Payoneer Global Inc 10-Q for FY2023 Q2
Payoneer Global Inc. (PAYO)
About this 10-Q
Payoneer Global Inc filed this 10-Q on August 8, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).
Headline figures
Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $206.73M
- up 39.5% from $148.19M a year earlier
- Net income
- $45.55M
- up 930.1% from net income of $4.42M a year earlier
- Diluted EPS
- $0.12
- up 1100.0% from $0.01 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to .
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (Commission File Number) | (I.R.S. Employer |
| | |
| (Address of principal executive offices, | |
| ||
| ( | |
Registrant’s Telephone Number, Including Area Code | ||
N/A | ||
(Former name or former address, if changed since last report) | ||
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
| | |||
| |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Accelerated filer ☐ | |
Non-accelerated filer ☐ | Smaller reporting company |
Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
As of August 1, 2023, the registrant had
Payoneer Global Inc.
Form 10-Q
For the Period Ended June 30, 2023
Table of Contents
2
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including the information incorporated herein by reference, contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Forward-looking statements are typically identified by words such as “anticipate,” “appear,” “approximate,” “believe,” “continue,” “could,” “estimate,” “expect,” “foresee,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “would” and other similar words and expressions (or the negative version of such words or expressions) may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements are based on the current expectations of Payoneer’s management and are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to: (1) changes in applicable laws or regulations; (2) the possibility that Payoneer may be adversely affected by geopolitical and other economic, business and/or competitive factors; (3) Payoneer’s estimates of its financial performance; (4) the outcome of any known and/or unknown legal or regulatory proceedings; and (5) other factors, described under the heading “Risk Factors” discussed and identified in public filings made with the U.S. Securities and Exchange Commission (the “SEC”) by Payoneer.
Should one or more of these risks or uncertainties materialize or should any of the assumptions made by the management of Payoneer prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.
All subsequent written and oral forward-looking statements concerning the matters addressed in this Quarterly Report on Form 10-Q and attributable to Payoneer or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Quarterly Report on Form 10-Q. Except to the extent required by applicable law or regulation, Payoneer undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Current Report on Form 10-Q or to reflect the occurrence of unanticipated events.
3
PART I. FINANCIAL INFORMATION
PAYONEER GLOBAL INC.
QUARTERLY REPORT FOR THE PERIOD ENDED June 30, 2023
TABLE OF CONTENTS
|
| Page |
Condensed consolidated financial statements (unaudited) in thousands of U.S. dollars: | ||
5 | ||
Condensed consolidated comprehensive statements of income (Unaudited) | 6 | |
Condensed consolidated statements of changes in shareholders’ equity (Unaudited) | | 7 |
9 | ||
Notes to condensed consolidated financial statements (Unaudited) | | 11 |
4
PAYONEER GLOBAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA
|
| June 30, |
| December 31, | ||
| | 2023 | | 2022 | ||
Assets: |
| |
|
| |
|
Current assets: |
| |
|
| |
|
Cash and cash equivalents | | $ | | | $ | |
Restricted cash | |
| | |
| |
Customer funds | |
| | |
| |
Accounts receivable (net of allowance of $ | |
| | |
| |
Capital advance receivables (net of allowance of $ | |
| | |
| |
Other current assets | |
| | |
| |
Total current assets | |
| | |
| |
Non-current assets: | |
| | |
|
|
Property, equipment and software, net | |
| | |
| |
Goodwill | |
| | |
| |
Intangible assets, net | |
| | |
| |
Restricted cash | |
| | |
| |
Deferred taxes | |
| | |
| |
Investment in associated company | |
| — | |
| |
Severance pay fund | |
| | |
| |
Operating lease right-of-use assets | |
| | |
| |
Other assets | |
| | |
| |
Total assets | | $ | | | $ | |
Liabilities and shareholders’ equity: | |
| | |
|
|
Current liabilities: | |
| | |
|
|
Trade payables | | $ | | | $ | |
Outstanding operating balances | |
| | |
| |
Other payables | |
| | |
| |
Total current liabilities | |
| | |
| |
Non-current liabilities: | |
| | |
|
|
Long-term debt from related party (refer to Notes 8 and 17 for further information) | |
| | |
| |
Warrant liability | | | | | | |
Other long-term liabilities | |
| | |
| |
Total liabilities | |
| | |
| |
Commitments and contingencies (Note 11) | |
| | |
|
|
| | | | | | |
Shareholders’ equity: | |
| | |
|
|
Preferred stock, $ | |
| |
| ||
Common stock, $ | | | | | | |
Treasury stock at cost, | | | ( | | | — |
Additional paid-in capital | |
| | |
| |
Accumulated other comprehensive loss | |
| ( | |
| ( |
Accumulated deficit | |
| ( | |
| ( |
Total shareholders’ equity | |
| | |
| |
Total liabilities and shareholders’ equity | | $ | | | $ | |
The accompanying notes are an integral part of the condensed consolidated financial statements (Unaudited).
5
PAYONEER GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA
|
| Three months ended |
| Six months ended | ||||||||
| | June 30, | | June 30, | ||||||||
| | 2023 |
| 2022 | | 2023 |
| 2022 | ||||
Revenues | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Transaction costs (Exclusive of depreciation and amortization shown separately below and inclusive of $ | |
| | |
| | |
| | |
| |
Other operating expenses (Exclusive of depreciation and amortization shown separately below) | |
| | |
| | |
| | |
| |
Research and development expenses | |
| | |
| | |
| | |
| |
Sales and marketing expenses | |
| | |
| | |
| | |
| |
General and administrative expenses | |
| | |
| | |
| | |
| |
Depreciation and amortization | |
| | |
| | |
| | |
| |
Total operating expenses | |
| | |
| | |
| | |
| |
| | | | | | | | | | | | |
Operating income (loss) | |
| | |
| ( | |
| | |
| ( |
| | | | | | | | | | | | |
Financial income (expense): | |
| | |
| | |
| | |
| |
Gain from change in fair value of Warrants | | | | | | | | | | | | |
Other financial income (expense), net | | | | | | ( | | | | | | ( |
Financial income, net | | | | | | | | | | | | |
| | | | | | | | | | | | |
Income before taxes on income and share in gains (losses) of associated company | |
| | |
| | |
| | |
| |
| | | | | | | | | | | | |
Taxes on income | |
| | |
| | |
| | |
| |
| | | | | | | | | | | | |
Share in gains (losses) of associated company | |
| - | |
| ( | |
| - | |
| |
| | | | | | | | | | | | |
Net income | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Other comprehensive loss, net of tax | | | | | | | | | | | | |
Foreign currency translation adjustments | | | - | | | ( | | | - | | | ( |
Other comprehensive loss, net of tax | | | - | | | ( | | | - | | | ( |
| | | | | | | | | | | | |
Comprehensive income | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Per Share Data | |
| | |
| | |
| | |
| |
Net income per share attributable to common stockholders — Basic earnings per share | | $ | | | $ | | | $ | | | $ | |
— Diluted earnings per share | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Weighted average common shares outstanding — Basic | |
| | |
| | |
| | |
| |
Weighted average common shares outstanding — Diluted | |
| | |
| | |
| | |
| |
| | | | | | | | | | | | |
The accompanying notes are an integral part of the condensed consolidated financial statements (Unaudited).
6
PAYONEER GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE DATA
| | |
|
| |
| |
|
| |
| | |
| Accumulated |
| | |
| | | |
| | | | | | | | | | | | Additional | | other | | | | | | | ||
| | Common Stock | | Treasury Stock | | paid-in | | comprehensive | | Accumulated | | | | |||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| capital |
| income (loss) |
| deficit |
| Total | ||||||
Balance at March 31, 2023 | | | | $ | | | — | | $ | — | | $ | | | $ | ( | | $ | ( | | $ | |
Exercise of options and vested RSUs | | | | | | | — | | | — | | | | | | — | | | — | | | |
Stock-based compensation | | — | | | — | | — | | | — | | | | | | — | | | — | | | |
ESPP shares issued | | | | | | | — | | | — | | | | | | — | | | — | | | |
Common stock repurchased | | — | | | — | | ( | | | ( | | | — | | | — | | | — | | | ( |
Net income | | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | |
| | |
Balance at June 30, 2023 | | | | $ | | | ( | | $ | ( | | $ | | | $ | ( | | $ | ( | | $ | |
| | | | | | | | | | | | | | | | | | | | | | |
Balance at March 31, 2022 | | | | $ | | | — | | $ | — | | $ | | | $ | | | $ | ( | | $ | |
Exercise of options and vested RSUs | | | |
| | | — | |
| — | |
| | |
| — | |
| — | |
| |
Stock-based compensation | | — | |
| — | | — | |
| — | |
| | |
| — | |
| — | |
| |
Other comprehensive loss, net of tax | | — | | | — | | — | | | — | | | — | | | ( | | | — | | | ( |
Net income | | — | |
| — | | — | |
| — | |
| — | |
| — | |
| | |
| |
Balance at June 30, 2022 | | | | $ | | | — | | $ | — | | $ | | | $ | ( | | $ | ( | | $ | |
The accompanying notes are an integral part of the condensed consolidated financial statements (Unaudited).
7
PAYONEER GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE DATA
| | |
|
| |
| |
|
| |
| | |
| Accumulated |
| | |
| | | |
| | | | | | | | | | | | Additional | | other | | | | | | | ||
| | Common Stock | | Treasury Stock | | paid-in | | comprehensive | | Accumulated | | | | |||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| capital |
| income (loss) |
| deficit |
| Total | ||||||
Balance at December 31, 2022 | | | | $ | | | — | | $ | — | | $ | | | $ | ( | | $ | ( | | $ | |
Exercise of options, vested RSUs, and shares granted | | | | | | | — | | | — | | | | | | — | | | — | | | |
Stock-based compensation | | — | | | — | | — | | | — | | | | | | — | | | — | | | |
ESPP shares issued | | | | | | | | | | | | | | | | — | | | — | | | |
Common stock repurchased | | — | | | — | | ( | | | ( | | | — | | | — | | | — | | | ( |
Net income | | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | |
| | |
Balance at June 30, 2023 | | | | $ | | | ( | | $ | ( | | $ | | | $ | ( | | $ | ( | | $ | |
| | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2021 | | | | $ | | | — | | $ | — | | $ | | | $ | | | $ | ( | | $ | |
Adoption of ASC 326 | | — | |
| — | | — | |
| — | |
| — | |
| — | |
| ( | |
| ( |
Exercise of options and vested RSUs | | | |
| | | — | |
| — | |
| | |
| — | |
| — | |
| |
Stock-based compensation | | — | |
| — | | — | |
| — | |
| | |
| — | |
| — | |
| |
Other comprehensive loss, net of tax | | — | | | — | | — | | | — | | | — | | | ( | | | — | | | ( |
Net income | | — | |
| — | | — | |
| — | |
| — | |
| — | |
| | |
| |
Balance at June 30, 2022 | | | | $ | | | — | | $ | — | | $ | | | $ | ( | | $ | ( | | $ | |
The accompanying notes are an integral part of the condensed consolidated financial statements (Unaudited).
8
PAYONEER GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
U.S. DOLLARS IN THOUSANDS
|
| Six months ended | ||||
| | June 30, | ||||
| | 2023 | | 2022 | ||
Cash Flows from Operating Activities |
| |
|
| |
|
Net income | | $ | | | $ | |
Adjustment to reconcile net income to net cash provided by operating activities: | |
| | |
|
|
Depreciation and amortization | |
| | |
| |
Deferred taxes | |
| ( | |
| |
Stock-based compensation expenses | |
| | |
| |
Share in gains of associated company | |
| — | |
| ( |
Gain from change in fair value of Warrants | | | ( | | | ( |
Foreign currency re-measurement loss (gain) | |
| ( | |
| |
Changes in operating assets and liabilities: | |
| | |
| |
Other current assets | |
| ( | |
| ( |
Trade payables | |
| ( | |
| |
Deferred revenue | |
| | |
| |
Accounts receivable, net | |
| | |
| ( |
Capital advance extended to customers | |
| ( | |
| ( |
Capital advance collected from customers | |
| | |
| |
Other payables | |
| ( | |
| ( |
Other long-term liabilities | |
| ( | |
| ( |
Operating lease right-of-use assets | |
| | |
| |
Other assets | |
| | |
| ( |
Net cash provided by operating activities | |
| | |
| |
| | | | | | |
Cash Flows from Investing Activities | |
|
| |
|
|
Purchase of property, equipment and software | |
| ( | |
| ( |
Capitalization of internal use software | |
| ( | |
| ( |
Severance pay fund distributions, net | |
| | |
| |
Customer funds in transit, net | |
| ( | |
| ( |
Net cash inflow from acquisition of remaining interest in joint venture (Refer to Note 2(c) for further information) | | | | | | — |
Net cash used in investing activities | |
| ( | |
| ( |
| | | | | | |
Cash Flows from Financing Activities | |
|
| |
|
|
Proceeds from issuance of common stock in connection with stock-based compensation plan | |
| | |
| |
Outstanding operating balances, net | |
| ( | |
| |
Borrowings under related party facility (Refer to Notes 8 and 17 for further information) | | | | | | |
Repayments under related party facility (Refer to Notes 8 and 17 for further information) | | | ( | | | ( |
Common stock repurchased | | | ( | | | — |
Net cash provided by (used in) financing activities | |
| ( | |
| |
| | | | | | |
Effect of exchange rate changes on cash and cash equivalents | |
| | |
| ( |
| | | | | | |
Net change in cash, cash equivalents, restricted cash and customer funds | |
| ( | |
| |
Cash, cash equivalents, restricted cash and customer funds at beginning of period | |
| | |
| |
Cash, cash equivalents, restricted cash and customer funds at end of period | | $ | | | $ | |
Supplemental information of investing and financing activities not involving cash flows: | |
| | |
|
|
Property, equipment, and software acquired but not paid | | $ | | | $ | |
Internal use software capitalized but not paid | | $ | | | $ | |
Common stock repurchased but not paid | | $ | | | $ | — |
Right of use assets obtained in exchange for new operating lease liabilities | | $ | | | $ | |
The accompanying notes are an integral part of the condensed consolidated financial statements (Unaudited).
9
PAYONEER GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) – (CONTINUED)
U.S. DOLLARS IN THOUSANDS
The below table reconciles cash, cash equivalents, restricted cash and customer funds as reported in the consolidated balance sheets to the total of the same amounts shown in the condensed consolidated statements of cash flows:
| | As of June 30, | ||||
|
| 2023 |
| 2022 | ||
Cash and cash equivalents | | $ | | | $ | |
Current restricted cash | | | | | | |
Non-current restricted cash | |
| | |
| |
Customer funds(1) | |
| | |
| |
Total cash, cash equivalents, restricted cash and customer funds shown in the condensed consolidated statements of cash flows | | $ | | | $ | |
(1)Excludes $
The accompanying notes are an integral part of the condensed consolidated financial statements (Unaudited).
10
PAYONEER GLOBAL INC.
NOTE 1 – GENERAL OVERVIEW
Unless otherwise noted herein, “we”, “us”, “our”, “Payoneer”, and the “Company” refer to Payoneer Global Inc.
Payoneer, incorporated in Delaware, empowers global commerce by connecting businesses, professionals, countries and currencies with its diversified cross-border payments platform. Payoneer enables small and medium-sized businesses (“SMB(s)”) around the globe to reach new audiences by reducing the complexity of cross-border trade, and facilitating seamless, cross-border payments. Payoneer offers its customers the flexibility to pay and get paid globally as easily as they do locally. The Company offers a suite of services that includes cross-border payments, physical and virtual Mastercard cards, working capital, risk management and other services. The fully-hosted service includes various payment options with minimal integration required, full back-office functions and customer support offered.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
a. Principles of consolidation, basis of presentation and accounting principles:
The accompanying condensed consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America (hereafter – U.S. GAAP) and include the accounts of Payoneer Global Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Investments in an entity where we have the ability to exercise significant influence, but not control, over the investee are accounted for using the equity method of accounting. For such investments, our share of the investee’s results of operations is shown within Share in gains and losses of associated company on our condensed consolidated statements of comprehensive income and our investment balance as an investment in associated company on our condensed consolidated balance sheets.
The consolidated interim financial information herein is unaudited; however, such information reflects all adjustments (consisting of normal, recurring adjustments), which are, in the opinion of management, necessary for a fair statement of results for the interim period. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the full year. The year-end condensed balance sheet data was derived from audited financial statements for the year ended December 31, 2022 but does not include all disclosures required by accounting principles generally accepted in the United States of America. These unaudited financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto of Payoneer Global Inc. and its subsidiaries.
b. Use of estimates in the preparation of financial statements:
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include, but are not limited to, allowance for capital advance receivables, income taxes, goodwill, revenue recognition, stock-based compensation, and loss contingencies.
c. Investment in associated company:
In July 2019, the Company, through its wholly-owned subsidiary Payoneer Research and Development Ltd., entered into an agreement for the establishment of a joint venture company in the People’s Republic of China (“PRC”). The objective of the joint venture was to apply for a local payment service provider license in accordance with PRC laws. The Company’s share in the Joint Venture was
In January 2023, the Company, through Payoneer Research and Development Ltd., acquired all remaining interests from other partners in the joint venture. As part of the agreement, the acquiring company assumed responsibility for all expenses and income incurred or earned through the date of acquisition related to the joint venture.
11
PAYONEER GLOBAL INC.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continued):
As substantially all of the fair value of the gross assets of the joint venture are concentrated in a group of similar assets (cash and cash equivalents and restricted deposits), the Company accounted for the transaction as an asset acquisition. As such, the Company’s basis in the acquired assets is valued at the amount of consideration transferred, as shown below.
Consideration paid | |
Cash1 | $ |
Foreign exchange loss on payment1 | ( |
Investment in associated company | |
Total | $ |
| |
Assets acquired | |
Cash and cash equivalents | $ |
Short-term restricted deposits | |
Prepaid assets | |
Tax receivable | |
Intangible assets | |
Total | $ |
| |
Net cash inflow related to acquisition | |
Cash and cash equivalents and restricted deposits acquired | $ |
Cash paid | ( |
Net cash inflow | $ |
________________________________________
| (1) | The underlying assets of the joint venture were previously valued in CNY. Due to a timing difference of payment date and acquisition agreement settlement date, $ |
The Company acquired $
The Company also acquired $
d. Functional currency and translation:
Prior to January 1, 2023, the Company had a foreign subsidiary that used the local currency of the respective country as its functional currency. As of January 1, 2023, this subsidiary has changed its functional currency to be that of the Company, the U.S. dollar, due to a shift in the subsidiary’s primary revenue streams, which are now substantially all from services provided to the Company.
e. Treasury stock:
The Company accounts for repurchases of shares of its common stock as of the trade date, and includes in treasury stock the repurchase price plus any costs associated with the transaction.
When and if treasury stock is reissued, the Company applies the average cost method to determine the value of the reissued shares, and to the extent that we remain in an accumulated deficit position, recognizes any related gain or loss in additional paid-in capital. When and if the Company’s accumulated deficit becomes a retained earnings balance, we will credit gains on reissuances to additional paid-in capital and offset losses against historical gains. Losses in excess of historical gains will be recognized against retained earnings.
Treasury stock is included in authorized and issued shares but excluded from outstanding shares.
12
PAYONEER GLOBAL INC.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continued):
f. Recently issued accounting pronouncements:
FASB Standards issued, but not adopted as of June 30, 2023
In 2020, the FASB issued amended guidance that provides transitional relief for the accounting impact of reference rate reform. For a limited duration, this guidance provides optional expedients and exceptions for applying GAAP to certain contract modifications, hedging relationships, and other transactions that will be impacted by a reference rate expected to be discontinued due to reference rate reform. The amended guidance is effective through December 31, 2024. The Company does not expect reference rate reform to have a material impact on the Company’s financial statements.
NOTE 3 – CAPITAL ADVANCE (“CA”) RECEIVABLES
The Company enters into transactions with pre-qualified sellers in which the Company purchases a designated amount of future receivables for an upfront cash purchase price.
During the six months ended June 30, 2023 and 2022, the Company has purchased and collected the following principal amounts associated with CAs:
| | Six months ended | ||||
| | June 30, | ||||
| | 2023 | | 2022 | ||
Beginning CA receivables, gross | | $ | | | $ | |
CA extended to customers | | | | | | |
Change in revenue receivables | | | | | | |
CA collected from customers | | | ( | | | ( |
Charge-offs, net of recoveries | | | ( | | | ( |
Ending CA receivables, gross | | $ | | | $ | |
Allowance for CA losses | |
| ( | |
| ( |
CA receivables, net | | $ | | | $ | |
The outstanding gross balance at June 30, 2023 consists of the following current and overdue amounts:
| | | | | 1‑30 days |
| 30‑60 |
| 60‑90 | | Above 90 |
Total | | Current | | overdue | | overdue | | overdue | | overdue | |
$ | | | | | | | | | | | |
The outstanding gross balance at December 31, 2022 consists of the following current and overdue amounts:
| |
| |
| 1‑30 days |
| 30‑60 |
| 60‑90 |
| Above 90 |
Total |
| Current |
| overdue |
| overdue |
| overdue |
| overdue | |
$ | |
|
|
|
|
| |||||
The following are current and overdue balances from above that are segregated into the timing of expected collections at June 30, 2023:
| | | | | Due in less | | Due in 30‑60 | | Due in 60‑90 | | Due in more |
Total |
| Overdue |
| than 30 days |
| days |
| days |
| than 90 days | |
$ | | | | | | | | | | | |
The following are current and overdue balances from above that are segregated into the timing of expected collections at December 31, 2022:
| | | |
| Due in less | | Due in 30‑60 | | Due in 60‑90 |
| Due in more |
Total |
| Overdue |
| than 30 days |
| days |
| days |
| than 90 days | |
$ | |
|
|
|
|
| |||||
13
PAYONEER GLOBAL INC.
NOTE 3 – CAPITAL ADVANCE (“CA”) RECEIVABLES (continued):
As of June 30, 2023 and December 31, 2022, the Company applied a range of loss rates to the CA portfolio of
Below is a rollforward for the allowance for CA losses (“ALCAL”):
| | Six months ended | ||||
| | June 30, | ||||
| | 2023 | | 2022 | ||
Beginning balance | | $ | | | $ | |
Adjustment for adoption of ASC 326 | | | — | | | |
Provisions | | | | | | |
Recoveries | | | ( | | | ( |
Charge-offs | | | ( | | | ( |
Ending balance | | $ | | | $ | |
NOTE 4 - OTHER CURRENT ASSETS
Composition of other current assets, grouped by major classifications, is as follows:
|
| June 30, |
| December 31, | ||
| | 2023 | | 2022 | ||
Prepaid expenses | | $ | | | $ | |
Income receivable | |
| | |
| |
Prepaid income taxes | |
| | |
| |
Other | |
| | |
| |
Total other current assets | | $ | | | $ | |
NOTE 5 – PROPERTY, EQUIPMENT AND SOFTWARE
Composition of property, equipment and software, grouped by major classifications, is as follows:
|
| June 30, |
| December 31, | ||
| | 2023 | | 2022 | ||
Computers, software and peripheral equipment | | $ | | | $ | |
Leasehold improvements | |
| | |
| |
Furniture and office equipment | |
| | |
| |
Property, equipment and software | |
| | |
| |
Accumulated depreciation | |
| ( | |
| ( |
Property, equipment and software, net | | $ | | | $ | |
Depreciation expense for the three months ended June 30, 2023 and 2022 was $
NOTE 6 – INTANGIBLE ASSETS
Composition of intangible assets, grouped by major classifications, is as follows:
|
| June 30, 2023 |
| December 31, 2022 | ||||||||||||||
| | Gross Carrying Value | | Accumulated Amortization | | Net Carrying Value | | Gross Carrying Value | | Accumulated Amortization | | Net Carrying Value | ||||||
Internal use software | | $ | | | $ | ( | | $ | | | $ | | | $ | ( | | $ | |
Developed technology | |
| | |
| ( | |
| | |
| | |
| ( | |
| |
Intangible assets, net | | $ | | | $ | ( | | $ | | | $ | | | $ | ( | | $ | |
14
PAYONEER GLOBAL INC.
NOTE 6 –INTANGIBLE ASSETS (continued):
Amortization expense for the three months ended June 30, 2023 and 2022 was $
Expected future intangible asset amortization as of June 30, 2023, excluding capitalized internal use software of $
Fiscal years | | |
|
2023 (Excluding the six months ended June 30, 2023) | | $ | |
2024 | | | |
2025 | | | |
2026 | | | |
2027 and thereafter | | | — |
Total | | $ | |
NOTE 7 - OTHER PAYABLES
Composition of other payables, grouped by major classifications, is as follows:
|
| June 30, |
| December 31, | ||
| | 2023 | | 2022 | ||
Employee related compensation | | $ | | | $ | |
Commissions payable | |
| | |
| |
Accrued expenses | |
| | |
| |
Lease liability | |
| | |
| |
Income tax payable | | | | | | — |
Other | |
| | |
| |
Total other payables | | $ | | | $ | |
NOTE 8 – DEBT
On October 28, 2021, Payoneer Early Payments Inc. (“PEPI”), a wholly-owned second tier subsidiary of the Company and its subsidiary (the “Borrower”) entered into a Receivables and Loan Security Agreement (the “Warehouse Facility”) with Viola Credit VI, L.P., Viola Credit Alternative Lending FNX SPV, L.P. (the “Lenders”) and Viola Credit Alternative Lending Management 2018 L.P. (collectively, the “Parties”) for the purpose of external financing of Capital Advance activity. The Company notes that the Lenders are related parties through the Company’s Board of Directors’ chairman’s ownership interest in the Lenders. Refer to Note 17 for further information regarding related party considerations.
In accordance with the Warehouse Facility agreement, the Lenders will make available to the Company an initial committed amount of $
15
PAYONEER GLOBAL INC.
NOTE 8 – DEBT (continued):
The Warehouse Facility agreement stipulates a borrowing base calculated at an advance rate of
| ● |
| ● |
| ● |
| ● |
On June 8, 2022, the Warehouse Facility agreement was amended to create a condition that the total interest rate, calculated as the sum per above, shall not exceed
The revolving period of the facility is
The Company recorded expenses, included in transaction cost, in the total amount of $
The Warehouse Facility agreement includes certain affirmative and negative covenants that must be maintained by the Company and includes certain financial measures such as minimum tangible equity and minimum unrestricted cash at the Company level. As of June 30, 2023 and December 31, 2022, the Company was in compliance with all applicable covenants.
As of June 30, 2023 and December 31, 2022, the fair value of the debt approximates the book value due to the short time span between initiation and balance sheet date with the outstanding balance classified as Level 3 in the fair value leveling hierarchy as the inputs into the valuation are not observable.
NOTE 9 – OTHER LONG-TERM LIABILITIES
Composition of other long-term liabilities, grouped by major classifications, is as follows:
|
| June 30, |
| December 31, | ||
| | 2023 | | 2022 | ||
Reserves for uncertain tax positions | | $ | | | $ | |
Long-term lease liabilities | |
| | |
| |
Severance pay liabilities | |
| | |
| |
Other | |
| | |
| |
Total other long-term liabilities | | $ | | | $ | |
NOTE 10 – WARRANTS AND SHAREHOLDERS’ EQUITY
Share Repurchase Program and Treasury Stock
On May 7, 2023, our Board of Directors authorized a stock repurchase program that provides for the repurchase of up to $
Any share repurchases under this stock repurchase program may be made through open market transactions, privately negotiated transactions or other means including in accordance with Rule 10b-18 and/or Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The timing and total amount of repurchases is subject to business and market conditions and the Company’s discretion.
During the six months ended June 30, 2023, we repurchased approximately
16
PAYONEER GLOBAL INC.
NOTE 10 – WARRANTS AND SHAREHOLDERS’ EQUITY (continued):
Warrants
The Company has publicly traded warrants that are exercisable for shares of the Company’s common stock. Warrants may only be exercised for a whole number of shares at an exercise price of $
The warrants are accounted for as liabilities in accordance with ASC 815-40, Derivatives and Hedging, and are presented within warrant liabilities on our condensed consolidated balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed consolidated statements of comprehensive income. The following table presents the changes in the fair value of warrant liabilities (Level 1):
|
| Warrant | |
| | Liability | |
Fair value as of December 31, 2022 | | $ | |
Change in fair value | |
| ( |
Fair value as of June 30, 2023 | | $ | |
| | | |
Fair value as of December 31, 2021 | | $ | |
Change in fair value | | | ( |
Fair value as of June 30, 2022 | | $ | |
NOTE 11 – COMMITMENTS AND CONTINGENCIES
The Company’s business is subject to various laws and regulations in the United States and other countries from where the Company operates. Any regulatory action, tax or legal challenge against the Company for noncompliance with any regulatory or legal requirement could result in significant fines, penalties, or other enforcement actions, increased costs of doing business through adverse judgment or settlement, reputational harm, the diversion of significant amounts of management time and operational resources, and could require changes in compliance requirements or limits on the Company’s ability to expand its product offerings, or otherwise harm or have a material adverse effect on the Company’s business.
On September 28, 2021, the National Banking and Securities Commission (CNBV) and the Bank of Mexico revoked the banking license of a banking entity utilized by the Company due to the banking entity not meeting applicable capital requirements. As a result, the Company is unable to withdraw funds from the banking entity. The Company has reserved $
From time to time, the Company is involved in other disputes or regulatory inquiries that arise in the ordinary course of business. These may include suits by its customers alleging, among other things, acting unfairly and/or not in conformity regarding pricing, rules or agreements, improper disclosure of our prices, rules, or policies or that our practices, prices, rules, policies, or customer agreements violate applicable law.
In addition to these types of disputes and regulatory inquiries, the operations of the Company are also subject to regulatory and/or legal review and/or challenges that tend to reflect the increasing global regulatory focus to which the industry in which the Company operates is subject and, when taken as a whole with other regulatory and legislative action, such actions could result in the imposition of costly new compliance burdens on the Company and may lead to increased costs and decreased transaction volume and revenue. Any claims or regulatory actions against the Company, whether meritorious or not, could be time consuming, result in costly litigation, settlement payments, damage awards (including statutory damages for certain causes of action in certain jurisdictions), fines, penalties, injunctive relief, or increased costs of doing business through adverse judgment or settlement, require the Company to change our business practices, require significant amounts of management time, result in the diversion of operational resources, or otherwise harm the business.
17
PAYONEER GLOBAL INC.
NOTE 12 – REVENUE
The following table presents revenue recognized from contracts with customers as well as revenue from other sources, which consists of interest income:
| | Three months ended June 30, |
| Six months ended June 30, | ||||||||
|
| 2023 |
| 2022 |
| 2023 | | 2022 | ||||
Revenue recognized at a point in time | | $ | | | $ | | | $ | | | $ | |
Revenue recognized over time | |
| | |
| | | | | | | |
Revenue from contracts with customers | |
| | |
| | | | | | | |
Revenue from other sources | |
| | |
| | | | | | | |
Total revenues | | $ | | | $ | | | $ | | | $ | |
Based on the information provided to and reviewed by our Chief Operating Decision Maker (“CODM”), we believe that the nature, amount, timing, and uncertainty of our revenue and cash flows and how they are affected by economic factors are most appropriately depicted through our primary regional markets. The following table presents our revenue disaggregated by primary regional market, with revenues being attributed to the country (in the region) in which the billing address of the transacting customer is located, with the exception of global bank transfer revenues, where revenues are disaggregated based on the billing address of the transaction funds source.
| | Three months ended |
| Six months ended | ||||||||
| | June 30, | | June 30, | ||||||||
|
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Primary regional markets |
| |
|
| |
| | | | | | |
Greater China1 | | $ | | | $ | | | $ | | | $ | |
Europe2 | | | | | | | | | | | | |
Asia-Pacific2 | | | | | | | | | | | | |
North America3 | |
| | |
| | |
| | | | |
South Asia, Middle East and North Africa2 | | | | | | | | | | | | |
Latin America2 | | | | | | | | | | | | |
Total revenues | | $ | | | $ | | | $ | | | $ | |
________________________________________
(1)Greater China is inclusive of mainland China, Hong Kong, Macao and Taiwan
(2)No single country included in any of these regions generated more than 10% of total revenue
(3) | The United States is our country of domicile. Of North America revenues, the US represents $ |
NOTE 13 - TRANSACTION COSTS
Composition of transaction costs, grouped by major classifications, is as follows:
|
| Three Months Ended | | Six months ended | ||||||||
| | June 30, |
| June 30, | ||||||||
|
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Bank and processor fees | | $ | | | $ | | | $ | | | $ | |
Network fees | |
| | |
| | | | | | | |
Chargebacks and operational losses | |
| | |
| | | | | | | |
Card costs | |
| | |
| | | | | | | |
Capital advance costs, net of recoveries | | | | | | | | | | | | |
Other | |
| | |
| | | | | | | |
Total transaction costs | | $ | | | $ | | | $ | | | $ | |
18
PAYONEER GLOBAL INC.
NOTE 14 – STOCK-BASED COMPENSATION
Stock Options and RSUs
The following table summarizes the options to purchase shares of common stock activity under our equity incentive plans for the six months ended June 30, 2023:
| | Options |
Outstanding at December 31, 2022 |
| |
Granted |
| — |
Exercised |
| ( |
Forfeited |
| ( |
Outstanding at June 30, 2023 | | |
Exercisable at June 30, 2023 | | |
The weighted average exercise price of the options outstanding as of June 30, 2023 was $
The following table summarizes the RSUs activity under our equity incentive plans as of June 30, 2023:
|
| Units |
Outstanding December 31, 2022 |
| |
Granted |
| |
Vested |
| ( |
Withhold to cover shares repurchased | | ( |
Forfeited |
| ( |
Outstanding June 30, 2023 |
| |
In the six months ended June 30, 2023, the Company granted
On May 23, 2023, we started to withhold common stock shares associated with net share settlements to cover tax withholding obligations upon the vesting of restricted stock units under our employee equity incentive plans in the United States. During the three and six months ended June 30, 2023, we withheld
Employee Stock Purchase Plan
As of June 30, 2023, approximately
The impact on our results of operations of recording stock-based compensation expense under the Company’s equity incentive plans, including the ESPP, were as follows:
| | Three Months Ended | | Six months ended | ||||||||
|
| June 30, |
| June 30, | ||||||||
|
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Other operating expenses | | $ | | | $ | | | $ | | | $ | |
Research and development expenses | |
| | |
| | | | | | | |
Sales and marketing expenses | |
| | |
| | | | | | | |
General and administrative expenses | |
| | |
| | | | | | | |
Total stock-based compensation | | $ | | | $ | | | $ | | | $ | |
19
PAYONEER GLOBAL INC.
NOTE 14 – STOCK-BASED COMPENSATION (continued):
Note that $
NOTE 15 - INCOME TAXES
The Company had an effective tax rate of
The Company maintains a valuation allowance in jurisdictions where it is more likely than not that all or a portion of a deferred tax asset may not be realized. In determining whether a valuation allowance is warranted, the Company evaluates factors such as prior earnings history, expected future earnings and the reversal of existing taxable temporary differences. During the period ended June 30, 2023, the Company recorded a release of $
We maintain a full valuation allowance on our deferred tax assets in Germany, and maintain our previous conclusion that a valuation allowance on deferred tax assets in Israel is not necessary.
NOTE 16 – NET EARNINGS PER SHARE
The Company’s basic net earnings per share is calculated by dividing net income attributable to common shareholders by the weighted-average number of shares of common stock outstanding for the period, without consideration of potentially dilutive securities. The diluted net earnings per share is calculated by giving effect to all potentially dilutive securities outstanding for the period using the treasury share method or the if-converted method based on the nature of such securities. Diluted net earnings per share is the same as basic net earnings per share in periods when the effects of potentially dilutive shares of common shares are anti-dilutive.
Basic and diluted net earnings per share attributable to common stockholders were calculated as follows:
|
| Three Months Ended | | Six months ended | ||||||||
| | June 30, |
| June 30, | ||||||||
|
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
|
| (In thousands, except share and per share data) | ||||||||||
Numerator: |
| |
|
| |
| | | | | | |
Net income | | $ | | | $ | | | $ | | | $ | |
Denominator: | |
|
| |
|
| | |
| | |
|
Weighted average common shares outstanding — | | | | | | | | | | | | |
Basic | | | | | | | | | | | | |
Add: | | | | | | | | | | | | |
Dilutive impact of RSUs, ESPP and options to purchase common stock | | | | | | | | | | | | |
Dilutive impact of private Warrants | | | | | | | | | | | | |
Weighted average common shares – diluted | | | | | | | | | | | | |
Net income per share attributable to common stockholders — Basic earnings per share | | $ | | | $ | | | $ | | | $ | |
Diluted earnings per share | | $ | | | $ | | | $ | | | $ | |
20
PAYONEER GLOBAL INC.
NOTE 16 – NET EARNINGS PER SHARE (continued):
Note that
NOTE 17 – RELATED PARTY TRANSACTIONS
As indicated in Note 8, the Company entered into a Warehouse Facility agreement with Lenders where a member of the Board of Directors has an interest. The Company has evaluated the relationship and determined that the Warehouse Facility agreement represents a related party transaction that has been entered into in the ordinary course of business. As such, the Warehouse Facility agreement was reviewed and approved as a related party transaction in accordance with the related party transaction approval process implemented by the Company.
The Company analyzed the terms of the Warehouse Facility agreement and concluded that the terms represent a transaction conducted at arm’s length.
NOTE 18 – SUBSEQUENT EVENTS
On July 10, 2023, the Company announced a plan to reduce its workforce by approximately
The Company estimates that it will incur charges of approximately $
On August 2, 2023, Payoneer Inc. and Payoneer Research & Development Ltd., wholly owned subsidiaries of the Company, purchased certain assets and Intellectual Property (IP) of Spott Incredibles Technologies Ltd. (“Spott”) for a total consideration of $
In addition, a member of the Board of Directors of the Company has an indirect interest within Spott and serves on its board. The Company evaluated the relationship and determined that the acquisition represents a related party transaction that has been entered into in the ordinary course of business. As such, the acquisition was reviewed and approved in accordance with the Company’s related party transaction approval process, and it was concluded that the terms represent a transaction conducted at arm’s length.
On August 7, 2023, Payoneer (Guangzhou) Commerce Services Co., Ltd. (“Payoneer Guangzhou”), a wholly owned subsidiary of the Company, entered into an agreement with a non-bank payments institution, (the “Licenseholder”) that offers pay-out and mobile payments solutions to merchants in the People’s Republic of China and holds a Payment Business License issued by the People’s Bank of China (the “License” and the “PBoC”, respectively).
Pursuant to the terms of the agreement, Payoneer Guangzhou seeks to purchase the Licenseholder, and agreed to place approximately $
21
PAYONEER GLOBAL INC.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Throughout this section, unless otherwise noted, “we”, “us”, “our”, “Payoneer”, and the “Company” refer to Payoneer Global Inc.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis includes forward-looking statements that involve risks and uncertainties. You should review the sections titled “Cautionary Note on Forward-Looking Statements” and “Risk Factors” for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
Payoneer democratizes access to financial services, empowering the world’s small and medium sized businesses to transact, do business and grow globally. With a single connection to Payoneer’s global payment and commerce-enabling platform, our customers can manage their global financial operations and transact globally as easily as they do locally, allowing them to participate in the digital economy and enabling growth for enterprises, marketplaces and SMBs worldwide.
Payoneer was founded in 2005 as technology and the internet were transforming commerce and making it possible for anyone, anywhere to build and grow a digital business. From the beginning, we recognized the importance of offering services to both sides of two-sided commerce networks: small and medium businesses who would need help navigating the increasingly complex digital economy, and marketplaces who would need help supporting their increasingly distributed seller-base. Over the past 18 years, we have built a one-of-a-kind platform designed to serve the needs of digital businesses globally, with a focus on emerging markets.
At the core of the Payoneer platform is a robust, secured, regulated global payment infrastructure that simplifies the process for any business to pay and get paid globally as easily as it does locally. On top of this core, we continue to develop a comprehensive suite of products and services, providing sophisticated tools to help our customers grow.
Leveraging the strength of our payment infrastructure and the breadth of our product offerings, Payoneer operates as both a provider of services to enterprises and marketplaces as well as a B2B payment services provider, empowering all of our customers to transact internationally with ease. As a result, we have cultivated a meaningful brand in the global digital commerce ecosystem supporting millions of marketplaces, enterprises, and SMBs across more than 190 countries and territories and 7,000+ unique trade corridors.
We primarily generate revenues when Payoneer customers use the funds in their Payoneer account to make a payment, make a purchase or to withdraw the funds locally. Our revenue growth is based on (i) growing the volume of transactions processed through the Payoneer platform; and (ii) increasing the monetization rates of Payoneer services. Our efforts to increase the overall monetization rate of Payoneer services includes increasing our focus on acquiring customers in regions with higher rates of monetization, accelerating the growth of payment services with higher rates of monetization like B2B AP/AR, and also introducing new services for customers that generate improved monetization, like our Payoneer Commercial Mastercard. Volume is one of the primary drivers for our revenue growth. See “Key Metrics and Non-GAAP Financial Measures” for additional information.
Our customers have trusted the Payoneer platform to process $15.8 billion and $14.6 billion in volume during the three months ended June 30, 2023 and 2022, respectively, and $31.5 billion and $29.3 billion in volume during the six months ended June 30, 2023 and 2022, respectively.
Looking forward, we intend to continue to invest actively to enhance our global platform, deliver new products, extend our regulatory footprint, further automate our operations, increase new customer growth and make more acquisitions to accelerate our ability to deliver more value to customers around the world.
22
PAYONEER GLOBAL INC.
Key Developments and Trends
Impact of the war in Ukraine
During 2022, a geopolitical and armed conflict between Ukraine and Russia, which developed into an ongoing war, resulted in economic sanctions on Russia, Belarus, and certain territories in Ukraine. Payoneer provides services to customers in Ukraine and in jurisdictions that are or may be impacted by these economic sanctions. We have developed and implemented a robust transaction monitoring program designed to comply with imposed sanctions and to monitor the impact the conflict may have on our results of operations. During 2022, we ceased to provide services to customers in Russia and have been reducing our payment services to Belarus customers, while at the same time revenues in Ukraine have remained relatively stable. For the three and six months ended June 30, 2023, Ukraine and Belarus, combined, accounted for less than 10% of our revenue, of which Belarus accounted for less than 1% of our revenue. Further escalation of the conflict may have a material effect on our results of operations.
Macroeconomic Conditions
Macroeconomic conditions, such as rising interest rates, inflation, the continued impact of COVID-19, the ongoing war in Ukraine, and disruptions in the banking sector, may affect our results of operations. For example, during 2022, and in response to rising inflation, the U.S. Federal Reserve raised the benchmark interest rate by 425 basis points, with an additional 100 basis point increase so far in 2023. This contributed to an increase in interest income earned on our customer balances. U.S. and global inflation rates have remained elevated and the Federal Reserve, as well as other central banks, have continued to raise interest rates. Higher interest rates positively impact our interest income revenues associated with underlying customer accounts. However, a prolonged period of high interest rates is likely to slow economic growth, and business and consumer spend globally which may negatively impact the volumes processed on our platform. There remains a great deal of uncertainty related to the ongoing trajectory of U.S. interest rate policy, the likely impact of monetary tightening globally and the degree to which the global economy could be impacted. In addition, while we have commercial arrangements with multiple banks globally, we have not been materially affected by the recent volatility and uncertainty in the banking sector.
Repurchase Program
On May 7, 2023, our Board of Directors authorized a stock repurchase program that provides for the repurchase of up to $80 million of our common stock over a period of 24 months. Any share repurchases under this stock repurchase program may be made through open market transactions, privately negotiated transactions or other means including in accordance with Rule 10b-18 and/or Rule 10b5-1 of the Exchange Act. The timing and total amount of repurchases is subject to business and market conditions and the Company’s discretion.
During the three months ended June 30, 2023, we repurchased approximately 4,201,025 shares of our common stock for approximately $19.7 million at a weighted average cost of $4.68 per share. As of June 30, 2023, a total of approximately $60.3 million remained available for future repurchases of our common stock under the program.
Workforce Reduction Plan
On July 10, 2023, the Company announced a plan to reduce its workforce by approximately 9% of the Company’s current total headcount (the “Plan”). The Company expects that the implementation of the Plan will be substantially completed by the end of the third quarter of 2023. The Plan is expected to enhance productivity and efficiency and streamline the Company’s organizational structure to better align operations with its growth objectives. The Company intends to reinvest some savings from the Plan into future growth initiatives, and to continue hiring for roles essential to those initiatives in areas such as research and development. Decisions regarding the elimination of positions are subject to local law in the various jurisdictions in which the Company employs its teams.
The Company estimates that it will incur charges of approximately $5 million in connection with the Plan, which are expected to be incurred in the third quarter of 2023. These expected costs are primarily related to cash expenditures for severance payments and payroll taxes.
Additionally, the Company expects an annualized future benefit to its operating expenses of approximately $20 million in connection with the Plan.
23
PAYONEER GLOBAL INC.
Results of Operations
The period-to-period comparisons of our results of operations have been prepared using the historical periods in our condensed consolidated financial statements. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related Notes included within this Quarterly Report on Form 10-Q.
| | Three months ended | | | | Six months ended | | |
| ||||||||
| | June 30, | | Increase/ | | June 30, | | Increase/ |
| ||||||||
|
| 2023 |
| 2022 |
| (Decrease) |
| 2023 |
| 2022 |
| (Decrease) |
| ||||
| | (in thousands except percentages) | | ||||||||||||||
Revenues | | $ | 206,734 | | $ | 148,190 |
| 40 | % | $ | 398,748 | | $ | 285,148 |
| 40 | % |
Transaction costs | |
| 28,497 | |
| 26,212 |
| 9 | % |
| 55,578 | |
| 51,787 |
| 7 | % |
Other operating expenses | |
| 40,527 | |
| 35,392 |
| 15 | % |
| 80,622 | |
| 70,151 |
| 15 | % |
Research and development expenses | |
| 27,995 | |
| 26,607 |
| 5 | % |
| 57,275 | |
| 52,522 |
| 9 | % |
Sales and marketing expenses | |
| 48,402 | |
| 36,820 |
| 31 | % |
| 96,228 | |
| 71,289 |
| 35 | % |
General and administrative expenses | |
| 22,012 | |
| 20,192 |
| 9 | % |
| 48,693 | |
| 38,320 |
| 27 | % |
Depreciation and amortization | |
| 5,909 | |
| 5,171 |
| 14 | % |
| 11,948 | |
| 9,626 |
| 24 | % |
Total operating expenses | | | 173,342 | | | 150,394 | | 15 | % | | 350,344 | | | 293,695 | | 19 | % |
Operating income (loss) | | | 33,392 | | | (2,204) | | ** | % | | 48,404 | | | (8,547) | | ** | % |
Financial income (expense): | | | | | | | | | | | | | | | | | |
Gain from change in fair value of Warrants | | | 13,586 | | | 12,831 | | 6 | % | | 13,334 | | | 44,027 | | ** | % |
Other financial income (expense), net | | | 4,318 | | | (4,824) | | ** | % | | 6,668 | | | (7,519) | | ** | % |
Financial income, net | |
| 17,904 | |
| 8,007 |
| 124 | % |
| 20,002 | |
| 36,508 |
| ** | % |
Income before taxes on income and share in gains (losses) of associated company | | | 51,296 | | | 5,803 | | ** | % | | 68,406 | | | 27,961 | | 145 | % |
Taxes on income | | | 5,747 | | | 1,374 | | ** | % | | 14,919 | | | 3,341 | | ** | % |
Share in gains (losses) of associated company | | | — | | | (7) | | ** | % | | — | | | 13 | | ** | % |
Net income | | $ | 45,549 | | $ | 4,422 |
| ** | % | $ | 53,487 | | $ | 24,633 |
| 117 | % |
**Not meaningful
Revenues
Revenues were $206.7 million and $398.7 million for the three and six months ended June 30, 2023, an increase of $58.5 million and $113.6 million, or 40% in both periods, compared to the prior-year period, driven mainly by an increase of $51.8 million in interest income resulting from an increase in customer balances held on our platform as well as rising interest rates. The remaining increase was driven by a combination of growth in the number of customers on our platform, growth in several high value regions, and continued adoption of our high value services.
Transaction costs
Transaction costs were $28.5 million for the three months ended June 30, 2023, an increase of $2.3 million, or 9%, compared to the prior-year period, primarily due to an increase in capital advance costs of $1.7 million driven by an increase in losses recognized. Excluding this driver, transaction costs increased by $0.6 million or 2%, while volume increased by 8% as compared to the prior-year period. Transaction costs grew at a lower rate than volume due to improved commercial terms, internal platform optimizations, and cost structure benefits from increased transaction volumes.
Transaction costs were $55.6 million for the six months ended June 30, 2023, an increase of $3.8 million, or 7%, compared to the prior-year period, primarily due to an increase of $1.9 million in capital advance costs, $1.1 million in bank and processor fees, and $1.1 million in network fees.
Other operating expenses
Other operating expenses were $40.5 million for the three months ended June 30, 2023, an increase of $5.1 million, or 15%, compared to the prior-year period, driven by an increase of $3.6 million in third-party contract and consulting expenses, $2.2 million in employee compensation, benefits and other employee-related expenses, mainly as a result of an increase in employee headcount, and an increase of $1.5 million in information technology expenses.
24
PAYONEER GLOBAL INC.
Other operating expenses were $80.6 million for the six months ended June 30, 2023, an increase of $10.5 million, or 15%, compared to the prior-year period, driven by an increase of $6.9 million in third-party contract and consulting expenses, $2.6 million in employee compensation, benefits and other employee-related expenses, mainly as a result of an increase in employee headcount, and an increase of $2.6 million in information technology expenses.
Research and development expenses
Research and development expenses were $28.0 million for the three months ended June 30, 2023, an increase of $1.4 million, or 5%, compared to the prior-year period, driven by an increase of $0.9 million in information technology expenses and $0.6 million in employee compensation, benefits and other employee-related expenses, mainly as a result of an increase in employee headcount in our research and development groups, which was partially offset by an increase in capitalization due to shifting of resources towards new investments in our platform.
Research and development expenses were $57.3 million for the six months ended June 30, 2023, an increase of $4.8 million, or 9%, compared to the prior-year period, driven by an increase of $2.8 million in employee compensation, benefits and other employee-related expenses, mainly as a result of an increase in employee headcount in our research and development groups, which was partially offset by an increase in capitalization due to shifting of resources towards new investments in our platform. Additional increases include $1.3 million in information technology expenses and $0.6 million in third-party contractor expenses.
Sales and marketing expenses
Sales and marketing expenses were $48.4 million for the three months ended June 30, 2023, an increase of $11.6 million, or 31%, compared to the prior-year period, driven by an increase of $4.6 million in third-party commissions, $3.7 million in employee compensation, benefits and other employee-related expenses, mainly as a result of an increase in employee headcount in our sales and marketing groups, an increase of $1.3 million in third-party contractor expenses, and increased spend of $1.6 million on marketing programs.
Sales and marketing expenses were $96.2 million for the six months ended June 30, 2023, an increase of $24.9 million, or 35%, compared to the prior-year period, driven by an increase of $10.6 million in employee compensation, benefits and other employee-related expenses, mainly as a result of an increase in employee headcount in our sales and marketing groups, an increase of $9.0 million in third-party commissions, increased spend of $2.6 million on marketing programs, and an increase of $2.5 million in third-party contractor and consultant expenses.
General and administrative expenses
General and administrative expenses were $22.0 million for the three months ended June 30, 2023, an increase of $1.8 million, or 9%, compared to the prior-year period, driven by an increase of $2.1 million in employee compensation, benefits and other employee-related expenses, mainly as a result of an increase in employee headcount.
General and administrative expenses were $48.7 million for the six months ended June 30, 2023, an increase of $10.4 million, or 27%, compared to the prior-year period, driven by an increase of $7 million in employee compensation, benefits and other employee-related expenses, mainly as a result of an increase in employee headcount, and an increase of $1.5 million in taxes and fees.
Depreciation and amortization expenses
Depreciation and amortization expenses were $5.9 million and $11.9 million for the three and six months ended June 30, 2023, an increase of $0.7 million and $2.3 million, or 14% and 24%, respectively, compared to the prior-year period, driven by an increase in amortization of internal use of software.
Financial income and expense, net
Financial income, net was $17.9 million for the three months ended June 30, 2023, an increase of $9.9 million, or 124%, compared to the prior-year period, driven by an increase of $5.3 million from revaluation of foreign currency balances, an increase of $3.8 million in interest income on corporate cash balances and a $0.8 million higher gain related to the change in fair value of warrants.
25
PAYONEER GLOBAL INC.
Financial income, net was $20.0 million for the six months ended June 30, 2023, a decrease of $16.5 million, or 45%, compared to the prior-year period, which benefitted from a gain related to the change in fair value of warrants that was $30.7 million higher than in the current period. This was partially offset by an increase of $7.6 million in interest income on corporate cash balances and an increase of $6.1 million from revaluation of foreign currency balances.
Income tax
Income tax expense was $5.7 million and $14.9 million for the three and six months ended June 30, 2023, an increase of $4.4 million and $11.6 million, or 318% and 347%, respectively, compared to the prior-year period, driven by an increase in the Company’s US federal and state income tax liabilities of $14.8 million and $19.5 million for the three and six months ended June 30, 2023, respectively. These increases were primarily driven by increased profitability in the US, including non-deductible permanent and temporary differences. Taxes associated with our foreign subsidiaries of $0.2 million and $2.7 million in the three and six months ended June 30, 2023, respectively, resulted in an additional increase to current period tax expense. These increases were offset by a deferred tax benefit from the release of the valuation allowance on deferred tax assets in the United States of $10.6 million for both the three and six months ended June 30, 2023.
Liquidity and Capital Resources
The following discussion of our liquidity and capital resources is based on the financial information derived from our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
We believe our existing cash and cash equivalents and cash flows from operating activities will be sufficient to meet our operating working capital, share repurchase and capital expenditure requirements for at least the next twelve months. Our future financing requirements will depend on many factors including our growth rate, the timing and extent of spending to support development of our platform and the ongoing expansion needs of sales and marketing activities. We have in the past and may in the future enter into agreements with third parties with respect to investments in, or acquisitions of, businesses or technologies, which could also require us to seek additional equity or debt financing.
Sources of Liquidity
As of June 30, 2023, we had $581.1 million of cash and cash equivalents.
On October 28, 2021, Payoneer Early Payments Inc. (“PEPI”), a wholly-owned second tier subsidiary of the Company and its subsidiary (the “Borrower”) entered into a multi-party Receivables Loan and Security Agreement (the “Warehouse Facility”) with, inter alia, affiliates of Viola Ventures. The objective was to provide access to external financing for our capital advance activity. See Note 8 and Note 17 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information.
The Warehouse Facility bears interest at the greater of 0.25% or LIBOR, plus 9% annually and has a revolving maturity of 36 months from the commencement date with a payback period of an additional 6 months after the revolving maturity date. The initial borrowing commitment is $25 million but can be increased subject to the lender’s discretion up to $100 million. Additional commitments will carry interest rates ranging from 7.0% to 7.75%. In addition, pursuant to the Warehouse Facility, PEPI entered into an amendment on June 8, 2022, capping the total interest rate at 10.5% per annum for all outstanding balances.
As of June 30, 2023, the LIBOR rate has ceased to be provided by the ICE Benchmark Administration. As such, beginning July 1, 2023, the sum of the Daily Simple SOFR and 0.26161% will be used as an alternative benchmark pursuant to the terms of the Warehouse Facility.
The Warehouse Facility is secured by eligible capital advance receivables at an initial rate of 80% of the total value of the underlying capital advance receivable outstanding. We are subject to financial covenants including minimum tangible equity, solvency and unrestricted cash requirements that are assessed based on our consolidated financial statements.
26
PAYONEER GLOBAL INC.
Current and Future Cash Requirements
On May 7, 2023, our Board of Directors authorized a stock repurchase program that provides for the repurchase of up to $80 million of our common stock over a period of 24 months. During the three months ended June 30, 2023, we repurchased approximately 4,201,025 shares of our common stock for approximately $19.7 million, of which $2.6 million was not yet paid in cash at period end. As of June 30, 2023, a total of approximately $60.3 million remained available for future repurchases of our common stock under the program.
Cash Flows
The following table presents a summary of cash flows from operating, investing, and financing activities for the following comparative periods.
| | Six months ended June 30, | ||||
|
| 2023 |
| 2022 | ||
| | (in thousands) | ||||
Net cash provided by operating activities | | $ | 59,919 | | $ | 28,874 |
Net cash used in investing activities | |
| (63,453) | |
| (34,523) |
Net cash provided by (used in) financing activities | |
| (315,444) | |
| 751,803 |
Effect of exchange rate changes on cash and cash equivalents | |
| 705 | |
| (2,491) |
Change in cash, cash equivalents, restricted cash and customer funds | | $ | (318,273) | | $ | 743,663 |
Operating Activities
Net cash provided by operating activities was $59.9 million for the six months ended June 30, 2023, an increase of $31.0 million compared to $28.9 million for the six months ended June 30, 2022.
For the six months ended June 30, 2023, the Company had $53.5 million of net income, which includes non-cash expenses of $33.1 million related to stock-based compensation and $11.9 million related to depreciation and amortization, as well as non-cash gains of $13.3 million related to change in fair value of warrants and non-cash deferred tax benefit of $9.8 million, primarily related to the release of our valuation allowance in the United States. Net income was also adjusted for changes in current assets and liabilities, including outflows of $13.2 million related to trade payables, $5.3 million related to other payables, and $3.1 million related to capital advances. These outflows were offset by inflows of $5.1 million related to operating lease right-of-use assets and $1.0 million related to miscellaneous items.
For the six months ended June 30, 2022, the Company had $24.6 million of net income, which includes non-cash expenses of $25.3 million related to stock-based compensation and $9.6 million related to depreciation and amortization, and non-cash gains of $44.0 million related to change in fair value of warrants. Net income was also adjusted for changes in current assets and liabilities, including net inflows of $12.6 million related to capital advances and $9.5 million related to trade payables. Other miscellaneous net outflows amounted to $8.7 million for the period.
Investing Activities
Net cash used in investing activities was $63.5 million for the six months ended June 30, 2023, a change of $28.9 million compared to net cash used in investing activities of $34.5 million for the six months ended June 30, 2022.
This change was predominantly related to an increase of $32.0 million in the balance of customer funds in transit in the current year compared to the previous year, partially offset by a cash inflow of $6.0 million related to our acquisition of the remaining interest in a joint venture, as described in Note 2(c) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Financing Activities
Net cash used in financing activities was $315.4 million for the six months ended June 30, 2023, a change of $1,067.2 million compared to net cash provided by financing activities of $751.8 million for the six months ended June 30, 2022. Current period cash used in financing activities primarily reflects a decline in customer balances, while cash provided by financing activities in the prior period reflects an increase in customer balances. Additionally, approximately $17.1 million was used in the current period to finance our share repurchase program which began during the three months ended June 30, 2023.
27
PAYONEER GLOBAL INC.
Key Metrics and Non-GAAP Financial Measures
Our management uses a variety of financial and operating metrics to evaluate our business, analyze our performance, and make strategic decisions. We believe these metrics and non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as management. However, these measures are not financial measures calculated in accordance with GAAP and should not be considered as substitutes for financial measures that have been calculated in accordance with GAAP. We primarily review the following key performance indicators and non-GAAP measures when assessing our performance:
Volume
Volume refers to the total dollar value of transactions successfully completed or enabled by our platform, not including orchestration transactions. For a customer that both receives and later sends payments, we count the volume only once, with certain limited exceptions where both received and sent payments are counted. Volume serves as a key metric for overall business activity, as growing volume is one of the primary drivers for our revenue growth.
| | Three months ended June 30, | | Six months ended June 30, | ||||||||
|
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
| | (in millions) | | | | | | | ||||
Volume | | $ | 15,788 | | $ | 14,635 | | $ | 31,524 | | $ | 29,255 |
Volume grew 8% for both the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022, respectively, driven by a combination of continued customer acquisition, a rebound in travel spending, and growth in some of our large digital commerce marketplaces.
Revenue
We generate revenues mainly from transaction fees, which vary based on the type of service the customer utilizes. Transaction fee revenue principally consists of fees for withdrawals and usage. In addition, the Company generates revenue from non-volume-based products and services which are based on a fixed fee. We believe that Revenue demonstrates our ability to monetize volume activity on our platform. Our revenues can be impacted by the following:
| (i) | Mix in customer size, products, and services; |
| (ii) | Mix between domestic and cross-border transactions; |
| (iii) | Geographic region or country in which a transaction occurs; and |
| (iv) | Pricing and other market conditions including interest rates. |
Management closely monitors volume and revenue to ensure that we continue to grow funds and business activity into the platform, expanding our overall scale and the reach of our business.
Adjusted EBITDA
In addition to our financial results determined in accordance with GAAP, we believe Adjusted EBITDA, as a non-GAAP measure, is useful in evaluating our operating performance. We use Adjusted EBITDA to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that this non-GAAP financial measure, when taken together with the corresponding GAAP financial measures, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of Adjusted EBITDA is helpful to our investors as it is a metric used by management in assessing our operating performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measure as a tool for comparison. A reconciliation is provided below for our non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measure and the reconciliation of this non-GAAP financial measure to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
28
PAYONEER GLOBAL INC.
Adjusted EBITDA
| | Three months ended June 30, | | Six months ended June 30, | ||||||||
|
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
| | (in thousands) | | | | | | | ||||
Net income | | $ | 45,549 | | $ | 4,422 | | $ | 53,487 | | $ | 24,633 |
Depreciation and amortization | |
| 5,909 | |
| 5,171 | |
| 11,948 | |
| 9,626 |
Taxes on income | |
| 5,747 | |
| 1,374 | |
| 14,919 | |
| 3,341 |
Other financial (income) expense, net | |
| (4,318) | |
| 4,824 | |
| (6,668) | |
| 7,519 |
EBITDA | |
| 52,887 | |
| 15,791 | |
| 73,686 | |
| 45,119 |
Stock based compensation expenses(1) | |
| 16,173 | |
| 11,890 | |
| 33,100 | |
| 24,798 |
Share in loss (gain) of associated company | |
| — | |
| 7 | |
| — | |
| (13) |
M&A related expense (income)(2) | |
| 498 | |
| (116) | |
| 1,272 | |
| (735) |
Gain from change in fair value of Warrants(3) | |
| (13,586) | |
| (12,831) | |
| (13,334) | |
| (44,027) |
Adjusted EBITDA | | $ | 55,972 | | $ | 14,741 | | $ | 94,724 | | $ | 25,142 |
(1) Represents non-cash charges associated with stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy.
(2) Amounts for the three and six months ended June 30, 2023 relate to M&A-related third-party fees, including related legal, consulting and other expenditures. Amounts for the three and six months ended June 30, 2022 relate to a non-recurring fair value adjustment of a liability related to our 2020 acquisition of optile.
(3) Changes in the estimated fair value of the warrants are recognized as gain or loss on the condensed consolidated statements of comprehensive income. The impact is removed from EBITDA as it represents market conditions that are not in control of the Company.
Critical Accounting Policies and Estimates
The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. As described in Note 15 to our financial statements included within this Quarterly Report on Form 10-Q, the Company released its valuation allowance of its US operations in the three months ended June 30, 2023. On an ongoing basis, we evaluate such estimates and judgments, including those described in greater detail below.
We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
With the exception of the updates previously described, there have been no updates to our critical accounting policies and estimates in the six months ended June 30, 2023. For more information, see “Payoneer Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Form 10-K filed with the SEC on February 28, 2023.
Recent Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position, result of operations or cash flows is disclosed in Note 2 to our unaudited condensed consolidated financial statement included elsewhere in this Quarterly Report on Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have operations both within the United States and globally, and we are exposed to market risks in the ordinary course of our business, including the effects of interest rate changes and foreign currency fluctuations. Information relating to quantitative and qualitative disclosures about these market risks is described below.
Interest Rate Sensitivity
Our cash and cash equivalents as well as customer funds as of June 30, 2023, were held in cash deposits and money market funds. The fair value of our cash and cash equivalents as well as customer funds would not be significantly affected by either an increase or decrease in interest rates due mainly to the short-term nature of a majority of these instruments. However, a hypothetical 1% increase or decrease in interest rates could have a material effect on our revenues and earnings.
29
PAYONEER GLOBAL INC.
Any future borrowings incurred under our Warehouse Facility would accrue interest at a floating rate based on a formula tied to certain market rates at the time of incurrence (as described above), not to exceed 10.5% per annum for all outstanding balances.
Foreign Currency Risk
While most of our revenue is earned in U.S. dollars, our foreign currency exposure includes currencies of the countries in which our operations are located as well as currencies in which our customer funds are held and may be subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, British Pound, Japanese Yen, Vietnamese Dong, Chinese Yuan, Australian Dollar, Canadian Dollar, New Zealand Dollar, Thai Baht, New Israeli Shekel, United Arab Emirates Dirham, Indian Rupee, Bangladeshi Taka, Indonesian Rupiah, Mexican Peso, Pakistani Rupee, Singapore Dollar and Hong Kong Dollar. A hypothetical 10% increase or decrease in current exchange rates could have a material impact on our financial results.
In addition, some of our services include the opportunity for Payoneer to generate revenues from foreign exchange transactions as part of the payment delivery process. Our ability to generate such revenues is partially dependent on external factors such as market conditions, applicable regulations and our ability to negotiate with third party financial institutions. The impact of these efforts to optimize foreign exchange can be material to revenues and earnings.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2023. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
30
PAYONEER GLOBAL INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time we are a party to various litigation matters incidental to the conduct of our business. Refer to Note 11 (Commitments and Contingencies) to the condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.
For more information on risks related to litigation, see the section titled “Risk Factors — General Risks Related to Payoneer — From time to time we are subject to various legal proceedings which could adversely affect our business, financial condition or results of operations” in our Annual Report on Form 10-K, filed with the SEC on February 28, 2023.
ITEM 1A. RISK FACTORS
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K, filed with the SEC on February 28, 2023. However, we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
A total of 607,010 options to purchase common stock of the Company were exercised by a former shareholder during the quarterly period ended June 30, 2023, pursuant to an options agreement with such shareholder in connection with the service on the board of a former director. The above options exercise price was $0.54 per share, and we received proceeds in the amount of $327,785 from the issuance. The issuance of the securities described in this paragraph was made in reliance upon the exemption from registration requirements pursuant to Section 4(a)(2) of the Securities Act.
Share Repurchase Activities
The following table provides information with respect to repurchases made by the Company during the three months ended June 30, 2023. All repurchases listed below were made in the open market.
Period | | Total Number of Shares Purchased1 | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Progreams2 | | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs2 |
April 1, 2023 - April 30, 2023 | | - | | - | | - | | - |
May 1, 2023 - May 31, 2023 | | 147,446 | | $4.24 | | 147,446 | | $79,374,648 |
June 1, 2023 - June 30, 2023 | | 4,053,579 | | $4.69 | | 4,053,579 | | $60,348,786 |
Total | | 4,201,025 | | | | 4,201,025 | | |
________________________________________
(1) No shares were repurchased other than through a publicly announced plan or program.
(2) On May 7, 2023, our Board of Directors authorized a stock repurchase program that provides for the repurchase of up to $80 million of our common stock over a period of 24 months. Any share repurchases under this stock repurchase program may be made through open market transactions, privately negotiated transactions or other means including in accordance with Rule 10b-18 and/or Rule 10b5-1 of the Exchange Act. The timing and total amount of repurchases is subject to business and market conditions and the Company’s discretion.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
31
PAYONEER GLOBAL INC.
ITEM 5. OTHER INFORMATION
Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements
During the three months ended June 30, 2023, certain of our officers and directors adopted trading arrangements for the sale of shares of our common stock as follows:
| | | Plans | | | |
| Action | Date | Rule 10b5-1* | Non-Rule 10b5-1** | Number of Shares to be Sold | Expiration |
Adoption | | |||||
Adoption | | (1) | ||||
Adoption | | |||||
Adoption | | (2) | ||||
________________________________________
*Intended to satisfy the affirmative defense conditions of Rule 10b5-1(c)
**Not intended to satisfy the affirmative defense conditions of Rule 10b5-1(c)
(1) Under this trading arrangement, common stock will be sold in amounts which represent the net amount of shares remaining following a withholding of shares to cover tax obligations upon the vesting of restricted stock units on various dates throughout the plan. The number of net shares to be sold to accomplish this purpose cannot be reliably determined at this time, as it will depend upon the share price on the vest date.
(2) Under this trading arrangement,
On May 23, 2023, we started to withhold common stock shares associated with net share settlements to cover tax withholding obligations upon the vesting of restricted stock units under our employee equity incentive plans in the United States. The above-described mechanism was mandated by the Company and replaced the mechanism which applied previously to such employees (including Scott Galit, Tsafi Goldman and Itai Perry), where shares were sold to cover the employee’s tax obligation arising from settlement of vested restricted stock units.
32
PAYONEER GLOBAL INC.
ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
Exhibit No. |
| Description of Exhibit |
31.1 |
| |
31.2 |
| |
32.1 |
| |
32.2 |
| |
101.INS | | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH | | XBRL Taxonomy Extension Schema Document |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document |
104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* | Filed herewith. |
** | Furnished herewith. |
† | Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby undertakes to furnish copies of any of the omitted schedules upon request by the Securities and Exchange Commission. |
33
PAYONEER GLOBAL INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PAYONEER GLOBAL INC. | | |
| | |
(Registrant) | | |
| | |
By: | /s/ John Caplan | |
John Caplan | | |
Chief Executive Officer | | |
(Principle Executive Officer) | | |
| | |
| | |
By: | /s/ Bea Ordonez | |
Bea Ordonez | | |
Chief Financial Officer | | |
(Principle Financial Officer) | | |
| | |
Date: August 8th, 2023 | | |
34
Exhibit 31.1
CERTIFICATION PURSUANT TO RULES 13A-14 AND 15D-14(A) UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002
I, John Caplan, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Payoneer Global Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: August 8, 2023
|
| By: | /s/ John Caplan |
| | Name: | John Caplan |
| | Title: | Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO RULES 13A-14 AND 15D-14(A) UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002
I, Bea Ordonez, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Payoneer Global Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: August 8, 2023
|
| By: | /s/ Bea Ordonez |
| | Name: | Bea Ordonez |
| | Title: | Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Payoneer Global Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Caplan, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: August 8, 2023
|
| By: | /s/ John Caplan | |
| | Name: | John Caplan | |
| | Title: | Chief Executive Officer | |
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Payoneer Global Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Bea Ordonez, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: August 8, 2023
|
| By: | /s/ Bea Ordonez |
| | Name: | Bea Ordonez |
| | Title: | Chief Financial Officer |