Q4 2023 Payoneer Global Inc Earnings Call
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Operator: Good morning. Thank you for standing by. Welcome to Payoneer's fourth quarter and full year 2023 earnings conference call. At this time, all lines have been placed on mute to prevent any background noise.
Good morning, Thank you for standing by welcome Japan years fourth quarter and full year 2023 earnings conference call. At this time all lines have been placed on mute to prevent any background noise.
Operator: Following the speaker's remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded. I would now like to turn the call over to Michelle Wang, Payoneer's VP of Investor Relations. Thank you, operator.
Following the speakers remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded I would now like to turn the call over to Michelle Wang pioneers VP of Investor Relations. Thank you operator with me on today's call are <unk>, Chief Executive Officer, Jon Caplan, and painter, Chief Financial officer would be or doing it before we begin.
Michelle Wang: With me on today's call are Payoneer's Chief Executive Officer, John Kaplan, and Payoneer's Chief Financial Officer, Bea Ordonez. Before we begin, I'd like to remind you that today's call may contain forward-looking statements that are subject to risks and uncertainties. For more information, please refer to our filings with the SEC, which are available in the Investor Relations section of Payoneer.com. However, actual results may differ materially from any forward-looking statements we make today.
I'd like to remind you that today's call may contain forward looking statements, which are subject to risks and uncertainties for more information. Please refer to our filings with the SEC, which are available in the Investor Relations section of painting or Dot com actual results may differ materially from any forward looking statements. We make today. These forward looking statements speak only as of.
Michelle Wang: These forward-looking statements speak only as of today, and the company does not assume any obligation or intent to update them except as required by law. In addition, today's call may include non-GAAP financial measures... These measures should be considered in addition to, and not instead of, GAAP financial measures.
Today, and the company does not assume any obligation or intent to update them, except as required by law. In addition, todays call may include non-GAAP measures. These measures should be considered in addition to and not instead of GAAP financial measures reconciliations to the nearest GAAP measure can be found in today's earnings press release, which is available on our website.
Michelle Wang: Reconciliation to the nearest GAAP measure can be found in today's earnings press release, which is available on our website. Additionally, please note we have posted an earnings presentation supplement alongside our earnings press release on investor.payoneer.com. All comparisons made on today's call are on a year-over-year basis, unless otherwise noted. With that, I'd like to turn the call over to John. Good morning.
Additionally, please note we have posted an earnings presentation supplement alongside our earnings press release on Investor Dot <unk> Dot Com all comparisons made on today's call are on a year over year basis, unless otherwise noted with that I'd like to turn the call over to John for Beacon.
Good morning.
John Kaplan: Thank you for joining us today. In 2023, we delivered 32% revenue growth and a 25% adjusted EBITDA margin. Our strong performance is the direct result of our focus on our ideal customers, the interest we earn on the funds our customers hold in their Payoneer accounts, and our disciplined approach to unlocking increased efficiency. As we exit 2023, the key performance indicators of our business are all pointing in the right direction. We have approximately 2 million active customers and 516,000 who meet our ideal customer profile, or ICPs.
Thank you for joining us today.
In 2023, we delivered 32% revenue growth and 25% adjusted EBITDA margin.
Our strong performance is the direct result of our focus on our ideal customers interest we earn on the funds our customers hold and theyre paying your accounts.
Our disciplined approach to unlocking increased efficiency.
As we exit 2023, the key performance indicators of our business are all pointing in the right direction.
We have approximately 2 million active customers and 516000, who meet our ideal customer profile or ICP.
John Kaplan: We grew our ICPs by 6% in 2023. We increased ARPU for our 2 million active customers by 36% and by 9% when you exclude interest income. We generated $66 billion of annual volume, up 11%.
We grew our ICP is by 6% in 2023.
We increased <unk>, four 2 million active customers by 36% and by 9% when you exclude interest income.
We generated $66 billion of annual volume up 11%.
John Kaplan: We grew total take rate by 21 basis points in 2023. We are trusted by our customers, evidenced by over $6 billion of customer funds held in Payoneer accounts; customer funds were up 9% year over year. In 2023, adjusted EBITDA of $205 million, more than quadrupled versus 2022. I'd like to put our results in context.
We grew total take rate by 21 basis points in 2023.
We are trusted by our customers evidenced by over $6 billion of customer funds held in pioneer accounts customer funds were up 9% year over year.
2023, adjusted EBITDA of $205 million more than quadrupled versus 2022.
I'd like to put our results in context.
John Kaplan: We've discussed before that we primarily serve SMBs directly, although we also have direct relationships with certain enterprise clients. Our S&P customer business represents 75% of our volume and approximately 90% of revenue. S&P Customer Volume enters the Payoneer account from marketplaces, B2B transactions, direct-to-consumer sales from a customer's web store, and when a customer loads funds from their local bank account. S&B customers use our Payoneer account to hold multi-currency funds and manage their accounts receivable and accounts payable with overseas customers, suppliers, vendors, and partners. Our S&B customers are valuable because we have a branded relationship with them and are able to cross-sell more of the Payoneer financial stack over time. We also operate an enterprise business in which large marketplaces use our payment rails to make payouts directly to a payee's local bank account. This is a scaled, lower-risk offering, and our enterprise clients benefit from our extensive breadth and geographic reach. And because we send payments directly to the recipient's bank account, we don't own the S&B relationship and have, therefore, limited opportunity to drive greater monetization or product adoption over time.
We've discussed before that we primarily serve smbs directly.
Though we also have direct relationships with certain enterprise clients.
Our SMB customer business represents 75% of our volume and approximately 90% of revenue.
Sandy customer volume enters the pay in your account from marketplaces, <unk> transactions direct to consumer sales from our customers web store and when a customer loads funds from the local bank accounts.
SMB customers use are paying your account to hold multi currency funds and manage their accounts receivable and accounts payable with overseas customers suppliers vendors and partners.
Our SMB customers are valuable because we have a branded relationship with them and are able to cross sell to them more of the paint or financial stack over time.
We also operate an enterprise business in which large marketplaces use our payment rails to make payouts directly to appease local bank accounts.
As a scaled lower risk offering and our enterprise clients benefit from our extensive breadth and geographic reach.
And because we send payments directly to the recipients bank account, we don't own the end SMB relationship and therefore limited opportunity to drive greater monetization for product adoption over time.
John Kaplan: To grow our business, we are increasing the number of ICPs on our platform, which in turn can drive more volume into Payoneer accounts. We are also enhancing our AP tools and adding to our financial stack to increase our utility to customers. I became the sole CEO of Payoneer almost exactly one year ago today, reflecting upon the progress we have made in 2023.
To grow our business, we are increasing the number of ICP is on our platform, which in turn can drive more volume into paying your accounts were.
We are also enhancing our AP tools and adding to our financial stack to increase our utility to customers.
I became the sole CEO of pain here almost exactly one year ago today.
<unk> upon the progress we have made in 2023.
John Kaplan: Thumbnail We bolstered the experience and skills among our executive team and our board of directors. We've become an even more S&B-centric company, and our focus on ICPs, ARPU, and cost-to-serve is resulting in greater organizational clarity and focus, which we believe will drive long-term profitable growth. We delivered 6% ICP growth in 2023, including faster growth of 13% in our higher take rate regions of APEC, SAMEA, and LATAM. We also delivered 15% growth in our larger, higher value ICPs that do more than $10,000 a month in volume. We aligned the market organization to our most valuable customers and the biggest opportunity market.
Some highlights.
We bolstered the experience and skills, among our executive team and our board of directors.
And even more SMB centric company and our focus on ICP is <unk> and cost to serve is resulting in greater organizational clarity and focus which we believe will drive long term profitable growth.
We delivered 6% ICP growth in 2023, including faster growth of 13% and our higher take rate regions of APAC EMEA and Latam.
We also delivered 15% growth in our larger higher value ICP that do more than $10000 a month in volume.
It aligns our the market organization to our most valuable customers and biggest opportunity markets. We recruited new leadership to drive the modernization of the <unk> platform. We are increasing the velocity of which we released new tools and features and are focused on driving improved monetization.
John Kaplan: We recruited new leadership to drive the modernization of the Payoneer platform. We are increasing the velocity of which we release new tools and features and are focused on driving improved monetization, faster activation, and increased customer engagement. We announced two acquisitions in 2023, closing a small acquisition in the data space to support our working capital business, and we continue to work towards closing our acquisition of a licensed PSP in China, which is subject to local regulatory approvals and customary closing conditions. We drove our account self-funding to nearly $500 million in 2023 through the strength of our AP solution. This represents a new source of volume entering Payoneer accounts. Additionally, we meaningfully reduce the operating losses on non-ICP customers. In 2022, non-ICPs resulted in approximately $25 million in operating losses.
Oster activation and increased customer engagement.
We announced two acquisitions in 2023 closing a small acquisition in the data space to support our working capital business and we continue to work towards closing our acquisition of a licensed PSP in China.
It is subject to local regulatory approvals and customary closing conditions.
We drove our account self funding to nearly $500 million in 2023 due to the strength of our AP solution.
This represents a new source of volume entering paying your accounts, we meaningfully reduced the operating losses on non ICP customers.
In 2022, non Icp's resulted in approximately $25 million of operating losses, we have.
John Kaplan: We've cut that by a third in 2023 as we increase our monetization of this segment via our pricing initiative. We lowered the average cost of a customer inquiry by over 40% as of the fourth quarter versus a year ago. We reduced our total employee headcount by 8% year over year.
Cut that by a third in 2023 as we increased our monetization of this segment VR pricing initiatives.
We lowered the average cost of a customer inquiry by over 40%.
As of the fourth quarter versus a year ago, we reduced our total employee head count by 8% year over year.
John Kaplan: And we initiated Payoneer's first share repurchase program in May of 2023 and in December increased the authorization to up to $250 million. We are proud of the hard work by our team to deliver these strong results and accelerate our progress. We're working to drive ICP acquisition, increase retention, and improve customer monetization. In our B2B and merchant services businesses, we believe we have a $6 trillion opportunity and are seeing product market fit and strong customer demand, specifically in B2B. Our B2B business drove over $7 billion of volume into Payoneer accounts in 2023, and we expect volumes to grow by 25% in 2024. B2B growth accelerated in the second half of 2023 as we saw improved acquisition in the service-oriented markets we are focused upon.
And we initiated painters first share repurchase program in May of 2023 and in December increased the authorization to up to $250 million.
We are proud of the hard work by our team to deliver these strong results to accelerate our progress we're working to drive ICP acquisition increased retention and improve customer monetization in our <unk> and merchant services businesses. We believe we have a six trillion dollar opportunity and are seeing product.
Get fit and strong customer demand specifically in <unk> or.
<unk> business drove over $7 billion of volume into paying your accounts in 2023, and we expect volumes to grow by 25% in 2024.
<unk> growth accelerated in the second half of 2023, as we saw improved acquisition and the service oriented markets. We are focused upon.
John Kaplan: We delivered 28% volume growth in APEC, CIMIA, and LATAM in 2023. And these fast-growing, higher take-rate regions now make up 42% of B2B volume, up from 35% in 2022. In 2024, we plan to continue focusing our B2B sales efforts on large ICPs in service-oriented markets and further differentiate our service level based on customer size. We also plan to introduce more customer segment-specific pricing within the B2B business to drive greater stickiness and expand on product functionality to better cater to the needs of our larger ICPs. We're confident that successful execution of these initiatives will drive accelerating growth in our B2B business. For example, our merchant services business ended its first full year with volume growth of over 400 percent. Fourth quarter volume of over $100 million was up 61% sequentially and included record sales during the Black Friday and Cyber Monday weekend.
We delivered 28% volume growth in APAC, EMEA and Latam in 2023, and these fast growing higher take rate regions now make up 42% of <unk> volume up from 35% in 2022.
In 2024, we plan to continue focusing our <unk> sales efforts on large ICP is in service oriented markets and further differentiate our service level based on customer size.
We also plan to introduce more customer segment specific pricing within the <unk> business to drive greater stickiness and expand on product functionality to better cater to the needs of our larger ICP.
We're confident that successful execution of these initiatives will drive accelerating growth in our <unk> business.
Our merchant services business ended its first full year with volume growth of over 400%.
Fourth quarter volume of over $100 million was up 61% sequentially and included record sales during the Black Friday and cyber Monday weekend.
John Kaplan: Our customers that sell direct to consumers want to receive this portion of their international remittances into their Payoneer account. We believe the $150 billion D2C payments market is a natural extension for Payoneer, given our strong branded relationships with good sellers in these emerging markets. Today, we have over 600 customers in our merchant services business using our checkout products, approximately half of which are net new to Payoneer. As of December, our merchant services customers on average receive over $60,000 in monthly volume, significantly larger than our ideal customer profile.
Our customers that sell direct to consumers want to receive this portion of their international AOR into Theyre paying your account.
We believe the 150 billion DTC payments market is a natural extension for pain here, given our strong branded relationships with good sellers in these emerging markets today, we have over 600 customers in our merchant services business using our checkout product.
Approximately half of which are net new to pay an ear.
As of December merchant services customers on average receive over $60000 of monthly volume.
Significantly larger than our ideal customer profile as.
Bea Ordonez: As we introduce this product to the market, we anticipate our momentum to continue. We have strong momentum coming into 2024. We are making progress at pace to capture our multi-year opportunity and to more reliably and securely connect the world's 80 million SMBs to the digital global economy. I'll now hand it over to Bea to discuss financial results and our 2024 guidance in more detail. Thank you, John, and thank you to everyone for joining us.
As we introduce this product to the market, we anticipate our momentum to continue.
We have strong momentum coming into 2024, we are making progress at pace to capture our multiyear opportunity and to more reliably and securely connect the world's 80 million smbs to the digital global economy.
I'll now hand, it over to be to discuss financial results and our 2024 guidance in more detail.
Thank you John and thank you to everyone for joining us.
Bea Ordonez: 2023 was a transformative year for Payoneer. We shifted the company's focus to acquire and better serve ICPs, made meaningful progress in optimizing our ARPU, and delivered improved operating efficiency. We were excited to hold our first Investor Day in September.
<unk> 23 was a transformative year for <unk>, we shifted the company's focus to our client and better serve icp's made meaningful progress in optimizing our Apis and delivered improved operating efficiency. We were excited to hold our first investor day in September we reintroduced the.
Bea Ordonez: We reintroduced the company to investors and laid out our strategy for capturing a six trillion dollar market opportunity. We initiated Payoneer's first share repurchase program, and we're pleased to announce in December a refreshed authorization to purchase up to $250 million of common stock through the end of 2025. We focused the company on delivering sustainable, profitable growth, and we delivered. Payoneer generated 32% revenue growth in 2023 and $205 million of adjusted EBITDA, representing a 25% adjusted EBITDA margin. These results are a testament to the unique value proposition we offer to our customers, SMBs looking to capture the opportunities of an increasingly digital and increasingly global economy.
To investors and laid out our strategy for capturing six trillion dollar market opportunity.
We initiated payments that share repurchase program and we're pleased to announce in December a refreshed authorization to purchase up to $250 million of common stock through the end of 2025.
We focus the company on delivering sustainable profitable growth and we delivered <unk> generated 32% revenue growth in 2023 and $205 million of adjusted EBITDA, representing a 25% adjusted EBITDA margin.
These results are a testament to the unique value proposition, we offer to our customers.
<unk> looking to capture the opportunities of an increasingly digital and increasingly global economy.
Bea Ordonez: Before I turn to our fourth-quarter results, I'd like to direct your attention briefly to our earnings supplement presentation, which is available on our website alongside our earnings release. We are committed to continuously enhancing our disclosures and appreciative of the feedback we continue to receive from investors. On page 23 of our supplement, we've included some additional information that breaks out our volume and revenue. We believe this is helpful in showing how the execution of our strategy drives greater volume into the network and delivers improved take rate dynamics. We believe this additional disclosure will enable investors to better model our business going forward. Now, turning to our fourth quarter results.
Before I turn to our fourth quarter results I'd like to direct your attention briefly to our earnings supplement presentation, which is available on our website alongside our earnings release, we are committed to continuously enhancing our disclosure and appreciative of the feedback we continue to receive from investors.
On page 23 of our supplement we have included some additional information that breaks out our volume and revenue. We believe this is helpful in showing how the execution of our strategy drives greater volume into the network and delivered improving take rate dynamics. We believe this additional disclosure will it.
Enable investors to better model, our business going forward.
Now turning to our fourth quarter results revenue of $224 million was up 22% driven by interest income on customer funds continued steady ICP growth record quarterly card usage and accelerating growth in our <unk> and merchant services business.
Bea Ordonez: Revenue of $224 million was up 22%, driven by interest income on customer funds, continued steady ICP growth, record quarterly card usage, and accelerating growth in our B2B and merchant services business. As a reminder, our Q4 revenue growth rate is impacted by $7.5 million of revenue earned in the prior year period from the provision of onboarding services for an enterprise client. Excluding the impact of this, revenue growth for the fourth quarter would have been 27%.
As a reminder, our Q4 revenue growth rate is impacted by $7 5 million of revenue earned in the prior year period from the provision of Onboarding services for an enterprise client.
Excluding the impact of this revenue growth for the fourth quarter would have been 27% volume growth at 16% reflected strong year over year volume trends with our SMB customers that sell on marketplaces, particularly larger customers that sell on E Commerce market places as well.
Bea Ordonez: Volume growth of 16% reflected strong year-over-year volume trends with our S&B customers that sell on marketplaces, particularly larger customers that sell on e-commerce marketplaces, as well as accelerating growth in our B2B and merchant services businesses. We also saw continued growth in our enterprise payouts volume, which includes travel-related volumes. Our B2B business delivered 13% volume growth in the fourth quarter versus 3% growth in the first quarter, a 2% decline in volumes in the second, and 1% growth in the third quarter of 2023. We generated volume of over 100 million in our merchant services business, up more than 400 percent from a year ago and up 61 percent versus the third quarter. A fourth quarter take rate of 118 basis points increased six basis points. The expansion was driven by higher levels of interest income, record quarterly card usage, and the benefits of our various pricing initiatives. Sequentially, take rates are expected to climb to nine basis points, driven by a seasonal mix shift towards e-commerce and especially towards larger e-commerce sellers. Our customers value the utility that the Payoneer account provides, including the ability to hold balances in multiple currencies and to manage their cross-border AP and AR needs from a single account.
As accelerating growth in our <unk> and merchant services businesses.
We also saw continued growth in our enterprise payouts volume, which includes travel related volumes.
<unk> business delivered 13% volume growth in the fourth quarter, but it's 3% growth in the first quarter, a 2% decline in volumes in the second and 1% growth in the third quarter of 2023.
We generated volume of over $100 million in our merchant services business up more than 400% from a year ago and up 61% versus the third quarter fourth quarter take rate of 118 basis points increased six basis points.
Spansion was driven by higher levels of interest income record quarterly card usage and the benefits of our various pricing initiatives.
Sequentially take rate declined nine basis points, driven by a seasonal mix shift towards e-commerce, and especially towards larger E Commerce sellers.
Our customers value the utility that the paying their account provides including the ability to hold balances in multiple currencies and to manage that cross border <unk> needs from a single account.
Bea Ordonez: Customer funds held by Payoneer increased 9% to $6.4 billion, and we earned $65 million in interest income from these balances in the fourth quarter. Total operating expenses of $199 million were up 3%, driven by higher transaction costs from strong volumes, increased depreciation and amortization, and higher R&D spend related to continued investment in our platform. This was partially offset by decreases in GNA and other operating expenses.
Customer funds held by <unk> increased 9% to $6 4 billion and we earned $65 million in interest income from these balances in the fourth quarter.
Total operating expenses of $199 million were up 3% driven by higher transaction costs from strong volumes increased depreciation and amortization and higher R&D spend related to continued investment in our platform.
This was partially offset by decreases in G&A and other operating expense.
Bea Ordonez: Q4 2023 operating expenses included $3 million related to our efforts to support employees in Israel, as well as a $1.5 million contribution to the Payoneer Foundation. In line with our continued commitment to driving operating leverage, we ended 2023 with 8% less headcount than we began the year. We continue to operate the business with a focus on streamlining the organization, increasing efficiency, and aligning our cost structure with our highest value customers and growth opportunities. Transaction costs of $36 million increased 20%, driven by higher chargebacks and operational losses, some of them one-time, as well as higher network fees from record card. Transaction costs represented 16.2% of revenue, a 40 basis point improvement from the prior year period. The decrease is driven primarily by higher interest income, while improved pricing with bank and processing partners and lower capital advance costs also contributed. Sales and marketing expense were roughly flat, with higher partner commissions in the current quarter offset by lower marketing spend.
Before 2023 operating expenses included $3 million related to our efforts to support employees in Israel as well as the one and a half million dollar contribution to the <unk> Foundation.
In line with our continued commitment to driving operating leverage we ended 2023 with 8% less head count than we began the year. We continue to operate the business with a focus on streamlining the organization, increasing efficiency and aligning our cost structure with our highest value customers.
And growth opportunities.
Transaction costs of $36 million increased 20% driven by higher charge backs and operational losses, some of them one time as well as higher network fees from record card usage.
Transaction costs represented 16, 2% of revenue a 40 basis point improvement from the prior year period.
The decrease was driven primarily by higher interest income, while improved pricing with bank and processing partners and lower capital advanced costs also contributed.
Sales and marketing expense was roughly flat with higher partner commissions in the current quarter offset by lower marketing spend.
As a reminder, the fourth quarter of 2022 included certain costs related to a onetime brand campaign, while labor expense was flat year over year, reflecting lower head count.
Bea Ordonez: As a reminder, the fourth quarter of 2022 included certain costs related to a one-time brand campaign, while labor expense was flat year-over-year, reflecting lower headcount. However, sequentially, sales and marketing expense was up 6%, primarily driven by incentive programs to drive card usage, as well as other largely seasonal in-country marketing activities. G&A expense decreased $3 million, or 10%, primarily due to higher one-time consulting and organizational expenses in the prior year.
Sequentially sales and marketing expense was up 6%, primarily driven from incentive programs to drive card usage as well as other largely seasonal in country marketing activities.
G&A expense decreased $3 million or 10%, primarily due to higher one time consulting and organizational expense in the prior year period.
Bea Ordonez: Our operating expense was down $2 million, or 4%, driven by lower headcount from initiatives undertaken earlier in 2023 to streamline and localize elements of our operations organization. R&D expense increased $2 million, driven by higher compensation expense and IT costs. Although partially offset by higher capitalization of payroll and third-party costs as internal use software, we continued to invest in our R&D organization, and average headcount was up 13% year-over-year. Adjusted EBITDA was $52 million, compared to $11 million in the prior year period. This represents a 23% adjusted EBITDA margin for the quarter. Net income was $27 million, compared to a net loss of $10 million in the fourth quarter of last year.
Other operating expense was down $2 million or 4% driven by lower head count from initiatives undertaken earlier in 2023 to streamline and localize elements of our operations organization.
R&D expense increased $2 million, driven by higher compensation expense and <unk> costs, partially offset by higher capitalization of payroll and third party costs as internal used software.
We continued to invest in our R&D organization and average head count was up 13% year over year.
Adjusted EBITDA was $52 million compared to $11 million in the prior year period. This represents a 23% adjusted EBITDA margin in the quarter.
Net income was $27 million compared to a net loss of $10 million in the fourth quarter of last year.
Bea Ordonez: Q4 basic earnings per share was $0.08, and diluted earnings per share was $0.07. We ended the quarter with cash and cash equivalents of $617 million, up $74 million, or 14% year-over-year. Our business continues to generate positive free cash flows, and our free cash flow conversion is well above 100% for the full year. We have been actively returning capital to shareholders since 2023, and since the inception of our share repurchase program in May, we repurchased $57 million of Payoneer shares, including $22 million in the fourth quarter. We have accelerated the pace of our repurchases following our $250 million authorization in mid-December, and in the first quarter through last Friday, February 23rd, we have repurchased over $30 million of Payoneer shares.
Basic earnings per share was eight.
And diluted earnings per share was <unk>.
We ended the quarter with cash and cash equivalents of $617 million up $74 million or 14% year over year.
Our business continues to generate positive free cash flows and our free cash flow conversion is well above 100% for the full year.
We have been actively returning capital to shareholders in 2023 and since the inception of our share repurchase program in may we repurchased $57 million of paying of shares including $22 million in the fourth quarter.
We have accelerated the pace of our repurchases following up $250 million authorization in mid December and in the first quarter through last Friday February 23rd we have repurchased over $30 million of pay initiative.
Bea Ordonez: Moving now to our 2024 guide. For the full year 2024, we expect revenues to be between $875 and $885 million. This includes $235 million of interest income for the year and $640 to $650 million of revenue excluding interest income.
Moving now to our <unk> guidance for the full year 2024, we expect revenues to be between 875 and 885 million. This includes $235 million of interest income for the year and $640 to 650 million.
Of revenue excluding interest income.
Bea Ordonez: We expect revenue excluding interest income to grow 7% at the midpoint of our guidance, representing 10% growth when excluding the impact of non-volume enterprise revenues of $15 million in the first half of 2023. We expect revenue growth excluding interest income to accelerate throughout 2024 and to exit the year in the mid-teens, in line with our medium-term target. We expect that acceleration to be driven by continued penetration of the large B2B and direct-to-consumer markets, as well as high single-digit volume growth in marketplace-related volumes. We expect B2B volumes to grow 25% this year and are seeing impressive performance year-to-date with volume growth of over 30%. Our strategy to focus our product roadmap and acquisition efforts on higher take rate service-oriented markets is working. We saw a 16 basis point take rate improvement in our B2B business in 2023, given strong performance in our higher take rate region. Take rates are 2% to 3% in LATAM, SEMEA, and AIPAC versus China's B2B take rates, which are approximately 50 basis points.
We expect revenue excluding interest income to grow 7% at the midpoint of our guidance, representing 10% growth when excluding the impact of non volume enterprise revenues of $15 million in the first half of 2023.
We expect revenue growth, excluding interest income to accelerate throughout 2024 and to exit the year in the mid teens in line with our medium term targets.
We expect that acceleration will be driven by continued penetration of the large <unk> and direct to consumer market as well as high single digit volume growth in marketplace related volumes.
We expect <unk> volumes to grow 25% this year and are seeing impressive performance year to date with volume growth of over 30%.
Our strategy to focus our product roadmap and acquisition efforts on higher take rate service oriented market is working.
We saw a 16 basis point take rate improvement in our <unk> business in 2023, given strong performance in our higher take rate regions.
Hey creates a 2% to 3% and Latam EMEA and APAC versus China, <unk> take rates, which are approximately 50 basis points.
Bea Ordonez: In 2024, we expect China B2B volume to rebound, which will drive some decrease in B2B take rates overall, while we expect that these take rates will remain significantly higher than take rates on our non-B2B business. We expect our merchant services volume to grow north of 100% this year as we continue to see strong adoption among existing sellers, as well as strong demand from new customers in critical markets like China and Vietnam. We grew the number of merchants using our checkout products by more than threefold in 2020. We also intend to continue implementing changes to our pricing to better align to the customer segments we serve, to deliver improved monetization, and to drive improved share of wallet capture. We believe we have further opportunities in our pricing strategy to refine our corridor-based pricing and to better monetize FX. We continue to test various pricing models related to our significant in-network payment volume and believe this represents a meaningful opportunity. We expect to generate $235 million of interest income for the year, which is modeled based on continued growth in customer balances, broadly in line with volumes, and probability-weighted market interest rate expectations.
In 2024, we expect China to be volume to rebound, which will drive some decrease can be to be take rates overall, while we expect that these take rates will remain significantly higher than take rates on our non <unk> business.
We expect our merchant services volume to grow north of 100%. This year as we continue to see strong adoption among existing sellers as well as strong demand from new customers and critical markets like China and Vietnam.
<unk> grew the number of merchants using our checkout product by more than threefold in 2023.
We also intend to continue implementing changes to our pricing to better aligned to the customer segments, we serve to deliver improved monetization and to drive improved share of wallet capture.
We believe we have further opportunity in our pricing strategy to refine our Colorado based pricing and to better monetize that fact, we continue to test various pricing models related to a significant in network payment volume and believe this represents a meaningful opportunity for.
We expect to generate $235 million of interest income for the year, which is modeled based on continued growth in customer balances broadly in line with volumes and probability weighted market interest rate expectations.
Bea Ordonez: We are taking steps to further manage and optimize this revenue stream through different interest rate cycles by prudently extending the duration of our portfolio and investing in longer-dated assets. As previously discussed, we recently launched a program to begin investing a portion of our customer funds in short-duration U.S. Treasuries. A very small portion of customer funds has been invested as of today, but we expect to grow this portfolio and potentially extend to other asset classes over the course of the year and as we further mature the program. We expect transaction costs as a percentage of revenue to be approximately 17.5%, which reflects the impact of shifting our business mix towards higher tape rates but also higher transaction cost business lines and products, like B2B, merchant services, and cards. 2024 cash opex, less anticipated transaction costs, is expected to be approximately 540 million, which represents six percent growth over 2023. Cash opex represents our guidance for revenue, less adjusted EBITDA.
We are taking steps to further manage and optimize this revenue stream through different interest rate cycles by prudently extending the duration of our portfolio and investing in longer dated assets.
As previously discussed we recently launched a program to begin investing a portion of our customer funds in short duration U S treasuries.
Very small portion of customer funds has been invested as of today, but we expect to grow this portfolio and potentially extend to other asset classes over the course of the year and as we further mature the program.
We expect transaction costs as a percentage of revenue to be approximately 17, 5%, which reflects the impact of shifting our business mix towards higher take rate, but also higher transaction costs business lines and products like <unk> to be merchant services and card.
2024, cash opex less anticipated transaction costs is expected to be approximately $540 million, which represents 6% growth over 2023.
Cash Opex represents our guidance for revenue less adjusted EBITDA.
Bea Ordonez: We expect adjusted EBITDA to be between $185 million and $195 million, representing an adjusted EBITDA margin of approximately 22% at the midpoint. Our 2023 results will demonstrate that our strategy and focus on growing ICTs, optimizing ARPU, and delivering improved leverage is working. We plan to continue enhancing our product offerings to deliver value for our customers, expanding our addressable market, optimizing monetization, and driving improved retention. We believe our unique assets, the scale and breadth of our ecosystem, and relationships position us to further expand our market share and create lasting value for our shareholders. We are now happy to answer any questions you may have. Operator, please open the line.
We expect adjusted EBITDA to be between $185 million to $195 million, representing an adjusted EBITDA margin of approximately 22% at the midpoint. Our 2023 results demonstrate that our strategy and focus on growing icp's optimizing orca and <unk>.
Delivering improving leverage is working we plan to continue enhancing our product offerings to deliver value for our customers expanding our addressable market optimizing monetization and driving improved retention.
We believe our unique assets the scale and breadth of our ecosystem and relationships position us to further expand our market share and create lasting value for our shareholders.
We are now happy to answer any questions. You may have operator, please open the line.
Operator: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If, for any reason, you would like to remove that question, please press star followed by two.
Thank you.
If you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove that question. Please press star followed by two again to ask a question Press Star One we do ask do you let me yourself to asking one question and one follow up as a reminder, if youre using a speakerphone. Please remember to pick up here.
Operator: Again, to ask a question, press star one. We do ask that you limit yourself to asking one question and one follow-up. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions get registered. Our first question comes from the line of Darren Peller with Wolf Research. Your line is now open. Hey, thanks, guys. Good morning.
Handset before asking your question, we will pause here briefly is questions get registered.
Our first question comes from the line of Darrin Peller with Wolfe Research. Your line is now open.
Okay. Thanks, guys. Good morning can we just start a little higher level and maybe what what might have changed a bit from the timing of your September investor day through today in terms of the expectations really for 'twenty four.
Bea Ordonez: Can we just start a little higher level on maybe what might have changed a bit from the timing of your September Investor Day through today in terms of the expectations really for 24 going from, I know we expected mid teens, and I think it's at 6% for revenue growth now and then maybe margins a bit lower and, as you mentioned as the year progressed, some of the growth rates getting back to those levels, but maybe just talk about some of the Yeah, thanks for the question, Darren. Look, as we said in the middle of December and as we're saying today with our guidance and reiterating, that guidance from an X interest income revenue perspective reflects a 10% growth rate at the midpoint, again, on a normalized basis.
From I know, we'd expected mid teens, and if you get that.
6% for revenue growth now and then.
<unk> is a bit lower.
I know you mentioned as the year progressed, some of the growth rates getting back to those levels, but maybe.
Maybe just talk about some of the nuances on the year progression all suite.
<unk>.
Yes. Thanks for the question Darren look as we said in the middle of December and as were saying today with our guidance and reiterating that guidance from an ex interest income revenue perspective reflects a 10% growth rate.
Midpoint again on a normalized basis, so apples to apples when accounting for the impact of non volume fees and as we said we expect those revenues as you know in your question ex interest income to accelerate throughout the year and to be exiting mid teens at a mid teens growth rate when we exit 2024 very.
Bea Ordonez: So, apples to apples when accounting for the impact of non-volume fees. And as we said, we expect those revenues, as you know, in your question, X interest income, to accelerate throughout the year and to be exiting mid-teens at a mid-teens growth rate when we exit 2024, very much in line with those medium-term targets as, you know, two things in our business, two sort of broad trends, I think, as we ride some of the headwinds that we discussed related to 2023. So we're lapping the termination of B2B customers. We've lapped the termination of our exit from Russia.
Much in line with those medium term targets.
Two things in our business to sort of broad trends I think as we lap some of the headwinds that we discussed related to 2023. So we're lapping the termination of beta customers, we lapsed the termination of our exit from Russia, while lapping the impact of those non volume fees, while lapping the take rate impact.
Bea Ordonez: We're lapping the impact of those non-volume fees. We're lapping the take rate impact from very strong growth in our travel sector. So all of those sort of come off the table, if you like, as you look at 2024.
From very strong growth in our travel sector. So all of those sort of come off off the table. If you like as you look at 2024 and much more importantly, as we see that accelerating momentum that we've highlighted related to be to be in merchant services, but especially b to b.
Bea Ordonez: And much more importantly, as we see the accelerating momentum that we've highlighted related to B2B and merchant services, but especially B2B, and our guidance calls for a 25% increase in volume, again, accelerating through the back half of the year. So our guidance for 2024 is really very consistent with what we said in December. We're very encouraged overall by the overall momentum of the business. We're seeing increased penetration into that large B2B market, strong and improving take rate dynamics from that B2B growth, stable growth, and stable economics in our marketplace business. And overall, many of the indicators that we look for are really showing strong momentum. To get my follow-up, maybe just ask me about ARPU, which was a big part of your story and underlying expectations for growth also. So maybe just maybe it just continues...
Our guidance calls for 25% increase in volume and again accelerating through the back half of the year. So our guidance for 'twenty four is really very consistent with what we said in December we're very encouraged overall with the overall momentum of the business, we're seeing increased penetration into that large feed a b mall.
Strong and improving take rate dynamics from that B to b growth stable gross and stable economics in our marketplace business and overall many of the indicators that we look for are really showing strong momentum.
Okay.
I guess my follow up maybe just the around <unk>, which was a big part of your story and underlying expectations for growth also.
So maybe just continue.
Bea Ordonez: I know you still have quite a few levers on pricing, so just maybe a quick update on where you guys are. All events will be AZ-tv exclusive. Yeah, absolutely. Look, as we noted at Investor Day, our pricing strategy is really much more segment-based and really focused on optimizing ARPU as sort of the second leg of the stool, if you like, growing ICPs, and optimizing ARPU. And there are really strong signs that that strategy is working, early signs. We grew ARPU in 2023 overall by 36 percent. We grew ARPU even excluding interest and income by 9 percent from that acceleration in B2B, driving improved card and working capital, and, as you know, from pricing. So, yeah, look, our broader pricing strategy, much more segment-focused, much more focused on bundling and corridor-based pricing initiatives.
I know you still have quite a few levers on pricing. So just maybe a quick update on where you guys.
Instituting some of the account fees are lower volume fees or maybe monetizing insurer network cross border volumes to help drive some of the some more take rate expansion in the year.
Yeah, absolutely look as we noted at Investor day, our pricing strategy is really much more segment based.
I'm really focused on optimizing op, who is sort of the second leg of the stool. If you like growing ICT is optimizing.
And Thats really strong signs that that strategy is working early signs we grew up here in 2023 overall by 36%. We grew op up to even excluding interest income by 9% from that acceleration in beta be driving improved caught in working capital and as you note.
From pricing, so, yes look our broader pricing strategy much more segment focused much more focused on bundling and Colorado based pricing initiatives and we've been able to drive improved monetization through that and made really very meaningful progress in 2003. As you noted account fees we talk.
Bea Ordonez: And we've been able to drive improved monetization through that and made really very meaningful progress in 23. As you noted, the account fees we talked about last year, we were able to increase ARPU on our 1.5 million ICPs by almost 30 percent year over year. We've introduced more nuanced FX pricing, which drove uplift in 23, and we see additional uplift in 24. We launched our Lite account late last year, which is specifically designed for gig workers and freelancers and offers a different product bundle, which allows us to better manage our cost to serve and differentiated pricing to better monetize that segment.
About last year, we were able to increase up to on a one and a half million ICT by almost 30% year over year, we've introduced more nuanced FX pricing, which drove uplift in 'twenty three and we see additional uplift in 'twenty four we launched our lights account late last year.
Which is specifically designed for gig workers and freelancers and also a different product bundle, which allows us to better manage our cost to serve and differentiated pricing to better monetize that segment.
Bea Ordonez: And we're doing additional development to really bundle for more segments as we look into 24. And then, finally, you mentioned the significant opportunity around intranetwork fees. We highlighted at Investor Day that many, many billions of intranetwork flow that we see annually, close to half or more than half of that flow is cross-border, and we're launching in Q2 a significant pilot to test intranetwork fees across some of those important routes and see significant opportunity there within our portfolio. So, overall, I think we saw significant success and meaningful progress in 23, but there's more value to unlock. Thank you, Darren. Our next question goes to Will Nance on Goldman Sachs. Your line is now open.
Doing additional development to really bundle some more segments as we look into 'twenty four and then finally, you mentioned the significant opportunity around interim network fees, we highlighted that at Investor day. Many many billions of internet workflow that we see annually close to half or more than half.
Of that slow is cross border in one launching in Q2, a significant pilot to test intra network fees.
Some of those important.
Routes and see significant opportunity there.
Within our within our portfolio. So overall I think we saw significant success and meaningful progress in 'twenty, three but there's more value to unlock there.
Thank you Darren.
Our next question comes from the line of will Nance with Goldman Sachs. Your line is now open.
Bea Ordonez: Hey guys, I appreciate you taking the questions. Look, I just wanted to ask about the long-term targets of mid-teens, recognizing you're telegraphing ending the year on that basis. I guess could you maybe talk about the gap in the first part of the year between where you're expecting to grow and that long-term target? And in your mind, what are the two or three things that are underperforming relative to that long-term growth framework? And then just how should investors kind of get confidence that that 15% exit rate is sustainable, particularly if there are some pricing benefits in those numbers? How do you see the bridge to a more consistent mid-teens growth rate in the business? Thanks.
Hey, guys.
Thanks for taking the questions.
Look I just wanted to ask on the long term targets of mid teens, recognizing you're telegraphing ending the year on that basis.
I guess could you maybe talk about the gap in the first part of the year between.
Where youre, where youre expecting to grow and that long term target and I guess in your minds. What are the two or three things that I guess are underperforming relative to that long term growth framework and then just how should investors kind of get.
Confidence that that 15% exit rate is sustainable.
Particularly if there is some pricing benefits in those numbers, how do you see the bridge to a more consistent mid teens growth rate in the business.
Bea Ordonez: Sure. Look, as we've said, that 10% growth on a normalized basis year over year does imply, and we are assuming, a strong trajectory throughout the year and acceleration. We do have certain headwinds that come off only after the second quarter, most notably those non-volume fees that are about a $15 million headwind in terms of those fees that we saw in early 2023. In terms of the momentum, look, as we've highlighted, there are significant headwinds that impacted us in 2023, both from a volume and a take rate perspective that are coming off. Our revenue guide for 2024 certainly does account for some potential for modest near-term headwinds from more muted consumer and business spending, just to account for some degree of macro and geopolitical uncertainty.
Sure.
Said that 10% growth on a normalized basis year over year. It does imply and we are assuming.
Strong trajectory throughout the year and acceleration, we do have certain headwinds that come off only after the second quarter, most notably those non volume fees that are about a 15 million dollar headwind in terms of those feeds that we saw in early 2023 in terms of the momentum look as we hire.
The significant headwinds that impacted us in 'twenty three both from a volume at a take rate perspective that are coming off.
Revenue guide for 'twenty four suddenly does account for some potential term modest near term headwinds for more muted consumer and business spending just to account for really some degree of macro and geopolitical uncertainty, but overall as we look at that guidance and to double click into the components Tibet if.
Bea Ordonez: But overall, as we look at that guidance and to double-click into the components a bit, if we look at the volume from SMB selling on Marketplace, a little over 60% of our total volume in 2023, we're expecting and have conviction around high single-digit volume growth there, really underpinned by strong economic performance over the course of the year. And we've seen and expect stable take rates. We've been very successful in defending our economics within that portfolio and holding that take rate stable.
We look at the the volume from SMB selling on market place a little over 60% of our total volume and 23, we're expecting and have conviction around high single digit volume growth really underpinned by strong E. Com performance over the course of the year and we've seen unexpected stable take rate we've been very successful.
<unk> in defending our economics within that portfolio and holding that state that take rate stable from a beta be perspective, we really are seeing improving trajectory. There again lapping those headwinds from terminations, but as we look at the trajectory over the course of 'twenty three and now into.
Bea Ordonez: From a B2B perspective, we really are seeing an improving trajectory there, again, lapping those headwinds from terminations. But as we look at the trajectory over the course of 2023 and now into 2024, in January, we grew volumes by 30%. Our strategy there is working.
<unk> 24 in January we grew volumes by 30% our strategy. There is working we focus the organization from a beta perspective on large ICP and service oriented market, we're driving additional volume and we were able to expand our take rate in that important segment for us by <unk> 16.
Bea Ordonez: We focus the organization from a B2B perspective on large ICPs and service-oriented markets. We're driving additional volume, and we were able to expand our take rate in that important segment for us by 16 basis points in 2023.
Basis points in 'twenty three.
Got it I appreciate it.
Bea Ordonez: I appreciate it. You might expect that December, just from a service-oriented flow, might be seasonally a little bit weaker, but overall, again, we want to emphasize that the trajectory is what we think is important, up 3% from a volume perspective in Q1, down 2% in Q2, up 1% in Q3, and accelerating to 13% in Q4, 30% is year-to-date numbers from a volume perspective. So, we're seeing really strong momentum and really strong signs that that business has excellent product market fit in the markets that we are targeting and drives improving dynamics, which was really, you know, the additional disclosure that we put in the supplement to really disaggregate this business, in large part, to demonstrate the positive impact on take rate that the shift into B2B is driving over the long term. Thank you, Will. Our next question comes from the line of Trevor Williams with Jefferson.
You might expect that December just from a service oriented floor might be seasonally a little bit weaker but overall again, we want to emphasize that the trajectory is what we think is important up 3% from a volume perspective Q1 down.
2% Q2 up 1% in Q3 and accelerating to 13% in Q4, 30% is year.
Year to date numbers from a volume perspective, so what we're seeing really strong momentum in really strong signs that that business has excellent product market fit in the markets that we are targeting and drive improving dynamics, which is really the.
The additional disclosure that we put in the supplemental.
Really disaggregate. These this business in large part is to demonstrate the positive impact to take rate.
That mix shift into beta B is driving over the long term.
Thank you will.
Our next question comes from the line of Trevor Williams with Jefferies. Your line is now open.
Operator: Your mind is now open. Great. Thanks a lot.
Great. Thanks, a lot.
Bea Ordonez: I wanted to go back to the revenue outlook as well. And all the detail, Bea, that you ran through just on the underlying components, that's all super helpful. But maybe at a higher level, I'd be curious to hear how you would frame, at least on the XFLOAT outlook, the level of conservatism in the outlook. And as you sit here today with the visibility that you have in the business on the quarter-to-date trends, it sounds like maybe there's a little bit of cushion built in on the macro, but it would be helpful to hear if there's anything else worth calling out Thanks. Now, look, I think you've read through what we said, right?
I'd to go back to the 24 revenue outlook as well.
All the detail that you ran through just on the underlying components. That's all super helpful. But maybe at a higher level I'd be curious to hear how you would frame at least on the ex float outlook. How you would frame the level of conservatism in the outlook kind of as you sit here today with the visibility that you have in the business.
The quarter to date trends.
It sounds like maybe there's a little bit of cushion built in on the macro but would be helpful to hear if there's anything else worth calling out just in terms of overall conservatism.
Yes.
Now look I think you've read through to what we said right. Some amount of modest near term headwinds are factored in as you would expect us from a sort of prudence perspective for us to be guiding to it in the beginning part of the year, there's still significant geopolitical uncertainty right and <unk>.
Bea Ordonez: Some amount of, you know, modest near-term headwinds are factored in, as you would expect just from a sort of prudence perspective for us to be guiding to in the beginning part of the year. But there's still significant geopolitical uncertainty, right? And despite very strong economic numbers in December, there's still some lingering concern about the health of the U.S. consumer and some of the other developed economies. So, there is some near-term potential for headwinds from more muted consumer and business spending. Overall, from a macro perspective, look, the guide assumes that volumes from RSMB selling on marketplaces grow by high single digits, supported by strong economics, accelerating towards the back half of the year, both seasonally and in general. And interest rates, I know you said sort of X interest, but interest rates in line with market expectations, with all of the potential impact that that could have on consumer spending overall. Okay, that's all very helpful.
By very strong E com numbers in December there's still some lingering concern about the health of the U S consumer and some of the other developed economies. So some near term potential for headwinds from more muted consumer and business spending overall from a macro perspective look at the guide assumes that volumes.
From our SMB selling on marketplaces grow high single digits supported by strong E com.
Accelerating towards the back half of the year, both seasonally and in general.
And interest rates I know, you said sort of ex interest about interest rates in line with market expectations with all of the potential impact that that could have to consumer spending overall.
Okay.
Helpful. And then John I want to go back to check out in merchant services, maybe if you could just revisit that opportunity more broadly the incremental disclosures. All helpful. I know you guys laid out what the underlying expectation is for 'twenty four but maybe just a refresh on.
Bea Ordonez: And then, Jonah, I want to go back to checkout and merchant services. Maybe if you could just revisit that opportunity more broadly, the incremental disclosure is all helpful. I know you guys laid out what the underlying expectation is for 24, but maybe just a refresh on the ideal customer profile for that service in particular, where you've seen really good traction to date, and if the expectation for 24 is just kind of more tapping into that part of the customer base, or if there's some kind of expansion in terms of customer types or geographies expected for this year. Thanks.
The ideal customer profile for that service in particular, where <unk> seen really good traction to date.
The expectation for 'twenty for just kind of more tapping into that part of the customer base or if there's some kind of.
Expansion in terms of customer types or geographies expected for this year. Thanks.
John Kaplan: You bet. Thanks for the question. What we saw from our customers that sell primarily goods on large marketplaces is that they wanted Payoneer to be able to power their direct-to-consumer checkout, and because they wanted all of their international shipments to enter their Payoneer account, so they could leverage the use of our AP tools.
You bet. Thanks for the question. So we are what we what we saw from our customers that sell primarily goods on large marketplaces is they wanted pain here.
To be able to power their direct to consumer checkout and because they wanted all of their internationally are to enter their pan Europe counts. So they could leverage the use of our AP tools.
John Kaplan: And we think this is a very significant opportunity for us to extend our capabilities and our strength with those marketplace sellers. We currently have less than 1% of the market share of this $150 billion market. We have strong acquisition, as we said, strong product market fit, great leadership of that group, 600 plus active merchants, monthly volume greater than $60,000, up more than 3X year over year. And I note in my prepared remarks that 50% of the customers for checkout are net new to Payoneer. And this is significant, right?
And we think this is a very significant opportunity for us to extend our capabilities and our strength with those marketplace sellers.
We currently have less than 1% market share of this $150 billion market. We have strong acquisition as we said strong product market fit great leadership of that group.
600, plus active merchants monthly volume greater than $60000 up more than three <unk> year over year and I note in my prepared remarks, 50% of.
Customers for checkout are net new to pay him here and this is significant because we're competing in in markets like China, and Vietnam, where we've held our take rate in a strong way now, we're adding new products and services as we look to lock in and retain customers and gain share in the market. So we are bringing.
John Kaplan: Because we're competing in markets like China or Vietnam, where we've held our take rate in a strong way. Now, we're adding new products and services as we look to lock in and retain customers and gain share in the market. So we're bringing new customers to the business, new AR into our existing customers. Those net new customers we add are also using, not just joining Payoneer for checkout, joining Payoneer to leverage our marketplace payouts and our AP tools.
New customers to the business, new ey, our into our existing customers those net new customers. We add are also using.
Not just joining pain here for checkout, joining pain year to leverage our marketplace payouts in our AP tools. So all in all we see this as a big opportunity a significant one we have partnerships with shopify shop lava and <unk> commerce.
John Kaplan: So all in all, we see this as a big opportunity, a significant one. We have partnerships with Shopify, ShopLaza, and WooCommerce. This is a big business for us. It's small today, but we'll grow, and I'm proud of what the team did, and we'll continue to drive its growth. Thank you, Trevor. Our next question goes to the line of Josh Siegler with Cantor Fitzgerald. Your line is open. Hi guys. Good morning.
This is a big business for us, it's small today, but will grow and I'm proud of what the team has done and will continue to drive its growth.
Thank you Trevor our next question comes from the line of Josh Seigler with Cantor Fitzgerald. Your line is now open.
Hi, guys. Good morning, Thanks for taking my call Tonight will look throughout planes weighing three obviously there was a.
Operator: Thanks for taking my call today. So look, throughout 2023, obviously, there was a pretty significant tailwind associated with interest income, which is real cash in the door. And we've seen that cash balance increase over time. I was wondering, as you're looking at 2024, how you're thinking about allocating that cash between, you know, returning it to shareholders, reinvesting in the business, and inorganic opportunities.
A significant tailwind associated with interest income, which is real cash in the door and we've seen that cash balance increase over time I was wondering as youre looking at 2020 for how youre thinking about allocating that cash between returning it to shareholders and reinvesting in the business and organic.
Thanks.
Thanks for the question Josh look.
Bea Ordonez: Look, as you note, significant free cash flow coming to the business in 2023 and continues to be significant in 2024, and frankly, given interest rate outlooks beyond, it puts us in a really strong position to do all of the things that you've said, right? One, to return capital to investors, as we noted in our prepared remarks. Kicking off a share repurchase program in May, we repurchased $57 million last year, including $22 million in Q4.
Significant free cash flow coming to the business in 'twenty three continues to be significant in 'twenty, four and frankly, given interest rate outlooks beyond that puts us in a really strong position to do all of the things that you've said right want to return capital to investors as we noted in our prepared remarks.
We kicked off a share repurchase program in May we repurchased $57 million last year, including $22 million in Q4, we announced a refreshed with that authorization.
Bea Ordonez: We announced a refresh to that authorization back in December for $250 million over the next two years. It really obviously reflects our confidence in the long-term opportunity and strategy, and we accelerated our repurchases through the year to date, so year to date through last Friday, more than $30 million. So we will actively return cash to investors. We expect to be more aggressive in 2024 than we were in 2023 in terms of doing more than offsetting dilution from stock-based compensation.
Back in December over the next two years for $250 million. It really obviously reflects our confidence in the long term opportunity and strategy and we accelerated our repurchases through the year to date, so year to date through last Friday more than $30 million. So we will actively return cash to investors.
We expect to be more aggressive in 'twenty four than we were in 'twenty three in terms of doing more than offsetting dilution from stock based comp and then from an investment perspective look what we're making we talked about it in 'twenty three we made significant investments in our platform in 'twenty three in our data infrastructure.
Bea Ordonez: And then from an investment perspective, look, what we're making, we talked about it in 2023; we made significant investments in our platform in 2023, in our data infrastructure, in our infrastructure more generally to enable greater velocity in product rollouts, in our compliance infrastructure to extend our moat, in our B2B roadmap to drive more company-grade features and capture more of that very large addressable market in our merchant services business, as you've just heard from And we're going to continue to do that because we're bullish on the opportunity. We're going to continue to make investments to capture that opportunity. We announced in our press release or noted in our press release that we've made some significant hires into that organization.
In our infrastructure more generally to enable greater velocity and product rollout in our compliance infrastructure to extend our moat in a b to b roadmap to drive more company, great features and capture more of that very large addressable market in our merchant services business as you've just heard from from John.
And we're going to continue to do that because we're bullish on the opportunity we're going to continue to make investments to capture that opportunity we announced in our press release on noted in our press release that we've made some significant hires into that organization, they're going to help us unlock value and really drive towards that opportunity. So we're excited to make.
Bea Ordonez: They're going to help us unlock value and really drive towards that opportunity, so we're excited to make those investments that we think really position us to drive growth over the long term.
Those investments that we think really position us to drive growth over the long term.
Bea Ordonez: Thanks, Bea. Appreciate the call you're on. And then I think you touched on travel volume earlier. Can you give us an update on how you're thinking about the travel volume outlook for 2024? We would expect some moderating in that travel volume.
Got it thanks, Steve I appreciate the color there and then I think you earlier you touched on travel volume can you give us an update on how youre thinking about the travel volume outlook for placement.
Sure we would expect some moderating in that travel volume so the travel volumes fits from a disclosure perspective within that supplement on page 23.
Bea Ordonez: So the travel volume sits from a disclosure perspective within that supplement on page 23, within that volume from enterprise customers. And as we've highlighted over the past couple of calls, this is volume that we facilitate through our payment rails for large enterprise customers that has proportionately a lower take rate but also a very different profile from a risk and cost to serve perspective. So that is the volume that you see in that line there.
Within that volume from enterprise customers, so as we've highlighted.
Over the past couple of calls this is volume that we facilitate through our payment rails for large enterprise customers that has proportionately a lower take rate, but also a very different profile from a risk and cost to serve perspective. So that is that volume that you see in that line that if not all travel, but it's a large.
Bea Ordonez: It's not all travel, but a large component of that overall enterprise payout business is travel, which has a lower take rate. We saw significant growth in that bucket, largely driven by travel, in 2023. It did, as we highlighted, put some downward pressure on take rate overall, which is why I think it's super helpful to disaggregate take rate on our customer business, where we grew modestly in 23, and take rate on our payout business. When we saw that compression, as we look out to 24, we would expect growth in that travel volume overall, but not at such an accelerated pace as we saw in 23. There's some leveling off going on here.
Component of that overall enterprise payout business is travel lower take rate, we saw significant growth in that bucket largely travel driven in 2023 at data as we highlighted puts some downward pressure on take rate overall, which is why I think it's super helpful to disaggregate take rate on our customer.
While we grew modestly in 'twenty, three and take rate on our payout business. When we saw that compression as we look out to 'twenty four we would expect gross in that travel.
Volume overall, but not at such an accelerated pace as we saw in 'twenty three that's from leveling off there I think our trends in the market more generally but still an important segment for us as I say lower take rate, but very different set of risk and cost to serve dynamic. So we're very comfortable with that volume.
Bea Ordonez: I think trends in the market more generally, but still an important segment for us, as I say, lower take rate, but a very different sort of risk and cost to serve dynamics. So we're very comfortable with that volume. Thank you, Josh. Our last question will go to Chris Kennedy on behalf of William Blair. Your line is now open. Good morning.
Thank you Josh our last question will go to the line of Cris Kennedy with William Blair. Your line is now open.
Good morning, Thanks for taking the question and for the New disclosure John can you talk about the competitive moat for paying year today versus a couple of years ago.
Operator: Thanks for taking the question and for the new disclosure. John, can you talk about the competitive moat for Payoneer today versus a couple years ago, and what's your updated thinking on that? Yeah, thanks for the question.
What's your updated thinking on that.
Yes, thanks for the question.
John Kaplan: You know, I am really excited about where we sit with our relationships with our S&B customers. I think the moat we have starts with our relationship with them. Two million active customers, 500,000 plus ICPs, 55,000 plus high-value ICPs. These are customers that are using Payoneer and the Payoneer account to capture their international remittance, hold it in multi-currencies, and manage their international payments.
I am really excited about where we sit with our relationships with our SMB customers I think the moat. We have starts with our relationship with them 2 million active customers 500000, plus ICP is <unk>.
55000, plus high value ICP. These are customers that are using paying year and the painting or account to capture their internationally or hold it in multi currencies and manage their international AP.
John Kaplan: That relationship with those customers is really powerful. As an ally to them, we are providing them a gateway to the global economy. And I think that relationship, you know, we did an event in China a couple of weeks ago, and over 1,000 customers were in the room talking about participating in the global economy. And I think the momentum we have in B2B, in APAC, CMEA, and Latin America, the new disclosure that helps people see the power of our relationship with our customers and, therefore, our take rate dynamics. I think that's important for shareholders to understand, right? Our business has two components. An enterprise component is B, that's very articulately shared, the volume and take rate dynamics there, and an S&B customer business, which is about ICPs and ARPU, and volume into the Payoneer account.
That relationship with those customers is.
Really powerful as an ally to them, we are providing them the gateway to the global economy, and I think that relationship and we did an event in China, a couple of weeks ago and over 1000.
Customers were in the room talking about participating in the global economy and I think.
The momentum, we Havent, <unk> and APAC, EMEA and Latin America the volume.
New disclosure that helps people see the power of our relationship with our customers and therefore take rate dynamics.
That's important for shareholders to understand right. Our business has two components and Andrew Prize component is B, just very articulately shared the volume and take rate dynamics, there and an SMB customer.
Business, which is about <unk> and <unk> and volume into the pay in your account. So our moat is strong with our customers. It's strong with regulators is strong with our go to market engine is strong with the balances we hold from customer funds and at the end of the day the team here the painter organizations an extraordinary one.
John Kaplan: So our mode is strong with our customers, it's strong with regulators, it's strong with our go-to-market engine, it's strong with the balances we hold from customer funds, and at the end of the day, it's the team here; the Payoneer organization is an extraordinary one. I've been CEO for just about a year, and I can tell you the thing that surprised me the most in the last year is that our opportunity is greater, our momentum is stronger, and our team has the capability to capture it. And so, right from where I sit, we're in a very strong position to capture the global opportunity right in front of us. And there are 80 million customers we're aiming to serve. Right? Very clear. Thanks for taking the time to answer the question. Thank you! There are no additional questions waiting at this time, so I'll pass the conference back over to John Kaplan, CEO, for closing remarks. Thank you so much.
I've been CEO for just about a year and I can tell you the thing that surprised me the most in the in the last year as our opportunity is greater our momentum is stronger and our team has the capability to capture it and so right from where I sit we're in a very strong position to capture the global opportunity right in front of us.
There are 80 million customer agreement to serve.
Great.
Very clear thanks for taking the question.
Yes.
Okay.
Thank you.
There are no additional questions waiting at this time, so I'll pass the conference back over to Jon Caplan.
Oh for closing remarks.
Thank you so much thanks everybody.
John Kaplan: Thanks, everybody, for your support and your questions. We're excited about Payoneer's opportunities in 2024 and beyond, and we appreciate your support. We're confident in the strategy we've laid out. We believe in our team, our brand, and our opportunity. This is a $6 trillion opportunity that we are best positioned to capture, and there is exciting growth happening within our business. And by disclosing, as we did on slide 23 of that Disclosure B reference, you can see the fast growing businesses built within the Payoneer platform that will power our growth through the 2024 year and beyond. So, thank you for joining us, and thank you for your support. That concludes today's conference call. Thank you for your participation. I hope you have a wonderful rest of your day.
For your support and your questions.
We're excited about <unk> opportunity in 2024 and beyond and we appreciate your support we're confident in the strategy. We've laid out we believe in our team our brand and our opportunity. This is a six trillion dollar opportunity that we are best positioned to go capture.
And there is exciting growth happening within our business and by disclosing as we did on slide 23 of that disclosure be reference you can see the fast growing businesses built within the pay in your platform that will power our growth through the 2024 year and beyond so thank you for joining us and thank you for your support.
Sure.
That concludes today's conference call. Thank you for your participation I Hope you have a wonderful rest of your day.
Okay.