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 that were 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 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.
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.
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. We see tremendous untapped potential in developing markets globally, and our go-to-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 are excited about the potential to accelerate our momentum with a growing range of partners, including SaaS platforms, banks, and mobile wallets, which help us efficiently acquire new customers and also to offer our joint customers a unique integrated experience.
We were excited to launch a new partnership this quarter with bKash, the largest mobile wallet in Bangladesh. We are 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 a 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 is 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 rollout of Payoneer Checkout, we are getting very positive customer feedback, and we are building momentum with a growing pipeline of new customers and with new 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 introduce more customers to our cashback rewards programs. We are 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 pending 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. TATA Electronics is a Payoneer customer from Southeast Asia that sells electronic parts to consumers worldwide. Tata 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, Tata 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 in 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 are 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. Shein is a leader in offering fast fashion for digitally savvy consumers and one of the fastest-growing e-commerce businesses in the world. Shein has partnered with Payoneer to support and facilitate Shein's global expansion and to open up new Shein marketplaces. Our first launch together is in Brazil, with Shein 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 multiyear 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 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 signups at payoneer.com and working collaboratively with partners to reduce their activity, all while implementing the sanctions requirements in the region. In addition, 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. 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 are 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 a broad range of services that they need. We have a highly resilient business model with a differentiated competitive advantage.
We win in the market because of our global brand, our strength in developing markets, our strong ecosystem of partners and marketplaces, the breadth of our offering for small businesses, deep risk management and compliance expertise, our amazing team and our scalable business model. 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.
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 was 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 percent of revenues is driven by 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 costs.
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 of 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 change in fair value of warrants.
Q1 basic earnings per share was $0.6 Based on 342 million weighted average basic shares outstanding, and Q1 diluted earnings per share was $0.6 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 are raising our prior guidance provided in March based on our strong first quarter results and our view into April, together with our current assessment of how our business is trending in light of the broader macroeconomic and geopolitical environment. We are raising our revenue guidance to $550 million-$560 million, reducing transaction costs as a percent of revenue to 21.5% and increasing our adjusted EBITDA guidance to be between -$10 million to -$20 million. We believe our go-to-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 of time due to pressures in the broader global economy, we believe that growing international travel and increased interest income due to the recent 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 10 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 are also revising our 2022 adjusted EBITDA guidance to be between -$10 million and -$20 million. This improved guidance is the result of our revenue growth and lower transaction costs as a % 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 face the challenging macro environment with the war in Ukraine and e-commerce headwinds. We have built a resilient business model that benefits from a diverse set of revenue drivers, and 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 increase 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.
Absolutely. If you'd like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. The first question comes from Bob Napoli with William Blair. Please proceed.
Thank you. Thank you for the questions and solid results. You know, good to see. The growth in B2B AP/AR and the take rate, I guess, linked together. You know, B2B AP/AR, I guess I think you said now 11% up from 5%-8% a year ago, 57% year-over-year growth. Where are we? What, I mean, is the take rate, the growth you've seen sustainable? We should see continued increase in the take rate and that B2B AP/AR sounds like it's, you know, very profitable given the take rate. You know, where can B2B AP/AR go as a percentage of the total business over the next five years?
Great. Hey, Bob. Thanks for the question. We're really excited about the overall large addressable opportunity that we have with B2B AP/AR. You know, we're
Focusing our efforts on what is a multitrillion-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're able to provide to small businesses. We still think we're in the relatively early stages there of what is a very large market opportunity. Over the next several years, you know, not putting any timeline on it, you know, 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 kind of focus and momentum and opportunity ahead. We are continuing to actively invest both in product and in sales.
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.
Sure. Thanks, Bob. All right. I think the B2B AP/AR business has effectively two flows. We make revenue on inbound as well as on outbound, so it has a higher take rate. We had shared it when we did the last earnings call that in general, we can dimensionalize it by thinking about it as you know, 1.5x our normal take rate thinking about it from a revenue perspective. When we talk about volume being 11%, obviously it's a larger percent of revenue, but it is one of the drivers that is helping take rate. Obviously with 94 basis points in the quarter, very strong. We talked about combination of the number of higher value services.
B2B AP/AR is one of those components along with the commercial card offerings and other services and mix of country customers coming from high-growth, high take rate countries. Those are all supporting the overall strength in take rate. I would say that, you know, we look at that take rate as relatively, you know, stable in the sense of if you were kind of in the net ballpark of 90 basis points or so. I think we would see as we go out a relatively stable take rate.
Thank you. Just a follow-up on the, I mean, it seems like with the take rate, the increase in interest rates, rebound in travel, that you could drive some pretty good profitability in the business on the EBITDA level sooner rather than later. 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. What are your thoughts on your confidence in the long-term margins? You know, why not drive some more profitability in the near term given, you know, it seems like some of the momentum you have behind the business, understanding the uncertainty, you know, especially in portions of your business.
Yeah. Maybe I'll kick things off, Bob, and then hand it off to Scott to augment. You know, 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. Our approach is always to think long term and not, you know, be swayed by the short term, you know, market whims. I think, well, we believe that the approach that we should take is accelerated investment.
We think we see that the opportunity to onboard customers, the needs, the ability to cross-sell, is a strong driver in our commitment to expand the platform, invest in the technology, build out 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. We're in a you know, I would say multi-year investment stage. I think we've proven ourselves out. You know, we would expect that the market will understand, you know, as we show variable profitability continuing to increase, increasing margins, as we see our transaction costs coming down as a percent of revenues, to take advantage of that market leadership position and to, you know, invest as have the.
You know, to take advantage of those opportunities that we see now, to really build those products that will allow us to have a very strong leadership position in the future, in many, many large TAMs, I should say. We're building out in a number of incredibly large addressable markets. We obviously have our, you know, traditional marketplace business, but off marketplace in terms of B2B AP/AR. We just recently announced our Checkout initiative for merchant services. We continue to build out our working capital business. There are a number of very large TAMs that we're addressing, and we're at the early stages of it. We believe that the best outcome for our shareholders is that commitment to the long-term strategy.
Very clear. Thank you.
Thanks, Bob.
Thank you. The next question comes from Ashwin Shirvaikar, Citi. Please proceed.
Thank you. It's a 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 know, able to perhaps try to quantify directionally the upside?
Sure. So hey, Ashwin, it's Michael again. I'll take it again. I'll let Scott answer it, but in general, I think we think of ourselves as conservatives. We generally take 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. Obviously we can see from a number of, you know, e-commerce companies and other companies that are reporting that there are the challenges in the market in terms of inflation, changes to consumer behavior, supply chain challenges. We're evaluating what that might mean and taking that into account in our numbers. Hopefully we, you know, you see better results than that.
We also, you know, take a, I think, a approach in terms of all the different variables. One thing to note, you know, travel is something that was mentioned earlier. I think travel is, you know, it's less than 5% of our revenue, 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 make sure that we're less dependent on any one particular vertical. In general, I think travel as an example is that we've seen growth. We are seeing international growth now. We expect to continue to see growth in international travel.
Probably I would say we kind of look at the range of possible outcomes and take something more in the middle than, you know, assuming a best-case scenario. There are a number of different things, whether we think about interest income or travel or e-commerce in terms of growth and how we forecast, in terms of, you know, looking at possible scenarios. What we would think is that we would hope we're hoping some better outcome. We want to make sure we're in a position that we can deliver on our numbers.
Okay. Okay, got it. Now, for sure you guys have beaten revenue expectations this quarter. If you could, in that vein, break down the upside that you delivered this quarter in more granular fashion. How much of it came specifically from your assumptions regarding Ukraine and Russia, which you know were bested versus doing better with specific products like B2B AP/AR or things like that, other factors? If you could sort of, you know, it would help from the perspective of forward modeling to lay that out.
Yeah. Hey, Ashwin. 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. Continued growth of services like our commercial card that also have a higher take rate create a lot of value for customers and generate 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 beat overall.
It really was execution really 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. Those remain the key drivers of the performance.
Understood. Thank you.
Thanks, Ashwin .
Thank you. The next question comes from Sanjay Sakhrani with KBW. Please proceed.
Thanks. Good afternoon. Maybe I could follow up actually on the same points that Ashwin did. Michael, when you think about some of these macro forces that you mentioned, China, obviously inflation as well, you know, what's sort of the baseline you're using in your base case, as far as how severe those are gonna be? Because I know some technology companies have come out and sort of quantified a significant impact, but it's gonna happen sort of later this year. Maybe you just give us some sense of sort of what the baseline is.
Yeah. You know, if we look at e-commerce as an example, we noted that we did see softness in e-commerce. If you look at the disaggregation of revenues in the Q where we break out, you know, regional, you know, revenues by region, and you look at, let's say, China as a proxy for e-commerce, you can see that in the quarter year-over-year we had lower growth in China than we had the rest of the world. The rest of the world's growth was much more significant. You know, when we look, we obviously are in touch with our customers. We hear about the challenges that they face as well as the opportunities.
We look at ourselves as an enabler to help drive additional growth to 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. As those, you know, some of those customers might have, you know, talking about from a macro standpoint, you know, need additional capital or to continue investing in their growth, or need or looking for other opportunities to go off marketplace and open up their web stores, we're providing those solutions to help increase their growth. I think there are, you know, a number of challenges. We talked about supply chain.
Obviously there could be some production issues in China through different COVID shutdowns that, you know, kind of roll through different regions. Inflation. For us, inflation has, you know, a few different, you know, impacts. One, since the majority of our revenues are volume-based, you know, if volumes swell because of inflation, we're a beneficiary. 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'll have to see what that trade-off is. But overall, you know, there's incredible resilience both in our customer base, but also design of our business model, where, you know, we're not dependent just solely on e-commerce.
When we look across at, you know, businesses that continue to look at, you know, freelance labor to try to bring down their costs, we're a beneficiary of that as well, and a number of other verticals that, you know, tend to have an ability to balance themselves out. That's one of the things I think people should walk away with, is we highlight the fact that, you know, there's growth in e-commerce, but, you know, some challenges in that growth. We see other parts of the business that continue to grow very strongly that help support that. You know, the comment I made on the last question, about travel, again, it's a number of different drivers, and so some things will step up.
When we look at, you know, again, inflationary challenges having a negative as interest rates go up, that actually becomes a net positive for us. There's a number of things on a net basis will continue to be positive overall for us.
Got it. 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? You know, 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 on a go-forward basis? Thanks.
You know, again, I would say in Ukraine, it's fluid obviously, and we're all praying for things to get better as quickly as possible, for many reasons. From a business standpoint, we actually saw, again, based on data, we saw things starting when we had our last conference call, which was when things were just heating up. We took a conservative approach by zeroing out the remaining revenues. What we witnessed in March and April was that the results were impacted, but not at the levels that we had feared. It's hard to tell longer term just based on effectively two months or, you know, more or less two months.
Of data because you could have, just as an example, situations where people are ending contracts and might not renew because they're afraid of, you know, the country risk of investing in Ukraine. Like, you know, the other direction is we've seen an incredible amount of support for people in Ukraine and people looking to give business to Ukrainians in support of their livelihoods. From a net basis, we haven't seen as big of an impact as we might have expected. In our 50% forecast going forward for the remaining nine months, we hope that it's a conservative approach, and we hope that it turns out to be even better than that. We think that we have discounted appropriately to still be conservative based on what we've seen in the last two months.
Okay.
Sanjay, more broadly, the way you talked about kind of the way you characterized our guidance update, I think is 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 to have the strong first quarter to have a lot of positive trends. There also are, again, 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 also, we've woven some conservatism into the numbers as well.
Okay, great. Thank you.
Thank you. The next question comes from Josh Siegler with Cantor Fitzgerald. Please proceed.
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 tied to two travel marketplaces, or has the travel vertical become more diversified?
Yeah. Hey, Josh, it's Scott. Good to talk with you. First, in terms of travel and what we have seen, and we've touched on this in the past in passing, but our exposure in the travel space tends to be a bit more geographically far-flung, tends to be a bit more emerging markets, and those have been slower to come back. We are seeing improvement. We are seeing positive trends, and we are actually generally upbeat about how those trends will continue to be positive. Overall, there has not been a return kind of across the board to where we were in the past from that perspective.
Still, again, some room to go and overall some positive trends there. In terms of the travel business overall, as Michael touched on, it's less than 5% of our revenues. We have increased our investment in other vertical markets and other aspects of the business, certainly more significantly than travel. More of the breadth and diversity in our business is coming from those other areas and not within the travel space so much. It's much more of a play for us outside of the travel vertical than within the travel vertical.
Understood. Appreciate the color there. You touched on this earlier, but given tightening economic forecasts and higher global inflation, can you provide investors with some more color on the different levers Payoneer can pull to maintain growth and profitability in a period of macro turbulence?
Yeah, sure. I mean, again, I'll start. Michael, feel free to chime in after. The exciting part of our business really is that the continued momentum towards participation in the digital economy remains very strong. That digital economy is a very broad and diverse economy with a lot of different vertical markets, and it's really very global. For us, what's exciting is we continue to see many opportunities around the world. We are continuing to lean in in these faster-growing regions of the world where we're really just scratching the surface of the opportunity. We're continuing to see lots and lots of momentum across really all of the major areas of our business.
We had very strong customer acquisition this quarter, which continues a really positive trend towards, again, increasing participation in the digital economy and Payoneer being an on-ramp. Looking across all of that, B2B AP/AR is a lever now with Payoneer Checkout. While it's still very early days, that becomes a lever if we see continued softness within e-commerce. We actually have tools with things like our commercial card that our teams are actually upselling to our existing customers, which actually drives increasing value for them and for us out of the same flows. Even if they actually end up being stagnant, we can actually save them some money and actually increase our growth by actually selling in services like that. We have a lot of tools in our toolbox.
In general, we're executing well on many, if not most of those. You know, we're looking forward to kind of a return to a more normal macro environment where we can actually get some tailwinds from some of these parts of the world or some of these vertical markets that right now are not actually driving the same kind of growth they were in the past. We have a lot of tools in our toolbox, lots of vectors of growth, and we're executing quite well across the board.
That's very helpful. Thank you, Scott. Congratulations on the pricing wins.
Yeah, thank you, Josh.
Thank you. The next question comes from Mayank Tandon with Needham. Please proceed.
Hey, good evening. It's actually Kyle Peterson on for Mayank. Appreciate you guys taking the questions. Great to see the results here. It seems like a lot of the revision of the guidance is better revenue than expected in kind of Russia, Ukraine, Belarus. Are there any other kind of puts and takes? Like, is the guide a little more conservative on e-commerce volumes and that's being partially offset by stronger take rates and adoption of new products? Or what are the moving pieces kind of outside of the Eastern Europe coming in better?
Sure. I'll take it. It's Mike speaking. I think the answer is yes. We decided that we did wanna be a little bit more conservative given some of the headwinds related to e-commerce. We did take a more conservative view going forward. Again, there are puts and takes. At the same time, you know, travel performed extremely well against a small piece. We'll benefit from interest income, as well. You know, there's a number of different drivers, as I mentioned, and again, there tends to be a balancing. One thing might look a little bit weaker. We take a conservative view on it. Something else, you know, continues to grow at a stronger pace than initially thought.
Our customer acquisition abilities to you know focus on certain markets, so that's what I mentioned a few of those. We're doing really well in high growth markets. You know, that includes Latin America and Southeast Asia and Middle East, where we're continuing to make investments with people on the ground. We're excited about those opportunities in those markets. You know, net overall, we're happy to raise guidance and, you know, across the board, both in terms of revenues as well as margins, which will drive more profitability.
We're seeing more option value in the future based on these investments because we're excited about the regions that we're in, we're excited about products that we're offering, and we're super excited about the value of the Payoneer brand globally and what that means to our customers and our ability to leverage that brand in the future. All in all, we look at Q1 as a great validation of the business model. We have built in, you know, caution for the rest of the year with a hope that things are better than that. We feel comfortable raising the guidance to the levels that we've raised them.
Got it. That's helpful. I guess just a quick follow-up. Looking at the revenue in the U.S. part of the business, it's been, you know, growing and scaling really nicely. What's driving some of that strength right now? Is a lot of it just travel coming back or kind of what are some of the moving pieces that are driving the U.S. upside right now?
Yeah. There's a number of different factors, you know, travel being one of them. We also have some non-volume services that we've added for enterprises as well. Overall continue to make a push globally across many markets. The, you know, work that we're doing with large marketplaces has been continuing to grow as it has on the SMB side as well.
Got it. That's helpful. Thanks for the guidance.
Thank you.
Thank you. The next question comes from Mike Grondahl with Northland Securities. Please proceed.
Hi, guys. This is actually Owen on for Mike. I just had a couple 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? Are there any comments you might have on performance on the initial launch in Asia?
Yeah. Hi, Owen. So as of now, we are continuing to focus on Asia, and that will remain our core focus for the rest of 2022. We are 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 really in early days. I mean, this is a huge market opportunity. It's something we're very excited about. The performance so far is actually really good. We have a lot of momentum building our pipeline and actually both in customers as well as partners. There will be more to come as we work our way through the year.
In the grand scheme of our overall financial results, the impact in Q1 is really immaterial. It'll take a little bit of time for that to really start to contribute, but it's something that we believe will be a material contributor as we actually look into future years. It's again big opportunity. It really plays to our strengths in simplifying global commerce, and in particular for SMBs, and in particular SMBs coming from developing markets, where we really bring a unique combination of both technology as well as the service and support to help connect them to the growth opportunities around the world that they can pursue. It's a great fit, and we're getting really positive feedback, but in the grand scheme of things, it's still very, very small.
Something we're excited to talk more about and expecting to talk more about as we go through the rest of the year.
Great. Thanks, guys, and congratulations on the quarter.
Thanks.
Thank you. The next question comes from Andrew Hummel with WestPark Capital. Please proceed.
Hey, guys. Thanks for taking my question. I just wanted to follow up one more time on the guide for the year. You know, I know last quarter, when you excluded the Russia-Ukraine impact, you just kind of talked about 22%-24%, you know, kind of growth, excluding those headwinds. You know, I understand there's a number of I guess puts and takes that would become, you know, maybe tailwinds and some of the other pieces that maybe are better. But can you talk to that 22%-24% range? Is that still kinda what you're seeing? Is there, you know, upside for that, you know, for that for the year?
I would say we're on track, and there are puts and takes. As I mentioned before, you know, we might be building in a little more conservatism on e-commerce, but have some other parts of our business that are accelerating at the same time. Net, I would say we're on target. To get to the question about upside, you know, as I mentioned in my comments, yes, I think there are opportunities for upside depending on both execution as well as, you know, broader market issues. Whether or not, you know, we see better than 50% in Ukraine, whether or not e-commerce, you know, is performed better than what we're, you know, assuming based on current trending and some of the more macro-related issues.
Our continued ability to, you know, cross-sell and get the message out and our ability to, you know, execute on our investment strategies, our go-to-market strategy on sales hires and getting those people into the markets to drive incremental sales, which we've seen has worked well so far. We, you know, expect will continue to work well. Yeah, I think that obviously we're all in a world where there are a number of risks, but we think we work hard to try to mitigate those and create as many different revenue streams as possible so that we create a natural diversification of our business.
I think that the results have demonstrated that we have been very successful from managing that, whether it be, you know, trying and successfully reducing concentrations to expanding into new businesses, to grabbing larger share of customer wallet. All of these have been successful, and I think, you know, provide opportunities if we continue to execute well to, you know, meet and exceed.
Okay, great. Thanks for that. Then just one follow-up. You know, on the FX side, just curious if you guys see any FX pressure within your revenue or anywhere in the business and some other, you know, players across the broader landscape, within the international exposure I've talked about from an FX point of view, as well as strength. Just wanted to see how that fits, you know, for you guys, and if you're seeing anything on that front.
I mean, I could speak on the cost side. I would say that we've been the beneficiary of movements between where we have the majority of our employees and the pairing of the US dollar, which has helped a bit. We'll see where we go for the rest of the year, but we have been beneficiaries to date from a cost perspective from low salary.
Yeah. In terms of the top line, it's very little, really. You know, we don't have the same kind of impact that a number of other businesses would have in terms of the way they have revenue recognition and things like that. That's less of an impact for us.
Okay, great. Thanks, guys. Appreciate it.
Thank you.
Thank you. We have a follow-up question from Bob Napoli. Please proceed.
Thank you. Just on geographic, I mean, you guys have called out Latin America and growth in high growth regions a number of times. Can you maybe give a little more color on, you know, those regions, the size of those regions and, you know, what you think can be delivered in some of these higher growth regions like Latin America over the next couple of years.
Yeah, sure. You know, some of the regions that we are particularly excited about, and again, there are a number of them, Latin America, as you mentioned, Middle East and North Africa, Southeast Asia, you know. I say Asia broadly is pretty extraordinary, just the leapfrogging that's happening there and the kind of dramatic digitalization of commercial activity that's happening in the region. These are parts of the world that are large populations that have lots of commercial activity that are rapidly digitalizing, and they are kind of leapfrogging into more modern tools and more modern providers. All of them are growing quickly, but we're still really, really small.
We are really a kind of a very small part of these very large, highly populated regions that actually have a tremendous amount of government encouragement towards exports, in particular small businesses, lots of kind of technology, learning and innovation that's coming from these areas. If you look at kind of just generally the digitalization of commerce in those parts of the world, those are the parts of the world that are actually growing faster. We're seeing the same thing, but just on the kind of exporter and supply side of that. We're still really small for us, in the grand scheme of things. The growth rates we think are sustainable for quite some time. We're making investments to actually drive the market.
We see it across a range of verticals and a range of services. B2B AP/AR in some of these parts of the world is actually a lead for us, not kind of an add-on or a new entry point. We see a lot of service providers and digital agencies and things like that that are in these parts of the world as well. Again, quite a bit of diversity in terms of the vertical markets and in terms of the services that are being used. We're really excited. Again, we think we have, as Michael touched on a few times, a great brand, and we've put terrific teams in these markets with great leaders. We've got a long runway ahead with sales opportunities, product opportunities, partnership opportunities.
We're really kind of laying the groundwork and putting the investments into the infrastructure to support this as a multi-year effort to penetrate what we think is a much larger opportunity.
Thank you. Just quickly, I mean, with your strong balance sheet and, I mean, 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 one way or another?
Yeah. We are continuing to explore M&A opportunities, and it's something that we are focused on and do see as a 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 a number of opportunities, and our team is really 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.
Thank you.
Thanks, Bob.
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.
Great. Thank you, everybody, for the support and the great questions. We're really, again, thrilled with our quarter and the Payoneer team globally has really executed well in the face of obviously some really challenging market conditions. We're really thrilled with their work and really happy to be able to support our customers and employees in Ukraine and really looking forward to better and brighter days ahead. Thank you for the questions, for the support, and we'll look forward to talking again soon. Thanks.
That concludes today's Payoneer First Quarter 2022 Earnings Conference Call. Thank you for your participation. You may now disconnect your lines.