Payoneer Global Inc.

Good morning. Thank you for standing by. Welcome to Payoneer's second quarter 2024 earnings conference call. At this time, all lines have been placed on mute to prevent any background noise. Following the speaker's remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded. I would now like to turn the call over to Michelle Wang, Payoneer's Vice President of Investor Relations. Please go ahead.

Thank you, Operator. With me on today's call are Payoneer's Chief Executive Officer, John Kaplan, 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 noted otherwise. With that, I'd like to turn the call over to John to begin.

Good morning, everyone, and thank you for joining us today. In September 2023, at our first Investor Day, we outlined our strategy to build the business-grade financial stack for global cross-border SMBs. We committed to long-term, durable revenue growth, expense discipline, and expanding profitability. I'm proud to say that our plan is working. We are pursuing a significant opportunity, and our record financial results for the first half of 2024 validate that we have both the right team and the right strategy to achieve our ambitious goals. In Q2, our strong execution drove momentum across our key business metrics. ICP growth accelerated to 10%, driven by higher take rate regions such as APEC, Samia, and Latin America, and double-digit growth in China. ARPU increased 27%, with a notable acceleration in ARPU growth, excluding interest income. Over the past four quarters, year-over-year ARPU growth X interest income climbed from 2% in Q3 2023 to 9% to 13% in Q1 of this year and now to 18% in Q2 of 2024. Volume growth accelerated for a sixth consecutive quarter to 22%. B2B volume growth accelerated for a fourth consecutive quarter to 40%. Total revenue grew 16%. Excluding interest income and normalizing for $7.5 million of non-volume fees earned in Q2 of 2023, our Q2 of 2024 revenue was up 21%, consistent with Q1 results. We generated record adjusted EBITDA of $73 million, delivering a 30% margin, fueled by strong revenue and sustained expense discipline. Payoneer is the steadfast ally to cross-border SMBs because we're local in the markets they operate in and deeply understand their challenges and their opportunities. Additional cross-border payments, particularly into and out of emerging developing markets, are complex, expensive, and time-consuming. Unlike Payoneer, emerging market local banking capabilities are not designed for modern global SMBs operating across multiple geographies. I'd like to share some insights from our recent SMB Ambition Survey on the businesses that our target customers own and operate. Approximately 50% of cross-border SMBs have customers in six or more countries and need to pay employees and vendors in six or more countries as well. Two-thirds of these SMBs have at least one non-local entity, and a third have two or more. And 60% don't have cross-border financial management capabilities, such as real-time currency conversion, the ability to accept payments on their website, payroll solutions for multiple countries, or multi-currency cards to pay for goods and services. The Payoneer Financial Stack is purpose-built to solve these challenges. We have the scaled payment, regulatory, and compliance infrastructure, and a localized experience built upon a strong and trusted brand. This enables us to be the global business-grade financial partner for SMBs and help them succeed and is what is powering our momentum. We are not done. We are continuously innovating to serve larger SMBs with more products and to serve smaller customers at scale in a cost-effective way. Within our ICPs today, we see twice the product adoption from ICPs who receive more than $250,000 per month in AR volume compared to those whose AR is more than $10,000 a month. Some recent examples of our product enhancements include launching integrations with accounting ERPs. This enables customers to track their spend on paying their cards directly within their preferred accounting solution. Improving our multi-entity and multi-user role management capabilities. This makes it easier for global SMBs to manage their business in one place. Advancing our FX capabilities. For example, we recently launched features so customers can automate their withdrawals at a specific exchange rate that they set. This makes it easier for them to manage currency fluctuations. Rolling out our Lite account for freelance customers who get paid via Marketplace. We anticipate most new customers from these marketplaces will be onboarded into our Lite account by the end of 2024. This will increase monetization, reduce costs and risks, and better align our service model to our diverse customer segments. We are improving our activation speed. For our ICPs, we've reduced the time from account approval to transaction from seven days a year ago to two days now. Our ecosystem is a strength. We are now integrated with QuickBooks, Zoho, and Xero, some of the largest global accounting platforms for SMBs. Our integrations enable a seamless reconciliation process for our customers' multi-currency transactions. We see opportunities to deliver the one-stop solution for our customers. We are extending the capabilities of our financial stack. Managing global AP is a primary challenge for cross-border SMBs. Within AP, nothing is more important than workforce and payroll management. The process of paying people must be timely, accurate, and comply with local regulations. When we surveyed our B2B customers, nearly 25% wanted cross-border payroll capabilities, with many existing customers already configuring our platform to address this need. This morning, we announced the acquisition of Squad, a mission-driven company that helps SMBs automate their hiring, onboarding, taxes, and payments for international employees and contractors. We intend to cross out Squad's capabilities into our existing customer base. We believe it will increase ARPU and enable us to better serve SMBs as they manage their talent across borders. The Squad acquisition, our accelerating momentum, and record adjusted EBITDA margin are the direct result of our well-planned steps to deliver the sustained revenue growth and profitability targets we have communicated. In doing so, we believe we will unlock significant long-term value for our shareholders. We're proud of our global team for their tireless efforts and dedication to our customers. They are the core driver of our accelerating momentum. We are at the beginning of capturing the opportunity ahead of us, and this team is disciplined and long-term oriented. I'll now hand it over to Bea to discuss financial results and our increased guidance going forward.