Wednesday, October 5 2022

Payoneer expects the slowdown in e-commerce in the second quarter to continue, which is why chief financial officer Michael Levine said the payments company is focusing on its other revenue streams to help offset this “softness”. .

The New York-based company expects current macroeconomic factors to prolong this e-commerce crisis, Levine said in an Aug. 19 interview. This is largely due to the normalization of e-commerce spending 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 payment services to cross-border sellers and marketplaces, said its first-half revenue rose 35% to $285.1 million in the first half of 2021, according to a report. publication of the results on August 11. First-half net profit 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 roughly flat with the first quarter of the year, amounting to $14.6 billion. This was up 7% from Q2 2021.

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

“Believers in e-commerce”

The company has carved out a significant niche in China, which generates 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, $38.3 million, from the United States, according to the company most recent quarterly filing with the Securities and Exchange Commission. It grossed $157 million from other countries, according to the filing.

E-commerce spending “will bottom out at some point … then grow from there,” Levine asserted. The company expects volume to grow faster in the second half due to holiday spending, Levine said during the company’s second-quarter earnings conference 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 forecast.

“From a long-term perspective, we believe strongly in e-commerce and the digitalization of commerce as a whole,” said Levine, who has been with the company for more than a decade.

Since Payoneer’s inception in 2005, business models have evolved and small and medium-sized enterprises (SMEs) have had to globalize their operations to grow, Levine said. The company, which made public in June 2021 through a special purpose acquisition company transaction, currently has approximately five million SMB customers.

Payoneer’s biggest source of revenue comes from in-market customers, such as Fiverr-linked freelancers and travelers using VRBO to book accommodation.

Payoneer also counts eBay among its big customers. Sales of e-commerce goods account for less than 50% of Payoneer’s revenue, Levine said. The company declined to provide details on revenue by segment.

Payoneer serves 190 countries and territories and is expanding in Latin America, South Asia, the Middle East and North Africa, executives said on the recent earnings call. “For us, whatever market is taking advantage of that, we’re already in that market,” Levine said.

Services added

Payoneer launched a payment product earlier this year to serve the direct-to-consumer e-commerce market as more businesses want to open their own online stores, Levine said. This payment offering is currently available to businesses incorporated in Hong Kong, and Payoneer plans to expand to other regions.

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

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

Diversifying its services broadens the way the company can serve SMEs, but also pits it against more competitors. Competitors include payment companies PayPal, Stripe, Adyen and Bill.com as well as neobanks and global card networks, according to Payoneer. last deposit 10-K in March.

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