Payoneer (PAYO) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Total volume growth accelerated for the seventh consecutive quarter to 25% [9] - Total revenue grew by 19%, with revenue excluding interest income rising by 24% [9] - Adjusted EBITDA reached $69 million, with a 28% margin [9] - B2B volume grew by 57% in Q3, contributing to over 40% of year-over-year revenue growth excluding interest income [11] - Customer funds held by Payoneer increased by 13% to$ 6.1 billion, driving an 8% increase in interest income to $65 million [29] - Net income was$ 42 million, compared to $13 million in Q3 of the previous year [36] Business Line Performance - B2B business delivered 57% volume growth, accelerating from 40% growth last quarter [27] - Merchant services volume grew by 142%, and enterprise payouts volume grew by 29% [27] - SMBs selling on marketplaces saw 17% volume growth, driven by strong performance from large Chinese e-commerce sellers [26] - Card product growth exceeded 40% quarter-over-quarter, with consistent growth in the previous four quarters [79] Market Performance - ICP growth increased by 11%, with strength in APAC, LatAm, and China [8] - 10,000+ ICPs represent 85% of SMB volume, with both volume and revenue growing by over 25% in Q3 [16] - Payoneer's customer portfolio continues to evolve, with ICPs now comprising 28% of the overall base, up from 25% at the start of 2023 [16] Strategic Direction and Industry Competition - Payoneer is building a full-service financial platform for the cross-border needs of SMBs globally, focusing on B2B transactions and emerging markets [6][17] - The company is modernizing its platform, expanding its financial stack, and focusing on compliance and regulatory moats to drive growth [18] - Payoneer is positioned to capture a multi-trillion-dollar opportunity in cross-border B2B payments, supported by regulatory infrastructure, banking partnerships, and strategic alliances [17] Management Commentary on Operating Environment and Future Outlook - Management highlighted the company's momentum, driven by strong execution, strategic capital allocation, and disciplined growth [7] - Payoneer expects to continue delivering mid-teens growth in 2025, with a focus on B2B and marketplace businesses [41][66] - The company is actively managing interest rate sensitivity, with one-third of customer funds invested in US Treasury bonds and term deposits, and another third protected by interest rate floors [30][31] Other Important Information - Payoneer repurchased$ 21 million worth of shares in Q3 and has repurchased a total of $119 million worth of shares in the first nine months of 2024 [37][38] - The company is working towards closing the acquisition of a licensed Chinese payment service provider, expected in the first half of 2025 [38] - Payoneer raised its 2024 revenue guidance by$ 30 million, expecting full-year revenue between $950 million and$ 960 million [39][40] Q&A Session Summary Question: B2B SMB Trends and Upside Surprises - B2B volume growth accelerated to 57% in Q3, driven by strategic initiatives, customer acquisition, and improved customer experience [47][48] - Management expects B2B growth to continue outpacing overall business growth, with a long-term opportunity in the multi-trillion-dollar cross-border B2B market [49] Question: Revenue Deceleration and Transaction Costs in Q4 - Q4 revenue growth is expected to decelerate to mid-teens, consistent with medium-term targets, due to tougher comps and potential macro uncertainties [51] - Transaction costs are expected to increase in Q4 due to seasonal business mix shifts and higher take-rate business lines [52] Question: Marketplace Payouts Business and Market Share Gains - Payoneer's marketplace payouts business grew by 17% in Q3, driven by strong performance in China and cross-selling of card products [56] - The company is focused on expanding its marketplace ecosystem and adding new marketplace relationships [57] Question: Exposure to Chinese Goods Sellers and US Tariffs - Payoneer is confident in its resilience to potential US tariffs, given its diverse global customer base and focus on non-sensitive verticals [60] Question: Sales and Marketing Investment and ICP Growth - Payoneer is focusing on acquiring larger ICPs, with headcount in go-to-market remaining stable while prioritizing high-value customers [62][63] - The company is also investing in cross-selling products like workforce management solutions to drive ARPU growth [63][79] Question: Pricing Roadmap and Revenue Yields - Payoneer continues to execute on its pricing strategy, with $45 million of uplift expected in 2024 from pricing initiatives [69] - The company is launching new account tiers, such as the pro account, to further monetize its customer base [78] Question: ARPU Growth and Intranetwork Flows - ARPU growth of 20% in Q3 was driven by a mix of pricing, cross-sell, and customer acquisition strategies [82] - Payoneer is piloting intranetwork flow pricing, which could be a significant driver of future monetization [83] Question: Float Income and Margins in 2025 - Float income is expected to decline in 2025 due to lower interest rates, partially offset by balance growth and duration extension strategies [85] - Payoneer remains confident in achieving mid-20s EBITDA margins in 2025, driven by core revenue growth and operational discipline [86] Question: Skuad Integration and M&A Strategy - Payoneer is on track with the integration of Skuad, with cross-sell activities beginning to drive growth in workforce management solutions [88] - The company is actively pursuing tuck-in acquisitions to expand its product capabilities and drive ARPU growth [90]