Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Payoneer Global Inc (PAYO, Financial) reported record financial results for the first half of 2024, validating their strategy and execution.
- ARPU increased by 27%, with a notable acceleration in ARPU growth excluding interest income.
- Volume growth accelerated for the sixth consecutive quarter to 22%, with B2B volume growth reaching 40%.
- Total revenue grew 16%, excluding interest income, and normalized revenue was up 21%.
- The company generated record adjusted EBITDA of $73 million, delivering a 30% margin fueled by strong revenue and sustained expense discipline.
Negative Points
- Transaction costs increased by 30%, driven by strong volume growth and an increase in chargebacks and operational losses.
- Sales and marketing expenses increased by 5%, driven by higher marketing spend related to card incentive programs.
- General and administrative expenses increased by $4 million, primarily due to higher M&A-related expenses.
- The company is modeling in some macroeconomic softness in the second half of the year, particularly in the marketplace business.
- Net income decreased to $32 million compared to $46 million in the second quarter of the previous year, which benefited from non-operating gains.
Q & A Highlights
Q: Nice job on the quarter. Maybe just start off with your overview of what you're seeing in terms of traction around different types of pricing initiatives in the business. How much of the revenue growth is coming from volume performance versus yield control?
A: Beatrice Ordonez, CFO: Everything from a pricing perspective is in line with prior calls. We launched our Lite account, driving improved monetization for freelancers and gig workers. We're seeing uplift from FX revenue pricing initiatives and continuing our multi-quarter journey to augment our pricing strategy. We expect a $20 million uplift in our 2024 guide from these initiatives.
Q: John, can you discuss the strategy of the business in terms of investments in different categories to cross-sell? What progress has been made on incremental products?
A: John Caplan, CEO: The team has focused on the full financial stack, with increasing cross-sell of AP products. Growth in China, APAC, EMEA, and Latin America is strong. We're excited about payroll capabilities with the Squad acquisition, which will grow ARPU and increase the stickiness of our financial stack. Our integrations into the ecosystem and multi-entity features make Payoneer the go-to hub for international financial activity.
Q: Can you comment on what you are seeing from a macro perspective across the various regions you serve, especially given the strength in China, Asia Pac, and Lat Am?
A: John Caplan, CEO: We saw strong performance in China, APAC, EMEA, and Latin America, with stable macro conditions in Q2. Bea Ordonez, CFO: We're modeling some macro softness in the back half of the year, particularly in our marketplace business. Our guide implies a deceleration in normalized revenue growth to mid-teens in the second half, but fundamentals remain strong, especially in B2B.
Q: With the addition of Squad, what else remains on your wish list in terms of building out the product suite?
A: John Caplan, CEO: We're excited about Squad's payroll management capabilities. Our M&A philosophy focuses on product acquisitions that leverage our existing customer base and regional footprint. We will continue to add capabilities through tuck-in M&A.
Q: Can you give us an update on the pilot program for intra-network flows and its potential impact?
A: Beatrice Ordonez, CFO: The pilot is progressing well, but it's not a meaningful driver for 2024 guidance. We expect it to be more impactful in 2025 as part of our broader pricing strategy.
Q: How are you thinking about incremental margins over the next year, excluding interest income?
A: Beatrice Ordonez, CFO: We see opportunities to drive sustainable growth in core revenue and constrain adjusted OpEx. We've outperformed expectations in transaction costs and see continued opportunities to drive additional leverage from an adjusted EBITDA margin perspective.
Q: Can you give more details on extending the duration of customer deposits and sensitivity to interest rates?
A: Beatrice Ordonez, CFO: We've extended roughly $1.2 billion in customer funds into treasuries and term deposits with a weighted average duration of 2 years and yield just under 5%. This reduces interest rate sensitivity and delivers greater earnings consistency.
Q: Can you talk about the investments in your tech stack and where you are in that journey?
A: John Caplan, CEO: We've increased the velocity of product releases and focused on high-value ICPs. Beatrice Ordonez, CFO: Our investment is divided into growth-driving initiatives, enabling platform capabilities, and platform modernization to support our diverse and complex financial stack.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
