Payfare Inc

TSX:PAY

Earnings Call Analysis

Earnings Call Transcript 2023-Q3

[Operator]

Good afternoon, ladies and gentlemen, and welcome to Payfare's 2023 Third Quarter Financial Results Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded.

I would now like to turn the conference over to Mr. Cihan Tuncay, Head of Investor Relations and Corporate Development. Please go ahead.

[Cihan Tuncay, executive]

Thank you, operator, and good afternoon, everyone. Joining me on the call this afternoon is Marco Margiotta, CEO and Founding Partner; and Charles Park, Payfare CFO.

Payfare would like to note that the company's remarks and answers to your questions today may contain forward-looking statements that are based upon management's current expectations. All such statements are made pursuant to the safe harbor provisions of and are intended to be forward-looking statements under applicable Canadian securities legislation.

When relying on forward-looking statements to make decisions with respect to the company, you should carefully consider the risks set forth in the Risk Factors section of the annual MD&A for the year ended December 31, 2022, which is available on www.sedarplus.ca.

Except as may be required by Canadian securities laws, the company does not undertake any obligation to update any forward-looking statements as a result of new information. We would also like to remind listeners that Payfare uses certain non-GAAP and supplementary financial measures to arrive at adjusted results to assess its business and to measure overall performance.

Payfare believes that these financial measures provide readers with a better understanding of how management views the company's overall performance. Throughout the call, we will also refer to a slide deck, which was posted on our website corp.payfare.com/investors.

I will now turn the call over to Marco Margiotta.

[Marco Margiotta, executive]

Thanks, Cihan. Let's turn on Slide 3. I'm once again proud to present another record operating quarter for Payfare. This is our fourth consecutive IFRS earnings positive quarter while generating a return on equity of 48%.

Our ROE profile in 2023 continues to track well ahead of the largest financial institutions in Canada. With our free cash flow growth -- while our free cash flow growth is industry-leading in the earned wage access space based on industry data that we track.

Our mission is to financially empower every worker with immediate access to earnings and wages in real time as work is performed. Our primary financial goal is to maximize long-term free cash flow per share. Our total addressable market is significant with over 72 million independent workers in the United States alone. And we think each and every 1 of them will benefit from an Instant Pay solution powered by Payfare.

We managed through our opportunities and challenges by executing on the most fundamental elements of our business. This creates a natural cycle of learning, process refinement and product enhancements in collaboration with our cardholders and gig platform partners. We judge our success by reducing worker acquisition costs for our partners and helping our cardholders earn more and keep more in their pockets.

We are proud to know that we have collectively achieved these goals alongside all of our key stakeholders, but there is still a long way to go to capitalize on the massive growth opportunities ahead of us.

Moving to Slide 4. We are pleased to provide fourth quarter revenue and adjusted EBITDA guidance of $50 million and $7 million, respectively, and we are well on track to meet our annual guidance provided in the first quarter. As previously disclosed, Payfare recently won 2 RFP processes to deliver instant payouts in digital banking experiences for globally recognized strategic partners.

Both of these opportunities were in our own backyard in Canada. In the third quarter, we were heads down working on setting up and integrating these new programs. In terms of impact of Payfare at scale, the combined opportunity could account for 10% to 15% of our active user base over time.

During the quarter, we signed a definitive agreement with 1 of the partners, an international big box retailer to provide earnings payouts to the retailers' delivery gig workforce.

We are on track to sign a definitive agreement with the second partner later in the fourth quarter as we continue to work on integration and new app development for that program. On new credit offerings, we have made progress with our gig platform and banking partners on overdraft.

Each of our platform partners have expressed their desire for an overdraft feature and we continue to work with our processing and banking partners to deliver on the needs of our customers. One of the new programs, 1 in Canada will have an overdraft feature built-in at launch.

Anonymized access for W-2 and T4 employees, large employers continue to knock on our door, asking for a solution given our leading track record in Instant Pay for the gig economy space. We are actively working to build payroll and time and attendance platform integrations to deliver on this massive market opportunity.

Finally, I would like to emphasize that as disclosed in our earnings materials, we intend to commence a normal course issuer bid to repurchase up to 5% of our outstanding shares. We believe our NCIB last year was successful and our free cash flow generation profile more than supports the funding required to buy back shares, which is our view and trading in -- which in our view, is significantly trading below its intrinsic value.

Turning to Slide 5. The third quarter was another record for revenue in GDV, both up 35% and 40% year-over-year, respectively. Our revenue and GDP growth continues to outpace our user growth, which demonstrates that Payfare is winning additional wallet share with our users.

Slide 6 highlights our user growth, which was up 32% year-over-year and in line with expectations based on normal quarter-over-quarter seasonality, which is also reflected in the earnings release of our gig platform partners. As disclosed in our press release and MD&A, as of October 31, we have 1.25 million active users.

In fact, our October user adds were almost double that of all the third quarter as we head into the seasonally strong fourth quarter. The macro backdrop continues to be positive for gig workers supply growth.

With that, I will turn it over to Charles for our Q3 financials.

[Charles Park, executive]

Thanks, Marco. Turning to Slide 7. We generated record revenue of $47.2 million, up 35% year-over-year. This increase was primarily driven by ongoing marketing initiatives and organic growth in each of our programs with DoorDash, Lyft and Uber.

Gross profit in the first quarter was also -- in the third quarter was also a record $12.2 million at a 26% margin. Gross profit dollars were up 77% year-over-year and up 10% from the prior quarter. Our gross margin primarily benefited from volume-based pricing improvements with our higher active user base in GDV volumes.

Specifically, I would like to emphasize that we have crossed through over $1 billion per month in GDV, which highlights the significant scale of our business, which is one of the key drivers in our gross margin expansion in the quarter. We continue to significantly expand adjusted EBITDA, which was $6.3 million in Q3, up 373% year-over-year and achieved a record margin of 13.3%.

As we grew our users in GDV in the quarter, we realized benefits in vendor pricing and scale. This was slightly offset by additional hiring in the quarter to deliver our new contract wins and product enhancements for existing partners this year, which we believe will drive long-term EBITDA and cash flow growth.

As a free cash flow positive company, we are not dependent on external financing to operate our business. And as our current and prospective partners evaluate the financial condition of their vendors, they can rest assured that Payfare will be there for the long term despite a challenging fundraising environment.

On Slide 8, we summarize our current financial condition. We ended the quarter with $56.4 million in cash. Our financial condition is strong. We have minimal capital needs to fund our organic growth opportunities as our core business is self-financing. Our balance sheet is well capitalized, and we remained at -- we remain well positioned to deploy capital to grow our business.

Finally, I would like to comment on our outlook for fiscal 2024. We are currently in the process of finalizing our budget for the year ahead, which will be reviewed and approved by our Board of Directors in December. Consistent with this year, our full year 2024 guidance, on revenue and adjusted EBITDA will be provided when we release our 2023 annual results.

Directionally, we expect the 2024 guidance to support a baseline of at least 20% year-over-year revenue growth on our existing programs by growing penetration levels before factoring in new contract wins and product offerings. Adjusted EBITDA as a percentage of revenue for our existing business is expected to closely mirror our Q4 2024 forecast.

I will now turn it over to Cihan for a capital markets update.

[Cihan Tuncay, executive]

Thank you, Charles. Let's look to Slide 9. This is a familiar chart that compares our share price performance with the ETFMG Prime Mobile Payments ETF since our IPO. We're happy to see that we have outperformed our benchmark by 30% over this period despite recent elevated market volatility.

Payfare is seeing best-in-class share price performance for technology companies that IPO-ed in 2021 in both Canada and the U.S. This outperformance is a direct function of achieving positive adjusted EBITDA generation positive free cash flow generation and positive earnings.

Slide 10 shows where our stock is trading relative to other high-growth payment -- high-growth payments companies and human capital management technology companies. I want to point out that all figures on this table are in U.S. dollars, and all forward-looking information reflects the analysts' consensus estimates and our 2023 revenue and adjusted EBITDA guidance.

I would also like to comment on the elevated level of share price volatility we've seen since Labor Day in early September. The broader equity markets, floating with correction levels over the past 8 weeks, there is been a sharp turn on the flight and liquidity choice. Our shares appear to have been in that trade as investors prefer more liquid and large comp stocks when equity markets are in flux.

Having said this, we have levers to pull to close the valuation gap with our peers. The first lever is expanding on adjusted EBITDA, cash flow and earnings, profitability, which we expect to continue through 2024. The second lever is expanding our gig platform partnerships. This is demonstrated by the recent 2 new contract wins that Marco just reviewed.

The third lever is new products. As also Marco mentioned, we are well on our way to launch an overdrop product and feature for our programs, which should maintain our momentum and increasing penetration with our partners. Importantly, we are ready to deploy capital for growth initiatives.

That being said, we are extremely disciplined with our capital, with our guidance principle that any deployment initiative must be accretive to Payfare on a per share basis. This simply means we will not overpay for acquisitions and we will manage our OpEx to a level to meet our free cash flow growth objectives.

Our advantage is that we are a self-financing business and its private market valuations pull back we will be ready to act on inorganic growth opportunities as they arise. And with that, operator, we are now ready to take questions.

[Operator]

[Operator Instructions] Your first question is from Hal Goetsch from B. Riley Securities.

[Harold Goetsch, analyst]

Great quarter. I wanted to ask about Earned Wage Access and the new partners. Can you give us a little bit of color on at least the first RFP sign, the kind of pacing cadence that, that might that those gate workers might come on the platform over the course of 2024 for our planning purposes.

[Marco Margiotta, executive]

It's Marco. I'll take that one. I would say each 1 is going to be slightly different. But I would say the bulk of the activities would probably occur in the second half of the year. We expect both to launch early January. But as you would expect, it's not kind of a full tilt open all levers kind of scenario.

It's done on a very methodical basis, where we kind of target cohorts of the database and ensure that everything is working the way it should. That being said, the quick answer is what I first stated, which will be the second half of the year, but it's kind of a progressive growth throughout. So a little bit of activity in the first quarter certainly more in the second quarter, and then we anticipate being full till come Q3, Q4.

[Harold Goetsch, analyst]

Okay. All right. And the next question would be on your core customers, the core platforms you service DoorDash, you're off to a great start. Is this -- was this above your expectations this early October start? And what are your thoughts on the remainder of the year as it's a very seasonally strong period like last year, you added 130,000. You think you're shrinking to something like that? Or is it -- is October usually the biggest month out of the quarter?

[Charles Park, executive]

Yes, I can take that. It's Charles. In terms of our expectations for Q4, what I would say is that traditionally, we track very well to kind of our partners, particularly DoorDash in terms of their earnings. If you look -- review their highlights from their earnings call last week, even though quarter-over-quarter growth largely mirrored what we had for -- from Q2 to Q3.

And they're factoring kind of a high seasonal kind of growth activity in Q4 as well. So obviously, October, we have some insight into those numbers in terms of user growth, which is quite strong. And what I would say is November and December typically in the past has always been a strong month for us. So we do anticipate to kind of benefit from a going sort of like off of the growth DoorDash typically sees in this quarter as well, along with Lyft and Uber as well.

[Operator]

Your next question is from Joseph Vafi from Canaccord.

[Joseph Vafi, analyst]

Nice to see the good results here once again. So congrats on that. Just a couple of quick questions here. First, maybe we kind of talk on that EWA opportunity a bit. I know you said that you're getting a lot of inbounds on it, and you mentioned it and you talked about it a bit, but maybe kind of drill down and if you have a little more color you can provide here, that would be great.

[Marco Margiotta, executive]

Joe, it's Marco. Thanks for the question. I'll be a little bit reluctant to kind of give too much detail here, but I will say it's coming from both large employers that are reaching out inbound directly seeking if we offer services in both the U.S. and Canada. .

It's also coming from large payroll providers looking for a partner to either join their marketplace or even a complete white label solution for their product offering for their own EWA offering. And so -- that sums it up. It's a good mix of everything. I think what I would say is if you look to the industry and look at some participants out there that offer EWA services, including some of the payroll companies and some of the numbers they're putting out -- the numbers are staggering.

The space continues to develop faster than it's ever been. I think it's got that momentum paradigm shift moment in time where there's definitely a lot of activity that's being kind of sped up once 1 of your industry players, much like we saw on the gig side, once 1 of the players in the gig sides decided to make move to an Instant Pay feature it felt like it was only a matter of time before the other competitors kind of came ahead and did it.

And so we're starting to see that race. We think it started in the last quarter and now it's coming fast and heavy. So I think there's great market adoption. And I think just by having even some of the big banks out there are getting involved as well, it's a clear sign that the race is on.

[Joseph Vafi, analyst]

That's great to hear, Marco. Is there any more color you can provide? Do you think that in terms of your -- I mean, it's super early, obviously, and it's kind of hard to kind of put a playbook together right now. But is there a road map or something we should think about for 2024?

Do we think that -- we have EWA as part of the business in 2024? Or how should we think about it, at least, I guess, in how you're thinking about how it could be added to Payfare over time.

[Marco Margiotta, executive]

Yes. Good question, Joe. So inorganically, there's going to be some opportunity there. We've been looking at it for quite some time looking for an acquisition that would make sense. We've seen private valuations come down, but not to the extent we feel comfortable making any moves.

It's just some of the numbers are still well beyond rational kind of valuations that we see in the public markets. And so that being said, it's made it difficult, but it's also more well defined with our scope and what our interest is in the space based on the learnings of what we've done by popping the hood in a few different instances. And so -- that being said, we do think that there's a massive opportunity to kind of partner directly with payroll providers.

And I would say in 2024, that would be the activity I would see first and foremost. There could be some marketplace opportunities where we show up within certain offerings that are offered to many EWA players within a payroll ecosystem. But I would say directly partnering with that payroll provider to kind of be their white label would be similar to what we do for the gig players out there. And I think that's what we would expect on the W-2 and T4 side once we hit to the broader -- or once we get to the broader EWA space?

[Joseph Vafi, analyst]

Great. And sorry, I'm going to sneak 1 more in on what -- you had a comment on, I think, Charles did on 20% growth on existing programs maybe, I guess, maybe on users. Is there anything else that -- any more color to drill down on there on relative to which of your partners or how you think that kind of -- that continued expansion with those partners continues.

[Charles Park, executive]

Sure. So Joe, what I'll say is, obviously, we'll have the more robust and detailed kind of answers to this once we finalize that budget process. But to the extent I can kind of share I would say that it's probably largely coming from Lyft and DoorDash, the growth that we're talking about as well as Uber.

So all 3 kind of horsemen are kind of contributing to 2024 to varying degrees. Obviously, with DoorDash, we already have a pretty impressive penetration and growth rate and establishment of a large base. So from a percentage perspective, if you're asking, probably Lyft and Uber will probably be doing some of the heavy lifting from that perspective.

But we still see significant growth opportunities within our existing DoorDash penetration, working with DoorDash to kind of implement new marketing initiatives to kind of grow that base and continue to onboard new drivers.

[Operator]

Your next question is from Mike Rizvanovic from KBW Research.

[Mehmed Rizvanovic, analyst]

A couple of quick ones for me. So on the on the announcement on the 2 new partners or potential partners that you're going to be rolling out in early January. Marco, so I'm just reading the press release, it says retailers delivery gig workforce in Canada. I'm just trying to better understand what that means.

If you can't give us detail on the specifics that's fine. Is this like a captive gig platform? Like I'm just tying to understand are the economics of the same? Is this just adding GDV and the economics are exactly the same as what you have with DoorDash and Lyft?

[Marco Margiotta, executive]

Mike, thanks for the question. So it's a very similar construct, Mike, but I don't want to dive too much into details, but the reality is it will all come out in January once the partner that has signed on is willing and able to kind of have us disclose what the activity will be.

For now, it's kind of a new way to kind of approach the space in terms of how they deliver last mile from the retail locations or warehousing. And so it's a significant move for them in the Canadian marketplace. And I think there's going to be some opportunity to kind of scale it beyond that because they are a global retail outfit.

And so I would say the economics will be more or less similar to what we would see elsewhere. But it all depends on what the average earned is earning. And so in this case, if you want to bucket all last mile delivery into that same bucket as some of the other traditional gig platforms that are out there, it wouldn't be anything significantly different.

[Mehmed Rizvanovic, analyst]

Okay. And then the fact that it's the gig workforce in Canada, does that mean Canada is sort of like a test bed and you maybe have expansion outside of Canada with that same partner online?

[Marco Margiotta, executive]

That's always the goal. And so collectively, now, you could see even through our I2C announcement that kind of gives some visibility as to what's happening here. If it's working in your own backyard, you know the economics are beneficial and you've successfully rolled it out.

I guess the next question becomes how do you replicate it and stamp it out so you can get those benefits elsewhere in the world. And so -- in some cases, we've been getting ahead of it. In others, we have simultaneous conversations going on and how we kind of roll this out globally.

Just being that we're in the Canadian market and we're in market with an infrastructure that we're rolling out for these next 2 RFPs, there's already a discussion on utilizing that for other programs, including the paid app itself. And so once you roll out that infrastructure, the scalability of it is there.

Similar to what we did in the U.S., we're now replicating in Canada, and we're getting all our Canadian infrastructure up to snuff with what we offer in the U.S., which is best-in-class.

[Mehmed Rizvanovic, analyst]

Okay. Got it. And then just maybe 1 quick 1 for Charles. On the 20%, what does that embed in terms of penetration for DoorDash and Lyft in terms of what the incremental change might be to get that 20%. I feel like 20% seems a bit light. And you could even see DoorDash outgrow 20% just on the activity level as they expand their own business.

So is that -- is it fair to say that the 20% is maybe a somewhat conservative number and based on just top line growth or top line or just activity for DoorDash and Lyft in general. And your penetration deepening penetration into the actual gig drivers has potential beyond that 20%?

[Charles Park, executive]

Yes. The short answer is yes, Mike. I mean, obviously, before we finalize our budget and get it approved by the Board, we're somewhat hesitant to kind of open the kimono and just provide everything. We wanted to provide obviously our most conservative outlook. So at least there's a baseline that you can at least imagine what 2024 can be.

But you're right. Like I think if history serves right like we've always surprised to the upside especially on the revenue growth side as well. So 20%, I think, is a pretty conservative number. I'm sure we could probably do better. But in terms of the exact numbers or the top end of that range, probably roll that back until we report our results next year.

[Operator]

Your next question is from Adhir Kadve From Eight Capital.

[Adhir Kadve, analyst]

Maybe just on the work that needs to be done. Marco, you mentioned an early January rollout for the 2 new partners. And you said your head down kind of working on those integrations. Can you give us a sense of what's left in kind of the last 7 weeks of the year here to get you up and running in January?

[Marco Margiotta, executive]

Yes. I mean, keep in mind, a lot of the activity isn't necessarily on our part. It's more of the collective effort, including effort that we have to make as well as our partners and new partners. So it's a collective effort on that front. The things that they need to do because they're possibly first time rolling out a set of programs.

In our case, because we are rolling out new infrastructure in Canada in the Canadian market, we've had the MVP products we've had in place since inception 7 years ago. It's massively different than what we offer in the U.S. And so whether it's integrating new disbursement methods, processing capabilities, new vendors that we have in the U.S. that aren't necessarily deployed in the Canadian market, a whole gamut of different things that need to be moved over.

And so for the most part, that's done on our end is just a function of the partners and how fast they can move if I'm just laying it out there. And so there's still a bit of -- bit to do, but we're more than confident we can get it launched within the time frame we mentioned, which has always been late Q4 or early Q1.

[Adhir Kadve, analyst]

Okay. Perfect. And then maybe just on the ITC renewal. I fully understand that as you grow and as you scale, there's some scale discounts in terms of your processor charges. But I would assume that, that contract was signed when you guys were a much smaller organization.

And now that you're a much larger organization, much higher GDV, I think Charles mentioned $1 billion a month getting processed through your system there. Was there any incremental margin improvements just outside of just the overall growth in GDV from the renewal?

[Charles Park, executive]

Yes. Adhir, it's Charles. There were, and that's -- you saw a little bit of that obviously coming through in Q3 as well. And we expect that to obviously continue into 2024 as our volumes increase as well.

What I would say is it's not a one-and-done type of thing. Our negotiations with our top vendors is ongoing. And we're going back to them. Obviously, we always have good news to deliver in terms of our growing business and volumes, and they're happy to obliged to keep us happy as well. So it's a partnership. We we give them more business, and we expect better pricing that ultimately reflects in our bottom line as well, which we'll share more details at least what that looks like from a 2024 perspective when we and provide that guidance in March. But short answer is yes. It does help us.

[Adhir Kadve, analyst]

Okay. Awesome. And then maybe I'll sneak 1 last 1 here. Just on the overdraft protection product. What's the progress there? And when are you expecting to launch that for your partners because I think Marco mentioned that it's going to be live with the new partner in January.

[Marco Margiotta, executive]

It's still tough to say. There's still a lot of things that have to be figured out in order to get that done. But I would say in 2024, I would expect the vast majority of clients out there or giga platform partners specifically to have that product in hand. And so can never put a sum on it just because things move around.

And so I'm reluctant to kind of give a date without having absolute certainty, and that's always tough given the changing needs of what our platforms or gate platform partners kind of need. And so it's constantly changing for us. And so it's constantly going to move our time lines around depending on their needs.

Sometimes different things take priorities. And so we've experienced that. We've been doing this for 7 years plus. We know that things change for the right reasons. And so there's work to be done on our end, no doubt, but that still is mainly driven by the platform themselves. They're the ones that have to kind of sign in or sign up for the ultimate kind of commitment to make sure that we can go to market with the right product that suits the needs of each big platform differently than others.

And so that's where it gets a little bit complicated for us. It's not a one-and-done exercise. The vast majority of the infrastructure is the same, but how you go to market, who's paying for what, how do the economics work? Different regulatory issues depending on which market you're in. There's a whole slew of different things that have to be considered. We're pretty much through those all.

It takes a long time to get through all that noise, but now it's more of a function of -- this is it. We've all agreed that this is what's going to work for your specific platform, and we're ready to go when you are. And so to sum it up, a little bit reluctant to kind of give a firm date, but I would say it's going to be in 2024.

And I would say probably more in the third quarter and beyond or second half of the year, H2.

[Operator]

Your next question is from Josh Siegler from Cantor Fitzgerald.

[Joshua Siegler, analyst]

You've laid out quite a few growth initiatives as we head into next year, including new partnerships, potential international expansion, EWA, I was curious what you expect to be most incremental in 2024? And how you're thinking about splitting time and resources between all these different initiatives?

[Marco Margiotta, executive]

Great question, Josh. I think -- it's never 1 question every business ask, right, limited resources, how do you deploy them. And so we're not shy of actually pulling resources of 1 project to kind of land in another. And that's kind of sums up the overall view of how the payback is kind of coming along.

We got 2 new contracts, and there's probably a couple more to come. We don't have growth at all costs. So it's not like we go higher like Matt to kind of redact them later. It's a function of moving those resources around the most efficient way possible to tackle the best economic beneficial programs that are out there first, in order of that priority.

And so that being said, first and foremost, the contracts that we have already won that we'll be deploying early January, most likely, if not late December, would be the biggest priority, and that will have the most immediate impact. In terms of other things that can kind of get out there, it's going to be further penetration of the existing user bases that are the easiest levers to pull and so there will be new products out there that will emphasize greater penetration.

Over and above that, EW activity in the second half of the year is what I would expect. It's -- I would say most likely, if it's not done inorganically through an acquisition or some type of partnership there would likely be a significant payroll provider that we've partnered with to offer EWA services directly to their clients.

And so China tough to lay out. I think that's what seems logical at this point. There could be a scenario where some of those initiatives get pulled forward or even back. But so far as it stands, that's the kind of way we're kind of seeing everything roll out.

In terms of global expansion, there are discussions being have. The challenge with that is once you go into that market, it's a bit of heavy lifting. There's probably a couple of quarters of work to do. But once that's in market, then you can scale from there. And so I wouldn't imagine any of that activity happened unless it was the second half of the year.

Those initiatives will probably require some new hires to build that infrastructure and keep it maintained. But I know that's a lot to cover, but it was a pretty open-ended question, but I think that's the way we would see it play out as it stands right now.

[Joshua Siegler, analyst]

No, that's very helpful. And then dialing in specifically into the credit product, I was wondering how you're thinking about launching a credit offering, especially given increased concerns over consumer credit quality moving forward.

[Marco Margiotta, executive]

In our case, Josh, it's not about building a balance sheet and risking capital that way. In fact, what we want to get out of it is mostly more penetration and greater use of the card greater adoption and greater retention.

And so in terms of balance sheet risk, we'll never expose afar to any type of significant balance sheet. Our primary focus is going to be enabling the activity so that our cardholders are adopting the product greater or greater adoption as well as greater LTV -- or sorry, lifetime value of that cardholder. And so -- there will be more a function of that as opposed to any traditional credit exposure and worrying about making a spread. It's certainly more about retention than anything else, adoption of retention.

[Operator]

Your next question is from Stephen Boland from Raymond James.

[Stephen Boland, analyst]

Couple of questions. So Marco, I just want to understand like this new partnership, EWA, you've always said that's a challenge for Payfare for certain businesses. You need boots on the ground. You didn't want to chase waiters and waitresses or things -- those types of businesses.

So is the way to think about your EWA offering going forward that it's definitely going to be less users but higher sorry, in terms of what you're looking for, what partnerships that you want to replicate with the 1 that's coming out.

[Marco Margiotta, executive]

Yes. Steve, I would say that the focus for us and what we've seen in knowing of popping the head of a few different companies and looking at the EWA space grow, and we've seen it since inception, right? We've always envisioned getting into that space. We think we took a better path, much better economics.

And that stems from the same reason why I think we'll take the same approach to get into the W-2, T4 employee side. A B2B model is really what makes the most sense because of that user cost of acquisition. You'll hear me say there's a lot, but the unbanked and underbanked are there for a reason.

It's because the big banks don't want to spend the cost of acquisition to go hunt down a relationship that might not be economically feasible when you're paying so much to find them. And so in our case, a partnership with a payroll company makes a lot of sense where the funnel is already there for you and you're not boiling the ocean to find the large employers.

We also think long term, a lot of payroll companies will migrate to a model that sees them make the bulk of the economics rather than using their data as a monetization strategy. The lost opportunity of actually gaining all the EW activity and momentum on your own is far greater than selling some of the data used only to provide it to another EWA provider out there. And so we think long term, that's the better path and so that's kind of what we're focused on now.

And some of the inorganic opportunities are leading towards that as well as how we position ourselves and market ourselves when we're talking to potential payroll providers that are absolutely thinking about it if they haven't already, it's probably too late. But it feels like the race is on. I've said it a few times, a lot of payroll companies are all over this.

[Stephen Boland, analyst]

Okay. That's great. And then maybe the second question. Your capital allocation, obviously, you put the NCIB in -- you've had modest use of it. I mean have you thought about putting a modest dividend in and getting you on to some of the fun lists that are just focused on income, and it can be very modest.

It just seems like you're very frustrated, obviously, people to help buys on the stock are frustrated too with the stock price. So what about putting a modest dividend in -- with over $50 million in cash at this point? What made you continue thinking about the NCIB as the best use of capital allocation?

[Marco Margiotta, executive]

Yes. I would say at this point, I think it's a signal to the market that there's volatility in the stock, no doubt. When your stock drops 40%, and everyone's kind of looking around the reason why. I think it's becoming more clear that it's just volatility and a low liquidity kind of scenario where people have to sell, they need to and that's what it is.

I think in terms of a dividend, there's just way too much opportunity out there. where we think the opportunity can garner a much better ROI than paying a dividend. And we also think with the intrinsic value of our share price, the quickest kind of bet until we kind of get our hands around some inorganic growth would be to do just that.

But long term, you can never play it out. We just think for the immediate kind of scenario we're in now buying back stock seems like the best use case until that inorganic opportunity presents itself.

[Operator]

There are no further questions at this time. Please proceed.

[Cihan Tuncay, executive]

Thanks, everybody, for joining the call this afternoon, and we will see you next quarter. Thanks. Goodbye.

[Operator]

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect.