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spk01: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Payoneer's Third Quarter 2021 Earnings Conference Call. At this time, all lines have been placed on mute to prevent any background noise. Following the speaker's remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded. I'd now like to turn the call over to Ignatius Joku, Vice President of Investor Relations, to begin.
spk02: Thank you. Before we begin, I'd like to remind you that today's call may contain forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC and available in the investor relations section of our website. 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 as a supplement to and not as a substitute for GAAP financial measures. Reconciliation to the nearest GAAP measure can be found in today's earnings press release, which is available on the company's website. Hosting today's call are Scott Gallant, Payoneer's Chief Executive Officer, and Michael Levine, Payoneer's Chief Financial Officer. With that, I'd like to turn the call over to Scott to begin.
spk07: Thanks, Ignatius. Good evening, and thank you all for joining us today to discuss our third quarter 2021 results. Payoneer had a very strong third quarter. We delivered revenues, take rate, and adjusted EBITDA well ahead of our expectations as our global team continued to execute well on our strategy to be the world's go-to partner for digital commerce everywhere. We saw continued momentum globally with small businesses, marketplaces, and partners who rely on Payoneer to provide them with the broad selection of services they need to pay and get paid, to grow, and to manage their digital businesses. We added a record number of new customers in the quarter as Payoneer continues to emerge as a leading on-ramp to the global digital economy for small businesses worldwide. The Payoneer brand is a growing asset. We received well over 1 million new customer applications in the quarter, and our growth is truly global and diversified. We had year-over-year volume growth of over 50% in regions like Latin America and South Asia, Middle East, North Africa. We see tremendous untapped potential in emerging markets globally, and we are increasing our go-to-market investments meaningfully. Our continued strong performance and momentum with customers highlight our unique position in the market, offering the most comprehensive solution set for small businesses from around the world looking to engage in commerce anywhere. We strengthened our position as the global leader in e-commerce marketplace ecosystems, We continue to support the rollout of our partnership with eBay, helping eBay improve payments for small businesses in a number of key markets around the world. And we recently announced our partnership with Coupang in South Korea, the world's fourth largest e-commerce market. We are very happy with the momentum we are building with the Payoneer partner ecosystem. One of our key initiatives is growing our bank partnerships globally as we collaborate with banks and mobile wallets around the world to acquire new customers and to offer our joint customers a unique integrated experience. We now have bank partnerships live on four continents and we had triple digit growth in both volumes and new customer applications with our partners. We are delighted to launch a new partnership in the third quarter with Vimo, a new mobile wallet partner in Vietnam. As we look to the future, we also continue to explore new and innovative payment models and partnerships. We recently partnered with Citibank and some leading financial institutions from around the world to explore a new concept called the Regulated Liability Network. which is designed to integrate central bank digital currencies and regulated liabilities on a shared distributed ledger. The design for the regulated liability network was introduced in a competition sponsored by the Monetary Authority of Singapore, and we're excited to be able to partner with other global leaders on such a pioneering effort. We have also been executing well on our strategy to broaden Payoneer's portfolio of services and to increase the number of Payoneer customers using these services. These services collectively represent our efforts to become the financial partner of choice for our customers and our expansion beyond marketplace payments. We are building on our momentum as we grow beyond being a marketplace payment provider to being a growth partner for digital businesses globally. One such service is our global B2B APAR offering. We are still in the very early stages of this multi-trillion dollar addressable market opportunity to help small businesses more efficiently transact with their trading partners worldwide, and our first step to open the Payoneer platform up beyond marketplace ecosystems. We delivered strong growth in B2B APAR in the third quarter, with volumes growing at a CAGR of over 100% for the past two years. We are increasing our investment in this offering, hiring more sales resources, and working with our global teams to acquire new customers and upsell B2B APAR to existing paying your customers. The majority of our B2B APAR customers are actually new to Payoneer, which demonstrates the strength of the Payoneer brand and our ability to acquire and grow a new complementary business at scale, all while pointing to the significant incremental addressable market opportunity we have in B2B APAR. We are seeing strong customer demand for our MasterCard commercial card. which enables our small business customers to use the funds they receive from Payoneer to pay international suppliers by advertising to acquire new customers and make other purchases to support the growth and management of their business. This is a compelling tool for global businesses that aren't based in the U.S. but are selling globally. During the third quarter, we ramped up our acquisition of customers and also introduced more customers to our cashback rewards program, driving accelerating spend. We see commercial cards as a high-value service that helps our customers better manage their business and drive growth, that saves our customers money, and that generates a higher-than-average take rate for Payoneer. While we are still in the relatively early stages of growth, we are optimistic about the unique value proposition we offer and the long runway ahead for this exciting opportunity. Our working capital offering also continues to be an important driver of value for our customers as we enable them to access the funds they need to invest in their businesses. We recently introduced Payoneer Advance Plus, At six months duration, it offers the longest term of our working capital products to date, as well as the ability for our customers to select the terms that best fit their business needs, allowing them to choose between multiple working capital offers, which also include Payoneer Express, a one-month product, and Payoneer Grow, a three-month product. We had record new originations in the third quarter across these Payoneer advanced products as we move into what is traditionally the peak sourcing season leading up to the holidays. Our merchant services offering continues to gain traction with larger enterprises around the world that are choosing Payoneer to enable them to simplify the complexity of their global consumer payments. We have built a robust pipeline with leading digital businesses in multiple regions, and remain enthusiastic about the growing demand among merchants for a strong global company like Payoneer to provide them with the great technology and service to solve complex payment problems. We're also very excited that we will be introducing Payoneer Checkout for small businesses starting in Hong Kong before the end of the year. Overall, these new services are part of our strategy to drive an important evolution in our business. Payoneer customers are increasingly using Payoneer for a broader set of more sophisticated services. Many small businesses are using Payoneer more as their primary global financial partner than as a payment processor. Our typical use case has historically been enabling a small business to get paid for their international sales on marketplaces, and then Payoneer would settle with local currency into our customer's local bank account. Now, Payoneer customers are increasingly using Payoneer to not only get paid by marketplaces, but to get paid by wholesale buyers using B2B APAR, to pay their suppliers, employees, and contractors, to access much needed working capital, to use our cards to buy advertising and pay other expenses. In aggregate, our customers maintain more than $3 billion of balances on the Payoneer platform, pending their use of one or more of our services. To help illustrate this, I'm going to share the stories of a couple of our amazing and inspiring customers that highlight the exciting opportunity for entrepreneurs around the world and help demonstrate how Payoneer is an important partner supporting their growth. OptiZone is an Australia-based e-commerce retailer that specializes in toys and homewares. They use Payoneer to receive payments in multiple countries, around the world. OptiZone then uses their Payoneer foreign currency balances to pay their freelancers and manufacturers that operate in various countries. And when OptiZone was looking to expand and further grow its business, they secured financing through Payoneer's working capital program to help them purchase additional inventory to support their peak season. Another example is Twin Barbarians. an apparel and active wear e-commerce business based in Bangkok, Thailand. Once Twin Barbarians has gotten paid through Payoneer, they use Payoneer to pay their suppliers, which has allowed them to reduce costs by 30% and speed up supplier access to funds. Payoneer is helping Twin Barbarians grow over 50% year-over-year in the third quarter and expand into additional marketplaces around the world. In both these cases, we have entrepreneurs tapping into the digital economy to grow, and Payoneer is helping them achieve their potential. That's why we are making significant investments in two primary areas of our business. R&D, to broaden our product offering to enable our customers to have more and better tools to help them grow. and sales to increase the capacity of our global team to acquire new customers and serve and upsell services to our existing customers. These investments enable us to deliver more value to our customers to further strengthen our competitive edge and improve our ability to monetize the volume on the Payoneer platform while also increasing the level of engagement with our customers. and we are continuing to explore acquisition opportunities to supplement organic investments and to accelerate our ability to deliver more value to digital businesses worldwide. All of this activity translated into strong results for our third quarter. We generated revenues of $123 million, an increase of over 35% compared to prior year results. Adjusted EBITDA was $6 million, which highlights our operating leverage, even while we continue to ramp up investment in the business. Volume in the quarter grew 16% year over year. As consumer behavior changes and supply chain issues continue to impact, many of our customers engaged in e-commerce, particularly from China. We had continued positive momentum in our take rate at 90 basis points, which was a meaningful increase from the second quarter and the last year, driven by our increasing geographic diversity, growth of higher-value services, and mix of customers. This solid performance validates our ability to create strong value and monetization, and we remain excited about the long-term market opportunity for digital commerce globally. We are confident in our execution and are increasing our guidance for revenues and EBITDA for the full year. This is despite the fact that digital commerce continues to face some short term challenges. We continue to be optimistic based on the acceleration of digitalization trends, the tremendous enthusiasm of small businesses around the world to participate in the digital economy, and the two year growth rates remain above pre-pandemic levels. In addition, we're in the early stages of penetrating the huge cross-border payments market and the opportunity to serve small businesses globally with sophisticated services to help them compete in the digital economy. We are innovating new solutions and scaling our global team to be the primary beneficiary of this expansion in an already gigantic addressable market. As supply chain constraints subside, border restrictions ease, and e-commerce and travel return to a more normal growth trajectory, Payoneer is well positioned to benefit from the secular tailwinds of digital commerce and cross-border payments. I would also like to highlight our continued investment to strengthen the Payoneer leadership team and board. Karen Levy will now serve as president with a focus on increasing Payoneer's global market position. Karen previously served as the Chief Operating Officer of Payoneer. Arnon Kraft joined Payoneer as our new Chief Operating Officer and brings global experience at large enterprises, including Microsoft and SanDisk. And we also strengthened our board of directors with the addition of Pam Patsley, who has extensive experience on public company boards and also as a FinTech executive at companies like MoneyGram, First Data, Paymentech, and more. Given our strong position and momentum, I couldn't be more optimistic about our future. We have a highly resilient business model with a differentiated competitive advantage. We win in the market because of our global brand, our broad ecosystem of partners and marketplaces, diverse product portfolio, deep risk management and compliance expertise, our amazing team, and our scalable business model. Our strong execution, enormous market opportunity, ongoing momentum, and accelerating customer demand for our unique offerings position us well to deliver strong revenue growth in 2022 and beyond. Before I turn the call over to Michael, I would like to thank the Payoneer team for their great efforts to deliver real value for our customers and to deliver positive financial results. I'll now hand it over to Michael to discuss financial results and forward guidance.
spk06: Thank you, Scott. As Scott just shared, we were very happy with our performance in the third quarter, and we are well on the way to record an excellent year while also positioning us for additional growth in the future. Allow me now to walk you through key financial highlights from our Q3 results. Revenues in the third quarter were $122.7 million, up 35% year over year, driven by growth in customers, new marketplaces, including eBay, expansion of offerings such as B2B APAR and commercial card, and non-volume revenue streams. Volume increased 16% year-over-year to $13.6 billion, with our growth rates impacted by supply chain disruptions and slowing e-commerce growth. When looking at a two-year compounded annual growth rate between Q3 2019 and Q3 2021, our volume grew 37% annually. We continue to build momentum in regions like Eastern Europe, Latin America, South Asia, and the Middle East, all of which have volume growth much faster than the business overall. We also continue to see above-average volume growth in B2B APAR, which has volume growth over 100% compounded over the past two years and now represents approximately 10% of Q3 volume, up from approximately 7% in the third quarter of 2020. We also had moderate growth in travel volumes this quarter over last year, but it was mostly in destinations where the payouts are in the same currency and thus with lower take rates. The blended take rate for the quarter was 90 basis points, up from 82 basis points in Q2 of this year and 77 basis points in Q3 of last year. Our faster-growing regions have a higher mix of services exporters and smaller customers, both of which typically generate higher take rates than the business overall. The increase in take rate was driven by changes in customer mix, geographic diversity, and the continued above-average growth in higher take rate parts of our business, such as B2B APAR, our MasterCard commercial card, and non-volume-based contributors, such as working capital, merchant services, and other revenue streams. Transaction costs were $24.7 million, representing 20.1% of revenues, a significant improvement compared to last year's third quarter of 27.1%, which reflects the company's ability to benefit from improved operating leverage as we scale. In Q3, we also had a reduction in capital advance losses. As a result of our third quarter revenue growth and lower transaction costs, revenues, less transaction costs, improved to $98 million, an increase of 48% year over year, representing 79.9% of revenues, up nearly 700 basis points from the same period one year ago. Total operating expenses, including transaction costs, were $129.2 million, up 44% from $89.6 million in the year-ago period. As Scott mentioned, we are making significant investments in R&D and sales, growing our teams and investing in our people, our platform and services, and the success of our customers. In addition, we incurred a temporarily elevated level of third-party labor expense related to the onboarding and compliance reviews for a record number of new customers. Stock-based compensation, Q3, was $8.6 million, an increase of approximately $5.5 million over the same period last year. Net income was $0.8 million, or $0, for share based on weighted average basic shares outstanding. On the investor section of our website, we have updated our detailed share count, which addresses the current float, shares subject to lockup, and contingent shares and related restrictions or exercise prices, as the case may be. Adjusted EBITDA, the calculation of which is detailed in Table 2 of our press release, was $6.1 million as compared to $2.6 million in the third quarter of last year. It's important to note that while we continue to accelerate significant investment in our platform and go-to-market strategy, we were still able to increase adjusted EBITDA thanks to the continued top-line growth and lower transaction costs. During our attention to the balance sheet, the cash and cash equivalents were $449 million as of the end of Q3. Given our cash position in Q3, we terminated our credit facility, and we also redeemed all of our Series 1 preferred stock, leaving us with a debt-free balance sheet as of the end of the third quarter. Turning now to our guidance. Given our strong performance through the first three quarters, we are updating our full-year 2021 guidance as follows. We expect 2021 revenue in the range of $458 million to $462 million. which reflects continued strong execution of our strategy, increasing customer and geographic diversity, and strong growth of high-value services like B2B APAR and commercial cards. This represents year-over-year growth of 33% to 34%, up from our previous guidance of 20% to 30% growth. The implied year-over-year growth rate for the fourth quarter is generally consistent with the full-year growth rate. We expect volume in the year to be in the range of $54.3 to $56 billion, or expected year-over-year growth between 22% to 26%. As we discussed earlier, supply chain issues continue to impact e-commerce, and we want to take a conservative view on the upcoming holiday season. International travel is not expected to accelerate neatly, so we are not forecasting a significant benefit in Q4. The targeted take rate for the full year 2021 is between 83 to 84 basis points, considerably higher than the 76 basis points we shared on our previous guidance update. We expect a slightly lower take rate in Q4 as a result of the annual seasonality, which typically shifts mixed towards e-commerce goods and larger customers, both of which have lower take rates than business overall. We expect transaction costs to be approximately 22% of revenues, an improvement from previous guidance of 25.3% of revenues. Revenues less transaction costs are expected to be $357 million to $360 million, representing year-over-year growth of approximately 44% to 45%. This compares to our most recent guidance of 35% and reflects approximately 78% of revenues. We projected adjusted EBITDA in the range of $16 to $18 million, up from previous guidance of $1 million to $3 million. We are very pleased that we have been able to continue to sequentially increase profit guidance while accelerating investments in our platform and the more recent initiatives Scott detailed earlier. We intend to share our 2022 guidance in early March when we issue our full year results. To summarize, echoing Scott's enthusiasm, we know we have a unique opportunity given our global reach and scale, broad customer base, and ability to help digital businesses around the world to grow. We believe we are well positioned to be the world's go-to partner for digital commerce everywhere and grow with the broader digital commerce revolution. We are confident in our ability to continue to execute on our strategy and to position Payoneer for accelerating growth once we see the easing of supply chain headwinds and normalization of e-commerce growth. We are now happy to answer any questions you may have. Operator, please open the line.
spk01: Absolutely. If you would like to ask a question, please press star-fold by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star once. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. The first question comes from Mayank Tandon with Needham and Company. Please proceed.
spk03: Hey, good evening. This is actually Sam Salvasan for Mayank tonight. Thanks for taking the question. I was wondering to start off if you guys could provide some additional commentary around how the rollout of some of these newer products like B2B commercial cards, working capital is going, as well as what the attach rates with these new products are looking like. Thanks.
spk07: Great. Thanks, Sam, for the question. So overall, we're really happy with what progress we're seeing with our newer services, and these are really important as we're focusing a lot on these high-value services like B2B APAR and the commercial card, as you talked about, B2B APAR, as Michael mentioned, is now up to 10% of our volume in the third quarter, up from 7% at the same time a year earlier. The two-year CAGR is there over 100%. And so this is a really exciting and unique high-value service. It is growing faster than the business overall, and we continue to see just tremendous opportunities all over the world. So we are increasing our investment in our go-to-market activities related to B2B APAR and also in our product activities. Commercial card is another area that we think is quite promising. It's still pretty early, so that's something that we just started to introduce earlier this year. but we're seeing really, really positive interest from our customers, and we're seeing growing momentum as we move through the year. So this is another area we introduced a little bit earlier this year, and we started to roll out a cashback rewards program to start incenting faster adoption of the product and actually greater usage of the product as well from customers that have signed up for it. And all of those strategies so far are working. So we're still quite a bit earlier in our curve of ramping that up versus the B2B APAR offering. But, again, it's a big opportunity and a way to actually generate a higher take rate from existing volume flows as we help our customers now actually do more with the way they spend their money and make purchases and bring more efficiency and utility to their relationship with Payoneer. Merchant services, we're also seeing tremendous opportunities Again, we're a little bit earlier in the growth curve there, but we're seeing a lot of excitement and a great pipeline with large enterprises in multiple regions around the world that really are excited to use our technology to help them better manage their payment infrastructure. And this quarter, we will begin to introduce Payoneer Checkout, which is a payment acceptance solution for small businesses starting in Hong Kong. And so, again, as you might imagine, over the next period of time here, we're going to look to roll that out more broadly around the world. But we're very excited to be able to now support, starting this quarter, not just larger enterprises, but also small businesses as well. And working capital continues to be a really, really important and valuable service. With some of the choppiness this year related to supply chains, it's something where we did dial back a little bit on the risk appetite, and so it's something that we continue to carefully manage. But it's a high-value service with, again, tremendous opportunities, and we have a lot of really exciting momentum building there as well. I touched on the new offering that we have that gives our customers a lot more flexibility and choice to kind of suit the duration to their needs. And so, again, we've got a lot of additional new services that we're going to roll out here as well. So these are all areas that we think are gigantic addressable markets. We're really still relatively early in all of them in the growth curve. B2B APAR being the furthest along in our market penetration, but also still, you know, we're barely scratching the surface of a multi-trillion dollar opportunity. So really exciting and great momentum. And those are all part of also the growth and the take rate that we talked about as well.
spk03: Got it. That's super helpful. Thanks for the color there. And then just a quick follow-up, I was wondering if you guys could elaborate a little bit more on the Coupang partnership and how we should think about that ramping and the long-term potential of that partnership. Thanks.
spk07: Yeah, thanks for asking. I mean, Coupang, we're really excited about the relationship there. South Korea is the fourth largest e-commerce market in the world, which is pretty remarkable given the size of the country. And Coupang is really a tremendous market leader there. It's a great opportunity for us. We're both like-minded in focusing on the opportunity for small businesses around the world to be able to grow and capitalize on the e-commerce opportunity in South Korea. And we're excited to work together with them on payments and also our Green Channel offering, where we'll help introduce small businesses to the Coupang platform. In general, we don't talk too specifically about any individual partner that we work with, but in general, partnerships like this can take some time to roll out. Often we have some time to implement and integrate the relationship and then actually begin a rollout, and those things can take some time. So usually these are relationships that will ramp up and become more significant as time passes.
spk03: Great. Thanks for the insight there, and congrats on the results.
spk07: Yeah, thanks very much for the great questions. Thanks.
spk01: Thank you. The next question is from Sanjay Sakrani with KBW. Please proceed.
spk04: Thanks. Good evening. You know, maybe on the volume weakness, obviously the e-com trends have been soft with the supply chain issues. And I know, Michael, you want to talk about next year in March, but just at a very high level, as we think about next year, you sort of laid out your long-term revenue growth expectations. Do you need a significant improvement in the supply chain issues to sort of achieve that? Because it seems like you've got a decent amount of momentum with the newer initiatives.
spk07: Great. Sanjay, great to talk with you again. So actually, I think one of the things that we probably haven't highlighted enough is just how much diversity we have in our business. And I think that actually really is highlighted by the strength of this quarter. So what you see right now, where there's a little bit of softness as it relates to e-commerce, is that we're continuing to see strength, not just in the new services, but actually in some of the other vertical markets that we operate in. And in practice, we are playing in a number of large markets that are really kind of transformational in the way the world is changing. So things like remote work, we work with social platforms, we're engaged in distance learning, and each of these verticals tends to have some different characteristics. So what we saw in the third quarter was really the amplification of some of those areas of strength. So we saw geographic diversity where we actually saw faster growth in other markets and regions like Latin America and South Asia, Middle East, North Africa, and Eastern Europe. We saw faster growth with some of those other verticals. And many of those other verticals, the payment sizes are smaller, the customers are a little bit smaller. and the take rates are a bit higher. We also, as we touched on, had terrific customer acquisition. Our bank partnership strategy is working. We're seeing, again, a lot of really exciting opportunities, and it's translating into tangible results with meaningful growth in new customer ads and also usage of those bank partner integrations And then, as you already touched on, those high-value services that are growing faster and also are higher tape rate services. So part of what we're excited about is that we think what we saw this quarter is a little bit of the opposite of what we saw last year, which was really fast growth last year in e-commerce, which has a lower average tape rate than the business overall. And this year, I mean, I think as you've seen, there are certain pockets of the e-commerce world that are not just not growing fast. I mean, in some cases, they're down, and in some cases, even down double digits year over year. We've got really good momentum across a range of vertical markets and geographies and also new services. So we think it sets us up really, really well going forward, where now as e-commerce comes back stronger, which, again, we're huge believers in the long-term trend towards digital commerce, We think supply chains will improve. It could be debated how fast, and we'll all learn together. And then as travel comes back, we see those as incremental tailwinds that can actually accelerate our business, but hopefully we've showed that we have multiple ways of actually delivering growth. And we're executing well on those, and we're really looking forward to having a really broad-based growth of all these vertical markets working together to give us just a little bit of an extra tailwind in the future. But we're excited about how we were able to perform, and we think it sets us up really well. I would just add we're also seeing geographic diversification as well. Scott mentioned those countries that are growing quite fast and continue to proactively invest and see growth in those. And to the point about the record number of customers, it really goes to show the opportunity to both grow the overall platform as well as to add additional services to get more value out of those relationships.
spk04: Absolutely. And then just second question, Scott, you talked about M&A potentially. Maybe you could just talk about, you know, the pipeline, how hot something might be in terms of, you know, happening and where exactly you're looking. Thanks.
spk07: Yeah, thanks. So we are actively exploring opportunities and we do have Quite a number of discussions that we're engaged in. There's nothing imminent, but we are seeing a number of interesting opportunities across a range of services, across a range of geographies. And we're actually excited about the breadth and scope of what's out there. So we are likely, I think we are likely to see us focus, we'll continue to be more broadly in the realm of digital commerce and commerce enablement. And we're still more likely to focus on buying something that is kind of smaller to midsize where we have an opportunity to take a company that has a great product that can be complementary for our customers where we can actually drop it into our global platform and push it out to customers around the world and through our sales teams and our partners around the world as well. So that's, in general, the way we're likely to approach it. So we are building momentum, but nothing imminent at the moment. Thank you.
spk01: Thank you, Mr. Saccharani. The next question comes from Josh Siegler with Cancer Fix Gerald. Please proceed.
spk05: Hi, good evening. Thanks for taking my question. I'd like to dive a little further into the emerging markets expansion. When we think about the key drivers for growth there, were a lot of applications coming in organically? Were you leveraging your go-to-market strategies? Any additional call you could provide would be helpful around that.
spk07: Yeah, sure. And hi, Josh. So first, you know, something, again, I mean, we probably have under-communicated just how much like the foundation of the Payoneer business historically has really been a broad focus on emerging markets. And that really is our heritage and our history and how we've grown up and really how we think about kind of the unique role that we can play in the world. And so we have great footprints in really interesting parts of the world in Eastern Europe, in places like Ukraine and Serbia and in South Asia more broadly and markets, you know, not just India, but places like Bangladesh and Pakistan and all over the world. So what we've seen is in many cases, those parts of the world are seeing the greatest transformation, not just in terms of the impact of digitalization on the lives of people locally, but actually enabling really, really talented and entrepreneurial people to actually plug into and access opportunities around the world. And many of those markets are the markets where Payoneer is really the most meaningful on-ramp to the digital economy. I mean, some of those markets you'll see where we can even be like a top 100 most trafficked website in some of those markets. So it really is the acquisition of momentum that we have, I think, first and foremost, really does highlight just how much excitement, enthusiasm, and demand there is around the world among entrepreneurs across different verticals, across different geographies to participate in the digital economy. And we are seeing really momentum across all of our acquisition channels. So organically, we get the majority of applications just coming to Payoneer.com. As these entrepreneurs around the world know that Payoneer is the place to go to get started when they're beginning their journey in digital commerce. We also have growth in our banking partnerships. We had actually triple-digit growth in those bank partnership channels in terms of new customer acquisition and also in terms of volume through those partnerships. So that's working well. We get more customers through more marketplace relationships, and so that continues to be an important driver. And then we've also been actively investing in sales teams, and part of what Michael was just touching on is, You know, we've been making bigger and kind of a higher percentage of our investments in our go-to-market teams are in some of those markets that we think have just huge potential but are less developed and less penetrated. So we're growing faster in Latin America with our go-to-market teams, and they're doing a terrific job. We're growing faster in the Middle East. with our investments there, and we opened up a new office in Dubai earlier this year, and we're seeing terrific opportunities in that region. Eastern Europe, we continue to broaden and expand not just the geographic footprint but the size of the team there, and we really are then seeing great opportunities. So really in a lot of different markets around the world, we're seeing similar momentum, excitement, enthusiasm, and trends among entrepreneurs, There's kind of this remarkable kind of commonality in the way entrepreneurs around the world are kind of seeing opportunities. And we are really leaning in to try to be their partner to help them capitalize on all of that opportunity that exists for them.
spk05: Got it. That's very helpful. And then I'd like to touch on the value-added services piece. So clearly you've been able to successfully cross-sell into your customer base. So how are you identifying and reaching these customers, and how much untapped opportunity still remains to cross-sell in the future?
spk07: Yeah, I mean, we're still pretty early in actually developing and flexing those muscles. So we have multiple ways that we actually go to market with those. And a way to think about it is we've got a chunk of our customer base that we would describe as being managed, where we actually have people that are assigned to manage those relationships. As you might guess, those would be typically a bit higher, larger volume, higher value customers. And then we have a large pool of customers that are self-serve customers. And we actually have tools for upselling in both of those different pockets of our business. So on the self-serve platform, We have ways, different parts of the infrastructure where we can actually present new offers. We obviously have a CRM platform where we have a variety of different ways of messaging and communicating. We host events around the world where we also will actually share information about new opportunities for our customers. in kind of larger scale. So we continue to see great, great opportunities there. We continue to refine those tools, but we've already seen a good amount of effectiveness as we actually deploy those. And then with our go-to-market teams, which are growing, again, that's a growing part of our sales organization, are not just net new sales, but also our customer success teams. and the teams that are managing our larger enterprise accounts. And those are areas where, again, I think we're still pretty early in not just building out those teams, but actually in kind of upselling new services to our existing customers. So we've already proven it out that we know how to do it, but we also know there's a long way to go, not just in improving it, but also we have lots and lots of customers that we believe there are more opportunities high-value services that we can bring to them. Merchant services, I'll just give another illustration. You know, we now have teams in multiple parts of the world that work with our enterprise customers that have actually now been going out and engaging with those customers, talking about our payment technology, and we're actually seeing a lot of good opportunities and already some good wins and a really nice pipeline that's developed there. So, again, on some of these, especially the kind of longer sales cycle type ones, it can take a little while for that to ramp up. But it's a muscle that we're actually building, and it's going pretty well.
spk05: Very helpful. Thank you, Scott. Yeah, thanks, Jeff.
spk01: Thank you, Mr. Siegler. The next question comes from Bob Napoli with William Blair. Please proceed.
spk09: Great. Thank you. Good afternoon, Scott and Michael and Iggy. Nice quarter, I guess. I mean, really solid results, and I think the guidance is pretty solid as well. There was some cautionary tone, I think, on the last question. and I think even some on this call, but it sounds like broadly there's a lot of momentum in the business. You know, what is doing better than what you expected when you gave guidance last quarter? And, you know, the EBITDA as well, just on the profitability side, falling through to the bottom line. So what changed versus last quarter that gave you the upside, not only in the top line but also on the bottom line?
spk07: Great. Hi, Bob. I'll start, and then Michael will chime in. So first, you know, again, I think in hindsight, I think in Q2 almost felt like a little bit maybe like the canary in the coal mine about some of what was going on around supply chain. And I think you know us, you know, in general, we try to be pretty cautious and moderated in the way we talk about things. In general, I would say we're executing well really across a lot of the different things that we're working on. I mean, B2B APAR continues to perform well. The customer acquisition continues to go really well. It's still, you know, on the smaller side, but we've had really nice momentum pickup with the commercial card through the third quarter. And then those bank partnerships, again, really starting to kick in. And so, again, all of these areas. have done quite well. And broadly speaking also, as I touched on earlier, the non-e-commerce portion of our business and the kind of broad geographically distributed portion of our business also performed well. So overall, I think what we're seeing, again, is kind of some of the fruits of the seeds that we've planted here over the last couple of years are coming to bear. And overall, we're seeing a lot of good, solid execution. And again, in portions of the market, it's cooperating. In other parts, you know, we certainly would benefit from a little bit of extra tailwind. But I think what we showed this quarter and what we're excited about looking forward is that that, again, we think provides upside to where we are now. I would just add that we're very experienced in terms of managing risk. In terms of where we were at the end of the second quarter, we were being cautious because we do have a great vantage point in understanding where things are going. We saw the supply chain challenges. We understood potential reverberation. Those challenges continued longer, I think, in in terms of the supply chain than we had hoped. But we took a conservative view on working capital. As Scott mentioned, we were more cautious.
spk06: I think we recognized that we had very good risk management processes in place and were able to adjust for that. So I think one of the things that we'll see when we talk about the margin is that the costs for working capital came down and the adjusted provisions to reflect the actual risk. So that is something that we hope to continue to accelerate going forward and that we feel more comfortable that we've measured what the risk is.
spk09: Thanks. And then just on first of all, I know you don't comment specifically on individual clients, but I was wondering if you have any commentary on how the eBay expansion is is going, uh, you know, especially given that, you know, they're, they've been moving off PayPal a lot faster, uh, than, you know, over the last couple of quarters. Uh, and then, you know, my last question would be just geographic market expansion wise, uh, where do you see the biggest opportunities? I mean, it seems like there's some really strong take rate opportunities in Latin America. Uh, but you know, where do you see the biggest opportunities for yourself, you to, uh, that it grow geographically. So eBay and geographic expansion.
spk07: Yeah. Great. So eBay, and I think they've commented on this, so more kind of echoing what I think they've already shared publicly. I think they've communicated that they've made good progress on overall their payment initiatives and It's something that we've been really proud to have the opportunity to work with them on such an important strategic effort as they've looked to improve the way small businesses around the world manage their payments around the eBay marketplace. And so they have made a lot of progress on that. and I think they've just recently provided some additional disclosure on that. So I think they are, as you said, pretty far along in that, and it's something that we've been, again, really happy to be able to cooperate and collaborate with them on that. In terms of geographic expansion, we really – there are – many, many opportunities, and we really are working to actually deploy additional sales resources in a number of different places. And again, I mean, even in markets like Western Europe and the United States, are relatively small for us. And as our portfolio of services continues to grow, we see big opportunities there. But I would say the biggest opportunities that we really get most excited about are, as you touched on, like Latin America, South Asia and the Middle East and North Africa, Eastern Europe. Actually, there are some amazing pockets in Southeast Asia where just Again, the activity is extraordinary in markets like Vietnam and Indonesia, the Philippines and other markets like that. So we really are seeing opportunities in a lot of different places. And I think you can kind of almost follow it as you – if you look around the world where you now are reading stories about – capital markets activity and venture investments and things like that. I mean, all of those become kind of self-fulfilling and self-reinforcing as ecosystems of kind of digital entrepreneurship are growing around the world. And so we end up really being both a contributor to that and a beneficiary of that. And so those are places that are seeing really the biggest impact transformation and the greatest kind of leapfrogging that we're seeing around the world. And as a result, again, we think there's kind of opportunities for faster growth and also, in a number of cases, opportunity to generate a higher take rate than what we would see in some of the bigger markets that are out there.
spk09: Thank you. Appreciate it.
spk07: Yeah. Thanks, Bob.
spk01: Thank you, Mr. Napoli. The next question comes from Ashwin Sherbakar with Citi. Please proceed.
spk08: Hey, good evening, and thank you for taking my question. Congratulations on the good quarter. I guess my first question is with regards to the transaction cost improvement. Is that sustainable going forward? I mean, certainly benefits this year, but what should we expect going forward?
spk07: Yeah, I think when you look at revenues minus transaction costs and look at that level of profitability, which is important to us and something that's grown very nicely, you can see that when you normalize throughout the quarters, there's actually been a lot of consistency. where we've been. So as we continue to grow, I think that the fundamentals are pretty sound at this point.
spk08: Okay. But the underlying factors that led to that, is that more of a year-over-year comp issue because of what was going on last year, things like that? Or should there be a path forward to continue?
spk04: Yeah, yeah, yeah. Sorry if I didn't clarify, sir.
spk07: Yeah, on a year-over-year basis, again, we continue to leverage our scale. It's one significant part of how we manage our transaction costs. But we've also, as part of a deal that we announced with MasterCard, we're able to structure our card costs on an ongoing basis where we've now improved our economics. So that's an ongoing benefit. We continue, as I mentioned before, to to manage, you know, our risk management as well. We've done a good job with that this year.
spk06: So all those should, you know, be for the most part at a relative steady state.
spk08: Got it, got it. And then the other question I had, when I looked at regional rev growth, right, I mean, obviously, you know, U.S. really solid results, other countries, and greater China is the one that had the... had the decel. Is there a way to kind of break that out with regards to how much is just, you know, what's going on inside China versus maybe supply chain crisis versus other factors? And I guess the more important question is, given you guys are more focused on exporters and exporting more stuff is the way out of a problem like this, What does that kind of – how does that inform your decision on, you know, making investments in the region to get back to a faster growth?
spk07: Yeah, great question and an important question. So, actually, there really hasn't been – any impact that we've seen related to some of the changes domestically within China. As you highlight, we're focused on exports. We work with Chinese businesses to help them grow around the world, and that continues to be actually an area of great focus there. I think what you're seeing there is more some of the less diversity in the nature of the business's there than what we have in a lot of other parts of the world. So when there are supply chain issues, that's a part of the world that they actually are going to hit quite hard. When there's a slowdown in the growth of e-commerce goods purchases or in some contexts even year-over-year decline in certain contexts, again, that's a part of the world that's going to actually get hit a bit harder, where in other parts of the world for us, you'll see more of a mix of services and goods, and you'll see quite a variety, a greater variety of different types of activity. So in general, we actually continue to see exciting opportunities. We continue to see really just incredible and dynamic activity there with a lot of focus on exports. and a lot of encouragement as it relates to that coming from the government there. And that's something that we think actually is positioned in general to do well. But, again, that's something that will snap back more as digital commerce actually comes back. So we are investing faster in other parts around the world, but it's certainly still a part of the world that we're actually upbeat and optimistic about. Understood. Thank you for that nuance. Appreciate it. Yeah, no, great question. Thanks, Ash.
spk01: Thank you, Mr. Shervick. All right. There are no additional questions registered. So as a reminder, the star 1 on your telephone keypad. There are no additional questions waiting at this time. So I'll pass the conference over to Mr. Golick for closing remarks.
spk07: Great. Thanks. I'll keep it brief. I mean, really, thank you, everybody, for your time and for all the great questions. Again, really. Happy to have the chance to talk with you. We think we really have had a really strong quarter. We really think it highlights so many of the powerful trends and themes happening with digitalization around the world, but maybe more importantly, around how our growth strategy is really positioning us. to have a durable and resilient business model well positioned for growth in the future. So we look forward to talking more in more detail. If you have any questions, obviously, please don't hesitate to reach out to our team and let us know how we can help. And thank you again.
spk01: That concludes the Payoneers Third Quarter 2021 Earnings Conference Call. Thank you for your participation. You may now disconnect your lines.
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