Payoneer Global Inc.

costs were $177 million, up 24% year over year. Excluding transaction costs, operating expenses of $150 million increased 27% year over year. Excluding the $16 million of discretionary investments in the fourth quarter, operating expenses excluding transaction costs were relatively flat sequentially, reflecting a more disciplined approach to spending in our business. Our sales and marketing costs in the first quarter increased 13 million or 39% year-over-year, representing approximately half of the total year-over-year increase in Q1 operating expenses, excluding transaction costs. Higher sales and marketing costs were primarily linked to higher headcount in our go-to-market organization from hiring in 2022 and reflect our ongoing focus on driving acquisition of ICPs and high-value partners. Q1 adjusted EBITDA was $39 million compared to $10 million in the first quarter of last year and $11 million in the fourth quarter. Q1 net income was $8 million compared to net income of $20 million in the first quarter of last year, which included a gain of over $30 million from the change in fair value of warrants. Q1 basic and diluted earnings per share was $0.02. We ended the quarter with cash and cash equivalents of $545 million, a $79 million increase year over year. We continue to actively evaluate and adjust our capital allocation strategy to ensure that we continue to invest to drive organic revenue growth, including in our platform and in executing on our product roadmap. We also remain intently focused on M&A opportunities. In 2022, we saw public company valuations for fintech companies drop significantly, while a similar correction in the private market has lagged the public market. We are, however, beginning to see signs of downward pressure on private company valuations, with the shift accelerating following the collapse of SVB. We have seen an uptick in inbound opportunity and are actively evaluating several potential targets. We are growing our capabilities in this area and further refining our strategy and roadmap. At the same time, and as part of an investor-focused, data-driven, and balanced capital allocation approach, we announced today that our board of directors has approved an $80 million share repurchase authorization. Turning to our outlook, we are raising our guidance for the eighth consecutive quarter since going public. As a reminder, we do not provide quarterly guidance at this time. For Fall year 2023, we expect revenues to be between $810 and $820 million. Transaction costs as a percent of revenue to be approximately 15.5% and adjusted EBITDA to be between $140 and $150 million. We expect revenue growth to be driven by continued ICP acquisition, growth in our B2B business and other high-value services, and from interest earned on our customer balances. Our revenue growth expectations excluding interest income are slightly softer relative to our prior guidance. reflecting a slight deceleration in volume growth in the first four months of the year, and ongoing macro headwinds that could constrain consumer and business spending. We expect interest income to be approximately $200 million for 2023, based on exit balances at the end of the first quarter, moderate balance growth in line with volumes for the remainder of the year, and current anticipated Fed funds interest rate changes. In line with market expectations, we anticipate interest rates will begin to decrease in the back half of the year. Assuming flat balances, we expect this would drive a $20 million revenue headwind in 2024 as compared to 2023. Based on our stated guidance, we expect cash OPEX less transaction costs to be 540 to 550 million for 2023. This is $10 million lower than our prior guidance, reflecting a greater degree of operating discipline and one which we believe is appropriate given the current environment. We believe Payoneer has near and longer-term opportunities to optimize operating efficiency. Work is underway to assess our spending across every function and category, including headcount, third-party vendor costs, and related to our real estate footprint. We continue to evaluate our long term hiring needs, including in the context of the macro climate. And as of May 1st, we have restricted our hiring plans across the organization. We expect this will generate approximately 5 million of savings in 2023. We will continue to ramp up our R&D team to support our ongoing platform transformation. We are also actively evaluating further headcount efficiencies as we look to delay our organization, streamline our operations, and reduce redundant roles. We expect to exit the year with headcount modestly lower versus the prior year. Finally, we continue to localize our operational support with service centers in Latin America, Eastern Europe, and Southeast Asia that will better serve our customers while driving additional operational efficiency. Our latest guidance for 2023 adjusted EBITDA is between 140 and 150 million. This guidance reflects a nearly threefold increase in adjusted EBITDA versus 2022. In conclusion, Payoneer's first quarter results underscore our ability to consistently deliver strong financial results. We have built a broad, diversified, and resilient business, and we continue to see significant customer demand for our financial operating solutions. We have confidence in our ability to meet our updated 2023 financial targets, while we remain focused on investing to position Payoneer for long-term profitable growth. Lastly, I'm excited to announce that Payoneer will be hosting its first Investor Day on September 21st, 2023 in New York City. We look forward to seeing many of you in person in the fall. We are now happy to answer any questions you may have. Operator, please open the line.

Thank you. As a reminder, please press star 1 on your telephone keypad to register a question or press star 2 to withdraw your question. First question today comes from Darren Pella from Wolf Research. Please go ahead.

Hey, guys. Good morning. Nice job on these results. Maybe we start off with the focus on ICPs and the growth. And what are your thoughts on the ability to grow that base the way you've been growing it during different macro environments? Just given how many applications you're getting, you obviously have quite a bit of opportunity. It's just more of a decision on risk, I imagine. So help us understand what your goals are around that and what kind of opportunity there. And then I have a more detailed follow up on our potential and pricing, if you don't mind.