Payoneer Global Inc

NASDAQ:PAYO

Earnings Call Analysis

Payoneer Reports Record Growth and Raises 2024 Revenue Guidance

In Q3 2024, Payoneer achieved record results with revenue up 19% year-over-year, and 24% excluding interest income. Total volume grew by 25%, spurred by strong B2B growth, particularly a remarkable 57% increase. Adjusted EBITDA reached $69 million, a 28% margin. The company raised its full-year revenue guidance to $950-$960 million, with interest income expected at $250 million. Payoneer forecasts mid-teens revenue growth for Q4, while maintaining a commitment to disciplined cost management and profitable growth, positioning itself strongly in the cross-border payments market.

Strong Financial Performance in Q3 2024

In the third quarter of 2024, Payoneer reported a remarkable performance, achieving record-breaking volume and revenue figures. Total volume grew by 25%, driven largely by the robust expansion of their B2B services, which saw a dramatic 57% increase. The company's revenue rose 19% year-over-year to $248 million, with revenue excluding interest income climbing by 24%. This growth has been attributed to effective strategic initiatives, increased customer base in the SMB sector, and a consistent focus on large, high-value clients.

Profitability and Operating Margins

Payoneer's adjusted EBITDA for Q3 reached $69 million, representing an impressive margin of 28%. This reflects a disciplined approach to operational costs amidst rising transaction expenses, which increased in line with the higher volume processed. Notably, net income surged to $42 million from $13 million a year prior, further solidifying the company's status as a profitable high-growth firm.

Raising Guidance for 2024

In light of the strong third quarter results, Payoneer has raised its full-year guidance for revenue and adjusted EBITDA by $30 million. The company projects revenue to fall between $950 million and $960 million for the year, including $700 million to $710 million from core operations, which signifies a year-over-year growth rate of approximately 17%. This is a significant increase from last year's growth rate and suggests a bullish outlook for the future.

Focus on B2B and Strategic Initiatives

The B2B segment continues to be a pivotal growth driver for Payoneer. The company has emphasized its dedication to capturing a substantial share of the multitrillion-dollar cross-border B2B market, enhancing customer acquisition strategies specifically targeting larger clients, and optimizing service offerings. For example, the company reported substantial growth in its merchant services and enterprise payout sectors, reflecting the growing adoption of its financial solutions.

Cash Flow Management and Stock Buybacks

As of Q3, Payoneer held cash and cash equivalents totaling $534 million. The company has actively engaged in stock buybacks, repurchasing $119 million worth of shares year-to-date at an average price of $5.16, exceeding its target for the year. This move indicates strong capital management and a commitment to returning value to shareholders.

Challenges Ahead and Future Expectations

Despite positive momentum, Payoneer expects a deceleration in revenue growth in Q4 2024, projecting growth in the mid-teens. The anticipated slowdown is in line with seasonal trends and reflects tougher comparisons to a stronger holiday season experienced in 2023. The company maintains its long-term target of mid-teens growth moving into 2025. Additionally, Payoneer has initiated plans to hedge against decreasing interest rates and fluctuations in customer funds to mitigate potential impacts on profitability.

Innovations and Product Expansion

Payoneer is working on enhancing its product suite, launching new accounts aimed at different customer segments. The introduction of a Pro account and light account is expected to boost ARPU (Average Revenue Per User), which already grew by 20% in Q3. Moreover, the integration of the acquired company Skuad is underway, aiming to expand capabilities and offer a more comprehensive solution for cross-border payment needs.

Conclusion: A Compelling Investment Case

In summary, Payoneer’s recent earnings call highlights its strong financial performance, strategic growth initiatives, and commitment to profitability. With a solid B2B foundation and an innovative product roadmap, the company is well-positioned to capture significant future growth in the global SMB space. However, investors should stay vigilant regarding the anticipated slowdown in growth and evolving market conditions.

Earnings Call Transcript 2024-Q3

[Operator]

Good morning. Thank you for standing by. Welcome to Payoneer Third Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Michelle Wang, Payoneer's, VP of Investor Relations. Please go ahead.

[Michelle Wang, executive]

Thank you, operator. With me on today's call are Payoneer's Chief Executive Officer, John Caplan; and Payoneer's Chief Financial Officer, B Ordonez. Before we begin, I'd like to remind you that today's call may contain forward-looking statements which are subject to risks and uncertainties. For more information, please refer to our filings with the SEC, which are available in the Investor Relations section of payoneer.com. Actual results may differ materially from any forward-looking statements we make today. These forward-looking statements speak only as of today, and the company does not assume any obligation or intent to update them, except as required by law.

In addition, today's call may include non-GAAP measures. These measures should be considered in addition to and not instead of GAAP financial measures. Reconciliation to the nearest GAAP measure can be found in today's earnings press release, which is available on our website. Additionally, please note we have posted an earnings presentation supplement alongside our earnings press release on investor.payoneer.com. All comparisons made on today's call are on a year-over-year basis, unless otherwise noted. With that, I'd like to turn the call over to John to begin.

[John Caplan, executive]

Good morning, everyone, and thank you for joining us today. Payoneer once again delivered a record-breaking quarter in both volume and revenue. We are systematically building a full-service financial platform for the cross-border needs of small and medium-sized businesses around the globe. We are committed and making significant progress. In 2024, Payoneer has entered a meaningful second curve of profitable growth as evidenced by our financial performance over the past 3 quarters. Our momentum is no accident. It's the result of a strong management team, effective strategic capital allocation and the disciplined execution of our global team. who are all aligned on driving sustainable and profitable growth.

In Q3, we delivered exceptional results. ICP growth increased for the fourth consecutive quarter, up 11% with strength in APAC, LatAm and China. ARPU, excluding interest income, increased by 20%, marking the fifth straight quarter of accelerating growth. We're onboarding larger customers, cross-selling products like cards and optimizing our pricing strategy. Total volume growth accelerated for a seventh consecutive quarter to 25%. We drove strong performance across our business, including with our SMBs that sell on marketplaces, B2B, merchant services and enterprise payouts. Total revenue grew by 19%. And when excluding interest income, revenue rose by 24% highlighting accelerating momentum versus the first half of the year.

Adjusted EBITDA reached $69 million with a 28% margin, underscoring our operational discipline. Payoneer is a profitable, high-growth company. Since the beginning of 2023 and excluding interest income, we have accelerated revenue growth from low single digits to 24% in Q3. We have also turned adjusted EBITDA net of interest income, positive for the first 3 quarters of this year. Our B2B business is the growth engine driving Payoneer forward as we serve and capture the multitrillion dollar cross-border B2B market. In Q3, B2B volume grew by 57%. We have generated 44% B2B growth for the first 3 quarters of 2024 compared to single-digit growth in 2023. B2B represents nearly 1/4 of our Q3 revenue, excluding interest income and contributed to over 40% of the year-over-year growth in revenue, excluding interest income. Within our B2B business, we're acquiring larger customers and expanding average transaction sizes. B2B volume growth came from our successful acquisition of larger SMBs as we realigned our go-to-market strategy, focused on high-potential clients and amplified our affiliate and partner network.

Let's look at a few examples of how our B2B customers are using Payoneer, a travel management company in Asia, operating across multiple countries and currencies relies on Payoneer to streamline treasury functions. This is simplifying their accounts receivable processes improving efficiency and reducing costs. Our virtual assistant business process outsourcer, serving U.S. clients with contractors in the Philippines. They centralize millions of dollars in monthly payments into their Payoneer account, consolidating collections and payouts without the need for local bank accounts. These are just 2 of the millions of SMBs worldwide that have cross-border financial needs, but traditional and local banks have underserved. Payoneer is stepping in to fill this gap faster, more efficiently and with greater focus than traditional legacy institutions. We are empowering businesses to manage their global multicurrency payments seamlessly and to scale worldwide.

Our customer portfolio continues to evolve with ICPs now comprising 28% of our overall base up from 25% at the start of 2023. And within our ICPs, we continue to sharpen our focus on larger customers and those with more complex needs 10,000-plus ICPs represent approximately 85% of our SMB volume, and we have grown both volume and revenue from 10,000-plus ICPs by over 25% in Q3 of this year. We're focused on a critical and underserved part of the payments ecosystem, SMBs, cross-border trade, B2B transaction and emerging markets. We are positioned to capture this multitrillion dollar opportunity with our regulatory infrastructure, banking partnerships, brand strength, and strategic alliances, all of which is supported by a strong culture of collaboration, execution and service.

Our success hinges on our relentless daily execution, expansion of our financial stack, modernization of our platform and focus on our compliance and regulatory moat. We will also work to build, partner with or acquire the products and services we need to drive acquisition, grow ARPU and improve stickiness and retention. As we do so, we will continuously review our products and programs to ensure they align with our long-term goals. We expect this will enable us to allocate capital in the most effective way to generate value over the long term for our shareholders. We believe the road ahead holds even greater value creation. Small businesses drive the global economy, creating jobs and enabling innovation. For these businesses, exports are a growth engine. Payoneer helping SMBs, especially in emerging markets, tap into the global economy by simplifying cross-border financial management. We empower these SMBs to reach new markets, reach new customers, engage new suppliers and enable them to expand, thrive and contribute to a growing global economy.

At Payoneer, trade is more than just flows of money. It's a catalyst for growth, collaboration, opportunity and prosperity. Payoneer proud to support SMBs and foster economic growth worldwide. All of this is possible. All of our momentum is because of our team's relentless energy, disciplined execution and dedication to our customers. They are the driving force behind our pursuit of the profitable growth opportunities that lie ahead. With that, I'll pass it over to Bea to dive deeper into our specific financial results and increased guidance for 2024. Thank you.

[Bea Ordonez, executive]

Thank you, John, and thank you to everyone for joining us. We continued our strong momentum in the third quarter and generated record quarterly volume, record quarterly revenue and strong profitability. We are building the financial stack of choice for SMBs looking to grow globally, and our financial results demonstrate we are winning share in this multitrillion dollar market. We grew third quarter volume by 25% and which drove revenue, excluding interest income growth of 24%. We are delivering top line growth alongside continued expense discipline and achieved a 28% adjusted EBITDA margin. Notably, we delivered another consecutive quarter of positive adjusted EBITDA even when you exclude interest income. Record quarterly revenue of $248 million was up 19% and growth was driven by accelerating B2B growth, strong marketplace growth, continued adoption of our card product, the impact of our pricing initiatives and an 11% increase in our ICP Revenue growth also continues to benefit from higher interest income, largely a result of a 13% increase in customer funds held on our platform.

Volume growth of 25% reflected broad-based strength across the platform, 17% growth from SMBs that sell on marketplaces reflected continued robust volume growth from our large Chinese e-com sellers supported by stable macro conditions and consumer spending trends on the large marketplaces our customers sell on. Our B2B business delivered 57% volume growth accelerating from 40% growth last quarter. As John highlighted, our B2B results were a result of continued strong customer acquisition and benefited from our focus on larger B2B customers. We generated 142% volume growth in Merchant Services and 29% volume growth in enterprise payouts.

Our Q3 take rate of 122 basis points decreased 5 basis points, primarily due to the impact of slowing interest income growth. Our SMB customer take rate of 109 basis points increased 2 basis points, driven by accelerating growth in our B2B business, continued penetration of our card offering and the impact of our pricing initiatives. Customer funds held by Payoneer increased 13% to $6.1 billion. Customers value on multicurrency capabilities and the ability to hold balances in stable currencies such as the U.S. dollar is a core value proposition. We continue to steadily grow customer funds, which drove an 8% increase in our interest income to $65 million for Q3, even as average interest rates were relatively flat year-over-year. We are taking active steps to reduce our sensitivity to interest rate movements as the U.S. Federal Reserve begins its rate-cutting cycle. We have continued to execute on programs to mitigate our exposure to interest rate volatility. And as of November 1, we have approximately 1/3 of our customer funds invested in U.S. treasury bonds and term bank deposits with a weighted average duration of approximately 2 years and an average yield of approximately 4.5%. We have also purchased derivatives on approximately 1/3 of our customer funds, providing a floor against interest rate declines below 3%. These instruments provide a minimum interest revenue stream on the principal covered even in the event of a decrease in short-term interest rates below 3% over the next 3 to 5 years.

As of November 1, the remaining 1/3 of customer funds are floating and subject predominantly to prevailing short-term interest rates in the U.S. We will continue to actively and prudently manage this revenue stream and expect to fine-tune our programs based on our ongoing assessment of market conditions. Total operating expenses of $213 million were up 19%, driven primarily by higher transaction costs from the 25% increase in volume in the quarter and increased R&D, depreciation and amortization and M&A-related expenses. Transaction costs of $38 million increased 25%, in line with volume growth. The increase was driven primarily by higher banking processor fees, which increased 20% and higher chargebacks and operational losses. Transaction costs represented 15.3% of revenue a 70 basis point increase from the prior year period.

Sales and marketing expense increased $4 million or 7%, driven by higher spend primarily related to incentive programs to drive card growth. G&A expense was up $5 million or 18%, primarily due to higher labor and consulting costs as well as M&A-related expenses, which are excluded from our adjusted results. Other operating expense increased $5 million or 11%, driven by increased IT costs and regulatory reserves, partially offset by lower labor and consulting expense. R&D expense was up $8 million or 28%, reflecting higher labor-related costs from higher headcount, which is up over 20%. Approximately 1/3 of the increased headcount is related to our acquisition of Skuad in August. Adjusted EBITDA of $69 million was up 19% and and reflected a 28% adjusted EBITDA margin. Net income was $42 million compared to $13 million in Q3 of last year.

The year-over-year increase reflects operating results as well as a $19 million tax benefit largely derived from a deduction on the U.S. tax law income earned from foreign customers and lower foreign tax expense related to stock-based compensation. Q3 basic earnings per share was $0.12 and diluted earnings per share was $0.11. We ended the quarter with cash and cash equivalents of $534 million. Our acquisition of Skuad represented a use of cash of approximately $61 million in the third quarter. We also repurchased and redeemed our outstanding public warrants for approximately $21 million. And finally, we repurchased [indiscernible] million of shares during the quarter, which was lower sequentially as we had to pull share repurchases during the warrant tender period.

For the first 9 months of 2024, we have repurchased a total of $119 million worth of shares at a weighted average price of $5.16 per share. This is in excess of our target of doubling our share repurchases in 2024 when compared to 2023. As a reminder, we continue to work towards the closing of our acquisition of a licensed Chinese payment service provider, which is subject to regulatory approval and customary closing conditions. We anticipate closing the acquisition in the first half of 2025.

Moving now to our 2024 guidance. We are raising our guidance for both revenue and adjusted EBITDA by $30 million to reflect our strong third quarter results and continued momentum heading into the final quarter of the year. For the full year, we expect revenues to be between $950 million and $960 million. This includes revenue, excluding interest income of $700 million to $710 million and $250 million of interest income for the year. We are raising our expectations for revenue, excluding interest income by $20 million, which implies full year growth of approximately 17% at the midpoint. This is more than triple the growth rate of 2023 and ahead of the mid-teens target we set at our Investor Day. We continue to expect fourth quarter revenues excluding interest to grow mid-teens and believe this is an appropriate exit run rate as we look to 2025.

We remain committed to delivering on our medium-term target of mid-teens growth next year. We are increasing our interest income revenue expectations by $10 million for the year to $250 million. This reflects third quarter outperformance and our latest expectations on interest rates and balanced growth. As we look to 2025, we'd expect our interest income to decline year-over-year. The market currently expects average rates to come down from over 5% in 2024 to approximately 3.7% in 2025. We'd expect to partially offset the impact of lower rates with balanced growth and with our program to extend the duration of our customer funds. We expect transaction costs as a percentage of revenue to be approximately 16% for the year versus our prior expectation of 16.5%. This implies a rate of 18.3% for the fourth quarter, stepping up from the first 3 quarters of the year due to both seasonality and including related to our merchant services business as well as the continued mix shift more broadly towards higher take rate but also higher transaction cost business lines and products.

Given these business dynamics as well as lower interest income expectations for 2025, we'd expect our fourth quarter transaction costs as a percentage of revenue to be an appropriate exit run rate heading into 2025. We are increasing our adjusted EBITDA guidance by $30 million to $255 million to $265 million. This represents an adjusted EBITDA margin of approximately 27% at the midpoint for the full year, also ahead of our medium-term targets. Our guidance for cash OpEx plus anticipated transaction cost remains unchanged at approximately $540 million. Cash OpEx represents our guidance for revenue less adjusted EBITDA.

Our third quarter performance demonstrates strong execution of our strategy, which centers on growing and retaining ICPs, boosting adoption of our financial solutions and investing in our financial stack to drive both top line growth and improved operational efficiency. We remain committed to driving innovation and delivering long-term value for our customers, shareholders and employees. We are now happy to answer any questions you may have. Operator, please open the line.

[Operator]

[Operator Instructions]

Our first question today comes from the line of Sanjay Sakhrani with KBW. Sanjay, please go ahead.

[Sanjay Sakhrani, analyst]

So the B2B SMB trends continue to show pretty strong trends this year. I know comps are helping at the margins, but what surprised you the most to the upside as we progress through the year?

[John Caplan, executive]

Thanks for the question. And we've had a tremendous performance by the team really across the company on B2B. If we look at the last 5 quarters, Q2 2023 was a negative year-over-year 2% quarter. Q2 of 2024 was a 40% growth quarter and Q3 of 2024 was a 57% growth quarter. Every region in the company exceeded our 25% B2B volume growth target in the third quarter. And I think the acceleration really is grounded in or the strategic initiatives the company has taken, targeted acquisition, expansion into new verticals and improvements in our customer experience across the Board. When I look at the product market fit we have for both goods businesses, particularly in China and services companies globally in LatAm, APAC, EMEA and Europe, we are seeing really solid penetration, particularly of larger ICPs, those even greater than $250,000 a month in average volume. And we're really seeing solid and strong performance across the Board.

We had guided at the beginning of the year to 25% growth for the B2B business which was, let's call it, brave at the time we made that statement. We delivered solid growth. We upped that guidance to 30% and -- and we have confidence that our B2B business will continue to grow faster than the overall business and is a really massive long-term opportunity that we are in the position to capture globally. So we feel confident in where we are proud of the execution of the team and believe we're at the beginning of the growth curve of our B2B business.

[Sanjay Sakhrani, analyst]

It has been great execution. And I guess I have a follow-up for me, maybe 2 sort of model questions. You're forecasting a deceleration in 4Q in revenues ex float. Could you just talk about those underlying assumptions? And then the gross profit outlook implies transaction costs will be higher in 4Q. Maybe you could just talk about what's driving that step up. I know there's some seasonality there, but this seems a little bit more than that.

[Bea Ordonez, executive]

No, thanks for the question, Sanjay. Yes, look, as you're calling out our guidance for '24, which again implies a 20% year-over-year normalized core revenue growth at the midpoint, does imply a step down on deceleration in Q4 from roughly 22% core revenue growth year-to-date to mid-teens. Now look, that's super consistent with everything we've said throughout the year in terms of the exit rate that we were looking to hit and very much in line with the medium-term targets that we set at Investor Day back in September of 2023. We think, as we said on the call that it's an appropriate exit run rate as we head into 2025, again, aligned with those medium-term targets. But we're going to continue to call out that we think prudence is appropriate as we sit here this continued macro uncertainty, including, of course, from the U.S. election as well as broader geopolitical tensions, and that could drive some softening in consumer spending in the last quarter of the year.

And as you called out really on your question around B2B, we do have tougher comps as we head into Q4. You'll recall that in 2023, we saw actually a pretty strong holiday season from an e-comm perspective. But look, overall, mid-teens we're really excited to have outperformed year-to-date. Mid-teens is a really strong, robust performance in Q4. There is certainly room to outperform if the macro remains stable and robust as it has today. And October has remained in line, right? So that's sort of how we're seeing the quarter playing out.

To your question on the acceleration, look, again, we've been proactively calling out that step-up in transaction costs. Certainly, we see a seasonal step up generally speaking, in Q4 just from business mix shift to lower take rate e-com business, larger China sellers, the MRS effect or merchant services. So we've been proactively calling out that mix shift that's going to just pick up those transaction costs. We're also going to see the beginning of the impact from interest income beginning to step down as interest rates come down. And again, we called out in our prepared remarks -- but we think that is a good run rate heading into 2025.

[Operator]

Next question comes from Will Nance with Goldman Sachs.

[William Nance, analyst]

I wanted to ask on the marketplace payouts business. So that business has performed quite nicely going in the high teens this quarter. And I just wanted to kind of understand how you guys would kind of frame the journey. I know there was a period of time where you had exited some customer relationships and the overall e-commerce business is growing slower. These numbers seem to very clearly suggest market share gains against a TAM that's probably more low double digits. So just how do you kind of think about the sustainability of the market share gains that you are putting up? Is there an element of sort of catch-up period from the prior couple of years? And just kind of how long do you think you can kind of sustain kind of growing above the market TAM, just given acknowledging that you guys are the market leader there?

[John Caplan, executive]

Yes. Thanks, Will, for the question. On the e-commerce and marketplace businesses, the team globally has done an exceptional job, both here in the United States working with Amazon, Walmart, Etsy, eBay and others as well as our colleagues in China and around the world in providing cross-selling of our cards products to our Chinese customers taking share from our competitors for customers that have multiple PSP relationships, the 17% volume growth in Q3 really led by broad-based strength in the business across the Board. We are winning share in China, both in the acquisition of new e-com sellers as well as increasing wallet share with the customers that we have.

We continue to expand our marketplace ecosystem. And I think that's a very important part of the flywheel at Payoneer is that our marketplace business will grow as our B2B business continues to grow even into broader, bigger addressable opportunities. We have a program, as you know, we call it the green channel, where we help e-commerce sellers get access to and distribution on multiple marketplaces. That's the partnership between Payoneer and our customers to help them drive their growth so they can participate in cross-border trade. We are, as you note, focused on adding new marketplace relationships. We are -- we believe we're in a strong position to do so and we'll continue to add. I think Bea spoke nicely about how the consumer has behaved. And as the consumers spend money and is engaged in the fourth quarter in a strong way, Payoneer will outperform on the marketplace line.

[William Nance, analyst]

That's great. I appreciate that. And then just maybe another question, obviously, just topical today as you're kind of sitting here watching the election. We've gotten some questions on just the exposure to Chinese goods sellers. And I know we've spoken about before, but maybe just with a broader audience, how do you think about the transition mechanism of potential U.S. tariffs? I know you've lived through this before. So maybe if you could talk through what the experience was and kind of what people understand how that does or doesn't impact the business.

[John Caplan, executive]

Yes, thanks for the question. And I like 78 million other Americans voted in the election and anybody listening and I hope you do too. Our economy is exceptionally resilient. And whoever the next administration is, I hope they can put in place policies that support the economy, consumers and jobs. A strong U.S. economy is good for the world and certainly good for global SMBs. Specific to my experience with tariffs in the past, should that come to pass. An iPhone case that retails for $20 at a store on Main Street in America is manufactured for guessing at $0.14. So a tariff on a $0.14 good generally is absorbed through the supply chain pretty effectively. And in the past, in my experience, when I worked at Alibaba group at alibaba.com, we saw exceptional growth in our exports business in Alibaba despite or maybe even because of tariffs that were put in place.

So we are focused on providing value to our SMBs. We're comfortable with our position in the market, our ability to take share in the market and we are very confident that our diverse business, right? We do business in 190 countries with customers in Argentina and Morocco and Turkey and Brazil and India and just about every country or territory, any of us could name. And services businesses are driving the growth of our B2B business, as you know. So Payoneer is exceptionally resilient. We're diverse and global. Our customers and SMBs are resilient, and we feel very well positioned. And for the absence of doubt, I think people know this, but it's important that I mentioned, we are -- our customers we serve are not in verticals related to national security priorities, precious metals, semiconductors, steel and other things. We're in the fun part of the economy around iPhone cases and yoga pants and that's doing just fine in the goods business.

And in services, it's the BPOs and the Philippines and the software developers in Latin America. It's the businesses that are really driving globalization in the global economy. Those are people who turn to Payoneer as their trusted global financial services partner, and we're really well positioned. And as I said, I hope folks get out in both.

[Operator]

Our next question comes from Mayank Tandon with Needham.

[Mayank Tandon, analyst]

Congrats John and Bea on the quarter. I wanted to turn to the investments in sales and marketing, John and Bea if you could speak to that in terms of where your headcount is at today in terms of sales. And as you target larger what is sort of the initiative to ramp up your sales engine? And just in general, your marketing approach as you go after bigger ICP?

[John Caplan, executive]

Thanks, Mike. One of the things that's been exceptional in our execution and go-to-market is we tiered and prioritized countries. First thing, our go-to-market team did is they this year as we we set out to prioritize specific countries. We set out to prioritize specific verticals and and we incentivize and compensate our sales organization around the acquisition and retention of high-value ICPs. And a year ago, that was $10,000 plus, then it was $50,000 plus. And as I mentioned earlier, we are adding customers that are $250,000 plus a month of accounts receivable. I think that speaks to the strength of our sales organization, the power of our marketing team, the brand we have built. And to your point about headcount, our head count and go-to-market has actually been relatively stable year-over-year. We're adding headcount in high opportunity areas and we're taking friction out of our system across the organization. We're reducing what I'll think of as middle management layer. So there's more people who are with directly responsible KPIs to drive customer acquisition and cross-sell in our CSM organization. And I think the strength of our cards product is -- demonstrates our cross-sell opportunity. And shareholders will hear us talk in 2025, about the cross-sell effort as it relates to workforce management and the Skuad acquisition. We are very excited about the opportunity to offer high-value not just an AR solution for their direct-to-consumer or B2B marketplace sales, not just an AP solution for their spend management as it relates to buying ads on Facebook or elsewhere or internetwork payments to other Payoneer customers, which is a robust part of our business but actually helping them manage the workforce management and payroll needs of their contractors and employees around the globe.

Our customers have multi entities around the world. They have employees around the world are contractors, and they're increasingly turning to Payoneer and will in 2025 and beyond as the globalization in a box, the one-stop solution for those needs and our go-to-market engine, our distribution engine, is the superpower of the firm. We have great people, a unique offering, a powerful brand, a regulatory framework that enables an expanding, growing SMB around the world to get the growth they need.

[Mayank Tandon, analyst]

That's very helpful color. And then if I could just turn back to the model, you gave us plenty of framework to think about 2025. But just given the outperformance this year, if you were to outperform your expectations in 2025, where do you think that comes from? Is that going to be driven by continued momentum on B2B? Do you think marketplaces can outperform the way it did this year relative to your initial guidance? Just what are the levers for our performance as we think about 2025?

[Bea Ordonez, executive]

Yes. Look, I think it's a great question, right? So we called out that we think the mid-teens exit rate is an appropriate run rate. But we've also said consistently -- most of that's in line with medium-term targets and that we think there's room to outperform. What can drive that outperformance? Look, first and foremost, certainly a robust and stable macro. We're seeing that today. We've seen it through October but that can certainly help continued performance in B2B. Look, as John said in his answer, we're executing on the strategy. We're seeing really strong acquisition. We're seeing improving retention and we're focused on larger customers, and that's driving that outsized performance. Look, as we go into 2025, obviously, as we've called out, tougher comps, we think 25% volume growth, 25% plus for '25 or so 2025 in our B2B business is a good target for us to push against. And that's, again, in line with what we said at Investor Day, and we think it is a strong sort of performance with room to outperform, right, as we continue to execute -- in terms of marketplace, as we said sort of to the e-com question, 2023, we've seen that we are outperforming those underlying marketplaces, delivering that strong mid-teens growth in volume that's really ahead of where you would say sort of looking through at the read-throughs on some of these e-com markets ahead of where they're performing. If we can continue to drive that through the strong acquisition and retention, then we think we can outperform that.

So look, I think there are multiple levers, which is a great place to be, strong fundamentals in the business, and we're looking forward to 2025.

[Operator]

Next question comes from Darrin Peller with Wolfe Research.

[Darrin Peller, analyst]

Nice job on the quarter. Maybe we just start off with the pricing road map and the opportunities. Just remind us where you guys are in terms of the opportunity to monetize different parts of the business, which you've been on a good path around. And I guess as a follow-up on that point, though, I mean, when do you think we can expect to see the pricing applications start to really benefit revenue I mean I know they were -- if you take float out of the equation, they were still down, I think, about 6 bps year-over-year. So just curious where you see it kind of playing out where it has more material of an impact on the numbers going forward?

[Bea Ordonez, executive]

Yes. Thanks, Darrin. Thanks for the question. Look, we continue to execute on the pricing strategy that we outlined throughout 2023. As we called out in the past, 2023 was really about improving monetization on non ICPs. We've done that very successfully. And also done it relative to sort of aspects of the revenue monetization in terms of our FX products in terms of how we monetize particular corridors. And in terms of how we look at customers, segments and corridors to be much more nuanced in how we think about pricing. So we're continuing to execute. We launched our light account in late 2023. We've continued to roll that out through our distribution partners throughout 2024. And as we've called out, we expect to generate roughly $45 million of uplift in 2024 from those pricing initiatives, of which $20 million is incremental. In terms of the take rate dynamics, look, we'll continue to execute on that. We've highlighted that sort of longer-term unlock that can drive share of wallet gains, improve penetration as we head into '25 and beyond.

In terms of the take rate, look, I think it's one of the many levers that is driving improvement in that take rate. Our SMB take rate year-over-year is up 2 basis points ex interest, it's up more than that. That's a factor of that pricing, impact as well as the mix shift to those higher take rate businesses and higher take rate products. So overall, we see pricing as an important sort of arrow in the quiver, so to speak, to continue to improve the economics in our business to drive improved penetration and capture of the market and to really drive stable and even improving take rate trends.

[Darrin Peller, analyst]

Okay. That's helpful. And guys, just focusing for a second more on ICPs. It looks like the growth overall on the larger side was about 2%. I think it was 6% last quarter. Overall, obviously, you're continuing to grow the underlying KPI as well. But just you can give us a little bit more color on maybe the TAM you see to penetrate for large ICPs. What's the long-term customer growth for these large ICPs, whether it's any sense of whether it's mid-single digit, all the way up to level, it's hard to really tell where you see the opportunity on that front?

[John Caplan, executive]

Yes, it's a great question, Darrin. We are very comfortable with our 10,000-plus ICP growth. When we introduced the ICP framework, it was a blunt force instrument to help people understand and create a rubric for people to understand our business. As you'll recall, 1.5 million customers below the definition, 0.5 million customers, fitting the definition. We've introduced 500 to 1000and 1000-plus -- we shared on the call today, the 1000 represents 80% plus of the volume. We are clearly driving our product strategy, our acquisition strategy, our retention work on those high-value 1000-plus ICPs. And we really think the ICP definition has helped crystallize the opportunity for shareholders, employees across partners across the board, just about our focus on who our customer is, the value we can provide for them. As you mentioned, the growth has slowed to 6% to 2%, but we've accelerated our volume and revenue growth of the 1000s segment. Volume growth for 1000-plus ICPs accelerated from 10% a year ago to 26% in Q3, revenue growth for 1000-plus ICPs from 7% a year ago to 31% in Q3.

So when I look ahead, the size of the opportunity is tremendous. There are many, many, many businesses around the globe that need a pay in our solution. We are in a deliberate and focused way penetrating geographies, industry networks of ICPs. And you will see that, and as we've talked about that in the past, there are tens of millions of SMBs that need Payoneer solution. We are less focused waking up this morning on driving absolute customer count, then making sure we have the volume and revenue dynamics from the customers we have, providing the service to them and unlocking the growth ahead of us. So I won't give you a number in terms of what I think the growth rate will be looking forward. I am confident it will grow in a strong way and we have a product set and a team focused on monetizing those customers. So you will see growth in the years ahead.

[Operator]

Next question comes from Mike Grondahl with Northland Securities.

[Mike Grondahl, analyst]

On the pricing initiatives, is there a lot left there or a little left there? And then secondly, I think you described your go-to-market and your priorities in the ICP area. Could you talk a little bit about how you're focused on cross-sell in getting multiple products into some of your larger ICP hands? Is it the same process? Or is there a kind of a unique process for that?

[Bea Ordonez, executive]

I'll take and thanks for the question. Look, I'll take the pricing. Look, I love the framing. Is there a lot or a little. I think we'll say that it continues to be in our view, a long-term driver of future performance, right? So we've called out very explicit numbers in terms of what we generated in '23 and what we've generated in '24. I think that the broader point is around sort of the more customer-based segmentation approach, one that is designed to focus on product bundling, on driving share of wallet and improved engagement and adoption of the products and using pricing as a lever to do that. With all that said, look, there's more opportunity for sure, right? We've launched the light account. As we've said, that covers predominantly freelancers and gig workers, and we're launching probably early next year what we called the Pro account, which is targeted at larger sort of SMBs and smaller entrepreneurs. And we think that, that will generate some meaningful uplift, right? We think we can monetize upgrade fees. We may introduce forms of usage fees. But overall, I think, again, it's a long-term driver of improved monetization and frankly, improved capture of the market, and that's how we're viewing it.

[John Caplan, executive]

And I'll just add to this answer. As we think about cross-sell, there's really 2 separate motions underway. One is what we call the high-touch motion, where we have CSMs globally whose responsibility is to match our product set to the needs of our high-value ICPs. And you're seeing that pull through in the performance of our card, right? Our card growth in Q3 was north of 40% and quarter-over-quarter. And it's -- the 4 quarters prior, growth was between 31% and 33% for the cards product. We will -- you'll see the high-touch cross-sell occur with our workforce management products. As we introduced the ability to help our customers manage their contractors, employees around the work. But at scale, it's the product itself, and Bea, it highlights the bundles, the light account, which is in distribution as we -- which limits features for sort of the lower end of our customer portfolio. The Pro account or platinum account or others will enable bundles of products so that the right product that is in front of each of our customers from when they join or as they log into their Payoneer account and see access to those features. So we feel good about our ability to drive ARPU through the cross-sell motions we have in place.

[Operator]

The next question comes from Trevor Williams with Jefferies.

[Trevor Williams, analyst]

Great. I wanted to go back to the ARPU growth. I think it was up or so in the quarter, John, I think I heard you say. If you could just give us a sense for how much of that ARPU growth is coming from mix, cross-sell, pricing, your view on the sustainability of that level of growth? And I know there's been a few questions on pricing already, but if there's any update you can give specifically on the intra network flows and that rollout would be great?

[John Caplan, executive]

So when we think about ARPU performance across the organization, we really have a number of activities underway. One is making -- acquiring high-value customers that bring a lot of volume into the organization by design drives up the ARPU for those folks. And when we look at our largest customers, those was greater than $20,000 -- $250,000 a month. in volume, we've seen very strong ARPU growth for that cohort. And across the Board, seeing that kind of result, both driven by pricing, cross-sell self-loading self-funding their accounts so they can -- customers can use our AP products, more bespoke, route-specific fee initiatives we are on a march frankly, not just acquire high-value customers, provide them the service they need, but be paid appropriately for the value we provide for them. And that's pulling through pricing larger customers, card cross-sell, workforce management cross-sell and other tuck-in acquisitions that we'll add to expand our product suite to offer more value to our customers.

[Bea Ordonez, executive]

And just on the interim network.Yes, on the intra network question, look, we've continued to run the pilot. It's been a meaningful pilot through our ecosystem really through the back half of of the year. And we're doing A/B testing across significant corridors. Again, look, and we've highlighted in prior calls, there's multiple use cases that are tied to those intra-network flows from sort of quasi payroll to true AP to sort of internal treasury type functions for larger SMBs. So we felt it was super important and we feel it's super important to really carefully measure the impact of that pricing, look at how it flows behave, look at customer behavior. At the end of the day, as we've highlighted, look, we've built in a very real sense, a 2-sided network, and the $11 billion to $12 billion of trailing 12-month internetwork flows are a real powerful proof point around that. So we continue to believe that as part of a broader monetization strategy that internet work flows can be a powerful driver to that.

[Trevor Williams, analyst]

Okay. Got you. And then on float and margins in '25, I think on the float income, I heard you say down year-over-year in '25. Just based on the curve, if there's anything more specific in terms of order of magnitude as you sit here today? And then with that in mind, I mean, how do you feel about the visibility of the mid-20s EBITDA margins next year. I think I heard the comment on -- you already had positive EBITDA contribution from the EXFO revenue, but just any more detail on kind of where you would expect that incremental exflow margin expansion to come from would be great.

[Bea Ordonez, executive]

Yes. Look, on float income, as we said, stepping down. I don't think that would be any surprise to anyone. We've noted that rate expectations look like they stepped down at least based on the curve right now to roughly an average of 3.5%, 3.7%. Again, they've been a bit choppy, but that's probably a reasonable number to model. We expect to offset a portion of that rate decline with balanced growth. We've been able to grow balances on our platform consistently, including the 13% uptick in the current quarter, and we provided pretty detailed commentary on the call, of course, around our program to extend duration. We've done that on roughly 1/3 of the portfolio. We've extended duration on a third roughly 2 years with a weighted average yield of 4.5%. We've put in place interest rate floors on roughly 1/3 of that portfolio. So we've taken really meaningful steps to reduce our sensitivity to interest rate movements, and we'll continue to optimize that program.

So look a step down based on rates will get partially offset from those from those initiatives to extend duration and so on. As we look to margin in 2025, look, we feel very good about hitting our medium-term adjusted EBITDA margin target. The ones we talked about at Investor Day at 25%. We're going to drive core revenue growth. As we said, we think an appropriate run rate is in line with our Q4 exit rate. And we'll continue to be disciplined operators. I think we've demonstrated the ability to do that. So overall, it's a huge opportunity. As we've said, we're investing to capture the TAM we think we can hit our medium-term targets, and we're excited by the momentum in the business.

[Operator]

Our final question today comes from Chris Kennedy with William Blair.

[Cristopher Kennedy, analyst]

John, you mentioned or talked about Skuad, I just wanted to get a little bit more color on what the opportunity is there and how you're thinking about that as we enter 2025?

[John Caplan, executive]

Yes, it's really super exciting, Cris. We are on track with the integration. The team the Skuad team and the Payoneer team are quickly becoming one team, the product integration, the first phase of it is actually completed. We closed the acquisition in early August. I'm excited about the first 90 days and the progress we've made. And we are beginning the cross-sell activity focusing on opportunity areas with our existing customers, with our existing go-to-market organization. We're seeing response from our customers as it relates to the sales cycle and learning about the time it takes to both introduce the product and get to a closed deal with our customers. And we feel very good about Payoneer's opportunity to not just be an infrastructure provider as we were historically, but more and more branded solution for the full financial needs of cross-border SMBs. And that opportunity is tremendous. And as Bea said, we are executing very effectively against capturing it.

[Cristopher Kennedy, analyst]

Got it. And then just a quick update on the M&A environment as you continue to add more products to your platform. Yes.

[John Caplan, executive]

Yes, it's an important question. We are excited about tuck-in acquisitions to extend our product capability to drive the cross-sell utility for our customers and ARPU for our shareholders. And so the work the team is doing, identifying targets, discussing the fit culturally product, et cetera, is deep and underway. We've shared our philosophy, which is grow ARPU, extend our footprint in high important markets, drive our licensing, and that is I think key part of the road map ahead is growth via M&A, and we will do that in 2025 and beyond.

[Operator]

Thank you. We have no further questions. And so I'll hand the call back to John for closing remarks.

[John Caplan, executive]

I want to thank everybody for joining us today. I think we had a record turnout here on the call, and it's exciting to share the incredible progress of paying your employees in over 28 countries. We are a diverse global organization moving at the pace of global trade to provide value to SMBs that are competing on the global landscape. It's been great results for the first 3 quarters of 2024 and we are focused on continuing our momentum. Thanks, everybody.

[Operator]

Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect your lines.