PAYO - NASDAQ

Ladies and gentlemen, thank you for standing by. My name is Colby, and I will be your conference operator today. At this time, I'd like to welcome you to the Payoneer Third Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Michelle Wang. Please go ahead. _

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

Good morning, and welcome to Payoneer's Q3 2025 earnings call. Payoneer is a global payments and financial operating platform, built on durable infrastructure. Together, our technology, strategic relationships, and regulatory framework form the moat we've built over 20 years. Our mission is straightforward. We remove the friction between an entrepreneur's ambition and their achievement by delivering a secure, easy-to-use and trusted financial platform built for global commerce. Our strong Q3 and year-to-date results reflect consistent execution against our strategic priorities in a massive, fragmented cross-border payments market. Our results give us confidence in our long-term opportunity even as we navigate short-term volatility. We are evolving our business to be on offense, as global trade evolves, supply chains adapt, and as innovations in money movement continue to gain momentum. I'll share our progress, where we're investing and how we're positioning Payoneer to win. Bea will then walk you through our financials and increase guidance for 2025. In the first quarter of 2023, when I became sole CEO, and Bea joined as CFO, Payoneer generated mid-single digit revenue growth ex-interest. Adjusted EBITDA ex-interest was negative. Our priority at the time as a new management team was on reigniting growth and resetting the business for durable profitability. 2.5 years later, we have delivered record Q3 results and are raising our 2025 guidance. Q3 revenue ex-interest was up 15%, and we have delivered 7 consecutive quarters of mid-teens or greater growth, in line with or exceeding our stated targets. We've delivered 6 consecutive quarters of positive adjusted EBITDA ex-interest, including $12 million in Q3. Our total adjusted EBITDA margin was north of 25% in 2024, as well as in the first 3 quarters of 2025. The strength and consistency of our results in an evolving macro backdrop underscores our successful execution, as we deliver for customers. So a few highlights. First, improved unit economics and higher quality customer portfolio. We are moving from casting a wide net to prioritizing quality. We define quality as larger, more complex customers with scale, ambition, and global reach. And we are focusing on industries and countries where we have the strongest product market fit. We are exiting customers that don't meet our risk tolerance or desired economics. We are driving meaningful ARPU growth, as we move upmarket, and as we deliver segment-specific pricing and product bundles. ARPU has increased 65% since Q1 of 2023 from $286 to over $470. In our long-tail segment, we've raised prices and tightened product access and the cohort is now profitable. We are focusing our acquisition efforts, service model, and product roadmap to capture and serve larger customers, especially multi-entity customers. ICPs receiving over $250,000 a month in volume, represented nearly 30% of our Q3 revenue ex-interest, and are growing significantly faster than the rest of the customer portfolio. The higher quality of our customer portfolio is evident in our financial results. You'll note that total ICP counts have been roughly flat year-over-year, while we have delivered consistent mid-teens revenue growth ex-interest. Our focus on larger ICPs has driven higher average volume per ICP. We have improved our transaction costs and profitability dynamics even as our business expands to serve more complex use cases. Our diversified business mix and B2B expansion continue to drive growth. B2B revenue grew 27% in Q3, and now represents roughly 30% of revenue ex-interest, up from 20% in Q1 2023. Our platform solves for the complex AR and AP needs of global businesses. Our AP capabilities are built on infrastructure, licenses and compliance, trusted by large global enterprise partners, and we are making these capabilities available to global SMBs. In B2B, we are also focusing our acquisition efforts on larger customers. More than 50% of B2B revenue came from ICPs doing more than $250,000 per month in volume, and the average invoice size in our B2B franchise increased mid-teens percentage year-over-year. Third, our customers have shown that the ability to hold balances across currencies in their Payoneer account is a core Payoneer value proposition. And as such, the interest we earn on those balances represent a core component of our economics. Ending Q3, customers held over $7 billion on our platform, up 17% year-over-year for the second straight quarter. This demonstrates both the trust our customers have in our platform, and the accounts payable utilities that we provide. And together, this drives our revenue. We monetize customer funds through interest income and transaction fees as funds leave the Payoneer account, either when a customer withdraws to their local bank account or spends via Payoneer's AP products. Customer funds have grown in excess of volume year-to-date and represent substantial future revenue as customers deploy their funds. We have protected a substantial portion of our interest income over the next 3 years through hedging programs, which Bea will discuss in more detail. Our customers turn to Payoneer as they grow their businesses globally, and we are investing in our platform to deliver more value for them. We continue to drive multiproduct adoption as we increase the utility of the Payoneer account and move away from being "a toll booth on the money highway." Over 50% of Payoneer account spend is now coming from customers who use 3 or more AP products, up 200 basis points year-over-year. Customers are increasingly using Payoneer as their central account to manage their business network payments and shifting to our card to pay for cross-border expenses. We are expanding the Payoneer account ecosystem and the services we provide to customers through strategic partnerships. Here's one example. We are partnering with a third-party lender to expand access to capital for our customers in a capital-efficient and tech-enabled way. On stablecoins and blockchain, the rails are evolving, and we are evolving our platform to capture the opportunity. Just as when Payoneer started, global businesses need multicurrency wallets and interoperability between different currencies and stores of value. Our strategy is to orchestrate across payment schemes and rails, so cross-border businesses can focus on growth, without compromising on safety or convenience. We are making steady progress on these efforts. We are now using Citi's on-chain money movement capabilities to move hundreds of millions of dollars quarterly, allowing us to manage liquidity even more efficiently. For customers, we are working on offering stablecoin wallet functionality in 2026. In summary, what you can expect from us going forward? One, relentless focus on profitable growth, guided by a refined portfolio segmentation across region, vertical, use case, product and unit economics. We do what's best for the long-term health of the business every single day; Two, expansion of core operating margin as we focus on unlocking the meaningful leverage we see in our business over the long term; Three, prudent capital allocation as we fund innovation, pursue selective M&A and return capital to shareholders via repurchases. We have nearly $500 million of cash and generated roughly $50 million of operating cash flow in Q3. In July, our Board approved a $300 million buyback, and we are executing with intent. We repurchased $45 million of shares in Q3. I'm proud of the progress the global Payoneer team has made this quarter and year-to-date to deliver for our customers. We remain confident in the secular drivers supporting our long-term opportunity, and believe our platform and competitive moat position us well to generate long-term, durable, profitable growth. I'll now hand it over to Bea to walk through the numbers and our increased guidance for 2025.

Thank you, John, and thank you to everyone for joining us. Payoneer delivered another strong quarter with record quarterly revenue, 15% revenue growth, excluding interest income, and adjusted EBITDA ahead of our medium-term targets. In a dynamic global macroenvironment, we grew volumes, expanded ARPU, increased our SMB take rate and improved our core business profitability. We are increasing our full year 2025 guidance and are well positioned to capture the significant long-term opportunity ahead of us. Now turning to our third quarter results. We delivered revenue of $271 million, up 9% year-over-year and our highest ever quarterly revenue. Revenue excluding interest income reached $211 million, also a quarterly record and up 15% year-over-year. Our strong growth was driven by our B2B franchise, increasing adoption of our high-value products and services such as Checkout and Card and the ongoing implementation of our strategic pricing and fee initiatives. ARPU increased 15% in the quarter, and excluding interest income, was up 22%. Since Q1 2023, we had increased total ARPU by 65%. This is a direct result of our multifaceted growth strategy to move upmarket, drive cross-sell of our higher-yielding AP products, prioritize growth in our higher take rate geographies, increase the value of our SMB grade services by expanding our financial stack, and refine our pricing and monetization strategies to capture the value we provide to our customers. Total volume was up 9% year-over-year. SMB volume grew 6% year-over-year with volume from SMBs that sell on marketplaces up 4%. Volume from B2B SMBs up 11% and Checkout volume up 46%, all consistent with the outlook we provided during our second quarter call in August. Enterprise payouts volume increased 19% year-over-year, above our expectations, primarily due to a strong demand in key travel routes we serve and the onboarding of a new enterprise customer. Our Q3 take rate of 121 basis points was roughly flat on a year-over-year basis, despite a $6 million headwind from lower interest income. We continue to drive significant expansion in our SMB customer take rate, which increased 12 basis points over the prior year period, and 1 basis point sequentially. Customer funds held by Payoneer increased 17% year-over-year to $7.1 billion, partially offsetting the impact of lower rates on our interest income revenue. We generated interest income of $60 million in the quarter. Customer balances reflect the trust our customers place in our platform and the value they place on the utility we provide. They also represent future revenues that will be realized as customers utilize our AP products. The Payoneer account gives customers the ability to manage balances in multiple currencies and to choose how, when, and in which currencies to use those balances. These are important aspects of the value we provide to customers and our interest income revenue is a direct outcome of this. As of September 30, we had reduced our sensitivity to fluctuations in short-term interest rates in relation to approximately $3.7 billion or roughly 52% of customer funds. This consists of approximately $1.8 billion of assets underlying customer funds that are invested in a portfolio of U.S. 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%. Through these programs, we had secured approximately $120 million of 2026 interest income regardless of moves in short-term interest rates, approximately $80 million to $85 million in 2027 and 2028 and approximately $60 million in 2029. Additional amounts will be locked in based on ongoing reinvestment as the portfolio runs off, and these divisions provide a durable and sustainable revenue stream. We continue to expect that customer balances should broadly grow in line with volumes overtime and that our unhedged balances will predominantly be subject to prevailing short-term interest rates, mainly in the U.S. We will continue to actively manage our hedging programs, while always prioritizing liquidity and security. Total operating expenses of $235 million increased 10%, primarily driven by increases in labor-related expenses, higher transaction costs, incentives and other spend designed to drive card adoption and usage and the effect of our Easylink acquisition in China and our workforce management acquisition. Transaction costs of $42 million increased 12%, the lower growth in revenue, excluding interest income. Transaction costs represented 15.7% of revenue, an increase of approximately 40 basis points from the prior year period, primarily due to lower interest income. Excluding interest income, transaction costs represented 20.1% of revenue, a decrease of around 70 basis points versus that prior year period, despite mix shift towards higher take rate, higher transaction cost products, driven by improved operational efficiency. We see transaction costs as a key aspect of our opportunity to continue to unlock operating leverage. When excluding interest income, transaction costs have been roughly stable over the past few years at approximately 20% of revenue, even as we shift towards higher-yielding products. We are optimizing our transaction cost economics by using our scale to negotiate with our partners by deepening our strategic relationships and partnerships, including those with Stripe and with Mastercard announced in August, by improving the efficiency of our money movement and Treasury operations. And over time, we expect through our ongoing blockchain-related initiatives. As we continue to grow and scale our business, we are confident that the durable, highly profitable nature of our transaction-based revenues should enable us to continue expanding our core business profitability. Sales and marketing expense increased $7 million or 14%, primarily due to higher labor-related costs and increased incentives related to our Card offering. G&A expense increased $6 million or 22%, primarily due to higher labor-related costs, including from our workforce management and Easylink acquisition, higher facilities costs related to our offices in Israel and higher legal and consulting fees, including relating to our license application in India. R&D expense increased $5 million or 15%, primarily due to higher labor-related costs, while other operating expense decreased by $5 million or 10%, primarily due to lower IT and communication costs. Adjusted EBITDA was $71 million, representing a 26% adjusted EBITDA margin in the quarter. We generated $12 million of adjusted EBITDA, excluding interest income. And year-to-date, we have generated approximately $27 million of adjusted EBITDA, excluding interest income, nearly double the amount we generated on a full year basis for 2024. We are unlocking leverage through growth, managing our transaction costs and being disciplined with OpEx. We believe we have a significant opportunity to continue to increase the profitability of our business. Net income was $14 million compared to $42 million in the third quarter of last year. While income before income taxes grew 38% year-over-year, net income in the prior year period included a $19 million income tax benefit, largely derived from a federal tax deduction for 2024 and for the prior year for income earned from foreign customers, and lower foreign tax expense related to stock-based compensation. Basic and diluted earnings per share were both $0.04, down from basic earnings of $0.12 and diluted earnings of $0.11 per share in the prior year period, largely due to the impact in the prior year period of the discrete income tax benefit just noted. We ended the quarter with cash and cash equivalents of $479 million. Our operating cash flows continue to significantly exceed net income, allowing us to continue to invest for profitable growth and to return capital to shareholders. During the quarter, we repurchased approximately 45 million of shares at a weighted average price of $6.73 and as of September 30, had approximately $273 million remaining on our current share repurchase authorization. Turning now to our increased 2025 guidance. We expect total revenue between $1,050 million and $1,070 million, an increase of $10 million at the midpoint relative to the guidance we issued in August. This includes interest income of $235 million and $815 million to $835 million of revenue, excluding interest income. We are increasing our expectations for interest income by $10 million to reflect robust growth in customer funds. In 2025, customer funds have grown significantly in excess of volume and above our expectations at 11% year-over-year in Q1 and 17% for both Q2 and Q3, reflecting the trust and value our customers place in our platform and partially offsetting the impact of lower interest rates. We are reiterating our expectations for revenue, excluding interest income of $815 million to $835 million. This reflects the current macro and trade environment and our view of the range of outcomes that this environment could imply, especially as we enter the holiday spending season. For the fourth quarter, we expect marketplace volumes to be flat to up mid-single digits and B2B volumes to grow mid-teens. For the full year, we expect transaction costs as a percentage of revenue to be approximately 16%, a 50 basis point reduction compared to our prior guide, and a 200 basis point reduction versus the guidance we provided at the beginning of the year. We expect 2025 adjusted OpEx, which represents our guidance for revenue less adjusted EBITDA and transaction cost of approximately $618 million at the midpoint of our adjusted EBITDA guidance range. We are raising our expectations for adjusted EBITDA to be between $270 million and $275 million, representing a 26% margin at the midpoint. While we see a broad range of potential outcomes on the top line, we are focused on what we can control. We expect to continue to deliver growing profitability through optimizing our transaction cost economics and managing OpEx. Excluding interest income, we expect adjusted EBITDA of $38 million at the midpoint, almost 3x the amount generated in 2024. We are making meaningful progress in evolving our business to capture the significant long-term growth opportunity. Behind our strong headline results is a healthier, higher quality and more durable customer portfolio. We are capturing and growing our business with larger customers, improving our risk profile, unlocking robust operating leverage, making strategic investments, generating substantial cash flow and positioning the company to create long-term shareholder value. We are now happy to answer any questions you may have. Operator, please open the line.

[Operator Instructions] Your first question comes from Mayank Tandon from Needham & Company.

Congrats on the quarter. I know you're not going to probably give guidance for '26. But just as you think about the business momentum, John and Bea, I was curious if you could share any sort of insight into what your expectations might be for the sustainability of some of the key metrics around volume, take rate? And also if you could remind us of any sort of seasonal impact that we should factor in as we lay out our quarters for 2026?

Sure, Mayank. So thanks for the question. Look, I think what we were looking to convey in the prepared remarks is really exactly to your point, the sustainability and the durability of the growth we're creating. The business performed very well in the third quarter, very much in line with the commentary that we provided in August. Our full year guidance, which we're raising, as we said, we're raising both revenue and adjusted EBITDA guidance is in line with the medium-term targets we communicated back in 2023, even with what I think everyone would acknowledge is a pretty dynamic macro. So overall, business is performing really well, and performing really well in a sustainable way, right? ARPU has been consistently growing above 20%, for I think, now 5 quarters. We're continuing to deliver SMB take rate expansion from that multifaceted strategy that we outlined. We're really building, in our view, healthier, more durable and sustainable customer portfolio, and it's showing up in the metrics. So overall, look, to your point, we're not giving guidance out to next year, but we see the business really performing well. We see a resilient business, a healthier business with a lot of momentum and opportunity in front of us.

Yes. I would just add to Bea's remarks that the strength in the portfolio as we move upmarket is evident. Those $250,000 a month customers that are growing exceptionally well, 30% of our Q3 revenue overall, 50% of the B2B revenue and the strength of that portfolio and the opportunity there is really bold. And we're going after it, we're focused on it, we believe we have the product for those customers. And as the shape of the portfolio moves upmarket, the profitability dynamics are unlocked in our business. So we feel really good about where we are.

Got it. That's very helpful. And maybe if I could just follow up with a question, John, around sort of your investments in sales capacity. And I ask that in terms of as you diversify the business overtime from China into other markets, as you grow ICPs, as you look to cross-sell, upsell into your base, how is your go-to-market strategy changing, if at all, if you could share any insights into your investments in sales and your overall approach to attacking the market?

Yes. That's a great question and an exciting part of the evolution of Payoneer. The majority of our customers are acquired organically, as you know, right? They come through the application or through our website. And if we get millions of applications annually, so we sift through those to find lookalikes of our best customers. And then alongside of that, are partnerships we're putting in place with resellers, affiliates and others around the globe in the key hubs of activity for the multi-entity entrepreneurs of the globe. So this is, I think, a very exciting engine of our growth looking forward, because it helps us bring in bigger, higher-quality customers. And when you look deep into our portfolio, the volume retention, net revenue retention data of our largest customers is the best in the portfolio. And so moving to focus on acquiring those customers in the hubs around the world where they exist, gives us, I think, a leg up in the market. And we have obviously select paid acquisition and lead generation underway, but we are a loved and well-known brand that's trusted by partners. The brand scores we get are exceptionally good. And when we host events, hundreds or thousands of people come to learn about what Payoneer has to offer and why we're helping people bridge their ambition to their achievement. So we feel good about the go-to-market effort. We're focused on not total number of customers, but the quality of customers. And we're moving the portfolio deliberately upmarket. You saw in our results the 10,000-plus customers, revenue was up 18%. Volume was up 7% despite the count coming down a bit. And that is deliberate effort on our part as we monetize intra-network volumes. We're $4 million a quarter of monetization there, which is the beginning of something we think very exciting and exit customers that don't fit our profitability and growth targets.

Your next question comes from the line of Sanjay Sakhrani with KBW.

John, Bea you guys talked about a dynamic macro. Maybe you could just drill down a little bit on what you're seeing with the SMBs on your platform? And how they're reacting to all these day-to-day fluctuations in policy?

Yes. Thanks, Sanjay, for the question. Look, I think in terms of the Q3 performance of the business, which as we said, has been robust, it's very much in line not only with the medium-term targets, but with the commentary we shared back in August. Volume consistent with that commentary, revenue performance consistent with that commentary. It's obviously difficult to quantify sort of what the tariff impact is and all of those moving parts from the volatile nature of the tariffs to how timing around shipping and stocking can impact. But we're likely seeing an impact on marketplace volumes from tariffs. Certainly, our discussions with our customers in China suggests that there's an impact. Obviously, those customers are resilient, as we pointed out in the past, and they're deploying all manner of strategies to really sort of continue to grow their business, whether that's logistic strategies, globalization strategies, pricing and so on. So there are always many factors. Look, in October, we saw what I would call a modest softening in volumes versus our expectations. Obviously, October is not at all a good proxy for the e-com heavy, China heavy e-com season that's coming in November and December. Golden Week is in October. Obviously, that e-com holiday spending season is both China heavy and goods heavy. So we're seeing those tariff impacts get absorbed through the portfolio. It's in line, as I say, with sort of what we expected in Q3. And the guidance we've laid out for Q4 really sort of incorporates that broad range of outcomes from those potential sort of shifts and dislocations that we're seeing sort of, frankly, across trade routes and supply routes and so on.

Okay. Helpful. And then, John, you talked about stablecoins and its availability on your platform in 2026. I'm just curious, like are your customers asking you for this technology? And maybe you could just talk a little bit about the evolution of your revenue model to the extent there is any if you provide this technology?

Sure. I'll add some dimension and then Bea, please jump in. We see stablecoins as a really interesting long-term opportunity for Payoneer, and we're exploring it with intent. And similar to how we built the financial stack on our network of bank and payment providers over the last 20 years to facilitate the movement of money around the world, we really believe that tokenized assets and the distributed ledger technology could be another component of what we've already put in place and in the market. It's really the core essence of the value prop we provide to those entrepreneurs, is being able to operate in whatever currency they want to use to run their business. But we all know that you can't buy a hammer in Ho Chi Minh City with an Argentinian peso today. So we need the world -- for the stablecoin technology and those rails to be turned into mainstream B2B use cases, companies like Payoneer are purpose-built to turn tradable assets into commercial assets. And we feel very excited about what our role in that can be. So we expect adoption corridors, use corridors, specific use cases to develop as our customers explore the impact in their own businesses and how it can both remove payment friction and create opportunity for them. If we look at over 5 years, I'm excited about what that traction can mean and where Payoneer sits. I think people misunderstand how valuable the Payoneer platform is to turning the promise of stablecoins into a reality, and we are in a very disciplined, organized way pursuing it. But Bea, if you'd like to add, go ahead.

Yes. I mean I think yes to all of that, I'd add a couple of sort of additional points. In terms of adoption, use case demand, I think there's sort of multiple lenses. One of them is certainly sort of a regional lens, as we think of regions that have potentially high inflation and stability locally. And who today use Payoneer and other such platforms to basically dollarize, right, to hold dollars as a hedge against local instability. The ability to hold dollars in a different or tokenized asset or in a different store of value is, by definition, valuable to them as well. So I think the stablecoin opportunity dovetails really nicely with the core utility or one of the core utilities that we already provide. And against the broader payment scheme sort of landscape as we see really more of a fragmented payment scheme, regional players, regional payment schemes coming up, increasingly mobile-first local schemes. Really, the name of the game in the cross-border space is to neatly, cleanly and efficiently orchestrate across all of those payment schemes, and stores of value like stablecoin are one such scheme, right? So we view it as very sort of tightly coupled to our money movement evolution and strategy overall. And we're seeing sort of use cases develop as customers, to John's point, really are able to explore the real-time benefits and programmability potentially around their own use cases and business in the corridors where it begins to become available.

Your next question comes from the line of Trevor Williams with Jefferies.

This is [ Ryan ] on for Trevor. Just wanted to ask on take rate. It looks like that's been pretty healthy here. Just wanted to see what you guys think about the sustainability of that take rate expansion, kind of break down what the core drivers have been in that strength.

Yes. Thanks for the question, Ryan. Look, we appreciate the call out, right. I think of the many metrics where we're seeing really sustainable performance, it's in the take rate dynamics, right. We've demonstrated the ability to continue to drive that take rate expansion in our SMB business. And excluding interest income, we've grown it by 12 basis points in the quarter, right. And there are numerous levers within that and numerous inputs. One is certainly the growth of our B2B business, which is outpacing the growth of the business as a whole. As John pointed out in his prepared remarks, that B2B revenue is about 1/3 now of our core revenue, and it grew 27%, right. So that's driving some of that uplift. Beyond that, product adoption, right, as we continue to drive adoption of our Card product, of Checkout, of our invoicing service within B2B of our workforce management product, that's also providing uplift. And then ultimately, also pricing, right, as we continue to refine and optimize our pricing strategy. So we're seeing take rate expansion across our business lines from our marketplace business to our B2B business. In B2B, look, we'll see some moderating of that increase going into Q4 as we lap workforce management, but still comfortably ahead of that volume across the book and really demonstrating that expanding value that we're providing to our customers and the take rate expansion that goes along with that.

Understood. That all makes sense. And then just as a follow-up on B2B volume. I think the prior expectation had been to get to high teens B2B volume growth by 4Q. Just wanted to see if that was still the expectation. I mean, if so, I guess, what is the level of visibility? And what are the main drivers into that acceleration into 4Q?

Thanks for the question. That is still the expectation. So the B2B business, as I said, performed in line in Q3. We grew volume 11%. We grew revenue 27%. Coming into the back half of the year, we expect that volume to increase mid-teens, and we expect the revenue to increase somewhere between 20% and 25%. So for the full year, the B2B business is going to generate approximately 25% year-over-year revenue growth. That's really robust growth in a sustainable and growing part of our business. We have good visibility into that business. We obviously are, as John has noted, really moving upmarket and bringing in, acquiring and serving larger customers with more predictable business models. So we feel good about how that business is performing. We're making investments in that business, both in the go-to-market motions that serve it, as John has noted, with partners and affiliates, in the product roadmap that really sort of delivers that SMB-grade experience. And in the service model to make sure that we are driving the improving retention that we're seeing. So we feel really good about that business, it's moving upmarket, it's healthier, it's more profitable, and it's growing really nicely.

Your next question comes from Nate Svensson with Deutsche Bank.

Really nice to see the continued progress here. I guess, first, I wanted to ask on the growth in customer funds. Obviously, been really impressive, 2 quarters of 17% growth. And I think you've been pretty clear that this is a core part of the Payoneer value proposition. It sounded like going forward, you think balances will grow in line with overall volumes, but they've clearly been growing above that recently. So I'm maybe just wondering how much more room we have to run in this environment where maybe balances can continue to grow faster than volumes? And then qualitatively, I know you talked about things like trust in the platform, but maybe you can talk more specifically about what you're doing to drive or incentivize clients to keep more funds on the platform?

Yes. I appreciate the question, Nate. So look, historically, we've certainly called out that our expectation over sort of a long enough time horizon is that we're able to grow balances in line with volume into the platform. We've seen outperformance this year. There's likely many factors from some of that macro volatility, especially around the China corridors as well as relative weakness and volatility in the dollar that can impact kind of near-term usage behavior. So I think we're seeing sort of some of that in the kind of cyclicality that you see. Obviously, we love seeing that number grow, right, not only because it demonstrates to your point, the trust, but because it is future revenues in effect when the customers utilize those balances using one of our AP products, that's revenue that comes to us in future periods, future quarters. So we like to see this growth and obviously, we monetize it in the short term. What are we doing? Look, really, it's very much aligned to some of the themes we've shared. One, as we move upmarket and provide more utility, customers are increasingly using us as their sort of broad-based bank replacement for want of a better word, to hold multiple currencies across the sort of multiple entities to manage that. And they're keeping their funds as we see greater adoption of those sorts of products. They're keeping their funds on the platform for longer, and we will tend to see larger balances, not only corresponding to those larger customers, but as we see greater adoption of those products. So overall, the inputs to that growing balance in addition to volume are moving upmarket towards those larger customers and adding more utility such that those customers really keep balances in order to utilize the cross-border AP capabilities that we're providing.

Yes, I think Bea absolutely nailed it, but I would just add one point, which is that the perception of Payoneer has been it's an AR company. We're an AR company. And I think that's wrong. We are as much an AP company as we are an AR company today. We've made that transition really effectively. The Card spend growing so nicely, the AP usage of -- the product attach of multiple AP products with our largest customers. And that pulls through, we see the net revenue retention of those customers really is exceptional. And we are seeing customers take funds out of their local banks to put them into their Payoneer account, so that they can use our AP products. And that -- as that continues, the correlation between AR volume and total balances become -- spreads even wider. And so we would anticipate overtime that as we continue to drive excellent AP products and great cross-sell of those products, even more balanced activity.

Super detail. I really appreciate that. For the follow-up, I did want to ask about trends in the Checkout business and maybe some future outlook there. Obviously, still growing really nicely in the high 40s, I think was in line with what you told us last quarter. Obviously, you couldn't sustain the levels of growth you had been seeing indefinitely, but would love to hear about maybe some of the tailwinds or headwinds in that business over the last 90 days. And then I think moving forward, I think historically, that business had maybe been more focused on sellers in particular geographies like Hong Kong. So I was just hoping you could talk about the growth or strategic initiatives you have lined up to expand that business in the future, whether that's internal investments, right partnership, anything else?

Yes. So let's -- first of all, thank you for asking. I think the Checkout team has done an awesome job at Payoneer, and so really proud of their efforts. We think that as Checkout transitions, we announced the Stripe partnership as we transition from our owned and operated solution to the partnership we have with Stripe, it will drive much better cost and yield dynamics in this business. But at the same time, top line growth will moderate in Q4 and into 2026 as we migrate there. What's most important about the Checkout business is that we provide a comprehensive solution for our customers for all of their GMV that they're doing globally, either with selling on a marketplace, selling B2B or selling direct-to-consumer, they're able to aggregate that AR into their Payoneer account and then obviously use the AP products that we were just sharing and so excited about. We have some good traction with APAC sellers. particularly in India and South Korea following the migration to Stripe, which really validates the core thesis we have, which was to switch to a great partner with solid technology that lets us globalize this franchise. And as you note, the growth rates year-over-year may be more modest, but the actual dollars in revenue will be more significant as we look out.

Your next question comes from Darrin Peller with Wolfe Research.

This is Daniel Krebs on for Darrin Peller. I wanted to ask about the focus on larger ICPs, and we're seeing ARPU that is rising very nicely. But I'm still struggling a bit to reconcile that goal with the large ICP customer growth numbers in 2025. And maybe a more direct way to ask this is, what percentage of those 47,000 large ICPs are not high quality and a focus for you?

Yes. Great question, and thanks for asking. I think that if you look at the 10,000 plus cohort, let's actually go back. We introduced the ICP framework a couple of years ago, largely to dimensionalize the size of the portfolio at the long tail that was unprofitable. And we are pleased that the long tail of Payoneer is solidly profitable now. And it was a definition that was, let's call it a broad pain push way of looking at customers, very small, sort of small and bigger. But it is less relevant a way to look at Payoneer overall and certainly how we're operating the business going forward. We are very focused on retaining, serving, adding high-value customers that are multi-entity that have the profitability and usage dynamics that mirrors our best customers, and that's where we're shifting our focus pretty intently. And we've discussed this a number of times as we've talked about the shape of the portfolio, how valuable it is for us to have product market fit at the top end. Those $250,000 a month customers are 30% of Q3 revenue, 50% of B2B revenue, more volume, more AP usage, and the best net revenue retention we have. Specifically, I would anticipate that 10,000-plus ICP count continues to decline as we scrub the portfolio, manage the -- who we add and who we retain and monetize the intra-network payments. The $4 million a quarter for those intra-network payments is new disclosure, and I think an exciting statement about how we are really fitting our pricing and our monetization to the needs of our customers and the profitability dynamics that we have. So we will continue to drive our focus upmarket, because that's the best way to deliver the profitable growth we're committed to.

Your next question comes from Pete Christiansen with Citi.

Great to see rising solutions engagement, take rate expansion, and mix shift drive strong incremental margin gains quarter-over-quarter. Nice results there. I had 2 questions. First, I was wondering if you can give us an update on the Skuad acquisition you did last year and how that -- how you see that scaling over the platform and potentially driving new areas -- new vectors of growth? And then my second question back on the stablecoin topic, we couldn't agree with you more multicurrency wallet providers are certainly key enablers of stablecoins. Just curious from what you're seeing on the infrastructure side, whether it be perhaps things like the G7 stablecoin that's been proposed, SWIFT potentially working on so I think circles, Arc blockchain development. Just wondering if you're seeing any of these infrastructure developments as key events that could help improve or drive demand for Payoneer's users to increasingly adopt stablecoins?

Sounds good. I'll take the workforce management. Bea will grab the stablecoin. So in workforce management, it's really nice to see that secular tailwind that are driving the employer of record solution growth, right. The more and more companies around the world are recognizing the 7.5 billion people on the planet, let's employ the best at the best price, and use companies like Payoneer to manage the complexity of the compliance heavy HR landscape to handle both managing those people and getting them paid. So our growth is really solid there. We're pleased with the progress. And obviously, we've seen the news around H-1B visas. And I think that bodes really well as it relates to the -- our EOR solution and what U.S. businesses want to do as they globalize their workforces. And then when you think about our workforce management business, it really expands our ecosystem of AP capabilities and broadens the core B2B value prop. So it's a small franchise for us, but it's growing really nicely. The contribution is solid. The team is great and full of entrepreneurs that are hell bent on grabbing market share there. So we feel really good about the traction as we continue to step into that space in a deliberate focused way that's delivering take rate expansion in our B2B business, solid retention for us and an additional value prop for us to offer our customers. It's the early days, but these are good days for that business.

Yes. And look, on the stablecoin, look, it's super exciting, right? We see all of the items you mentioned, lots of innovation in the space. I think the regulatory clarity that the GENIUS Act brought was really helpful, obviously, in that sense, has provided real tailwinds to some of this innovation. And I think we can expect to see a broad range of players in the space, both innovating around the infrastructure and beginning to integrate elements of that infrastructure into legacy financial systems, into other payment schemes, into payment orchestration platforms in ways small and big, right. We've done some of that already today. We've integrated some of Citibank's blockchain-based tokenized deposit technology to really enable some of those treasury management used cases that can benefit a business like ours, right. So we're going to continue to innovate in that space, as John said in his prepared remarks, really evolving our money movement capabilities to provide that used case or to provide those capabilities to our customers. And ultimately, we see the value that a platform like ours brings to this is really in seamlessly connecting those digital currencies, those stores of value with the legacy payment rails, the legacy fiat rails and allowing customers whatever their used case is to be able to seamlessly move between those stores of value and those local rails to enable what they need in order to grow their business to transact and so on. And we're very well positioned given our best-in-class last mile infrastructure to be a part of solving for that challenge. So look, in short, we think it's super exciting. We follow the space carefully. We talk to a lot of players in the space, and we see it as an opportunity for continued innovation in our business and in general.

And your last question comes from Mike Grondahl with Northland Securities.

Two questions. One, you guys have done a lot on OpEx and margins. Anything that you're still targeting there for improvement? And then secondly, John, what are your 2 priorities going into year-end in 2026?

Sure. So let me take. And hey Mike how are you doing? Thanks for the question. So yes, look, we're really proud of the progress we have made in unlocking core profitability, right, meaning profitability, excluding interest income. At the midpoint, it will be up 3x versus last year, and we've showed continued progress in unlocking that profitability, obviously, from growing the business organically and otherwise, but also from driving improvements. And we see -- and we called some of that out in the prepared remarks. We see continued runway both from improving transaction revenue economics in general. We talked at the last call around the pricing power we have, the strategic relationships we have with payment players in the space like Mastercard, like Stripe to continue to evolve the economics and evolve the profit dynamics of that business. And then on the OpEx line, lots of opportunity in that space to continue to align our service model towards those larger customers that we're serving to drive increased automation, to use AI within our back office, within our operations teams, within our risk management infrastructure to really continue to unlock profitability in that business going forward. So we see a lot of runway in short.

Yes. And Mike, I would just say we are intensely determined to deliver the shareholder value that we are committed to creating. And we think we do that by moving our business upmarket, focusing on those multi-entity customers that are underserved by anybody else on the planet that we have the ability to deliver a high amount of value for. We have a brand that's trusted, the licenses that we need, the innovation happening in our money movement organization and a broad set of AP products that we're cross-selling effectively to those customers. So the shape of our customer portfolio gets stronger and stronger, which drives the shape of our P&L to be more and more profitable. And doing those 2 things are really what motivates us every day to fight and continue to build what is an exceptional platform, a kickass team and a big opportunity. So we're really -- we're fired up about doing that through the end of the year. But I don't think that changes at year-end. It just motivates us to continue to execute at a really high level.

That concludes our question-and-answer session. I'd like to turn the conference back over to John Caplan, CEO, for closing remarks.

Thanks everybody for your questions and participation today. We delivered record results in the third quarter, and we are executing with the kind of intense focus and discipline that great teams and great management teams come together to do. I want to thank our team all over the world for their energy, their drive, their commitment to collaboration and delivering for our customers. We're excited about the opportunities ahead, and really look forward to speaking to everyone again in February as we talk about the future.