Payoneer Global Inc. (PAYO) Earnings Call Transcript & Summary

Great. Thank you, everyone, for being here today and for joining the fireside chat with Payoneer. I'm here with John Caplan. John currently serves as CEO and Director at Payoneer, a financial technology company, empowering the world's small- and medium-sized businesses to transact, do business and to grow globally. John is an executive, investor and entrepreneur with a track record of scaling companies. Prior to joining Payoneer, John was President of North America and Europe at alibaba.com, the cross-border B2B business unit of Alibaba Group. In this role, he helped lead its transformation into one of Alibaba Group's fastest-growing and most profitable business units. John, thank you for being here. Pleasure to see you.

It's awesome to be here. Thank you so much for having me.

To start, John, can you provide for folks a quick overview of Payoneer? And why does Payoneer exist?

Yes. So thrilled to do it and really glad to be at the conference. It's great to see the energy at the conference. Payoneer is a 20-year-old business. We just celebrated our 20th anniversary, which we're very proud of. And our mission is to connect the world's cross-border businesses to the rising global economy. We are on the ground. We have customers in 190 countries and territories. And what we're working on doing is taking the complexity out of cross-border payments, the complexity out of cross-border accounts receivable and accounts payable. We offer a sophisticated but yet simple-to-use global account for cross-border businesses. And that creates a financial stack. And that financial stack enables businesses that are doing business anywhere to anywhere to have the tools they need to compete, whether it's using our card products or our workforce management, newly acquired business, 100% of someone's international AR and their international AP funnels through the Payoneer account. And we are a business that has -- had 42% revenue growth in the last 2 years, turned the business -- core business profitable. We have teams on the ground in 35 countries. We're a business with momentum.

Excellent. So John, you've been with the company almost 3 years now. What initially attracted you to Payoneer and why did you join? And tell us about how you came to work here?

Yes. So if you scratch me, I bleed entrepreneurship. I really care about helping entrepreneurs achieve their business streams. I'm passionate about entrepreneurs. I'm particularly passionate about those that are competing cross-border. In most of the world, when you start a business, you go global from day 1. You're either sourcing human capital or capability internationally and you're selling your goods or services internationally from day 1. And I think that's largely misunderstood by folks in the United States where you can get rich between Boston, Philadelphia and New York. There's enough consumer demand right here at home in the U.S. to drive a business success. But in most parts of the globe, to be successful, you're participating in the global economy. And when I had the incredible opportunity to come join Payoneer, what I saw was a unique set of assets, regulatory assets, product and infrastructure assets, a brand that is well loved and respected by entrepreneurs around the globe. Like if we were in Manila right now, 5,000 people would be in this room, right? Payoneer is synonymous with entrepreneurship around the globe. And the ecosystem of relationships the team had put in place with bank partners, with big marketplaces around the world like Amazon or Coupang or Walmart or Etsy or Airbnb really created a platform that I saw that could be expanded to be a bigger business. We are -- when I arrived, the company had 20-some-odd percent share in what is considered the marketplace payouts business, which a $300 billion market. Payoneer largely innovated and created the industry to help global sellers participate in Western marketplaces. But there was an even bigger opportunity in front of the firm. And that bigger opportunity really was cross-border payments for B2B, for SMBs in emerging markets. And those 4 themes when we looked at the assets Payoneer had assembled, those 4 themes, we were uniquely positioned not just to innovate in, but to capture significant market share. And that's what has been powering our growth. We've put in place changes inside the firm to go after it. We have an extraordinary executive management team. The people who are leading Payoneer are the best entrepreneurs I've ever had a chance to partner with. So together, we're really excited that we're in the earliest innings of what is a very big and exciting growth trajectory for the firm.

In the last 3 years, the market is evolving rapidly. It's changing every day. What you -- how has the company evolved since you've joined? And what are some of the things that excite you going forward?

Yes. I think the first and sort of the most central thing that's happened is that we've evolved our strategy at Payoneer from a one-size-fits-all approach to a much more focused customer go-to-market and product and pricing strategy. And we are -- and we've shared this in our disclosures, we have 2 million active customers. We love all of them. We get 11 million applications a year from people around the globe who want Payoneer accounts. But we are very focused on the B2B customer, the customer that needs a comprehensive set of financial solutions, both on AR and AP. And those customers are generally larger. Their entities exist in multiple geographies. Their headquarters might be in Ho Chi Minh City, but they have an operation in Dubai and in Colombia and in Turkey. And that isn't easy for a 50-person organization. We just -- as I said, our 20th anniversary, and we had a customer here in the United States, the firm called IA Blueprint, Beaux Pilgrim, runs the business from Louisiana. Beaux helps U.S.-based insurance companies and insurance agents outsource part of their operation to the Philippines. And he uses our Payoneer workforce management product to both manage employees around the globe and pay contractors around the globe. And it is incredibly exciting to see how our business is growing because we're expanding the suite of services we offer and who we offer it to. We delivered 20% revenue growth in 2024, well ahead of the medium-term targets we had and much greater than our 2023 at 5% revenue growth. And we've unlocked significant leverage in our business. Our headcount has largely remained flat for a couple of years now. We've taken the business from money losing to money making. We have great momentum, disciplined focus on driving profitable revenue growth. And lots of opportunity and runway in front of us.

That's great. Payoneer, since you joined in the last few years, you've built out the management team, you've invested in the business. What are some of your proudest accomplishments in the last few years since you joined?

Yes. I think the proudest thing that I could look at is not just the team we have, the culture we've built, the customer love and centricity in the organization. It's just how resilient Payoneer is, right? During my tenure leading the firm, we've had the war in Ukraine, October 7 and then the most recent -- we had the SVB collapse, the most recent event with the tariffs. And Payoneer is so resilient and so global and so necessary in the lives of our customers that while macro -- short-term macro disruptions are time-consuming, gray hair inducing things, our business is very strong and resilient. So I'm particularly proud of that and the capability our organization has to weather what a weaker firm wouldn't grow through. And we're strong and we're growing through them. So I'd say that's one. The second is we're in the earliest stages of our growth journey. The momentum in the firm is really exceptional. We've shared 6-plus quarters of 30% growth in our card product. We had 39% or 37% growth in our B2B revenue in the first quarter, 16% revenue growth overall in our core business in Q1, expanded profitability in the first quarter. So we're in the earliest stages of a multiyear growth journey that this team is capable of executing against in a disciplined and focused way. Another particularly proud accomplishment at Payoneer is how we've refined our focus on our customer. We've defined who our best customers are, and we're disciplined about focusing on quality customers. The investments we've made in the SMB-grade financial stack, cross-selling the stack, the data in our platform shows customers who use more of our accounts payable products, bring in more accounts receivable and stay longer. So our net revenue retention grows really nicely. And then at the end of the day, delivering value for shareholders. 2023, the firm core business lost $14 million of adjusted EBITDA. 2024, we generated $14 million of core adjusted EBITDA. Being innovators who are also disciplined on costs and focused on growth, those things together create shareholder value.

And maybe we could talk a little bit about the industry and the competitive landscape. Can you talk a little bit about the industry, what you're seeing not only in the cross-border payments landscape, but who your main competitors are, who do you see? I imagine it varies by geography quite a bit. You guys are very global. So you probably -- it's pretty fragmented environment, but would love to hear your thoughts on it?

Yes. I love this question because people don't realize. I think often don't realize how big the cross-border SMB economy really is and don't understand that in 190 countries and territories, Payoneer is a meaningful part of the export economy and the import economy. We sit at the intersection of what I think are underserved, but incredibly exciting areas in cross-border payments. The first is cross-border in and of itself. The second is B2B. Business is -- as the digitization economy grows, as the globalization economy continues to grow despite the sort of near-term news about the trade war and tariffs, I do think that, that news, in fact, brought more eyes on how important SMBs and the cross-border economy is. And then the emerging markets. In India, we shared in earnings a week ago that we're in the process of applying for our license in India. We are excited about a new partnership that I'm sharing for the first time today with you with alibaba.com, where we've just partner with alibaba.com to help India-based exporters onboard into the Payoneer account and participate in the cross-border export economy. I think that's a very exciting sort of signal for how necessary India is and how much momentum Payoneer has both in our ecosystem of partnerships and the value we provide to SMBs around the world. As it relates to who we take share from, really, we're not -- PayPal is a competitor, but we do a lot of business together, and there's enough room for both of us to grow and capture share. We complement one another pretty nicely. We actually are disrupting the local analog bank. 90% of cross-border B2B payments activity is happening between an analog, old world bank and another bank around the world. And they don't have the technology, multicurrency account capability, support 24/7 support services, they're built for the old economy and Payoneer is built for the new economy. So as you're right, the landscape is fragmented and different. What we do in Argentina may be a little bit different than what we do in Pakistan. But at the end of the day, young people and entrepreneurs are changing the global economy and driving the innovation and those people choose Payoneer as the solution to be their financial solution cross-border.

Yes. I mean I can't imagine how much friction there is in setting up a business and selling globally. These answers may seem obvious, but why do you guys win? What you're right to win in the global marketplace? What do you think differentiates you from some of the competitors that you mentioned in the marketplace?

Yes. So the -- probably the most important dynamic of Payoneer is both that we're global and local, right? We are integrated into local ecosystems with local customers, with people who speak -- understand local traditions, but also have built a global regulatory moat around the business, a brand payment infrastructure and capability that enables a business anywhere to do business everywhere. And that is a competitive advantage for us without question. I think probably the single most important reason we have the right to win. The next is we're a customer-focused company. The 500-person SMB in Serbia is not getting the attention from a multinational bank. But they have multinational financial needs that the local branch of a multinational bank can't serve or won't serve. For Payoneer that is our target customer. We're giving them the support they need and we're part of their -- we coach the Little League team with them, like we're part of their community. I think that's pretty important. And I do think we're so responsive to the needs of our customers that our product road map and our innovation road map is focused on that unique customer. And we had at our 20th anniversary, I was sharing with you before we got on stage here that the -- at the 20th anniversary that we had a celebration of entrepreneurship. And we brought together customers from around the globe into New York, along with our colleagues and employees and listen to them talk about how valuable a multicurrency account is. If you're an entrepreneur in Colombia and your customers are in Venezuela, the traditional banks generally charge you 30% to move the money from point A to point B. So our 3% feels pretty good to that entrepreneur. And the fact that he can do it in the palm of his hand in his Payoneer mobile account with all the invoicing capability connected to his Payoneer card, so his employees when they go global on business trips, they can track their expenses, makes doing business easier. We don't help them grow their business by selling their products or price their products, but we make the financial activity simpler. And the office of the CFO for a cross-border emerging market SMB is not easy. And I listened to Bill at Rene's interview yesterday, and he was talking about how valuable the Bill.com product is to U.S.-based SMBs. And in some ways, we mirror that on the others around the world. And as investors and shareholders and customers begin to take a look at Payoneer and understand our revenue growth rate, our profitability, our utility for SMBs, the question about the competitive landscape becomes clearer and clearer. There isn't somebody in most of the world delivering the value we deliver to a customer that without us struggles.

Yes. That's a great analogy in serving the market that's not served around the world. One of the topics in terms of the industry that has come up in a lot of our client conversations recently, whether it's a consumer remittance player or if you talk to Visa or you talk to SMB-focused players in the industry is just is the role evolving role of stablecoins in the industry? And how is that going to impact cross-border payments and trade. Can you talk a little bit about that? Have you thought about it? Are you guys focused on it? What are you seeing in the market?

Yes. I think this is a really exciting opportunity. And we're probably one of the best positioned firms to benefit and capitalize on it. And the reason for that is we're trusted at the last mile. We're trusted by the person who has to not just receive the stablecoins, but use them and convert them into their local currency. So it is a very interesting long-term opportunity and one that we're exploring. In many ways, if you look at the history of Payoneer over 20 years, as our volumes have grown, our balances that we hold with our customers have grown as well, $6.6 billion of customer balances funds held today. And in some ways, we are -- provide a similar utility today to customers in emerging markets who are holding stable fiat currencies. And we think of stablecoins as another form, another payment rail that Payoneer is, I think, best positioned to capitalize on and innovate around and partner with the ecosystem of infrastructure firms who've built really purpose-built infrastructure that can integrate with a platform like Payoneer to bring more mainstream, the utilization of cross-border stablecoin payments, right? So that the -- as those use cases develop, that they're deployed by people who are doing real business cross-border and not the sort of peripheral side of it. And so we continue to talk to partners. There's nothing new to announce today, but it's an important innovation opportunity and one that we think we're uniquely positioned to participate in.

Yes. Maybe we could switch gears into the macro. There's obviously a ton going on in the market. You saw some of the announcements yesterday on trade. Obviously, there's been conflict with China. There's been tariffs. Those are moving around quite a bit. We get a lot of questions from our clients around how this is going to impact their business. Can you talk a little bit about how the macro is affecting your customers, their business, your business and what you guys see going forward?

Yes. So let's start with our customers, right, which is as a customer-first organization, let's start with how they're thinking and what they're doing, and then we can go broader from there. It's obviously a dynamic, rapidly changing environment and entrepreneurs are the most creative, the most focused on driving -- finding solutions and the most resilient. So we've had a front row seat to see cross-border businesses driving change in their own business because of decisions outside of their own control. And what sellers and businesses are doing are very specific to what industry they're in, what corridors they trade in, where they source or sell, what margin structures they have in their business and where they want to invest and diversify. So I think that I wouldn't paint sellers with one picture, I think there really depends by geography, industry and margin profiles. In our financials, we haven't seen any deterioration of our results as a result of the disruption from the trade. We've -- maybe more gray hair, but no impact in the P&L. And we expect our Q2 growth to be in line with our medium-term targets, which I think is a very important signal about how important Payoneer is and where we are in the trade cycle. Sellers in China specifically where we have 1/3 of our revenue at Payoneer are exporters from China. And we shared last week at our -- at Q1 earnings that 15% of our total revenue are China sellers, selling to the rest of the world, not to the United States. And so this is a corridor and corridors to Europe, Latin America, the Middle East to Australia, where we have well-worn tracks and relationships and distribution. And those channels will grow because the China-based sellers who are manufacturing high-quality, low-cost goods want to sell them wherever they can. And they are focused on expanding their market distribution. They're focused on optimizing their pricing for the 20% of volume that is on our platform that are China-based sellers to the United States. They're focused on optimizing their pricing, evaluating their cross-border logistics, thinking about their supply chains themselves, addressing their product mix. If you had 100 SKUs January 1, on May 15, looking at the tariff environment to adjust at 30% tariffs or 40% tariffs, which -- what products, what margins are the most important products. Going from 145% tariffs, which is effectively an embargo to a more manageable tariff environment where we're currently in during the pause, gives the sellers more, I think, latitude to adjust and manage their business. Nobody wants empty shelves in the United States, that's for sure. And those sellers want to have invested a lot in driving the distribution of their products. One of the things, Scott, that I find really interesting is 43% of the world's consumer consumption happens in the United States. So there is no seller in Vietnam or China or Bangladesh or India that isn't -- doesn't care about preserving and capturing competing for that shelf space and they are really focused on doing that. And I shared with you the news about our Alibaba.com announcement. We signed a deal with Alibaba.com to offer the Payoneer account to their thousands of India-based sellers on their platform. We are -- India is one, if not the fastest-growing global exporting GDP, 7% GDP growth or better, 1.4 billion people. We've shared that we're underway in applying for the license there. We're excited about our momentum in India and we think that's an important geography for us.

Yes. Congratulations on that.

Yes, big deal.

This is a really big deal. So maybe we could switch a little bit to the product. I think you've touched on this before, but you mentioned creating a comprehensive financial stack for your customers. It's very exciting. Obviously, you have a core SMB marketplace business. You're helping these customers with checkout. You're helping them with B2B goods and services, accounts payable. What's really exciting is the workforce management and payroll applications that you have. It's becoming a really big financial stack. What's exciting to you? What's growing fast? What some of the things that you're doing with your customers?

Yes. You nailed it, right? We want 100% of a business's international AR to flow into their Payoneer account. You sell in 15 marketplaces around the world, consolidate all that AR into your Payoneer account. You sell your goods wholesale, use Payoneer to invoice people around the world. You sell direct-to-consumer, use the Payoneer Checkout solution. So all of that international AR flows in. And at the same time, we want to serve 100% of our business' cross-border AP needs. And that's -- whether that's withdrawing some funds to your local bank because you have to pay your local rent and you're going to use your local bank account to do that. But more than anything, we're focused on helping our customers pay suppliers, pay international employees, use our FX tools to manage currency and increase the penetration of our card solutions with our global customers. I think this is maybe overlooked by people, the power of the Payoneer Card franchise because our AP tools, the growth of our AP tools, 30-some-odd percent growth of card usage each quarter for the last 6 or more quarters, indicates with a platform that has $80 billion of AR flowing through it and just about $6 billion of card spend on it, how much upside we have in our card product. And I think you'd understand this, I certainly see it in my own behavior. Once I use a card for my personal accounts payable, it's hard to take it out of my wallet, right? I create loyalty and stickiness around it. We see exactly the same data with our customers. The more AP tools our customers use, the more AR volume flows into the platform, the broader their network inside of our company platform grows and the better the net revenue retention and logo retention is. So AP plus AR and a multicurrency account of Payoneer is, I think, a killer app for cross-border SMBs. We're -- the team is our product and the team is so strong. And what they're doing is constantly driving to drive the simplicity, speed, utility and convenience of the Payoneer application, so more businesses can focus on doing business. And so we feel good about where we are, the investments we're making in the product and think they will continue to help us capture more share and more share of wallet from the customers we have.

Yes. It's really interesting. I mean you see in the office of the CFO, people focused on the enterprise and the mid-market, you have U.S., but what you guys are doing in SMB globally, it's just a very -- we see as a very underserved market.

Yes. And just if you look at the enterprise companies, the payments firms focus on the enterprise, generally see take rate erosion. Well, Payoneer, we've seen 16 bps of take rate expansion over the last couple of years and continue to see more there. I think that's, again, an overlooked dynamic of our business, 2 million active customers, 560,000 of what we call our ICPs, which is a blunt force definition of customers. But the simple way to think of it is a bigger multi-entity cross-border business makes us more money and uses more of our products, and we have more -- a lot more runway in front of us with those customers to take -- to drive profitable revenue growth with high-value customers and expand our take rate. And I think that is -- speaks to the strength of trust that our customers have with Payoneer. They're not nickel and diming us on our fees. What they're actually doing is using more and more of our products.

Yes. A huge market opportunity. I mean, bigger SMB pool, global higher -- obviously, better economics with those customers as they're growing a lot faster than some of the other upmarket parts of the market. Maybe I'll open it up to the floor for any audience questions, if there are any. Okay. We'll keep going. So you mentioned earlier about your customer base. One of the things you've done successfully is really focus on your ideal customer profile, obviously, moving a little bit more to larger customers. You've mentioned that take rates expanding, ARPU is expanding over time. So what is it about these larger customers? Are you able to sell more of your products and services that -- some of which we just went through? Tell us about that target segment?

Yes. The -- I think the -- our 560,000 ICPs in the multi-entity cross-border SMB is underserved by the financial services landscape, and we intend to serve them. We are very focused on delivering them the products and services they need, whether an SMB that sells on a marketplace, an SMB that sells B2B or even some of the smaller enterprise partners that are turning to Payoneer because they want to use our platform to handle their payouts globally. What we see is that we're increasingly focused on high-growth service-oriented emerging market customers, particularly in places like APAC and Latin America. In Q1, we saw 20% plus revenue growth in APAC and Latin America. Those regions together are 1/3 of our total revenue. And the firm overall had 16% core revenue growth. And there is given the shifting reshaping global trade landscape, we think really strong product market fit for us in APAC and Latin America and good tailwinds for our business there. And as it relates to ARPU expansion, we have -- we're getting smarter and smarter and more bespoke about our pricing and going from a one-size-fits-all approach to more disciplined look at corridors, customers, geographies and industries, and that's having a positive impact. We've looked at the bundling of our products and services more sensibly so that we can cross-sell more products into our customers in a bundled way. And we think we'll see strong take rate expansion over the next number of quarters and years because there is value in what we're providing, and we've shown that the elasticity of our pricing doesn't -- isn't having a negative impact either on our customer retention or our customer acquisition. So it feels like today, the more product value we provide for customers, we can charge even more for it.

I think we have a question in the audience.

Yes. I can speak up. So I'm listening to you and I'm trying to wrap my head around and I do a lot of work in emerging markets. So I do a lot of work in emerging markets. And I'm trying to wrap my head around, are you seeing a big difference now given the tariff conversation that's happening on the product side or FMCG products or the services side, right? So outsourcing technology to India or APAC, right? So where are you seeing the shift, if at all, you're tracking that information?

Yes. We haven't seen a shift in our activity or engagement with our customers by category or by geography. If you're a goods exporter in Vietnam, you're thinking differently about the business where you're going to sell to, where you're going to hold pallets and container loads of product, similar for a China-based exporter. If you're a services business in most of the globe, there's lots of opportunity to sell globally and have not been largely impacted by the tariffs, there have been some concern about if a consumer recession happens, what impact that would have on B2B services trade. So far, we haven't seen any deceleration there. Our business and our relationships with our customers indicate that SMBs around the world view macro disruptions as an opportunity for dynamic market share gains because they can move faster than big or old companies. And that -- I was talking to our sales organization in Dubai just the other day, who we sell -- that team sells a lot of marketing services to marketing services companies, our spend management and card -- virtual card products. That team is cooking and doing great. Talking to our team in Latin America about Brazil and the penetration of our cards product and the momentum we have there. I shared our Alibaba.com exciting announcement, helping India-based goods exporters more quickly participate and sell to the rest of the world by participating in the Payoneer platform. Our green channel program in China helps the world's best SMB exporters in China get access to and connect to the marketplaces around the globe. So Coupang or MercadoLibre or Etsy or eBay or Walmart basically come to Payoneer and want to meet the best exporting high-quality goods exporters. And those exporters want to meet Coupang and MercadoLibre and Walmart, and we help make those connections. So there's -- to date, the disruption from the trade conflict has shown up in the boats leaving China. We see all of that data, but has yet to show up in Payoneer's financials.

Well, thank you, everybody. John, thank you very much for coming to our conference. It's very exciting and looking forward to hearing more.

You bet. Thanks, everybody.

Thanks.