Q3 2022 Remitly Global Inc Earnings Call
Good day and thank you for standing by welcome to the Q3 2022 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need a press star one on your telephone please be advised.
Today's conference is being recorded I would now like to hand, the conference over to your host today, Stefan Schulz Vice President Investor Relations. Please go ahead.
Thank you good afternoon, and thank you for joining us for <unk> third quarter 2022 earnings call.
Joining me on the call today are Matt Oppenheimer, <unk> co founder and Chief Executive Officer are permanently and Hey, Marc <unk>, Our Chief Financial Officer.
Our results and additional management commentary are available in our earnings release presentation slides, which can be found at IR <unk> Dot com.
Please note that this call will be simultaneously webcast on the Investor Relations website.
Before we start I would like to remind you that we will be making forward looking statements within the meaning of the federal securities laws, including but not limited to statements regarding <unk> future financial results and management's expectations and plans.
These statements are neither promises or guarantees and involves risks and uncertainties that may cause actual results to vary materially from those presented here you should not place undue reliance on any forward looking statements. Please refer to our earnings release and SEC filings for more information regarding the risk factors that may affect our results any forward looking.
Statements made on this conference call, including responses to your questions are based on current expectations as of today and are mentally assumes no obligation to update them or revise them, whether as a result of new developments or otherwise except as required by law.
The presentation contains non-GAAP financial measures for a reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP metric. Please see our earnings release, which is also available on the IR section of our website now I will turn the call over to Matt to begin.
Thank you Stephane and thank you all for joining us to discuss our strong third quarter results and progress on our strategic priorities as we continue our track record of consistent execution.
Our focus on our customers and the resilience of remittances through economic cycles has positioned us well to deliver sustainable long term results for all of our stakeholders. We are committed to delivering outsized revenue growth and returns for many years to come while at the same time, ensuring <unk> is positioned to benefit from increasing.
Scale across our expense base.
We're very proud of the progress we've made since our IPO.
On slide four you can see that we have made great strides across many dimensions of our business. We now serve $3 8 million quarterly active users, adding more than $1 2 million since our IPO.
Our geographic footprint is now over 170 countries up from 135 weeks.
Provide service to approximately 4200 corridors and increase of 2400 corridor in the past year alone.
Our third quarter annualized send volume now stands at 30 billion.
This growth has resulted in significant scale as we look to become the largest remittance provider with complementary products for immigrants and their families.
We have delivered a track record of consistent execution versus expectation and finally, we've done all of this while maintaining our unique customer centric culture with an authentic focus on ESG priorities across our business.
Now, let's turn to a brief overview of our third quarter results.
Our track record of solid execution, continuing in the third quarter as shown on slide five.
Our active customer base increased by 49% year over year to more than $3 8 million revenue increase increased 40% year over year to $169 million above our expectations. This is exceptionally strong growth at our scale. This growth was driven by increases in active customers as we continue to take.
Share from legacy providers subscale digital providers and the informal remittance market as more transactions shift digital.
Repeat transactions with loyal customers also contributed to growth.
Given that remotely has only 2% of the global remittance market combined with a very strong product offering that drives repeat usage. These new and repeat customers will drive revenue growth for many quarters to come.
Revenue continues to be highly visible and predictable due to high customer loyalty and the non discretionary nature of remittance transactions.
As a result of this strong top line performance and our outlook for the fourth quarter. We are once again, increasing our revenue outlook for 2022.
Our adjusted EBITDA performance in the third quarter was also above expectations, we delivered strong efficiencies in our marketing investments and drove robust active customer growth given that the fourth quarter provides the greatest seasonal opportunity to acquire even more new customers at strong unit economics, we are maintaining our 2022 adjusted EBITDA outlook.
Consistent with what we saw last quarter, our customers remain resilient in the face of a volatile macro environment as you can see on slide six.
Women tend to perform well across economic cycles, and digital adoption remains a long term tailwind for remittance.
The reasons that remittances performed well over economic cycles is due to their non discretionary function and.
The determination of our customers to send money back home on a regular basis no matter the obstacles they face.
We saw that clearly during Covid for example, when many of our customers who work in jobs such as hospitality.
We're impacted by shutdowns were able to quickly pivot to finding other sources of income such as food delivery.
The diversity of our customers across various occupations from blue collar to white collar and now in more than 25 send countries lowers the risks of potential changes in specific areas of local economy.
We consistently monitor monitor the underlying transaction in sand volume trends and we have continued to see resilience in our customer base and loyalty to remotely.
We do not see reductions in transactions per customer or average transaction that are not driven by shifts in customer disbursement preferences.
We believe our customers prioritizing sending money back home to family and friends over other more discretionary spending.
While our sand volume per active customer was down year over year. This was primarily due to the increasing mix of new customers versus existing customers in the third quarter and foreign currency translation headwinds, excluding new customers in both periods and on a constant currency basis sales volume per active customer was up slightly in the third.
Quarter year over year.
We also surveyed our customers last month and found that nine in 10 customers expect to send the same amount of money or more in 2023 versus 2022.
Similarly, most customers say they expect to send money abroad at the same frequency or more often than they did in the past year.
This is similar to findings.
And our second quarter survey and gives us confidence that our customers continue to prioritize remittances.
While not a primary driver of results foreign currency movements, particularly the recent strength in the U S dollar do impact our business in numerous ways.
First in certain markets, especially those with larger transaction sizes, we see customers taking advantage of the ability to get more local currency to their families and friends.
Second we believe the strength of the us dollar and the strength.
In other developed market currencies versus emerging market currencies make it easier to acquire new customers in certain markets.
Finally year over year growth in our revenue metrics were negatively impacted by foreign currency translation as our international business continued to grow in currencies, such as the British pound and euro weakened against the U S dollar.
Turning to some key trends in our three largest received market, Mexico, Philippines, and India and Mexico, our largest received market by revenue we are seeing consistent customer behavior as the vast majority of customers are sending money back home to family for basic household needs the.
The customers that send to Mexico tend to be less affluent and we continue to see strong employment trends for lower wage occupations, especially in the U S. In fact, the Mexican Central Bank reported that remittances to Mexico reached a record high in July as Mexican families received $5 3 billion.
From abroad, and annual increase of 17%.
The strong trend continued in August with remittances to Mexico up 8% our growth in Mexico was significantly higher than these industry members as we continue to take market share.
Customers in the Philippines continue to shift their disbursement preferences to mobile wallets and other digital receive methods, which we are encouraging and leading with our digital first approach.
We support customers, if and when they're ready to make the shift to digital receive with our highly localized marketing and product experience.
Finally in India as the rupee depreciated materially against the US dollar and other currencies, we saw a very strong year over year growth in both sales volume to India and new customers in the quarter.
While these three large receive countries remain very important to our business. It is important to keep in mind.
We continue to diversify our corridor portfolio.
Both send and receive countries. We saw this diversification play out in the third quarter as more than 50% of new customers acquired in the third quarter were sending to countries outside of Mexico, Philippines and India.
Even our high retention rate.
Adding new customers tends to be the leading indicator of revenue growth for the quarters and years to come and as a result, we expect our revenue to become even more diversified across corridors.
In the third quarter, we made progress across our investment priorities as you can see on slide seven we are very focused on new customer acquisition and strong unit economic geographic expansion remittance product enhancement and complementary new products.
With these priorities we are laying the foundation for sustainable outsized growth and returns for many years to come.
Consistent with the second quarter, we were able to drive significant customer acquisition efficiency efficiencies in the third quarter. As you can see on slide eight we continue to manage customer acquisition cost elasticity testing and a focus on lower cost channel all while maintaining strong new customer acquisition growth.
As a result have improved 18% sequentially from the second quarter and 19% year over year from the third quarter of last year.
Our increasing brand awareness in both the U S and international markets, along with rapid scaling of active customers is driving efficiency and resulting in word of mouth network effects.
We have seen a moderate softening and the competitiveness of the advertising environment in the third quarter, both sequentially and year over year, and we were able to take advantage to drive even further efficiency.
As we look ahead to the fourth quarter, we would expect customer acquisition costs increased sequentially, but declined year over year as we remain focused on driving efficiencies across the marketing funnel.
The fourth quarter is typically the most seasonally expensive media quarter, while also providing the best opportunity for us to acquire new customers as the holiday season drive additional spending behavior across remittance corridor.
Our geographic expansion is accelerating as you can see on slide nine at the end of the third quarter, we serve customers in more than 170 countries and territories worldwide.
We now serve nearly 4200 corridor and we added approximately 1000 corridors in the third quarter alone another record quarterly geographic expansion for us.
We continue to believe the quality of our network and our focus on customer preference and disbursement options remains a compelling differentia.
The focus on improving the customer experience and delivering peace of mind drives our investments in our ribbons platform as you can see on slide 10.
We made significant progress in the quarter on reducing customer friction as we enhanced a number of key features to drive peace of mind.
These investments Rev retention product differentiation and will ultimately lower customer service costs as customers will contact us less frequently.
Some key examples in the third quarter that helped drive customer peace of mind included reducing customer pain points by expanding rapid refunds to visa Mastercard in the U S.
And enhancements to the customer experience in the Senate funnel by allowing global customers to import the recipient contacts or scan their card to add it as a payment method in their profile.
Our global uptime of 99.96% in the third quarter reflects our commitment to our customers as downtowns are amongst the worst case scenarios for our customers ranging from losing trust with new customers are shopping around.
To devastating for existing customers, especially during a family emergency.
We continue to have a high customer ratings in both the <unk> App store and Google play store and as we continued to scale. We believe we will be able to make investments in our platform. The other competitors will simply be unable to make.
This drive in increasing preference for were adamantly service and delivers peace of mind to our customers.
We talked last quarter about narrowing our focus to complementary products to deepen relationships with remittance customers. As you can see on slide 11, we believe our product strategy will result in a deeper and stickier relationship with our customers over time, which will drive even more business to our remittance platform in any.
Creased retention of existing customers, we continue to iterate and test demand for additional products that solved critical problems for our immigrant customers and their families and are pleased with the progress so far are.
<unk> acquisition of Rewire in their account basis increment platform will help us execute and accelerate this product strategy. In addition, the critical investments we are making across our platform or ensure we can serve our customers across multiple products with the same peace of mind that we deliver with our remittance product.
The portfolio of for strategic investment areas position.
Physicians us to drive sustainable growth in the near medium and long term as seen on slide 12, the overlapping return profiles and our strong balance sheet gives us the confidence that we can deliver on our promises to customers shareholders and employees.
Before I turn the call over to him off I would like to return to our vision on slide 13, our vision is to transform the lives of immigrants and their families by providing the most trusted financial services on the planet.
This is what drives us energizes us and we will remain our Northstar.
Our focus on the long term and our customers also drives a commitment to ESG.
As part of this commitment we will publish more about our ESG strategy soon and we plan to provide additional reporting across ESG metrics in 2023 and.
In addition, as part of our commitment to ESG, we made our second annual contribution to pledge, 1% of approximately 182000 shares during the third quarter.
It is our strong belief that our ESG programs and initiatives ultimately improve our product our ability to serve customers and our employees experience with us. This is what drives a long term sustainable business that delivers returns for all stakeholders with that I'll turn the call to him up who will provide more details on our financial results and outlook.
Thank you, Matt I am pleased with our strong third quarter results are continued track record of execution and the resilience of our customers. This is allowed us to raise our revenue open up for 2022 once again over the past quarter at once I had the opportunity to dive deeper across drive might be significant growth opportunities and our investments that I make.
Cited and confident about their agenda potential.
With that let's go over the details of our third quarter results.
Begin by reviewing the drivers of our third quarter financial performance and then would provide more detail on our outlook for 2022 as a reminder, I will discuss non-GAAP operating expenses and adjusted EBITDA in my remarks.
These metrics exclude items, such as stock based compensation the donation of common stock in connection with our pledge, 1% commitment and transaction costs related to acquisitions reconciliations to GAAP results are included in the earnings release.
Beginning on slide 15, with our high level topline performance active customers grew by 49% year over year to more than $3.8 million.
Sending volume grew 44% a year over year to approximately $75 billion, all resulting in revenue growth of 40% year over year to $169 million, which was about our expectations.
As you can see on slide 16, a number of factors drove the strong 49% active customer growth.
Alluding setting another record number for new customer acquisitions in the quarter and high retention of existing customers, who in many cases continued to transact with us over many years.
Differentiated products highly effective marketing and increasing global scale all contributed to the outside active customer growth we saw in the quarter.
We also believe in the strength and the U S dollar to help drive incremental new customers directly in certain markets. We saw particular strength in new customer acquisition in the USA to Mexico, and USA to India corridors, what are we deliver record new customers surpassed the previous customer records that at the beginning of the pandemic.
This was driven by marketing efficiencies as we scale, including improved referrals and word of mouth upper final investments localized promotions and product and landing page optimization. We also saw a strong growth and some of our newer and smaller corridors, including to Africa. What are we benefited from our sub Saharan Africa awareness campaign.
An additional scale.
Turning to slide 17 robust growth in active customers and high retention drove the 40% year over year revenue growth that we delivered in the quarter as we continue our multi on track record of healthy double digit revenue growth.
Revenue growth and a quarter was impacted by approximately 300 basis points unfavourably due to foreign currency translation as you saw the British pound and euro decline against the Euro dollar.
Turning to transaction expensive slide 18 transaction expense with $70 million or 41% of revenue compared with 39% of revenue in the third quarter of last year.
We saw a higher than expected loss rates in the third quarter as we onboarded a record number of new customers will generally have a higher risk profile. However, the fraud losses were well within our guard risks for new customers and we continued to invest in improving our fraud enriched systems when at the same time, improving our customer experience.
We continued to see leverage our send an destination fees in the third quarter as the global scale and we're able to drive better comes with our payment of disbursement partners on a year to date basis transaction expense as a percent of revenue has improved by 140 basis points over the long term, we expect to continue to benefit from increasing ski.
Gail and improved precession on fraud losses, although we expect some variability in transaction expense from quarter to quarter.
Now what is turned to a non-GAAP operating expenses on slide 19, which reflects the investments, we're making to allow us to scalar remedies business and execute on our long term strategy of delivering complimentary new products to immigrants and their families.
Overall, we saw moderation in year over year Opex growth rates in the third quarter as compared with the second quarter, including in both technology and development and G&A expenses.
As Matt discussed earlier, we also continue to drive efficiencies in customer acquisition costs.
Our marketing expense of which the the vast majority is targeted at new customer acquisition was 40 million dollar quarter and are reflected a 100 basis point year over year improvement as a percent of revenue. This leverage was driven by a marketing efficiencies in customer acquisition. What are the same time delivering a record number of new customers <unk>.
Our efficiencies came from elasticity testing improved overall brand awareness and a moderately less competitive advertising market. We plan to continue to invest in high return marketing with a highly disciplined focused on driving efficiency gains.
Customer support and operations expense was $18 billion in the third quarter and was up 70 basis points year over year on a percentage of revenue basis. The primary driver of this increase was due to a higher than expected number of new customers added in the quarter, new cohorts of customers on average contact us at a significantly higher rate that order.
Cohorts. It is our goal to drive this contact right down over time, as we make technology investments in our product payment and disbursement networks to deliver peace of mind for our customers as.
As you scale, we expect new customers to be a smaller proportion of active customers. We also expect our peace of mind product enhancements to drive contact rates lower both of these factors should help drive leverage and customer support costs or the medium term.
Technology and development expense with $23 million in the third quarter and was essentially flat year over year as a percentage of revenue.
Our investments allow us to deliver a peace of mind drive retention and loyalty and enable the development of complimentary new products.
Ultimately deepens, our relationships with our customers and provides additional revenue opportunities.
As we mentioned on our last call, we expect technology and development expense to increase as a percentage of revenue in 2022.
February 2021, as you prioritize product improvements new product development and corridor additions.
G&A expense was $22 million in the third quarter, our year over year growth rate in G&A expense has moderated as we begin to anniversary the rampant public company expenses, we expected a year over year growth rate in G&A expense to continue to moderate in the fourth quarter.
Turning to slide 20, adjusted EBITDA, which excludes down based compensation expense the donation of common stock in connection with black, 1% and transaction costs with negative approximately $4 million in the third quarter of 2022.
Justin EBITDA performance was better than we expected primarily due to a higher than expected revenue and lower customer acquisition costs.
Third quarter of GAAP net loss was $33 million compared to a 30 million dollar net loss in the third quarter of 2021. The increase in net loss was primarily due to 21 million of incremental stock based compensation expense.
Into our balance sheet working capital at the end of the quarter was approximately $450 million and reflects cash on our balance sheet of $376 million are strong balance sheet is a key differentiator from many other competitors, especially subscale ones and allows us to execute our strategic priorities to drive long term profitable growth.
Moving toward 2022 outlook on slide 21, we expect revenues to be between 635 and $640 million. This is a 10 million dollar increase to the mid point from our prior outlook and implies a year over year growth rate of 38% to 40%.
But increasing our outlook to reflect the strong performance with delivered in the third quarter with both existing customers and new customers are strong new customer growth. During the first three quarters of the year will be a tailwind for growth in the fourth quarter 2023 and beyond.
We're maintaining our adjusted EBITDA outlook for 2022 at negative 35 million to negative $30 million due to seasonally strong new customer acquisition in the fourth quarter, we expect the fourth quarter to have lower adjusted EBITDA than the third quarter.
Acquiring these new customers in the quarter impact short term profitability be fully expect these customers will continue to drive remedies strong growth going forward.
As I've also now completed my first 90 days I'm, even more confident that we have an attractive investment return profile.
Look forward to discussing when we provide guidance for 2023 early next year.
Executing strongly with financial discipline, and continuing to build and Ah trapdoor return profile with the momentum up our strong revenue growth predictable and resilient customer behavior global scale operating leverage opportunities at a healthy balance sheet.
With that Maddon I will open up the call for your questions operator.
Thank you. Thank you have a question.
Please press star one one on your touch.
One moment for our first question.
Yeah first question comes from the line.
With a G P Mark and your line is open. Please go ahead.
Thanks, So much good results here. Good afternoon, just really big increase in customers added sequentially here from a social standpoint, you just wanted to make sure I.
Heard this correctly or maybe you can explain how much of it as a function of the growth in the quarters, which stepped up again two quarters in a row.
This is attracting users from existing quarters, and our marketing efforts, there and I think I heard you mentioned that there were some users being opportunistic with effects, which makes sense as well. So just shut it better than some of that and is there any risk of pull forward as well given what you study.
Thanks and.
Good question, where principal like really pleased with our growth and our customers overall, and it's frankly, a global sort of growth that we've seen it broadly broad based across the corridors. We certainly saw some obviously was strong in certain markets from the USA to Philippines, Mexico, India being some of our stronger corridors. So we did.
With the affects your point is well aware, we saw some increased demand a new customer activity relating to that FX impacts but.
I'd say, Brian on a broad basis growth was everywhere, we sell 50% of new customer activity coming outside from a send market perspective outside of India, Philippines in Mexico as well, so we're pretty pleased with that overall.
In terms of your question about whether there was any put forward. We do think there may be a slight pull forward in terms of.
Demand, but we don't think it's material enough at this point or just want to reinforce that we're seeing pretty consistent customer behavior across the board.
We don't expect a major.
Back to pull forward it back.
Okay, Matt anything further to add.
No attention I think the only thing I would add is.
Appreciate you picking up a new customers because it was a record quarter in terms of new customer and and we're also excited that we did it with an 18% decline in cat from Q2 and 19% <expletive>.
Declined from.
Q1, or sorry, Q3, 2021, and so that's what enabled us to not only bank a lot of new customers, which is going to which bodes well for not only this quarter's growth and improvement in terms of revenue guidance, but also gives us more confidence going into twenty-three not only around growth, but the levers that we can pull around growth.
And profitability given that we're banking a lot of new customers that have strong paybacks and therefore.
Goes through to transaction margin and then ultimately gives us flexibility from that standpoint, so really excited and I think in terms of the sustainability some of it is.
Do too.
The less competitive advertising environment, but I think we've done a better job testing the elasticity I think we've got a great marketing team in place our CMO has been in the seat for less than a year in her role.
Creative execution, the creative velocity and just the opportunity seems very large right now so excited about what that represents and the orders come.
No thanks for that and that really stood out and the cat.
As important as you said, because we're clearly giving the questions for investors around western unions.
Mind me mentioning them in their state is strategy to improve digital customer acquisition. So have you does it seem like you're seeing.
Effects, there and I don't know if it's from a marketing perspective, another fourth quarter comment was pretty clear is that opportunistic on your side or is it.
Are you seeing some need to maybe step up some some marketing.
Given what wishing and is trying to do in some ways to replicate your model.
Thank you.
Yeah. Thanks, since then I think that.
Look into Q4, as we mentioned in the remarks, I think that it's a unique time, where a lot of customers send money back home and so there is a demand capture from from being able to capture a lot of new customers in queue for that again, we will give us a lot of optionality both in terms of.
Of revenue growth and being able to put that down to the bottom line and so we want to be able to capture that it doesn't mean more of an investment in Q4 minutes less driven by the competitive dynamics and more driven by the fact that we're continuing to add record number of new customers at improving unit economics, and so we think it's prudent.
Continue to test that elasticity, but bank and add a lot of these new customers that we can serve in 2023 that gives us a lot of ups nowadays the business.
It makes sense.
Six months.
Thank you one moment for our next question. Please.
Our next question comes from the line of Andrew Schmidt with City. Your line is open.
Hey, Matt amount Stephan thanks for taking my questions and <unk> get commentary here.
Once you start out just it's just a question on where the share gains are coming from and I know you mentioned the sources traditional sources prepared remarks, but the curious if there's been any change in terms of proportion of where your Windsor coming from and then just as a corollary to that it sounds like part of the.
Efficiency and marketing is also being a little bit more efficient with with your customer acquisition channels, particularly referrals.
Comment on how the just the customer acquisition channel mixes is changing over time as well thanks a lot.
Andrew Nice to nice to connect with you I would say so let me start with the second question and then maybe matinee can cover the share again, I would say in terms of efficiency and marketing which is earlier question.
And waded through optimization, but I think the marketing team has been executing really really strongly and there is upper final Desi Lastly testing there is what we're doing at a local level, it's really pretty broad based and this team has really been place only for the last six nine months with them with the new leadership team in place and they've been doing.
A phenomenal job there so I would say, there's a ton of work happening in marketing that is driving optimization on driving efficiency marketing.
The other factors, we also seeing in terms of CAC efficiency. One we talked about referrals I think referrals is obviously, one that's hard to sort of measure an attribute to but we do things with that in our increasing scale that it is increasingly becoming.
A benefit beneficial factor for us when you think about marketing expenditures. So there's there's the zest made a bit of that happening again hard to kind of quaint exact numbers and attribution to that.
The third piece, which again I just sort of pointed out that we had that in purple prepared remarks as well.
Is that the market has been less competitive so there has been a.
A little bit of that that's been benefiting us we'll have to see where that goes obviously Q4 is going to be a seasonally hi spend in terms of marketing for many of our competitors as well and will continue to watch that but we're really pleased with that.
The things that were controlling in terms of just driving optimization and marketing spend which has been at a at a great rate.
Yeah, I think that's right and the only thing I would add Andrea that's a great question I think that.
If you look at where we are gaining share from it's important anchor ourselves and the fact that it's still very very fragmented market and.
As we continue to ensure although again, we mentioned we have 2% of the 1.6 trillion that sent there.
There are word of mouth network effects as we mentioned and that gives us operating leverage from a business standpoint and from a customer standpoint.
Really organic additions to efficient organic auditioned additions to using recently and.
We measure things like brand awareness and other things that are signals for that I think bode well for continued efficient growth, but it is a broad base acquisition.
Crossbows legacy players as well as sub scale players those subscale legacy and subscale did though which is where a lot of the market resides in I think it's harder for those companies to build real reliable peace of mind that delivers for customers on a consistent basis, which is something that I think we did well in that shows up in.
Fast transferred without any sort of friction and cutting through a lot of complexity that is inherent in international payments that were good at and we're continuing to get better at with our scale size and growth right and ability to invest in every aspect of friction that customers Memphis.
It's very helpful.
Thank you Matt him up and just a quick follow up on the applied fourth quarter outlook.
It seems like just on a quarter over quarter basis, just a little bit of T cells revenue growth, despite fourth quarter being typically seasonally stronger.
I just wanted to be clear is there something that you are seeing in the environment that might.
Cause cause or caution is it conservatism around potential pull forward or is it just nature terms of let's call. It your normal kind of outlook algorithm that does kind of embed a level of prudence just curious just characterize.
The setup sure. Thanks a lot.
Yeah.
Yeah, I'd say I agree to that I would say, we are broadly assuming pretty consistent drivers of sort of the macro elements in our queue for outlook. So we're not baking in.
Anything different fundamentally from from Q3.
To your question on deceleration on the revenue line again, just wanted to reinforce that being seasonally strong with a high customer growth expectation that we have there that doesn't directly translate into into revenues to that effect in that quarter right. So this is why we expect to get in subsequent quarters. So.
Sort of how the timeline of Hell revenues will flow into our P&L. So Q4 doesn't have any sort of deceleration built in from from the perspective of sort of any decreased expectation on a new customer activity.
Perfect very helpful. Thank you very much.
Thank you.
Next question.
Our next question comes from the line is Ramsey Ll, It's all with Barclays. Your line is open. Please go ahead.
Hi, Thanks for taking my question this evening and forgiveness you've covered this it was Mr. First part of the call.
I wanted to ask about your quarter expansion, which has been really impressive trend how should we think about the kind of a longer term past. There is it is it fruitful to just kind of add more corridors indefinitely or is it just the type of thing where you have a target in mind when you reach a certain point a certain scale in terms of the number of quarters. You will then say.
We've got what we need out of this we can we can move on.
Thanks, <unk> and thanks for joining especially during busy earning season. So you may have heard earlier in the remarks Foundationally and then I'll address your question, we haven't a thousand corridors last quarter alone.
And if you look at we've added 1800 corridors.
Two sorry, we've gone from 800 quarter to 4200 corridor since our IPO. So your question is right in terms of how do we think about continued corridor expansion and I'd say a couple of things one we're very intentional when we think about our corridor expansion playbook and what I mean by that is there's a lot of companies that go very broad very fast.
And we've been very intentional about adding new countries in new corridor, and really methodological approach and the court or do we launched a year or two ago are the ones that are driving growth now despite the corridor as we want to know where you're going to be the ones that are going to be driving growth in the quarters in years to come but.
But we're gonna do that intentionally so you can get a sense of just looking at a map of where <unk> slow versus where we're at now.
We have opportunities.
In APAC you may have seen that we just launched Japan, and New Zealand as origination corridor.
We also.
Are in the process of acquiring rewire, which is an Israeli based remittance company. They also have a presence in Europe , but that will help us.
With our first middle East origination country, and then on the <unk> side Asia Africa, and Latin America, primarily is where our customer send money too and we see opportunities there primarily to improve the quality of our network, but there are opportunities to continue to add countries as well and given that we know send over 150 <unk>.
Steve countries, each time, we add a new <unk> country.
It gives us 150, new corridors, given the customer's consent from that one <unk> country to 150 received so from operational leverage and efficiency standpoint, it gets more efficient.
And as we do it you mentioned, what we do in perpetuity, there will come a time, where we have expanded everywhere, but we're a long ways away from that and we've got really clear I think paths for continued continued sustainable expansion and growth given are methodological corridor expansion approach and strategy.
Great. Thank you for that and one follow up from me.
Could you give us an update on <unk>.
Developers sort of how his uptake trending how's the pipeline developing that type of thing.
Yeah, absolutely Ramsey I'm really glad you asked about that so when we.
First of all is is <unk> business to business, we refer to a variety of product offerings that were that were.
Offering to businesses and so you mentioned mentally for developers, which is the one that we have partnered with as we mentioned companies like meta.
To be able to be funds disbursement with our network and what we've seen interestingly with many businesses as we look at the broader pipeline is that they think they just want access to this disbursement network, but they quickly realized there's a lot more complexity to remittances and international payments than just the disbursement network. Some FX inflow of funds that are part of the <unk>.
RFD product as well. It's also are you ask our pricing or risk product or access and management are payment disbursement and then all of that localized and managed across 4000 corridor as we just talked about given the localization.
<unk> within remittances and so that the platform is hard to build and it's part of what makes remittances defensible and that's being validated as businesses get to know remittances and international payments in more depth. So accordingly, where now offering an embedded BW product and this product is designed for organizations like banks credit unions Neobank.
Offer a really simple entrusted to international payments to their customers and it's more fully leveraging.
Alex strong and platform, we built to accelerate growth. So excited about the btb's space Bradley an important understand the strategic context, and what we're learning from businesses, because it's validating not only to the complexity that's inherent in remittances, but also to the platform that we built that can potentially add even more value to other businesses.
Mmm.
Fantastic. Thanks, so much.
Thank you thank.
Thank you for your next question.
Our next question comes on the line.
Robert Hollywood William Blair. Your line is open. Please go ahead.
Thank you and thank you for your question <unk>.
Congratulations on disorder really impressive.
Additions of new customers in corridors, but to see.
Just the it may be a little color on rewire and your diversification efforts I mean as it relates to the diversification efforts. If you can give us any color on on rewire.
Is M&A.
Going to become a.
More steady way I guess entering new countries or corridors.
Thanks, Bob Yes, great to hear from you and.
The question because I just got back from Tel Aviv seem the team at Rewire and again that that acquisition is pending regulatory approval. So it's not closed yet, but we're excited about the two strategic rationale for that deal. The first being that as I mentioned will help us expand to Israel, where we don't originate <unk>.
<unk> from Ya as well as <unk>.
Continue to grow our European business, where they have a presence.
So complimentary from a geographic standpoint, and then the second is when you think about complimentary new products.
They have a history in DNA and team that is both bill commencing products like a.
<unk> product that's linked to a store of value, but also just has a track record of innovating in that space and so.
Really excited about that acquisition once we get the requisite regulatory approvals.
But.
And when you look more broadly in M&A I think that we are always looking at ways to continue to grow efficiently, whether that's organic inorganic but.
Excited about what we have to talk about today, which is which is the rewire acquisition.
Thank you and then just to follow up on retention I mean, I'm really kind of surprised to hear less competition in the market, but have you seen.
Any change in your your customer retention like the waterfall how confident are you in.
Economics, as it relates to pretension and margins et cetera.
Yeah. Thanks for the question I think it's one that we look at obviously pretty closely I would say in terms of retention I think the metric we actually had before is that we've got 90%.
Revenue redemption, we feel we think we're right in that range. So we don't have any fundamental changes, we're seeing in sort of a new customer behavioral cohorts.
Indicate any change in that.
So that's that's sort of that's kind of where we sit on on retention on the unit economics a piece of it.
Certainly that interesting quarter for hasn't been Super pleased with the.
The increase in new customers.
And what that drives actually has some impact in the P&L with just a little bit in terms of potential impacts on transaction costs with some of the fraud levels being a little bit elevated we also talked about customer service expenses getting impacted because new customers.
Contact us a lot more when he gets trip if you strip that out and look at the core fundamentals are the business. The unit economics is pretty consistent and stable and we continue to see a profile.
Interesting with opportunities to continue to improve so I'd say Q3, because just of the significance of the new customer additions, we just fantastic to see along with.
Lower lower marketing costs and higher efficiencies.
We saw the impact slow to the P&L, but the fundamental unit economics is pretty stable.
Thank you. Thank you appreciate it.
One moment prior next question.
Our next question comes from the line as well Goldman Sachs. Your line is open. Please go ahead.
Hey, guys. Thanks for taking the question.
At first I wanted to ask about why we weren't flying the revenue bead into the fourth quarter guidance. I think you guys have addressed that quite well. So instead of that I'll ask this I mean, you guys really optimistic.
About what you're seeing from our customer acquisition standpoint, if we fast forward three months from now and the investments that you're planning on making on the fourth quarter to continue to accelerate customer acquisition pay off and.
Theoretically that leads to a much better than expected new customer additions on the fourth quarter as well I mean could you just spend a little bit of time on some of the geography of how where that flows through on the p&l's you've touched on higher fraud cost, obviously higher marketing hopefully higher revenue in future quarters, but when we think about things like.
Higher fraud costs running through promotional first transactions free things like that just what are some things to look out for her so investors can kind of be prep for what to expect in a very strong organic growth quarter.
Yeah, I mean, I think you really best plan key element.
Yeah.
Mmm.
There is some.
Little bit elevated during the period that were driving a lot of new customers.
We do see increased customer contacts in that period of time, it's actually bring significantly higher but then starts dropping down.
Maturity as well so those are some of the key elements that you can think of it from a unit economics perspective or marketing efficiencies. We believe you've made some sense.
Made some significant improvements will last couple of quarters, we do see line inside for a continued.
Having set up as a loan that's happening in the market as well.
One of them.
Let me think about marketing spend.
Bottom line on marketing to I wanted to just reinforces that we've continued to maintain a high on Roy expectation on a marketing. So we can look at our LTV uncac ratios.
We monitor that all the time, they're well within the range of what we wanted us to be from a being that perspective.
Got it.
Well I think.
Yeah, and I think that I think that answers.
<unk> of your question, well I think that the strategic.
Ah.
Perspective, but I would add is.
And I mentioned earlier, but it's because we're seeing great record a desk with a record edition of new customers in Q3, and we're optimistic on that front in queue for.
What it also does because of the payback dynamics and the strong <unk> behavior. The strong retention that we're seeing is that that eventually flows down to transaction <unk>.
Profit and I think that that gives us when I say optionality in 2003.
We have a sustainable business that we can then decide as we go into 23, how do we think about that.
To continue to reinvest in our business.
While also be mindful of the profitability so we're being.
<unk> when it comes acquisition in queue for we're also making the investments to give us that optionality as we head into 2023.
Yeah that all makes a ton of sense and I. Appreciate all the color that you guys gave on kind of one one year out from the IPO in the slides Super interesting you mentioned the top three corridors and the percentage of of new customers coming from outside of those corridors. I was just wondering if you could kind of update us on on the sides of that from a revenue or send volume perspective to.
Day, and aware how much of that from the top three corridors contributing today, and where was that kind of a year ago.
Yes, those are obviously stats. So we don't we don't share I would say we continued to have a significant amount of revenues from our top.
X number of <unk> will look obviously north America originated but we're seeing increasing makes towards international as well.
So more to come on that and we'll be at a point, where we can talk more about it but I think I would say the growth from new customer activity is Brian .
Revenue.
He needs to be.
Towards North America business.
Understood I appreciate you taking all of my questions and nice results today.
Thank you.
Thank you and one moment for our last question.
And our last question comes from the line of Alex.
Keeping your line is open and please go ahead.
Hey, Tim Thanks for taking the question.
Maybe a couple here just to kind of on the same note around the impact of new customers as it relates to transaction margin this quarter versus laughs.
I was curious if you could characterize how much the sequential decline is related to new customers high recall from last quarter, there's some commentary around.
More stable will transaction margins I assume that was kind of.
Excluding the impact of any new customers so maybe.
Maybe just any any sort of commentary there for ya where to strip out the impact of.
Record and that adds does.
Does that commentary round stable margins hold.
Yes. It is a great question, yeah, we've been we've been looking at that pretty closely as well I would say that if you strip the effect of new customers out were broadly stable at the levels that we have been historically and.
The other the other thing to just mentioned in terms of sort of transaction.
Fraud loss impacts in Q3 that we also had a.
Obviously unpredictable as sort of one time localized effects, which are well within.
Our overall guardrails, but these are things we see from time to time, so that was probably more of the effect than the deals on the new customer in basketball you strip those out we're pretty much in line with a stable trend on transaction margins and in line with what we've seen historically.
Okay. That's really helpful. And then just lastly around cats I'm curious.
I think about some of the localized marketing efforts is there any sort of FX tailwind that you all are are realizing.
With more localized marketing spend.
There is there is going to be some translational impacts that we're seeing when it comes to.
The FX impacts on our overall spend again, given the nature of our business and to my earlier comment area that we have quite a bit of concentration in terms of our on the revenue side of the business out of out of the U S. The international mix has less of an overall impact does impact us from accomplishing perspective, and operationally inserted in certain areas.
Okay Super helpful. Thanks, guys.
Thank you. Thank you thanks.
And that does conclude today's question and answer session and I would like to carrying the confidence back over to see.
For any further remarks.
Alright, thanks, so much so.
And thanks, everybody for the really thoughtful questions as we always do at room, maybe I'd like to end the call by highlighting another one of our amazing customers and this customer's name is April April joined remotely in June of 2022, and send the money from the U S to family in Kenya, and April shared I would highly recommend recently for sending money it is fast and really.
Liable I send money to Kenya, once or twice a month and.
And my.
People have received it safely.
April is one of our now millions of customers.
That we want to thank for using remotely and specifically April for recommending were mentally to others. We're super excited about the rest of the year and beyond and look forward to sharing our progress as we continue to execute our vision of transforming the lives of immigrants and their families by providing the most trusted financial services on the planet.
Ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect Goodbye.
The conference will begin shortly to raise your hand during Q&A you can dial 911.
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