Form: 6-K

Current report of foreign issuer pursuant to Rules 13a-16 and 15d-16 Amendments

August 13, 2024

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

OF THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 2024

(Commission File No. 001-40302)

PAYSAFE LIMITED

(Exact name of registrant as specified in its charter)

 

Not Applicable

(Translation of registrant’s name into English)

Paysafe Limited

2 Gresham Street

London, United Kingdom EC2V 7AD

(Address of Principal Executive Offices) (Zip Code)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

 

Form 20-F ☒

Form 40-F ☐

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

Information Contained in this Form 6-K Report

Financial Statements

This report contains Paysafe Limited’s (“the Company”) Unaudited Condensed Consolidated Interim Financial Statements as of June 30, 2024, including Management’s Discussion and Analysis of Financial Condition and Results of Operations for the period presented therein.

 

Incorporation by Reference

This Report shall be deemed to be incorporated by reference into the registration statement of the Company on Form F-3 (No. 333-263910), Form S-8 (No. 333-256692), Form S-8 (No. 333-270582), and Form S-8 (No. 333-279401) and to be a part thereof from the date on which this Report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.

Exhibits

 

Exhibit

 

Description

 

 

101.INS

 

Inline XBRL Instance Document*

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document*

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document)*

 

*Filed herewith


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Paysa

 

 

PAYSAFE LIMITED

 

 

 

 

 

 

By:

/s/ Alexander Gersh

 

Name:

Alexander Gersh

 

Title:

Chief Financial Officer

 

Date: August 13, 2024

 

 

 

 


 

 

TABLE OF CONTENTS

 

1.

Condensed Consolidated Interim Financial Statements (Unaudited) – June 30, 2024

 

F-1

 

 

 

 

2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

1

 

 

 

 

 

 

 

 

 


 

INDEX TO FINANCIAL STATEMENTS

 

Paysafe Limited

 

Condensed Consolidated Interim Financial Statements (Unaudited)

Page No.

Condensed Consolidated Statement of Comprehensive (Loss) / Income

F-2

Condensed Consolidated Statement of Financial Position

F-3

Condensed Consolidated Statement of Shareholders’ Equity

F-4

Condensed Consolidated Statement of Cash Flows

F-5

Notes to the Condensed Consolidated Financial Statements

F-7

 

 

 

F-1


 

Paysafe Limited

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE (LOSS) / INCOME

(Unaudited)

(U.S. dollars in thousands, except per share data)

 

 

 

For the three months ended June 30,

 

 

For the six months ended June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenue

 

$

439,924

 

 

$

402,338

 

 

$

857,662

 

 

$

790,187

 

Cost of services (excluding depreciation and amortization)

 

 

183,825

 

 

 

166,614

 

 

 

354,198

 

 

 

325,553

 

Selling, general and administrative

 

 

150,059

 

 

 

133,600

 

 

 

294,867

 

 

 

261,911

 

Depreciation and amortization

 

 

68,630

 

 

 

66,425

 

 

 

136,940

 

 

 

129,972

 

Impairment expense on goodwill and intangible assets

 

 

23

 

 

 

193

 

 

 

676

 

 

 

275

 

Restructuring and other costs

 

 

728

 

 

 

1,340

 

 

 

1,180

 

 

 

3,330

 

Loss on disposal of subsidiaries and other assets, net

 

 

144

 

 

 

 

 

 

321

 

 

 

 

Operating income

 

 

36,515

 

 

 

34,166

 

 

 

69,480

 

 

 

69,146

 

Other income, net

 

 

4,397

 

 

 

7,376

 

 

 

16,752

 

 

 

9,923

 

Interest expense, net

 

 

(37,135

)

 

 

(36,762

)

 

 

(72,100

)

 

 

(74,218

)

Income before taxes

 

 

3,777

 

 

 

4,780

 

 

 

14,132

 

 

 

4,851

 

Income tax expense

 

 

5,207

 

 

 

6,545

 

 

 

12,506

 

 

 

10,424

 

Net (loss) / income

 

$

(1,430

)

 

$

(1,765

)

 

$

1,626

 

 

$

(5,573

)

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) / income per share – basic

 

$

(0.02

)

 

$

(0.03

)

 

$

0.03

 

 

$

(0.09

)

Net (loss) / income per share – diluted

 

$

(0.02

)

 

$

(0.03

)

 

$

0.03

 

 

$

(0.09

)

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) / income

 

$

(1,430

)

 

$

(1,765

)

 

$

1,626

 

 

$

(5,573

)

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

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) / gain on foreign currency translation

 

 

(6,055

)

 

 

8,204

 

 

 

(13,667

)

 

 

10,378

 

Total comprehensive (loss) / income

 

$

(7,485

)

 

$

6,439

 

 

$

(12,041

)

 

$

4,805

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-2


 

Paysafe Limited

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(Unaudited)

(U.S. dollars in thousands, except share data)

 

 

 

June 30, 2024

 

 

December 31, 2023

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

222,382

 

 

$

202,322

 

Customer accounts and other restricted cash

 

 

1,069,269

 

 

 

1,295,947

 

Accounts receivable, net of allowance for credit losses of $5,677 and $5,240, respectively

 

 

177,323

 

 

 

162,081

 

Settlement receivables, net of allowance for credit losses of $4,334 and $5,197, respectively

 

 

166,877

 

 

 

171,224

 

Prepaid expenses and other current assets

 

 

66,810

 

 

 

74,919

 

Total current assets

 

 

1,702,661

 

 

 

1,906,493

 

Deferred tax assets

 

 

77,273

 

 

 

77,273

 

Property, plant and equipment, net

 

 

22,175

 

 

 

17,213

 

Operating lease right-of-use assets

 

 

26,110

 

 

 

22,120

 

Derivative financial assets

 

 

9,888

 

 

 

10,427

 

Intangible assets, net

 

 

1,062,881

 

 

 

1,163,935

 

Goodwill

 

 

2,000,689

 

 

 

2,023,402

 

Other assets – non-current

 

 

8,689

 

 

 

6,838

 

Total assets

 

$

4,910,366

 

 

$

5,227,701

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable and other liabilities

 

$

190,541

 

 

$

202,699

 

Short-term debt

 

 

10,190

 

 

 

10,190

 

Funds payable and amounts due to customers

 

 

1,254,680

 

 

 

1,477,017

 

Operating lease liabilities – current

 

 

8,073

 

 

 

8,233

 

Contingent consideration payable – current

 

 

9,908

 

 

 

11,828

 

Liability for share-based compensation – current

 

 

3,405

 

 

 

2,701

 

Total current liabilities

 

 

1,476,797

 

 

 

1,712,668

 

Non-current debt

 

 

2,441,205

 

 

 

2,491,643

 

Operating lease liabilities – non-current

 

 

21,740

 

 

 

16,963

 

Deferred tax liabilities

 

 

103,618

 

 

 

111,705

 

Warrant liabilities

 

 

1,283

 

 

 

1,423

 

Liability for share-based compensation – non-current

 

 

2,545

 

 

 

3,108

 

Contingent consideration payable – non-current

 

 

325

 

 

 

6,878

 

Total liabilities

 

 

4,047,513

 

 

 

4,344,388

 

Commitments and contingent liabilities

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

 

Common shares - $0.012 par value; 1,600,000,000 shares authorized; 62,390,318 shares issued and 60,714,503 outstanding as of June 30, 2024 and 61,719,443 shares issued and outstanding as of December 31, 2023

 

 

749

 

 

 

741

 

Additional paid in capital

 

 

3,182,585

 

 

 

3,166,012

 

Accumulated deficit

 

 

(2,258,068

)

 

 

(2,259,694

)

Treasury shares - at cost; 1,675,815 shares as of June 30, 2024 and 0 shares as of December 31, 2023

 

 

(25,000

)

 

 

 

Accumulated other comprehensive loss

 

 

(37,413

)

 

 

(23,746

)

Total shareholders' equity

 

 

862,853

 

 

 

883,313

 

Total liabilities and shareholders' equity

 

$

4,910,366

 

 

$

5,227,701

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-3


 

Paysafe Limited

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(Unaudited)

(U.S. dollars in thousands)

 

 

 

Common
shares

 

 

Additional paid in capital

 

 

Accumulated
deficit

 

 

Treasury shares

 

 

Accumulated other
comprehensive loss

 

 

Total
Shareholders'
equity

 

 

January 1, 2024

 

$

741

 

 

$

3,166,012

 

 

$

(2,259,694

)

 

$

 

 

$

(23,746

)

 

$

883,313

 

 

Net income

 

 

-

 

 

 

-

 

 

 

3,056

 

 

 

-

 

 

 

-

 

 

 

3,056

 

 

Loss on foreign currency translation, net of tax of $0

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,612

)

 

 

(7,612

)

 

Restricted stock units issued (Note 10)

 

 

1

 

 

 

(1

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

Share-based compensation

 

 

-

 

 

 

9,149

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9,149

 

 

Common shares repurchased (Note 11)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(14,000

)

 

 

-

 

 

 

(14,000

)

 

March 31, 2024

 

$

742

 

 

$

3,175,160

 

 

$

(2,256,638

)

 

$

(14,000

)

 

$

(31,358

)

 

$

873,906

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

(1,430

)

 

 

-

 

 

 

-

 

 

 

(1,430

)

 

Loss on foreign currency translation, net of tax of $0

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6,055

)

 

 

(6,055

)

 

Restricted stock units issued (Note 10)

 

 

7

 

 

 

(7

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

Share-based compensation

 

 

-

 

 

 

5,589

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,589

 

 

Common shares repurchased (Note 11)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(11,000

)

 

 

-

 

 

 

(11,000

)

 

Capital contribution (Note 10)

 

 

-

 

 

 

1,843

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,843

 

 

June 30, 2024

 

$

749

 

 

$

3,182,585

 

 

$

(2,258,068

)

 

$

(25,000

)

 

$

(37,413

)

 

$

862,853

 

 

 

 

 

 

Common
shares

 

 

Additional paid in capital

 

 

Accumulated
deficit

 

 

Accumulated other
comprehensive income / (loss)

 

 

Total
Shareholders'
equity

 

January 1, 2023

 

$

730

 

 

$

3,136,426

 

 

$

(2,239,443

)

 

$

(38,076

)

 

$

859,637

 

Net loss

 

 

-

 

 

 

-

 

 

 

(3,808

)

 

 

-

 

 

 

(3,808

)

Gain on foreign currency translation, net of tax of $0

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,174

 

 

 

2,174

 

Restricted stock units issued

 

 

6

 

 

 

(6

)

 

 

-

 

 

 

-

 

 

 

 

Share-based compensation

 

 

-

 

 

 

2,925

 

 

 

-

 

 

 

-

 

 

 

2,925

 

Conversion of liability classified award to equity (Note 10)

 

 

-

 

 

 

6,276

 

 

 

-

 

 

 

-

 

 

 

6,276

 

Capital contribution

 

 

-

 

 

 

3,707

 

 

 

-

 

 

 

-

 

 

 

3,707

 

March 31, 2023

 

$

736

 

 

$

3,149,328

 

 

$

(2,243,251

)

 

$

(35,902

)

 

$

870,911

 

Net loss

 

 

-

 

 

 

-

 

 

 

(1,765

)

 

 

-

 

 

 

(1,765

)

Gain on foreign currency translation, net of tax of $0

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,204

 

 

 

8,204

 

Restricted stock units issued

 

 

4

 

 

 

(4

)

 

 

-

 

 

 

-

 

 

 

 

Share-based compensation

 

 

-

 

 

 

6,814

 

 

 

-

 

 

 

-

 

 

 

6,814

 

June 30, 2023

 

$

740

 

 

$

3,156,138

 

 

$

(2,245,016

)

 

$

(27,698

)

 

$

884,164

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-4


 

Paysafe Limited

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(U.S. dollars in thousands)

 

 

 

Six months ended June 30,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities

 

 

 

 

 

 

Net income / (loss)

 

$

1,626

 

 

$

(5,573

)

Adjustments for non-cash items:

 

 

 

 

 

 

Depreciation and amortization

 

 

137,461

 

 

 

129,972

 

Unrealized foreign exchange (gain) / loss

 

 

(3,872

)

 

 

7,207

 

Deferred tax (benefit) / expense

 

 

(6,191

)

 

 

8,104

 

Interest expense, net

 

 

(4,962

)

 

 

(666

)

Share-based compensation

 

 

22,325

 

 

 

18,123

 

Other income, net

 

 

(9,542

)

 

 

(14,627

)

Impairment expense on goodwill and intangible assets

 

 

676

 

 

 

275

 

Allowance for credit losses and other

 

 

19,205

 

 

 

9,241

 

Loss on disposal of subsidiary and other assets, net

 

 

321

 

 

 

 

Non-cash lease expense

 

 

4,335

 

 

 

4,501

 

Movements in working capital:

 

 

 

 

 

 

Accounts receivable, net

 

 

(31,131

)

 

 

(17,648

)

Prepaid expenses and other current assets

 

 

(3,646

)

 

 

(7,488

)

Accounts payable and other liabilities

 

 

(10,909

)

 

 

(37,174

)

Income tax receivable

 

 

(2,721

)

 

 

(24,033

)

Net cash flows provided by operating activities

 

 

112,975

 

 

 

70,214

 

Cash flows in investing activities

 

 

 

 

 

 

Purchase of property, plant & equipment

 

 

(8,227

)

 

 

(6,339

)

Purchase of merchant portfolios

 

 

 

 

 

(23,488

)

Other intangible asset expenditures

 

 

(46,666

)

 

 

(49,487

)

Cash inflow from merchant reserves

 

 

6,510

 

 

 

 

Receipts under derivative financial instruments

 

 

4,949

 

 

 

4,784

 

Other investing activities

 

 

1,626

 

 

 

(478

)

Net cash flows used in investing activities

 

 

(41,808

)

 

 

(75,008

)

Cash flows from financing activities

 

 

 

 

 

 

Cash settled equity awards

 

 

 

 

 

(484

)

Repurchases of shares withheld for taxes

 

 

(5,320

)

 

 

(6,709

)

Purchase of treasury shares

 

 

(25,000

)

 

 

 

Settlement funds - merchants and customers, net

 

 

(195,156

)

 

 

(423,099

)

Repurchases of borrowings

 

 

(67,928

)

 

 

(83,635

)

Proceeds from loans and borrowings

 

 

129,291

 

 

 

55,781

 

Repayments of loans and borrowings

 

 

(73,412

)

 

 

(55,044

)

Proceeds under line of credit

 

 

450,000

 

 

 

450,000

 

Repayments under line of credit

 

 

(450,000

)

 

 

(450,000

)

Contingent consideration paid

 

 

(8,597

)

 

 

(7,642

)

Net cash flows used in financing activities

 

 

(246,122

)

 

 

(520,832

)

Effect of foreign exchange rate changes

 

 

(31,663

)

 

 

31,553

 

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

 

$

(206,618

)

 

$

(494,073

)

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

 

 

1,498,269

 

 

 

2,127,195

 

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

 

$

1,291,651

 

 

$

1,633,122

 

 

 

 

 

Six months ended June 30,

 

 

 

2024

 

 

2023

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

Cash paid for interest

 

$

77,062

 

 

$

74,884

 

Cash paid for income taxes, net

 

$

21,418

 

 

$

26,353

 

 

F-5


 

The table below reconciles cash, cash equivalents, customer accounts and other restricted cash as reported in the unaudited condensed consolidated statement of financial position to the total of the same amounts shown in the unaudited condensed consolidated statement of cash flows:

 

 

 

Six months ended June 30,

 

 

 

2024

 

 

2023

 

Cash and cash equivalents

 

$

222,382

 

 

$

206,703

 

Customer accounts and other restricted cash

 

 

1,069,269

 

 

 

1,426,419

 

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

 

$

1,291,651

 

 

$

1,633,122

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

F-6


 

Paysafe Limited
NOTES TO THE CONDENSED CONSOLIDATED FINAN
CIAL STATEMENTS

(Unaudited)
(U.S. dollars in thousands, except per share data)

1. Basis of presentation and summary of significant accounting policies

Description of the Business

In these unaudited condensed consolidated financial statements and related notes, Paysafe Limited, and its consolidated subsidiaries are referred to collectively as “Paysafe,” “we,” “us,” and “the Company” unless the context requires otherwise. Paysafe is a leading global provider of end-to-end payment solutions. Our core purpose is to enable businesses and consumers to connect and transact seamlessly through our payment platforms.

Paysafe Limited was incorporated as an exempted limited company under the laws of Bermuda on November 23, 2020 for purposes of effectuating the merger (the “Transaction”) with Foley Trasimene Acquisition Corp. II (“FTAC”), a special purpose acquisition company that completed its Initial Public Offering (“IPO”) in August 2020, and Pi Jersey 1.5 Limited (“Legacy Paysafe”).

In connection with the Transaction, which was consummated on March 31, 2021, the Company’s common shares and warrants were listed on the New York Stock Exchange under the symbols PSFE and PSFE.WS, respectively. Subsequent to the Transaction, Pi Jersey Topco Limited (“Topco”), funds advised by affiliates of CVC Capital Partners (such funds collectively, “CVC”) and The Blackstone Group Inc. (“Blackstone”) continue to retain ownership in the Company.

 

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024 and the comparative financial information for the three and six months ended June 30, 2023 and for the year ended December 31, 2023 include the accounts of the Company, and its subsidiaries, based upon information of Paysafe Limited.

All intercompany transactions have been eliminated in consolidation. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for the fair statement of the Company’s financial position, results of operations and cash flows have been included.

 

These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2023 on Form 20-F filed on March 20, 2024.

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reported period. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or any other interim period.

Disaggregation of Revenue

 

The Company provides payment solutions through two primary lines of business: Merchant Solutions and Digital Wallets. For each primary source of revenue within these business lines, the Company’s main performance obligation is to stand ready to provide payment services to merchants and consumers. Due to the concentration of economic factors, products and services in each of the business lines, the Company has presented disaggregated revenue at the segment level (See Note 15).

 

We do not have any material contract balances associated with our contracts with customers as of June 30, 2024 and December 31, 2023. The Company has elected to exclude disclosing any contracts with an original duration of one year or less and any variable consideration that meets specified criteria. The Company’s most significant performance obligations consist of variable consideration under a stand-ready series of distinct days of service, which typically represent all or almost all of the total transaction price for the related contract. The variable consideration that will be allocated to future days of service is not required to be disclosed as these days of services are wholly unsatisfied at the Company’s reporting date. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material.

 

F-7


 

Reclassifications

 

Certain prior period amounts have been reclassified in order to conform with the current period presentation. These reclassifications have no impact on the Company’s previously reported consolidated net loss.

 

Changes in presentation

 

During the fourth quarter of 2023, the Company elected to change its presentation of the cash flows associated with "Settlement receivables, net" and "Funds payable and amounts due to customers" from operating activities, to present them as financing activities within its consolidated statement of cash flows. Comparative amounts have been recast to conform to current period presentation. These recasts had no impact on the consolidated statement of comprehensive (loss) / income, consolidated statement of financial position or consolidated statement of shareholders' equity.

 

The following tables present the effects of the changes in presentation within the consolidated statement of cash flows:

 

 

 

For the six months ended June 30, 2023

 

 

 

As Previously Reported

 

 

Adjustment

 

 

As Adjusted

 

Consolidated Statement of Cash Flows

 

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

     Settlement receivables, net

 

$

50,131

 

 

$

(50,131

)

 

$

-

 

     Funds payable and amounts due to customers

 

 

(473,230

)

 

 

473,230

 

 

 

-

 

Net cash provided by operating activities

 

$

(352,885

)

 

$

423,099

 

 

$

70,214

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

     Settlement funds - merchants and customers, net

 

$

-

 

 

$

(423,099

)

 

$

(423,099

)

Net cash provided by financing activities

 

$

(97,733

)

 

$

(423,099

)

 

$

(520,832

)

 

Significant Accounting Policies

 

There have been no material changes in our significant accounting policies during the three and six months ended June 30, 2024. A detailed discussion of our significant accounting policies is included within the audited consolidated financial statements for the year ended December 31, 2023 on Form 20-F filed on March 20, 2024.

Accounting Pronouncements not yet Adopted

 

Segment Reporting

 

In November 2023, the FASB issued ASU 2023-07, which amends Segment reporting (Topic 280). This update enhances reportable segment disclosure requirements, primarily by requiring disclosure of the significant segment expenses for each reportable segment that are regularly provided to the Chief Operating Decision Maker, and aligning the segment reporting disclosure requirements in interim and annual reporting periods. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company expects to adopt this guidance in our December 31, 2024 annual financial statements and this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

 

Crypto Assets

 

In December 2023, the FASB issued ASU 2023-08, Intangibles – Goodwill and Other – Crypto assets. This update provides guidance on the accounting for and disclosure of crypto assets by requiring that crypto assets that meet criteria defined by the ASU to 1) be measured at fair value separately from other intangible assets in the statement of financial position, 2) to present remeasurement separately from other changes in other intangible assets in the statement of comprehensive income / (loss), and 3) to enhance disclosure requirements related to the crypto assets, including providing roll-forward information of crypto asset holdings. This update is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years, with early adoption permitted.

 

The Company purchases cryptocurrency assets on behalf of its customers. All the risks and rewards associated with those assets are transferred to the customer at the time of purchase and the Company has no ability to control the assets and no requirement to safeguard the assets. As a result, the Company does not recognize either the cryptocurrency asset or liability to the customer on its balance sheet. The Company expects to adopt ASU 2023-08 on January 1, 2025 which is not expected to have a material impact on the Company’s consolidated financial statements.

 

 

Income Taxes

F-8


 

 

In December 2023, the FASB issued ASU 2023-09, which amends Income taxes (Topic 270). This update enhances income tax disclosure requirements, primarily by requiring public companies to provide disclosures regarding the statutory tax rate and effective tax rate in tabular format with specific categories identified, and to provide additional disclosures for reconciling items that meet quantitative thresholds. This update is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company expects to adopt this guidance on January 1, 2025 which is not expected to have a material impact on the Company’s consolidated financial statements.

 

2. Net (loss) / income per share

 

The following table sets forth the computation of the Company’s basic and diluted net (loss) / income per share attributable to the Company.

 

The Company uses the treasury stock method of calculating diluted net (loss) / income per share. For the three months ended June 30, 2024 and for the three and six months ended June 30, 2023, we excluded all potentially dilutive restricted stock units, stock options and warrants in calculating diluted net loss per share as the effect was antidilutive (See Notes 10 and 12). For the six months ended June 30, 2024, we excluded all potentially dilutive stock options and warrants in calculating diluted net income per share as the effect was antidilutive.

 

 

For the three months ended June 30,

 

 

For the six months ended June 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Numerator

 

 

 

 

 

 

 

 

 

 

 

Net (loss) / income - basic

$

(1,430

)

 

$

(1,765

)

 

$

1,626

 

 

$

(5,573

)

Net (loss) / income - diluted

$

(1,430

)

 

$

(1,765

)

 

$

1,626

 

 

$

(5,573

)

 

 

 

 

 

 

 

 

 

 

 

 

Denominator

 

 

 

 

 

 

 

 

 

 

 

        Weighted average shares – basic

 

60,696,289

 

 

 

61,466,385

 

 

 

61,162,889

 

 

 

61,210,799

 

        Weighted average shares – diluted (1)

 

60,696,289

 

 

 

61,466,385

 

 

 

61,671,131

 

 

 

61,210,799

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) / income per share

 

 

 

 

 

 

 

 

 

 

 

        Basic

$

(0.02

)

 

$

(0.03

)

 

$

0.03

 

 

$

(0.09

)

        Diluted

$

(0.02

)

 

$

(0.03

)

 

$

0.03

 

 

$

(0.09

)

 

(1)
The denominator used in the calculation of diluted net income per share for the six months ended June 30, 2024, includes an additional 508,242 shares representing the dilutive effect of restricted stock units.

 

3. Taxation

 

We account for income taxes in interim periods pursuant to the provisions of ASC 740, Income Taxes. Under this method, our provision for or benefit from income taxes is computed by applying an estimated annual effective tax rate to the year to date pre-tax book income and the effects of any discrete income tax items are recognized in the periods in which they occur.

 

Our effective tax rate for the three and six months ended June 30, 2024 was 137.9% and 88.5%, respectively. The difference between our effective tax rate and the U.K. statutory rate of 25% for the three and six months ended June 30, 2024 was primarily the result of changes to our valuation allowance related to our recoverability of deferred tax assets on restricted interest carryforwards and items identified as discrete during the year.

 

Our effective tax rate for the three and six months ended June 30, 2023 was 136.9% and 214.9%, respectively. The difference between our effective tax rate and the U.K. statutory rate for the three and six months ended June 30, 2023 was primarily the result of our valuation allowance on restricted interest carryforwards and items identified as discrete during the year.

 

On December 12, 2022, the European Union ("EU") Member States agreed in principle on the introduction of a global minimum tax rate of 15%. On December 15, 2022, the written procedure for formal adoption of a directive was signed and transposed into the national law of EU Member States with effectiveness beginning January 1, 2024. The application of the minimum tax rate did not have a material impact on the Company’s consolidated financial statements.

 

 

4. Goodwill

Changes in the carrying amount of goodwill are as follows:

F-9


 

 

 

 

Merchant Solutions(1)

 

 

Digital Wallets (2)

 

 

Total

 

Balance as of December 31, 2023

 

$

637,446

 

 

$

1,385,956

 

 

$

2,023,402

 

Foreign exchange

 

 

 

 

 

(22,713

)

 

 

(22,713

)

Balance as of June 30, 2024

 

$

637,446

 

 

$

1,363,243

 

 

$

2,000,689

 

 

(1)
Accumulated impairment loss was $1,159,145 as of June 30, 2024 and December 31, 2023 within the Merchant Solutions segment.
(2)
Accumulated impairment loss was $723,042 as of June 30, 2024 and December 31, 2023 within the Digital Wallets segment.

 

The Company performs its annual goodwill impairment test for all reporting units as of October 1st, or when events and circumstances have occurred that would indicate the carrying amount of goodwill exceeds its fair value. No such events and circumstances were identified during the three and six months ended June 30, 2024. However, failure to achieve future cash flows or declines in the stock price may cause a future impairment of goodwill at the reporting unit level.

 

5. Intangible assets

The Company’s intangible assets consisted of the following:

 

 

 

June 30, 2024

 

 

December 31, 2023

 

Brands

 

$

165,583

 

 

$

168,508

 

Software development costs

 

 

909,615

 

 

 

880,764

 

Customer relationships

 

 

1,528,857

 

 

 

1,541,507

 

Computer software

 

 

40,846

 

 

 

39,311

 

Gross carrying value

 

$

2,644,901

 

 

 

2,630,090

 

 

 

 

 

 

 

 

Brands

 

 

107,620

 

 

 

101,197

 

Software development costs

 

 

624,667

 

 

 

578,383

 

Customer relationships

 

 

816,464

 

 

 

756,463

 

Computer software

 

 

33,269

 

 

 

30,112

 

Accumulated amortization

 

$

1,582,020

 

 

$

1,466,155

 

Intangible assets, net

 

$

1,062,881

 

 

$

1,163,935

 

 

 

 

 

 

 

 

 

Amortization expense on intangible assets for the three months ended June 30, 2024 and 2023, was $66,786 and $65,025, respectively. Amortization expense on intangible assets for the six months ended June 30, 2024 and 2023, was $133,165 and $127,157, respectively. The increase in gross intangible assets during the six months ended June 30, 2024, mainly relates to software development costs.

The Company performs an impairment analysis on intangible assets with finite lives when events and circumstances have occurred that would indicate the carrying amount of intangible assets may not be recoverable. No such events and circumstances were identified during the three and six months ended June 30, 2024 and 2023. For the three and six months ended June 30, 2024 impairment expenses of $23 and $676, respectively, was recognized related to software development costs which had no future economic benefit. For the three and six months ended June 30, 2023 impairment expenses of $193 and $275, respectively, was recognized related to software development costs.

 

 

 

 

 

 

6. Allowance for credit losses

F-10


 

The Company has exposure to credit losses for financial assets, including settlement receivables, accounts receivable, and financial guarantee contracts to the extent that a chargeback claim is made against the Company directly or to the Company’s merchants on card purchases.

 

The following table summarizes the expected credit allowance activity for settlement receivables, net; accounts receivable, net; and financial guarantee contracts and other, for the six months ended June 30, 2024:

 

 

 

Accounts
receivable,
net

 

 

Settlement
receivables,
net
(2)

 

 

Financial
guarantee
contracts
and other

 

 

Total
allowance
for current
expected
credit losses

 

Balance as of December 31, 2023

 

$

5,240

 

 

$

5,197

 

 

$

11,650

 

 

$

22,087

 

Credit loss expense

 

 

12,208

 

 

 

551

 

 

 

1,967

 

 

 

14,726

 

Recoveries

 

 

2,848

 

 

 

1,294

 

 

 

-

 

 

 

4,142

 

Write-Offs

 

 

(14,445

)

 

 

(2,420

)

 

 

(3,160

)

 

 

(20,025

)

Other (1)

 

 

(174

)

 

 

(288

)

 

 

(20

)

 

 

(482

)

Balance as of June 30, 2024

 

$

5,677

 

 

$

4,334

 

 

$

10,437

 

 

$

20,448

 

 

(1)
Other mainly relates to the impact of foreign exchange.
(2)
Recoveries from freestanding credit enhancements related to Settlement receivables, net, were $48 and $337 for the three and six months ended June 30, 2024, respectively, and $223 and $677 for the three and six months ended June 30, 2023, respectively. Recoveries from freestanding credit enhancements related to Settlement receivables, net are recorded separately from expected credit losses in "Selling, general and administrative" in the unaudited condensed consolidated statement of comprehensive (loss) / income.

 

Credit loss expense for the three months ended June 30, 2024 and 2023 was $5,967 and $5,095, respectively and for the six months ended June 30, 2024 and 2023 were $14,726 and $8,564, respectively. The increase in credit loss expense was partially due to increased volume of transactions in the Merchant Solutions segment and an increase in aged accounts. Write-offs for the three months ended June 30, 2024 and 2023 were $8,836 and $7,855, respectively and for the six months ended June 30, 2024 and 2023 were $20,025 and $15,169, respectively. Including recoveries, write offs were comparable period over period.

 

7. Debt

The Company's current facilities include the following:

(i) $305,000 senior secured revolving credit facility (the “Revolving Credit Facility”);

(ii) $1,018,000 aggregate principal amount senior secured USD first lien term loan facility (the “Term Loan Facility (USD)”)(comprising the original $628,000 and incremental $390,000 facility);

(iii) €710,000 aggregate principal amount senior secured EUR first lien term loan facility (the “Term Loan Facility (EUR)”) (comprising the original €435,000 and an incremental €275,000 facility); and

(iv) $400,000 aggregate principal amount of USD secured notes and €435,000 aggregate principal amount of EUR secured notes (the “Secured Notes”).

The Company has made drawdowns and repayments on the Revolving Credit Facility throughout the year. As of June 30, 2024 and December 31, 2023, $95,955 and $35,640, respectively, was drawn down on the Revolving Credit Facility.

On April 13, 2023, the Company entered into a debt amendment agreement to replace LIBOR with SOFR, following the Financial Conduct Authority's ("FCA") decision to phase out the use of LIBOR by June 30, 2023. The Term Loan Facility (USD) and Revolving Credit Facility (USD) previously bore interest at LIBOR plus margin. This contract modification qualified for the relief provided in ASU 2021-01. The Company applied the optional expedient in the standard, accounting for the amendment as if the modification was not substantial and thus a continuation of the existing contract, with the change in rate accounted for prospectively.

 

 

 

Line of Credit

F-11


 

The Company has a Line of Credit of $75,000 which is restricted for use in funding settlements in the Merchant Solutions business and is secured against known transactions. As of both June 30, 2024 and December 31, 2023, the Company had an outstanding balance of $75,000. Subsequent to June 30, 2024, an amendment was signed to extend the maturity of the Line of Credit from June 2025 to July 2027. In accordance with ASC 470, the Line of Credit continues to be classified as non-current debt as of June 30, 2024, as we have refinanced the obligation on a long-term basis subsequent to the balance sheet date, but prior to the issuance of these unaudited condensed consolidated financial statements.

The key terms of these facilities were as follows:

 

Facility

 

Currency

 

Interest Rate (1)

 

Effective Interest Rate (2)

 

Facility
Maturity
Date