Payfare and its largest customer, DoorDash, will not be renewing their partnership next year in a move that one investment dealer expects to result in major revenue losses for the wage access company.
In a news release issued Thursday, Payfare said that its agreement related to DoorDash’s DasherDirect card program will not be renewed beyond the current term in early 2025.
Payfare is a platform that allows gig workers and other companies to quickly and easily get paid following a delivery. DoorDash uses the platform to pay its employees, who primarily collect food orders and deliver it to customers.
The news release says that DasherDirect is its largest program, “and the revenue derived from the program has been a substantial proportion of Payfare’s total revenues.”
The loss is expected to affect its 2024 total earnings, as the company says that it will be withdrawing its previously issued financial guidance and earnings for this year.
DoorDash is the company’s largest client.
“Payfare continues to see high growth with its other client programs and is working on securing new, large-scale EWA programs in both the gig economy and employee verticals,” the news release reads in part. “[Payfare] believes that the aggregate Gross Dollar Value (GDV) from these opportunities could mitigate the impact of the DoorDash non-renewal.”
According to its website, Payfare’s clients include Uber, Uber Eats and Lyft – all of which are companies that employ gig workers like DoorDash.
The company’s stock dropped over 75 per cent on Friday during the late afternoon trading following the announcement.
In addition, Payfare’s director, Hugo Chan, has resigned due to “personal reasons,” the release said.
This is a ‘negative event’ for company: Eight Capital
In a note issued Friday, analysts at investment dealer Eight Capital called the exit a “negative event” for Payfare.
“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,” it reads in part. “The company will now be left with the majority of its revenue from its recently renewed Lyft (Not Rated) contract and from the recently launched Uber Pro Card with Uber in Canada.”
The analysts do not expect third-quarter or fourth-quarter estimates will be impacted, however it expects there to be a large decrease in earnings next year, as the report estimates DoorDash represents 70 to 80 per cent of Payfare’s revenue.
However, the note states that the company has secured commitments which will help it maintain its gross margin profile, and thus generate profit next year, after operating at a deficit.
“…Given the company’s capex light model, we do see a path to potentially EBITDA breakeven towards the end of F25, as the company has several measures to mitigate the opex impact,” it reads. “That being said, under any scenario, Payfare would go from FCF generation to being OCF negative, which in turn would put a strain on the company’s $94mm cash balance.”