Paysafe Ltd 6-K, filed May 11, 2022
Paysafe Ltd (PSFE)
About this 6-K
Paysafe Ltd filed this 6-K on May 11, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934
For the month of May 2022
(Commission File No. 001-40302)
PAYSAFE LIMITED
(Exact name of registrant as specified in its charter))
Not Applicable
(Translation of registrant’s name into English)
Paysafe Limited
25 Canada Square
27thFloor
London, United Kingdom E14 5LQ
(Address of Principal Executive Offices) (Zip Code)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ☒ |
Form 40-F ☐ |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b) (1):
Yes ☐ |
No ☒ |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b) (7):
Yes ☐ |
No ☒ |
Information Contained in this Form 6-K Report
On May 11, 2022, Paysafe Limited issued a press release announcing its financial condition and results of operations for the quarter ended March 31, 2022. A copy of the press release is furnished as Exhibit 99.1 to this report on Form 6-K.
The information contained in this report and the exhibit hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be deemed incorporated by reference into any filings made by Paysafe Limited under the Securities Act of 1933, as amended, or the Exchange Act, except as may be expressly set forth by specific reference in such filing.
Financial Statements and Exhibits
Exhibits
Exhibit |
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Description |
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99.1 |
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1
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, thereto duly authorized.
Date: May 11, 2022 |
PAYSAFE LIMITED |
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By: |
/s/ Ismail Dawood |
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Name: |
Ismail Dawood |
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Title: |
Chief Financial Officer |
2
Exhibit 99.1
PAYSAFE REPORTS FIRST QUARTER 2022 RESULTS
REAFFIRMS FULL YEAR OUTLOOK
London, UK – May 11, 2022 – Paysafe Limited (“Paysafe” or the “Company”) (NYSE: PSFE) (PSFE.WS), a leading specialized payments platform, today announced its financial results for the first quarter of 2022.
First Quarter 2022 Financial Highlights
(Metrics compared to first quarter of 2021)
Bruce Lowthers, CEO of Paysafe, commented: “I am thrilled to be joining the talented Paysafe team at such a pivotal time. Paysafe has a long track record of being a pioneer in payments and with a lot of potential to grow in verticals with strong tailwinds. I look forward to working with the team to seize the opportunities ahead, drive more innovation in the fintech ecosystem and ultimately generate greater shareholder value.”
Izzy Dawood, CFO of Paysafe, commented: “Paysafe is off to a good start this year, posting first quarter results ahead of our expectations. We are particularly pleased with the strong performance from our US Acquiring business, which delivered double-digit volume, revenue and adjusted EBITDA growth. We are winning across Digital Commerce and the turnaround of the digital wallet business continues to show progress. Additionally, Paysafe is succeeding in North America iGaming, recently launching in Ontario’s new private market. Despite macro headwinds, we remain confident in our full year outlook supported by continued momentum in US Acquiring and our pipeline across Digital Commerce.”
Recent Strategic and Operational Highlights
Impairment of Goodwill
Due to a sustained decline in Paysafe’s stock price and market capitalization, as well as current market and macroeconomic conditions, Paysafe recognized a $1.2 billion impairment of goodwill in the first quarter of 2022. The non-cash impairment charge will not have any impact on the Company’s compliance with its debt covenants, cash flows or liquidity. Additional information about the results of the goodwill impairment test and related disclosures will be available in the Company's interim financial report on Form 6-K to be filed with the SEC.
1
* Volumes exclude embedded finance related volumes of $4.4 billion.
First Quarter 2022 Summary of Consolidated Results
|
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Three months ended |
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|||||
|
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March 31, |
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|||||
($ in thousands) (unaudited) |
|
2022 |
|
|
2021 |
|
||
Revenue |
|
$ |
367,668 |
|
|
$ |
377,424 |
|
Gross Profit (excluding depreciation and amortization) |
|
$ |
220,565 |
|
|
$ |
226,387 |
|
Net loss attributable to the Company |
|
$ |
(1,171,183 |
) |
|
$ |
(60,647 |
) |
|
|
|
|
|
|
|
||
Adjusted EBITDA |
|
$ |
103,967 |
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|
$ |
113,230 |
|
Adjusted EBITDA margin |
|
|
28.3 |
% |
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|
30.0 |
% |
Total revenue for the first quarter of 2022 was $367.7 million, a decrease of 3%, compared to $377.4 million in the prior year period. Excluding a $11.6 million unfavorable impact from year-over-year changes in foreign exchange rates, revenue was approximately flat compared to the prior year period. Growth from US Acquiring, which increased 10%, was offset by declines in Digital Commerce, which decreased 11%, reflecting unfavorable foreign exchange as well as market headwinds related to gambling regulations in Europe, partially offset by the contribution from acquisitions completed in the last twelve months. Additionally, in the prior year period, Paysafe’s eCash solutions benefited from comparably strong volumes associated with COVID-19 lockdowns in Europe.
Net loss attributable to the Company for the first quarter was $1.2 billion, compared to net loss of $60.6 million in the prior year period, reflecting the aforementioned impairment charge. This was partially offset by a $66.9 million reduction in share-based compensation due to shares vested on completion of the Transaction in the prior year period. Additionally, interest expense of $26.0 million decreased by $36.4 million as a result of the Company’s debt refinancing completed in 2021.
Adjusted EBITDA for the first quarter was $104.0 million, a decrease of 8%, compared to $113.2 million in the prior year period. Adjusted EBITDA margin decreased to 28.3%, compared to 30.0% in the prior year period, primarily reflecting business mix.
First quarter net cash from operating activities was $503.8 million, compared to $48.7 million in the prior year period. Free cash flow was $59.2 million, compared to $108.5 million in the prior year period.
Summary of Segment Results
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Three months ended |
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March 31, |
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YoY |
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($ in thousands) (unaudited) |
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2022 |
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2021 |
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change |
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|||
Revenue: |
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|
|
|
|
|
|
|
|
|||
US Acquiring |
|
$ |
169,144 |
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|
$ |
153,341 |
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|
|
10.3 |
% |
Digital Commerce |
|
$ |
198,524 |
|
|
$ |
224,083 |
|
|
|
-11.4 |
% |
Total Revenue |
|
$ |
367,668 |
|
|
$ |
377,424 |
|
|
|
-2.6 |
% |
|
|
|
|
|
|
|
|
|
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|||
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
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US Acquiring |
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$ |
47,242 |
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|
$ |
39,257 |
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|
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20.3 |
% |
Digital Commerce |
|
$ |
75,795 |
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|
$ |
91,514 |
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|
|
-17.2 |
% |
Unallocated Corporate |
|
$ |
(19,070 |
) |
|
$ |
(17,541 |
) |
|
|
8.7 |
% |
Total Adjusted EBITDA |
|
$ |
103,967 |
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|
$ |
113,230 |
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|
|
-8.2 |
% |
|
|
|
|
|
|
|
|
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Adjusted EBITDA margin: |
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US Acquiring |
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27.9 |
% |
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25.6 |
% |
|
230 bps |
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Digital Commerce |
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38.2 |
% |
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40.8 |
% |
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(270) bps |
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Total Adjusted EBITDA margin |
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|
28.3 |
% |
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30.0 |
% |
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(170) bps |
|
|
2
Revenue Disaggregation
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Three months ended |
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March 31, |
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|
YoY |
|
||||||
($ in thousands) (unaudited) |
|
2022 |
|
|
2021 |
|
|
change |
|
|||
Revenue: |
|
|
|
|
|
|
|
|
|
|||
US Acquiring |
|
$ |
169,144 |
|
|
$ |
153,341 |
|
|
|
10.3 |
% |
eCash (1) |
|
$ |
101,112 |
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|
$ |
112,916 |
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|
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-10.5 |
% |
Digital Wallets (1) |
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$ |
82,187 |
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$ |
94,923 |
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|
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-13.4 |
% |
Integrated & Ecommerce Solutions (IES) (1) |
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$ |
23,201 |
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$ |
23,561 |
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|
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-1.5 |
% |
Intracompany (1) |
|
$ |
(7,976 |
) |
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$ |
(7,317 |
) |
|
|
9.0 |
% |
Total Revenue |
|
$ |
367,668 |
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|
$ |
377,424 |
|
|
|
-2.6 |
% |
(1) These business lines are part of the Digital Commerce segment.
Financial Guidance
($ in millions) |
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Q2 2022 |
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Full Year 2022 |
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Revenue |
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$370 – $380 |
|
$1,530 – $1,580 |
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Adjusted EBITDA |
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$100– $110 |
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$440 – $460 |
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Webcast and Conference Call
Paysafe will host a live webcast to discuss the results today at 8:30 a.m. (ET). The webcast and supplemental information can be accessed on the investor relations section of the Paysafe website at ir.paysafe.com. An archive will be available after the conclusion of the live event and will remain available via the same link for one year.
Time |
Wednesday, May 11, 2022, at 8:30 a.m. EST |
Webcast |
Go to the Investor Relations section of the Paysafe website to listen and view slides |
Dial in |
877-407-3037 (U.S. toll-free); 215-268-9852 (International) |
Reorganization and Recapitalization (the “Transaction”)
On March 30, 2021, Paysafe completed the previously announced transaction with FTAC, a special purpose acquisition company, which resulted in Paysafe Limited acquiring, and becoming the successor to, the Accounting Predecessor. Simultaneously, it completed the merger with FTAC with an exchange of the shares and warrants issued by Paysafe Limited for those of FTAC. The acquisition was accounted for as a capital reorganization followed by the merger with FTAC, which was treated as a recapitalization. Following the transaction, both the Accounting Predecessor and FTAC are indirect wholly owned subsidiaries of Paysafe Limited. Upon completion of the Transaction, the common stock and warrants began trading on the New York Stock Exchange under the ticker symbols “PSFE” and “PSFE WS,” respectively, on March 31, 2021.
Basis of Presentation
The financial information for the three months ended March 31, 2021 included in this press release reflect, and is based upon, information of Paysafe Limited after giving effect to the transaction with Foley Trasimene Acquisition Corporation II (“FTAC”) completed on March 30, 2021.
The Company’s financial statements for the three months ended March 31, 2021 have been updated for certain non-cash adjustments to the amounts presented within the Company’s Form 6-K filed on May 11, 2021. These adjustments were not significant and predominately relate to share-based compensation.
3
About Paysafe
Paysafe Limited (“Paysafe”) (NYSE: PSFE) (PSFE.WS) is a leading specialized payments platform. Its core purpose is to enable businesses and consumers to connect and transact seamlessly through industry-leading capabilities in payment processing, digital wallet, and online cash solutions. With over 20 years of online payment experience, an annualized transactional volume of over US $120 billion in 2021, and approximately 3,500 employees located in 12+ global locations, Paysafe connects businesses and consumers across 100 payment types in over 40 currencies around the world. Delivered through an integrated platform, Paysafe solutions are geared toward mobile-initiated transactions, real-time analytics and the convergence between brick-and-mortar and online payments. Further information is available at www.paysafe.com.
Contacts
Media
Kate Aldridge
Paysafe
kate.aldridge@paysafe.com
+44 750 079 7547
Investors
Kirsten Nielsen
Paysafe
+1 (646) 901-3140
kirsten.nielsen@paysafe.com
Forward-looking Statements
This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Paysafe Limited’s (“Paysafe,” “PSFE” or the “Company”) actual results may differ from their expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “anticipate,” “appear,” “approximate,” “believe,” “budget,” “continue,” “could,” “estimate,” “expect,” “forecast,” “foresee,” “guidance,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “would” and variations of such words and similar 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. These forward-looking statements include, without limitation, Paysafe’s expectations with respect to future performance.
These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially, and potentially adversely, from those expressed or implied in the forward-looking statements. While the Company believes its assumptions concerning future events are reasonable, a number of factors could cause actual results to differ materially from those projected, including, but not limited to: cyberattacks and security vulnerabilities; complying with and changes in money laundering regulations, financial services regulations, cryptocurrency regulations, consumer and business privacy and data use regulations or other regulations in Bermuda, the UK, Ireland, Switzerland, the United States, Canada and elsewhere; geopolitical events, including acts of war and terrorism, including the conflict in Ukraine, the economic and other impacts of such conflict and the responses of governments around the world thereto; changes in our relationships with banks, payment card networks, issuers and financial institutions; risk related to processing online payments for merchants and customers engaged in the online gambling and foreign exchange trading sectors; risks related to our focus on specialized and high-risk verticals; risks related to becoming an unwitting party to fraud or be deemed to be handling proceeds of crimes being committed by customers; risks associated with the integration of acquisitions; the effects of chargebacks, merchant insolvency and consumer deposit settlement risk; changes to our continued financial
4
institution sponsorship; failure to hold, safeguard or account accurately for merchant or customer funds; risks related to the availability, integrity and security of internal and external IT transaction processing systems and services; failure of third parties to comply with contractual obligations; changes and compliance with payment card network operating rules; substantial and increasingly intense competition worldwide in the global payments industry; the COVID-19 pandemic, including the resulting global economic uncertainties; risks associated with interest rate and foreign currency exchange rate fluctuations, including the impact of possible currency devaluations in countries experiencing high inflation rates; risks related to developing and maintaining effective internal controls over financial reporting; managing our growth effectively, including growing our revenue pipeline; any difficulties maintaining a strong and trusted brand; keeping pace with rapid technological developments; risks associated with the significant influence of our principal shareholders; our ability to retain, attract and motivate key personnel; and other factors included in the “Risk Factors” in our Form 20-F and in other filings we make with the SEC, which are available at https://www.sec.gov. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. The Company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in their expectations with respect thereto or any change in events, conditions, or circumstances on which any statement is based, except as required by law.
5
Paysafe Limited Condensed Consolidated Balance Sheets (unaudited)
($ in thousands) |
|
March 31, 2022 |
|
|
December 31, 2021 |
|
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Assets |
|
|
|
|
|
|
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Current assets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
258,046 |
|
|
$ |
313,439 |
|
Customer accounts and other restricted cash, net of allowance for credit losses of $664 and $673, respectively |
|
|
1,711,994 |
|
|
|
1,658,279 |
|
Accounts receivable, net of allowance for credit losses of $9,288 and $8,642, respectively |
|
|
157,033 |
|
|
|
147,780 |
|
Settlement receivables, net of allowance for credit losses of $3,668 and $4,049, respectively |
|
|
124,397 |
|
|
|
149,852 |
|
Prepaid expenses and other current assets |
|
|
69,115 |
|
|
|
64,497 |
|
Related party receivables – current |
|
|
6,236 |
|
|
|
6,492 |
|
Contingent consideration receivable – current |
|
|
2,767 |
|
|
|
2,842 |
|
Total current assets |
|
|
2,329,588 |
|
|
|
2,343,181 |
|
Deferred tax assets |
|
|
21,723 |
|
|
|
21,926 |
|
Property, plant and equipment, net |
|
|
13,633 |
|
|
|
14,907 |
|
Operating lease right-of-use assets |
|
|
30,846 |
|
|
|
33,118 |
|
Intangible assets, net |
|
|
1,390,718 |
|
|
|
1,202,204 |
|
Goodwill |
|
|
2,712,809 |
|
|
|
3,650,037 |
|
Other assets – noncurrent |
|
|
1,976 |
|
|
|
1,856 |
|
Total non-current assets |
|
|
4,171,705 |
|
|
|
4,924,048 |
|
Total assets |
|
$ |
6,501,293 |
|
|
$ |
7,267,229 |
|
|
|
|
|
|
|
|
||
Liabilities and equity |
|
|
|
|
|
|
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Current liabilities |
|
|
|
|
|
|
||
Accounts payable and other liabilities |
|
$ |
220,991 |
|
|
$ |
211,841 |
|
Short-term debt |
|
|
10,190 |
|
|
|
10,190 |
|
Funds payable and amounts due to customers |
|
|
1,806,040 |
|
|
|
1,400,057 |
|
Operating lease liabilities – current |
|
|
8,843 |
|
|
|
8,845 |
|
Income taxes payable |
|
|
13,317 |
|
|
|
11,041 |
|
Contingent and deferred consideration payable – current |
|
|
20,520 |
|
|
|
13,673 |
|
Liability for share-based compensation – current |
|
|
4,308 |
|
|
|
3,360 |
|
Total current liabilities |
|
|
2,084,209 |
|
|
|
1,659,007 |
|
Non-current debt |
|
|
2,702,792 |
|
|
|
2,748,178 |
|
Operating lease liabilities – non-current |
|
|
25,676 |
|
|
|
28,008 |
|
Deferred tax liabilities |
|
|
76,295 |
|
|
|
64,886 |
|
Warrant liabilities |
|
|
28,292 |
|
|
|
35,575 |
|
Liability for share-based compensation – non-current |
|
|
5,764 |
|
|
|
6,664 |
|
Contingent and deferred consideration payable – non-current |
|
|
15,316 |
|
|
|
17,142 |
|
Total non-current liabilities |
|
|
2,854,135 |
|
|
|
2,900,453 |
|
Total liabilities |
|
|
4,938,344 |
|
|
|
4,559,460 |
|
Commitments and contingent liabilities |
|
|
|
|
|
|
||
Shareholders' equity in the Company |
|
|
1,462,868 |
|
|
|
2,569,764 |
|
Non-controlling interest |
|
|
100,081 |
|
|
|
138,005 |
|
Total shareholders' equity |
|
|
1,562,949 |
|
|
|
2,707,769 |
|
Total liabilities and shareholders' equity |
|
$ |
6,501,293 |
|
|
$ |
7,267,229 |
|
6
Paysafe Limited Condensed Consolidated Statements of Operations (unaudited)
|
|
Three months ended |
|
|||||
|
|
March 31, |
|
|||||
($ in thousands) |
|
2022 |
|
|
2021 |
|
||
Revenue |
|
$ |
367,668 |
|
|
$ |
377,424 |
|
Cost of services (excluding depreciation and amortization) |
|
|
147,103 |
|
|
|
151,037 |
|
Selling, general and administrative |
|
|
130,568 |
|
|
|
193,998 |
|
Depreciation and amortization |
|
|
63,423 |
|
|
|
65,462 |
|
Impairment expense on goodwill and intangible assets |
|
|
1,205,731 |
|
|
|
578 |
|
Restructuring and other costs |
|
|
12,591 |
|
|
|
2,970 |
|
Operating loss |
|
|
(1,191,748 |
) |
|
|
(36,621 |
) |
Other income, net |
|
|
3,478 |
|
|
|
32,525 |
|
Interest expense, net |
|
|
(25,956 |
) |
|
|
(62,369 |
) |
Loss before taxes |
|
|
(1,214,226 |
) |
|
|
(66,465 |
) |
Income tax benefit |
|
|
(43,414 |
) |
|
|
(5,936 |
) |
Net loss |
|
$ |
(1,170,812 |
) |
|
$ |
(60,529 |
) |
Less: net income attributable to non-controlling interest |
|
|
371 |
|
|
|
118 |
|
Net loss attributable to the Company |
|
$ |
(1,171,183 |
) |
|
$ |
(60,647 |
) |
|
|
|
|
|
|
|
||
Net loss |
|
$ |
(1,170,812 |
) |
|
$ |
(60,529 |
) |
Other comprehensive income / (loss), net of tax of $0: |
|
|
|
|
|
|
||
Gain / (loss) on foreign currency translation |
|
|
14,396 |
|
|
|
(8,498 |
) |
Total comprehensive loss |
|
$ |
(1,156,416 |
) |
|
$ |
(69,027 |
) |
Less: comprehensive income attributable to non-controlling interest |
|
|
371 |
|
|
|
118 |
|
Total comprehensive loss attributable to the Company |
|
$ |
(1,156,787 |
) |
|
$ |
(69,145 |
) |
7
Paysafe Limited Condensed Consolidated Statements of Cash Flow (unaudited)
|
|
Three months ended |
|
|||||
|
|
March 31, |
|
|||||
($ in thousands) |
|
2022 |
|
|
2021 |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
||
Net loss |
|
$ |
(1,170,812 |
) |
|
$ |
(60,529 |
) |
Adjustments for non-cash items: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
63,423 |
|
|
|
65,462 |
|
Unrealized foreign exchange gain |
|
|
2,364 |
|
|
|
6,438 |
|
Deferred tax benefit |
|
|
(49,601 |
) |
|
|
(3,730 |
) |
Interest expense, net |
|
|
11,202 |
|
|
|
25,516 |
|
Share-based compensation |
|
|
13,970 |
|
|
|
80,841 |
|
Other income, net |
|
|
(1,815 |
) |
|
|
(31,975 |
) |
Impairment expense on goodwill and intangible assets |
|
|
1,205,731 |
|
|
|
578 |
|
Allowance for credit losses and other |
|
|
5,888 |
|
|
|
5,985 |
|
Non-cash lease expense |
|
|
2,269 |
|
|
|
2,462 |
|
Movements in working capital: |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
(14,529 |
) |
|
|
(20,856 |
) |
Prepaid expenses, other current assets, and related party receivables |
|
|
(5,151 |
) |
|
|
(3,813 |
) |
Settlement receivables, net |
|
|
22,447 |
|
|
|
14,379 |
|
Accounts payable, other liabilities, and related party payables |
|
|
(1,189 |
) |
|
|
(9,309 |
) |
Funds payable and amounts due to customers |
|
|
418,944 |
|
|
|
(21,272 |
) |
Income tax payable |
|
|
707 |
|
|
|
(1,437 |
) |
Net cash flows from operating activities |
|
|
503,848 |
|
|
|
48,740 |
|
Cash flows in investing activities |
|
|
|
|
|
|
||
Purchase of property, plant & equipment |
|
|
(650 |
) |
|
|
(412 |
) |
Purchase of merchant portfolios |
|
|
(10,364 |
) |
|
|
(1,644 |
) |
Purchase of other intangible assets |
|
|
(19,989 |
) |
|
|
(14,994 |
) |
Net cash outflow on acquisition of subsidiary |
|
|
(424,722 |
) |
|
|
(23,531 |
) |
Net cash flows used in investing activities |
|
|
(455,725 |
) |
|
|
(40,581 |
) |
Cash flows from financing activities |
|
|
|
|
|
|
||
Cash settled equity awards |
|
|
(154 |
) |
|
|
— |
|
Proceeds from exercise of warrants |
|
|
3 |
|
|
|
— |
|
Net cash inflow from reorganization and recapitalization |
|
|
— |
|
|
|
1,167,874 |
|
Payment of equity issuance costs |
|
|
— |
|
|
|
(133,422 |
) |
Proceeds from loans and borrowings |
|
|
50,000 |
|
|
|
— |
|
Repayments of loans and borrowings |
|
|
(60,885 |
) |
|
|
(1,155,743 |
) |
Payment of debt issuance costs |
|
|
(6,261 |
) |
|
|
— |
|
Payments under derivative financial instruments, net |
|
|
— |
|
|
|
(4,693 |
) |
Proceeds under line of credit |
|
|
150,000 |
|
|
|
150,000 |
|
Repayments under line of credit |
|
|
(150,000 |
) |
|
|
(150,000 |
) |
Contingent consideration paid |
|
|
(1,436 |
) |
|
|
(970 |
) |
Net cash flows used in financing activities |
|
|
(18,733 |
) |
|
|
(126,954 |
) |
Effect of foreign exchange rate changes |
|
|
(31,068 |
) |
|
|
(62,402 |
) |
Decrease in cash and cash equivalents, including customer accounts and other restricted cash during the period |
|
$ |
(1,678 |
) |
|
$ |
(181,197 |
) |
Cash and cash equivalents, including customer accounts and other restricted cash at beginning of the period |
|
|
1,971,718 |
|
|
|
1,763,852 |
|
Cash and cash equivalents at end of the period, including customer accounts and other restricted cash |
|
$ |
1,970,040 |
|
|
$ |
1,582,655 |
|
|
|
Three months ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Cash and cash equivalents |
|
$ |
258,046 |
|
|
$ |
274,438 |
|
Customer accounts and other restricted cash, net |
|
|
1,711,994 |
|
|
|
1,308,217 |
|
Total cash and cash equivalents, including customer accounts and other restricted cash, net |
|
$ |
1,970,040 |
|
|
$ |
1,582,655 |
|
8
Non-GAAP Financial Measures
To supplement the Company’s condensed consolidated financial statements presented in accordance with generally accepted accounting principles, or GAAP, the company uses non-GAAP measures of certain components of financial performance. This includes Gross Profit (excluding depreciation and amortization), Gross Profit Margin (excluding depreciation and amortization), Adjusted EBITDA, Adjusted EBITDA margin, Free cash flow and Free cash flow conversion, which are supplemental measures that are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“U.S. GAAP”).
Gross Profit (excluding depreciation and amortization) is defined as revenue less cost of services (excluding depreciation and amortization). Gross Profit Margin (excluding depreciation and amortization) is defined as Gross Profit (excluding depreciation and amortization) as a percentage of revenue. Management believes Gross Profit to be a useful profitability measure to assess the performance of our businesses and ability to manage cost.
Adjusted EBITDA is defined as net income/(loss) before the impact of income tax (benefit)/expense, interest expense, net, depreciation and amortization, share based compensation, impairment expense on goodwill and intangible assets, restructuring and other costs, loss/(gain) on disposal of a subsidiaries and other assets, net, and other income/(expense), net. These adjustments also include certain costs and transaction items that are not reflective of the underlying operating performance of the Company. Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of Revenue. Management believes Adjusted EBITDA to be a useful profitability measure to assess the performance of our businesses and improves the comparability of operating results across reporting periods.
Free cash flow is defined as net cash flows provided by/used in operating activities, adjusted for the impact of capital expenditure, payments relating to restructuring and other costs, cash paid for interest and movements in customer accounts and other restricted cash. Capital expenditure includes purchases of property plant & equipment and purchases of other intangible assets, including software development costs. Capital expenditure does not include purchases of merchant portfolios. Free cash flow conversion is defined as free cash flow as a percentage of Adjusted EBITDA. Management believes free cash flow to be a liquidity measure that provides useful information about the amount of cash generated by the business.
Management believes the presentation of these non-GAAP financial measures, including Gross Profit, Gross Profit Margin, Adjusted EBITDA and Adjusted EBITDA margin, when considered together with the Company’s results presented in accordance with GAAP, provide users with useful supplemental information in comparing the operating results across reporting periods by excluding items that are not considered indicative of Paysafe’s core operating performance. In addition, management believes the presentation of these non-GAAP financial measures provides useful supplemental information in assessing the Company’s results on a basis that fosters comparability across periods by excluding the impact on the Company’s reported GAAP results of acquisitions and dispositions that have occurred in such periods. However, these non-GAAP measures exclude items that are significant in understanding and assessing Paysafe’s financial results or position. Therefore, these measures should not be considered in isolation or as alternatives to revenue, net income, cash flows from operations or other measures of profitability, liquidity or performance under GAAP.
You should be aware that Paysafe’s presentation of these measures may not be comparable to similarly titled measures used by other companies. In addition, the forward-looking non-GAAP financial measures of Adjusted EBITDA and Gross Profit provided herein have not been reconciled to comparable GAAP measures due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations. We have reconciled the historical non-GAAP financial measures presented herein to their most directly comparable GAAP financial measures. A reconciliation of our forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measures cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the adjusting items necessary for such reconciliations that have not yet occurred, are out of our control, or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results.
9
Reconciliation of GAAP Net Loss to Non-GAAP Adjusted EBITDA
|
|
Three months ended |
|
|||||
|
|
March 31, |
|
|||||
($ in thousands) |
|
2022 |
|
|
2021 |
|
||
Net Loss |
|
$ |
(1,170,812 |
) |
|
$ |
(60,529 |
) |
Income tax benefit |
|
|
(43,414 |
) |
|
|
(5,936 |
) |
Interest expense, net |
|
|
25,956 |
|
|
|
62,369 |
|
Depreciation and amortization |
|
|
63,423 |
|
|
|
65,462 |
|
Share-based compensation expense |
|
|
13,970 |
|
|
|
80,841 |
|
Impairment expense on goodwill and intangible assets |
|
|
1,205,731 |
|
|
|
578 |
|
Restructuring and other costs |
|
|
12,591 |
|
|
|
2,970 |
|
Other income, net |
|
|
(3,478 |
) |
|
|
(32,525 |
) |
Adjusted EBITDA |
|
$ |
103,967 |
|
|
$ |
113,230 |
|
Adjusted EBITDA Margin |
|
|
28.3 |
% |
|
|
30.0 |
% |
Reconciliation of Operating Cash Flow to Non-GAAP Free Cash Flow
|
|
Three months ended |
|
|||||
|
|
March 31, |
|
|||||
($ in thousands) |
|
2022 |
|
|
2021 |
|
||
Net cash inflows from operating activities |
|
$ |
503,848 |
|
|
$ |
48,740 |
|
Capital Expenditure |
|
|
(20,639 |
) |
|
|
(15,406 |
) |
Cash paid for interest |
|
|
14,754 |
|
|
|
36,853 |
|
Payments relating to Restructuring and other costs |
|
|
12,141 |
|
|
|
3,455 |
|
Movement in Customer Accounts and other restricted cash |
|
|
(450,882 |
) |
|
|
34,886 |
|
Free Cash Flow |
|
$ |
59,222 |
|
|
$ |
108,528 |
|
Adjusted EBITDA |
|
|
103,967 |
|
|
|
113,230 |
|
Free Cash Flow Conversion |
|
|
57 |
% |
|
|
96 |
% |
Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit (excluding depreciation and amortization)
|
|
Three months ended |
|
|||||
|
|
March 31, |
|
|||||
($ in thousands) |
|
2022 |
|
|
2021 |
|
||
Revenue |
|
$ |
367,668 |
|
|
$ |
377,424 |
|
Cost of services (excluding depreciation and amortization) |
|
|
147,103 |
|
|
|
151,037 |
|
Depreciation and amortization |
|
|
63,423 |
|
|
|
65,462 |
|
Gross Profit (1) |
|
$ |
157,142 |
|
|
$ |
160,925 |
|
Depreciation and amortization |
|
|
63,423 |
|
|
|
65,462 |
|
Gross Profit (excluding depreciation and amortization) |
|
$ |
220,565 |
|
|
$ |
226,387 |
|
10