Q4 2022 Payoneer Global Inc Earnings Call
Years ago. These faster growing regions also have higher average take rates.
And we are focused on building and growing high value services, including <unk> commercial Mastercard working capital and checkout and we expect these will continue to drive growth in the future.
We grew <unk> volumes by 39% year over year in 2022, and it now represents 12% of our total volumes up from 9% in 2021, we drove a threefold increase in spend on our virtual commercial mastercard year over year and exited 2022 with a run rate of over 1 billion.
This is an example of how we are innovating to offer more ways for our customers to use their <unk> account.
We also remain optimistic about the long term growth potential for our working capital and checkout businesses.
Working capital, we intend to continue to grow, albeit with an adjusted risk appetite given the current environment long term. We believe there is meaningful opportunity to provide emerging market Smes with access to the capital they need to grow and our checkout business. We are seeing positive initial adoption in growth rates following our launch nine.
Months ago, we have already announced partnerships with platforms, including Shopify shop, Lazar and commerce.
2022 volumes of $61 billion were up 8% year over year and benefited also from a recovery in travel.
Our long term strategy to diversify geographically and grow high value services and also increased monetization of customer balances enabled us to deliver 18 basis points of take rate expansion year over year.
A year ago, we reported our earnings just as the war in Ukraine was beginning Ukraine is an important market for pioneer and we remain committed to supporting our extraordinary Ukrainian customers and employees. Additionally, we worked with our partners throughout 2022 to wind down our business in Russia and as of December .
Remember 31, 2022, we no longer send payments into Russia.
2022 was an incredibly strong year for pioneer as we continued our track record of delivering consistent revenue and adjusted EBITDA growth. We have a strong foundation for our next leg of growth and I am incredibly excited about <unk> future on February 27, the board appointed John as CEO effective March one.
Now I will transition to the role of senior adviser and continue to serve as a board member I am looking forward to staying actively involved with pan here and plan to focus more of my time on strategic projects.
This is my last earnings call I'd like to say, thank you to all of our employees, our customers and our shareholders for their support over the past 12 years.
When we first announced John was joining Pan here, we said that we'd look for John to transition to CEO by the end of 2023 to ensure we didn't rush to the transition.
The transition has progressed very smoothly and after working closely together over the past nine months the board John and I. All felt now was the right time to move forward.
I'm enthusiastic about the opportunities paying your has and I have full confidence that John and the strong team that we have will deliver value for our customers employees and shareholders for many years to come I will now hand, it to John to discuss our 2023 strategy.
Thanks, Scott for your guidance and friendship as we work through the transition.
Credibly excited about paying your strong position to capture a greater share of a growing market globally and recognize our long term potential I am looking forward to leading Dana airports next leg of growth from over $600 million of revenue to multi billions in the years ahead.
<unk> that transact globally have cross border operation expenses and currencies to manage they need a holistic and cost effective solution for managing their global financial operations and accessing the capital they need to grow their business yet they are underserved by the traditional banking and financial system.
In fact, approximately 90% of <unk> payment volume.
On legacy payment methods.
Near provides these smbs with the tools and services they need to grow their businesses.
We plan to generate strong long term revenue growth, while driving greater operational efficiency in 2023 pay here expect to more than double adjusted EBITDA, while investing in future growth and profitability.
I will now discuss our three core priorities going forward number one delivering continued revenue growth.
Number two focusing our acquisition and service model on profitable customers and number three building our next generation technology platform.
We remain committed to delivering long term, 20% plus revenue growth.
We have created a network and infrastructure with scale and reach and benefit from a trusted brand that drives millions of customer registrations annually.
We will leverage our strength and focus of our customer acquisition on higher take rate region and on growing and scaling high value services.
Pioneer is delivering a global financial operating solution for Smbs are core products accounts receivable accounts payable and the operating account our capabilities are at different stages of their maturity and development.
We intend to deliver a comprehensive product set that can increase our wallet share and drive greater monetization of existing customer relationships our.
Our <unk> business for example provides our customers with invoicing billing and payments tools to make and receive payments from their trade partners around the globe approximately one third of our <unk> customers are existing customers, where we were able to increase our value proposition.
The remaining two thirds are net new to pioneer and represent a significant expansion of our addressable market opportunity.
<unk> customers tend to have more complex needs, including spend management and operating account functionality, which increase their monetization potential over time.
This underscores the big opportunity in front of Us and we expect <unk> to continue to grow faster than our business overall.
We plan to also continue diversifying our revenue mix geographically.
We remain focused on acquiring more customers and faster growing higher take rate regions, such as Latin America, EMEA and APAC to accelerate our revenue growth and our ability to upsell and cross sell we are also evaluating inorganic opportunities. We believe M&A will play a meaning.
Full roll in our product roadmap and help us scale revenue growth.
Our ability to attract a large number of diverse smbs to our network is a core strength of our business. We are deepening our understanding of our customers' differences by size or geography industry and product utilization to better inform and focused our growth strategy different.
Portfolios of our customers have different profitability profiles.
Going forward, we will focus a greater proportion of our go to market on adding and retaining profitable active customers at the same time, we will invest in our platform and product capabilities. So that overtime, we can profitably serve an even greater number of our customers.
And the prospects that come to pay in here every day today, approximately a quarter of our active customers drive the majority of our volume revenue and profitability on average they tend to have the highest retention rates growth potential and most attractive unit economics.
Within this segment are tens of thousands of customers, who do more than $100000 of volume annually and we are focusing our go to market strategy and partnership efforts on acquiring lookalike of these larger smbs. We recently made changes to our go to market.
Organization and leadership to fully align and accelerate our efforts.
The balance of our customers those who make it a small portion of our volume and revenue carry a significant cost to onboard and serve in today's operating environment in aggregate. This group of customers resulted in approximately $25 million of operating losses in 2022.
Additionally, we have seen a significant growth in the number of applications. We receive every month.
Our powerful brand attracts hundreds of thousands of customers every month on average we received nearly 400000 prospect registrations a month in 2022 up 25% versus a year ago.
This is a core strength of our business and highlights the significant market demand for our pay in your account at the same time. However, we spent over $50 million in 2022 on processing application that did not become active customers.
This represents a meaningful opportunity and we intend to continue leveraging our brand to cost effectively acquire more SMB is while significantly reducing the cost to onboard and serve the smaller customers in the near term we have begun to address some of this drag.
On our earnings by implementing a set of focused efforts, including experimenting with new fees and pricing models.
Pioneer has built a strong and trusted brand and in many markets. We are the on ramp to the global economy for Smbs.
The long term mission for paying here is to profitably serve more of these smbs and we are making meaningful investments in our technology platform to do so.
In 2023, we plan to invest approximately $30 million.
To build the next generation of our technology platform. We expect this investment will unlock significant value over time through greater automation and operating efficiency and faster product delivery, which will better enable our cross selling and up selling it.
It will also strengthen our platform. So that we can meet the increasingly complex needs of our customers and global partners, particularly as compliance costs associated with operating a global financial services business continue to rise across the global financial ecosystem.
Building the next generation of our platform will be a multiyear journey and the first phase in 2023, we will focus on our customer onboarding infrastructure. This.
This includes enhancing our AI and predictive tools to better identify and reduce in fact, the number of prospects applying that are unlikely to ever achieve our target unit economics, and our profitability thresholds.
We expect to begin seeing the benefits of our investments towards the end of 2023 as we begin transitioning to our new platform.
At this time, we expect that half of our investment in 2023 will be expense, which is reflected in our guidance, which <unk> will discuss in more detail shortly while the remainder will be capitalized.
We plan to also spend an incremental $20 million and our compliance function in 2023 to support ongoing growth of our high value services and the increasing regulatory complexity of our industry, we will invest in infrastructure personnel and plan to add to our global licenses for.
Work to support our future growth.
This is required to facilitate the current business we operate.
Importantly, also serves as a significant competitive moat.
It is increasingly challenging and expensive for any competitor fintech or traditional bank to build the infrastructure necessary to operate across the breadth of markets and industries in which we serve customers.
We recognize the opportunity we have at paying here is extraordinary for our customers. We will continue to innovate and to evolve our offerings. So we can deliver a comprehensive suite of financial services to Smbs with global needs.
For our communities I am proud to announce that at the end of 2022, we established the payment are foundation for all of our charitable efforts. We plan to support organizations that are deeply aligned with tenures values, including small business development and supporting global entrepreneurship.
For our employees, we are dedicated to recruiting and retaining the best individuals and ensuring pioneer remains a great place to work.
Our 2022 results and our forward momentum are a direct result of our experienced leaders and talented employees around the world who are passionate and focused on our mission.
And for our shareholders, we are committed to delivering sustained long term profitable growth before I hand, it over to Michael and B to discuss fourth quarter financial results and forward guidance in more detail I'd like to announce that our board of directors have appointed B as our CFO effective March.
<unk> one.
Want to thank Michael for his leadership and friendship over the past 11 years with that over to you Michael.
Thank you John and thank you to everyone for joining us <unk> delivered another strong quarter and exceeded our guidance for full year revenue transaction cost as a percentage of revenue and adjusted EBITDA, we saw 30% or greater year over year revenue growth in each quarter of 2022.
Q4 revenue increased 32% year over year to $184 million.
Driven by growth of high value services continued customer acquisition across diverse geographies and accelerating interest income from growing customer funds and rising interest rates.
Sequentially revenue increased 16%, which also benefited from our typical Q4 seasonality.
Q4 volume increased 5% year over year, and 12% sequentially to $16 9 billion volume growth year over year was driven by a recovery in travel and continued growth in <unk>, while e-commerce volumes were slightly lower compared to Q.
For 2021.
<unk> volume growth for Q4 was 10% year over year as we saw the full quarter impact of customer terminations, we need in the third quarter.
Q4 take rate was 109 basis points up compared to 86 basis points in the fourth quarter of last year and 105 basis points in Q3.
Sequentially. The take rate expansion was driven by higher interest income, partially offset by holiday seasonality, which drives mix shift into large e-commerce customers with lower take rates.
<unk> funds held by pain here have increased nearly $800 million sequentially and over one 4 billion.
Year over year to five 8 billion.
Customers value the ability to get paid manage their multi currency funds and make payments around the world.
Some of this fourth quarter growth is also seasonal.
We have been driving greater monetization from customer fund balances by leveraging our scale to get better economics, and a greater share of each subsequent interest rate increase.
Further by working with regulators to secure the appropriate approvals.
We're able to optimize our allocation of customer funds to interest bearing accounts now over 80% of customer funds are earning interest versus over 50% a year ago.
We earned $36 million of interest income from customer balances in the fourth quarter up from less than $1 million in the prior year period.
Sequentially.
<unk> income increased $21 million.
Before transaction costs were $30 million. This represented 16, 6% of revenue an improvement from 22% in the fourth quarter of last year.
The 17, 6% versus Q3.
Transaction costs grew at a lower rate than revenue, primarily due to higher interest income revenue.
Bank and processors fees, the largest component of transaction costs increased 8% year over year, driven by higher volume as well as strong growth in <unk>, which has relatively higher transaction costs Q.
Q4 revenue less transaction costs increased 38% year over year to $153 million representing.
Representing 83, 4% of revenue.
Q4, total operating expenses, including transaction costs were $192 million.
Up 34% year over year, excluding transaction costs operating expenses of $162 million increased 40% year over year and 19% sequentially.
On our third quarter earnings call. We noted we were going to make $16 million of discretionary investments in the fourth quarter, we expect $4 million of these expenses to continue for the full year 2023, mostly linked to ongoing third party consulting services.
Q4 sales and marketing costs increased $18 million year over year, including $8 million of discretionary expenses.
The increase in our sales and marketing costs represented approximately 40% of the total year over year increase in Q4 operating expenses, excluding transaction cost. It was driven by higher labor expenses, primarily linked to strategic growth hiring in China, and Latin America and to support our <unk> busy.
This.
As we mentioned on our third quarter call, we invested $8 million and targeted marketing campaigns, and Brazil, India, UAE and the Philippines.
We saw positive results from our marketing campaigns in terms of awareness consideration and positive impact of Pioneer's brand image.
Given our focus on operating efficiency, we do not plan to continue to spend in 2023, but we'll use the data from this campaign to inform our future sales and marketing strategies.
Q4, R&D expenses increased 29% or $7 million year over year, mostly from higher labor expenses as we continue to invest in our platform capabilities. We expect to continue investing in R&D as we enhance our technology platform, which <unk> will discuss.
In more detail shortly.
Other operating expenses increased $10 million in Q4, 'twenty two versus the prior year period, primarily reflecting higher employee and contractor expenses to support ongoing growth of the business.
DNA also increased $10 million year over year and included $8 million of discretionary investment, which was for third party consultants and travel expenses as well as charitable contributions to organizations supporting relief efforts in Ukraine.
Additionally, G&A expenses included $2 5 million.
To launch the <unk> Foundation, which was not included in our original discretionary investment outlook.
Our Q4, adjusted EBITDA was $11 million compared to $14 million.
In the fourth quarter of last year and $13 million in the third quarter.
Q4, net loss was $10 million compared to net loss of $19 million in the fourth quarter of last year.
Net loss for Q4 2022 included a $5 million gain from the change in fair value of warrants.
Q4, basic and diluted net loss per share was negative <unk>.
We continue to generate positive cash flow and we ended the quarter with cash and cash equivalents of $543 million a sequential.
<unk> increase of $35 million.
As this is my last earnings call I would also like to say thank you to all our shareholders for their continued interest in and support of pain here.
<unk> has delivered strong results and consistently exceeded our revenue and adjusted EBITDA guidance over the past seven quarters since going public in June of 2021, and I remain confident in our ability to execute on our plan.
<unk>, who I have had the pleasure of working with over the past few weeks, we will become CFO as of March 1st and I have the utmost confidence in John and B to lead <unk> into its next phase of growth.
I'd like to now turn it over to be to discuss 2023 guidance.
Thank you Michael for your support during this transition process I look forward to meeting many of you in the coming weeks and to working together in the years ahead.
We see significant opportunities in our business, both near term and long term.
To continue to drive revenue growth through prudent investments cannot client acquisition efforts and in a high value service offerings. While also focusing on driving long term operating leverage growth through investment in our platform capabilities and infrastructure.
The near term 2023, adjusted EBITDA performance is expected to benefit from strong revenue growth, including some interest income and expense rationalization mentioned, which drive more mentioned operating expense growth.
Ensure we are positioned to deliver meaningful adjusted EBIT growth and <unk> training, while also investing to further strengthen and grow our business for the years ahead.
The full year 2023, we expect revenues to be between 800 $810 million transaction costs as a percentage of revenue to be approximately 16% and adjusted EBITDA to be between 120 and $113 million.
The midpoint of our latest guidance represents a 28% increase to revenue and a doubling of adjusted EBITDA margins year over year.
We expect revenue growth to be driven by continued customer acquisition in particular growth in larger more profitable customers and then higher take rate legions.
We also expect continued growth in our <unk> business and other high value services and from interest and on our customer balances.
This will be partially offset by approximately $22 million of non headwinds we face in 2023 from the decline in revenues, we end that sets an onboarding services for an enterprise client and from the full year impact of the closure of payments into Russia at the end of 2020.
We expect interest income to be approximately $180 million for 2023 based on our fourth quarter customer funds exit balances.
Drive balanced growth in line with volumes and current anticipated fed funds interest rate changes.
Our ability to monetize the customer balance is a core part of our business model as we have grown volume on our platform. We have seen customer balances grow and have leveraged our scale to derive a greater share of the economics.
We expect transaction costs for 2023 to be approximately 16% of revenue.
Transaction cost as a percentage of revenue continued to trend downward year over year as we leverage our scale to drive better pricing, while also benefiting from higher interest income revenue.
We expect these improvements to continue moderating relative to what we saw over the past two years.
This is driven by mix shift and to beat to be <unk>.
And into regions, such as Latin America, Sanmina, and APAC with higher take rates and also relatively higher transaction cost based on updated guidance. We expect adjusted Opex less transaction costs to be between 550 and $560 million for 2023.
Representing an approximately 18% year over year increase at the midpoint.
2023 operating expenses include an incremental $15 million of annual recurring incentive payments related to an enterprise client.
As John discussed beginning in 2023, we are investing in the next generation about technology platform.
We expect this to be a multi year journey to enhance and strengthen our platform to better fit the needs of our growing and complex business.
In 2023, and we anticipate spending approximately $30 million 15 million of which will be expense and is included in our adjusted EBITDA guidance, while the remainder will be capitalized.
As we make progress on these investments we expect to deliver increased automation across our business operations, which will drive down our acquisition costs and our ongoing cost to serve.
These investments will also accelerate our ability to launch new products and features and to enhance the customer experience, which will over time drive increased customer acquisition retention and monetization.
As we have noted customer onboarding costs, including compliance costs and our ongoing cost to serve contributed meaningfully to the growth in our operating expenses.
We expect to see some of the benefits from our platform investments in our 2023 exit run rate while the full capture of these benefits are expected to occur in 2024 and beyond.
<unk> benefits from a strong local brand and network effects that drive significant inbound customer traffic.
In line with other regulated financial institutions the costs associated with Onboarding have been growing for a significant portion of inbound customer applications. The cost exceeds the potential revenue, we can add based on our existing operating environment.
In the long term the evolution of our platform capabilities will allow us to profitably serve a greater proportion of our estimates.
In the near term, we will be focused on better managing our acquisition efforts as well as our existing customer relationships through enhancements that will streamline the onboarding process, where do you think the associated costs as well as through pricing strategies related to certain cohorts of customers.
We are also focused on driving greater efficiency across our business more broadly and are actively evaluating other areas. It spending.
Our guidance for 2023, adjusted EBITDA is between 120 and $130 million.
This guidance reflects an approximately two five fold increase in adjusted EBITDA and <unk>.
A doubling of adjusted EBITDA margins versus 2022.
In conclusion Pan is 2020 <unk> results once again demonstrated our team's ability to deliver strong financial results. We have built a diversified profitable business and we see positive and exciting trends in a large and growing market for our products.
We have confidence in our ability to meet our 2023 financial targets, while investing to position paying in so many more years of profitable growth.
We are now happy to answer any questions. You may have operator, please open the line.
Thank you to ask a question. Please press star followed by one on the telephone keypad now intend to mine.
And on preparing to ask a question. Please ensure that your line is muted.
The first question on the line comes from will Nance of Goldman Sachs. Please go ahead your line of sight.
Tim.
Hey, guys. Appreciate you taking the question.
I wanted to follow up on some of the learning that you guys have had on the review of the customer base.
Talking about.
I was wondering if you could maybe double click a little bit.
The customer cohort that you guys.
We're not currently serving profitably and are there any kind of common thread.
Paul.
Run through that customer base across other vertical.
<unk>.
<unk>.
Within that cohort and I guess just going forward.
We'll have to continue to service these clients, but not acquire clients like that or the goal of some of these investments in the platform team to enable you guys to kind of sort of unprofitable on a go forward basis.
Hey, well John here, that's a great question Theres a lot of questions in there so I'm going to try to sort of give you an answer sort of broadly about.
Our customer acquisition go to market strategy and the portfolios.
We have been very successful at acquiring our desired customer profile and what we see in the portfolios of our customers' customers with higher dollar amounts of volume on a monthly basis are quickly the most profitable customers we serve.
And our incentive structure and focus for our go to market teams is aligned entirely about acquiring those profitable customers.
R R.
Our business if you look at our business broadly we attract hundreds of thousands I said on my prepared remarks, 400000 applicants prospect applicants every month and our goal long term is ultimately to serve all of them or as many of them as we possibly can profitably and they are geographically diverse so it's hard to <unk>.
Generalize about any specific customer size or industry or geography, given the dynamic nature of our business and how we operate in over 190 countries, but generally size drives our economics and what I think is important is that we think that the investments we're making in our.
That form and in Onboarding will enable us to serve more of the population of our customers' long term profitably. It will never be I believe that 100% would be profitable just given the power of our brand globally and the number of people we attract.
You and I have talked in the past about how important it is for a platform like ours to attract customers for such a low cost right. One of the core strengths of paying here today is that people view pioneer as an on ramp.
As an entrepreneur to the global economy, and we believe that's a very powerful strength, we're tuning the products we offer the pricing our service levels and our acquisition efforts. So that we can improve the profitability dynamics in the budget.
Got it I appreciate that very helpful.
If you could talk about them a little bit more detail on the product enhancements.
What are kind of the top priorities of the top areas of spending as you look out into the year that.
Each of them some of the efficiencies of organization.
Right.
That's a direct and easy one from my perspective, we.
We think of our business really is an end to end payment and financial services partner for SMB customers and we.
When we look at that we look at.
Our on account and accounts payable we shared.
<unk> relief that we have seen a threefold increase in our commercial Mastercard and we broke over $1 billion in volume there that bundling that product with our <unk> product, which is the power frankly powering the growth of our platform. We feel is very.
Very exciting longer term, we're focused on adding more credit and lending products faster money movement opportunities and extension of what I would describe as our seller product suite to suite of products that a seller needs to use.
And our core effort in 2023 is really around the first phase of the technology work, we're doing on Onboarding and work around the <unk> functionality for our <unk> customers to make it easier for more of them to serve more of their.
<unk> financial operating unit.
Understood I appreciate you guys, taking the question, but wanted to hear more about it.
Thanks Ralph.
Yes.
Next question on the line comes from Darren <unk> of Needham. Please go ahead.
Thank you good evening and congrats on the quarter John I wanted to start with you. If you could just give us maybe some sense of the aggregate attach rate for all of the high value products, where it stands today you did break out the <unk>, but if you took everything in aggregate where are we today, what do you expect going forward.
And what are the implications for the take rate longer term.
Yes, so we haven't shared in the past attach rates or specific product I can say, we continue to see very positive progress.
On our Upselling and cross selling activities, we're seeing strong examples of our bundling efforts I was just with a customer two weeks ago in Israel in fact, an Israeli entrepreneur that sells bird theaters here on Amazon. They used a couple of million dollars of bird theater sales on Amazon.
They use the pay in your platform to get access to the Walmart marketplace and they access our working capital offerings. This is a customer that was pleased with our service comfortable what the fee.
And on account and working capital offerings, and candidly was asking for more financial products from us and we sat there mapping out the potential together so I feel very good about the bundled solution that <unk> offers our best customers.
Got it and then maybe for B you provided some good framework in terms of the outlook, but I just wanted to ask you about the seasonality and how we should think about the trajectory for the whole year. Both in terms of the revenue and then also on an EBITDA basis, what are sort of the flow that we should expect over the course of 2023.
Sure. Thanks for the question. So the revenue we would expect over the course of 2023 that revenue will increase sequentially throughout the year driven by our continued customer acquisition growth in high value services as Jonathan indicated even if we see the impact as we noted in our prepared remarks is that fair.
<unk> million dollar decrease in non volume revenues beginning in the back half.
As you know.
Our business is seasonal benefits from strong consumer spending in Q4, So we would expect to see that as well as the impact of peak travel season, which we generally see in Q3, but overall from a revenue perspective sequentially increase throughout the year from an adjusted EBITDA perspective, taking into account that revenue outlook.
We will expect that roughly speaking to be evenly distributed over the course of the year.
While revenue is expected to ramp up.
The impact of our investments that will be a little more back loaded so those investments that we've discussed today in our tech platform and our compliance infrastructure.
Be more back loaded and that will yield that kind of relatively flat EBIT performance through the quarters.
That's helpful. Thank you so much.
The next question on the line comes from Trevor Williams of Jefferies. Please go ahead.
Great. Thanks, I just wanted to go back to the revenue guidance for a second I got the interest income number of 180 million anything else you can share just on the level of volume growth you are assuming and then within that embedded volume assumption just how we should think of the underlying mix there impacting the.
Kind of the core ex interest income take rate. Thanks.
Sure I'll take that so thanks for the question look our guidance reflects our expectations given obviously the macro environment and the ongoing results that we're seeing in our business.
And in terms of the different levers look as Jonathan indicated we're going to see and we expect to see continued strong growth across key high growth Underpenetrated region, Latin America, EMEA and APAC.
High margin products would be to be on some of those other kind of high value services, we do expect to see a normalization in volumes from certain of our large e-commerce marketplaces with ceiling roughly mid single digit volume growth from our E. Commerce marketplaces. This is actually slightly better growth rate when compare.
2022, although that's in large part because we were lapping in 'twenty, two tough comps versus the prior year.
So look again, that's the kind of inherent assumption in terms of the volume.
Marketplaces.
The volume related from those kind of channels on obviously.
Uncertain in terms of the macro environment. This considerable if you will know macro uncertainty embedded in that but look overall, excluding interest income and the impact of those non headwinds that we talked about related to non volume Keith and our exit from Russia, our guidance implies roughly a mid teens revenue growth.
For 2023.
Got it okay. Thanks, and then on the <unk> piece I know you've said roughly two thirds of customers. There are net new to pay in your can you guys give us just a better sense for the geographies and types of customers you have seen the most traction with to date and then I think the implied attach rate on <unk>.
Listing customers it still implies very low just how youre thinking about the potential or not to more aggressively cross sell the <unk> product into the existing customer base. Thanks sure.
We remain very optimistic and excited about the <unk>.
Long term growth of our <unk> business and we expect it to outpace the total revenue growth in 2023 and accelerate throughout the year.
The opportunity for us is different than our marketplace payouts opportunity because we are.
Penetrating into the five trillion dollar space that is really dominated by legacy banks in checks and wires and bringing our innovative solutions to the market broadly I'll be in Argentina next week, which is our fastest Latin America is our fastest growing region and we're seeing terrific <unk>.
Our growth in Latin America.
This is a global product with a global opportunity.
Having customers that are in just about every industry. We can all think of broad industry coverage broad global coverage competing.
Against legacy providers, and what I would describe as analog solutions, we feel well positioned to grow that business well for the year ahead.
Okay, great. Thanks again.
Yeah.
Your next question comes from Chris <unk> of William Blair.
No.
Yes, good afternoon, and thanks for taking the questions John Thanks for all the details on the customers can you provide a little bit more color on how many active customers you guys have.
On your platform or any more details on that.
Hey, Chris good to hear from you and thanks for the question.
We are not sharing a specific customer account number today, we are working through all of the best ways to communicate the breath of the customers we serve the number of active customers.
And we are planning to do so.
In the future not all customers are created equal right and I think that's important the very small customer who comes to pay in here, who aspires one day to be a freelancer is drastically different than the GPO, that's working in the Philippines or a team of engineers in Ukraine or the.
<unk> e-commerce goods merchant that selling.
There are products on the biggest marketplaces around the globe, our focus profitable customer acquisition the teams or tool to do that we are working to make an even greater portion of the total customer book profitable through pricing through experiments with fees with looking at tiered service levels and.
The work the team is doing on the next generation of our platform will enable us to serve an even greater percentage of the total applicants who are eager for the global account that we have.
And I'll get already includes a couple of things.
Question on one of our key priorities for me.
Youll Finance organization is really continuing to build on the great work, that's already been done and building out those that data and the insights that are really going to allow us.
When you look at our unit economics, we do a very fulsome.
Carnival analysis and answer all these questions and provide guidance.
We know that you and the market more generally I'm looking for.
Definitely sort of very focused on deepening our understanding of unit economics across our business.
And we wanted to be very very thoughtful in how we scale out that disclosure, but it is not a it is an area of priority for me and for the team will broadly.
Great very helpful and then.
Just real quickly on the guidance significant margin expansion, that's kind of different from what you guys were talking about on the last quarter call. I think you were talking about modest margin expansion I assume it's all about float revenue, but if you could just talk about that thanks for taking the questions.
Now we appreciate the questions.
I'll take that.
Comments in November when we started to sort of flagged modest.
Pension that were really based on our expectations. Obviously at the time, we got 2023 budget price is still very much underway. The guidance. We're sharing today reflects our ongoing evaluation of the business. How we're looking at it today, our ongoing results with the benefit of a little more time elapsed and of course, the macro environment.
It also reflects proactive decisions that John and I have made in coordination with the board and management team to return a greater proportion of that interest income uplift to shareholders. We felt that that was important and appropriate.
And we're well positioned even giving that to continue to invest in growth initiatives and in the platform that we need to really scale this business and support future crops. So.
That's really the main drivers of why we've arrived at today.
Thank you.
The next question on the line comes from Joe Sorry, Brett.
Fitzgerald. Please go ahead your line is open.
Yes, hi, Thanks for taking my question and congratulations on the quarter I was wondering if you could provide some more color on how the pipeline for these new larger at the merchant partner is looking like right now.
Sure.
We have an extraordinary go to market organization, Adam Cohen, who just joined US actually was in China last week meeting with our teams on the ground there.
Talking about and talking to customers. So I think the way to think about the opportunity is there is a 100 million small businesses globally that we have the potential to provide solutions for and we are very focused on going to work with them. They can do hundreds of thousands of dollars of value.
Of volume.
A year and we think we're well positioned to serve them I'd also like to talk for a minute about our relationships with the world's largest marketplaces, which are critical partners and good partners of ours. We continue to make good progress solid progress and good focus to enhance our existing.
Relationships with those marketplaces and add new marketplaces that will bring volumes into our SMB customer accounts, we don't announce all of them.
Our continued focused effort of our excellent partnerships team.
Understood appreciate that and then in your prepared remarks, you mentioned M&A are you seeing more attractive valuations in the market right now and what form do you think future acquisitions might take.
Yes, so I do think we benefit from.
The private company market valuations are in fact coming down basis lags I think the public market comps, but they are rationalizing we are evaluating potential M&A opportunities sort of across the board.
Our core products.
The account working capital and AP or AR.
All at different stages of their development and we are thinking through which acquisitions can help us cross sell and up sell create more revenue per customer.
Create more value for our customers and then looking at the gaps we may have in our product capability.
Geographically all.
So our opportunities for us to consider a month ago, we hired Kevin <unk> to join us to lead this effort and he is working closely with our regional leaders.
Soft and our product leaders and our technology lead as we put together the plan to go execute the M&A that we see in front of us.
Understood. Thank you and congratulations once again.
Thanks.
The next question.
Comes from Mike Grondahl of Northland Securities. Please go ahead.
Hey, Thanks, guys two quick questions one.
$50 million, you spend processing customer apps that.
Don't really turn into real customers.
What would your goal be.
Much of that can you eliminate and then secondly.
Are you guys doing anything.
Incentivizing small business customers to hold higher balances with U.
Grow those balances.
You've done in the last I don't know 120 days that kind of incentivize those small businesses.
Sure. Thanks, we appreciate the question Mike.
<unk> talked about $50 million, we felt it was useful to site that provides that kind of disclosure I noted the time, yes, we're going to see the benefit in our adjusted EBITDA margin.
Adjusted EBITDA performance from Asia, more focused acquisition strategy that we've talked about and fees from some of the efforts that we've begun to talk about related to omni onboarding platform.
So we see the cost of email within our compliance in our operations area, but to be clear, we're not saying that $50 million.
Or are there any kind of timeline any business that al is that is like Alex said F&B is going to incur costs on prospect that doesn't ultimately become profitable.
But we do see a meaningful opportunity right. That's a significant drag was a significant drag to earnings in 2022, and we expect to begin to capture some of that benefit some of that opportunity as we said in our exit run rate as we begin to move some of that onboarding volume onto new technology with the full cap.
And what's still sort of looking to fully cycle not hitting up in 2024, as we fully onboard with that.
In terms of your second question.
As we've noted we view interest income revenue is really core to our value proposition is demonstrates the functionality that we deliver to F&B that demonstrate the trust placed in us and we're actively evaluating how we can continue to grow that revenue.
Successful, giving that to this point and driving greater monetization of those balances over the long term.
<unk> implies that could certainly involve sort of product development initiatives.
Estimate behavior to grow balances and in the next time I think we have an opportunity with a scale to continue to increase some monetization.
Also actively thinking through strategies that will maximize yield and manage the earnings consistency to different interest rate cycles. So again, it's an area that we think about carefully we think it's core to our business and we're really looking to find sort of near and long term strategies to optimize that revenue stream.
Thank you.
The final question today comes from Daniel <unk> of.
<unk>. Please go ahead your line is open.
Hi, This is Daniel on for Darren I was wondering if you could give any qualitative color on the painter to paint air volume, which would be helpful are you seeing any increases or changes to client activity on the platform. There are there any efforts to explore monetizing these volumes over time or what the ultimate opportunity here. Thank you.
Hey, Daniel there is it's a great question and it's an area of focus internally here, we see billions of dollars of.
Payments between paying your account holders we have payer has built a global trust economy between small businesses that are increasingly recognizing if European air customer and have a pay on your account doing business with one another is a positive way to grow your business globally.
Your second question about monetizing those flows yes, we are exploring and looking at different methods to do so and looking at the behavior of each of those customers to optimize exactly.
The future of that how that product gets developed we're working through that strategy in real time, there is nothing new to announce today following up from my comments on our last quarterly call.
Great. Thanks, guys.
You bet.
We have no further questions I'll hand back to the management team for any closing remarks.
So this is John to conclude on behalf of the entire pioneer Global organization.
I think it's important to say a special thank you to Michael and Scott.
I am excited about the company the team we have the volume and momentum we have as an organization, we are going from strength to strength and I am deeply grateful for your friendship and partnership.
Okay.
This concludes today's conference call. Thank you all for joining you may now disconnect your lines.
Yeah.
[music].
Okay.