Payoneer Global Inc. (PAYO) FY 2024 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
Item 7. 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 other sections of this Annual Report, including “Item 1. Business,” and the accompanying Consolidated Financial Statements and related Notes included elsewhere in this Report. Some of the information contained in this discussion and analysis, including information with respect to our future performance, liquidity and capital resources, and general and administrative functions, includes forward-looking statements that involve risks and uncertainties. You should review the sections titled “Cautionary Statement Regarding 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.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations focuses on a discussion of 2024 results as compared to 2023 results. For a discussion of the 2023 results as compared to 2022 results, refer to Part I, Item 7 of our Form 10-K filed with the SEC on February 28, 2024.
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 and entrepreneurs, 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 suite of cross-border accounts receivable (AR) and accounts payable (AP) capabilities, including multicurrency account capabilities, and includes services such as working capital and funds management. 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 and entrepreneurs around the world can serve and transact with their overseas customers, suppliers, vendors, and contractors, 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, make a purchase or to withdraw the funds to a financial institution. For our customers transacting on a B2B or DTC basis, we also in certain circumstances generate revenue when they receive funds, such as when they invoice a customer or collect payments via their webstore. Additionally, given the significant customer funds held on our platform and ongoing growth in those balances, and in light of the high interest rate environment in the U.S. and elsewhere, 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 $80.1 billion, $66.0 billion, and $59.7 billion in volume during the years ended December 31, 2024, 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 acquisitions to accelerate our ability to deliver more value to customers around the world.
40
Table of Contents
Key Development and Trends
Impact of Israel’s Conflicts in the Middle East
Since October 7, 2023, Israel has been at war with Hamas and Hezbollah, and exchanged attacks with Iran and other proxies of the regime. 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 55% of our global employee base is located in Israel, including approximately 78% 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 year ended December 31, 2024 and is included within revenues from Europe, Middle East, and Africa within Note 20 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
The state of the ongoing conflict remains highly uncertain and 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 as well as to negatively impact the broader global economy and may have a material adverse 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. We have continued to provide services to customers located in Ukraine and our revenues in Ukraine have remained relatively stable. For the years ended December 31, 2024 and 2023, Ukraine and Belarus, combined, accounted for less than 10% of our revenue, of which Belarus accounted for less than 1% of our revenue, respectively. 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, trade policies (including tariffs), local political instability, global health crises, supply chain dislocations, regional and other conflicts, including the ongoing war in Ukraine and Israel’s ongoing conflicts in the Middle East, and disruptions and instability and regulatory changes in the banking sector, as well as evolving changes to trade policies (including tariffs) particularly in the U.S, may impact our customers, providers, banking partners and relationships and ultimately the amount of volume processed on our platform which may affect our results of operations.
During 2023, the U.S. Federal Reserve raised the target benchmark interest rate by 525 basis points to a high of 525 to 550 basis points by August 2023. Coupled with continued growth in customer balances, this drove a significant increase in the interest income revenue we earn on our customer funds. During 2024, the U.S. Federal Reserve cut the benchmark interest rate by 100 basis points to a target range of 425 to 450 basis points. While there remains uncertainty as to the timing and magnitude of future interest rate changes, we expect to see a negative impact on our revenue from declining interest rates over the medium-term. In response, as of the year ended December 31, 2024, we have invested a total of $1.8 billion of our customer funds in both available-for-sale debt securities and term deposits to reduce our sensitivity to declines in short term interest rates, and have purchased interest rate derivative contracts with respect to $1.9 billion in customer funds to provide a floor against the impact of interest rate declines below levels defined in the relevant interest rate derivative instruments.
41
Table of Contents
Mergers & Acquisitions
On August 5, 2024, Payoneer acquired 100% of the outstanding equity of Skuad Pte. Ltd. (or “Skuad”), a global workforce and payroll management company. The acquisition accelerates Payoneer’s strategy to deliver a comprehensive and integrated financial stack for SMBs that operate internationally.
In 2023, we entered into an agreement to acquire a licensed China-based payment service provider to support Payoneer’s China business. In February 2025, we received the regulatory approvals in China required to complete the acquisition, which is expected to close in the first half of 2025, subject to customary closing conditions and termination provisions provided for in the agreement. For more information on this pending acquisition, see Note 19 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Seasonality
Given the diverse nature of our customers and their businesses, Payoneer’s revenues experience seasonal fluctuations as a result of consumer and business spending patterns. Historically, we have seen revenues increase in the fourth quarter of every year, primarily as a result of higher e-commerce sales during the holiday season.
Key Factors Affecting Our Performance
Continued Growth of Digital Commerce. We have continued to see growth in digital commerce, as businesses of all sizes increasingly look to access the global digital economy and as the market for goods, labor, and services becomes more global and more distributed. In 2022 and 2023, we saw e-commerce growth rates normalizing to pre-pandemic levels due to a combination of macroeconomic factors, including supply chain disruptions, inflation and higher interest rates, and consumers shifting spending preferences from goods to services, including travel, following the loosening of pandemic restrictions. In 2024, we have seen e-commerce growth accelerate, as macroeconomic conditions and consumer sentiment have improved. For the years ended December 31, 2024, 2023 and 2022, total volume increased by 21%, 11% and 8% on a year-over-year basis, respectively.
Multiple Acquisition Channels Allow Us to Add Customers, Including Those That Meet Our Ideal Customer Profile. We operate a two-sided network, providing services to buyers and suppliers, businesses and contractors, marketplaces and marketplace sellers, and connecting them via a single platform.
We benefit from a strong brand in the markets in which our customers operate, and especially in key e-commerce markets such as China. We continue to make investments both in our brand and in our go-to-market infrastructure, including in our local go-to-market teams. Our financial performance will depend in large part on our ability to continue to add customers, including customers who meet our ideal customer profile.
We leverage our unique relationships with various marketplace platforms to cost-effectively acquire and serve new customers and look to add new marketplace relationships, which drives increased volumes on our platform and broadens our global reach.
We enter from time to time into various agreements with marketplaces and e-commerce platforms. These agreements govern how we provide services to SMBs and individuals receiving payments from those marketplaces, or how we provide services to the marketplace directly, or a combination of both. Some agreements have exclusivity arrangements with a defined term length, and in a few instances, we compensate the marketplace with structured incentives tied to the overall economics of the relationship. These incentive structures can apply throughout the contract term or through only a portion of the term. While the revenues we generate directly from our marketplace relationships are not significant, material changes to the terms that govern these relationships or the termination of those relationships could materially impact our revenues, expenses, and earnings.
We benefit from a local presence and significant expertise in the markets in which our customers operate. We collaborate with many partners around the world, including local logistics firms, accounting firms, marketing companies and others, and these serve as a valuable acquisition channel for our business. We also integrate our services into software platforms, including accounting software providers, and with banks and other local payment providers. These partnerships enable us to offer better service to our customers and to cost-effectively acquire new customers. Our ability to innovate and grow is dependent, in part, on our ability to maintain and grow our partnership base.
42
Table of Contents
Expanding our Addressable Market and Driving Increased Adoption of our Financial Stack. SMBs doing business in the global economy have many of the same complex needs as larger enterprises but lack internal resources and are underserved by the legacy financial system. Our financial stack is designed to meet the end-to-end AR and AP needs of SMBs with cross-border business.
We will continue to make significant investments in both existing and new products and services, including for those customers who operate B2B and direct-to-consumer models. We remain focused on increasing our penetration in these markets through new customer acquisition and from driving increased adoption of these and other services, such as our card product.
As we meet more of the needs of our customers, we expect to grow the revenues we earn from customers and to drive improved retention. Our ability to continue to grow our revenues is dependent on our ability to continue to grow our customer base and to drive increased adoption of our B2B, Checkout, card products and other differentiated offerings.
Macroeconomic Trends. Our results are impacted by the relative strength of the overall global economy and its effect on business investment, unemployment, consumer spending behavior, and business and consumer demand. Our revenues are also impacted by the level of customer funds held on our platform and by the interest rate we are able to earn on those funds.
Our customers are also impacted by the macroeconomic and geopolitical environment, both the global environment and specific regional or local factors. For example, trade policy and higher tariffs (as recently threatened or imposed by certain countries, including the U.S.) may increase the costs of cross-border trade.
M&A. We believe there are additional opportunities to leverage our global platform, regulatory and compliance infrastructure, technology, brand and team to deliver additional value to more customers more quickly by supplementing our organic product development with targeted acquisitions that add new capabilities, regulatory infrastructure or geographic expansion.
Components of Results of Operations
The period-to-period comparisons of our results of operations have been prepared using the historical periods included in our consolidated financial statements. The following discussion should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
Revenue
The majority of our revenues are generated from transaction fees, which vary based on the type of service the customer utilizes. Transaction fee revenue principally consists of revenue generated when customers use their funds, either to withdraw their funds from our platform to a local banking institution or to use the funds to make payments. We also in certain circumstances generate revenue when customers receive funds, such as when they invoice a customer or collect payments via their webstore or from other businesses. Some services, such as virtual commercial cards, typically generate higher transaction fees from a dollar of volume than if that same dollar was withdrawn to a customer’s bank account.
We generate significant revenues from interest earned on customer funds held on our platform. To a lesser extent, we generate revenue through the collection of fees, such as fees charged when payments are made into a customer’s account, and bank transfer fees, which are fees charged when one of Payoneer’s enterprise customers uses Payoneer to send a payment directly into the bank account of a small business or individual that does not have an account on our platform. The majority of our revenue is recognized and collected upon the completion of the underlying transaction. In some cases, revenues are collected through intermediaries. For more information on our revenue recognition policies, see note 2s. of our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Transaction costs
Transaction costs mainly consist of fees paid to the banks, processors and networks that process payments to and from the Payoneer platform, costs to acquire currencies, card supply costs, losses related to certain of our services, and expenses related to the outstanding balance associated with the Warehouse Facility (for which the scheduled revolving period is now expired as described in greater detail below under “— Liquidity and Capital Resources”). These costs are net of any rebate programs with banks and processors, such as volume rebates. Transaction costs are primarily driven by volume and number of transactions and generally increase as volume and number of transactions increase, while certain of our products and services, such as our commercial card or checkout product, certain billing services and increases in flows in certain markets drive higher transaction costs.
43
Table of Contents
We are exposed to potential transaction losses such as credit or debit collections losses, recalled payments, card negative balances and chargebacks and capital advance losses. These costs are included in transaction costs. We record an allowance for estimated losses arising from the above scenarios as well as doubtful capital advances.
Other operating expenses
Other operating expenses mainly include compensation for our employees and subcontractors, who support customer service calls, customer onboarding costs, banking infrastructure implementations, transaction monitoring and liquidity management as well as indirect costs incurred for fraud detection, compliance operations, regulatory services and maintenance costs related to our customer call center infrastructure.
Research and development expenses
Research and development expenses consist primarily of employee compensation and related costs, professional services and consulting expenses, and non-capitalized costs associated with the development of new technologies. Such non-capitalized costs are charged to the consolidated statements of comprehensive income (loss) as incurred.
Sales and marketing expenses
Sales and marketing expenses consist of costs for business development, customer success, product launch costs, marketing and advertising costs, retention costs and certain customer acquisition costs and includes employee compensation and related costs.
General and administrative expenses
General and administrative expenses consist primarily of compensation, benefits and overhead expenses associated with corporate management. This also includes, among other things, directors’ and officers’ liability insurance, director fees, internal and external accounting and legal and administrative resources, including audit and legal fees.
Depreciation and amortization
Depreciation and amortization consist primarily of amortization of intangible assets, internally developed software, and depreciation of our investments in property, equipment, and software. We depreciate and amortize our assets on a straight-line basis in accordance with our accounting policies.
Financial income (expense), net
Financial income (expense), net includes gains (losses) from foreign exchange fluctuations. We conduct transactions worldwide and settle accounts with our financial intermediaries in various currencies. Interest income (expense) from corporate cash and cash equivalents deposited in our accounts is also included under financial income (expense), net, which vary based on cash and cash equivalents balances, and based on market rates. In addition, as a result of the reverse recapitalization transaction we completed with FTAC Olympus Acquisition Corp. (“FTOC”) in 2021, we assumed public warrants that were exercisable for shares of our common stock. These warrants were repurchased and redeemed in full in September 2024 (Refer to Note 18 to our consolidated financial statements included elsewhere within this Annual Report on Form 10-K for details), but prior to repurchase and redemption were classified as a liability and remeasured at period end and the corresponding mark-to-market adjustment were included in financial income (expense), net.
Income taxes
We are in a taxable income position in the U.S. and in certain foreign jurisdictions, for which there are income taxes recorded. In addition, we record expenses associated with uncertain income tax positions.
Share in losses of associated company
Investment in entities where we have the ability to exercise significant influence, but not control, over the investee and investment in joint ventures, are accounted for using the equity method of accounting. As of December 31, 2022, we had a joint venture with assets and operations located in China. In January 2023, through our subsidiary Payoneer Research and Development Ltd., we acquired all remaining interests in the joint venture from other partners, and in February 2025, formally deregistered the entity. For the periods prior to full ownership and consolidation, our share in the results of operations is included as share in losses of associated company on our consolidated statements of comprehensive income (loss).
44
Table of Contents
Results of Operations
The following table sets forth a summary of our consolidated results of operations for the years indicated, and the changes between periods.
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Year ended December 31, | | Increase (Decrease) | ||||||||||||
| (in thousands) | | 2024 | 2023 | 2022 | 2024 | | 2023 | | |||||||
| Revenues | | $ | 977,716 | | $ | 831,103 | | $ | 627,623 | 18 | % | 32 | % | ||
| Transaction costs (Excluding depreciation and amortization shown separately below)(1) | | 152,106 | | 122,291 | | 110,165 | 24 | % | 11 | % | |||||
| Other operating expenses | | 169,550 | | 160,609 | | 149,199 | 6 | % | 8 | % | |||||
| Research and development expenses | | 134,631 | | 119,197 | | 115,041 | 13 | % | 4 | % | |||||
| Sales and marketing expenses | | 211,839 | | 196,654 | | 164,564 | 8 | % | 20 | % | |||||
| General and administrative expenses | | 113,263 | | 100,929 | | 90,010 | 12 | % | 12 | % | |||||
| Depreciation and amortization | | 47,296 | | 27,814 | | 20,858 | 70 | % | 33 | % | |||||
| Total operating expenses | | 828,685 | | 727,494 | | 649,837 | 14 | % | 12 | % | |||||
| Operating income (loss) | | 149,031 | | 103,609 | | (22,214) | 44 | % | ** | % | |||||
| Financial income (expense): | | | | | | | | | | | |||||
| Gain from change in fair value of Warrants | | | 2,767 | | | 17,359 | | | 33,963 | | (84) | % | | (49) | % |
| Loss on Warrant repurchase/redemption | | | (14,746) | | | — | | | — | | ** | % | | ** | % |
| Other financial income (expense), net | | | 2,419 | | | 11,568 | | | (10,131) | | (79) | % | | ** | % |
| Financial income (expense), net | | | (9,560) | | | 28,927 | | | 23,832 | | ** | % | | 21 | % |
| Income before income taxes and share in losses of associated company | | 139,471 | | 132,536 | | 1,618 | 5 | % | ** | % | |||||
| Income taxes | | 18,308 | | 39,203 | | 13,586 | (53) | % | 189 | % | |||||
| Share in losses of associated company | | — | | — | | 2 | ** | % | ** | % | |||||
| Net income (loss) | | $ | 121,163 | | $ | 93,333 | | $ | (11,970) | 30 | % | ** | % |
** Not meaningful
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| (1) | In 2024, 2023, and 2022 interest expense and fees associated with related party transaction were $1.4, $1.8, and $1.5 million respectively. |
Year ended December 31, 2024 Compared to the year ended December 31, 2023
Revenues
Revenues were $977.7 million for the year ended December 31, 2024, an increase of $146.6 million, or 18%, compared to $831.1 million for the year ended December 31, 2023. This increase in revenue was generally in line with volume, which grew by $14.0 billion, or 21% compared to the year ended December 31, 2023. The increase in revenue was driven by an increase in SMB revenue, including $66.3 million from SMBs that sell on marketplaces, $47.0 million from B2B SMBs, and $13.7 million from SMBs selling DTC. This growth in SMB revenue was driven by 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. The remaining increase in revenues was driven by an increase of $26.2 million in interest income earned on customer balances resulting from modestly higher interest rates and an increase in customer balances held on our platform compared to the prior year period.
Transaction costs
Transaction costs were $152.1 million for the year ended December 31, 2024, an increase of $29.8 million, or 24%, compared to $122.3 million for the year ended December 31, 2023, largely as a result of the 21% increase in volume, as well as from an increase in chargebacks and other operational losses of $5.5 million.
Other operating expenses
Other operating expenses were $169.6 million for the year ended December 31, 2024, an increase of $8.9 million, or 6%, compared to $160.6 million for the year ended December 31, 2023. This increase was driven by an increase of $13.6 million in information technology expenses and an increase of $1.1 million in reserves related to ongoing regulatory matters, partially offset by a
45
Table of Contents
decrease of $5.2 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 $134.6 million for the year ended December 31, 2024, an increase of $15.4 million, or 13%, compared to $119.2 million for the year ended December 31, 2023. This increase was driven primarily by an increase of $19.5 million in employee compensation, benefits and other employee-related expenses as a result of an increase in average employee headcount, a $2.1 million increase in information technology expenses, and a $1.7 million increase in third-party contractor expenses. This was partially offset by an increase of $9.2 million in the amount of payroll and third-party related costs capitalized as internal use software.
Sales and marketing expenses
Sales and marketing expenses were $211.8 million for the year ended December 31, 2024, an increase of $15.2 million, or 8%, compared to $196.7 million for the year ended December 31, 2023. This increase was driven mainly by an increase of $11.9 million in expenditures on certain direct marketing efforts, an increase of $2.2 million in partnership commissions, and an increase of $1.2 million in information technology expenses.
General and administrative expenses
General and administrative expenses were $113.3 million for the year ended December 31, 2024, an increase of $12.3 million, or 12%, compared to $100.9 million for the year ended December 31, 2023. This increase was driven mainly by an increase of $4.5 million in M&A related expenses, an increase of $3.5 million in third-party consultancy expenses, and $1.8 million in expense related to the fair value adjustment of a liability related to our 2024 acquisition of Skuad.
Depreciation and amortization expenses
Depreciation and amortization expenses were $47.3 million for the year ended December 31, 2024, an increase of $19.5 million, or 70%, compared to $27.8 million for the year ended December 31, 2023. The increase was driven primarily by an increase in amortization of internal use software costs.
Financial income (expense), net
Financial expense, net was $9.6 million for the year ended December 31, 2024, a change of $38.5 million compared to $28.9 million in income for the year ended December 31, 2023. The change was primarily driven by a $14.7 million loss from the warrant repurchase and redemption transaction in 2024, as well as a gain on revaluation of warrant liabilities (prior to repurchase and redemption) that was $14.6 million lower in the current year period compared to prior year, as well as a $9.9 million increase in loss on revaluation of foreign currency balances.
Income taxes
Income tax expense was $18.3 million for the year ended December 31, 2024, a decrease of $20.9 million, or 53%, compared to $39.2 million for the year ended December 31, 2023. The decrease was primarily driven by (i) a reduction in U.S. current tax expense of $3.1 million and a U.S. provision-to-return benefit of $11.8 million (specifically related to the 2023 tax return), both of which were related to a deduction claimed under U.S. tax law for income earned from foreign customers, and (ii) a reduction in foreign tax expense of $9.4 million for future deductions of certain share-based compensation expenses. These impacts were partially offset by additional expense for unrecognized tax benefits.
Net income
For a discussion regarding our net income position in 2024 and 2023, please refer to the Liquidity and Capital Resources section below.
Liquidity and Capital Resources
The following discussion of our liquidity and capital resources is based on the financial information derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
46
Table of Contents
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 December 31, 2024, we had $497.5 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 14 and Note 26 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information. As disclosed in Note 14 and Note 26, the Warehouse Facility reached its scheduled revolving period termination date on October 28, 2024, and the Company has repaid all outstanding borrowings. The Warehouse Facility is set to be automatically terminated on April 28, 2025. After the expiration of the Warehouse Facility, the Company intends to finance capital advance activity internally.
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 of Directors 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 on December 31, 2025.
During the year ended December 31, 2024, we repurchased 24,807,647 shares of our common stock for approximately $136.8 million, of which $0.8 million was not yet settled at period end. As of December 31, 2024, a total of approximately $103.8 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.
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| | Year ended December 31, | ||||||||
| (in thousands) | | 2024 | 2023 | 2022 | |||||
| Net cash provided by operating activities | | $ | 176,925 | | $ | 159,489 | | $ | 83,960 |
| Net cash provided by (used in) investing activities | | (1,961,267) | | (44,254) | | 5,734 | |||
| Net cash provided by financing activities | | 427,773 | | 511,954 | | 1,461,312 | |||
| Effect of exchange rate changes on cash and cash equivalents | | (3,588) | | 4,458 | | (2,719) | |||
| Change in cash, cash equivalents, restricted cash and customer funds | | $ | (1,360,157) | | $ | 631,647 | | $ | 1,548,287 |
Operating Activities
Net cash provided by operating activities was $176.9 million for the year ended December 31, 2024, an increase of $17.4 million compared to $159.5 million for the year ended December 31, 2023.
Impact of net income - $27.8 million year over year increase to operating cash flows
This increase was driven by an increase in net income of $27.8 million in the year ended December 31, 2024 compared to the prior year period, which was primarily a result of $146.6 million of growth in revenue which outpaced $101.2 million of growth in operating expenses, as well as a $20.9 million reduction in tax expense, partially offset by a $38.5 million reduction of other financial income, as discussed in the Results of Operations section above.
47
Table of Contents
Impact of non-cash items - $35.7 million year over year increase to operating cash flows
The increase in net income period over period includes non-cash items, including higher non-cash addbacks to net income to arrive at operating cash flows compared to prior year, consisting primarily of:
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | $19.5 million increase in depreciation and amortization expense |
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | $29.3 million related to Warrants, driven by a decrease of $14.6 million in the amount of the gain recorded on Warrant revaluation and a $14.7 million loss on the Warrant repurchase and redemption transaction |
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | An increase of $7.9 million in the amount of the addback due to the effect of exchange rate changes on cash and cash equivalents |
The overall increase to operating cash flows from non-cash items was partially offset by higher non-cash reductions to net income compared to prior years, consisting primarily of:
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | $11.5 million increase in deferred tax assets compared to the prior year period increase, primarily due to share-based compensation temporary differences in the current year period, which exceeded the release of the valuation allowance on deferred tax assets in the United States during the prior year |
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | $8.6 million from interest not paid in cash and amortization of discount on investments in debt securities |
Impact of changes in operating assets and liabilities - $46.1 million year over year decrease to operating cash flows
During the year ended December 31, 2024, cash flows related to Other current assets decreased $40.5 million, Other payables decreased $9.7 million, and Trade payables increased $9.5 million, in each case compared to the prior year period, all due to changes in timing of payments relative to period cut-off. Additionally, cash flows related to Other assets decreased $9.0 million from the prior period primarily related to $9.5 million of accrued interest on term deposits which we had not invested in the prior period. Note that each of these drivers are net of acquired Skuad assets and liabilities.
Investing Activities
Net cash used in investing activities was $1,961.3 million for the year ended December 31, 2024, an increase of $1,917.0 million compared to net cash used in investing activities of $44.3 million for the year ended December 31, 2023.
This change was predominantly related to the net purchase of $1,166.8 million in investments in U.S. Treasury Securities and $600.0 million in term deposits, both related to customer balances held on our platform. In addition, our acquisition of Skuad represented a use of cash in the year, net of cash acquired, of $48.2 million. Also included in cash used in investing activities is $35.2 million related to derivative instruments purchased and $12.9 million in incremental investment in internal use software when compared to the prior year. The change was also impacted by a cash inflow in the prior year of $6.0 million related to our acquisition of the remaining interest in a joint venture, which did not recur. Additionally, customer funds in-transit at period-end were $51.7 million lower than the prior year period.
Financing Activities
Net cash provided by financing activities was $427.8 million for the year ended December 31, 2024, a decrease of $84.2 million compared to net cash provided by financing activities of $512.0 million for the year ended December 31, 2023. This decrease was primarily driven by an incremental $82.1 million in cash used for common stock repurchases, $20.7 million in related party debt repayment, and $19.8 million related to the repurchase and redemption of our public warrants. These impacts were partially offset by the receipt of collateral on our derivative instruments of $18.8 million, an increase in customer balances held on our platform of $11.7 million, and $7.9 million in proceeds from the issuance of common stock related to our stock-based compensation program.
Lease Commitments
We have entered into various non-cancelable leases for certain offices and vehicles with contractual lease periods expiring between 2025 and 2035.
48
Table of Contents
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Payments due by period | ||||||||||||||
| | | | | | Less than | | | | | | | | More than | ||
| (in thousands) | | Total | 1 year | 1-3 years | 3-5 years | 5 years | |||||||||
| Operating leases | | $ | 30,166 | | $ | 705 | | $ | 13,236 | | $ | 3,853 | | $ | 12,372 |
Additionally, in 2024, we entered into a lease commencing after the balance sheet date, which is expected to necessitate lease payments of approximately $5.5 million annually for the first five years, and $5.0 million annually for five years thereafter, exclusive of fees and expenditures for construction and other related costs.
Off-Balance Sheet Arrangements
As of the balance sheet dates of December 31, 2024 and December 31, 2023, we have not engaged in any off-balance sheet arrangements, as defined by Regulation S-K, that have or are reasonably likely to have a current or future effect on our financial condition, results of operations or cash flows.
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:
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.
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| | Year ended December 31, | ||||||||
| (in millions) | | 2024 | 2023 | 2022 | |||||
| Volume | | $ | 80,062 | | $ | 66,020 | | $ | 59,729 |
Volume grew 21% for the year ended December 31, 2024 compared to the year ended December 31, 2023, driven by a combination of continued growth in volumes from SMBs selling on marketplaces, strong growth in volume from B2B SMBs, and continued strength in volumes processed for enterprise partners, including in the travel segment.
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:
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| (i) | Mix in customer size, products, and services; |
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| (ii) | Mix between domestic and cross-border transactions; |
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| (iii) | Geographic region or country in which a transaction occurs; and |
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| (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.
49
Table of Contents
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
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| | Year ended December 31, | ||||||||
| (in thousands) | | 2024 | 2023 | 2022 | |||||
| Net income (loss) | | $ | 121,163 | | $ | 93,333 | | $ | (11,970) |
| Depreciation and amortization | | 47,296 | | 27,814 | | 20,858 | |||
| Income taxes | | 18,308 | | 39,203 | | 13,586 | |||
| Other financial (income) expense, net | | (2,419) | | (11,568) | | 10,131 | |||
| EBITDA | | 184,348 | | 148,782 | | 32,605 | |||
| Stock based compensation expenses(1) | | 64,787 | | 65,767 | | 52,150 | |||
| Share in losses of associated company | | | — | | | — | | | 2 |
| M&A related expenses (income)(2) | | 9,439 | | 3,468 | | (2,323) | |||
| Gain from change in fair value of Warrants(3) | | | (2,767) | | | (17,359) | | | (33,963) |
| Loss on Warrant repurchase/redemption(4) | | | 14,746 | | | — | | | — |
| Restructuring charges(5) | | | — | | | 4,488 | | | — |
| Adjusted EBITDA | | $ | 270,553 | | $ | 205,146 | | $ | 48,471 |
(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 years ended December 31, 2024 and 2023 relate to M&A-related third-party fees, including related legal, consulting and other expenditures. Additionally, amounts for the year ended December 31, 2024 include $1.8 million in non-recurring fair value adjustment of the Skuad contingent consideration liability discussed in Note 3 to our consolidated financial statements included elsewhere within this Annual Report on Form 10-K. Amounts for the year ended December 31, 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 public warrants are recognized as gain or loss on the consolidated statements of comprehensive income. The impact is removed from EBITDA as it represents market conditions that are not in our control.
(4) Amounts relate to a non-recurring loss on the repurchase and redemption of outstanding public warrants; refer to Note 18 to our consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information.
(5) We initiated a plan to reduce our workforce during the year ended December 31, 2023 and had non-recurring costs related to severance and other employee termination benefits.
50
Table of Contents
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the report amounts of assets, liabilities, revenue, costs and expenses as well as related disclosures. On an ongoing basis, we evaluate these estimates and the assumptions used. Actual results may differ from these estimates under different assumptions or conditions.
We believe that the accounting estimates discussed in this section are critical based on the subjectivity and judgement involved in the underlying assumptions, and the materiality to our consolidated financial statements. Our significant accounting policies are described within Note 2 to the consolidated financial statements.
Allowance for Capital advance (“CA”) losses:
We have established an allowance for CA losses (“ALCAL”), which represents our estimate of current expected credit losses inherent in our portfolio. Since the adoption of ASC 326, Current Expected Credit Losses, as of January 1, 2022, we estimate ALCAL based on historical lifetime loss data as well as macroeconomic forecasts applied to the portfolio, which is segmented by program. Loss rates are generated using historical loss data for each portfolio which are applied to segments of each portfolio. We then apply macroeconomic factors such as market unemployment rate, current and forecasted GDP, S&P yield, risk free rate and inflation rate, which are sourced externally, using a single scenario that we believe is most appropriate to the economic conditions applicable to a particular period. Expected credit loss rates, incorporating historical loss data and macroeconomic factors, are applied to the principal amount of our CA receivables.
Determining appropriate current expected credit loss allowances for CA receivables is an inherently uncertain process and ultimate losses may vary from current estimates. We regularly update our allowance estimates as new facts become known, and events occur that may impact the settlement or recovery of losses. The allowances are maintained at a level we deem appropriate to adequately provide for current expected credit losses at the balance sheet date after incorporating the impact of externally sourced macroeconomic forecasts.
Goodwill:
The valuation of assets acquired in a business combination requires the use of significant estimates and assumptions. The acquisition method of accounting for business combinations requires us to estimate the fair value of assets acquired, liabilities assumed, and any noncontrolling interest in an acquired business to properly allocate purchase price consideration between assets that are depreciated or amortized and goodwill. Our estimates are based upon assumptions that we believe to be reasonable, but which are inherently uncertain and unpredictable. These valuations require the use of management’s assumptions, which do not reflect unanticipated events and circumstances that may occur.
Goodwill is tested annually for impairment at the reporting unit level in the third quarter, or sooner when circumstances indicate an impairment may exist. The impairment evaluation for goodwill utilizes a qualitative assessment to determine whether it is more likely than not that goodwill is impaired. The qualitative factors may include, but are not limited to, macroeconomic conditions, industry and market conditions, operating environment, financial performance and other relevant events, which are inherently subject to estimation. If it is determined that it is more likely than not that goodwill is impaired, then we are required to perform a quantitative goodwill impairment test, which requires us to estimate the fair value of our reporting units. The fair value of the reporting unit is estimated using a discounted cash flow method. The discounted cash flow method, a form of the income approach, uses expected future operating results and a market participant discount rate. Estimation is inherent in calculating the discount rate to apply and involves the use of third-party specialists.
Revenue recognition:
Application of the accounting principles in U.S. GAAP related to the measurement and recognition of revenue requires us to make judgments and estimates. Complex arrangements with nonstandard terms and conditions may require significant contract interpretation to determine the appropriate accounting. Specifically, the determination of whether we are a principal to a transaction (gross revenue) or an agent (net revenue) can require considerable judgment. Further, we provide incentive payments to customers, including marketplace platforms, and merchants, which require judgment to determine whether the payments should be recorded as a reduction to gross revenue. Changes in judgments with respect to these assumptions and estimates could impact the amount of revenue recognized.
51
Table of Contents
Income taxes:
Calculating our tax provision requires us to make estimates regarding the timing and amount of taxable and deductible items which will adjust pretax income earned in various tax jurisdictions. We are required to interpret complex tax legislation in the jurisdictions in which we operate, and although we believe that our estimates and judgments discussed herein are reasonable, actual results may be materially different than the estimated amounts.
The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. Valuation allowances are established for deferred tax assets when the likelihood of the deferred tax assets not being realized exceeds the more likely than not criterion. Assessing the likelihood of realizing deferred tax assets involves significant judgement and assumption. Management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.
We follow the guidance on accounting for uncertainty in income taxes in accordance with U.S. GAAP, which requires us to estimate whether it is more likely than not (greater than 50%) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position; otherwise, no benefit can be recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Additionally, we accrue interest and related penalties, if applicable, on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. Interest and penalties are classified as taxes on income in the consolidated financial statements.
In addition to aforementioned changes, the U.S. Tax Cuts and Jobs Act of 2017 also included a mandatory one-time tax on accumulated earnings of foreign subsidiaries, and as a result, all previously unremitted earnings for which no U.S. deferred tax liability had been accrued were subject to U.S. taxation. Notwithstanding the U.S. taxation of these amounts, we intend to continue to invest most or all of these earnings, as well as our capital in these subsidiaries, indefinitely outside of the U.S. and do not expect to incur any significant, additional taxes related to such amounts.
Loss contingencies:
We are a party to certain legal and regulatory proceedings with respect to a variety of matters. We evaluate the likelihood of an unfavorable outcome of all legal or regulatory proceedings to which we are a party and accrue a loss contingency when the loss is probable and reasonably estimable. These judgments are subjective based on the status of the legal or regulatory proceedings, the merits of its defenses and consultation with in-house and external legal counsel. Because of uncertainties related to these matters, accruals are based only on the best information available at the time. As additional information becomes available, we reassess the potential liability related to pending claims, litigation, or other enforcements and may revise our estimates. Due to the inherent uncertainties of the legal and regulatory process in the multiple jurisdictions in which we operate, our judgments may differ materially from the actual outcomes.
Contingent consideration liability:
As described in Note 3 to our consolidated financial statements included elsewhere within this Annual Report on Form 10-K, the Company recognized a liability related to contingent consideration in connection with the Skuad acquisition during the year ended 2024.
The fair value of the contingent consideration at each reporting date is based on estimates of probability of each outcome and the Option Pricing Model (“OPM”). The OPM requires various assumptions and inputs, and our estimates of probability are subjective based on the status of Skuad’s performance and our expectations about future performance. Because of uncertainties related to these matters, the estimate of the contingent liability is based only on the best information available at the time. As additional information becomes available, we reassess the potential liability and may revise our estimates.
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 audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
52
Table of Contents