Payfare Announces Third Quarter 2024 Financial Results

Payfare generated net income of $4.5 million, and Adjusted net income per share¹ of $0.17 in Q3 2024

TORONTO, Nov. 6, 2024 /CNW/ - Payfare Inc. ("Payfare" or the "Company") (TSX: PAY) (OTCQX: PYFRF), a leading international Earned Wage Access ("EWA") company powering instant access to earnings and digital banking solutions for workforces, today announced the filing of its Financial Statements and Management's Discussion and Analysis ("MD&A") for the quarter ending September 30, 2024. A comprehensive discussion of Payfare's financial position and results of operations are provided in the MD&A, which is filed on SEDAR+ under Payfare's profile and can be found at www.sedarplus.ca.

Q3 2024 Highlights:

• Increased revenue to $59.0 million for the three months ended September 30, 2024, representing an $11.8 million (+25%) increase compared to the same period in 2023.
• Ended Q3 2024 with 1,502,028 active users¹, up by 290,753 (+24%) compared to the active users¹ count as at the end of Q3 2023.
• Total gross dollar value (Total GDV)¹ in Q3 2024 was $3.8 billion, up by $0.8 billion (+29%) over Q3 2023.
• Gross Profit¹ of $16.0 million for the three months ended September 30, 2024, up by $3.8 million (+31%) over the same period in 2023.
• Net income of $4.5 million, or $0.09 per share, for the three months ended September 30, 2024, compared to $4.8 million in the same period in 2023.
• Adjusted net income¹ of $8.1 million, or $0.17 per share, for the three months ended September 30, 2024, representing an increase of $0.6 million (+8%) over the same period in 2023.
• Adjusted EBITDA¹ of $7.8 million for the three months ended September 30, 2024, reflecting a $1.5 million increase (+24%) compared to the same period in 2023.
• Free cash flow¹ of $5.4 million for the three months ended September 30, 2024, up by $1.7 million (+44%) compared to the same period in 2023.
• As at September 30, 2024, Payfare has over $100 million in cash, cash equivalents and guaranteed investment certificates and is well capitalized to fund its new strategic initiatives. Payfare continues to see high growth with its other client programs that were recently renewed to long-term extensions. In addition, the Company is working on securing new, large-scale EWA programs in both the gig economy and employee verticals.
• On July 16, 2024, the Company announced the formation of a Strategic Advisory Board led by a new seasoned strategy and corporate development executive to guide the Company's international expansion opportunities (including EWA platform) and achieve global scale efficiently and effectively.
• On July 25, 2024, the Company announced the long-term extension of its agreement with Lyft Inc. in respect to the Lyft Direct Program, which Payfare currently powers. The extension means drivers on the Lyft program will continue to benefit from free instant pay, a feature rich digital banking platform and a rich cashback rewards program that is offered through Lyft's partnership with Payfare.
• On August 27, 2024, the Company launched an upgraded version of the Lyft Direct debit card and banking app with a range of features that include: (a) Lyft Direct Savings – a high-yield savings account, (b) Balance Protection – which provides qualifying cardholders up to US$200 to cover unforeseen costs, (c) New Cashback Rewards for elite drivers, (d) Wellness Perks by Avibra, which provides access to a comprehensive suite of health and financial wellness tools, (e) Spend Insights – which helps with enhanced financial decision making and provides control of personal budgets, and (f) Cash ATM Deposits at participating ATM locations.
• On September 26, 2024, Payfare announced that its core services agreements related to the DoorDash DasherDirect card program will not be renewed beyond the current term in early 2025. A transition and wind-down plan for the program has not yet been agreed to with DoorDash and it is currently unknown when the financial impact, including on revenue, net income, key performance indicators and certain non-GAAP measures utilized by the Company will be experienced by Payfare from the non-renewal.
• On September 29, 2024, the Board of Directors initiated a strategic review process to explore and evaluate a broad range of potential options for the Company to enhance value, support conversion of potential new opportunities and alleviate concentration risks.
• Subsequent to quarter-end, Payfare successfully launched a pilot EWA product with Automatic Data Processing Inc. ("ADP"), a leading global provider of Human Capital Management solutions, to offer EWA to the Canadian market.

Conference Call

Management will be hosting a conference call on Wednesday, November 6, 2024, at 6:30 PM ET to discuss the Company's financial results for the third quarter of 2024. A short presentation in connection with the conference call will be made available ahead of time on the Company's website at https://corp.payfare.com/investors/. Management will also host a live question and answer session on the conference call with analysts.

To access the conference call, please dial [phone] or 1-800-717-1738. Please call the conference telephone number 10-15 minutes prior to the start time so that you are in the queue for an operator to assist in registering and patching you through.

An archived recording of the conference call will be available until December 6, 2024. To listen to the recording, call [phone] or 1-888-660-6264 and enter passcode 70127#.

About Payfare (TSX:PAY, OTCQX: PYFRF)

Payfare is a leading, international Earned Wage Access ("EWA") company powering instant access to earnings through an award-winning digital banking platform for today's workforce. Payfare partners with leading e-commerce marketplaces, payroll platforms, and employers to provide financial security and inclusion for all workers.

¹Non-IFRS and Supplementary Financial Measures

This press release contains references to "active users", "Total gross dollar value ("Total GDV"), "adjusted net income", "adjusted net income per share", "EBITDA", "Adjusted EBITDA", "free cash flow" and "gross profit", which are not measures prescribed by IFRS Accounting Standards ("IFRS"). These supplementary financial measures are provided as additional information to complement IFRS measures by providing a further understanding of our results of operations from management's perspective, to provide investors and security analysts with supplemental measures to evaluate the financial performance of the Company and highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. Management also uses non-IFRS and supplementary financial measures to facilitate operating performance comparisons from period to period, prepare annual operating budgets and strategic business plans and to evaluate and price potential acquisitions.

Accordingly, non-IFRS and supplementary financial measures should not be considered in isolation or as a substitute for analysis of our financial information reported under IFRS. Such measures do not have any standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other corporations. The non-IFRS and supplementary financial measures are not subject to standard industry definition and our definitions and method of calculation may differ from other issuers and therefore may not be comparable to similar measures presented by other issuers.

The Company determines the number of users to its services based on active users. "Active users" represent users who have loaded earnings and direct deposits on their card in the period.

Total gross dollar value ("Total GDV") is defined as the aggregate dollar amount of active user earnings and direct deposits loaded on their payment card during the period.

"EBITDA" means net income (loss) before amortization and depreciation expenses, foreign exchange gain (loss), amortization of deferred income, finance and interest income/ costs, current tax expense and change in fair value of derivative liability.

"Adjusted EBITDA" adjusts EBITDA for share-based compensation expense, restructuring costs and non-recurring expense items. Non-recurring expense items are transactions or events which management believes will not re-occur within the foreseeable future and includes legal and professional fees related to regulatory matters, claim settlements, acquisition, divestiture, asset impairment charges and going public transaction.

The table below reconciles net income to EBITDA and Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023.

	Three Months Ended September 30,			Nine Months Ended September 30,
In CAD $	2024		2023	2024		2023
Net income	$   4,463,222		$  4,810,360	$ 14,467,608		$  8,212,761
Add:
Current tax expense	34,629		20,874	84,230		66,242
Finance income	(875,557)		(795,305)	(2,291,157)		(1,565,277)
Other income	-		-	-		(9,397)
Foreign exchange (gain) loss	528,569		(445,690)	(447,081)		(20,009)
Amortization of intangible assets	1,487,379		942,531	4,153,641		2,227,776
Depreciation of building, property and equipment	25,734		17,812	79,733		87,615
EBITDA	5,663,976		4,549,952	16,046,974		8,999,711
Adjustments:
Restructuring expense/other	514,924		706,185	1,563,513		2,009,504
Share based compensation	1,596,831		1,040,863	2,766,769		3,078,369
Adjusted EBITDA	$  7,775,731		$ 6,297,000	$  20,377,256		$ 14,087,584

"Adjusted net income" adjusts net income (loss) for amortization of intangible assets, depreciation of building, property & equipment, share-based compensation expense, restructuring costs and non-recurring expense items. Non-recurring expense items are transactions or events which management believes will not re-occur within the foreseeable future and includes legal and professional fees related to regulatory matters, claim settlements, acquisition, divestiture, asset impairment charges and going public transaction.

The table below reconciles net income to Adjusted net income for the three and nine months ended September 30, 2024 and 2023.

	Three Months Ended September 30,			Nine Months Ended September 30,
In CAD $	2024		2023	2024		2023
Net income	$   4,463,222		$  4,810,360	$ 14,467,608		$  8,212,761
Add:
Amortization of intangible assets	1,487,379		942,531	4,153,641		2,227,776
Depreciation of building, property  and equipment	25,734		17,182	79,733		87,615
Restructuring expense/other	514,924		706,185	1,563,513		2,009,504
Share based compensation	1,596,831		1,040,863	2,766,769		3,078,369
Adjusted net income	$  8,088,090		$  7,517,121	$  23,031,264		$  15,616,025

"Adjusted net income per share" is calculated as Adjusted net income divided by the basic weighted average number of shares outstanding during the period.

The Company defines its "free cash flow" as cash from operating activities less cash used in purchase of building, property and equipment and additions to intangible assets.

The table below reconciles cash from operating activities to free cash flow for the three and nine ended September 30, 2024 and 2023.

	Three Months Ended September 30,			Nine Months Ended September 30,
In CAD $	2024		2023	2024		2023
Cash from operating activities	$ 7,327,321		$5,300,226	$  26,431,141		$  14,603,936
Less: Cash used in investing activities
Purchase of building, property and equipment	-		(15,495)	(41,252)		(19,708)
Additions to intangible assets	(1,896,269)		(1,506,530)	(5,497,115)		(4,067,629)
Free cash flow	$ 5,431,052		$ 3,778,201	$  20,892,774		$ 10,516,599

The Company defines "gross profit" as revenue less cost of services.

Additional information on these measures may be found under the heading "Definitions – IFRS, Additional GAAP and Non-GAAP Measures" in the interim MD&A for the three and nine months ended September 30, 2024 which is available under Payfare's profile on SEDAR+ at www.sedarplus.ca and is incorporated by reference to this press release.

Cautionary Statement Regarding Forward-Looking Information

This press release also contains forward-looking information within the meaning of applicable securities legislation, which reflects Payfare's current expectations regarding future events as of the date hereof. Such forward-looking information may include but are not limited to statements regarding the Company's future financial conditions, results of operations, plans, objectives, performance or business developments and includes statements on rapid international expansion opportunities and achieving global scale efficiently and effectively, achieving profitability, expansion into the earned wage access vertical for hourly paid employees, the actual timing for the non-renewal and eventual termination of the Company's services agreement with DoorDash and the anticipated material impact on future revenues, earnings, key performance indicators and Non-GAAP measures, potential new EWA programs in both the gig economy and employee verticals and aggregate potential new GDV opportunities being able to mitigate the impact of the non-renewal of the agreement with DoorDash, and the strategic review process to explore and evaluate potential options for the Company to enhance value, support conversion of potential new opportunities and alleviate concentration risks. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Payfare's control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. Such risks include the factors discussed under the "Risk Factors" section in Payfare's MD&A for the year ended December 31, 2023 and factors discussed from time to time in Payfare's filings with the Canadian Securities Authorities, copies of which can be found under Payfare's profile on the SEDAR+ website at www.sedarplus.ca. Other factors that could cause actual results or events to differ materially include the inability of Payfare to launch its new programs or platforms including for earned wage access in a timely manner, the lack of experience or resources to enter into the EWA vertical, the regulatory uncertainty and constraints around EWA services, the economic viability of new programs and platforms, the inability to scale Payfare's operations to manage the increased volume of new cardholder sign-ups, active users or transactions, loss or termination of existing service agreements with one of its large gig platform clients, the impact of an inflationary recession and rising costs of goods and services on Payfare's business model, Payfare's ability to finance and support new programs and platforms, a general decline in the credit markets or gig economy in North America, cybersecurity incidents or data breaches impacting the Company's operations, reputation, or subjecting the Company to regulatory or legal action, the availability of talent and the retention of employees to support Payfare's plans, industry competitors who may have superior technology or are quicker to take advantage of certain market opportunities, the non-renewal of the agreement with DoorDash being either expedited or delayed in comparison to current expectations, new client opportunities taking longer to execute and therefore delaying the mitigation impacts sought by the Company, and implications from any decisions or outcome from the Company's current strategic review process. Accordingly, readers should not place undue reliance on forward-looking information.

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SOURCE Payfare Inc.

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