Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Payoneer's Second Quarter 2021 Earnings Conference Call. At this time, all lines have been placed on mute to prevent any background noise. Following the speaker's remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded. I'd now like to turn the call over to Ignatius Njoku, Vice President of Relations to begin.

Thank you. Before we begin, I'd like to remind you that, today's call may contain forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC and available in the investor relations section of our website, which may cause actual results to differ materially from any forward looking statements we made today. These forward looking statements speak only as of today, and the company does not assume any obligation or intent to update them, except as required by law. In addition, today's call may include non-GAAP measures. These measures should be considered as a supplement to and not as substitute for GAAP financial measures. In most cases, reconciliation to the nearest GAAP measure can be found in today's earnings fresh release, which is available on the company's website. Hosting today's call are Scott Galit, Payoneer's Chief Executive Officer; and Michael Levine, Payoneer's Chief Financial Officer. With that, I'd like to turn the call over to Scott to begin.

Thanks, Ignatius. Good evening and thank you all for joining us on our first earnings call. Payoneer’s transition in June to a public company was a significant milestone as we continue on our journey to be the world's go-to partner for digital commerce everywhere. I want to thank all of my senior colleagues for making this a reality. I am so proud of everything we have accomplished and the positive impact we have on the world. And I am even more excited to take this next step on our journey together. For today's call, I would like to begin by providing a brief overview of Payoneer, for those who are not as familiar with our story. I will then briefly share some customer highlights, recap our strategy to create long term shareholder value and discuss our second quarter results. Payoneer is unique global payment and commerce enabling platform that powers growth for digital businesses all over the world. We've built an amazing scale platform that makes global commerce local for millions of customers by leveraging several unique capabilities we've developed as a market leader over the past 15 plus years. Our core value proposition even from the beginning was global coverage and conductivity with localized capabilities. Connect once to Payoneer and get the whole world. We are able to move money around the world instantly for our customers in a trusted compliant way. Making it as easy to pay or get paid globally as it is locally, whether it be marketplace payments or B2B accounts payable, accounts receivable payments, which we call B2B APAR, which are payments directly between buyers and suppliers. There are powerful network effects in our business. We connect marketplaces and sellers, buyers and suppliers, creating a virtuous cycle where more suppliers bring more buyers and more…

Thank you, Scott. Given this is our first earnings call I want to briefly discuss our financial models for review our second quarter results in detail. And provide updated guidance for the full year 2021. Our revenue models primarily driven, by our ability to grow volume and optimize take rate, volume is counted only once, when funds arrive on or pass through our platform. And take rate is a measurement of revenue, as percent of volume in a given period. The majority of our revenue is generated funds are withdrawn from the platform to customers bank account, or when used to send a payment off the platform. The majority of our revenues are from [Indiscernible] transaction fees, which in most but not all cases, are borne by the customer getting paid. Revenue Growth is generated by increasing volumes, increasing take rate, or a combination of both. We have a number of customer types and product categories with varying take rates. And the weighting of each can influence the overall blended take rate. Adding more services and products that leverage existing volumes such as, working capital products and our MasterCard commercial card offerings, has had a positive impact on our take rate. Additionally, we have introduced non-volume related offerings, such as, value added compliance services for enterprise clients that further enhance our take rate. Transaction costs, mainly consisted fees pay to banks processors, and networks that process payments to and from the Payoneer platform. Over the years, we've built a global banking infrastructure, the scale of which gives us an advantage in our ability to reduce our underlying transaction costs. We manage our business with long-term profitable growth in mind. And continue to acquire customers, in an efficient manner. We believe that our customers will need additional products and services as…

Certainly [Operator Instructions] The first question on the line of Sanjay Sakhrani with KWB. You may proceed.

Thanks and congrats on your first quarter out of the gate. I guess Scott, you went through a laundry list of some of the impacts that impact -- that negatively impacted you this quarter. Maybe you can just talk about which one of those you think might have the potential to come back sooner than the others? And then as far as the take rate is concerned, maybe just talk about what the underlying assumptions are that you continue to see the strength and that take right? Thanks.

Great, thanks so much, Sanjay. So, first, in terms of the trends that we've been seeing that have made us a little bit more cautious on volume. Really the potential for e-commerce to rebound faster at this point, and frankly, seems more likely than a significant surge in international travel, for example. So, what we're continuing to see is kind of the changes in evolution of consumer behavior, obviously going into COVID and now, I wouldn't say we're out of COVID. But obviously, as things evolve, we're seeing people spending their time on different types of activities. And we've seen reports on that from a variety of different companies in the market that have -- that we work with, that have reported earnings so far. So, I think there -- again, all of our underlying trends are positive, we're seeing more customers sign up than ever and more new customers than we ever had in the quarter. We're just seeing again, kind of, fairly broadly across the board, a bit of a softening there versus what we saw a year ago with a really strong COVID trends. So, again, to your trends are really strong as Mike and I touched on 45% to your taggers. We continue to believe that long-term digital commerce is really the place to be, so we've remained really, really bullish and enthusiastic. The demand among customers and prospects around the world to participate in digital commerce has never been stronger. But again, there certainly is a little bit more choppiness in the near-term as we see, again, some of these kind of unprecedented moves in and out of COVID. Travel, again, at this point, we are senses that domestic travel has rebounded quite a bit. But not surprisingly, that's not really where we focus and…

Thank you, Mr. Sakhrani. The next question is from the line of Josh Siegler with Cantor Fitzgerald. You may proceed.

Hi. Good evening. Thanks for taking my call. First one, it looks like your concentration in China declined sequentially. Can you elaborate a little on some of the drivers of this diversification?

Yes, sure. And hi, Josh. So it's -- in general, we -- we've had -- generally, we've had trends overall with a diversification around the business and growth, actually, outside of China has been even stronger than growth in our customer base that comes from China. And some of that will go along with e-commerce. And so when e-commerce is really strong, you will see potentially a little bit of a hiccup there, or less of a gradual decline. But when e-commerce is maybe showing a little bit of weakness the way it did, this quarter and what we're kind of guided into looking forward a little bit here. That will -- that means that other parts of the business are growing faster relative to e-commerce and that will skew us away from China in terms of the mix of the business geographically.

Got it. Thanks.

And hey, Josh, it’s Michael -- Josh, it’s Michael. I’ll just add, if you look at No. 2, you'll be able to see the breakout in 10-Q, and footnote 2 will have the obviously the breakout probably looked at. You'll see we went from 39% last year down to 34%. In this quarter for China, but US grew from 8% to 12%. Part of that and another thing that has helped us continue to grow, in addition to things which got mentioned is that, we are adding services that are non-volume based value added services, like -- related to compliance and other areas where we can help our enterprise customers, and that has grown, not materially, but has helped. So that also continues to contribute to the diversification from a geographic standpoint.

Got it. Thank you. That's some helpful color. Can you also talk a little bit more about the current M&A pipeline? How are you guys feeling about valuations in the market right now?

Everything's cheap. No, I mean, look, it's interesting. I mean, we're -- we obviously are seeing certain areas where price expectations are quite high. And we're also seeing other areas where we actually are seeing really good opportunities. We have the benefit of having a pretty broad and diverse business in terms of geography and also in terms of the services that we either offer or looking to offer. And it cuts across a pretty wide spectrum. And, also, I mean, keep in mind that there's been so -- there have been so many startups that have been funded, while you're seeing some breakouts and you're seeing a lot of big funding rounds with companies that are kind of breaking through. There are lots of companies that actually aren't getting the same kind of breakthrough and traction the same way. So when we are looking, we are looking at a range of different companies as targets, some of them are larger. But we're also looking at really strong tuck-ins that can bring terrific functionality that we're actually expecting that our global customer base and distribution capabilities can really bring a lot of value. So on average, we certainly are seeing things be a bit more expensive than they were, but we're also seeing pockets of opportunity out there. And overall, I'd say, we're pretty upbeat about the opportunities ahead.

That's great to hear. Thanks for taking my questions.

Yes. Thank you.

Thanks, Mr. Siegler. The next question is from the line of Mayank Tandon with Needham. You may proceed.

Thank you. Good evening. Congrats, Scott and Michael, on your first quarter as a public company. I wanted to start with just, Scott, how do you think about growth going forward between new customers versus increased penetration of the existing base? With all the additional services that you called out, what are the projects we're going to look like, over time, not near term, but really, over a multi-year period, between new customer growth and the landing expand, if I can call it?

Great and thanks, Mayank. Its great to talk to you again. So the great thing right now is that we're really kind of firing on all cylinders there. We are, in a position right now, where we're getting really strong, new application volumes of customers signing up. We're seeing, as we touched on a record number of new customers and so we continue to have strong momentum in the market, and continuing to see more and more opportunities. And at the same time, we're getting more sophisticated in terms of our global sales teams and our ability to actually engage our customers and grow the portfolio of services that we're offering to our existing customers. So, in practice, as we talked about for a while, I mean, we've been around for a while, I mean, we've been around for a while. And we've talked about the cohorts that we build and how each cohort builds upon the previous models. And so, those positive volume retention trends and our ability to continue to kind of steepen those curves, certainly gives us a big opportunity to drive a lot of leverage through the existing customer base. And that will continue to be a really, really important driver of growth. But again, right now, part of what's exciting is, we're just seeing so much interest all over the world, in our platform and in digital commerce, that we think, that we still have a long way to go here with new customer acquisition as an important driver as well. So, really again, we're executing well on both fronts, and I actually expect that that will continue to be an important thing for us over the next couple of years.

That’s helpful. And then as a quick follow up, Michael, you talked about the transaction losses coming down, and you've been able to manage that very effectively. Could you just give us a little bit more details into what is driving that? How sustainable is that? Now, should we think about that modeling going forward in terms of transactional losses?

Yeah, I think when you say transaction losses, you mean transaction costs.

Right. Sorry?

Yes. Bringing up a really critical element of our entire business model, and something we spoken about, as a core part of thinking about how our model works, which is that that, basically variable expense is really a key, if you look at revenues less that those transaction costs, and those transaction costs go up, that inverse of revenue, less transaction costs becomes a metric effectively to look at the variable profitability of the business, right. So their costs come down, that profitability goes up. And what we've always explained is for us, when we look internally, that's really the heartbeat of the business. And as we were able to consistently keep that margin, not only hide, but continuing to keep it in the higher range, it gives us more flexibility to invest in the business or eventually to pull out in profitability. So we look at that effective KPI of revenue, less transaction costs, as a way to measure the variable profitability of the business to see how we're improving over time. And so it's been really strong, when you adjust out actually, and sort of normalize, and look at first quarter and second quarter, in terms of variable profitability, you would actually see that there was a lot of consistency between first quarter and second quarter, because in the first quarter, we had that 400 basis points that you'd probably take out of the -- maybe the other way, you'd add one or two points to the transaction costs, related to one time benefits we got from the MasterCard deal. And in this quarter, again for our approach to managing risk, we increased our reserves for our working capital, business and capital advanced business. And if you were to adjust that, sort of to a normal level, you would see that we actually, on that normalized basis, performed really well from that variable profitability analysis. So, what's driving it ultimately is continued efficiency and business mix really are the two main drivers of that.

I appreciate that. Thank you so much.

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

Hey, thanks, guys. I guess on the B2B side, or even the service provider vertical, can you give us a little bit more sense, if their growth rates have continued how that shook out? And then, maybe just with your marketing strategy and customer acquisition, have you tweaked anything there anything new there to call out?

Great. Hi Mike. So on B2B, B2B continues to grow quite a bit faster than the business overall and continues to actually perform ahead of even our internal expectations. And we really just continue to see tremendous opportunities there. So that continues to be a bright spot. In the service provider vertical, I would say, we've seen, that the a bit more resilient then e-commerce, and again, part of what gets so interesting is the timing of some of these year-over-year tough comps. Actually, you start to get into some real nuance, when you look at what kind of services, when last year. So maybe not surprisingly, some of the e-commerce volumes started to grow a bit faster last year, than some of the platforms that support remote work or some digital services, which kind of picked up, as we went a little bit further into the summer last year. So -- but I would say, and again, if you take a look at some of the other companies that have reported in the services space, you get a sense that they are also seeing a little bit of softness as well, reporting some of the same kinds of trends, that some of the e-commerce platforms are talking about. Things around people, things have been opening up, people spending more time out, going on vacations, than sitting at home and working in generating income and fees from services. So, overall, continuing to see strengths. And the two year growth trends are really strong. And, again, we think the overall the growth of more flexible work arrangements, and third-party service providers, and freelancing overall will continue to be very, very strong. But even there continue to be reports and an indications that there are some just some tough year-over-year comps, and…

Got it. Thank you.

Yeah. Thanks, Mike.

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

Hey, Scott and Michael. Good afternoon.

Hey, Bob.

So, I guess, just on the -- so your volume guide, $57 billion to $60 billion is about in line with where we had forecasted. I did say in the first half of the year, you're at about $27 billion. What would cause you to be at the low-end and are you expecting based on some of your commentary to be at the low-end of that of that range? What would cause you to be at the low-end or to missed that range or will entice you to be at the high-end?

Yeah. So I'll start and obviously Michael can amplify on some of this. But on the low-ends, it would take us seeing kind of increasing softness in eCommerce from where we've been and really looking at trends, essentially, continuing to soften. And on the positive side, if we take one of the few different things, just continuing to perform more the way we expect with eCommerce, staying solid, not extraordinary or anything and continued positive trends and other parts of the business. I think the one thing that again, we've -- in general, I think we try to be on the more conservative side and we certainly with travel are trying to make sure that we really have kept that pretty cautious in the way we've looked at the rest of the year. But outside of that, again, I mean, the trends are just down a bit from what we have actually seen an expected and -- but overall, we feel good about the range and good about how our performance in that.

So what is -- how much of the change -- was there -- what percentage of eCom is your business? And what was the change in growth rates for eCom?

eCom…

I'm sorry, can you hear me?

Yeah. Bob, can you hear me?

Yes.

Okay. Yeah, hi. eComm, what we've shared before of eComm is directionally about half of the business. We haven't broken out specific growth rates overall. So that's not something that we have shared. But again, given the percentage that represents of the business overall, you can obviously pretty easy to get a sense of how -- if the trends are slowing a bit there, how it has a meaningful impact on the overall volumes that we report.

And then, just as you have a guidance out there for 2022 and for top line growth of 20%, at least 20%. How do you feel about that being able to hit that target, that revenue growth target in the 2022? And you're actually doing better from the profitability side? What do you -- what are your thoughts on investing versus reporting a little better bottom line result?

Yeah. I was just going to say, in general, we remain very, very upbeat about digital commerce overall, the big broad macro trends and themes around our business and around our customers and around the opportunities haven't changed at all. And we really are very, very upbeat and enthusiastic about that. And we are continuing to feel very, very positive about those opportunities, our specific market position, the execution that we have and our ability to drive increasing revenue growth and an increasing take rate, and very much looking forward to making more investments and helping more businesses around the world actually capitalize on opportunities in digital commerce. So, we feel really good about the long-term growth trends and the numbers that we've shared about our long-term growth rates and our long-term EBITDA targets and we're absolutely continuing to invest that as the strength in the business and the strength in the P&L. And, the short-term volume considerations coming from some of the short-term macro trends in the market, we don't think actually impacts that at all.

Thank you. Appreciate it.

Yeah. Bob, I’ll just add that, we have a great first half. We're really happy with the results. We think we're in a really strong position, no different than when we spoke at the beginning of the year, we think that our platform gives us a distinct advantage. We think now is the time to accelerate our investment. So we're pressing on the gas harder than ever. We think that there's tremendous growth opportunity in the future, and we're executing on it now. So, I think the first half results show that we've had back-back really strong quarters. And again, given some of the things we're flagging in the market, which now you're seeing across with other companies that are reporting that we're seeing as well, we're still raising our guidance with confidence that we can increase our revenue growth from what was prior guidance to 25% raising that to 28% to 30% growth for this year. And we'll continue to work hard to execute on that.

Great. Thank you. I really appreciate the commentary.

Thanks.

Thank you, Mr. Nepali. There are no additional questions waiting at this time. I would like to pass it back to the management team for any closing remarks.

Now, I thank you all for joining and for all the good questions and all of your time and attention. So we really appreciate it, and really appreciate the engagement and look forward to continuing our discussions. So, thank you all so much and we'll talk to you sometime soon. Thanks.

That concludes the Payoneer’s second quarter 2021 earnings conference call. I hope you all enjoy the rest of your day.