Paysafe Reports Third Quarter 2022 Results; Reaffirms and Tightens Full Year Outlook; Announces Planned Reverse Stock Split

LONDON–(BUSINESS WIRE)–Paysafe Limited (“Paysafe” or the “Company”) (NYSE: PSFE) (PSFE.WS), a leading specialized payments platform, today announced its financial results for the third quarter of 2022.

Third Quarter 2022 Financial Highlights

(Metrics compared to third quarter of 2021)

• Total Payment Volume of $32.5 billion*, increased 5%
• Revenue of $366.0 million, increased 4%; Revenue increased 10% on a constant currency basis
• Net Income attributable to the Company of $1.0 million, compared to net loss attributable to the Company of $147.2 million
• Adjusted net income of $29.2 million, compared to adjusted net income of $39.4 million
• Adjusted EBITDA of $95.5 million, decreased 10%; Adjusted EBITDA decreased 5% on a constant currency basis

Bruce Lowthers, CEO of Paysafe, commented: “We are pleased with our third quarter financial results, including 10% year-over-year constant currency revenue growth, marked by continued resiliency in the US SMB market and improvement in Digital Commerce. I want to thank our employees for their hard work and dedication during this period of change and I am confident that the actions we are taking to reinvigorate growth will set us up for further improvement in 2023 and beyond.”

Strategic and Operational Highlights

• Welcomed Alex Gersh to Paysafe as CFO, bringing more than 25 years of international financial leadership and highly relevant industry experience
• Continued strong growth from US Acquiring – revenue increased 12% in Q3 and 12% year-to-date
• Entered into Kansas iGaming market, extending longstanding payments partnerships with multiple leading operators
• Continued expansion in Latin America, launching 10 Paysafe merchants into the region; expanded into Argentina with market-leading eCash payment solution
• Won ‘Payment Solution & Innovation’ award at the SBC Awards Latinoamérica, recognizing Paysafe’s ongoing payments support for iGaming operators in Latin America

* Volumes exclude embedded finance related volumes of $10.4 billion.

Reverse Stock Split

Today Paysafe also announced that it intends to hold a special meeting of shareholders on December 8, 2022 to seek approval for a 1-for-12 reverse stock split of the Company’s common shares and a corresponding decrease in the total number of authorized shares. If approved by shareholders, the reverse split is expected to be completed prior to year-end.

The Board reserves its right to delay the implementation or elect not to proceed with the reverse stock split if it determines that implementing a reverse split is no longer in the best interests of the Company and its shareholders.

The reverse stock split will affect all shareholders uniformly and will not affect any shareholder’s percentage ownership interest in the Company, except as a result of rounding for fractional amounts. Shareholders are not expected to receive fractional shares in connection with the reverse stock split. Instead, shareholders who otherwise would be entitled to receive fractional shares because they hold a number of shares not evenly divisible by 12 are expected to receive an additional fraction of a share to round up to the next whole share.

Additional information regarding the special meeting, including a proxy statement, will be sent to shareholders and filed with the Securities and Exchange Commission.

Changes to Segment Names and Reporting Structure

Paysafe will rename and realign its two reportable segments as follows:

• Merchant Solutions (renamed from US Acquiring) will continue to include the Company’s US Acquiring business and will also include the integrated & eCommerce (IES) business.
  • IES was previously included within Digital Commerce.
• Digital Wallets (renamed from Digital Commerce) will continue to include the Company’s digital wallets and eCash businesses.

The Company believes this new segment presentation better aligns with Paysafe’s strategy and how Paysafe’s management reviews its financial results to drive decisions about the business. Segment reporting under the renamed and realigned segments will begin in the fourth quarter of 2022. The recast of certain financial information for 2020, 2021 and 2022 are available within the materials accompanying this press release.

Total revenue for the third quarter of 2022 was $366.0 million, an increase of 4%, compared to $353.6 million in the prior year period, driven by strong revenue growth from US Acquiring, which increased 12%, partly offset by Digital Commerce, which declined 4%. Excluding a $23.0 million unfavorable impact from changes in foreign exchange rates, total revenue increased 10% compared to the prior year period. Digital Commerce revenue increased 8% on a constant currency basis, reflecting growth from acquisitions completed in the last twelve months and growth from new products, which more than offset an impact from the Russia-Ukraine war totaling approximately $4.1 million.

Net income attributable to the Company for the third quarter was $1.0 million, compared to a net loss of $147.2 million in the prior year period. The increase in net income largely reflects the intangible impairment expense in the prior year.

Adjusted EBITDA for the third quarter was $95.5 million, a decrease of 10%, compared to $106.4 million in the prior year period, including an unfavorable impact from foreign exchange rates, higher value added tax (“VAT”) expense resulting from historic refunds and releases in the prior year period, as well as an impact from the Russia-Ukraine war. These headwinds were partly offset by an increase in Adjusted EBITDA from the US Acquiring segment as well as the contribution from the acquisitions. Excluding the $5.6 million unfavorable impact from changes in foreign exchange rates, Adjusted EBITDA decreased 5% compared to the prior year period. Adjusted EBITDA margin decreased to 26.1%, compared to 30.1% in the prior year period.

Adjusted net income for the third quarter was $29.2 million, compared to $39.4 million in the prior year period. The change in adjusted net income was largely attributable to higher interest expense as well as the decline in Adjusted EBITDA.

Third quarter net cash outflow from operating activities was $6.2 million, compared to net cash inflow of $51.6 million in the prior year period, mainly reflecting the timing of settlement of customer funds. Free cash flow was $106.5 million, compared to $70.2 million in the prior year period.

Financial Guidance

For full year 2022, Paysafe expects revenue and Adjusted EBITDA to be in the ranges provided below, which reflects a tightening of the ranges previously communicated on the August 10 earnings call. Excluding the impact of movement in foreign exchange rates, Paysafe anticipates mid single-digit revenue growth for full year 2022.

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.

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 and nine months ended September 30, 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.

Following an internal review of the disclosures in our terms and conditions of foreign exchange rates in our Digital Commerce business for the period January 2018 to August 2022, and pursuant to discussions with our regulator that were initiated by us and concluded in September 2022, we agreed to provide payments to certain customers. As a result, we recorded a provision of $33.6 million related to this matter as of June 30, 2022 in our interim financial statements filed on Form 6-K October 19, 2022. This was a subsequent event that occurred after the filing of our second quarter 2022 earnings release and therefore was not reflected in the financial results included therein. The following line items have been updated to reflect this provision: Net (loss) / income attributable to the company, restructuring and other costs, and income tax (benefit).

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.

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 and the completion of the reverse stock split.

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 geopolitical events and the responses of governments around the world; the effects of global economic uncertainties, including inflationary pressure and rising interest rates, on consumer and business spending; risks associated foreign currency exchange rate fluctuations; 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; the effects of chargebacks, merchant insolvency and consumer deposit settlement risk; changes to our continued financial institution sponsorships; 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; our ability to manage regulatory and litigation risks, and the outcome of legal and regulatory proceedings; 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; 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; the effect of the COVID-19 pandemic on our business; 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.

Contacts

Media

Kate Aldridge

Paysafe

[email protected]
+44 750 079 7547

Investors

Kirsten Nielsen

Paysafe

+1 (646) 901-3140

[email protected]

Read full story here