Nuvei Reports Third Quarter 2020 Financial Results

Nuvei reports in U.S. dollars and in accordance with IFRS


MONTREAL, Nov. 11, 2020 (GLOBE NEWSWIRE) -- Nuvei Corporation (“Nuvei” or the “Company”) (TSX: NVEI and NVEI.U), the global payment technology partner of thriving brands, today reported financial results for its third quarter of 2020.

“I am incredibly proud of all that we accomplished in the third quarter, as we embarked on our journey as a publicly-traded company. We believe our performance, which included total volume* of $11.5 billion along with strong revenue growth, is a testament to the strength of our technology, business model and focus on high growth verticals,” said Philip Fayer, Nuvei’s chairman and CEO. “Furthermore, we made significant progress executing our growth strategy, broadening our capabilities and footprint, as well as winning many notable clients. We earned regulatory approval in the states of Indiana and Colorado for sports betting, and launched local acquiring in Hong Kong, Singapore, Russia, Brazil, and Columbia, meaningfully expanding our total addressable market. Lastly, we were thrilled last week to announce the closing of the Smart2Pay acquisition, which not only strengthens our global presence in high-growth markets including digital gaming, but allows us to offer a more complete, robust alternative payment solution. Looking ahead, we are well positioned to continue to scale the business and drive shareholder value.”

Financial Highlights for the Three Months Ended September 30, 2020

  • Total volume was $11.5 billion, an increase of 62% as compared to $7.1 billion in the third quarter of 2019
  • Revenue was $93.6 million, an increase of 32% as compared to $70.8 million in the third quarter of 2019
  • Net loss in the quarter was $77.9 million, as compared to $65.7 million in the third quarter of 2019
    • Net loss included $83.4 million in non-cash finance costs resulting from the Company’s initial public offering (“IPO”) and associated valuation
  • Adjusted EBITDA** was $41.0 million, an increase of 59% as compared to $25.8 million in the third quarter of 2019
  • Adjusted net income** was $16.5 million, as compared to $2.2 million in the third quarter of 2019
  • Following Nuvei’s successful IPO in September, the Company used the net proceeds for the repayment of debt. The Company ended the quarter with $99.4 million in usage of its credit facilities (net of unamortized transaction costs), down from $717.8 million (net of unamortized transaction costs) as at December 31, 2019. In addition, unsecured convertible debentures and liability classified common and preferred shares were fully converted or repaid as a result of the IPO.

Recent Operational Highlights

  • The Company made significant progress on its strategic plan to support the fast-growing U.S. sports betting industry launching its first pilot merchant, Carousel, in Colorado. In August, Nuvei was awarded a certificate of registration for sports wagering from the Indiana Gaming Commission, and in September, the Company received its sports betting vendor license from Colorado’s Division of Gaming. In addition, the Company is in the process of applying for approval in all other states that permit online sports betting and gaming.
  • Nuvei has accelerated its new client wins by signing many notable merchants in the quarter including Kwiff, Maxbet, Superbet, Wargaming, Oanda, Pepperstone, and Rinascente, across the gaming, financial services, and marketplace verticals. This provides strong momentum into the fourth quarter and 2021.
  • Nuvei continued to execute on its strategic plan by expanding its footprint geographically, launching local processing solutions in Hong Kong, Singapore, Russia, Brazil, and Colombia. These new markets enlarge the Company’s total addressable market, providing extended reach for existing merchants and enabling Nuvei to win new merchants in those countries.   
  • The Company expanded its support for cryptocurrency exchanges, onboarding two exchanges during the quarter.
  • The Company continues to enhance its offering including foreign exchange services, PSD2 mandate support, early warning dispute management solutions and payout capabilities that includes the launch of Mastercard MoneySend.

Initial Public Offering
On September 22, 2020, Nuvei announced the successful closing of its IPO. The IPO, along with a concurrent private placement, raised $833 million in aggregate proceeds resulting in $758 million of proceeds to the Company.

Subsequent Event
On November 2, 2020, the Company announced the completion of its previously disclosed acquisition of Smart2Pay Global Services B.V. (“Smart2Pay”), demonstrating the Company’s commitment to growth through strategic acquisitions. The total consideration was settled with $82.9 million in cash, and the balance with 6,711,923 shares issued by the Company. The Smart2Pay acquisition strengthens Nuvei’s presence in the high-growth digital gaming space and further expands the Company’s geographic footprint in additional regions including Russia, Brazil, as well as adding UnionPay processing. Furthermore, the transaction creates one of the largest and most complete alternative payment method (“APM”) solution providers in the world, with 450 APMs supporting global commerce, all through a single integration.   

Outlook
Total volume in the fourth quarter of 2020 to date continues to be strong with year-over-year growth in line with the third quarter of 2020. The following should also be considered for the fourth quarter of 2020:

  • The results of Smart2Pay will be included in the Company’s results as of the date of closing, November 2, 2020.
  • The fourth quarter of 2020 will represent the Company’s first full quarter as a public company. As a result, incremental costs pertaining to being a public company will be incurred in the quarter.
  • The Company continues to invest in its direct sales force.

*Total volume does not represent revenue earned by the Company, but rather the total dollar value of transactions processed by merchants under contractual agreement with the Company. Total volume is explained in further detail in the Company’s MD&A.

**Adjusted EBITDA and Adjusted net income are non-IFRS measures. Reconciliations of these non-IFRS measures to the most directly comparable IFRS financial measures are included in the tables at the end of this press release. An explanation of these measures and how they are calculated are also included under the heading “Non-IFRS Financial Measures”.

Conference Call
Nuvei will host a conference call to discuss third quarter 2020 financial results today at 8:30 am ET. Hosting the call will be Philip Fayer, Chairman and CEO, and David Schwartz, CFO.

The conference call will be webcast live from the Company’s investor relations website at https://investors.nuvei.com/ under the “Events & Presentations” section. The conference call can also be accessed live over the phone by dialing 877-425-9470 (US/Canada Toll-Free), or 201-389-0878 (International). A replay will be available approximately two hours after the call, and can be accessed by dialing 844-512-2921 (US/Canada Toll-Free), or 412-317-6671 (International); the conference ID is 13711347. The replay will be available until Wednesday, November 25, 2020. An archive of the webcast will be available at the same location on the website shortly after the call has concluded.

The complete financial results are available at Sedar (www.sedar.com), as well as at Nuvei’s investor relations website.

About Nuvei
We are Nuvei, the payment technology partner of thriving brands. We provide the intelligence and technology businesses need to succeed locally and globally, through one integration – propelling them further, faster. Uniting payment technology and consulting, we help businesses remove payment barriers, optimize operating costs and increase acceptance rates. Our proprietary platform offers direct connections to all major payment card schemes worldwide, supports 450 local and alternative payment methods and nearly 150 currencies. Our purpose is to make our world a local marketplace. For more information, visit www.nuvei.com.

Forward-Looking Information
This press release contains “forward-looking information” within the meaning of applicable securities laws, including statements with regard to our objectives and the strategies to achieve these objectives. Forward-looking information involves known and unknown risks and uncertainties, many of which are beyond the Company’s control, that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to those described under “Risk Factors” in Nuvei’s supplemented prep prospectus dated September 16, 2020. Forward-looking information is based on management’s beliefs and assumptions and on information currently available to management. Although the forward-looking information contained in this press release is based upon what management believes are reasonable assumptions, you are cautioned against placing undue reliance on this information since actual results may vary from the forward-looking information. Unless otherwise noted or the context otherwise indicates, the forward-looking information contained in this press release is provided as of the date of this press release, and the Company does not undertake to update or amend such forward-looking information whether as a result of new information, future events or otherwise, except as may be required by applicable law.

Non-IFRS Financial Measures
The information presented within this news release includes the non-IFRS financial measures, “Adjusted EBITDA” and “Adjusted Net Income”. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. These non-IFRS measures are used to provide investors with a supplemental measure of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Our management also uses non-IFRS measures to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. We believe Adjusted EBITDA and Adjusted Net Income are important supplemental measures of Nuvei’s performance, primarily because these and similar measures are used widely among others in the payments industry as a means of evaluating a company’s underlying operating performance.

Adjusted EBITDA is defined as net income (loss) before finance costs, finance income, depreciation and amortization, income taxes expense/recovery, acquisition, integration and severance costs, share-based payments, net gain/loss on foreign currency exchange, and other.

Adjusted net income is defined as net income (loss) before acquisition, integration and severance costs, share-based payments, net gain/loss on foreign currency exchange, amortization of certain intangible assets, and the related income tax expense or recovery for these items. Adjusted net income also excludes change in redemption value of liability-classified common and preferred shares and accelerated amortization of deferred transaction costs.

Contact:
Investor Relations
NuveiIR@icrinc.com

Public Relations
Nuvei-PR@icrinc.com


Interim consolidated statements of profit or loss and comprehensive loss  
(In thousands of U.S. dollars except for per share amounts)Three months ended September 30 Nine months ended September 30 
2020 2019 2020 2019 
$ $ $ $ 
         
Revenue93,599 70,752 259,165 166,489 
Cost of revenue17,007 12,173 45,736 27,683 
Gross profit76,592 58,579 213,429 138,806 
         
Selling, general and administrative61,398 62,689 168,499 138,405 
Operating profit (loss)15,194 (4,110) 44,930 401 
         
Finance income(1,375) (1,532) (4,170) (4,058) 
Finance costs90,933 62,069 171,368 71,386 
Net finance costs89,558 60,537 167,198 67,328 
Loss before income tax(74,364) (64,647) (122,268) (66,927) 
Income tax expense (recovery)3,505 1,049 3,979 (539) 
Net loss(77,869) (65,696) (126,247) (66,388) 
         
Other comprehensive income (loss)         
Foreign operations – foreign currency translation differences(8,849) 1,836 14,461 843 
Total comprehensive loss (86,718) (63,860) (111,786) (65,545) 
         
         
Net income (loss) attributable to:(78,579) (66,054) (127,956) (66,915) 
Shareholders of the Company710 358 1,709 527 
Non-controlling interest(77,869) (65,696) (126,247) (66,388) 
         
Comprehensive imcome (loss) attributable to        
Shareholders of the Company(87,428) (64,218) (113,495) (66,072) 
Non-controlling interest710 358 1,709 527 
 (86,718) (63,860) (111,786) (65,545) 
         
Net loss per share attributable to common shareholders of the company        
Basic and diluted(0.88) (1.10) (1.49) (1.11) 
         
No of shares weighted average89,217,178 60,072,213 86,153,927 60,072,213 
         



Consolidated statements of financial position     
(in thousands of U.S. dollars)      
   September 30,  December 31,  
2020 2019  
$ $  
       
Assets      
       
Current assets      
Cash  99,426  60,072  
Trade and other receivables  31,880  34,069  
Inventory  540  709  
Prepaid expenses  1,648  964  
Current portion of advances to third parties  7,914  8,901  
Current portion of contract assets  1,755  1,720  
       
Total current assets before segregated funds  143,163  106,435  
Segregated funds  301,352  200,612  
       
Total current assets  444,515  307,047  
       
Non-current assets      
Advances to third parties  41,442  42,584  
Property and equipment  15,228  15,272  
Intangible assets  362,234  408,380  
Goodwill  760,833  768,497  
Contract assets  1,291  1,426  
Processor deposits  13,292  12,478  
Other non-current assets  1,851  3,088  
       
Total Assets  1,640,686  1,558,772  
       
Liabilities      
       
Current liabilities      
Trade and other payables  57,477  51,258  
Income taxes payable  153  2,866  
Current portion of loans and borrowings  2,319  2,874  
Other current liabilities  4,196  9,875  
Liability-classified common shares  -  58,262  
Liability-classified preferred shares  -  39,967  
       
Total current liabilities before due to merchants  64,145  165,102  
Due to merchants  301,352  200,612  
       
Total current liabilities  365,497  365,714  
       
Non-current liabilities      
Loans and borrowings  106,037  722,166  
Deferred tax liabilities  7,572  12,976  
Other non-current liabilities  2,263  4,875  
Unsecured convertible debentures due to shareholders  -  109,022  
       
Total Liabilities  481,369  1,214,753  
       
Contingencies      
Subsequent event      
Equity      
       
Equity attributable to shareholders      
Share capital  1,371,043  450,523  
Contributed surplus  8,767  1,603  
Deficit  (232,768) (104,812) 
Accumulated other comprehensive income (loss)  4,076  (10,385) 
       
   1,151,118  336,929  
Non-controlling interest  8,199  7,090  
       
Total Equity  1,159,317  344,019  
       
Total Liabilities and Equity   1,640,686  1,558,772  
       



Interim consolidated statements of cash flows   
(in thousands of U.S. dollars)   
For the nine months ended September 30  2020 2019 
$ $ 
     
Cash flows from operating activities    
Net loss for the period  (126,247)(66,388)
Adjustments for:    
Depreciation of property and equipment  4,142 2,115 
Amortization of intangible assets  47,121 31,969 
Amortization of contract assets  1,697 1,809 
Share-based payments  7,207 767 
Net finance costs  167,198 67,328 
Impairment on disposal of a subsidiary  338 - 
Income tax expense (recovery)  3,979 (539)
     
Changes in non-cash working capital items  637 11,568 
     
Interest paid  (42,293)(21,089)
Net realized loss on foreign currency exchange  (5,937)- 
Income taxes paid  (10,579)(2,083)
     
   47,263 25,457 
     
     
Cash flows from (used in) investing activities    
Business acquisitions, net of cash acquired  - (780,196)
Decrease (increase) in other non-current assets  (1,080)2,585 
Proceeds from the sale of a subsidiary, net of cash  19,045 - 
Sale of equity investments  - 21,800 
Net decrease (increase) in advances to third parties  2,129 (13,564)
Acquisition of property and equipment  (1,701)(1,349)
Acquisition of intangible assets  (10,570)(4,663)
     
   7,823 (775,387)
     
Cash flows (used in) from financing activities    
Transaction costs related to loans and borrowings  (293)(27,491)
Redemption of preferred shares  - (2,299)
Issuance of preferred shares  - 81,240 
Issuance of convertible debentures due to shareholders  - 199,000 
Repayment of convertible debentures due to shareholders  (93,384)- 
Issuance of Class B common shares  150 - 
Issuance of Subordinate Voting Shares, net of issuance fees  719,886 - 
Proceeds from loans and borrowings  - 629,509 
Repayment of loans and borrowings  (642,786)(60,507)
Payment of lease liabilities  (691)(701)
     
   (17,118)818,751 
     
Effect of movements in exchange rates on cash   1,386 40 
     
Net increase in cash   39,354 68,861 
     
Cash – Beginning of period  60,072 6,070 
     
Cash – End of period  99,426 74,931 
     



Reconciliation from IFRS to Non-IFRS Results Three months ended September 30 Nine months ended September 30
(In thousands of U.S. dollars) 2020 2019 2020 2019
  $ $ $ $
Net loss (77,869) (65,696) (126,247) (66,388)
Finance costs 90,933 62,069 171,368 71,386
Finance income (1,375) (1,532) (4,170) (4,058)
Depreciation and amortization 16,931 15,357 51,263 34,084
Income tax expense (recovery) 3,505 1,049 3,979 (539)
Acquisition, integration and severance costs (a) 2,418 13,898 5,297 17,129
Share-based payments (b) 6,472 425 7,207 767
Net loss on foreign currency exchange (c) 778 125 3,118 2,602
Other(d) (802) 72 (146) 275
Adjusted EBITDA(e) 40,991 25,767 111,669 55,258
Advance from third party - merchant residual received 3,848 3,085 9,515 7,368
       
(a) These expenses relate to (i) professional, legal, consulting, accounting and other fees and expenses related to our acquisitions and financing activities completed during the period and our initial public offering, (ii) acquisition-related compensation and deferred purchase consideration for previously acquired businesses, and (iii) integration expenses and severances paid.
(b) These expenses represent non-cash expenses recognized in connection with stock options and other awards issued under share-based plans.
(c) This includes gains or losses on foreign currency exchange included in selling, general and administration.   
(d) This line item primarily represents legal settlements and associated legal costs reached outside of the normal course of business as well as non-cash gains, losses and provisions and certain other costs.
(e) Adjusted EBITDA is a non-IFRS measure that the Company uses to assess its operating performance and cash flows. 
       



Reconciliation from IFRS to Non-IFRS Results Three months ended September 30 Nine months ended September 30
(In thousands of U.S. dollars) 2020 2019 2020 2019
  $ $ $ $
Net loss (77,869) (65,696) (126,247) (66,388)
Change in redemption value of liability-classified common and preferred shares (a) 58,952 35,720 76,438 38,128
Accelerated amortization of deferred transaction costs / loss on debt modification(b) 24,491 4,830 24,491 4,830
Amortization of certain intangible assets (c) 14,161 12,485 43,211 28,234
Acquisition, integration and severance costs (d) 2,418 13,898 5,297 17,129
Share-based payments (e) 6,472 425 7,207 767
Net loss (gain) on foreign currency exchange (f) (9,544) 2,021 17,889 (955)
Other (g) (802) 72 (146) 275
Adjustments 96,148 69,451 174,387 88,408
Income tax expense related to adjustments (1,824) (1,563) (5,646) (5,038)
Adjusted net income (h) 16,455 2,192 42,494 16,982
       
Adjusted net income per share attributable to common shareholders of the company (i)      
Basic 0.18 0.03 0.47 0.27
Diluted 0.17 0.03 0.46 0.26
       
       
(a) This line item represents change in redemption value related to shares classified as liabilities prior to the IPO. As part of the IPO, the shares were converted into equity as Subordinate Voting Shares. For the liability-classified common shares, the expense represents the fair value adjustment for the corresponding period, with the three months ended September 30, 2020 amount representing the IPO value of $26 per Subordinate Voting Shares. These expenses are included in finance costs.
(b) With the repayment of long-term debt from the IPO proceeds, the associated deferred transaction costs were recognized in finance costs for the three months ended September 30, 2020 on an accelerated pro-rata basis. Additionally, in 2019 a loss on debt modification was recognized because of the incremental debt taken to fund the SafeCharge acquisition.
(c) This line item relates to amortization expense taken on intangible assets created from the purchase price adjustment process on acquired companies and businesses and from the acquisition of all of the outstanding shares of the predecessor by Nuvei in September 2017 (as further described in the 2019 notes to the audited consolidated financial statements).
(d) These expenses relate to (i) professional, legal, consulting, accounting and other fees and expenses related to our acquisitions and financing activities completed during the period and our initial public offering, (ii) acquisition-related compensation and deferred purchase consideration for previously acquired businesses, and (iii) integration expenses and severances paid.
(e) These expenses represent non-cash expenses recognized in connection with stock options and other awards issued under share-based plans.
(f) This includes gains or losses on foreign currency exchange included in finance costs and selling, general and administration.
(g) This line item primarily represents legal settlements and associated legal costs reached outside of the normal course of business as well as non-cash gains, losses and provisions and certain other costs.
(h) Adjusted net income (loss) is a non-IFRS measure that the Company uses to further assess its operating performance.
(i) Diluted Adjusted net income per share is calculated using stock options outstanding at the end of each period on a fully diluted basis if they were in-the-money at that time. Potentially dilutive instruments converted or reimbursed as part of the IPO have been excluded.