PSFE Paysafe Limited

Paysafe Limited (“Paysafe” or the “Company”) (NYSE: PSFE), a leading payments platform, today announced its financial results for the first quarter of 2024.

First Quarter 2024 Financial Highlights (Metrics compared to first quarter of 2023, unless otherwise noted)

• Revenue of $417.7 million, increased 8%; increased 7% on a constant currency basis
• Total Payment Volume of $36.1 billion, increased 7%
• Net income of $3.1 million, or $0.05 per diluted share, compared to net loss of $3.8 million, or ($0.06) per diluted share
• Adjusted net income of $35.3 million, or $0.57 per diluted share, compared to $33.1 million, or $0.54 per diluted share
• Adjusted EBITDA of $111.9 million, increased 4%; increased 3% on a constant currency basis
• Net leverage1 decreased to 4.9x as of March 31, 2024, compared to 5.0x as of December 31, 2023

Bruce Lowthers, CEO of Paysafe, commented: “We are off to a great start this year, delivering 8% year-over-year revenue growth in the first quarter, reinforcing that our strategic initiatives and associated investments are driving momentum in the business and setting us up for long-term success. We remain confident in our financial outlook for this year, which reflects stronger underlying revenue performance, anchored by improved operational execution.”

Recent Strategic and Operational Highlights

• Published Paysafe's inaugural sustainability report
• Expanded sales team as part of previously announced investment plans to enhance Paysafe's go-to-market capabilities to support growth in target verticals
• Capital returns - repurchased 989,419 of Paysafe's common shares for $14 million
• Advanced our white label wallet strategy through a partnership with Xsolla, a leader in game commerce
• Launched Paysafe's Pay by Bank solution for U.S. iGaming, allowing bettors to log-in directly to their bank accounts at online sportsbooks’ cashiers to fund real-time wagers
• Paysafe is now processing iGaming payments in 33 U.S. states and territories, including Q1 launches in Vermont and North Carolina
• Completed our network tokenization offering by integrating with Mastercard’s Secure Card on File, providing cardholders with an extra layer of protection and enhancing their payment journey

(1)

Paysafe defines net leverage as net debt (total debt less cash and cash equivalents) divided by the sum of the last twelve months (LTM) Adjusted EBITDA. For the period ended March 31, 2024, total debt was $2,457.4 million and cash and cash equivalents was $202.1 million, and LTM Adjusted EBITDA was $462.8 million. For the period ended December 31, 2023, total debt was $2,501.8 million and cash and cash equivalents was $202.3 million, and LTM Adjusted EBITDA was $458.7 million.

First Quarter of 2024 Summary of Consolidated Results

 

 

Three Months Ended

 

 

 

March 31,

 

($ in thousands) (unaudited)

 

2024

 

 

2023

 

Revenue

 

$

417,738

 

 

$

387,849

 

Gross Profit (excluding depreciation and amortization)

 

$

247,365

 

 

$

228,910

 

Net income / (loss)

 

$

3,056

 

 

$

(3,808

)

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

111,916

 

 

$

107,815

 

Adjusted net income

 

$

35,306

 

 

$

33,076

 

Total revenue for the first quarter of 2024 was $417.7 million, an increase of 8%, compared to $387.8 million in the prior year period, reflecting 7% growth in total payment volume. Excluding a $2.1 million favorable impact from changes in foreign exchange rates, total revenue increased 7%. Revenue from the Merchant Solutions segment increased 11%, reflecting double-digit growth in e-commerce as well as growth from small and medium-sized businesses ("SMBs") driven by initiatives to expand our sales capabilities and optimize the portfolio. Revenue from the Digital Wallets segment increased 5% as reported and 4% in constant currency, reflecting growth from gambling merchants as well as ongoing initiatives related to product and consumer engagement.

Net income for the first quarter increased to $3.1 million, compared to a net loss of $3.8 million in the prior year period. An increase in expenses for depreciation and amortization, share-based compensation, and taxes was more than offset by an increase in other income as well as a decrease in interest expense, which declined by $2.5 million, despite higher interest rates year-over-year, partly reflecting our focus on reducing debt.

Adjusted net income for the first quarter increased 7% to $35.3 million, compared to $33.1 million in the prior year period.

Adjusted EBITDA for the first quarter was $111.9 million, an increase of 4%, compared to $107.8 million in the prior year period. Excluding a $0.4 million favorable impact from changes in foreign exchange rates, Adjusted EBITDA increased 3%, primarily reflecting revenue growth, partially offset by incremental expenses related to previously announced initiatives to expand the sales team and optimize the portfolio as well as higher severance and credit loss expense.

First quarter operating cash flow was $58.8 million, compared to $20.0 million in the prior year period, which was mainly driven by lower taxes paid and the timing of bonus payments. Unlevered free cash flow was $69.2 million, compared to $42.2 million in the prior year period.

Balance Sheet

As of March 31, 2024, total cash and cash equivalents were $202.1 million, total debt was $2.5 billion and net debt was $2.3 billion. Compared to December 31, 2023, total debt decreased by $44.5 million, reflecting net repayments of $14.6 million as well as movement in foreign exchange rates.

2023 Sustainability Report

Demonstrating our commitment to acting as a responsible fintech company, Paysafe published its first Sustainability Report today, outlining the core tenets of the new strategy, its key pillars, and commitments. Paysafe’s approach to sustainability seeks to deepen the company’s work in four key areas where the greatest impact can be realized: Trusted technology, Engaged employees, Thriving society, and Responsible business principles.

Paysafe has established an oversight framework to drive the strategy and set targets across all focus areas to ensure accountability and monitor performance. Embedding sustainability practices into every level of the organization will increase the positive impact Paysafe makes on customers, employees, society and the environment.

The report can be accessed on the Sustainability section of Paysafe’s website at https://www.paysafe.com/en/about/sustainability/.

Paysafe’s Sustainability Report highlights the company’s commitment to focus on the following four pillars:

• Trusted technology: delivering security and protection for consumers and merchants alike by continually strengthening the security of our products, services and internal processes, providing a great customer experience, underpinned by trust, convenience and support for the vulnerable and a responsible approach to technology and innovation.
• Engaged employees: attracting and retaining the right talent through offering our people a great place to work, which rewards commitment, promotes engagement, offers development opportunities and prioritizes their wellbeing, building upon our diverse workforce at every level of the business.
• Thriving society: striving to make a positive contribution to society by increasing accessibility to financial and digital products for all customers, supporting community volunteer programs, corporate donations, and reducing the impact of our operations and value chain on the environment.
• Responsible business practices: operating in a responsible manner by promoting effective governance, ethics and compliance across our organization through experienced leaders, established committees and robust policies, standards and procedures to guide everyone that works for Paysafe, including our suppliers and partners.

Summary of Segment Results

 

 

Three Months Ended

 

 

 

 

 

 

March 31,

 

 

YoY

($ in thousands) (unaudited)

 

2024

 

 

2023

 

 

change

Revenue:

 

 

 

 

 

 

 

 

 

Merchant Solutions

 

$

231,398

 

 

$

208,521

 

 

 

11

%

Digital Wallets

 

$

190,457

 

 

$

181,448

 

 

 

5

%

Intersegment

 

$

(4,117

)

 

$

(2,120

)

 

 

94

%

Total Revenue

 

$

417,738

 

 

$

387,849

 

 

 

8

%

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

Merchant Solutions

 

$

49,178

 

 

$

52,336

 

 

 

-6

%

Digital Wallets

 

$

83,274

 

 

$

79,209

 

 

 

5

%

Corporate

 

$

(20,536

)

 

$

(23,730

)

 

 

13

%

Total Adjusted EBITDA

 

$

111,916

 

 

$

107,815

 

 

 

4

%

Full Year 2024 Financial Guidance

($ in millions) (unaudited)

 

Full Year 2024

Revenue

 

$1,688 - $1,712

Adjusted EBITDA

 

$473 - $488

Webcast and Conference Call

Paysafe will host a live webcast to discuss the results today at 4:30 p.m. (ET). The webcast and supplemental information can be accessed on the investor relations section of the Paysafe website at ir.paysafe.com. An archive will be available after the conclusion of the live event and will remain available via the same link for one year.

Time   Monday, May 13 2024, at 4:30 p.m. ET Webcast   Go to the Investor Relations section of the Paysafe website to listen and view slides Dial in   877-407-0752 (U.S. toll-free); 201-389-0912 (International)

About Paysafe

Paysafe Limited (“Paysafe”) (NYSE: PSFE) (PSFE.WS) is a leading payments platform with an extensive track record of serving merchants and consumers in the global entertainment sectors. Its core purpose is to enable businesses and consumers to connect and transact seamlessly through industry-leading capabilities in payment processing, digital wallet, and online cash solutions. With over 25 years of online payment experience, an annualized transactional volume of $140 billion in 2023, and approximately 3,200 employees located in 12+ countries, Paysafe connects businesses and consumers across 260 payment types in over 40 currencies around the world. Delivered through an integrated platform, Paysafe solutions are geared toward mobile-initiated transactions, real-time analytics and the convergence between brick-and-mortar and online payments. Further information is available at www.paysafe.com.

Forward-looking Statements

This press release includes “forward-looking statements” within the meaning of U.S. federal securities laws. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Paysafe Limited’s (“Paysafe,” “PSFE,” the “Company,” “we,” “us,” or “our”) actual results may differ from their expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “anticipate,” “appear,” “approximate,” “believe,” “budget,” “continue,” “could,” “estimate,” “expect,” “forecast,” “foresee,” “guidance,” “intends,” “likely,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” "will," “would” and variations of such words and similar expressions (or the negative version of such words or expressions) may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. These forward-looking statements include, without limitation, Paysafe’s expectations with respect to future performance.

These forward-looking statements involve significant risks, uncertainties, and events that may cause the actual results to differ materially, and potentially adversely, from those expressed or implied in the forward-looking statements. While the Company believes its assumptions concerning future events are reasonable, a number of factors could cause actual results to differ materially from those projected, including, but not limited to: cyberattacks and security vulnerabilities; complying with and changes in money laundering regulations, financial services regulations, cryptocurrency regulations, consumer and business privacy and data use regulations or other regulations in Bermuda, the UK, Ireland, Switzerland, the United States, Canada and elsewhere; risks related to our focus on specialized and high-risk verticals; geopolitical events and the economic and other impacts of such geopolitical events and the responses of governments around the world; acts of war and terrorism; the effects of global economic uncertainties, including inflationary pressure and rising interest rates, on consumer and business spending; risks associated with foreign currency exchange rate fluctuations; changes in our relationships with banks, payment card networks, issuers and financial institutions; risk related to processing online payments for merchants and customers engaged in the online gambling and foreign exchange trading sectors; risks related to becoming an unwitting party to fraud or being deemed to be handling proceeds resulting from the criminal activity by customers; the effects of chargebacks, merchant insolvency and consumer deposit settlement risk; changes to our continued financial institution sponsorships; failure to hold, safeguard or account accurately for merchant or customer funds; risks related to the availability, integrity and security of internal and external IT transaction processing systems and services; our ability to manage regulatory and litigation risks, and the outcome of legal and regulatory proceedings; failure of fourth parties to comply with contractual obligations; changes and compliance with payment card network operating rules; substantial and increasingly intense competition worldwide in the global payments industry; risks related to developing and maintaining effective internal controls over financial reporting; managing our growth effectively, including growing our revenue pipeline; any difficulties maintaining a strong and trusted brand; keeping pace with rapid technological developments; risks associated with the significant influence of our principal shareholders; the effect of regional epidemics or a global pandemic on our business; and other factors included in the “Risk Factors” in our Form 20-F and in other filings we make with the SEC, which are available at https://www.sec.gov. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made.

The Company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in their expectations with respect thereto or any change in events.

Paysafe Limited Condensed Consolidated Statements of Operations (unaudited)

 

 

Three Months Ended

 

 

 

March 31,

 

($ in thousands)

 

2024

 

 

2023

 

Revenue

 

$

417,738

 

 

$

387,849

 

Cost of services (excluding depreciation and amortization)

 

 

170,373

 

 

 

158,939

 

Selling, general and administrative

 

 

144,808

 

 

 

128,311

 

Depreciation and amortization

 

 

68,310

 

 

 

63,547

 

Impairment expense on goodwill and intangible assets

 

 

653

 

 

 

82

 

Restructuring and other costs

 

 

452

 

 

 

1,990

 

Loss on disposal of subsidiary and other assets, net

 

 

177

 

 

 

—

 

Operating income

 

 

32,965

 

 

 

34,980

 

Other income, net

 

 

12,355

 

 

 

2,547

 

Interest expense, net

 

 

(34,965

)

 

 

(37,456

)

Income before taxes

 

 

10,355

 

 

 

71

 

Income tax expense

 

 

7,299

 

 

 

3,879

 

Net income / (loss)

 

$

3,056

 

 

$

(3,808

)

 

 

 

 

 

 

 

Net income / (loss) per share – basic

 

$

0.05

 

 

$

(0.06

)

Net income / (loss) per share – diluted

 

$

0.05

 

 

$

(0.06

)

 

 

 

 

 

 

 

Net income / (loss)

 

$

3,056

 

 

$

(3,808

)

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

 

 

 

 

 

 

(Loss)/gain on foreign currency translation

 

 

(7,612

)

 

 

2,174

 

Total comprehensive loss

 

$

(4,556

)

 

$

(1,634

)

Paysafe Limited Consolidated Net income / (loss) per share

 

Three Months Ended

 

 

March 31,

 

 

2024

 

 

2023

 

Numerator ($ in thousands)

 

 

 

 

 

Net income / (loss) - basic

$

3,056

 

 

$

(3,808

)

Net income / (loss) - diluted

$

3,056

 

 

$

(3,808

)

Denominator (in millions)

 

 

 

 

 

Weighted average shares – basic

 

61.6

 

 

 

61.0

 

Weighted average shares – diluted (1)

 

62.0

 

 

 

61.0

 

Net income / (loss) per share

 

 

 

 

 

Basic

$

0.05

 

 

$

(0.06

)

Diluted

$

0.05

 

 

$

(0.06

)

(1)

The denominator used in the calculation of diluted net income per share for the three months ended March 31, 2024, includes an additional 0.4 million shares representing the dilutive effect of the Company's restricted stock units.

Paysafe Limited Condensed Consolidated Balance Sheets (unaudited)

($ in thousands)

 

March 31, 2024

 

 

December 31, 2023

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

202,134

 

 

$

202,322

 

Customer accounts and other restricted cash

 

 

1,172,818

 

 

 

1,295,947

 

Accounts receivable, net of allowance for credit losses of $6,322 and $5,240, respectively

 

 

176,283

 

 

 

162,081

 

Settlement receivables, net of allowance for credit losses of $4,774 and $5,197, respectively

 

 

179,404

 

 

 

171,224

 

Prepaid expenses and other current assets

 

 

61,454

 

 

 

74,919

 

Total current assets

 

 

1,792,093

 

 

 

1,906,493

 

Deferred tax assets

 

 

77,273

 

 

 

77,273

 

Property, plant and equipment, net

 

 

18,925

 

 

 

17,213

 

Operating lease right-of-use assets

 

 

28,649

 

 

 

22,120

 

Derivative financial assets

 

 

11,097

 

 

 

10,427

 

Intangible assets, net

 

 

1,109,934

 

 

 

1,163,935

 

Goodwill

 

 

2,006,801

 

 

 

2,023,402

 

Other assets – non-current

 

 

9,381

 

 

 

6,838

 

Total non-current assets

 

 

3,262,060

 

 

 

3,321,208

 

Total assets

 

$

5,054,153

 

 

$

5,227,701

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable and other liabilities

 

$

206,649

 

 

$

202,699

 

Short-term debt

 

 

10,190

 

 

 

10,190

 

Funds payable and amounts due to customers

 

 

1,357,682

 

 

 

1,477,017

 

Operating lease liabilities – current

 

 

8,241

 

 

 

8,233

 

Contingent and deferred consideration payable – current

 

 

10,183

 

 

 

11,828

 

Liability for share-based compensation – current

 

 

3,105

 

 

 

2,701

 

Total current liabilities

 

 

1,596,050

 

 

 

1,712,668

 

Non-current debt

 

 

2,447,162

 

 

 

2,491,643

 

Operating lease liabilities – non-current

 

 

23,357

 

 

 

16,963

 

Deferred tax liabilities

 

 

108,540

 

 

 

111,705

 

Warrant liabilities

 

 

1,698

 

 

 

1,423

 

Liability for share-based compensation – non-current

 

 

2,798

 

 

 

3,108

 

Contingent and deferred consideration payable – non-current

 

 

642

 

 

 

6,878

 

Total non-current liabilities

 

 

2,584,197

 

 

 

2,631,720

 

Total liabilities

 

 

4,180,247

 

 

 

4,344,388

 

Commitments and contingent liabilities

 

 

 

 

 

 

Total shareholders' equity

 

 

873,906

 

 

 

883,313

 

Total liabilities and shareholders' equity

 

$

5,054,153

 

 

$

5,227,701

 

Paysafe Limited Condensed Consolidated Statements of Cash Flow (unaudited)

 

 

Three Months Ended

 

 

 

March 31,

 

($ in thousands)

 

2024

 

 

2023 (1)

 

Cash flows from operating activities

 

 

 

 

 

 

Net income / (loss)

 

$

3,056

 

 

$

(3,808

)

Adjustments for non-cash items:

 

 

 

 

 

 

Depreciation and amortization

 

 

68,581

 

 

 

63,547

 

Unrealized foreign exchange gain

 

 

(2,519

)

 

 

(5,598

)

Deferred tax (benefit) / expense

 

 

(1,767

)

 

 

7,782

 

Interest expense, net

 

 

3,634

 

 

 

8,563

 

Share-based compensation

 

 

9,359

 

 

 

7,216

 

Other income, net

 

 

(7,162

)

 

 

(3,189

)

Impairment expense on goodwill and intangible assets

 

 

653

 

 

 

82

 

Allowance for credit losses and other

 

 

11,739

 

 

 

3,923

 

Loss on disposal of subsidiary and other assets, net

 

 

177

 

 

 

—

 

Non-cash lease expense

 

 

2,232

 

 

 

2,243

 

Movements in working capital:

 

 

 

 

 

 

Accounts receivable, net

 

 

(24,222

)

 

 

(12,766

)

Prepaid expenses and other current assets

 

 

(1,788

)

 

 

(11,947

)

Accounts payable and other liabilities

 

 

(3,792

)

 

 

(15,752

)

Income tax receivable / (payable)

 

 

654

 

 

 

(20,282

)

Net cash flows from operating activities

 

 

58,835

 

 

 

20,014

 

Cash flows in investing activities

 

 

 

 

 

 

Purchase of property, plant & equipment

 

 

(3,719

)

 

 

(2,732

)

Purchase of merchant portfolios

 

 

—

 

 

 

(4,399

)

Other intangible asset expenditures

 

 

(20,706

)

 

 

(27,636

)

Receipts under derivative financial instruments

 

 

2,531

 

 

 

2,224

 

Cash inflow from merchant reserves

 

 

6,510

 

 

 

—

 

Other investing activities, net

 

 

1,559

 

 

 

—

 

Net cash flows used in investing activities

 

 

(13,825

)

 

 

(32,543

)

Cash flows from financing activities

 

 

 

 

 

 

Cash settled equity awards

 

 

—

 

 

 

(484

)

Repurchases of shares withheld for taxes

 

 

(257

)

 

 

(3,690

)

Purchase of treasury shares

 

 

(12,000

)

 

 

—

 

Settlement funds - merchants and customers, net

 

 

(108,302

)

 

 

(138,975

)

Repurchase of borrowings

 

 

(30,545

)

 

 

(57,386

)

Proceeds from loans and borrowings

 

 

50,242

 

 

 

25,781

 

Repayments of loans and borrowings

 

 

(33,759

)

 

 

(13,329

)

Proceeds under line of credit

 

 

225,000

 

 

 

225,000

 

Repayments under line of credit

 

 

(225,000

)

 

 

(225,000

)

Contingent consideration paid

 

 

(7,755

)

 

 

(6,475

)

Net cash flows used in financing activities

 

 

(142,376

)

 

 

(194,558

)

Effect of foreign exchange rate changes

 

 

(25,951

)

 

 

20,379

 

Decrease in cash and cash equivalents, including customer accounts and other restricted cash during the period

 

$

(123,317

)

 

$

(186,708

)

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

 

 

1,498,269

 

 

 

2,127,195

 

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

 

$

1,374,952

 

 

$

1,940,487

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Cash and cash equivalents

 

$

202,134

 

 

$

221,687

 

Customer accounts and other restricted cash

 

 

1,172,818

 

 

 

1,718,800

 

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

 

$

1,374,952

 

 

$

1,940,487

 

(1)

During the fourth quarter of 2023, the Company elected to change its presentation of the cash flows associated with "Settlement receivables, net" and "Funds payable and amounts due to customers" from operating activities, to present them as financing activities within its Consolidated Statements of Cash Flows. Comparative amounts have been recast to conform to current period presentation. These recasts had no impact on the Consolidated Statements of Comprehensive Loss, Consolidated Statements of Financial Position or Consolidated Statements of Shareholders' Equity.

Non-GAAP Financial Measures

To supplement the Company’s condensed consolidated financial statements presented in accordance with generally accepted accounting principles, or GAAP, the company uses non-GAAP measures of certain components of financial performance. This includes Gross Profit (excluding depreciation and amortization), Adjusted EBITDA, Unlevered free cash flow, Adjusted net income, Adjusted net income per share, and Net leverage which are supplemental measures that are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“U.S. GAAP”).

Gross Profit (excluding depreciation and amortization) is defined as revenue less cost of services (excluding depreciation and amortization). Management believes Gross Profit to be a useful profitability measure to assess the performance of our businesses and ability to manage cost.

Adjusted EBITDA is defined as net income/(loss) before the impact of income tax (benefit)/expense, interest expense, net, depreciation and amortization, share-based compensation, impairment expense on goodwill and intangible assets, restructuring and other costs, loss/(gain) on disposal of a subsidiaries and other assets, net, and other income/(expense), net. These adjustments also include certain costs and transaction items that are not reflective of the underlying operating performance of the Company. Management believes Adjusted EBITDA to be a useful profitability measure to assess the performance of our businesses and improves the comparability of operating results across reporting periods.

Adjusted net income excludes the impact of certain non-operational and non-cash items. Adjusted net income is defined as net income/(loss) attributable to the Company before the impact of other non-operating income / (expense), net, impairment expense on goodwill and intangible assets, restructuring and other costs, accelerated amortization of debt fees, amortization of acquired assets, loss/(gain) on disposal of subsidiaries and other assets, share-based compensation, discrete tax items and the income tax (benefit)/expense on these non-GAAP adjustments. Adjusted net income per share is adjusted net income as defined above divided by adjusted weighted average dilutive shares outstanding. Management believes the removal of certain non-operational and non-cash items from net income enhances shareholders ability to evaluate the Company’s business performance and profitability by improving comparability of operating results across reporting periods.

Unlevered free cash flow is defined as net cash flows provided by/used in operating activities, adjusted for the impact of capital expenditure, payments relating to restructuring and other costs and cash paid for interest. Capital expenditure includes purchases of property plant & equipment and purchases of other intangible assets, including software development costs. Capital expenditure does not include purchases of merchant portfolios. Management believes unlevered free cash flow to be a liquidity measure that provides useful information about the amount of cash generated by the business.

Net leverage is defined as net debt (gross debt less cash and cash equivalents) divided by the last twelve months Adjusted EBITDA. Management believes net leverage is a useful measure of the Company's credit position and progress towards leverage targets.

Management believes the presentation of these non-GAAP financial measures, including Gross Profit, Adjusted EBITDA, Unlevered free cash flow, Adjusted net income, Adjusted net income per share, and Net leverage when considered together with the Company’s results presented in accordance with GAAP, provide users with useful supplemental information in comparing the operating results across reporting periods by excluding items that are not considered indicative of Paysafe’s core operating performance. In addition, management believes the presentation of these non-GAAP financial measures provides useful supplemental information in assessing the Company’s results on a basis that fosters comparability across periods by excluding the impact on the Company’s reported GAAP results of acquisitions and dispositions that have occurred in such periods. However, these non-GAAP measures exclude items that are significant in understanding and assessing Paysafe’s financial results or position. Therefore, these measures should not be considered in isolation or as alternatives to revenue, net income, cash flows from operations or other measures of profitability, liquidity or performance under GAAP.

You should be aware that Paysafe’s presentation of these measures may not be comparable to similarly titled measures used by other companies. In addition, the forward-looking non-GAAP financial measure of Adjusted EBITDA provided herein have not been reconciled to the comparable GAAP measure due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations. We have reconciled the historical non-GAAP financial measures presented herein to their most directly comparable GAAP financial measures. A reconciliation of our forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measures cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the adjusting items necessary for such reconciliations that have not yet occurred, are out of our control, or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results.

Reconciliation of GAAP Net Income / (Loss) to Adjusted EBITDA

 

 

Three Months Ended

 

 

 

March 31,

 

($ in thousands)

 

2024

 

 

2023

 

Net income / (loss)

 

$

3,056

 

 

$

(3,808

)

Income tax expense

 

 

7,299

 

 

 

3,879

 

Interest expense, net

 

 

34,965

 

 

 

37,456

 

Depreciation and amortization

 

 

68,310

 

 

 

63,547

 

Share-based compensation expense

 

 

9,359

 

 

 

7,216

 

Impairment expense on goodwill and intangible assets

 

 

653

 

 

 

82

 

Restructuring and other costs

 

 

452

 

 

 

1,990

 

Loss on disposal of subsidiaries and other assets, net

 

 

177

 

 

 

—

 

Other income, net

 

 

(12,355

)

 

 

(2,547

)

Adjusted EBITDA

 

$

111,916

 

 

$

107,815

 

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

 

 

Three Months Ended

 

 

 

March 31,

 

($ in thousands)

 

2024

 

 

2023 (1)

 

Net cash inflows from operating activities

 

$

58,835

 

 

$

20,014

 

Capital expenditure

 

 

(24,425

)

 

 

(30,368

)

Cash paid for interest

 

 

31,331

 

 

 

28,893

 

Payments relating to Restructuring and other costs

 

 

3,453

 

 

 

23,684

 

Unlevered Free Cash Flow

 

$

69,194

 

 

$

42,223

 

Adjusted EBITDA

 

 

111,916

 

 

 

107,815

 

(1)

During the fourth quarter of 2023, the Company elected to change its presentation of "Settlement receivables, net" and "Funds payable and amounts due to customers" from operating activities, to present them as financing activities within its Consolidated Statements of Cash Flows. As a result, the reconciling item related to "Movements in customer accounts and other restricted cash" is no longer required in the unlevered free cash flow reconciliation. Comparative amounts have been recast to conform to current period presentation.

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

 

 

Three Months Ended

 

 

 

March 31,

 

($ in thousands)

 

2024

 

 

2023

 

Revenue

 

$

417,738

 

 

$

387,849

 

Cost of services (excluding depreciation and amortization)

 

 

170,373

 

 

 

158,939

 

Depreciation and amortization

 

 

68,310

 

 

 

63,547

 

Gross Profit (1)

 

$

179,055

 

 

$

165,363

 

Depreciation and amortization

 

 

68,310

 

 

 

63,547

 

Gross Profit (excluding depreciation and amortization)

 

$

247,365

 

 

$

228,910

 

(1)

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

Reconciliation of GAAP Net Income / (Loss) to Adjusted Net Income

 

 

Three Months Ended

 

 

 

March 31,

 

($ in thousands)

 

2024

 

 

2023

 

Net income / (loss)

 

$

3,056

 

 

$

(3,808

)

Other non operating income, net (1)

 

 

(9,774

)

 

 

(764

)

Impairment expense on goodwill and intangible assets

 

 

653

 

 

 

82

 

Amortization of acquired assets (2)

 

 

33,603

 

 

 

33,673

 

Restructuring and other costs

 

 

452

 

 

 

1,990

 

Loss on disposal of subsidiaries and other assets, net

 

 

177

 

 

 

—

 

Share-based compensation expense

 

 

9,359

 

 

 

7,216

 

Discrete tax items (3)

 

 

5,465

 

 

 

5,479

 

Income tax expense on non-GAAP adjustments (4)

 

 

(7,685

)

 

 

(10,792

)

Adjusted net income

 

$

35,306

 

 

$

33,076

 

(in millions)

 

 

 

 

 

 

Weighted average shares - diluted

 

 

62.0

 

 

 

61.0

 

Adjusted diluted impact

 

 

0.0

 

 

 

0.4

 

Adjusted weighted average shares - diluted

 

 

62.0

 

 

 

61.4

 

(1)

Other non-operating income, net primarily consists of income and expenses outside of the Company's operating activities, including, fair value gain / loss on warrant liabilities and derivatives, gain / loss on repurchases of debt, gain / loss on foreign exchange and the release of certain provisions.

(2)

Amortization of acquired asset represents amortization expense on the fair value of intangible assets acquired through various Company acquisitions, including brands, customer relationships, software and merchant portfolios.

(3)

Discrete tax items mainly represent (a) valuation allowance recorded on deferred tax assets of $5,502 and $740 for the three months ended March 31, 2024 and 2023, respectively (b) measurement period adjustments which were ($57) and $2,529 for the three months ended March 31, 2024 and 2023, respectively and (c) discrete tax expense on share-based compensation, which would not have been incurred as share-based compensation expense is removed from adjusted net income, of $182 and $0 for the three months ended March 31, 2024 and 2023, respectively. The remaining discrete tax items relate to the remeasurement of certain deferred tax balances due to changes in the statutory tax rates in certain jurisdictions.

(4)

Income tax expense on non-GAAP adjustments reflects the tax expense on each taxable adjustment using the current statutory tax rate of the applicable jurisdiction specific to that adjustment.

Adjusted Net Income per Share

 

Three Months Ended

 

 

March 31,

 

 

2024

 

 

2023

 

Numerator ($ in thousands)

 

 

 

 

 

Adjusted net income - basic

$

35,306

 

 

$

33,076

 

Adjusted net income - diluted

$

35,306

 

 

$

33,076

 

Denominator (in millions)

 

 

 

 

 

Weighted average shares – basic

 

61.6

 

 

 

61.0

 

Adjusted weighted average shares – diluted (1)

 

62.0

 

 

 

61.4

 

Adjusted net income per share

 

 

 

 

 

Basic

$

0.57

 

 

$

0.54

 

Diluted

$

0.57

 

 

$

0.54

 

(1)

The denominator used in the calculation of diluted adjusted net income per share for the three months ended March 31, 2024 and 2023 includes the dilutive effect of the Company's restricted stock units.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240510776430/en/

Media Crystal Wright Paysafe crystal.wright@paysafe.com +1 (904) 328-7740 Investors Kirsten Nielsen Paysafe +1 (646) 901-3140 kirsten.nielsen@paysafe.com