Payoneer (PAYO) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited Q1 2022 financials report 36% revenue growth to $137.0 million and $20.2 million net income, driven by warrant gains Condensed Consolidated Balance Sheets Total assets increased to $5.31 billion from $5.08 billion, with liabilities at $4.79 billion and equity at $522.0 million Condensed Consolidated Balance Sheet Data (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $465,734 | $465,926 | | Customer funds | $4,630,553 | $4,401,254 | | Total current assets | $5,185,537 | $4,962,723 | | Total assets | $5,307,852 | $5,078,752 | | Liabilities & Equity | | | | Outstanding operating balances | $4,630,553 | $4,401,254 | | Total liabilities | $4,785,888 | $4,591,679 | | Total shareholders' equity | $521,964 | $487,073 | Condensed Consolidated Statements of Income (Loss) Q1 2022 revenues grew 36% to $137.0 million, resulting in a $20.2 million net income, primarily from warrant fair value gains Q1 2022 vs Q1 2021 Income Statement (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Revenues | $136,958 | $100,606 | | Total operating expenses | $143,301 | $101,755 | | Operating loss | $(6,343) | $(1,149) | | Gain from change in fair value of Warrants | $31,196 | $0 | | Net income (loss) | $20,211 | $(3,508) | | Diluted earnings (loss) per share | $0.06 | $(0.16) | Condensed Consolidated Statements of Comprehensive Income (Loss) Q1 2022 comprehensive income was $20.6 million, a significant improvement from a $4.7 million loss in the prior year Comprehensive Income (Loss) (in thousands) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net income (loss) | $20,211 | $(3,508) | | Foreign currency translation adjustments | $390 | $(1,189) | | Comprehensive income (loss) | $20,601 | $(4,697) | Condensed Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity increased to $522.0 million in Q1 2022, driven by net income and stock-based compensation - Shareholders' equity increased by $34.9 million during Q1 2022, from $487.1 million to $522.0 million[25] Condensed Consolidated Statements of Cash Flows Q1 2022 operating cash flow was $2.4 million, with investing activities providing $28.0 million and financing $233.6 million Summary of Cash Flows (in thousands) | Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $2,372 | $(16,468) | | Net cash provided by (used in) investing activities | $27,953 | $(8,034) | | Net cash provided by financing activities | $233,611 | $2,430 | Notes to the Condensed Consolidated Financial Statements Notes detail accounting policies, Russia-Ukraine conflict impact (immaterial), CECL adoption, and revenue disaggregation by geography - The Russia-Ukraine conflict's impact on revenue was immaterial in Q1 2022. Russia, Belarus, and Ukraine combined accounted for slightly less than 10% of revenue for the quarter[43] - The company early adopted the new CECL guidance for credit losses on financial instruments effective January 1, 2022, resulting in a cumulative effect adjustment to retained earnings[66] Revenue by Primary Geographical Market (in thousands) | Region | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Greater China | $43,041 | $39,614 | | United States | $19,782 | $8,053 | | All other countries | $74,135 | $52,939 | | Total revenues | $136,958 | $100,606 | - The company entered into a Warehouse Facility agreement with related party Viola Credit for external financing of its Capital Advance activity, with an initial committed amount of $25 million[77][78] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Q1 2022 revenue grew 36% to $137.0 million, with volume up 10% to $14.6 billion, while operating expenses increased 41% Q1 2022 vs Q1 2021 Operational Results (in thousands) | Metric | Q1 2022 | Q1 2021 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $136,958 | $100,606 | 36% | | Total operating expenses | $143,301 | $101,755 | 41% | | Operating loss | $(6,343) | $(1,149) | 452% | | Net income (loss) | $20,211 | $(3,508) | (676)% | - Revenue growth of 36% was driven by increased acquisition of new customers and fast growth in several developing markets[132] - Operating expenses increased across the board, primarily due to higher employee compensation from increased headcount in R&D (+56%), Sales & Marketing (+49%), and G&A (+72%)[135][138][139] Key Metrics and Non-GAAP Measures (in millions) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Volume | $14,620 | $13,341 | | Adjusted EBITDA | $10.4 | $7.8 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rate changes and significant foreign currency fluctuations, with potential material impact - Interest rate sensitivity on cash and cash equivalents is low due to the short-term nature of the instruments. A hypothetical 1% change in rates on the Warehouse Facility debt would not have a material effect[174][175] - The company has significant foreign currency exposure from its global operations. A hypothetical 10% increase or decrease in exchange rates could have a material impact on financial results[176][180] - The company is an emerging growth company under the JOBS Act and has elected to use the extended transition period for new accounting standards, but expects to lose this status at the end of fiscal year 2022[181] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2022, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[184] - 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[185] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various litigation matters incidental to its business, as detailed in Note 8 of the financial statements - The company is involved in various litigation matters that arise in the ordinary course of business. For more details, refer to Note 8 (Commitment and Contingencies)[188] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the Annual Report on Form 10-K - As of the filing date, no material changes have occurred to the risk factors disclosed in the Annual Report on Form 10-K[190] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported for the period - None[191] Item 3. Defaults upon Senior Securities No defaults upon senior securities were reported for the period - None[192] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[193] Item 5. Other Information No other information to report for the period - None[194] Item 6. Exhibits Exhibits include employment agreements and CEO/CFO certifications required by the Sarbanes-Oxley Act - Exhibits filed with the report include CEO and CFO certifications pursuant to Rules 13a-14, 15d-14, and Section 906 of the Sarbanes-Oxley Act[198]