Payfare Inc. is a Canadian-listed payments company with a market cap of C$290 million, boasting C$85 million in cash and no debt. The company has carved out a dominant position in the niche market of instant payouts to gig workers upon completing a delivery or ride.
Despite partnering with major delivery companies like DoorDash, Uber, and Lyft, Payfare remains relatively unknown among U.S. growth investors. This scenario is expected to change due to several growth catalysts.
Business Overview
Founded in 2015, Payfare gained traction with platform gig companies starting in 2019, initially winning contracts with Uber, followed by Lyft and DoorDash. Unlike many U.S. fintechs, Payfare bootstrapped its operations without venture capital, raising funds from its founders and a 2021 IPO at $6/share.
The company has shown an impressive growth track record, expanding from 75,000 monthly active drivers in 2019 to over 1.5 million in 2024, a CAGR of 84%. Additionally, gross dollar value loaded grew from C$485 million to C$14.6 billion, a CAGR of 98%, and revenue surged from C$6 million to C$240 million, a CAGR of 109%.
Service Offering
Payfare partners with gig platforms to enable drivers to receive payments instantly upon completing their tasks. For example, the DasherDirect by Payfare program allows drivers to be paid immediately after completing a delivery. This service offers several benefits, including instant payouts, streamlined tax tracking, cashback rewards, and other perks.
Payfare earns revenue from interchange fees when drivers use the card or app for purchases, creating a seamless and frictionless experience for all parties involved.
Growth Opportunities
Payfare has three main growth pillars expected to drive 20% revenue growth and faster profit growth over the next five years:
Growth with Existing Clients: As platforms like DoorDash, Uber, and Lyft grow at a projected CAGR of 10-15%, Payfare will benefit from this base growth and increased program penetration.
International Expansion: Payfare plans to extend its programs to international markets with existing clients, currently not offering instant payment options.
Adding New Clients: Recently, Payfare won a contract with a big box retailer in Canada, likely Walmart, to power instant payments for gig drivers. This expansion into new verticals, including a partnership with ADP Canada for earned wage access, is expected to drive additional growth.
Financial Performance
Despite its success, Payfare’s stock has traded flat since its IPO. The company achieved profitability six quarters ago and has been expanding its profit margins. For instance, operating income grew by 320% year-over-year in Q1 2024.
Valuation
Payfare is projected to generate C$600 million in revenue, C$180 million in gross profit, $114 million in EBITDA, $91 million in free cash flow, and $1.95 in EPS by 2029.
Based on industry valuation metrics, the company could be worth between C$27 and C$39 per share by 2029, offering a potential 37% CAGR from the current price of C$6.06 per share.
Market Awareness and Listing
Currently listed on the Canadian TSX, Payfare generates 99% of its revenue in the U.S. This listing disparity contributes to its obscurity among U.S. investors. A potential move to the U.S. Nasdaq in the next 1-2 years could increase its visibility and close the awareness gap.
Risks
Despite its growth potential, Payfare faces several risks:
Earnings or Revenue Growth: If growth does not materialize as expected, the stock could suffer.
Customer Concentration: With DoorDash contributing over half of its revenue, the loss of a major customer could significantly impact the business.
Key Man Risk: The business relies heavily on a few key executives.
Payfare: Well-Positioned for Sustainable Growth
Payfare Inc. stands as a dominant player in the instant payout niche for gig workers. With its strong growth track record, strategic partnerships, and significant growth opportunities, the company is poised for substantial long-term growth.
While risks exist, the potential for high returns makes Payfare a compelling investment in the evolving payments landscape.
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Faith is an enthusiastic freelancer and regular contributor to numerous finance blogs, creating valuable pieces to educate individuals on finance and fintech options. As a skilled writer, Faith has created content for diverse industries—if it exists, she’s likely written about it!
