Payoneer Global Inc.

Good morning. Thank you for standing by. Welcome to Payoneer's second quarter 2025 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 the call over to Michelle Wang, Payoneer's Vice President of Investor Relations. You may begin.

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 materials, which are available on our Web site. Additionally, please note we have posted an earnings presentation supplement alongside our earnings press release on .Payoneer.com. All comparisons made on today's call are on a -over-year basis, unless otherwise noted. With that, I'd like to turn the call over to John to begin.

Good morning, everyone. Thank you for joining us. Today I'll walk you through our strong second quarter results. We are executing against the significant opportunity in front of us and building the financial stack for cross-border commerce. After that, we will take you through the financials and our reinstated full-year 2025 guidance. Let's start with the big picture. Payoneer is the global payment solution for entrepreneurs and SMBs who power international commerce. These are manufacturers, exporters, agencies, creators, and service providers from every corner of the world. They need to invoice and collect payments from customers globally, manage multiple currencies, pay suppliers and employees, and access capital, all while navigating local regulations and legacy banking rails. That's where Payoneer comes in. We are their trusted partner, delivering innovation at the intersection of global trade and digital finance. Q2 was another strong quarter for Payoneer. Our strategy is working. We're growing and unlocking meaningful operating leverage. In Q2, we delivered record quarterly revenue, ex-interest income, up 16% -over-year ahead of our medium-term target. We delivered 13,000 net new ICPs, up 2% -over-year, led by tier one markets, which account for over 60% of our revenue. We delivered ARPU expansion of 21% ex-interest income, our fourth consecutive quarter above 20%, a sign of strong product adoption, smart pricing, and a deliberate move upmarket. We delivered $66 million of adjusted EBITDA, a 25% margin. We delivered over $15 million of adjusted EBITDA ex-interest income for the first six months of 2025, greater than what we delivered for the full year of 2024. And our latest guidance at the midpoint implies we expect to more than triple our adjusted EBITDA ex-interest in 2025. We're strengthening the fundamentals of our business, improving earnings quality, and building a platform designed for durable, compounding growth. Global commerce is resilient, and it continues to grow and evolve. Our customers are adapting to shifting trade flows, and they're choosing Payoneer to help them grow. In China, we see long-term momentum and growth in cross-border commerce, and we have built a highly differentiated business over two decades serving this market. Our e-com customers are focused on both continuing to serve the U.S. while increasing their investment in new markets. In Q2, approximately a third of our China revenue came from sellers selling to -U.S. markets. We are helping customers expand globally through our Green Channel product, supporting their ad spend with our virtual card, and providing access to trusted tax and compliance partners. We don't just move money. We help our customers scale. B2B remains one of the fastest-growing and most exciting parts of our business. We grew B2B revenue 37% in Q2, led by our largest customer segments. We continue to shift towards larger, multi-entity customers who have more complex needs. In APAC, Latem, and EMEA, we delivered -20% volume growth and continued take-rate expansion. We have strong product market -and-knee service-oriented markets, and our customers are rewarding us with their loyalty. At the same time, our China B2B business grew mid-single digits in Q2. We continue our methodical approach to unlocking the -trillion-dollar China B2B opportunity. We are strengthening our financial stack to better serve the needs of our customers and drive our retention and ARPU. We have expanded our FX capabilities, launched smarter invoicing, and deepened our ERP and third-party integrations. We are delivering more automation, removing friction, and increasing product engagement and adoption. In Q2, we launched a strategic partnership with Stripe to expand our global checkout footprint and enhance the product's capabilities. We are combining their -in-class technology with our local market reach, expertise, and customer relationships. This partnership improves our operating efficiency and lets us stay focused on our customer to provide them with an integrated financial stack. I'd like to share an example of a customer that is leveraging Payoneer as their global payment infrastructure to streamline their operations. Brand 501 is a Korean beauty company with entities across Asia and the U.S. They are using Payoneer to consolidate their payments from major marketplaces, wholesale B2B sales, and via their own website for -to-consumer sales through Payoneer checkout. They also use our cards for operational expenses such as advertising and subscription services. By choosing Payoneer, they are able to eliminate inefficiencies in their operations and are thriving in a competitive, fast-growing industry. That's the kind of customer journey we're enabling every day. We're excited about the momentum we're seeing in stablecoin and blockchain-enabled payment technology innovation and adoption. We believe that increased regulatory clarity, including as the result of the enactment of the Genius Act, will unlock opportunity for Payoneer and provide a framework to drive stablecoin adoption, including by global businesses. Payoneer has unique assets that can help position us as a critical part of the infrastructure for this rapidly developing technology. We have distribution, deep customer relationships, and connectivity to last-mile bank infrastructure around the globe. We enable money movement across 7,000 trade corridors and allow our global customers to transact and hold multiple currencies within a single ecosystem. In pursuit of this opportunity, we're actively exploring enablement of stablecoin functionality for our customers. For example, we're allowing our customers, who already rely on us for business-grade accounts, to send and receive stablecoin along with our full suite of AP and AR products. We're looking at using our world-class last-mile infrastructure to help businesses off-ramp stablecoin globally into the local currency that they need for their operation. We are also investing in scale and talent to drive and accelerate our innovation, serve our customers better, and drive greater efficiency. We recently announced that we are opening a new technology hub in Gorgon, India, one of the world's fastest-growing economies and home to deep engineering expertise.

We're backing our belief

and

our momentum

with

action.

In Q2, we nearly doubled our share repurchases versus Q1. Today, we're announcing a refreshed $300 million buyback authorization. This reflects our conviction in the value of our business and the strength of our financial performance. We're focused. We're executing. And we're building a more valuable platform for our customers and delivering durable growth and compounding returns for our shareholders. Let me end with this. The future of commerce is cross-border and it's global. Entrepreneurs in every part of the world are building great companies, but they still face legacy financial systems when they try to trade internationally. That's the problem Payoneer is solving, and it's a massive opportunity. I'll now hand it over to Bea to walk through the results and our reinstated guidance for 2025.

Thank you, John, and thank you to everyone for joining us. Payoneer delivered a strong second quarter, executing with discipline and advancing our profitable growth strategy. In a complex global trade environment, we continue to generate revenue and adjusted EBITDA in line with our medium-term targets and are reinstating our full year 2025 guidance. We remain confident in our ability to drive profitable growth and deliver long-term value for our customers, employees, and shareholders. Now turning to our second quarter results. We delivered revenues of 261 million, up 9% -over-year. Revenue excluding interest income reached 202 million, a quarterly record, and was up 16% -over-year, in line with our first quarter results. Our strong growth was driven by our B2B franchise, increasing adoption of our high-value products and services such as checkout and card products, and the ongoing implementation of our pricing and offering strategy. Total volume was up 11% -over-year. SMB volume grew 9% -over-year, with volume from SMBs that sell on marketplaces up 6%. Volume from B2B SMBs up 19%. And checkout volumes up 83%. During the quarter, we saw modest softening in volumes from large e-com marketplaces, likely in response to the global macro and tariff environment. Enterprise payouts volume increased 15% -over-year, primarily due to strong demand in key travel routes we serve. Our Q2 take rate of 126 basis points decreased two basis points on a -over-year basis, driven by lower interest income. We continued to drive significant expansion in our SMB customer take rate, which increased nine basis points over the prior year period and one basis point sequentially. This reflects the ongoing impact of our pricing strategy, continued growth in our higher-yielding B2B and checkout franchises, an ongoing adoption of our card, strong growth in our higher take rate regions, and the impact of our workforce management acquisition. Customer funds held by Payoneer increased 17% -over-year to $7 billion, partially offsetting the impact on our interest income revenue of lower rates. We generated interest income of $58 million in the quarter. Growth in customer funds was above our expectations and in excess of our volume growth, with customer usage behavior moderating in certain key markets, likely in response to the uncertain macro environment. This demonstrates the trust our customers have in our platform and the value they place on the utility we provide. As of June 30th, we had reduced our sensitivity to fluctuations in short-term interest rates in relation to approximately $3.7 billion or roughly 53% of customer funds. This consists of approximately $1.8 billion of assets underlying customer funds that are invested in a portfolio of US Treasury securities and term-based deposits, as well as interest rate derivatives on approximately $1.9 billion of funds underlying customer balances, providing a floor against interest rate declines below 3%. We will continue to actively manage our hedging programs while always prioritizing liquidity and security. Total operating expenses of $231 million increased 19%, primarily driven by increases in labor-related expenses, higher transaction costs, consultancy fees, as well as the investments to scale our card product and the effect of recent acquisitions, including our EZ-Link acquisition in China and our workforce management acquisition. Transaction costs of $41 million increased 10%, broadly in line with volume growth. Transaction costs represented .6% of revenue, an increase of approximately 20 basis points from the prior year period, primarily due to lower interest income. Excluding interest income, transaction costs represented .1% of revenue, a decrease of around 120 basis points versus the prior year period, despite a mix shift towards higher take rate, higher transaction cost products, and driven by improvements in our chargebacks and losses and lower costs related to our capital advance offering. Sales and marketing expense was up 7 million or 13% year over year, driven primarily by higher labor-related costs, including from our workforce management acquisition and by card-related incentives in support of Chinese and other goods sellers. Other operating expenses were up 1.5 million or 4%, primarily due to higher IT and communication costs. R&D expense increased 10 million or 36%, mainly due to higher labor-related costs, including in relation to our workforce management and EZ-Link acquisitions. G&A expense increased 11 million or 42%, primarily due to higher legal and consulting fees, including in relation to our India license application, as well as higher labor-related costs. Adjusted EBITDA was 66 million, representing a 25% adjusted EBITDA margin in the quarter, despite the 7 million headwind from interest income. This is the fifth consecutive quarter of positive adjusted EBITDA excluding interest income. Net income was 19 million compared to 32 million in the second quarter of last year. Basic and diluted earnings per share were both 5 cents, down from 9 cents in the prior year period. We ended the quarter with cash and cash equivalents of 497 million, delivering continued strong cash generation. Over the last 12 months, operating cash flows have significantly exceeded net income, providing incremental opportunities to invest for profitable growth and return capital to shareholders. During the quarter, we repurchased approximately $33 million worth of shares at a weighted average price of $6.80, nearly double the amount we purchased in the first quarter. As John mentioned, our board recently authorized an amendment to our share repurchase program, increasing the program's repurchase authority to up to $300 million. Given our strong performance in the first half of the year, our visibility into the third quarter, and a less severe tariff environment, particularly between the US and China, we are reinstating 2025 guidance. We expect total revenue between $1,040 million and $1,060 million above the full-year guidance we issued in February. This includes higher interest income of $225 million and $815 million to $835 million of revenue excluding interest income. We expect our gross rate for revenue excluding interest income to be fairly consistent from Q3 to Q4. The top end of our core revenue range is in line with our guidance in February, despite a more challenging macro environment. For the second half of 2025, we anticipate high single-digit growth in total volume and expect that our strategic focus on higher take-rate products and geographies and pricing initiatives will enable us to continue to deliver yield expansion and revenue growth that outpaces volume growth. We expect volume from SMBs that sell on marketplaces to continue to grow by mid-single digits and mid-teens B2B volume growth in the second half of the year. We anticipate low double-digit B2B volume growth in Q3, accelerating to high teams in Q4 as strong -of-world B2B volume growth is partially offset by slower growth in our China B2B franchise. Given the lower take-rate profile in China compared to other regions, we expect B2B revenue to grow at roughly 25% for the second half of the year. For the full year, we expect transaction costs as a percentage of revenue to be approximately 16.5%, significantly below our expectations at the beginning of the year and representing a modest step up in transaction costs for the second half of 2025. This reflects continued business mid-shift towards higher take-rate and also higher transaction cost products and geographies, as well as the impact of lower interest income. When excluding interest income, transaction costs as a percentage of revenue has been roughly stable over the past two years. We continue to work to optimize the economics of our business from a transaction cost perspective by utilizing our scale and leveraging and deepening our strategic relationships. We are actively working on a number of initiatives that leverage blockchain technology, bringing real-time treasury management capabilities to our platform.

We have

rolled out real-time funds transfer capabilities on-chain in specific corridors, enabling us to move funds between global accounts with greater speed, automation and transparency. In collaboration with Citi, we are excited for the opportunity to expand these capabilities to additional markets in the coming quarters. We also plan to extend these capabilities via other banking partners, further enhancing our treasury management flows and delivering enhanced capabilities to our customers. Additionally, we recently signed a new long-term agreement with MasterCard, further solidifying this important strategic relationship. We have seen substantial growth in our card products since beginning this partnership over four years ago, with nearly six billion of card usage over the trailing 12 months. We are further deepening our relationship and, in partnership with MasterCard, launching an SMB gross hub to better serve customers globally and to drive further innovation and engagement. We expect 20 times 5 adjusted OPEX, which represents our guidance for revenue, less adjusted EBITDA and transaction costs, of approximately $610 million. Our outlook for transaction costs is materially lower than we had anticipated at the start of this year, and this enables us to make incremental investments in our business, including in regulatory licensing efforts and key jurisdictions, in scaling our card product and in stable coin-focused initiatives. We are investing to support our long-term growth trajectory, while still expecting to exceed our 25% adjusted EBITDA margin target. Based on our strong performance in the first half of the year, we are raising our guidance for adjusted EBITDA, which we expect to be between $260 million and $275 million. At the midpoint, this represents an adjusted EBITDA margin of approximately 25% for the full year. Excluding interest income, we expect adjusted EBITDA of $43 million at the midpoint, over three times the amount we generated in 2024, and in line with the target we have communicated at our fourth quarter results in February. Our 2025 guidance assumes a stable macro environment in the second half of the year, and that global tariffs remain broadly comparable to today's levels. Our second quarter 2025 results underscore the strength of our execution. In a dynamic macro and tariffs environment, we grew revenues, expanded our SMB take rate, increased our POO, and delivered adjusted EBITDA in line with our communicated targets. We are well positioned to deliver on our full year guidance, and remain focused on creating long-term shareholder value. We are now happy to answer any questions you may have. Operator, please open the line.

Thank

you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. We do request for today's session that you please limit to one question and one follow-up and re-queue for any additional questions. Again, press star 1 to join

the queue.

And our first question comes from the

line of Nate Svensson with Deutsche Bank. Your line is open.

Nice results and great to

see the reinstated guide. Maybe at the highest level, just given there are so many headlines still going around on tariffs, what gave you the confidence to reinstate that higher guide and add a slightly higher level than what we saw previously? Maybe more explicitly on tariffs. I know B.U. called out that tariffs, the levels stay at broadly the same level as what we have today. Any other explicit impact they get from tariffs? I know previously you had called out that $50 million number. I assume it's probably lower today than it was on the last call. And then last thing, you mentioned slower volume at some large e-com platforms. Anything else that you're explicitly seeing with regards to tariffs in two-queue numbers or this quarter today?

Sure. Thanks for the question, Nate. Look, so as you noted, we held the top range of our core revenue guidance in line with the four-year guidance we gave back in February. We raised it at the midpoint. We raised our adjusted EBITDA at the midpoint as well. All as we continue to navigate and our customers continue to navigate this super dynamic environment. And we reinstated guidance. Look, to your point, we're obviously a quarter out from when we reported last, which was in May and barely three weeks out from the original three to four weeks, the original tariff announcement. We have greater visibility into what the tariff environment is likely to look like. It is obviously much less severe certainly as between the -U.S. corridor. We have some degree of visibility into Q3 and we're beginning to see the outlines of how we might expect the business to perform overall and felt very comfortable in our ability to continue navigating. We have a very resilient business as our guidance clearly demonstrates and feel confident about navigating to hit our four-year guidance through the end of the year. In terms of marketplace volumes, look, we called out some modest softening in the back half of Q2. It's always difficult to attribute the exact cause, but likely related to some tariff impacts. We had said back in May that tariff impacts, when we see them, would likely be felt in the back half of the year. And our guidance implies some modest softening in marketplace volumes to about the -single-digit range in terms of volume growth. So all of that is embedded. We don't provide and we're not going to provide an explicit number for tariff headwind. We've embedded assumptions based on how we understand the environment today.

Yeah, Sue, for helpful being, yes, obviously don't envy your position and given all the changes that are going on. I do have to ask about stablecoins. I think given sort of the merchants you serve and the role you play in the B2B payments ecosystem, I actually think there's a real role for stablecoins here in helping you serve your end customers. It was great to hear some of the initiatives that you're undertaking on the pioneer side of things. But I'd be really interested to hear what merchants are telling you with regards to their demand or appetite to adopt stablecoins. We spend a lot of time debating the topic with investors, but it would be great to hear how real this is for the merchants that you're serving on a -to-day basis.

Yeah, this is John. Thanks for the question. I think we are in the earliest, earliest days of understanding both the use cases and the demand among merchants. As we've mentioned on the call, we believe that we have an exceptional set of assets and relationships with customers and trust with our banks and our marketplace partners globally to help take our deep customer relationships, our global distribution, to add new currencies into the experience for our customers as they seek to use them. And our last mile relationships enable us to help customers turn whatever currency they're doing business in into the local fiat that they use domestically. And so we see a long-term opportunity. I think a lot of the type cycle is exciting, but the practical use case, and I think what hopefully investors have gotten comfortable with the way we run Payoneer today is we are very pragmatic about helping our customers participate in the global economy. And right now, they primarily do that in dollars, and we're helping them do that exceptionally well. And as they explore the use of new currencies and new ways of transacting, we will be there to support them.

Thanks, John. Look forward to tracking the progress there. Thanks.

Our next question comes from the line of Trevor

Williams with Jeffreys. Your line is open.

Thanks. Good morning, guys. I wanted to ask on China specifically and just how merchants there have responded to the tariffs and thinking kind of about more distribution into Europe or the rest of the world. And, John, I think in your prepared remarks, I heard you say that now about a third of your China revenue is coming from selling into -U.S. markets. I'm curious how that number has changed more recently, and just a bigger picture, if the current environment has kind of helped accelerate any of your share gains locally in China to be able to facilitate sales into kind of more -U.S. markets.

Thanks. Thanks, Trevor. It's a great question and an important one. We've held 15 events in China for sellers looking to expand across Europe, Latin America, and Middle East, really bringing together an ecosystem of partners to help them think about through the logistics, tax, legal considerations when they're expanding. So we are our customers' partners as they help them explore expanding. They're very focused on expanding, particularly in Europe and Latin America. And our Green Channel program has had, I think, the best ever demand of that product we've seen as customers look to explore ways to drive their distribution and improve the resilience of their business models, not just selling to the United States, but selling globally. A third of our revenue comes from Chinese customers. Of that, 20% is China to the U.S. and approximately 10% is China to the rest of the world. And we have not seen a significant shift in that composition in Q2. It's really, I think, too soon to see it. What I do think is really important is how dedicated the China sellers are to their U.S. distribution and what they see the events of April 2nd as a springboard to force them into more global distribution, both of which will serve Payoneer well in the long term. I'll just add one other note about that. We saw our China customers holding increased balances on the platform. You saw the balances grow by 17% in Q2 year over year. That balance growth is future revenue growth for us. And I think that's something just important to highlight.

Okay. That's helpful. Thanks, Sean. And then just as my follow-up, within the ICP growth, and I know it's an imperfect metric, maybe you guys could parse out some of the puts and takes within some of the headline growth rates there, both on kind of the overall and then the 10,000 a month ICP growth would be great. Thanks.

Yeah. We've made a very conscious, and we've been talking about it at length, we made strategic shifts over the past year to align our resources, focusing on durable and profitable revenue growth. And our ICP portfolio really reflects those decisions. If you go back all the way to Q1 of 2023, 23% of our total customers are ICPs. In Q2 of 2025, it was 28%. So we've continually driven ICPs as a percentage of our total portfolio. We're driving faster B2B customer growth, which is very exciting for us. We're targeting larger multi-entity customers, those that bring in a quarter of a million dollars a month in volume and greater. They use more products, they have more complex needs, they stay longer. Our net revenue retention for those, that cohort is exceptionally strong. And we continue to fine tune our risk appetite across the portfolio generally to make sure that the folks that we add to the platform reflect our focus in the long term. So in Q2, volume growth from 10K plus ICPs, we saw 20% volume growth, really exceptionally and exciting for us in our business. And I'm pleased by the execution of the team, and we continue to drive cross-sell and momentum in the portfolio. I expect the ICP growth to be, as I've said in the past, the word we like to use around here is lumpy. Some quarters it's up, some quarters it's down, some quarters it's flat. It has to do with the overall portfolio mix. What we're focused on doing to drive ICP growth, we're beginning to work with reseller programs, which is an exciting innovation. We have more and more deep focus into specific regions, and we're driving our funnel conversion for the over 11 million people who show up at Payoneer.com to start creating Payoneer accounts. We have an exceptional brand, Great Relationships, Last Mile Delivery that entrepreneurs around the globe are increasingly coming to us to be their foreign bank alternative as they grow their business.

Appreciate it. Thanks, guys.

Next question comes

from the line of Will Nance with Goldman Sachs. Your line is open.

Hey, guys. Thanks for taking the questions, and congrats on the great corridor and the reinstatement of guidance. Great to see you. I wanted to ask on the B2B volume growth. You came in at high teens. I think the guidance was kind of low double digits and then back to high teens. You alluded to some kind of moving pieces in the China B2B corridor, so I was wondering if you could expand a bit on that. I know that's been kind of an ebb and flow type of region for you. Is there something going on there in the market from a competitive perspective? Would you attribute this more to just the macro environment and some of the things that you called out on the SMB e-commerce corridor? And just talk through how you view that exit rate in the fourth quarter, and I think you called out mid-20s ex-China as kind of like a run rate as we think about going forward.

Thanks for the question, Will. So yeah, look, we've talked in the past about our B2B business and really sort of drawn the distinction between the China business, which is a goods business by and large, and the rest of world business, which is a services business, and the relative differences in those two business lines for us are in those two portfolios. Just to sort of level set again. Our B2B rest of world portfolio is about 80% of total B2B volume and about 90% of the revenue, and China makes up the rest, right? Our China portfolio, I like the term you use, has seen some ebbs and flows, right? We have a relatively speaking tiny, tiny slice of a very big market. We estimate the market in China from a goods perspective B2B to be about 2.3 trillion. We have a very tiny slice. These are bigger sellers. Serving B2B goods sellers in China is more complex. Because they're bigger sellers, it's more volatile portfolio just because the GMB per customer is larger. And so what we see in those ebbs and flows is a more volatile dynamic that in effect distorts the overall volume growth of the B2B portfolio as a whole. So yes, we've had sort of ebbs and flows or fits and starts with that. We're continuing to invest in finding product market fit in China. We see it as a really exciting adjacent opportunity given our strong brand in China, given our capabilities there. But today it is tiny and we see sort of these fits and starts. Our rest of world business, which look at as we say is more than 90% of that B2B revenue. And it's worth noting our B2B revenue as a whole is about a third of our total core revenue today. That revenue flow is growing very impressively. We're showing, as we said in Q2, 22% volume growth in that rest of world portfolio. And we're growing the revenue overall 37%. So as we move into the back house of the year, as you called out, we're calling for low double G's. We're seeing digit growth in Q3, accelerating to high teens growth as we exit the year, higher than that from the rest of world perspective. And still feel very confident that we will hit more than 25% revenue growth overall. So this remains for us the real lever and driver of growth in our business, given its growing importance to the portfolio as a whole.

That's super helpful and kind of dovetails with my next question, which is the take rate dynamics here. Obviously you guys have just historically seen stronger growth in higher take rate regions, Latin America and APAC. B2B business is growing faster within the B2B business. You know, you're seeing some mix out of China. So there's a mixed dynamic. The e-commerce business, there's an assumption of a little bit lower growth. So I guess maybe when you zoom out, you look at all the pricing dynamics and take rate dynamics. Is there a way that you could kind of bucket some of the take rate expansion you're seeing kind of between mix related dynamics, macro related dynamics, and anything else that you would kind of attribute it to on the pricing side? Appreciate it.

Yeah, of course. Well, so look, I think what is often sort of not fully appreciated about our business is how consistently we've been able to demonstrate our ability to increase yields in our portfolio. Right? We have driven take rate expansion in our SMB business for multiple consecutive quarters now, including in Q2, where we expanded our take rate by nine basis points. And we saw take rate expansion across the portfolio. Right? We grew our marketplace SMB take rate by two basis points. That's mostly a factor of increased card adoption. We grew our card portfolio 25% record usage on our card in the quarter. We grew our B2B take rate by 26 basis point. That is, as you note, Will, in your question, somewhat a factor of geomix, strong growth, rest of world, relatively weaker growth, as we just talked about in China, pricing power within that book and adoption of our card as well, particularly in Latin America, where we see really strong growth, as well as the acquisition of the workforce management business. Right? So lots of levers that we are deploying within that business to expand our yield, to expand our take rate. And similarly, within our checkout business. Right? We announced our partnership with Stripe. Really excited to see continued take rate expansion there. So as you said, we have sort of multiple drivers and impacts to that take rate. We don't really kind of look to decouple them and sort of explain each, but we're demonstrating additional utility and it shows up in the take rate that we're able to deliver quarter after quarter.

Yeah, no, that's great. It sounds like a lot of just organic take rate expansion, which is great to see. Appreciate you

taking the questions and congrats again.

Thanks, Will.

Our next question comes from the line of Chris Kennedy with William Blair. Your line is open.

Good morning. Thanks for taking the questions. Appreciate all the detail. Is there any way to think about the EBITDA margin profile X-flow as you think about the business

going forward over the long term?

So, look, I think the main way to think about it is that we have continued to drive expansion in our, I'll call it our core adjusted EBITDA profile. Right? At the midpoint, our guidance for adjusted EBITDA X interest income is roughly 3X what we delivered last year. Even as the environment is, as we've said, dynamic. Right? So we feel confident that even as we mix shift into more complex business lines, even as we make investments both organic and inorganic, that we continue to hit both our headline, I'll call it, adjusted EBITDA margin target of 25%. But importantly and critically continue to improve the overall profitability dynamics of the core business excluding interest income. And you're seeing that show up in the number in the first half of this year. We've already delivered more core adjusted EBITDA than we did for all of 2024. And we expect to continue to accelerate into the back half of the year, even as we make investments and we're continuing to invest, as John said in his prepared remarks, in our licensed infrastructure. That is an important enabler of our business and an important motor around our business. We're continuing to invest in our platform capabilities and the team that supports it, including by expanding in India, as we discussed. And we're continuing to make investments in our money market infrastructure and last mile capabilities, which ultimately unlock the additional opportunities within our ecosystem. So we feel very comfortable with the trajectory that we're taking.

Understood. Thank you for that. As a follow up, you talked about implementing blockchain to improve your treasury management operations. Can you just talk a little bit more about kind of the benefits that you are seeing from that

or what you can see from that? Thank you.

Sure, happy to. As John said in his prepared remarks, one of the unique assets that we think positions us really well to drive adoption of stable coin, to integrate the important capabilities of stable coin into our ecosystem, is really our last mile infrastructure. In a very real world, we saw for the last mile challenge, the AIL's adoption in certain use cases around stable coins. Ultimately, users need to be able to, yes, receive stable coin within their ecosystem, but ultimately to off ramp it to other use cases within their local jurisdictions or otherwise. So we have, as we've talked in the past in other contexts, an extensive bank and TSP network that allows us to solve for that challenge. So what we've already done, and one of the well known use cases, as you know, Chris, from a stable coin adoption perspective, is internal treasury management capabilities. What we've done is already to integrate by one of our banking partners, Citi, their capabilities to move tokenized funds through their global network to integrate those capabilities into our own treasury management capabilities. And what that gives us is an ability to move funds 24 by 7, so we're not sort of beholden to cut off times and so on, to get automation of those movements, to get programmability of those movements, and overall to really enable better capabilities internally, and therefore enable better capabilities within our ecosystem for our customers. That's what we're doing sort of with the broader context. So this is an exciting real world use case for us, and we're continuing to expand, and it adds real value to how we manage our ecosystem from a liquidity perspective, from a risk perspective, from an FX perspective.

Got it. Thanks for all the color.

Next question comes from the line of

Sanjay Sakrani with KDW. Your line is open.

Thank you. Good morning. I have one more on tariffs, which was, you know, as we've seen the tariff drama sort of unfold, I'm just curious if you've seen any more resiliency from your customers and sort of how to evolve their business around tariffs. So just as we think about what might be on the come, you know, how different you guys feel about their ability to deal with tariffs on a go-forward basis. And then just one related point. I mean, has there been any impact from your customers on this de minimis exemption going away? I'm just curious as we think about that China to US corridor, how we see that playing through. Is the full impact in there already, or could there be a residual one? Thank you.

Thanks, Sanjay. There is no impact from the de minimis really of any, you know, I think we talked about in the past is single digit, low single digits and not an impact for us. What I think it's important to note about our customer book is we have 2 million entrepreneurial, creative, hardworking, hustling business owners in 190 countries and territories committed to growing their businesses. So we benefit from their grit, frankly, and their grit suggests that they are very focused on globalizing their businesses even more, driving increased distribution, cleaning up their portfolios of products to make sure that they're selling the right products in the right markets at the right price. So we haven't seen anything other than impressive entrepreneurship from the entrepreneurs we serve and great effort from the Payoneer team. I mentioned before the 15 events we've done in China, the work our teams are doing across the globe. I share to my prepared remarks the case study of brand 501, which is a business that is using Payoneer for B2B wholesale activity, using our cards for expenses, using checkout for the direct to consumer work. And selling on marketplaces. Those are the kind of customers we love serving and provide them a full financial stack solution for their international operations. Got it.

And I guess I got one more on stable coins. Obviously very encouraging that you're incorporating it into your business. I'm just curious, you know, the one question we just get quite frequently is sort of the disruptive threat. I'm just curious sort of how you guys think about it being a disruptive threat. I know there's lots of advantages to your model, but I'd love to just hear from you in terms of sort of how you guys think about that, that angle of it. Thanks.

Yeah, look, thank you for the question. Like any new innovation or new technology, it can be disruptive, right? It's whether you're well positioned to take advantage of the disruption and we are confident that we are. Again, what has been a headwind to adoption to stable coin more broadly. And it's obviously growing massively in it. As John said, we welcome the regulatory clarity that comes with the with the genius act, but some of the headwinds to broader adoption have been solving the last mile challenge. We can do that. The complexity for end users of managing multiple wallets and keys and cold storage and all of that we can integrate. And so we are a very, very complex ecosystem today and today we already provide a single utility, if you like, that allows users to manage currencies and to hold funds across a complex ecosystem. So we already abstract that complexity today within our ecosystem, and we feel we're well positioned to do that, which is why we're focused on looking to add digital wallet capabilities. So again, disruptive any innovation can be disruptive. We're well positioned. Ultimately for us, we view the value as being able to seamlessly connect those modern digital currencies with all of the value that that comes in terms of programmability and real time settlement with the legacy banking infrastructure and rails that we have within our ecosystem in a way that is user friendly and enables the ultimate business needs of the customers that you're serving. We're well positioned to do that. We're excited. So we view it as a long term opportunity for us.

Thank you. Next question comes from the line of Mayank

Tandon with Needham and Company. Your line is open.

Thank you. Good morning. John or V, are you able to share any metrics around churn levels either by segment over the company as a whole? I'm just curious to see if there's any impact from the higher tariffs uncertainty and sort of related with these. Have you had more difficulty onboarding customers because there might be resistance to, you know, working with you just given some of the uncertainty in the market. So curious around like churn and potential for onboarding customers because of the uncertainty.

Thanks for the question. Our revenue retention has continued to improve modestly year over year, and we see retention as a very exciting opportunity for us. It's one of the reasons why we've moved the portfolio towards larger customers and focused on specific geographies. And given the profile of our customer base, as you'd expect, we see higher volume and revenue retention than we do individual logo retention. That's sort of the nature of the game when you serve small businesses. Our ICP retention is significantly higher than our non-ICP retention and retention of our managed ICPs. You know, a call out to some of the extraordinary people that work at Payoneer. We have local teams on the ground serving customers in emerging markets. Part of their local ecosystem, speaking the local language, our managed ICPs, those that have the relationships directly with the CSM, perform better than the non-managed or un-managed ICPs. And the team is working hard at productizing management services for ICPs as we scale. And the retention in general is an increasing focus for us. And I think the work the team has done to put in place tools to help us both track, manage, cross-sell our ICPs are working, and we're pleased with our progress there.

Got it. OK, I'll move to maybe a more... Oh, you

asked a second...

Sure.

Sorry, Mike. You asked a second question, which I just was leaving my notes. It said, are customers hesitant to onboard because of tariffs? I think quite to the contrary. We saw ICP growth in China at 11% growth. So we are not seeing reticence. I think the opposite. People, to Bee's point about stablecoins generally, we are trusted. And being trusted means that folks are turning to Payoneer to participate in the global economy.

Got it. Actually, you answered my second question. So I'll ask something else instead, which is, you mentioned the facility in Gurgaon. I just want to understand, is that going to be showing up in terms of operating expenses on the R&D line? Or what is sort of the motivation behind that? Is that more because it's about able to hire engineers to do R&D in a hub like India? Or what are some of the main factors behind this initiative?

So, look, happy to take the question. In general, we're looking to operate our ecosystem with a view to ensuring resilience, recruiting the best talent, and having access to the best talent as we continue to invest in our platform more broadly. We have a fantastic team based out of Israel that support our platform. We have folks all over the world. As you know, we're a very global company. We did a ton of research, and India represents a real opportunity. We already have a foothold there as part of our workforce management acquisition, and in other areas, it represents a real opportunity to tap into one of the largest tech talent hubs in the world. So, yes, it will be incremental investment into our platform. It gives us resilience, access to a bigger pool of talent. That is important. And we will continue to manage to the medium-term adjusted EBITDA targets that we have talked about and feel very comfortable that we can do that.

Great. Thank

you so much for taking my questions.

And our last question comes from the line of Daniel Peller with

Wolf Research. Your line is open.

Hi, thanks. This is Daniel Kruijs, for Darren. I just wanted to follow up on the great pay grade expansion we've seen and how to think about that relative to Sabrecoin integration. Any early sense of how you think about the unit economics of the Sabrecoin off-ramp versus the traditional payout, and if this presents any sort of headwind to consistent yield growth over time? Thank you.

Thanks for the question. I think too early to say, right, what we have laid out, why we think we can play in this space. We're exploring and making investments in the back half of the year to begin to build out that infrastructure. I think the take rate dynamics are going to depend very much on the particular use cases that we enable within our ecosystem. I think the overall sort of message that we want to leave you with is obviously sort of what I said to the other question, that we have demonstrated consistent ability to drive take rate expansion because we deliver more utility. And as we deliver more utility, whether that's access to more markets, whether that's a card product, whether that's a -in-class checkout capability, we can command higher yield, and that shows up in the take rate. So, Sabrecoin is really just one more aspect of that, and we feel good that we can continue to drive take rate expansion as we add to the financial stack, as we serve more complex customers with more complex needs. So, again, we feel good about that trajectory and good about sort of how we're performing that.

Great. Thank you. And then maybe as a related follow-up, is there any sense of what percentage of your revenues today are driven by FX conversion fees? And maybe if you could provide a sense of how this directionally has changed over time as you guys have broadened out the product suite. Thank you.

I love it. You know, we've talked about it in the context of pricing strategy more generally, where we saw an opportunity and we were able to sort of unlock it. We saw an opportunity to more effectively monetize FX within our ecosystem based on enhancements to the product, product adding capabilities, and ensuring that we were monetizing those additional capabilities appropriately, and also looking at corridor by corridor pricing and so on. So we've been able to optimize over time, and that has shown up in some of the pricing sort of discussions that we've had. We haven't sort of, we don't disaggregate our revenue based on FX and core and so on. We charge customers fees for the utility that we provide, and FX is one component of

that.

We

have no further questions, and

so I'll hand the call back to the management team for any closing remarks.

Thank you everybody for your questions and your participation this morning. We really had a great second quarter and we're confident that our strategy is working. We're excited about the opportunities in front of us and the strength of our platform. The resilience of our customer base and the focus on innovation that positions us to drive long term sustainable growth. I want to particularly thank our team for their relentless commitment and our shareholders for their continued trust. We're excited about what's next, and we're just getting started as we like to say. Thanks everybody.

Thank you everyone.

This concludes our call and you may now disconnect your lines.