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spk01: Deputy Chief Financial Officer. 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 filing with the SEC, which are 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 contain 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 release, which is available on the company's website. With that, I'd like to turn it all over to Scott to begin.
spk13: Thank you to everyone for joining us today to discuss Payoneer's fourth quarter and full year 2022 earnings. I'll be discussing our 2022 results and CEO transition, which was announced earlier today. John will cover Payoneer strategy for 2023 and beyond. Michael will discuss our 2022 financial results, and Bea will talk about our 2023 guidance. Payoneer delivered record 2022 results, including revenue of $628 million, representing 33% year-over-year growth, and adjusted EBITDA of $48 million, representing 72% year-over-year growth. We are capturing opportunity in a growing $5 trillion addressable market because of our strategy to build a diversified business and to innovate to help SMVs compete globally. Our relative resilience in a challenging macroeconomic environment highlights the power of our network, the diversity of our business, the value we bring to our customers, their trust in Payoneer, and the capabilities of our team. Payoneer's 2022 revenue growth reflected continued customer acquisition, adoption of high-value services, and the full-year benefit of onboarding eBay in 2021. We also increased monetization of customer funds on the Payoneer platform, which is a core part of our business model and will continue to be so going forward. This was partially offset by moderate year-over-year volume declines at some of our e-commerce marketplaces. We have increased our geographic diversity Growing the share of our revenue from Latin America, APAC, and Samina to nearly 35% of our overall revenues in 2022, up from approximately 20% four years ago. These faster-growing regions also have higher average take rates. We are focused on building and growing high-value services, including B2B APAR, Commercial MasterCard, Working Capital, and Checkout, and we expect these will continue to drive growth in the future. We grew B2B APAR volumes by 39% year-over-year in 2022, and it now represents 12% of our total volumes, up from 9% in 2021. We drove a threefold increase in spend on our virtual commercial MasterCard year over year and exited 2022 with a run rate of over $1 billion. This is an example of how we are innovating to offer more ways for our customers to use their Payoneer account. We also remain optimistic about the long-term growth potential for our working capital and checkout businesses. In working capital, we intend to continue to grow, albeit with an adjusted risk appetite given the current environment. Long term, we believe there is meaningful opportunity to provide emerging market SMBs with access to the capital they need to grow. In our checkout business, we are seeing positive initial adoption and growth rates following our launch nine months ago. We have already announced partnerships with platforms including Shopify, ShopLaza, and WooCommerce. 2022 volumes of $61 billion were up 8 percent year-over-year and benefited also from a recovery in travel. Our long-term strategy to diversify geographically and grow high-value services and also increase monetization of customer balances enabled us to deliver 18 basis points of take rate expansion year-over-year. A year ago, we reported our earnings just as the war in Ukraine was beginning. Ukraine is an important market for Payoneer, and we remain committed to supporting our extraordinary Ukrainian customers and employees. Additionally, we work with our partners throughout 2022 to wind down our business in Russia, and as of December 31, 2022, we no longer send payments into Russia. 2022 was an incredibly strong year for Payoneer as we continued our track record of delivering consistent revenue and adjusted EBITDA growth. We have a strong foundation for our next leg of growth, and I am incredibly excited about Payoneer's future. On February 27th, the board appointed John as CEO, effective March 1st, while I will transition to the role of senior advisor and continue to serve as a board member. I'm looking forward to staying actively involved with Payoneer and plan to focus more of my time on strategic projects. As this is my last earnings call, I'd like to say thank you to all of our employees, our customers, and our shareholders for their support over the past 12 years. When we first announced John was joining Payoneer, we said that we'd look for John to transition to CEO by the end of 2023 to ensure we didn't rush the transition. The transition has progressed very smoothly, and after working closely together over the past nine months, The board, John, and I all felt now was the right time to move forward. I'm enthusiastic about the opportunities Payoneer has, and I have full confidence that John and the strong team that we have will deliver value for our customers, employees, and shareholders for many years to come. I'll now hand it to John to discuss our 2023 strategy.
spk02: Thanks, Scott, for your guidance and friendship as we work through the transition. I'm incredibly excited about Payoneer's strong position to capture a greater share of a growing market globally and recognize our long-term potential. I'm looking forward to leading Payoneer for its next leg of growth, from over $600 million of revenue to multi-billions in the years ahead. SMBs that transact globally have cross-border operations, expenses, and currencies to manage. They need a holistic and cost-effective solution for managing their global financial operations and accessing the capital they need to grow their business. Yet they are underserved by the traditional banking and financial system. In fact, approximately 90% of B2B payment volume relies on legacy payment methods. Payoneer provides these SMBs with the tools and services they need to grow their businesses. We plan to generate strong long-term revenue growth while driving greater operational efficiency. In 2023, Payoneer expects to more than double adjusted EBITDA while investing in future growth and profitability. I will now discuss our three core priorities going forward. Number one, delivering continued revenue growth. Number two, focusing our acquisition and service model on profitable customers. And number three, building our next generation technology platform. We remain committed to delivering long-term 20% plus revenue growth. We have created a network and infrastructure with scale and reach and benefit from a trusted brand that drives millions of customer registrations annually. We will leverage our strengths and focus our customer acquisition on higher take rate regions and on growing and scaling high value services. Payoneer is delivering a global financial operating solution for SMBs. Our core products, accounts receivable, accounts payable, and operating account capabilities are at different stages of their maturity and development. We intend to deliver a comprehensive product set that can increase our wallet share and drive greater monetization of existing customer relationships. Our B2B APAR business, for example, provides our customers with invoicing, billing, and payments tools to make and receive payments from their trade partners around the globe. Approximately one-third of our B2B customers are existing customers, where we were able to increase our value proposition. The remaining two-thirds are net new to Payoneer and represent a significant expansion of our addressable market opportunity. B2B customers tend to have more complex needs, including spend management and operating account functionalities, which increase their monetization potential over time. This underscores the big opportunity in front of us, and we expect B2B APAR to continue to grow faster than our business overall. We plan to also continue diversifying our revenue mix geographically. We remain focused on acquiring more customers in faster-growing, higher take-rate regions such as Latin America, Samia, and APAC. To accelerate our revenue growth and our ability to upsell and cross-sell, we are also evaluating inorganic opportunities. We believe M&A will play a meaningful role in our product roadmap and help us scale revenue growth. Our ability to attract a large number of diverse SMBs to our network is a core strength of our business. We are deepening our understanding of our customers' differences by size, geography, industry, and product utilization to better inform and focus our growth strategy. Different portfolios of our customers have different profitability profiles. Going forward, we will focus a greater proportion of our go-to-market on adding and retaining profitable active customers. At the same time, we will invest in our platform and product capabilities so that over time, we can profitably serve an even greater number of our customers and the prospects that come to Payoneer every day. Today, approximately a quarter of our active customers drive the majority of our volume, revenue, and profitability. On average, they tend to have the highest retention rates, growth potential, and most attractive unit economics. Within this segment are tens of thousands of customers who do more than $100,000 of volume annually. And we are focusing our go-to-market strategy and partnership efforts on acquiring lookalikes of these larger SMBs. We recently made changes to our go-to-market organization and leadership to fully align and accelerate our efforts. The balance of our customers, those who make a small portion of our volume and revenue, carry a significant cost to onboard and serve in today's operating environment. In aggregate, this group of customers resulted in approximately $25 million of operating losses in 2022. Additionally, we have seen a significant growth in the number of applications we receive every month. Our powerful brand attracts hundreds of thousands of customers every month. On average, we receive nearly 400,000 prospect registrations a month in 2022. up 25% versus a year ago. This is a core strength of our business and highlights the significant market demand for a Payoneer account. At the same time, however, we spent over $50 million in 2022 on processing applications that did not become active customers. This represents a meaningful opportunity, and we intend to continue leveraging our brand to cost-effectively acquire more SMBs while significantly reducing the cost to onboard and serve the smaller customers. In the near term, we have begun to address some of this drag on our earnings by implementing a set of focused efforts, including experimenting with new fees and pricing models. Payoneer has built a strong and trusted brand, and in many markets, we are on-ramp to the global economy for SMBs. The long-term mission for Payoneer is to profitably serve more of these SMBs, and we are making meaningful investments in our technology platform to do so. In 2023, we plan to invest approximately $30 million to build the next generation of our technology platform. We expect this investment will unlock significant value over time through greater automation and operating efficiency and faster product delivery, which will better enable our cross-selling and up-selling. It will also strengthen our platform so that we can meet the increasingly complex needs of our customers and global partners, particularly as compliance costs associated with operating a global financial services business continue to rise across the global financial ecosystem. Building the next generation of our platform will be a multi-year journey, and the first phase in 2023 will focus on our customer onboarding infrastructure. This includes enhancing our AI and predictive tools to better identify and reduce, in fact, the number of prospects applying that are unlikely to ever achieve our target unit economics and our profitability thresholds. We expect to begin seeing the benefits of our investments towards the end of 2023 as we begin transitioning to our new platform. At this time, we expect that half of our investment in 2023 will be expensed, which is reflected in our guidance, which Bea will discuss in more detail shortly, while the remainder will be capitalized. We plan to also spend an incremental $20 million in our compliance function in 2023 to support ongoing growth of our high-value services and the increasing regulatory complexity of our industry. We will invest in infrastructure, personnel, and plan to add to our global licenses framework to support our future growth. This is required to facilitate the current business we operate, but it importantly also serves as a significant competitive moat. It is increasingly challenging and expensive for any competitor, fintech or traditional bank, to build the infrastructure necessary to operate across the breadth of markets and industries in which we serve customers. We recognize the opportunity we have at Payoneer is extraordinary. For our customers, we will continue to innovate and to evolve our offerings so we can deliver a comprehensive suite of financial services to SMBs with global needs. For our communities, I am proud to announce that at the end of 2022, we established the Payoneer Foundation for all of our charitable efforts. We plan to support organizations that are deeply aligned with Payoneer's values, including small business development and supporting global entrepreneurship. For our employees, we are dedicated to recruiting and retaining the best individuals and ensuring Payoneer remains a great place to work. Our 2022 results and our forward momentum are a direct result of our experienced leaders and talented employees around the world who are passionate and focused on our mission. And for our shareholders, we are committed to delivering sustained long-term profitable growth. Before I hand it over to Michael and Bea to discuss fourth quarter financial results and forward guidance in more detail, I'd like to announce that our board of directors have appointed Bea as our CFO effective March 1st. I want to thank Michael for his leadership and friendship over the past 11 years. With that, over to you, Michael.
spk03: Thank you, John, and thank you to everyone for joining us. Payoneer delivered another strong quarter and exceeded our guidance for full-year revenue, transaction costs as a percentage of revenue, and adjusted EBITDA. We saw 30% or greater year-over-year revenue growth in each quarter of 2022. Q4 revenue increased 32% year-over-year to $184 million, driven by growth of high-value services, continued customer acquisition across diverse geographies, and accelerating interest income from growing customer funds and rising interest rates. Sequentially, revenue increased 16 percent, which also benefited from our typical Q4 seasonality. Q4 volume increased 5 percent year-over-year and 12 percent sequentially to $16.9 billion. Volume growth year-over-year was driven by recovery in travel and continued growth of B2B APAR, while e-commerce volumes were slightly lower compared to Q4 of 2021. B2B APAR volume growth for Q4 was 10% year-over-year as we saw the full quarter impact of customer terminations we made in the third quarter. Q4 take rate was 109 basis points, up compared to 86 basis points in the fourth quarter of last year and 105 basis points in Q3. Sequentially, the take rate expansion was driven by higher interest income, partially offset by holiday seasonality, which drives mix shift into large e-commerce customers with lower take rates. Customer funds held by Payoneer have increased nearly $800 million sequentially and over $1.4 billion year-over-year to $5.8 billion. Customers value the ability to get paid, manage their multi-currency funds, and make payments around the world. Note, some of this fourth quarter growth is also seasonal. we have been driving greater monetization from customer fund balances by leveraging our scale to get better economics and a greater share of each subsequent interest rate increase. Further, by working with regulators to secure the appropriate approvals, we were able to optimize our allocation of customer funds to interest-bearing accounts. Now, over 80% of customer funds are earning interest versus over 50% a year ago. We earned $36 million of interest income from customer balances in the fourth quarter, up from less than $1 million in the prior year period. Sequentially, interest income increased $21 million. Q4 transaction costs were $30 million. This represented 16.6% of revenue, an improvement from 20.2% in the fourth quarter of last year and 17.6% versus Q3. Transaction costs grew at a lower rate than revenue, primarily due to higher interest income revenue. Bank and processor fees, the largest component of transaction costs, increased 8% year-over-year driven by higher volume as well as strong growth in B2B APAR, which has relatively higher transaction costs. Q4 revenue less transaction costs increased 38% year-over-year to $153 million, representing 83.4% of revenue. Q4 total operating expenses, including transaction costs, were $192 million, up 34% year-over-year. Excluding transaction costs, operating expenses of $152 million increased 40% year-over-year and 19% sequentially. On our third quarter earnings call, we noted we were going to make $16 million of discretionary investments in the fourth quarter. We expect $4 million of these expenses to continue for the full year 2023, mostly linked to ongoing third-party consulting services. Q4 sales and marketing costs increased $18 million year-over-year, including $8 million of discretionary expenses. The increase in our sales and marketing costs represented approximately 40% of the total year-over-year increase in Q4 operating expenses, excluding transaction costs. It was driven by higher labor expenses, primarily linked to strategic growth hiring in China and Latin America, and to support our B2B APAR business. As we've mentioned on our third quarter call, we invested $8 million in targeted marketing campaigns in Brazil, India, UAE, and the Philippines. We saw positive results from our marketing campaigns in terms of awareness, consideration, and positive impact on Payoneer's brand image. Given our focus on operating efficiency, we do not plan to continue this spend in 2023, but we'll use the data from this campaign to inform our future sales and marketing strategies. B4 R&D expenses increased 29% or $7 million year-over-year mostly from higher labor expenses, as we continue to invest in our platform capabilities. We expect to continue investing in R&D as we enhance our technology platform, which Bea will discuss in more detail shortly. Other operating expenses increased $10 million in Q4 22 versus prior year period, primarily reflecting higher employee and contractor expenses to support ongoing growth of the business. G&A also increased $10 million year over year and included $8 million of discretionary investment, which was for third-party consultants and travel expenses, as well as charitable contributions to organizations supporting relief efforts in Ukraine. Additionally, G&A expenses included $2.5 million to launch the Payoneer Foundation, which was not included in our original discretionary investment outlook. Our Q4 adjusted EBITDA was $11 million compared to $14 million in the fourth quarter of last year and $13 million in the third quarter. Q4 net loss was $10 million compared to net loss of $19 million in the fourth quarter of last year. Net loss for Q4 2022 included a $5 million gain from the change in fair value of warrants. Q4 basic and diluted net loss per share was negative 3 cents. We continued to generate positive cash flow, and we ended the quarter with cash and cash equivalents of $543 million, a sequential increase of $35 million. As this is my last earnings call, I would also like to say thank you to all our shareholders for their continued interest and support of Payoneer. Payoneer has delivered strong results and consistently exceeded our revenue and adjust EBITDA guidance over the past seven quarters since going public in June of 2021, and I remain confident in our ability to execute on our plan. The Ordonez, who I have had the pleasure of working with over the past few weeks, will become CFO as of March 1st. and I have the utmost confidence in John and Bea to lead Payoneer into its next phase of growth. I'd like to now turn it over to Bea to discuss 2023 guidance.
spk06: Thank you, Michael, for your support during this transition process. I look forward to meeting many of you in the coming weeks and to working together in the years ahead. We see significant opportunities in our business, both near-term and long-term. to continue to drive revenue growth through prudent investments in our client acquisition efforts and in our high-value service offerings, while also focusing on driving long-term operating leverage growth through investment in our platform capabilities and infrastructure. In the near term, 2023 adjusted EBITDA performance is expected to benefit from strong revenue growth, including from interest income and expense rationalization measures. which drive more measured operating expense growth. In short, we are positioned to deliver meaningful, adjusted EBITDA growth in 2023, while also investing to further strengthen and grow our business for the years ahead. Before year 2023, we expect revenues to be between $800 and $810 million. Transaction costs as a percentage of revenue to be approximately 16%, and adjusted EBITDA to be between $120 and $130 million. The midpoint of our latest guidance represents a 28% increase to revenue and a doubling of adjusted EBITDA margins year over year. We expect revenue growth to be driven by continued customer acquisition, in particular growth in larger, more profitable customers and in higher take rate regions. We also expect continued growth in our B2B business and other high value services and from interest earned on our customer balances. This will be partially offset by approximately 22 million of known headwinds we face in 2023. from the decline in revenues we earn for certain onboarding services for an enterprise client, and from the four-year impact of the closure of payments into Russia at the end of 2022. We expect interest income to be approximately $180 million for 2023 based on our fourth quarter customer fund exit balances, moderate balance growth in line with volumes, and current anticipated Fed funds interest rate changes. Our ability to monetize customer balances is a core part of our business model. As we have grown volume on our platform, we have seen customer balances grow and have leveraged our scale to derive a greater share of the economics. We expect transaction costs for 2023 to be approximately 16% of revenue. Transaction costs as a percentage of revenue continue to trend downward year over year as we leverage our scale to drive better pricing while also benefiting from higher interest income revenue. We expect these improvements to continue moderating relative to what we saw over the past two years. This is driven by mixed shift into B2B APAR and into regions such as Latin America, Semina, and APAC with higher take rates and also relatively higher transaction costs. Based on our stated guidance, we expect adjusted OPEX less transaction costs to be between 550 and 560 million for 2023, representing an approximately 18 percent year-over-year increase at the midpoint. 2023 operating expenses include an incremental 15 million of annual recurring incentive payments related to an enterprise client. As John discussed, beginning in 2023, we are investing in the next generation of our technology platform. We expect this to be a multi-year journey to enhance and strengthen our platform to better fit the needs of our growing and complex business. In 2023, we anticipate spending approximately 30 million, 15 million of which will be expensed and is included in our adjusted EBITDA guidance, while the remainder will be capitalized. As we make progress on these investments, we expect to deliver increased automation across our business operations, which will drive down our acquisition costs and our ongoing costs to serve. These investments will also accelerate our ability to launch new products and features and to enhance the customer experience, which will, over time, drive increased customer acquisition, retention, and monetization. As we have noted, customer onboarding costs, including compliance costs, and our ongoing cost to serve have contributed meaningfully to the growth in our operating expenses. We expect to see some of the benefits from our platform investments in our 2023 exit run rate, while the full capture of these benefits are expected to occur in 2024 and beyond. Payoneer benefits from a strong local brand and network effect that drives significant inbound customer traffic. In line with other regulated financial institutions, the costs associated with onboarding have been growing, and for a significant portion of inbound customer applications, the cost exceeds the potential revenue we can earn based on our existing operating environment. In the long term, the evolution of our platform capabilities will allow us to profitably serve a greater proportion of our customers. In the near term, we will be focused on better managing our acquisition efforts as well as our existing customer relationships through enhancements that will streamline the onboarding process, reducing the associated costs, as well as through pricing strategies related to certain cohorts of customers. We are also focused on driving greater efficiency across our business more broadly and are actively evaluating other areas of spending. Our guidance for 2023 adjusted EBITDA is between 120 and 130 million. This guidance reflects an approximately two and a half fold increase in adjusted EBITDA and a doubling of adjusted EBITDA margins versus 2022. In conclusion, Payoneer's 2022 results once again demonstrated our team's ability to deliver strong financial results. We have built a diversified, profitable business, and we see positive and exciting trends and a large and growing market for our products. We have confidence in our ability to meet our 2023 financial targets while investing to position Payoneer for many more years of profitable growth. We are now happy to answer any questions you may have Operator, please open the line.
spk09: Thank you. To ask a question, please press star followed by 1 on your telephone keypad now. If you change your mind, please press star followed by 2. And when preparing to ask your question, please ensure that your line is unmuted locally. The first question on the line comes from Will Nance of Goldman Sachs. Please go ahead, Will. Your line is open.
spk05: I just wanted to follow up on some of the learnings that you guys have had from the review of your customer base that you guys are talking about. I was wondering if you could maybe double-click a little bit on the customer cohort that you guys have found that you're not currently serving profitably. Are there any kind of common threads that kind of run through that customer base across either vertical or product? And I guess in size, the only thing that kind of correlates within that cohort, and I guess just going forward, is the goal to continue to service these clients, but not acquire clients like that, or is the goal of some of these investments in the platform to enable you guys to kind of serve them profitably on a go-forward basis?
spk02: Hey, Will, John here. That's a great question. There's a lot of questions in there, so I'm going to try to sort of give you an answer sort of broadly about our customer acquisition go-to-market strategy and the portfolios. We have been very successful at acquiring our desired customer profile. What we see in the portfolios of our customers, customers with higher dollar amounts of volume on a monthly basis are quickly the most profitable customers we serve. Our incentive structure and focus for our go-to-market teams is aligned entirely about acquiring those profitable customers. Our business, if you look at our business broadly, we attract hundreds of thousands. I said in my prepared remarks, 400,000 applicants, prospect applicants every month. And our goal long term is ultimately to serve all of them, or as many of them as we possibly can, profitably. And they are geographically diverse, so it's hard to generalize about any specific customer size, or industry or geography, given the dynamic nature of our business and how we operate in over 190 countries. But generally, size drives our economics. And what I think is important is that we think that the investments we're making in our platform and in onboarding will enable us to serve more of the population of our customers long-term profitably. It will never be, I believe, that 100% would be profitable, just given the power of of our brand globally and the number of people we attract. You and I have talked in the past about how important it is for a platform like ours to attract customers for such a low cost. One of the core strengths of Payoneer today is that people view Payoneer as an on-ramp, as an entrepreneur to the global economy, and we believe that's a very powerful strength. the products we offer, the pricing, our service levels, and our acquisition efforts so that we can improve the profitability dynamics in the platform.
spk05: Got it. Appreciate that. That's very helpful. And just maybe if you could talk about, go into a little bit more detail on the product enhancements, just what are kind of the top priorities or the top areas of spending as you look out into the year that you're hoping should improve some of the efficiencies of your organization? Thanks.
spk02: Right, so that's a direct and easy one from my perspective. We think of our business really as an end-to-end payment and financial services partner for our SMB customers. And when we look at that, we look at AR on account and accounts payable. We shared in our release that we've seen a three-fold increase in our commercial MasterCard and we broke over a billion dollars in volume there. Bundling that product together with our B2B APAR product, which is frankly powering the growth of our platform, we feel is very exciting. Longer term, we're focused on adding more credit and lending products, faster money movement opportunities, and extension of what I would describe as our seller product suite, the suite of products that a seller needs to use. And our core effort in 2023 is really around the first phase of the technology work we're doing on onboarding and work around the B2B APR functionality for our B2B customers to make it easier for more of them to serve more of their financial operating needs.
spk05: Understood. Appreciate you guys taking the question. Look forward to hearing more about it.
spk07: Thanks, Will.
spk09: The next question on the line comes from Mayank Tandon of Needham. Please go ahead.
spk07: Thank you. Good evening and congrats on the quarter. John, I wanted to start with you. If you could just give us maybe some sense of the aggregate attach rates for all the high-value products, where it stands today. You did break out the B2B APAR, but if you took everything in aggregate, where are we today? What do you expect going forward? And what is the implication for the take rate longer term?
spk02: Yeah, so we haven't shared in the past attach rates of specific products. I can say we continue to see very positive progress on our upselling and cross-selling activities. We're seeing strong examples of our bundling efforts. I was just with a customer two weeks ago in Israel, in fact, an Israeli entrepreneur that sells bird feeders here on Amazon. couple of million dollars of bird feeder sales on Amazon. They used the Payoneer platform to get access to the Walmart marketplace and they accessed our working capital offerings. This is a customer that was pleased with our service, comfortable with the AR and on account and working capital offerings and candidly was asking for more financial products from us and we sat there mapping out the potential together. So I feel very good about the bundled solution that Payoneer offers our best customers.
spk07: Got it. And then maybe for B, you provided some good framework in terms of the outlook. But I just wanted to ask you about the seasonality and how we should think about the trajectory for the whole year, both in terms of the revenue and then also on an EBITDA basis. What is sort of the flow that we should expect over the course of 2023? Sure.
spk06: Thanks for the question. So look, revenue, we would expect over the course of 2023 that revenue will increase sequentially. throughout the year, driven by our continued customer acquisition, growth in high-value services, as John has indicated. Even as we see the impact, as we noted in our prepared remarks, of that $15 million decrease in non-volume revenues beginning in the back half of the year. As you know, our business is seasonal, benefits from strong consumer and other spending in Q4, so we would expect to see that, as well as the impact of peak travel season, which we generally see in Q3. But overall, from a revenue perspective, sequential increase throughout the year. From an adjusted EBITDA perspective, taking into account that revenue outlook, we'll expect it, roughly speaking, to be evenly distributed over the course of the year. Because while revenue is expected to ramp up, we'll also see the impact of our investments that will be a little more back-loaded for those investments that we've discussed here today in our tech platform, in our compliance infrastructure, they'll be more back-loaded, and that will yield that kind of relatively flat EBITDA performance through the quarters.
spk07: That's helpful. Thank you so much.
spk09: The next question on the line comes from Trevor Williams of Jefferies. Please go ahead.
spk08: Great. Thanks. I just want to go back to the revenue guidance for a second. I got the interest income number of $180 million. Anything else you can share just on the level of volume growth you're assuming? And then within that embedded volume assumption, just how we should think of the underlying mix there impacting the kind of the core X interest income? Take right. Thanks.
spk06: Sure, I'll take that, so thanks for the question. Look, our guidance reflects our expectations, given obviously the macro environment and the ongoing results that we're seeing in our business. And in terms of the different levers, look, as John has indicated, we're going to see and we expect to see continued strong growth across key high-growth, under-penetrated regions, so think Latin America, Semina and APAC, and in our high-margin products, so B2B and some of those other kind of high-value services. We do expect to see a normalization in volumes from certain of our large e-commerce marketplaces. We're assuming roughly mid-single-digit volume growth from those e-commerce marketplaces. This is actually slightly better of a growth rate when compared to 2022, although that's in large part because we were laughing in 22 tough pumps versus the prior year. So look, again, that's the kind of inherent assumption in terms of the volume. Our marketplaces and other volume related from those kind of channels are obviously uncertain in terms of the macro environment. There's considerable, as you all know, macro uncertainty embedded in that. But look, overall, excluding interest income and the impact of those known headwinds that we talked about related to non-volume fees and our exit from Russia, our guidance implies roughly a mid-teens revenue growth target for 2023.
spk08: Got it. Okay. Thanks. And then on the B2B APAR piece, I know you've said roughly two-thirds of customers there are net new to Payoneer. Can you guys give us just a better sense for the geographies and types of customers you've seen the most traction with to date? And then I think the implied attach rate on existing customers is still implied very low. Just how you're thinking about the potential or not to more aggressively cross-sell the B2B product into the existing customer base? Thanks.
spk02: Sure. We remain very optimistic and excited about the long-term growth of our B2B APAR business, and we expect it to outpace the total revenue growth in 2023 and accelerate throughout the year. The opportunity for us is different than our marketplace payouts opportunity because we are penetrating into the $5 trillion space that's really dominated by legacy banks and checks and wires and bringing our innovative solutions to the market broadly. I'll be in Argentina next week, which is our fastest, Latin America is our fastest growing region, and we're seeing terrific B2B APR growth in Latin America. So this is a global product with a global opportunity serving customers that are in just about every industry we could all think of. Broad industry coverage, broad global coverage, competing against legacy providers and what I would describe as analog solutions. We feel well positioned to grow that business well for the year ahead.
spk08: Okay, great. Thanks again.
spk09: The next question comes from Chris Kennedy of William Burr. Your line is now open.
spk11: Yeah, good afternoon and thanks for taking the questions. John, thanks for all the details on the customers. Can you provide a little bit more color on how many active customers you guys have on your platform or any more details on that?
spk02: Hey, Chris, good to hear from you and thanks for the question. We are not sharing a specific customer count number today. We are working through all the best ways to communicate the breadth of the customers we serve, the number of active customers and we are planning to do so in the future. Not all customers are created equal and I think that's important. The very small customer who comes to Payoneer who aspires one day to be a freelancer is drastically different than the BPO that's working in the Philippines or the team of engineers in Ukraine or the e-commerce goods merchant that's selling their products on the biggest marketplaces around the globe. Our focus, profitable customer acquisition, the teams are tooled to do that. We are working to make an even greater portion of the total customer book profitable through pricing, through experiments with fees, with looking at tiered service levels, and the work the team's doing on the next generation of our platform will enable us to serve an even greater percentage of the total applicants who are eager for the global account that we have.
spk06: And I'll just stop there, Chris, because look, it's an important question, and one of the key priorities for me and the whole finance organization is really continuing to build on the great work that's already been done and building out that data and those insights that are really going to allow us to really look at our unit economics and do a very fulsome cohort analysis and answer all of these questions and provide that enhanced disclosure that we know that you and the market more generally are looking for. So we're definitely very focused on that and deepening our understanding of unit economics across our business. And we want to just be very, very thoughtful in how we scale out that disclosure. But know that it is an area of priority for me and for the team more broadly.
spk11: Great. Very helpful. And then just real quickly on the guidance, significant margin expansion that's kind of different from what you guys were talking about on the last quarter call. I think you were talking about modest margin expansion. I assume it's all about float revenue, but if you could just talk about that. Thanks for taking the questions.
spk06: No, we appreciate the questions. I'll take that. Look, our comments in November where we started to sort of flag modest expansion there were really based on our expectations, obviously, at the time. With our 2023 budget process still very much underway, the guidance we're showing today reflects our ongoing evaluation of the business, how we're looking at it today, our ongoing results with the benefit of a little more time elapsing, and, of course, the macro environment. It also reflects proactive decisions that John and I have made in coordination with the broader management team to return a greater proportion of that interest income uplift to shareholders. We felt that that was important and appropriate, and we're well-positioned even doing that to continue to invest in growth initiatives and in the platform that we need to really scale this business and support future growth. So that's really the main drivers of where we've arrived at today.
spk00: Thank you.
spk09: The next question on the line comes from Josh Seigler from Cancer Fitzgerald. Please go ahead. Your line is open.
spk04: Yes. Hi. Thanks for taking my question. Congratulations on the quarter. I was wondering if you could provide some more color on how the pipeline for these new larger SMB merchant partners is looking like right now.
spk02: Sure. We have an extraordinary go-to-market organization. Adam Cohen, who just joined us, actually was in China last week meeting with our teams on the ground there, talking about and talking to customers. So I think the way to think about the opportunity is there's 100 million small businesses globally that we have the potential to provide solutions for. and we are very focused on going to work with them. They can do hundreds of thousands of dollars of volume a year, and we think we're well positioned to serve them. I'd also like to talk for a minute about our relationships with the world's largest marketplaces, which are critical partners and good partners of ours. We continue to make good progress, solid progress, and good focus to enhance our existing relationships with those marketplaces and add new marketplaces that will bring volumes into our S&B customer accounts. We don't announce all of them, but those are a continued focused effort of our excellent partnerships team.
spk04: Understood. Appreciate that. And then in your prepared remarks, you mentioned M&A. Are you seeing more attractive valuations in the market right now? And what form do you think future acquisitions might take?
spk02: Yeah, so I do think we benefit from the private company market valuations are in fact coming down. They lag I think the public market comps, but they are rationalizing. We are evaluating potential M&A opportunities sort of across the board. Our core products, AR, the account, working capital, and AP, are all at different stages of their development. And we are thinking through which acquisitions can help us cross-sell and up-sell, create more revenue per customer, create more value for our customers. And then looking at the gaps we may have in our product capability geographically, also are opportunities for us to consider. A month ago, We hired Kevin Ambrosini to join us to lead this effort, and he is working closely with our regional leaders, SOFT and our product leaders, and our technology leads as we put together the plan to go execute the M&A that we see in front of us.
spk04: Understood. Thank you, and congratulations once again. Thanks.
spk09: The next question comes from Mike Grundle of Northland Securities. Please go ahead.
spk10: Hey, thanks guys. Two quick questions. One, that $50 million you spend processing customer apps that don't really turn into real customers, what would your goal be? How much of that can you eliminate? And then secondly, are you guys doing anything – incentivizing small business customers to hold higher balances with you or to grow those balances? Anything you've done in the last, I don't know, 120 days that kind of incentivizes those small businesses?
spk06: Sure, thanks. We appreciate the question, Mike. Look, in terms of that $50 million, we felt it was useful to cite that and provide that kind of disclosure. And over time, yes, we're going to see the benefit in our adjusted EBITDA margin or in our adjusted EBITDA performance from A, the more focused acquisition strategy that we talked about, and B, from the efforts that we've begun to talk about related to our new onboarding platform. So we see the cost, as you know, within our compliance and our operations area. But to be clear, we're not saying that that $50 million goes to zero over any kind of timeline. Any business that is like ours that serves SMBs is going to incur costs on prospects that don't ultimately become profitable customers. But we do see a meaningful opportunity, right? That's a significant drag, was a significant drag to earnings in 2022. And we expect to begin to capture some of that benefit or some of that opportunity, as we said in our exit run rate, as we begin to move some of that onboarding volume onto new technology with the full capture, and we're still sort of working through fully citing that, hitting up in 2024 as we fully onboard there. In terms of your second question, look, as we've noted, we view interest income revenue as really core to our value proposition. It demonstrates the functionality that we deliver to SMBs. It demonstrates the trust that they place in us. And we're actively evaluating how we can continue to grow that revenue. I think we've been very successful doing that to this point and driving greater monetization of those balances. Over the long term, as your question implies, that could certainly involve sort of product development initiatives that incent customer behavior to grow balances. And in the near term, I think we have an opportunity with our scale to continue to increase our monetization. And we're also actively thinking through strategies that will both maximize our yield and manage the more earnings consistency through different interest rate cycles. So, again, it's an area that we think about carefully. We think it's core to our business. And we're really looking to find sort of near and long-term strategies to optimize that revenue stream.
spk12: Thank you.
spk09: The final question today comes from Daniel Kress of Wolf Research. Please go ahead. Your line is open.
spk12: Hi, this is Daniel on for Darren. I was wondering if you could give any qualitative color on the Payoneer to Payoneer volume, which would be helpful. Are you seeing any increases or changes to client activity on the platform there? And are there any efforts to explore monetizing these volumes over time, or what's the ultimate opportunity here? Thank you.
spk02: It's a great question. It's an area of focus internally here. We see billions of dollars of payments between Payoneer account holders. Payoneer has built a global trust economy between small businesses that are increasingly recognizing if you're a Payoneer customer and have a Payoneer account, doing business with one another is a positive way to grow your business globally. Your second question about monetizing those flows, yes, we are exploring and looking at different methods to do so and looking at the behavior of each of those customers to optimize exactly the future of how that product gets developed. We're working through that strategy in real time. There's nothing new to announce today following up from my comments in our last quarterly call.
spk12: Great, thanks, John.
spk04: You bet.
spk09: We have no further questions, so I'll hand back to the management team for any closing remarks.
spk02: So, this is John. To conclude, on behalf of the entire Payoneer Global organization, I think it's important to say a special thank you to Michael and to Scott I'm excited about the company, the team we have, the volume and momentum we have as an organization. We are going from strength to strength, and I'm deeply grateful for your friendship and partnership.
spk09: This concludes today's conference call. Thank you all for joining. You may now disconnect your lines.
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