Remitly Global : 2Q 2023 Earnings Transcript

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EDITED TRANSCRIPT

RELY.OQ - Q2 2023 Remitly Global Inc Earnings Call

EVENT DATE/TIME: AUGUST 02, 2023 / 9:00PM GMT

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AUGUST 02, 2023 / 9:00PM, RELY.OQ - Q2 2023 Remitly Global Inc Earnings Call

C O R P O R A T E P A R T I C I P A N T S

Hemanth Munipalli Remitly Global, Inc. - CFO

Matthew B. Oppenheimer Remitly Global, Inc. - Co-Founder, CEO, President & Director

Stephen M. Shulstein Remitly Global, Inc. - VP of IR

C O N F E R E N C E C A L L P A R T I C I P A N T S

Andrew Garth Schmidt Citigroup Inc., Research Division - VP & Analyst

Daniel Krebs Wolfe Research, LLC - Research Analyst

Ramsey Clark El-Assal Barclays Bank PLC, Research Division - Research Analyst

Robert Paul Napoli William Blair & Company L.L.C., Research Division - Partner and Co-Group Head of Financial Services & Technology Tien-TsinHuang JPMorgan Chase & Co, Research Division - Senior Analyst

William Alfred Nance Goldman Sachs Group, Inc., Research Division - Research Analyst

Zachary G. Gunn Financial Technology Partners LP - Research Analyst

P R E S E N T A T I O N

Operator

Good day, and thank you for standing by. Welcome to the Remitly Q2 2023 Earnings Call. (Operator Instructions). Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Stephen Shulstein, Vice President of Investor Relations. Please go ahead.

Stephen M. Shulstein - Remitly Global, Inc. - VP of IR

Thank you. Good afternoon, and thank you for joining us for Remitly's Second Quarter 2023 Earnings Call. Joining me on the call today are Matt Oppenheimer, Co-Founder and Chief Executive Officer of Remitly, and Hemanth Munipalli, 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.remitly.com. Please note that this call will be simultaneously webcast on the Investor Relations website.

Before we start, I would like to remind you that we will be making forward-looking statements within the meaning of federal securities laws, including, but not limited to, statements regarding Remitly'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 in 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. The 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 release in the appendix to our earnings presentation, which are available on the IR section of our website. And now I will turn the call over to Matt to begin.

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AUGUST 02, 2023 / 9:00PM, RELY.OQ - Q2 2023 Remitly Global Inc Earnings Call

Matthew B. Oppenheimer - Remitly Global, Inc. - Co-Founder, CEO, President & Director

Thank you, Stephen, and thank you all for joining us to discuss our exceptional second-quarter results and our increased outlook for 2023. I'm grateful to our amazing customers, and our global teams who are the drivers of our consistent performance quarter after quarter. Our second quarter results demonstrate the resilience of our loyal customers who consistently prioritize sending remittances to their families and friends to help support everyday living expenses, and we appreciate that they continue to choose Remitly to do so.

Our consistent execution over many quarters has allowed us to make significant investments that we expect to drive growth this year and for many years to come. As you can see on the slide before, our investments across our strategic priorities have delivered clear wins for our customers and shareholders. We now have the opportunity to deliver additional growth and long-term returns, as we deploy capital to fund additional investments. Our new customer acquisition investments have delivered superior active customer growth for many quarters with quarterly active customers nearly doubling since we went public in the third quarter of 2021.

Our unit economics remain incredibly strong and are currently higher than the 6x LTV to CAC that we shared at our IPO. Our focus on delivering our promises -- on our promises to customers is paying off as we see the benefits of word-of-mouth acquisition across region. Our multiyear geographic expansion strategy has developed -- has delivered new markets, that have contributed substantially to our growth rates and scale benefits. Our investments in our disbursement network and our product have led to improvements in speed, reliability, and overall user experience, leading to strong customer reviews, declining customer contact rates, higher retention, and engagement, and a lower cost structure.

Finally, we believe our remittance customers have unmet needs, and combined with the large opportunity we have in the remittance market, we are optimistic that we will be able to drive additional customer engagement and scale across our business. We are in a unique position in the remittance industry and the global payments industry at large to make the necessary investments that will allow us to capture even more than our approximately 2% share of the large $1.6 trillion remittance market. Given the significant opportunity and our prior success in capturing market share and delivering high returns, we expect to increase our investments across our strategic priorities in a targeted and disciplined manner.

For new customer acquisition, we have the opportunity to make additional high-return marketing investments to drive 2024 growth, as our LTV has been increasing as we see improving customer activity, and leverage in our transaction costs. Our geographic expansion investments will allow us to continue to enter new markets more quickly and efficiently, driving even more customer growth and scale benefits. Investments in new partnerships to enable a faster, more reliable, and cost-efficient network will provide customer and cost benefits. Delivering a flawless experience for customers is very difficult, especially without scale, but is paramount to maintain a trusted remittance experience, that drives retention and word-of-mouth recommendations, and that is what we are focused on with our remittance product investments.

We have been prudent stewards of capital across economic cycles, and we remain focused on delivering high long-term returns for our investors. We will take a balanced approach as we focus on delivering near-term progress, combined with investing to ensure we can deliver high growth and returns for many years to come.

Now turning to our second quarter financial results on Slide 5. We delivered $234 million of revenue, which was a 49% increase year-over-year, and which on an annualized basis, is now approaching $1 billion. We are very pleased with the high revenue growth we have been able to achieve over the longer term, which includes a 58% revenue compound annual growth rate since the second quarter of 2020. Our top-line results in the quarter, and scale efficiencies across transaction costs, marketing expenses, and other operating expenses resulted in an exceptionally strong adjusted EBITDA of $20 million in the quarter. As a result of this strong performance, we are pleased to be raising our outlook for both revenue and adjusted EBITDA, once again.

In the second quarter, our quarterly active customers grew 47% year-over-year, as you can see on Slide 6. We now serve more than 5 million quarterly active customers and added 1.6 million quarterly active customers in the past year alone. We continue to significantly outpace the overall growth in the remittance market as we continue to deliver for our customers. Our new customer acquisition this quarter was once again a record high, and we continue to benefit from scale, a multiyear focus on brand building, creative velocity, and experimentation, and optimization across marketing channels. We significantly grew our active customer base with highly efficient marketing investments, with customer acquisition costs down more than 15% year-over-year.

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AUGUST 02, 2023 / 9:00PM, RELY.OQ - Q2 2023 Remitly Global Inc Earnings Call

As I mentioned before, we are currently delivering exceptionally strong unit economics above the 6x LTV to CAC, that we shared at our IPO in 2021, which provides us an opportunity for us to make additional marketing investments in the second half of 2023, to drive even higher 2024 growth. Now let's turn to more details on our customer acquisition success, on Slide 7. The drivers of strong new customer acquisitions have been a sustained multiyear focus on data-driven, measurable, and optimized new customer acquisition, supported by our proprietary marketing platform technology, which results in a large and satisfied customer base, that then drives strong brand awareness and word-of-mouth effects. We believe that continued investment in delivering peace of mind to our customers will drive increasing word-of-mouth customer acquisition, and brand awareness.

The majority of our marketing investments are performance-oriented marketing. We are also seeing early success in selective investments at the top of the pole, which drives higher returns across our entire marketing spend. One example of our brand awareness approach is our integrated campaign focused on senders to Mexico and Central America, which includes traditional media and digital channels combined. We are also pleased with our continuously expanding geographic presence, and the quality of our global payment and disbursement network, as seen on Slide 8. We serve customers and their families in more than 170 countries, and territories, and now across approximately 4,800 corridors.

However, there are significant opportunities for geographic expansion, and we will enter new markets in the same way we have always done, with focus on compliance, providing a localized customer experience, and ensuring we have the most relevant pay-in and disbursement partners. Looking ahead, we have the opportunity to further expand in the Middle East, Europe, Asia, Latin America, and Africa. As we scale, these geographic expansions become more efficient, and we have the opportunity to replicate the success and market share gains, we have achieved in markets that we entered a number of years ago.

The scale and quality of our pay-in and disbursement options, including approximately 4 billion bank accounts, over 460,000 cash pickup locations, and approximately 1.2 billion mobile wallets is another structural advantage that is difficult to replicate. Our network allows customers to send funds with their preferred funding method and allows recipients the optionality to receive funds in either cash, mobile wallets, bank accounts or even home delivery in certain markets. Our increasing direct integrations with disbursement partners enhances the quality and reliability of our network. We define network quality with a number of metrics, including speed, transaction delay, customer support contact rate, and many others, which we have seen improvements as we have scaled over the past few years.

Our geographic expansion has allowed us to further grow and diversify our revenue as can be seen on Slide 9. Our U.S. and Canada regions are still seeing very healthy growth, and there is still significant opportunity for market share gains in the U.S. and Canada. However, as we have seen our business outside North America grow even faster, and achieve a scale of nearly $200 million of revenue on an annualized run rate basis. Our business outside North America was more than 20% of total revenue in the second quarter, and grew 120% year-over-year.

Our growth in scale outside North America is critical for many reasons, including lessening our risk of exposure to region-specific macroeconomic issues, diversifying our foreign exchange exposure, and lowering our customer acquisition costs outside North America as we gain relevant scale and brand presence. Our global network and our investments in increasing direct partnerships deliver a superior and continuously improving customer experience, which ultimately drives loyalty, and additional customer transaction activity. Our strategy is to deliver an instant, reliable, transparent, and low-costcross-border money movement globally. In order to do this, we established strategic partnerships with pay-in and payout partners, as well as participate in local banking networks. On the disbursement side, we have made significant progress in establishing direct relationships, enabling faster disbursements, lower costs, and ultimately, a better customer experience.

Over the last quarter, we launched several key integration partners, including M-Pesa in Africa, which ultimately expands the coverage of our network, increases the percentage of transactions dispersed instantly, and lowers the cost of the network. Our partnership with M-Pesa is a great example of the success we are seeing as we increase our direct integrations. For example, in Tanzania, approximately 50% of our volume goes to M-Pesa wallets, and this partnership allows us to instantly deliver mobile wallet transactions to M-Pesa wallets in Tanzania with lower cost and lower error rates, providing a much better customer experience.

We are excited about the potential to expand to other African countries where M-Pesa is present, such as Mozambique and Kenya, and more broadly, our opportunity to serve more customers in Africa. Just as we have made progress in our disbursement network, we are also focused on improving our pay-in capabilities. Over the last quarter, we continued to make progress on providing our customers with the ability to pay with

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AUGUST 02, 2023 / 9:00PM, RELY.OQ - Q2 2023 Remitly Global Inc Earnings Call

the payment method of their choice. In our largest end market, we enabled Apple Pay or Google Pay for our customers. We are also exploring new opportunities to drive additional improvements to the customer experience by integrating with emerging instant payment networks.

More broadly, over time, we believe we have more opportunities to speed up the payment leg of the transaction, whether it's avoiding delays of the existing ACH system in the U.S., or emerging payment methods in some of the other 30 send countries we support. These network investments are only possible with scale, and we believe we are uniquely positioned to drive these improvements that matter to our customers while improving our cost structure.

Turning to Slide 10, using a remittance product that they can trust is paramount for our customers, and speed, reliability, and great customer service when needed are always that we build and maintain trust. In the second quarter, more than 92% of transactions, were dispersed in less than an hour, which improved more than 200 basis points from the second quarter of last year. We have been able to successfully reduce the rate of transfers to take greater than an hour to disperse, even as our volumes have increased substantially. Reliability is a key driver of customer preference as well. Customers need to know that our service will be available when they need it, given the critical nature of remittances for recipients. High platform availability, which was 99.99% in the second quarter demonstrates our commitment to our customers and the continued benefits from our investments in our technology platform.

We are also proud of our customer service, which can be easily accessed in the app for both self-help and chat and over the phone. We support more than 15 languages with the combination of native speakers and real-time chat translation. This helps our customers solve problems quickly in their native language, and build loyalty. We are also excited about the potential of generative AI to help improve the customer experience and drive down costs. Our investments in our product and network have already reduced the need for customers to contact us over time, and this provides a better customer experience and lower cost across millions of transactions. This premium customer experience has built significant trust in our platform, as you can see by the approximately 1.2 million ratings for the Remitly app in the App Store with an average of 4.9 stars, and approximately 650,000 ratings in the Google Play store, with an average of 4.8 stars. This trust drives additional flywheel benefits for new customer acquisition, while also driving strong retention for existing customers.

Turning to Slide 11, we continue to make progress on building a scalable platform that will enable us to introduce complementary new products to our remittance customers. We believe our complementary product strategy will result in a deeper and stickier relationship with our customers over time, which will drive even more business to our remittance platform, strengthen engagement of existing customers, and drive more efficient customer acquisition. We continue to build additional products that solve critical problems for our customers, and we look forward to sharing more about these products in the future.

As we look ahead, we remain focused on delivering on our vision on Slide 12, to transform the lives of immigrants and their families, by providing the most trusted financial services on the planet. We believe we are in a unique position to drive sustainable growth and increase long-term returns as we aim to reinvent international payments for our customers. With that, I'll turn the call to Hemanth to provide more details on our financial results and our revised 2023 outlook.

Hemanth Munipalli - Remitly Global, Inc. - CFO

Thank you, Matt. I'm pleased with the exceptional financial performance we delivered in the second quarter. Our teams had strong execution in the quarter, and we benefited from continued strong active user growth, expanding transaction margin, and operating leverage. I will start with a review of second-quarter financial highlights and then discuss our revised 2023 outlook. I'll discuss non-GAAP operating expenses, and adjusted EBITDA in my remarks. These metrics exclude items such as stock-based compensation, the donation of common stock in connection with our pledge 1% commitment, transaction and integration costs related to acquisitions, and foreign exchange gain or loss. Reconciliations to GAAP results are included in the earnings release.

With that, let's turn to our second quarter results, beginning on Slide 14, with our high-level financial performance. We were pleased to deliver another quarter of high active customer and revenue growth and increased adjusted EBITDA profitability. Quarterly active customers grew by 47% year-over-year to $5 million. Same volume grew 38% year-over-year to approximately $9.6 billion, all resulting in revenue growth of 49% year-over-year to $234 million.

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