What happened
Shares of U.K.-based digital payments processor Paysafe (PSFE +1.98%) jumped 7.2% through 11:33 a.m. EST after the company reported Q3 earnings on Thursday.
Analysts expected Paysafe to post $353 million in sales for the quarter, but earn no profit. Paysafe beat these expectations, though, generating revenue of $366 million, and earning...no profit.
PSFE Paysafe Limited
NYSE · As of 4:00 PM ET 10/15/26
So what
That may not sound like great news for Paysafe, but today it seems to be good enough for investors (especially in light of today's positive inflation news -- inflation down to 7.7% in October). Meanwhile, at Paysafe, payment volumes grew 5% year over year and revenues were up 4% (and would have been up 10% but for unfavorable currency exchange rates).
As for profit, while it's true they rounded to zero dollars and zero cents per share, in fact Paysafe did earn $1 million in total profits -- a big improvement over last year's $147.2 million net loss. CEO Bruce Lowthers pronounced himself "pleased" with this result, and it seems Paysafe's shareholders agree with that.
Now what
Still, the quarter seems a bit lackluster to me, given the weak numbers. Guidance, too, was unimpressive. Looking ahead, Paysafe raised its revenue guidance slightly, to roughly $1.49 billion in revenue for the full year -- but that's really only flat against last year's revenues, which hardly seems like the thing 7% stock price rallies are usually made of.
Paysafe promised no profits for 2022 under generally accepted accounting principles (GAAP), either -- only $407 million or so worth of "adjusted" earnings before interest, taxes, depreciation, and amortization (EBITDA). Perhaps most telling of all, though, is that Paysafe plans to hold a reverse stock split -- 12 existing shares getting compacted down to one new share -- in December. The effect of this will be to lift Paysafe's apparent stock price into the $15 range. But really, the best way for a company to grow its share price is by improving its earnings so as to attract more investor interest -- not by reverse-splitting its shares.
The fact that Paysafe has chosen to do the latter suggests management doesn't see much prospect for the former.
