Remitly Global Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
July 31, 2024

There are 15 speakers on the call.

Operator

to the Remedi Second Quarter 20 24 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

I would now like to hand the conference over to your speaker today, Stefan Scholstein, Vice President of Investor Relations. Please go ahead.

Speaker 1

Thank you. Good afternoon and thank you for joining us

Speaker 2

for Verbitly's Q2 2024

Speaker 1

Earnings Call. Joining me on the call today are Matt Oppenheimer, Co Founder and Chief Executive Officer of Lee and Hemant Munupalli, our Chief Financial Officer. Our results and additional management commentary are available in our earnings release and presentation slides, which can be found at ir. Vermitley.com. Please note that this call will be simultaneously webcast on the Investor Relations website.

Speaker 1

Before we start, I would like to remind you that we'll be making forward looking statements within the meaning of the federal securities laws, including, but not limited to, statements regarding Ramily's future financial results and management's expectations and plans. These statements are neither promises nor guarantees and involve risks and uncertainties that may cause actual results to vary materially from those presented here. You should not place undue reliance on any forward looking statements. Please refer to our earnings release and SEC filings for more information regarding the risk factors that may affect our results. Any forward looking statements made on this conference call, including responses to your questions, are based on current expectations as of today and Remitly assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law.

Speaker 1

Following presentation contains non GAAP financial measures. For a reconciliation of these non GAAP financial measures to the most directly comparable GAAP metric, please see our earnings press release and the appendix to earnings presentation, which are available on the IR section of our website. Now, I will turn the call over to Matt to begin.

Speaker 2

Thank you, Stefan, and thank you all for joining us to discuss Rimitli's long term strategic priorities, strong second quarter results and our increased outlook for 2024. We continue our journey to transform lives with trusted financial services that transcend borders. Are doing this by reinventing international payments for our customers in a way that has not been done before, making the cross border payment experience as seamless as any domestic payment transaction. At the same time, we are solving for a myriad of additional problems faced by those sending money across borders. We are excited about the array of opportunities to invest efficiently to drive high growth, increase market share and deliver sustainable cash flow over the long term.

Speaker 2

In order to deliver on these opportunities, we remain focused on our strategic priorities as you can see on Slide 4. These priorities allow us to execute our near term goals while setting us up to drive even more long term returns in a large and growing addressable market where we only have approximately 2.5% share. We are positioned well today and expect to benefit from the ongoing rapid shift in customer preference to more digital options. Our strong second quarter results and improved outlook validate that our strategy is both the right one and delivering the outcomes we are looking for. These results also demonstrate the resilience of our customer base and the differentiated experience we are building for our customers to send money across borders seamlessly and delightfully.

Speaker 2

Now let's get into some of the details of our second quarter results on Slide 5. We delivered $306,000,000 in revenue, a 31% increase year over year and ahead of our expectations. We saw robust growth in quarterly active customers and strong customer engagement. We delivered $25,000,000 in adjusted EBITDA, benefiting from strong top line growth and scale efficiencies across our operating expense base. Based on our performance this quarter and our 2024 revenue and adjusted EBITDA outlook.

Speaker 2

We now serve approximately 6,900,000 quarterly active customers that you can see on Slide 6, which is up 36% or 1,800,000 from the Q2 of last year. We saw strength in both our record new customer acquisition and engagement of existing customers. The majority of our customers send regularly with predictable and durable sending patterns. This is a direct result of the quality of our product combined with the necessity of remittances for our customers and their families to support basic living needs. This predictable behavior is also elevated by specific holidays that happen throughout the year, Mother's Day, Christmas, Eid and New Year's just to name a few.

Speaker 2

And these sending occasions vary by corridor globally. This results in predictable seasonal patterns with Q4 being the strongest quarter seasonally and Q2 being the 2nd strongest quarter in terms of customer activity impact. As expected, there were more sending occasions such as Mother's Day in the Q2 of this year as compared with the Q1. Additionally, in some corridors, we saw some modest benefits from a stronger U. S.

Speaker 2

Dollar, which helped to drive some additional activity on our platform. With fewer key holidays, the upcoming Q3 is typically seasonally weaker from a customer activity perspective. As a result, we expect the sequential change in quarterly active customers in the Q3 to be lower than the sequential change we saw in the 2nd quarter and then increase as we move from the 3rd to the 4th quarter. Ultimately, improvements to our product and platform were the foundation that drove our customer growth and improving cost structure. As you can see on Slide 7, we are making significant progress on delivering a customer experience that is fast and reliable while driving efficiencies that allow us to invest even more into the customer experience driving a flywheel of growth and efficiency.

Speaker 2

Our transactions continue to get faster with more than 90% dispersed in less than an hour and customer support contact continue to decline with more than 95% of transactions proceeding without a customer support contact. Improvements in both these metrics on a year over year and sequential basis are directly attributable to our product investments. These customers have also recognized the progress we have made across these dimensions with our Trustpilot score continuing to increase throughout the Q2 and was recently the highest among major competitors. Investments have also delivered significant reductions in customer support costs as percentage of revenue a customer centric way. We delivered 2 60 basis points of leverage in customer support in the 2nd quarter compared with the Q2 of last year and spent less on an absolute dollar basis year over year even though we grew active customers by 36% and onboarded a record number of new customers.

Speaker 2

We were especially pleased that our customer support contact rate in the 2nd quarter was the lowest it has ever been even while onboarding record number of new customers during a seasonally strong quarter. Driving some of this improvement was our launch of an AI powered virtual assistant experience to help customers solve even more problems without the need to contact a live customer support associate. We are seeing strong initial results in both customer satisfaction and the decreasing customer support contact rates as I mentioned previously. The virtual assistant is currently focusing on transfer related customer problems. For example, if a transfer is delayed or a customer needs to amend or cancel a transfer.

Speaker 2

The virtual assistant also answers how do I type questions, leveraging generative AI and our existing help center content. If customers need help with something that the virtual assistant does not support, it seamlessly passes the complete context of the customer issue to an associate. We have found that the virtual assistant can resolve issues within 2 to 4 minutes, 4 times faster than we interacting with associates. Customers also love this experience. This is resulting in savings across our support organization and we expect our savings to continue to grow as we expand coverage to more languages and enable more use cases for self-service resolution.

Speaker 2

Looking ahead, we intend to add more use cases and expect the AI powered virtual assistant to handle a majority of support contacts in chat, a key driver of an improved customer experience and efficiency in our customer support expenses. This would enable our highly trained customer associates to focus even more on delighting our customers when they contact us. Continuing with investments and the returns we are generating, the investment in our technology platform allowed us to provide a better experience for cruise ship workers, also known as seafarers that we launched this quarter. With an estimated 1,89,000 seafarers worldwide, including a significant number from the Philippines and India, seafarers play crucial role in the global economy, often spending months away from their families to ensure a smooth operation of international trade and travel. I personally met several seafarers in Q2 and their journeys are inspiring and remarkable.

Speaker 2

The remittances they sent home are a lifeline for their families and their loved ones. And seafarers typically have faced high fees, difficult KYC processes and inconvenient non digital options when sending money home. During the quarter, we launched our Remitly for Seafarers product with an all new in app onboarding experience, specifically designed with the unique needs of seafarers in mind. We improved the way in which seafarers can find us and complete onboarding. Seafarers can simply take a photo of their ship ID and passport, upload it to our app and start sending money home.

Speaker 2

As a result, we have seen significant increase in seafarers as new customers. Our nimble technology platform will allow us to rapidly localize and target more types of customers that are spending money across borders. Our technology investments have also driven additional progress in tailoring our product to attract additional customer types, including higher dollar senders to our platform. Our strategy includes adding relevant payment options that provide great customer experiences and an attractive value proposition regardless of the size of the transaction. We are focused on providing these alternatives and localized payment methods because they are becoming more ubiquitous and preferred by customers and they are typically lower cost, which allows us to drive our growth and cost efficiency flywheel.

Speaker 2

An example of this is our launch of Interact as a pay in method in Canada for all corridors in the quarter. Interact is Canada's predominant electronic P2P money transfer solution and is a widely adopted payment method. Compared to traditional bank payments, Interact provides much faster speed at a lower cost than card payments. As we look ahead, options for customers to fund transactions rapidly with their bank account, including faster payments in the U. S.

Speaker 2

Will make our product more attractive, diversify our transaction mix and lower our costs. We have been able to increasingly target new types of customers such as those sending higher transaction amounts as a result of our technology platform investments. As a result, we have been able to apply a more risk based approach to sending limits. In the past, we have had broad sending limits that were not tailored specifically to the individual customer risk profile, which added friction to customers who are looking to send larger amounts. Now we are able to make dynamic risk decisions and reduce friction significantly for this customer base.

Speaker 2

As a result, we have seen strong customer behavior trends at higher sending amounts, especially in our U. S. To India corridor, which was weighted towards higher dollar senders. Now let's turn to our marketing efforts on Slide 8. On the new customer acquisition front, we benefited from long term trust driving word-of-mouth and product improvements that reduced friction for our customers.

Speaker 2

This allows us to execute marketing investments at even stronger unit economics. We use our deep knowledge and large data sets to invest at a deaveraged and target CAC that aligns with customer lifetime value. This approach allows us to be intentional about how much we're willing to invest to acquire new customers. In addition to the trusted product and efficient marketing, we also have a competitive advantage in our ability to continually leverage large data sets to optimize price in an analytical and targeted manner to drive both near term and long term customer lifetime value. All of this occurs on an ongoing basis and is not in response to any specific competitive pricing changes in the quarter.

Speaker 2

As a result, we delivered another record number of new customers in the 2nd quarter. Year over year growth in new customer acquisition was the strongest we have seen in the past 4 quarters. Our new customers are also increasingly sending to markets outside our top 3 received markets of India, Mexico and the Philippines, with the majority of newly acquired customers in the Q2 sending outside of these markets. While our mix of markets has continued to diversify, we also acquired a record number of customers in the quarter that sent to our top receive markets such as India, Mexico and the Philippines. This diversification brings a host of benefits, including less volatility and exposure to specific FX or macro events in local economies.

Speaker 2

Marketing also delivered an increasing mix of customers from unpaid channels such as search engine optimization as we continue to optimize across all marketing channels. We are increasingly testing the elasticity of investments across areas such as performance marketing and promotions for new customers with the goal of driving even more efficient marketing spend. Our data driven analytics allows us to deeply understand the incremental and marginal costs of our marketing investments. We saw some initial success with this elasticity testing in the Q2 in reducing certain areas of spending with limited impact on new customer acquisition. We will continue to monitor the effectiveness of all our marketing channels and make adjustments to continually improve our unit economics.

Speaker 2

Overall, our marketing investments continue to deliver very strong returns and our global payback remains very attractive at less than 12 months. In summary, we are excited about our progress so far this year in delivering strong growth across multiple time horizons, all while delivering significant operating leverage in the business and improving return on our investments. In a complex industry, our strong product, customer experience and therefore trusted brand is the foundation for this growth. As we look forward, I am confident in our 2024 outlook and beyond as we execute on our vision to transform lives with trusted financial services that transcend borders. Before I turn the call over to Hemant, I'd like to make an announcement about a change to our executive leadership team.

Speaker 2

Hemant Muthupalli, our CFO for the past 2 years has informed us that he would like to leave the company based on a need to spend more time with his family in India. In true professional manner and with care for remitly, He generously supported our search for a potential CFO replacement so that Remitly can seamlessly move forward along its strategic path. Hemant has been a key driver of our success and I would like to thank him for his many contributions. Since Hemant joined Remitly, he has helped lead significant customer growth with the number of quarterly active users more than doubling since he joined. In his role, he not only supported this growth, but he also enabled us to achieve these milestones with better control, efficiency and effectiveness.

Speaker 2

Most importantly, he built a strong finance team that I have confidence will continue to support Remedley's efficient growth. I'm also grateful for your leadership, partnership and for all that you've taught me during our work together. I'm also grateful that Himansa has agreed to serve in an advisory capacity until September 30. Replacing Himans as CFO, effective August 19 will be Vikas Mehta. Vikas has over 25 years of global experience across software, FinTech and E Commerce, driving hypergrowth, business transformation and operational excellence.

Speaker 2

He has worked for some of the most renowned Fortune 500 Companies and has expertise in strategy, Investor Relations and Financial Management. He is also a Remedy customer and has a passion for our customer base. We believe that Vikas' experience will be instrumental as we continue to drive growth and high returns for our shareholders. With that and with thanks, I'll turn the call over to Hemla.

Speaker 3

Thank you, Matt. The strong results we delivered in the quarter are a testament to our customers' resilience and the consistent execution by our global teams. Our customer activity and growth remain highly durable and predictable, and we are pleased with our top line results with improving operating efficiencies. I'll begin by reviewing some of the high level drivers of our financial performance and finish with more details on our improved outlook for 2024. With that, let's turn to our Q2 results.

Speaker 3

As a reminder, I will discuss non GAAP operating expenses and adjusted EBITDA in my remarks. These metrics exclude items such as stock based compensation, acquisition integration, restructuring and other costs and foreign exchange gain or loss. Reconciliations to GAAP results are included in the earnings release. Let's begin on Slide 10 with our high level financial performance in the Q2. Our revenue and active customer growth were both above our expectations as we delivered solid execution and benefited from the seasonally consistent customer behavior in the 2nd quarter that we described on our last call along with record new customer acquisition.

Speaker 3

Our adjusted EBITDA profitability also improved as we benefited from scale and a deliberate focus on driving efficiencies through all parts of the business. Quarterly active customers grew by 36% year over year to 6,900,000. Dollars Send volume grew 38% year over year to approximately $13,200,000,000 resulting in revenue growth of 31% year over year to 30 $6,000,000 Our GAAP net loss of $12,100,000 narrowed in the 2nd quarter, an improvement of 36% year over year as we benefited from leverage across the P and L. Our net loss included $37,000,000 of stock compensation expense and we did not have restructuring charges in the quarter. Strong revenue growth combined with efficiency across operating expenses led to adjusted EBITDA of $25,100,000 in the quarter and above our expectations.

Speaker 3

As you can see on Slide 11, our focus remains on 4 key areas to drive sustainable long term returns: continuing to deliver strong revenue growth, reducing transaction expenses to scale efficiencies and technological advancements, acquiring new customers with efficient marketing and driving operational efficiencies. By focusing on executing across these four areas, we're improving the long term cash flow generation of our business. This is the ultimate measure of value we deliver to our shareholders. Now let's turn to Slide 12 to review some of the key drivers of our 2nd quarter performance. Revenue was up 31% year over year in the 2nd quarter on a reported and constant currency basis.

Speaker 3

Our better than expected second quarter revenue growth was driven by high retention of existing customers and strong seasonal sending patterns in line with the expectations we outlined on our last call. We also achieved benefits from investments in improving customer engagement through product enhancements, our growing global expansion and record new customers we acquired in the quarter. Turning to our transaction expenses, which include costs related to our pay in partners, disbursement partners and fraud losses. Transaction expense as a percentage of revenue increased 90 basis points year over year in the Q2. This was primarily due to higher than expected fraud losses that we experienced in the latter part of the quarter, partially offset by efficiencies from increasing volumes.

Speaker 3

Excluding fraud losses, transaction expense as a percentage of revenue improved by approximately 50 basis points. As we have noted before, fraud losses can be temporarily volatile. However, total fraud losses were within our historical tolerance range and we quickly reacted to this unwanted activity with optimization of risk controls and improvements to our machine learning models, bringing down fraud losses while maintaining a great customer experience. As a result of our rapid response, we expect fraud levels to be at a more normalized level in the back half of the year as we continue to balance the customer experience and manage fraud losses within our thresholds. Our longer term trend of improving transaction expense and overall variable cost structure provides us with a significant competitive advantage in delivering value to customers and building a sustainable business model.

Speaker 3

We are proud of our continued progress on operating more efficiently. In the Q2, customer support and operations expense as a percentage of revenue was down 2 60 basis points on a year over year basis as we have continued to make significant progress on lowering expenses and improving our customers' experience. In fact, on an absolute dollar basis, customer support expenses declined year over year even as we grew quarterly active customers by 36%. This performance reflects improving customer satisfaction and realizing the benefits from technology investments made to improve both our product and customer support experience. By increasing the automation of various manual tasks such as risk reviews and targeted elimination of various issues that caused customers to contact us, our product and customer service teams have consistently delivered efficiencies.

Speaker 3

Also as Matt mentioned, we've made significant improvements in the self help experience with the rollout of our AI based virtual assistant for our customers and are seeing strong progress across both customer satisfaction and efficiency metrics. G and A expense as a percentage of revenue decreased 80 basis points year over year and was essentially flat sequentially on an absolute dollar basis. Overall, our focus remains on continued discipline across both headcount and non headcount expenses. And over the medium and long term, we expect to see continued moderation in G and A expense as a percentage of revenue. Our marketing investments delivered a record number of new customers in the quarter at highly attractive unit economics.

Speaker 3

We fully expect these customers to deliver a long stream of revenue less transaction expense for many years to come. Our marketing expense was $73,000,000 in the 2nd quarter as we achieved additional marketing efficiencies through elasticity and the benefits of word-of-mouth, while bringing a record number of new customers. This reflects our deep data driven insights into marketing efficiently across both lower and upper funnels. We expect to continue to acquire new customers at highly attractive returns to ensure strong revenue growth for many years to come. Technology and development expenses were $47,000,000 in the second quarter.

Speaker 3

These investments are enabling operational efficiencies across our P and L by reducing our transaction expenses over time and driving down customer support contacts. These investments are also critical to ensuring our platform can deliver new features and complementary new products to our customers in addition to maintaining high levels of security, compliance and enabling higher productivity of our engineering teams. Turning to our stock compensation expense. In the Q2, the growth rate of our stock compensation expense slowed significantly to 6%. This is a significant improvement from prior quarters' growth rates and reflects our focus on moderating our headcount growth rates.

Speaker 3

On a full year basis, we continue to expect stock compensation expenses to grow slower than revenue. We're also highly focused on managing the number of shares issued to help moderate dilution over the long term. An example of this is providing more cash compensation to new hires. This results in additional compensation being reflected in adjusted EBITDA and lowering share dilution impacts. Now let's turn to our updated 2024 outlook on Slide 13.

Speaker 3

We now expect revenue to be between $1,230,000,000 $1,250,000,000 for the year, which is $5,000,000 higher at the low end of our prior outlook. This increase reflects the outperformance in the 2nd quarter and our expectations for continued strong execution in driving both existing and new customer activity in the back half of the year. Assuming various mix factors such as customer preferences for pay in and disbursement options, corridor mix and transaction sizes remain largely consistent to the Q2, we expect a similar relationship between revenue and spend volume for the balance of the year as compared with the Q2. As we look ahead to the Q3, we expect revenue growth in Q3 to be approximately 32% as we have now lapped some difficult comps in the first half of the year. While we have significant visibility into near term results, revenue growth rates in any given quarter can volatility in foreign exchange rates, new customer acquisition timing and seasonal customer activity.

Speaker 3

While we expect to remain in a GAAP net loss position, we expect adjusted EBITDA to be between $90,000,000 $100,000,000 for the year, which is a $5,000,000 increase at the midpoint from our prior outlook. The increase in our adjusted EBITDA outlook is driven both by our strong performance in the second quarter as well as additional growth and operational efficiencies we expect to deliver in the back half of the year. As we look ahead to the 3rd and 4th quarters, we would expect adjusted EBITDA dollars to be roughly balanced between these quarters. This improved outlook also gives us the opportunity to acquire additional customers at strong unit economics, especially during seasonally strong periods of customer activities such as in Q4. Overall, we are pleased with our solid execution thus far this year and are excited about the opportunities ahead to deliver on our commitments to customers and shareholders.

Speaker 3

Before we move to Q and A, I would like to thank Matt and the entire Remitly team for the opportunity to have been part of significant growth over the last few years. It has been a fast paced, impactful journey, and I'm very proud of the progress we've made in driving transformative change across all facets of the finance function at Remitly. I've personally grown partnering with Matt, who's an amazing leader and CEO. Grateful for being part of a very strong executive leadership team and to every single Remitlyan who do their very best to delight our customers. I look forward to spending more time with my family in India.

Speaker 3

I'm excited for and highly confident about Remitlean's journey toward its bold and exciting vision of transforming lives with trusted financial services that transcend borders. I remain a loyal customer and a strong advocate for Amity's continued successes. It has been a pleasure to work with all of you in the investment community.

Speaker 2

Thanks so much, Matt. And with that, we'll turn the call over to the operator to begin Q and A.

Operator

Thank you. And at this time, we'll conduct question and answer session.

Speaker 4

Our first question comes from

Operator

the line of Tien Tsin Huang from JPMorgan. Your line is open.

Speaker 5

Thanks a lot. And Matt, all the best to you as you move back to India here. I did want to start maybe if you don't mind just asking on the big growth in customers, which was nice to see. I'm curious if that growth the big growth is related to the increase in fraud and why you're confident the increase in fraud is temporary?

Speaker 3

Yes. Thanks, Denson, for the wishes as well. No, it's not related actually. We are really pleased with the growth of our customers in Q2. Some of that was the seasonality we talked about both on existing customers.

Speaker 3

We also had record new customers in the quarter. On the fraud point, very different. We saw it in certain quarters. It was very temporary in nature, something we saw towards the last later part of the quarter and we were quickly able to fix it. So levels have been normalized and well within our threshold at this point.

Speaker 3

So unrelated largely to the record growth of our customers.

Speaker 5

Great. Good to know. And just my follow-up and then I'll open it up. Just looking at the take rate, I know there's a lot of complexity to the take rate, but I'll ask it anyway. Just it was down sequentially and year over year, I think it's typically up Q2 over Q1.

Speaker 5

So why the change in pattern there?

Speaker 2

Yes. Thanks, Tien Tsin. So as we mentioned, and I appreciate your caveat in the question, we don't manage the business to take rate given that it's impacted by average transaction size, geo mix shifts, continuous pricing optimization, pay in, payout method mix. We so take rate more is more of an output in that respect. We manage more to revenue per transaction, profit per transaction, LTV.

Speaker 2

And when you look at it from that lens, it's business as usual in Q2, no major shifts in competitive pricing. It wasn't due to any sort of pricing pressure. Ultimately, as we mentioned in the past, our business comes down to that trusted and reliable product. And part of that trust is providing a fairly priced product, but not the best. And if you look at some of the other metrics around the trusted product that we're delivering, the improvements on the CS front, some of the virtual AI assistant features that we've rolled out, I think there are further proof points that our product and some of the elements around the seamlessness and the trusted nature of it are what is actually driving the kind of growth from a revenue and retention standpoint.

Speaker 2

So really pleased with the quarter.

Speaker 6

Great. Thank you, guys.

Operator

Thank you. One moment for our next question.

Speaker 4

Our next question comes from

Operator

the line of Andrew Schmidt from Citi. Your line is open.

Speaker 7

Hey, Matt. Hey, Himant. Thanks for taking my questions. And Himant, best of luck.

Speaker 8

Pleasure to work with you.

Speaker 7

If I could dig into the EBITDA outlook in the back half, I know, Hammad, you addressed this a little bit, in terms of the EBITDA margin or EBITDA dollars being balanced in the 3rd Q4 and creating some optionality for new customer adds in the back half. It just seems like we're lapping some pretty significant upticks in marketing expense in the Q4, which does leave you guys a good position either A, drop some of that to the bottom line or B, acquire a significant number of customers that will set you up pretty well for FY 2020 5. Maybe I know this all comes back to LTV to CAC and unit economics decisions. So maybe just walk us through the thought process there and how you're setting things up at this point? Thanks a lot.

Speaker 3

Yes. Thanks, Andrew. And I think like we've had in prior years as well, I think we wanted to make sure that as we look at sort of the back half, particularly in Q4, which is a seasonally high quarter, particularly to acquire new customers, we retain optionality in terms of being able to deploy our marketing to acquire customers. We look forward to 2025 and beyond. Again, we're really focused on unit economics and the LTV cap ratios and we continue to do that.

Speaker 3

So that's sort of thinking that as we looked at sort of the EBITDA guide for the balance of the year and particularly as you look at sort of the margin for Q4.

Speaker 7

Got it. Understood. And then maybe just a larger related question. Maybe talk longer term in terms of your confidence to scale sales and marketing based on what you've been seeing in the market, the elasticity testing, word-of-mouth referrals stepping up and other things you have going on. Maybe just talk about how that confidence may have evolved over time given what you've seen more recently?

Speaker 7

Thanks a lot.

Speaker 2

Yes. Thanks for the question, Andrew. I think that when you look at the scalability of our market, I think that we're feeling more confident than ever on that front. And we're excited about the record number of new customers and the efficiency that we're getting. And I think that's a reflection of the fact that we have trusted brand.

Speaker 2

As you alluded to in your question, the word-of-mouth continues to improve. And our unit economics continue to be well below our 12 month payback target. And so what that means to us is that we have a lot of optionality in terms of how much we spend to grow versus how much we let flow to the bottom line. And we're well positioned from a marketing standpoint. And then more broadly to build on your first question that Hemant also answered, our business is just getting a lot of scale and leverage.

Speaker 2

And it's in a special place in that respect and that we grew 31% year on year from a revenue standpoint. But you look at our confident adjusted EBITDA guide and the overall leverage we're getting in everything from customer support costs to a variety of aspects of the P and L. And I think it's a reminder that scale matters in payments businesses both to deliver a differentiated and quality customer experience and to be able to continue to get leverage and profitability as a business.

Speaker 7

Totally agree. Thank you very much, Matt. Appreciate the comments.

Speaker 3

Thanks, Andrew.

Operator

Thank you. One moment for our next question.

Speaker 4

Our next question will come from

Operator

the line of Ramsey El Assal from Barclays. Your line is open.

Speaker 9

Hi. This is Allison on for Ramzi. Thank you guys so much for taking our question. And, Hammad, it's been great working with you. So just thinking through the ongoing momentum you're seeing in new ads, Matt, I want to go back to the Seafarer product that you spoke about, which does seem like a nice opportunity to capture new customers.

Speaker 9

So how big of a lift is it to get these types of specialized products off the ground from like an investment standpoint? And how easy is it to replicate this type of product to other groups? So like is that something that we could see in the product pipeline going forward? Thanks.

Speaker 2

Thanks, Allison. Yes, great question and great to hear from you. We're excited about the Seafares product. And I think it's indicative we've talked about some of the technology investments we've made in our platform, but those technology investments have enabled us to more nimbly and efficiently adjust our product to be able to serve multiple audiences. Seafarers is a prime example of that.

Speaker 2

We also talked about high dollar senders, but you could apply that to a wide range of different types of customer profiles in different geographies. I think that we're getting faster and better at doing that. And the result is continued growth in the numbers that you've seen from a volume and revenue standpoint. And so I'd say with seafarers, as I mentioned, I had an opportunity to interact with seafarers last quarter. And it's an underserved demographic that I think our product is serving very well and there's 1,89,000 seafarers that work across the globe.

Speaker 2

It's one of many segments that you can expect us to continue to grow in and serve even better.

Speaker 9

Great. Really helpful. Thanks.

Operator

One moment for our next question.

Speaker 4

Our next question will come

Operator

from the line of Will Nantz from Goldman Sachs. Your line is open.

Speaker 10

Hey, guys. Appreciate taking the question tonight. Matt, I actually also wanted follow-up with some of the comments you made on customer acquisition. So the Seafair example, I think you also mentioned higher dollar senders and the fact that the majority of your customers are kind of reoccurring senders each week or month. And so I'm just wondering maybe high level if you can hit on if there's been any noticeable or meaningful shifts in sort of the profile of the incremental customer.

Speaker 10

I think there's been a lot of focus on kind of third party data around app downloads and it seems like the momentum in the business is continuing very strong. So I'm just wondering if there's been any shifts in sort of the profile of the existing customer over the last couple of quarters? Thanks.

Speaker 2

Thanks Will. Yes, great question. I would say that the mix in terms of the profile of customers has not changed substantially in the last quarter or last even year or 2. I think that what I like about the business in terms of where it's at now is the portfolio of kind of different geographies, which we've proven we can deliver different segments of customers. And so I view this as additional additions to a very diverse portfolio of customers.

Speaker 2

And having started the business 13 or 14 years ago, I will tell you that kind of business is much more resilient, much more predictable than when we were just in U. S. To the Philippines call it, which we were in for the 1st 2 years of the business alone. You look at the business now and that diversification which only becomes is only becoming more diversified, give even more as I an predictability to the business. And I would view it as continuation on that journey.

Speaker 2

When you look at the absolute number of customers from these new segments as opposed to a rapid change in any way shape or form.

Speaker 10

Got it. Appreciate that. And then I given it given Hammad's in the announcement, I wanted to lob the CFO question as well just on the fraud, the fraud costs this quarter. It looks like I was looking at the Q, it looks like the fraud losses of maybe up $5,000,000 $6,000,000 sequentially. Is that about the right number to think about kind of the impact in the quarter?

Speaker 10

And just confirming you kind of expect to be back at normal patterns in the back half? Appreciate it. And Himans, it's been great working with you over the last few years.

Speaker 3

Thanks Will.

Operator

Thank you.

Speaker 6

Did you? Yes, you are. Rich.

Operator

Go ahead.

Speaker 3

No, sounds great. Let's go to the next question.

Operator

One moment for our next question.

Speaker 4

Our next question will come from

Operator

the line of David Scharf from Citizens JMP. Your line is open.

Speaker 11

Hi, good afternoon. Thanks for taking my questions. Maybe just a follow-up on a couple of topics that have been touched upon. First, just on the fraud. Just curious, you had talked in your prepared remarks, Matt, on implementing risk based more risk based underwriting, if you will, for larger dollar senders.

Speaker 11

Was the temporary bump in fraud related to large dollar senders? Anything that was either very geographic focused or dollar size, something that was very easy to identify and gives you comfort for it being ephemeral?

Speaker 2

Yes, yes. Thanks for the question. It was not related to higher dollar senders to answer that directly. And I think that the important element when you think about the fraud systems that we have is there's a constant balance between optimizing for fraud loss rates and for maintaining a great user experience and not having what we call higher sideline rates meaning manual reviews for good customers. And I think that as we've said in the past, there will be times where we have more sophisticated fraud attacks.

Speaker 2

And I think we've shown in Q2 and over the longer journey that we're good at responding to those. And if anything, we've just gotten better because of a lot of the data and analytics that we can feed into our machine learning model that can help do that delineation. And so that's what happened in Q2 is there was an uptick as we continue to have that optimization across that efficient frontier of sideline rate and fraud loss. We pulled it back into our levels that are going into Q3 back within our range of goals and normality, while again maintaining low sideline rates. So excited about what's to come and you should expect in the business some variation, but it's always very temporary and we bring that back under control as we did in Q2.

Speaker 11

Got it. Understood. And maybe following up on the EBITDA guidance and maybe approaching it from a different angle. At least on a revenue basis, Remitly is it's actually 1 third as big as Western Union is now. Based on your full year guidance when we look at their total revenue ex U.

Speaker 11

S. To U. S. Transfers. And I'm just wondering, you've clearly shown an ability to scale already.

Speaker 11

There have been quarters where you've delivered outsized margins. And as we just think about the trajectory of where margins could head, whether it's next year or 3 years out, Do you feel normal ceiling in terms of the size and the market share you can achieve or certain milestones at which you say, you know what, now is the time to focus less on customer acquisition and more on profitability, because it's been quite remarkable how quickly the company has grown and Western Union obviously is really not grown in 20 years, not that it's a it might be an artificial ceiling to how big a global remittance provider could get that $4,000,000,000 in revenue mark. But just curious about how you think about what is the milestone out there, whether it's account growth, corridor numbers or revenue in which you kind of signifies to you that there's more of a focus on margin expansion versus account acquisition?

Speaker 2

Yes. Thanks, David. I think that the answer is if you look at our current business, we're really proud. I mean, we're at $1,200,000,000 in revenue trailing 12 months. And we're continuing to show that leverage in the business.

Speaker 2

And so we do have ambition and we talk about this internally to become the largest remittance company on the planet. And we are you see the glide path to be able to do that. But we can do that while continuing to show leverage on the bottom line. And I did a fireside chat with Tencent at a JPMorgan conference recently where I kind of went through different aspects of the P and L and talk through where there's leverage as a technology company doing remittances. And what you see is whether that's in this quarter leverage on the customer support side where we continue to see that to leverage on the marketing element because of the word-of-mouth components to leverage on overall headcount as we just get more scale as a payments company, you see a business that continues to be able to deliver really remarkable top line growth for our scale and size, while showing leverage on the bottom line and we're excited to continue to deliver that.

Speaker 11

Got it. Thanks very much.

Operator

Thank you. One moment for our next question.

Speaker 4

Our next question will come

Operator

from the line of Darrin Peller from Wolfe Research. Your line is open.

Speaker 6

Hey guys, thanks.

Speaker 8

Sorry, my phone. First of all, I just wanted to wish you congrats as well. But I guess just on the overarching growth in the customer adds. Matt, if

Operator

you could just take a

Speaker 8

step back and review the strategy, what's changed in it, if anything, in the last, let's call it, few quarters to deliver the kind of growth you're seeing still being sustainable? And maybe just give a little more color on the corridor plans. Again, you're at about, I think, 5,000 is what I saw lately. But like when you compare to what it could be, is there any intentional shift around different corridors or any push into new markets that we should expect in the next, let's call it, 12 months? And just a quick follow-up, let's put it all together, is on pricing.

Speaker 8

So if there's any discussion you could share with us around trends you're seeing in the market, there's been different yield. I know fraud in some cases here was a little bit more of an impact. But in some of the competitors we've been seeing some spread widening between growth on revenue and transactions. So any color on what you're seeing competitively would be great. Thanks guys.

Speaker 2

Yes. Thanks Aaron. I think there were kind of 3 parts to your question, so I'll answer Amit briefly. On the net adds point, it was what we said to some extent Q1 and that there is some seasonality when you look at quarterly active users. And so we know that the market looks at that and first that metric of Q1 to Q2 change in quarterly active users.

Speaker 2

And I think it was exactly as expected and that there's more holidays and reasons that folks send in Q2 combined with record number of new customers and continued strong retention that we're really proud of given our exceptional product. And so in some respects it was business as usual on that front. On the corridor side, we're in about 5,000 corridors now. Over time in the long run, we plan to expand the 15,000 to 20,000 globally. But the reality is we have so much room to grow in the 5,000 corridors we're in.

Speaker 2

So you should expect us to continue to add corridors in a methodological way as we've always done. But the takeaway there is lots of room to grow since you said 12 months, lots of room to grow in the next 12 months in our existing stores. And on the pricing front, no material changes in Q2 on pricing. We as always, are continuing to do price optimization so that we provide a fair value to customers as well as more importantly improve our product. So it's trusted and reliable, which is the foundation for what customers look at when they choose a remittance provider.

Speaker 2

Okay.

Operator

That's helpful. Thanks, Matt.

Speaker 2

Thanks, Aaron.

Operator

Thank you. One moment for our next question.

Speaker 4

Our next question comes from

Operator

the line of Chris Kennedy from William Blair. Your line is open.

Speaker 2

Great. Thanks for taking the question. And Hemeth, thank you. Good working with you. We've seen some smaller peers have some struggles and shutdown.

Speaker 2

Can you just talk about the structural cost advantages that Remitly has relative to others in the industry? Yes, absolutely. And I can answer that as founder having been subscale. I think it's really hard to succeed in this business without scale and by succeed I mean deliver an exceptional customer experience, while continuing to get leverage profitability as a company. And so it's not a surprise to see some subscale players whether those are subscale digital players or subscale cash based players.

Speaker 2

And I think we're the beneficiary of and ultimately our customers are the beneficiary of being able to have enough scale to deliver a lot of the things that we've talked about whether that's some of the data analytics on our fraud side, our virtual AI assistant and the scale required to deliver that exceptionally, our pay in, payout partners, our word-of-mouth, I could go on and on. But scale is important. And I think that the folks that are subscale are having challenges and folks that are especially digital first at scale are delivering the kind of growth and retention numbers that you're seeing from us in Q2.

Speaker 12

Thank you for that.

Speaker 2

And then last quarter, I think you talked about Africa as being a large opportunity for you. Can you just talk about some of the dynamics of that market? Thank you. Yes, sure. Big opportunity simply because we haven't been there as long if you look at just the 13 year history of the company and it's a good example of where when I say we have a lot of room to grow in the 5,000 corridors we're in, lots of room to grow across Africa.

Speaker 2

And obviously within Africa, there's East Africa and markets like Kenya where the origin story came from and I lived before starting the business. There's a lot of countries in West Africa, but the punch line there is rapid shift towards digitization both on the origination and the disbursement side, especially in disbursement options like mobile wallets. And we feel really well positioned to offer a great product in several countries in Africa to be able to drive growth. Thank you.

Operator

Thank you. One moment for our next question.

Speaker 4

Our next question comes from

Operator

the line of Alex Margraf from KeyBanc Capital Markets. Your line is open.

Speaker 13

Hi, guys. Thanks for taking my questions. Matt, one for you and then one for Himans. Just on the virtual assistant that you mentioned for customer support,

Speaker 3

any way to

Speaker 13

sort of characterize how big of an unlock the language expansion is? Just maybe in the context of like what mix of interactions or engagements on the support side are not in English? And then just how big of an effort it is to broaden the language coverage for that?

Speaker 2

Yes, great question. I do think that in general, when you look at a lot of the AI tools, the language translation capabilities are material. And so I think there's opportunities there. I think most of where we've driven it thus far is in English, but easy expansion when it comes to multiple languages. And if you look at the number of use cases, we can also expand the number of use cases for the types of problems we can solve when customers are using that virtual AI assistant.

Speaker 2

So excited about the potential there for both better customer experience as well as helping our customer support agents do things that they can uniquely do with their skills, but at a more specialized level.

Speaker 13

Okay, thanks. And then Hemant, just on I apologize if this was hit already, but just on the transaction margin expansion for the year and consideration of the higher expense rate in 2Q, how should we be thinking about that level of expansion in the second half and for the full year? Yes. Axel?

Speaker 3

Yes. Thanks for the question, Alex. No, I think we would continue to focus on improving transaction reducing transaction expenses over time. I think we've I think the rate of improvement will be more moderated. We had some really significant improvements last year, particularly in the second half.

Speaker 3

So we're going to be comping through some of that. But in terms of what we're doing with the focus on whether it's direct integrations, reducing our improving our customer experience and so many different levers, especially as we've gotten a lot of scale and volume growth. We do continue to see opportunities to reduce our reduced transaction expenses over the next coming years.

Speaker 13

Thank you. Pleasure working with you, Himans.

Speaker 6

Thanks. Thank

Operator

you. One moment for our next question. Our next question comes from the line of Andrew Bach from Wells Fargo. Your line is open.

Speaker 14

Hey, thanks for taking the question. And Hamash, wishing you the best. It's been a pleasure. Looking at volume per customer, it's inflected positively in the Q2 for, I think, the first time in about 2 years. I'm sure the holidays had something to do with that.

Speaker 14

Is there any way to kind

Speaker 3

of parse out what those holidays

Speaker 14

could have contributed to that metric? Just trying to get a sense if we could potentially start modeling that flat to positive going forward.

Speaker 3

Yes. Thanks for the question, Andrew. No, I think it's I think as we called out last quarter, we do see when we go from Q1 to Q2 that there is a significant increase in sort of the sequential growth of active customers. And I think what and we saw that as it sort of played out. I think we did see a degree of outperformance, particularly given some of the product improvements that we've been making and those enhancements have contributed as well to just improving retention and engagement with customers.

Speaker 3

And I think the other piece here is, as you've called out before, transaction intensity continues to improve as there's more and more digital mix in the disbursement options and we have an advantage there as well in terms of our product offering. Demonstrated increased sort of customer engagement in the quarter on top of our seasonal pattern that we expected.

Speaker 2

And then maybe just

Speaker 14

a follow on top of that with a macro kind of related question. Anything that you guys are seeing in the market today, be it from geopolitical, economic or otherwise that you're monitoring that helps inform the guide that you're putting out today? I know remittances are generally pretty stable from a macro perspective, but just want to make sure we're covering our bases.

Speaker 2

Yes. Yes, I can take that one. I think that we certainly monitor the geopolitical landscape, not only domestically, but globally now that we're in 170 countries. And the first thing I'd say is having been around for prior election cycles and for over a decade, we have seen various cycles unfold. And the criticality of remittances and the predictability is something that has been there through a variety of whether it's geopolitical or economic cycles.

Speaker 2

And so I'd say we are taking this into account and we feel even with those that we have high confidence in our guide.

Speaker 14

So no developments to speak of?

Speaker 2

No developments to speak of, no.

Operator

Great. Thanks. Thank you. One moment for our next question.

Speaker 4

Our next question comes from

Operator

the line of Rufus Hone from BMO. Your line is open.

Speaker 14

Hey guys, thanks for the question. I wanted to ask about the G and A trajectory and you saw a meaningful step down in the G and A percentage sequentially this quarter. Sounds like you're being measured around hiring, but also maybe looking to increase the mix of cash comp here. So love any color you'd like to share on the G and A outlook? Thanks.

Speaker 3

Yes. Thanks, Rufus. Yes, I think it's G and A and across the P and L. We've been really focused on operational efficiencies. You've seen that on the customer service side and we're seeing that now across other aspects of the operating expenditures.

Speaker 3

So G and A would follow a similar trend. We would expect that the growth rates there would be moderated going forward. And we see technology, we see process efficiencies, the way we're managing our software spend. There's so many dimensions to this and we'll continue to put focus on it to drive efficiencies in G and A.

Speaker 14

Okay. And then just a quick follow-up on Remitley Circle and other new products that you're working on. Wondering if there was any update on progress and the level of spend associated with that as well? Thanks.

Speaker 2

Yes, thanks. If you look at our broader vision of Transform Lives with trusted financial services that transcend borders, we are highly confident in the broad range of pain points that our customers have starting with remittances in international payments, but extending to other areas, including some of the areas that Circle is solving. And if you look at the early trajectory there, I think it's encouraging and we're excited. But it's in the broader context of this technology platform that we've built out that enables us to innovate and launch new products in a more modular fashion based on APIs and other elements that we have started to improve in our technology stack. And so I'd say that that also ties to the cost point and it costs us less to launch and ramp new products.

Speaker 2

We're investing in a pretty disciplined way in that area, but excited about what's to come and it's critical for us to continue to scale that. And we look forward to talking about it more as it does reach a shift at an efficient scale and makes sense to talk about in more detail.

Operator

Our next question comes from the line of Gus Gala from Monness, Caspi, Hardt and Company. Your line is open.

Speaker 6

Hi, Matt. Hi, Aman. Best wishes, Samark, by the way. Can we talk about transaction expense mechanics a little bit differently? Can you help us think of as this scales, how do volume as the volume gets bigger, is there a reset in the pricing?

Speaker 6

How often does that happen? Just how to think about that? And then the other one, the mix of customers you're bringing on, can you talk about what you're seeing in initial spend maybe in terms of intensity and AOV or transaction size for those non India, Mexico, Philippines customers? Thanks.

Speaker 3

Yes. I think you called out that thanks for I think you called out one of the key levers as we've gotten more volume and we negotiate with our pay and disbursement partners is there's certainly some volume tiers. These will happen over time. We've been negotiating some very large contracts. I think we called out in the last couple of quarters and some of the partnership with some of the larger global payment providers.

Speaker 3

And that's been an ongoing thing. So we'll see this pan out as we get more and more volume and scale. And that's one of the bigger levers in being able to get volume related economics as well that will flow through? And your second question in terms of mix, I think what we're seeing is broadly the mix of customers haven't really changed. What we're seeing is that they largely have a very similar behavior and patterns of resiliency that we've experienced now for many, many quarters years.

Speaker 3

So that fundamentally hasn't really changed. And I think that will probably stay the same at least here as we look forward, certainly as part of our guidance and then as we think about the coming years. Thank you.

Operator

Thank you. One moment for our next question.

Speaker 4

Our next question comes from

Operator

the line of Matthew O'Neill from Feet Partners. Your line is open.

Speaker 12

Yes. Thanks for squeezing me in at the end here. Appreciate it. And Hammad, congratulations and best wishes. I thought I would just ask a couple of follow ups.

Speaker 12

A lot of good questions asked and answered. When Western Union provided their prepared remarks on their earnings call, they talked about how they view the higher interest rate environment as forcing out some rational competition in the market and driving out some marginal players. I was just curious, broadly, what has your experience been in the last few months from the competitive front? Would you sort of share some of those views or anything else that you've seen? And then if I could just do my follow-up quickly, I was just curious on the heightened fraud, just to confirm, it sounds like you guys have gotten your arms around it and already it's come back down.

Speaker 12

And was it a particular geography or a new type of vector that kind of popped up? Or any color you could provide there? Thanks so much.

Speaker 2

Yes. Great question. On the second one, Matt, yes to having optimized the fraud and it's back within our typical ranges and it was in a few geographies that we focused on and brought it down. On the former, when it comes to the smaller players and just cost of capital, I think that there is definitely some truth to that in the sense that they if you look back to even the remitly journey, I think it does impact the ability for subscale players to be able to get to scale because it's harder to raise capital. I also think there's benefits from the standpoint of marketing efficiency, given that there's not as many irrational crypto and other advertisers that might make the marketing environment more competitive.

Speaker 2

So I think we're a beneficiary of that. I think that you look at just how well positioned we are as a digital player at scale and we're really excited about that. And I think it does make it so there's probably going to be additional consolidation in the market around players that have scale. And the only thing I would add is that digital players at scale, I think, have a competitive advantage. And where we sit, we feel right in that sweet spot.

Speaker 12

Thanks so much. Appreciate it.

Operator

Thanks, Matt. Thank you. That's all the time we have for Q and A today. I would like to turn the call back over to Matt Oppenheimer for any closing remarks.

Speaker 2

Great. Thanks, operator, and thanks, everyone, for the thoughtful questions. As we do it remitly, I'd like to end the call by highlighting Kyung, who is another one of our amazing customers. Kyung sends money from the U. S.

Speaker 2

To their family in South Korea, and they were one of the many customers who shared their feedback with us last year. And Kyung commented, I love Remedi. I have recommended it to a few friends and they love it too. It is convenient and safe. You can view the current exchange rates in real time and sending funds is right at your fingertips.

Speaker 2

So thank you everybody for joining us. We appreciate your support and we are excited about the opportunities ahead in 2024 and beyond and look forward to sharing our progress as we continue to execute on our vision of transforming lives with trusted financial services that transcend borders.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

Speaker 9

Goodbye.

Remove Ads
Powered by Quartr
Earnings Conference Call
Remitly Global Q2 2024
00:00 / 00:00
Remove Ads