Remitly Global, Inc. (NASDAQ:RELY) Q1 2024 Earnings Call Transcript

Remitly Global, Inc. (NASDAQ:RELY) Q1 2024 Earnings Call Transcript May 2, 2024

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Operator: Good day and thank you for standing by. Welcome to the Remitly First Quarter 2024 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. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Stephen Shulstein, Vice President, Investor Relations. Please go ahead.

Stephen Shulstein: Thank you. Good afternoon and thank you for joining us for Remitly’s first quarter 2024 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, 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’ll 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 response 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 press release, and the appendix to our earnings presentation, which are available on the IR section of our website.

Now, I will turn the call over to Matt to begin.

Matt Oppenheimer: Thank you, Stephen and thank you all for joining us to discuss our strong first quarter results and our outlook for 2024. We are pleased with our results as our value proposition of delivering trust and peace of mind throughout the cross-border payment security continues to resonate with our new and existing customers. You will see this in our first quarter financial results on Slide 4, our consistent execution continued with a strong start to the year. We are pleased to deliver $269 million of revenue, a 32% increase year-over-year. Our top line results and scale efficiencies across transaction costs and operating expenses resulted in a strong adjusted EBITDA of $19 million, a more than 250% increase year-over-year and ahead of our expectations.

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Q&A Session

Our digital-first positioning and increasing scale allowed us to deliver the improvements in adjusted EBITDA profitability in the quarter, demonstrating the structural profitability potential of our business, while continuing to make targeted investments to deliver both long-term growth and strong returns. As a result, we are reaffirming our 2024 revenue outlook and raising our 2024 adjusted EBITDA outlook. In the first quarter, our quarterly active customers grew 36% year-over-year, as you can see on Slide 5. We now serve 6.2 million quarterly active customers, up 1.7 million from last year, and we continue to outpace the overall growth in the remittance industry and our digital peers. We also continue to benefit from record new customer acquisition due to our investments in creating a seamless customer experience, efficient performance marketing, and brand awareness across key markets.

Our customers are highly resilient and have a deep sense of responsibility to support their families. And this is key to understanding their predictable and durable behavior. A significant majority of our customers send money home on a regular basis and recurring basis to support daily living necessities. At the same time, we also see strong seasonality as many customers send more actively around key holidays and festivals, including Christmas, Mother’s Day, and Ramadan, just to name a few. This seasonality of customer activity played out in the first quarter as expected as there are fewer large sending activity drivers such as the Christmas holiday season that we see in the fourth quarter or Mother’s Day and Eid al-Fitr in the second quarter of this year.

This seasonality is particularly evident in the first quarter on the back of a very strong Q4 activity. We have observed this pattern for several years and see many of these customers increase their sending activity from Q2 to Q4. As expected, we have also observed an increase in recent customer activity in April, which reflects typical seasonal patterns as we remain confident in the resilient customer behavior trends that result in predictable and durable five-year LTV. The trend of customer preference for digital receive options continued in the first quarter. The year-over-year mix of digital received transactions increased by nearly 500 basis points in the first quarter, which was a similar increase as Q4. As transactions sent to mobile wallets tend to be smaller and more frequent, we continue to optimize our product features and underlying cost structure to serve these customers effectively and profitably.

Having a wide variety of high-quality disbursement options, including 1.2 billion mobile wallets, 4.2 billion bank accounts, 470,000 cash pickup locations, and home delivery in certain markets, to serve different customer needs is a key differentiator and a driver of customer transaction activity. Turning to some additional detail in our marketing efforts on — in Q1 on Slide 6. Our focus for our marketing investments remains on ensuring we optimize the customer acquisition cost we are willing to pay with the lifetime value of a customer in order to drive high long-term returns. We continue to see strength in lifetime value as customer activity remains strong with increasing transactions per active, particularly related to digital transactions and our overall unit costs continue to improve.

We delivered another record number of new customers in the first quarter as our marketing investments across channels drove new customers to our platform at a highly efficient customer acquisition cost. We also benefit from word of mouth as we continue to make product improvements and drive additional customer activity in both new and existing markets. Consistent with seasonal patterns, our customer acquisition costs declined sequentially from the fourth quarter. Our marketing investments, particularly our global 360 integrated campaigns in key markets are resonating with new customers, which is a leading indicator of future revenue growth. Building off our momentum in the fourth quarter, we are pleased to continue our brand awareness efforts in key strategic regions worldwide, including the launch of an integrated brand campaign in the large Los Angeles market in the quarter.

L.A. has a significant customer base that sends to many of our key receive markets, including Mexico and other Latin American countries. These campaigns combine traditional media and digital channels and we are taking the successes we have had in other key markets to L.A. We believe that the disciplined and data-driven ROI-focused approach to our marketing investments is unique, and we continue to monitor for a variety of signals with our brand campaigns such as branded search impressions, alongside other metrics across the customer funnel. Taking this approach, we’ve seen positive results to-date from our marketing campaigns. Finally, on the marketing front, we continue to find more ways to utilize AI, including generative AI across a variety of use cases in marketing.

We’re starting to see the benefits of generative AI in helping us generate long form content at scale. We’re exploring AI for a variety of process improvements that are actively using AI as an effective tool in translating our product and marketing efforts into many different languages, increasing the benefits of localization. Overall, we continue to have high confidence in our recent marketing investments, which are expected to deliver strong returns this year and beyond with a predictable and durable stream of revenue, less transaction expense, which we detailed in our call last quarter. This is consistent with the resilient customer behavior that we see related to cross-border transfers for primarily non-discretionary needs, along with our ongoing focus on program optimization and our ability to continue driving down unit costs as we scale.

Our focus on delivering a fast and seamless customer experience has not changed, as you can see on Slide 7. We often get asked the question of what makes Remitly so special and unique, that results in the high growth rates that we’re delivering. The truth of the matter is that it’s a complex answer because remittances are complex, but it all comes back to the customer and continuing to earn their trust. When we analyze responses to our NPS customer surveys over the last six months, the top two drivers were fast transfers and that the experience was easy. Additionally, a large portion of comments simply say that Remitly was some version of grit, such as excellent, incredible, amazing superb or brilliant. I want to emphasize, while qualities like fast and easy may sound like table stakes, international payments are incredibly complex, and we are uniquely reinventing international payments in a way that’s magical and delightful for customers.

And you can see this reflected in our industry-leading growth rates and customer reviews. Let me highlight a few areas of progress in the first quarter on delivering this great experience for our customers. In order to achieve this long-term trust, we are excessively focused on reducing what we call transaction defects. These are issues related to pay-in, disbursement, and risk that negatively impact the customer experience or delay or delay the ultimate delivery of customer funds, which creates unnecessary friction and erodes trust for our customers. Reducing these defects typically results in lower customer contact rates, less back office work for our customer support teams and ultimately, higher customer satisfaction, trust, word of mouth, and retention.

On the pay-in side, meaning the way that we collect funds from customers, we are focused on reducing payment issues for our customers. This product work matters to our customers because it enables us to deliver faster transactions, more payment options, fewer errors, and at a lower cost to Remitly. We can also uniquely deliver these benefits with our digital-first approach at scale. We continue to and expect to add relevant payment options that provide great customer experiences. Examples of this are bank contact in Belgium, interact in Canada, and the ability to speed up ACH transactions in the U.S., which we expect to launch later this year. To help with speed and to reduce errors, we are leveraging machine learning and dynamic routing across payment processors to drive down errors, which improves the customer experience.

On the disbursement side, we continue to make progress on improving our mix of high-quality direct integrations, which increases transaction speeds, improve the customer experience and lowers costs. These include M-Pesa in Tanzania, ICICI Bank in India, and Yape mobile wallets in Peru. We are also providing more self-service options for customers to resolve disbursement exceptions effectively when they do happen. Finally, we are automating manual actions such as downtime routing and validation APIs that delay transactions and create unnecessary work. Finally, on the risk side, we are also focused on reducing the frequency that transaction defects are introduced to legitimate customers and improving the customer experience around resolving any risk-related issues.

To achieve this, our strategy is to build robust, intelligent, and scalable systems utilizing advanced machine learning capabilities to combat bad actors effectively, ensure regulatory compliance, and streamline required customer verification experiences. As a result of our efforts, more than 90% of transactions in the first quarter were dispersed in less than an hour. And more than 95% of transactions proceeded without a customer support contact. While our primary focus on this work is to continue to build a fast and magical experience to send money internationally, thereby continuing to drive long-term retention, we have been able to deliver a significant improvement in customer support expense with leverage of 260 basis points compared with the first quarter of last year.

While we are pleased with these results so far, our global teams are focused on continually improving the experience for our customers, which is helped by our increasing scale and investments in our technology infrastructure. Our ability to execute our long-term vision of transforming lives with trusted financial services that transcend borders is driven by resilient and predictable customer behavior, our differentiated and continuously improving product, a focus on increasing investment returns and efficiency, and even more growth, enabling us to deliver a more delightful customer experience across all dimensions of the cross-border payments journey for our customers. As we look ahead to the rest of 2024 and beyond, our strategic priorities remain the same, as you can see on Slide 8.

We are just getting started in addressing our large market opportunity, which includes growth opportunities in both new and existing send and receive markets. I am especially excited about the opportunity we have to grow across Sub-Saharan Africa. This region has only been a focus for Remitly for a relatively short period of time and since that focus began, we have been seeing encouraging growth in a large market with a lot of potential for future growth. On a global basis, we are still only about 2% of a very large market and we are seeing strong growth across our portfolio. We believe we can continue to delight customers, grow market share with high-return marketing investments and new markets, deepen customer relationships, and at the same time, drive even more dollars to the bottom-line through operating efficiencies.

With that, I’ll turn the call to Hemant, who will provide more details on our financial results and our improved 2024 outlook.

Hemanth Munipalli: Thank you, Matt. I’m very pleased with the strong results that we delivered in the first quarter and the progress we’re making on continued strong revenue growth and driving efficiencies throughout the organization. I’ll begin by reviewing some high-level drivers of our financial performance. I will then discuss the priorities we’re focusing on to ensure we can deliver sustainable growth and high returns for many years to come, and I’ll finish with our updated outlook for 2024. With that, let’s turn to our first quarter results. As a reminder, I will discuss only 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, 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 quarter. We were pleased to deliver a high active customer and revenue growth in what is typically a seasonally weaker quarter for customer activity. Our adjusted EBITDA profitability also improved substantially 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 $6.2 million. Send volume grew 34% year-over-year to approximately $11.5 billion, resulting in revenue growth of 32% year-over-year to $269 million, which was in line with our expectations. Our GAAP net loss was $21 million in the quarter and included $34 million of stock compensation expense.

Strong revenue growth, combined with significantly lower transaction expense as a percentage of revenue and efficiency across operating expenses, led to higher-than-expected adjusted EBITDA of $19.3 million in the quarter. Our focus for 2024 and beyond remains on 4 key areas to drive sustainable long-term returns, as you can see on Slide 11. These are to continue to deliver strong revenue growth, reduced transaction expenses, acquire new customers with efficient marketing, and operate more efficiently. By focusing on executing across these four areas, particularly with the additional focus on efficiencies, we believe we can deliver sustainable long-term high returns. Now, let’s turn to some of the key factors that drove our strong performance in the first quarter.

On Slide 12, we detail the drivers of our strong performance. Let’s begin with revenue, which was up 32% year-over-year in the first quarter on both the reported and constant currency basis. We have also anniversaried our acquisition of Rewire, which positively impacted our growth rate by about 2 percentage points in the first quarter of 2023 and full year 2023. Our revenue growth was driven by the high retention of existing customers, consistent first quarter sending patterns, benefits from earlier send market expansion, and record new customers acquired in the quarter. As is typical, sending activity from returning customers contributed to a significant portion of total revenue in the first quarter, which reflects the non-discretionary nature of remittances and the loyalty of our customers.

As Matt mentioned, the first quarter is typically a seasonally less active quarter for existing customer activity as compared sequentially with the fourth quarter. It is also important to note that the first quarter of 2023 was somewhat of an anomaly for quarterly active customer growth as we recognize the addition of all newly acquired Rewire customers in our quarterly active customer count in the first quarter 2023, which we have now fully anniversaried. As we look ahead to the second quarter, we typically see increased customer activity from prior active customers due to more seasonal spending opportunities, and we also expect to continue acquiring even more new customers to Remitly. We expect various factors to impact year-over-year and sequential increase in quarterly active customers.

These are related to the timing of holidays and gift-giving periods such as Easter, Mother’s Day, and Ramadan, the increasingly diverse global customer base, timing sensitivity to foreign exchange rates, particularly at higher transaction values, and quarters ending on weekends versus weekdays. Overall, we continue to observe very consistent customer behavior patterns with high retention that are expected to generate robust LTV as measured by revenue-less transaction expense for years to come. As a result, our LTV to CAC ratios remain attractive for continued investment in marketing to acquire new customers. 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 improved to 90 basis points year-over-year.

This was primarily due to our increasing volumes, which allows for improving terms with our pay-in and payout partners, while at the same time, improving our fraud precision. Approximately 200 basis points of the improvement was related to pay-in and disbursement partner cost reductions. Our continued improvement in transaction expense and overall variable cost structure allows us the optionality to make investments in improving the customer experience and the value we deliver to customers, which results in increased retention, transaction activity, and ultimately increasing lifetime value of our customers. We’re also making solid progress on delivering operational efficiencies, which has been an increased area of focus for us this year. Let’s begin with our progress on customer support expenses.

Customer support and operations expenses as a percentage of revenue was down 260 basis points year-over-year, consistent with the trends we’ve seen over the past few quarters. As Matt mentioned, we’re focused on reducing unnecessary friction for our customers via our transaction defect reduction goals. As an example, we have enabled even more self-help options such as changing disbursement choices without the need to contact customer support. When self-service is not the right option, we’re starting to apply technology like generative AI to make it easier and more efficient for agents to support and delight our customers. We’re also applying AI in our risk systems to improve precision and to provide a more effective customer support experience either via chat, e-mail, or phone.

All of these things reduce the workload rate for our agents and help provide a more efficient and tailored experience to delight our customers. In the first quarter, G&A expense as a percentage of revenue decreased 70 basis points year-over-year as we benefited from continued discipline on hiring, non-headcount expenses and other efficiencies. A portion of the improvement in G&A expenses benefited from some favorable timing and indirect tax reduction, totaling about $2 million that we do not expect to reoccur. We view our marketing and technology and development expenses as key investments that provide returns over both the near, medium and long-term. Our marketing investments have a payback period of less than 12 months and provide a long stream of revenue-less transaction expense from resilient customer activity.

Our technology investments have both near-term returns as you can see in our progress reducing transaction and customer support costs and expected medium to long-term returns as we invest in our platform to further deepen customer relationships. Our marketing expense was $64 million in the first quarter, which was a sequential decline of about $7 million from the fourth quarter and in line with our expectations. This reflects the typical seasonality of declining customer acquisition costs sequentially as the opportunity to acquire new customers is generally lower in the first quarter. Given our data-driven approach, we are also uniquely able to manage LTV to CAC ratios to the return thresholds that we desire, including taking into account the cost of capital on our higher return thresholds.

We will focus on this balance to ensure that we were delivering high long-term returns relative to our cost of capital. Technology and development expenses were $44 million in the first quarter. The primary areas of investment included our remittance platform, driving transaction defects down, deepening customer relationships, and enabling increasing automation across various operational areas such as customer service and back-end transactional processing. We expect moderating growth in our T&D expenses as we scale over the medium term. Before we turn to our updated outlook for 2024, I’d like to discuss our balance sheet and perspectives on cash flow. As you can see on Slide 13, we ended the quarter with $286 million of cash and access to a $325 million credit facility.

At the end of the quarter, we had $150 million outstanding on the credit facility. This balance was paid off the next business day on April 1st, consistent with our prior practice of using the credit facility to fund short-term spikes in customer demand, especially over holidays or weekends. As we have been improving adjusted EBITDA, we have seen corresponding improvements in our cash flow performance when we adjust for the timing of customer fund flows. Turning to our stock compensation expense. In the quarter, our stock compensation expense of $34 million grew 17% on a year-over-year basis. This is a significant deceleration from prior quarter’s growth rates and reflects our focus on moderating our headcount growth rates. However, we expect stock compensation expense dollars to increase sequentially as a result of our annual performance reviews and RSU grand cycles.

On a full year basis, we expect stock compensation expenses to grow slower than revenue. We’re also focused on managing the number of shares issues and we have been taking various measures to reduce share dilution for increasing long-term returns to our shareholders. As a result of our strong performance in the first quarter, we are updating our outlook for 2024, as you can see on Slide 14. Specifically, we expect revenue to be between $1.225 billion and $1.25 billion, which reflects a year-over-year growth rate of 30% to 32% and is consistent with our prior outlook and reflects the strong performance in the first quarter and in line with our expectations. We remain confident in both the resilience and seasonal cadence of customer activity and the outlook for new customer acquisition in the rest of 2024.

As a result, we are reaffirming our full year revenue outlook. We also expect second half revenue growth rates to be improved versus the first half revenue growth rate, especially as we lap exceptionally strong growth rates in the first half of 2023. As a result, we expect the revenue growth rate in Q2 to be at the lower end of the annual guidance growth rate range of 30% to 32%. As a reminder, revenue growth rates in any given quarter can be impacted by volatility in foreign exchange rates, new customer acquisition timing, and seasonal customer activity, even if underlying customer behavior and spending patterns remain largely consistent to historical trends. While we expect to remain in a GAAP net loss position, we expect adjusted EBITDA to be between $85 million and $95 million, which is a $7.5 million increase at the midpoint from our prior outlook.

The increase in our adjusted EBITDA outlook is primarily driven by a strong performance in the first quarter, ahead of our expectations and our increased confidence on driving operational efficiencies for the rest of the year. Consistent with our commentary on our 2024 revenue outlook, we expected adjusted EBITDA year-over-year growth to be higher in the back half of the year when compared with the first half adjusted EBITDA growth. As a reminder, we delivered an exceptional second quarter last year and the year-over-year comparisons get improved as we enter the back half of this year. The outlook also allows us to take advantage of opportunities to acquire even more customers if the unit economics remain compelling and we continue to be highly targeted in deploying our marketing investments.

We’re planning for a macro and FX environment that remains consistent with what we’ve seen in the first quarter of 2024. Our continued global diversification, resilient customer base and increasing scale help us to mitigate localized macroeconomic or FX trends. Overall, we are pleased with the solid start to the year, and our business remains robust and resilient as we serve customers that have a recurring need to send money home. With that, Matt and I will open up the call for your questions. Operator?

Operator: Thank you. [Operator Instructions] One moment for our next question, please. And it comes from the line of Andrew Schmidt with Citi Global. Please proceed.

Andrew Schmidt: Hey Matt, hey Hemanth. Thanks for taking my questions here. I want to dig into the first quarter performance a little bit. I understand that there’s normal seasonality there, but historically, you guys have done a great job of delivering upside expectations. So, I’m wondering if maybe you could elaborate if there was anything else as normal seasonality that surprised you? It sounds like customer behavior was pretty consistent, but would love to kind of peel back the layers here better understand if anything played out differently versus your initial expectations? Thanks a lot guys.

Hemanth Munipalli: Yes, awesome. Thanks, Andrew, for the question. Really excited. I think we’ve had a really strong start to the year. Q1 was well within our expectations. We expected obviously, seasonal patterns are known to us historically. So, nothing different in Q1 that we’ve seen in some of the other quarters as well. So, very consistent. And just to reinforce the customer behavior patterns have been as well as super consistent. We’ve seen increased engagement, transaction intensity, all these patterns that we track our activity rates and so on with our customers, very consistent. We had record new customer acquisition as well. So, we’ve seen a lot of consistent patterns in Q1, and we continue to be excited about the year.

Matt Oppenheimer: Yes, Andrew, the only thing I’d add is having built this business over the last 10-plus years, there is seasonality to the business and Q1 has less seasonal activity, as I mentioned in the opening remarks, just due to fewer holidays. But if you look at the overall performance of our cohorts, if you look at the overall fundamentals of our business, I think are looking very strong. And so excited about the rest of the year and excited about the fact that out of the gate, we grew 32% year-on-year for a business that now trailing 12 months is at over $1 billion in annual revenue. And that’s something that — those two metrics in combination, combined with the improvement on adjusted EBITDA, give us a great start to the year that we’re really proud of.

Andrew Schmidt: Absolutely. No, it’s a great growth rate. That’s fair. Maybe to dig into marketing expense just a little bit. So, I understand, again, the seasonality in the first quarter, but it’s a little bit lower versus our expectations. Has the strategy around performance marketing changed at all? Were you able to deploy as much marketing as you wanted to in the quarter given CAC levels? And then as we think about the full year and I understand that there’s some scale in the back half potentially with marketing expense, how should we expect at least what you’re thinking about right now marketing expense trend? Thanks a lot guys.

Hemanth Munipalli: Yes. Thanks Andrew. Yes, great question. And I think when we look at marketing, again, the whole quarter was very much in line with our expectations, same applies to marketing. To your point, we did sequentially reduced marketing expense as we can expect it and in plan, and we’re able to acquire record new customers in the quarter as well. So, we look at unit economics very closely, and I think that’s one of our competencies that we’ve built over the years. When we look at lifetime values of our customers, we look at cost of acquisition to look at those ratios, very consistent across the board. We’ve seen, again, on the LTV front, consistent behavior from our customers. So, it gives us continued conviction that the investments we’re making in marketing makes a lot of sense for us when we think about payback and these investments have less than 12 months payback as we called out in the prepared remarks as well.

In terms of trends, and similar to what we called out last quarter, we do think that as we get to the back half of the year, some of the growth rates in marketing will decelerate in the back half of the year, which is also reflected in our guide for the year. So, no change in our strategies around marketing investment, excited about the customers we’re acquiring and the paybacks that we’re seeing.

Andrew Schmidt: Got it. Thank you very much Hemanth. I appreciate the comments.

Operator: Thank you. One moment for our next question, please. And it comes from Ramsey El-Assal with Barclays. Please proceed.

Allison Gelman: Hi, this is Allison on for Ramsey. Thank you so much for taking our question. So, it seems like customer acquisition is a key focus here, and you have some really interesting marketing initiatives in the works. Do you think you could give some updated thoughts on where you’re seeing new users come from? And maybe how that was apparent as shown in today’s results? So, just where are you taking share from when you’re acquiring a customer? Is it a customer who’s brand new to remittances? Are they coming from a digital channel or brick-and-mortar? Just some updated thoughts here on what your general view is would be really helpful.

Matt Oppenheimer: Yes. Thanks Allison. If you look at where our customers are coming from, it’s a wide range of competitors. It’s a very fragmented market of which, as we’ve mentioned, we’re only 2% of the overall market. Most customers — it really depends on the market, but most customers have — are not necessarily new migrants, given that there are 250-plus million immigrants that live and work outside the country they are born. And so lots of room to grow within that customer base. And lots of marketing opportunities that ties a little bit to Andrew’s question, but we have no shortage of opportunities of high-return marketing channels to invest in. And we’re seeing some of the channels that I talked about in the opening remarks in terms of being able to focus in certain geographies like L.A. seeing good returns from marketing channels like that.

And our product continues to get better and better every day in terms of the reliability and speed. And so that also creates a word-of-mouth effect that we’re really excited about. So, while you do see the — the net adds being lower in Q1 because of seasonality of the retention, the number of new customers coming in at record numbers is really exciting for what it holds for the rest of the year.

Allison Gelman: Thanks so much. Very helpful.

Operator: Thank you. One moment for our next question, please. And it’s from the line of Will Nance with Goldman Sachs. Please proceed.

Will Nance: Hey guys. Appreciate taking the question. I wanted to ask about maybe some of the interplay between the revenue yield on volume and the transaction costs that you mentioned. Just knowing you guys have very dynamic pricing, and it seems like there’s been a lot of mix shift just in terms of the rates of digital versus in-person disbursement. I’m just wondering if there’s anything to be aware of as we think about kind of the continued reduction in transaction costs and sort of your reaction function to gross revenue when you see these shifts to either lower cost payment methods or you gain scale, I guess, said a different way, like are you guys passing on any of the benefits of transaction costs to the customers? And if we see benefits to transaction costs, should we also expect all the people to see the gross take rate come down?

Hemanth Munipalli: Yes. Thanks, Will, for the question. There’s a lot in there to unpack. But maybe just beginning with underpinning it around LTV. We really focus on making sure that we’re improving, growing the LTV with our customers, and that’s where the real value is. And we look at obviously, customer behavior trends, which we talked about. And I think you called out the digital trend there as well. And we’ve seen improved mix towards digital transactions, which, again, the 500 basis points this quarter, similar to last quarter as well. So, as a digital-first player and now at significant scale globally, we’re excited about that trend. And that certainly has a degree of impact in terms of the mix shifts that we’re seeing.

But I would say broadly on when you asked about take rate, there’s a lot — there’s other mix factors in there. We’re obviously in multiple geos, et cetera. And when we see our overall take rate with an average of an average, we continue to remain in a band that we’re comfortable with. It’s in the 2% to 2.5% range, it was very close to what we had sequentially last quarter as well. So, no real changes. There is obviously some underpinning mix shifts that we called out, particularly the digital trend there. On the transaction cost side, yes, we continue to improve. We think that having more direct connects, reducing friction with — friction in the entire process are all things that will help us reduce transaction costs and Matt talked about that in his prepared remarks as well.

So, I would kind of disconnect a little bit around kind of the take rate percentage and the transaction margin percentages. I think they’re somewhat not completely directly related. But we’re seeing great value we’re providing to our customers reflected in what you’re seeing in terms of revenue growth and activities and an improvement on the transaction expense side as well. Anything further to add Matt?

Matt Oppenheimer: I think — yes, Will, it’s a great question. I think the punchline answer to the take rate question is mix shift. So, that’s within the normal band. There’s nothing that’s happening from a competitive standpoint in Q1 that changed that. And then I love your question around digital disbursement because I think that we have a strategic advantage with our digital-first approach at scale to continue to drive variable costs out of the system. And as we do that, we can decide how much we pass along to customers versus how much we pass along to improving transaction expense, but lots of room for us to continue to differentiate there. And we’re leading the way when it comes to digitization, and we’re really, really excited and proud of that and excited about what it will hold for our customers as we look forward.

Will Nance: Yes. Awesome. Makes a ton of sense. And then just maybe as a follow-up, the seasonality kind of dynamics, I think, kind of coming up every other quarter. And I hear the commentary on sort of the cadence in the back half of the year, which is, I guess, great to hear the confidence. And I guess I wanted to follow-up on the commentary that the growth rate should actually be stronger in the second half of the year on easier comps. And I guess maybe can you just expand a little bit more on that? Like I guess, when we think about seasonality, it kind of seems like in every other quarter type of thing. And so when you talk about the stronger growth rates in the back half of the year, — is that mostly a comment on the third quarter? Or are you generally expecting to see acceleration even as we lap what was a pretty stellar performance in the fourth quarter last year? Sorry to be so nitty-gritty on the quarters here.

Hemanth Munipalli: Yes, I mean I think the way that we were trying to frame up this to help people understand seasonality. Of course, there are seasonal patterns, which largely relate to sort of holidays and gift-giving periods. And we kind of see that again in Q2 with some of the holidays coming up or have come up earlier this quarter. Now, to your question on growth rates, yes. I mean I think when we look at last year, first half, second half and this year, first half, second half, we had really exceptionally strong first half of 2023. So, when we think about sort of in terms of growth rates, I think that’s kind of why we wanted to share a little bit more around how we think about Q2 as you already have the numbers for Q1, but we do think that Q3 and Q4 will have improved revenue growth rates from that context, we’re within the guidance range, again, reinforcing the 30% to 32% for the full year.

So, that’s how it sort of plays out. There is the year-over-year comparison and then there’s sort of the seasonal elements underpinning all of that. I also just want to point out that we’ve had record new customers. We continue to be excited about adding a lot of new customers. Our base has continued to grow, and we’re seeing really strong active customer growth. We talk about QAUs and the metric that we share, but we’re excited that we’re continuing to build a very strong base of customers here.

Will Nance: Got it. Appreciate you taking the questions.

Operator: Thank you. One moment for our next question, please. And it comes from the line of Tien-Tsin Huang with JPMorgan. Please proceed.

Tien-Tsin Huang: Thanks a lot. I just want to clarify on the new marketing efforts. I know you mentioned something here in L.A. Do you think some of these investments will be more focused in the second quarter? Or is this more spread out? Do you see it spreading protect other cities or regions as well based on what you learned? Just trying to understand what’s new versus structurally change in in your approach on marketing?

Matt Oppenheimer: Yes. Thanks Tien-Tsin. I would say it’s a continuation. So, this is not something that’s dramatically new or different. It’s more rolling out what we’ve done in new geographies. So, I wouldn’t expect there to be large spikes quarter-to-quarter, and we’ve got a lot of confidence in the playbook that we’ve rolled out. So, I just mentioned the L.A. example is one, but we’ve got a lot of other performance marketing channels that are great acquisition channels, especially during times that customers send like Mother’s Day and other seasons like that. So, continuation and proven channels that we’re excited about the continued return from this.

Tien-Tsin Huang: Okay, great. And then just quickly on the — I know a lot has been asked around seasonality. Just how about — with the volatility in foreign currency, especially strong dollar here, is there anything to consider with respect to pull forward of growth? I know it would be transient, but just figured I’d ask. And also as FX volatility callout with respect to take rate fees monetization, that kind of thing?

Hemanth Munipalli: Yes. Thanks, Tien-Tsin, for the question. When we look at on a global basis, we don’t see we have an increasingly diversified portfolio of corridors, and we see FX sort of impact everywhere. And generally speaking, on a constant currency basis, as you can see, our revenue growth rate was plant. And so nothing specific to call out in terms of FX there. There’s always going to be some degree of FX sensitivity for short periods of time at certain transaction sizes, and we see that as well. But on an aggregate basis, as we look across, we haven’t seen anything that is material or significant to the results.

Tien-Tsin Huang: Good. Thank you.

Operator: Thank you. One moment for our next question, please. And it comes from the line of Rufus Hone with BMO. Please proceed.

Rufus Hone: Hey guys. Thanks for the question. I wanted to ask about the competitive environment and really just whether you’re seeing any incremental change in competitive intensity? Any extra color there would be great. Thank you.

Matt Oppenheimer: Yes. Yes. thanks. Let me take that one. And the headwind there is, as you do, we look at the competitive dynamics, and we haven’t seen any material changes in Q1. I think that’s indicative of the fact that it’s a very large market, as we’ve mentioned, we’re 2% of that very large market. And we’re outperforming that market. If you look at the scale and size and growth rate combined of the $1 billion in trailing 12-month revenue and 32% year-on-year growth. And when you look at why that’s the case, the — we tend to be more customer than competitor-led. And when you look at the product that we have built and that continues to get better every day in terms of reliability, in terms of speed, in terms of a lot of those descriptors that we called out that our customers use to describe our products.

That results in strong retention in an industry-leading product, and we’re excited about continuing to have the kind of growth that I mentioned as we look forward. So, no changes to note in the competitive dynamics other than the structural benefit that we believe we have as a digital-first player at scale and how that resonates in our product.

Rufus Hone: Okay. And just a quick kind of unrelated follow-up on Remitly Circle. I was wondering whether there was any sort of update on progress there? Thank you.

Matt Oppenheimer: Yes, sure. We continue to be really excited about the ability to offer broad financial services for our customers. And as I mentioned during last earnings call, we’re investing in what we call our technology platform, and that has paid dividends when it comes to the efficiency and velocity of our engineering team in terms of taking what’s more of a monolith to a more decoupled platform that we’re using to not only deploy code and deliver faster for our remittance customers, but also we’re making very targeted investments that are more efficient to make those investments on top of that technology platform in what we call complementary products and services. And so Circle is one of those. And given our scale and size of the business and just our approach in general, we like to have products get to more materiality before we talk about them broadly, but excited about what’s to come with Circle and another area that we’re investing in when it comes to [Indiscernible] products.

More to come there in the future, but excited as ever about the opportunity.

Rufus Hone: Thank you.

Operator: Thank you so much. One moment for our next question, please. And it’s from the line of Cris Kennedy with William Blair. Please proceed.

Cris Kennedy: Good afternoon. Thanks for taking the question. Matt, you talked about the structural profitability of the business. Can you give us your updated views on the long-term margin opportunity here?

Matt Oppenheimer: Yes, I think I can — why don’t I let Hemanth — and then I’m happy to jump in.

Hemanth Munipalli: Yes, awesome Yes. Thanks for the question, Cris. Yes. I think when you think about, first of all, maybe stepping back in here, I mean, we — I think we reiterated that we have a significant growth opportunity in cross-border and remittances, and we’re excited about that. So, we really anchor around the growth trajectory, and we expect to be in sort of having that as being the primary focus of all of our investments that we’re making. But as we look across the P&L, as you’ve seen, we’ve been delivering improvements in transaction expense reduction. And frankly, also really excited about the work that’s been done in reducing our customer service expenses, which has been reducing year-over-year basis quite substantially with both processes as well as bringing some of the AI and other technologies into it.

We’ve renewed — or I say have even more focus on operational efficiencies, and you’ve seen that now with our EBITDA performance in the quarter and our increase in our confidence for rest of the year in terms of increasing our EBITDA. So, we are making progress on improving our margin, to your question, but I think it’s a little bit too early for us to talk about long-term margin profile. The business fundamentally has very strong unit economics and we’ve seen that to continue to play out. We’ve seen strong retention and those aspects of customer behavior. So, we want to make sure we’re taking a balanced approach. But keeping in mind there is a cost of the capital and delivering the returns, both for the near, mid, and long-term. So, early to talk about long-term margins, but making good progress on that front.

Matt Oppenheimer: Yes. And Cris the only thing that I would add on that front is remittance businesses, our payments business is inherently, and payments business is at scale are — get a lot of leverage and cash flow when done effectively and correctly, especially digital payments companies. And I think you’re seeing that if you look back, I mean, even a year ago, it’s easy to lose — I mean we had just over $5 million in adjusted EBITDA a year ago. We’re $19 million in the first quarter of this year, and we’ve guided to $85 million to $95 million in adjusted EBITDA for the year. So, that kind of ramp gives you a sense of how the business is getting leveraged. Now, we’re still growing at 32% year-on-year, while getting that leverage because we want to balance growth and profitability.

But we’re — I will tell you, having again run this business for the last 10-plus years. Five, 10 years ago is really hard to start getting leverage out of the business because we just weren’t quite large enough. Now, we really have the dials around how much we want to drive down to the bottom-line versus how much we want to grow and we’re excited about the momentum on both the top and the bottom-line and what’s to come.

Cris Kennedy: Great. Thank you for that. And then just you mentioned April, can you give any more color on kind of the trends that you saw in that month? Thanks for taking the question.

Matt Oppenheimer: Yes, I’m happy to take that one, Cris. I think that it’s a really important and good question because I think that we’ve been pleased with the activity — customer activity in April as we’ve seen, given the seasonality points that we’ve made. And obviously, we look at monthly active rates in addition to quarterly active rates. And so as we look at our QAU goals for Q2, we’re feeling good about those. And it reinforces that there’s seasonality to the business and customer retention continues to be strong. The customer acquisition continues to be strong, which gives us confidence in the rest of the year, as we mentioned. And the one other thing I’ll make on this because I think it is related is we don’t internally use the term net adds.

We do obviously look at quarterly active users, but net adds somehow would signal that these are like new customers coming into the business. And different customers are active in different quarters, hence the seasonality. And when you look at the activity rate in April, it further reinforces that we’re excited about our continued retention and the great product that we’re continuing to deliver for our customers.

Cris Kennedy: Thank you.

Operator: Thank you. One moment for our next question, please. And it comes from the line of Darrin Peller with Wolfe Research. Please proceed.

Darrin Peller: Hey guys. Can we just circle back to the digital dispersed transaction trends in terms of the amount of the volume per transaction and the trend line it’s been dropping a bit for a little some time now. I just kind of want to understand some of the dynamics there and what you see in terms of stabilization — or maybe when you could see stabilization on that front? And maybe a little more on the dynamics driving that?

Matt Oppenheimer: Yes. Sure, Darrin. Yes, great question. I think that we do see in some markets an increase in digital disbursement trends, which we view as a real positive for our business. And it might mean that customers transact more frequently but a lower average transaction amount, given how easy it is and the variable cost and effort of sending to a mobile wallet as opposed to cash pickup, both take that cost out of the system and makes it easier for customers. And so we feel very well-positioned to lead some of those transitions in some markets. But I can’t emphasize enough that it really varies depending on the market. We’re in 170 countries. Some markets remain predominantly cash pickup, some markets are mobile wallet, some markets are bank deposit.

A few markets are even home delivery, where a courier will come deliver cash to one’s home. And what we’re good at is getting customers the funds the way that they want to receive them looking very intentionally at the variable costs that feed into that lifetime value and then offering a great product to customers that meet their needs. And given our scale and size, we also have more and more leverage to drive down those costs and do more direct integrations to make that experience more affordable and much faster and more seamless. So, we see these trends as positive for our business, and they do very tough depending on the country that customers are sending money to.

Darrin Peller: All right. Thanks Matt. I guess maybe just one quick follow-up would be on the corridor ad potential. It just looks roughly flat if I’m reading it right. And curious to hear what the opportunity in the pipeline is there? And then just, I guess also a quick follow-up on Circle. I didn’t hear anything around timing expectations more than just — obviously, it is a big opportunity. Just any more color you can give us on potential cadence or timing around it? Thanks again.

Matt Oppenheimer: Yes. Yes. On the first question, we are now at over 5,000 corridors and there is no shortage of opportunity for us to grow in both the corridors that we’re in as well as new corridors that we can add. And so I mentioned Sub-Saharan Africa as one region, and I’ve mentioned a few others in the past. But it’s not like we need to launch new corridors to drive even short or medium term growth. We will still launch new corridors because we’re in this for the long-term, and that is how we have had the compounding growth over the last decade plus. But the point on corridors is there is no shortage of room to grow in corridors that we’re in, including corridors we’ve been in for the last 10-plus years. And so lots of opportunity to grow in new and existing corridors.

And on Circle, I broaden it to complementary products, and it’s a fair question around timing. We’ll talk more about it once it gets to the material point that we think it makes sense to talk about it. But I would view that as a complementary product and a way that we’re deepening relationships with our existing customers and excited about the early results we’re seeing there and more to come in the future.

Darrin Peller: Okay. Thanks guys.

Operator: Thanks. One moment for our next question, please. And it comes from the line of Alex Markgraff with KeyBanc Capital Markets. Please proceed.

Alex Markgraff: Hey guys. Thanks for taking my questions. Just a couple for me. First, Matt, on the accelerated ACH offering that you mentioned going live later this year, any sort of considerations around the economics of that payment method versus what exists today for Remitly?

Matt Oppenheimer: Yes. Yes, we’re excited about launching Fast ACH later this year. And the economics are favorable in the sense that we can offer a faster product without having to pay some of the card processing fees. And so that’s something we’re excited to be able to offer to our customers later this year.

Alex Markgraff: Okay, great. And then sorry to belabor the point on net adds or if that’s not the right metric, just quarterly actives. But I guess I’m trying to sort of square some of the comments on seasonal opportunity to add customers with the comments around record new customers. And then what I think a lot of folks do look at externally the net adds. So, just I guess I’m struggling to sort of piece that all together and if quarterly net adds is not the right metric to look at? Just any sort of guidance on how to better think about that and capture how you all are thinking about it internally, it would be helpful?

Hemanth Munipalli: Yes. Yes. Thanks for the question, Alex. I think yes, I think we — obviously, with the metrics we share, we understand the math that’s being done there. But we just wanted to make sure there’s clarity in the sense that there are customers who are active in different periods of time and the seasonality there plays into effect. And in terms of record, so when you think about Q1 in particular, maybe this is the simplest way to answer, January and February are generally much lighter months than most months in the year. And March is where activity starts picking up. And so when we looked at that and saw a significant portion of new customer acquisition would come in later part of — came in the later part of Q1.

So, I think this is around — you have to look at almost monthly active users to look at what’s going on in terms of the rates there. So, that’s probably one of the better metrics, and we track that internally and pretty excited about how our marketing and other efforts are helping us acquire new customers.

Alex Markgraff: Okay. Thank you, Hemanth.

Operator: Thank you. One moment for our next question, please. And it’s from Andrew Bauch with Wells Fargo. Please proceed.

Andrew Bauch: Hey guys. Sorry to ask duplicative questions at the back end here. But I guess looking at the yield trajectory that you’re seeing in the business now, I know it’s — we’ve been talking about the digital piece of the business and the like. But is there any way to get comfortable on how we should be modeling this gross yield trajectory through the remainder of the year? And what — is it mix that you kind of anticipate shifting back into higher yield corridors? Or is it — are we all looking at this kind of on the wrong way? Because I think that’s the key piece that people are trying to focus in on.

Hemanth Munipalli: Yes, I don’t think there’s a necessarily the easy way here, Alex, to model that out because there are quite a few mix effects when you look at the take rate, if you will, effectively but largely depends on the average transaction price, and that sort of changes corridor, it changes based on obviously the digital trend that we talked about or other options that customers might choose to prefer. So, we do look at it on an aggregate average basis, which just tends to operate in a range. And I think the best way to model that going forward is to keep it within the range.

Matt Oppenheimer: Yes. And the only thing I’d add is I don’t — while we’ve talked about some digital trends, when you’re saying yield, I think you’re referring to take rate. And I think that there hasn’t really been trends in terms of take rate as much as there is a mix shift a bit quarter-to-quarter, but it’s not hugely material when you look at that amount of mix. And what we’re focused on is things like ARPU and specifically average revenue per transaction and profit per transaction and fewer trends there as much as how we think about modeling the business. So, no big trends on the take rate side, outside of mix shift.

Andrew Bauch: Got it. Understood. And then, look, it’s been two, three quarters now where we’ve had this higher levels of marketing spend. And I’m trying to understand on when you do ramp-up investments in marketing. What are those LTV curves look like? Should we be anticipating some more returns in the way of customers, be it on a gross or a net basis in 2024? Just trying to wrap my head around that comment around new customers added in 2024 relative to 2023 is still something we should be relying on?

Hemanth Munipalli: Yes. Nothing fundamentally has really changed in terms of our marketing return profile remains very strong and consistent. We’ve previously shared ratios of LTV to CAC and they tend to be in the is sort of range and with payback period less than 12 months. So, there’s a lot of consistency in that, and so there’s really no change in that. Now, when we think about sort of sequential growth Q1 to Q2 in terms of quarterly active users, given the trends that we’ve seen in April that Matt talked about very much in line with our expectation. We do expect an increase in terms of sort of seasonal growth and other growth with even the new customer acquisitions we’re doing for Q2 versus what we had in Q1.

Andrew Bauch: Got it. Thanks for the questions.

Operator: Thank you so much. One moment for our last question, please. And it comes from Matthew O’Neill with FT Partners. Please proceed.

Matthew O’Neill: Hi guys. Thanks for squeezing me in here. I think most of the questions have been asked and answered, and I’ll follow-up real quick on Darrin’s corridor question. Just curious, philosophically, around 5,000 I think some competitors are a few multiples of that. Is that something that you guys collectively think about internally is a number that is a target to achieve on a quarterly basis or more of an outcome that just kind of happens over time, recognizing that all corridors are not created equal? Thanks.

Matt Oppenheimer: Yes. Yes. Thanks Matt. I view us getting into that many corridors in the future. But it’s in our DNA, given how corridor-specific this business is and how unit economic focus this business is to do it in a really intentional way. And so if you go back to the early days of Remitly, we spent a couple of years just focused on the U.S. to Philippines, and we got that right and then we scaled in the right way. And the good thing is about where we’re at now is we have a portfolio of 5,000 corridors to be able to grow in, all of which there’s growth opportunity. And we also have corridors that we can continue to launch over the coming quarters and years. So, no shortage of growth opportunities, as I mentioned, lots of new corridors to be able to grow in currently and a playbook to launch new corridors in a really intentional way.

So, we launched them in the right time with the right efficiency, with the right playbook as we’ve always done to be able to fuel long-term growth.

Matthew O’Neill: Thanks Matt. And if I could just squeeze in one more follow-up to fully belabor the marketing questions. Would you say you’re still operating in a bit of a heightened kind of marketing spend paradigm, like you have communicated over the last couple of quarters? And if so, is it may be more of a structural shift that as you’re seeing scale come through in the business and transaction and other costs are coming down structurally that on a more permanent basis, you’ll want to sort of put more money towards the marketing going forward?

Matt Oppenheimer: Yes. Thanks Matt. And not belaboring at all. I think marketing in the data-driven way that we do is one of our competitive advantages and I’m happy to talk about it all day. I wouldn’t say that there’s a heightened marketing competitive environment right now. I think that it’s — I think that there’s continuation in terms of stability on that front. I think our marketing team is continuing to execute very well across multiple channels and multiple geographies. And we’re excited about the payback. We’re excited about the record number of new customers. And given the kind of cohort way that our business works with the seasonality, we’re excited about what that means for QAUs and revenue and, ultimately, profit growth in the quarters to come.

Matthew O’Neill: Great. Thanks so much.

Operator: Thank you. And that was the final question. I will now turn the call back to Matt Oppenheimer for closing remarks.

Matt Oppenheimer: Great. Thanks again everyone for the really thoughtful questions. As we always do at Remitly, I’d like to end the call by highlighting another one of our amazing customers, Rameel. And Rameel sends money from the United Kingdom to his family in the Philippines. He was one of the many customers who shared their feedback with us last year, and Rameel commented trustworthy, reliable, fast, and most of all, I feel safe. We want to thank Rameel for placing his trust, which is ultimately what our product is all about in Remitly and for his recognition of the safety, reliability, and speed of our service. And we want to thank all of you for joining us, and we appreciate your continued support. We are excited about the opportunities ahead and we 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 all for participating and you may now disconnect.