Payoneer Global Inc (PAYO) 2022 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Payoneer's First Quarter 2022 Earnings Conference Call. (Operator Instructions) 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 available in the Investor Relations section of our website. Actual results may differ materially from any forward-looking statements we make today. These forward-looking statements speak only as of today, and the company does not assume any obligation or intent to update them, except as required by law.

In addition, today's call may include non-GAAP measures. These measures should be considered as a supplement to and not as a substitute for GAAP financial measures. Reconciliations to the nearest GAAP measures can be found in today's earnings press release which is available on the company's website. Hosting today's call are Scott Galit, 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.

Good afternoon, and thank you all for joining us today to discuss our first quarter 2022 results. Payoneer had a very strong first 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.

The Payoneer brand continues to be an important and growing asset as we see increasing demand among small businesses, marketplaces and partners around the world eager to participate in the digital economy across a diverse range of vertical markets, including e-commerce, freelancing, content creators, 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 increasingly diversified. We had year-over-year revenue growth of over 50% for our fastest-growing markets, which include regions like Latin America, Southeast Asia and South Asia, the Middle East and North Africa and excludes the developed markets of North America, Europe and Greater China.

We see tremendous untapped potential in developing markets globally, and our go-to-market investments are delivering strong results as we continue to have a new customer payback period globally of less than 12 months. Partnerships are increasingly important contributors to this growth, and we are excited about the potential to accelerate our momentum with a growing range of partners, including SaaS platforms, banks and mobile wallets, which help us efficiently acquire new customers and also to offer our joint customers a unique integrated experience.

We were excited to launch a new partnership this quarter with bKash, the largest mobile wallet in Bangladesh, and 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 those services.

These higher-value services are key to our effort to become the financial partner of choice for our customers and to generate higher take rates from our customer relationships. Broadly speaking, there are 2 types of higher-value services. The first is higher value accounts receivable services for SMBs.

Getting paid is the lifeblood of a business and our primary focus is improving the way SMBs get paid by providing differentiated tools to improve their global sales. The second type of higher-value service is higher value account services through which we provide SMBs, the financial services they need to manage their global business after they have gotten paid.

Our global B2B APAR offering is a higher-value accounts receivable service for SMBs, providing small businesses with better ways to get paid from their B2B trading partners. Once again, this quarter, B2B APAR was a key contributor to our growth. B2B APAR volumes grew approximately 57% year-over-year with a 2-year CAGR of over 90%.

B2B APAR represented 11% of our volume, up from 8% a year ago. We are still in the very early stages of this multitrillion-dollar addressable market opportunity. We have been increasing our investment in B2B APAR, hiring more sales resources and working with our global teams to acquire new customers and to upsell B2B APAR to existing Payoneer customers.

The majority of our B2B APAR customers are new to Pioneer, which demonstrates the strength of the Payoneer brand and our ability to acquire and grow a new complementary business at scale, all while pointing to the significant incremental addressable market opportunity we have in B2B APAR.

And Merchant Services is another higher-value accounts receivable service and one of the largest market opportunities in digital commerce as we work to enable businesses around the world to simplify the complexity of getting paid by consumers globally. We are especially excited about Payoneer Checkout, our offering for small businesses. While it is still in the very beginning of our gradual rollout of Payoneer Checkout, we are getting very positive customer feedback, and we are building momentum with a growing pipeline of new customers and with new partners for what we expect will be an important growth driver for many years to come.

Our Payoneer commercial Mastercard is a good example of a higher-value account service, generating higher value from the painter account after our customers have gotten paid. The commercial card enables our small business customers to better manage their business and drive their growth and also saves our customers' money while generating a higher-than-average take rate for Payoneer. This is a compelling tool for businesses that aren't based in the U.S. but are selling globally.

During the first quarter, we continued to increase our penetration of customers for our commercial card and introduce more customers to our cash-back rewards programs. We are still in the relatively early stages of growth for our commercial card, and we continue to be optimistic about the long runway ahead for this exciting opportunity.

Overall, these higher-value 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 needs. Many small businesses are using Payoneer more as their primary global financial partner than as a payment processor.

In aggregate, as of March 31, 2022, our customers maintained more than $4 billion of balances on the Payoneer platform, pending their use of 1 or more of our services. To help illustrate this, I'm going to share the stories of a few of our inspiring customers and partners that highlight the exciting opportunity for entrepreneurs around the world and help demonstrate how Payoneer is an important partner supporting their growth. (inaudible) Electronics is a Payoneer customer from Southeast Asia that sells electronic parts to consumers worldwide.

(inaudible) is one of our Pioneer checkout customers and has integrated Payoneer checkout into its web store to process payments from its customers who are largely based in the United States, Europe and Australia. Once we settle the funds to their Payoneer account, (inaudible) is then using their Payoneer global account to manage and distribute their funds across multiple entities, countries and banks around the world.

bKash, a leading mobile wallet in Bangladesh with over 50 million registered customers launched in Q1 as a Payoneer for bank's partner. bKash has integrated Payoneer into their mobile wallet to enable freelancers that use Payoneer for their cross-border sales to get real-time settlement from their Payoneer accounts into their bKash accounts. We are excited to collaborate with bKash to drive cost-effective new customer acquisition for Payoneer to improve customer experience for our shared customers and to support the continued development of the services exports ecosystem in Bangladesh.

And SHEIN is a leader in offering fast fashion for digitally savvy consumers and one of the fastest-growing e-commerce businesses in the world. SHEIN has partnered with Payoneer to support and facilitate SHEIN global expansion and to open up new SHEIN marketplaces. Our first launch together is in Brazil, with SHEIN using Payoneer to pay marketplace sellers.

In these examples, we have entrepreneurs tapping into the digital economy to grow globally and Payoneer is helping them achieve their potential. That's why we are continuing to make significant investments in R&D to broaden our product offering, and sales as we have demonstrated that our go-to-market investments have a very positive ROI.

These investments together 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.

We also executed very well on our investment plan in the first quarter with hiring generally in line with our expectations. All of this momentum translated into strong financial results for our first quarter. We generated revenues of $137 million, an increase of over 36% compared to prior year results.

Adjusted EBITDA was $10 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, and the growth of higher-value services, our take rate increased meaningfully to 94 basis points from 75 basis points in the prior year's first quarter.

We continue to execute well on our multiyear strategy and our continued solid financial performance reaffirms our ability to create strong value and monetization. And we remain very excited about the long-term market opportunity for digital commerce globally and very confident in our strategy to be the world's go-to partner for digital commerce everywhere. We also continue to be focused on the safety and well-being of our employees and customers in Ukraine. People are at the heart of everything we do, and our thoughts are with them and what continues to be a very challenging time.

In our last call, the war in Ukraine was in its early stages. Since then, we have been proactively reducing our activity in Russia and Belarus, relocating or terminating all of our contractors in those regions, turning off new customer sign-ups at payoneer.com and working collaboratively with partners to reduce their activity, all while implementing the sanctions requirements in the region.

In addition, we have made donations to humanitarian causes in Ukraine and are working to support Ukrainian refugees. The war is impacting our 2022 business results, though so far only moderately. Russia and Belarus together were expected to represent less than 3% of our revenues and combined with Ukraine, less than 10% of our revenues. In the first quarter, there was less revenue impact than we initially expected as our partners are gradually curtailing their activity in Russia. And fortunately, because most of our employees and a number of our Ukrainian customers have found their way to safety and have continued to find ways to work albeit at reduced levels. The situation continues to be unpredictable and evolving, and we remain concerned for our colleagues and customers in Ukraine.

Given our strong financial position, our strong financial performance, our brand momentum and large market opportunities, I remain very optimistic about our future. We are building on a solid foundation and just beginning to explore our potential as a global platform, enabling businesses to succeed across all digital sales channels and with a 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 small businesses, deep risk management and compliance expertise, our amazing team and our scalable business model. And now with Payoneer checkout, joining B2B APAR as promising higher-value accounts receivable services and strong growth in developing markets.

Our future is bright indeed. I would like to thank the pay and your 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. I'll now hand it over to Michael to discuss financial results and forward guidance in more detail.

Thank you, Scott. Indeed, it was a very strong quarter. Q1 revenue increased 36% year-over-year to $137 million. As Scott mentioned, we attracted many new customers, especially from fast-growing regions such as Latin America, Southeast Asia and the Middle East, which in general have higher than average take rates. We also benefited from strong customer adoption of our higher-value services such as B2B APAR and commercial card.

The Q1 take rate was 94 basis points a significant increase from 75 basis points in Q1 2021 and 86 basis points in Q4 of 2021, primarily driven by continued adoption of higher-value services and an increased mix in high-growth developing markets with higher take rates, along with nonvolume-based services.

Q1 volume increased 10% year-over-year to $14.6 billion. Solid volume growth across a wide range of verticals and geographies was partially offset by softness in e-commerce which continues to face headwinds caused by changes in consumer purchasing behavior, inflation and supply chain disruptions.

Q1 B2B APAR volume grew 58% year-over-year. Q1 transaction costs were $25.6 million, representing 18.7% of revenues, an improvement from 20% in Q1 2021. The improvement in transaction costs as a percent of revenues is driven by operating leverage derived from our scale, which is reflected in improved pricing from our bank and processor costs.

Q1 total operating expenses, including transaction costs, were $143.3 million, up 40.8% from Q1 2021. Excluding stock-based compensation, Q1 total operating expenses increased 34% over Q1 2021. The biggest component of our operating expense is our labor cost.

In Q1, we met our hiring expectations and continue to make significant investments, particularly in R&D and sales, while also investing in our global technology infrastructure to support onboarding of additional customers, enhancing our regulatory and compliance capabilities and expanding our transactional capacity. Q1 adjusted EBITDA was $10.4 million compared to $7.8 million in the first quarter of last year, an increase of 33%.

Q1 net income was $20.2 million compared to a net loss of $3.5 million in the first quarter of last year. The main driver of the increase in net income was a $31 million gain from change in fair value of warrants. Q1 basic earnings per share was $0.06 based on 342 million weighted average basic shares outstanding and Q1 diluted earnings per share was $0.06 based on 366 million weighted average diluted shares outstanding.

We ended the quarter with cash and cash equivalents of $466 million relatively flat with the end of 2021. Customer funds grew in Q1 by over $200 million to $4.6 billion. We continue to work on increasing the interest earning potential of our cash balances without changing our risk profile.

Turning to our outlook for full year 2022. We're happy to share that we are raising our prior guidance provided in March. Based on our strong first quarter results and our review into April, together with our current assessment of how our business is trending in light of the broader macroeconomic and geopolitical environment, we are raising our revenue guidance to $550 million to $560 million, reducing transaction costs as a percent of revenue to 21.5% and increasing our adjusted EBITDA guidance to be between negative $10 million to negative $20 million.

We believe our go-to-market investments in higher value services, such as B2B APAR and commercial card will continue to generate above-average revenue growth, and we expect to benefit from continued strong growth in developing markets. Although we expect softness in e-commerce trends to continue for some period of time, due to pressures in the broader global economy, we believe that growing international travel and increased interest income due to the recent anticipated Federal Reserve rate hikes will help grow overall revenues.

Regarding the situation in Ukraine, we had previously shared that we were hearing at the remaining 10 months of revenues for Ukraine, Russia and Belarus, which equated to approximately $46 million.

As Scott mentioned earlier, while the situation in the region remains fluid, we now believe it is more likely that we will retain some of our existing business in Ukraine, while the business in Russia and Belarus will continue to decline.

We have now increased our forecast to assume approximately 50% of the original forecasted revenue collectively for all 3 countries for the remaining 3 quarters of the year. However, there is still tremendous volatility and a wide range of possible outcomes.

Based on our assumptions and the timing of events, we expect total Q2 revenue will be below Q1 revenue as a result of the impact from Ukraine, Russia and Belarus. We expect continued strong take rate performance in 2022 as our fast-growing developing markets and higher-value services increase in mix compared to the lower take rate e-commerce vertical, which is growing more slowly.

We expect transaction costs over 2022 to be approximately 21.5% of revenues an improvement from our previous guidance of 22%. This improvement comes from reducing our banking costs, slightly offset by higher borrowing costs for our working capital products as well as new costs related to our growing merchant services business.

As previously mentioned, we are also revising our 2022 adjusted EBITDA guidance to be between negative $10 million to negative $20 million. This improved guidance is the result of our revenue growth and lower transaction costs as a percent of revenue. We will continue to pursue our investment strategy, which we believe will not deviate much from our initial plan.

In conclusion, our Q1 success once again demonstrated our ability to deliver strong results even as we face the challenging macro environment with the war in Ukraine and e-commerce headwinds. We -- we have built a resilient business model that benefits from a diverse set of revenue drivers, and we see positive trends such as growth in B2B APAR and strong customer adoption of our commercial card offering. We will continue to benefit from increased cross-border travel, interest income and go-to-market investments in high-growth developing regions. As we increase our investment in these developing markets and launch new products, we believe there are additional short-term and long-term growth opportunities that can add upside to our guidance.

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.

(Operator Instructions) The first question comes from Bob Napoli with William Blair.

The growth in B2B APAR and the take rate, I guess, linked together, B2B APAR, I guess, I think you said now 11% up from 8% a year ago, 57% year-over-year growth. Where are we -- what -- I mean, is the take rate -- the growth you've seen sustainable so we should see continued increase in the take rate and that B2B APAR, sounds like it's very profitable given the take rate. Where can B2B APAR go as a percentage of the total business over the next 5 years?

Bob, thanks for the question. So we're really, really excited about the overall large addressable opportunity that we have with B2B APAR. We're focusing our efforts on what is a multitrillion dollar part of the market of cross-border flows between businesses that are trading partners.

And we have something that we really think is quite unique and differentiated and the value we're able to provide to small businesses. So we still think we're in the relatively early stages there of what is a very large market opportunity. So over the next several years, not putting any time line on it.

We think it's possible that B2B APAR could even be bigger than our marketplace business, for example. We think it has that kind of potential, and we think we have that trying to focus and momentum and opportunity ahead. We are continuing to actively invest both in product and in sales. And so we, again, are focused on this being an important driver of growth, not just for the rest of 2022 but for years to come.

So this is really one of the core drivers for Payoneer. From a take rate perspective, I'll let Michael talk a little bit about B2B APARs from a take rate perspective and how that actually impacts the business?

Sure. Since the B2B APAR business has effectively too slow. We make revenue on inbound as well as on outbound. So it has a higher take rate. And we had sured, we did the last earnings call that in general in dimensioned by thinking about it as 1.5x our normal take rate, thinking about it from a revenue perspective. So when we talk about volume being 11%, obviously, it's a larger percent of revenue, but it is 1 of the drivers that is helping take rate.

So obviously, it was 94 basis points in the quarter, very strong. We talked about a combination of a number higher value of services, B2B APAR is one of those components along with the commercial card offering and other services mix of country customers coming from high growth, high take rate countries. So those are all supporting the overall strength in take rate. And I would say that we look at that take rate as relatively stable and if you were kind of net ballpark of 90 basis points or so, I think we would see as we go out as relatively stable quarter.

And then just a follow-up on the -- I mean, it seems like the take rate, the increase in interest rates, rebound in travel that you could drive some pretty good profitability in the business on the at least EBITDA level sooner rather than later.

But I know there's -- you have a great balance sheet. You certainly don't need capital, so you have plenty of firepower to invest. But what are your thoughts on your confidence in the long-term margins? Why not drive some more profitability in the near term, given it seems like some of the momentum you have behind the business, understanding the uncertainty, especially in portions of the business.

Yes. So maybe I'll continue. I'll take it and then hand it off to Scott. Okay, but I think the results of the first quarter speak for themselves in terms of our ability to generate strong EBITDA in our business, while I should add, investing heavily in our platform for future expansion and future growth. I think this is a validation point that what we're doing is working in terms of our business model.

And our approach is always to think long term and not be sweep by the short-term market wins. And so I think -- well, we believe that the approach that we should take is accelerated investment, we think we see that the opportunity to onboard customers, the needs, the ability to cross-sell is a strong, strong driver in our commitment to expand the platform investment in technology, build out an additional product, bring on more customers that we can sell more to and get larger share of wallet to drive lifetime value and ultimately drive profitability in the long term.

But we're in the -- I would say, a multiyear investment stage. We think we've proven ourselves out. And we would expect that the market will understand as we show variable profitability continuing to increase, increasing margins as we see our transaction costs coming down as a percent of revenues to take advantage of that market leadership position and to invest -- to take advantage of those opportunities that we see now to really build those products that will allow us to have a very strong leadership position in the future and many large TAMs, I should say.

So we're building out in a number of incredibly large addressable markets. We obviously have our traditional marketplace business, but off marketplace in terms of B2B APAR where we've just recently announced our checkout initiative for Merchant Services. We continue to build out our working capital business. So there are a number of very large TAMs that we're addressing and we're at the really early stages of it. And we believe that the best outcome for our shareholders is that commitment to the long-term strategy.

The next question comes from Ashwin Schervier, with Citi.

Great quarter, folks. I just wanted to take you up on -- there was a comment at the very end of your prepared remarks about factors that can lead to upside beyond the updated outlook. Could you break that down, if you don't mind, what are these factors? And are you able to perhaps try to quantify directionally the upside?

Sure. So Ashwin, it's Michael again. I'll take it again. I'll let Scott add to it. But in general, I think we think of ourselves as conservative. We generally take approach of putting out guidance that we feel we can deliver on, and we work hard to try to deliver and achieve.

Our approach is really evaluating all the risks. And obviously, we can see from a number of e-commerce companies and other companies that are reporting that there are those challenges in the market in terms of inflation, consumer -- changes in consumer behavior, supply chain challenges, and we're evaluating what that might mean and taking that into account in our numbers.

And hopefully, we see better results than that. But we also take -- I think approach in terms of all the different variables. One thing to note, travel is something that we've mentioned earlier. I think travel is it's less than 5% of our revenue. So it's not going to be the major driver of overall growth, but it's one of many contributors.

And so we've worked to diversify our revenue streams to make sure that we're not -- we're less dependent on any one particular vertical. But in general, I think travel, as an example, is that we've seen growth. We are seeing international growth now. We expect to continue to see growth in international travel.

But probably I would say we're -- we kind of look at the range of possible outcomes and take something more in the middle than assuming a best case scenario. So there are a number of different things, whether we think about interest income or travel or e-commerce in terms of growth and how we forecast in terms of looking at possible scenarios.

And what we would think is that we would hope -- we hope things come better at, but we want to make sure we're in a position that we can deliver on our numbers.

Okay. Okay. Got it. Now for sure, you guys have beaten revenue expectation this quarter. If you could -- in that net range, if you could break down the upside that you delivered this quarter in the more granular fashion. How much of it came specifically from your assumptions regarding Ukraine and Russia, which you were vested versus doing better with specific products like B2B APAR, things like that, other factors, if you could sort of maybe to help from the perspective of forward modeling, just to lay that out?

Yes. Ashwin, it's Scott. The B2B APAR was certainly one of the positive contributors as we've touched on, also the country mix as we continue to make sales investments in some of these high-growth higher take rate regions of the world. The overall mix of our volume is positive in those higher take rate parts of the world.

And then continued growth of services like our commercial card that also have a higher take rate, create a lot of value for customers and generate more value for us. So the Ukraine war, it was a smaller part of the impact. We did do better than what we had actually talked about last time we were together, but that was a smaller part of the beat overall.

So it really was execution really across the board on those same things we've been talking about for a while. The higher value services, in particular, B2B APAR and commercial card and the strong performance in these faster-growing parts of the world that we think, again, have tremendous opportunity ahead, and we're still relatively early days. And so that -- those would remain the key drivers of the performance.

The next question comes from Sanjay Sakhrani with KBW.

Maybe I have a follow-up actually on the same point that Ashwin did. Michael, when you think about some of these macro forces that you mentioned, China, obviously, inflation as well. What sort of the baseline you're using in your base case as far as how severe those are going to be? Because I know some technologies, companies have come out sort of quantified a significant impact, but it's going to happen sort of later this year. So maybe you could just give us some sense of sort of what the baseline is?

Yes. So if we look at e-commerce as an example, we noted that we did see softness in e-commerce. If you look at the disaggregation of revenues in the Q where we break out regional revenue by region and you look at, let's say, China as a proxy for e-commerce, you can see that in the quarter, we -- the year-over-year, we had lower growth in China than we had rest of the world. So rest of the world growth was much more significant.

And so when we look, we obviously are in touch with our customers. We hear about the challenges that they face as well as the opportunities. We look at ourselves as an enabler to help drive additional growth to those customers and try to help them either manage through the frictions that they're having or at least think about the long-term relationship and how to build deeper into those relationships.

So as those -- some of those customers might have talked about from a macro standpoint, you need additional capital or to continue investing in their growth or needs or looking for other opportunities to go off marketplace and open up their web stores, we're providing those solutions to help increase their growth. And so I think there are a number of challenges. So we talked about supply chain.

Obviously, there could be some production issues in China, there are different COVID shutdowns that kind of roll in regions inflation. And so for us, inflation has a few different impacts. One, since the majority of our revenues are at (inaudible). If volumes, well, the cost of inflation were a beneficiary. And if people have less to spend on certain goods because they're spending more on gas than food that might lower the amount that they're spending online.

So over time, we'll have to see what that trade-off is. But overall, we -- there's incredible resilience, both in our customer base but also the design of our business model where we're not dependent just solely on e-commerce. And so when we look across businesses that continue to look at freelance labor to try to bring down their costs we're a beneficiary of that as well and a number of other verticals that tend to have an ability to balance themselves out.

And so that's one of the things I think people should walk away with is as we highlight the fact that there's growth in e-commerce, but some challenges in that growth, we see other parts of the business that continue to grow very strongly. That helps support that. The comment I made on the last question, about travel.

Again, it's a number of different drivers. And so some things will step up. And so we look at, again, inflationary challenges having a negative as interest rates go up, that actually becomes a net positive for us. And so there's a number of things on a net-net basis will continue to be positive overall for us.

Got it. And I guess -- and then we just sort of cycle back through to the revenue guidance range on the surface, it seems like the addition of some of what you thought you might lose is driving the upside to the revenue guidance, but it might be tempered by some of the macro headwinds that you're expecting. Is that right?

And then if we think about these revenues that you now expect to get from that region, the Russia, Ukraine region, like what's the risk to that if the war just continues to happen on a go-forward basis?

Yes. So again, I would say in Ukraine, it's fluid, obviously, and we're all framed for things to get better as quickly as possible for many reasons. But from a business standpoint, we actually saw, again, based on data, we saw things starting when we had our last conference call, which was when things were just heating up, we took a conservative approach by during our remaining revenues. What we witnessed in March and April was that the results were impacted but not at the levels that we had feared.

And so it's hard to tell longer term just based on effectively 2 months or more or less 2 months of data because you could have just as an example of situations where people are ending contracts and might not renew because they're afraid of the country risk of invest in Ukraine.

And like the other direction is we've seen an incredible amount of support for people in Ukraine and people looking to give business to Ukrainians and so forth of their livelihoods. And so from a net-net basis, we haven't seen as big of an impact as we might have expected, but in our 50% forecast going forward for the remaining 9 months.

We hope that it's a conservative approach, and we hope that it turns out to be even better than that. But we think that we have discounted appropriately to still be conservative based on what we've seen in the last 2 months.

And Sanjay, more broadly, the way you talked about kind of the way you characterized our guidance update I think is a good way to think about it. It's -- there are a number of factors at work, and we have taken a conservative approach. So we're happy to have a strong first quarter to have a lot of positive trends.

There also are, again, a number of crosswinds out there, and we're baking that into an updated guidance that is higher, which we're excited about, but also we've woven some conservatism into the numbers as well.

The next question comes from Josh Siegler with Cantor FitzGerald.

Yes. Congratulations on the strong results this quarter. I'd like to dive a little deeper on the travel volume for a bit. Are you seeing a return to pre-COVID levels? Or is there still more room for recovery? Additionally, is there still significant volume size of 2 travel marketplaces? Or is the travel vertical become more diversified?

Yes. Josh, it's Scott. So first, in terms of travel and what we have seen. And we've touched on this in the past in passing, but our exposure in the travel space tends to be a bit more geographically far fund, tends to be a bit more emerging markets. And those have been slower to come back we are seeing improvement. We are seeing positive trends, and we are actually generally upbeat about how those trends will continue to be positive.

But overall, there has not been a return kind of across the board to where we were in the past from that perspective. So still, again, some room to go and overall, some positive trends there. In terms of the travel business overall, as Michael touched on, it's less than 5% of our revenues. We have increased our investment in other vertical markets and other aspects of the business certainly more significantly than travel.

And so more of the breadth and diversity in our business is coming from those other areas and not within the rentable space so much. So it's much more of a play for us outside of the travel vertical than within the travel vertical.

Understood. Appreciate the color there. And you touched on this earlier, but given timing economic forecast on higher global inflation, can you provide investors with some additional color on the different levers in our control to maintain growth and profitability in a period of macro turbulence?

Yes, sure. I mean -- and -- and again, I'll start, Michael, feel free to chime in after. So again, the exciting part of our business really is that the continued momentum towards participation in the digital economy remains very strong. And that digital economy is a very broad and diverse economy with a lot of different vertical markets, and it's really very global.

So for us, what's exciting is we continue to see many opportunities around the world. We are continuing to lean in, in these faster-growing regions of the world where we're really just scratching the surface of the opportunity. We're continuing to see lots and lots of momentum across really all of the major areas of our business.

And we had very strong customer acquisition this quarter, which continues a really positive trend towards, again, increasing participation in the digital economy and Payoneer being an on-ramp. So looking across all of that, B2B APAR is a lever now with Payoneer checkout. While it's still very early days, that becomes a lever if we see continued softness within e-commerce. We actually have tools with things like our commercial card that our teams are actually upselling to our existing customers, which actually drives increasing value for them and for us out of the steam flows.

So even if they actually end up being stagnant, we can actually save them some money and actually increase our growth by actually selling in services like that. So we have a lot of tools in our toolbox. And in general, we're executing well on many that's not most of those.

And what we're looking forward to kind of a return to a more normal macro environment where we can actually get some tailwinds from some of these parts of the world that -- or some of these vertical markets that right now are not actually driving the same kind of growth as they were in the past. So we have a lot of tools in our toolbox, lots of vectors of growth, and we're executing quite well across the board.

The next question comes from Mayank Tandon from Needham.

It's actually Kyle Peterson on for Mayank. Great to see the results here. Just kind of want to think -- it seems like a lot of the revision of the guidance is better revenue than expected in kind of Russia, Ukraine, Belarus.

Are there any other kind of puts and takes? Like is the guide a little more conservative on e-commerce volumes and that's been partially offset by stronger take rate and adoption of new products? Or what are the moving pieces kind of outside of the Eastern Europe coming in better?

Sure. I'll take it. It's Mike. So I think the answer is yes. We decided that we didn't want to be a little bit more conservative given some of the headwinds related to e-commerce. So we did take a more conservative view going forward. And again, there are puts and takes. So at the same time, travel performed extremely well against small tags will benefit from interest income as well.

So there's a number of different drivers, as I mentioned. And again, there tends to be a balancing once one thing might look a little bit weaker. We take a conservative view on it. Something else continues to grow at a stronger pace than initially thought. Our customer acquisition abilities to focus on certain markets. So Scott mentioned a few of those. But we're doing really well in high-growth markets and that includes Latin America and Southeast Asia and Middle East, where we're continuing to make investments for people on the ground, and we're excited about those opportunities in those markets.

So net-net, overall, we're happy to raise guidance across the board, both in terms of revenues as well as margins. which will drive more profitability. But we're seeing more option value in the future based on these investments because we're excited about the regions that we're in, we're excited about the products that we're offering.

And we're super excited about the value of the Payoneer brand globally and what that means to our customers and our ability to leverage that brand in the future. So all in all, we're -- we look at Q1 as a great validation of the business model. We have built in caution for the rest of the year with a hope that things are better than that, but we feel comfortable raising the guidance to the levels that we've raised them.

Got it. That's helpful. And then I guess just a quick follow-up. Looking at the revenue in the U.S. part of the business, has been growing and scaling really nicely. What's driving some of that strength right now? Is a lot of it just travel coming back? Or kind of what are some of the moving pieces that are driving the U.S. upside right now?

Yes, there's a number of different factors, travel being one of them. We also have some non-volume services that we've added for enterprises as well. And overall, continue to make a push globally across many markets. But the work that we're doing with large marketplaces, has been continuing to grow as it has on the SMB side as well.

The next question comes from Michael Grondahl with Northland Securities.

This is actually Allen on for Mike. I just have a couple of quick ones. In terms of the new Payoneer Checkout offering. Could you provide some more color in terms of the time line of launch into additional regions? And then are there any comments you might have on performance on the initial launch in Asia?

Yes. So as of now, we are continuing to focus on Asia, and that will remain our core focus for the rest of 2022. We will -- we are laying the groundwork for expanding into other regions and consistent with our approach to cover the entire world that will be our focus over the next couple of years as we continue to broad and expand that offering. We're still really early days.

I mean, this is a huge market opportunity. is something we're very excited about. The performance so far is actually really good. And we have a lot of momentum building our pipeline and actually both with customers as well as partners. And so there will be more to come as we work our way through the year.

But in the grand scheme of our overall financial results, the impact in Q1 is really immaterial and so it will take a little bit of time for that to really start to contribute, but it's something that we believe will be a material contributor as we actually look into future years. So It's, again, big opportunity. It really plays to our strengths in simplifying global commerce and in particular, for SMBs and in particular, SMBs coming from developing markets. where we really bring a unique combination of both technology as well as the service and support to help connect them to the growth opportunities around the world that they can pursue. So it's a great fit, and we're getting really positive feedback.

But in the grand scheme of things, it's still very, very small. And so -- but something we're excited to talk more about and expecting to talk more about as we go through the rest of the year.

Congratulation's on the quarter.

The next question comes from Andrew Hummel with Westpark Capital.

I just wanted to follow up on we're talking on the guide for the year. And I know last quarter, when you excluded the Russia, Ukraine impacted. You kind of talked about 22% to 24% kind of growth excluding those headwinds.

And I understand there's a number of, I guess, puts and takes or where you come maybe touch later on some of the other pieces maybe. But can you talk to that 22% to 24% range and maybe include that? And is that still kind of what you're seeing? Is there upside to that for the year. So I would say we're on track. And there are puts and takes.

And so as I mentioned before, we might be building in a little bit more on services in e-commerce, but have some other parts of our business that are accelerating at the same time. And so net-net, I would say we're on target and gets to the question about upside. As I mentioned in my comments, yes, I think there are opportunity for upside depending on execution as well as broader market issue.

So whether or not we see better than 50% in Ukraine, whether or not e-commerce performed better than what we're assuming based on current trending and some of the more macro related issues and our continued ability to cross-sell and get the message out and our ability to execute on our investment strategies, our go-to-market strategy on sales hires and putting those people into the markets to drive incremental sales, you've seen has worked well so far, and we expect will continue to work well.

So yes, I think that, obviously, we're all in the world where there are a number of risks, but we think we were to try to mitigate those and create as many different revenue streams as possible so that we create a natural diversification of our business.

And I think that the results have demonstrated that we have been very successful from managing that, whether it be trying and successfully reducing concentration to expanding into new businesses. So we're having a larger share of customer wallet. All of these have been successful, and I think provide opportunities which do execute well to beat and exceed.

Okay. Great. And then just one follow-up. On the FX side, just curious if you guys see any effect pressure within your revenue or any some other players across the broader landscape with international you talked about back U.S. dollar strengthened. But just wanted to see how that fits for you guys if you're seeing anything on that front?

I could talk on the cost side, I would say that we've been the beneficiary of those movements between where we have the majority of our employees and the pairing of the dollar, which has helped a bit. We'll see where we go for the rest of the year. So we have been a beneficiary to date from a cost perspective on coal.

Yes. And in terms of the top line, there is really -- we don't have the same kind of impact that a number of other businesses would have in terms of the way they have revenue recognition and things like that. So that's less of an impact for us.

We have a follow-up question from Bob Napoli.

Just on geographic, I mean, you guys have called out Latin America and growth in high-growth regions a number of times. Can you maybe give a little more color on those regions, the size of those regions and what you think can be delivered in some of these higher-growth regions like Latin America over the next couple of years?

Yes, sure. So some of the regions that we are particularly excited about, and again, there are a number of them. Latin America, as you mentioned, Middle East, North Africa, Southeast Asia. And I'd say Asia broadly is pretty extraordinary, just the leapfrogging that's happening there in the kind of dramatic digitalization of commercial activity that's happening in the region.

So these are parts of the world that are large populations that have lots of commercial activity that are rapidly digitalizing and they are kind of leapfrogging into more modern tools and more modern providers. And all of them are growing quickly, but we're still really, really small. So we are really kind of a very small part of these very large highly populated regions that actually have a tremendous amount of government encouragement towards exports, in particular, small businesses, lots of kind of technology, learning and innovation that's coming from these areas.

And so if you look at kind of just generally the digitalization of commerce in those parts of the world, those are the parts of the world that are actually growing faster, and we're seeing the same thing, but just on the kind of exporter and supply side of that. So we're still really small for us in the grand scheme of things and the growth rates we think are sustainable for quite some time.

And we're making investments to actually drive the market. And we see it across a range of verticals and a range of services. So B2B APAR in some of these parts of the world is actually a lead for us, not kind of an add-on or a new entry point. We see a lot of service providers and digital agencies and things like that, that are in these parts of the world as well. So again, quite a bit of diversity in terms of the vertical markets and in terms of the services that are being used. And so we're really excited.

Again, we think we have -- as Michael touched on a few times, a great brand, and we've put terrific teams in these markets with great leaders, and we've got a long runway ahead with sales opportunities, product opportunities, partnership opportunities.

So we're really kind of laying the groundwork and putting the investments into the infrastructure to support this as a multiyear effort to penetrate what we think is a much larger opportunity.

And just quickly, I mean, with your strong balance sheet? And I mean, is there -- are you more focused on M&A today? Or what are your thoughts just around market, Payoneer has a unique franchise, should it be involved in industry consolidation in one way or another?

Yes. So we are continuing to explore M&A opportunities, and it's something that we are focused on and do see as a part of our strategy to expand and broaden the platform and the services that we're able to offer to small and medium-sized businesses around the world.

And so we are seeing a number of opportunities, and our team is really thoughtfully focusing on some areas. And we're -- we remain very optimistic about our ability to add more capabilities to our platform and supplement our organic investments with acquisitions.

That concludes today's Q&A session. I would like to turn the conference back over to Scott Galit to conclude the call Great.

Thank you, everybody, for the support and the great questions. We're really, again, thrilled with our quarter and your team globally has really executed well in the face of obviously, some really challenging market conditions. And so we're really thrilled with their work and really happy to be able to support our customers and employees in Ukraine and really looking forward to better and brighter days ahead. So thank you for the question for the board. And we look forward to talking again to you. So thanks.

That concludes today's Payoneer's First Quarter 2022 Earnings Conference Call. Thank you for your participation. You may now disconnect your lines.