Press releases

Paysafe reports third quarter 2021 results

Nov 11, 2021

London, UK – 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 2021.

Third Quarter 2021 Financial Highlights

(Metrics compared to third quarter of 2020)

  • Total Payment Volume of $31.1 billion, increased 19%
  • Revenue of $353.6 million, decreased 1%
  • Net loss attributable to the Company of $147.2 million, compared to net loss of $38.1 million, and inclusive of a non-cash impairment charge of $322.2 million
  • Adjusted EBITDA of $106.4 million, decreased 1%
  • Revised outlook for full year 2021

 

Philip McHugh, CEO of Paysafe, stated, “In the third quarter we reported Adjusted EBITDA in line with our expectations, despite softer than expected revenue, reflecting both market and performance challenges within the digital wallet business. While the recent trend will drive an adjusted financial outlook, we continue to see strong momentum across the business. Our position to win in high growth and disruptive markets including online sports betting and crypto continues to accelerate, coupled with strong delivery against our cost and technology platform targets.”

Strategic and Operational Highlights

  • 50% year-to-date revenue growth in North American iGaming
  • Announced several new and expanded U.S. iGaming partnerships, including Fubo Gaming, PlayUp, and SuperBook Sports
  • Continued rollout of Skrill USA digital wallet revamp designed to make it easier and faster than ever to wager online; pilot now expanded to 11 iGaming brands
  • Expanded eCash partnership with Incomm, supporting financial inclusion and enabling cash consumers to pay bills at more than 4,600 Walmart stores across the U.S.
  • Acquired German fintech company, viafintech, positioning Paysafe as an essential payments partner to fast-growing neobanks around the world
  • Announced acquisition of SafetyPay and closed acquisition of PagoEfectivo, establishing Paysafe as the leading provider of open banking solutions in Latin America
  • Exceeding cost savings program targets, delivering $26 million year-to-date

 

Third Quarter 2021 Summary of Consolidated Results

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

($ in thousands) (unaudited)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

353,585

 

 

$

355,505

 

 

$

1,115,352

 

 

$

1,056,204

 

Gross Profit (excluding depreciation and amortization)

 

$

208,733

 

 

$

220,153

 

 

$

663,685

 

 

$

665,219

 

Net loss attributable to the Company

 

$

(147,200

)

 

$

(38,127

)

 

$

(201,250

)

 

$

(123,320

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

106,405

 

 

$

107,280

 

 

$

338,439

 

 

$

330,425

 

Adjusted EBITDA margin

 

 

30.1

%

 

 

30.2

%

 

 

30.3

%

 

 

31.3

%

 

Total revenue for the third quarter of 2021 was $353.6 million, a decrease of 1%, compared to $355.5 million in the prior year. Growth was partially offset by a $7.7 million impact of a business divestiture (Pay Later) in October 2020. Excluding Pay Later, revenue increased 2%. Revenue performance compared to the prior year also reflects the impact of actions taken to improve the Company’s overall risk/reward profile in certain markets and channels, specifically related to the exit of certain clients in the direct marketing vertical within the Integrated Processing segment, which had an unfavorable impact on growth. Excluding the divested business and the direct marketing vertical, growth from all other revenue was approximately 5% compared to the prior year, driven by the Integrated Processing segment, including growth from both U.S. acquiring and integrated eCommerce, as well as strong growth from the eCash segment. Growth was partially offset by a decline from the Digital Wallet segment.

Net loss attributable to the Company for the third quarter was $147.2 million, compared to a loss of $38.1 million in the prior year. Net loss included a non-cash impairment charge of $322.2 million to reduce the carrying value of intangible assets in the Digital Wallet segment. This was partially offset by a fair value gain of $94.3 million on the measurement of the warrant liability at period-end. Results also reflect a $23.3 million decrease in interest expense related to the Company’s debt refinancing which was completed in June of 2021 as well as an income tax benefit of $76.9 million compared to $14.3 million in the prior year.

Adjusted EBITDA for the third quarter was $106.4 million, a decrease of 1%, compared to $107.3 million in the prior year. Adjusted EBITDA margin was 30.1%, compared to 30.2% in the prior year.

Third quarter net cash from operating activities was $51.6 million, an increase of 37%, compared to $37.8 million in the prior year. Free cash flow was $70.2 million, compared to $58.8 million in the prior year.

Summary of Segment Results

 

 

Three months ended

 

 

 

 

 

 

Nine months ended

 

 

 

 

 

 

 

September 30,

 

 

YoY

 

 

September 30,

 

 

YoY

 

($ in thousands) (unaudited)

 

2021

 

 

2020

 

 

change

 

 

2021

 

 

2020

 

 

change

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integrated Processing

 

$

186,889

 

 

$

180,557

 

 

 

3.5

%

 

$

555,034

 

 

$

545,171

 

 

 

1.8

%

Digital Wallet

 

$

83,662

 

 

$

98,543

 

 

 

-15.1

%

 

$

275,856

 

 

$

298,144

 

 

 

-7.5

%

eCash Solutions

 

$

90,175

 

 

$

81,983

 

 

 

10.0

%

 

$

306,967

 

 

$

227,050

 

 

 

35.2

%

Intersegment

 

$

(7,141

)

 

$

(5,578

)

 

 

28.0

%

 

$

(22,505

)

 

$

(14,161

)

 

 

58.9

%

Total Revenue

 

$

353,585

 

 

$

355,505

 

 

 

-0.5

%

 

$

1,115,352

 

 

$

1,056,204

 

 

 

5.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integrated Processing

 

$

44,432

 

 

$

48,674

 

 

 

-8.7

%

 

$

135,123

 

 

$

155,938

 

 

 

-13.3

%

Digital Wallet

 

$

39,931

 

 

$

48,136

 

 

 

-17.0

%

 

$

124,631

 

 

$

142,135

 

 

 

-12.3

%

eCash Solutions

 

$

36,346

 

 

$

30,832

 

 

 

17.9

%

 

$

127,450

 

 

$

80,996

 

 

 

57.4

%

Unallocated Corporate

 

$

(14,304

)

 

$

(20,362

)

 

 

-29.8

%

 

$

(48,765

)

 

$

(48,644

)

 

 

0.2

%

Total Adjusted EBITDA

 

$

106,405

 

 

$

107,280

 

 

 

-0.8

%

 

$

338,439

 

 

$

330,425

 

 

 

2.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA margin:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integrated Processing

 

 

23.8

%

 

 

27.0

%

 

(320) bps

 

 

 

24.3

%

 

 

28.6

%

 

(430) bps

 

Digital Wallet

 

 

47.7

%

 

 

48.8

%

 

(110) bps

 

 

 

45.2

%

 

 

47.7

%

 

(250) bps

 

eCash Solutions

 

 

40.3

%

 

 

37.6

%

 

270 bps

 

 

 

41.5

%

 

 

35.7

%

 

580 bps

 

Total Adjusted EBITDA margin

 

 

30.1

%

 

 

30.2

%

 

(10) bps

 

 

 

30.3

%

 

 

31.3

%

 

(90) bps

 

 

Financial Guidance

For full year 2021, Paysafe is now anticipating revenue, gross profit and Adjusted EBITDA to be in the ranges provided below. These revised expectations primarily reflect the impact of the following developments:

  • Gambling regulations and softness in key European markets and performance challenges impacting the Digital Wallet segment
  • The modified scope and timing of new eCommerce customer agreements relative to the Company’s original expectations for these agreements

 

As described in more detail in the supplemental presentation to this press release, Paysafe is taking actions to address these challenges and to deliver on its growth opportunities, but the Company expects these headwinds to impact the Company’s growth and profitability in 2021.

($ in millions)

 

Q4 2021

 

Full Year 2021 - prior

 

Full Year 2021 - updated

Revenue

 

$355 – $365

 

$1,530 – $1,550

 

$1,470 – $1,480

Gross Profit (excluding depreciation and amortization)

 

$205 – $215

 

$930 – $970

 

$870 – $880

Adjusted EBITDA

 

$90– $100

 

$480 – $495

 

$425 – $435

 

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

Thursday, November 11, 2021 at 8:30 a.m. ET

Hosts

Philip McHugh, Chief Executive Officer and Director

Izzy Dawood, Chief Financial Officer

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)

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 (as further discussed below under Reorganization and Recapitalization (the “Transaction”). The comparative financial information for the three and nine months ended September 30, 2020 is based upon information of Pi Jersey Holdco 1.5 Limited (the “Accounting Predecessor”), prior to giving effect to the Transaction. Prior to the Transaction, Paysafe Limited had no material operations, assets or liabilities.

As of December 31, 2020, an out of period adjustment related to the period ended March 31, 2020 was identified and corrected for the impairment of certain Digital Wallet’s intangible assets. This resulted in the overstatement of Intangible assets, net and understatement of Impairment expense on intangible assets, net of $21.4 million ($15.8 million net of tax), respectively, as of March 31, 2020.  The prior period results have been revised to reflect the correction of this misstatement.

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. 

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 US $100 billion in 2020, and approximately 3,400 employees located in 12+ global locations, Paysafe connects businesses and consumers across 70 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, consumer and business privacy and data use regulations or other regulations in Bermuda, the UK, Ireland, Switzerland, the United States, Canada and elsewhere; 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; our ability to satisfy closing conditions related to acquisitions and risks associated with the integration of acquisitions; the effects of chargebacks, merchant insolvency and consumer deposit settlement risk; changes to our continued financial 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 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; terrorism; 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 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.

Paysafe Limited Condensed Consolidated Balance Sheets (unaudited)

($ in thousands)

 

September 30, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

262,267

 

 

$

387,616

 

Customer accounts and other restricted cash, net of allowance for credit losses of $4,350 and $4,096, respectively

 

 

1,201,801

 

 

 

1,376,236

 

Accounts receivable, net of allowance for credit losses of $10,317 and $25,035, respectively

 

 

131,220

 

 

 

117,410

 

Settlement receivables, net of allowance credit losses of $4,057 and $5,859, respectively

 

 

152,364

 

 

 

223,083

 

Prepaid expenses and other current assets

 

 

68,872

 

 

 

63,252

 

Related party receivables – current

 

 

6,459

 

 

 

6,271

 

Contingent consideration receivable – current

 

 

2,896

 

 

 

26,668

 

Total current assets

 

 

1,825,879

 

 

 

2,200,536

 

Deferred tax assets

 

 

17,236

 

 

 

17,669

 

Property, plant and equipment, net

 

 

15,539

 

 

 

18,691

 

Operating lease right-of-use assets

 

 

33,035

 

 

 

40,187

 

Intangible assets, net

 

 

1,163,072

 

 

 

1,524,817

 

Goodwill

 

 

3,536,623

 

 

 

3,481,816

 

Contingent consideration receivable – non-current

 

 

 

 

 

125,107

 

Other assets – noncurrent

 

 

1,670

 

 

 

508

 

Total non-current assets

 

 

4,767,175

 

 

 

5,208,795

 

Total assets

 

$

6,593,054

 

 

$

7,409,331

 

 

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and other liabilities

 

$

236,974

 

 

$

231,724

 

Short-term debt

 

 

6,280

 

 

 

15,400

 

Funds payable and amounts due to customers

 

 

1,335,568

 

 

 

1,552,187

 

Operating lease liabilities – current

 

 

8,470

 

 

 

8,969

 

Income taxes payable

 

 

19,873

 

 

 

8,161

 

Contingent and deferred consideration payable – current

 

 

10,647

 

 

 

5,820

 

Liability for share-based compensation – current

 

 

5,835

 

 

 

 

 

Derivative financial liabilities, current

 

 

 

 

 

2,651

 

Total current liabilities

 

 

1,623,647

 

 

 

1,824,912

 

Non-current debt

 

 

2,190,938

 

 

 

3,246,871

 

Related party payables – non-current

 

 

 

 

 

195,228

 

Operating lease liabilities – non-current

 

 

28,220

 

 

 

34,540

 

Deferred tax liabilities

 

 

34,603

 

 

 

122,519

 

Warrant liabilities

 

 

99,717

 

 

 

 

Derivative financial liabilities – non-current

 

 

 

 

 

47,547

 

Liability for share-based compensation – non-current

 

 

5,882

 

 

 

 

Contingent and deferred consideration payable – non-current

 

 

3,112

 

 

 

3,742

 

Other liabilities – non-current

 

 

969

 

 

 

969

 

Total non-current liabilities

 

 

2,363,441

 

 

 

3,651,416

 

Total liabilities

 

 

3,987,088

 

 

 

5,476,328

 

Commitments and contingent liabilities

 

 

 

 

 

 

 

 

Shareholders' equity in the Company

 

 

2,468,187

 

 

 

1,921,705

 

Non-controlling interest

 

 

137,779

 

 

 

11,298

 

Total shareholders' equity

 

 

2,605,966

 

 

 

1,933,003

 

Total liabilities and shareholders' equity

 

$

6,593,054

 

 

$

7,409,331

 

 

Paysafe Limited Condensed Consolidated Statements of Operations (unaudited)

 

 

For the three months ended

September 30,

 

 

For the nine months ended

September 30,

 

($ in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

353,585

 

 

$

355,505

 

 

$

1,115,352

 

 

$

1,056,204

 

Cost of services (excluding depreciation and amortization)

 

 

144,852

 

 

 

135,352

 

 

 

451,667

 

 

 

390,985

 

Selling, general and administrative

 

 

111,041

 

 

 

112,873

 

 

 

418,076

 

 

 

334,794

 

Depreciation and amortization

 

 

61,832

 

 

 

66,141

 

 

 

197,408

 

 

 

203,132

 

Impairment expense on intangible assets

 

 

322,210

 

 

 

44,401

 

 

 

324,145

 

 

 

123,804

 

Restructuring and other costs

 

 

14,833

 

 

 

505

 

 

 

22,321

 

 

 

10,511

 

(Gain) / loss on disposal of subsidiary and other assets, net

 

 

 

 

 

98

 

 

 

(28

)

 

 

359

 

Operating loss

 

 

(301,183

)

 

 

(3,865

)

 

 

(298,237

)

 

 

(7,381

)

Other income / (expense), net

 

 

96,490

 

 

 

(6,484

)

 

 

175,573

 

 

 

(31,062

)

Interest expense, net

 

 

(19,272

)

 

 

(42,578

)

 

 

(144,291

)

 

 

(123,332

)

Loss before taxes

 

 

(223,965

)

 

 

(52,927

)

 

 

(266,955

)

 

 

(161,775

)

Income tax benefit

 

 

(76,859

)

 

 

(14,305

)

 

 

(66,105

)

 

 

(38,073

)

Net loss

 

$

(147,106

)

 

$

(38,622

)

 

$

(200,850

)

 

$

(123,702

)

Less: net income / (loss) attributable to non-controlling interest

 

 

94

 

 

 

(495

)

 

 

400

 

 

 

(382

)

Net loss attributable to the Company

 

$

(147,200

)

 

$

(38,127

)

 

$

(201,250

)

 

$

(123,320

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(147,106

)

 

$

(38,622

)

 

$

(200,850

)

 

$

(123,702

)

Other comprehensive income / (loss), net of tax of $0:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss / (gain) on foreign currency translation

 

 

6,602

 

 

 

(6,568

)

 

 

2,144

 

 

 

9,074

 

Total comprehensive loss

 

$

(153,708

)

 

$

(32,054

)

 

$

(202,994

)

 

$

(132,776

)

Less: comprehensive income / (loss) attributable to non-controlling interest

 

 

94

 

 

 

(495

)

 

 

400

 

 

 

(382

)

Total comprehensive loss attributable to the Company

 

$

(153,802

)

 

$

(31,559

)

 

$

(203,394

)

 

$

(132,394

)

 

Paysafe Limited Condensed Consolidated Statements of Cash Flow (unaudited)

 

 

Nine Months Ended September 30,

 

($ in thousands)

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(200,850

)

 

$

(123,702

)

Adjustments for non-cash items:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

197,408

 

 

 

203,132

 

Unrealized foreign exchange gain

 

 

(3,167

)

 

 

(8,843

)

Deferred tax benefit

 

 

(94,255

)

 

 

(39,324

)

Interest expense, net

 

 

81,494

 

 

 

5,552

 

Share based compensation

 

 

92,830

 

 

 

 

Other (income) / expense, net

 

 

(166,818

)

 

 

14,613

 

Impairment expense on intangible assets

 

 

324,145

 

 

 

123,804

 

Allowance for credit losses and other

 

 

13,611

 

 

 

42,518

 

(Gain) / loss on disposal of subsidiary and other assets, net

 

 

(28

)

 

 

359

 

Non-cash lease expense

 

 

7,192

 

 

 

7,847

 

Movements in working capital:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(26,862

)

 

 

(47,165

)

Prepaid expenses, other current assets, and related party receivables

 

 

(8,969

)

 

 

7,522

 

Settlement receivables, net

 

 

60,542

 

 

 

10,636

 

Accounts payable, other liabilities, and related party payables

 

 

(6,850

)

 

 

(18,866

)

Funds payable and amounts due to customers

 

 

(176,091

)

 

 

3,322

 

Income tax payable

 

 

(732

)

 

 

(8,599

)

Net cash flows from operating activities

 

 

92,600

 

 

 

172,806

 

Cash flows in investing activities

 

 

 

 

 

 

 

 

Purchase of property, plant & equipment

 

 

(4,452

)

 

 

(2,303

)

Purchase of merchant portfolios

 

 

(48,533

)

 

 

(3,241

)

Purchase of other intangible assets

 

 

(57,083

)

 

 

(43,356

)

Net cash outflow on acquisition of subsidiary

 

 

(119,177

)

 

 

(9,137

)

Net cash flows used in investing activities

 

 

(229,245

)

 

 

(58,037

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Net cash inflow from reorganization and recapitalization

 

 

1,167,874

 

 

 

 

Payment of equity issuance costs

 

 

(151,455

)

 

 

 

Proceeds from loans and borrowings

 

 

2,241,081

 

 

 

270,050

 

Repayments of loans and borrowings

 

 

(3,295,658

)

 

 

(323,264

)

Payment of debt issuance costs

 

 

(5,930

)

 

-

 

Payments under derivative financial instruments, net

 

 

(48,457

)

 

 

(3,259

)

Cash outflow on foreign exchange forward contract

 

 

(6,504

)

 

 

 

Proceeds under line of credit

 

 

450,000

 

 

 

346,867

 

Repayments under line of credit

 

 

(450,000

)

 

 

(328,230

)

Contingent consideration received

 

 

7,942

 

 

 

 

Contingent consideration paid

 

 

(4,497

)

 

 

(4,359

)

Net cash flows used in financing activities

 

 

(95,604

)

 

 

(42,195

)

Effect of foreign exchange rate changes

 

 

(67,535

)

 

 

45,485

 

(Decrease) / increase in cash and cash equivalents, including customer accounts and other restricted cash during the period

 

$

(299,784

)

 

$

118,059

 

Less: Net decrease in cash and cash equivalents classified within current assets held for sale

 

$

 

 

$

(2,250

)

Net (decrease) / increase in cash and cash equivalents, including customer accounts and other restricted cash during the year

 

$

(299,784

)

 

$

115,809

 

Cash and cash equivalents, including customer accounts and other restricted cash at beginning of the period (1)

 

 

1,763,852

 

 

 

1,382,361

 

Cash and cash equivalents at end of the period, including customer accounts and other restricted cash

 

$

1,464,068

 

 

$

1,498,170

 

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

Cash and cash equivalents

 

$

262,267

 

 

$

298,800

 

Customer accounts and other restricted cash, net

 

 

1,201,801

 

 

 

1,199,370

 

Total cash and cash equivalents, including customer accounts and other restricted cash, net

 

$

1,464,068

 

 

$

1,498,170

 

 

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 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.

Reconciliation of GAAP Net Loss to Non-GAAP Adjusted EBITDA

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

($ in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net Loss

 

$

(147,106

)

 

$

(38,622

)

 

$

(200,850

)

 

$

(123,702

)

Income tax benefit

 

 

(76,859

)

 

 

(14,305

)

 

 

(66,105

)

 

 

(38,073

)

Interest expense, net

 

 

19,272

 

 

 

42,578

 

 

 

144,291

 

 

 

123,332

 

Depreciation and amortization

 

 

61,832

 

 

 

66,141

 

 

 

197,408

 

 

 

203,132

 

Share based compensation expense

 

 

8,713

 

 

 

 

 

 

92,830

 

 

 

 

Impairment expense on intangible assets

 

 

322,210

 

 

 

44,401

 

 

 

324,145

 

 

 

123,804

 

Restructuring and other costs

 

 

14,833

 

 

 

505

 

 

 

22,321

 

 

 

10,511

 

Loss / (gain) on disposal of subsidiaries and other assets, net

 

 

 

 

 

98

 

 

 

(28

)

 

 

359

 

Other (income) / expense, net

 

 

(96,490

)

 

 

6,484

 

 

 

(175,573

)

 

 

31,062

 

Adjusted EBITDA

 

$

106,405

 

 

$

107,280

 

 

$

338,439

 

 

$

330,425

 

Adjusted EBITDA Margin

 

 

30.1

%

 

 

30.2

%

 

 

30.3

%

 

 

31.3

%

 

Reconciliation of Operating Cash Flow to Non-GAAP Free Cash Flow

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

($ in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net cash inflows from operating activities

 

$

51,590

 

 

$

37,764

 

 

$

92,600

 

 

$

172,806

 

Capital Expenditure

 

 

(22,914

)

 

 

(15,903

)

 

 

(61,535

)

 

 

(45,659

)

Cash paid for interest

 

 

6,933

 

 

 

59,934

 

 

 

62,797

 

 

 

117,780

 

Payments relating to Restructuring and other costs

 

 

8,035

 

 

 

2,776

 

 

 

12,215

 

 

 

14,900

 

Movement in Customer Accounts and other restricted cash

 

 

26,508

 

 

 

(25,750

)

 

 

127,199

 

 

 

(20,381

)

Free Cash Flow

 

$

70,152

 

 

$

58,821

 

 

$

233,276

 

 

$

239,446

 

Adjusted EBITDA

 

 

106,405

 

 

 

107,280

 

 

 

338,439

 

 

 

330,425

 

Free Cash Flow Conversion

 

 

66

%

 

 

55

%

 

 

69

%

 

 

72

%

 

Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit (excluding depreciation and amortization)

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

($ in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

353,585

 

 

$

355,505

 

 

$

1,115,352

 

 

$

1,056,204

 

Cost of services (excluding depreciation and amortization)

 

 

144,852

 

 

 

135,352

 

 

 

451,667

 

 

 

390,985

 

Depreciation and amortization

 

 

61,832

 

 

 

66,141

 

 

 

197,408

 

 

 

203,132

 

Gross Profit (1)

 

$

146,901

 

 

$

154,012

 

 

$

466,277

 

 

$

462,087

 

Depreciation and amortization

 

 

61,832

 

 

 

66,141

 

 

 

197,408

 

 

 

203,132

 

Gross Profit (excluding depreciation and amortization)

 

$

208,733

 

 

$

220,153

 

 

$

663,685

 

 

$

665,219

 

  1. Gross Profit has been calculated as revenue, less cost of services and depreciation and amortization. Gross profit is not presented within the Company's consolidated financial statements.