Payoneer Global Inc

NASDAQ:PAYO

Earnings Call Transcript 2021-Q4

[Operator]

Good afternoon, ladies and gentlemen, thank you for standing by. Welcome to Payoneer’s Fourth Quarter 2021 Earnings Conference Call. At this time, all lines have been placed on mute to prevent any background noise. Following the speakers’ remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded. Before we begin, I’d like to remind you that today’s call may contain forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC and are available in the Investor Relations section in our website. Actual results may differ materially from any forward-looking statements we make today. These forward-looking statements speak only as of today and the company does not assume any obligation or intend to update them, except as required by law. In addition, today’s call may include non-GAAP measures. These measures should be considered as a supplement to and not as a substitute for GAAP financial measures. Reconciliation to the nearest GAAP measure can be found in today’s earnings press release which is available on the company’s website. Hosting today’s call are Scott 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.

[Scott Galit, Chief Executive Officer]

Good afternoon and thank you all for joining us today to discuss our fourth quarter 2021 results. Payoneer had a very strong fourth quarter. We delivered revenues and adjusted EBITDA well ahead of our expectations, as we continue to drive strong new customer acquisition and increasing adoption of higher value services, especially in faster growing markets around the world. We are building exciting momentum with small businesses, marketplaces and partners globally, who rely on Payoneer to provide them with the growing suite of services they need to pay and get paid, to grow and to manage their digital businesses. The Payoneer brand is an important and growing asset. As we see increasing demand among small businesses to participate in a digital economy across a diverse range of vertical markets, including e-commerce, freelancing, social platforms, digital marketing, remote work, travel, and distance learning. Payoneer has emerged as a leading on-ramp to the global digital economy for small businesses worldwide, reinforcing our growing role as the world’s go-to-partner for digital commerce everywhere. And our growth is truly global and diversified. We have year-over-year growth of over 50% in regions like Latin America, Southeast Asia and South Asia, the Middle East and North Africa. We see tremendous untapped potential in developing markets globally. And our go-to-market investments in these exciting markets are delivering strong results. As we continue to have a new customer payback period globally of less than 12 months. We also continue to build momentum with the Payoneer partner ecosystem. One of our key initiatives is growing our bank partnerships. As we collaborate with banks and digital wallets around the world to acquire new customers and to offer our joint customers a unique integrated experience. We have bank partnerships live on four continents, and in the fourth quarter, we once again had triple-digit growth with these partners. We have a strong pipeline of additional partner opportunities, and we expect partnerships to be an important contributor to our future growth. We are particularly excited by the progress we’re making, executing on our strategy to broaden Payoneer’s portfolio of higher value services and to increase the number of Payoneer customers using these services. These higher value services collectively represent our efforts to become the financial partner of choice for our customers and to generate higher take rates from our customer relationships. Once again, our global B2B AP/AR offering was a key contributor to our growth in the fourth quarter. B2B AP/AR volumes grew over 75% year-over-year, accelerating sequentially from the third quarter. B2B AP/AR represented 11% of our volume up from 7% a year ago. We are still in the very early stages of this multi-trillion dollar addressable market opportunity to help small businesses more efficiently transact with their trading partners worldwide. We are increasing our investment in B2B AP/AR, hiring more sales resources and working with our global teams to acquire new customers and upsell B2B AP/AR to existing Payoneer customers. The majority of our B2B AP/AR customers are new to Payoneer, which demonstrates the strength of the Payoneer brand and our ability to acquire and grow a new complimentary business at scale. All – while also pointing to the significant incremental addressable market opportunity we have in B2B AP/AR. We are also seeing strong customer demand for our Payoneer commercial Mastercard, which enables our small business customers to use their Payoneer global multicurrency account to pay international suppliers by advertising and make other purchases to support the growth and management of their business. This is a compelling tool for businesses that aren’t based in the U.S., but are selling globally. During the fourth quarter, we ramped up our acquisition of customers for our commercial card and also introduced more customers to our cash back rewards programs. Together, resulting in customer spend, more than doubling from the third quarter. The Payoneer commercial card is a higher value service that helps our customers better manage their business and drive their growth that saves our customers money. And then generates a higher than average take rate for Payoneer, while we are still in the relatively early stages of growth for our commercial card, we are optimistic about the unique value proposition we offer and the long runway ahead for this exciting opportunity. Working capital is another important driver of value for our customers and partners. In the fourth quarter, we announced our partnership with Walmart, collaborating to provide Walmart sellers with easier access to the funds they need to grow their businesses. And merchant services, this is one of the largest market opportunities in digital commerce. We continue to gain traction with businesses of all sizes around the world that are choosing Payoneer technology to simplify the complexity of their global consumer payments. This is a great opportunity to upsell existing customers and acquire new customers. We’re especially excited about Payoneer Checkout, our offering for small businesses while it is still very early in our gradual rollout of Payoneer Checkout. We are getting positive customer feedback, and we are building momentum for what we expect will be an important growth driver for many years to come. Overall, these new services are core to our strategy to drive an important evolution in our business. As Payoneer customers are increasingly using our platform for a broader set of more sophisticated and higher value services. Many small businesses are using Payoneer more as their primary global financial partner than as a payment processor. In aggregate, as of December 31, 2021, our customers maintained more than $4 billion of balances on the Payoneer platform pending their use of one or more of our services. To help illustrate our customer relationships, I’m going to share a couple of stories of some of our inspiring customers that highlight the exciting opportunity for entrepreneurs around the world and help demonstrate how Payoneer is an important partner supporting and enabling their growth. AutoDS, a dropshipping platform headquartered in Israel, helps over 10,000 merchants throughout the U.S. and Europe to automate their online sales processes. AutoDS relies on Payoneer’s B2B AP/AR services to get paid by its clients while integrating with our API to enable other Payoneer customers to pay AutoDS with their Payoneer account balances. Another example is TrueSooth from Australia, a brand created by women for women delivering breast pain relief products. They use Payoneer to get paid for their sales on e-commerce marketplaces in the U.S., as well as using B2B AP/AR to get paid for their B2B transactions with international wholesalers, they use the funds in their Payoneer multicurrency account to pay their suppliers and use the Payoneer commercial Mastercard to pay for online business expenses. In these examples, we have entrepreneurs tapping into the digital economy to grow and Payoneer is helping them achieve their potential. That’s why we are making significant investments in two primary areas of our business. First, R&D to broaden our product offering to enable our customers to have more and better tools to help them grow and second, sales, to increase the capacity of our local teams around the world to acquire new customers and serve and upsell services to our existing customers. As we have demonstrated that such investments have a positive ROI, these investments enable us to deliver more value to our customers to further strengthen our competitive edge and to improve our ability to monetize the volume on the Payoneer platform, while also increasing the level of engagement with our customers. All of this momentum translated into strong results for our fourth quarter, we generated revenues of $139 million, an increase of over 47% compared to prior year results. Adjusted EBITDA was $13.5 million, which highlights the operating leverage in our business model, even while we continue to ramp up investment in the business. As a result of our positive momentum in an increasingly diverse set of geographies and vertical markets, as well as the growth of higher value services. Our take rate increased meaningfully to 86 basis points from 68 basis points in the prior year. Our continued solid financial performance reaffirms our ability to create strong value and monetization. And we remain excited about the long-term market opportunity for digital commerce globally and confident in our multiyear strategy to be the world’s go-to partner for digital commerce everywhere. Now let’s take a look ahead at 2022, when we went public, we shared that we see a big opportunity to support many more digital businesses around the world with more services and that we are committed to delivering sustainable shareholder value creation over the long-term. We laid out our multi-year strategy to drive revenue growth in the short-term and sustained 20-plus percent revenue growth and 20% plus EBITDA margins over the long-term. The strategy called for us to put significant resources towards acquiring more customers with increased investments in developing markets like Latin America, Central and Eastern Europe and South Asia, the Middle East and North Africa, to also expand our services, to support customers across all digital sales channels and to increase the number of higher value services we bring to our customers through their Payoneer global account. When we went public, we set expectations that we would deliver 25% revenue growth and have negative adjusted EBITDA in 2021 and 2022, while we ramp up investments. I’m thrilled that in 2020, we executed ahead of our expectations on almost all dimensions of our strategy. Well exceeding our revenue growth and adjusted EBITDA targets and actually delivering positive adjusted EBITDA, even while we have been increasing our investments as planned. In short, we executed very well in 2021 and reinforced our conviction that our multi-year strategy is on target and that we are generating positive returns from our investments. We are really excited for 2022 and we will continue to increase our investments consistent with our multi-year plan. We see great opportunities to invest in several important areas that we expect will drive sustained long-term revenue growth and profitability, including more sales resources, especially in developing markets, increased investment in B2B AP/AR with more go-to-market and R&D resources, significant investments in R&D overall to expand our platform and develop additional services for customers, especially in merchant services and continued investments in compliance and risk management to maintain our competitive advantage. Given our strong position, brand momentum and large market opportunities, I’m really optimistic about our future. We are building on a solid foundation and really just beginning to explore our potential as a global platform, enabling businesses to succeed across all digital sales channels and with the broad range of services that they need. We have a highly resilient business model with a differentiated competitive advantage. We win in the market because of our global brand, our strength in developing markets, our strong ecosystem of partners and marketplaces, the breadth of our offering for our customers, deep risk management and compliance expertise, our amazing team and our scalable business model. I would like to thank the Payoneer team for their great efforts to deliver real value for our customers to deliver positive financial results and to set us up for sustainable long-term success. Our team really is the key to our success. So we’re also making meaningful investments in employee compensation, employee experience and employee development. People really are at the heart of everything we do. And we are particularly focused right now on the safety and wellbeing of our employees and customers in Ukraine and our thoughts are with them during this challenging time. The current conflict is causing some disruption to our business and will likely have some impact on our 2022 business results. Russia and Belarus together represent less than 3% of our revenues and combined with Ukraine represents slightly less than 10% of our revenues. All together, we had projected these countries to generate revenues of approximately $46 million during the remaining 10 months of the year. As the situation in Ukraine is quite new and evolving very quickly, we are analyzing a variety of scenarios and we have not yet updated any of our plans for the year. We remain both concerned for our colleagues and customers in Ukraine and confident in our ability to deliver growth in 2022 and beyond. I’ll now hand it over to Michael to discuss financial results and forward guidance in more detail.

[Michael Levine, Chief Financial Officer]

Thank you, Scott. And I’m very happy to share more detail on Q4 and discuss the strong exit velocity that helped us achieve a great overall year in 2021. And more importantly has positioned us well for 2022 and beyond. In the fourth quarter, revenue increased 47% year-over-year to $139 million. As Scott mentioned, the strong Q4 performance was driven by new customer ads, continued momentum with marketplace wins and new partnerships and customer adoption of higher value services such as B2B AP/AR, working capital and Payoneer Commercial Card. To illustrate the impact of some of these higher value services, fourth quarter volume for B2B AP/AR grew by over 75% year-over-year and represented approximately 11% of total volume for the quarter compared to 7% of total volume in the fourth quarter of 2020. Keep in mind that B2B AP/AR has a higher than average take rate because we often collect revenues on funds coming in, as well as on funds going out. So the take rate is currently running in the ballpark of approximately 1.5x that of our average take rate. Thus B2B AP/AR is already in the mid teens as a percent of total revenue. The continued growth of higher value services, high growth markets and non-volume based services helped drive the Q4 take rate to 86 basis points, a significant increase from 68 basis points in Q4 of 2020. As expected, it was a holiday season mix shift to e-commerce and large sellers with lower pricing. So we saw a slight dip from the 90 basis points we reported in Q3 2021. In the fourth quarter, volume increased 16% year-over-year to $16 billion. We had good quarter-over-quarter growth in e-commerce during the holiday season, but changes in consumer purchasing behavior and lingering supply chain disruptions that impacted e-commerce businesses weighed on our year-over-year volume growth. Over the last two years, our fourth quarter volume grew at a 34% compounded annual growth rate. Nevertheless, revenue continues to grow faster than volume based on the positive transition in our business to higher value services and customer segments. Thus, volume growth alone is not fully reflective of the overall health of the business. Q4 transaction costs were $28 million representing 20% of revenues, a significant improvement from 25% in Q4 2020. The improvement is driven by ongoing benefits from operating leverage drive from our unique scale and improved risk management. Q4 revenues less transaction costs increased 57% year-over-over to $111 million, representing 80% of revenues, an increase of over 500 basis points from the same period one year ago. Q4 total operating expenses, including transaction costs were $143 million, up 38% from Q4 2020. We made the most significant investments we’ve ever made in our business in 2021. And as we continue to invest for future scale, particularly in R&D and sales and marketing to drive future growth, excluding stock-based compensation Q4 total operating expenses increased 28% over Q4 2020. Q4 adjusted EBITDA was $14 million as compared to a loss of $1 million in the fourth quarter of last year. Net loss for Q4 was $19 million or a loss of $0.06 per share based on weighted average basic shares outstanding of 340.6 million. I’d like to note that in the Investor section on our website, we have updated our detailed share count, which addresses the current basic shares outstanding as well as all equity awards, contingent shares and related restrictions or exercise prices as the case may be. We ended the quarter with cash and cash equivalents of $466 million. There is an additional $4.4 billion of customer funds on our yearend balance sheet, more than half of which are held in interest bearing accounts. The interest on these funds is recorded as revenues. While not meaningful in a low interest rate environment, such as we have today, we could see upside if interest rates increase. Full year 2021, this strong quarter capped off a very successful year. Revenue for the full year grew 37% to $473 million. Revenue less transaction costs for the full year 2021 increased 50% to $372 million and adjust EBITDA was $28 million, an increase of $22 million over full year 2020. Now turning to our outlook for 2022. Based on current business trends and the situation in Ukraine, we would like to walk you through the puts and takes of our full year 2022 guidance as follows. Our initial outlook assumed revenue in the range of $576 million to $586 million, which would reflect year-over-year growth of 22% to 24%. However, given the rapidly changing situation and uncertainty in Ukraine, we felt it was important to adjust our guidance to bookend the possible impact to our results. As Scott mentioned, Russia and Belarus combined present represents less than 3% of our revenues and together with Ukraine are slightly less than 10% of revenues. Altogether, these countries are projected to generate approximately $46 million of revenue during the remaining 10 months of this year. Therefore, we have taken a conservative approach and reduced our guidance range revenues by $46 million, which is 100% of the expected revenue from Ukraine, Russia and Belarus for the remainder of the year. The result is revenue in the range of $530 million to $540 million, which would reflect year-over-year growth of 12% to 14%. If we exclude Ukraine, Russia and Belarus, we expect the rest of our global business to grow 22% to 24%. Our initial outlook is modeled based on revenue growth being driven approximately equally by volume growth and take rate improvement over 2021. We anticipate customers adoption of higher value services such as B2B AP/AR, Payoneer Commercial Card and Merchant Services to support a higher take rate. Our volume expectations include assumptions about the current inflationary pressures, digital supply chain issues and evolving consumer behavior. We expect transaction costs to be approximately 22% of revenues. We expect cost benefits from the ongoing scaling of the platform, which will be slightly offset by higher borrowing costs for our working capital products, as well as new costs related to our growing Merchant Services business. Our stellar 2021 results demonstrated our ability to acquire customers at scale and sell new higher value service to our existing customer base. As a result of the success, we are continuing with our plan to increase our OpEx investments in 2022. These investments are focused on go-to-market, mainly adding more sales resources and high growth markets and R&D mainly focused on our higher value services, such as B2B AP/AR, Payoneer Commercial Card and Merchant Services, as well as compliance and risk management capabilities to further differentiate our platform. Our initial outlook – in our initial outlook, we forecasted adjusted EBITDA to be breakeven or slightly positive for the year, reflecting the increased investments that I just mentioned. Our approach has been and will continue to be focused on making the right long-term decisions to build a much larger scaled business. While these investments will impact near-term profitability, our demonstrated operating leverage and efficient customer acquisition model positions us to achieve our long-term growth and profitability targets. As the situation in Ukraine is fluid and evolving quickly, we have not yet updated any meaningful changes to our investment plans. So the adjusted EBITDA ranges shown in the table assume our current investment plans are unchanged. As such, our adjusted EBITDA guidance is negative $25 million to negative $35 million. In conclusion, Q4 was a great end to a terrific year for Payoneer. Our ability to execute throughout the 2021 and perform despite supply chain and lingering pandemic challenges reinforces our confidence in our multi-year growth strategy to invest aggressively, build a much larger platform and to be the go-to partner for the future of digital commerce. Despite the very unfortunate situation in Ukraine, our management team is highly experienced and always manages for the long-term. We’ve built a global business with a diverse and resilient set of customers who understand the digital commerce landscape and will adjust as needed over time. Our guidance demonstrates our ability to reduce double digit growth, even in a downside case scenario during this once in a generation event. We have never lost our entrepreneurial spirit nor our confidence in the growth of our global commerce. As such, we plan to use a combination of organic, inorganic and partnering opportunities to drive sustainable and profitable long-term growth. On behalf of Scott and myself and the rest of the Payoneer management team, we thank you all for the continued interest and support. We are now happy to answer any questions you may have. Operator, please open the line.

[Operator]

[Operator Instructions] The first question is from the line of Josh Siegler with Cantor Fitzgerald. You may proceed.

[Keeler Patton, Cantor Fitzgerald]

Hi. This is Keeler Patton on for Josh. Thank you for taking our questions. As far as Ukraine exposure, is there any single platform that is responsible for that exposure? Or is it diversified across a bunch of platforms?

[Scott Galit, Chief Executive Officer]

Yes, it’s diversified across market segments, across services that we provide, vertical markets and different cross border payment channels that folks are selling into. So it’s a market that there’s a fair amount of digital services being provided, but also a fair amount of e-commerce businesses that are being managed out of there and in addition, it also fairly active in B2B AP/AR as well. So fairly diverse very, very digitally forward market and pretty broad-based.

[Keeler Patton, Cantor Fitzgerald]

Understood. Thank you. Appreciate the transparency there. And then on a separate note, how are you guys viewing the current acquisition market? Has there been any shift in your capital allocation strategy?

[Scott Galit, Chief Executive Officer]

No. I mean, we’re continuing to consistently focus on opportunities to bring more value to more customers around the world. We continue to be focused on making an acquisition that is more likely to be in the kind of small to medium size range as opposed to large and really focus on something that will bring more value to our customers. So the market continues to evolve in a variety of different directions. But overall we’ve been pretty consistent in what we’re focused on.

[Keeler Patton, Cantor Fitzgerald]

Okay, great. Thank you very much.

[Scott Galit, Chief Executive Officer]

Thank you.

[Operator]

Thank you, Mr. Siegler. The next question is from the line of Will Nance with Goldman Sachs. You may proceed.

[Will Nance, Goldman Sachs]

Yes. Good afternoon. Obviously, very nice quarter. Just wondering if you could talk through what you’re seeing on the e-commerce side as it relates to e-commerce normalization and supply chain issues. I think that have been an issue in the past couple of quarters, volume seem to come out a bit ahead of expectations this quarter. So I guess, added it play out this quarter relative to your projections. And are you factoring any additional disruption to global supply chains in the guidance that you’re providing as a result of everything that’s going on?

[Scott Galit, Chief Executive Officer]

Yes. Hi, Will. So in general, what we’ve seen is a bit of a moderating of supply chain and logistics issues. So I wouldn’t say things are 100% back to normal based on what we continue to hear in the market. We’ve seen if you track a number of the kind of larger e-commerce brands that are public as they’ve reported generally strong two year numbers, but challenging comps year-over-year and that’s pretty consistent with what we’ve in general been seeing. We – again, as of now have been seeing, again, some challenges, but certainly moderated from where things were in the middle part of last year. Looking forward, we’re expecting the current trends to continue with – again, general more moderate growth and also more moderate supply chain and logistics issues.

[Will Nance, Goldman Sachs]

Got it. That’s helpful. Appreciate it. And then I guess, as a follow up. I’m wondering – I appreciate the disclosure on the B2B and the color on the take rates there. I’m just wondering if maybe to dig a little bit deeper on the total pie of higher margin revenues as B2B and then a lot of your other initiatives, financing, et cetera. What percentage of total revenues that contributing today? And over a longer period of time, where do you think that goes to when you kind of model out across sell to existing customer base?

[Scott Galit, Chief Executive Officer]

Yes. So the B2B is by quite a bit the biggest contributor there. So we haven’t disclosed what the rest represent. But B2B overall is larger than the rest combined. We really see just being at the very, very beginning here of the opportunities, when we look at something like the commercial card, which we touched on. I mean, we’re not even getting to 1% of the volume in the business with the penetration that we’ve had so far. So there’s a lot of, lot of opportunity ahead for us. And these higher value services over time, we think will have the potential to be larger than the rest of the businesses as we sit here now. So we’re very, very enthusiastic about where we’re going. As Michael has mentioned in the past, each one of these is a large addressable market opportunity and we happen to be in a very fortunate position of being able to bring some really, really great value to a global set of digital businesses. And we’re really seeing very, very positive feedback and tremendous opportunity ahead.

[Will Nance, Goldman Sachs]

Got it. Appreciate all the color guys. Thanks again for taking the questions.

[Scott Galit, Chief Executive Officer]

Thank you.

[Operator]

Thank you, Mr. Nance. The next question is from the line of Mayank Tandon with Needham and Company. You may proceed.

[Sam Salvas, Needham and Company]

Hey, good evening. This is actually Sam Salvas on for Mayank tonight. Congrats on the results and thanks for the color relating to the Russia-Ukraine situation. I just wanted to touch on the Walmart partnership. It’s been a few months since you guys announced the partnership, and I was just wondering if you could talk about how things have progressed since then. And maybe how they progressed compared to your expectations? Thanks.

[Scott Galit, Chief Executive Officer]

Yes. Thanks, Sam. So in general, things are progressing along the lines of what we expected. We typically don’t disclose anything specific about any particular partners. But in general, we’re really excited about the opportunity to collaborate with Walmart. We’re getting very positive feedback from customers, and we’re looking forward to continuing to build on the momentum that’s been growing as we go through the rest of 2022.

[Sam Salvas, Needham and Company]

Got it. Thanks. And then just a quick follow-up. You guys have mostly grown the business organically so far and have mentioned the interest in pursuing M&A. And you just mentioned maybe we could expect a little bit of inorganic growth in 2022. Could you just talk a little bit about what the appetite is for M&A today? And what some potential areas of interest might be? Thanks.

[Scott Galit, Chief Executive Officer]

Yes. So we are focused on, as we’ve touched on, we see so much opportunity and so much need among our customers and our go-to-market team does a terrific job of really engaging with and listening to our customers. And so we really have a sense of what they have as opportunities and challenges and we also have a sense of how much they rely on Payoneer to help them actually pursue the opportunities and address their challenges. So we have a long list of opportunities that we think can really be very useful to help digital businesses globally succeed and grow. And so you’ll see us focusing on some of the kinds of areas that we’ve touched on. And again, these big areas for us, like B2B AP/AR and Merchant Services and working capital and card, and looking at the vertical markets like e-commerce, I mean all of these are kind of broad categories more than they are specific products. And so we think there’s a lot of opportunity to buy software, services and capabilities that we can bring to our customers that fit in – fit within this kind of very broad framework of these very large market opportunities that actually can really help them grow. So we’re focused on buying something. Again, it would be more of a product-driven approach and something that we could globalize, where there aren’t that many companies that we would be able to buy that are already global. And so it’s something where we think we can plug a really great value proposition into our global infrastructure and our global sales and customer teams as well.

[Sam Salvas, Needham and Company]

Got it. Thanks. That’s super helpful. Congrats again on the results.

[Operator]

Thank you, Mr. Tandon. The next question is from the line of Bob Napoli with William Blair. You may proceed.

[Bob Napoli, William Blair]

Thank you. Good afternoon, Mike, Scott, nice fourth quarter based on the Russia, Ukraine, tough for everybody. But just on the B2B AP/AR as a percentage of revenue, I guess it’s 11% of volume up from 10% last quarter higher take rate, so it’s looks like that’s maybe a 18% of total revenue in the fourth quarter, somewhere in that range.

[Scott Galit, Chief Executive Officer]

Yes. We – yes, what I just mentioned on the call is that we’re – we kind of put it as mid teens, so within that ballpark.

[Bob Napoli, William Blair]

Okay. And then how much has that affected? I mean, which pieces are of that business are growing faster? The commercial card, how is that a – is that’s early days yet? I think you just rolled it out at the beginning of the year – beginning of last year.

[Scott Galit, Chief Executive Officer]

Yes.

[Bob Napoli, William Blair]

What are the pieces making that up and how should we think about the growth of that – those value added services?

[Scott Galit, Chief Executive Officer]

Yes, sure. And thanks Bob. So B2B AP/AR there really are two main components to what we offer there. So one is a self search capability for our customers to use our platform, to bill their customers and request payments and so that tends to be used by customers that are on average a bit smaller and for transactions that are a bit smaller. And then we have another part of that service, which is enabling our customers to build their customers and use us kind of like they had bank accounts around the world and a set of capabilities to get paid locally wherever their customers are. So that tends to be geared towards larger customers, larger transactions. And so those are the two main parts of B2B AP/AR. When we talk about commercial card, we’re actually leaving that separate from B2B AP/AR. So it’s not included in those numbers that we talked about. It would be incremental to that. And a way to think about it would be that one of our customers, that’s using us for B2B AP/AR think of that the primary use case there is they’re using us on the receivable side. So let’s say, they invoice their customer and they get paid $20,000 into their Payoneer Global Multicurrency Account. They then might use the Payoneer Commercial Card to pay a supplier or pay a SaaS subscription and essentially use the balance that came in from that $20,000 to support that. So those are essentially two different complimentary parts of our overall set of services, each one of which actually has a lot of forward opportunity. And we actually have customers using both, but those are numbers that we keep separate.

[Bob Napoli, William Blair]

Okay. Then those are growing. I mean, that’s growing close to 100%. Is that the way to think about that in the next couple of quarters?

[Scott Galit, Chief Executive Officer]

You say that, sorry, the card.

[Bob Napoli, William Blair]

With the combination, looks like it’s growing the revenue of close to 100% in the fourth quarter.

[Scott Galit, Chief Executive Officer]

Yes, we’re expecting – sorry, Bob, I think there’s a touch of a delay. I apologize. Yes, we are expecting B2B AP/AR to continue to grow at strong double digit growth rate well into the future and commercial card is sufficiently small still that it will grow faster than that for a little while here. So again, we think with both were really just scratching the surface of very, very large opportunities. And as a result, we think we’ve got quite a bit of room to run here at very attractive growth rate.

[Bob Napoli, William Blair]

Thanks. And then just lastly, what new markets are you investing in Latin America? Where are you seeing – where are you have material volume in new markets, fast growth markets?

[Scott Galit, Chief Executive Officer]

Yes. We’re seeing over 50% growth in – markets in Latin America, in Southeast Asia, in South Asia, Middle East and North Africa and in some other places as well. So we really are seeing just a lot of enthusiasm around the world, the kind of move to digital and the focus among entrepreneurs around the world, recognizing that digital channels created an opportunity for them to really build global businesses has been accelerating. And we’ve got great teams that we’ve been putting on the ground with strong leadership locally in these markets and building really robust teams on the ground. So that’s an important area of investment for us in 2022, as we really are looking to put the foot on the gas in many of those markets.

[Bob Napoli, William Blair]

Thank you. Appreciate it.

[Operator]

Thank you, Mr. Napoli. The next question is from the line of Mike Grondahl with Northland Securities. You may proceed.

[Mike Grondahl, Northland Securities]

Good afternoon, Scott and Michael. 47% revenue growth was very nice. Two questions. You guys mentioned sort of strong new customer acquisitions. Can you give us a growth rate on that? Or is there any way to kind of quantify that a little bit? And then secondly, just any high level comments on kind of the China-related business and how that trended?

[Scott Galit, Chief Executive Officer]

Yes. So in terms of new acquisition, we had a terrific year – a record year for us overall, and actually our 2021 new customer cohort was about 50% larger than the 2020 cohort. Just to give you sense. And I think more than doubled from 2019. So we continue to build strong momentum on the customer acquisition side, and we’re doing that while retaining strong customer acquisition cost and economics and strong payback period. So, we’re very excited about that. And on China, I think what you’ll see is that the percentage tick down overall as a percentage of the overall business, but we continue to have growth and opportunity there, and it continues to perform well. So again, not calling out China when we talk about some of the fast growth markets, I mean, it’s a bigger market for us and continue to be and we continued to be very excited about opportunities there. But we’re seeing more greenfields and we’re kind of earlier in some of the ramp cycles in some of these other markets. And Mike, we do have in our 10-K, we do have breakout overtime.

[Mike Grondahl, Northland Securities]

Got it. Okay. Thanks.

[Scott Galit, Chief Executive Officer]

Thank you, Mike.

[Operator]

Thank you, Mr. Grondahl. The next question is a question from the line of Ashwin Shirvaikar with Citi. You may proceed.

[Ashwin Shirvaikar, Citi]

Thank you, Scott, Mike, good to hear – we heard from you guys. Can I start with asking about how you expect the cadence in the year to kind of play out the next four quarters from a volume, revenue and also investment perspective? And on that investment angle, when you say you haven’t decided whether or not to proceed with all your investments. Just a clarification, were there any specific regional investments that you were thinking of that you’re now going to potentially pull back or were those – or were you thinking of maybe not making investments, just because you have uncertainty in the business?

[Michael Levine, Chief Financial Officer]

Yes. Maybe I’ll start and then I’ll let Scott go a little deeper on the investment side. Ashwin, good to speak with you. From a volume standpoint, we would expect to see a pickup as we go throughout the year, actually. So we hope to see year-over-year growth rates increase as we go through the year. A lot of the thinking about the cadence on investment is really a long-term approach because a lot of the investments we’re making will affect years to come. And I think the comments Scott made about the higher value services really having traction and we’re able to prove that and show that even for the earlier stage initiatives, really gives us a lot of confidence to now be more aggressive and grab that opportunity. So we feel that we’ve really proven ourselves in 2021. We’ve demonstrated our ability to execute. And really in terms of making the investments to continue to build out and not only from a product standpoint, from a geographic standpoint, that these are really critical to building the scale platform that we really think we can achieve in the coming years. So it’s been a strategy we’ve had since day one. We’re consistent with that strategy. I think, what we tried to clarify in our approach and we think it’s a conservative approach in terms of how we handle the situation in Ukraine is to, at this point, not make any adjustments from an investment perspective, keep them – stay the course. And our approach to that at this point is to continue to stay the course, but to evaluate the changes in the broader market and have the flexibility over time. So we don’t – again, we’re long-term thinkers. We’ve been, as a team, working together through many cycles, and we’ve seen much throughout our careers. We’re patient, but we’re also methodical in our thinking and we don’t rush into any decisions. And so we think we have the right strategy. We think we’ve been able to see where we’re getting the traction in businesses and investing in those businesses that have models or businesses that we can model out with confidence. And so we’re super excited to make these investments because we see this as – clear to us at least, that there is a great return on making these investments. And so we want to continue down that path.

[Scott Galit, Chief Executive Officer]

Just to add a couple of very brief points on top. Again, as we go through the year, the investments will likely ramp. A lot of the investments involve hiring. We’ve also needed to increase the capacity on hiring as we look to bring more people on this year. So that also is something kind of hiring and building the hiring machine is something, that that’s part of the early part of the year as well, again, with a strong focus on both sales resources and R&D capacity as well. And again, just to amplify what Michael said, I mean, we are as enthusiastic as ever about our long-term opportunity about our long-term target business model, about the – and we have more conviction than ever in the investments that we’ve made and have the opportunity to continue to make. So as of now, we’re continuing to move forward. And as Michael said, I mean, we’ve managed the business in an EBITDA-positive way since 2012. We’ve done that through a variety of twists and turns and ups and downs. And we think we’ve got a really good formula here for investing for the long term and doing it in a thoughtful and responsible way. So as Michael said, we’ll continue to monitor the situation. But as of now, we remain very, very excited overall about the opportunities ahead and are continuing to push forward.

[Ashwin Shirvaikar, Citi]

Got it, got it. And the second question I had was, just if you don’t mind stepping back a bit and kind of talking about take rate. Because you’ve mentioned a couple of times higher value services and so on, which should result, I think, in an improvement in the take rate. And then mix may also help, is my suspicion. Certain of the types of things that went away during the pandemic potentially come back. So can you just talk about some of these factors and what you expect with regards to take rate? Thank you.

[Michael Levine, Chief Financial Officer]

Yes. So Ashwin, you’re correct that these higher value services definitely help support increasing take rate. We do expect, as we mentioned, that right now, our focus is on really continuing to drive revenue growth. And that’s coming from a combination – almost an equal combination of volume growth and take rate improvement over last year. As we grow, obviously, the mix shift makes a difference as we look at travel, which actually would have a lower take rate than average, continues to grow. That would mitigate some of the positives that we get from the higher-value services. But all in all, the net benefit will be – we’re expecting a net increase in 2020 to take rate over 2021 take rate, driven by those higher value services.

[Scott Galit, Chief Executive Officer]

One other note just to add is, as we add more sales resources, we’ve touched on before that our customer base is a mix of smaller customers that are self-serve and larger customers that our sales teams work with. And that those larger customers typically have lower take rates than the average and the smaller ones have higher take rates than the average. And so as we add more sales resources that bring on more customers that, on average, are larger, that has again, another dimension of a mix shift that contributes also to take rate. So our sales teams are also focused on selling in higher value services. But on some of the core payment services, that can have a negative effect on that line of take rate as well. So all of that blends together, as Michael said, in take rate growth. But there are, again, puts and takes within that.

[Ashwin Shirvaikar, Citi]

Understood, thank you both for that.

[Scott Galit, Chief Executive Officer]

Thanks Ashwin.

[Operator]

Thank you, Mr. Shirvaikar. The next question is a question from the line of Andrew Hummel with WestPark Capital. You may proceed.

[Andrew Hummel, WestPark Capital]

Hi guys. Thanks for taking my question. Just wanted to follow up a little bit on the Russia-Ukraine situation and I appreciate the conservatism, I think, from a revenue perspective and kind of pulling that all on the forecast. But I just wanted to see if there’s – are you guys still seeing money flowing through the platform in some of those areas? And I mean do you expect that to continue if that’s the case? Or I mean, I guess I’m just trying to gauge the level of conservatism that pulling it all out implies?

[Scott Galit, Chief Executive Officer]

Yes. So thanks, Andrew. So a couple of points. So first, just to avoid any confusion at all. We are absolutely fully complying with all sanctions, obligations. And so everything that we need to do, we’re doing. And we have a large team focused on that, and it’s something that we do quite well. Second, what I would tell you is that there’s quite a bit of – it’s a pretty fluid situation right now. And so we are continuing to see activity. We also – when we look forward, part of what’s interesting and one of the major trends of digitalization and, frankly, something that we’ve talked about more just collectively coming out of COVID is actually kind of where people work is actually more fluid than ever. So there’s quite a range of outcomes here. We are seeing folks that are moving. We are seeing folks that are looking for support and help. And we are seeing folks that want to continue to work. Actually, I mean, we’re even hearing that from people that are developers that need to fill their time with something other than worry. And so there’s all kinds of things that are happening at this point. Again, it’s a very, very challenging, very fluid situation. And so again, really impossible to predict anything with great accuracy here. We remain for many, many reasons, quite hopeful for folks. And – but from a business perspective, we think it’s appropriate to, again, take the conservative approach here.

[Andrew Hummel, WestPark Capital]

Okay. Got it. That makes sense. That’s really helpful. And then just one other question around some of these other marketplaces that you guys just have outside of the e-com base. I think from a broader market perspective, I think it’s easier to kind of peg e-com to broader market trends. But can you just talk through some of the verticals you’re seeing the most strength in some of those other marketplaces? And how should we think about that broader bucket of customers growing from a long-term perspective or even how should we think about it maybe relative to what you guys are seeing in the e-com marketplace side. Thanks.

[Scott Galit, Chief Executive Officer]

Yes. That’s actually one of the more exciting parts of who we are and what we do. And I think 2020 really amplified our e-commerce strength, and 2021 really amplified the strength of other vertical markets. And so remote work and freelancing and global service providers, again, there’s just a tremendous growth in the number of people around the world working across borders in a variety of different models. And all of that ends up translating into some set of services that are needed by both the company or people buying the services as well as those providing them. And again, there’s a range of models, from sole traders working consistently, the sole traders working in – as freelancers to agencies and companies that are getting larger and are quite organized. Social platforms are growing quite significantly. And so that’s a trend that I’m sure anybody with kids is quite aware of these days, and it’s something where this whole realm of content creation and actually how that starts to blend with e-commerce is becoming quite interesting. And that’s an area that we are seeing a lot of activity and a lot of opportunity around the world. Same thing with distance learning, although albeit a little bit smaller. Travel, again, there’s a variety of different verticals that are actually quite interesting, quite exciting that are developing. So we, again, we’re super bullish about just in general, the evolution of digital commerce across a variety of different models, and it’s really, really global. And most of the companies that are participating are keen to be global. And they look for global partners that are credible and trustworthy and really can help them plug into one place and cover the world. So we’re seeing it across, again, a very, very wide range of geographies and vertical markets.

[Andrew Hummel, WestPark Capital]

Great, thanks guys. Really appreciate it.

[Operator]

Thank you, Mr. Hummel. Next question is a follow-up question from the line of Bob Napoli with William Blair. Please proceed.

[Bob Napoli, William Blair]

Thank you. Just wanted to get a handle on the interest income and how you’re managing – so you have $4.4 billion of customer funds on the balance sheet at the end of the year. How much of that is investable? How do you invest in – how should we think about interest income as the Fed moves rates up?

[Michael Levine, Chief Financial Officer]

Yes, I mentioned earlier, upside. So our focus is to really make sure we protect our customers’ funds. But at the same time, as we mentioned, more than half of the funds that are customer funds are interest earning. But we’re still in a low interest rate environment. And so while I definitely put it as upside, if the Fed starts raising and rates go up, we’ll be a beneficiary of that. But we don’t want to get into the game of trying to guess how many hikes they’re going to be in the year. So we’ll leave that as that there is upside. We’re not – we don’t bet on that in building our models, but there will be potentially incremental upside if rates move up.

[Bob Napoli, William Blair]

Right. But if they raise rates 100 basis points, what – is that $4 million of revenue or is that the way to think about it? I’m not asking you to guess – I mean, $40 million, sorry, $40 million if they raised 1%, right?

[Michael Levine, Chief Financial Officer]

Well, if you earned it on the full amount. So again, we don’t have all the funds. We use those funds – are going through the myriad of banks that we have in our platform. So they’re not – not all the funds are in interest-earning accounts. Again, our focus is making sure the fund to get to where they need to be as quickly as they can and as safely as possible. But nevertheless, there is room to benefit from an increasing rate environment. So we actually do have interest income broken out in the 10-K. So you can see where it was last year and with the calculation.

[Bob Napoli, William Blair]

But you don’t have any rate hikes in your guidance is what – at this point.

[Michael Levine, Chief Financial Officer]

In our expectations, we have a slight increase in interest income, but not anything...

[Bob Napoli, William Blair]

Sorry. Just a quick big-picture question. You guys have so much momentum with your higher value services. I’m just curious, why were those not rolled out like five years ago? I mean it’s – was there a technology evolution that – I mean, it seems like you have – that these are businesses that you could have rolled out several years ago, earlier.

[Scott Galit, Chief Executive Officer]

What I would say is, first of all, financial services that – it’s not easy. I mean you have to get a lot of things right. You have to get the value proposition right. You have to get regulation and compliance right. You have to get risk management right. Yes, there’s a lot that comes along with it. And for a long time, we invested, first and foremost, to actually get a global infrastructure in place and to solidify something that’s, frankly – it’s not that easy to build and manage a global payment platform and acquire customers all over the world and then support those customers. So for us, these have been logical extensions of what we’re doing as we listen to customers. And we’ve actually been a leader and really have pioneered in many of the areas that we have talked about and are opening up. So for us, it’s something that – we are excited about what we’re doing, and we think we have already a nice amount of breadth to what we offer. And actually, our customers really do value the breadth of services we provide already today. And we focus on delivering quality for our customers, and it’s something that we actually really look to continue to invest to do. So we’re, again, excited about where we are, excited about where we’re going, and we’re getting very positive feedback from our customers as we do.

[Michael Levine, Chief Financial Officer]

I would just add to that. Bob, I think you hit on really a key theme, which is that we’ve created a foundation now in terms of our reach and scale and our compliance and regulatory know-how. That really the goal now is to continue to drive more product delivery, product creation and delivery through those channels. And I think this reflects why we’re aggressively investing now, because we’re building that global go-to-market team to get those products out, and we’re also continuing to invest in the platform to develop products even faster and wider to get out. So again, I think we have a proven formula, and now it’s putting more gas in the machine.

[Bob Napoli, William Blair]

Great, thanks. Good to see the momentum there.

[Scott Galit, Chief Executive Officer]

Thank you, Bob.

[Operator]

Thank you, Mr. Napoli. The next question is a follow-up question from the line of Will Nance with Goldman Sachs. You may proceed.

[Will Nance, Goldman Sachs]

Hey, guys. Thanks for squeezing me in here at the end. This is – I think it should be a very quick one, but I just wanted to clarify on the guidance, assuming we’re trying to model to the guidance that fully strips out Ukrainian dollars and Russia. There’s a note that says it assumes an approximately equal contribution from volume and higher take rates. I’m just wondering if you can drill down a little bit into that just given we’re going to want to put the Russia, Ukraine dollars impact to volumes. Could you expand a little bit on just what the volume impact is? And is this roughly 13% revenue growth at the midpoint, is that – are we thinking like 6% volume growth and the rest by take rate? I just want to understand that comment and how to kind of put that through the model.

[Michael Levine, Chief Financial Officer]

Yes. So we built our initial outlook with the assumption that volume growth rate, you can interpret that if revenue is growing 22% to 24%, you would take half of that growth rate in terms of the volume growth rate. And then the rest would be from the change in take rate, 2022 over 2021. In general, we also mentioned that the – if you take out Ukraine, Belarus and Russia and look at the residual remaining countries, the growth rate continues to stay where we had an initial outlook and basically meaning that those countries, we’re growing at a similar overall growth rate to the overall. So at this point, I think it would be fair to just use that as your methodology.

[Will Nance, Goldman Sachs]

Got it, all right. Thanks for taking the call.

[Michael Levine, Chief Financial Officer]

Okay, Will. Thank you.

[Operator]

Thank you, Mr. Nance. That concludes the question-and-answer session so I’ll pass the conference over to the management team for closing remarks.

[Scott Galit, Chief Executive Officer]

Great. Thank you, everybody, as always, for joining and for asking thoughtful questions. We look forward to talking soon and wish everybody a lots of health and success. Thanks.

[Michael Levine, Chief Financial Officer]

Thank you, everybody.

[Operator]

That concludes today’s Payoneer fourth quarter 2021 earnings call. Thank you for your participation. You may now disconnect your lines.