Q1 2025 Payoneer Global Inc Earnings Call
Speaker Change: Good morning and thank you for standing by. Welcome to the Payoneer's first quarter 2025 earnings conference call. At this time, all lines have been placed on mute to prevent any background noise. Following the speakers remarks, there will be a question and answers that will open your life for questions.
As a reminder, this conference call is being recorded. I would now like to turn the call over to Michelle Wang, Payoneer, or Steepy of Investor Relations.
Michelle Wang: Thank you, operator. With me on today's call are Payoneer's Chief Executive Officer, John Caplan, and Payoneer's Chief Financial Officer, B. Ordonez. Before we begin, I'd like to remind you that today's call may contain forward-looking statements, which are subject to risks and uncertainties.
Michelle Wang: For more information, please refer to our filings with SEC, which are available in the Investor Relations section of payoneer.com.
Michelle Wang: Actual results make different materially from any forward-looking statements we make today. These forward-looking statements speak only as of today, and the company does not assume any obligation or intense to update them except as required by law.
In addition, today's call may include non-GAAP measures .
Michelle Wang: These measures should be considered in addition to and not instead of GAAP financial measure.
Michelle Wang: 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 to begin.
Good morning everyone and thank you for joining us.
Michelle Wang: Payoneer has a long-term opportunity to become the essential partner for cross-border SMBs to help connect them to the global economy.
Michelle Wang: Today I'll share how we're leveraging our core assets to build momentum and navigate the rapidly changing trade landscape. We will then walk through our first quarter financial results and provide context on our 2025 outlook.
Michelle Wang: We serve nearly two million entrepreneurs in SMBs, including over half a million who fit our ideal customer profile. Our customers are engaged in cross-border trade, operating in more than 190 countries and territories, and selling to a wide range of end markets.
Michelle Wang: They provide marketing, IT, customer support, and other services to a diverse set of global industries and countries.
Michelle Wang: They also sell a broad set of goods wholesale through marketplaces and direct to everyday cut consumers around the world.
Speaker Change: Through their multi-currency pay-and-year account, our customers manage their cross-order accounts receivable and accounts payable, including using our card and workforce management products.
Speaker Change: Around that stack, we have built a significant mode over the past 20 years.
Speaker Change: Licenses across key markets from China to Europe to the U.S.
Speaker Change: We have expertise in local markets and robust infrastructure aligned with local regulatory needs.
Speaker Change: Enduring partnerships with leading freelance, travel, content, and e-commerce goods, marketplaces, a robust and resilient infrastructure of global bank and PSP relationships that enable connectivity across 7,000 payment corridors.
Speaker Change: Employees on the ground in over 35 countries and a scalable support model that serves our nearly 2 million customers.
Speaker Change: 2024 was a record year for Payoneer and we've carried that strength into our Q1 2025 results.
Speaker Change: Revenue grew 16% year-over-year, excluding interest income ahead of our stated medium-term targets. Our B2B business continues to grow significantly.
Speaker Change: B2B revenue increased 37% driven by growth in APEC, AMIA and Latin America. We see strong demand and product market fit in these service focused markets.
Speaker Change: Adjusted EBITDA with $65 million, with a 27% margin. Excluding interest income?
Speaker Change: Q-1 was our highest adjusted EBITDA quarter in nearly three years and was the fourth consecutive quarter of profitability net of interest.
We continue to focus our efforts on quality customers.
Speaker Change: We've been actively shifting our customer portfolio and targeting the highest value segments by industry, region, size, and product needs.
Speaker Change: At the same time, we are cross-selling more of our products and expanding our relationships with our customers.
Our results reflect our strategy.
Speaker Change: Our ARPU growth excluding interest income accelerated for the seventh straight quarter, reaching 22% growth year over year. This is the direct result of our customer mixed shift and successful cross-cell of more products and services.
Speaker Change: Our results reflect the value we're delivering to our customers as they continue to scale and grow their cross-border businesses.
Trade is being reshaped.
Speaker Change: for businesses around the world. This is a challenging and clarifying moment.
Speaker Change: Like the first few months of COVID were five years ago.
We've sent the past few weeks listening to our customers.
Speaker Change: Our conversations give us more conviction about what we're building and how we're building it here at Payoneer.
Speaker Change: One customer said to me, the changing macro-environment fuels innovation and reinvention and I'm glad I have pain in your supporting me as I expand my business to more countries.
Speaker Change: Our customers are nimble and rapidly adapting to change. Last month at Payoneer's 20th anniversary, we brought together 20 customers from around the world.
Speaker Change: Here's what they told us. They're increasingly diversifying both where they sell and how they source materials and talent. Many are more focused on Europe , Southeast Asia, Latin America and Australia.
As They Pivot
The Payoneer account becomes even more useful.
Speaker Change: They're building distributed teams around the world in order to benefit from global talent capabilities. As they do, they're turning to Payoneer's account payable capabilities, including our workforce management product.
Payoneer is built to support them.
Speaker Change: We see this current disruption as a meaningful long-term opportunity because Payoneer isn't just built for the old model of trade, we're positioned for the new one and as value chains diversify, we are positioned to benefit.
Speaker Change: First, we combine local presence with global scale. Our teams are on the ground in the world's most entrepreneurial regions. In Q1,
Speaker Change: RAPAC and Latin America, customer regions, each grew revenue over 20 percent.
Speaker Change: Together they represent about a third of our firm's total revenue with an average take rate of approximately two to three percent.
Speaker Change: These are regions where we expect continued tailwind as trade routes shift and businesses expand their global footprint.
Speaker Change: We have over a half a million ICPs that are roughly evenly distributed across our five regions.
Speaker Change: Approximately 40% of our revenue comes from helping customers sell to non-US markets. We are well positioned to grow with our customers as they diversify the regions they sell to.
Second, our Global Regulatory Footprint
Speaker Change: We've recently closed our acquisition of a licensed China-based payment provider, becoming only the third foreign player licensed in China.
Speaker Change: China is an important market for us. It's about a third of our revenue comes from China-based
Speaker Change: While only 20% of our overall annual revenue is tied directly to the U.S. to China Trade
Speaker Change: China exports over 120 countries and as our Chinese customers drive their goods distribution to more markets around the world, including Europe , Latin America, Southeast Asia, we will help them diversify and we will grow with them.
Speaker Change: We also applied for a cross-border payment aggregator license in India.
The fastest growing top five economy in the world.
Speaker Change: They are a country that stands to benefit from this new trade landscape. We are also actively pursuing licenses in Canada, Israel and beyond.
Speaker Change: We're investing in the future of trade, global, regulated, diverse, and powered by entrepreneurs and cross-border SMBs.
3rd
Speaker Change: Trade is increasingly services-based. Our customers include service providers such as BPO's, software developers, marketing firms, and remote workers on marketplaces.
Speaker Change: outsourcing and remote work will continue, especially in uncertain times as companies look to grow and to optimize their own PNLs.
We are well positioned.
Speaker Change: including our new workforce management solution to help customers capitalizing on this trend.
Speaker Change: Payoneer has weathered uncertainty before and we've come out stronger.
Speaker Change: This is another moment to turn change and disruption into opportunity. We're staying close to our customers. We're staying disciplined in our execution and we're moving fast to to seize new opportunities in emerging markets.
Speaker Change: By doing just that, we believe we can create long-term value for shareholders, and we continue to play a vital role in the global economy. With that, I'll turn it over to B to take you through the numbers and our outlook for the year.
Bea: Thank you John and thank you to everyone for joining us.
Speaker Change: Payoneer delivered another strong quarter with revenue and profitability ahead of our median
Speaker Change: We achieved growth in revenue excluding interest income of 16% and generated 65 million in adjusted EBITDA, representing a 27% adjusted EBITDA margin.
Speaker Change: These results demonstrate the value we offer to our customers and the strengths of our execution.
Speaker Change: Now turning to our first quarter results. We delivered revenue at 247 million, up 8% year-over-year.
Speaker Change: Revenue excluding interest income grew 16% year over year, driven by strong growth in our B2B franchise, increasing adoption of our high value products and services, including our checkout and card products and the impact of our monetization initiatives.
Speaker Change: Volume was up 7% with growth rate normalizing consistent with the trends we described when we reported our fourth quarter results in February .
Speaker Change: S&B volume grew 7% year over year, with volume from S&B's at seller marketplaces up 3%. Volume from BWB S&B's up 21% and merchant services volume up 88%.
Speaker Change: Volume from SMBs that sell on marketplaces were impacted by a number of factors including marketplace driven changes in the timing of certain large holiday volume payouts including from Amazon as well as other marketplaces.
Speaker Change: For the 2024 holiday season, these payout volumes occurred in late December 2024 compared to early January typically.
Speaker Change: Adjusting for this effect, we estimate that in the first quarter of 2025, volume from SMDs that sell on marketplaces would have grown roughly 10% year over year.
Speaker Change: At Q1 take rate of 125 basis points, increased one basis point on a year over year basis and nine basis points sequentially, driven by take rate expansion in all of our SMB customer segments, and outrunning the impact of lower interest income.
Speaker Change: On a year-over-year basis, we drove significant expansion in our SMB customer take rate in line with our stated strategy and reflecting the value we offer to our customers.
Speaker Change: RSMB customer take rate was up 11 basis points year over year and 10 basis points sequentially driven by continued growth in our higher yielding B2B franchise, continued adoption of our high value product.
Speaker Change: especially our card product, the ongoing impact of our various pricing initiatives, as well as the impact of our workforce management acquisition.
Speaker Change: Customer funds held by Payoneer increased 11% euro per year to 6.6 billion which helped partially offset the impact of lower rates on our interest income revenue.
Speaker Change: Customance value are multi-currency capabilities and the ability to hold balances in the currencies in which they do business and in stable currencies is a core value proposition.
Speaker Change: We offer customers the ability to do business in a range of currencies and jurisdictions and we are well positioned to help customers as they adapt and shift their businesses towards new trade corridors.
Speaker Change: We continue to steadily grow customer funds and generate an interest income of 58 million in Q1 even as average interest rates declined year over year.
Speaker Change: As of March 31st, we had reduced our sensitivity to fluctuations in short-term interest rates in relation to approximately 3.7 billion or roughly 56% of customer funds.
Speaker Change: This consists of approximately 1.8 billion of assets from the Lion Customer Funds that are invested in a portfolio of US Treasury securities and term-based deposits.
Speaker Change: as well as interest rate derivatives on approximately 1.9 billion of funds underlying customer balances providing a floor against interest rate declined below 3%.
Speaker Change: We will continue to actively manage our hedging programs while always prioritizing liquidity and security.
Speaker Change: Total operating expenses of 217 million increased 14 percent, primarily driven by higher transaction costs, later related expenses, consultancy fees, and the impact of cash back incentive programs designed to drive adoption of our card's product.
Speaker Change: Transaction cost is 39 million, increased 16 percent, driven by growth in higher transaction cost products and business lines, including B2B, merchant services and our card product.
Speaker Change: Transaction costs represented 16% of revenue, an increase of approximately 110 basis points from the prior YIP areas.
Speaker Change: Primarily due to lower interest income. Excluding interest income transaction costs represented 20.9% of revenue consistent with the prior year period.
Speaker Change: Sales and marketing expense was up 5 million or 10% euro per year, driven primarily by higher labor-related costs, including from our workforce management acquisition and increased spend on card incentives. Other operating expenses were up 1.4 million or 3%, primarily due to higher IT and communication costs.
Speaker Change: G&A expense increased 6 million or 24% primarily due to higher labour-related costs and higher consulting fees related to several discrete projects.
Speaker Change: Adjusted EBITDA with $65 million, consistent with the prior year period.
Speaker Change: This represents a 27% adjusted EBITDA margin in the quarter despite a decline of 7 million in our interest income and is the fourth consecutive quarter of positive adjusted EBITDA excluding interest income.
Speaker Change: Net income was 21 million compared to 29 million in the first quarter of last year. Q1 basic and deluded earnings per share were six cents and five cents respectively.
Speaker Change: We ended the quarter with cash and cash equivalence of 524 million. During the quarter we repurchased approximately 17 million of shares, with approximately 87 million remaining on our current repurchased authorization.
Speaker Change: As John discussed, our long term thesis has not changed. We continue to believe that over the long term, the digitisation of commerce, globalisation of the services economy and the growth and diversification of global trade will continue.
John: SMDs are by nature resilient and continue to adapt and thrive. We are proactively positioning ourselves to help our customers navigate the current environment.
John: by connecting them to new markets, working to expand our regulatory infrastructure and our marketplace ecosystem and local capabilities, and by continuing to invest in expanding our financial stack to better serve their needs.
John: That said, recent developments related to tariffs and global trade have shifted the immediate landscape and near term there is a high degree of uncertainty around the global macroeconomic and trade policy environment, which is dynamic and evolving.
John: As a result, we are suspending our previously issued four-year 2025 guidance.
John: We expect that if the existing global tariff regime remains in place, there will be a potentially significant negative impact on our future financial performance.
John: True early May, we have not seen a slowdown in volumes or revenue, given our April performance and our understanding of customer inventories that are already in the US. We expect growth in the second quarter to be broadly in line with our stated medium-term targets.
John: Therefore, we expect any potential impact from tariffs to be primarily in the second half of the year.
John: Our over half a million ICPs are roughly evenly distributed across our five regions and sell a diverse range of products and services to businesses and consumers all around the world.
John: In 2024, customers in China represented roughly a third of our revenue.
John: However, only 60% of our China revenue or roughly 20% of our total revenue came from Chinese customers selling to the U.S.
John: The balance of our China revenue was generated from Chinese customers selling into non-US markets, including in Europe , the UK, Australia and Japan.
John: As noted, given the wide range of potential economic and trade policy scenarios, we do not believe we can reliably forecast our 4-year 25 performance at this time.
John: There is a lot we don't know about how the environment will evolve and there is a very broad range of potential outcomes.
with that said based on what we know today.
John: Assuming the existing tariff regime remains in place and making broad assumptions.
John: Our current estimate is that we could see a headwind to our 4-year 2025.
Revenue in the region of $50 million.
John: Again, the environment is to say the least dynamic and evolving and our estimation is based on a broad set of assumptions related to how our customers might be impacted, how consumer and business behavior might evolve, as well as other factors that could impact our business more generally.
John: Despite this potential for volatility in the near term, we remain focused on our long-term opportunity.
We will be disciplined operators.
John: continued to monitor the macro and trade policy environment as it evolves, worked to support our customers as they pivot and expand and appropriately align our investment and costs to the size of the business opportunity.
John: Our first quarter results reflect strong execution of our strategy and continued discipline.
John: During this period of heightened economic uncertainty, our focus is on supporting our customers, further diversifying our business and investing in our core capabilities.
John: We remain confident in our long-term opportunity and our ability to capture it and deliver value for our shareholders, customers, and employees.
John: We are now happy to answer any questions you may have. Operator, please open the line.
[inaudible]
Speaker Change: Our first question comes from Diane Peller from Wolf Research. Please go ahead.
Speaker Change: Hi, thanks. This is Daniel Krebs on for Darren. I was wondering if you could speak to the customer reception to various price increases we know that's in March and wondering how competent you feel in your price increases we know that's in March and wondering how competent you feel in your pricing power at this time. If you could maybe talk to, you know, your previous guidance around $30 million in pricing up what's in 2025. Thank you.
Speaker Change: Hey, Daniel, thanks for the question. I mean, look, our pricing strategy at this time hasn't changed. We've talked about it historically as being more customer segment focused.
Really looking at bundling the value we offer our customers.
Speaker Change: Adjusting our pricing to the competitive environment, we're going to continue to do that. We're not making any changes today. We're really focused.
Speaker Change: in the current environment, obviously given the macro uncertainty that we talked about in our prepared remarks.
Speaker Change: on serving our customers and on aligning the value that we give them to our pricing and to our overall strategy and on supporting those customers we're not seeing any particular pressure the 30 million we outlined was obviously sort of in that pre tariff environment but we haven't changed how we're looking at pricing as of now.
Speaker Change: Okay, great. Thank you. And if I can follow up, if we could maybe zoom out a bit, if you can put a finer point, you know, now having been in business for over 20 years, I'll have customer onboardings and retention trended over paths like those throughout your history. Thank you.
Speaker Change: Thanks for the question. It's an important area for us, which is in focusing our...
Speaker Change: Customer Support Organization, our go-to-market organization, and our cross-cell efforts on providing a full suite of financial products for our large ICP customers. And what we see in our data is that our net revenue retention is strongest among our largest customers and continues to be.
Divate programs locally to drive improved retention.
We've seen successful results.
Speaker Change: Driving Retention with our B2B customers, cross-selling card products globally to them, cross-selling our workforce management products, and while we think we're early in the overall retention journey for Payoneer, the indication of our progress is strong.
Speaker Change: Our next question comes from Will Nance from Goldman Sachs. Peace, go ahead.
I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change: in the moving pieces that you guys are thinking about. And then as it relates to pulling the guide, if you could just maybe talk through some of the considerations around pulling the guide ends versus, you know, maybe just flowing through the $50 million into guide.
Speaker Change: into the guide. How are you thinking about some of the range of outcomes here and maybe what should we be looking at externally to measure the health of the ECOM corridor? Would that be something like Port Shipments into the US? No, there's a lot there, but thanks for taking the question.
Speaker Change: As we said on the call, obviously there's a lot of uncertainty and obviously there's a very broad range of outcomes here.
Speaker Change: So we based our sizing of that exposure on a lot of assumptions and I can run through some of them and a lot of Second and Third all the impact that are frankly very hard to quantify right it goes without you
saying that the supply chains are super interconnected.
Speaker Change: So there could be downside to that 50 million number, there could also be upside, right? Again, very broad range of outcomes and obviously the environment is super dynamic but to share really to some of the assumptions and how we thought about it. Look, we looked at how we think CN, our China sellers will respond to this, right? We talked to a lot of those sellers. [inaudible]
Speaker Change: and we made assumptions to whether some of those sellers may exit, may pivot their business to other market, etc. We looked at how we think marketplace volumes might be impacted from higher prices and we baked in assumptions there. We looked at how we sought services businesses might be impacted, how that volume might be impacted by softer business spending. We thought about how we might see card usage impact from lower ad spend, right? So that's just a flavor of the
analysis, again.
Speaker Change: Super evolving situation. We're not assuming, you know, to the other number we put out there in terms of sort of framing our business that 20% total revenue number that is directly tied to the China US corridor. We don't assume that that goes to zero. That's not what we hear from our customers.
Speaker Change: So we baked in a lot of sort of assumptions into that. We again think there's a broad range of outcomes and wanted to share that additional color.
Speaker Change: No, it's great. I appreciate all the disclosures this morning. And then maybe if I can just sneak in another question here well actually just to clarify does a 20% number include float revenues and then I actually had a different question on just to take great expansion that we saw across the business this morning.
Speaker Change: if you could dimensionalize or maybe provide some color on just the breakdown between sort of pricing actions that you guys have taken versus the mixed dynamics and some of the higher take rate corridors that John alluded to in the script that would be helpful to appreciate it. Thanks for the questions today.
Speaker Change: No problem. Well, yes, the 20% that we that we size does include float revenue on the take rate question look at we're really happy that we've been able to consistently grow SMB take rates. We've seen that for multiple consecutive quarters now.
Speaker Change: and we're doing that by by increasing the value that we provide to our SMBs, by activating them more quickly, by cross-selling more effectively, by growing our B2B franchise, by really driving adoption of our card product.
Speaker Change: Yes, from pricing initiatives, from our workforce management acquisition. So it's what you're really seeing in that number is kind of the fruits of that strategy of really expanding the value and the utility that we provide to our customers.
Speaker Change: To give you sort of a little more visibility on that, look from a marketplace perspective. So SMB is selling on marketplaces. We saw that take rate expand by four basis points year over year. That's a mixture of both geomix shift.
Speaker Change: Year over year, partly a factor of slower growth in China, and therefore, mixed shift into those higher growth, higher take rate regions like Latam, and also pricing actions as we've really sort of figured the right product market fit pricing dynamics in those markets. So again, really consistent take rate expansion. And we expect to continue to drive modest, you know, to the question we had at the top of the hour, modest take rate expansion, and that
Revenue should outpace volumes over time.
Very helpful. Appreciate you taking the questions.
Speaker Change: Our next question comes from Trevor Williams from Jeffries, ease of go at it.
Trevor Williams: Hey, good morning, guys. If I get us another on the China exposure, so the 20% revenue you're calling out, China, into the US.
Speaker Change: Can you give us a sense for what the underlying mix looks like there by merchant size, type, category? I mean, I think in the past you guys have talked about the average merchant in China being bigger than the average overall, Payoneer merchant, but any more detail just on an underlying merchant mix within that number would be helpful. Thanks.
Speaker Change: Yeah, happy to take the question. So look, I think you've called out some of the answer in your question. It's a very broad community there so we support a very broad and diverse
Speaker Change: Range of Sellers in China that are selling both a diverse set of goods across multiple platforms.
and also a diverse in terms of their side.
Speaker Change: and in talking to our customers and really looking at that underlying data as well, we do expect that those larger sellers will tend to be more Paris-Rosilium. For one of a better word, they will tend to have more branded goods in that inventory, have more pricing power more broadly.
Speaker Change: So we do expect that those merchants will be more resilient and be able to really sort of pass some of those pricing changes through and be able to continue to sell actively into that US market while smaller sellers might be expected to exit. And to your point, we think our portfolio.
Speaker Change: is more weighted towards those larger sellers overall but again diverse set of sellers that will not be universally impacted and a diverse set of goods and skews if you like that are being solved that again will not be universally impacted.
Speaker Change: Yeah, and I just want to add that to amplify B's point about how well positioned the China sellers can be, and particularly the larger sellers, they have integrated business models where they both design and manufacture products and strong competitive modes.
Speaker Change: in their businesses, and they've invested heavily in winning the buy box and building relationships with their distribution in the U.F. And in our...
Speaker Change: Qualitative Conversations with them. You hear them refer to how important it is to maintain their distribution into the US as an important key distribution channel for them. Additionally, Payoneer, we're working hard with our customers to help them expand their distribution around the globe.
Speaker Change: into Europe , into other regions of the world where this forcing function of the current tariff environment is driving innovation and improved increased distribution for our customers into other markets around the world.
and I believe long-term we will see.
Speaker Change: More corridors, more distribution for Chinese sellers across the globe, 85% of China's exports
Speaker Change: Go to market other than the United States and the forcing function of the terror of environment I believe will drive increased distribution thanks for the question Trevor.
Trevor Williams: No, that's super helpful. My follow-up is kind of along those lines. So, once we get through kind of the near-term disruption from all of this, I mean, how are you guys viewing this as a potential accelerant for share beings, where merchants that are going to need to explore?
Trevor Williams: Spelling more into other corridors and just how well you think you guys are to kind of accumulate share gains with merchant ads kind of once we get through the near-term disruption. Thanks.
Trevor Williams: Yes, yes. I mean, if you think about how dynamic the environment is, sellers or what sellers are doing depending on their size, scale, product, category, they're in and where they currently sell to. So what sellers are focused on is optimizing their supply chains, adjusting their logistic infrastructure.
Trevor Williams: addressing pricing is be just referred to thinking about what their product mix should be and what the return on ad spend is or when they're buying volume or buying traffic, but particularly as it relates to expanding the other markets.
Trevor Williams: We see them focus on Europe , Australia, Canada, and Latin America. And we have a program called the Green Channel Program in China which helps introduce high quality, high volume branded sellers to the world's marketplaces.
Trevor Williams: Sellers are excited by that program as our marketplaces are on the globe and we can help them do that so China to the rest of the world is a significant opportunity and at 20 years of building relationships with global marketplaces our reputation and relationships with the world's marketplaces is strong and getting stronger. Thank you very much.
Trevor Williams: and now that we have completed the acquisition of our license in China, we've spoken frequently about how important that is being regulated in China, trusted in China to help Chinese merchants sell to the world is a significant long-term opportunity for us.
Thank you.
Speaker Change: Our next question comes from Chris Kennedy from William Blair. Please go ahead.
Chris Kennedy: Good morning, thanks for all the detail and thanks for taking the question. The ex-float EBITDA, you continue to make good progress on that. Can you just talk about the levers that you have to maintain the recent momentum in a potentially more difficult environment?
Chris Kennedy: Yeah, thanks for the question. Chris, look at, yes, I think we're obviously very pleased that we've been able to increase profitability of the core business of the last several quarters and we continue to have. We look at the business in the aggregate.
Chris Kennedy: We'll continue to be disciplined operators and really very carefully scrutinize the expense base and ongoing investments that we're making. To John's point, we view a really strong long-term opportunity here. And we also have levers over discretionary spend and indeed over variable spend that really tracks closer to transaction volumes more generally. So we do expect that we have levers in terms of really optimizing as we see the situation
Chris Kennedy: As we see what the impact might be in the back half of the year, we believe and we know that we have levels to really optimize appropriately in terms of maintaining sort of good operating margin overall as we as we continue through the cycle.
Chris Kennedy: Okay, understood. Thank you. And then, John , you talked about the opportunity in workforce management. Can you just kind of talk about kind of what your strategy is there and what the opportunity is for Payoneer?
Chris Kennedy: Yeah, I'm really pleased about the progress the team's making globally on workforce management. We are hearing from our customers that they are increasingly focused on having global teams support their global sales and global sourcing. So driven by our customer need and the dynamic, I think…
Chris Kennedy: Macro Environment. There's more momentum towards global workforces than ever before. We've now rebranded squad to paying their workforce management. It expands our ecosystem.
Chris Kennedy: The Potentials for Partnerships and Partners are B2B offering, I think, significantly. We're seeing strong growth. We're able to leverage our US distribution and US relationships to successfully sell the products. We are...
Chris Kennedy: Passing the $1 million of new incremental AR from newly signed deals, which is a nice milestone the U.S. team has achieved, and we remain very excited about the long-term opportunity for our workforce management initiatives.
Chris Kennedy: I think it validates the financial stack fully. As a global brand regulated, trusted by entrepreneurs around the world, helping them manage their global workforces is just another notch on our belt in our expansion of our strategy, globalists.
[inaudible]
Chris Kennedy: Ardaq's question comes from Sanjay Sakhrani from KBW. Please go ahead.
Sanjay Sakrani: Thank you. Good morning. I have one question on tariffs and one on another topic. Just on tariffs. Thank you so much for all the detail. I know there's so many balls.
Sanjay Sakrani: in the air here, but just to clarify, there's obviously lots of geographies where there's tariffs being discussed, and just on the margin it seems like there might be an increase across the board.
Sanjay Sakrani: I'm just curious, in that situation where maybe there's this 10% increase across the board, do you feel like there's any significant impact there or is it just more of the more onerous scenarios specific to China?
Sanjay Sakrani: Yeah, thanks for the question, Sanjay. Look at the impact of the quote unquote exposure we size is really based on the current tariff regime so that the very heavy tariffs on China and the existing tariffs.
Sanjay Sakrani: But again, I think we're going to need to see how this all plays out [inaudible]
Sanjay Sakrani: and really continue to sort of model and scenario plan as we've been doing and course correct. We remain super focused on the long-term opportunity.
Sanjay Sakrani: Super focused on supporting our sellers and really see that we can value and grow into this changing environment.
Got it.
Sanjay Sakrani: Just one more on Tara, one other question I'm sorry. Did you guys see any evidence of pull-forward?
Sanjay Sakrani: in the months leading up to May. And then just on ICPs, that number actually declined. Sequentially who I'm just curious, is there anything there that surprised you in terms of your penetration or anything changed? Thanks.
Thank you.
Speaker Change: Yeah, thanks. Look, it's hard to say. We've read a lot of the same sort of reporting that you have around Paul forward. Q1 from a, from a volume perspective, especially marketplace volume was kind of noisy, as we called out in the prepared remarks in terms of changes to payout cycles. There were also implicit impacts from the wildfires in LA and other noise, right, that I think.
Speaker Change: makes it hard to tease out whether there was a pull forward or not. So I'm satisfying answer but I think the answer is hard to say perhaps, right? As we looked into Q2,
Speaker Change: Certainly we've seen no impact to date from volume. April has shown stable trends in what we're seeing across the portfolio and and into I guess we're almost halfway into May now and so as we cool down in our prepared remarks.
Speaker Change: At this point, we expect you to be broadly in line with our stated medium term targets.
and we'll continue to monitor an update.
and quickly on the ICPs.
Speaker Change: You know, the ICP definition when we introduced it and volume as sort of the governor is a blunt force in instrument, but it's not actually how we're managing the business today. We're very focused on managing the business to maximize profitable revenue growth as opposed to quantity of individual ICPs and I've shared.
Speaker Change: I think a number of times are focused on moving towards larger and larger customers, and that shows up in the numbers.
Volume growth from my 10k plus ICPs was 8%
Speaker Change: Revenue growth from that cohort as we've driven pricing and cross-cell of products was up 18%
Speaker Change: and we continue to focus on quality customers globally and to find quality as geographic, industry, product mix and product adoption is enabling us to focus our go-to-market efforts, our product team's efforts on adding the right customers into the mix to help us continue to drive our growth.
Michael Grondahl, Michael Grondahl, Michael Grondahl,
Speaker Change: I believe that's the last question. So thank you everybody for your questions today and for your participation this morning.
Speaker Change: Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.
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Speaker Change: haven't drank this much blood in a long time, that's a fact Yetーヤ YY It seems like every other high school craving for blood
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Speaker Change: and John Carpenter Produced by John Carpenter and Beatrice Ordonez Produced by John Carpenter and Beatrice Ordonez
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Speaker Change: Good morning and thank you for standing by. Welcome to the Payoneer's first quarter 2025 earnings conference call. At this time, all lines have been placed on mute to prevent any background noise.
Speaker Change: Following the speakers remarks, there will be a question and answers that will open your life for questions.
Speaker Change: 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.
Michelle Wang: Thank you, operator. With me on today's call are Payoneer's Chief Executive Officer, John Caplan, and Payoneer's Chief Financial Officer, B. Ordonez. Before we begin, I'd like to remind you that today's call may contain forward-looking statements, which are subject to risks and uncertainties.
Michelle Wang: For more information, please refer to our filings with SEC, which are available in the investor relation section of payoneer.com.
Michelle Wang: Actual results make different materially from any forward-looking statements we make today. 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.
Michelle Wang: In addition, today's call may include non-GAAP measures . These measures should be considered in addition to and not instead of GAAP financial measure.
Michelle Wang: Reconciliation to the nearest gap measure can be found in today's Ernest Press release, which is available on our website.
Michelle Wang: Additionally, please note that we've posted an earnings presentation supplement alongside our earnings press release on investors.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 to be here.
Good morning everyone and thank you for joining us.
Michelle Wang: Payoneer has a long-term opportunity to become the essential partner for cross-border S&Bs to help connect them to the global economy.
Michelle Wang: Today I'll share how we're leveraging our core assets to build momentum and navigate the rapidly changing trade landscape. We will then walk through our first quarter financial results and provide context on our 2025 outlook.
Michelle Wang: We serve nearly 2 million entrepreneurs in SMBs including over a half a million who fit our ideal customer profile our customers are engaged in cross-border trade operating in more than 190 countries and territories and selling to a wide range of end markets.
Michelle Wang: They provide marketing, IT, customer support, and other services to a diverse set of global industries and countries.
Michelle Wang: They also sell a broad set of goods wholesale through marketplaces and direct to everyday cut consumers around the world.
Speaker Change: Through their multi-currency pay and year account, our customers manage their cross-order accounts receivable and accounts payable, including using our card and workforce management products.
Speaker Change: Around that stack, we have built a significant mode over the past 20 years.
Speaker Change: Licenses Across Key Markets from China to Europe to the US.
Speaker Change: We've expertise in local markets and robust infrastructure aligned with local regulatory needs.
Speaker Change: Enduring partnerships with leading freelance, travel, content, and e-commerce goods, marketplaces, a robust and resilient infrastructure of global bank and PSP relationships that enable connectivity across 7,000 payment corridors.
Speaker Change: Employees on the ground in over 35 countries, and a scalable support model that serves our nearly 2 million customers.
Speaker Change: 2024 was a record year for Payoneer and we've carried that strength into our Q1 2025 results.
Speaker Change: Revenue grew 16% year-over-year, excluding interest income ahead of our stated medium-term targets. Our B2B business continues to grow significantly.
Speaker Change: B2B Revenue Increased 37% Driven by Growth in APEC, Damia, and Latin America, we see strong demand and product market fit in these service focused markets.
Speaker Change: Adjusted EBITDA with $65 million, with a 27% margin. Excluding interest income?
Speaker Change: Q-1 was our highest adjusted EBITDA quarter in nearly three years and was the fourth consecutive quarter of profitability net of interest.
We continue to focus our efforts on quality customers.
Speaker Change: We've been actively shifting our customer portfolio and targeting the highest value segments by industry, region, size and product need. At the same time, we are cross-selling more of our products and expanding our relationships with our customers.
Our results reflect our strategy.
Speaker Change: Our ARPU growth excluding interest income accelerated for the seventh straight quarter, reaching 22% growth year over year. This is the direct result of our customer makeshift and successful cross sell of more products and services.
Speaker Change: Our results reflect the value we're delivering to our customers as they continue to scale and grow their cross-border businesses.
Trade is being reshaped.
Speaker Change: for businesses around the world. This is a challenging and clarifying moment.
Speaker Change: Like the first few months of COVID were, five years ago.
We sent the past few weeks listening to our customers.
Speaker Change: Our conversations give us more conviction about what we're building and how we're building
Speaker Change: One customer said to me, the changing macro environment fuels innovation and reinvention and I'm glad I have pain here supporting me as I expand my business to more countries.
Speaker Change: Our customers are nimble and rapidly adapting to change. Last month at Payoneer's 20th anniversary, we brought together 20 customers from around the world.
Speaker Change: Here's what they told us. They're increasingly diversifying both where they sell and how they source materials and talent. Many are more focused on Europe , Southeast Asia, Latin America and Australia as they pivot.
The Payoneer account becomes even more useful.
Speaker Change: They're building distributed teams around the world in order to benefit from global talent capabilities. As they do, they're turning to pioneers accountable capabilities, including our workforce management
Payoneer is built to support them.
Speaker Change: We see this current disruption as a meaningful long-term opportunity because Payoneer isn't just built for the old model of trade, we're positioned for the new one and as value chains diversify, we are positioned to benefit.
Speaker Change: First, we combine local presence with global scale. Our teams are on the ground in the world's most entrepreneurial regions. In Q1
Speaker Change: Our APAC and Latin America customer regions, each grew revenue over 20%.
Speaker Change: Together they represent about a third of our firm's total revenue with an average take rate of approximately two to three percent.
Speaker Change: These are regions where we expect continued tailwind as trade routes shift and businesses expand their global footprint.
Speaker Change: We have over a half a million ICPs that are roughly evenly distributed across our five regions.
Speaker Change: Approximately 40% of our revenue comes from helping customers sell to non-US markets.
Speaker Change: We are well positioned to grow with our customers as they diversify the regions they sell to.
Speaker Change: Second, our Global Regulatory Footprint. We've recently closed our acquisition of a licensed China-based payment provider, becoming only the third foreign player licensed in China.
Speaker Change: China is an important market for us. It's about a third of our revenue comes from China-based
Speaker Change: While only 20% of our overall annual revenue is tied directly to the U.S. to China Trade
Speaker Change: China exports over 120 countries, and as our Chinese customers drive their goods distribution to more markets around the world, including Europe , Latin America, Southeast Asia, we will help them diversify, and we will grow with them.
Speaker Change: We also applied for a cross-border payment aggregator license in India, the fastest growing top five economy in the world.
Speaker Change: They are a country that stands to benefit from this new trade landscape.
Speaker Change: We are also actively pursuing licenses in Canada, Israel and beyond.
Speaker Change: We're investing in the future of trade, global, regulated, diverse, and powered by entrepreneurs and cross-border SMBs.
3rd
Speaker Change: Trade is increasingly services based. Our customers include service providers such as BPO's, software developers, marketing firms, and remote workers on marketplaces.
Speaker Change: House sourcing and remote work will continue, especially in uncertain times, as companies look to grow and to optimize their own PNLs.
Speaker Change: We are well positioned, including our new workforce management solution to help customers
Payoneer has weathered uncertainty before and we've come out stronger.
Speaker Change: This is another moment to turn change and disruption into opportunity.
Speaker Change: We're staying close to our customers, we're staying disciplined in our execution and we're moving fast to see new opportunities in emerging markets.
Speaker Change: By doing just that, we believe we can create long-term value for shareholders and we continue to play a vital role in the global economy. With that, I'll turn it over to B to take you through the numbers and our outlook for the year.
Bea: Thank you, John , and thank you to everyone for joining us.
Bea: Payoneer delivered another strong quarter with revenue and profitability ahead of our median
Bea: We achieved growth in revenue excluding interest income of 16% and generated 65 million in adjusted EBITDA, representing a 27% adjusted EBITDA margin. These results demonstrate the value we offer to our customers and the strengths of our execution.
Bea: Now turning to our first quarter results. We delivered revenue at 247 million, up 8% year-over-year.
Bea: Revenue excluding interest income grew 16% year-over-year, driven by strong growth in our B2B franchise, increasing adoption of our high value products and services, including our checkout and card products, and the impact of our monetization initiatives.
Bea: Volume was up 7% with growth rate normalizing, consistent with the trends we described when we reported our fourth quarter results in February .
Bea: S&B volume grew 7% year over year with volume from S&Bs at seller marketplaces up 3%. Volume from BWB S&Bs up 21% and merchant services volume up 88%.
Bea: Volume from SMBs that sell on marketplaces were impacted by a number of factors, including marketplace driven changes in the timing of certain large holiday volume payouts, including from Amazon as well as other marketplaces.
Bea: For the 2024 holiday season, these payout volumes occurred in late December 2024, compared to early January typically.
Bea: Adjusting for this effect, we estimate that in the first quarter of 2025, volume from SMDs at fellow marketplaces would have grown roughly 10% year over year.
Bea: At Q1 take rate of 125 basis points, increased one basis point on a year-over-year basis, and nine basis points sequentially, driven by take rate expansion in all of RSMB customer segments and outrunning the impact of lower interest income.
Bea: On a year-over-year basis, we drove significant expansion in our SMB customer take rate, in line with our stated strategy and reflecting the value we offer to our customers.
Bea: RSMB customer take rate was up 11 basis points year over year and 10 basis points sequentially driven by continued growth in our higher yielding B2B franchise.
continues adoption of our high-value product.
Bea: especially our card product, the ongoing impact of our various pricing initiatives as well as the impact of our workforce management acquisition.
Bea: Customer funds held by Payoneer increased 11% year-over-year to 6.6 billion which helped partially offset the impact of lower rates on our interest income revenue.
Bea: Customance value are multi-currency capabilities and the ability to hold balances in the currencies in which they do business and in stable currencies is a core value proposition.
Bea: We offer customers the ability to do business in a range of currencies and jurisdictions, and we are well positioned to help customers as they adapt and shift their businesses towards new trade corridors.
Bea: We continue to steadily grow customer funds and generate an interest income of 58 million in Q1, even as average interest rates declined year over year.
Bea: As of March 31st, we had reduced our sensitivity to fluctuations in short-term interest rates in relation to approximately 3.7 billion or roughly 56% of customer funds.
Bea: This consists of approximately 1.8 billion of assets from the Lion Customer Funds that are invested in a portfolio of US Treasury securities and term-based deposits.
Bea: as well as interest rate derivatives on approximately 1.9 billion of funds underline customer balances providing a floor against interest rate declines below 3 percent.
Bea: We will continue to actively manage our hedging programs while always prioritizing liquidity and security.
Bea: Total operating expenses of 217 million increased 14 percent, primarily driven by higher transaction costs, later related expenses, consultancy fees, and the impact of cashback incentive programs designed to drive adoption of our card's product.
Bea: Transaction cost is 39 million, increased 16%, driven by growth in higher transaction cost products and business lines, including B2B, merchant services and our card product.
Bea: Transaction costs represented 16% of revenue, an increase of approximately 110 basis points from the Priya Yip area.
Bea: Primarily due to lower interest income. Excluding interest income transaction costs represented 20.9% of revenue consistent with the prior year period.
Bea: Sales and marketing expense was up 5 million or 10% euro per year, driven primarily by higher labor-related costs, including from our workforce management acquisition and increased spend on card incentives.
Bea: Other operating expenses were at 1.4 million or 3%, primarily due to higher IT and communication costs.
Bea: R&D expense increased 5 million or 16%, mainly due to higher labour-related costs, primarily related to our workforce management acquisition as well as consulting expenses and several one-time items.
Bea: G&A expense increased 6 million or 24 percent primarily due to higher labour-related costs and higher consulting fees related to several discrete projects.
Bea: Adjusted EBITDA was 65 million, consistent with the prior year period. This represents a 27% adjusted EBITDA margin in the quarter despite a decline of 7 million in our interest income and is the fourth consecutive quarter of positive adjusted EBITDA excluding interest
Bea: Net income was 21 million compared to 29 million in the first quarter of last year. Q1 basic and alluded earnings per share were 6 cents and 5 cents respectively.
Bea: We ended the quarter with cash and cash equivalence of 524 million. During the quarter we repurchased approximately 17 million of shares with approximately 87 million remaining on our current repurchase
Bea: As John discussed, our long-term thesis has not changed. We continue to believe that over the long term, the digitization of commerce, globalization of the services economy, and the growth and diversification of global trade will continue.
Bea: SMDs are by nature resilient and continue to adapt and thrive. We are proactively positioning ourselves to help our customers navigate the current environment.
Bea: by connecting them to new markets, working to expand our regulatory infrastructure and our marketplace ecosystem and local capabilities, and by continuing to invest in expanding our financial stack to better serve their needs.
Bea: That said, recent developments related to tariffs and global trade has shifted the immediate landscape and near-term there is a high degree of uncertainty around the global macroeconomic and trade policy environment, which is dynamic and evolving.
Bea: As a result, we are suspending our previously issued four-year 2025 guidance.
Bea: We expect that if the existing global tariff regime remains in place, there will be a potentially significant negative impact on our future financial performance.
Bea: Through early May we have not seen a slowdown in volumes or revenue, given our April performance and our understanding of customer inventories that are already in the US. We expect growth in the second quarter to be broadly in line with our stated medium-term targets.
Bea: Therefore, we expect any potential impact from tariffs to be primarily in the second half of the year.
Bea: to provide further color. Our business is highly diverse across geographies and
Bea: Our over half a million ICPs are roughly evenly distributed across our five regions and sell a diverse range of products and services to businesses and consumers all around the world.
Bea: In 2024, customers in China represented roughly a third of our revenue. However, only 60% of our China revenue or roughly 20% of our total revenue came from Chinese customers selling to the U.S.
Bea: The balance of our China revenue was generated from Chinese customers selling into non-US markets, including in Europe , the UK, Australia and Japan.
Bea: As noted, given the wide range of potential economic and trade policy scenarios, we do not believe we can reliably forecast our four-year 25 performance at this time.
Bea: There is a lot we don't know about how the environment will evolve and there is a very broad range of potential outcomes.
with that said based on what we know today.
Bea: Assuming the existing tariff regime remains in place and making broad assumptions related to potential impacts and customer, business, and consumer behaviour, our current estimate is that we could see a headwind to our full year 2025 revenue in the region of $50 million.
Bea: Again, the environment is to say the least dynamic and evolving and our estimation is based on a broad set of assumptions related to how our customers might be impacted, how consumer and business behavior might evolve, as well as other factors that could impact our business more generally.
Bea: Despite this potential for volatility in the near term, we remain focused on our long-term opportunity.
We will be disciplined operators.
Bea: continued to monitor the macro and trade policy environment as it evolves, worked to support our customers as they pivot and expand and appropriately align our investment and costs to the size of the business opportunity.
Bea: Afer's quarter results reflect strong execution of our strategy and continued discipline.
Bea: During this period of heightened economic uncertainty, our focus is on supporting our customers, further diversifying our business and investing in our core capabilities.
Bea: We remain confident in our long-term opportunity and our ability to capture it and deliver value for our shareholders, customers, and employees.
Speaker Change: We are now happy to answer any questions you may have. Operator, please open the line.
Speaker Change: Our first question comes from Davenon, Peller from Wolf Research. Please go ahead.
Speaker Change: Hi, thanks. This is Daniel Krebs on for Darren. I was wondering if you could speak to the customer reception to various pricing increases we noticed in March and wondering how competent you feel in your pricing power at this time, if you could maybe talk to, you know, your previous guidance around $30 million in pricing upwards in 2025. Thank you.
Hey Daniel, thanks for the questions.
Speaker Change: I mean, look, our pricing strategy at this time hasn't changed. We've talked about it historically as being more customer segment focused. Really looking at bundling the value we offer our customers, adjusting our pricing to the competitive environment. We're going to continue to do that. We're not making any changes today. We're really focused.
Speaker Change: in the current environment, obviously given the macro uncertainty that we talked about in our prepared remarks.
Speaker Change: on serving our customers and on aligning the value that we give them to our pricing and to our overall strategy and on supporting those customers. We're not seeing any particular pressure. The 30 million we outlined was obviously sort of in that pre-tariff environment, but we haven't changed how we're looking at pricing as of now.
Speaker Change: Okay, great. Thank you. And if I can follow up, if we can maybe zoom out a bit, if you can put a finer point, you know, now having been in business for over 20 years, I'll have customer onboardings and retention trended over past like throughout your history. Thank you.
Speaker Change: Thanks for the question. It's an important area for us, which is focusing our...
Speaker Change: Customer Support Organization, our go-to-market organization, and our cross-cell efforts on providing full suite of financial products.
Speaker Change: for our large ICP customers. And what we see in our data is that our net revenue retention is strongest among our largest customers and continues to be.
Divate programs locally to drive improved retention.
We've seen successful results.
Speaker Change: Driving Retention with our B2B customers, cross-selling card products, globally to them, cross-selling our workforce management products, and while we think we're early in the overall retention journey for Payoneer, the indication of our progress is strong.
Speaker Change: Our next question comes from Will Nance from Goldman Sachs. Peace, go ahead.
Speaker Change: for the moving pieces that you guys are thinking about. And then as it relates to pulling the guide, if you could just maybe talk through...
Speaker Change: You know, some of the considerations around, you know, pulling the guidance versus, you know, maybe just flowing through the $50 million into guide, into the guide. You know, how are you thinking about some of the range of outcomes here and, you know, maybe what should we be looking at externally?
Speaker Change: to measure the health of the ECOM corridor. Would that be something like port shipments into the U.S.? No, there's a lot there, but thanks for taking the question.
at Guidance, as we said on the call, obviously there's a lot of uncertainty and obviously there's a very broad range of outcomes here.
Speaker Change: So we based our sizing of that exposure on a lot of assumptions and I can run through some of them and a lot of seconds and third order impacts that are frankly very hard to quantify right it goes without
saying that the supply chains are super interconnected.
Speaker Change: So there could be downside to that 50 million number. There could also be upside, right? Again, very broad range of outcomes and obviously the environment is super dynamic but to share really to some of the assumptions and how we thought about it. Look, we looked at how we think CN, our China sellers will respond to this, right? We talked to a lot of those sellers. [inaudible]
Speaker Change: and we made assumptions to whether some of those sellers may exit, may pivot their business to other market, etc. We looked at how we think marketplace volumes might be impacted from higher prices and we baked in assumptions there. We looked at how we sought services businesses might be impacted, how that volume might be impacted by softer business spending. We thought about how we might see card usage impact from lower ad spend, right? So that's just a flavor of the...
Analysis, Again.
Speaker Change: Super evolving situation. We're not assuming, you know, to the other number we put out there in terms of sort of framing our business that 20% total revenue number that is directly tied to the China US corridor. We don't assume that that goes to zero. That's not what we hear from our customers.
Speaker Change: So we baked in a lot of sort of assumptions into that. We again think there's a broad range of outcomes and wanted to share that additional color.
Speaker Change: Now it's great. I appreciate all the disclosures this morning. And then maybe if I can just sneak in another question here Well actually just to clarify does the 20% number include float revenues and then I actually had a different question on just to take great expansion that we saw across the business this morning
Speaker Change: if you could dimensionalize or maybe provide some call out on just the breakdown between sort of pricing actions that you guys have taken versus the mixed dynamics and some of the higher take rate corridors that John alluded to in the script that would be helpful to appreciate it. Thanks for the questions today.
Speaker Change: No problem. Well, yes, the 20% that we that we size does include float revenue on the take great question. Look at we're really happy that we've been able to consistently grow SMD take great. We've seen that for multiple consecutive quarters now and we're doing that by by increasing the value that we provide to our SMBs.
Speaker Change: by activating them more quickly, by cross-selling more effectively, by growing our B2B franchise, by really driving adoption of our card product.
Speaker Change: We saw that take rate expand by 4 basis points year over year. That's a mixture of both geomix shift.
Speaker Change: Year over year, partly a factor of slower growth in China, and therefore, mixed shift into those higher growth, higher take rate regions like Latam, and also pricing actions as we've really sort of figured the right product market fit pricing dynamics in those markets. So again, really consistent take rate expansion, and we expect to continue to drive modest risk to the question we had at the top of the hour, modest take rate expansion, and that
Revenue Shutout, Pace, Vol. Over Time.
Very helpful. Appreciate you taking the questions.
Trevor Williams: Our next question comes from Trevor Williams from Jeffries. Peace, I'll go ahead.
Trevor Williams: Hey, good morning guys. If I get us another on the China exposure so that the 20% and a revenue are calling out China into the U.S.
Trevor Williams: Can you give us a sense for what the underlying mix looks like there by merchant size, type, category? I mean, I think in the past, you guys have talked about the average merchant in China being bigger than the average overall Payoneer merchant, but any more detail just on an underlying merchant mix within that number would be helpful. Thanks.
Speaker Change: Yeah, happy to take the question. So look, I think you've called out some of the answer in your question. It's a very broad community there so we support a very broad and diverse range of sellers in China that are selling both a diverse set of goods across multiple platforms and also a diverse in terms of their size. And in talking to our customers and really looking at the underlying data as well, we do expect that those larger sellers will tend to be a very diverse and diverse range of sellers in China that are selling both a diverse range of sellers in China that are selling both a diverse range of sellers in China
Speaker Change: More Paris, Resilien, for one of a better word they will tend to have more branded goods in that inventory, have more pricing power more broadly.
Speaker Change: So we do expect that those merchants will be more resilient and be able to really sort of pass some of those pricing changes through and be able to continue to sell actively into that US market, while smaller sellers might be expected to exit. And to your point, we think our portfolio...
Speaker Change: is more weighted towards those larger sellers overall but again diverse set of sellers that will not be universally impacted and a diverse set of goods and skews if you like that are being sold that again will not be universally impacted.
Speaker Change: Yeah, and I just want to add that to amplify B's point about how well positioned the China sellers can be, and particularly the larger sellers, they have integrated business models where they both design and manufacture products and strong competitive modes.
Speaker Change: in their businesses and they've invested heavily in winning the buy box and building relationships with their distribution in the U.S. and in our...
Speaker Change: Qualitative Conversations with them. You hear them refer to how important it is to maintain their distribution into the US as an important key distribution channel for them. Additionally, a Payoneer, we're working hard with our customers to help them expand their distribution around the globe.
Speaker Change: into Europe , into other regions of the world where this forcing function of the current tariff environment is driving innovation and improved increased distribution for our customers into other markets around the world.
and I believe long-term we will see.
Speaker Change: More corridors, more distribution for Chinese sellers across the globe. 85% of China's exports
Speaker Change: Go to market other than the United States and the forcing function of the terror of environment I believe will drive increased distribution thanks for the question Trevor.
Trevor Williams: No, that's super helpful. My follow-up is kind of along those lines, so once we get through the near-term disruption from all of this, how are you guys viewing this as a potential accelerant for share beings, where merchants that are going to need to explore?
Trevor Williams: Spelling more into other corridors and just how well you think you guys are to kind of accumulate share gains with merchant ads kind of once we get through the near-term disruption. Thanks.
Trevor Williams: Yes, yes. So I mean, if you think about how dynamic the environment is, sellers are what sellers are doing, depending on their size, scale, product, category, they're in, and where they currently sell to. So what sellers are focused on is optimizing their supply chains, adjusting their logistics infrastructure.
Trevor Williams: Addressing pricing is be just referred to thinking about what their product mix should be and what the return on ad spend is or when they're buying volume or buying traffic, but particularly as it relates to expanding to other markets.
Trevor Williams: We see them focus on Europe , Australia, Canada, and Latin America and we have a program called the Green Channel program in China which helps introduce high quality, high volume branded sellers to the world's marketplaces.
Trevor Williams: Sellers are excited by that program as our marketplaces are on the globe and we can help them do that so China to the rest of the world is a significant opportunity and at 20 years of building relationships with global marketplaces our reputation and relationships with the world's marketplaces is strong and getting stronger. Thank you very much.
Trevor Williams: And now that we have completed the acquisition of our license in China, we've spoken frequently about how important that is, being regulated in China, trusted in China to help Chinese merchants sell to the world is a significant long-term opportunity for us.
Speaker Change: Our next question comes from Chris Kennedy from William Blair. Please go ahead.
Chris Kennedy: Good morning. Thanks for all the detail and thanks for taking the question. The ex-float EBITDA, you continue to make good progress on that. Can you just talk about the levers that you have to maintain the recent momentum in a potentially more difficult environment?
Speaker Change: Yeah, thanks for the question. Chris, look at, yes, I think we're obviously very pleased that we've been able to increase profitability of the core business over the last several quarters. And we continue to have, we look at the business and the aggregate will continue to be disciplined operators and really very carefully scrutinize the expense base and ongoing investments that we're making. To John's point, we view a really strong long-term opportunity here. And we also have levers over discretion.
and Beatrice Ordonez.
Speaker Change: As we see what the impact might be in the back half of the year, we believe and we know that we have levers to really optimize appropriately in terms of maintaining sort of good operating margin overall as we as we continue through the cycle.
Speaker Change: Okay, understood. Thank you. And then, John , you talked about the opportunity in workforce management. Can you just kind of talk about kind of what your strategy is there and what the opportunity is for Payoneer?
John: Yeah, I'm really pleased about the progress the team's making globally on workforce management. You know, we are hearing from our customers.
Speaker Change: that they are increasingly focused on having global teams support their global sales and global sourcing, so driven by our customer need and the dynamic.
I think.
Macro Environment, there's more momentum towards global workforces than ever before.
Speaker Change: We've now rebranded Squad to Payoneer Workforce Management. It expands our ecosystem.
Speaker Change: The Potential for Partnerships and Partners are B2B offering, I think, significantly. We're seeing strong growth. We're able to leverage our US distribution and US relationships to successfully sell the products.
Speaker Change: Passing the $1 million of new incremental AR from newly signed deals, which is a nice milestone the U.S. team has achieved, and we remain very excited about the long-term opportunity for our workforce management initiatives.
Speaker Change: I think it validates the financial stack fully as a global brand regulated, trusted by entrepreneurs around the world, helping them manage their global workforces is just another notch on our belt in our expansion of our strategy globally.
Michael Grondahl, Michael Grondahl, Michael Grondahl,
Unknown Moderator: Ardaq's question comes from Sanjay Sakhrani from KBW, please go ahead.
Sanjay Sakrani: Thank you. Good morning. I have one question on tariff and one on another topic. Just...
Speaker Change: on tariffs. Thank you so much for all the detail. I know there's so many balls.
Sanjay Sakrani: in the air here, but just to clarify. There's obviously lots of geographies where there's tariffs being discussed.
Sanjay Sakrani: and just on the margin, it seems like there might be an increase across the board. I'm just curious in that situation where maybe there's this 10% increase across the board, do you feel like there's any significant impact there or is it just more of the more onerous scenarios specific to China?
Rawr!
Sanjay Sakrani: Yeah, thanks for the question, Sanjay. Look at the impact of the quote unquote exposure we size is really based on the current tariff regime. So the the very heavy tariffs on China and the existing tariff.
Sanjay Sakrani: But again, I think we're going to need to see how this all plays out and really continue to sort of model and scenario plan as we've been doing and course correct. We remain super focused on the long term opportunity.
Sanjay Sakrani: Super Focus on supporting our sellers and really see that we can value and grow into this changing
Speaker Change: Got it. Just one more on tariff, one other question, I'm sorry. Did you guys see any evidence of pull forward in the months leading up to May? And then just on ICPs, that number actually declined. Sequentially, I'm just curious, is there anything there that surprised you in terms of your penetration or anything changed? Thanks.
Thank you.
Speaker Change: Yeah, thanks. Look, it's hard to say. We've read a lot of the same sort of reporting that you have around Paul forward. Q1 from a volume perspective, especially marketplace volume, was kind of noisy, as we called out in the prepared remarks in terms of changes to pay out cycles, there were also implicit impacts from the wildfires in L.A. and other noise, right, that I think.
Speaker Change: Makes it hard to tease out whether there was a pull forward or not, so I'm satisfying answer, but I think the answer is hard to say perhaps, right? As we looked into Q2,
Speaker Change: Certainly we've seen no impact to date from volume. April has shown stable trends in what we're seeing across the portfolio and into I guess we're almost halfway into May now. And so as we cool down in our prepared remarks.
Speaker Change: At this point, we expect Q2 to be broadly in line with our stated medium term targets.
and we'll continue to monitor an update.
and quickly on the ICPs.
Speaker Change: You know, the ICP definition when we introduced it and volume as sort of the governor is a blunt force in instrument but it's not actually how we're managing the business today. We're very focused on managing the business to maximize profitable revenue growth as opposed to quantity of individual ICPs and I've shared. Thank you very much.
Speaker Change: I think a number of times are focused on moving towards larger and larger customers and that shows up in the numbers.
Volume growth to 10k plus ICPs was 8%.
Speaker Change: Revenue growth from that cohort is we've driven pricing and cross sell of products was up 18%
Speaker Change: and we continue to focus on quality customers globally and to find quality as.
Speaker Change: Geographic Industry, Product Mix, and Product Adoption is enabling us to focus our go-to-market efforts, our product team's efforts on adding the right customers into the mix to help us continue to drive our growth.
I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change: I believe that's the last question, so thank you everybody for your question today and for your participation this morning. As B&I shared, we are confident in the long-term opportunity for our company and focused on delivering value for our customers and our shareholders. We look forward to our next discussion next quarter. Thanks everyone.
Speaker Change: Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.