PAYO - NASDAQ

Good morning. Thank you for standing by. Welcome to Payoneer's Fourth Quarter 2024 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 line for your questions. As a reminder, this conference call is being recorded. I would now like to turn the call over to Caius Slater, Payoneer's Director of Investor Relations.

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 intend 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. Payoneer had a standout Q4 and a record breaking 2024. We hit new highs in volume, revenue and profitability because we are executing with focus and precision. Our strategy to build a global financial stack for SMBs is working. Our mission is clear to connect the world's underserved businesses to a rising global economy, while delivering sustainable profitable growth and shareholder value. At our Investor Day in September 2023, we laid out a simple plan, become the leading payments and financial services provider to cross-border SMBs. We're doing exactly that. Leveraging Payoneer's key strengths, our strong team, broad ecosystem, regulatory infrastructure, trusted brand and a diverse global customer base. Traditional banks underserve SMBs operating across borders and we don't. 2024 was a breakthrough year for Payoneer. We sharpened our ICP strategy, prioritized our largest customers and AP products, and accelerated both growth and profitability. The results they speak for themselves. Revenue growth, excluding interest income, accelerated from 5% in 2023 to 20% in 2024. B2B volume grew 42% year-over-year, far ahead of our initial target of 25% and significantly outpacing our 2023 performance. ARPU, excluding interest income, grew 21% year-over-year, marking six consecutive quarters of acceleration. Customer adoption of three or more AP products reached 53% of our total usage in Q4 of 2024, a 30% increase over Q1 of 2022. Card usage grew 36% year-over-year with broad based growth across all regions. 10K plus ICPs grew volumes 21% year-over-year. Key product launches included the lite account, ERP integrations and the Green Channel portal in China, helping our customers there increase their access to global demand. We expanded our financial stack with the acquisition of Skuad, positioning us to capture share in global workforce management. We were disciplined about our costs. For example, Payoneer headcount has been largely flat for two years. We delivered three consecutive quarters of positive adjusted EBITDA excluding interest income. We're scaling efficiently and profitably. Our execution is strong and we've exceeded our September 2023 Investor Day targets. These results demonstrate our scalable, increasingly profitable model and the strength of our execution. We are in the early stages of a multiyear value creation journey. The trade technology and financial landscape is shifting and we are in the prime position to capitalize on it. Here's where we're focused. We intend to deliver sustained growth and profitability, further refining our ICP strategy, enhancing acquisition efficiency, increasing cross-sell, improving retention and optimizing pricing. We will continue to implement our platform modernization and expansion. We will build, buy and partner with an ecosystem of products, simplifying our UX and advancing our regulatory infrastructure, all to provide the financial stack our customers need. We plan to close our acquisition in China. We shared a few weeks ago that we have secured the regulatory approvals required to proceed with our acquisition of a licensed payment service provider and are working towards closing in the first half of this year. We will continue to review and optimize capital allocation. We are balancing growth investments with returns to shareholders to drive long-term value. As we look ahead to our 20th anniversary this April, we are committed to unlocking the multi trillion-dollar cross-border SMB payments opportunity. The Payoneer brand is strong, recognized and trusted with our strong team, clear strategy, consistent results and improving profitability. We are taking share in cross-border B2B payments and creating value for our shareholders. With that, I'll turn it over to Bea to walk you through the financial details and our 2025 guidance.

Thank you, John and thank you to everyone for joining us. Payoneer had a record breaking 2024. We delivered volume growth of 21%, growth in revenue excluding interest income of 20% and generated $271 million of adjusted EBITDA, representing a 28% adjusted EBITDA margin for the year. These results are a testament to the unique value proposition we offer to our customers, SMBs and entrepreneurs looking to access the opportunities of an increasingly digital global economy. Now turning to our fourth quarter results. We delivered another quarter of record revenue at $262 million up 17%. Growth was driven by robust performance in our marketplace business, continued strength in our B2B franchise, increased adoption of our checkout capabilities and card product, as well as the impact of our pricing and offering strategy. Volume growth of 18% reflected broad based outperformance across our ecosystem. SMB volumes grew 18% year-over-year. Volume from SMBs that sell on marketplaces was up 14%. We grew volumes from SMBs that sell B2B by 37%. Merchant services volume continued to grow by more than 100% year-over-year. Our Q4 take rate of 116 basis points decreased 2 basis points on a year-over-year basis and 6 basis points sequentially, primarily driven by lower interest income. On a year-over-year basis, we were able to drive expansion in our SMB customer take rate reflecting the incremental value we are delivering to our customers. Our SMB customer take rate was up 9 basis points year-over-year and flat sequentially despite a seasonal mix shift towards larger e-comm sellers, driven by continued growth in our B2B franchise, the ongoing impact of our various pricing initiatives, continued adoption of our high value products, especially our card product, as well as the impact of our workforce management acquisition. Customer funds held by Payoneer increased 9% year-over-year to $7 billion. Customers value our multicurrency capabilities and the ability to hold balances in stable currencies is a core value proposition. We continue to steadily grow customer funds and generated interest income of $61 million in Q4 even as average interest rates declined year-over-year. As described on our third quarter call, in 2024 we implemented a number of actions to reduce our sensitivity to short term interest rate fluctuations. As of December 31st, we had approximately $1.8 billion of assets underlying customer funds invested in a portfolio of US treasury securities and term-based deposits. The weighted average yield on this portfolio is approximately 4.4% with a weighted average duration of approximately two years. We have purchased interest rate derivatives on approximately $1.9 billion of funds underlying our customer balances, providing a floor against interest rate declines below 3%. Approximately 50% of the assets underlying customer balances are short term, highly liquid and thus, subject to floating rates predominantly to short term interest rates in the US. We will continue to actively manage our hedging programs. Total operating expenses of $233 million increased 17% primarily driven by labor related expenses, higher transaction costs, consultancy fees and the impact of seasonal cashback incentive programs designed to drive adoption of our card product. Total operating expenses included approximately $70 million of one-time and seasonal items, including adjustments to full year bonus and benefits accruals in line with our strong 2024 performance, one-time investments in certain platform and infrastructure initiatives and a donation to the Payoneer foundation, among other items. Transaction costs of $43 million increased 19% broadly in line with volume growth of 18%, even as we saw mix shift into higher transaction cost products and business lines, including our B2B merchant services and our card product. Transaction costs represented 16.5% of revenue, an increase of 30 basis points from the prior year period. Sales and marketing expense was up $7 million or 14% year-over-year driven by higher labor related costs including from our workforce management acquisition, increased spend on card incentives especially in China and higher partner commissions. Other operating expenses were up $3 million or 9% driven by higher IT and communication costs and higher consulting fees. R&D expense increased $5 million or 15%, reflecting higher labor-related costs from higher headcount which increased approximately 25% year-over-year including from our workforce management acquisition, as well as higher bonus and employee benefit accruals in line with our 2024 performance. G&A expense increased $6 million or 23%, again primarily due to higher bonus accruals as well as certain non-recurring consulting fees and the impact of our donation to the Payoneer foundation. Adjusted EBITDA was $63 million compared to $52 million in the prior year period. This represents a 24% adjusted EBITDA margin in the quarter and is the third consecutive quarter of positive adjusted EBITDA excluding interest income. For the full year, we achieved $14 million of positive adjusted EBITDA excluding interest income versus an adjusted EBITDA loss excluding interest income of $25 million in 2023. Net income was $18 million compared to $27 million in the fourth quarter of last year. Q4 basic and diluted earnings per share was $0.05. We ended the quarter with cash and cash equivalents of $497 million. During the quarter we purchased approximately $18 million worth of shares, and for 2024, we repurchased a total of $137 million worth of shares at a weighted average price of approximately 550 and exceeded our target of doubling our share repurchases in 2024 versus 2023. As discussed on our third quarter call, during 2024 we also repurchased and redeemed all 25 million outstanding public warrants for $21 million. Turning now to our 2025 guidance. For full year 2025, we expect revenues to be between $1,040 million and $1,050 million. This includes $215 million of interest income and $825 million to $835 million of revenue excluding interest income. The midpoint of our guidance implies 15% growth in revenue excluding interest income in line with medium term targets we shared at our Investor Day in late 2023. We expect revenue excluding interest income to grow at a faster rate than volume in line with our stated strategy to expand ARPU from faster growth in our higher yielding B2B business and ongoing penetration of high yield products like our card offering as well as from the continued rollout of our pricing and offering strategy. We expect to generate $215 million of interest income for the year, based on probability weighted market interest rate expectations, our expectations for balance growth and the impact of our investment program. We expect transaction costs as a percentage of revenue to be approximately 18%, up from 15.6% in 2024 from the impact of declining interest rates and in line with ongoing growth in our higher cost B2B checkout and card offerings. We expect 2025 adjusted OpEx less transaction costs of approximately $595 million, which represents 7% growth over 2024. Adjusted OpEx represents our guidance for revenue less adjusted EBITDA. We expect adjusted EBITDA to be between $255 million and $265 million, representing an adjusted EBITDA margin of approximately 25% at the midpoint, again in line with the medium term targets we set at our 2023 Investor Day. When excluding interest income, our guidance implies adjusted EBITDA of between $40 million and $50 million, over three times higher than in 2024 and showing increasing profitability in our core business. Our 2024 results reflect strong momentum across our business and demonstrate the size of our opportunity and the strengths of our execution. We delivered meaningful growth in our B2B business, demonstrating strong product market fit with service oriented SMBs in emerging markets. We grew ICPs and the volume from our larger ICPs delivered increased ARPU and generated positive adjusted EBITDA excluding interest income. We remain committed to driving innovation and delivering long-term value for our customers, our shareholders and our employees. 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. [Operator Instructions] Our first question comes from Sanjay Sakhrani with KBW. Please go ahead.

Thank you. Good morning. I was wondering if we just think about the macro assumptions that underpin your views. Could you just talk about what you factored in and sort of what -- so the upside downside cases are inside the guide. Thanks.

Hey, Sanjay. It's Bea. Nice to hear from you. So, look in terms of our guidance philosophy, there's been no change there. Our guidance reflects how we expect the business to perform, the environment in which we operate, models and assumptions that are anchored to those key metrics that we're seeing in our business, as well as how we expect marketplaces and other part of the ecosystem perform. So, we're not looking to be conservative. We feel our guidance is pragmatic, appropriate, consistent. We talked in our prepared remarks around the assumptions there. The main assumptions really are around marketplace volume and B2B volume, as well as take rate dynamics which we're happy to dive into. But on that marketplace volume we assume in our guidance that those growth rates normalize to high single digits from the mid-teens that we saw in 2024. And we assume that B2B growth continues to come in at about 25%. That steps down off of the record year in 2024, but is consistent with the dynamics we're seeing in our business right now. And so, look, taken together in the aggregate, that all points to volume growth for our SMB business and in general, in that low double-digit range. And as we said again in our prepared remarks, we expect revenue to grow faster than volume based on take rate dynamics that we are seeing within our business, a modest take rate expansion. And that all gets us to that revenue guide. Right? We're coming off of a record year, as we've said. We have really good momentum. We're hitting those medium term targets that we said in late 2023, and we feel confident about our guide with all of the assumptions baked in.

Thank You. Thank you, Bea. I mean, I guess, maybe just a quick follow up on that. Just there's a lot of chatter around tariffs, China, et cetera, on that macro point. Anything that you guys have factored in or contemplating as we think about the discussions of tariffs around the world. And then specific -- I'll take you up on the take rate. Pricing and ARPU is obviously a key strategic point that you guys outlined. Just as we move forward and we think about ARPU optimization, where are the opportunities and sort of what inning are we in? And just maybe you could talk about the execution over 2025. Thank you.

Yeah. Happy to do that. So, look, maybe I'll take the take rate question first. Look, I think we feel really good about the fact that we demonstrated the ability to grow take rate in our SMB business X interest income. Right? That was something that we tracked and talked about all through 2024. We grew at 4 basis points in Q1, 1 basis point in Q2, 2 in Q3 and in Q4 we delivered 9 basis points of take rate expansion. Right? And we were flat quarter-over-quarter where usually we see that sequential decline. So, we're seeing really nice take rate expansion which to your question is very aligned with our overall sort of growth strategy. And as we guidance in '25, we expect our SMB customer take rate to continue to modestly expand. That's what we're factoring in. Modestly for us means, in that 1 to 3 basis point range. And the drivers are the drivers that we've been consistently talking through all along. One, we're going to continue to drive accelerated growth in our B2B when compared to our core business, our marketplace business. And reminding that the take rate on that business is roughly one and a half times that marketplace business. We're going to continue to cross-sell our higher value products, things like card and checkout. We delivered record performance in our card product, up 36%, record spend on our cards. We're going to continue to deliver on the financial stack strategy that we talked about. So, our workforce management acquisition continuing to sell our checkout capabilities. And then finally pricing, this has been as you know, Sanjay, a journey for us. We're continuing to iterate there and we see continued value that we're going to unlock with that. So, overall all of those -- and I could go on, all of those factors give us a high degree of conviction in our strategy overall and our continued ability to expand take rate as we move through '25. I'll take -- as you threw that one in there as well. So, look, we talked a little bit about the guidance finance philosophy and all of the assumptions baked in. I'm not going to share here an explicit assumption modeled in our guidance for trade policy. There's obviously a very broad range of potential outcomes. Obviously, the situation is evolving and evolving quite quickly. I think what we would say is consistent with what we've said historically. Our business is really diversified, right? It's diversified across geographies, across trade routes, across goods and services. Look, just as an example, and we've talked about it before, 80% of our B2B business is services. Right? So, again, very broad range of outcomes. But our business has proven itself to be resilient in the face of similar trade policy sort of challenges historically. So, we're monitoring closely over the medium to longer term, I think it actually creates an opportunity. In the near term, we'll continue to monitor. And in most moderate tariff scenarios, which I think is what most observers expect at this point, we don't expect any material impact to our business while we, of course, acknowledge uncertainty. So that's really how we're thinking about that over the long-term.

Thank you.

Our next question comes from Nate Svensson with Deutsche Bank. Please go ahead.

Hi. Thanks for the question. Wanted to ask about revenue ex-interest income. Obviously, exited the year at a really healthy 26% year-over-year clip. And I know you're expecting a bit of a step down in '25 to 15%. So, maybe you could talk about some of the drivers of that decel. I know, Bea, you just talked about marketplace and B2B volumes, but anything beyond that. And then any comments on the cadence of that decel through the year, should it be a steady decel or any sort of step functions in any of the quarters or other timing issues to call out?

Yeah. Thanks for the question, Nate and welcome. So, look, yeah, we're calling at the midpoint for 15% year-over-year core revenue guidance. That is definitely a step down from '24, which was again a record year for us. Right? And we called out throughout '24, as you know that a lot of the outperformance came from two factors, right? Outsized performance in our B2B business and marketplaces coming in with much stronger volume performance than we or frankly anybody anticipated, right? So, as I think back to this time a year ago, we baked in high single digit growth in our marketplace business. There was a lot of talk of a recession in 2024 and marketplaces ended up delivering for us 15% give or take mid-teens volume growth that drove some of that uplift. While our B2B business, look, we were super happy with how quickly we were able to accelerate growth. As we look into 2025, we're expecting a normalization, right, in those e-comm marketplace volume behaviors back to that high single digit. That's very consistent frankly with what we're seeing in the tail end of '24 and what we're beginning to see in January and February. We're very comfortable at that level. That to me is sort of a reversion to what you would expect longer term trend should be from a growth perspective. And we are confident that we're going to deliver 25% volume growth in our B2B business. So, again, a little bit of a step down, but with tougher comps and a growing baseline I think to be expected. So, you take those two things combined. Again, low double-digit volume growth overall, I think that that's a good measure of sort of where we can expect to be for 2025, accelerated versus that level revenue growth, meaning higher revenue growth versus that volume from all the take rate sort of implications that we just talked about. And in terms of quarterly cadence, look, we're not assuming some sort of big ramp up through the back half of the year mid-teens in Q1 and Q2 stepping up modestly, 1 or 2 percentage points, give or take. It’s not -- we don't need a massive acceleration or ramp up to hit this target. We're very comfortable with how the business is operating mid-teens in the first couple of quarters and accelerating modestly and seasonally in the back half is how you should think about it.

That's really great detail and I think you used the word pragmatic to describe the guide earlier, so it's good to hear that. So, for the follow up, it was nice to see a return to some sequential growth in that cohort of ICPs doing greater than $10,000 per month. And I know you've been focused more on growing volume per ICP, but I think it'd be great to hear how you're thinking about the pace of ICP adds in '25, maybe across both the size buckets and by region, and then similarly how you're thinking about growing that volume per ICP, capturing more share of wallet, et cetera.

That's a great question and I'll take that one. But first some context. If you think about where the firm was 2023, we delivered $585 million of revenue on a normalized basis, taking out some one-time fees and the core business lost approximately $20 million. We're guiding for '25 at $830 million of revenue and about $40 million of core EBITDA. When you think about where we were in September of 2023 coming off 5% growth, delivering the 2024, 20% growth I think speaks to the extraordinary execution of our team and the macro factors that propelled the business forward. And our plan for 2025 is to continue to execute and drive the controllable factors of our business and benefit from macro dynamics as they present tailwinds for us. When you think about the ICP framework specifically, we introduced ICPs because it was important to clarify internally and frankly for the market that our largest customers contribute the most amount of our volume, the most amount of our revenue, need the full financial stack and are asking Payoneer to solve the multicurrency, multi-geography challenges that SMBs face all over the globe. So, our formula for growth is ICP times ARPU minus cost to serve. So, we're obviously unlocking leverage in 2025 with the 4x growth in our core adjusted EBITDA. We're driving ARPU growth with our large customers and we're acquiring larger and larger ICPs. We have yet to disclose net revenue retention numbers for cohorts of our customers. But if you look at the 10K plus ICPs, the largest of those of that segment, of that group have the strongest logo, volume and revenue retention numbers. So, we are allocating our resources to drive profitable growth, not ICP metrics. And that's I think very important for folks to understand that the levers we turn are driving that. So, when you think about the components of ARPU growth we mentioned some of them, 36% growth in our card products, exceptional results, the strength of our checkout product over 100% growth there, our B2B growth at 42%. When we guided in 2023, we were coming off single digit, low single digit sort of growth and we guided at 25% and our team executed the hell out of it and knock the cover off the ball and we drove that business and we have the kind of confidence that a growth company at over $1 billion of revenue has to deliver extraordinary results and profitability. So, you will see through 2025 us acquire more high value, larger ICPs because Adam Cohen and our go-to-market organization is having extraordinary success doing it. Oren Ryngler and our product organization, our platform team is making it easier for us to onboard customers at scale, so that we don't need to add incremental headcount or costs to drive the scale of our platform. So, on every measure, when we look at the business and the arc of the business we're building, we have a strong team, exceptional opportunity given the competitive landscape, the proven ability to add ICPs and monetize them. So, across the board we feel great about where we are. I will note in the supplement we shared there's -- I think it's on slide, I don't know, 10 or so. We share ICPs around the world and you see the growth in ICPs in our highest take rate regions continues to outpace the rest of the firm. So, we are -- all of our resources are lined up to drive profitable growth and shareholder value.

John, Bea, appreciate the detailed answers. Thanks.

Thanks, Nate.

The next question comes from Will Nance with Goldman Sachs. Please go ahead.

Hey guys, good morning. Congrats on finishing the year strong. I wanted to maybe talk through the B2B dynamics, I guess both that you guys are seeing in the first quarter and expecting for the full year. I totally hear you. The outlook is for -- the 25%. You guys have been pretty clear on that since the Investor Day, that is the long-term expectation. Can you talk about -- I mean given everything that you have done on the go-to-market side and I know you guys are proud of the efficiencies and the focus that you guys have been able to generate there, what would it take to generate further outperformance over and above that 25% level? Do we hit same level of large numbers this year or do you think there are opportunities to continue that outperformance as we get through 2025?

Hey Will, great question. Thank you for raising it. Yes, we have -- we exceeded $10 billion of B2B volume in 2024, which is an extraordinary achievement by our team and we're very proud of the momentum and traction that we had. And when you think about the percentage of our volume growth coming from B2B, it continues to grow, which is I think very important for the long-term -- for shareholders to consider long term because the full financial stack, 100% of the AR and 100% of the AP of our customers, makes us a stronger, more valuable business for everyone. The B2B opportunity is enormous. It's a large market. Our acquisition in that market has been exceptionally strong. We only know one pace, which is full pace, right? Our team is focused on acquiring customers, serving those customers. So, we seek to outperform because that's -- we're always seeking to outperform and our business is so diversified that when you think about the regions of the globe, whether it's in APAC or Latin America or China or across Europe, you can see that customers need the multicurrency solution that we provide. So, I think when I look at the growth by region, I'll just share some of the growth by region stats, we saw a lot of our growth in Latin America, somewhat 80% of it coming from B2B. In EMEA, 88%; in APAC, 37%. So, the power of our B2B franchise is penetrating the markets where we do business. And we all know that SMBs are not well served, particularly the SMBs that are multi entity are not well served by their local domestic banks and we are by competing with them providing a much superior solution. So, I believe there is upside for us to capture and when we look at the financial stack and the acquisition of our workforce management product, there is some upside potential as we see the cross sell and integration of that platform.

Got it. Awesome. That's super helpful. And then just maybe if you could speak a little bit to the process around the acquisition in Mainland China, could you just give an update or any additional thoughts versus what you shared previously on the opportunities there. I know there's been a lot of share gains even without that acquisition in the Chinese corridor. Just wondering how you view -- I guess one of the competitive dynamics of the Chinese corridor and what sort of unlock that that deal represents.

Yeah. I mean, we announced that deal and we shared a few weeks ago or a week ago that we've received all regulatory approvals and now can move towards closing in the first half. The advantages that we anticipate from that transaction are very straightforward. We have -- first, we're regulated and trusted by governments around the globe and that's essential to provide a global solution for global SMBs. We will be one of a very small handful of NASDAQ listed firms with this privilege and we respect it. I'll be in China in a couple of weeks. Looking forward to seeing our customers there and working with our customers. First and foremost, it's an opportunity to continue to take share in the China market because our solutions are superior to the local providers. Our global network, our Green Channel initiatives which enable help us help our customers expand their distributions in regions around the globe. Specifically, to the acquisition, there are opportunities for us to explore capabilities to provide outbound money flows. There are opportunities for us to provide on the ground operations with technology and R&D which will accelerate our development and product roadmap serving those customers and will certainly improve cost structure. And if you think, Will, and you and I talked about this in the past. Yeah. Just one note we've talked about in the past. We continue to prioritize expanding our regulatory footprint because that provides an exceptional moat around the Payoneer franchise for our shareholders.

Yeah. Now that's certainly differentiated in the payment space. I appreciate you taking the question.

You bet.

Cool.

Our next question comes from Cris Kennedy with William Blair. Please go ahead.

Yeah. Good morning. Thanks for taking the questions. It's good to see the continued progress in core EBITDA. Is there any way to think about the long-term margin for that metric? I think guidance calls for about 5% in 2025.

Hey, Cris, thanks for the question. Hope all is well. Look, we're really proud of the leverage we've been able to unlock in the business and that we're driving increasing profitability in that core business, as you said. Look again to provide some context, as John did. In 2023, the core business lost $25 million. And even as interest rates now decline, as we look at that core profitability for 2025, we're going to deliver at the midpoint in excess of $40 million of adjusted EBITDA, right? That's 3x what we did last year. So, we -- and I've made this sort of observation in the past, even as we have mix shifted our business into more geographies, added regulatory and licensed infrastructure which adds complexity. And yes, adds to our moat, added more complicated products and expanded our moat. Even as we've done all of those things, we've been able to do it more efficiently to serve our customers more efficiently. And we've driven leverage in the business, right? And delivered improving profitability. We think we can continue to do that. We set a target back in 2023 of 25% adjusted EBITDA and we were agnostic to how interest rates would move, right? So that's '25 adjusted EBITDA inclusive. Even as we face some of those headwinds, we're going to hit that. We feel confident that we will hit that in '25. And we think that that is a good long-term target for us as well. And there's upside there, right? Look, as we look to our platform investments, as John had said, as we look to the capabilities that can come from AI and some of the innovation that we're driving in our platform related to AI capabilities in our customer journey function and in other areas, we think over time we can unlock further leverage. For now 25%, we're very comfortable with that target and with hitting that target in '25.

Great. Thanks for that. And John, you alluded to it earlier and I think last quarter you talked about those ICPs generating over 250,000 of monthly volume. Can you just give any additional color on that cohort what that looks like?

Yeah. They're frigging awesome and they're happy with our product. And it's exciting to serve them because when you meet with them, what you see is these are real scale businesses underserved by the traditional banking system. And so, as I mentioned, we see great net revenue retention with them, strong logo retention with them and our go-to-market team is being very effective at identifying high value customers. So, whether it's marketing services companies in Dubai or business process outsourcers in the Philippines or iPhone case exporters and traders coming out of China, it's pretty exciting to see the Payoneer global brand, strong regulatory framework serving an upmarket cohort of customers very effectively.

Got it. Thanks for taking the questions.

Thanks, Cris.

Our next question comes from Trevor Williams with Jefferies. Please go ahead.

Hi, this is Spencer James on for Trevor Williams. Thank you for taking the question. I wanted to ask maybe a follow up to Sanjay's earlier question on tariff risk to Payoneer and maybe put a finer point specifically around efforts to close the de minimis loophole for goods shipped to the US. I was wondering if you could maybe comment on how you expect the impact of this rule to affect different sellers across your base for it to go into effect.

Yeah. Look, I mean, that's a super specific question and I think we can say very confidently that the de minimis rule is not impactful for us. Less than 3% of our volume is our estimate, right? It's not always straightforward to see, but 3% of our volume directionally is coming in under that de minimis exception. And so, we're very comfortable that we are -- of our China volume, just to be clear, is coming in under that exception. So, we're very comfortable that we're not significantly impacted there. I think that the more important point, look, we could sort of iterate through and speculate through many, many sort of policy changes and directions. The important point is really the one that I'll reiterate in terms of the question that Sanjay asked is that our business is diversified across geographies, goods, services, trade routes and has proven itself to be resilient, right? And we continue to see that. Our sellers are resilient. We have a global network that enables 7,000 trade routes. And so, while we're monitoring it closely and there's obviously uncertainty, we feel good that our business is resilient, that our customers are resilient and that we're very comfortable with our overall directionality and the momentum that we have in the business. Ultimately, we're building for long-term value creation, right?

Great. Thank you for that. Appreciate it. And as a quick follow up, one quick modeling question. Could you add any color on the cadence of adjusted EBITDA throughout the year by quarter?

Yeah, for sure. So, look, we talked a little bit about the core revenue cadence in that mid-teens and just stepping up very modestly over the course of the year transaction costs we called out in our guidance, we expect them to be at 18% of total revenue, again stepping up over the course of the year and again, from mix shift and declining interest rates in the back half of the year. So, directionally, if you're starting more or less aligned with that Q4 exit rate and stepping up to around that 18% or 19%, that's how we see transaction costs behaving over the course of the year. Adjusted OpEx relatively flat for those first two quarters or so. Stepping up modestly in Q3, stepping up again in Q4 from seasonal impact. But more or less, if you assume a pretty consistent 24%, 25% adjusted EBITDA margin overall over the course of the four quarters, you're very much aligned with the expectations we have for the business.

Great. Thank you for taking the questions.

The next question comes from Daniel Krebs with Wolfe Research. Please go ahead.

Hi, thank you. I wanted to ask again on ICP segmentation, could you maybe discuss what you view as the max potential size for a customer? We talk about the increased focus on the larger ICPs, the 250 K cohort. At what point does a customer become potentially too large in terms of a product market fit? Thank you.

Hey Daniel, great question. We actually haven't seen it. We have some very large ICPs in the book that have been loyal multiyear Payoneer customers. So, we actually haven't topped out. We do have efficiency that's focused and service level that's focused and unit economic focus. So, what we are is continuing to build a platform that enables serving global cross-border SMBs in a self-serve way. That full financial stack as well as the high service on the ground acquisition of ICPs and CSM support of those ICPs so that we're able to capture all of the cross-border volumes that we seek. Just to add some context. If you think about it, we're building a global financial stack that our customers don't have access to without us. Right? There isn't a cross-border, multicurrency, multi-entity, high growth emerging markets, SMB, B2B payments focused platform other than Payoneer. And so, when we look about the complex needs those customers have and the attach rates of our AP products being the highest with our largest customers, we see real opportunity to continue to serve the fat middle of our customer base and the high value, high volume customers at the top.

That's great. Thank you. If I could follow up on intra-network flows, could you perhaps give us an update on the size of intra-network flows in 2024 and any update on the monetization efforts there? Thank you.

Yeah. Thanks for the question. Look, I'll talk a little more broadly really around our pricing and offering strategy, because I think it's a really important thing for us to sort of talk through. So, look, we've talked in the past about our ongoing strategy to really move from a one size fits all approach to pricing to one that's segmented and customer-centric and is anchored not just to pricing, right, but to sort of the bundling and offering strategy that goes along with it. So, we've spent a lot of time starting really in 2023 defining our customer personas, understanding their use cases and aligning our product bundling and pricing to those personas, right? Very much a shift away from that one size fits all. You withdraw cash in geography A, you pay Y. So, thinking through that journey in 2023, we executed on low hanging fruit largely to improve monetization of non-ICPs. And we generated $25 million in uplift on a $600 million base. In '24, we continued to invest in that infrastructure. We continued to roll out our lite account. We continued FX optimization measures. We developed and refined our views on a pro and premium offering for those larger SMBs that John was just talking about. And yet we did research on use cases and testing of intra-network fees. And in 2024, in addition to the uplift we had from the prior year, we generated about $30 million of uplift on a $721 million base. So, as we look out to 2025, we're continuing with that differentiated offering and pricing approach, with that segment based lite pro premium approach, broader functionality for larger customers, annual fees for some of those larger customers, upgrade fees for some of those products and services, continuing to optimize our FX continues to be an opportunity for us, rolling out those intra network prices and testing those fees or continuing to roll out those fees. And we're expecting and have included in our guidance roughly $30 million in uplift from those initiatives. So, again, it's been a multi quarter journey for us. It's a meaningful long-term opportunity to really do a whole bunch of things, right? To drive more engagement and cross-sell in how we think about how we bundle, to improve monetization, to add SaaS type or recurring type revenues in terms of those account fees as we sort of flux into those premium and pro products and to overall reduce the complexity and cost to serve by really making the offerings that we make available to our customers fit for purpose and fit for size. So, intra-network is a big part of that, right? About $11.5 billion directionally in 2024 in intra-network flows. We think that's a really powerful proof point of the two-sided network that we've created and of the value that it has. Two companies and two individuals and others that are operating in that ecosystem. We've made strides to monetize that and we're continuing to do that as part of that broader pricing and offering strategy.

Thanks everybody for joining us today. We have had an extraordinary 2024, a standout Q4 and we're confident in our team, the size of our opportunity, the power of our brand, the moat around the firm and the response from our customers. So, probably the final thing I want to say is thank you to our shareholders for your support and to our team for their incredible hard work.