UNITED STATES
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Washington, D.C. 20549
FORM
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Payoneer Global Inc.
Form 10-Q
For the Period Ended June 30, 2024
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), 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 events and conflicts, such as the current conflict between Israel and Hamas, and other economic, business and/or competitive factors; (3) changes in the assumptions underlying our financial estimates; (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 Quarterly 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, 2024
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
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA
| June 30, |
| December 31, | |||
| 2024 |
| 2023 | |||
Assets: |
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Current assets: |
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Cash and cash equivalents | $ | | $ | | ||
Restricted cash |
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Customer funds |
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Accounts receivable (net of allowance of $ |
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Capital advance receivables (net of allowance of $ |
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Other current assets |
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Total current assets |
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Non-current assets: |
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Property, equipment and software, net |
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Goodwill |
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Intangible assets, net |
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Restricted cash |
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Deferred taxes |
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Severance pay fund |
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Operating lease right-of-use assets |
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Other assets |
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Total assets | $ | | $ | | ||
Liabilities and shareholders’ equity: |
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Current liabilities: |
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Trade payables | $ | | $ | | ||
Outstanding operating balances |
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Short-term debt from related party (refer to Notes 11 and 20 for further information) | | — | ||||
Other payables |
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Total current liabilities |
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Non-current liabilities: |
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Long-term debt from related party (refer to Notes 11 and 20 for further information) |
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Warrant liability | | | ||||
Other long-term liabilities |
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Total liabilities |
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Commitments and contingencies (Note 14) |
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Shareholders’ equity: |
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Preferred stock, $ |
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Common stock, $ | | | ||||
Treasury stock at cost, | ( | ( | ||||
Additional paid-in capital |
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Accumulated other comprehensive income (loss) |
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Retained earnings (accumulated deficit) |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity | $ | | $ | | ||
The accompanying notes are an integral part of the condensed consolidated financial statements (Unaudited).
5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA
| Three months ended |
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June 30, | June 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Revenues | $ | | $ | | $ | | $ | | ||||
Transaction costs (Exclusive of depreciation and amortization shown separately below and inclusive of $ |
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Other operating expenses |
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Research and development expenses |
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Sales and marketing expenses |
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General and administrative expenses |
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Depreciation and amortization |
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Total operating expenses |
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Operating income |
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Financial income: |
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Gain from change in fair value of Warrants | | | | | ||||||||
Other financial income, net | | | | | ||||||||
Financial income, net | | | | | ||||||||
Income before taxes on income |
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Taxes on income |
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Net income | $ | | $ | | $ | | $ | | ||||
Other comprehensive income (loss) | ||||||||||||
Unrealized gain on available-for-sale debt securities, net | | - | | - | ||||||||
Unrealized loss on cash flow hedges, net | ( | - | ( | - | ||||||||
Tax benefit on unrealized losses on cash flow hedges, net | | - | | - | ||||||||
Other comprehensive income, net of tax | | - | | - | ||||||||
Comprehensive income | $ | | $ | | $ | | $ | | ||||
Per Share Data |
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Net income per share attributable to common stockholders — Basic earnings per share | $ | | $ | | $ | | $ | | ||||
— Diluted earnings per share | $ | | $ | | $ | | $ | | ||||
Weighted average common shares outstanding — Basic |
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Weighted average common shares outstanding — Diluted |
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The accompanying notes are an integral part of the condensed consolidated financial statements (Unaudited).
6
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE DATA
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| Accumulated |
| Retained |
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Additional | other | earnings | ||||||||||||||||||||
Common Stock | Treasury Stock | paid-in | comprehensive | (accumulated | ||||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| capital |
| income (loss) |
| deficit) |
| Total | |||||||
Balance at March 31, 2024 | | $ | | ( | $ | ( | $ | | $ | ( | $ | | $ | | ||||||||
Exercise of options and vested RSUs, net of taxes paid related to settlement of equity awards | | | — | — | | — | — | | ||||||||||||||
Stock-based compensation | — | — | — | — | | — | — | | ||||||||||||||
ESPP shares issued | | | — | — | | — | — | | ||||||||||||||
Common stock repurchased | — | — | ( | ( | — | — | — | ( | ||||||||||||||
Unrealized gain on available-for-sale debt securities, net | — | — | — | — | — | | — | | ||||||||||||||
Unrealized loss on cash flow hedges, net | — | — | — | — | — | ( | — | ( | ||||||||||||||
Tax benefit on unrealized losses on cash flow hedges, net | — | — | — | — | — | | — | | ||||||||||||||
Net income | — |
| — |
| — |
| — |
| — |
| — |
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Balance at June 30, 2024 | | $ | | ( | $ | ( | $ | | $ | | $ | | $ | | ||||||||
Balance at March 31, 2023 | | $ | | — | $ | — | $ | | $ | ( | $ | ( | $ | | ||||||||
Exercise of options and vested RSUs | |
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Stock-based compensation | — |
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ESPP shares issued | | | — | — | | — | — | | ||||||||||||||
Common stock repurchased | — | — | ( | ( | — | — | — | ( | ||||||||||||||
Net income | — |
| — | — |
| — |
| — |
| — |
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Balance at June 30, 2023 | | $ | | ( | $ | ( | $ | | $ | ( | $ | ( | $ | | ||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements (Unaudited).
7
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE DATA
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| Accumulated |
| Retained |
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Additional | other | earnings | ||||||||||||||||||||
Common Stock | Treasury Stock | paid-in | comprehensive | (accumulated | ||||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| capital |
| income (loss) |
| deficit) |
| Total | |||||||
Balance at December 31, 2023 | | $ | | ( | $ | ( | $ | | $ | ( | $ | ( | $ | | ||||||||
Exercise of options and vested RSUs, net of taxes paid related to settlement of equity awards | | | — | — | | — | — | | ||||||||||||||
Stock-based compensation | — | — | — | — | | — | — | | ||||||||||||||
ESPP shares issued | | | — | — | | — | — | | ||||||||||||||
Common stock repurchased | — | — | ( | ( | — | — | — | ( | ||||||||||||||
Unrealized gain on available-for-sale debt securities, net | — | — | — | — | | — | | |||||||||||||||
Unrealized loss on cash flow hedges, net | — | — | — | — | — | ( | — | ( | ||||||||||||||
Tax benefit on unrealized losses on cash flow hedges, net | — | — | — | — | — | | — | | ||||||||||||||
Net income | — |
| — |
| — |
| — |
| — |
| — |
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Balance at June 30, 2024 | | $ | | ( | $ | ( | $ | | $ | | $ | | $ | | ||||||||
Balance at December 31, 2022 | | $ | | — | $ | — | $ | | $ | ( | $ | ( | $ | | ||||||||
Exercise of options, vested RSUs, and shares granted | |
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Stock-based compensation | — |
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ESPP shares issued | | | — | — | | — | — | | ||||||||||||||
Common stock repurchased | — | — | ( | ( | — | — | — | ( | ||||||||||||||
Net income | — |
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Balance at June 30, 2023 | | $ | | ( | $ | ( | $ | | $ | ( | $ | ( | $ | | ||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements (Unaudited).
8
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
U.S. DOLLARS IN THOUSANDS
| Six months ended | |||||
June 30, | ||||||
| 2024 |
| 2023 | |||
Cash Flows from Operating Activities |
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Net income | $ | | $ | | ||
Adjustment to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Deferred taxes |
| ( |
| ( | ||
Stock-based compensation expenses |
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Gain from change in fair value of Warrants | ( | ( | ||||
Foreign currency re-measurement loss (gain) |
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Changes in operating assets and liabilities: |
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Other current assets |
| ( |
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Trade payables |
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Deferred revenue |
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Accounts receivable, net |
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Capital advance extended to customers |
| ( |
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Capital advance collected from customers |
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Other payables |
| ( |
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Other long-term liabilities |
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Operating lease right-of-use assets |
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Interest and amortization of discount on investments | ( | — | ||||
Other assets |
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Net cash provided by operating activities |
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Cash Flows from Investing Activities |
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Purchase of property, equipment and software |
| ( |
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Capitalization of internal use software |
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Severance pay fund distributions, net |
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Customer funds in transit, net |
| ( |
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Purchases of investments in available-for-sale debt securities | ( | — | ||||
Maturities and sales of investments in available-for-sale debt securities | | — | ||||
Net cash inflow from acquisition of remaining interest in joint venture | — | | ||||
Net cash used in investing activities |
| ( |
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Cash Flows from Financing Activities |
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Proceeds from issuance of common stock in connection with stock-based compensation plan, net of taxes paid related to settlement of equity awards and proceeds from employee equity transactions to be remitted to employees |
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Outstanding operating balances, net |
| ( |
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Borrowings under related party facility (Refer to Notes 11 and 20 for further information) | | | ||||
Repayments under related party facility (Refer to Notes 11 and 20 for further information) | ( | ( | ||||
Common stock repurchased | ( | ( | ||||
Net cash used in financing activities |
| ( |
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Effect of exchange rate changes on cash and cash equivalents |
| ( |
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Net change in cash, cash equivalents, restricted cash and customer funds |
| ( |
| ( | ||
Cash, cash equivalents, restricted cash and customer funds at beginning of period |
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Cash, cash equivalents, restricted cash and customer funds at end of period | $ | | $ | | ||
Supplemental information of investing and financing activities not involving cash flows: |
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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 | $ | | $ | | ||
9
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, | ||||||
| 2024 |
| 2023 | |||
Cash and cash equivalents | $ | | $ | | ||
Current restricted cash | | | ||||
Non-current restricted cash |
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Customer funds |
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Less: Customer funds in transit | ( | ( | ||||
Less: Customer funds invested in available-for-sale debt securities | ( | — | ||||
Net customer funds shown in the condensed consolidated statements of cash flows | | | ||||
Total cash, cash equivalents, restricted cash and customer funds shown in the condensed consolidated statements of cash flows | $ | | $ | | ||
The accompanying notes are an integral part of the condensed consolidated financial statements (Unaudited).
10
PAYONEER GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)
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.
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, 2024 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, 2023, 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. Customer funds and investments:
Beginning in February 2024, the Company invested certain customer funds in available-for-sale debt securities. These securities are reported at fair value, net of any unamortized discount or premium, accrued interest, and unrealized gains and losses, within ‘Customer funds’ on the Company’s condensed consolidated balance sheets. Unrealized gains and losses are included as a component of other comprehensive income (loss) (“OCI”), net of related estimated tax provisions or benefits. Interest income, amortization of any discount or premium, and realized gains and losses on these securities are recognized within revenue from other sources. In the period of sale, any unrealized gain or loss previously recognized in accumulated other comprehensive income (“AOCI”) is reversed into net income.
The Company accounts for purchases and sales of securities on the trade date and recognizes any related cut-off asset or liability within Other current assets or Other payables, respectively.
Beginning in June 2024, the Company invested certain customer funds in term deposit instruments. These investments are accounted for as restricted cash, given that the Company’s ability to withdraw the balances is restricted during the term of the deposit agreement. Interest income is recognized within revenue from other sources on the condensed consolidated statements of comprehensive income, and the balances are included within customer funds on the condensed consolidated balance sheets.
11
PAYONEER GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continued):
d. Derivatives and Hedging
The Company is exposed to foreign currency risk due to operating expenses denominated in New Israeli Shekels. To reduce that risk, the Company enters into foreign currency forward contracts and net purchased options to hedge foreign currency risk related to its foreign operations in Israel. The company does not use derivative financial instruments for trading or speculative purposes.
The Company designates derivatives as hedges of forecasted transactions (“cash flow” hedges) or derivatives that do not qualify for hedge accounting. To qualify for hedge accounting treatment, a derivative must be highly effective in mitigating the designated risk of the hedged item. Effectiveness of the hedge is formally assessed at inception and throughout the life of the hedging relationship. The Company evaluates the effectiveness of derivative contracts on a quarterly basis by comparing the critical terms of the derivative instruments with the critical terms of the forecasted cash flows of the hedged item; if the critical terms are the same, the Company concludes the hedge will be perfectly effective. The Company does not exclude any component of the changes in fair value of the derivative instruments from the assessment of hedge effectiveness.
To the extent that derivatives qualify as cash flow hedges, changes in the fair value are recorded, net of applicable taxes, in OCI and subsequently reclassified into the same statement of comprehensive income line item as the hedged exposure when the underlying hedged item is recognized in earnings. The cash flows associated with derivatives designated as cash flow hedges are reported in cash flows from operating activities in the consolidated statements of cash flows.
Derivatives that are not designated hedges are adjusted to fair value into earnings through financial income or expense. The cash flows associated with these derivatives, if any, are reported in cash flows from investing activities.
e. Recently issued accounting pronouncements:
FASB Standards issued, but not adopted as of June 30, 2024
In 2023, the FASB issued guidance, ASU 2023-09, which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). It also requires entities to disclose their income tax payments (net of refunds received) to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.
In 2023, the FASB issued guidance, ASU 2023-07, that requires entities to report incremental information about significant segment expenses included in a segment’s profit or loss measure as well as the name and title of the chief operating decision maker. The guidance also requires interim disclosures related to reportable segment profit or loss and assets that had previously only been disclosed annually. The amendments also require entities with a single reportable segment to provide all disclosures required by these amendments, and all existing segment disclosures. The new standard is effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024 and must be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.
12
PAYONEER GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)
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, 2024 and 2023, the Company has purchased and collected the following principal amounts associated with CA receivables, including foreign exchange adjustments:
Six months ended | ||||||
June 30, | ||||||
2024 | 2023 | |||||
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, 2024 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, 2023 consists of the following current and overdue amounts:
|
| 1‑30 days |
| 30‑60 |
| 60‑90 |
| Above 90 | |||
Total |
| Current |
| overdue |
| overdue |
| overdue |
| overdue | |
$ | |
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The following are current and overdue balances from above that are segregated into the timing of expected collections at June 30, 2024: