Nuvei (NVEI) - 2021 Q3 - Quarterly Report

Condensed Interim Consolidated Financial Statements Consolidated Statements of Financial Position As of September 30, 2021, Nuvei's total assets grew to $2.89 billion from $2.25 billion at the end of 2020, primarily driven by a significant increase in intangible assets and goodwill from recent acquisitions, while total liabilities rose to $1.32 billion from $790 million, mainly due to increased loans and borrowings to finance these acquisitions, consequently increasing total equity from $1.46 billion to $1.58 billion Consolidated Statement of Financial Position Highlights (in thousands of US dollars) | Financial Metric | September 30, 2021 | December 31, 2020 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $2,893,408 | $2,247,769 | +28.7% | | Intangible assets | $756,593 | $524,232 | +44.3% | | Goodwill | $1,133,864 | $969,820 | +16.9% | | Total Liabilities | $1,316,256 | $789,880 | +66.6% | | Loans and borrowings (Non-current) | $501,385 | $212,726 | +135.7% | | Total Equity | $1,577,152 | $1,457,889 | +8.2% | Consolidated Statements of Profit or Loss and Comprehensive Income or Loss For the nine months ended September 30, 2021, Nuvei reported a significant turnaround, posting a net income of $94.7 million compared to a net loss of $126.2 million in the same period of 2020, driven by 97% year-over-year revenue growth to $512.7 million and a dramatic reduction in net finance costs Performance Highlights (in thousands of US dollars, except per share) | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | Change | | :--- | :--- | :--- | :--- | | Revenue | $512,651 | $260,319 | +97.0% | | Gross Profit | $414,011 | $214,583 | +92.9% | | Operating Profit | $123,629 | $48,048 | +157.3% | | Net Finance Costs | $9,569 | $152,427 | -93.7% | | Net Income (Loss) | $94,706 | ($126,247) | Turnaround to Profit | | Diluted EPS | $0.64 | ($1.49) | Turnaround to Profit | Consolidated Statements of Cash Flows For the nine months ended September 30, 2021, the company generated $201.9 million in cash from operating activities, a significant increase from $49.0 million in the prior year period, while cash used in investing activities was $387.5 million, primarily for business acquisitions, and financing activities provided $298.2 million, largely from new loans, resulting in an overall increase in cash and cash equivalents of $108.0 million Cash Flow Summary (in thousands of US dollars) | Cash Flow Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $201,885 | $48,969 | | Net Cash from (used in) Investing Activities | ($387,501) | $7,821 | | Net Cash from (used in) Financing Activities | $298,210 | ($18,822) | | Net Increase in Cash | $108,012 | $39,354 | | Cash - End of period | $288,734 | $99,426 | Consolidated Statements of Changes in Equity Total equity increased from $1.46 billion as of January 1, 2021, to $1.58 billion by September 30, 2021, primarily driven by a net income of $91.5 million attributable to shareholders and equity-settled share-based payments of $20.2 million, partially offset by a $20.1 million loss from foreign currency translation differences - Total equity grew by $119.3 million in the first nine months of 2021[10] Reconciliation of Total Equity (in thousands of US dollars) | Description | Amount | | :--- | :--- | | Balance as at January 1, 2021 | $1,457,889 | | Net income and comprehensive income | $74,595 | | Equity-settled share-based payments | $20,245 | | Share issuance & option exercises | $16,460 | | Balance as at September 30, 2021 | $1,577,152 | Notes to Condensed Interim Consolidated Financial Statements The notes provide detailed explanations of the financial statements, including the basis of preparation (IFRS), significant accounting policies, and impacts of the COVID-19 pandemic, covering four business acquisitions completed in 2021, a significant increase in debt to finance them, revenue and expense breakdowns, related party transactions, and important subsequent events, including a US IPO on the Nasdaq Reporting entity Nuvei Corporation is a global payment technology solutions provider based in Canada, with its Subordinate Voting Shares trading on the Toronto Stock Exchange (TSX) and, as of October 6, 2021, also on the Nasdaq Global Select Market under the symbol 'NVEI' - The company's shares were listed on the Nasdaq Global Select Market on October 6, 2021, under the symbol 'NVEI'[11] Basis of preparation and consolidation The financial statements are prepared in accordance with IFRS (IAS 34), with certain 2020 comparative figures for foreign currency exchange gains/losses reclassified from net finance costs and SG&A to a separate line item to improve comparability, with no impact on net income - The company has one reportable segment: the provision of payment technology solutions[15] - The COVID-19 pandemic's impact on the business for the nine months ended September 30, 2021, was limited, but future impacts remain uncertain[19] Business combinations During the first nine months of 2021, Nuvei completed four strategic acquisitions: Base Commerce, Mazooma, Simplex, and Paymentez, which significantly expanded the company's technology and market presence, adding total goodwill of $175.4 million and intangible assets of $268.6 million, financed in part by increasing its credit facility 2021 Acquisitions Summary | Company Acquired | Acquisition Date | Total Consideration (USD thousands) | Revenue Contribution (to Sep 30, 2021) | | :--- | :--- | :--- | :--- | | Base Commerce LLC | Jan 1, 2021 | $92,678 | $41,517 | | Mazooma Technical Services Inc. | Aug 3, 2021 | $54,503 | $395 | | SimplexCC Ltd. | Sep 1, 2021 | $290,574 | $3,606 | | Paymentez LLC. | Sep 1, 2021 | $24,459 | $236 | - In May 2020, the company disposed of its wholly-owned subsidiary, CreditGuard, for $21.1 million, resulting in net cash proceeds of $19.0 million[34] Intangible assets and goodwill As of September 30, 2021, the carrying amount of intangible assets increased to $756.6 million and goodwill rose to $1.13 billion, primarily due to business combinations during the period, which added $268.6 million in intangible assets and $175.4 million in goodwill Changes in Intangible Assets and Goodwill (in thousands of US dollars) | Account | Balance at Dec 31, 2020 | Additions from Acquisitions | Balance at Sep 30, 2021 | | :--- | :--- | :--- | :--- | | Intangible assets | $524,232 | $268,629 | $756,593 | | Goodwill | $969,820 | $175,385 | $1,133,864 | Loans and borrowings The company significantly increased its debt to fund acquisitions, amending its credit facility on June 18, 2021, to increase term loans to $512.0 million and the revolving facility to $350.0 million (later increased to $385.0 million), which resulted in the carrying amount of total loans and borrowings (non-current) increasing to $501.4 million from $212.7 million at year-end 2020, while remaining in compliance with all debt covenants - On June 18, 2021, the company borrowed an additional $300 million under its amended term loan facility to finance acquisitions[32][41] - The company is subject to a total leverage ratio covenant, which it was in compliance with as of September 30, 2021[42] Revenue and expenses by nature For the nine months ended September 30, 2021, total revenue was $512.7 million, with the vast majority ($506.0 million) coming from merchant transaction and processing services, and key operating expenses included commissions ($97.1 million), employee compensation ($74.6 million), and depreciation & amortization ($64.9 million) Revenue and Key Expenses for Nine Months Ended Sep 30, 2021 (in thousands of US dollars) | Item | 2021 | 2020 | | :--- | :--- | :--- | | Revenue | $512,651 | $260,319 | | Merchant transaction and processing services | $506,007 | $253,559 | | Cost of revenue | $98,640 | $45,736 | | SG&A Expenses | $290,382 | $166,535 | | - Commissions | $97,108 | $49,307 | | - Employee compensation | $74,634 | $42,847 | | - Depreciation and amortization | $64,890 | $51,264 | Net finance costs Net finance costs for the nine months ended September 30, 2021, were $9.6 million, a stark decrease from $152.4 million in the prior-year period, as the 2020 figure was significantly inflated by costs related to liability-classified shares and convertible debentures that were settled or converted as part of the 2020 TSX listing Breakdown of Net Finance Costs (in thousands of US dollars) | Item | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Interest on loans and borrowings | $11,460 | $64,424 | | Change in redemption amount of liability classified shares | $0 | $73,429 | | Interest on unsecured debentures | $0 | $15,503 | | Interest on advances to third parties (income) | ($2,309) | ($4,170) | | Total Net Finance Costs | $9,569 | $152,427 | Share-based payment arrangements As of September 30, 2021, the company had 6.8 million stock options outstanding with a weighted average exercise price of $33.40, and during the first nine months of 2021, it granted approximately 1.2 million new stock options, 209k RSUs, and 730k PSUs under its Omnibus Incentive Plan Outstanding Awards as of September 30, 2021 | Award Type | Quantity Outstanding | | :--- | :--- | | Stock options | 6,804,452 | | Restricted share units (RSUs) | 208,948 | | Performance share units (PSUs) | 730,169 | | Deferred share units (DSUs) | 8,613 | Subsequent events After the quarter ended, Nuvei completed its initial public offering in the United States on October 8, 2021, issuing 3.45 million Subordinate Voting Shares for gross proceeds of $424.8 million, and additionally granted a significant special award of 665,000 PSUs and 2.2 million stock options to its founder, chair, and CEO, with vesting tied to substantial share price appreciation - On October 8, 2021, the company closed its US IPO, raising gross proceeds of $424.8 million[68] - The company's shares began trading on the Nasdaq on October 6, 2021, under the symbol 'NVEI'[67] - A special award of 2.2 million stock options and 665,000 PSUs was granted to the CEO, with vesting contingent on the share price increasing by 50%, 100%, and 150%[69]