Earnings Call Transcript
Payoneer Global Inc. (PAYO)
Earnings Call Transcript - PAYO Q1 2022
Operator, Operator
Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Payoneer's First Quarter 2022 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. 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. 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 include non-GAAP measures. These measures should be considered as a supplement to and not as a substitute for GAAP financial measures. Reconciliation to the nearest GAAP measure can be found in today's earnings press release, which is available on the Company's website. Hosting today's call are Scott Galit, Payoneer's Chief Executive Officer, and Michael Levine, Payoneer's Chief Financial Officer. With that, I'd like to turn the call over to Scott to begin.
Scott Galit, CEO
Good afternoon. And thank you all for joining us today to discuss our first quarter 2022 results. Payoneer had a very strong first quarter. We delivered revenues and adjusted EBITDA well ahead of our expectations as we continued to drive strong new customer acquisition and increasing adoption of higher-value services, especially in faster-growing markets around the world. The Payoneer brand continues to be an important and growing asset as we see increasing demand among small businesses, marketplaces, and partners around the world eager to participate in the digital economy across a diverse range of vertical markets, including e-commerce, freelancing, content creators, social platforms, digital marketing, remote work, travel, and distance learning. Payoneer has emerged as a leading on-ramp to the global digital economy for small businesses worldwide, reinforcing our growing role as the world's go-to partner for digital commerce everywhere. And our growth is truly global and increasingly diversified. We had year-over-year revenue growth of over 50% for our fastest-growing markets, which include regions like Latin America, Southeast Asia, and South Asia, the Middle East and North Africa, and excludes the developed markets of North America, Europe, and Greater China. Market investments are delivering strong results as we continue to have a new customer payback period globally of less than 12 months. Partnerships are increasingly important contributors to this growth. And we're excited about the potential to accelerate our momentum with a growing range of partners, including SaaS platforms, banks, and mobile wallets. We were excited to launch a new partnership this quarter with bKash, the largest mobile wallet in Bangladesh. We're particularly excited by the progress we're making, executing on our strategy to broaden Payoneer's portfolio of higher-value services and to increase the number of Payoneer customers using those services. These higher-value services are key to our effort to become the financial partner of choice for our customers and to generate higher take rates from our customer relationships. Broadly speaking, there are two types of higher-value services. The first is higher-value accounts receivable services for SMBs. Getting paid is the lifeblood of the business, and our primary focus is improving the way SMBs get paid by providing differentiated tools to improve their global sales. The second type of higher-value service is higher-value account services; through which we provide SMBs the financial services they need to manage their global business after they have gotten paid. Our global B2B AP/AR offering is a higher-value accounts receivable service for SMBs, providing small businesses with better ways to get paid from their B2B trading partners. Once again this quarter, B2B AP/AR was a key contributor to our growth. B2B AP/AR volumes grew approximately 57% year-over-year with a two-year CAGR of over 90%. B2B AP/AR represented 11% of our volume, up from 8% a year ago. We are still in the very early stages of this multi-trillion-dollar addressable market opportunity. We have been increasing our investment in B2B AP/AR, hiring more sales resources, and working with our global teams to acquire new customers and to upsell B2B AP/AR to existing Payoneer customers. The majority of our B2B AP/AR customers are new to Payoneer, which demonstrates the strength of the Payoneer brand and our ability to acquire and grow a new complementary business at scale, all while pointing to the significant incremental addressable market opportunity we have in B2B AP/AR. Merchant services are another higher-value accounts receivable service and one of the largest market opportunities in digital commerce as we work to enable businesses around the world to simplify the complexity of getting paid by consumers globally. We are especially excited about Payoneer checkout, our offering for small businesses. While it is still in the very beginning of our gradual roll-out of Payoneer checkout, we're getting very positive customer feedback and we are building momentum with a growing pipeline of new customers and partners for what we expect will be an important growth driver for many years to come. Our Payoneer commercial MasterCard is a good example of a higher-value account service. Generating higher value from the Payoneer Account after our customers have gotten paid. The commercial card enables our small business customers to better manage their business and drive their growth. And also saves our customers money while generating a higher-than-average take rate for Payoneer. This is a compelling tool for businesses that aren't based in the U.S. but are selling globally. During the first quarter, we continued to increase our penetration of customers for our commercial card and introduced more customers to our cashback rewards programs. We're still in the relatively early stages of growth for our commercial card, and we continue to be optimistic about the long runway ahead for this exciting opportunity. Overall, these higher-value services are core to our strategy to drive an important evolution in our business as Payoneer customers are increasingly using our platform for a broader set of more sophisticated needs. Many small businesses are using Payoneer more as their primary global financial partner than as a payment processor. In aggregate, as of March 31st, 2022, our customers maintained more than $4 billion of balances on the Payoneer platform, tending their use of one or more of our services. To help illustrate this, I'm going to share the stories of a few of our inspiring customers and partners that highlight the exciting opportunity for entrepreneurs around the world and help demonstrate how Payoneer is an important partner supporting their growth. Kada Electronics is a Payoneer customer from Southeast Asia that sells electronic parts to consumers worldwide. Kada is one of our Payoneer checkout customers and has integrated Payoneer checkout into its web store to process payments from its customers who are largely based in the United States, Europe, and Australia. Once we settle the funds to their Payoneer Account, Kada is then using their Payoneer global account to manage and distribute their funds across multiple entities, countries, and banks around the world. bKash, a leading mobile wallet in Bangladesh with over 50 million registered customers, launched Q1 as a Payoneer for banks partner. bKash has integrated Payoneer into their mobile wallet to enable freelancers that use Payoneer for their cross-border sales to get real-time settlement from their Payoneer accounts into their bKash accounts. We're excited to collaborate with bKash to drive cost-effective new customer acquisition for Payoneer, to improve customer experience for our shared customers, and to support the continued development of the services exports ecosystem in Bangladesh. One of our partnered brands is a leader in offering fast-fashion for digitally savvy consumers and one of the fastest-growing e-commerce businesses in the world. They have partnered with Payoneer to support and facilitate their global expansion and to open up new marketplaces. Our first launch together is in Brazil, using Payoneer to pay marketplace sellers. In these examples, we have entrepreneurs tapping into the digital economy to grow globally, and Payoneer is helping them achieve their potential. That's why we are continuing to make significant investments in R&D to broaden our product offering and sales as we have demonstrated that our go-to-market investments have a very positive ROI. These investments together enable us to deliver more value to our customers, to further strengthen our competitive edge, and to improve our ability to monetize the volume on the Payoneer platform, while also increasing the level of engagement with our customers. We also executed very well on our investment plan in the first quarter with hiring generally in line with our expectations. All of this momentum translated into strong financial results for our first quarter. We generated revenues of $137 million, an increase of over 36% compared to prior year results. Adjusted EBITDA was $10 million, which highlights the operating leverage in our business model even while we continue to ramp-up investment in the business. As a result of our positive momentum in an increasingly diverse set of geographies and vertical markets and the growth of higher-value services, our take rate increased meaningfully to 94 basis points from 75 basis points in the prior year's first quarter. We continue to execute well on our multi-year strategy, and our continued solid financial performance reaffirms our ability to create strong value and monetization. We remain very excited about the long-term market opportunity for digital commerce globally and are very confident in our strategy to be the world's go-to partner for digital commerce everywhere. We also continue to be focused on the safety and well-being of our employees and customers in Ukraine. People are at the heart of everything we do, and our thoughts are with them in what continues to be a very challenging time. In our last call, the war in Ukraine was in its early stages. Since then, we have been proactively reducing our activity in Russia and Belarus, relocating or terminating all of our contractors in those regions, turning off new customer sign-ups at Payoneer.com, and working collaboratively with partners to reduce their activity, all while implementing the sanctions requirements in the region. Additionally, we have made donations to humanitarian causes in Ukraine and are working to support Ukrainian refugees. The war is impacting our 2022 business results, though so far only moderately. Russia and Belarus together were expected to represent less than 3% of our revenues and combined with Ukraine, less than 10% of our revenues. In the first quarter, there was less revenue impact than we initially expected as our partners are gradually curtailing their activity in Russia, and fortunately, because most of our employees and a number of our Ukrainian customers have found their way to safety and have continued to find ways to work, albeit at reduced levels. The situation continues to be unpredictable and evolving, and we remain concerned for our colleagues and customers in Ukraine. Given our strong financial position, our strong financial performance, our brand momentum, and large market opportunities, I remain very optimistic about our future. We're building on a solid foundation and just beginning to explore our potential as a global platform, enabling businesses to succeed across all digital sales channels and with the broad range of services that they need. We have a highly resilient business model with a differentiated competitive advantage. We went in the market because of our global brand, our strength in developing markets, our strong ecosystem of partners and marketplaces, the breadth of our offering for small businesses, deep risk management and compliance expertise, our amazing team and our scalable business model. And now with Payoneer checkout joining B2B AP/AR as promising higher-value accounts receivable services and strong growth in developing markets, our future is bright indeed. I would like to thank the Payoneer team for their great efforts to deliver real value for our customers, to deliver positive financial results, and to set us up for sustainable long-term success. I'll now hand it over to Michael to discuss financial results and forward guidance in more detail.
Michael Levine, CFO
Thank you, Scott. Indeed, it was a very strong quarter. Q1 revenue increased 36% year-over-year to $137 million. As Scott mentioned, we attracted many new customers, especially from fast-growing regions, such as Latin America, Southeast Asia, and the Middle East, which in general have higher than average take rates. We also benefited from strong customer adoption of our higher-value services such as B2B AP/AR and commercial card. The Q1 take rate was 94 basis points, a significant increase from 75 basis points in Q1 of 2021 and 86 basis points in Q4 of 2021, primarily driven by continued adoption of higher-value services and an increased mix in high-growth developing markets with higher take rates along with non-volume-based services. Q1 volume increased 10% year-over-year to $14.6 billion. Solid volume growth across a wide range of verticals and geographies is partially offset by softness in e-commerce, which continues to face headwinds caused by changes in consumer purchasing behavior, inflation, and supply chain disruptions. Q1 B2B AP/AR volume grew 58% year over year. Q1 transaction costs were $25.6 million, representing 18.7% of revenues, an improvement from 20% in Q1 2021. The improvement in transaction costs as a percentage of revenues is driven by the operating leverage derived from our scale, which is reflected in improved pricing from our bank and processor costs. Q1 total operating expenses, including transaction costs, were $143.3 million, up 40.8% from Q1 2021. Excluding stock-based compensation, Q1 total operating expenses increased 34% over Q1 2021. The biggest component of our operating expense is our labor cost. In Q1, we met our hiring expectations and continued to make significant investments, particularly in R&D and sales, while also investing in our global technology infrastructure to support onboarding additional customers, enhancing our regulatory compliance capabilities, and expanding our transactional capacity. Q1 adjusted EBITDA was $10.4 million compared to $7.8 million in the first quarter of last year, an increase of 33%. Q1 net income was $20.2 million compared to a net loss of $3.5 million in the first quarter of last year. The main driver of the increase in net income was a $31 million gain from the change in fair value of the warrants. Q1 basic earnings per share was $0.06 based on 342 million weighted average basic shares outstanding, and Q1 diluted earnings per share was $0.06 based on 366 million weighted average diluted shares outstanding. We ended the quarter with cash and cash equivalents of $466 million, relatively flat with the end of 2021. Customer funds grew in Q1 by over $200 million to $4.6 billion. We continue to work on increasing the interest-earning potential of our cash balances without changing our risk profile. Turning to our outlook for full-year 2022, we're happy to share that we're raising our prior guidance provided in March. Based on our strong first-quarter results and our review into April, together with our current assessment of how our business is trending in light of the broader macroeconomic and geopolitical environment, we're raising our revenue guidance from $550 million to $560 million, reducing transaction costs as a percentage of revenue to 21.5%, and increasing our adjusted EBITDA guidance to be between negative $10 million to negative $20 million. We believe our good market investments in higher-value services such as B2B AP/AR and commercial card will continue to generate above-average revenue growth, and we expect to benefit from continued strong growth in developing markets. Although we expect softness in e-commerce trends to continue for some period due to pressures in the broader global economy, we believe that growing international travel and increased interest income due to the recent and anticipated Federal Reserve rate hikes will help grow overall revenues. Regarding the situation in Ukraine, we had previously shared that we were zeroing out the remaining ten months of revenues for Ukraine, Russia, and Belarus, which equated to approximately $46 million. As Scott mentioned earlier, while the situation in the region remains fluid, we now believe it is more likely we will retain some of our existing business in Ukraine while the business in Russia and Belarus will continue to decline. We have now increased our forecast to assume approximately 50% of the original forecasted revenue collectively for all three countries for the remaining three quarters of the year. However, there is still tremendous volatility and a wide range of possible outcomes. Based on our assumptions and the timing of events, we expect total Q2 revenue will be below Q1 revenue as a result of the impact from Ukraine, Russia, and Belarus. We expect continued strong take rate performance in 2022 as our fast-growing developing markets and higher-value services increase in mix compared to the lower take rate e-commerce vertical, which is growing more slowly. We expect transaction costs over 2022 to be approximately 21.5% of revenues, an improvement from our previous guidance of 22%. This improvement comes from reducing our banking costs, slightly offset by higher borrowing costs for our working capital products, as well as new costs related to our growing merchant services business. As previously mentioned, we're also revising our 2022 adjusted EBITDA guidance to be between negative $10 million and negative $20 million. This improved guidance is the result of our revenue growth and lower transaction costs as a percentage of revenue. We will continue to pursue our investment strategy, which we believe will not deviate much from our initial plan. In conclusion, our Q1 success once again demonstrated our ability to deliver strong results, even as we faced a challenging macro-environment with the war in Ukraine and e-commerce headwinds. We've built a resilient business model that benefits from a diverse set of revenue drivers. We see positive trends such as growth in B2B AP/AR and strong customer adoption of our commercial card offering. We will continue to benefit from increased cross-border travel, interest income, and go-to-market investments in high-growth developing regions. As we increased our investment in these developing markets and launch new products, we believe there are additional short-term and long-term growth opportunities that can add upside to our guidance. On behalf of Scott and myself and the rest of the Payoneer management team, we thank you all for the continued interest and support. We are now happy to answer any questions you may have. Operator, please open the line.
Operator, Operator
Absolutely. [Operator Instructions] We will pause here briefly as questions are registered. The first question comes from Bob Napoli with William Blair. Please proceed.
Robert Napoli, Analyst
Thank you. Thank you for the questions, and solid results it's good to see. The growth in B2B AP/AR and the take rate linked together, B2B AP/AR, I think you said now 11% up from 8% a year ago, 57% year-over-year growth. Where are we -- is the take rate growth you've seen sustainable? So we should see continued increase in the take rate, and that B2B AP/AR sounds like it's very profitable given the take rate. Where can B2B AP/AR go as a percentage of total business over the next five years?
Scott Galit, CEO
Hey Bob. Thanks for the question. We're really excited about the overall large addressable opportunity that we have with B2B AP/AR. We're focusing our efforts on what is a multi-trillion-dollar part of the market of cross-border flows between businesses that are trading partners. We have something that we really think is quite unique and differentiated in the value we are able to provide for small businesses. We still think we're in the relatively early stages of what is a very large market opportunity. So over the next several years, not putting any timeline on it, we think it's possible that B2B AP/AR could even be bigger than our marketplace business. For example, we think it has that kind of potential, and we think we have that focus and momentum and opportunity ahead. We are continuing to actively invest both in product and in sales. So we again are focused on this being an important driver of growth, not just for the rest of 2022, but for years to come. This is really one of the core drivers for Payoneer. From a take rate perspective, I'll let Michael talk a little bit about B2B AP/AR from a take rate perspective and how that actually impacts the business.
Michael Levine, CFO
The B2B AP/AR business has effectively greater volume drivers, we make revenue on inbound as well as outbound. So it has a higher take rate and we had shared it was -- we did the last earnings call that is generally by thinking about it as 1.5 times our normal transaction margins. We talk about volume being left a higher percentage with a larger percentage of revenue, but it is one of the drivers that is helping the take rate. So obviously with 94 basis points in the quarter, very strong. We've talked about a combination of the number of higher-value services, of which B2B AP/AR is one of those components along with the commercial card offering and other services, and the mix of countries, customers coming from high take rate countries. Those are all supporting the overall strength and take rate. I would say that we look at that take rate as relatively stable, and I'd say we're looking at an expectation of around 90 basis points or so.
Robert Napoli, Analyst
Thank you. And then just to follow-up on the -- it seems like with the take rate, the increase in interest rates, and rebound in travel, that you could drive some pretty good profitability in the business on the EBITDA level sooner rather than later. But I know there's -- I mean, you have a great balance sheet. You certainly don't need capital, so you have plenty of firepower to invest. But what are your thoughts on your confidence in the long-term margins? Why not drive some more profitability in the near-term given the things like some of the momentum you have behind the business, understanding the uncertainty, especially in portions of your business?
Michael Levine, CFO
Maybe I'll continue, I'll take it, and then hand it off to Scott to comment. But I think the results of the first quarter speak for themselves in terms of our ability to generate strong EBITDA in our business while I should add investing heavily in our platform for future expansion and future growth. I think this is a validation point that what we're doing is working in terms of our business model, and our approach is always to think long-term and not be swayed by the short-term market whims. We believe that the approach we should take is accelerated investment, and while we see the opportunity to onboard customers, the needs, the ability to cross-sell is a strong driver in our commitment to expand the platform investment technology, build-out of additional products, bring on more customers that we can sell more to and get larger share of wallet to drive lifetime value and ultimately drive profitability in the long term. But we're in an investment -- it's a multi-year investment stage. I think we've proven ourselves out. And you would expect that the market will understand as we show variable profitability continuing to increase and increasing margins as we see our transaction costs coming down as a percentage of revenues. To take advantage of that market leadership position and invest to take advantage of those opportunities.
Robert Napoli, Analyst
Very clear. Thank you.
Scott Galit, CEO
Thank you, Bob.
Operator, Operator
Thank you. The next question comes from Ashwin Shirvaikar with Citi. Please proceed.
Ashwin Shirvaikar, Analyst
Thank you. Great quarter, folks. I just want to take you up on there was a comment at the very end of your prepared remarks about factors that can lead to upside beyond the updated outlook. Could you break that down? If you don't mind what are these factors and are you able to perhaps try to quantify directionally the upside?
Michael Levine, CFO
Sure. So hey, Ashwin, it's Michael again. I'll take it again. I'll let Scott add to it. But in general, I think we think of ourselves as conservative. We generally take an approach of putting out guidance that we feel we can deliver on and we work hard to try to deliver and exceed. Our approach is really evaluating all the risks. And obviously, we can see from a number of e-commerce companies and other companies that are reporting that there are challenges in the market in terms of inflation, consumer changes in behavior, supply chain challenges. We're evaluating what that might mean and taking into account in our numbers, and hopefully we see better results than that. We take an approach in terms of all the different variables. One thing to note, travel is something that was mentioned earlier. I think travel is less than 5% of our revenues, so it's not going to be the major driver of overall growth, but it's one of many contributors. We've worked to diversify our revenue streams to ensure that we're less dependent on any one particular vertical. But in general, I think travel is an example of that. We've seen growth and we expect continued growth in international travel. But we kind of look at the range of possible outcomes and take something more in the middle than assuming a best-case scenario. So there are a number of different factors whether we think of interest income or travel or e-commerce in terms of growth. We forecast in terms of looking at possible scenarios and we would hope things to become better. We want to ensure we're in a position that we can deliver on our numbers.
Ashwin Shirvaikar, Analyst
Okay. Got it. Now for sure you guys have beaten revenue expectation this quarter. If you could, in that grain, if you could break down the upside that you delivered this quarter in a more granular fashion, how much of it came specifically from your assumptions regarding Ukraine and Russia which were bested versus doing better with specific product like B2B AP, things like that. Other factors, if you could sort of maybe perhaps from the perspective of forward modeling, lay that out.
Scott Galit, CEO
Hey, Ashwin, it's Scott. The B2B AP/AR was certainly one of the positive contributors, as we've touched on. Also, the country mix as we continue to make sales investments in some of these high-growth, higher take rate regions of the world. The overall mix of our volume is positive in those higher take rate parts of the world. And then, continued growth of services like our commercial card that also have a higher take rate contributes a lot of value for customers and generates more value for us. The Ukraine war was a smaller part of the impact. We did do better than what we had actually talked about last time we were together, but that was a smaller part of the overall pie. So it really was execution across the board on those same themes we've been talking about for a while, the higher-value services, in particular B2B AP/AR and commercial card, and the strong performance in these faster-growing parts of the world that we think again have tremendous opportunity ahead and we're still relatively early days. And so those remain the key drivers of the performance.
Ashwin Shirvaikar, Analyst
Understood. Thank you.
Scott Galit, CEO
Thanks, Ashwin.
Operator, Operator
Thank you. The next question comes from Sanjay Sakhrani with KBW. Please proceed.
Sanjay Sakhrani, Analyst
Thanks. Good afternoon. Maybe I could follow-up actually on the same points that Ashwin did. When we think about some of these macro forces that you mentioned, China, obviously inflation as well, what baseline you're using in your base case as far as how severe those are going to be? Because I know some technology companies have come out and quantified a significant impact, but it's going to happen later this year. Maybe you could just give us some sense of what the baseline is.
Scott Galit, CEO
If we look at e-commerce as an example, we noticed that we did see softness in e-commerce. If you look at the disaggregation of revenue in the queue where we dissected revenue by region, and you look at China as a proxy for e-commerce, you can see that in the quarter in the year-over-year, we had lower growth in China compared to the rest of the world. The rest of the world growth was much more significant. When we look, we are in touch with our customers. We hear about the challenges that they face as well as the opportunities. We view ourselves as enablers to help drive additional growth for those customers and try to help them either manage through the frictions that they're having or at least think about the long-term relationships and how to build deeper into those relationships. Some of those customers might need additional capital to continue investing in growth. We're providing those solutions to help increase their growth. I think overall there are a number of challenges. We talked about supply chain, there could be some production issues, and obviously inflation has a few different impacts. One, since the majority of our revenues are ad valorem, if volumes swell due to inflation, we're a beneficiary, and if people have less to spend on certain goods because they're spending more on gas and food that might lower the amount that they're spending online. Over time, we will have to see what that trade-off is. But overall, there's incredible resilience in our customer base, but also in the design of our business model, where we're not dependent just solely on e-commerce. When we consider businesses that continue to seek freelance labor to bring down costs, we are a beneficiary of that as well. A number of other verticals continue to show strong growth, which helps support the comments I made regarding travel. Overall, there's a mix of factors that we see positively affecting our business.
Sanjay Sakhrani, Analyst
Got it. And I guess -- and then we just sort of cycle that through to the revenue guidance range, on the surface, it seems like the addition of some of what you thought you might lose is driving the upside to the revenue guidance, but it might be tempered by some of the macro headwinds that you're expecting; is that right? And then if we think about these revenues that you now expect to get from that region, the Russia, Ukraine region. Like what's the risk to that? If the war just continues to happen?
Michael Levine, CFO
Again, I would say in Ukraine, it's fluid obviously, and we're all praying for things to improve rapidly, but from a business standpoint, we actually saw, based on data, we saw things starting as we had our last conference call when the situation began heating up. We took a conservative approach by zeroing out the remaining revenues. What we observed in March and April was that the results were impacted but not at the levels we had feared. It's difficult to provide a longer-term view based on effectively two months of data, because you could have situations where people are ending contracts and might not renew due to the country risk of investing in Ukraine. Conversely, we've seen an incredible amount of support for businesses operating in Ukraine. So, from a net-net basis, we haven't seen as big of an impact as we had initially expected. But in our 50% forecast going forward for the remaining months, we hope that it's a conservative approach and that it turns out to be even better. However, we believe we have adequately accounted for potential risks based on what we've observed in the last two months.
Scott Galit, CEO
And Sanjay, more broadly, the way you talked about our guidance update, I think it's a good way to think about it. There are a number of factors at work and we have taken a conservative approach. We're happy with our strong first quarter, to have a lot of positive trending indicators. There are also a number of crosswinds out there, and we're baking that all into an updated guidance that is higher, which we're excited about, but we also have integrated some conservatism into the numbers.
Sanjay Sakhrani, Analyst
Okay. Great. Thank you.
Operator, Operator
Thank you. The next question comes from Josh Siegler with Cantor Fitzgerald. Please proceed.
Josh Siegler, Analyst
Yes, hi. Thanks for taking my question and congratulations on the strong results this quarter. I'd like to dive a little deeper on the travel volume for a bit. Are you seeing a return to pre-COVID levels, or is there still more room for recovery? Additionally, is there still significant volume applied to travel marketplaces, or has the travel vertical become more diversified?
Scott Galit, CEO
So first in terms of travel and what we have seen, we've touched on this in the past. Our exposure in the travel space tends to be a bit more geographically diverse, typically more emerging markets, and those have been slower to come back. We are seeing improvement. We are seeing positive trends, and we are generally upbeat about how those trends will continue. But overall, there has not been a widespread return to prior levels. So there is still, again, some room to go, with overall positive trends emerging. In terms of the travel business overall, as Michael touched on, it's less than 5% of our revenues. We have increased investments in other vertical markets and other aspects of the business significantly more than travel, so most of the breadth and diversity in our business comes from those other areas and not within the travel space.
Josh Siegler, Analyst
Understood. Appreciate the color there. Sanjay touched on this earlier, but given the timing, economic forecasts, and higher global inflation, can you provide investors with some additional insight on the different levers Payoneer can pull to maintain growth and profitability in a period of macro turbulence?
Scott Galit, CEO
Yes, sure. The exciting part of our business really is that the continued momentum towards participation in the digital economy remains very strong, and that digital economy is extensive and diverse, covering many vertical markets, and it is truly global. The exciting opportunity for us is that we continue to see many opportunities around the world, with strong momentum in all major areas of our business. We had very strong customer acquisition this quarter, which continues a really positive trend towards increasing participation in the digital economy, and Payoneer being an entry point for that. Looking across all of that, B2B AP/AR is a lever accommodating Payoneer checkout. While it's still very early, that becomes a lever if we see continued softness within e-commerce; we actually have tools with our commercial card that our teams are upselling to our existing customers, driving increasing value for them and for us. Even if they actually turn stagnant, we can still save them some money and increase our growth by selling in services like that. We have many tools in our toolbox, and we are executing well across the board.
Josh Siegler, Analyst
That's very helpful. Thank you, Scott. And congratulations once again.
Scott Galit, CEO
Yes. Thank you, Josh.
Operator, Operator
Thank you. The next question comes from Mayank Tandon with Needham. Please proceed.
Kyle Peterson, Analyst
Hey, good evening. This is actually Kyle Peterson on for my Mayank. Appreciate you guys taking the questions. Great to see the results here. Just want to think. It seems like a lot of the revision of the guidance is better revenue than expected in Russia, Ukraine, Belarus. Are there any other puts and takes? Like is the guide a little more conservative on e-commerce volumes, and that's being partially offset by stronger take rate and adoption of new products or what are the moving pieces outside of the Eastern Europe coming in better?
Michael Levine, CFO
Sure. I'll take it. It's Michael speaking. I think the answer is yes. We decided that we did want to be a little bit more conservative given some of the headwinds related to e-commerce, so we did take a more conservative view going forward. Again, there are puts and takes, so at the same time travel performed well against a small piece. We'll benefit from interest income as well. There are a number of different drivers as I mentioned, and again, there tends to be a balancing act where one aspect may look a little weaker due to our conservative evaluation while something else continues to grow at a stronger pace than initially thought. Our customer acquisition success and focus are helping us in high-growth markets in Latin America, Southeast Asia, and the Middle East, where we're making investments and our performance in these regions excites us. So overall, we're happy to raise guidance across-the-board in terms of revenue and margins, which will drive more profitability, while seeing significant option value in the future based on centralized investments.
Kyle Peterson, Analyst
Got it. That's helpful. And then I guess just a quick follow-up. Looking at the revenue in the U.S. part of the business, it's been growing and scaling really nicely. What's driving some of that strength right now? Is a lot of it just travel coming back, or can you share where some of the moving pieces are driving the U.S. upside right now?
Michael Levine, CFO
Yeah. There are a number of different factors; travel being one of them. We also have some non-volume services that we've added. Overall, we continue to make a push globally across many markets. The work we are doing with large marketplaces has continued to grow as it has in that aspect as well.
Kyle Peterson, Analyst
Got it. That's helpful. Next quarter I guess.
Michael Levine, CFO
Thank you.
Operator, Operator
Thank you. The next question comes from Sir Mike Grondahl with Northland Securities. Please proceed.
Unidentified Speaker, Analyst
Hi, guys. This is actually going on from Mike. I just had a couple of quick ones; in terms of the new Payoneer checkout offering, could you provide some more color in terms of the timeline of launch into additional regions and then any comments on performance on the initial launch in Asia?
Scott Galit, CEO
Yeah. Hi, Aaron. As of now, we are continuing to focus on Asia, and that will remain our core focus for the rest of 2022. We will be laying the groundwork for expanding into other regions, and consistent with our approach to cover the entire world, that will be our focus over the next couple of years as we continue to broaden and expand that offering. We're still in the early days. This is a huge market opportunity; we're very excited about it. The performance so far is good, and we have momentum building our pipeline of both customers and partners. There will be more to come as we work our way through the year. In the bigger picture, the impact on our Q1 financial results is small, but we believe this will be a material contributor as we look to future years. It's again big opportunity, it really plays to our strengths and simplifies global commerce. In particular for SMEs, we bring a unique combination of both technology and service and support to help connect them to the growth opportunities they can pursue around the world.
Unidentified Speaker, Analyst
Great. Thanks, guys. And congratulations on the quarter.
Michael Levine, CFO
Thank you.
Operator, Operator
Thank you. The next question comes from Andrew Hummel with WestPark Capital. Please proceed.
Andrew Hummel, Analyst
Hey guys, thanks for taking my question. I just wanted to follow up on the guide for the year-end. I know last quarter when they excluded the Russia, Ukraine impact, you've talked about 22% to 24%, the kind of growth that's excluding those headwinds. And I understand there's a number of, I guess, puts and takes that would come from those adjustments. But can you talk about 22% to 24% range while being still kind of what you're seeing, is there upside for that for the year?
Michael Levine, CFO
I would say we're on track and there are puts and takes. We might be building in some more conservatism regarding e-commerce, but on the other hand, some parts of our business are accelerating. Our customer acquisition focuses on certain markets where we've observed good performance, Latin America and Southeast Asia, and those regions are seeing great results. So overall, we feel comfortable raising guidance across-the-board. We're excited about this year's revenue opportunities while keeping margins projected driving profitability, based on current positive trends.
Andrew Hummel, Analyst
Okay. Great. Thanks for that. And then there's one follow-up. On the FX side. Just curious if you guys see any FX pressure within your revenue year-over-year from other players across the broader landscape, or has that not really affected you?
Scott Galit, CEO
I think, on the cost side, we've been beneficiaries of movements in foreign exchange, specifically related to where we operate and our employees, and this has helped a bit. However, in terms of top-line revenue, we don't have the same kind of impact that some other businesses have based on revenue recognition, so that pressure has been less significant for us.
Andrew Hummel, Analyst
Okay. Great. Thanks. I appreciate it.
Scott Galit, CEO
Thank you.
Operator, Operator
Thank you. We have a follow-up question from Bob Napoli. Please proceed.
Robert Napoli, Analyst
Thank you. Just on geographic, and you guys have called that Latin America and growth in high-growth regions a number of times, can you maybe give a little more color on those regions, the size of those regions, and what you think can be delivered in some of these higher-growth regions like Latin America over the next couple of years?
Scott Galit, CEO
Yes, sure. Some of the regions that we are particularly excited about and again, there are a number of them, are Latin America, the Middle East, North Africa, and Southeast Asia. Asia broadly is quite extraordinary just the leapfrogging that's happening there and the dramatic digitalization of commercial activity. These regions have large populations with lots of commercial activity and are rapidly digitalizing. They are leapfrogging into more modern tools and providers. All of them are growing quickly, and we see a significant market potential there, yet we are still a tiny part of these large regions. We are making investments to drive the market, and we feel great about the growth rates being sustainable for a long time. Across verticals and services like B2B AP/AR, in these parts of the world is a lead, not just an add-on or new entry point.
Robert Napoli, Analyst
Thank you. And just quickly, with your strong balance sheet, is there -- are you more focused on M&A today or what are your thoughts just around the market? Payoneer has a unique franchise. Should it be involved in industry consolidation in one way or another?
Scott Galit, CEO
Yeah. We are continuing to explore M&A opportunities and it's something that we are focused on and do see as part of our strategy to expand and broaden the platform and the services that we're able to offer to small and medium-sized businesses around the world. We are seeing several opportunities, and our team is thoughtfully focusing on some areas. We remain very optimistic about our ability to add more capabilities to our platform and supplement our organic investments with acquisitions.
Robert Napoli, Analyst
Thank you.
Scott Galit, CEO
Thanks, Bob.
Operator, Operator
Thank you. That concludes today's Q&A session. I would like to turn the conference back over to Scott Galit to conclude the call.
Scott Galit, CEO
Great. Thank you, everybody for the support and the great questions. We're really thrilled with our quarter, and the Payoneer team globally has really executed well in the face of some really challenging market conditions. We are really thrilled with their work and are really happy to be able to support our customers and employees in Ukraine and look forward to better and brighter days ahead. Thank you for the questions and the discussion, and we will talk again soon. Thanks.
Operator, Operator
That concludes today's Payoneer's First Quarter 2022 Earnings Conference Call. Thank you for your participation. You may now disconnect your lines.