EXHIBIT 99.1
Condensed Interim Consolidated Financial Statements
Nuvei Corporation
(Unaudited)
For the three and nine months ended September 30, 2022 and 2021
(in thousands of US dollars)
Table of Contents
Pages | |||||
Condensed Interim Consolidated Financial Statements | |||||
Notes to Condensed Interim Consolidated Financial Statements | |||||
1 Reporting entity | |||||
2 Basis of preparation and consolidation | |||||
3 Significant accounting policies and new accounting standards | |||||
4 Business combinations | |||||
5 Trade and other receivables | |||||
6 Advances to third parties | |||||
7 Trade and other payables | |||||
8 Share capital | |||||
9 Revenue and expenses by nature | |||||
10 Net finance cost | |||||
11 Share-based payment arrangements | |||||
12 Net income per share | |||||
13 Determination of fair values | |||||
14 Related party transactions | |||||
15 Supplementary cash flow disclosure | |||||
16 Contingencies | |||||
Nuvei Corporation
Consolidated Statements of Financial Position
(Unaudited)
(in thousands of US dollars)
Notes | September 30, 2022 | December 31, 2021 | |||||||||
$ | $ | ||||||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | 753,612 | 748,576 | |||||||||
Trade and other receivables | 5 | 53,562 | 39,262 | ||||||||
Inventory | 1,239 | 1,277 | |||||||||
Prepaid expenses | 8,225 | 8,483 | |||||||||
Income taxes receivable | 2,757 | 3,702 | |||||||||
Current portion of advances to third parties | 6 | 924 | 3,104 | ||||||||
Current portion of contract assets | 1,359 | 1,354 | |||||||||
Total current assets before segregated funds | 821,678 | 805,758 | |||||||||
Segregated funds | 628,892 | 720,874 | |||||||||
Total current assets | 1,450,570 | 1,526,632 | |||||||||
Non-current assets | |||||||||||
Advances to third parties | 6 | 3,290 | 13,676 | ||||||||
Property and equipment | 28,066 | 18,856 | |||||||||
Intangible assets | 689,457 | 747,600 | |||||||||
Goodwill | 1,099,715 | 1,126,768 | |||||||||
Deferred tax assets | 13,221 | 13,036 | |||||||||
Contract assets | 980 | 1,091 | |||||||||
Processor deposits | 4,462 | 4,788 | |||||||||
Other non-current assets | 2,622 | 3,023 | |||||||||
Total Assets | 3,292,383 | 3,455,470 |
3
Nuvei Corporation
Consolidated Statements of Financial Position
(Unaudited)
(in thousands of US dollars)
Notes | September 30, 2022 | December 31, 2021 | |||||||||
$ | $ | ||||||||||
Liabilities | |||||||||||
Current liabilities | |||||||||||
Trade and other payables | 7 | 110,772 | 101,848 | ||||||||
Income taxes payable | 15,796 | 13,478 | |||||||||
Current portion of loans and borrowings | 8,526 | 7,349 | |||||||||
Other current liabilities | 6,222 | 13,226 | |||||||||
Total current liabilities before due to merchants | 141,316 | 135,901 | |||||||||
Due to merchants | 628,892 | 720,874 | |||||||||
Total current liabilities | 770,208 | 856,775 | |||||||||
Non-current liabilities | |||||||||||
Loans and borrowings | 503,470 | 501,246 | |||||||||
Deferred tax liabilities | 58,634 | 71,100 | |||||||||
Other non-current liabilities | 2,664 | 4,509 | |||||||||
Total Liabilities | 1,334,976 | 1,433,630 | |||||||||
Equity | |||||||||||
Equity attributable to shareholders | |||||||||||
Share capital | 8 | 2,015,091 | 2,057,105 | ||||||||
Contributed surplus | 169,758 | 69,943 | |||||||||
Deficit | (164,274) | (108,749) | |||||||||
Accumulated other comprehensive loss | (72,615) | (8,561) | |||||||||
1,947,960 | 2,009,738 | ||||||||||
Non-controlling interest | 8 | 9,447 | 12,102 | ||||||||
Total Equity | 1,957,407 | 2,021,840 | |||||||||
Total Liabilities and Equity | 3,292,383 | 3,455,470 | |||||||||
Contingencies | 16 | ||||||||||
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
4
Nuvei Corporation
Consolidated Statements of Profit or Loss and Comprehensive Income or Loss
(Unaudited)
For the three and nine months ended September 30
(in thousands of US dollars, except for per share amounts)
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||
Notes | $ | $ | $ | $ | |||||||||||||
Revenue | 9 | 197,146 | 183,932 | 622,984 | 512,651 | ||||||||||||
Cost of revenue | 9 | 38,363 | 38,332 | 121,259 | 98,640 | ||||||||||||
Gross profit | 158,783 | 145,600 | 501,725 | 414,011 | |||||||||||||
Selling, general and administrative expenses | 9 | 149,184 | 106,076 | 442,501 | 290,382 | ||||||||||||
Operating profit | 9,599 | 39,524 | 59,224 | 123,629 | |||||||||||||
Finance income | 10 | (4,131) | (538) | (6,427) | (2,309) | ||||||||||||
Finance cost | 10 | 7,859 | 5,131 | 13,627 | 11,878 | ||||||||||||
Net finance cost | 3,728 | 4,593 | 7,200 | 9,569 | |||||||||||||
Loss (gain) on foreign currency exchange | (12,528) | 727 | (20,415) | 1,973 | |||||||||||||
Income before income tax | 18,399 | 34,204 | 72,439 | 112,087 | |||||||||||||
Income tax expense | 5,393 | 6,202 | 19,836 | 17,381 | |||||||||||||
Net income | 13,006 | 28,002 | 52,603 | 94,706 | |||||||||||||
Other comprehensive income (loss) | |||||||||||||||||
Items that may be reclassified subsequently to profit and loss | |||||||||||||||||
Foreign operations – foreign currency translation differences | (33,599) | (9,572) | (64,054) | (20,111) | |||||||||||||
Comprehensive income (loss) | (20,593) | 18,430 | (11,451) | 74,595 | |||||||||||||
Net income attributable to: | |||||||||||||||||
Common shareholders of the Company | 11,710 | 26,841 | 48,692 | 91,485 | |||||||||||||
Non-controlling interest | 1,296 | 1,161 | 3,911 | 3,221 | |||||||||||||
13,006 | 28,002 | 52,603 | 94,706 | ||||||||||||||
Comprehensive income (loss) attributable to: | |||||||||||||||||
Common shareholders of the Company | (21,889) | 17,269 | (15,362) | 71,374 | |||||||||||||
Non-controlling interest | 1,296 | 1,161 | 3,911 | 3,221 | |||||||||||||
(20,593) | 18,430 | (11,451) | 74,595 | ||||||||||||||
Net income per share | 12 | ||||||||||||||||
Net income per share attributable to common shareholders of the Company | |||||||||||||||||
Basic | 0.08 | 0.19 | 0.34 | 0.66 | |||||||||||||
Diluted | 0.08 | 0.19 | 0.34 | 0.64 | |||||||||||||
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
5
Nuvei Corporation
Consolidated Statements of Cash Flows
(Unaudited)
For the nine months ended September 30
(in thousands of US dollars)
2022 | 2021 | ||||||||||
Notes | $ | $ | |||||||||
Cash flow from operating activities | |||||||||||
Net income | 52,603 | 94,706 | |||||||||
Adjustments for: | |||||||||||
Depreciation of property and equipment | 5,936 | 4,276 | |||||||||
Amortization of intangible assets | 73,822 | 60,614 | |||||||||
Amortization of contract assets | 1,425 | 1,585 | |||||||||
Share-based payments | 11 | 103,666 | 20,245 | ||||||||
Net finance cost | 10 | 7,200 | 9,569 | ||||||||
Loss (gain) on foreign currency exchange | (20,415) | 1,973 | |||||||||
Income tax expense | 19,836 | 17,381 | |||||||||
Changes in non-cash working capital items | 15 | (17,050) | 15,269 | ||||||||
Interest paid | (15,152) | (9,559) | |||||||||
Interest received | 4,577 | 117 | |||||||||
Income taxes paid (net) | (23,295) | (14,291) | |||||||||
193,153 | 201,885 | ||||||||||
Cash flow used in investing activities | |||||||||||
Business acquisitions, net of cash acquired | 4 | — | (387,654) | ||||||||
Payment of acquisition-related contingent consideration | (2,027) | — | |||||||||
Acquisition of property and equipment | (8,681) | (3,564) | |||||||||
Acquisition of intangible assets | (25,130) | (13,963) | |||||||||
Decrease in other non-current assets | 726 | 9,756 | |||||||||
Net decrease in advances to third parties | 6 | 1,884 | 7,924 | ||||||||
(33,228) | (387,501) | ||||||||||
Cash flow from (used in) financing activities | |||||||||||
Shares repurchased and cancelled | 8 | (109,158) | — | ||||||||
Transaction costs from issuance of shares | 8 | (903) | (74) | ||||||||
Proceeds from exercise of stock options | 8 | 1,474 | 6,499 | ||||||||
Repayment of loans and borrowings | (3,840) | — | |||||||||
Proceeds from loans and borrowings | — | 300,000 | |||||||||
Transaction costs related to loans and borrowings | — | (5,373) | |||||||||
Payment of lease liabilities | (2,674) | (1,962) | |||||||||
Purchase of non-controlling interest | 8 | (39,751) | — | ||||||||
Dividend paid by subsidiary to non-controlling interest | (260) | (880) | |||||||||
(155,112) | 298,210 | ||||||||||
Effect of movements in exchange rates on cash | 223 | (4,582) | |||||||||
Net increase in cash and cash equivalents | 5,036 | 108,012 | |||||||||
Cash and cash equivalents – Beginning of period | 748,576 | 180,722 | |||||||||
Cash and cash equivalents – End of period | 753,612 | 288,734 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
6
Nuvei Corporation
Consolidated Statements of Changes in Equity
(Unaudited)
For the nine months ended September 30
(in thousands of US dollars)
Attributable to shareholders of the Company | Non- Controlling interest | Total equity | |||||||||||||||||||||
Notes | Share capital | Contributed surplus | Deficit | Accumulated other comprehensive income (loss) | |||||||||||||||||||
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Balance as at January 1, 2021 | 1,625,785 | 11,966 | (211,042) | 22,470 | 8,710 | 1,457,889 | |||||||||||||||||
Contributions and distributions | |||||||||||||||||||||||
Share issuance | 4, 8 | 9,961 | — | — | — | — | 9,961 | ||||||||||||||||
Exercise of stock options | 8, 11 | 8,865 | (2,366) | — | — | — | 6,499 | ||||||||||||||||
Equity-settled share-based payments | 11 | — | 20,245 | 20,245 | |||||||||||||||||||
Tax effect - equity-settled share-based payments | — | 8,843 | — | — | — | 8,843 | |||||||||||||||||
Dividend paid by subsidiary to non-controlling interest | — | — | — | — | (880) | (880) | |||||||||||||||||
Net income and comprehensive income | — | — | 91,485 | (20,111) | 3,221 | 74,595 | |||||||||||||||||
Balance as at September 30, 2021 | 1,644,611 | 38,688 | (119,557) | 2,359 | 11,051 | 1,577,152 | |||||||||||||||||
Balance as at January 1, 2022 | 2,057,105 | 69,943 | (108,749) | (8,561) | 12,102 | 2,021,840 | |||||||||||||||||
Contributions and distributions | |||||||||||||||||||||||
Exercise of stock options | 8, 11 | 1,752 | (278) | — | — | — | 1,474 | ||||||||||||||||
Equity-settled share-based payments | 11 | — | 103,666 | — | — | — | 103,666 | ||||||||||||||||
Tax effect - equity-settled share-based payments | — | (3,573) | — | — | — | (3,573) | |||||||||||||||||
Shares repurchased and cancelled | 8 | (29,094) | — | (43,290) | — | — | (72,384) | ||||||||||||||||
Share repurchase liability | 8 | (14,672) | — | (27,812) | — | — | (42,484) | ||||||||||||||||
Dividend paid by subsidiary to non-controlling interest | — | — | — | — | (260) | (260) | |||||||||||||||||
Effect of purchase of non-controlling interest | 8 | — | — | (33,115) | — | (6,306) | (39,421) | ||||||||||||||||
Net income and comprehensive loss | — | — | 48,692 | (64,054) | 3,911 | (11,451) | |||||||||||||||||
Balance as at September 30, 2022 | 2,015,091 | 169,758 | (164,274) | (72,615) | 9,447 | 1,957,407 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
7
Nuvei Corporation
Notes to Condensed Interim Consolidated Financial Statements
(Unaudited)
September 30, 2022 and 2021
(in thousands of US dollars, except for share and per share amounts)
1. Reporting entity
Nuvei Corporation (“Nuvei” or the “Company”) is a global payment technology provider to businesses across North America, Europe, Middle East and Africa, Latin America and Asia Pacific and is domiciled in Canada with its registered office located at 1100 René-Lévesque Blvd., 9th floor, Montreal, Quebec, Canada. Nuvei is the ultimate parent of the group and was incorporated on September 1, 2017 under the Canada Business Corporations Act (“CBCA”).
The Company's Subordinate Voting Shares are listed on the Toronto Stock Exchange ("TSX") and on the Nasdaq Global Select Market ("Nasdaq") both under the symbol "NVEI".
2. Basis of preparation and consolidation
These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) applicable to the preparation of interim financial statements, including International Accounting Standard (“IAS”) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”). Certain information and disclosures have been omitted or condensed. The accounting policies and methods of computation described in the annual audited consolidated financial statements were applied consistently in the preparation of these condensed interim consolidated financial statements. Accordingly, these condensed interim consolidated financial statements should be read together with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2021.
The condensed interim consolidated financial statements as at and for the three and nine months ended September 30, 2022 were authorized for issue by the Company’s Board of Directors on November 2, 2022.
Operating segment
The Company has one reportable segment for the provision of payment technology solutions to merchants and partners.
Seasonality of interim operations
The operations of the Company can be seasonal, and the results of operations for any interim period are not necessarily indicative of operations for the full year or any future period.
Estimates, judgments and assumptions
The preparation of these condensed interim consolidated financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The significant estimates, judgments and assumptions made by management are the same as those applied and described in the Company's audited annual consolidated financial statements for the year ended December 31, 2021 except those described below. Actual results may differ from these estimates, judgments and assumptions.
Fair value of services rendered
When issuing share-based payments in exchange for services rendered by an external party, the Company estimates the fair value of the instruments granted by reference to the fair value of services rendered by the external party, if the services can be measured reliably, instead of the fair value of the equity instrument granted.
8
Nuvei Corporation
Notes to Condensed Interim Consolidated Financial Statements
(Unaudited)
September 30, 2022 and 2021
(in thousands of US dollars, except for share and per share amounts)
3. Significant accounting policies and new accounting standards
The accounting policies used in these interim financial statements are consistent with those applied by the Company in its December 31, 2021 audited annual consolidated financial statements except for those described below.
Share capital repurchase
On March 7, 2022, the Board approved a normal course issuer bid ("NCIB") to purchase for cancellation Subordinate Voting Shares. When the Company controls the amount and timing of the repurchase being made, the Company recognizes the share capital repurchase on the trade date. For each share repurchased and cancelled, the Company reduces share capital by the weighted average cost of the related category of shares and any difference between the amount paid, including transaction costs, and the weighted average cost of the related category of shares is recorded directly in retained earnings or deficit.
When the Company enters into an agreement under which it has a contractual obligation to purchase its own shares, subject to certain pre-determined limitations, the Company initially records this obligation as a financial liability at the current fair market value with a corresponding reduction of equity. The share purchase liability is carried at fair market value until it is settled or upon termination of the agreement, with change in fair value being recognized in the finance costs line item in the consolidated statement of profit or loss.
New accounting standards and interpretations adopted
The following amendments were adopted on January 1, 2022:
Amendments to references to conceptual framework in IFRS Standards
This amendment replaces references to the 2010 Conceptual Framework for Financial Reporting with references to the 2018 Conceptual Framework for Financial Reporting in order to determine what constitutes an asset or liability in a business combination, adds a new exception for certain liabilities and contingent liabilities to refer to IAS 37, Provisions, Contingent Liabilities and Contingent Assets, or IFRIC 21, Levies, rather than to the 2018 Conceptual Framework, and clarifies that an acquirer should not recognize contingent assets at the acquisition date. The amendments are effective for business combinations occurring in reporting periods starting on or after January 1, 2022.
The amendments described above had no impact on these condensed interim consolidated financial statements.
New accounting standards and interpretations issued but not yet adopted
The IASB has issued new standards and amendments to existing standards which are applicable to the Company in future periods. There were no significant updates to the standards and interpretations issued but not yet adopted described in the December 31, 2021 annual audited consolidated financial statements.
4. Business combinations
Transactions for the nine months ended September 30, 2021
Base Commerce LLC
On January 1, 2021, the Company acquired substantially all of the net assets of Base Commerce LLC (“Base”), a technology-driven payment processing company specializing in bank card and automated clearing house payment processing solutions. The purchase price for this acquisition totaled $92,678 of which $89,674 was paid in cash at closing. The remaining amount consists of a contingent consideration of $3,004, estimated on the date of acquisition, which is contingent upon meeting certain performance metrics. During the three
9
Nuvei Corporation
Notes to Condensed Interim Consolidated Financial Statements
(Unaudited)
September 30, 2022 and 2021
(in thousands of US dollars, except for share and per share amounts)
months ended September 30, 2022, the contingent consideration was paid in cash and a gain on remeasurement of $488 was recognized in the consolidated statement of profit and loss (note 13).
Mazooma Technical Services Inc.
On August 3, 2021, the Company acquired 100% of the shares of Mazooma Technical Services Inc. (“Mazooma”), a North American payments provider with instant bank-to-bank payments for pay-ins and payouts and real time payments for accelerated withdrawals. The purchase price including closing adjustment for this acquisition totaled $68,342 thousands Canadian dollars ($54,503). The initial consideration included a cash amount of $54,063 thousands Canadian dollars ($43,116) and $14,278 thousands Canadian dollars ($11,387) paid with the issuance of 138,522 Subordinate Voting Shares to the sellers. The purchase price also included contingent consideration of up to a total maximum consideration, including the initial consideration of $400,000 thousands Canadian dollars ($315,433). The contingent consideration is subject to meeting certain performance metrics over a three-year period. At the acquisition date, the fair value of the contingent consideration was estimated to be nil. Since the initial purchase price allocation was estimated, additional tax losses that can be used against future taxable income have been recognized, decreasing the deferred tax liability by $1,299 and income tax payable by $60, with a corresponding decrease of $1,359 to goodwill.
SimplexCC Ltd.
On September 1, 2021, the Company acquired 100% of the shares of SimplexCC Ltd. (“Simplex”), a payment solution provider to the digital asset industry connecting market participants including exchanges, brokers, wallet and liquidity providers, for a total cash consideration of $290,574 including $40,574 relating to working capital and closing adjustments.
Paymentez LLC.
On September 1, 2021, the Company acquired 100% of the shares of Paymentez LLC (“Paymentez”), a South American payments providers, for a total cash consideration of $24,459.
To finance the cash consideration of the Mazooma, Simplex and Paymentez acquisitions noted above, on June 18, 2021, the Company increased its credit facility by amending its credit agreement to add a term loan of $300,000.
10
Nuvei Corporation
Notes to Condensed Interim Consolidated Financial Statements
(Unaudited)
September 30, 2022 and 2021
(in thousands of US dollars, except for share and per share amounts)
Purchase Price Allocation
The following table summarizes the final amounts of assets acquired and liabilities assumed at the acquisition date for acquisitions in 2021:
Base $ | Mazooma $ | Simplex $ | Paymentez $ | Total $ | |||||||||||||
Assets acquired | |||||||||||||||||
Cash | 744 | 5,369 | 52,832 | 1,224 | 60,169 | ||||||||||||
Segregated funds | 122,139 | 18,506 | 3,632 | 94 | 144,371 | ||||||||||||
Trade and other receivables | 6,860 | 809 | 3,641 | 323 | 11,633 | ||||||||||||
Prepaid expenses | 42 | 238 | — | — | 280 | ||||||||||||
Property and equipment | 160 | — | 428 | 29 | 617 | ||||||||||||
Processor deposits | 1,385 | — | — | — | 1,385 | ||||||||||||
Other non-current assets | — | — | — | 1,109 | 1,109 | ||||||||||||
Intangible assets | |||||||||||||||||
Trademarks | 2,396 | — | — | 222 | 2,618 | ||||||||||||
Technologies | 8,809 | 22,076 | 105,435 | 10,878 | 147,198 | ||||||||||||
Partner and merchant relationships | 47,232 | 15,158 | 55,422 | 4,420 | 122,232 | ||||||||||||
Goodwill1 | 32,109 | 26,710 | 103,098 | 9,196 | 171,113 | ||||||||||||
Deferred tax assets | — | — | 24 | — | 24 | ||||||||||||
221,876 | 88,866 | 324,512 | 27,495 | 662,749 | |||||||||||||
Liabilities assumed | |||||||||||||||||
Trade and other payables | (7,059) | (290) | (6,104) | (1,287) | (14,740) | ||||||||||||
Other current liabilities | — | (1,763) | — | — | (1,763) | ||||||||||||
Due to merchants | (122,139) | (18,506) | (3,632) | (94) | (144,371) | ||||||||||||
Income taxes payable | — | (5,505) | (4,678) | (156) | (10,339) | ||||||||||||
Deferred tax liabilities | — | (8,299) | (19,524) | — | (27,823) | ||||||||||||
Other non-current liabilities | — | — | — | (1,499) | (1,499) | ||||||||||||
92,678 | 54,503 | 290,574 | 24,459 | 462,214 | |||||||||||||
Total consideration | |||||||||||||||||
Cash paid | 89,674 | 43,116 | 290,574 | 24,459 | 447,823 | ||||||||||||
Equity issuance | — | 11,387 | — | — | 11,387 | ||||||||||||
Contingent consideration | 3,004 | — | — | — | 3,004 | ||||||||||||
92,678 | 54,503 | 290,574 | 24,459 | 462,214 |
1 Goodwill mainly consists of future growth, assembled workforce and expected synergies, which were not recorded separately since they did not meet the recognition criteria for identifiable intangible assets. Goodwill arising from the Base and Paymentez acquisitions is deductible for tax purposes.
11
Nuvei Corporation
Notes to Condensed Interim Consolidated Financial Statements
(Unaudited)
September 30, 2022 and 2021
(in thousands of US dollars, except for share and per share amounts)
5. Trade and other receivables
September 30, 2022 | December 31, 2021 | |||||||
$ | $ | |||||||
Trade receivables | 46,310 | 34,765 | ||||||
Other receivables | 7,252 | 4,497 | ||||||
Total | 53,562 | 39,262 |
6. Advances to third parties
Advances to third parties comprise the following:
September 30, 2022 | December 31, 2021 | |||||||
$ | $ | |||||||
Advances to a third party independent sales organization | 4,068 | 16,616 | ||||||
Other | 146 | 164 | ||||||
4,214 | 16,780 | |||||||
Current portion | (924) | (3,104) | ||||||
Long-term portion | 3,290 | 13,676 |
The movement in the advances to a third party independent sales organization is as follows:
Nine months ended | ||||||||
September 30, 2022 | ||||||||
$ | ||||||||
Balance, beginning of period | 16,616 | |||||||
Interest on advances to a third party | 517 | |||||||
Merchant residuals received | (1,866) | |||||||
Settlement of advances to a third party* | (11,199) | |||||||
Balance, end of period | 4,068 |
* In accordance with the agreements, these advances to a third party were settled in exchange for a fixed portfolio of merchant contracts upon expiry of the minimum guarantee for the first three years. The portfolio of merchant contracts was recognized at the fair value of the advance to a third party on the date of settlement as an intangible asset under partner and merchant relationships.
12
Nuvei Corporation
Notes to Condensed Interim Consolidated Financial Statements
(Unaudited)
September 30, 2022 and 2021
(in thousands of US dollars, except for share and per share amounts)
7. Trade and other payables
Trade and other payables comprise the following:
September 30, 2022 | December 31, 2021 | |||||||
$ | $ | |||||||
Trade payables | 31,892 | 29,720 | ||||||
Accrued bonuses and other compensation-related liabilities | 42,310 | 30,460 | ||||||
Sales tax | 7,701 | 10,358 | ||||||
Interest payable | 344 | 262 | ||||||
Due to processors | 5,701 | 6,497 | ||||||
Due to merchants not related to segregated funds | 14,453 | 14,991 | ||||||
Other accrued liabilities | 8,371 | 9,560 | ||||||
110,772 | 101,848 |
8. Share capital
On March 7, 2022, the Board approved a NCIB to purchase for cancellation a maximum of 6,617,416 Subordinate Voting Shares, representing approximately 10% of the Company’s Subordinate Voting Shares as at February 28, 2022. The Company is authorized to make purchases under the NCIB during the period from March 10, 2022 to March 9, 2023 in accordance with the requirements of the TSX and the Nasdaq and applicable securities laws. During the nine months ended September 30, 2022, the Company repurchased and cancelled 1,768,668 Subordinate Voting Shares for a total consideration, including transaction costs, of $109,158.
The Company also issued 1,692,832 Subordinate Voting Shares for a cash consideration of $1,474 during the nine months ended September 30, 2022 following the exercise of stock options.
There were 76,064,619 Multiple Voting Shares and 65,236,600 Subordinate Voting Shares outstanding as at September 30, 2022.
13
Nuvei Corporation
Notes to Condensed Interim Consolidated Financial Statements
(Unaudited)
September 30, 2022 and 2021
(in thousands of US dollars, except for share and per share amounts)
Share repurchase liability
On March 18, 2022, the Company had entered into an Automatic share purchase plan ("ASPP") with a third-party in order for the Company to allow for the purchase of Subordinate Voting Shares under the NCIB during the Company's blackout periods. Under this agreement, the broker is authorized to repurchase Subordinate Voting Shares, without consultation with the Company, subject to predefined share price and other limitations imposed by the Company and subject to TSX regulation and the Nasdaq and applicable securities laws, such as a daily purchase restriction.
The change in share repurchase liability during the nine months ended September 30, 2022 was as follows:
Nine months ended September 30, | ||||||||
2022 | ||||||||
Balance, beginning of period | — | |||||||
Initial fair value of share repurchase liability | 43,923 | |||||||
Shares repurchased under the ASPP | (36,774) | |||||||
Change in fair value of share repurchase liability | (5,710) | |||||||
Other | (1,439) | |||||||
Balance, end of period | — |
Put option exercise notice and purchase of non-controlling interest
On February 4, 2022, the Company received a put option exercise notice from the Loan Payment Pro ("LPP") non-controlling interest unit holders which obligated the Company to purchase the remaining 40% interest in LPP at fair market value. On April 7, 2022, the Company completed the purchase of the remaining 40% interest in LPP for a cash consideration of $39,751.
14
Nuvei Corporation
Notes to Condensed Interim Consolidated Financial Statements
(Unaudited)
September 30, 2022 and 2021
(in thousands of US dollars, except for share and per share amounts)
9. Revenue and expenses by nature
Three months ended September 30 | Nine months ended September 30 | |||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||
$ | $ | $ | $ | |||||||||||
Revenue | ||||||||||||||
Merchant transaction and processing services revenue | 195,238 | 181,655 | 616,771 | 506,007 | ||||||||||
Other revenue | 1,908 | 2,277 | 6,213 | 6,644 | ||||||||||
197,146 | 183,932 | 622,984 | 512,651 | |||||||||||
Cost of revenue | ||||||||||||||
Processing cost | 37,324 | 37,098 | 117,984 | 95,263 | ||||||||||
Cost of goods sold | 1,039 | 1,234 | 3,275 | 3,377 | ||||||||||
38,363 | 38,332 | 121,259 | 98,640 | |||||||||||
Selling, general and administrative expenses | ||||||||||||||
Commissions | 28,080 | 31,867 | 85,635 | 97,108 | ||||||||||
Employee compensation | 43,414 | 30,597 | 118,656 | 74,634 | ||||||||||
Share-based payments | 33,815 | 11,187 | 103,666 | 20,245 | ||||||||||
Depreciation and amortization | 26,269 | 23,152 | 79,758 | 64,890 | ||||||||||
Professional fees | 7,416 | 3,054 | 19,850 | 16,496 | ||||||||||
Transaction losses (recovery) | 546 | 446 | (1,226) | 1,601 | ||||||||||
Contingent consideration adjustment | (488) | — | (992) | — | ||||||||||
Other | 10,132 | 5,773 | 37,154 | 15,408 | ||||||||||
149,184 | 106,076 | 442,501 | 290,382 |
15
Nuvei Corporation
Notes to Condensed Interim Consolidated Financial Statements
(Unaudited)
September 30, 2022 and 2021
(in thousands of US dollars, except for share and per share amounts)
10. Net finance cost
Three months ended September 30 | Nine months ended September 30 | |||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||
$ | $ | $ | $ | |||||||||||
Finance income | ||||||||||||||
Interest on advances to third parties and interest income | (4,131) | (538) | (6,427) | (2,309) | ||||||||||
Finance cost | ||||||||||||||
Interest on loans and borrowings (excluding lease liabilities) | 7,169 | 5,009 | 17,321 | 11,460 | ||||||||||
Change in fair value of share repurchase liability | — | — | (5,710) | — | ||||||||||
Interest expense on lease liabilities | 158 | 92 | 423 | 297 | ||||||||||
Other interest expense | 532 | 30 | 1,593 | 121 | ||||||||||
7,859 | 5,131 | 13,627 | 11,878 | |||||||||||
Net finance cost | 3,728 | 4,593 | 7,200 | 9,569 |
11. Share-based payment arrangements
The Omnibus Incentive Plan permits the Board of Directors to grant awards of options, Restricted Share Units ("RSUs"), Performance Share Units ("PSUs") and Deferred Share Units (“DSUs”) to eligible participants.
RSUs and DSUs will be settled by the issuance of shares at the exercise date. DSUs vest immediately as they are granted for past services. The RSUs and PSUs vest over a period of up to three years.
16
Nuvei Corporation
Notes to Condensed Interim Consolidated Financial Statements
(Unaudited)
September 30, 2022 and 2021
(in thousands of US dollars, except for share and per share amounts)
Share-based payments continuity
The table below summarizes the changes in the outstanding RSUs, PSUs, DSUs, and stock options for the nine months ended September 30, 2022:
Stock options | |||||||||||||||||
Restricted share units | Performance share units | Deferred share units | Quantity | Weighted average exercise price | |||||||||||||
$ | |||||||||||||||||
Outstanding, beginning of period | 972,097 1 | 1,395,169 | 10,371 | 8,847,218 | 55.87 | ||||||||||||
Forfeited | (30,208) | — | — | (168,879) | 55.78 | ||||||||||||
Granted | 781,379 | 383,262 | 22,300 | 41,845 | 37.97 | ||||||||||||
Exercised | — | — | — | (75,836) | 19.45 | ||||||||||||
Outstanding, end of period | 1,723,268 1 | 1,778,431 | 32,671 | 8,644,348 | 56.10 | ||||||||||||
Exercisable, end of period | 47,398 | 35,280 | 32,671 | 3,459,532 | 19.48 | ||||||||||||
Granted - Weighted average grant date fair value | $63.09 | $49.76 | $35.17 | $7.01 | — |
1 484,590 of the 1,723,268 RSUs outstanding were granted in 2021 to a third party consultant. On May 9, 2022, the Company and the third party consultant reached a mutual understanding of the services to be rendered by the consultant. As a result, the accounting grant date of the 484,590 RSUs previously granted was met and the fair value of the services of $25,000 was estimated on that date.
Share-based payments by exercise price
The table below summarizes the share-based payments units outstanding based on the greater of the exercise price and the share price to be reached under the market performance conditions:
As at September 30, 2022 | For the three months ended September 30, 2022 | For the nine months ended September 30, 2022 | |||||||||||||||
Units outstanding | Unrecognized share-based payments | Share-based payments | |||||||||||||||
$ | $ | $ | |||||||||||||||
$0.00 - $37.51 | 7,768,762 | 81,858 | 17,658 | 55,070 | |||||||||||||
$47.21 - $78.58 | 728,721 | 1,991 | 1,393 | 3,084 | |||||||||||||
$104.53 and above | 3,681,235 | 84,631 | 14,764 | 45,512 | |||||||||||||
Total | 12,178,718 | 168,480 | 33,815 | 103,666 |
As at September 30, 2022, unrecognized share-based payments expense was approximately $168.5 million. The period over which such expense will be recognized is 4.25 years (1.0 year on a weighted average basis).
Grant date fair value
The PSUs, RSUs and DSUs grant date fair value was determined by using the quoted share price on the date of issuance. During the nine months ended September 30, 2022, 383,262 PSUs awarded included performance conditions and the right to these units will vest upon meeting the related performance criteria. These units have a maximum payout of 200% and could result in an additional 383,262 shares being issued.
17
Nuvei Corporation
Notes to Condensed Interim Consolidated Financial Statements
(Unaudited)
September 30, 2022 and 2021
(in thousands of US dollars, except for share and per share amounts)
12. Net income per share
Diluted net income per share excludes all dilutive potential shares if their effect is anti-dilutive as well as all potential shares for which performance conditions have not yet been met as of the reporting date. For the nine months ended September 30, 2022 and 2021, anti-dilutive stock options, RSUs and PSUs were excluded from the calculation of diluted net income per share because the effect was anti-dilutive.
Three months ended September 30 | Nine months ended September 30 | |||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||
$ | $ | $ | $ | |||||||||||
Net income attributable to common shareholders of the Company (basic and diluted) | 11,710 | 26,841 | 48,692 | 91,485 | ||||||||||
Weighted average number of common shares outstanding – basic | 141,311,785 | 139,252,523 | 141,866,671 | 138,728,421 | ||||||||||
Effect of dilutive securities | 2,404,639 | 4,753,928 | 3,320,127 | 4,723,749 | ||||||||||
Weighted average number of common shares outstanding – diluted | 143,716,424 | 144,006,451 | 145,186,798 | 143,452,170 | ||||||||||
Net income per share attributable to common shareholders of the Company: | ||||||||||||||
Basic | 0.08 | 0.19 | 0.34 | 0.66 | ||||||||||
Diluted | 0.08 | 0.19 | 0.34 | 0.64 |
13. Determination of fair values
Certain of the Company’s accounting policies and disclosures require the determination of fair value for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes using the following methods.
Financial assets and financial liabilities
In establishing fair value, the Company uses a fair value hierarchy based on levels as defined below:
•Level 1: defined as observable inputs such as quoted prices in active markets.
•Level 2: defined as inputs other than quoted prices in active markets that are either directly or indirectly observable.
•Level 3: defined as inputs that are based on little or no observable market data, therefore requiring entities to develop their own assumptions.
The Company has determined that the carrying amounts of its current financial assets and financial liabilities approximate their fair value given the short-term nature of these instruments.
The fair value of the variable interest rate non-current liabilities approximates the carrying amount as the liabilities bear interest at a rate that varies according to the market rate.
As at September 30, 2022 and December 31, 2021, financial instruments measured at fair value in the condensed interim consolidated statements of financial position were as follows:
18
Nuvei Corporation
Notes to Condensed Interim Consolidated Financial Statements
(Unaudited)
September 30, 2022 and 2021
(in thousands of US dollars, except for share and per share amounts)
Notes | Fair value hierarchy | September 30, 2022 | December 31, 2021 | |||||||||||
$ | $ | |||||||||||||
Assets | ||||||||||||||
Investments | Level 1 | 857 | 1,112 | |||||||||||
Investments | Level 3 | 2,148 | 1,148 | |||||||||||
Liabilities | ||||||||||||||
Advances to a third party independent sales organization | 6 | Level 3 | 4,068 | 16,616 | ||||||||||
Contingent considerations | 4 | Level 3 | — | 3,004 | ||||||||||
LPP put option liability | Level 3 | — | 531 |
The following table presents the changes in level 3 items for the nine months ended September 30, 2022:
Advances to a third party independent sales organization | LPP put option liability | Investments | Contingent considerations | ||||||||||||||
$ | $ | $ | $ | ||||||||||||||
Balance at December 31, 2021 | 16,616 | 531 | 1,148 | 3,004 | |||||||||||||
Acquisition | — | — | 1,000 | — | |||||||||||||
Payment | — | — | — | (2,027) | |||||||||||||
Merchant residuals received, net of interest on advances to a third parties | (1,349) | — | — | — | |||||||||||||
Settlement of advances to a third party | (11,199) | — | — | — | |||||||||||||
Fair value remeasurement | — | (531) | — | (977) | |||||||||||||
Balance at September 30 2022 | 4,068 | — | 2,148 | — | |||||||||||||
Fair value remeasurement of level 3 instrument is recognized in selling, general and administrative expenses. Below are the assumptions and valuation methods used in the level 3 fair value measurements:
•The fair value of the advances to a third party independent sales organization was determined by calculating the present value of the future estimated cash flows over the term of the agreements. There has been no material change to the assumptions used at December 31, 2021.
•Contingent considerations outstanding as at September 30, 2022 represent Mazooma contingent consideration. The fair value of contingent considerations is determined using a formula specified in the purchase agreement. The main assumption is the forecast of expected future cashflows.
19
Nuvei Corporation
Notes to Condensed Interim Consolidated Financial Statements
(Unaudited)
September 30, 2022 and 2021
(in thousands of US dollars, except for share and per share amounts)
14. Related party transactions
Transactions with key management personnel
Key management personnel compensation comprises the following:
Three months ended September 30 | Nine months ended September 30 | |||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||
$ | $ | $ | $ | |||||||||||
Salaries and short-term employee benefits | 1,395 | 1,261 | 4,062 | 4,006 | ||||||||||
Share-based payments | 19,136 | 4,585 | 53,283 | 8,453 | ||||||||||
20,531 | 5,846 | 57,345 | 12,459 |
Other related party transactions
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
$ | $ | $ | $ | ||||||||||||||||||||
Expenses – Travel | (i) | 503 | — | 841 | 271 | ||||||||||||||||||
(i)In the normal course of operations, the Company receives services from a company owned by a shareholder of the Company. The services received consist of travel services.
15. Supplementary cash flow disclosure
Nine months ended September 30 | |||||||||||
2022 | 2021 | ||||||||||
$ | $ | ||||||||||
Changes in non-cash working capital items: | |||||||||||
Trade and other receivables1 | (18,877) | 1,916 | |||||||||
Inventory | 38 | (339) | |||||||||
Prepaid expenses | 258 | (1,913) | |||||||||
Contract assets | (1,392) | (1,273) | |||||||||
Trade and other payables | 9,746 | 18,125 | |||||||||
Other current and non-current liabilities | (6,823) | (1,247) | |||||||||
(17,050) | 15,269 |
1 In prior periods, interest received from cash and cash equivalents was presented with changes in trade and other receivables within cash flows from operating activities. In the nine months ended September 30, 2022, the Company is presenting interest received in a separate line in the cash flow statement but all within cash flows from operating activities, which led to an immaterial reclassification of comparative figures of $117 for the nine months ended September 30, 2021.
20
Nuvei Corporation
Notes to Condensed Interim Consolidated Financial Statements
(Unaudited)
September 30, 2022 and 2021
(in thousands of US dollars, except for per share amounts)
16. Contingencies
From time to time, the Company is involved in various litigation matters arising in the ordinary course of its business. The Company is also exposed to possible uncertain tax positions in certain jurisdictions. Management does not expect that the resolution of those matters, either individually or in the aggregate, will have a material effect on the Company’s Condensed Interim Consolidated Financial Statements.
21