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:
Due in less | Due in 30‑60 | Due in 60‑90 | Due in more | ||||||||
Total |
| Overdue |
| than 30 days |
| days |
| days |
| than 90 days | |
$ | | | | | | | |||||
The following are current and overdue balances from above that are segregated into the timing of expected collections at December 31, 2023:
| Due in less | Due in 30‑60 | Due in 60‑90 |
| Due in more | ||||||
Total |
| Overdue |
| than 30 days |
| days |
| days |
| than 90 days | |
$ | |
|
|
|
|
| |||||
As of June 30, 2024 and December 31, 2023, the Company applied a range of loss rates to the CA portfolio of
13
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 (continued):
Below is a rollforward for the allowance for CA losses (“ALCAL”):
Six months ended | ||||||
June 30, | ||||||
2024 | 2023 | |||||
Beginning balance | $ | | $ | | ||
Provisions | | | ||||
Recoveries | ( | ( | ||||
Charge-offs | ( | ( | ||||
Ending balance | $ | | $ | | ||
NOTE 4 – CUSTOMER FUNDS AND INVESTMENTS
The Company has invested certain customer funds in available-for-sale debt securities and term deposits. The following table summarizes the assets underlying customer funds as of June 30, 2024 and December 31, 2023:
June 30, | December 31, | ||||
2024 | 2023 | ||||
Customer funds: | |||||
Cash and cash equivalents | $ | | $ | | |
Restricted cash | | — | |||
Available-for-sale debt securities | | — | |||
Total customer funds | $ | | $ | | |
As of June 30, 2024, the estimated fair value of the available-for-sale debt securities included $
During the period ended June 30, 2024, the Company did not sell any available-for-sale debt securities or incur any realized gains or losses.
As of June 30, 2024, $
NOTE 5 – DERIVATIVES AND HEDGING
The table below summarizes the gross notional amount and fair value of outstanding derivative instruments at June 30, 2024.
June 30, 2024 | ||||||||
Balance Sheet Location | Notional Amount | Fair Value | ||||||
Derivative liabilities designated as hedge accounting instruments: | ||||||||
Foreign currency forwards | $ | | $ | | ||||
Foreign currency net purchased options | | | ||||||
Total derivative liabilities | $ | | $ | | ||||
14
PAYONEER GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)
NOTE 5 – DERIVATIVES AND HEDGING (continued):
During the three and six months ended June 30, 2024, the Company recognized $
As of June 30, 2024, the Company estimated that $
NOTE 6 – FAIR VALUE
The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023:
June 30, 2024 | |||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||
U.S. Treasury Securities (included within Customer funds) | $ | | $ | — | $ | — | $ | | |||
Derivative liabilities (included within Other payables) | |||||||||||
Foreign currency forwards | $ | — | $ | | $ | — | $ | | |||
Foreign currency net purchased options | — | | — | | |||||||
Total derivative liabilities | $ | — | $ | | $ | — | $ | | |||
Warrant liability | $ | | $ | — | $ | — | $ | | |||
Total financial liabilities | $ | | $ | | $ | — | $ | | |||
December 31, 2023 | |||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||
Warrant liability | $ | | $ | — | $ | — | $ | | |||
The Company’s derivative instruments are valued using pricing models that take into account the contract terms and relevant currency rates.
As of June 30, 2024 and December 31, 2023, the fair values of the Company's cash, cash equivalents, customer funds (other than the portion consisting of available-for-sale debt securities), restricted cash, accounts receivable, capital advance receivables, accounts payable, outstanding operating balances, and short and long-term debt approximated the carrying values of these instruments presented in the Company's consolidated balance sheets because of their nature. The fair value of long-term debt, when carrying value does not approximate fair value, is determined using Level 3 unobservable inputs and assumptions by the Company.
NOTE 7 - OTHER CURRENT ASSETS
Composition of Other current assets, grouped by major classifications, is as follows:
| June 30, |
| December 31, | |||
2024 | 2023 | |||||
Prepaid expenses | $ | | $ | | ||
Income receivable |
| |
| | ||
Prepaid income taxes |
| |
| | ||
Other |
| |
| | ||
Total Other current assets | $ | | $ | | ||
15
PAYONEER GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)
NOTE 8 – PROPERTY, EQUIPMENT AND SOFTWARE
Composition of property, equipment and software, grouped by major classifications, is as follows:
| June 30, |
| December 31, | |||
2024 | 2023 | |||||
Computers, software and peripheral equipment | $ | | $ | | ||
Leasehold improvements |
| |
| | ||
Furniture and office equipment |
| |
| | ||
Property, equipment and software |
| |
| | ||
Accumulated depreciation |
| ( |
| ( | ||
Property, equipment and software, net | $ | | $ | | ||
Depreciation expense for the three months ended June 30, 2024 and 2023 was $
During the three and six months ended June 30, 2024, the Company retired computers, software, and peripheral equipment with a cost of $
NOTE 9 – INTANGIBLE ASSETS
Composition of intangible assets, grouped by major classifications, is as follows:
| June 30, 2024 |
| December 31, 2023 | |||||||||||||||
Gross Carrying Value | Accumulated Amortization | Net Carrying Value | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | |||||||||||||
Internal use software | $ | | $ | ( | $ | | $ | | $ | ( | $ | | ||||||
Acquired developed technology |
| |
| ( |
| |
| |
| ( |
| | ||||||
Intangible assets, net | $ | | $ | ( | $ | | $ | | $ | ( | $ | | ||||||
Amortization expense for the three months ended June 30, 2024 and 2023 was $
During the three and six months ended June 30, 2024, the Company recognized an insignificant amount of impairment related to intangible assets. During the six months ended June 30, 2023, the Company recognized $
Expected future intangible asset amortization as of June 30, 2024, excluding capitalized internal use software of $
Fiscal years |
|
| |
2024 (Excluding the six months ended June 30, 2024) | $ | | |
2025 | | ||
2026 | | ||
2027 | | ||
2028 and thereafter | — | ||
Total | $ | |
16
PAYONEER GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)
NOTE 10 - OTHER PAYABLES
Composition of Other payables, grouped by major classifications, is as follows:
| June 30, |
| December 31, | |||
2024 | 2023 | |||||
Employee related compensation | $ | | $ | | ||
Commissions payable |
| |
| | ||
Accrued expenses |
| |
| | ||
Lease liability |
| |
| | ||
Income tax payable | | | ||||
Derivative liabilities | | — | ||||
Other |
| |
| | ||
Total Other payables | $ | | $ | | ||
NOTE 11 – DEBT
On October 28, 2021, Payoneer Early Payments Inc. (“PEPI”), a wholly-owned second tier subsidiary of the Company and its subsidiary (the “Borrower”) entered into a Receivables and Loan Security Agreement (the “Warehouse Facility”) with Viola Credit VI, L.P. (currently known as Viola Credit ALF II, L.P.), Viola Credit Alternative Lending FNX SPV, L.P. (the “Lenders”) and Viola Credit Alternative Lending Management 2018 L.P. (collectively, the “Parties”) for the purpose of external financing of Capital Advance activity. The Company notes that the Lenders are related parties through the Company’s Board of Directors’ chairman’s ownership interest in the Lenders. Refer to Note 20 for further information regarding related party considerations.
In accordance with the Warehouse Facility agreement, the Lenders will make available to the Company an initial committed amount of $
The Warehouse Facility agreement stipulates a borrowing base calculated at an advance rate of
As of July 1, 2023, the Warehouse Facility bears interest at the sum of the Daily Simple SOFR and
| ● |
| ● |
| ● |
| ● |
Prior to July 1, 2023, interest on the facility was calculated as the greater of
On June 8, 2022, the Warehouse Facility agreement was amended to create a condition that the total interest rate, calculated as the sum per above, shall not exceed
The revolving period of the facility is
17
PAYONEER GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)
NOTE 11 – DEBT (continued):
The Company recorded expenses, included in transaction costs, in the total amount of $
The Warehouse Facility agreement includes certain affirmative and negative covenants that must be maintained by the Company and includes certain financial measures such as minimum tangible equity and minimum unrestricted cash at the Company level. As of June 30, 2024 and December 31, 2023, the Company was in compliance with all applicable covenants.
As of June 30, 2024 and December 31, 2023, the fair value of the debt approximates the book value due to the short time span between initiation and balance sheet date with the outstanding balance classified as Level 3 in the fair value leveling hierarchy as the inputs into the valuation are not observable.
NOTE 12 – OTHER LONG-TERM LIABILITIES
Composition of other long-term liabilities, grouped by major classifications, is as follows:
| June 30, |
| December 31, | |||
2024 | 2023 | |||||
Reserves for uncertain income tax positions | $ | | $ | | ||
Long-term lease liabilities |
| |
| | ||
Other tax provisions | | | ||||
Severance pay liabilities |
| |
| | ||
Other |
| — |
| | ||
Total other long-term liabilities | $ | | $ | | ||
NOTE 13 – WARRANTS AND SHAREHOLDERS’ EQUITY
Share Repurchase Program and Treasury Stock
On May 7, 2023, the Company’s Board of Directors authorized a stock repurchase program that provides for the repurchase of up to $
The program is intended to offset the impact of dilution from the issuance of new shares as part of employee compensation programs.
Any share repurchases under this stock repurchase program may be made through open market transactions, privately negotiated transactions or other means including in accordance with Rule 10b-18 and/or Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The timing and total amount of repurchases is subject to business and market conditions and the Company’s discretion.
During the three and six months ended June 30, 2024, the Company repurchased
18
PAYONEER GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)
NOTE 13 – WARRANTS AND SHAREHOLDERS’ EQUITY (continued):
Warrants
The Company has publicly traded warrants that are exercisable for shares of the Company’s common stock. Warrants may only be exercised for a whole number of shares at an exercise price of $
The warrants are accounted for as liabilities in accordance with ASC 815-40, Derivatives and Hedging, and are presented within warrant liabilities on the condensed consolidated balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed consolidated statements of comprehensive income. The following table presents the changes in the fair value of warrant liabilities (Level 1):
| Warrant | ||
Liability | |||
Fair value as of December 31, 2023 | $ | | |
Change in fair value |
| ( | |
Fair value as of June 30, 2024 | $ | | |
Fair value as of December 31, 2022 | $ | | |
Change in fair value | ( | ||
Fair value as of June 30, 2023 | $ | | |
Accumulated Other Comprehensive Income (Loss)
The changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, for the three and six months ended June 30, 2024 were as follows. There were
Three Months Ended June 30, 2024 | ||||||||||||
Foreign currency translation adjustments | Unrealized losses on available-for-sale debt securities | Unrealized gains on cash flow hedges | Total | |||||||||
Beginning balance | $ | ( | $ | ( | $ | | $ | ( | ||||
Other comprehensive income (loss) before reclassifications | — | | ( | ( | ||||||||
Amount of loss reclassified from AOCI | — | — | | | ||||||||
Net current period other comprehensive income (loss) |
| — |
| |
| ( |
| | ||||
Ending balance | $ | ( | $ | | $ | ( | $ | | ||||
19
PAYONEER GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)
NOTE 13 – WARRANTS AND SHAREHOLDERS’ EQUITY (continued):
Six Months Ended June 30, 2024 | ||||||||||||
Foreign currency translation adjustments | Unrealized losses on available-for-sale debt securities | Unrealized gains on cash flow hedges | Total | |||||||||
Beginning balance | $ | ( | $ | — | $ | — | $ | ( | ||||
Other comprehensive income (loss) before reclassifications | — | | ( | | ||||||||
Amount of loss reclassified from AOCI | — | — | | | ||||||||
Net current period other comprehensive income (loss) |
| — |
| |
| ( |
| | ||||
Ending balance | $ | ( | $ | | $ | ( | $ | | ||||
NOTE 14 – COMMITMENTS AND CONTINGENCIES
The Company’s business is subject to various laws and regulations in the United States and other countries from where the Company operates. Any regulatory action, tax or legal challenge against the Company for noncompliance with any regulatory or legal requirement could result in significant fines, penalties, or other enforcement actions, increased costs of doing business through adverse judgment or settlement, reputational harm, the diversion of significant amounts of management time and operational resources, and could require changes in compliance requirements or impose limits on the Company’s ability to expand its product offerings, or otherwise harm or have a material adverse effect on the Company’s business. From time to time, the Company incurs insignificant fines and penalties in the ordinary course of business.
On September 28, 2021, the National Banking and Securities Commission (CNBV) and the Bank of Mexico revoked the banking license of a banking entity utilized by the Company due to the banking entity not meeting applicable capital requirements. As a result, the Company is unable to withdraw funds from the banking entity. The Company has reserved $
On August 7, 2023, Payoneer (Guangzhou) Commerce Services Co., Ltd. (“Payoneer Guangzhou”), a wholly owned subsidiary of the Company, entered into an agreement with a non-bank payments institution (the “Licenseholder”), that offers pay-out and mobile payments solutions to merchants in the People’s Republic of China and holds a Payment Business License issued by the People’s Bank of China (the “PBoC”).
Pursuant to the terms of the agreement, Payoneer Guangzhou seeks to purchase the Licenseholder, and placed approximately $
From time to time, the Company is involved in other disputes or regulatory inquiries that arise in the ordinary course of business. These may include suits by its customers alleging, among other things, acting unfairly and/or not in conformity regarding pricing, rules or agreements, improper disclosure of the Company’s prices, rules, or policies or that the Company’s practices, prices, rules, policies, or customer agreements violate applicable law.
20
PAYONEER GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)
NOTE 14 – COMMITMENTS AND CONTINGENCIES (continued):
In addition to these types of disputes and regulatory inquiries, the operations of the Company are also subject to regulatory and/or legal review and/or challenges that tend to reflect the increasing global regulatory focus to which the industry in which the Company operates is subject and, when taken as a whole with other regulatory and legislative action, such actions could result in the imposition of costly new compliance burdens on the Company and may lead to increased costs and decreased transaction volume and revenue. Any claims or regulatory actions against the Company, whether meritorious or not, could be time consuming, result in costly litigation, settlement payments, damage awards (including statutory damages for certain causes of action in certain jurisdictions), fines, penalties, injunctive relief, or increased costs of doing business through adverse judgment or settlement, require the Company to change its business practices, require significant amounts of management time, result in the diversion of operational resources, or otherwise harm the business.
NOTE 15 – REVENUE
The following table presents revenue recognized from contracts with customers as well as revenue from other sources:
Three months ended June 30, |
| Six months ended June 30, | ||||||||||
| 2024 |
| 2023 |
| 2024 | 2023 | ||||||
Revenue recognized at a point in time | $ | | $ | | $ | | $ | | ||||
Revenue recognized over time |
| |
| | | | ||||||
Revenue from contracts with customers | $ | | $ | | $ | | $ | | ||||
Interest income on customer balances | $ | | $ | | $ | | $ | | ||||
Capital advance income | | | | | ||||||||
Revenue from other sources | $ | | $ | | $ | | $ | | ||||
Total revenues | $ | | $ | | $ | | $ | | ||||
Based on the information provided to and reviewed by the Company’s Chief Operating Decision Maker (“CODM”), the Company believes that the nature, amount, timing, and uncertainty of its revenue and cash flows and how they are affected by economic factors are most appropriately depicted through its primary regional markets. The following table presents the Company’s revenue disaggregated by primary regional market, with revenues being attributed to the country (in the region) in which the billing address of the transacting customer is located, with the exception of global bank transfer revenues, where revenues are disaggregated based on the billing address of the transaction funds source.
Three months ended |
| Six months ended | ||||||||||
June 30, | June 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Primary regional markets |
|
|
|
| ||||||||
Greater China1 | $ | | $ | | $ | | $ | | ||||
Europe2 | | | | | ||||||||
Asia-Pacific2 | | | | | ||||||||
North America3 |
| |
| |
| | | |||||
South Asia, Middle East and North Africa2 | | | | | ||||||||
Latin America2 | | | | | ||||||||
Total revenues | $ | | $ | | $ | | $ | | ||||
(1) | Greater China is inclusive of mainland China, Hong Kong, Macao and Taiwan |
(2) | No single country included in any of these regions generated more than 10% of total revenue |
(3) | The United States is the Company’s country of domicile. Of North America revenues, the US represents $ |
21
PAYONEER GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)
NOTE 16 - TRANSACTION COSTS
Composition of transaction costs, grouped by major classifications, is as follows:
| Three Months Ended | Six months ended | ||||||||||
June 30, |
| June 30, | ||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Bank and processor fees | $ | | $ | | $ | | $ | | ||||
Network fees |
| |
| | | | ||||||
Capital advance costs, net of recoveries |
| |
| | | | ||||||
Chargebacks and operational losses | | | | | ||||||||
Card costs |
| |
| | | | ||||||
Other |
| |
| | | | ||||||
Total transaction costs | $ | | $ | | $ | | $ | | ||||
NOTE 17 – STOCK-BASED COMPENSATION
Stock Options and RSUs
The following table summarizes the options to purchase shares of common stock activity under the Company’s equity incentive plans for the six months ended June 30, 2024:
| Options | |
Outstanding at December 31, 2023 |
| |
Granted |
| |
Exercised |
| ( |
Forfeited |
| ( |
Outstanding at June 30, 2024 | | |
Exercisable at June 30, 2024 | |
The weighted average exercise price of the options outstanding as of June 30, 2024 was $
The following table summarizes the RSUs activity under the Company’s equity incentive plans as of June 30, 2024:
| Units | |
Outstanding December 31, 2023 |
| |
Granted |
| |
Vested |
| ( |
Withhold to cover shares repurchased | ( | |
Forfeited |
| ( |
Outstanding June 30, 2024 |
| |
In the six months ended June 30, 2024, the Company granted
The Company withholds common stock shares associated with net share settlements to cover tax withholding obligations upon the vesting of restricted stock units under its employee equity incentive plans in the United States. During the three and six months ended June 30, 2024, the Company withheld
22
PAYONEER GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)
NOTE 17 – STOCK-BASED COMPENSATION (continued):
The Company collects cash from proceeds from certain international employees’ sales of common stock. The amount is held in a Company bank account until it is remitted to the employees. Due to the restrictions on the use of the funds in the bank account, we have classified the amount as short-term restricted cash, and a corresponding liability is included in Other payables in the condensed consolidated balance sheets. As of June 30, 2024, $
Employee Stock Purchase Plan
As of June 30, 2024, approximately
The expense associated with the ESPP recognized during the three and six months ended June 30, 2024 was $
Impact on Results of Operations
The impact on the Company’s results of operations of recording stock-based compensation expense under the Company’s equity incentive plans, including the ESPP, were as follows:
Three Months Ended | Six months ended | |||||||||||
| June 30, |
| June 30, | |||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Other operating expenses | $ | | $ | | $ | | $ | | ||||
Research and development expenses |
| |
| | | | ||||||
Sales and marketing expenses |
| |
| | | | ||||||
General and administrative expenses |
| |
| | | | ||||||
Total stock-based compensation | $ | | $ | | $ | | $ | | ||||
Note that $
NOTE 18 - INCOME TAXES
The Company’s provision for income taxes in the interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items arising in the period.
The Company had an effective tax rate of
The Company maintains a valuation allowance in jurisdictions where it is more likely than not that all or a portion of a deferred tax asset may not be realized. In determining whether a valuation allowance is warranted, the Company evaluates factors such as prior earnings history, expected future earnings and the reversal of existing taxable temporary differences. As of June 30, 2024, the Company maintains a full valuation allowance on its deferred tax assets in Germany and maintains its previous conclusion that a valuation allowance on deferred tax assets in the United States and Israel is not necessary.
23
PAYONEER GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)
NOTE 19 – NET EARNINGS PER SHARE
The Company’s basic net earnings per share is calculated by dividing net income attributable to common shareholders by the weighted-average number of shares of common stock outstanding for the period, without consideration of potentially dilutive securities. The diluted net earnings per share is calculated by giving effect to all potentially dilutive securities outstanding for the period using the treasury share method or the if-converted method based on the nature of such securities. Diluted net earnings per share is the same as basic net earnings per share in periods when the effects of potentially dilutive shares of common shares are anti-dilutive.
NOTE 19 – NET EARNINGS PER SHARE (continued):
Basic and diluted net earnings per share attributable to common stockholders were calculated as follows:
| Three Months Ended | Six months ended | ||||||||||
June 30, |
| June 30, | ||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
| (In thousands, except share and per share data) | |||||||||||
Numerator: |
|
|
|
| ||||||||
Net income | $ | | $ | | $ | | $ | | ||||
Denominator: |
|
|
|
|
|
| ||||||
Weighted average common shares outstanding — | ||||||||||||
Basic | | | | | ||||||||
Add: | ||||||||||||
Dilutive impact of RSUs, ESPP and options to purchase common stock | | | | | ||||||||
Dilutive impact of private Warrants | | | | | ||||||||
Weighted average common shares – diluted | | | | | ||||||||
Net income per share attributable to common stockholders — Basic earnings per share | $ | | $ | | $ | | $ | | ||||
Diluted earnings per share | $ | | $ | | $ | | $ | | ||||
Note that for both the three and six month periods ended June 30, 2024,
24
PAYONEER GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)
NOTE 20 – RELATED PARTY TRANSACTIONS
Warehouse Facility
As indicated in Note 11, the Company entered into a Warehouse Facility agreement with Lenders where a member of the Board of Directors has an interest. The Company has evaluated the relationship and determined that the Warehouse Facility agreement represents a related party transaction that has been entered into in the ordinary course of business. As such, the Warehouse Facility agreement was reviewed and approved as a related party transaction in accordance with the related party transaction approval process implemented by the Company. The Company analyzed the terms of the Warehouse Facility agreement and concluded that the terms represent a transaction conducted at arm’s length.
NOTE 21 – SUBSEQUENT EVENTS
On August 5, Payoneer acquired
The aggregate purchase price is subject to customary post-closing adjustments and escrows, and included cash consideration of $
Due to its insignificant size relative to the Company, we do not expect to provide supplemental pro forma financial information for the current and prior reporting periods.
25
PAYONEER GLOBAL INC.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Throughout this section, unless otherwise noted, “we”, “us”, “our”, “Payoneer”, and the “Company” refer to Payoneer Global Inc.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis includes forward-looking statements that involve risks and uncertainties. You should review the sections titled “Cautionary Note on Forward-Looking Statements” and “Risk Factors” for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
Payoneer is a financial technology company purpose-built to enable the world’s small and medium-sized businesses (“SMB(s)”) to grow and operate their businesses around the world by reliably and securely connecting them to the global digital economy. Payoneer’s financial stack makes it easier for millions of SMBs, particularly in emerging markets, to access global demand and supply, pay and get paid, and manage their cross border and other needs from a single platform. Our financial stack provides a full suite of cross-border accounts receivable (AR) and accounts payable (AP) capabilities, and includes services such as working capital and the provision of data-driven insights. Payoneer’s core value proposition is that we remove the complexity and barriers of doing business across borders for our customers. With a multi-currency Payoneer Account, businesses around the world can serve and transact with their overseas customers, suppliers, vendors, and partners as if they were local.
We primarily generate revenues when Payoneer customers use the funds in their Payoneer account to make a payment, to make a purchase or to withdraw the funds locally. For our Business to Business (“B2B”) and Direct to Consumer (“DTC”) customers, we also in certain circumstances generate revenue on their AR, such as when they invoice a customer or collect payments via their webstore. Additionally, given the high interest rate environment, interest earned on customer funds held on our platform has been a significant source of revenue. Our long-term strategy is centered on growing the number of customers on our platform who fit our ideal customer profile, namely – those who are customers that have on average over $500 a month in volume and were active over the trailing twelve-month period, and on increasing the revenue we earn from each customer. We believe that successful execution of this strategy will drive revenue growth as (i) adding new customers who meet our ideal customer profile, improving retention, and increasing our product offerings to capture more wallet share will drive greater ad valorem volume of transactions processed through the Payoneer platform; and (ii) introducing new products and services and increasing customer adoption of additional products and services will improve our monetization of customers over time. Volume is one of the primary drivers for our revenue growth. See “Key Metrics and Non-GAAP Financial Measures” for additional information.
Our customers have trusted the Payoneer platform to process $18.7 billion and $15.3 billion in volume in the three months ended June 30, 2024 and 2023, respectively, and $37.2 billion and $30.6 billion in volume in the six months ended June 30, 2024 and 2023, respectively.
Looking forward, we intend to continue to invest actively to enhance our global platform, deliver new products, extend our regulatory footprint, further automate our operations, increase new customer growth and make acquisitions to accelerate our ability to deliver more value to customers around the world.
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Key Developments and Trends
Impact of the war in Israel
In October 2023, in response to Hamas’ attack on Israel from the Gaza Strip, Israel declared war on Hamas. Concurrently, hostilities between Israel and Hezbollah ensued at the Israeli northern border. Despite the ongoing war, we have continued to operate our business and serve our customers around the world and, to date, our ability to support customers has not been materially impacted. We are monitoring the situation closely and benefit from our broad geographic footprint, partially outsourced operations model, and a robust business continuity plan. Additionally, our technology infrastructure has redundancy in place outside of Israel. Approximately 60% of our global employee base is located in Israel, including approximately 85% of our research and development resources. At this time, an insignificant portion of our Israeli workforce have been called to military reserve duty and we have contingencies in place to cover impacted roles and responsibilities.
The evolving conflict is likely to continue to impact economic activity in the region and could impact revenues from customers located in Israel. Our revenue derived from customers based in Israel was insignificant for the three and six months ended June 30, 2024 and is included within revenues from Europe in Note 15 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
The situation in the region remains highly uncertain and there is the possibility that the conflict could worsen or expand which could, in turn, further impact economic conditions in Israel and in the broader region. At this time, it is difficult to assess the impact the war may have on our future results of operations. Any further escalation, expansion, or prolonged continuation of the ongoing conflict has the potential to impact our operations locally as well as to negatively impact the broader global economy and may have a material effect on our results of operations.
Impact of the war in Ukraine
During 2022, a geopolitical and armed conflict between Ukraine and Russia, which developed into an ongoing war, resulted in economic sanctions on Russia, Belarus, and certain territories in Ukraine. We provide services to customers in Ukraine and in jurisdictions that are or may be impacted by these economic sanctions. We have developed and implemented a robust transaction monitoring program designed to comply with imposed sanctions and to monitor the impact the conflict may have on our results of operations. During 2022, we ceased to provide services to customers in Russia and have limited our payment services to Belarus customers, while at the same time revenues in Ukraine have remained relatively stable. For the three and six months ended June 30, 2024, Ukraine and Belarus, combined, accounted for less than 10% of our revenue, of which Belarus accounted for less than 1% of our revenue. Further escalation of the conflict may have a material effect on our results of operations.
Macroeconomic Conditions
Macroeconomic conditions, including geopolitical and other global events, that impact consumer and business spending and behavior, such as, but not limited to, the interest rate environment, inflation, local political instability, global health crises, supply chain dislocations, regional and other conflicts, including the ongoing war in Ukraine and the Israel-Hamas war and disruptions and instability in the banking sector, may impact our customers, providers, banking partners and ultimately the amount of volume processed on our platform which may affect our results of operations. In 2023, we saw a significant increase in the interest income revenue we earn on our customer funds as the U.S. Federal Reserve raised the benchmark interest rate by 525 basis points since 2022. While there remains a great deal of uncertainty around the future timing and magnitude of interest rate cuts, we do expect to see a negative impact from declining interest rates over the medium-term.
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Results of Operations
The period-to-period comparisons of our results of operations have been prepared using the historical periods in our condensed consolidated financial statements. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related Notes included within this Quarterly Report on Form 10-Q.
Three months ended | Six months ended |
| |||||||||||||||
June 30, | Increase/ | June 30, | Increase/ |
| |||||||||||||
| 2024 |
| 2023 |
| (Decrease) |
| 2024 |
| 2023 |
| (Decrease) |
| |||||
(in thousands except percentages) | |||||||||||||||||
Revenues | $ | 239,520 | $ | 206,734 |
| 16 | % | $ | 467,703 | $ | 398,748 |
| 17 | % | |||
Transaction costs |
| 36,961 |
| 28,497 |
| 30 | % |
| 70,927 |
| 55,578 |
| 28 | % | |||
Other operating expenses |
| 41,242 |
| 40,527 |
| 2 | % |
| 81,525 |
| 80,622 |
| 1 | % | |||
Research and development expenses |
| 27,580 |
| 27,995 |
| (1) | % |
| 59,631 |
| 57,275 |
| 4 | % | |||
Sales and marketing expenses |
| 50,614 |
| 48,402 |
| 5 | % |
| 100,504 |
| 96,228 |
| 4 | % | |||
General and administrative expenses |
| 26,102 |
| 22,012 |
| 19 | % |
| 50,311 |
| 48,693 |
| 3 | % | |||
Depreciation and amortization |
| 10,712 |
| 5,909 |
| 81 | % |
| 20,120 |
| 11,948 |
| 68 | % | |||
Total operating expenses | 193,211 | 173,342 | 11 | % | 383,018 | 350,344 | 9 | % | |||||||||
Operating income | 46,309 | 33,392 | 39 | % | 84,685 | 48,404 | 75 | % | |||||||||
Financial income: | |||||||||||||||||
Gain from change in fair value of Warrants | 1,006 | 13,586 | (93) | % | 2,767 | 13,334 | (79) | % | |||||||||
Other financial income, net | 976 | 4,318 | (77) | % | 3,723 | 6,668 | (44) | % | |||||||||
Financial income, net |
| 1,982 |
| 17,904 |
| (89) | % |
| 6,490 |
| 20,002 |
| (68) | % | |||
Income before taxes on income | 48,291 | 51,296 | (6) | % | 91,175 | 68,406 | 33 | % | |||||||||
Taxes on income | 15,866 | 5,747 | 176 | % | 29,776 | 14,919 | 100 | % | |||||||||
Net income | $ | 32,425 | $ | 45,549 |
| (29) | % | $ | 61,399 | $ | 53,487 |
| 15 | % | |||
Revenues
Revenues were $239.5 million and $467.7 million for the three and six months ended June 30, 2024, an increase of $32.8 million and $69.0 million, or 16% and 17%, respectively, compared to the prior-year period, driven mainly by an increase of $10.5 million and $25.7 million, respectively, in interest income earned on customer balances resulting from rising interest rates and an increase in customer balances held on our platform compared to the prior-year period. The remaining increase was driven by a combination of continued adoption of our high value services, certain monetization initiatives, ongoing growth in high value regions, and growth in the number of customers on our platform.
Transaction costs
Transaction costs were $37.0 million for the three months ended June 30, 2024, an increase of $8.5 million, or 30%, compared to the prior-year period, partially due to an increase in chargebacks and other operational losses of $3.0 million. Excluding the impact of these non-volume related costs, transaction costs increased by $5.5m or 20%, while volume increased by 22% compared to the prior year period. Transaction costs grew at a lower rate than volume due to improved commercial terms, internal platform optimizations, and the scale benefits of increased transaction volumes.
Transaction costs were $70.9 million for the six months ended June 30, 2024, an increase of $15.3 million, or 28%, compared to the prior-year period, partially due to an increase in chargebacks and other operational losses of $3.8 million. Excluding the impact of these non-volume related costs, the increase in transaction costs is broadly in line with the 21% increase in volume.
Other operating expenses
Other operating expenses were $41.2 million for the three months ended June 30, 2024, an increase of $0.7 million, or 2%, compared to the prior-year period, driven by an increase of $3.4 million in information technology expenses offset by a decrease of $2.7 million in employee compensation, benefits and other employee-related expenses primarily due to a decrease in employee headcount.
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Other operating expenses were $81.5 million for the six months ended June 30, 2024, an increase of $0.9 million, or 1%, compared to the prior-year period, driven by an increase of $6.1 million in information technology expenses partially offset by a decrease of $4.6 million in employee compensation, benefits and other employee-related expenses primarily due to a decrease in employee headcount.
Research and development expenses
Research and development expenses were $27.6 million for the three months ended June 30, 2024, a decrease of $0.4 million, or 1%, compared to the prior-year period, driven by an increase of $2.8 million in employee compensation costs capitalized as internal use software in connection with ongoing investments in our platform infrastructure, partially offset by an increase of $1.5 million in employee compensation, benefits and other employee-related expenses in line with an increase in employee headcount and an increase of $1.0 million in information technology expenses.
Research and development expenses were $59.6 million for the six months ended June 30, 2024, an increase of $2.4 million, or 4%, compared to the prior-year period, driven by an increase of $7.9 million in employee compensation, benefits and other employee-related expenses in line with an increase in employee headcount and an increase of $2.5 million in information technology expenses, partially offset by an increase of $7.6 million in employee compensation costs capitalized as internal use software in connection with ongoing investments in our platform infrastructure.
Sales and marketing expenses
Sales and marketing expenses were $50.6 million for the three months ended June 30, 2024, an increase of $2.2 million, or 5%, compared to the prior-year period, driven by an increase of $2.5 million in spend on certain direct marketing efforts and an increase of $1.0 million in information technology expenses, offset by a decrease of $1.1 million in third-party contractor and consulting expenses.
Sales and marketing expenses were $100.5 million for the six months ended June 30, 2024, an increase of $4.3 million, or 4%, compared to the prior-year period, driven by an increase of $5.1 million in spend on certain direct marketing efforts, $1.8 million in marketplace partner commissions and an increase of $1.0 million in information technology expenses, offset by a decrease of $4.0 million in employee compensation, benefits and other employee-related expenses primarily due to a decrease in employee headcount.
General and administrative expenses
General and administrative expenses were $26.1 million for the three months ended June 30, 2024, an increase of $4.1 million, or 19%, compared to the prior-year period, driven by an increase of $1.8 million in M&A related expenses and an increase of $1.6 million in third-party contractor and consulting expenses.
General and administrative expenses were $50.3 million for the six months ended June 30, 2024, an increase of $1.6 million, or 3%, compared to the prior-year period, driven by an increase of $3.4 million in M&A related expenses and an increase of $1.7 million in third-party contractor and consulting expenses, offset by a decrease of $3.5 million in employee compensation, benefits and other employee-related expenses in line with a decrease in employee headcount.
Depreciation and amortization expenses
Depreciation and amortization expenses were $10.7 million and $20.1 million for the three and six months ended June 30, 2024, an increase of $4.8 million and $8.2 million, or 81% and 68%, respectively, compared to the prior-year period, mainly driven by an increase in amortization of internal use of software.
Financial income and expense, net
Financial income, net was $2.0 million for the three months ended June 30, 2024, a decrease of $15.9 million, or 89%, compared to the prior-year period, driven by a gain from the change in the fair value of warrants that was $12.6 million lower than the gain recognized in the prior year period, as well as a $5.1 million increase in loss on revaluation of foreign currency balances. These drivers were partially offset by an increase of $1.8 million in interest income on corporate cash balances.
Financial income, net was $6.5 million for the six months ended June 30, 2024, a decrease of $13.5 million, or 68%, compared to the prior-year period, driven by a gain from the change in the fair value of warrants that was $10.6 million lower than the gain recognized in the prior year period, as well as a $6.3 million increase in loss on revaluation of foreign currency balances. These drivers were partially offset by an increase of $3.4 million in interest income on corporate cash balances.
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Income tax
Income tax expense was $15.9 million for the three months ended June 30, 2024, an increase of $10.1 million, or 176%, compared to the prior year period. This increase was primarily driven by a tax benefit of $10.6 million in the three months ended June 30, 2023, related to the release of the valuation allowance on deferred tax assets in the United States, which did not recur in the current period.
Income tax expense was $29.8 million for the six months ended June 30, 2024, an increase of $14.9 million, or 100%, compared to the prior year period. This increase was primarily driven by a tax benefit of $10.6 million in the six months ended June 30, 2023, related to the release of the valuation allowance on the deferred tax assets in the United States, which did not recur in the current period. Additionally, our US federal and state income tax expense increased by $2.6 million, as compared to the prior-year period. This increase was driven primarily by an increase in non-deductible stock compensation. In addition, foreign income tax expense increased by $1.2 million for the six months ended June 30, 2024, as compared to the prior-year period.
Liquidity and Capital Resources
The following discussion of our liquidity and capital resources is based on the financial information derived from our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
We believe our existing cash and cash equivalents and cash flows from operating activities will be sufficient to meet our operating working capital, share repurchase and capital expenditure requirements for at least the next twelve months. Our future financing requirements will depend on many factors including our growth rate, the timing and extent of spending to support development of our platform and the ongoing expansion needs of sales and marketing activities. We have in the past and may in the future enter into agreements with third parties with respect to investments in, or acquisitions of, businesses or technologies, which could also require us to seek additional equity or debt financing.
Sources of Liquidity
As of June 30, 2024, we had $575.7 million of cash and cash equivalents.
On October 28, 2021, Payoneer Early Payments Inc. (“PEPI”), our wholly-owned second tier subsidiary and its subsidiary (the “Borrower”) entered into a multi-party Receivables Loan and Security Agreement (the “Warehouse Facility”) with, inter alia, affiliates of Viola Ventures. The objective was to provide access to external financing for our capital advance activity. See Note 11 and Note 20 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information.
Effective July 1, 2023, the Warehouse Facility interest rate was updated to the sum of the Daily Simple SOFR and 0.26161% plus 9% annually. The Warehouse Facility has a revolving maturity of 36 months from the commencement date with a payback period of an additional 6 months after the revolving maturity date. The initial borrowing commitment is $25 million subject to increases at our request and the lender’s discretion up to $100 million. Additional commitments will carry interest rates ranging from 7% to 7.75% in addition to the benchmark rate. In addition, pursuant to the Warehouse Facility, PEPI entered into an amendment on June 8, 2022, whereby creating a condition that the total interest rate shall not exceed 10.5% per annum for all outstanding balances.
The Warehouse Facility is secured by eligible capital advance receivables at an initial rate of 80% of the total value of the underlying capital advance receivable outstanding. We are subject to financial covenants including minimum tangible equity, solvency and unrestricted cash requirements that are assessed based on our condensed consolidated financial statements.
Current and Future Cash Requirements
On May 7, 2023, our Board of Directors authorized a stock repurchase program that provides for the repurchase of up to $80.0 million of our common stock, including any applicable excise tax. On December 7, 2023, the Board authorized an amendment to the program to increase the authorized amount of repurchases to an aggregate amount not to exceed $250.0 million, including the amount that remained available as of December 7, 2023 to repurchase common stock under, but not any prior repurchases effected pursuant to, the previous authorization, and any applicable excise tax. The amended authorization expires December 31, 2025.
During the six months ended June 30, 2024, we repurchased 19,244,897 shares of our common stock for approximately $97.8 million, of which $0.6 million was not yet settled at period end. As of June 30, 2024, a total of approximately $142.8 million remained available for future repurchases of our common stock under the program.
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Cash Flows
The following table presents a summary of cash flows from operating, investing, and financing activities for the following comparative periods.
Six months ended June 30, | ||||||
| 2024 |
| 2023 | |||
(in thousands) | ||||||
Net cash provided by operating activities | $ | 80,914 | $ | 59,919 | ||
Net cash used in investing activities |
| (665,298) |
| (63,453) | ||
Net cash used in financing activities |
| (443,475) |
| (315,444) | ||
Effect of exchange rate changes on cash and cash equivalents |
| (2,311) |
| 705 | ||
Change in cash, cash equivalents, restricted cash and customer funds | $ | (1,030,170) | $ | (318,273) | ||
Operating Activities
Net cash provided by operating activities was $80.9 million for the six months ended June 30, 2024, an increase of $21.0 million compared to $59.9 million for the six months ended June 30, 2023.
For the six months ended June 30, 2024, we had $61.4 million of net income, which includes non-cash expenses of $28.7 million related to stock-based compensation and $20.1 million related to depreciation and amortization. Net income was also adjusted for changes in current assets and liabilities, including net outflows of $17.7 million related to Other payables and $12.7 million related to Other current assets.
For the six months ended June 30, 2023, we had $53.5 million of net income, which includes non-cash expenses of $33.1 million related to stock-based compensation and $11.9 million related to depreciation and amortization, as well as non-cash gains of $13.3 million related to change in fair value of warrants and non-cash deferred tax benefit of $9.8 million, primarily related to the release of our valuation allowance in the United States. Net income was also adjusted for changes in current assets and liabilities, including outflows of $13.2 million related to Trade payables, $5.3 million related to Other payables, and $3.1 million related to Capital advances. These outflows were offset by inflows of $5.1 million related to operating lease right-of-use assets and $1.0 million related to miscellaneous items.
Investing Activities
Net cash used in investing activities was $665.3 million for the six months ended June 30, 2024, an increase of $601.8 million compared to net cash used in investing activities of $63.5 million for the six months ended June 30, 2023.
This change was predominantly related to the net purchase of $634.2 million in investments of customer balances held on our platform in U.S. Treasury Securities.
Financing Activities
Net cash used in financing activities was $443.5 million for the six months ended June 30, 2024, an increase of $128.0 million compared to net cash used in financing activities of $315.4 million for the six months ended June 30, 2023. Current period cash used in financing activities reflects the $353.4 million decline in customer balances since the beginning of the period which was $43.5 million higher than the $309.9 million decline in the prior year period. Additionally, share repurchases were $81.5 million higher than in the prior year period.
Key Metrics and Non-GAAP Financial Measures
Our management uses a variety of financial and operating metrics to evaluate our business, analyze our performance, and make strategic decisions. We believe these metrics and non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as management. However, certain of these measures are not financial measures calculated in accordance with GAAP and should not be considered as substitutes for financial measures that have been calculated in accordance with GAAP. We primarily review the following key performance indicators and non-GAAP measures when assessing our performance:
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Volume
Volume refers to the total dollar value of transactions successfully completed or enabled by our platform, not including orchestration transactions. For a customer that both receives and later sends payments, we count the volume only once. Volume serves as a key metric for overall business activity, as growing volume is one of the primary drivers for our revenue growth.
Three months ended June 30, | Six months ended June 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
(in millions) | ||||||||||||
Volume | $ | 18,713 | $ | 15,338 | $ | 37,169 | $ | 30,641 | ||||
Note: as disclosed in the Company’s Form 10-K filed with the SEC on February 28, 2024, we have updated our methodology to adjust for previously disclosed limited exceptions where both received and sent payments were counted in volumes, such that we count volume only once for a customer that both receives and later sends payments.
Volume grew 22% and 21% for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, respectively, driven by a combination of continued growth in volumes from our largest digital commerce marketplaces, strong growth in B2B volumes, strong travel demand, and continued customer acquisition.
Revenue
We generate revenues mainly from transaction fees, which vary based on the type of service the customer utilizes. Transaction fee revenue principally consists of fees for withdrawals and usage. We also earn revenues in certain instances from volumes coming into the platform related to our B2B services and through our Checkout offering. We generate significant revenues from interest earned on customer funds held on our platform. In addition, we generate revenue from non-volume-based products and services which are based on a fixed fee. We believe that Revenue demonstrates our ability to monetize volume activity on our platform. Our revenues can be impacted by the following:
| (i) | Mix in customer size, products, and services; |
| (ii) | Mix between domestic and cross-border transactions; |
| (iii) | Geographic region or country in which a transaction occurs; and |
| (iv) | Pricing and other market conditions including interest rates. |
Management closely monitors volume and revenue to ensure that we continue to grow funds and business activity that enters into the platform, expanding our overall scale and the reach of our business.
Adjusted EBITDA
In addition to our financial results determined in accordance with GAAP, we believe Adjusted EBITDA, as a non-GAAP measure, is useful in evaluating our operating performance. We use Adjusted EBITDA to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that this non-GAAP financial measure, when taken together with the corresponding GAAP financial measures, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of Adjusted EBITDA is helpful to our investors as it is a metric used by management in assessing our operating performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measure as a tool for comparison. A reconciliation is provided below for our non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measure and the reconciliation of this non-GAAP financial measure to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
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Adjusted EBITDA
Three months ended June 30, | Six months ended June 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
(in thousands) | ||||||||||||
Net income | $ | 32,425 | $ | 45,549 | $ | 61,399 | $ | 53,487 | ||||
Depreciation and amortization |
| 10,712 |
| 5,909 |
| 20,120 |
| 11,948 | ||||
Taxes on income |
| 15,866 |
| 5,747 |
| 29,776 |
| 14,919 | ||||
Other financial income, net |
| (976) |
| (4,318) |
| (3,723) |
| (6,668) | ||||
EBITDA |
| 58,027 |
| 52,887 |
| 107,572 |
| 73,686 | ||||
Stock based compensation expenses(1) |
| 13,666 |
| 16,173 |
| 28,742 |
| 33,100 | ||||
M&A related expense(2) |
| 2,091 |
| 498 |
| 4,466 |
| 1,272 | ||||
Gain from change in fair value of Warrants(3) |
| (1,006) |
| (13,586) |
| (2,767) |
| (13,334) | ||||
Adjusted EBITDA | $ | 72,778 | $ | 55,972 | $ | 138,013 | $ | 94,724 | ||||
(1) Represents non-cash charges associated with stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy.
(2) Amounts relate to M&A-related third-party fees, including related legal, consulting and other expenditures.
(3) Changes in the estimated fair value of the warrants are recognized as gain or loss on the condensed consolidated statements of comprehensive income. The impact is removed from EBITDA as it represents market conditions that are not in our control.
Critical Accounting Policies and Estimates
For more information, see “Payoneer Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Form 10-K filed with the SEC on February 28, 2024.
Recent Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position, result of operations or cash flows is disclosed in Note 2 to our unaudited condensed consolidated financial statement included elsewhere in this Quarterly Report on Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have operations both within the United States and globally, and we are exposed to market risks in the ordinary course of our business, including the effects of interest rate changes and foreign currency fluctuations. Information relating to quantitative and qualitative disclosures about these market risks is described below.
Interest Rate Sensitivity
Our cash and cash equivalents as well as customer funds as of June 30, 2024, were held in cash deposits, term deposits and money market funds, as well as U.S. Treasury Securities classified as available-for-sale debt securities. The fair value of our cash and cash equivalents as well as assets underlying customer funds would not be significantly affected by either an increase or decrease in interest rates due mainly to the short-term nature of these instruments. However, a hypothetical 1% increase or decrease in interest rates could have a material effect on our revenues and earnings.
Any future borrowings incurred under our Warehouse Facility would accrue interest at a floating rate based on a formula tied to certain market rates at the time of incurrence (as described above), not to exceed 10.5% per annum for all outstanding balances.
Foreign Currency Risk
While most of our revenue is earned in U.S. dollars, our foreign currency exposure includes currencies of the countries in which our operations are located, including operating expenses denominated in New Israeli Shekels. To reduce that risk, in January 2024, we began investing in foreign currency forward contracts and net purchased options, which are accounted for as cash flow hedges as described in Note 2d and Note 5 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. A hypothetical 10% strengthening or weakening of the U.S. dollar against the New Israeli Shekel would have had a material impact on unrealized gains (losses) recognized in AOCI at June 30, 2024.
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Our foreign currency exposure also includes currencies in which our customer funds are held and may be subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Australian Dollar, Euro, Japanese Yen, British Pound, Chinese Yuan, Canadian Dollar, New Zealand Dollar, Thai Baht, New Israeli Shekel, Philippine Peso, Pakistani Rupee, Korean Won, Indian Rupee, Saudi Riyal, and Hong Kong Dollar. A hypothetical 10% increase or decrease in current exchange rates could have a material impact on our financial results.
In addition, some of our services include the opportunity for Payoneer to generate revenues from foreign exchange transactions as part of the payment delivery process. Our ability to generate such revenues is partially dependent on external factors such as market conditions, applicable regulations and our ability to negotiate with third party financial institutions. The impact of these efforts to optimize foreign exchange can be material to revenues and earnings.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2024. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time we are a party to various litigation matters incidental to the conduct of our business. Refer to Note 14 (Commitments and Contingencies) to the condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.
For more information on risks related to litigation, see the section titled “Risk Factors — General Risks Related to Payoneer — We may be subject to various legal proceedings which could materially adversely affect our business, financial condition or results of operations” in our Annual Report on Form 10-K, filed with the SEC on February 28, 2024.
ITEM 1A. RISK FACTORS
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K, filed with the SEC on February 28, 2024. However, we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
No unregistered sales during the quarterly period ended June 30, 2024.
Share Repurchase Activities
The following table provides information with respect to repurchases made by the Company during the three months ended June 30, 2024. All repurchases listed below were made in the open market.
Period | Total Number of Shares Purchased1 | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Progreams2 | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs2 | ||||
April 1, 2024 - April 30, 2024 | 3,754,527 | $4.89 | 3,754,527 | $ 170,850,052 | ||||
May 1, 2024 - May 31, 2024 | 2,430,630 | $5.65 | 2,430,630 | $ 157,124,234 | ||||
June 1, 2024 - June 30, 2024 | 2,525,806 | $5.67 | 2,525,806 | $ 142,802,325 | ||||
Total | 8,710,963 | 8,710,963 |
| (1) | No shares were repurchased other than through a publicly announced plan or program. |
| (2) | On May 7, 2023, our Board of Directors authorized a stock repurchase program that provides for the repurchase of up to $80 million of our common stock, including any applicable excise tax. On December 7, 2023, our Board of Directors authorized an amendment to the above program to increase the authorized amount of repurchases to an aggregate amount not to exceed $250 million. The $250 million authorization amended the previous repurchase authorization, and includes the amount that remains available as of December 7, 2023 to repurchase common stock under, but not any prior repurchases effected pursuant to, the previous authorization, and any applicable excise tax. The amended authorization expires December 31, 2025. These share repurchases may take place from time to time, in the open market, through privately negotiated transactions or other means, including in accordance with Rule 10b-18 and/or Rule 10b5-1 of the Securities Exchange Act of 1934. The timing and total amount of repurchases is subject to the Company’s discretion. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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ITEM 5. OTHER INFORMATION
Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements
During the three months ended June 30, 2024, certain of our officers and directors took the following actions with respect to trading arrangements for the sale of shares of our common stock:
Plans | ||||||
Action | Date | Rule 10b5-1* | Non-Rule 10b5-1** | Number of Shares to be Sold | Expiration | |
Arnon Kraft, Chief Operating Officer(1) | ||||||
Scott Galit, Director | ||||||
Bea Ordonez, Chief Financial Officer | ||||||
* | Intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) |
** | Not intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) |
(1) Arnon Kraft departed as Chief Operating Officer of the Company on June 30, 2024.
Reclassification of the Board and re-appointment of a Director to the Board.
Pursuant to the terms of the Amended and Restated Certificate of Incorporation of the Company, the Company’s board of directors (the “Board”) is to be divided into three classes, with each class consisting, as nearly as may be practicable, of one-third of the total number of directors. In order to effect a rebalancing of the existing classes of the Company’s Board, on August 2, 2024, Rich Williams, who currently serves as a Class II director, submitted his resignation as a director of the Company, subject to and effective upon the Board’s agreement to reappoint Mr. Williams as a Class I director. On August 5, 2024, the Board reappointed him as a Class I director, with immediate effect. As a Class I director, Mr. William’s term will continue until the Company’s 2025 annual meeting of stockholders. Mr. Williams will continue to serve on the Company’s Audit Committee and as chair of the Risk Committee. Mr. Williams’ resignation was submitted solely to enable the Board to rebalance its three classes and not due to any disagreement between himself and the Company, its management, the Board, or any committee of the Board.
Amendments to Bylaws.
On August 5, 2024, the Board amended the bylaws of the Company (the bylaws, as so amended and restated, the “Amended and Restated Bylaws”), effective immediately. The Amended and Restated Bylaws, among other things:
| ● | update the provisions relating to adjournment procedures to conform with amendments to the Delaware General Corporation Law; |
| ● | clarify certain procedural requirements with respect to director nominations by stockholders related to the delivery of notices; |
| ● | enhance the disclosure requirements to include additional information regarding the stockholder making the director nomination(s), the director nominee(s), and their associates and affiliates and that the information is updated and supplemented to be accurate and timely; |
| ● | require that any stockholder making director nominations pursuant to Rule 14a-19 include a representation that such stockholder will deliver a proxy statement and form of proxy to holders of at least 67% of the voting power of the Company’s stock entitled to vote generally in the election of directors and provide reasonable evidence of compliance with Rule 14a-19 upon request; |
| ● | require any stockholder soliciting proxies from other stockholders to use a proxy card color other than white, with white proxy cards being reserved for exclusive use by the Board; and |
| ● | make various conforming, technical and non-substantive changes. |
The foregoing summary of the amendments does not purport to be complete and is qualified in its entirety by reference to the complete text of the Amended and Restated Bylaws, a copy of which is attached to this Quarterly Report on Form 10-Q as Exhibit 3.1 and is incorporated herein by reference.
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ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
Exhibit No. |
| Description of Exhibit |
3.1 | ||
10.1 | ||
10.2 | ||
31.1 |
| |
31.2 |
| |
32.1 |
| |
32.2 |
| |
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* | Filed herewith. |
** | Furnished herewith. |
† | Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby undertakes to furnish copies of any of the omitted schedules upon request by the Securities and Exchange Commission. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PAYONEER GLOBAL INC. | ||
(Registrant) | ||
By: | /s/ John Caplan | |
John Caplan | ||
Chief Executive Officer | ||
(Principle Executive Officer) | ||
By: | /s/ Bea Ordonez | |
Bea Ordonez | ||
Chief Financial Officer | ||
(Principle Financial Officer) | ||
Date: August 7th, 2024 | ||
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