Payoneer battles e-commerce slowdown

Payoneer is counting on global growth and new services to offset what CFO Michael Levine called e-commerce “softness

Payoneer expects a second-quarter slowdown in e-commerce to continue, so Chief Financial Officer Michael Levine said the payments company is focused on its other revenue streams to help offset that “softness.”

The New York-based company expects current macroeconomic factors to prolong that e-commerce slump, Levine said during an Aug. 19 interview. That’s largely due to e-commerce spending normalizing after soaring during the COVID-19 pandemic. In recent months, consumer behavior has shifted again, and shoppers are buying less online as they return to stores, schools and the gym, he noted.

Payoneer, which provides payments services for cross-border sellers and marketplaces, reported first-half revenue rose 35% to $285.1 million over the first half of 2021, according to an earnings release on Aug. 11. Net income for the first half of the year was $24.6 million, compared to a net loss of $15.9 million in the first half of 2021.

Payment volume for the second quarter was about flat with the first quarter of the year, coming in at $14.6 billion. That was up 7% over Q2 2021.

Analysts at the financial firm William Blair noted the e-commerce slowdown in a report on the company’s second-quarter results. “Payoneer’s volume growth has been impacted by slowing retail e-commerce growth, though revenue growth has been aided by strong improvements in take-rate,” the Aug. 11 note said. “We believe volume growth has the potential to benefit from a reacceleration in broader retail e-commerce volumes.”

The company has carved out a significant niche in China, which accounts for more revenue than any other country. For the first half of 2022, $89.8 million of Payoneer’s total revenue came from greater China, compared to less than half that much, $38.3 million, from the U.S., according to the company’s most recent quarterly filing with the Securities and Exchange Commission. It reported $157 million from other countries, the filing said.

E-commerce spending “will baseline at some point … and then grow from there,” Levine asserted. The company expects volume to grow faster in the latter half of the year due to holiday spending, Levine said during the company’s second-quarter earnings call with analysts earlier this month. He expects more positive trends next year, but noted “it’s impossible to know,” so the company remains cautious in its forecasting.

“From a long-term perspective, we’re definite believers in e-commerce and digitalization of commerce overall,” said Levine, who has been at the company for more than a decade.

Since Payoneer’s 2005 founding, business models have evolved and small and mid-size businesses (SMBs) have had to globalize their operations to grow, Levine said. The company, which went public in June 2021 through a special purpose acquisition company transaction, currently has about five million SMB customers. 

Payoneer’s largest revenue stream flows from marketplace customers, such as freelancers tied to the firm Fiverr and travelers using VRBO to book accommodations.

Payoneer also counts eBay among its large customers. E-commerce sales of goods make up less than 50% of Payoneer’s revenue, Levine said. The company declined to provide revenue detail by segment.

Payoneer services 190 countries and territories and is growing in Latin America, South Asia, the Middle East and North Africa, executives said during the recent earnings call. “For us, whichever market gets the benefit, we’re already in that market,” Levine said.

Payoneer introduced a checkout product earlier this year to serve the direct-to-consumer e-commerce market, given an increasing number of businesses want to open their own online stores, Levine said. That checkout offering is currently available to businesses incorporated in Hong Kong, and Payoneer plans to expand it to other regions.

“The products we have rolling out now will be more focused on helping those small businesses expand their web presence globally,” he said. Payoneer also has added business-to-business services, such as automated payables and receivables capabilities and access to working capital, Levine said. Those B2B accounting volumes grew 65% for the second quarter, compared to last year, and made up 12% of the company’s total volume in the most recent period.

The payments company “continues to diversify services beyond core payouts into more value-added services for online sellers; these services continue to grow faster than the whole and add to Payoneer’s take-rate,” William Blair analysts said in their note. 

Diversifying its services expands how the company can serve SMBs, but also pits it against more rivals. Competitors include payments companies PayPal, Stripe, Adyen and as well as neobanks and global card networks, per Payoneer’s latest 10-K filing in March.

By Caitlin Mullen on Aug 26, 2022
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