Q4 2021 Payoneer Global Inc Earnings Call
Southeast Asia, and South Asia, the Middle East and North Africa, we see tremendous untapped potential in developing markets globally and our go to market investments in these exciting markets are delivering strong results as we continue to have a new customer payback period globally of less than 12 months.
We also continue to build momentum with the pay in your partner ecosystem. One of our key initiatives is growing our bank partnerships as we collaborate with banks and digital wallets around the world to acquire new customers and to offer our joint customers a unique integrated experience we have bank partner.
Ships 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 <unk> portfolio of higher value services and to increase the number of paying your 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 <unk> offering was a key contributor to our growth in the fourth quarter <unk> volumes grew over 75% year over year accelerating sequentially from the third quarter <unk> 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 <unk> hiring more sales resources and working with our global teams to acquired acquire new customers and up sell <unk> to existing <unk> customers.
The majority of our <unk> customers are new to pay an ear, which demonstrates the strength of the pioneer brand and our ability to acquire and grow a new complementary business at scale.
All while also pointing to the significant incremental addressable market opportunity we have in <unk>.
Our.
We are also seeing strong customer demand for our pioneer commercial Mastercard, which enables our small business customers to use their cannier global multi currency 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 arent based in the U S, but are selling globally during.
During the fourth quarter, we ramped up our acquisition of customers for our commercial card and also introduce more customers to our cashback rewards programs together, resulting in customer spend more than doubling from the third quarter.
The pioneer commercial card as 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 <unk>. While we are still in the relatively early stages of growth for our commercial card we are optimistic about the <unk>.
<unk> 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 pannier technology to simplify the complexity of their global consumer payments. This is.
As a great opportunity to upsell existing customers and acquire new customers, we're especially excited about paying your checkout, our offering for small businesses. While it is still very early in our gradual rollout of pay in your checkout, we are getting positive customer feedback and we are building momentum.
<unk> for what we expect will be an important growth driver for many years to come.
Overall these neat new services are core to our strategy to drive an important evolution in our business as pioneer customers are increasingly using our platform for a broader set of more sophisticated and higher value services. Many small businesses are using pannier 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 <unk> platform pending their use of one or more of our services.
<unk> 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 helped demonstrate how pioneer is an important partner supporting and enabling their growth.
Auto DFS or drop shipping platform headquartered in Israel helps over 10000 merchants throughout the U S and Europe to automate their online sales processes auto DFS relies on 10 years <unk> services to get paid by its clients, while integrating with our API to enable other pay.
And your customers to pay auto DFS with they're paying your account balances.
Another example is true suite from Australia, a brand created by women for women delivering breast pain relief products. They use pain here to get paid for their sales on E Commerce marketplaces in the U S as well as using <unk> to get paid for their <unk> transactions with international hold.
Taylor's they use the funds in their annual multi currency account to pay their suppliers and use the painter commercial mastercard to pay for online business expenses.
In these examples we have entrepreneurs tapping into the digital economy to grow and pannier 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 too.
Acquire new customers and serve an up sell services to our existing customers as we have demonstrated that such investments have a positive rois. 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.
<unk> platform, while also increasing the level of engagement with our customers.
All of this momentum translated into strong results for our fourth quarter <unk>.
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 and an increasingly diverse set of geographies and vertical markets as well as the growth of higher value services, our take rate increased meaningfully to 86 basis points from 68 basis points in the prior year.
Our continued solid financial performance reaffirms, our ability to create strong value and monetization and we remain excited about the long term market opportunity for digital commerce globally and confident in our multi year strategy to be the worlds 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 opportunities 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 multiyear 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.
This 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.
We will 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 payer global accounts.
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.
<unk> that in 2021, we executed ahead of our expectations on almost all dimensions of our strategy well exceeding our revenue growth and adjusted EBITDA targets and actually delivering positive adjusted EBITDA, even while we have been increasing our investments as planned in short we executed very well in 2002.
'twenty, one and reinforced our conviction that our multiyear 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 <unk> with more go to market and R&D resources.
<unk> 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 in large market opportunities I'm really optimistic about our future. We are building on our 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 through deep risk management and compliance expertise our amazing team.
And our scalable business model I would like to thank the pioneer 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 2020 to business results.
Russia, and Belarus, together represent less than 3% of our revenues and combined with Ukraine represents slightly less than 10% of our revenues.
Altogether, we had projected these countries to generate revenues of approximately $46 million during the remaining 10 months of the year.
As the situation in Ukraine is quite new and evolving very quickly.
We are analyzing a variety of scenarios and we have not yet updated any of our plans for the year. We remain both concern for our colleagues and customers in Ukraine and confident in our ability to deliver growth in 2022 and beyond.
Ill hand, it over to Michael to discuss financial results and forward guidance in more detail.
Thank you Scott and I am very happy to share more detail on Q4 and discuss our strong exit philosophy and helped US achieve agreed 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 adds continued momentum with marketplace wins and new partnerships and.
And customer adoption of higher value services, such as <unk>.
Our working capital and pain year commercial card.
To illustrate the impact of some of these higher value services fourth quarter volume for BBB APR 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 <unk> is a higher than average decrease.
Because we often collect revenues on funds coming in as well as on funds going out to the decrease is currently running in the ballpark of approximately one five times that of our average take rate.
Thus <unk> APR 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.
The 86 basis points, a significant increase from 68 basis points in Q4 2020.
As expected it was a holiday season mix shift to ecommerce and large sellers with lower pricing.
A slight dip from the 90 basis points, we reported in Q3 21.
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 with changes in consumer purchasing behavior and lingering supply chain disruptions that impacted ecommerce businesses.
<unk> on our year over year volume growth over.
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.
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 year to $111 million, representing 80% of revenues an increase of over 500 basis points from the same period one year ago.
Q4, total operating expenses, including transaction costs were $143 million.
Up 38% from Q4 2020.
We made the most significant investments we've ever made in our business in 2021, and as we continue to invest for future scale, particularly in R&D and sales and marketing to drive future growth.
Excluding stock based compensation in 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 <unk> <unk> per share based on weighted average basic shares outstanding of $346 million.
I'd like to note that in the investors section on our website.
Updated our detailed share count, which addresses the current basic shares outstanding as well as all equity awards contingent shares and related restrictions were exercised prices and as the case may be.
We ended the quarter with cash and cash equivalents of $466 million.
There is an additional $4 4 billion of customer funds on our year end balance sheet more than half of which are held in interest bearing accounts.
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 adjusted EBITDA was $28 million, an increase of $22 million over full year 2020.
Now turning to our outlook for 2022.
Based on current business trends and the situation in Ukraine, we'd 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.
Each 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 book and the possible impact to our results.
As Scott mentioned, Russia, and Belarus, combined present represent less than 3% of our revenues and together with Ukraine are slightly less than 10% of revenues.
Altogether. These countries are projected to generate approximately $46 million of revenue during the remaining 10 months of this year.
Therefore, we have taken a conservative approach and reduced our guidance range revenues by $46 million, which is 100% of the expected revenue from Ukraine, Russia, and Belarus for the remainder of the year.
The result is revenue in the range of $530 million to $540 million, which would reflect year over year growth of 12% to 14%.
If we exclude Ukraine, and 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 <unk> APR senior commercial card and merchant services to support the higher take rate.
Our volume expectations include assumptions about the current inflationary pressures residual supply chain issues and evolving consumer behavior.
We expect transaction costs to be approximately 22% of revenues.
We expect cost benefits from the ongoing scaling of the platform, which will be slightly offset by higher borrowing costs for our working capital products as well as the new costs related to our growing merchant services business.
Yes.
Our stellar 2021 results demonstrated our ability to acquire customers at scale and sell new higher value services to our existing customer base.
As a result of 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 in high growth markets.
And R&D, mainly focused on our higher value services, such as <unk> <unk> commercial card and merchant services as well as compliance and risk management capabilities to further differentiate our platform.
Our initial outlook and our initial outlook, we forecasted adjusted EBITDA to be breakeven or slightly positive for the year, reflecting the increased investments that I just mentioned.
Our approach has been and will continue to be focused on making the right long term decisions to build a much larger scale business.
While these investments will impact near term profitability.
Our demonstrated operating leverage 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 you have not yet updated any meaningful changes to our investment plans. So the adjusted EBITDA range as shown in the table assume our current investment plans are unchanged as such our adjusted EBITDA guidance is negative.
<unk> $25 million to negative $35 million.
In conclusion.
Q4 was a great end to a terrific year for <unk>, our ability to execute throughout 2021 and performed despite supply chain and lingering pandemic challenges reinforces our confidence in our multi year growth strategy to invest aggressively to build a much larger platform.
And to be the go to partner for the future of digital Commerce.
Despite the very unfortunate situation in Ukraine.
Our management team is highly experienced and always manages for the long term.
<unk> built a global business with a diverse and resilient set of customers, who understand the digital commerce landscape and we'll adjust as needed over time.
Our guidance demonstrates our ability to produce double digit growth even in a downside case scenario. During this once in a generation event.
We've never lost our entrepreneurial spirit, nor our confidence in the growth of our global of global Commerce.
As such we plan to use a combination of organic inorganic and partnering opportunities to drive sustainable and profitable long term growth.
On behalf of Scott and myself and the rest of the <unk> 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.
Certainly if you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove that question. Please press star followed by two again to ask a question press Star one.
Wonder if you are using a speakerphone. Please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered.
So first question is from the line of Josh Stiegler with Cantor Fitzgerald you May proceed.
Hi, This is <unk> patent and then 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.
Yes, it's diversified across.
Market segments across.
Ross services that we provide.
Vertical markets.
And different.
Cross border payment channels that folks are selling into so.
It's a market that.
There is 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.
And in addition.
Also fairly active in BBVA PR as well so fairly diverse very very digitally forward market.
And pretty broad based.
Understood. Thank you I appreciate the transparency there and then on a separate note.
How are you guys viewing the current acquisition market has there been any shifts in your capital allocation strategy.
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 smaller to medium size range.
Opposed to large and really focus on something that will bring more value to our customers.
So the market continues to evolve in a variety of different directions, but but overall, we've been pretty consistent in what we're what we're focused on.
Okay, great. Thank you very much.
Thank you.
Thank you Mr. Li.
The next question is from the line of will Nance with Goldman Sachs. You May proceed.
Yes.
Afternoon.
Very nice quarter, just wondering if you could talk through what youre seeing on the e-commerce side as it relates to e-commerce normalization on supply chain issues I think that had been an issue in the past couple of quarters.
Volumes and depending a little bit ahead of expectations look relative to your projections.
And are you factoring any additional disruption to global supply chains in the in the guidance that you provided.
As a result of everything that's going on.
Yes so.
Well so in general what we've seen is a bit of a.
Moderating of suppliers, we can say things are 100% back to normal normal based on.
What we continue to hear in the market.
We've seen it.
If you track a number of the commerce brands that are public.
Reported generally.
Really strong two year numbers.
Over a year.
And Thats pretty good.
<unk> been seeing.
We again as of now.
Then some challenges.
Is certainly moderated from.
Part of last year.
Looking forward, we're expecting the current trend.
Mr continue.
Again general and also.
Okay.
More moderate supply chain and logistics issues.
That's helpful. Appreciate it and then I guess.
A follow up I'm wondering I think in.
And the color on the acreage there.
I'm wondering if maybe you could dig a little bit deeper on the.
The total call all higher margin revenue.
For initiatives financing.
Federal what percentage of any today and over a longer period upon what do you think that.
It goes to when you've got a model.
<unk> is by quite a bit.
So we haven't disclosed.
So it is what the rest represents.
But but BTB overall is.
Is larger than the rest combined.
We really see just being at the very very beginning year of the opportunities.
The commercial card, which we touched on it I mean, we're.
We're not even.
Getting to 1% of the volume in the business with the penetration that we've had so far so there is a lot a lot of offers in these higher value services.
Have the potential to be larger than the rest of the businesses.
As we sit here now so so we're very very Louisiana pick about where we're going as Michael has mentioned in the past.
Yes.
Each one of the uses 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 opportunities ahead.
Well I appreciate all the color guys. Thanks, taking my questions.
Thank you.
Thank you Mr Nan.
The next question is from the line of <unk> Tandon.
With Needham <unk> Company you May proceed.
Hey, good evening. This is actually Sam <unk> on for Mike Congrats on the results and thanks for the color relating to the.
So you're creating situations.
Just wanted to touch on the Walmart month since you guys announced.
And I was just wondering if you could talk about how things have progressed since then.
And maybe how they.
Compared to your expectations. Thanks. Thanks.
Thanks, Sam so.
In lines of what we expected.
We typically don't.
As disclosed anything specific about any particular partners, but in general.
We're really.
Okay.
Excited about the opportunity to collaborate back from customers.
And we're looking forward.
And some of Thats been growing as we go through.
Sure.
And then just.
Hopefully grow.
The business organically so far.
You mentioned the interest in pursuing that.
M&A.
You mentioned inorganic growth in 'twenty two could you just talk a little bit about what the appetite is for M&A today and with some potential areas of interest might be.
Yes, so we are.
Our.
Focused on as we've touched on we see.
So much operator.
Attunity and so much need among our customers and our go to market of really engaging with and listening to our customers.
And so they have as opportunities and challenges.
And we also have a sense of how much they rely on pioneer to help them actually pursue the opportunities and address their challenges. So we have a <unk>.
Long list of opportunities.
And to US that we think can really is.
Globally, so youll see us focusing on.
Shawn and again these.
Big areas for us like.
<unk> and merchant service line 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 theres a lot of opportunity.
The capabilities.
That we can bring to our customers that fit and fit within this kind of.
Very large market opportunities that actually can really help them grow. So we're focused on buying something again it would be.
More of it.
Products and something that we could globalized, where there arent 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 organizations.
Congrats again on the results.
Thank you.
The next question is from.
The line of Bob Napoli.
Yes.
Thank you.
This quarter.
Paul in the bank.
Sandy.
In Russia, Ukraine.
Hello, everybody.
Yeah.
Just on the <unk>.
Revenue I guess.
Last quarter higher.
The take rate so it looks like the third.
Total revenue.
At fourth quarter somewhere.
Yes.
What I just mentioned on the call is that we are.
And within that ballpark okay.
And then the.
<unk>.
How much has that affected.
Which pieces are of that business are growing faster at the commercial card is that it is that thats early days, yet and I think you just rolled all beginning of last year, yes.
What are the Pds, making.
But the growth of that value.
Value added services.
Yes sure.
Thanks, Bob.
So.
So <unk>.
The main components to what we offer there so want.
And it is.
For our customers to use our platform to bill there.
Their customers.
Yeah.
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 customer.
And build their their customers and use use us kind of.
Bank accounts around the world.
And a set of capabilities to get paid locally wherever their customer year towards larger customers.
Larger transactions.
And so those are the two main parts of <unk>.
Our commercial card.
Were actually <unk>, so it's not an <unk>.
Numbers that we talked about it would be incremental to that.
That in a way to think about it.
It would be that one of our customers that are using us for BBB or.
Think about the primary use case there is they are using us on the receivables side. So let's say they invoice our customers into their pay and are a global multi carrier.
Use the pain here.
Our commercial card.
To pay a supplier or pay a SaaS subscription.
Use the balance that Keith.
With that so.
So those are essentially two different complementary parts of our overall set of services each one of which is.
Our forward opportunity and we actually have customers using both but that we keep separate.
Okay and those are growing.
I mean, that's growing close to 100% is that the way to think about that.
And the next year would you say that sorry the card.
Well the combination looks like its grow out of that revenue.
Close to.
Okay.
Yes, we were expecting.
Sure.
Sorry, Bob I think there's a touch of a delight.
Yeah.
Yes, we are expecting <unk> APR.
At strong double digit growth rates well into the future and commercial card is.
But it will grow faster than that.
For a little while here.
So again, we think we're both we're really just scratching the surface of very very large opportunities and as a result, we think we've got quite a bit of room to run here at.
At very attractive growth rates.
Thanks, and then just lastly, what new markets are you investing in Latin America, where are you seeing yield.
Where you have material volume.
And new market cash both markets.
Yes.
We're seeing over 50% growth then.
Markets in Latin America, and Southeast Asia, and South Asia, Middle East and North Africa.
And in some other places as well. So we really are seeing just a lot of enthusiasm around the world the kind of move to digital and the focus among entrepreneurs around the world recognizing that that digital channels created opportunity for them to really build the <unk>.
Mobile businesses has been accelerating and we've got great teams that we have been.
Sitting 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 and many of those markets.
Thank you appreciate it.
Thank you Mr <unk>.
The next question is from the line of Mike Grondahl with Northland Securities You May proceed.
Hey, good afternoon, Scott and Michael 47% revenue growth was very nice.
Two questions.
You guys mentioned sort of strong new customer acquisitions can.
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.
Yep.
So.
In terms of new acquisition, we had a terrific year.
A record year for us.
Overall and actually our 2021.
New customer cohort growth was about 50% larger than the 2020 cohort.
Just to give you a sense and I think more than double from from 2019. So we continue to.
Build strong momentum on the customer acquisition side, and we're doing that while retaining.
Strong.
Customer acquisition costs, and economics and strong payback period. So so we're very excited about that.
And on China, I think what Youll see is that the.
Percentage ticked down overall as a percentage of the overall business, but we continue to have growth and opportunity there and it continues to perform well.
So.
So again, not calling out China.
When we talk about some of the fast growth markets of minutes.
Bigger market for us and continuing to grow and we continue to be very <unk>.
Cited about opportunities there, but we're seeing more more greenfield and were kind of earlier in some of the ramp cycles and some of these other markets.
And Mike we do have in our 10-K, we guided you have.
Hey, Ken.
For China.
Okay. Thanks.
Thank you Mike.
Thank you Mr Grondahl.
The next question is a question from the line of Ashwin <unk> with Citi. You May proceed.
Thank you.
Okay Mike.
We heard from you guys.
Yes.
Can I start with asking about.
How do you expect sort of the cadence in the year to kind of play out the next four quarters from a volume revenue and also investment.
Perspective, and on that investment angle.
When you say you haven't decided.
Whether or not to proceed with all your investments is the clarification any specific.
Regional investments that you were thinking of that Youre now going to potentially pull back.
With dose.
When you're thinking of maybe not making investments is because you have uncertainty in the business.
Yes, maybe maybe I'll start and then I'll, let Scott a little deeper on the investment side.
Good to speak with you.
From a volume standpoint, we would expect to see a pick up as we go.
Go throughout the year actually.
Hope to see year over year growth rates.
The increase as we go through the year.
A lot of the thinking about the cadence on investment.
Is is really a long term approach because a lot of the investments we're making.
The years to come and I think the comments Scott made about the higher value services really having traction.
And we're able to improve that and show that even through the.
Earlier stage initiatives.
Really gives us a lot of confidence to now.
To be more aggressive and grab that opportunity. So we feel that we've really proven ourselves in 'twenty, one 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've really thing.
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.
We've.
Think what we tried to clarify in our approach and we think it is a conservative approach in terms of how we handled the situation in Ukraine.
As to at this point and not make any adjustments.
From an investment perspective keep them stable.
Stay the course.
And our approach at depth 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.
Then as a team working together through.
Many many cycles and we've seen much throughout our careers.
We are patient, but we're also methodical in our thinking and we don't rush.
To any decisions and so we think we have the right strategy. We think we've been able to see where we're getting the traction in businesses and investing in those businesses that have models or businesses that we can model out with confidence.
And so we're super excited to make these investments because we see this is clear.
Clear to us at least that there is a great return on making these investments and so we want to continue.
Are you down that path.
Ken 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 involved hiring.
We have also needed to <unk>.
We increased the capacity on hiring as we look to bring more people on this year. So so that also is something kind of hiring and building. The hiring machine is something that's part of the early part of the year as well.
Again with a strong focus on both sales resources in R&D.
Capacity as well and.
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.
And we have more conviction than ever and 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 and an EBITDA positive way since 2012, we've done that through a variety of twists and turns and ups and downs.
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.
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 to.
To push forward.
Got it got it.
The second question I had was.
You just don't mind stepping back a bit.
Yes.
Kind of talking about.
Great.
Because you've mentioned a couple of times.
The high value services, and so on which should result.
In an improvement in the take rate and then mix May also help is my is my suspicion.
Certain of the types of things that have been delayed 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.
Yes.
You are correct that these higher value services definitely helps support increasing take rate.
We do expect as we mentioned that.
Our focus is on really continuing to drive revenue growth and that's coming from a combination of volume growth and take rate improvement.
As.
So we grow obviously the mix shift makes a difference as we look at travel which actually.
Lower take rate than average.
Continuing to grow that would mitigate some of the positives that we get.
The higher value services, but all in all the net benefit will decrease in 2020.
And to take rate over 2021 take rate.
Driven by those higher value services.
One other note just to add is as we add more sales resources.
We've touched on before that our customer base as emitters that are self serve and larger accounts.
Customers that our sales teams work with and that those larger customers surge and the smaller ones have higher take rates.
More sales resources that bring on more.
For customers that on average are larger.
Again, another dimension of a mix shift that contributes also to take rates. So.
Our sales teams are also focused on selling higher value services, but on some of them.
And services.
That can have.
The negative effect on that blended take rate.
I will set in take rate growth.
But there are again.
Takes within that.
Understood. Thank you both.
Thanks, Ed.
Thank you Mr. Sir next question is a question from the line.
Our Andrew Hummel with West Park Capital you May proceed.
Yes.
My question.
Just wanted to follow up a little bit on that now.
I appreciate it.
Conservatism I think from a from a revenue perspective.
Pulling back.
That all led to.
The forecast but.
Just wanted to see if there is.
Thanks, guys.
Money flowing through the platform.
Sure.
<unk>.
That to continue if thats the case.
Or.
I guess I'm, just kind of level of conservatism on pulling it all out.
Implies.
Yes.
A couple of.
A couple of points so first.
Paul we are absolutely.
Fully complying with all and so everything that.
We need to do we're doing.
And we have.
A large team.
<unk> focused on on that and that's something that we do quite well.
Second bad.
There is there's quite a bit of.
It's pretty fluid situation right.
We are continuing to see activity.
We also when we look forward.
<unk>.
Part of what's interesting and one of the major trends.
Digitalization and frankly, something that we've talked about more coming out of Covid is actually kind of where.
People work is actually more fluid than app.
For so.
<unk> of outcomes here we are.
Folks that are moving we are.
Are seeing folks that are.
Looking for.
For support and help and.
And we're seeing folks that want to continue to work actually I remember from people that are developers that need to fill their time with some.
Thing other than worry and so there is all kind of at this point again, it's a very very soon.
And so.
Again really impossible to predict.
And here.
We remain.
And for many many reasons quite hopeful.
For folks.
And.
But.
From a business perspective.
We think it's appropriate to again take a conservative approach here.
Okay.
That makes sense.
But that's just one other question around.
And some of these other marketplaces.
Are you guys.
Yes, I think I think from from a broader market perspective, it's easier to kind of peg E com.
The broader market trends, but.
Can you just talk through some of the vertical that maybe youre seeing the most strength and some of those other marketplaces and how should we think about.
The broader.
Bucket of customers.
Growing from all should we think about it maybe relative to what you guys are seeing.
Comp marketplace site. Thanks.
The more exciting parts of.
And I think.
2020 really amplified.
But amplified.
Sure.
Strength of other vertical markets.
And so.
Remote work and free layers.
Again, there's just a tremendous.
Growth in the number of.
People around the world working a variety of different models and.
Some set of services.
That are needed by.
Or both.
The company or are people buying the services as well as those providing them.
And again, there's a range of models both from sole traders working consistently.
Freelancers.
Two agencies 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. This 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 Thats 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, theres a variety of different verticals.
That are actually quite interesting and quite exciting.
That are developing so 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 so we're seeing it across again, a very very wide range and vertical markets.
Great. Thanks, guys really appreciate it.
Okay.
Thank you Mr Hummel.
The next question is a follow up with William Blair. Please proceed.
Thank you just wanted to get out.
<unk> the interesting Tom.
Tom.
And how you are managing I'd say, 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 your investing how should we think about interest income.
The fed moves rates up.
As I mentioned earlier, it's upside.
No.
Our folks really to make sure we protect our customers' funds.
But at the same time.
As we mentioned.
More than half.
Of the funds that.
Our customer funds, our interest, earning but we're still in a low interest rate environment.
So.
Bob I definitely put it as upside.
No.
The fed starts raising rates go up we'll be a beneficiary.
Of that but we don't want to get into the game of trying to guess if theyre going to be in the year. So we'll leave that as debt.
There is upside were not we don't bet on that and building our models.
The incremental upside.
But if they raise rates 100 basis points.
Is that.
$4 million of revenue.
<unk>.
Alright.
Okay.
Think about it.
Sorry $40 million.
1% Okay.
Well, it's early Doug.
If you earn <unk> earned it on the <unk>.
Matt. So again, we don't we don't have all of the funds. We used those funds are going through the myriad of banks.
Banks that we have in our platform so they're not not.
Not all of the funds are in the interest, earning accounts and again, our focus is making sure the funds get to where they need to be as quickly as they can and safely as possible.
But nevertheless, there is room to bear.
Benefits from an increasing rate environment.
We actually.
We do have interest income.
Broken out in the 10-K, so you can see.
Where it was last year.
Do the calculation.
But you don't have any rate hikes in your guidance.
At this point.
Our expectations, we have a slight increase in interest income, but can add anything.
Alright.
A quick Big picture question, you guys have so much momentum like your higher value services.
Curious.
Why were those not rolled out like five years ago.
Okay was there a technology evolution.
Addition that.
It seems like you guys.
Yes.
Rolled out several years ago earlier.
Yeah.
What I would say is first of all.
Financial services.
It's not easy I mean, you have to get a lot of things right.
You have to get value proposition right you have to get.
Regulation and compliance variety yet to get risk management right.
Yes.
There is a lot that comes along with it.
And for a long time.
We invested.
Our global enterprise.
But if I Miss something Thats, frankly, it's not that easy to build and manage it.
Our global payment platform and acquire customers all over the world and then support those customers. So so for US. These have been logical extensions of of what we're doing is we're listening to customers and we've actually been a leader in really pioneered and many of the areas that we have.
That we talked about in our opening up so.
So for us it's something that.
We are excited about what we're doing and we think we have already a nice amount of breath to what we offer and actually are customers really do provide already today in.
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.
So we're growing and we're getting very positive feedback from our customers as we do I would just add to that Bob I think you hit on.
Which is that we've created a foundation now.
Now in terms of our reach and scale and compliance and regulatory Knowhow.
Okay.
We'll now is to continue to drive more product delivery product through those channels.
I think.
This reflects why we are aggressively in that global go to market team to get those products had an overall.
Platform to develop products, even though.
Faster and wider.
To get out so again I think we've we have.
A proven formula now.
Putting more gas in the machine.
To see the momentum there.
Thank you Bob.
Okay.
The next question is a follow up question from the line of will Nance with Goldman Sachs. You May proceed.
Hey, guys. Thanks for squeezing me in here at the end. This is I think should be a very quick one but I just wanted to clarify on the guidance, assuming we're trying to model.
Ukraine and Russia.
Okay.
As a note that says it has since then approximately equal contribution from volume and higher take rates I'm. Just wondering if you can drill down a little bit into that just given we're going to want to put.
The Russia, Ukraine, Belarus impact through volumes could you expand a little bit on just what the volume impact is in.
Yes.
Growth at the midpoint is that counts.
Volume growth in the rest of my takeaway and I just want to understand that.
That comment and add up kind of put that through the model.
Yes, so we built our initial outlook with the with the assumption that.
Volume growth rate you can interpret that as revenue is growing 22% to 24%.
You would take half of that growth rate in terms of the volume.
The growth rate and then the rest would be from the change in take rate.
Okay.
In General we also mentioned that the.
If you take out deliveries from Russia.
<unk> the growth rate.
We had an initial outlook basically meaning that those companies.
A similar.
Overall growth rate to the overall so.
I think the series.
So use that as here.
Analogy.
Thanks, Paul.
Sure. Thank you.
Thank you Ms Jean Ann.
That concludes the question and answer session. So I will pass the conference over to the management team for closing remarks.
Great. Thank you everybody as always for joining us.
And for asking thoughtful questions.
We look forward to talking soon and wish everybody had lots of health and success.
Thank you everybody.
That concludes todays <unk> fourth quarter 2021 earnings call. Thank you for your participation.
Okay.
Okay.
Yes.