Good afternoon. Thank you for standing by. Welcome to Payoneer’s Fourth Quarter and Full Year 2022 Earnings Conference Call. At this time, all lines have been placed on mute to prevent any background noise. Following the speakers' remarks, we will open the line for your questions. As a reminder, this conference call is being recorded. I would now like to turn the call over to Michelle Wang, Payoneer's VP of Investor Relations. Please, go ahead.

Thank you, operator. With me on today's call are Payoneer's Co-Chief Executive Officers, John Caplan and Scott Galit; as well as Michael Levine, Payoneer's Chief Financial Officer; and Bea Ordonez, Payoneer's Deputy Chief Financial Officer. 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, which are available in the Investor Relations section of our website. Actual results may differ materially from any forward-looking statements we make today. These forward-looking statements speak only as of today and the company does not assume any obligation or intent to update them, except as required by law. In addition, today's call may contain non-GAAP measures. These measures should be considered as a supplement to and not as a substitute for GAAP financial measures. Reconciliation to the nearest GAAP measure can be found in today's earnings release, which is available on the company's website. With that, I'd like to turn the call over to Scott to begin.

Thank you to everyone for joining us today to discuss Payoneer's fourth quarter and full year 2022 earnings. I'll be discussing our 2022 results and CEO transition, which was announced earlier today. John will cover Payoneer strategy for 2023 and beyond. Michael will discuss our 2022 financial results; and Bea will talk about our 2023 guidance. Payoneer delivered record 2022 results, including revenue of $628 million, representing 33% year-over-year growth and adjusted EBITDA of $48 million, representing 72% year-over-year growth. We are capturing opportunity in a growing $5 trillion addressable market, because of our strategy to build a diversified business and to innovate to help SMBs compete globally. Our relative resilience in the challenging macroeconomic environment highlights the power of our network, the diversity of our business, the value we bring to our customers, their trust in Payoneer and the capabilities of our team. Payoneer's 2022 revenue growth reflected continued customer acquisition, adoption of high-value services and the full year benefit of onboarding eBay in 2021. We also increased monetization of customer funds on the Payoneer platform, which is a core part of our business model and will continue to be so going forward. This was partially offset by moderate year-over-year volume declines at some of our e-commerce marketplaces. We have increased our geographic diversity, growing the share of our revenue from Latin America, APAC and SAMENA to nearly 35% of our overall revenues in 2022 and up from approximately 20% four years ago. These faster-growing regions also have higher average take rates. And we are focused on building and growing high-value services, including B2B AP/AR, Commercial Mastercard, working capital and checkout, and we expect these will continue to drive growth in the future. We grew B2B AP/AR volumes by 39% year-over-year in 2022, and it now represents 12% of…

Thanks, Scott, for your guidance and friendship as we work through the transition. I'm incredibly excited about Payoneer strong position to capture a greater share of a growing market globally and recognize our long-term potential. I'm looking forward to leading Payoneer for its next leg of growth from over $600 million of revenue to multibillions in the years ahead. SMBs that transact globally have cross-border operations, 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 B2B payment volume relies on legacy payment methods. Payoneer 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, Payoneer expects 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 our customer acquisition on higher take rate regions and on growing and scaling high-value services. Payoneer is delivering a global financial operating solution for SMBs. Our core products, accounts receivable, accounts payable and operating account 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…

Thank you, John, and thank you to everyone for joining us. Payoneer delivered another strong quarter and exceeded our guidance for full year revenue, transaction costs as a percentage of revenue and adjusted EBITDA. We saw a 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 of B2B AP/AR, while e-commerce volumes were slightly lower compared to Q4 of 2021. B2B AP/AR volume growth for Q4 was 10% year-over-year as we saw the full quarter impact of customer terminations we made 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. Customer funds held by Payoneer have increased nearly $800 million sequentially and over $1.4 billion year-over-year to $5.8 billion. Customers value the ability to get paid, manage their multicurrency funds and make payments around the world. Note, 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 were able to optimize our allocation…

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 in our client acquisition efforts, and in our high-value service offerings, while also focusing on driving long-term operating leverage growth through investment in our platform capabilities and infrastructure. In the near-term, 2023 adjusted EBITDA performance is expected to benefit from strong revenue growth, including from interest income and expense rationalization measures, which drive more measured operating expense growth. In short, we are positioned to deliver meaningful adjusted EBITDA growth in 2023, while also investing to further strengthen and grow our business for the years ahead. For full year 2023, we expect revenues to be between $800 million and $810 million, transaction costs as a percentage of revenue to be approximately 16% and adjusted EBITDA to be between $120 million and $130 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 in higher take rate regions. We also expect continued growth in our B2B business and other high-value services, and from interest and on our customer balances. This will be partially offset by approximately $22 million of known headwinds we faced in 2023 from the decline in revenues we earn for certain onboarding services, for an enterprise client and from the full year impact of the closure of payments into Russia at the end of 2022. We expect interest income to be approximately $180 million for 2023,…

Thank you [Operator Instructions] The first question on the line comes from Will Nance of Goldman Sachs. Please go ahead, Will. Your line is open.

Hey, guys. I appreciate you taking the question. I just wanted to follow up on some of the learnings that you guys have had from the review of the customer base that you guys are talking about. I was wondering if you could maybe double-click a little bit on the customer cohort that you guys have found that you're not currently serving profitably. Are there any kind of common threads that kind of run through that customer base across either vertical or product? And I guess the size, we almost think that kind of correlates within that cohort? And I guess just going forward, is the goal to continue to service these clients but not acquire clients like that, or is the goal of some of these investments in the platform to enable you guys to kind of serve them profitably on a go-forward basis?

Hey, Will, John here. That's a great question. There's 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 portfolio 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. And our business, if you look at our business broadly, we attract hundreds of thousands, I said in my prepared remarks, 400,000 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 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 platform 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 Payoneer today is that people view Payoneer 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 past.

Got it. I appreciate that. That's very helpful. And just maybe if you could talk about going to a little bit more detail on the product enhancements, just what are kind of the top priorities of the top areas of spending as you look out into the year that you're hoping should improve some of the efficiencies of the organization. Thanks.

Right. So that's a direct and easy one from my perspective, right? We think of our business really as an end-to-end payment and financial services partner for our SMB customers. And -- when we look at that, we look at AR on account and accounts payable. We shared in our release that we've seen a threefold increase in our commercial MasterCard, and we broke over $1 billion in volume there. That's bundling that product with our B2B AP/AR product, which is the -- frankly, powering the growth of our platform, we feel is 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, the 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 B2B AP/AR functionality for our B2B customers to make it easier for more of them to serve more of their financial operating needs.

Understood. Appreciate you guys having the question. Look forward to hearing more about it.

Thanks Will.

The next question on the line comes from Mayank Tandon 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 rates for all the high-value products, where it stands today? You did break out the B2B AP/AR, but if you took everything in aggregate. Where are we today? What do you expect going forward? And what is the implication for the take rate longer term?

Yeah. So we haven't shared in the past the attach rates of specific products. I can say, we continue to see very positive progress on our up-selling 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 feeders here on Amazon. They use couple of million dollars of bird filter sales on Amazon. They use the Payoneer platform to get access to the Walmart marketplace and they access our working capital offering. This is a customer that was pleased with our service comfortable with the AR 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 Payoneer offers our best customers.

Got it. And then maybe for Bea, 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 the flow that we should expect over the course of 2023?

Sure. Thanks for the question. So look, revenue, we would expect over the course of 2023, that revenue will increase sequentially throughout the year, driven by our continued customer acquisition, grossing high value services, as John has indicated, even if we see the impact, as we noted in our prepared remarks, of that $15 million decrease in non-volume revenues beginning in the back half of the year, as you know, our business is seasonal, benefits from strong consumer and other 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, sequential increase throughout the year. From an adjusted EBITDA perspective, taking into account that revenue outlook, look, we'll expect it roughly speaking, to be evenly distributed over the course of the year, because while revenue is expected to ramp up, we'll also see the impact of our investments that will be a little more back loaded. So those investments that we've discussed here today in our tech platform, in our compliance infrastructure they'll be more back loaded and that will yield that kind of relatively flat EBITDA 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're assuming? And then within that embedded volume assumption? Just how we should think of the underlying mix there impacting 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 John has indicated, we're going to see and we expect to see continued strong growth across key high growth, underpenetrated regions so take Latin America, SAMEN [ph] or an APAC and in online margin products or B2B and 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, we're seeing roughly mid-single-digit volume growth from those e-commerce marketplaces. This is actually slightly better of a growth rate when compared to 2022, although that's in large part because we were lapping in 2022, tough comps versus the prior year. So look, again, that's the inherent assumption in terms of the volume, marketplaces and other volume related from those channels are obviously uncertain in terms of the macro environment it's considerable, as you all know, macro uncertainty embedded in that. But, look, overall excluding interest income and the impact of those known headwinds that we talked about related to non-volume fees and our exit from Russia. Our guidance implies roughly a mid-teens revenue gross profit for 2023.

Got it. Okay. And then on the B2B APAR piece. I know you've said roughly two-thirds of customers there are net new to Payoneer. Can you guys give us just a better sense for the geographies and types of customers you've seen the most traction with to date? And then I think the implied attach rate on existing customers is still implied very low. Just how you're thinking about the potential or not to more aggressively cross-sell the B2B product into the existing customer base? Thanks.

Sure. We remain very optimistic and excited about the long-term growth of our B2B APAR 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 $5 trillion space that's really dominated by legacy banks and 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 B2B APRR growth in Latin America. So this is a global product with a global opportunity serving customers that are in just about every industry we could 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.

The next question comes from Chris Kennedy of William Blair. Your line is now open.

Yeah. 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 count number today. We are working through all the best ways to communicate the breadth 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 Payoneer, who aspires one day to be a freelancer is drastically different than the BPO that's working in the Philippines or the team of engineers in Ukraine or the e-commerce goods merchant that's selling their products on the biggest marketplaces around the globe. Our focus, profitable customer acquisition, the teams are tooled 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 are eager for the global account that we have.

I just Chris look question and one of the key priorities for me and the whole finance organization is really continuing to build on the great work that's already been done and building out that data and those insights that are really going to allow us to really look at our unit economics and do a very fulsome cobalt analysis and answer all of these questions and provide that enhanced disclosure that we know that you and the market more generally are looking for. So we're definitely sort of very focused on that and deepening our understanding of unit economics across our business and we want to just be very, very thoughtful in how we scale out that disclosure. But it is not that it is an area of priority for me and for the team more 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.

No, we appreciate the questions. I'll take that. Look, our comments in November where we started to sort of flag modest expansion there were really based on our expectations, obviously, at the time. With our 2023 budget price is still very much underway, the guidance we're showing 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 elapsing and, of course, the macro environment. And look, 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 doing that to continue to invest in growth initiatives and in the platform that we need to rescale this business and support future growth. So, that's really the main drivers of where we've arrived that for that.

Thank you

The next question on the line comes from Josh Siegler from Cantor Fitzgerald. Please go ahead, your line is open.

Yes, hi. Thanks for taking my questions and congratulations on the quarter. I was wondering if you could provide some more color on how the pipeline for these new larger SMB merchant partners 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's 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, but those are continued focused effort of our excellent partnership 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. They lagged, 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, AR, the account, working capital, and AP, are all at different stages of their development. And we are thinking through which acquisitions can help us cross-sell and upsell, create more revenue per customer, to create more value for our customers. And then looking at the gaps we may have in our product capability geographically, also are opportunities for us to consider. A month ago, we hired Kevin Ambrosini to join us to lead this effort, and he is working closely with our regional leaders our staff and our product leaders and our technology leads 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. A – John Caplan: Thanks.

The next question comes from Mike Grondahl of Northland Securities. Please go ahead.

Hi. Thanks, guys. Two quick questions. One, that $50 million you spent processing customer apps that don't really turn into real customers, what would your goal be how much of that can you eliminate? And then secondly, are you guys doing anything incentivizing small business customers to hold higher balances with you or to grow those balances. Anything you've done in the last, I don't know, 120 days that kind of incentivizes those small businesses. A – Bea Ordonez: Sure. Thanks. We appreciate the question, Mike. Look, in terms of that $50 million, we felt it was useful to size that and provide that kind of disclosure. And over time, yes, we're going to see the benefit in our adjusted EBITDA margin or in our adjusted EBITDA performance from a, more focused acquisition strategy that we talked about and b, from the efforts that we've begun to talk about related to our new onboarding platform. So we see the cost, as you know, within our compliance and our operations area. But to be clear, we're not saying that, that $50 million goes to zero over any kind of time line. Any business analysis if that is like analysis SMB is going to impair costs on prospects that don't ultimately become profitable moment. But we do see a meaningful opportunity, right? That's a significant drag -- was a significant dragged earnings in 2022, and we expect to begin to capture some of that benefit or 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 capture, and we're still sort of working through fully cycling that, heading up in 2024 as we fully onboard that. In terms of your second question, look, as we've noted, we view interest income revenue as really core to our value proposition. It demonstrates the functionality that we deliver to SMBs. It demonstrates the trust that they place in us. And we're actively evaluating how we can continue to grow that revenue. I think we've been very successful doing that to this point and driving greater monetization of those balances. Over the long term, as your question implies, that could certainly involve sort of product development initiatives that incent customer behavior to grow the balances. And in the near term, I think, we have an opportunity with our scale to continue to increase our monetization. And we're also actively thinking through strategies that will both maximize our yield and manage the more earnings consistency through different interest rate cycles. So, again, it's an area that we think about carefully. We think its 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 Krebs of Wolf Research. Please, go ahead. Your line is open.

Hey. This is Daniel on for Darren. I was wondering if you could give any qualitative color on the Payoneer to Payoneer 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's the ultimate opportunity here? Thank you.

Hey, Daniel. There is -- it's a great question. It's an area of focus internally here. We see billions of dollars of payments between Payoneer account holders, right? We have -- Payoneer has built a global trust economy between small businesses that are increasingly recognizing. If you're paying your customer and have a Payoneer 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 how that product gets developed, we're working through that strategy in real time. There's nothing new to announce today, following up from my comments on our last quarterly call.

Great. Thanks, John.

You bet

We have no further questions, so I'll hand back to the management team for any closing remarks.

So, this is John. To conclude, on behalf of the entire Payoneer Global organization, I think it's important to say a special thank you to Michael and to Scott. I'm 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'm deeply grateful for your friendship and partnership.

This concludes today's conference call. Thank you all for joining. You may now disconnect your lines.