# Payoneer Global Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Payoneer Global Inc.](/companies/payo.md) (CIK 1845815)
- Form: 10-Q
- Filed: 2023-11-08
- Accepted by EDGAR: Nov 8, 2023, 21:05 ET
- Period: 2023-09-30
- Accession: 0001558370-23-018263
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1845815/000155837023018263/payo-20230930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1845815/000155837023018263/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $147.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $441.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $26.9m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $84.2m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $29.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $77.9m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $10.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $24.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $12.8m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $66.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.03 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.17 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.04 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.18 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 381,845,099 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 389,658,789 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $101.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $4.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $34.4m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $590.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $6.06bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $6.22bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $5.51bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $5.58bn | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $15.8m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2023-09-30 | $638.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 36,319 characters.

*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 democratizes access to financial services, empowering the world’s small and medium sized businesses to transact, do business and grow globally. With a single connection to Payoneer’s global payment and commerce-enabling platform, our customers can manage their global financial operations and transact globally as easily as they do locally, allowing them to participate in the digital economy and enabling growth for enterprises, marketplaces and SMBs worldwide.

Payoneer was founded in 2005 as technology and the internet were transforming commerce and making it possible for anyone, anywhere to build and grow a digital business. From the beginning, we recognized the importance of offering services to both sides of two-sided commerce networks: small and medium businesses who would need help navigating the increasingly complex digital economy, and marketplaces who would need help supporting their increasingly distributed seller-base. Over the past 18 years, we have built a one-of-a-kind platform designed to serve the needs of digital businesses globally, with a focus on emerging markets.

At the core of the Payoneer platform is a robust, secured, regulated global payment infrastructure that simplifies the process for any business to pay and get paid globally as easily as it does locally. On top of this core, we continue to develop a comprehensive suite of products and services, providing sophisticated tools to help our customers grow.

Leveraging the strength of our payment infrastructure and the breadth of our product offerings, Payoneer operates as both a provider of services to enterprises and marketplaces as well as a B2B payment services provider, empowering all of our customers to transact internationally with ease. As a result, we have cultivated a meaningful brand in the global digital commerce ecosystem supporting millions of marketplaces, enterprises, and SMBs across more than 190 countries and territories and 7,000+ unique trade corridors.

We primarily generate revenues when Payoneer customers use the funds in their Payoneer account to make a payment, make a purchase or to withdraw the funds locally. Our revenue growth is based on (i) growing the volume of transactions processed through the Payoneer platform; and (ii) increasing the monetization rates of Payoneer services. Our efforts to increase the overall monetization rate of Payoneer services includes increasing our focus on acquiring customers in regions with higher rates of monetization, accelerating the growth of payment services with higher rates of monetization like B2B, and also introducing new services for customers that generate improved monetization, like our card products. 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 $16.8 billion and $15.1 billion in volume during the three months ended September 30, 2023 and 2022, respectively, and $48.3 billion and $44.4 billion in volume during the nine months ended September 30, 2023 and 2022, 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 more acquisitions to accelerate our ability to deliver more value to customers around the world.

### Key Developments and Trends

#### 2023 Israel – Hamas War

In October 2023, in response to Hamas’ attack on Israel from the Gaza Strip, Israel declared war on Hamas. 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 benefits 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 50% of our global employee base is located in Israel, including approximately 81% of our research and development resources. At this time, less than 10% 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 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 nine months ended September 30, 2023, respectively, and is included within revenues from Europe in Note 13 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 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 the broader global economy and may have a material effect on our results of operations.

#### Workforce Reduction Plan

On July 10, 2023, we announced a plan to reduce our workforce by approximately 9% of our then-current total headcount (the “Plan”). The Plan is expected to enhance productivity and efficiency as well as streamline our organizational structure to better align operations with our growth objectives. We intend to reinvest some savings from the Plan into future growth initiatives, and to continue hiring for roles essential to those initiatives in areas such as research and development.

During the three and nine months ended September 30, 2023, we incurred costs of $4.5 million related to severance and other employee termination benefits.

We expect an annualized future benefit to our operating expenses of approximately $20 million in connection with the Plan.

#### Repurchase Program

During the nine months ended September 30, 2023, we repurchased approximately 6,939,117 shares of our common stock for approximately $34,759 million at a weighted average cost of $4.99 per share under our $80 million repurchase program authorized in May 2023. As of September 30, 2023, a total of approximately $45,379 million remained available for future repurchases of our common stock under the program.

#### 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 nine months ended September 30, 2023, 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, such as rising interest rates, inflation, the continued impact of COVID-19, the ongoing war in Ukraine and the evolving Israel-Hamas war, and disruptions in the banking sector, may affect our results of operations. For example, during 2022, and in response to rising inflation, the U.S. Federal Reserve raised the benchmark interest rate by 425 basis points, with an additional 100 basis point increase so far in 2023. This has contributed to an increase in interest income earned on our customer balances. U.S. and global inflation rates have remained elevated and the Federal Reserve, as well as other central banks, have continued to raise interest rates. Higher interest rates positively impact our interest income revenues. However, a prolonged period of high interest rates is likely to slow economic growth, and business and consumer spending globally which may negatively impact the volumes processed on our platform. There remains a great deal of uncertainty related to the ongoing trajectory of U.S. interest rate policy, the likely impact of monetary tightening globally and the degree to which the global economy could be impacted. In addition, while we have commercial arrangements with multiple banks globally, we have not been materially affected by the volatility and uncertainty in the banking sector experienced earlier this year.

### 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.

*(in thousands except percentages)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Three months ended September 30, 2023 | ​ | ​ ​ 2022 | ​ ​ ​ | ​ ​ ​ ​ Increase/ ​ (Decrease) | ​ ​ Nine months ended September 30, 2023 | ​ | ​ ​ 2022 | ​ ​ ​ | ​ ​ ​ Increase/ (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | ---: | --- | ---: | --- | ---: |
| Revenues | ​ | $208,035 | ​ | $158,917 |  | 31% | $606,783 | ​ | $444,065 |  | 37% |
| Transaction costs | ​ | 30,393 | ​ | 27,986 |  | 9% | 85,971 | ​ | 79,773 |  | 8% |
| Other operating expenses | ​ | 40,301 | ​ | 37,744 |  | 7% | 120,923 | ​ | 107,895 |  | 12% |
| Research and development expenses | ​ | 26,950 | ​ | 29,617 |  | (9)% | 84,225 | ​ | 82,139 |  | 3% |
| Sales and marketing expenses | ​ | 48,664 | ​ | 41,081 |  | 18% | 144,892 | ​ | 112,370 |  | 29% |
| General and administrative expenses | ​ | 25,112 | ​ | 21,693 |  | 16% | 73,805 | ​ | 60,013 |  | 23% |
| Depreciation and amortization | ​ | 7,116 | ​ | 5,899 |  | 21% | 19,064 | ​ | 15,525 |  | 23% |
| Total operating expenses | ​ | ​ 178,536 | ​ | ​ 164,020 | ​ | 9% | ​ 528,880 | ​ | ​ 457,715 | ​ | 16% |
| Operating income (loss) | ​ | ​ 29,499 | ​ | ​ (5,103) | ​ | \*\*% | ​ 77,903 | ​ | ​ (13,650) | ​ | \*\*% |
| Financial income (expense): | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Gain (loss) from change in fair value of Warrants | ​ | ​ (7,799) | ​ | ​ (15,095) | ​ | (48)% | ​ 5,535 | ​ | ​ 28,932 | ​ | (81)% |
| Other financial income (expense), net | ​ | ​ 1,137 | ​ | ​ (3,617) | ​ | \*\*% | ​ 7,805 | ​ | ​ (11,136) | ​ | \*\*% |
| Financial income (expense), net | ​ | (6,662) | ​ | (18,712) |  | (64)% | 13,340 | ​ | 17,796 |  | (25)% |
| Income (loss) before taxes on income and share in gains (losses) of associated company | ​ | ​ 22,837 | ​ | ​ (23,815) | ​ | \*\*% | ​ 91,243 | ​ | ​ 4,146 | ​ | \*\*% |
| Taxes on income | ​ | ​ 10,012 | ​ | ​ 2,635 | ​ | \*\*% | ​ 24,931 | ​ | ​ 5,976 | ​ | \*\*% |
| Share in gains (losses) of associated company | ​ | ​ — | ​ | ​ (2) | ​ | \*\*% | ​ — | ​ | ​ 11 | ​ | \*\*% |
| Net income (loss) | ​ | $12,825 | ​ | $(26,452) |  | \*\*% | $66,312 | ​ | $(1,819) |  | \*\*% |

*\*\*Not meaningful​*

#### Revenues

Revenues were $208.0 million and $606.8 million for the three and nine months ended September 30, 2023, an increase of $49.1 million and $162.7 million, or 31% and 37%, compared to the prior-year period, driven mainly by an increase of $45.4 million and $146.4 million in interest income earned on customer balances resulting from rising interest rates and an increase in customer balances held on our platform. The remaining increase was driven by a combination of growth in the number of customers on our platform, ongoing growth in high value regions, certain monetization initiatives and continued adoption of our high value services.

#### Transaction costs

Transaction costs were $30.4 million for the three months ended September 30, 2023, an increase of $2.4 million, or 9%, compared to the prior-year period, partially due to an increase in capital advance costs of $0.8 million driven by an increase in losses recognized. Excluding the impact of these non-volume related costs, transaction costs increased by $1.6 million or 6%, while volume increased by 11% compared to the prior year period. Transaction costs grew at a lower rate than volume due to improved commercial terms with banking and other providers, internal platform optimizations, and cost structure benefits from increased transaction volume.

Transaction costs were $86.0 million for the nine months ended September 30, 2023, an increase of $6.2 million, or 8%, compared to the prior-year period, primarily due to an increase of $2.9 million in card network fees, $2.7 million in capital advance costs and $2.1 million in bank and processor fees.

#### Other operating expenses

Other operating expenses were $40.3 million for the three months ended September 30, 2023, an increase of $2.6 million, or 7%, compared to the prior-year period, driven by an increase of $3.3 million in third-party contract and consulting expenses and an increase of $1.0 million in information technology expenses, partially offset by a decrease of $1.0 million in employee compensation, benefits and other employee-related expenses in line with a decrease in employee headcount.

Other operating expenses were $120.9 million for the nine months ended September 30, 2023, an increase of $13.0 million, or 12%, compared to the prior-year period, driven by an increase of $10.2 million in third-party contract and consulting expenses, an increase of $3.6 million in information technology expenses, and an increase of $1.7 million in employee compensation, benefits and other employee-related expenses.

#### Research and development expenses

Research and development expenses were $27.0 million for the three months ended September 30, 2023, a decrease of $2.7 million, or 9%, compared to the prior-year period, driven by an increase in the capitalization of employee compensation costs related to ongoing investments in our platform infrastructure, resulting in an additional $5.0 million in capitalized costs, offset by an increase of $1.7 million in information technology expenses and $1.6 million in costs related to the workforce reduction plan discussed in the key developments and trends section.

Research and development expenses were $84.2 million for the nine months ended September 30, 2023, an increase of $2.1 million, or 3%, compared to the prior-year period, driven by an increase of $3.0 million in information technology expenses and $1.6 million in severance related costs related to the workforce reduction plan discussed above, partially offset by a decrease of $2.3 million in employee compensation, benefits and other employee-related expenses as a result of an increase in capitalization due to shifting of resources towards new investments in our platform.

#### Sales and marketing expenses

Sales and marketing expenses were $48.7 million for the three months ended September 30, 2023, an increase of $7.6 million, or 18%, compared to the prior-year period, driven by an increase of $6.1 million in marketplace partner commissions and $2.0 million in costs related to the previously discussed workforce reduction plan. These increases were offset by a decrease of $1.3 million in employee compensation, benefits and other employee-related expenses.

Sales and marketing expenses were $144.9 million for the nine months ended September 30, 2023, an increase of $32.5 million, or 29%, compared to the prior-year period, driven by an increase of $15.1 million in marketplace partner commissions, an increase of $9.2 million in employee compensation, benefits and other employee-related expenses as a result of an increase in average employee headcount in our sales and marketing groups as well as $2.0 million in costs associated with the previously discussed workforce reduction plan, increased spend of $3.1 million on marketing programs, and an increase of $2.9 million in third-party contractor expenses.

#### General and administrative expenses

General and administrative expenses were $25.1 million for the three months ended September 30, 2023, an increase of $3.4 million, or 16%, compared to the prior-year period, driven by an increase of $1.7 million in M&A and legal expenses and an increase of $1.6 million resulting from the fair value adjustment of a liability related to our 2020 acquisition of Optile that positively impacted the prior period and did not recur.

General and administrative expenses were $73.8 million for the nine months ended September 30, 2023, an increase of $13.8 million, or 23%, compared to the prior-year period, driven by an increase of $6.8 million in employee compensation, benefits and other employee-related expenses as a result of an increase in employee headcount, an increase of $2.8 million in M&A and legal expenses, an increase of $2.3 million due to the fair value adjustment of a liability related to our 2020 acquisition of Optile that positively impacted the prior period and did not recur, and an increase of $1.9 million in taxes and fees.

#### Depreciation and amortization expenses

Depreciation and amortization expenses were $7.1 million and $19.1 million for the three and nine months ended September 30, 2023, an increase of $1.2 million and $3.5 million, or 21% and 23%, 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 expense, net was $6.7 million for the three months ended September 30, 2023, an improvement of $12.1 million, or 64%, compared to the prior-year period, driven by a $7.3 million decrease in the loss from the change in the fair value of warrants, an increase of $3.0 million in interest income on corporate cash balances, and a $1.9 million increase derived from revaluation of foreign currency balances.

Financial income, net was $13.3 million for the nine months ended September 30, 2023, a decrease of $4.5 million, or 25%, compared to the prior-year period, which benefitted from a gain related to the change in fair value of warrants that was $23.4 million higher than in the current period. This was partially offset by an increase of $10.6 million in interest income on corporate cash balances and an increase of $8.9 million from revaluation of foreign currency balances.

#### Income tax

Income tax expense was $10.0 million and $24.9 million for the three and nine months ended September 30, 2023, an increase of $7.4 million and $19.0 million, or 280% and 317%, respectively, compared to the prior-year periods, driven by an increase in our US federal and state income tax expenses of $8.3 million and $17.5 million for the three and nine months ended September 30, 2023, respectively. These increases were driven by increased profitability in the US, primarily due to interest income, as well as certain stock compensation and research and development expenses which are nondeductible for US tax purposes. Income tax expense was also impacted by an increase in taxes associated with our foreign subsidiaries of $1.4 million and $3.5 million in the three and nine months ended September 30, 2023, respectively. These increases were offset by a US deferred tax benefit of $1.2 million and $11.7 million for the three and nine months ended September 30, 2023, respectively.

### 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 September 30, 2023, we had $590.6 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 8 and Note 18 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information.

As of July 1, 2023, the Warehouse Facility bears interest at the sum of the Daily Simple SOFR and 0.26161% plus 9% annually and 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 but can be increased subject to the lender’s discretion up to $100 million. In addition, pursuant to the Warehouse Facility, PEPI entered into an amendment on June 8, 2022, capping the total interest rate at 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 million of our common stock over a period of 24 months. During the nine months ended September 30, 2023, we repurchased approximately 6,939,117 shares of our common stock for approximately $34.8 million, of which $0.4 million was not yet settled at period end. As of September 30, 2023, a total of approximately $45.4 million remained available for future repurchases of our common stock under the program.

### Cash Flows

The following table presents a summary of cash flows from operating, investing, and financing activities for the following comparative periods.

*(in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Nine months ended September 30, 2023 | ​ | ​ ​ 2022 |
| --- | --- | ---: | --- | ---: |
| Net cash provided by operating activities | ​ | $101,328 | ​ | $44,326 |
| Net cash used in investing activities | ​ | (47,754) | ​ | (13,942) |
| Net cash provided by (used in) financing activities | ​ | (492,732) | ​ | 655,735 |
| Effect of exchange rate changes on cash and cash equivalents | ​ | (662) | ​ | (3,369) |
| Change in cash, cash equivalents, restricted cash and customer funds | ​ | $(439,820) | ​ | $682,750 |

#### Operating Activities

Net cash provided by operating activities was $101.3 million for the nine months ended September 30, 2023, an increase of $57.0 million compared to $44.3 million for the nine months ended September 30, 2022.

For the nine months ended September 30, 2023, we had $66.3 million of net income, which includes non-cash expenses of $48.4 million related to stock-based compensation and $19.1 million related to depreciation and amortization, as well as non-cash income of $12.0 million related to deferred taxes and a $5.5 million non-cash gain from change in the fair value of warrant liabilities. Net income was also adjusted for changes in current assets and liabilities, including net outflows of $12.0 million related to capital advances, $6.9 million related to trade payables, $5.9 million related to other current assets, and $4.2 million related to miscellaneous items. These outflows were partially offset by inflows of $7.3 million related to operating lease right-of-use assets and $6.9 related to accounts receivable.

For the nine months ended September 30, 2022, we had $1.8 million of net loss, which includes non-cash expenses of $39.1 million related to stock-based compensation and $15.5 million related to depreciation and amortization, as well as non-cash gains of $28.9 million related to change in fair value of warrants. Net income was also adjusted for changes in current assets and liabilities, including net inflows of $17.8 million related to capital advances and $2.6 million related to miscellaneous items.

#### Investing Activities

Net cash used in investing activities was $47.8 million for the nine months ended September 30, 2023, a change of $33.8 million compared to net cash used in investing activities of $13.9 million for the nine months ended September 30, 2022.

This change was predominantly related to an increase of $23.5 million in the balance of customer funds in transit at the current period end compared to the prior year period and an increase of $15.1 million in capitalization of internal use software, partially offset by a cash inflow of $6.0 million related to our acquisition of the remaining interest in a joint venture, as described in Note 2(c) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

#### Financing Activities

Net cash used in financing activities was $492.7 million for the nine months ended September 30, 2023, a change of $1.1 billion compared to net cash provided by financing activities of $655.7 million for the nine months ended September 30, 2022. Current period cash used in financing activities primarily reflects a decline in customer balances, while cash provided by financing activities in the prior period reflects an increase in customer balances. Additionally, approximately $34.4 million was used in the current period to finance our share repurchase program which began during the nine months ended September 30, 2023.

### 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, 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:

#### 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, with certain limited exceptions where both received and sent payments are counted. Volume serves as a key metric for overall business activity, as growing volume is one of the primary drivers for our revenue growth.

*(in millions)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Three months ended September 30, 2023 | ​ | ​ ​ 2022 | ​ ​ ​ | ​ ​ Nine months ended September 30, 2023 ​ ​ | ​ ​ | ​ ​ 2022 ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Volume | ​ | $16,753 | ​ | $15,131 | ​ | $48,277 | ​ | $44,387 |

Volume grew 11% and 9% for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022, respectively, driven by a combination of continued growth with our largest digital commerce marketplaces, strong travel demand, and 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. 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 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.

#### Adjusted EBITDA

*(in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Three months ended September 30, 2023 | ​ | ​ ​ 2022 | ​ ​ ​ | ​ ​ Nine months ended September 30, 2023 ​ ​ | ​ ​ | ​ ​ 2022 ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| **Net income (loss)** | **​** | **$12,825** | **​** | **$(26,452)** | **​** | **$66,312** | **​** | **$(1,819)** |
| Depreciation and amortization | ​ | 7,116 | ​ | 5,899 | ​ | 19,064 | ​ | 15,525 |
| Taxes on income | ​ | 10,012 | ​ | 2,635 | ​ | 24,931 | ​ | 5,976 |
| Other financial (income) expense, net | ​ | (1,137) | ​ | 3,617 | ​ | (7,805) | ​ | 11,136 |
| **EBITDA** | **​** | **28,816** | **​** | **(14,301)** | **​** | **102,502** | **​** | **30,818** |
| Stock based compensation expenses(1) | ​ | 15,330 | ​ | 13,525 | ​ | 48,429 | ​ | 38,323 |
| Share in loss (gain) of associated company | ​ | — | ​ | 2 | ​ | — | ​ | (11) |
| M&A related expense (income)(2) | ​ | 1,745 | ​ | (1,588) | ​ | 3,017 | ​ | (2,323) |
| Loss (gain) from change in fair value of Warrants(3) | ​ | 7,799 | ​ | 15,095 | ​ | (5,535) | ​ | (28,932) |
| Restructuring charges(4) | ​ | ​ 4,488 | ​ | — | ​ | 4,488 | ​ | — |
| **Adjusted EBITDA** | **​** | **$58,178** | **​** | **$12,733** | **​** | **$152,901** | **​** | **$37,875** |

(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 for the three and nine months ended September 30, 2023 relate to M&A-related third-party fees, including related legal, consulting and other expenditures. Amounts for the three and nine months ended September 30, 2022 relate to a non-recurring fair value adjustment of a liability related to our 2020 acquisition of optile.

(3) Changes in the estimated fair value of the warrants are recognized as gain or loss on the condensed consolidated statements of comprehensive income (loss). The impact is removed from EBITDA as it represents market conditions that are not in our control.

(4) The Company initiated a plan to reduce its workforce during the three months ending September 30, 2023 and had non-recurring costs related to severance and other employee termination benefits. Please refer to Note 10 to our condensed consolidated financial statements included elsewhere within this Quarterly Report on Form 10-Q for additional information.

### Critical Accounting Policies and Estimates

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. As described in Note 16 to our condensed consolidated financial statements included elsewhere within this Quarterly Report on Form 10-Q, we released our valuation allowance on deferred tax assets related to our US operations during the nine months ended September 30, 2023. On an ongoing basis, we evaluate such estimates and judgments, including those described in greater detail below.

We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

With the exception of the updates previously described, there have been no updates to our critical accounting policies and estimates in the nine months ended September 30, 2023. For more information, see “Payoneer Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K filed with the SEC on February 28, 2023.

### 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.

## Market risk

As filed, 2,263 characters.

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 September 30, 2023, were held in cash deposits and money market funds. The fair value of our cash and cash equivalents as well as 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 as well as 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 Euro, Japanese Yen, Chinese Yuan, Australian Dollar, Canadian Dollar, New Zealand Dollar, Thai Baht, New Israeli Shekel, Philippine Peso, Indian Rupee, Bangladeshi Taka, Turkish Lira, Pakistani Rupee, 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.

## Controls and procedures

As filed, 1,493 characters.

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 September 30, 2023. 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.

## Risk factors

As filed, 329 characters.

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, 2023. However, we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

Filed Nov 8, 2023.
Source: SEC EDGAR, the filing index for accession 0001558370-23-018263. Last ingested by Listed: Oct 24, 2026, 15:16 ET. No prices; not investment advice.