Q3 2021 Remitly Global Inc Earnings Call

November 10, 2021

Good day, ladies and gentlemen, thank you for joining <unk> third quarter fiscal 2021 earnings conference call.

I'll now turn the call over to Stephen <unk>, Vice President of Investor Relations to begin.

Good afternoon, and thank you for joining us for <unk> third quarter 2021 earnings call joined.

Joining me on the call today are Matt Oppenheimer, co founder and Chief Executive Officer, a permanently 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 Dot <unk> Dot Com. Please note that this call will be simultaneously webcast on the Investor Relations website.

Wept section of the company's 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 <unk> future financial.

Actual 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 <unk>.

<unk> assumes no obligations 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 each of these non-GAAP financial measures to the most directly comparable GAAP metrics. Please see our earnings press release, which is available on the IR Sir.

<unk> of our website now I will turn the call over to Matt to begin.

Thank you Stephanie and thank you all for joining us today for our first earnings call as a public company. It's been a pleasure to meet many of you throughout the IPO process and we look forward to building relationships with those of you who have not yet met.

I'd also like to recognize our customers and our employees, who are central to our vision and success and has been instrumental in our transition to becoming a public company.

We're proud of our results this quarter and excited about the outlook for the future Q3 revenue grew 69% year over year and key metrics were strong across the board.

Quarterly active customers increased by more than 50% year over year with strong average revenue per active customer.

This demonstrates the value our customers find in our platform as they send more frequently with us with send volume up 61% year over year.

The third quarter was a strong start to our new chapter as a public company and as we often say, we're just getting started.

The four Susanna dives into the numbers I'd like to give a brief overview of <unk> for those of you who are less familiar with our story.

<unk> vision is to transform the lives of immigrants and their families by providing the most trusted financial services on the planet achieving.

Achieving that vision to begin with solving the key pain points, our customers face within financial services, which is the need for fast convenient transparent and affordable cross border remittances in Q3, $2 6 million customers trusted remotely to safely deliver their hard earned money home to their loved ones. We are grateful to.

Those customers and as we look towards the future we want to continue to transform remittances and broader financial services to serve millions more customers in the years ahead.

Today, there are over 280 million immigrants worldwide, who may be excluded from fair access to everyday financial services that can be used to support their loved ones build wealth and achieve financial security. The inspiration behind remotely came when I was living and working in Kenya, and saw how difficult and painful it was descent and risk.

Seed money overseas and I learned just how far those funds go in the communities where they are received.

I also learned just how complex cross border remittances really are much more complex than most people realize due to a myriad of hurdles, including regulatory compliance payment collection payment disbursement fraud prevention and core infrastructure challenges inherent in the industry. Additionally challenges all has to be solved at a low.

<unk> level across thousands of corridors, where mainly was founded to answer to these challenges and to transform the industry by creating they're an inclusive financial services products for immigrants around the world.

<unk> has a differentiated approach based on four pillars first where mobile centric second we have a vast global network of funding and disbursement partnerships third we are localized at scale and fourth we're highly data driven leveraging a sophisticated and proprietary technology stack. These pillars guy.

Our strategy and I'll be highlighting the first two on today's call I look forward to updating you on our other pillars in future earnings calls.

Let me begin with our first pillar our integrated mobile first platform, which is the foundation upon which the company was built it is incredibly challenging to create a mobile interface that is easy to use fast secure and tailored to exactly what each customer needs. Knowing this we built our digitally native platform from the.

Ground up to ensure it could answer the demands of our customers who are clearly migrating to the convenience and security of our mobile platform.

<unk> platform execute each transaction individually factoring in the risked customers risk profile transaction size speed and geography, among many other considerations.

All of this within a seamless and easy to navigate user interface for.

For our customers. This means onboarding and repeat logins are quick or easy and our secure <unk>.

Leverage multiple security layers layers to keep customer data safe and with our machine learning, we can assign a risk score to each customer to designate the amount of information we need from them based on their risk profile.

We also have machine learning based electronic <unk> or know your customer fraud, scoring and payment authentication processes, which take place in real time to give our customers immediate feedback and peace of mind.

With this digital mobile mindset, we are uniquely able to solve some of the biggest problems our customers face, including inconvenient and limited store hours long wait times and manual forms not to mention exorbitant fees that means fewer funds in the hands of their loved ones back home.

We are incredibly proud of the methodological work, we have put into localizing the <unk> journey for our customers to make sure. Each transaction is flawless no matter. The geography, whether you are sending the money in Mexico, or Kenya or any of the more than 120 receive countries.

Of course to deliver this unique mobile experience at scale. It was also critical to build out a network capable of supporting it which is where our second pillar comes in our vast global network.

Our global Disbursement network conveniently puts money in the hands of our customers families wherever they are beating via our leading global network of payment collection and disbursement partners. This enables our customers to send to over $3 6 billion bank accounts over 660 million mobile wallets and approximately <unk> <unk>.

380000 cash pick up locations.

All of this results in a powerful flywheel in which improved customer experience drives more transactions, which gives us more scale to invest in our network, which improves the per transaction unit economics, driving even more transactions. The velocity of these integrations is ever increasing and our network moat is growing all.

Thanks to the quality of the disbursement network that we've built.

And while the breadth of this network is remarkable the depth and quality are equally important our extensive compliance and risk management capabilities as well as our focus on extending our partnerships have been and will continue to be key to capturing more of our large total addressable market, which we estimate to be one five trillion.

Remember he has now completed more than 100 direct integrations with financial institutions in Asia Africa, Europe, and Latin America, and we have executed these integrations in the right way leveraging our custom built API to ensure transactions with these partners are state of the art and create a best in class customer experience.

These direct integrations result in more peace of mind for our customers by making transactions easier compliance checks more streamlined.

Partner outages more transparent and transactions faster.

Given the scale complexity expertise and years required to build out a network like ours, we recognized the opportunity to offer other businesses the ability to integrate cross border payments in order to provide locally relevant payout options to their customers with a simple and custom built API.

To that end, we are proud to have launched our <unk> product offering remotely for developers or RSD.

Were seeing businesses value RFT because of our locally relevant payment methods fast delivery speeds and superior customer experience.

Last month, we announced that remotely supports <unk> pilot of next generation digital wallet using RFT. This partnership enables that nobody customers in Guatemala to offer <unk> funds from their <unk> wallet to convenient cash pickup locations powered by <unk> robust distribution network.

Due to the quality of our network and our unique capabilities, we expect to enter into additional partnerships of a similar nature in the future.

The projected unit economics of the RFT product will drive high returns and more transactions flowing through our distribution network, which enables us to invest more into it creating an even better customer experience more defensibility and lower costs for remotely we view this as an opportunity to increase our penetration in our serviceable.

<unk> market since the use cases for these products are often if not always fundamentally different than our core customer use case.

Additionally, in a market that is rapidly shifting digital and where <unk> share is growing quickly, but it is still nascent we believe we can gain share of the overall market.

RFD as well as passbook.

Our digital banking service uniquely designed for immigrants in partnership with Sunrise banks reflect <unk> long term vision to transform the lives of immigrants and their families.

Focusing on the long term also means laying a foundation for our strong ESG strategy as part of our commitment to ESG, we joined the pledge 1% campaign, while still.

The company and plan to donate 1% of the company's equity over 10 years to philanthropic efforts that work towards increasing financial inclusion for immigrants. We made our first contribution of approximately 182000 shares at the IPO and while our philanthropic and ESG strategies are still evolving their core to our culture and to our mission.

To close I'd like to share that building a mission driven business is operationally complex as remotely. It takes a team of highly engaged people who are United in our singular vision with a clear and unique culture.

Additionally, we have a set of values that define our culture and our culture is how we interact and how we get things done at remotely we take these cultural values very seriously and they are and central to our values is customer centricity.

You can trust that it the entire <unk> team will continue to stay laser focused on adding long term value to the to the lives of our customers as well as our shareholders.

This has been the key to <unk> success over the last 10 years and we believe is what will make us successful for many years to come with that I'll turn the call to Susanna.

Thank you Echo, Matt we had a very strong Q3 and brought our mission to life by serving our growing customer base to guide you as I walk through the results I wanted to share a few key financial principles and themes.

Our main focus going forward is driving continued strong revenue and customer growth.

Our anchoring on top line growth rather than on profitability in the near term as we are prioritizing high confidence investments that allow us to continue to capture an increasing share of the large addressable market that we serve.

We'll continue to scale investment with discipline and a constant eye on unit economics and high return on investment.

Second I will focus on non-GAAP operating expenses and adjusted EBITDA in my remarks.

These metrics exclude noncash items, such as stock based compensation and the impact of pledge 1%.

This will help you better understand and analyze the underlying trends in our business.

Third I'd like to provide our philosophy around guidance, we plan to provide annual guidance for revenue and adjusted EBITDA along with additional color on how we are thinking about growth and the investments we plan to make to drive us towards long term profitable growth.

We're committed to running the business in a way that will benefit our customers employees and shareholders over the long term.

Now, let's turn to our third quarter results.

Our Q3 revenue was $121 million at 69% year over year exceeding our expectations. This increase was primarily due to an increase in sand volume as a result of strong customer growth and increased transaction frequency, reflecting our differentiated offering and high levels of customer engagement.

As a reminder, our revenue primarily comes from the women's business, where we earn revenue on transaction fees and foreign exchange spreads applied to the customer's principle.

Trusted relationships, we foster with our customers and the repeat nature at their spending behavior has resulted in strong revenue retention rates.

This provides a reoccurring revenue stream with high visibility and predictability.

Sand volume increased 61% to $5 $2 billion compared to $3 2 billion in Q3 of 2020, driven primarily by the growth of active customers and also by the existing customers spending more money home to support their families.

Active customers those that transacted at least once in the quarter increased by 51% year over year to approximately $2 6 million in Q3.

This growth was driven by an increase in new customers. As a result of marketing investments are seamless user experience global network expansion and the continued growth in digital adoption.

During the quarter average revenue per active customer grew 12% year over year to over $47 as active customers transacted more frequently and spend more money than in the prior year demonstrating their reliance on recently.

This was influenced by an improvement in employment and many of our end markets and the mix of new and repeat customers within the quarter.

Moving down the P&L transaction expense was $47 6 million or 39% of Q3 revenue flat as a percentage of revenue year over year transaction expense primarily include fees paid to disbursement partners and payment processors transaction losses, and tools supporting fraud prevention and compliance.

Yes.

The remaining expenses will be discussed on a non-GAAP basis, excluding stock based compensation expenses, and a $6 $9 million noncash charge associated with the donation of our common stock in connection with our pledge, 1% commitment, which is recorded in GAAP G&A expense.

Customer support and operations expense, which primarily includes personnel expenses related to worldwide customer support was $12 million or 10% of revenue compared to 11% in Q3 of 2020 as a result of process improvements that increased our efficiency.

Marketing expense in Q3 was $29 $9 million up 61% year over year, driven primarily by higher direct marketing spend focused on new customer acquisition.

As a percentage of revenue marketing expenses decreased slightly to 25%. This is due to our existing customer base, becoming a larger portion of revenue while our marketing spend is primarily dedicated to acquire new customers. We.

We expect marketing spend as a percentage of revenue to increase in the fourth quarter is Q4 is typically a seasonally high period for new customers to join <unk> those customers will drive a return in 2022 and beyond.

Technology and development expense was $16 4 million up 67% over Q3 of 2020, driven by increased head count and personnel related expenses as well as software cost per employee tools and cloud services.

As a percentage of revenue technology and development expenses remained flat at 14%.

G&A expense was $15 $1 million up 113% year over year due to increased head count and personnel related expenses, along with higher public company related costs.

As a percentage of revenue G&A expense increased to 12% for Q3 of 2021 compared to 10% in Q3 of 2020.

Q3, GAAP net loss was $13 million compared to a $2 $4 million net loss in the third quarter of 2020.

This increase was primarily due to the donation of common stock in connection with pledge, 1% as well as incremental stock based compensation expense.

Q3, adjusted EBITDA was $325000 as we recognized stronger than expected revenue fueled by growth in active customers and transaction frequency.

This was partially offset by transaction costs and other operating expenses.

As reflected in our guidance, we don't expect positive EBITDA in the fourth quarter as we continue to make investments that we believe will have high returns in the long term.

We expect to continue to make significant investments in our business next year as well.

Turning to our balance sheet working capital at the end of the quarter was approximately 475 million, which included $305 million of net proceeds from our September initial public offering and concurrent private placement.

Working capital is an important liquidity metric for us and a good proxy for operating cash and that it removes the impact of customer funds that are included in our balance sheet within cash and cash equivalents and disbursement pre funding, which represents cash held in partner banks to be distributed to customers, but which has not yet been distributed at the end of the period.

Looking ahead to the full year, we expect 2021 revenue will be between 445 and $450 million up 73% to 75% year over year, driven primarily by reoccurring revenue from our existing active customers along with continued growth in new customers.

We expect 2021, adjusted EBITDA will be between negative 17, and negative $19 million as we typically see higher new customer acquisition activity in Q4, which drives higher transaction costs and higher marketing investments that pay off in future quarters.

We will also incur a full quarter of public company expenses.

And plan to continue to invest in product innovation.

While we don't guide to earnings per share, we will see a significantly higher share count going forward due to the conversion of our preferred shares and the shares issued in our IPO and private placement.

Looking ahead, we continue to believe that the investments, we're making in areas, including marketing and technology and development will generate high long term returns as we benefit from strong unit economics, and a large total addressable market.

In closing we're proud of everything we accomplished this quarter and are grateful to be able to provide our services to customers as they support their families. During this time.

With that Matt and I will open up the call for your questions.

Greater.

Ladies and gentlemen, if you have a question or comment at this time. Please press Star then one on your telephone keypad.

If your question has been answered or you wish to remove yourself from the queue simply press the pound key.

Again, if you have a question or comment at this time. Please press Star then one on your telephone keypad.

Our first question or comment comes from the line of Tien Tsin Huang from JP Morgan Your line is open.

Thank you very much congrats guys on your first earnings call as a public company that was also a good here.

I wanted to.

Then on the revenue upside that was better than what we had expected as you had called out here I mean interesting macro trends.

From month to month in the quarter worth sharing here.

Specifically curious if you saw a lift in users or volume with certain nations locking down.

Some of your work and peers.

Called out this earning season thanks.

Thanks, Tien tsin, great to hear from you.

In terms of macro trends I'd say the revenue upside was primarily due to the growth of active customers, which is really strong along with more transaction activity for those active customers as well.

On.

We saw 51% growth in active is really due to acquire more acquiring new customers.

With pretty strong payback and strong retention of the customer base as well.

On the revenue per active customer in the transaction activity in particular, we do believe that some of that may be due to an improvement in unemployment and many of our end markets. That's also due to the mix of new and repeat customers and some of our investments and engagement programs that really support our customers throughout their lifecycle. So I think there was.

Some some tied to macro conditions, there, but also just strong performance overall got.

Got you.

Makes sense and then just my quick follow ups you guys don't mind just on the <unk>.

<unk> partnerships, maybe if you can to the extent that you can maybe share a little bit more about how youre involved in what the revenue model is for Italy and.

Did fueled a lot of questions.

When this news came out on why partner right, if <unk> could potentially be in EMEA longer term.

What's the thinking on working with them.

Your thoughts on that thank you.

Yes, absolutely tension and great to hear from you.

Let me start with the kind of strategic rationale on crypto and I'll focus on the direct to consumer elements of crypto, though I'm happy to talk about infrastructure and kind of back end crypto opportunities later, but on direct to consumer I think it's important to recognize the remittance companies are fundamental fundamentally good at onboarding and off boarding funds into different currencies.

Cutting through all the complexity that's required to do that in those currencies can be fiat currencies that can be crypto currency. So the biggest threat to remittances as you alluded to potentially with nobody would be that there is a global default currency, where there is no need to exchange funds between currencies with that context. It is still something that we keep a healthy level of focus.

On and then turn that focus into a really clear strategy to ensure that really benefits from any changes in the remittance landscape and this is where we're excited about our RFD partnerships broadly with a few leading crypto companies and we find the most.

That we find the most compelling and while there is still I think as you know some major trust scaling regulatory complexities around the globe that make their success have been uncertain. We've seen we spent really years cultivating these relationships and establishing partnerships. So that were part of any upside that results from broader adoption.

Of crypto currencies, so with that context, we are really excited about the partnership with <unk> and <unk> has been an active partner of ours for over a year and they are able to take advantage of the significant work we've done to simplify the complex and really valuable remittance space into a simple tech forward product integration.

And so it allows us to monetize the large quality network that we've built into potential different use cases than our core remittance customer and in a very large market, where we only have 3% market share and keep in mind that while remittances are a feature of the <unk> wallet.

Our cross border wallet and not <unk> specific.

So it's possible that customers who are interested in those products are different from our core customers than remotely, which gives us an opportunity to expand into adjacent customer segments, but the thing that I'm. Most pleased about as it compares to other companies in this space is that instead of reacting we've.

We've taken a proactive approach and we have material upside given our partnership.

In a highly fragmented market and then lastly tension just to comment on the business model. Since you asked about that we charge a fee per transaction dispersed and the unit economics for RFD, our strong since the marketing costs are much lower for us and the potential cumulative transaction profit is sizable so it's very early days for some of those businesses.

We're excited about the proactive approach.

A very large market.

Thanks, so much for going through it.

Thank you.

Thank you. Our next question or comment comes from the line of Bob Napoli from William Blair. Your line is open.

Thank you and congratulations Matt Susanna.

On the IPO in your first call.

Really good numbers as well.

We also got a lot of questions on Navy, so, but I appreciate your detailed answer.

Just on the competitive environment.

The you are ramping up marketing really good numbers active accounts.

Transactions per account revenue per account.

What are you seeing in the market.

From a price competition and the ramp up in marketing.

How is the trend in cost per account how effective is the.

The marketing issue.

Ramping up great.

Yes, yes, great great to hear from you Bob and thanks for the question.

I think that is your question more about for advertising pressure in terms of pricing there or is it more about pricing and the industry overall.

And it gets.

Pricing in the industry overall, but plus now how effective has your marketing your cost per account trending as you've ramped up marketing.

Got it got it yeah that makes sense.

So if you think about pricing overall before I kind of jump in there I think the important thing to.

To recognize first and foremost if you think about why customers use our product is ultimately.

Come to us for peace of mind and peace of mind is something that.

And so when you think about it from that angle that is what I've learned over the last 10 years of building. This business I used to think it was much more about price.

And you have to build that peace of mind in order to acquire and retain customers and it's hard to do that with the complexity. So with that context, I think that from an industry standpoint. If you look at some of the digital players that have emerged like us we do take some some sizable cost out of the system, because we originate funds digitally and that I predict if you look at the kind of global average.

Of 67% at the World Bank quotes.

Down to our kind of call it 2% to 5% once you get into that new equilibrium as I call. It.

There is some elasticity because youre, taking sizable cost out of the system, but once you're within that new equilibrium there real variable cost to our business we have scale advantages.

Given our scale with some of those variable cost, but at the end of the day. There is a lot less elasticity given that the complexity of the peace of mind that trust is what customers care about and if you put yourself in their shoes, which is important to do and you think about <unk>.

Who is sending a few hundred dollars, who asked to provide us with a lot of sensitive information about themselves for compliance and risk reasons and is sending a sizeable portion of their funds back home is my information as a customer they are asking going to be treated with the security.

That it deserves is my transaction going to have a reliable experience that gives me peace of mind to the customer that is what customers care about the most and so that's where we continue to focus our effort in building peace of mind to customers.

Sure your question around marketing spend and customer acquisition Bob.

Just to continue on that thread, we really focus much more so on payback then on customer acquisition costs itself.

Just in terms of context and feel really good about the unit economics in our payback and LTV to CAC metrics.

At the same time in Q2 to Q4 of last year customer acquisition costs were positively impacted by the fact that the digital advertising environment was less competitive during COVID-19.

We are continuously expanding our marketing channels testing, new packaging options and really looking for more efficient and effective ways of driving growth as well.

Thank you and then my follow up question is just you guys have you.

You have expanded.

Core doors that you served pretty rapidly over the last couple of years and just any color on that.

The continued plans to expand corridor.

To expand our center markets as well, where do you see the largest opportunities.

Thanks, Bob Yeah. So if you look at our.

Just for everyone on the call in terms of just understanding the evolution of how we built room at least first important context for how we'll answer that question.

And we have taken a very localized approach given the complexity and remittances. So we started just with the use of the Philippines for a couple of years added than India, USA, India than U S to Mexico for the first several years to get the product right and the experience right and then we have scaled over the last five six years into corridors around the globe and our customer centric.

Way of doing it and the reason that I as CEO of appreciated that strategy as it gives us the opportunity to grow in our existing markets grow in markets that we've just launched and we're at 1700 corridor is now many of which we've launched in the last year or two.

And it gives us growth opportunities in new corridors that we have not yet launched so there's untapped growth opportunities down the road and so I would say that as you think about the growth of our business. The short and medium term will come from markets that we have been in for a long time, where theres still room to grow markets that we just.

Recently launched and then finally, we are laying the foundation for both send and receive markets that we will be rolling out in the future.

We don't announce those until they are actually live but you can trust that as we have in the past we're laying the foundation for those future launches to kind of drive the medium to long term growth of our company.

Okay. Thank you I appreciate it.

Thanks, Bob.

Thank you.

Next question or comment comes from the line of Ramsey El <unk> from Barclays. Your line is open.

Hey, guys. This is Ben on for Ramsey. Thanks, So much for taking my question.

I wanted to follow up on the question earlier about kind of the upside you are seeing in the Q4 guidance can you just maybe parse out a little bit you mentioned that Q4 is typically like a heavy quarter in terms of acquiring new customers just like the puts and takes between new customer growth in the quarter versus.

What you expect from a revenue per customer perspective.

Yes.

Thanks for the question Randy in terms of the puts and takes for Q4 on the revenue side, we do feel really good about the revenue growth that's implied in the 2021 guidance for Q4, Thats, 52% to 58% implied in Q4 revenue in particular.

Yet, we believe thats exceptional growth at our scale and the transition to digital will continue to remain a tailwind we are in an excellent position to capture that demand.

Restaurant level offerings in our vast global network, our ability to localize our scale and our data driven approach.

The take from in the very short term as I mentioned just on EBITDA guidance is that in terms of framing how we think about EBITDA revenue growth is our top priority.

Because it's such a large market and we have such low low market share.

But if you look at Q4 typically its a less profitable quarter, just due to the seasonality of new customer acquisition.

Don't see the full profit impact of those new customers when we acquire them in the quarter itself, but obviously that will drive higher revenue growth and profitability in future quarters, which is why would we continue to invest in them.

I also see full quarter of public company costs, and we also plan to continue to make investments in technology and development. So we have high confidence in these but these investments will pay off in 2022 and beyond but those are some of the puts and takes with respect to the Q4 guidance in particular.

Okay. That's very helpful. If I could ask one more maybe like a higher level question as you've kind of gone through and now starting to come out of the pandemic a little bit are you seeing any changes in the cohort behavior from new customers that perhaps were once part of the.

The unofficial remittance channels.

Moved into digital or more formal remittances and as borders are open up is there any change in behavior or are you seeing a lot of stickiness with that new customer group.

Yes, I can take that one I think.

First and foremost if you think about just the impact that Covid has had on our.

Customer base.

It is nothing short of inspiring given the fact that and it is a reminder of how important.

<unk> two.

Our customers loved ones and even during a pandemic, even especially during a pandemic and even during a recession the amount that they have prioritized getting money home to their families. Both makes rational sense. When you think about how our customers are leaving close family members parents siblings children at times extended family members. So I just want to call it.

It out because it's really shows the resilience and.

Inspiring nature of who our customers are I think that now shifting to the question around how our cohorts have performed.

The strength <unk> seen in aggregate in our financial performance is an output of the fact that the customers. We've acquired recently as well as customers who have been with us for a long time continue to prioritize sending money back to their families and I think that if you think about the shift that was gradually happening to digital.

And the trust hurdle that was required to get over that it changed the calculus for our customers during a pandemic, where it may be going to an offline cash location versus the digital alternatives. It became more attractive to go to that digital alternative antitrust that and once they have trusted that experience once they've once we've delivered peace of mind to our customers. We continue to see the nice.

Repeat behavior, given that they've had a good experience and they want to continue to send money home that way.

Okay, great. Thanks, so much for taking the questions and I'll Echo my congratulations on the successful IPO.

Thank you. Our next question or comment comes from the line of Darrin Peller from Wolfe Research. Your line is open.

Hey, guys Congrats again.

If you could just I mean, it's a bit of a follow up but it's a little bit more detail to the question around customer growth.

If you could just sort of break it out a little more by the new card or as Youre getting customers from versus the big three you guys have been in for some time.

Much traction are you, having with some of the new investment areas and then.

A bit of a follow up to the question before just with regard to coming out of a year and a half and then it now I mean are you seeing any change in patterns in the magnitude of your customer acquisition right now.

Can we can we basically expect a similar pattern in the next few quarters in terms of ads that we've been seeing.

Yes, so thanks.

Thanks, Darren for the question in terms of the first question.

Corridor dynamics there we are seeing you can see.

Yeah.

We are seeing higher growth outside of the U S.

Particular, so not surprisingly some of our newer corridors that are in Europe and other places.

Our growing more quickly than or us and so we're continuing to diversify geographically and mix shift away from those big three which were U S to India, Philippines, and Mexico. So we view that as a real positive for us.

For the business.

And in terms of the second question, which I believe was patterns around the magnitude of customer acquisition.

I don't know that there is yes.

Yes.

Go ahead go ahead, I'm, sorry, yes, sorry, just really how much you expect similar trends in future quarters for the what we've seen.

Yes, I think we're seeing continuing to see strong new customer acquisition.

And.

We were a high growth company before Covid and so I expect we will continue to be a high growth company after COVID-19.

Matt mentioned earlier I believe we did obviously see some digital acceleration during the Covid period.

And so where.

We're still feeling good about the customer growth and probably nothing nothing to anomalous to call out around the pattern.

Customer acquisition now outside of <unk>.

<unk> corridors.

Got it.

Can you just give us an update on some of the past broken initiatives in the financial services opportunities Youre customers are are going to be seeing in the coming months and years.

Yeah, absolutely. Thanks, Darren it's great to see you.

I think the first going back to the kind of complexity, that's inherent not only in remittances, but broad financial services. It also means that it takes just more time to innovate.

<unk> given all the things that we've talked about some of the things that apply to past book as well as remittances, but it requires also building out core features as well as differentiated features all with the right regulatory partnerships the right infrastructure and so with that context past book is still relatively new and it takes time to gain traction, but we continue to believe.

That providing broader financial services for immigrants is a significant opportunity that were uniquely positioned to solve and we look forward to sharing more progress on that in future calls.

Okay. Thanks, guys.

Thank you. Our next question or comment comes from the line of Andrew Schmidt from Citi. Your line is open.

Sure.

Hey, Matt Susanna Congrats on the first quarter's Copa company can speak with you.

I was hoping obviously a big topic is.

Can you sort of been through this pricing. So was hoping you could just remind everyone kind of your philosophy on pricing, where you're positioned and then I think when people talk about remains pricing.

That's the only characteristic theres, obviously other things.

Clay their trust.

Low friction and things like that so if you could talk about kind of your pricing strategy.

Overall decision, making process when someone choose that provider that'd be great. Thanks.

Yeah, absolutely Andrew.

It's good to see you.

And so I'll circle back on some of the points to start I think it was Bob who asked the question that ultimately I've learned over the last 10 years of building this business that.

It is important to first and foremost build peace of mind with customers and if there is historical very high pricing going then I think that there is a sensitivity as you bring it down to that new equilibrium that I mentioned, but once we're in that new equilibrium customers care more about other features such as well Mike.

Moneymaking home will my information be secure.

And elements like that and so we're continuing to see that our pricing philosophy is not always to be the best it has to be competitive. It is to be transparent is to focus on the long term relationship with our customers and that's how we set our pricing everyday both as it pertains to fee and foreign exchange and I think the last thing I'll say in terms of pricing philosophy is that the industry often talks about take rates.

And while that is important to talk about it at an industry level. When we talk about like the the numbers I mentioned earlier of six 7% down to two 5% at a customer level customers do not think in terms of take rate. They think about the total revenue that they are paying for in a transaction and that's fee and foreign exchange combined and so wind transactions.

Are much larger.

Then as you can easily do the math when talking about take rate take rate drops to be much lower and so that's also a really important thing to understand when thinking about our business and also looking at the industry. Overall is it take rate is largely a function of transaction size and as we think about pricing going back to your pricing philosophy point customers, Karen we focus much.

On what is that customer actually paying per transaction, which is fee and foreign exchange combined and customers are naturally going to be more sensitive around foreign exchange. If they are sending higher dollar amounts.

The per unit actual fee, they're paying if theyre, sending $2000 versus $250. They are paying customers don't think I should pay more I should pay eight times more if theyre, sending $2000 versus $250. So I always like to make sure. The industries understand your take rate and again going back to how we set our pricing is not always the best.

It's within that new equilibrium, it's long term focused and it's transparent and customer centric to again build more peace of mind with customers, which is paramount.

Makes sense, thanks for that Matt sorry, if I double up on a question there I appreciate the comments.

If I could ask about thin volume per active customer obviously.

That took a took a hit during 2020 and the pandemic Lisa.

Recovery.

This year or are we at a more stable place here or is there more recovery as it pertains to kind of just the volume per active customer metric.

No that's it.

That's an interesting question Mike.

My gut would be that we're at a pretty stable place youre right. We did see a dip and spend per active customer in particular getting during the.

At the height of Covid in Q2 of 2020.

And it's recovered to above $2000 in prior periods. This quarter in prior periods, we thought a bit higher than that but I would think it's around or close to the normalized rate.

<unk>.

Perfect. Thank you both very much.

Thank you. Our next question or comment comes from the line of Alex Mark Graf from Keybanc capital markets. Your line is open.

Thanks, Tim Nice to speak with you all I wanted to just come back to revenue per active customer and kind of understand how we might think about this through the end of the year.

During some of the tail wins, you called out for the third quarter on a frequency unemployment trends.

And potentially some headwinds around the new customer mix and pricing with new customers.

Just any thoughts around that and maybe compared to this time of our fourth quarter last year would be helpful. Thank you.

Yeah in terms of.

What's really driving the uptick in revenue per active customer as I mentioned, it's primarily driven by transaction activity and so some of that is factors. We can influence ourselves so in other words.

And engagement programs that.

Support customers through their first transaction and encourage them to refer and continue to transact you know obviously the simple our product is to use encourages repeat transactions as well.

Our outstanding customer service and things like that.

So we think it's exciting to see customers transacting more frequently.

Forward Theres, maybe some potential continued upside from that but.

It's not something that were.

We'd necessarily focus ongoing going forward.

<unk>.

There are some external factor to that as well and.

Some of it.

I think things are.

Probably reverting towards the norm in 2022.

So yes.

I think.

We're thinking about kind of the right way is a fairly stabilized level.

Alright, thank you.

Thank you. Our next question or comment comes from the line of David Scharf from JMP Securities. Your line is open.

Hey, Thanks and.

Thanks for taking my questions.

And Matt I think I'll bypass being the 40 40 person to congratulate you on the IPO.

Congratulation on the pledge, 1% contribution on the <unk>.

Web site now I have no idea how many companies were involved in this.

Mhm terrific organization.

Hey.

Two questions.

Have been answered, but maybe first for Susanna I did want to follow up just on the previous question on the revenue per active maybe more broadly.

It was such an elevated well it was a very robust number over $47 this quarter.

And I guess as we think about.

The next year plus.

It seems like there are competing factors.

Tailwind is certainly.

The employment situation, improving post COVID-19 reopening and as you mentioned, you've got some tools available in terms of engagement.

But as you lean into marketing and potentially there becomes a bigger mix of new customers, which probably transact at least initially less frequently that there would be.

More of a headwind so I'm trying to get a sense for balancing those two and whether or not that $47 is sort of a ceiling at this point.

A high watermark as you add more new customers. If you can give a little color on those sort of competing dynamics.

Yeah, no that's a really it's a really good point.

There are some some puts and takes there I wouldn't think of it as a ceiling. The things if I guess, if I step back in terms of the revenue per customer and thinking of it as a growth lever the major drivers of that are.

A more transactions per customer like we saw this quarter and that can be influenced by a number of factors as I mentioned.

It could also be influenced by higher revenue per transaction.

Pricing changes are part of our mix shifts and then the third item, which is probably the longer term lever is additional products as we continue to innovate and deliver on our mission. So.

There is a combination of things that could drive continued growth in revenue per active customer going forward. You are right that there is some data that does mix and so in Q4.

We will likely see more new customers because of the seasonality that we see in the business.

So I wouldn't necessarily assume that that number.

Would go up in Q4, specifically.

Okay.

That's helpful and then maybe as a follow up Matt.

I guess a general question what are the one of the questions I have received a lot and it's not just for <unk>, it's really for any kind of digital remittance provider is.

Essentially if this is a service that is catering to a lot of the under bank and non bank.

How do these people load the money and obviously its card based but can you talk about.

I guess as you look at.

No youre marketing strategies, who you're targeting conversion rates.

Are these immigrant communities in which they are.

You're assuming that these are people that are already banked or are you seeing trends on the ground for example in the U S. Mexico corridor were more.

Immigrants based in the U S or opening up demand deposit accounts and have some vehicle for getting money into applications, such as yours, because I think it's kind of a riddle a lot of people still try to get their arms around.

Yes.

Thanks, David and I really appreciate you're also mentioning the specificity around plus 1%, which I'm going to come back to actually even as I answer your question I think that.

The way that we think about it is the buckets you mentioned theres there are unbanked underbanked and there is fully baked and I think that when you think back to being a broadly defined term obviously, but if you look at who we're serving it is what I would classify as under banked in the sense that they may have a bank account, whether it's with a large bank or whether it is with a small local credit union.

Most of those banks do not offer remittances back to <unk>.

Emerging markets, where our customers come from and especially with the disbursement network and speed that our customers expect and Thats why some of the legacy players have existed in this space for so long because it is a very separate.

Product that our customers, specifically need and so those customers have a bank account, but they may actually still go to a physical location.

Because they can't get their needs met.

Existing financial services institution.

And we're moving them from the Underbanked and offering more complete digitized remittance services moving them more into that fully bank segment again with banks being pretty broadly defined and that is a very attractive segment from a business perspective.

Because of the fact that it might be more efficient to build trust and also convert to using a digital platform and Thats where were squarely focused on unit economics, and where we believe the most sizable market is now it varies tremendously by corridor as you mentioned and when you look at the very Unbanked folks who have no access to.

Financial services provider, that's where I think there is more long term opportunity in the businesses even changed over the last 10 years and the reason I'm going to circle back to plus 1% is those customers may not.

Make short term unit economic sense, but if we can invest in financial literacy if we can invest in the communities that we serve to ultimately fulfill our mission of transforming the lives of immigrants and their families by providing the most trusted financial services on the planet that not only will build additional brand and goodwill in the communities we serve but it could over time also increased the marker.

That we serve given that were.

Including more potential customers in the formal financial system. So that's one way of going after that the second is via products like pass, but we're obviously excited about as well so more context than you probably want wanted or needed David but I really loved the question and that's how we think about the various aspects of the market.

Great Great very helpful. Thank you.

Thank you I'm showing no additional questions in the queue at this time I would like to turn the conference back over to Mr. Matt Oppenheimer for any closing remarks.

Great. Thanks.

So I just want to close and first off thank everyone for the really thoughtful questions and a <unk> one tradition that we've had for the last 10 years is at our all hands company wide meetings the leadership meetings.

And with the customer story and that reminds us why the work that we do really matters, which I think not every business can say so before we close I'd like to highlight a story that illustrates just how incredible our customers are and why we are so passionate about the work that we do so the customer will talk about today is angelica.

He's been a <unk> customer since 2019, she moved to the U S from Colombia, and she began sending money home to her family for basic necessities through an independent remittance provider in Florida.

And what Angelica shared is it was always a hassle to send money every time I wanted to send money and needed to go to the bank to deposit money into our business account once the provider received my funds. They would call me with the pin within.

I will then share the pain with a family member in Colombia, So they can pick up the money from our local partner.

It was like running an errand every time a friend and then referred me to remotely it sounded too good to be true, but I tried sending money to my cousin it was so easy.

No longer needed to plan to going on going to a bank during business hours or wait for my provider to call me back I can rely on remotely to help my family back home with basic needs and in times of immediate need whether it is replacing a fridge. So my answer you can store her insulin or buying a fryer from my uncles new business.

And with that that is why we're here that is why we do what we do and thank you for being part of <unk> journey as we continued to drive forward our vision of transforming the lives of immigrants and their families by providing the most trusted financial services on the planet and we look forward to sharing our continued progress with you over the coming months.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day.

[music].

Good day, ladies and gentlemen, thank you for joining <unk> third quarter fiscal 2021 earnings Conference call I will now turn the call over to Stephanie Shafting, Vice President of Investor Relations to begin.

Okay.

Good afternoon, and thank you for joining us for <unk> third quarter 2021 earnings call joining.

Joining me on the call today are Matt Oppenheimer co founder and Chief Executive Officer are permanently 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 <unk> Dot Com. Please note that this call will be simultaneously webcast on the Investor Relations website.

Actual results and managements expectations and plan.

For the business. These statements are neither promises no 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 reserve.

Any forward looking statements made in this conference call, including responses to your questions are based on current expectations as of today.

Our website now I will turn the call over to Matt to begin.

I'd also like to recognize our customers and our employees, who are central to our vision and success and has been instrumental in our transition to becoming a public company.

We're proud of our results this quarter and excited about the outlook for the future Q3 revenue grew 69% year over year and key metrics were strong across the board.

Quarterly active customers increased by more than 50% year over year with strong average revenue per active customer.

This demonstrates the value our customers find in our platform as they send more frequently with us with <unk> volume up 61% year over a year.

The third quarter was a strong start to our new chapter as a public company and as we often say, we're just getting started.

Before Suzanne and dive into the numbers I'd like to give a brief overview of <unk> for those of you who are less familiar with our story.

<unk> vision is to transform the lives of immigrants and their families by providing the most trusted financial services on the planet achieving.

Achieving that vision to begin with solving key pain points, our customers face within financial services, which is the need for fast convenient transparent and affordable cross border remittances in Q3, $2 6 million customers trusted remotely to safely deliver their hard earned money home to their loved ones. We are grateful to.

Those customers and as we look towards the future we want to continue to transform remittances and broader financial services to serve millions more customers in the years ahead.

Behind remotely came when I was living and working in Kenya, and saw how difficult and painful it was to send and receive money overseas and I learned just how far those funds go in the communities where they are received.

Additionally, challenges all has to be solved at a local level across thousands of corridors.

<unk> was founded to answer these challenges and to transform the industry by creating fair and inclusive financial services products for immigrants around the world.

<unk> is a differentiated approach based on four pillars first where mobile centric.

We have a vast global network of funding and disbursement partnerships.

Third we are localized at scale and fourth we're highly data driven leveraging a sophisticated and proprietary technology stack. These pillars guide our strategy and I will be highlighting the first two on today's call I look forward to updating you on our other pillars in future earnings calls.

Let me begin with our first pillar.

Our integrated mobile first platform, which is the foundation upon which the company was built it is incredibly challenging to create a mobile interface that is easy to use fast secure and tailored to exactly what each customer needs. Knowing this we built our digitally native platform from the ground up to ensure it could answer the demand.

Our customers, who are clearly migrating to the convenience and security of our mobile platform <unk>.

<unk> platform execute each transaction individually factoring in the rent customers risk profile transaction size speed and geography. Among many other considerations. We do all of this within a seamless and easy to navigate user interface.

For our customers. This means onboarding and repeat logins are quick or easy and our secure we leveraged multiple security layers layers to keep customer data safe and with our machine learning, we can assign a risk score to each customer to designate the amount of information we need from them based on their risk profile. We also have machine learning based.

Electronic <unk> or know your customer fraud, scoring and payment authentication processes, which take place in real time to give our customers immediate feedback and peace of mind.

Of course to deliver this unique mobile experience at scale. It was also critical to build out a network capable of supporting it which is where our second pillar comes in our vast global network.

Our global Disbursement network conveniently puts money in the hands of our customers families wherever they are leading via our leading global network of payment collection and disbursement partners. This enables our customers to send to over $3 6 billion bank accounts over 660 million mobile wallets and approximately <unk> <unk>.

380000 cash pick up locations.

Thanks to the quality of the disbursement network that we've built.

<unk> now completed more than 100 direct integrations with financial institutions in Asia Africa, Europe, and Latin America, and we have executed these integrations in the right way leveraging our custom built API to ensure transactions with these partners are state of the art and create a best in class customer experience.

These direct integrations result in more peace of mind for our customers by making transactions easier compliance checks more streamlined.

Partner outages more transparent and transactions faster.

To that end, we are proud to have launched our <unk> product offering remotely for developers or RSD.

Were seeing businesses value RFT because of our locally relevant payment methods fast delivery speeds and superior customer experience.

Last month, we announced that remotely supports <unk> pilot of next generation digital wallet using RFT. This partnership enables that nobody customers in Guatemala to off ramp funds from their <unk> wallet to convenient cash pick up locations powered by <unk> robust distribution network due to the.

Due to the quality of our network and our unique capabilities, we expect to enter into additional partnerships of a similar nature in the future.

We view this as an opportunity to increase our penetration in our serviceable addressable market since the use cases for these products are often if not always fundamentally different than our core customer use case. Additionally in a market that is rapidly shifting digital and where <unk> share is growing quickly, but it is still nascent we believe we can gain share of the.

Overall market.

RFD as well as passbook our.

Our digital banking service uniquely designed for immigrants in partnership with Sunrise banks reflect <unk> long term vision to transform the lives of immigrants and their families.

Focusing on the long term also means laying a foundation for our strong ESG strategy as part of our commitment to ESG, we joined the pledge 1% campaign, while still.

As a global organization now spanning five continents, we invest in hiring and developing a workforce that is diverse and lived experiences and identities, including ethnicity and gender. Additionally, we have a set of values that define our culture and our culture is how we interact and how we get things done at remotely we take these cultural values.

Very seriously and they are central to our values is customer Centricity you.

You can trust that it the entire <unk> team will continue to stay laser focused on adding long term value to the to the lives of our customers as well as our shareholders.

This has been the key to <unk> success over the last 10 years and we believe is what will make us successful for many years to come with that I'll turn the call to Susanna.

First our main focus going forward is driving continued strong revenue and customer growth.

Anchoring on top line growth rather than on the profitability in the near term as we are prioritizing high confidence investments that allow us to continue to capture an increasing share of the large addressable market that we serve.

We'll continue to scale investment with discipline and a constant eye on unit economics and high return on investment.

Second I will focus on non-GAAP operating expenses and adjusted EBITDA in my remarks.

These metrics exclude noncash items, such as stock based compensation and the impact of pledge 1%.

This will help you better understand and analyze the underlying trends in our business.

We're committed to running the business in a way that will benefit our customers employees and shareholders over the long term.

Now, let's turn to our third quarter results.

As a reminder, our revenue primarily comes from the women's business, where we earned revenue on transaction fees and foreign exchange spreads applied to the customer's principle the <unk>.

Rested relationships, we foster with our customers and the repeat nature at their spending behavior has resulted in strong revenue retention rates.

This provides a reoccurring revenue stream with high visibility and predictability.

<unk> volume increased 61% to $5 $2 billion compared to $3 2 billion in Q3 of 2020, driven primarily by the growth of active customers and also by the existing customers spending more money home to support their families.

Active customers those that transacted at least once in the quarter increased by 51% year over year to approximately $2 6 million in Q3.

This growth was driven by an increase in new customers. As a result of marketing investments are seamless user experience global network expansion and the continued growth in digital adoption.

This was influenced by an improvement in employment and many of our sand markets and the mix of new and repeat customers within the quarter.

Moving down the P&L transaction expense was $47 6 million or 39% of Q3 revenue.

<unk> as a percentage of revenue year over year transaction expense primarily include fees paid to disbursement partners and payment processors transaction losses, and tools supporting fraud prevention and compliance.

The remaining expenses will be discussed on a non-GAAP basis, excluding stock based compensation expenses, and a $6 9 million noncash charge associated with the donation of our common stock in connection with our pledge, 1% commitment, which is recorded in GAAP G&A expense.

Marketing expense in Q3 was $29 9 million up 61% year over year, driven primarily by higher direct marketing spend focused on new customer acquisition.

As a percentage of revenue technology and development expenses remained flat at 14%.

G&A expense was $15 $1 million up 113% year over year due to increased head count and personnel related expenses, along with higher public company related costs.

As a percentage of revenue G&A expense increased to 12% for Q3 of 2021 compared to 10% in Q3 of 2020.

Q3, GAAP net loss was $13 million compared to a $2 4 million net loss in the third quarter of 2020.

This increase was primarily due to the donation of common stock in connection with pledge, 1% as well as incremental stock based compensation expense.

Q3, adjusted EBITDA was $325000 as we recognized stronger than expected revenue.

By growth in active customers and transaction frequency.

This was partially offset by transaction costs and other operating expenses.

As reflected in our guidance, we don't expect positive EBITDA in the fourth quarter as we continue to make investments that we believe will have high returns in the long term.

We expect to continue to make significant investments in our business next year as well.

We will also incur a full quarter of public company expenses.

And plan to continue to invest in product innovation.

In closing we are proud of everything we accomplished this quarter and are grateful to be able to provide our services to customers as they support their families. During this time.

With that Matt and I will open up the call for your questions.

Greater.

Ladies and gentlemen, if you have a question or comment at this time. Please press Star then one on your telephone keypad.

If your question has been answered or you wish to remove yourself from the queue simply press the pound key.

If you have a question or comment at this time. Please press Star then one on your telephone keypad.

Our first question or comment comes from the line of Tien Tsin Huang from Jpmorgan. Your line is open.

Thank you very much congrats guys on your first earnings call as a public company and the results look good here.

I wanted to.

On the revenue upside that was better than what we had expected as you called out here any interesting macro trends.

From month to month in the quarter worth sharing here.

Specifically curious if you saw a lift in users or volume with with certain nations locking down.

Some of your work and peers.

Called out this earning season thanks.

Thanks, Tien tsin, great to hear from you.

We saw 51% growth in active is really due to a quiet more acquiring new customers.

With pretty strong payback and strong retention of the customer base as well and on the revenue per active customer in the transaction activity. In particular, we do believe that some of that may be due to an improvement in unemployment and many of our sand markets. It's also due to the mix of new and repeat customers and some of our.

Investments and engagement programs that really support our customers throughout their lifecycle. So I think there was potentially some some tied to macro conditions. There, but also just strong performance overall got.

Got you that makes sense and then just my quick follow ups you guys don't mind just on the <unk> partnership maybe if you can to the extent that you can maybe share a little bit more about how you are involved in what the revenue model is for admittedly in.

I did fueled a lot of questions.

When this news came out on why partner right, if <unk> could potentially be and then maybe longer term.

What's the thinking on working with them.

Your thoughts on that thank you.

Yeah, absolutely tension and great to hear from you.

Let me start with the kind of strategic rationale on crypto and I'll focus on the direct to consumer elements of crypto, though I'm happy to talk about infrastructure and kind of backend crypto opportunities later, but on direct to consumer I think it's important to recognize the remittance companies are fundamental fundamentally good at onboarding and off boarding funds in the different currencies.

And coming to all the complexity that's required to do that in those currencies can be fiat currencies that can be crypto currencies. So the biggest threat to remittances as you alluded to potentially with nobody would be that there is a global default currency, where theres no need to exchange funds between currencies with that context. It is still something that we keep a healthy level of focus.

And then turn that focus into a really clear strategy to ensure that we benefit from any changes in the remittance landscape and this is where we're excited about our RFT partnerships broadly with a few leading crypto companies and we find that.

We find the most compelling and while there is still I think as you know some major trust scaling regulatory complexities around the globe that make their success have been uncertain. We've seen we spent really years cultivating these relationships and establishing partnerships. So that we are part of any upside that results from broader adoption.

Crypto currencies, so with that context, we are really excited about the partnership with <unk> and <unk> has been an active partner of ours for over a year and they're able to take advantage of the significant work we've done to simplify the complex and really valuable remittance space into a simple tech forward product integration.

Our cross border wallet and not a remittance specific.

So it's possible that customers who are interested in those products are different from our core customers than <unk>, which gives us an opportunity to expand into adjacent customer segments, but the thing that I'm. Most pleased about as it compares to other companies in the space is that instead of reacting we've taken a proactive approach and we have material upside given our partnership.

In a highly fragmented market and then lastly attention just to comment on the business model. Since you asked about that we charge a fee per transaction dispersed and the unit economics for RFT or strong since the marketing costs are much lower for us and the potential cumulative transaction profit as is sizable. So it is very early days for some of those businesses.

We're excited about the proactive approach.

A very large market.

Thanks, so much for going through it it's good stuff. Thank you.

Thank you. Our next question or comment comes from the line of Bob Napoli from William Blair. Your line is open.

Thank you and congratulations Matt Susanna on the IPO in your first call really good numbers as well.

C. We also got a lot of questions on Navy show, but I appreciate your detailed answer.

Just on the competitive environment.

The youre ramping up marketing really good numbers active accounts.

Transactions per account revenue per account.

What are you seeing in the market.

From a price competition and the ramp up in marketing.

How is the trend in cost per account how effective is the.

The marketing Azure.

Ramping upgrades.

Yes, yes, great great to hear from me, Bob and thanks for the question.

I think that is your question more about for advertising pressure in terms of pricing there or is it more about pricing and the industry overall.

And it gets.

Placing any industry overall, but plus how effective has your marketing your cost per account trending as you've ramped up marketing.

Got it got it yeah that makes sense.

So if you think about pricing overall before I kind of jump in there I think the important thing.

To recognize first and foremost if you think about why customers use our product is ultimately.

Come to us for peace of mind and peace of mind is something that.

As our brand positioning and is much much more difficult to deliver than meets the eye given the complexity in our business, whether that's the regulatory complexities the compliance experienced the payment collection payment disbursement the core infrastructure and so when you think about it from that angle that is what I have learned over the last 10 years in building. This business I used to think it was much more about price.

Averages of 67% at the World Bank quotes.

Down to our kind of call it 2% to 5% once you get into that new equilibrium as I call. It.

There is some elasticity because youre, taking sizable cost out of the system, but once you're within that new equilibrium there real variable cost to our business we have scale advantages.

Given our scale with some of those variable costs, but at the end of the day. There is a lot less elasticity given that the complexity of the peace of mind that trust is what customers care about and if you put yourself in their shoes, which is important to do and you think about a customer who is sending a few hundred dollars you asked to provide us with a lot of sensitive information about themselves for compliance and risk reasons.

And as sending a sizeable portion of their funds back home is my information as a customer they're asking going to be treated with the security.

That it deserves is my transaction is going to have a reliable experience that gives me peace of mind to the customer that is what customers care about the most and so that's where we continue to focus our effort in building peace of mind to customers.

So your question around marketing spend and customer acquisition Bob.

Just to keep continuing that thread, we really focus much more so on payback then on customer acquisition cost itself.

Just in terms of context, and we feel really good about the unit economics in our payback and LTV to CAC metrics.

At the same time in Q2 to Q4 of last year customer acquisition costs were positively impacted by the fact that the digital advertising environment was less competitive during COVID-19.

We are continuously expanding our marketing channels testing, new packaging options and really looking for more efficient and effective ways of driving growth as well.

Thank you and then my follow up question is just you guys have you have expanded the corridor that you served pretty rapidly over the last couple of years.

Just any color on that is if they.

Continued plans to expand corridor.

To expand.

End markets as well, where do you see the largest opportunities.

Thanks, Bob.

If you look at our.

Just for everyone on the call in terms of just understanding the evolution of how we built remotely is first important context for how we'll answer that question and we have taken a very localized approach given the complexity and remittances. So we started just with the U S. The Philippines for a couple of years.

Added than India U S India than U S to Mexico for the first several years to get the product right and the experience right and then we have scaled over the last five six years into corridors around the globe, but in a customer centric way of doing it and the reason that I as CEO of appreciated that strategy as it gives us the opportunity to grow in our existing markets.

Grow in markets that we've just launched and we're at 1700 corridors now many of which we've launched in the last year or two and gives us growth opportunities in new corridors that we have not yet launched so there's untapped growth opportunities down the road and so I would say that as you think about the growth of our business. The short and medium term will come from markets that we have been in for <unk>.

A long time, where theres still room to grow markets that we just.

Recently launched and then finally, we are laying the foundation for both send and receive markets that we will be rolling out in the future. We don't announce those until they're actually live but you can trust that as we have in the past we're laying the foundation for those future launches to kind of drive the medium to long term growth of our company.

Okay. Thank you appreciate it.

Thanks, Bob.

Thank you.

Next question or comment comes from the line of Ramsey El <unk> from Barclays. Your line is open.

Hey, guys. This is Ben on for Ramsey. Thanks, So much for taking my question.

Yes, and thanks for the question Randy in terms of the puts and takes for Q4 on the revenue side, we do feel really good about the the revenue growth that's implied in the 'twenty one 'twenty one guidance for Q4, Thats, 52% to 58% implied in Q4 revenue in particular.

We believe thats exceptional growth at our scale and the transition to digital will continue to remain a tailwind we're in an excellent position to capture that demand due to our strong mobile offerings in our vast global network, our ability to localize our scale and our data driven approach.

The take from in the very short term as I mentioned just on EBITDA guidance is that in terms of framing how we think about EBITDA revenue growth is our top priority.

Because it's such a large market and we have such low low market share.

But if you look at Q4 typically its a less profitable quarter, just due to the seasonality of new customer acquisition.

Customers, sending home for the holidays, and such and so that does drive higher transaction cost as a percentage of revenue and higher marketing costs in the quarter, which obviously negatively impacts EBITDA in the quarter and we don't see the full profit impact of those new customers when we acquire them in the quarter itself, but obviously they'll draw.

As higher revenue growth and profitability in future quarters, which is why would we continue to invest in them.

We'll also see full quarter of public company costs, and we also plan to continue to make investments in technology and development. So.

We have high confidence in the is it that these investments will pay off in 2022 and beyond but those are some of the puts and takes with respect to the Q4 guidance in particular.

Okay. That's very helpful. If I could ask one more maybe like a higher level question as you've kind of gone through and now starting to come out of the pandemic a little bit are you seeing any changes in cohort behavior from new customers that perhaps were once part of the.

The unofficial remittance channels.

<unk> moved into digital or more formal remittances and as borders are open up is there any change in behavior or are you seeing a lot of stickiness with that new customer group.

Yes, I can take that one I think that first and foremost if you think about just the impact that COVID-19 has had on our.

Customer base.

It's nothing short of inspiring given the fact that and it's a reminder of how important.

Remittances are too.

Our customers loved ones and even during a pandemic, even especially during the pandemic and even during a recession the amount that they have prioritized getting money home to their families. Both makes rational sense. When you think about how our customers are leaving close family members parents siblings children at times extended family members. So I just want to call.

That out because it really shows the resilience and.

Inspiring nature of who our customers are I think that now shifting to the question around how our cohorts have performed.

And the trust hurdle that was required to get over that it changed the calculus for our customers during a pandemic, where it may be going to an offline cash location versus a digital alternatives.

Became more attractive to go to that digital alternative antitrust that and once they have trusted that experience once they've once we've delivered peace of mind to our customers. We continue to see the nice repeat behavior given that they've had a good experience and they want to continue to send money home that way.

Okay, great. Thanks, so much for taking the questions and I'll Echo my congratulations on the successful IPO.

Thank you. Our next question or comment comes from the line of Darrin Peller from Wolfe Research. Your line is open.

Hey, guys Congrats again.

If you could just I mean, it's a bit of a follow up but it's a little bit more detail to the question around customer growth.

If you could just sort of break it out a little more by the new card or as Youre getting customers from versus the big three you guys have been in for some time.

How much traction are you having with some of the new investment areas and then a.

A bit of a follow up to the question before just with regard to you know coming out of a year and a half and debit now I mean are you seeing any change in patterns in the magnitude of your customer acquisition right now.

Can we can we basically expect a similar pattern in the next few quarters in terms of ads that we've been seeing.

Yeah.

Yes, so thanks.

Thanks, Darren for the question in terms of the first question.

Corridor dynamics. There we are seeing you can see well you will see we are seeing higher growth outside of the U S. In particular, so not surprisingly some of our newer core doors that are in Europe and other places.

Our growing more quickly than the corridor and so we're continuing to diversify geographically and mix shift away from those big three which were U S to India, Philippines, and Mexico. So we view that as a real positive.

For the business.

And in terms of the second question, which I believe is patterns around the magnitude of customer acquisition.

I don't know that there were scattered.

Go ahead go ahead, I'm, sorry, yes, sorry, just really how much you expect similar trends in future quarters, where you've already seen.

Yeah, I think we're seeing continuing to see strong new customer acquisition.

And.

We were a high growth company before Covid and so I expect we will continue to be a high growth company. After COVID-19 is not.

I mentioned earlier I believe we did obviously some digital acceleration during the Covid period.

And so we're still feeling good about the customer growth and probably nothing nothing to anomalous to call out around the pattern of customer acquisition now outside of the diversification across corridors.

Got it.

Hey, Matt can you just give us an update on some of the passbook initiatives in the financial services opportunities Youre customers are are going to be seeing in the coming months and years.

Yeah, absolutely. Thanks, Darren it's great to see you.

I think the first going back to the kind of complexity, that's inherent not only in remittances, but broad financial services. It also means that it takes more time to innovate it's complex given all of the things that we've talked about some of the things that apply to past book as well as remittances, but it requires also building out core features as well as differentiated features all with the right regulatory partnership.

The right infrastructure and so with that context past book is still relatively new and it takes time to gain traction, but we continue to believe.

Providing broader financial services for immigrants is a significant opportunity that were uniquely positioned to solve and we look forward to sharing more progress on that in future calls.

Okay. Thanks, guys.

Thank you. Our next question or comment comes from the line of Andrew Schmidt from Citi. Your line is open.

Hey, Matt Susanna Congrats on the first quarter as public company can speak with you.

I was hoping you obviously a big topic is.

Can you sort of been through this pricing. So was hoping you could just remind everyone kind of your philosophy on pricing, where you're positioned and then I think when people talk about pricing.

The only characteristic theres, obviously other things.

At play their trust.

Friction and things like that so if you could talk about kind of your pricing strategy.

The overall decision, making process when someone choose that provider that'd be great. Thanks.

Yes.

Yeah, absolutely Andrew.

It's good to see.

And so I'll circle back on some of the points to start I think it was Bob who asked the question that ultimately I've learned over the last 10 years in building this business of that.

It is important to first and foremost build peace of mind with customers and if there is historical very high pricing.

Then I think that there is a sensitivity as you bring it down to that new equilibrium that I mentioned, but once we're in that new equilibrium customers care more about other features such as well my money make at home will my information be secure.

And elements like that and so we're continuing to see that our pricing philosophy is not always to be the best it has to be competitive it is to be transparent. It is to focus on the long term relationship with our customers and that's how we set our pricing everyday both as it pertains to fee and foreign exchange and I think the last thing I'll say in terms of pricing philosophy is that the industry often talks about take rate.

And while that's important to talk about it at an industry level. When we talk about like the the numbers I mentioned earlier, the six 7% down to two 5% at a customer level customers do not think in terms of take rate. They think about the total revenue that they are paying for in a transaction and that's fee and foreign exchange combined and so wind transactions.

Are much larger.

Then as you can easily do the math when talking about take rate the take rate drops to be much lower and so that's also a really important thing to understand when thinking about our business and also looking at the industry. Overall is that take rate is largely a function of transaction size and as we think about pricing going back to your pricing philosophy point customers care and we focus much.

More on what is that customer actually paying per transaction, which is fee and foreign exchange combined and customers are naturally going to be more sensitive around foreign exchange. If they are sending higher dollar amounts.

The per unit actual fee, they're paying if theyre, sending $2000 versus $250. They are paying customers don't think I should pay more I should pay eight times more if theyre, sending $2000 versus $250. So I always like to make sure the industries understand take rate and again going back to how we set our pricing it's not always the best.

It's within that new equilibrium, it's long term focus and it's transparent and customer centric to again build more peace of mind with customers, which is paramount.

Makes sense, thanks for that Matt sorry, if I double up on your question there I appreciate the comments.

If I could ask about thin volume per active customer obviously.

That took a took a hit during 2020 and the pandemic Lisa it's a pretty strong recovery. This year or are we at a more stable place here or is there more recovery as it pertains to kind of just the volume per active customer metric.

Yeah.

It's an interesting question and I hope my gut would be that we're at a pretty stable place Youre right. We did see a dip and spend per active customer in particular getting during the kind of the height of COVID-19 in Q2 of 2020.

And it's recovered to above $2000 you know in prior periods. This quarter in prior periods, we thought a bit higher than that but I would think it's around or close to the normalized rate.

Mt.

Perfect. Thank you both very much.

Thank you. Our next question or comment comes from the line of Alex Mark Graf from Keybanc capital markets. Your line is open.

Thanks, Tim Nice to speak with you all.

Wanted to just come back to revenue per active customer and kind of understand how we might think about this through the end of the year considering some of the tailwind you called out for the third quarter around frequency unemployment trends.

Potentially some headwinds around the new customer mix and pricing with new customers.

Just any thoughts around that maybe compared to this time of our fourth quarter last year would be helpful. Thank you.

Yeah in terms of what was.

Really driving the uptick in revenue per active customer as I mentioned, it's primarily driven by transaction activity.

And so some of that is you know factors that we can influence ourselves so in other words.

Engagement programs that.

Support customers through their first transaction and encourage them to refer and continue to transact you know obviously, the simple or our product is to use encourages repeat transactions as well.

Our outstanding customer service and things like that.

So we think it's exciting to see customers transacting more frequently.

Going forward Theres, maybe some potential continued upside from that but.

It's not something that were.

We'd necessarily focus ongoing going forward.

There are some external factor to that as well and.

Some some yeah.

I think things are.

Labour breeding towards the norm in 2022, and so I.

I think.

We're thinking about kind of the right way is a fairly stabilized level.

Alright, thank you.

Thank you. Our next question or comment comes from the line of David Scharf from JMP Securities. Your line is open.

Hey, Thanks and.

Thanks for taking my questions.

And Matt I think I'll bypass being the 40 40 personally congratulate you on the IPO.

Congratulations on the pledge, 1% contribution on the <unk>.

Web site now I have no idea how many companies were involved in this.

Mhm terrific organization.

Hey.

Two questions.

Have been answered, but maybe first for Zander I did want to follow up just on the previous question on the revenue per active maybe more broadly.

It was such an elevate well it was a very robust number over $47 this quarter.

And I guess as we think about.

The next year plus.

It seems like there are competing factors.

Tailwind is certainly.

The employment situation, improving post COVID-19 reopening and as you mentioned you got some tools available in terms of engagement.

Sure.

But as you lean into marketing and potentially there becomes a bigger mix of new customers, which probably transact at least initially less frequently that there would be.

More of a headwind so I'm trying to get a sense for balancing those two and whether or not that $47 is sort of a ceiling at this point.

A high watermark as you add more new customers. If you can give a little color on those sort of competing dynamics.

Yeah, no that's a really it's a really good point.

There are some puts and takes there I wouldn't think of it as a ceiling. The things if I guess, if I step back in terms of the revenue per customer and thinking of it as a growth lever the major drivers of that.

<unk> a more transactions per customer like we saw this quarter and that can be influenced by a number of factors as I mentioned.

It could also be influenced by higher revenue per transaction.

Pricing changes or corridor mix shifts and then the third item, which is probably the longer term lever is additional products as we continue to innovate and deliver on our mission. So.

There is a combination of things that could drive continued growth in revenue per active customer going forward. You are right that there is some data that does mix and so in Q4.

We will likely see more new customers because of the seasonality that we see in the business.

So I wouldn't necessarily assume that that number would look.

Would go up in Q4, specifically.

Okay.

That's helpful and then maybe as a follow up Matt.

I guess a general question what are the one of the questions I've received a lot and it's not just for <unk>, it's really for any kind of digital remittance provider is.

Essentially if this is a service that is catering to a lot of the under bank and non bank.

How do these people load the money and obviously its card based but can you talk about.

I guess as you look at.

No youre marketing strategies, who you're targeting conversion rates.

Are these immigrant communities in which they are.

You're assuming that these are people that are already banked or are you seeing trends on the ground for example in the U S. Mexico corridor were more.

Yeah.

Thanks, David and I really appreciate you also mentioning the specificity around pledge, 1%, which I'm going to come back to actually even as I answer your question I think that.

The way that we think about it is is the buckets you mentioned theres there are unbanked underbanked and Theres fully baked and I think that when you think back to being a broadly defined term obviously, but if you look at who we're serving it is what I would classify as under banked in the sense that they may have a bank account, whether it's with a large bank or whether it is with a small local credit union.

Most of those banks do not offer remittances back to <unk>.

Product that our customers, specifically need and so those customers have a bank account, but they may actually still go to a physical location and because they can't get their needs met via their <unk>.

Existing financial services institution.

Financial services provider, that's where I think there's more long term opportunity of the business is even changed over the last 10 years and the reason I'm going to circle back to plus 1% is those customers may not.

Make short term unit economic sense, but if we can invest in financial literacy if we can invest in the communities that we serve to ultimately fulfill our mission of transforming the lives of immigrants and their families by providing the most trusted financial services on the planet and not only will build additional brand and goodwill in the communities, we serve but it could over time also increased the market.

That we serve given that we're in.

Including more potential customers in the formal financial system. So that's one way of going after that the second is via products like past book that we're obviously excited about as well so more context than you probably want wanted or needed David but I really love. The question and that's how we think about the various aspects of the market.

Great Great very helpful. Thank you.

Thank you I'm showing no additional questions in the queue at this time I would like to turn the conference back over to Mr. Matt Oppenheimer for any closing remarks.

Great. Thanks.

So I just want to close and first off thank everyone for their really thoughtful questions and remit Li one tradition that we've had for the last 10 years is at our all hands company wide meetings leadership meetings.

Moved to the U S from Colombia, and she began sending money home to her family for basic necessities through an independent remittance provider in Florida.

And what Angelica shared is it was always a hassle to send money every time I wanted to send money and needed to go to the bank to deposit money into a business account once the provider received my funds. They would call me with the pen I will then share the pen with a family member in Colombia, So they could pick up the money from our local partner it was like running an errand ever.

Any time, a friend, who then referred me to remotely it sounded too good to be true, but I tried sending money to my cousin. It was so easy I no longer needed to plan to going on going to a bank during business hours or wait for my provider to call me back I can rely on <unk> to help my family back home with basic needs and in times of immediate need.

It is replacing a fridge semi antique and store her insulin or buying a fryer for my uncles new business.

And with that that is why we are here that is why we do what we do and thank you for being part of <unk> journey as we continued to drive forward our vision of transforming the lives of immigrants and their families by providing the most trusted financial services on the planet and we look forward to sharing our continued progress with you over the coming months.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day.

Q3 2021 Remitly Global Inc Earnings Call

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