202023%20compared%20to%20three%20months%20ended%20September%2030%2C%202022) For the three months ended September 30, 2023, Paysafe's revenue increased by **8.3%** to **$396.4 million**, operating income surged by **827.3%** to **$43.2 million**, while net loss increased to **$2.5 million**, and Adjusted EBITDA grew by **21.6%** to **$116.1 million** Key Financial Results (3 Months Ended Sep 30, USD in thousands) | Metric | 2023 (USD in thousands) | 2022 (USD in thousands) | Variance ($ in thousands) | Variance (%) | | :------------------------------------------ | :---------------------- | :---------------------- | :------------------------ | :----------- | | Revenue | $396,410 | $365,988 | $30,422 | 8.3% | | Operating income / (loss) | $43,229 | $4,662 | $38,567 | 827.3% | | Net (loss) / income | $(2,549) | $978 | $(3,527) | (360.6)% | | Adjusted EBITDA | $116,076 | $95,470 | $20,606 | 21.6% | | Selling, general and administrative | $121,195 | $132,250 | $(11,055) | (8.4)% | | Impairment expense on goodwill and intangible assets | $0 | $4,036 | $(4,036) | n/m | | Restructuring and other costs | $835 | $6,443 | $(5,608) | (87.0)% | | Other income, net | $9,661 | $38,230 | $(28,569) | (74.7)% | | Income tax expense | $17,018 | $7,283 | $9,735 | 133.7% | - Revenue growth was driven by a **6.4% increase** in Merchant Solutions and a **12.2% increase** in Digital Wallets, benefiting from higher volumes, growth initiatives, and favorable foreign exchange[161](index=161&type=chunk) - Selling, general and administrative expenses decreased by **8.4%**, primarily due to a reduction in share-based compensation expense (**$8.6 million**) driven by forfeitures and performance adjustments[164](index=164&type=chunk) [Nine months ended September 30, 2023 compared to nine months ended September 30, 2022](index=33&type=section&id=Nine%20months%20ended%20September%2030%2C%202023%20compared%20to%20nine%20months%20ended%20September%2030%2C%202022) For the nine months ended September 30, 2023, Paysafe's revenue increased by **6.7%** to **$1.19 billion**, operating income turned positive to **$112.4 million**, net loss decreased substantially by **99.6%** to **$8.1 million**, and Adjusted EBITDA increased by **11.4%** to **$336.9 million** Key Financial Results (9 Months Ended Sep 30, USD in thousands) | Metric | 2023 (USD in thousands) | 2022 (USD in thousands) | Variance ($ in thousands) | Variance (%) | | :------------------------------------------ | :---------------------- | :---------------------- | :------------------------ | :----------- | | Revenue | $1,186,597 | $1,112,569 | $74,028 | 6.7% | | Operating income / (loss) | $112,375 | $(1,890,172) | $2,002,547 | (105.9)% | | Net loss | $(8,122) | $(1,828,573) | $1,820,451 | (99.6)% | | Adjusted EBITDA | $336,922 | $302,390 | $34,532 | 11.4% | | Impairment expense on intangible assets | $275 | $1,886,223 | $(1,885,948) | (100.0)% | | Restructuring and other costs | $4,165 | $60,636 | $(56,471) | (93.1)% | | Other income, net | $19,584 | $97,863 | $(78,279) | (80.0)% | | Income tax expense / (benefit) | $27,442 | $(52,749) | $80,191 | n/m | - The significant decrease in net loss was primarily driven by the **$1.89 billion** goodwill impairment expense in the prior period and a **$56.5 million** decrease in restructuring and other costs, partially offset by a **$78.3 million** decrease in other income, net[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[186](index=186&type=chunk) - Interest expense, net, increased by **26.5%** to **$112.6 million** due to higher variable interest rates on Term Loan facilities, partially offset by loan note repurchases[184](index=184&type=chunk) [Analysis by Segment](index=35&type=section&id=Analysis%20by%20Segment) This section provides a detailed analysis of Paysafe's financial performance across its Merchant Solutions and Digital Wallets segments for the three and nine months ended September 30, 2023 [Three months ended September 30, 2023 compared to three months ended September 30, 2022](index=35&type=section&id=Three%20months%20ended%20September%2030%2C%202023%20compared%20to%20three%20months%20ended%20September%2030%2C%202022) For the three months ended September 30, 2023, Merchant Solutions revenue increased by **6.4%** to **$216.8 million**, and Digital Wallets revenue grew **12.2%** to **$182.9 million**, both segments showing Adjusted EBITDA growth Segment Performance (3 Months Ended Sep 30, USD in thousands) | Segment | 2023 Revenue (USD in thousands) | 2022 Revenue (USD in thousands) | 2023 Adj. EBITDA (USD in thousands) | 2022 Adj. EBITDA (USD in thousands) | | :---------------- | :------------------------------ | :------------------------------ | :---------------------------------- | :---------------------------------- | | Merchant Solutions | $216,847 | $203,733 | $57,467 | $45,631 | | Digital Wallets | $182,855 | $162,992 | $79,930 | $68,142 | | Corporate | $0 | $0 | $(21,321) | $(18,303) | - Merchant Solutions' Adjusted EBITDA increased by **$11.8 million**, or **25.9%**, due to higher revenue and decreased credit losses, partially offset by increased cost of services[195](index=195&type=chunk) - Digital Wallets' Adjusted EBITDA increased by **$11.8 million**, or **17.3%**, driven by increased revenues, partially offset by higher personnel costs and credit losses[197](index=197&type=chunk) [Nine months ended September 30, 2023 compared to nine months ended September 30, 2022](index=36&type=section&id=Nine%20months%20ended%20September%2030%2C%202023%20compared%20to%20nine%20months%20ended%20September%2030%2C%202022) For the nine months ended September 30, 2023, Merchant Solutions revenue increased by **6.9%** to **$651.1 million**, and Digital Wallets revenue grew **6.7%** to **$543.4 million**, both segments showing Adjusted EBITDA growth Segment Performance (9 Months Ended Sep 30, USD in thousands) | Segment | 2023 Revenue (USD in thousands) | 2022 Revenue (USD in thousands) | 2023 Adj. EBITDA (USD in thousands) | 2022 Adj. EBITDA (USD in thousands) | | :---------------- | :------------------------------ | :------------------------------ | :---------------------------------- | :---------------------------------- | | Merchant Solutions | $651,066 | $608,848 | $165,572 | $149,282 | | Digital Wallets | $543,382 | $509,024 | $236,350 | $212,286 | | Corporate | $0 | $0 | $(65,000) | $(59,178) | - Merchant Solutions' Adjusted EBITDA increased by **$16.3 million**, or **10.9%**, due to increased revenue, decreased credit losses, and lower personnel costs, partially offset by higher cost of services[202](index=202&type=chunk) - Digital Wallets' Adjusted EBITDA increased by **$24.1 million**, or **11.3%**, driven by increased revenues and a reduction in cost of services due to growth in higher margin verticals, partially offset by higher personnel and technology costs[204](index=204&type=chunk) [Seasonality](index=37&type=section&id=Seasonality) Paysafe's business experiences seasonal fluctuations with **increased activity during traditional holiday periods, national holidays, and sporting events**, potentially leading to volatility in financial results - The business historically experiences **increased activity during traditional holiday periods, national holidays, and around sporting events**[206](index=206&type=chunk) - **Volatility in revenue or key operating metrics** can result in fluctuations in financial condition or results of operations[206](index=206&type=chunk) [Inflation](index=37&type=section&id=Inflation) While inflation may impact Paysafe's revenue and expenses, its effects on the company's results of operations and financial condition have **not been significant** to date - The effects of inflation on results of operations and financial condition have **not been significant**[207](index=207&type=chunk) - There is **no assurance** that future results will not be materially impacted by inflation[207](index=207&type=chunk) [Quantitative and Qualitative Disclosure about Market Risk](index=37&type=section&id=Quantitative%20and%20Qualitative%20Disclosure%20about%20Market%20Risk) This section details Paysafe's exposure to market risks, including interest rate, foreign currency, credit, and liquidity risks, and the strategies employed to manage them [Interest Rate Risk](index=37&type=section&id=Interest%20Rate%20Risk) Paysafe manages **interest rate risk** from variable-rate borrowings using **interest rate swaps**, with a **100 basis point increase** in rates resulting in a **$16.2 million unfavorable impact** on annualized net loss - Paysafe is exposed to **interest rate risk** on variable-rate borrowings and interest revenue, managed through **interest rate swaps**[209](index=209&type=chunk) - A **100 basis point increase** in interest rates would result in a **$16.2 million unfavorable impact** on annualized net loss as of September 30, 2023[210](index=210&type=chunk) - Due to interest rate floors (**0.5% on SOFR, 0% on EURIBOR**), the company may not realize the full benefit of a 100 basis point decrease in rates[210](index=210&type=chunk)[211](index=211&type=chunk) [Foreign Currency Risk](index=37&type=section&id=Foreign%20Currency%20Risk) Paysafe manages foreign currency risk by **transacting materially in USD, EUR, and GBP**, and **matching borrowing currencies to operational currencies**, with a **1% U.S. dollar strengthening** decreasing net assets by **$2.1 million** - Paysafe is exposed to movements in exchange rates of various currencies against the U.S. dollar, primarily **GBP, EUR, CAD, NOK, CHF, SEK, and PLN**[212](index=212&type=chunk) - Currency risk is managed by **transacting materially in USD, EUR, and GBP**, and **matching borrowing currencies to expected operational currencies**[213](index=213&type=chunk)[214](index=214&type=chunk) - A **1% strengthening** of the U.S. dollar would result in a **$2.1 million decrease** in net assets as of September 30, 2023[215](index=215&type=chunk) [Credit Risk](index=38&type=section&id=Credit%20Risk) Paysafe faces **credit risk** from financial assets and merchant chargebacks, managed through monitoring credit exposures, utilizing credit limits, insurance, collateral, and assessing customer credit quality - **Credit risk** arises from **financial loss** if a counterparty fails to meet contractual obligations, primarily from **cash, settlement receivables, restricted cash, and trade receivables**[217](index=217&type=chunk) - The company is exposed to potential losses from **merchant-related chargebacks**, especially for merchants promising future delivery of goods/services[218](index=218&type=chunk) - Credit risk is managed through **regular monitoring, credit limits, insurance, collateral** (bank guarantees, cash deposits), and **assessing customer/distributor credit quality**[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk) [Liquidity Risk](index=38&type=section&id=Liquidity%20Risk) Paysafe manages **liquidity risk** by monitoring cash levels, utilizing a **$305 million revolving credit facility**, and maintaining **compliance with debt covenants**, with total external borrowings at **$2.53 billion** - **Liquidity risk** is managed by **controlling and monitoring cash levels and cash flow**, ensuring sufficient liquidity to meet financial obligations[222](index=222&type=chunk) - The company has a **$305 million revolving credit facility** available to mitigate short-term liquidity risk and fund future M&A activity[223](index=223&type=chunk) - As of September 30, 2023, the total principal amount of external borrowings was **$2.53 billion**, and the company was in **compliance with all financial covenants**, including maintaining a first lien debt ratio below 7.5x LTM EBITDA[224](index=224&type=chunk)[225](index=225&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Paysafe's primary liquidity sources are operations, debt issuance, and credit facilities, with **$226.5 million** in cash and **$255.1 million** available under its revolving credit facility as of September 30, 2023 - Primary sources of liquidity include **funds from operations, debt issuance, and revolving credit facilities**[227](index=227&type=chunk) Liquidity Position (USD in thousands) | Metric | Sep 30, 2023 (USD in thousands) | Dec 31, 2022 (USD in thousands) | | :------------------------------------------------ | :---------------------------- | :---------------------------- | | Cash and cash equivalents | $226,451 | $260,219 | | Available under Revolving Credit Facility | $255,055 | $283,592 | - In November 2023, the Board approved a share repurchase program authorizing up to **$50 million** of common shares, to be funded by cash on hand, operations, or future financing[229](index=229&type=chunk) [Cash Flow](index=39&type=section&id=Cash%20Flow) This section provides a detailed analysis of Paysafe's cash flows from operating, investing, and financing activities for the nine months ended September 30, 2023, compared to the prior year [Comparison of Cash Flows](index=39&type=section&id=Comparison%20of%20Cash%20Flows) For the nine months ended September 30, 2023, Paysafe experienced a significant decrease in cash and cash equivalents, including restricted cash, by **$609.1 million**, primarily due to a shift to cash used in operating activities Summary Consolidated Cash Flow Information (9 Months Ended Sep 30, USD in thousands) | Activity | 2023 (USD in thousands) | 2022 (USD in thousands) | | :---------------------------------------------------------------- | :---------------------- | :---------------------- | | Net cash flows (used in) / provided by operating activities | $(355,368) | $1,373,219 | | Net cash flows used in investing activities | $(125,561) | $(533,588) | | Net cash flows used in financing activities | $(120,344) | $(91,604) | | Effect of foreign exchange rate changes | $(7,809) | $(284,334) | | (Decrease) / increase in cash and cash equivalents, including customer accounts and other restricted cash | $(609,082) | $463,693 | - The company includes **customer accounts and other restricted cash** in the cash and cash equivalents balance reported in the consolidated statements of cash flows[234](index=234&type=chunk) [Operating Activities](index=40&type=section&id=Operating%20Activities) Net cash flows used in operating activities increased by **$1.73 billion** to an outflow of **$355.4 million** for the nine months ended September 30, 2023, mainly due to a cash outflow from movements in funds payable and amounts due to customers - Net cash flows used in operating activities increased by **$1.73 billion**, primarily due to a cash outflow of **$529.9 million** from movements in funds payable and amounts due to customers in 2023, compared to a **$1.21 billion** inflow in 2022[241](index=241&type=chunk)[242](index=242&type=chunk)[243](index=243&type=chunk) - Non-cash items for the nine months ended September 30, 2023, included **$197.0 million** in depreciation and amortization, **$23.1 million** in share-based compensation, and **$17.5 million** in deferred tax expense[242](index=242&type=chunk) - Regulatory obligations require safeguarding customer funds, which are recorded as **customer accounts and other restricted cash** and are not presented within net cash flows from operating activities[238](index=238&type=chunk) [Investing Activities](index=40&type=section&id=Investing%20Activities) Net cash used in investing activities decreased by **$408.0 million** to **$125.6 million** for the nine months ended September 30, 2023, mainly due to the absence of large business acquisitions like SafetyPay - Net cash used in investing activities decreased by **$408.0 million**, primarily due to the absence of a **$424.7 million** cash outflow for the acquisition of SafetyPay in the prior year[244](index=244&type=chunk) - This decrease was partially offset by cash outflows of **$24.4 million** for merchant reserves held at a partner bank in 2023[244](index=244&type=chunk) [Financing Activities](index=41&type=section&id=Financing%20Activities) Net cash used in financing activities increased by **$28.7 million** to **$120.3 million** for the nine months ended September 30, 2023, primarily due to **$124.3 million** in debt repurchases - Net cash used in financing activities increased by **$28.7 million**, primarily due to **$124.3 million** in repurchases of borrowings[245](index=245&type=chunk) - This was partially offset by an increase in borrowings on the revolving credit facility[245](index=245&type=chunk) [Accounting Pronouncements Not Yet Adopted](index=41&type=section&id=Accounting%20Pronouncements%20Not%20Yet%20Adopted) This section refers to **Note 1** for details on recently issued accounting pronouncements that may be relevant to operations but have not yet been adopted - Details on recently issued accounting pronouncements not yet adopted are provided in **Note 1** of the financial statements[247](index=247&type=chunk)

Paysafe Limited (NYSE:PSFE) Q3 2023 Earnings Conference Call November 14, 2023 8:30 AM ET Company Participants Bruce Lowthers - Chief Executive Officer Alex Gersh - Chief Financial Officer Kirsten Nielsen - Senior Vice President, Investor Relations Conference Call Participants David Togut - Evercore ISI Scott Wurtzel - Wolfe Research Jamie Friedman - Susquehanna Tim Chiodo - UBS Aditya Buddhavarapu - Bank of America Operator Hello and welcome to the Paysafe Q3 2023 earnings conference call and webcast. If ...

Free cash flow is defined as net cash flows provided by/used in operating activities, adjusted for the impact of capital expenditure, payments relating to restructuring and other costs, cash paid for interest and movements in customer accounts and other restricted cash. Capital expenditure includes purchases of property plant & equipment and purchases of other intangible assets, including software development costs. Capital expenditure does not include purchases of merchant portfolios. Free cash flow conver ...