Nuvei (NVEI) - 2022 Q1 - Quarterly Report

Condensed Interim Consolidated Financial Statements This section presents the unaudited interim financial statements, including the statements of financial position, profit or loss, cash flows, and changes in equity, along with their detailed explanatory notes Consolidated Statements of Financial Position This statement details Nuvei's financial position, showing a slight asset increase, a rise in liabilities, and a decrease in total equity as of March 31, 2022 Consolidated Statements of Financial Position (in thousands of US dollars) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $3,467,121 | $3,455,470 | | Total Current Assets | $1,555,181 | $1,526,632 | | Total Non-current Assets | $1,911,940 | $1,928,838 | | Total Liabilities | $1,563,132 | $1,433,630 | | Total Current Liabilities | $989,323 | $856,775 | | Total Non-current Liabilities | $573,809 | $576,855 | | Total Equity | $1,903,989 | $2,021,840 | Consolidated Statements of Profit or Loss and Comprehensive Income or Loss This statement presents Nuvei's Q1 2022 financial performance, showing strong revenue growth but a significant decline in operating profit and net income due to increased expenses Q1 2022 vs Q1 2021 Performance (in thousands of US dollars) | Metric | Q1 2022 | Q1 2021 | Change | | :--- | :--- | :--- | :--- | | Revenue | $214,544 | $150,480 | +42.6% | | Gross Profit | $167,628 | $123,296 | +36.0% | | Operating Profit | $20,816 | $34,860 | -40.3% | | Net Income | $4,514 | $27,790 | -83.8% | | Diluted EPS | $0.02 | $0.19 | -89.5% | Consolidated Statements of Cash Flows This statement outlines Nuvei's Q1 2022 cash flows, showing increased operating cash flow, reduced investing cash outflow, and significant cash usage in financing activities, resulting in an overall cash decrease Cash Flow Summary (in thousands of US dollars) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Cash flow from operating activities | $65,734 | $53,403 | | Cash flow used in investing activities | ($9,148) | ($90,281) | | Cash flow from (used in) financing activities | ($76,337) | $336 | | Net decrease in cash | ($13,538) | ($36,258) | | Cash – End of period | $735,038 | $144,464 | Consolidated Statements of Changes in Equity This statement details the changes in Nuvei's total equity during Q1 2022, primarily driven by share repurchases and the purchase of non-controlling interests, partially offset by share-based payments Changes in Equity for Q1 2022 (in thousands of US dollars) | Item | Amount | | :--- | :--- | | Balance as at January 1, 2022 | $2,021,840 | | Share repurchased and cancelled | ($72,384) | | Share repurchase liability | ($43,923) | | Effect of purchase of non-controlling interests | ($39,751) | | Equity-settled share-based payments | $37,187 | | Net income and comprehensive loss | ($348) | | Balance as at March 31, 2022 | $1,903,989 | Notes to Condensed Interim Consolidated Financial Statements This section provides detailed explanations for the primary financial statements, covering accounting policies, business combinations, asset and liability breakdowns, share-based payments, and subsequent events Note 1: Reporting entity This note identifies Nuvei Corporation as a global payment solutions company domiciled in Canada, with shares traded on the TSX and Nasdaq - Nuvei is a global payment company providing solutions across North America, Europe, Middle East and Africa, Latin America, and Asia Pacific[9] - The company's shares are listed on the TSX and Nasdaq under the symbol 'NVEI'[10] Note 2: Basis of preparation and consolidation This note explains that the financial statements are prepared under IFRS (IAS 34) and that the company operates as a single reportable segment - Financial statements are prepared according to IFRS applicable to interim statements (IAS 34)[11] - The company has one reportable segment: the provision of payment technology solutions[13] - The impact of the COVID-19 pandemic on the financial statements for Q1 2022 and 2021 has been limited, though future uncertainty remains[17][18] Note 3: Significant accounting policies and new accounting standards This note details the consistent accounting policies with 2021, highlighting a new policy for share capital repurchases following a normal course issuer bid - A new accounting policy was adopted for share capital repurchases following the approval of a normal course issuer bid (NCIB) on March 7, 2022[21] - Contractual obligations to repurchase shares are recorded as a financial liability at fair market value, with changes in fair value recognized in finance costs[22] Note 4: Business combinations and disposals This note describes the acquisition of Base Commerce LLC on January 1, 2021, and the resulting goodwill recognized from the transaction - Acquired Base Commerce LLC on January 1, 2021, for a total consideration of $92,678 thousand[26] - The acquisition resulted in goodwill of $32,109 thousand, which is deductible for tax purposes[28] Note 5: Trade and other receivables This note details the increase in total trade and other receivables as of March 31, 2022, primarily driven by a rise in trade receivables Trade and Other Receivables (in thousands of US dollars) | Category | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Trade receivables | $38,873 | $34,765 | | Other receivables | $5,824 | $4,461 | | Total | $44,733 | $39,262 | Note 6: Advances to third parties This note explains the significant decrease in advances to a third-party independent sales organization due to a settlement for merchant contracts - Advances to a third-party were settled for $7,663 thousand in exchange for a portfolio of merchant contracts, which was recognized as an intangible asset[30] Note 7: Trade and other payables This note outlines the slight increase in trade and other payables as of March 31, 2022, with trade payables and accrued bonuses as major components Trade and Other Payables (in thousands of US dollars) | Category | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Trade payables | $31,037 | $29,720 | | Accrued bonuses and other compensation-related liabilities | $31,726 | $30,460 | | Due to merchants not related to segregated funds | $13,881 | $14,991 | | Total | $104,873 | $101,848 | Note 8: Share repurchase liability This note details the establishment of an Automatic Share Purchase Plan (ASPP) and the initial recording of a share repurchase liability in Q1 2022 - The company established an Automatic Share Purchase Plan (ASPP) to buy back shares during blackout periods[32] Change in Share Repurchase Liability Q1 2022 (in thousands of US dollars) | Item | Amount | | :--- | :--- | | Initial fair value of share repurchase liability | $43,923 | | Shares repurchased under the ASPP | ($2,371) | | Fair value remeasurement | $2,174 | | Balance, end of period | $43,726 | Note 9: Share capital This note describes the share repurchases and cancellations under the Normal Course Issuer Bid (NCIB) in Q1 2022, along with shares issued from stock option exercises - In Q1 2022, the company repurchased and cancelled 1,208,766 Subordinate Voting Shares for a total of $74,754 thousand under its NCIB program[34] Note 10: Revenue and expenses by nature This note provides a breakdown of revenue, primarily from merchant transaction services, and highlights the significant increase in selling, general, and administrative expenses Revenue and Expense Breakdown (in thousands of US dollars) | Category | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Revenue | $214,544 | $150,480 | | Merchant transaction and processing services | $212,412 | $148,290 | | Cost of revenue | $46,916 | $27,184 | | Selling, general and administrative expenses | $146,812 | $88,436 | | Share-based payments (within SG&A) | $37,187 | $4,105 | Note 11: Net finance costs This note explains the increase in net finance costs in Q1 2022, primarily due to higher interest on borrowings and the new share repurchase liability expense Net Finance Costs Breakdown (in thousands of US dollars) | Category | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Interest on loans and borrowings | $4,893 | $3,170 | | Change in fair value of share repurchase liability | $2,174 | — | | Total Finance costs | $7,741 | $3,315 | | Net finance costs | $7,110 | $2,456 | Note 12: Share-based payment arrangements This note details the various share-based awards granted under the Omnibus Incentive Plan, including outstanding options, RSUs, PSUs, and DSUs Outstanding Share-Based Awards as of March 31, 2022 | Award Type | Quantity Outstanding | | :--- | :--- | | Restricted share units (RSUs) | 1,633,168 | | Performance share units (PSUs) | 1,778,431 | | Deferred share units (DSUs) | 12,530 | | Stock options | 8,734,657 | - PSUs awarded in Q1 2022 have a maximum payout of 200%, potentially resulting in an additional 383,262 shares being issued[42] Note 13: Net income per share This note presents the calculation of basic and diluted net income per share for Q1 2022, showing a significant decrease compared to the prior year Net Income Per Share Calculation (Q1 2022 vs Q1 2021) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net income attributable to common shareholders ($'000) | $3,003 | $26,814 | | Weighted average shares outstanding – basic (in '000s) | 142,863 | 138,202 | | Weighted average shares outstanding – diluted (in '000s) | 146,605 | 142,741 | | Basic Net Income Per Share | $0.02 | $0.19 | | Diluted Net Income Per Share | $0.02 | $0.19 | Note 14: Determination of fair values This note explains the company's use of a three-level hierarchy for fair value measurement of financial instruments, identifying Level 1 and Level 3 items - The company uses a fair value hierarchy for financial instruments, with Level 1 based on quoted prices, Level 2 on observable inputs, and Level 3 on unobservable inputs[45][47] Financial Instruments at Fair Value as of March 31, 2022 (in thousands of US dollars) | Instrument | Fair Value Hierarchy | Amount | | :--- | :--- | :--- | | Share repurchase liability | Level 1 | $43,726 | | Advances to a third party | Level 3 | $8,250 | | Contingent considerations | Level 3 | $3,004 | Note 15: Related party transactions This note details the significant increase in transactions with key management personnel in Q1 2022, primarily driven by higher share-based payments Key Management Personnel Compensation (in thousands of US dollars) | Compensation Type | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Salaries and short-term benefits | $1,350 | $1,367 | | Share-based payments | $17,866 | $1,451 | | Total | $19,216 | $2,818 | Note 16: Supplementary cash flow disclosure This note provides a detailed breakdown of changes in non-cash working capital items, which resulted in a net cash use in Q1 2022 Changes in Non-Cash Working Capital Items (in thousands of US dollars) | Item | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Trade and other receivables | ($5,471) | ($2,010) | | Prepaid expenses | ($1,916) | ($446) | | Trade and other payables | ($3,298) | ($323) | | Total | ($13,618) | ($3,198) | Note 17: Contingencies This note addresses the company's involvement in various litigation matters and exposure to uncertain tax positions, which are not expected to materially affect financial statements - Management does not expect that the resolution of ordinary course litigation or uncertain tax positions will have a material effect on the Company's financial statements[53] Note 18: Subsequent events This note describes events occurring after the quarter-end, including the purchase of remaining interest in LPP and the accounting grant date for RSUs to a consultant - On April 7, 2022, the Company purchased the remaining 40% interest in LPP for a cash consideration of $39,751 thousand[54] - On May 9, 2022, the accounting grant date for 484,590 RSUs granted to a consultant was met, allowing for the fair value of the services to be estimated[55]