Good morning. Thank you for standing by. Welcome to Payoneer’s Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all lines have been placed on mute to prevent any background noise. Following the speakers’ remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded. I would now like to turn this call over to Michelle Wang, Payoneer’s VP of Investor Relations.

Thank you, operator. With me on today’s call are Payoneer's Chief Executive Officer, John Caplan; and Payoneer's Chief Financial Officer, Bea Ordonez. Before we begin, I’d like to remind you that today’s call may contain forward-looking statements which are subject to risks and uncertainties. For more information, please refer to our filings with the SEC, which are available in the Investor Relations section of payoneer.com. Actual results may differ 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. In addition, today’s call may include non-GAAP measures. These measures should be considered in addition to and not instead of GAAP financial measures. Reconciliation to the nearest GAAP measure can be found in today’s earnings press release, which is available on our website. Additionally, please note we have posted an earnings presentation supplement alongside our earnings press release on investor.payoneer.com. All comparisons made on today's call are on a year-over-year basis unless otherwise noted. With that, I’d like to turn the call over to John to begin.

Good morning. Thank you for joining us today. In 2023, we delivered 32% revenue growth and 25% adjusted EBITDA margins. Our strong performance is the direct result of our focus on our ideal customers, interests we earn on the funds, our customers hold in their Payoneer accounts, and our disciplined approach to unlocking increased efficiency. As we exit 2023, the key performance indicators of our business are all pointing in the right direction. We have approximately 2 million active customers and 516,000 who meet our ideal customer profile for ICPs. We grew our ICPs by 6% in 2023. We increased ARPU for our 2 million active customers by 36% and by 9% when you exclude interest income. We generated $66 billion of annual volume, up 11%. We grew total take rate by 21 basis points in 2023. We are trusted by our customers evidence by over $6 billion of customer funds held in Payoneer accounts. Customer funds were up 9% year-over-year. 2023 adjusted EBITDA of $205 million more than quadrupled versus 2022. I'd like to put our results in context. We've discussed before that we primarily serve SMBs directly, although we also have direct relationships with certain enterprise clients. Our SMBs customer business represents 75% of our volume and approximately 90% of revenue. SMBs customer volume enters the Payoneer account from marketplaces, B2B transactions, direct-to-consumer sales from a customer's web store and when a customer loads funds from their local bank account. SMBs customers use our Payoneer account to hold multi-currency funds and manage their accounts receivable and accounts payable with overseas customers, suppliers, vendors and partners. Our SMBs customers are valuable because we have a branded relationship with them and are able to cross-sell to them more of the Payoneer financial stack over time. We also operate an enterprise…

Thank you, John, and thank you to everyone for joining us. 2023 was a transformative year for Payoneer. We shifted the company's focus to acquire and better serve ICPs, made meaningful progress in optimizing our ARPU and delivered improved operating efficiency. We were excited to hold our first investor day in September. We reintroduced the company to investors and laid out our strategy for capturing a $6 trillion market opportunity. We initiated Payoneer's first share repurchase program and were pleased to announce in December a refreshed authorization to purchase up to $250 million of common stock through the end of 2025. We focused the company on delivering sustainable, profitable growth and we delivered Payoneer generated 32% revenue growth in 2023 and $205 million of adjusted EBITDA, representing a 25% adjusted EBITDA margin. These results are a testament to the unique value proposition we offer to our customers, SMBs looking to capture the opportunities of an increasingly digital and increasingly global economy. Before I turn to our fourth quarter results, I'd like to direct your attention briefly to our earning supplement presentation which is available on our website alongside our earnings release. We are committed to continuously enhancing our disclosures and appreciative of the feedback we continue to receive from investors. On page 23 of our supplement we have included some additional information that breaks out our volume and revenue. We believe this is helpful in showing how the execution of our strategy drives greater volume into the network and delivers improving take-rate dynamics. We believe this additional disclosure will enable investors to better model our business going forward. Now turning to our fourth quarter results. Revenues of $224 million was up 22% driven by interest income on customer funds, continued steady ICP growth, record quarterly card usage and accelerating growth…

Thank you. [Operator Instructions] Our first question comes from the line of Darrin Peller with Wolfe Research. Your line is now open.

Hey, thanks. Guys, good morning. Can we start a little higher level on what might have changed a bit from the timing of your September Investor Day through today in terms of the expectations really for '24 going from, I know we expected mid-teens and I think it's at 6% for revenue growth now and then maybe margins a bit lower? And Bea, I know you mentioned as the year progressed, some of the growth rates. But maybe just talk about some of the nuances on the year progression also?

Yes, thanks for the question, Darrin. Look, as we said in the middle of December and as we're saying today with our guidance and reiterating, that guidance from an ex-interest income revenue perspective reflects a 10% growth rate at the midpoint, again on a normalized basis, so apples-to-apples when accounting for the impact on non-volume fees. And as we said, we expect those revenues as you know in your question, ex-interest income to accelerate throughout the year and to be exiting mid-teens at a mid-teens growth rate when we exit 2024 very much in line with those medium-term targets as -- two things in our business, two broad trends, I think, as we lap some of the headwinds that we discussed related to 2023. So we're lapping the termination of B2B customers. We've lapped determination of our exit from Russia. We're lapping the impact of those non-volume fees. We're lapping the take rate impact from very strong growth in our travel sector. So all of those sort of come of off the table if you like as you look at 2024. And much more importantly as we see that accelerating momentum that we've highlighted related to B2B and merchant services, but especially B2B and our guidance calls for a 25% increase in volume and again accelerating through the back half of the year. So our guidance for 2024 is really very consistent with what we said in December. We're very encouraged overall with the overall momentum of the business. We're seeing increased penetration into that large B2B market, strong and improving take rate dynamics from that B2B growth, stable growth and stable economics in our marketplace business and overall many of the indicators that we look for are really showing strong momentum.

Okay. I guess my follow-up maybe just be around ARPU which was a big part of your story and underlying expectations for growth also. So maybe just it continues to rise. I know you still have quite a few levers on pricing. So just maybe a quick update on where you guys instituting some of the account fees or lower volume fees or maybe monetizing intra-network cross-border volumes to help drive some of the some more take rate expansion in the year?

Yes, absolutely. Look as we know that at Investor Day our pricing strategy is really much more segment-based and really focused on optimizing ARPU as sort of the second leg of the stool if you like growing ICPs optimizing ARPU and there's really strong signs that that strategy is working early signs. We grew ARPU in 2023 overall by 36%. We grew ARPU even excluding interested income by 9% from that acceleration in B2B driving improved card and working capital and as you know from pricing. So yes, look, our broader pricing strategy much more segment focused, much more focused on bundling and corridor-based pricing initiatives and we've been able to drive improved monetization through that and made really very meaningful progress in '23. As you noted, account fees we talked about last year, we were able to increase ARPU on our one and a half million ICPs by almost 30% year-over-year. We've introduced more nuanced FX pricing which drove uplift in '23 and we see additional uplift in '24. We launched our Light Account late last year, which is specifically designed for gig workers and freelancers and offers a different product bundle which allows us to better manage our cost-to-serve and differentiated pricing to better monetize that segment, and we're doing additional development to really bundle for more segments as we look into '24. And then finally you mentioned the significant opportunity around intra-network fees. We highlighted that at Investor Day many, many billions of intra-network flow that we see annually close to half or more than half of that flow is cross-border and we're launching in Q2 a significant pilot to test intra-network fees across some of those important routes and see significant opportunity there within our portfolio. So overall I think we saw significant success and meaningful progress in '23 but there's more value to unlock here.

Thank you, Darrin. Our next question goes to the line of Will Nance with Goldman Sachs. Your line is now open.

Hey guys, appreciate you taking the questions. Look, I just wanted to ask on the long-term targets of mid-teens and recognizing you're telegraphing ending the year on that basis. I guess could you maybe talk about the gap in the first part of the year between where you're expecting to grow and that long-term target? And I guess in your mind what are the two or three things, I guess are underperforming relative to that long-term growth framework? And then just how should investors kind of get confidence that that 15% exit rate is sustainable particularly if there is some pricing benefits in those numbers. How do you see the bridge to a more consistent mid-teens growth rate in the business? Thanks.

Sure. Look, as we said that 10% growth on a normalized basis year-over-year does imply and we are assuming strong trajectories throughout the year and acceleration. We do have certain headwinds that come off only after the second quarter most notably those non-volume fees that are about a $15 million headwind in terms of those fees that we saw in early 2023. In terms of the momentum, look, as we've highlighted, there's significant headwinds that impacted us in '23 both from a volume and a take-rate perspective that are coming off. Our revenue guide for '24 certainly does account for some potential, some modest, some headwinds from more muted consumer and business spending just to account for really some degree of macro and geopolitical uncertainty. But overall as we look at that guidance and to double click into the components a bit, if we look at the volume from SMBs selling on marketplace, a little over 60% of our total volume in '23, we're expecting and have conviction around high single digit volume growth there really underpinned by strong e-com performance over the course of the year and we've seen and expect stable take rate. We've been very successful in defending our economics within that portfolio and holding that state, that take-rate stable. From a B2B perspective we really are seeing improving trajectory, there again lapping those headwinds from terminations. But as we look at the trajectory over the course of '23 and now into '24 in January we grew volumes by 30%. Our strategy there is working. We focus the organization from a B2B perspective on large ICPs and service oriented markets. We're driving additional volume and we were able to expand our take rate in that important segment for us by 16 basis points in '23.

Got it. Appreciate all that color. And then just maybe on that last point on B2B volumes, I guess, there's a lot of moving pieces in this guidance and you guys try to get this message out in December. I guess the one piece that I saw came in a bit lower was on the B2B volumes in the quarter. So the number I'm seeing in the press release is 13%. It seems like you were messaging more of a high-teens number kind of intra quarter. And so, I guess, are we looking at the same number that you guys are quoting? And there's the same whole truth for the 25% and the 30%. I can't remember what number you said for quarter-to-date in the first quarter? Thanks.

Yes, thanks, Will. Look at on a day comp adjusted basis versus the prior months, Q4 came in at between 12% and 14% depending on the month. I'm not to get too sort of into the weeks, but sort of the day comp matters a lot when you're looking at growth rates. So that's where we landed from a overall quarter at the 13%. It fluxed sort of up and down over the course of those months. You might expect that December, just from a service-oriented flow, might be seasonally a little bit weaker, but overall, again, we want to emphasize that the trajectory is what we think is important, up 3% from a volume perspective, Q1, down 2% Q2, up 1% in Q3, and accelerating to 13% in Q4, 30% is year-to-date numbers from a volume perspective. So we're seeing really strong momentum and really strong signs that that business has excellent product market fit in the markets that we are targeting, and drives improving dynamics, which is really the additional disclosure that we put in the supplement to really disaggregate this business. In large part is to demonstrate the positive impact to take rate that that makes shift into the B2B is driving over the long term.

Thank you, Will. Our next question comes from the line of Trevor Williams with Jefferies. Your line is now open.

Great. Thanks a lot. I wanted to go back to the '24 revenue outlook as well, and all the detail Bae that you ran through just on the underlying components, that's all super helpful. But maybe at a higher level, I'd be curious to hear how you'd frame, at least on the ex-flow outlook? How you'd frame the level of conservatism in the outlook? And as you sit here today with the visibility that you have in the business on the quarter-to-date trends, it sounds like maybe there's a little bit of cushion built in on the macro, but it would be helpful to hear if there's anything else worth calling out just in terms of overall conservatism? Thanks.

Now, look, I think you've read through to what we said, right? Some amount of modest near-term headwinds are factored in, as you would expect just from a sort of prudence perspective for us to be guiding to in the beginning part of the year. There's still significant geopolitical uncertainty, right? And despite very strong e-com numbers in December, there's still some lingering concern about the health of the U.S. consumer and some of the other developed economies. So some near-term potential for headwinds from more muted consumer and business spending. Overall from a macro perspective, look at the guide assumes that volumes from RSMB selling on marketplaces grow high single digits supported by strong e-com, accelerating towards the back half of the year, both seasonally and in general, and interest rates, I know you said sort of ex-interest, but interest rates in line with market expectations, with all of the potential impact that that could have to consumer spending overall.

Okay. That's all helpful. And then, John, I want to go back to checkout and merchant services, maybe if you could just revisit that opportunity more broadly, the incremental disclosure is all helpful. I know you guys laid out what the underlying expectation is for '24. Maybe just to refresh on the ideal customer profile for that service in particular where you've seen really good traction to date if the expectation for '24 is just kind of more tapping into that part of the customer base? Or if there's some kind of expansion in terms of customer types or geographies expected for this year? Thanks.

You bet. Thanks for the question. So, what we saw from our customers that sell primarily goods on large marketplaces is they wanted Payoneer to be able to power their direct-to-consumer checkout, because they wanted all of their international AR to enter their Payoneer account so they could leverage the use of our AP tools. And we think this is a very significant opportunity for us to extend our capabilities and our strength with those marketplace sellers. We currently have less than 1% market share of this $150 billion market. We have strong acquisition, as we said, strong product market fit, great leadership of that group, 600-plus active merchants, monthly volume greater than $60,000, up more than 3X year-over-year. And I note in my prepared remarks, 50% of the customers for checkout are net new to Payoneer. And this is significant because we're competing in markets like China or Vietnam where we've held our take rate in a strong way. Now we're adding new products and services as we look to lock in and retain customers and gain share in the market. So we're bringing new customers to the business, new AR into our existing customers. Those net new customers we add are also using, not just joining Payoneer for checkout, joining Payoneer to leverage our marketplace payouts and our AP tools. So all in all, we see this as a big opportunity, a significant one. We have partnerships with Shopify, Shoplazza, and WooCommerce. This is a big business for us. It's small today, but we'll grow and I'm proud of what the team's done and we'll continue to drive its growth.

Thank you, Trevor. Our next question goes to the line of Josh Siegler with Cantor Fitzgerald. Your line is now open.

Hi, guys. Good morning and thanks for taking my call today. So look, throughout 2023, obviously, there was a pretty significant tailwind associated with interest income, which is real cash in the door and we've seen that cash balance increase over time. I was wondering as you're looking at 2024, how are you thinking about allocating that cash between returning it to shareholders, reinvesting in the business, and inorganic opportunities? Thanks.

Thanks for the question, Josh. Look, as you know, significant free cash flow coming to the business in 2023 continues to be significant in 2024 and frankly, given interest rate outlooks beyond it puts us in a really strong position to do all of the things that you've said, right? One, to return capital to investors as we noted in our prepared remarks. We kicked off a shared repurchase program in May. We repurchased $57 million last year, including $22 million in Q4. We announced a refresh to that authorization back in December over the next two years for $250 million. It really obviously reflects our confidence in the long-term opportunity and strategy and we accelerated our repurchases through the year-to-date, so year-to-date through last Friday, more than $30 million. So we will actively return cash to investors. We expect to be more aggressive in 2024 than we were in 2023 in terms of doing more than off setting of dilution from stock-based comp. And then from an investment perspective, look, we're making, we talked about it in 2023. We made significant investments in our platform in 2023, in our data infrastructure, in our infrastructure more generally to enable greater velocity in product rollouts, in our compliance infrastructure to extend our moat, in our B2B roadmap to drive more company-grade features and capture more of that very large, addressable market, in our merchant services businesses you've just heard from John. And we're going to continue to do that because we're bullish on the opportunity. We're going to continue to make investments to capture that opportunity. We announced in our press release, or noted in our press release, that we've made some significant hires into that organization. They're going to help us unlock value and really drive towards that opportunity. So we're excited to make those investments that we think really position us to drive growth over the long term.

Thanks, Bae. I appreciate the call there. And then I think you, earlier, you touched on travel volume. Can you give us an update on how you're thinking about the travel volume outlook for 2024?

Josh, we would expect some moderating in that travel volume. So the travel volume sits from a disclosure perspective within that supplement on page 23, within that volume from enterprise customers. So as we've highlighted over the past couple of calls, this is volume that we facilitate through our payment rails for large enterprise customers that has proportionately a lower take rate, but also a very different profile from a risk and cost to serve perspective. So that is that volume that you see in that line there. It's not all travel, but it's a large component of that overall enterprise payout business is travel, lower take rate. We saw significant growth in that bucket, largely travel driven in 2023. It did, as we highlighted, put some downward pressure on take rate overall, which is why I think it's super helpful to disaggregate take rate on our customer business, where we grew modestly in '23, and take rate on our payout business, when we saw that compression. As we look out to '24, we would expect growth in that travel volume overall, but not at such an accelerated pace as we saw in '23. There's some leveling off there. I think of trends in the market more generally, but still an important segment for us, as I say, lower take rate, but very different sort of risk and cost to serve dynamics. So we're very comfortable with that volume.

Thank you, Josh. Our last question will go to the line of Chris Kennedy with William Blair. Your line is now open.

Good morning. Thanks for taking the question and for the new disclosure. John, can you talk about the competitive moat for Payoneer today versus a couple years ago? And what's your updated thinking on that?

Yes, thanks for the question. I am really excited about where we sit with our relationships with our SMB customers. And I think the moat we have starts with our relationship with them, 2 million active customers, 500,000 plus ICPs, 55,000 plus high value ICPs. These are customers that are using Payoneer and the Payoneer account to capture their international AR, hold it in multi-currencies, and manage their international AP. That relationship with those customers is really powerful. As an ally to them, we are providing them the gateway to the global economy. And I think that relationship -- and we did an event in China a couple of weeks ago and over 1,000 customers were in the room talking about participating in the global economy. And I think the momentum we have in B2B and APAC, SAMEA and Latin America, the new disclosure that helps people see the power of our relationship with our customers and therefore our take rate dynamics, I think that's important for shareholders to understand. Our business has two components. An enterprise component is the, just very articulately share the volume and take rate dynamics there. And an SMB customer business, which is about ICPs and ARPU and volume into the Payoneer account. Our moat is strong with our customers, it's strong with regulators, it's strong with our go-to-market engines, it's strong with the balances we hold from customer funds. And at the end of the day, the team here, the Payoneer organization is an extraordinary one. I've been CEO for just about a year and I can tell you the thing that surprised me the most in the last year is our opportunity is greater, our momentum is stronger and our team has the capability to capture it. And so right from where I sit, we're in a very strong position to capture the global opportunity right in front of us. There are 80 million customers we're aiming to serve.

Great, very clear. Thanks for taking the question.

Thank you. There are no additional questions waiting at this time, so I'll pass the conference back over to John Caplan, CEO for closing remarks.

Thank you so much. Thanks everybody for your support and your questions. We're excited about Payoneer's opportunity in 2024 and beyond and we appreciate your support. We're confident in the strategy we've laid out. We believe in our team, our brand and our opportunity. This is a $6 trillion opportunity that we are best positioned to go capture. And there is exciting growth happening within our business and by disclosing as we did on slide 23 of that disclosure Bae referenced, you can see the fast-growing businesses built within the Payoneer platform that will power our growth through the 2024 year and beyond. So thank you for joining us and thank you for your support.

That concludes today's conference call. Thank you for your participation. I hope you have a wonderful rest of your day.