Thank you for standing by, and welcome to Remitly First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question-and-answer session. [Operator Instructions] Now, it’s my pleasure to hand the conference over to your host, Stephen Shulstein. Please go ahead..

Thank you. Good afternoon, and thank you for joining us for Remitly’s first quarter 2022 earnings call. Joining me on the call today are Matt Oppenheimer, Co-Founder and Chief Executive Officer of Remitly; and Susanna Morgan, our Chief Financial Officer.

Our results and additional management commentary are available in our earnings release, which can be found on the Investor Relations section of the website at ir.remitly.com.

Please note that this call will be simultaneously webcast on the Investor Relations section of the company’s website, and please also reference the presentation slides, which are also available on the IR 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 for the business.

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 them 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 each of these non-GAAP financial measures to the most directly comparable GAAP metrics. Please see our earnings press release, which is also available on the IR section of our website. Now, I will turn the call over to Matt to begin..

Greece, Latvia, Lithuania, Slovakia, and Portugal, bringing our total send countries to 22. We now serve more than 2,300 corridors, and we added approximately 200 corridors in the first quarter alone. We look forward to continuing our geographic expansion into new, attractive corridors.

And our experience and our corridor expansion playbook enables us to enter into new markets quickly and with the appropriate localization around payment acceptance, customer support, and partner integration to attract new customers. The geographic expansion will help us acquire new customers and leverage our increasing scale.

We also have a large, competitively differentiated and growing network of banks, mobile wallets, and cash pickup locations so that our customers can choose what works best for them and their recipients. We believe offering our customers the broadest menu of delivery options drives customer loyalty.

Our investments in product and technology continue to drive a superior customer experience, enabled by our intuitive mobile-first interface, risk and fraud management, infrastructure, security, and customer support.

As you can see on Slide 12, these investments have resulted in more than 90% of Remitly customers engaging with us on their mobile phone, a 4.9 star rating on the iOS App Store, and a 4.8 star rating in the Google Play Store. Finally, our platform availability is above 99.96%, reinforcing customer peace of mind.

Looking ahead, we will continue to invest in marketing, focus on new customer acquisition, geographic expansion, product technology, and importantly, new and adjacent products to expand our platform.

The same 280 million immigrants worldwide have financial services need beyond remittances, and most have not been served or underserved by traditional financial services providers. We founded Remitly just over ten years ago by initially focused – focusing on disrupting the remittance business.

We are early in that journey with just 1% of the remittance TAM, and the other vision for what we can accomplish is much larger. You can see this vision on Slide 13, to transform the lives of immigrants and their families by providing the most trusted financial services on the planet.

This remains our North Star and we are just getting started in our journey to accomplish it. With that, I’ll turn the call over to Susanna, who will provide more details on our financial results and outlook..

Thank you, Matt. Working with you and the Remitly team has been such a meaningful experience. The commitment and drive for the mission to improve the lives of immigrants and their families has been inspiring. I’m proud of our work together to deliver on our promises and look forward to watching this wonderful company grow.

Now, let’s turn to our first quarter results. To reiterate Matt’s comments, we delivered a strong Q1. And accordingly, we are raising our revenue outlook for 2022. I’ll begin by reviewing the strategic drivers of our first quarter financial performance and then will provide more detail on our outlook for 2022.

As a reminder, I will discuss non-GAAP operating expenses and adjusted EBITDA in my remarks. These metrics exclude non-cash items such as stock-based compensation in all periods. Reconciliations to GAAP results are included in the earnings release. Beginning on Slide 15, active customers grew by 42% year-over-year to more than 3 million.

Send volume grew 43% year-over-year to approximately $6.1 billion, all resulting in revenue growth of 49% year-over-year to $136 million in line with our expectations.

As you can see on Slide 16, a number of factors drove the 42% active customer growth, including acquiring new customers and higher retention of existing customers who, in many cases, have transacted with us for multiple years.

We continue to acquire new customers at highly attractive, unit economics, and retain existing active customers with a best-in-class user experience. Unit economics and new customer acquisition remain highly compelling even in a more competitive advertising market.

And we continue to spend in customer growth wherever and whenever we find compelling ROI. Turning to the loyalty of our customers and the reason for high lifetime value, we have over a 90% revenue retention shown on Slide 17. This is a result of our compelling product and our commitment to invest in making it even better.

In particular, we are investing in our mobile platform, our empathetic and efficient customer service, and our global network. Our average volume per customer grew slightly year-over-year, and our pricing continues to remain stable.

Our take rate, as you can see on Slide 18, has consistently been between 2% and 2.5% over the last eight quarters and reflects our goal to always provide a fair price, not the lowest price, driven by our sophisticated and data-rich pricing engine. We’re talking about take rate because it signals pricing stability over a longer term.

But it is also important to note that take rate in the short term is influenced by transaction size and the associated corridor mix. Overall, the goal of our pricing strategy is to optimize for long-term cumulative revenue, net of transaction expense.

Turning to Slide 19, the robust growth in active customers, stable take rates, and high retention drove the 49% revenue growth that we delivered in the quarter, as we continue our multiyear track record of healthy double digit revenue growth at scale. Average revenue per active customer increased 5% year-over-year in the first quarter.

The year-over-year increase was primarily driven by a larger book of returning customers who transact frequently, along with an increase in revenue per transaction.

As expected, we saw flat sequential growth in the first quarter as compared to the fourth quarter, primarily due to the seasonal impact of customers transacting more during the holiday season.

Turning to costs on Slide 20, the first quarter reflects the leverage we’re seeing in transaction expense and the impact of the investments we are making to drive future growth. Transaction expense was $56 million or 41% of revenue, an improvement of nearly 400 basis points from 45% of revenue in Q1 of last year.

This improvement is beneficial to our unit economics, increasing the lifetime value of our customers, and the ROI of our marketing spend.

We worked hard to make this happen through more direct partner integrations, better terms of payment processing partners driven by increasing scale, and advanced risk and fraud management systems which drive down transaction loss rates.

We expect to see a modest ongoing improvement in transaction expense as a percentage of revenue in 2022, as we’ll continue to benefit from increasing scale and improve precision around fraud losses, although we expect some variability quarter-to-quarter.

Now, I’ll turn to our non-GAAP operating expenses on Slide 21, which reflects the investments we’re making to execute on our long-term vision. Our largest operating expense is marketing, which represented $40 million in the quarter or 43% of total operating expenses.

This marketing investment delivered very strong new customer additions within our payback guardrails. Our goal is to continuously bring in more and more customers within these guardrails. As a result of our highly attractive unit economics, we’re very comfortable with our level of marketing spend.

While we continue to deploy our dollars efficiently, like many other companies that leverage digital advertising, we have observed a broader shift in the marketplace as major platforms adapt to more competitive digital advertising and a new data privacy landscape.

Compensating for this, we continuously test new marketing channels, including more brand building to drive customer acquisition cost efficiencies. Our investment in and commitment to delivering a superior customer experience also drove a 300 basis point year-over-year increase in customer referrals as a percentage of our marketing channel mix.

Increasing brand awareness and lower cost referrals are a few of the many ways we can drive efficiencies and CAC in the future. Technology and development expense was $20 million in the quarter, 21% of total operating expenses. This included technical hiring, along with enhancing our product, platform, and security.

These investments are critical to ensure a superior customer experience and to drive expansion geographically and in new products.

As we mentioned on our last call, we expect technology and development expense to increase as a percentage of revenue in 2022 compared to 2021 as we prioritize product improvements, new product development, and corridor additions. G&A expense was $19 million in the first quarter, or 21% of total operating expense.

This includes an investment in our human resources, finance, and legal teams, and additional public company operating costs, which will allow us to effectively scale to support our growth initiatives. We expect a year-over-year growth in G&A expense to moderate as we begin to anniversary public company costs in the fourth quarter of 2022.

And we expect to see leverage in G&A later this year. Finally, customer support and operations expense was $14 million in the first quarter or 15% of total operating expense. This was driven by a deliberate strategy to improve customer support, remove friction points to reduce a customer’s need to call us, and to deliver peace of mind.

As we continue to scale, we expect to leverage our customer support organization with the benefit of increased automation and efficiencies as we add new corridors. Our product investments in ensuring a frictionless customer experience will also drive leverage in customer support costs over time, as our customers will need to contact us often.

Turning to the bottom line on Slide 22, Q1 GAAP net loss was $23 million compared to a $8 million net loss in the first quarter of 2021.

The increase in net loss was primarily due to increased investments in new customer direct marketing and headcount growth and technology development in other areas, as well as $8 million of incremental stock-based compensation expense.

Adjusted EBITDA, which excludes stock-based compensation expense, was negative $12.1 million in the first quarter of 2022. This performance reflects the $40 million we spent on marketing in the quarter, of which the vast majority is related to new customer acquisition.

As our unit economics remain highly attractive, we will continue investing in marketing, and we have the ability to scale it up or down, depending on the returns we expect to generate. Adjusted EBITDA margin was negative 8.9% as compared to negative 6.4% in the first quarter of 2021.

Our adjusted EBITDA margin reflects the investments they’re making to drive long-term growth and profitability, along with the scale benefits we are delivering on the transaction expense line. Turning to our balance sheet, working capital at the end of the quarter was approximately $456 million and reflects cash on our balance sheet of $445 million.

Our balance sheet provides a significant flexibility to execute on our main growth drivers of acquiring new customers at highly attractive unit economics, expanding corridors and new geographies, and building a broad suite of financial services for immigrants and their families.

Moving to our 2022 outlook on Slide 23, we expect revenue to be between $610 million and $620 million. This is a $5 million increase at the midpoint from our prior guidance and implies a year-over-year growth rate of 33% to 35%.

We are increasing our guidance to account for the strong new customer acquisition trends we saw in the first quarter, as well as the strong performance we have seen in April. We expect increased transactions from these new customers to benefit us through the rest of 2022 and beyond.

As a result, we expect revenue to increase sequentially every quarter and the remainder of 2022. We remain focused on growing active customers by enhancing the loyalty of our existing customers and continuing to invest in acquiring new customers and existing and new corridors.

We are maintaining our 2022 adjusted EBITDA outlook of between negative $40 million and negative $30 million. As we have discussed, 2022 is a year of disciplined investment to drive future growth.

We expect to continue making growth investments in the second quarter and expect Q2 adjusted EBITDA to be roughly in line with the first quarter of 2022 as we maintain our flexibility to pursue high return investments that drive long-term growth.

We expect adjusted EBITDA in the back half of the year to improve compared with the first half through the timing of certain investments and higher expected revenue. Given the expected high return of investing in new customers, expanding geographies, and building new products, we will continue to invest at highly attractive unit economics.

These investments will propel our growth going forward and put us on a path to profitability as we look to leverage our scale and our strong customer loyalty in the years ahead. With that, Matt and I will open up the call for your questions.

Operator?.

Thank you. [Operator instructions] Your first question comes from Andrew Schmidt with Citi. Please go ahead..

Hey, Matt, Susanna, Stephen. Thanks for taking my questions in a good quarter here. And Susanna, I know you’ll be around for a little while, but good working with you, and best of luck..

Thank you..

So, I want to start off just on the marketing expense. I know you mentioned some more competition, particularly in the digital acquisition channel. Perhaps, you could talk about that a little bit more and your sort of – your ability to offset that with being more agile with creative customer acquisition.

And then just as a follow-on to that, maybe more of a longer-term question, just as you talk about your experience as you sort of spend more time in a given market, do you see incremental efficiency coming from marketing as, perhaps, you know, marketing shifts to more efficient word of mouth or other channels? So, kind of a near and a longer-term question, if you don’t mind.

Thanks a lot..

Yes. Thanks, and good to chat with you. So in terms of CAC, we have seen some CAC pressure. I’d say it’s consistent with the broader industry. And despite that, our unit economics remain highly attractive. We really focus on payback and LTV to CAC in and of itself isn’t meaningful.

And historically, we have had the six times LTV to CAC, and we talked here about 200% ROI on our marketing spend. So, we feel really good about the returns on that marketing spend and the fact that LTV is also increasing as transaction margins increase as well to help compensate for some of the market pressures.

In terms of the – does CAC reduce over time as we have more time in certain markets, I would say that referrals become an increasingly important part of the marketing mix.

And we talked about that a little bit here, just the longer we’re in market and that’s obviously a very low-cost acquisition channel and more brand awareness as well as we’ve had more time within the markets, which helps with that offset some of those CAC pressures as well..

Perfect. Very helpful. And then just a higher-level question, just on the economic environment, obviously, a lot of secular growth here and ability to continue to drive growth for the foreseeable future. But if you don’t mind maybe talking about what you’re seeing just from an employment or macro perspective.

And then just remind us just the overall sensitivity of the model to things like employment, labor market. And obviously, this depends on whether we’re talking about send-or-receive markets. But if you just remind us just how to think about cyclical sensitivity, that’d be great. Thanks a lot..

Thanks, Andrew. Yes. Happy to take that one, and good to see you. I think, historically, if you look at the remittance market, it has been resilient during economic hardships or downturns.

And when you think about why that’s the case, it’s because, our customers are sending money home to their families for basic needs, for living expenses, for emergency medical expenses. So, it’s not discretionary in that sense. And it’s a key priority for our customers to send money back home.

They’re not always immune to economic hardships, but it’s not like other consumer businesses where it’s low on the list of spend. This is a key priority for our customers. And you can see that whether it was the 2008 recession, whether it was – as we went through COVID, it’s very sticky and repeat business.

And that’s a testament to the resilience of our customers and how committed they are to getting money back on to their families. So, that’s what we’ve seen historically. That’s what we’ve seen in Q1. And we’re confident, as economic conditions continue to evolve, that our customers will continue to prioritize getting money back to the family..

Perfect. Thanks, Matt. Appreciate the comments..

Your next question comes from Ramsey El-Assal with Barclays. Please go ahead..

Hi. This is Ben on for Ramsey. Thanks so much for taking the question. I wanted to ask about the take rate. I think we had thought that, perhaps, as you continue to expand in to new geographies and diluted the big three quarters that you might see some yield uplifts just by the nature of those being less competitive.

It sounds like the expectation is perhaps for that to be a little bit more stable. Just wondering if you could kind of comment on that trend..

Yes. We have seen that be quite stable over time, which we see good as a proof point around pricing in the industry in general. There’s probably some mix component to that, but I wouldn’t say that it’s a predominant factor. So we feel good that it’s been quite stable over the last eight quarters..

Yes, Ramsey, I’d just add that I think that, certainly, we’ve proven that we can be successful in some of the largest and most competitive remittance corridors out there. I think as you get into some of the – what we call longer-tail corridors, you may see even higher pricing.

But when you look at take rate over the long-term, there could be potential there. That being said, it’s influenced by mix shift, by average transaction size, by each individual corridor is different. So, that’s why we’ve shown the data that we’ve consistently been in the 2% to 2.5% take rate.

And I think, in the long-term, that’s a pretty good assumption..

Okay. Very helpful. And then kind of another little modeling question, just on your transaction expense. I know you indicated that for the whole year, it should be continuing to prove, but perhaps not at the same magnitude as what we saw in Q1.

Is there – are there any like seasonal impacts to think of? Like I believe it usually ticks up a tiny bit in Q4.

Anything else we need to kind of keep in mind as we’re looking at the transaction expense line?.

Yes. No, we were really excited to see the increase in transaction expense – or transaction margin in Q1 expense as a percent of revenue kind of coming – improving by about 400 basis points. In terms of kind of go forward, we would expect to see some modest improvements over time. That’s due to three factors, really.

It’s more direct partner integrations, which are both better cost and better customer experience but do require some product investments. It’s also due to better terms of payment processors as we’re driving – increasing scale and then advanced risk and fraud management systems, which drove down transaction loss rates.

So modest improvements over time in terms of quarterly seasonality, in some cases, Q4 is a bit lower transaction margin quarter because we typically see a larger mix of new customers in Q4. And they sometimes have higher losses or kind of lower margins associated with new customers due to promotions and the like.

So, that is the one, I guess relatively minor factor to consider in terms of seasonality at this point. That’s becoming less prominent as our existing base gets bigger and bigger, and we have more and more repeat customers..

Okay, great. Thank you for taking my questions..

Your next question comes from….

Thanks, Ben..

Excuse me. Our next question is from Tien-Tsin Huang from JP Morgan. Please go ahead..

Thank you so much. Good afternoon to you, guys. Just – so, I’m thinking about the quarter and how it shook out, it was pretty close to what you had predicted, right? That it would be in line with the fourth quarter. It looks like it ended up being at about a million higher as you mentioned. You’re taking up the guide by, what, 5 million.

So, just curious on the confidence in the raise. Is it really just based on, I think you said, customer acquisition being quite strong, including into April? Is that the main driver? I just wanted to make sure I caught the details there..

Yes. Thanks, Tien-Tsin. I’d say that is the primary driver. We saw really good customer acquisition in Q1 and in April as well. We’re also seeing that our customer base continues to be very high quality and we have really high retention in that base as well.

So, I would say that we have high confidence in that because of the over 90% revenue retention, which really gives us visibility into near-term trends and pretty rigorous forecasting at the cohort level as well. And so, yes, we’re excited that we’re able to take up the revenue guidance for the year as a result of that..

Got you. Very good. So a quick follow-up and then I’ll jump off. Just on the on the macro, I know you’ve addressed that well, just with a lot of FX volatility going on. We’ve been hearing it throughout this earnings season.

Does that mean anything either from a behavior or potential sort of pricing dynamic there? I know some of them preceded in terms of the amount of volatility, hope it comes down. But just wanted to make sure we discussed that. Thanks..

Hey, Tien-Tsin, yes. It’s great to see you, and appreciate that question. I think that, yes, from a broader economic standpoint, yes, I would reiterate the resilience of our customers and the resilience of remittances broadly.

I think when it comes to foreign exchange, when the origination currency, meaning euro, pound, dollar, when it strengthens relative to where our customers send money to, there could be some short-term pull-forward or pull-back of demand. But it’s historically, at a global level, not been that dramatic.

And one of the things about being in now 2,300 corridors is there’s also this diversification standpoint that is valuable to our business because we have a wide range of currencies, a wide range of customers. And so there’s also an offsetting component, depending on how various currencies are changing.

And in a medium to long-term basis, there’s not an impact. It’s mainly just short-term fluctuations when that happens..

Understood. Right. So, it probably evens out over time. All right. Thank you, guys. Thank you, both..

Thank you..

Thanks..

Thanks. [Operator Instructions] Next question is from Alex Markgraff with KeyBanc Capital. Please go ahead..

Hey, team. Good to speak with you today. Just one question as it relates to headcount expectations for 2022. Just curious if you’re seeing any changes to competition for talent as we’ve seen some reduction in force and in hiring freezes across tech. Really just looking for any read on that or any changes to your outlook for the year to be aware of..

Yes. Thanks, Alex. Great question, and good to see you. I think that, certainly, if you look at our engagement and retention, we’re pleased with some of those metrics. And I think that’s rooted in the fact that we care very, very deeply about culture. We care very, very deeply about our team.

And I think if you were to walk that virtual or in-person Remitly halls, you would see that. From a recruiting standpoint, it’s important that we continue to hire across the globe. And that means across the U.S., that means in our offices across three European offices and countries. We have also customer support sites in Manila and Managua.

And so, we – I think – we expanded our geographic presence to be able to accelerate hiring. And that’s where I said is a key part of our focus is to fill some of the open roles that we have because it is competitive to recruit folks. But the employee experience, the engagement, the attrition, I’m very pleased. And I think that’s rooted in our culture.

And our culture is rooted in customer centricity and a team that really wants to make a positive impact in the world. And I think they see that by coming to Remitly..

Super. Thanks, Matt. Maybe just one final point on the macro discussion. Just to clarify, as it relates to your expectations for the year, you are not assuming any sort of deterioration in the health of the customer base.

Is that a fair assumption as we look at the 2022 guidance sort of expectations through the year?.

Yes, I think that’s a fair assumption. We’ve seen very consistent customer behavior trends, which has been really nice to see. And you’ll see like average send proactive customer increase very, very modestly but has been stable in the quarter. We’re still seeing very strong retention. And so, so far no signs.

The customer base has been very resilient in other periods as well. And so far, we’re seeing just consistency in terms of the customer behavior..

Perfect. Thanks, Susanna..

Thank you. And that’s the last question. I will now like to turn the call back to Matt Oppenheimer for his closing remarks..

Thank you. And thank you, everyone, for your thoughtful questions. As we always do at Remitly, I’d like to end the call by highlighting another one of our amazing customers. This customer’s name is Floyd. Floyd’s a relatively new customer. He joined remotely in 2021. And Floyd works in the U.S. and sends money to his girlfriend in the Philippines.

So far, Floyd has already sent money with Remitly more than 50 times, 5-0. Floyd shared his story with Remitly. And sharing his own words, he said, "I wanted to send money to my girlfriend who is in the Philippines, and it was a great experience using Remitly. My experience with the money transmitter companies I used before was really bad.

They made sending money really hard, and I would get rejected. I’m proud to help support my girlfriend back home, and I feel that Remitly treats me with dignity. And I know she received the money safe and sound. This is the way it should be. We thank your company for providing a great service for us." We thank you, Floyd.

And to all of you on the call for being part of the Remitly journey. And we are excited about 2022 and look forward to sharing our progress as we continue our mission..

And ladies and gentlemen, with that, we conclude today’s program and you may now disconnect. Please, have a great day..