What the path forward may look like for Pluxee and Edenred
Pluxee Q1 results are out
Yesterday the #2 player in the global employee benefits market, Pluxee, reported earnings (well, revenue figures for Q1) and after an initial 6% surge closed the day flat. The sector and its largest players, Pluxee and Edenred, have seen a brutal sell off over the last two years amidst regulatory fears. I’ve been covering the situation intensely and Edenred continues to be my #2 position, so let’s dive into what Pluxee said about the situation, what the path forward may look like and what potential I see in these two companies. (View my previous Edenred article here and many more on both on my profile).
Pluxee Q1 results
As a European company, Pluxee only has to report revenue figures for Q1, so we don’t have insights into its profitability and balance sheet. They reported 9.1% organic revenue growth, with 11.6% growth in the employee benefits segment, dragged down by expected declines in the other products segment, driven by scale down of public benefit contracts in Europe. That also partially explained why Europe was the slowest growing region with 2.7% organic growth, compared to LATAM (14.3%) and the rest of the world (12.6%).
Net revenue retention stayed strong at 100%, aligning with Pluxee’s target, driven by cross sell and face value increases (meaning legal caps increased in some countries and companies allowed higher spend on employee cards).
Pluxee reiterated its FY26 outlook after the Brazilian PAT reforms were announced. We can see that it set back the company quite a bit. They expect to keep revenue stable and slightly increase their EBITDA margin. We need to keep in mind that Pluxee has an unusual financial year, so FY2026 does not align with Edenred as it ends sooner for Pluxee. Edenred thus looks to be effected worse from the Brazil reform, but really that’s just timing.
Pluxee is preparing for the changes (as outlined on the following slide) and does expect them to go into effect. In February we’ll see a cut to 3.6% cap on merchant discount rate and a faster working capital turnover (negatively effecting Pluxee’s float and thus interest income). The 3.6% cap is not just on Pluxee’s fees, but also on other fees occurring on the payment. That leaves very little margin and cuts deep into profitability.
In May the government wants to transition to a 4C model with a 2% merchant commission. The “4C” model is payments jargon and stands for Four-Corner model:
Cardholder (employee / beneficiary)
Issuer (Pluxee issuing the card)
Merchant (restaurant, supermarket, etc.)
Acquirer (the merchant’s bank or payment processor)
The transaction flows across an open card network that connects issuer and acquirer, like standard debit card rails. By contrast, the traditional Brazilian meal/benefit market has largely been closed-loop (3-corner):
Pluxee issues the card
Merchants sign directly with Pluxee
Pluxee handles acceptance, settlement and pricing end-to-end
There were no Visa/Mastercard rails, no third-party acquirer and limited interoperability. At the end of 2027 the government also wants to implement interoperability, meaning that merchants can accept all forms of cards and service providers.
The biggest issue right now is that there is very little information as this decision was unexpected and did not align with previous discussions Brazil had with the leading companies in the sector. Pluxee is exploring legal responses, alone and together with other companies, to challenge parts of the presidential decree. They do not expect to revert the proposal, but they want more time and more clarity on what the government expects them to do. Also they do not see some of these changes feasible, at least within the time plan.
Impact of the Brazil situation
These fee caps cut drastically into margins and will bring the ~5% take rate down to around 2%. To compensate for this, Pluxee is discontinuing some marketing services they are doing for their customers and they expect to lose around 40% of Brazil revenue in H2 2026, followed by 60% in H1 2027 as the full effects of regulations take effect. Starting in H2 2027 the situation should get a bit better as the implementation of the changes is done and business should return to “normal” around 50% below current Brazil revenues (this all assumes the worst case, meaning the proposed timeline with no success in legal action from Pluxee and peers).
This of course sounds horrible, especially with 28% of operating Pluxee revenue coming from Brazil, but it is not as bad as it sounds: The introduction of the 4C model will allow Pluxee to cut part of its team that manages the current 3C model and other cost structure optimizations. So ideally they will try to hold EBITDA margins, despite the strong operating deleverage from losing that much revenue.
Let’s go ahead and talk about the second order effects of these changes, my thoughts on Edenred and a valuation of both companies.