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Payoneer (PAYO) - 2023 Q2 - Earnings Call Transcript
PAYOPayoneer (PAYO)2023-08-08 18:26
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Financial Data and Key Metrics - Q2 revenue increased 40% YoY to 207million,drivenbyhighermarginproducts,improvedmonetization,andgrowthinkeyB2Bregions[9]−AdjustedEBITDAof207 million, driven by higher margin products, improved monetization, and growth in key B2B regions [9] - Adjusted EBITDA of 56 million, nearly quadrupled YoY, representing a 27% adjusted EBITDA margin [4] - Q2 take rate was 131 basis points, up 30 basis points YoY and 9 basis points sequentially [14] - Customer funds held by Payoneer increased 8% YoY to 5.5billion,with5.5 billion, with 55 million in interest income earned from these balances [16] - Q2 net income was 46million,comparedto46 million, compared to 4 million in Q2 2022, with basic and diluted EPS of 0.12[19]BusinessLinePerformance−B2Bpaymentsvolumedeclined20.12 [19] Business Line Performance - B2B payments volume declined 2% YoY, but grew 12% YoY excluding proactive customer terminations made last year [5] - Strong traction in B2B business in service-oriented markets like APAC, SAMEA, and Latin America [5] - Total active ICPs grew 6% YoY, with 13% growth in APAC, SAMEA, and Latin America [6] - Largest ICPs (those with >10,000 monthly volume) grew 18%, contributing over 50% of total revenues [6] - Originations from first-time users increased 80% in Q2 [11] Market Performance - APAC, SAMEA, and Latin America saw 29% YoY volume growth, with Europe showing stable growth despite Ukraine war impacts [31] - China remains a significant market, with over 50% YoY revenue growth in Q2, driven by customer growth and ARPU increases [121] - New verticals in Europe, such as agricultural exporters, represent 30billioninpotentialannualvolume[10]StrategicDirectionandIndustryCompetition−FocusonacquiringICPs,improvingARPU,andexpandingproductofferingslikecommercialcardsandcheckoutservices[7][48]−Investmentsinplatformtransformation,includingcloud−basedinfrastructureandnewonboardingfunctionality[11]−Strategicacquisitions,suchasaChina−basedpaymentserviceproviderandanIsraelidataplatform,toenhanceunderwritingandriskmanagement[61][103]−Emphasisonoperatingefficiencyandcostdiscipline,withheadcountreductionsandstreamlinedoperations[21][102]ManagementCommentaryonOperatingEnvironmentandFutureOutlook−Managementexpectsinterestincometoremainameaningfulcontributortocorerevenueinthecomingyears[15]−Guidancefor2023adjustedEBITDAraisedto30 billion in potential annual volume [10] Strategic Direction and Industry Competition - Focus on acquiring ICPs, improving ARPU, and expanding product offerings like commercial cards and checkout services [7][48] - Investments in platform transformation, including cloud-based infrastructure and new onboarding functionality [11] - Strategic acquisitions, such as a China-based payment service provider and an Israeli data platform, to enhance underwriting and risk management [61][103] - Emphasis on operating efficiency and cost discipline, with headcount reductions and streamlined operations [21][102] Management Commentary on Operating Environment and Future Outlook - Management expects interest income to remain a meaningful contributor to core revenue in the coming years [15] - Guidance for 2023 adjusted EBITDA raised to 160-170million,reflectinga20170 million, reflecting a 20% margin [26] - Anticipated 10% core revenue growth in the back half of 2023, driven by B2B acceleration and new verticals [47][162] - Long-term focus on ICP growth, ARPU expansion, and leveraging technology for operational efficiency [87] Other Important Information - Payoneer repurchased 20 million of shares at a weighted average cost of $4.68 per share [20] - The company expects to use 25% of interest income for platform investments and stock repurchases [17] - New product features, such as real-time fund availability and enhanced commercial card functionality, aim to improve customer experience and drive growth [7] Q&A Session Summary Question: What drives the confidence in continued ICP growth in H2 2023? - Answer: Strong product offerings, focused go-to-market efforts, and exceptional partnerships globally enable continued ICP growth [68][69] Question: How are B2B headwinds in North America and Europe expected to evolve? - Answer: Outside of China, strong YoY volume growth is seen, with Ukraine showing resilience despite challenges [70] Question: What is the outlook for interest income and its sustainability? - Answer: Interest income is expected to remain a meaningful driver of revenue, with medium-term interest rates projected at 2%-3% [49][156] Question: What are the expectations for M&A activity? - Answer: The company continues to evaluate M&A opportunities, particularly in product extensions and regional footprint expansion [50] Question: How is Payoneer managing operating efficiency and cost discipline? - Answer: Recent headcount reductions and streamlined operations are driving greater efficiency, with a focus on high-growth areas [21][102]