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

Okay. So joining us today and kicking off Day 2 of the conference, we have John Caplan, CEO of Payoneer. Prior to joining Payoneer, John served as President of North America and Europe at Alibaba, the cross-border B2B business at Alibaba to be specific. John, thank you for joining us. We're pleased to have you at the conference once again this year.

It's great to be here. Thanks for having me.

So let's kick it off at a high level. It's been 2.5 years since you took over as CEO. One of the main priorities has been the targeted focus on ideal customer profiles, or ICPs, and the changes to the go-to-market organization. Where do you feel the company is now versus where you started? And what are you most focused on to continue the momentum?

It's good to be here, and thanks for asking the question. It's an important one. As we think about the growth momentum transformation underway at Payoneer, and what we see is lots of opportunity in front of us. So when I arrived at Payoneer, there had been a one-size-fits-all approach to our customers. We do business in 190 countries and territories. We have 3,700 employees and contractors working together to serve the needs of cross-border businesses. But when I arrived, there was not an approach that said, these are our primary customers and these others are nice to have, but not the focus. So we adopted a segment-specific approach. And we identified goods exporters in China as being very important and B2B services companies across the globe, significantly important opportunities for us and larger customers more valuable to Payoneer than smaller. So since becoming CEO on March 1, 2023, we've had compound annual revenue growth of 16%. Prior to that, it was low single-digit growth at Payoneer. And our revenue per customer is up 50%. So we feel very good that the -- sort of at the most macro view of the business, we are -- we've done what we said we're going to do. We've executed very well, and we've proven we have strong product market fit. At the same time, for folks that are newer to Payoneer story, you see that our customer balances have grown 29% since this transformation of the company began. And that's because not just that folks trust us and feel comfortable holding their funds in their Payoneer account, is they're using Payoneer for their international accounts receivable, selling on a marketplace, selling to other businesses, selling direct to consumers, and now increasingly using our accounts payable tools to manage all of their international expenses. We've shared at the last earnings that our card is now 10% of all the usage of funds at Payoneer. It was 8% 2 years ago. And what's so exciting about the card is it's not just higher take rate, which it is, and distributed across more companies employees, which it is for travel, et cetera, or putting limits in place for managing employees, it actually demonstrates that Payoneer is not a toll booth on the money highway. People are choosing Payoneer because we can serve and solve complex business problems that they have, managing an international operation as a small business from day 1. Our innovation has substantially accelerated. We announced last quarter the partnership we struck with Stripe for our Checkout business. We took a product market fit that we proved to ourselves that our customers -- goods exporting customers in China, particularly wanted a checkout solution from us. We got to $1 billion in volume, partnered with the best-in-class solution at Stripe. That feels like a big step forward in innovation. We announced recently the collaboration with Citibank for treasury flows and their blockchain technology. This is us putting our, the rhetoric aside and just looking directly at real-world use cases of blockchain, technology to serve our business. And we have some early progress with AI in our customer support team that's making nice headway. So I would say, on balance, very happy with the progress we've made in our transformation and hungry for more, right? This is a motivated team where we're aligning our resources with our growth. We're building our plans for '26 and beyond, really about focusing on high-value customers in high-value geographies in high-value industries, and, frankly, reducing our emphasis on everywhere for everyone and more about focus on the high value because we promised profitable growth. And you and I have talked about this in the past. In 2024, we generated $14 million of core business EBITDA. That's not including any of the interest revenue we made. In the first half of this year, $16 million of core business EBITDA. So we have grown EBITDA in the first half of this year compared to last year. We are focused delivering optimistic, which would be how I'd say how we feel.

Great. And I also want to give you a chance to comment on the macro environment. I mean, you reported second quarter earnings a few weeks ago. The second quarter felt like one of the longer 3-month periods that I can remember. And I think the highlight of the quarter was Payoneer reinstating guidance amid what's been a volatile trade backdrop. So what is your latest thinking on the trade environment? And what adjustments have you and your customers made to accommodate that?

Yes. So the pulling guidance was the prudent and responsible thing for us to do at the time, reinstating it was equally prudent and responsible. The trade environment is dynamic, as we all know. What's equally dynamic or frankly, even more dynamic is the resilience and entrepreneurship of our customers, right? Our customers are proving again and again how focused they are on their own growth and how valuable Payoneer is to them. So we are seeing our customers expand their distribution, not just China to the U.S., but China to Europe, Latin America to APAC and EMEA. We've seen -- I mentioned this when you and I chatted last about we do events across China, where we help global marketplaces meet the highest quality exporters in China, and we're doing, frankly, around the world, but specifically in China. And we had 15 of those kinds of events oversubscribed in second quarter. Our customers turn to Payoneer to fast track their access to global demand, and that's, I think, really positive for us as a growth partner to our customers. I just saw in an e-mail this morning before walking in work we're doing with Walmart similarly to help Walmart connect to the high-quality exporters across Europe. We are a business that marketplaces turn to, to get access to high-quality sellers and sellers turn to, to reach global demand. If we think about August, August results were really consistent with our Q2 guidance. I'm pleased with the results we've seen through the third quarter and feel good about reiterating the guidance that we did and feel good about the trajectory of the firm is on right now.

That's great. And then switching over to the top of funnel. Could you talk through the changes you've made so far on go-to-market and what's next? You hit on the focus on ICP over the last couple of years. How are you thinking about the need to add sales and marketing talent versus kind of doing more with what you have, which I think has been the primary approach as you've kind of focused over the last couple of years? And then how do you think about geographies and verticals and where it could make sense to do that over time?

Yes. So let's start my impression when I arrived a couple of years ago, I was not satisfied with Payoneer's go-to-market motion, did not think it was focused enough that the yield per salesperson was strong enough. And we made substantial changes to our go-to-market, as you mentioned. And we focused on high ROI areas where we had unique product market fit, strong brand, the right infrastructure and product market fit and focus. And since then, we've nearly 3x the revenue per salesperson than when I arrived. And I think, before you expand, you got to get good at your basics. And we have gotten really good at the basics, and our cost per salesperson has been flat. In that context, we now can see what the yield we expect from a salesperson in a geography. And now we're going a step further and looking at specific regions, specific industries and identifying the, let's call it, sub-20 markets around the globe where Payoneer has a right to substantially win. And as we move into the next chapter of our growth, focusing in key geographies with our sales people, we have increased the percentage of our customers that have a named CSM. We have 50,000 or so $10,000-plus customers. They're not all created equal. Some have more complex needs and they need a named account manager who can really help them. And I think that's an important maybe overlooked dynamic of Payoneer's business is how valuable our service offering is and the service, the human service to our tech-enabled product that helps our customers be successful. So we will continue to invest in our Tier 1 markets. We'll continue to drive our incentives with our card product. The card being so valuable for the goods exporters who are buying advertising is increasingly valuable to the marketing services companies that are buying advertising on behalf of other firms, and the partnership with Stripe is just 1 example where we -- and there'll be more, where we see the opportunity to build an ecosystem around our customer acquisition engine and our value prop to accelerate our growth going forward.

Great. Maybe we can just go through a couple of the major parts of the business. I think it's always helpful to kind of remind people of some of the distinct businesses within Payoneer, and I want to start with the payouts business. Marketplace payouts is the largest and most penetrated, most developed of Payoneer's businesses. You're the market leader. Can you talk about the drivers of growth for that segment? And just what your expectations are going forward?

Yes. So you're right. We are the market leader, and we're proud of that. That is we fought hard to win that, and we continue to hold that share. And we aren't the cheapest provider in the market, but we have the best product market fit and, I think, really strong customer relationships. The first priority in terms of growing the marketplace business is we are focused on larger sellers, not smaller sellers. And I think it's important for people to understand that what matters in the marketplace business is not the number of sellers you have, it's the quality and volume they do. It is very hard to enter a marketplace from scratch and get -- and win the buy box and capture volume. So others may be focused on spreading wide, we are really focused on high quality and volume, and that's our emphasis there. The second is expanding the ecosystem. We continue to work across social selling, innovative sort of marketplace design to help bring our traditional marketplace sellers into the next phase of marketplace growth. Going forward, we see strong growth, but it will be mid-single-digit-type growth. It won't be much more than that, I don't think, as the consumer in the West sort of navigates the changing tariff landscape, the changing economy, the interest rate environment and all the messaging, but right now, we are benefiting from motivated large sellers focused on selling more globally. And the take rate has been largely flat in our marketplace business over the trailing 3 years. And if you think about other payment companies where they see take rate erosion while they scale, and as you've seen in ours, we are doing just the opposite.

Yes. That makes sense. So the mid-single digits, you think about that as maintaining share within the e-com space. I know a lot of people think about the largest marketplace out there that may grow a little faster, but I know there's a range of marketplaces out there, there's a range of growth rates, some of the services platforms are a little lower, just mid-single digits is kind of what you view the market growth at?

Correct. And we saw it in Q2. Walmart -- excuse me, Wayfair put up a really strong Q2, and we saw that in our Wayfair numbers. But as consumers shift their behavior, they shift across different marketplaces, different price points.

Makes sense. Okay. Then switching gears to the B2B business. I think it's helpful to go over just what separates this area from the core business? What is different about this from the payouts business? What are the problems that you're solving for the customer base there? And then I have a more numerical follow-up.

Yes. So if you think about it in the most basic way, if you're a business process outsourcer in the Philippines, right, and you've got customers in Germany and Canada and the United States, who use your call center for -- to handle customer inquiries, you fly over to the United States, you go meet on your customers and talk to them, convince them that you've got a great product. You use Payoneer's invoice, and that's a process that used to be done by a local bank, but you couldn't hold multicurrencies in your local bank and the cost and time to get paid was substantial. So you get paid into your Payoneer account. Then, in the Philippines, you have local employees, so you need to withdraw some of those funds into your local bank account in the Philippines to pay your local employees, pay your local rent. We also have contractors across APAC that do overflow work to go on business trips, so use Payoneer's cards to hand to your employees to handle their travel to add new customers and you use Payoneer to pay your contractors. So we really sit as the central nervous system of our customers' cross-border activity. And we're solving something that local banks can't do because they don't offer the multicurrency account, can't do because they don't have the technical capability and don't have the regulatory framework and don't have the speed and cost dynamics. So we really are a unique provider in the B2B space. It's a $1 trillion TAM, right? You and I have talked about this at length. It is a massive business opportunity. What we identified a couple of years ago was Payoneer has the assets and right to win in this space, and we've done just that. We've seen 37% revenue growth in the first half of this year in our B2B business. It's $11 billion of our trailing 12-month $80 billion or so, and that is 30% of our core revenue. So a business that -- a nascent small business a couple of years ago now is the sort of coal-fired engine of our growth dynamics inside of -- and, I am looking at my notes, it was -- our B2B business was 50% of our Q2 revenue growth, like that is demonstration of both product market fit and a big opportunity. We are on a long march, though. This isn't a flash in the pan. It's all about quarter after quarter improving the product, which has higher take rates, which is more relevant in high take rate geographies and leveraging bespoke pricing by corridor, cross-selling our workforce management acquisition, adding the capability so 100% of B2B customers' cross-border activity flow through their Payoneer account.

And then I just want to follow up and get in the weeds a little bit more. On the 2Q numbers, B2B volumes were up 19%. Revenues were up 37%. And I know we talked about a little bit of this on the call and afterwards the drivers around the China B2B business versus kind of rest of world. Could you just maybe level set the outlook for both B2B volumes and B2B revenue? And just where you're expecting to see the most growth out of the B2B business?

Yes. So the focus on the B2B business is primarily the rest of the world in the services area. We have the strongest product market fit there, the least sort of complexity as it relates to managing the banks, the regulators and all the sort of onboarding that's required for cross-border B2B flows out of China. We're working hard on those China flows because there's a real opportunity, but we are focused on the rest of world as the primary sort of growth driver. And we will have, and we've shared with folks, 25% revenue growth as really the second half target for our B2B business. It will be a mix of geographies, but we're not overinvesting into China, but we get the product to the place it needs to be. So we're moving upmarket, larger customers. There's an interesting dynamic that folks in the U.S. might not really understand, but many of our B2B customers are what we call multi-entity. They have a home market, I don't know, Colombia, but also do business in Dubai, they also do business else -- in other markets around the globe, and they end up setting up entities around the world. And those multi-entity customers have the most sophisticated needs, and we have great retention. So we're very focused on identifying larger multi-entity cross-border B2B businesses. And the partnerships we've built with the resellers starting to create some momentum and more effective identification of customers that are coming inbound to drive growth. So we are super focused on the B2B services arena, see 25% growth is really solid coming off of 2024's exceptional growth, and we'll continue to drive it.

That's great. So maybe we can talk about some of the recent partnerships. You mentioned Stripe for the Checkout business. Maybe just touch on where do you see the most growth in the Checkout business historically? And then how is the Stripe partnership going to kind of help you accelerate that growth?

Yes. So it's really important. If our thesis, and our thesis is that -- and it's validated by the discussions we have with our customers and the net revenue retention of our best customers. The more of their AR they consolidate into 1 Payoneer account, the easier it is for them to run their businesses. And the larger goods exporters, particularly those in China, but across the region, sell on marketplaces, they sell wholesale and they also sell direct. We had, I think, a very solid test effectively with the product we launched. It took us very quickly to $1 billion of volume running through our owned and operated solution. But our ambition is greater than playing catch-up to Stripe, frankly. And so we decided, made the tough decision to sunset our own offering and replace it with the best-in-class offer. And that is good economics for us. It lets us extend that product to more customers, really validates that our account is that valuable to our customers that they want to aggregate all those flows into one place regardless of whether it's Payoneer, Checkout tech or Stripe tech. We own the customer relationship. So if someone is wondering, "Hey, why would you do that? Can't Stripe take your customers?" Actually, in fact, no. Those are Payoneer customers and well-organized relationship between Payoneer and Stripe. And it's a much better cost and yield dynamics over time for us. And now with this Stripe relationship, we have the potential. We have not said we're ready yet to do it, but we have the potential to roll that out into more geographies. And that would have taken a lot longer with our owned and operated solution. And so on sort of every score better for our customers, better for our P&L, just opportunity in front of us, and so we're going to drive that business forward.

Yes. No, it makes sense. Okay. And then the other major partnership this quarter was the relationship with Citi. The theme of the summer, it's been stablecoin summer. And I know you recently announced the collaboration with Citi to begin integrating blockchain infrastructure. I know it's not technically a stablecoin product, but maybe you could talk about that announcement. What is the brain to the table? What does it help Payoneer do better?

Yes. I think the thing that -- and you've had a chance to meet our -- some of our folks in our treasury team, and we have a really exceptional group of people who are looking at driving the innovation there. And our relationship with Citibank is very solid. By using their blockchain technology, it lets us move money more quickly in more geographies with less sort of concern about daytime or weekend time, right? And sort of all of the sort of practical applications of moving funds around the globe using Citibank's blockchain tools enable -- will enable our treasury department to move even faster, better speed, better automation and more transparency. We're sort of the motivating reason to extend the relationships that way. There's no more cutoff times, which obviously is a benefit. And it lets us optimize our funds in interest-bearing accounts. And I'm a strong believer that the 17% growth in balances we had in Q2 and the volume of funds our customers hold is misunderstood by investors, right? I think investors don't appreciate the fact that we actually serve a critical function in the life of our customers' sort of financial operating journey And moving their money around the world quickly with Citibank is a benefit and seeing our balances continue to grow is something we're proud of.

So I guess 1 follow-up on the stablecoin topic. There's been a lot of questions around stablecoins and how they could be a disruptive force in cross-border payments for all companies in the ecosystem. You have a very high gross margin on payments-related revenue like most kind of electronic cross-border companies do. So could you talk about the barriers to entry in your business? Where you feel the value add is? And why stablecoins are or aren't a threat to the economics of the business longer term?

Yes, an awesome question. And stablecoin summer was exciting for all of us, right? Because the GENIUS Act now codified something to allow, what was it, a tradable asset and trading is fun to be something where I live, which is in the practical use cases that entrepreneurs around the world need to do business and feed their families and grow their companies. Stablecoin is turbo for Payoneer, right? If you think about -- or the express train, right, because it's a real opportunity. We -- if you think about going from tradable assets to use -- assets that are used, if you're an entrepreneur in Vietnam, you cannot buy a hammer with USDC today, right? Even if someone wants to pay you in USDC, you can't convert it into your local fiat and the hardware store you go into buy a hammer wouldn't accept it if you could use it. So if you think about what we've built, it's a global network of last mile delivery and converting multiple currencies into local fiats so that they can be used. And so we think our unique asset, bank relationships, regulatory relationships, 2 million active customers, Walmart, Amazon, Airbnb, Etsy, Fiver, Upwork, marketplace relationships enables us to actually be a really important part of the infrastructure that helps the stablecoin community turn into the use by the commercial community.

Yes. No, that makes sense. And then I guess when you talk to your marketplace customers, what is their perception of the use of stablecoins? And as we think about the marketplace payouts business, we had SoFi on stage yesterday talking about working with marketplaces to leverage stablecoins and payments context. What's your kind of thought on stablecoin adoption in the payouts business?

Yes. So all of the -- I've had a chance over the summer to have a tour with a number of our -- the payments teams inside America's largest marketplace and sit across the table from them and ask them. And they say, we have no idea. We don't know what this means. We're curious to learn about this. We don't want to be left behind, but we're certainly not -- I was with 1 big marketplace, we'll call it, $100 billion market cap market this summer, and they were bemoaning the size of their payments infrastructure team as single-digit tens of people. And I explained well we spent $600 million a year building payment infrastructure so you don't have to. And they said, right, because I think the potential exists, but the reality is it's going to come through companies like Payoneer for it to actually get really adopted.

Yes. Okay. Another development this year was that Payoneer became one of the handful of Western payments companies with a license to operate in Mainland China. You closed on the acquisition there earlier this year. What do you see as the biggest benefits from that?

Yes, it's awesome. Tsafi Goldman who was just there. She's our General Counsel and leading this activity. We are 1 of 3 Western firms with the license. And this is really important for Payoneer because China is a substantial market for us and a big growth opportunity for us. We shared when the tariff sort of -- which feels like 100 years ago, but we shared when the tariff stuff began that 15% or so of our total revenue is China sellers selling to not to the United States, 20% is China to the U.S., and we continue to see really nice growth of helping Chinese sellers sell all over the world. So specifically on the acquisition, it expands our TAM. It lets us help bring fund CNY outbound out of China, which is we can all read the same articles in Bloomberg about the renminbi and how important that is to China. I think that's not a today opportunity. It does feel like a good long-term opportunity. And then specific inside of Payoneer P&L in the near term, there's cost synergies through transaction costs, right, where we -- instead of paying a third-party vendor to help us bring fund domestically from Hong Kong into China, we'll be able to use our owned and operated entity. That will not have a big impact in the near term, but over time, as it takes more share, will let us to do that. And so we think this is super strategic for us, expands the TAM, cuts some OpEx and positions us again with the regulatory moat around the business that is, we think, very valuable to shareholders.

Okay. I want to talk about the Payoneer card a little bit. I think I attended a customer conference that you guys hosted a while back and it really struck me how much focus the card got from your customers. And I think a lot of people in the U.S. markets, U.S. investors are so familiar with what have become fairly commonplace card offerings from a lot of fintechs here. I don't think there's a great understanding for how differentiated it is, particularly in the APAC region. So can you talk about what did it take for you to stand that up? What is so differentiated about it? And what's kind of the true -- the problem that, that card solves in -- particularly in the APAC region?

Yes. So the value prop is really straightforward, which is operating in local currency off of your cross-border AR, saving on conversion fees, higher acceptance rates so your card doesn't get declined, which we all know is a nightmare, and linking it directly to your Payoneer balance, which is, again, simplifying activity and providing limits for users. So the CEO of a firm can provide the appropriate limits to their Head of Sales, their -- I think you get the point. In Q2 of 2025, we did $1.5 billion of usage on the card, which is up 25% year-over-year, 2.8% yield and 10%, as I mentioned, a moment ago, of over total usage. And the net revenue retention of our customers who are card-carrying customers is exceptional, and they stay longer, use more products are more valuable and our ARPU for those customers are really strong. Our biggest users today are China goods exporters by far, but we're seeing very strong growth in Latin America among B2B services firms. We've talked in the past about marketing agencies in the Middle East who are using our virtual cards to consolidate ad spend for their customers. So we're excited about the card, and you'll hear us begin to focus even more on it, right? As we focus on key geographies, I talked about 20 or fewer key geographies, focus on larger customers, so absolute count of customers become less meaningful, right? It's volume per account, ARPU per account, but the absolute count was really useful when I was beginning the remake of Payoneer and less useful today as we've got the machine starting to really hum and cook in the right direction.

Yes. Okay. And then another one -- another acquisition that we haven't talked about today yet is the payroll acquisition. It didn't immediately -- I didn't immediately understand the motivation that I think when you described it about how difficult cross-border payroll is for a lot of your customers, I sort of got it. But maybe you could talk a little bit about the motivation, and just how you're feeling about kind of cross-sell and the progress so far?

At the most basic, Payoneer resolves knowing who people are and paying them. And if you're a business owner, that KYC gave us permission with banks and regulators to go do business and moving money around the world, obviously, critically important. If you look at the P&L of a business owner globally who has employees around the world, the compliance complexity of managing HR is something American firms, I think, don't understand. Because if you have employees in a dozen countries, you have to comply with local employment law all over the world. That is burdensome, taxes are complex. So we acquired the workforce management business a year ago August. It is really strong growth, and we're proud of it. It's small absolute dollars, but strong growth both of new customers and cross-sell. We're selling to a different customer, right? The Payoneer value prop in payment was finance. The value prop in human capital is HR and finance. So we're learning and have been learning the difference in that dynamic. 25% of our won -- new customers left another workforce management platform. And there's a lot of sort of buzz in the U.S. certainly about Deel or others that get a lot of sort of noise, but in sort of on the playing field, Payoneer is doing a very effective job at building this new opportunity, which will be, I think, a building block of the next sort of phase of our growth.

That's great. So maybe we can talk through a little bit more some financial metrics. Payoneer has strong mid-20s margins. There's a degree of sensitivity to interest rates in the model, just given the significance of the interest income you generate from customer funds. How are you thinking about the outlook for margins and the ability to hold margins flat with rate cuts potentially closer than they have?

Yes. I think this is -- again, for the people who are paying attention and scratching into the P&L, you'll see approximately $40 million headwind in interest revenue, all of it made up for in core business EBITDA growth. That's us unlocking leverage in our business. And we are very focused at continuing to drive the core business profitability. And so holding adjusted EBITDA margins flat at 25% when we face that interest rate headroom, we think it should be viewed really positively by the market because it's evidence of the strength and health of our business. And I mentioned a moment ago, in the first half of '25, $16 million of core EBITDA versus a total of $14 million for all of last year. We are focused on profitable growth, not looking for empty calories. You'll see even more focused on the adjusted EBITDA side of the business as we continue to unlock more leverage in the model.

Yes. No, I'd be remiss if I didn't mention all the work Bea has done on the hedging side as well. So you start to limit that as well. Okay. In the last couple of minutes here, I just wanted to hit on capital allocation. Payoneer is highly profitable, highly cash generative. You have been actively repurchasing shares. You've also done some tuck-in M&A. So what's top of mind from the capital allocation front?

Yes. We have really strong cash generation every month. We're -- and envy of others presenting at this conference, if you look at the monthly free cash flow we generate, it's great. We have deployed the excess cash towards inorganic and organic investments. We've done a few acquisitions, over $250 million of buybacks and the warrant redemption since 2023. And we still have $500 million of cash and no debt. So with that balance sheet and that free cash flow we're generating, we authorized -- the Board authorized $300 million of additional buyback, which we continue because we believe there's value in Payoneer's shares. And we are, in fact, looking into the market at consolidation opportunities where we see businesses that either bring us additional verticals to add or capabilities that we can cross-sell to our existing customer base. So we think that the market -- we're in a strong position. We've delivered really nicely. Shareholders can have confidence in our execution, and we're going to be more aggressive.

That's great. Well, John, I think we'll leave it there. But thank you so much for taking the time today. I really appreciate the conversation, and thanks for supporting the Goldman Communacopia Conference.

Thanks for having me. Thanks, everybody.