Payoneer (PAYO) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Presents Payoneer Global Inc.'s unaudited Q1 2023 financial statements, including balance sheets, income, and cash flow statements with notes Condensed Consolidated Balance Sheets Total assets and liabilities decreased by March 31, 2023, mainly due to customer funds, while shareholders' equity increased | Balance Sheet Item | March 31, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :--- | :--- | :--- | | Total Assets | $6,237,718 | $6,594,651 | | Cash and cash equivalents | $544,542 | $543,299 | | Customer funds | $5,467,274 | $5,838,612 | | Total Liabilities | $5,660,872 | $6,049,395 | | Outstanding operating balances | $5,467,274 | $5,838,612 | | Total Shareholders' Equity | $576,846 | $545,256 | Condensed Consolidated Statements of Comprehensive Income Revenues significantly increased for Q1 2023, resulting in operating income, a turnaround from a prior-year loss, though net income decreased | Income Statement Item | Q1 2023 ($ thousands) | Q1 2022 ($ thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Revenues | $192,014 | $136,958 | +40% | | Total operating expenses | $177,002 | $143,301 | +24% | | Operating income (loss) | $15,012 | ($6,343) | N/A | | Financial income, net | $2,098 | $28,501 | -93% | | Net income | $7,938 | $20,211 | -61% | | Diluted earnings per share | $0.02 | $0.06 | -67% | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities in Q1 2023 was positive, while both investing and financing activities used significant cash | Cash Flow Activity | Q1 2023 ($ thousands) | Q1 2022 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $3,902 | $2,372 | | Net cash provided by (used in) investing activities | ($57,004) | $27,953 | | Net cash provided by (used in) financing activities | ($364,490) | $233,611 | | Net change in cash, cash equivalents, restricted cash and customer funds | ($417,077) | $263,858 | Notes to the Condensed Consolidated Financial Statements Notes provide detailed explanations of accounting policies and financial results, covering acquisitions, capital advances, revenue disaggregation, and a stock repurchase program - In January 2023, the Company acquired all remaining interests in its joint venture in the People's Republic of China, accounting for it as an asset acquisition[35] | Revenue by Region | Q1 2023 ($ thousands) | Q1 2022 ($ thousands) | YoY Growth | | :--- | :--- | :--- | :--- | | Greater China | $63,960 | $43,041 | 49% | | Europe | $38,621 | $28,461 | 36% | | North America | $25,536 | $20,276 | 26% | | Asia-Pacific | $25,381 | $19,019 | 33% | | South Asia, Middle East and North Africa | $19,945 | $15,412 | 29% | | Latin America | $18,571 | $10,749 | 73% | | Total Revenues | $192,014 | $136,958 | 40% | - On May 7, 2023, the Board of Directors authorized a stock repurchase program for up to $80 million of common stock over 24 months[97] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2023 financial results, highlighting significant revenue growth driven by interest income, leading to improved operating income and Adjusted EBITDA Results of Operations Q1 2023 revenues significantly increased, primarily from interest income, leading to operating income despite rising expenses, though net income decreased - Revenues increased by $55.1 million (40%) YoY, primarily driven by a $49.2 million increase in interest income from higher customer balances and rising interest rates[115] - Sales and marketing expenses increased by $13.4 million (39%) due to higher employee compensation, third-party commissions, and marketing program spending[120] - General and administrative expenses rose by $8.6 million (47%), mainly from increased employee compensation and legal services costs[121] Liquidity and Capital Resources The company held substantial cash as of March 31, 2023, with liquidity from operations and a Warehouse Facility, deemed sufficient for future needs - The company had $544.5 million of cash and cash equivalents as of March 31, 2023[126] - The company utilizes a Warehouse Facility to provide external financing for its capital advance activity, with an initial committed amount of $25 million that can be increased up to $100 million[127][128] | Cash Flow Summary | Q1 2023 ($ thousands) | Q1 2022 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $3,902 | $2,372 | | Net cash provided by (used in) investing activities | ($57,004) | $27,953 | | Net cash provided by (used in) financing activities | ($364,490) | $233,611 | Key Metrics and Non-GAAP Financial Measures Management uses Volume and Adjusted EBITDA to evaluate performance, with Q1 2023 showing transaction volume growth and a significant increase in Adjusted EBITDA | Metric | Q1 2023 | Q1 2022 | YoY Growth | | :--- | :--- | :--- | :--- | | Volume | $15,735 million | $14,620 million | 8% | | Reconciliation to Adjusted EBITDA | Q1 2023 ($ thousands) | Q1 2022 ($ thousands) | | :--- | :--- | :--- | | Net income | $7,938 | $20,211 | | Adjustments (Depreciation, Taxes, etc.) | $12,861 | $29,328 | | EBITDA | $20,799 | $29,328 | | Other Adjustments (Stock comp, M&A, etc.) | $17,953 | ($18,927) | | Adjusted EBITDA | $38,752 | $10,401 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rate changes and foreign currency fluctuations, with hypothetical shifts materially impacting revenues and earnings due to large balances - The company is exposed to interest rate sensitivity, where a hypothetical 1% change in rates could materially affect revenues and earnings due to its holdings of cash, cash equivalents, and customer funds[156] - Payoneer faces foreign currency risk from its global operations and customer funds held in various currencies. A hypothetical 10% change in exchange rates could materially impact financial results[158] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2023, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[161] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[162] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is periodically involved in various litigation matters incidental to its normal business operations, with further details in Note 11 - The company is party to various litigation matters incidental to the conduct of its business. More details are available in Note 11 (Commitment and Contingencies)[165] Item 1A. Risk Factors No material changes occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K filed on February 28, 2023 - As of the filing date of this Form 10-Q, there have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K filed on February 28, 2023[167] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company issued common stock to a senior employee for the 2020 optile acquisition, exempt from registration under Section 4(a)(2) of the Securities Act - A total of 59,257 shares of common stock were issued during the quarter pursuant to an employment agreement related to the 2020 optile acquisition, exempt from registration under Section 4(a)(2) of the Securities Act[168] Item 3. Defaults upon Senior Securities The company reported no defaults upon senior securities - None[169] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[170] Item 5. Other Information The company reported no other information for this item - None[171] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including various agreements, CEO and CFO certifications, and XBRL data files - Lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files[174][175]