Payfare announced in a press release on Thursday that the current term of its arrangement with DoorDash’s Dasher Direct card program will not be extended into early 2025.
Payfare is a platform that makes it simple and quick for businesses and gig workers to receive payment after a delivery. DoorDash pays its workers through the platform; these workers mainly pick up and deliver food orders to customers.
Its flagship product, DasherDirect, “has generated revenue that has been a substantial portion of Payfare’s total revenues,” according to the press release.
Given that the company has said that it will be revising its previously released financial guidance and results for this year, the loss is anticipated to have an impact on its total earnings in 2024.
The company’s biggest client is DoorDash.
A portion of the news release stated, “Payfare is working on securing new, large-scale EWA programs in both the gig economy and employee verticals and continues to see high growth with its other client programs.” “[Payfare] thinks that the DoorDash non-renewal’s impact might be lessened by the total Gross Dollar Value (GDV) from these opportunities.”
Payfare’s website lists Uber, Lyft, and Uber Eats as clients; these businesses also hire gig workers, much like DoorDash.
Following the disclosure, the company’s stock fell more than 75% on Friday during late-afternoon trade.
Hugo Chan, the director of Payfare, also quit for “personal reasons,” according to the press announcement.
This is a ‘negative event’ for company: Eight Capital4
Analysts at investment dealer Eight Capital referred to the move as a “negative event” for Payfare in a note they released on Friday.
Part of the statement says, “There is no denying that this is a negative event for the company and one that changes the company’s financial profile on a fundamental level.” “The company’s primary sources of income will now come from its recently extended contract with Lyft (Not Rated) and the recently introduced Uber Pro Card in Canada.”
Although the analysts do not anticipate any impact on third- or fourth-quarter predictions, they do anticipate a significant decline in profitability for the next year, given that DoorDash is estimated to account for 70–80% of Payfare’s sales.
Despite operating at a deficit, the note claims the company has obtained commitments that will allow it maintain its gross margin profile and, consequently, turn a profit the next year.
With the company’s numerous efforts to lessen the impact of opex, “…given the company’s capex light model, we do see a path to potentially EBITDA breakeven towards the end of F25,” the statement continues. “Having said that, Payfare would experience a shift from positive free cash flow to negative free cash flow at any point in time, placing pressure on the company’s $94 million cash balance.”
