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spk00: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Payoneer's fourth 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. 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 are available in the investor relations section in 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 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 Gallat, 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.
spk03: Good afternoon, and thank you all for joining us today to discuss our fourth quarter 2021 results. Payoneer had a very strong fourth quarter. We delivered revenues and adjusted EBITDA well ahead of our expectations as we continue to drive strong new customer acquisition and increasing adoption of higher value services, especially in faster growing markets around the world. We are building exciting momentum with small businesses, marketplaces, and partners globally who rely on Payoneer to provide them with the growing suite of services they need to pay and get paid, to grow and to manage their digital businesses. The Payoneer brand is an important and growing asset as we see increasing demand among small businesses to participate in the digital economy across a diverse range of vertical markets, including e-commerce, freelancing, social platforms, digital marketing, remote work, travel, and distance learning. Payoneer has emerged as a leading on-ramp to the global digital economy for small businesses worldwide, reinforcing our growing role as the world's go-to partner for digital commerce everywhere. And our growth is truly global and diversified. We had year-over-year growth of over 50% in regions like Latin America, Southeast Asia, and South Asia, the Middle East, and North Africa. We see tremendous untapped potential in developing markets globally, and our go-to-market investments in these exciting markets are delivering strong results as we continue to have a new customer payback period globally of less than 12 months. We also continue to build momentum with the Pay In Your Partner ecosystem. One of our key initiatives is growing our bank partnerships as we collaborate with banks and digital wallets around the world to acquire new customers, and to offer our joint customers a unique, integrated experience. We have banked partnerships live on four continents, and in the fourth quarter, we once again had triple-digit growth with these partners. We have a strong pipeline of additional partner opportunities, and we expect partnerships to be an important contributor to our future growth. We are particularly excited by the progress we're making executing on our strategy to broaden Payoneer's portfolio of higher value services and to increase the number of Payoneer customers using these services. These higher value services collectively represent our efforts to become the financial partner of choice for our customers and to generate higher take rates from our customer relationships. Once again, our global B2B APAR offering was a key contributor to our growth in the fourth quarter. B2B APAR volumes grew over 75% year over year, accelerating sequentially from the third quarter. B2B APAR represented 11% of our volume, up from 7% a year ago. 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. We are increasing our investment in B2B APAR, hiring more sales resources, and working with our global teams to acquire new customers and upsell B2B APAR to existing Payoneer customers. The majority of our B2B APAR customers are 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 also pointing to the significant incremental addressable market opportunity we have in B2B APAR. We are also seeing strong customer demand for our Payoneer Commercial MasterCard, which enables our small business customers to use their Payoneer global multi-currency account to pay international suppliers, buy advertising, and make other purchases to support the growth and management of their business. This is a compelling tool for businesses that aren't based in the U.S., but are selling globally. During the fourth quarter, we ramped up our acquisition of customers for our commercial card and also introduced more customers to our cashback rewards programs. together resulting in customer spend more than doubling from the third quarter. The Payoneer Commercial Card is a higher value service that helps our customers better manage their business and drive their growth, that saves our customers money, and then generates a higher than average take rate for Payoneer. While we are still in the relatively early stages of growth for our commercial card, we are optimistic about the unique value proposition we offer and the long runway ahead for this exciting opportunity. Working capital is another important driver of value for our customers and partners. In the fourth quarter, we announced our partnership with Walmart, collaborating to provide Walmart sellers with easier access to the funds they need to grow their businesses. And merchant services. This is one of the largest market opportunities in digital commerce. We continue to gain traction with businesses of all sizes around the world that are choosing Payoneer technology to simplify the complexity of their global consumer payments. This is a great opportunity to upsell existing customers and acquire new customers. We're especially excited about Payoneer Checkout, our offering for small businesses. While it is still very early in our gradual rollout of Payoneer Checkout, we are getting positive customer feedback and we are building momentum for what we expect will be an important growth driver for many years to come. Overall, these new services are core to our strategy to drive an important evolution in our business as Payoneer customers are increasingly using our platform for a broader set of more sophisticated and higher value services. Many small businesses are using Payoneer more as their primary global financial partner than as a payment processor. In aggregate, as of December 31st, 2021, our customers maintained more than $4 billion of balances on the Payoneer platform pending their use of one or more of our services. To help illustrate our customer relationships, I'm going to share a couple of stories of some of our inspiring customers that highlight the exciting opportunity for entrepreneurs around the world and help demonstrate how Payoneer is an important partner supporting and enabling their growth. AutoDS, a dropshipping platform headquartered in Israel, helps over 10,000 merchants throughout the U.S. and Europe to automate their online sales processes. AutoDS relies on Payoneer's B2B APAR services to get paid by its clients while integrating with our API to enable other Payoneer customers to pay AutoDS with their Payoneer account balances. Another example is TrueSooth from Australia, a brand created by women for women delivering breast pain relief products. They use Payoneer to get paid for their sales on e-commerce marketplaces in the U.S., as well as using B2B ATAR to get paid for their B2B transactions with international wholesalers. They use the funds in their Payoneer multi-currency account to pay their suppliers and use the Payoneer commercial MasterCard to pay for online business expenses. In these examples, 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. First, R&D to broaden our product offering to enable our customers to have more and better tools to help them grow. And second, sales to increase the capacity of our local teams around the world to acquire new customers and serve and upsell services to our existing customers. as we have demonstrated that such investments have a positive ROI. These investments enable us to deliver more value to our customers, to further strengthen our competitive edge, and to improve our ability to monetize the volume on the Payoneer platform while also increasing the level of engagement with our customers. All of this momentum translated into strong results for our fourth quarter. We generated revenues of $139 million, an increase of over 47% compared to prior year results. Adjusted EBITDA was $13.5 million, which highlights the operating leverage in our business model, even while we continue to ramp up investment in the business. As a result of our positive momentum in an increasingly diverse set of geographies and vertical markets, as well as the growth of higher value services, our take rate increased meaningfully, to 86 basis points from 68 basis points in the prior year. Our continued solid financial performance reaffirms our ability to create strong value and monetization, and we remain excited about the long-term market opportunity for digital commerce globally and confident in our multi-year strategy to be the world's go-to partner for digital commerce everywhere. Now let's take a look ahead at 2022. When we went public, we shared that we see a big opportunity to support many more digital businesses around the world with more services and that we are committed to delivering sustainable shareholder value creation over the long term. We laid out our multi-year strategy to drive revenue growth in the short term and sustained 20 plus percent revenue growth and 20 percent plus EBITDA margins over the long term. The strategy called for us to put significant resources towards acquiring more customers with increased investments in developing markets like Latin America, Central and Eastern Europe, and South Asia, the Middle East, and North Africa. To also expand our services to support customers across all digital sales channels and to increase the number of higher value services we bring to our customers through their Payoneer global account. When we went public, We set expectations that we would deliver 25% revenue growth and have negative adjusted EBITDA in 2021 and 2022 while we ramp up investments. I'm thrilled that in 2021, we executed ahead of our expectations on almost all dimensions of our strategy, well exceeding our revenue growth and adjusted EBITDA targets and actually delivering positive adjusted EBITDA even while we have been increasing our investments as planned. In short, We executed very well in 2021 and reinforced our conviction that our multi-year strategy is on target and that we are generating positive returns from our investments. We are really excited for 2022 and we will continue to increase our investments consistent with our multi-year plan. We see great opportunities to invest in several important areas that we expect will drive sustained long-term revenue growth and profitability, including more sales resources, especially in developing markets, increased investment in B2B APAR with more go-to-market and R&D resources, significant investments in R&D overall to expand our platform and develop additional services for customers, especially in merchant services, and continued investments in compliance and risk management to maintain our competitive advantage. Given our strong position, brand, momentum, and large market opportunities, I'm really optimistic about our future. We are building on a solid foundation and really just beginning to explore our potential as a global platform enabling businesses to succeed across all digital sales channels and with the broad range of services that they need. We have a highly resilient business model with a differentiated competitive advantage. We win in the market because of our global brand, our strength in developing markets, our strong ecosystem of partners and marketplaces, the breadth of our offering for our customers, deep risk management and compliance expertise, our amazing team, and our scalable business model. I would like to thank the Payoneer team for their great efforts to deliver real value for our customers, to deliver positive financial results, and to set us up for sustainable long-term success. Our team really is the key to our success. So we're also making meaningful investments in employee compensation, employee experience and employee development. People really are at the heart of everything we do. And we are particularly focused right now on the safety and wellbeing of our employees and customers in Ukraine. And our thoughts are with them during this challenging time. The current conflict is causing some disruption to our business and will likely have some impact on our 2022 business results. Russia and Belarus together represent less than 3% of our revenues, and combined with Ukraine represents slightly less than 10% of our revenues. Altogether, we had projected these countries to generate revenues of approximately $46 million during the remaining 10 months of the year. As the situation in Ukraine is quite new and evolving very quickly, we are analyzing a variety of scenarios and we have not yet updated any of our plans for the year. We remain both concerned for our colleagues and customers in Ukraine and confident in our ability to deliver growth in 2022 and beyond. I'll now hand it over to Michael to discuss financial results and forward guidance in more detail.
spk04: Thank you, Scott. And I'm very happy to share more detail on Q4 and discuss the strong exit philosophy that helped us achieve a great overall year in 2021. And more importantly, has positioned us well for 2022 and beyond. In the fourth quarter, revenue increased 47% year over year to 139 million dollars. As Scott mentioned, the strong Q4 performance was driven by new customer ads, continued momentum with marketplace wins and new partnerships, and customer adoption of higher value services such as B2B APAR, working capital, and paying your commercial card. To illustrate the impact of some of these higher value services, fourth quarter volume for B2B APAR grew by over 75% year-over-year and represented approximately 11% of total volume for the quarter compared to 7% of total volume in the fourth quarter of 2020. Keep in mind that B2B APAR has a higher than average take rate because we often collect revenues on funds coming in as well as on funds going out. So the take rate is currently running in the ballpark of approximately one and a half times that of our average take rate. Thus, B2B APAR is already in the mid-teens as a percent of total revenue. The continued growth of higher value services High-growth markets and non-volume-based services helped drive the Q4 take rate to 86 basis points, a significant increase from 68 basis points in Q4 2020. As expected, it was a holiday season mix shift to e-commerce and large sellers with lower pricing, so we saw a slight dip from the 90 basis points we reported in Q3 2021. In the fourth quarter, volume increased 16% year over year to $16 billion. We had good quarter-over-quarter growth in e-commerce during the holiday season, but changes in consumer purchasing behavior and lingering supply chain disruptions that impacted e-commerce businesses weighed on our year-over-year volume growth. Over the last two years, our fourth quarter volume grew at a 34% compounded annual growth rate. Nevertheless, revenue continues to grow faster than volume based on the positive transition in our business to higher value services and customer segments. Thus, volume growth alone is not fully reflective of the overall health of the business. Q4 transaction costs were $28 million, representing 20% of revenues, a significant improvement from 25% in Q4 2020. The improvement is driven by ongoing benefits from operating leverage derived from our unique scale and improved risk management. Q4 revenues less transaction costs. increased 57% year-over-year to $111 million, representing 80% of revenues, an increase of over 500 basis points from the same period one year ago. Q4 total operating expenses, including transaction costs, were $143 million, up 38% from Q4 2020. We made the most significant investments we've ever made in our business in 2021. And as we continue to invest for future scale, particularly in R&D and sales and marketing to drive future growth, excluding stock-based compensation, Q4 total operating expenses increased 28% over Q4 2020. Q4 adjusted EBITDA was $14 million as compared to a loss of $1 million in the fourth quarter of last year. Net loss for Q4 was $19 million, or a loss of six cents per share, based on weighted average basic shares outstanding of $340.6 million. I'd like to note that in the investor section on our website, we have updated our detailed share count, which addresses the current basic shares outstanding, as well as all equity awards, contingent shares, and related restrictions or exercise prices, as the case may be. We ended the quarter with cash and cash equivalents of $466 million. There is an additional $4.4 billion of customer funds on our year-end balance sheet, more than half of which are held in interest-bearing accounts. The interest on these funds is recorded as revenues. While not meaningful in a low-interest rate environment such as we have today, we could see upside if interest rates increased. Full year 2021. This strong quarter capped off a very successful year. Revenue for the full year grew 37% to $473 million. Revenue less transaction costs for the full year 2021 increased 50% to $372 million. And adjusted EBITDA was $28 million, an increase of $22 million over full year 2020. Now, turning to our outlook for 2022. Based on current business trends and the situation in Ukraine, we would like to walk you through the puts and takes of our full year 2022 guidance as follows. Our initial outlook assumed revenue in the range of $576 million to $586 million, which would reflect year-over-year growth of 22 to 24%. However, given the rapidly changing situation and uncertainty in Ukraine, we felt it was important to adjust our guidance to bookend the possible impact to our results. As Scott mentioned, Russia and Belarus combined represent less than 3% of our revenues, and together with Ukraine, are slightly less than 10% of revenues. Altogether, these countries are projected to generate approximately $46 million of revenue during the remaining 10 months of this year. Therefore, we have taken a conservative approach and reduced our guidance range revenues by $46 million, which is 100% of the expected revenue from Ukraine, Russia, and Belarus for the remainder of the year. The result is revenue in the range of $530 million to $540 million, which would reflect year-over-year growth of 12% to 14%. If we exclude Ukraine, Russia, and Belarus, we expect the rest of our global business to grow 22% to 24%. Our initial outlook is modeled based on revenue growth being driven approximately equally by volume growth and take rate improvement over 2021. We anticipate customers' adoption of higher value services such as B2B APAR, Payoneer Commercial Card, and merchant services to support a higher take rate. Our volume expectations include assumptions about the current inflationary pressures, residual supply chain issues, and evolving consumer behavior. We expect transaction costs to be approximately 22% of revenues. We expect cost benefits from the ongoing scaling of the platform, which will be slightly offset by higher borrowing costs for our working capital products, as well as new costs related to our growing merchant services business. Our stellar 2021 results demonstrated our ability to acquire customers at scale and sell new, higher-value services to our existing customer base. As a result of this success, we are continuing with our plan to increase our OpEx investments in 2022. These investments are focused on go-to-market, mainly adding more sales resources in high-growth markets, and R&D, mainly focused on our higher-value services, such as B2B APAR, Payoneer Commercial Card, and Merchant Services, as well as compliance and risk management capabilities to further differentiate our platforms. Our initial outlook, in our initial outlook, we forecasted adjusted EBITDA to be breakeven or slightly positive for the year, reflecting the increased investments that I just mentioned. Our approach has been and will continue to be focused on making the right long-term decisions to build a much larger scale business. While these investments will impact near-term profitability, our demonstrated operating leverage, an efficient customer acquisition model, positions us to achieve our long-term growth and profitability targets. As the situation in Ukraine is fluid and evolving quickly, we have not yet updated any meaningful changes to our investment plans. So the adjusted EBITDA ranges shown in the table assume our current investment plans are unchanged. As such, our adjusted EBITDA guidance is negative $25 million to negative $35 million. in conclusion q4 was a great end to a terrific year for paying near our ability to execute throughout 2021 and perform despite supply chain and lingering pandemic challenges reinforces our confidence in our multi-year growth strategy to invest aggressively to build a much larger platform and to be the go-to partner for the future of digital commerce Despite the very unfortunate situation in Ukraine, our management team is highly experienced and always manages for the long term. We have built a global business with a diverse and resilient set of customers who understand the digital commerce landscape and will adjust as needed over time. Our guidance demonstrates our ability to produce double-digit growth, even in a downside case scenario during this once-in-a-generation event. We have never lost our entrepreneurial spirit nor our confidence in the growth of global commerce. As such, we plan to use a combination of organic, inorganic, and partnering opportunities to drive sustainable and profitable long-term growth. On behalf of Scott and myself and the rest of the Payoneer management team, we thank you all for the continued interest and support. We are now happy to answer any questions you may have. Operator, please open the line.
spk00: Certainly, if you would like to ask a question, please press star followed 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 one. As a reminder, if you're 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 is from the line of Josh Siegler with Cantor Fitzgerald. You may proceed.
spk09: Hi, this is Keila Padden on for Josh. Thank you for taking our questions. As far as Ukraine exposure, is there any single platform that is responsible for that exposure, or is it diversified across a bunch of platforms?
spk03: Yeah, it's diversified across market segments across services that we provide, vertical markets, and different cross-border payment channels that folks are selling into. So it's a market that there's a fair amount of digital services being provided, but also a fair amount of e-commerce businesses that are being managed out of there. And in addition, also fairly active in B2B APR as well. So fairly diverse, very, very digitally forward market, and pretty broad-based.
spk09: Understood. Thank you. I appreciate the transparency there. And then on a separate note, how are you guys viewing the current acquisition market? Has there been any shifts in your capital allocation strategy?
spk03: No, I mean, we're continuing to consistently focus on opportunities to bring more value to more customers around the world. We continue to be focused on making an acquisition that is more likely to be in the kind of small to medium-sized range as opposed to large and really focus on something that will bring more value to our customers. So the market continues to evolve in a variety of different directions, but But overall, we've been pretty consistent in what we're focused on.
spk09: Okay, great. Thank you very much. Thank you.
spk00: Thank you, Mr. Segway. The next question is from the line of Will Nance with Goldman Sachs. You may proceed.
spk08: Good afternoon. Obviously a very nice quarter. Just wondering if you could talk through what you're seeing on the e-commerce side as it relates to e-commerce normalization and supply chain issues. I think that had been an issue in the past couple of quarters. Volume seemed to come in a bit ahead of expectations this quarter relative to your projections. And are you factoring any additional disruption to global supply chains in the guidance that you're providing as a result of everything that's going on?
spk03: Yeah, so So, in general, what we've seen is a bit of a moderating of supply. We wouldn't say things are 100% back to normal based on what we continue to hear in the market. We've seen if you track a number of the commerce brands that are public, they've reported generally
spk06: really strong two-year numbers every year and that's pretty been seeing we again as of now again some challenges is but certainly moderated from part of last year looking forward we're expecting the current trend to continue with, again, general and also more moderate supply chain and logistics issues.
spk08: Got it. That's helpful. Appreciate it. And then I guess as a follow-up, I'm wondering, I appreciate the color on the take rates there. I'm just wondering if maybe to dig a little bit deeper on the On the total pie of higher margin revenue, B2B for initiatives, financing, et cetera, what percentage are you contributing today and over a longer period of time? Where do you think that goes to when you kind of model out?
spk06: B2B is by quite a bit. So we haven't disclosed.
spk03: what the rest represent, but B2B overall is larger than the rest combined. We really see just being at the very, very beginning here of the opportunity, like the commercial card, which we touched on. I mean, we're not even you know, getting to 1% of the volume in the business with the penetration that we've had so far. So there's a lot, a lot of opportunity. And these higher value services have the potential to be larger than the rest of the businesses, as we sit here now. So we're very, very enthusiastic about where we're going. As Michael has mentioned in the past, you know, each one of these is a large addressable market opportunity. And we happen to be in a very fortunate position of being able to bring some really, really great value to a global set of digital businesses. And we're really seeing very, very positive feedback and tremendous opportunity ahead.
spk08: Got it. Appreciate all the call, guys. Thanks, Kim, for taking the questions.
spk05: Thank you.
spk00: Thank you, Mr. Nance. The next question is from the line of Mayank Tandon. With Needham and Company, you may proceed.
spk02: Hey, good evening. This is actually Sam Salvatron from MyOnc tonight. Congrats on the results and thanks for the color relating to the Russia-Ukraine situation. I just wanted to touch on the Walmart month since you guys announced the partnership. And I was just wondering if you could talk about how things have progressed since then. and maybe how they've progressed compared to your expectations. Thanks.
spk03: Thanks, Sam. So in the lines of what we expected, we typically don't disclose anything specific about any particular partners. But in general, we're really excited about the opportunity to collaborate from customers, and we're looking forward
spk06: that's been growing as we go through.
spk02: And then just mostly grown, you know, the business organically so far and have mentioned the interest in pursuing M&A and you just mentioned organic growth in 22, what the appetite is for M&A today and what some potential areas of interest might be?
spk03: Yeah, so we are focused on so much opportunity and so much need among our team does a terrific job of really engaging with and listening to our customers. And so what they have is opportunities and challenges, and we also have a sense of how much they rely on Payoneer to help them actually solve their challenges. So we have a long list of opportunities that we think can really help businesses globally succeed and grow. And so you'll see us focusing on some of the kinds of areas that we've touched on. And again, these big areas for us, like B2B APAR and merchant services and working capital and CARD, And and looking at the vertical markets like e-commerce. I mean all of these are kind of broad they are specific products and And so we think there's a lot of opportunity And capabilities that we And fit within this kind of very broad framework of these very large market opportunities that actually can really help them grow so we're focused on buying something again, it would be more of a product that driven approach and something that we could globalize where there aren't that many companies that we would be able to buy that are already global. And so it's a really great value proposition into our global infrastructure and our global customer teams as well.
spk06: Got it. Thanks. That's super helpful. Congrats again on those results. Thank you.
spk00: Thank you, Mr. Tandon. The next question is from the line of Bob Napoli with William Blair. You may proceed.
spk07: Thank you. Good afternoon, Mike, Scott. Nice fourth quarter and, you know, all the best on the for everybody. But just on the B2B APAR, it's a percentage of revenue. I guess you get 11% of volume up from 10%. Last quarter, higher take rate. So it looks like the total revenue in the fourth quarter, somewhere in that range.
spk06: Yeah, we kind of put it as mid-teens, so within that ballpark.
spk07: Okay. And then the... I mean, how much has that affected, uh, I mean, the, which pieces are of that business are growing faster. The commercial card. How is that? Uh, is that, that's early days yet? Uh, I think you just rolled, uh, beginning of last year.
spk06: Yeah.
spk07: Uh, what are the pieces making that up and how should we think about the growth of that? Those, uh, value added services.
spk03: Yeah, sure. And thanks, Bob. So B2B APAR, there really are two main components to what we offer there. So one is a self-service capability for our customers to use our platform to bill their customers and request payments. And so that tends to be used by customers that are On average a bit smaller and for transactions that are a bit smaller And then we have another part of that service which is enabling our customers to Build their their their customers and use use us kind of like they had bank accounts around the world and a set of capabilities to get paid locally wherever their customer geared towards larger customers and larger transactions. And so those are the two main parts of B2B APAR. When we talk about commercial card, we're actually B2B APAR. So it's not included in those numbers that we talked about. It would be incremental to that. And a way to think about it would be that one of our customers that's using us for B2B APAR Think of that, the primary use case there is they're using us on the receivable side. So let's say they invoice their customers into their Payoneer global multi currency account. They then might use the Payoneer commercial card to pay a supplier or pay a SaaS subscription and essentially use the balance that came in from that $20,000 to support that. So those are essentially two different complementary parts of our overall set of services, each one of which actually has a lot of forward opportunity, and we actually have customers using both, but those are numbers that we keep separate.
spk07: Okay. Then those are growing. I mean, that's growing close to 100%. Is that the way to think about that?
spk03: You say that, sorry, the card?
spk07: Well, the combination looks like it's growing of the revenue of close to 100% in the fourth quarter.
spk03: Yeah, we're expecting... Sorry, Bob, I think there's a touch of a delay, I apologize. Yeah, we are expecting B2B APAR to continue to grow at strong double-digit growth rates well into the future. And commercial card is sufficiently small still that it will grow faster than that for a little while here. So, again, we think with both, we're really just scratching the surface of very, very large opportunities. And as a result, we think we've got quite a bit of room to run here at very attractive growth rates.
spk07: Thanks. And then just lastly, what new markets are you investing in Latin America? Where are you seeing real, uh, you know, where you have material volume, uh, in new markets, fast growth markets?
spk03: Yeah, we were seeing, uh, over 50% growth in, uh, markets in Latin America, in Southeast Asia and South Asia, Middle East and North Africa. and in some other places as well. So we really are seeing just a lot of enthusiasm around the world. The kind of move to digital and the focus among entrepreneurs around the world, recognizing that digital channels create an opportunity for them to really build global businesses has been accelerating, and we've got great teams that we've been putting on the ground with strong leadership locally in these markets and building really robust teams on the ground. So that's an important area of investment for us in 2022 as we really are looking to put the foot on the gas in many of those markets.
spk07: Thank you. Appreciate it.
spk00: Thank you, Mr. Napoli. The next question is from the line of Mike Grondahl with Northland Securities. You may proceed.
spk01: Hey, good afternoon, Scott and Michael. 47% revenue growth was very nice. Two questions. You guys mentioned sort of strong new customer acquisitions. Can you give us a growth rate on that, or is there any way to kind of quantify that a little bit? And then secondly, just any high-level comments on kind of the China-related business and how that trended?
spk03: Yep. So in terms of new acquisition, we had a terrific year, a record year for us overall, and actually our 2021 – New customer cohort was about 50% larger than the 2020 cohort, just to give you a sense, and I think more than double from 2019. So we continue to build strong momentum on the customer acquisition side, and we're doing that while retaining strong customer acquisition costs and economics and strong payback periods. So we're very excited about that. And on China, I think what you'll see is that the percentage ticked down overall as a percentage of the overall business, but we continue to have growth and opportunity there, and it continues to perform well. So again, not calling out China, and when we talk about some of the fast growth markets, I mean, it's a bigger market for us and continuing to grow, and we continue to be very excited about opportunities there, but we're seeing more green fields and we're kind of earlier in some of the ramp cycles in some of these other markets.
spk04: And Mike, we do have in our 10K, we do have breakout for China.
spk02: Okay, thanks.
spk06: Thank you, Mike.
spk00: Thank you, Mr. Grondahl. The next question is a question from the line of Ashwin Shivakar with Citi. You may proceed.
spk10: Thank you, Scott, Mike. Good to hear from you guys. Can I start with asking about how you expect sort of the cadence in the year to kind of play out the next four quarters from a volume revenue and also investment perspective and on that investment angle, when you say you haven't decided whether or not to proceed with all your investments, just a clarification, were there any specific regional investments that you were thinking of that you're now going to potentially pull back or were you thinking of maybe not making investments just because you have uncertainty in the business?
spk04: Yeah, maybe I'll start, and then I'll let Scott go a little deeper on the investment side. But, Ashwin, it's good to speak with you. From a volume standpoint, we would expect to see a pickup as we go throughout the year, actually. So, we would hope to see year-over-year growth rates increase as we go through the year. You know, a lot of the thinking about the cadence on investment is really a long-term approach because a lot of the investments we're making will affect, you know, years to come. And I think the comments Scott made about the higher value services really having traction and we're able to prove that and show that even for the earlier stage initiatives really gives us a lot of confidence to now be more aggressive and grab that opportunity. So we feel that we've really proven ourselves in 21, demonstrated our ability to execute and really in terms of making the investments to continue to build out and not only from a product standpoint, from a geographic standpoint, that these are really critical to building the scale platform that we really think we can achieve in the coming years. So it's been a strategy we've had since day one. We're consistent with that strategy. I think what we try to clarify in our approach, and we think it's a conservative approach in terms of how we handled the situation in Ukraine, is to, at this point, not make any adjustments from an investment perspective, keep them, you know, stay the course And our approach at this point is to continue to stay the course, but to evaluate the changes in the broader market and have the flexibility over time. So we don't, again, we're long-term thinkers. We've been as a team working together through many cycles, and we've seen much throughout our careers. We're patient, but we're also methodical in our thinking, and we don't rush to any decisions. And so we think we have the right strategy. We think we've been able to see where we're getting the traction in businesses and investing in those businesses that have models or businesses that we can model out with confidence. And so we're super excited to make these investments because we see this as, you know, clear to us at least that there's a great return on making these investments. And so we want to continue down that path.
spk03: Yeah. And just to add a couple of very brief points on top, you know, again, you know, as we go through the year, the investments will likely ramp. A lot of the investments involve hiring. We've also needed to increase the capacity on hiring as we look to bring more people on this year. So that also is something kind of hiring and building the hiring machine is something that's part of the early part of the year as well. Again, with a strong focus on both sales resources and R&D capacity as well. And again, just to amplify what Michael said, I mean, we are as enthusiastic as ever about our long-term opportunity, about our long-term target business model, about the – and we have more conviction than ever in the investments that we've made and have the opportunity to continue to make. So as of now, we're continuing to move forward. And as Michael said, I mean, you know, we've managed the business in an EBITDA-positive way since 2012. We've done that through a variety of twists and turns and ups and downs, and we think we've got a really good formula here for investing for the long term and doing it in a thoughtful and responsible way. So, as Michael said, we'll continue to monitor the situation, but as of now, we remain very, very excited overall about the opportunities ahead and are continuing to push forward.
spk10: Got it. Got it. The second question I had was just if you don't mind stepping back a bit and kind of talking about take rate because you mentioned a couple of times, you know, higher value services and so on, which should result, I think, in an improvement in the take rate. And then mix may also help is my suspicion. Okay. certain of the types of things that went away during the pandemic potentially come back. So, can you just talk about some of these factors and what you expect with regards to take rate? Thank you.
spk04: Yeah. So, Ashwin, you're correct that these higher value services definitely help support increasing take rate. We do expect, as we mentioned, that, you know, and our focus is on really continuing to drive revenue growth, and that's coming from a combination, almost an equal combination of volume growth and take rate improvement.
spk06: You know, as we grow, obviously, the mix shift, look at travel, which actually lower take rate than average, continues to grow, that would mitigate what we get.
spk04: from the higher value services, but all in all, the net benefit will be, we're expecting a net increase to take rate over 2020 driven by those higher value services.
spk03: One other note just to add is as we add more sales resources, we've touched on before that our customer base is a mix of smaller customers
spk06: customers that our sales teams work with, and the smaller ones have higher take rates than the average.
spk03: And so as we add more sales resources that bring on more customers that on average are larger, that has, again, another dimension of a mix also to take rates. So our sales teams are also focused on selling in higher value services, but on some of the services that can have a negative effect on that line of take rate, as Michael said, and take rate growth.
spk06: But there are, again, puts and takes within that.
spk10: Understood. Thank you both for that. Thanks, Ashley. Thanks.
spk00: Thank you, Mr. Sherpa. The next question is a question from the line. Andrew Hummel with West Park Capital. You may proceed.
spk05: Hey, guys. Thanks for taking my question. I just wanted to follow up a little bit on the, you know, I appreciate the conservatism, I think, from a revenue perspective and, you know, kind of pulling that all out of the forecast.
spk06: There's, you know, are you guys still seeing
spk05: money flowing through the platform in some of those areas. Do you expect that to continue if that's the case? I guess I'm just trying to gauge that pulling it all out implies.
spk03: Thanks, Andrew. A couple of points. First, just to avoid any confusion, fully complying with all sanctions, obligations, and so everything that we need to do, we're doing, and we have a large team focused on that, and it's something that we do quite well. What I would say is that there's quite a bit of, it's a pretty fluid situation right now. We are continuing this the activity. We also, you know, when we look forward, you know, part of what's interesting and one of the major trends of digitalization and frankly, something that we've talked about more coming out of COVID is actually kind of where people work is actually more fluid than ever. So they're, There's quite a range of outcomes here. We have folks that are moving. We are seeing folks that are looking for support and help. And we are seeing folks that want to continue to work. Actually, I mean, we're from people that are developers that need to fill their time with something other than worry. And so there's all kinds at this point. Again, it's a very, very...
spk06: And so, again, really impossible to predict anything with great accuracy here.
spk03: We remain, for many, many reasons, quite hopeful for folks. But from a business perspective, we think it's appropriate to, again, take the conservative approach here.
spk05: Okay, that makes sense. That's just one other question around some of these other marketplaces that you guys have outside of the e-comm base. I think from a broader market perspective, I think it's easier to kind of peg e-comm to broader market trends, but Can you just talk through some of the verticals that maybe you're seeing the most strength in some of those other marketplaces and how should we think about the bucket of customers long-term perspective or even how to what you guys are seeing in the e-com marketplace side?
spk06: Thanks.
spk03: More exciting parts of who we are and what we do. And I think, you know, 2020 really amplified the strength of other vertical markets. And so remote work and freelancing and global service providers, tremendous growth in the number of people around the world working a variety of different models and some set of services that are needed by both the company or people buying the services as well as those providing them. And again, there's a range of models from sole traders working consistently to sole traders working in as freelancers to agencies and companies that are getting larger and are quite organized. Social platforms are growing quite significantly, and so that's a trend that I'm sure anybody with kids is quite aware of these days, and it's something where this whole realm of content creation and actually how that starts to blend with e-commerce is becoming quite interesting, and that's an area that we are seeing a lot of activity and a lot of opportunity around the world. Same thing with distance learning, although, you know, albeit a little bit smaller. Travel, again, there's a variety of different verticals that are actually quite interesting, quite exciting, that are developing. So we, again, we're super bullish about Just in general, the evolution of digital commerce across a variety of different models, and it's really, really global. And most of the companies that are participating are keen to be global, and they look for global partners that are credible and trustworthy and really can help them plug into one place and cover the world. So we're seeing it across, again, a very, very wide range of geographies and vertical markets.
spk05: Great. Thanks, guys. Really appreciate it.
spk00: Thank you, Mr. Hummel. The next question is a follow-up with William Blair. Please proceed.
spk07: Thank you. Just wanted to get a handle on the interest income and how you're managing. So you have $4.4 billion of customer funds on the balance sheet at the end of the year. How much of that is investable? How do you invest it? How should we think about interest income as the Fed moves rates up?
spk04: As I mentioned earlier, it's upside. So really make sure we protect our customers' funds, but at the same time, as we mentioned, more than half of the funds that are customer funds are interest earning. But we're still in a low interest rate environment. And so, you know, Bob, I definitely put it as upside if, you know, the Fed starts raising and rates go up, we'll be a beneficiary of that. But, you know, we don't want to get into the game of trying to guess if they're going to be in the year. So, We'll leave that as that there is upside. We don't bet on that in building our models. The incremental upside if rates move up.
spk07: Right. But if they raised rates 100 basis points, is that $4 million of revenue? Is that the best way to think about it?
spk06: Sorry, $40 million if they raised it.
spk07: 1%, right?
spk04: Well, if you earned it on the full amount. So again, we don't have all the funds we use. Those funds are going through the myriad of banks that we have in our platform. So not all the funds are interest-earning accounts. And again, our focus is making sure the funds get to where they need to be as quickly as they can and as safely as possible. But nevertheless, there is room to benefit from an increasing rate environment. So, you know, we actually do have interest income broken out in the 10K, so you can see where it was last year and do the calculation.
spk07: but you don't have any rate hikes in your guidance at this point.
spk04: In our expectations, we have a slight increase in interest income, but not anything.
spk07: All right. Just a quick big picture question. You guys have so much momentum with your higher value services. I'm just curious, you know, why were those not rolled out like five years ago? I mean, was there a technology evolution that it seems like you have rolled out several years ago, earlier?
spk03: You know, what I would say is, first of all, you know, financial services, it's not easy. I mean, you have to get a lot of things right. You have to get value proposition right. You have to get regulation and compliance right, you have to get risk management right. Yeah, there's a lot that comes along with it. And, you know, for a long time, you know, we invested to get a global infrastructure, solidify, you know, something that's, you know, frankly, it's not that easy to build and manage a global payment platform and acquire customers all over the world and then support those customers so so for us you know these of what we're doing as we listen to customers and we've actually been a leader and really a pioneer in many of the areas that we have that we talked about in our opening up so so for us it's something that we are excited about what we're doing. And we think we have already a nice amount of breadth to what we offer. And actually, our customers really do provide already today. And we focus on delivering quality for our customers. And it's something that we actually really look to continue to invest to do. So we're, again, going and we're getting very positive feedback from our customers as we do.
spk04: I would just add to that, Bob, I think you hit on which is that we've created a foundation now in terms of our reach and scale and our compliance and regulatory know-how that really the goal now is to continue to drive more product delivery, product creation and delivery through those channels. And I think this reflects why we're aggressively in that global go-to-market team.
spk06: So continuing to invest in the platform to develop products even faster and wider. We have a proven formula in the machine. Great. Thanks. Good to see the momentum there.
spk00: Thank you, Mr. Napoli. The next question is a follow-up question from the line of Will Nance with Goldman Sachs. You may proceed.
spk08: Hey, guys. Thanks for squeezing me in here. At the end, this is, I think, should be a very quick one, but I just wanted to clarify on the guidance, assuming we're trying to model to the Ukraine, Belarus, and Russia. There's a note that says that it assumes an approximately equal contribution from volume and higher take rates. I'm just wondering if you can drill down a little bit into that, just given we're going to want to put the Russia, Ukraine, Belarus impact through volumes. Could you expand a little bit on just what the volume impact is? And it's roughly 13% revenue growth at the midpoint. Are we thinking like 6% volume growth and the rest by take rate? I just want to kind of put that through the model.
spk04: We built our initial outlook with the assumption that volume growth rate, you can interpret that if revenue is growing 22% to 24%, you would take half of that growth rate in terms of the volume. growth rate, and then the rest would be from the change in take rate, 22 over 21. In general, we also mentioned that if you take out Ukraine and look at the residual of the remaining countries, the growth rate, we had an initial outlook, basically meaning that those countries had a similar
spk06: to the overall. So, you know, I think it would be fair to just use that as your methodology. Got it. All right. Thanks for taking the call.
spk00: Thank you, Mr. Nance. That concludes the question and answer session. So I will pass the conference over to the management team for closing.
spk06: Great.
spk03: Thank you, everybody, as always, for joining and for asking thoughtful questions. We look forward to talking soon and wish everybody lots of health and success. So thanks.
spk04: Thank you, everybody.
spk00: That concludes today's Payoneer fourth quarter 2021 earnings poll. Thank you for your participation.
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