Q4 2022 Remitly Global Inc Earnings Call

February 22, 2023

Good day and thank you for standing by welcome to the <unk> fourth quarter 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 to press star one on your telephone you will then hear an automated message advising you.

Hamed this race.

Try your question Press Star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Stefan Schulz Senior Vice President Investor Relations. Please go ahead.

Thank you good afternoon, and thank you for joining us for <unk> fourth quarter 2022 earnings call. Joining me on the call today are Matt Oppenheimer Co founder and Chief Executive Officer, Lee <unk>, Our Chief Financial Officer.

Our results and additional management commentary are available in our earnings release and presentation slides, which can be found at IR <unk> Dot com. Please note that this call will be simultaneously webcast on the Investor Relations website.

Four 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 involve risks and uncertainties that may cause actual results to vary materially from those presented here.

You should not place any 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> assumes no obligation to update or revise them, whether as a result of new developments or otherwise except as required by law.

Sure.

Following 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 available on the IR section of our website now I will turn the call over to Matt to begin.

Thank you Stephanie and thank you all for joining us to discuss our strong fourth quarter results and our outlook for 2023.

This past year was a momentous year for <unk> and we made significant progress on our long term vision with benefits for both our customers and shareholders.

We are grateful to be in a business that matter so deeply to our customers. They depend on us every day to get money home to family and friends safely and quickly.

On slide four you can see why I am so confident about <unk> future.

First our customers are resilient and predictable over many years of spending.

This matters, even more in volatile times and gives me comfort that we will be able to deliver strong growth across economic cycles.

Second our investments to provide a world class experience for our customers have resulted in a premium product that customers loyally use and keeps getting better as we scale.

Third we are proud of our track record of execution as we have consistently exceeded expectations since our IPO.

Finally, as a result of these foundational investments we have made solid execution and the continued strength in customer behavior, we have been able to increase the returns on our investments.

As a result, we expect to be adjusted EBITDA positive in 2023.

We believe we can continue to deliver strong revenue growth with high return investments over many years, while efficiently scaling the business to deliver increased efficiencies.

Turning to our exceptionally strong results for the fourth quarter revenue increased by 41% to $191 million.

Our topline result efficiencies across many areas of our cost structure and favorable market dynamics resulted in a strong adjusted EBITDA performance of $7 5 million in the quarter.

We believe the results in the fourth quarter display our strong product loyal customer base and an intentional approach to delivering high returns on our investments.

Turning to the drivers of our fourth quarter quarterly active customer growth of 48% on slide five.

We continue to take share and our growing customers significantly faster than the overall remittance market, whether that's a traditional brick and mortar or digital.

We set another company record for new customer acquisition during the fourth quarter as we benefited from our increasingly effective marketing and scale, especially in markets outside North America we.

We also benefited early in the fourth quarter as developed market currencies were strong compared to emerging market currencies.

Our focus later in the fourth quarter was the pick up increased demand during the holidays, especially for corridor that see seasonal spending spikes for Christmas.

Joel that we successfully executed.

Our business outside North America also delivered a record number of new customers as we continue to focus on providing a localized marketing experiences contributing to a strong holiday demand capture.

Finally, our product improvement, meaning the customer peace of mind also made it easier to attract and retain customers.

Our retention remains strong at an average of 90% of revenue retained after the first full year of growth and our recent cohorts continue to show.

<unk> retention trends as we focus on acquiring high quality customers, who continue to transact with us over many years.

This retention is the result of our premium product and our commitment to investing in reducing customer friction along with pricing that delivers long term value for our customers.

Our retention is also driven by the resilience of our customers and the reasons why they use our product our customers typically send money home to their families friends multiple times a quarter to help with basic non discretionary living expenses.

This support to their families back home takes on even more important, especially during times of economic uncertainty, which we've seen across the developing world even more than in developed countries.

Finally, we survey our customers every quarter and the results remain consistent.

Majority of customers expect to send money at the same frequency or more often than they did in the past year.

This gives us additional comfort around the visibility and predictability of our customer behavior in 2023.

We continue to invest in our strategic priorities as shown on slide six.

Our investments in these four priorities will allow us to deliver efficient new customer growth and drive additional retention and customer loyalty in both the near and long term.

Our focus on new customer acquisition at a highly attractive unit economics, and growing our geographic footprint will help us drive efficient customer growth and.

Enhancing our remittance product and our vision of serving our customers with complementary new products will allow us to drive even higher retention and customer engagement.

As we continue to invest across these four areas, we are maintaining our disciplined focus to ensure our reversal our investments have even higher long term returns consistent with our history of making investments at very strong unit economics.

As the cost of capital has increased we have increased our hurdle rates around these investment priorities in 2022, and also increased focus on scale efficiencies.

Which had the benefit of allowing us to accelerate our path to adjusted EBITDA profitability to the full year 2023, while at the same time, ensuring we were able to generate generate sustainable high returns for many years to come we.

We are well positioned to reap the benefits of increasing returns from our new customer acquisition geographic expansion remittance product enhancements and complementary new products in 2023 and beyond.

Turning to slide seven our efficient new customer acquisition has been has been driven by increasing brand awareness are highly localized approach across 170 countries.

And increasing scale, which drives low cost of word of mouth customer acquisition.

One of our strengths is deploying and measuring the impact of our marketing investments at a quantitative detailed and actionable level specifically.

Specifically, we focus on the elasticity of our marketing investment and making sure our paid marketing spend is bringing the right level of return in a short term time horizon.

Alongside that we have continued to invest in unpaid channels and awareness building efforts, making sure. We are building medium and longer term demand, which in turn drive even more efficiency into our marketing program as our brand awareness increases.

This combination of increased rigor in how we deploy marketing dollars combined with a scalable and highly localized approach and a continued multi year investments into the upper funnel has resulted in the cost efficiencies that we have delivered.

While <unk> is a key driver for marketing efficiencies. It is important to note. We look at CAC in the context of LTV to CAC.

Our customer lifetime value remains incredibly strong driven by high retention.

Customer resilience our premium product.

Durability and pricing and continued leverage in transaction expense.

Even as our business has grown substantially and geographically our LTV to CAC for our 2022 cohort. It's similar to the six X we shared during the IPO.

Our second investment priority is expanding our geographic footprint, which includes opening up new corridors as well as expanding our disbursement option.

As you can see on slide eight we continue to add new send markets, including New Zealand in the fourth quarter and the United Arab Emirates market last month.

UAE is the second largest source market for remittance is after the U S. With significant received corridor, so we already serve well, including India, Pakistan, Philippines and Bangladesh.

The UAE currently has a large percentage of remittance transactions done via cash pay in and is ripe for digital disruption. We believe we can compete very effectively in this market and we are very proud to now be able to support the more than 8 million immigrants in the UAE, many of whom send money home to their loved ones.

And are looking for more convenient option and a better experience that we believe we can deliver.

Looking ahead, we have the opportunity to further expand into additional markets, including in the Middle East and Europe helped by the Rewire acquisition, which we closed last month.

Additionally, we continue to believe the quality of our disbursement option, including four 1 billion Bank accounts 435000 cash pickup locations and $1 1 billion mobile wallets remained one of the many compelling value propositions for our customers.

Our geographic expansion has allowed us to further grow and diversify our revenue as can be seen on slide nine.

While all regions have had a greater than 50% revenue CAGR since 2020.

We have seen our business outside North America grow even faster and achieve a scale of more than $100 million in revenue in 2022.

Our business outside of North America, and now represents 15% of total revenue, which is up over 400 basis points compared with 2020.

In addition, our three largest receive markets.

By revenue, Mexico, India, and the Philippines represented approximately 65% of total revenue in 2022, which is down from approximately 75% in 2020.

Our growth and scale outside North America is critical for many reasons.

Including lessening our risk exposure to regions specific macroeconomic issues.

Diversifying our foreign exchange exposure.

And lowering our cash outside North America, as we gain relevant scale and brand presence.

Our third priority is to deliver a premium customer experience as we scale by continuing to invest in the remittance product.

Customers are offered peace of mind from the moment. They open our app until funds are safely delivered in the hands of their family and friends around the world as you can see on slide 10.

From ensuring our customers have the widest selection of payment options delivering a frictionless experience, while minimizing exposure to risk.

Enabling the ability to track funds anytime.

Accessing self help and live customer support.

To operate one of the fastest most reliable and extensive disbursement networks in the industry. We are reinventing the remittance experience and building a premium products that our loyal customers Love and trust.

Accordingly, once we have received customer funds more than 90% of transactions are dispersed and less than one hour.

Additionally, we are able to maintain an uptime of 90, 994% even as our volumes continued to show significant growth.

All of this leads to high retention of existing customers and helps us build a premium experience and a trusted brand in the communities we serve.

The last point I would like to note regarding remittance product enhancement investments is our fraud prevention systems continue to be a strategic advantage to both our business model and customer experience.

Fraud losses always a balancing act between delivering a frictionless customer experience and an acceptable fraud loss rate.

In Q4, both the customer experience and fraud loss rates were strong.

These updates were the results of improvements we made to our fraud machine learning models, which with the addition of scale and sophistication gives us better data and better tools to train our models to more effectively identify bad actors. This will ultimately enable us to improve the customer experience while also improving.

Moving our fraud loss rate.

We believe our internally developed fraud capabilities are a long term strategic advantage, even though a certain segment of fraud loss remains variable from quarter to quarter as we seek to maximize our customer experience and fraud loss rates.

Finally, turning to our long term vision of complementary new products on slide 11.

Our strategy has narrowed the focus on solving customer problems that are complementary to the international payment needs. We are already serving.

We believe this focus will drive valuable outcomes for customers deepen customer loyalty and retention and further improve efficiency with new customer acquisition.

Ultimately, we expect that our focused product strategy will deepen and expand our remittance relationship with our customers, creating a virtuous cycle and competitive advantage for <unk> that will be hard to replicate.

As a result of this strategic evolution, we have made the decision to sunset our path footprint.

While past book with gaining traction with customers and was growing it was ultimately outside our core customer segment.

We believe it makes sense to redeploy our resources to higher returning investments targeted at our core remittance customer.

We're taking the best of learning from past book and integrating them into products or features to deliver greater value through innovative solutions that are directly relevant to our customers' needs.

Needs and that we are uniquely equipped to deliver.

Before I turn the call over to <unk> I'd like to reiterate.

Reiterate our strategic priorities for 2023 on slide 12, which are all about continuing to deliver on our promises to cut to our customers and shareholders over the long term. This.

This is all supported by building a world class culture rooted in serving our customers are.

Our focus on long term sustainable returns remains the common thread across all of these priorities.

Turning to specifics on these priorities first new customer acquisition, we will plan to remain disciplined on marketing expenses and believe we will be able to continue to show leverage with some variability over time, depending on competition in the AD market with unit economics guiding our investment decisions.

Second geographic expansion, there remains a significant amount of new market opportunities and opportunities in existing markets as we still only represent approximately 2% of total remittance volume or scale and prior investments will allow us to enter new market, even more efficiently and effectively.

Great.

Third we will strive to deliver customer peace of mind with a flawless remittance experience, which drives customer loyalty and improved margins.

And finally for with our complementary new products, we will solve problems are unique to our remittance customers driving additional engagement and loyalty.

I am very confident in our ability to deliver on our promises to customers and shareholders and we remain anchored on our vision on slide 13 to transform the lives of immigrants and their families by providing the most trusted financial services on the planet I believe we have the best team in the industry to.

Executing on this vision and look forward to what we can accomplish together for all of our stakeholders with that I will turn the call to him up.

To provide more details on our financial results and 2023 outlook.

Thank you, Matt I'm very pleased with our exceptional financial performance for the fourth quarter. Our teams had strong execution in the quarter and we also benefited from some favorable market conditions and both of these factors led to our outperformance in the quarter.

I'll begin by reviewing some high level drivers of our financial performance I will then discuss the priorities we're focusing on to ensure we can deliver sustainable growth and high returns for many years to come I'll finish with our outlook for 2023 and our investment priorities.

With that let's turn to our fourth quarter results 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 transaction costs related to acquisitions and foreign exchange gain or loss.

Reconciliations to GAAP results are included in the earnings release.

Beginning on slide 15, with our high level financial performance in the fourth quarter, we're pleased to deliver a high active customer and revenue growth and adjusted EBITDA profitability quarterly.

Quarterly active customers grew by 48% year over year to $4 2 million setting volume grew 35% year over year to approximately $8 $1 billion.

While the resulting in revenue growth of 41% year over year to $191 million.

On a constant currency basis, both volume and revenue growth rates would have been approximately 500 basis points higher on a year over year basis.

This revenue outperformance combined with significantly lower transaction expense and marketing efficiency led to adjusted EBITDA of $7 5 million in the quarter. Our GAAP net loss was $19 million in the quarter and included $27 million of stock compensation expense recognized during the quarter.

Now, let's turn to some of the key factors that drove the exceptional performance in the fourth quarter on slide 16, we detailed both our execution wins and some macro factors that led to our strong results in the quarter.

Beginning with revenue, which was up 41% year over year in the fourth quarter and approximately up 46% year over year on a constant currency basis.

Strong revenue growth was driven by high retention of existing customers and benefit from earlier international expansion.

Listing customer activity contributed to a significant portion of total revenue in the fourth quarter, which reflects the consistent spending behavior of our customers and our premium customer experience.

In Q4, we also acquired a significant number of new customers, who we expect to more meaningfully contribute to revenue in future quarters. In addition, certain macro factors such as some strong developed market currencies had a positive impact on our revenue in the quarter as this provided an incentive for some of our customers.

Remicade.

While our customers are typically sending money home for basic needs. There are some markets that are more sensitive to foreign exchange rate changes, especially those that tend to also have larger transaction sizes in.

In addition, we also benefited from lower advertising cost as strong developed market currencies tend to encourage prospective customers to search for limited options to take advantage of favorable foreign exchange rates.

Turning to our transaction expenses, which includes costs relating to our <unk> partners disbursement partners in fraud losses.

Transaction expense as a percentage of revenue was down 410 basis points year over year.

This was primarily due to significantly lower fraud loss rates in the fourth quarter as a result of improved algorithms, which highlights our increasing amount of data and analytical sophistication. This helped drive substantial improvements in fraud loss rates on a year over year basis.

We're excited about the improvements in fraud loss rates in Q4, and we will continue to invest in our data and analytics capabilities to manage both our fraud loss rates and provide our customers with frictionless experiences.

However, we expect some variability in fraud loss rate in any quarter.

<unk>, while making sustainable improvements in the long term.

A key driver of our strong results in the fourth quarter was the efficiency will deliver a new customer acquisition marketing as we made a deliberate effort to drive even more higher returns on our marketing spending while still acquiring a record number of new customers.

As customer acquisition costs or CAC makes up the vast majority of marketing expense, we were able to deliver a 600 basis points year over year decline in an overall marketing expense as a percentage of revenue.

We were able to significantly drive down fourth quarter, GAAP, 35% year over year, and 6% sequentially a number of factors drove declines in CAC, including increased benefit from localized digital marketing brand awareness.

<unk> effects and increasing scale in our business outside North America.

This has allowed us to bring down our rest of the world gap closer toward North American CAC levels. We also believe the strength of certain developed market currencies attracted some customers acquiring less marketing effort. In Q4. We also observed increased competition in the advertising market as it is a seasonally high period for Remicade.

Activity. However, it was still weaker than expected both year over year and on a sequential basis.

We were pleased to be able to take advantage of this environment in the fourth quarter.

Overall, we're very pleased with the significant gains we have made in CAC efficiency through 2022.

But with a relatively low market share in the global remittance market, we expect to remain dynamic in managing CAC within our investment thresholds to ensure that we continue to aggressively grow our customer base we.

We will continue to monitor the advertising market trend during 2023 with the expectation that 2020 will have a more normalized competitive environment.

We're also focused on delivering additional scale efficiencies while at the same time investing in our growth opportunities in the fourth quarter G&A expense declined 150 basis points year over year Abbvie as we anniversaried the increase in public company expenses, and we maintain discipline and focus on the highest returning investments.

That will allow us to scale effectively for many years to come.

Knowledge and development expenses increased to 70 basis points year over year and reflects the investments, we're making in our remittance platform and developing complementary new products. We expect to continue to invest in delivering a premium experience and are being opportunistic about hiring high quality talent given the dislocation seen recently in the.

Tech hiring market.

Customer support and operations expenses were essentially flat year over year as a percentage of revenue, we expect to see improved efficiencies and customer support over time, as we continue to scale and reap the benefits and product investments and automation.

Our focus for 2023 and beyond is on four key areas to drive sustainable long term returns as you can see on slide 17. These.

These are to continue to deliver strong revenue growth improved transaction expense sustain our improved marketing efficiency and increased scale efficiencies in other operating expenses.

By focusing on executing extra across these four areas, particularly the additional focus on efficiencies. We believe we can deliver sustainable long term high returns.

First we expect to consistently deliver high double digit revenue growth, even as we scale. This will be driven by robust growth in active customers high retention and pricing that delivers value for our customers.

Customers are driven by customer loyalty highly effective marketing and a premium experience, enabling us to continue our market share gains in the fourth quarter. These factors helped deliver a 41% year over year revenue growth.

Second we see opportunities to continue to improve our transaction expense cost structure as we increase our volume of remittance transactions.

We expect our transaction expense leverage will be driven in the medium to long term, but reduced costs relating to partner integrations, better terms with payment processing and disbursement partners and improvement to risk and fraud management systems, especially as we increase the volume of customer data that we integrated integrate into a fraud models and algorithms.

These drive Don fraud loss rates, while at the same time, improving the customer experience.

We expect some variability in transaction expense from quarter to quarter as some truck costs remain inherently unpredictable.

Turning to marketing efficiency marketing expenses on our largest operating expense and the vast majority of marketing expenses related to new customer acquisition efforts.

We plan to continue investing in high return marketing with a focus on customer growth and sustaining our cash efficiency gains.

As we grow we're also looking closely at our operating expenses, while at the same time, ensuring we're making the appropriate investments that allow us to deliver on our strategic priorities for the long term.

Our year over year growth in G&A expense has moderated as we begin to anniversary the ramp in public company expense and we expect to continue to be disciplined on both head count and non head count expenses.

Our technology and development expense reflects the investments, we're making to deliver a world class <unk> experience for our customers.

And to position us to deliver complementary new products and engineering efficiencies through investments in our platform.

We expect to continue prioritizing these investments as they are crucial to attracting and retaining customers.

Our customers the postcards are influenced by the level of new customer adds in the quarter as new customers tend to have higher initial support contacts.

Were focused on automating key customer support features so customers have more self help options with the goal of reducing both the contact rate and the cost of servicing these contacts over time.

By focusing on executing on these four areas. We believe we are positioning <unk> to deliver both strong topline revenue growth and increasing returns on our investments for the foreseeable future.

Looking ahead to our outlook for 2020 on slide 18, we expect to be able to deliver strong revenue growth along with profitability on an adjusted EBITDA basis for the full year, specifically, we expect revenue to be between $860 million and $880 million.

Which reflects a year over year growth rate of 32% to 35%, we expect adjusted EBITDA to be between breakeven and $10 million, we're excited to be able to accelerate adjusted EBITDA profitability to 2023 on the back of a strong fourth quarter as we continue to prioritize growth, but increase our phone.

On efficiencies, while continuing to make investments that we expect to deliver high returns for the long term.

Our 2020 outlook reflects the following assumptions, we're planning for a macro and FX environment that remains relatively stable to what we have seen in the fourth quarter of 2022. We also believe that strong developed market currencies in 2022 had a partial beneficial impact on our customer spending behavior for some corridor.

And enabled some new customer acquisition.

From a planning perspective, we assume that customer spending behavior of returns to a more normalized pattern in 2023.

However, this is a highly dependent on how currencies move in 2023, and a continued global diversification will help mitigate some of this impact as well as other localized macroeconomic trends.

We expect to continue to see modest leverage on transaction expense as we expect to benefit from improving terms with both de and disposal partners.

Giving the given the increasing volume flowing through our network on fraud costs, we expect to continue to benefit from advanced technologies data and algorithms to reduce fraud, while continuing to improve our customers' experience.

However, certainly fraud costs are inherently unpredictable in any quarter and we believe we are being prudent in our assumptions.

In 2023, we expect to sustain cash efficiencies, we were able to achieve last year as our CAC is also partially impacted by the competitive environment for the advertising market for planning purposes, we have assumed a benefit from an improving competitive AG market will be more modest in 2023 versus what we experienced.

In 2022.

We also plan to maintain our ability to invest even more in new customer acquisition, if the unit economics become even more compelling.

We expect to continue to broadly see leverage on our operating expenses as we scale globally and focus on high return on investment by continuing to invest in our technology and development as we prioritize improving our remnant experience to our resilient customers and building complementary new products.

We also expect the normal seasonality of limited activity will apply to 2023 with the first quarter revenue being the lowest and fourth quarter revenue being seasonally the highest this was the same seasonal pattern last year.

We're pleased to be able to accelerate our path to adjusted EBITDA profitability in 2023, while maintaining very strong topline growth at our scale.

This along with our strong balance sheet as seen on slide 19 positions us to keep investing in our strategic priorities to deliver for both our customers and shareholders for many years to come.

We ended the year with approximately $300 million of cash and cash equivalents on our balance sheet and zero debt, which provides us with substantial liquidity to execute on our strategic priorities.

Our primary focus for capital allocation remains our organic growth priorities of new customer acquisition geographic expansion remittance product enhancements and complementary new products.

We are executing strongly with a resilient and loyal customer base and I'm excited about opportunities to continue delivering strong results for our customers and shareholders in 2023 and beyond with that Matt and I will open up open up the call for your questions operator.

Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby what we compile the Q&A roster.

Our first question comes from Andrew Schmidt with Citi. Please go ahead.

Hey, Matt <unk> stuff and create results here, thanks for taking my questions.

I wanted to start off just with a longer term question.

Good job sort of outlining the marketing efficiencies and narrowing our focus and the other opex efficiencies I'm just curious with the work that you've done so far.

Hospital to provide.

Framework for intermediate to longer term margin structure.

Just curious clearly you had a lot of work has been done in terms of getting our profitability. Just curious if there is a framework for the longer term view. Thanks, a lot guys.

Yes, Thanks, Andrew.

I think we've had a really strong Q4 performance and also really pleased that in 2023, you were able to pull forward and accelerate our adjusted EBITDA profitability to your question in terms of the long term I think we're still in the process of looking at what our ultimate margin profile would look like for the company, but given.

Our guidance of getting to a $60 to $8 million range in terms of our revenues and profitability in the range of breakeven to $10 million, we think it sets us in the right place to continue on a trajectory of increasing margins over time, we talked about.

<unk> expenses, there's opportunities in terms of improving our transaction expense profile and the margin that comes out of that gap continues to be efficient, although like we said.

There is a little bit of an industry impact by a way to think about the advertising market. When you looked at Q4, we expected the market to be hotter. It wasn't as competitive as we thought it will be so the reason I call that out as we have a smaller market share in a large derivative chemistry, and we will continue to invest in things.

Like marketing.

To drive our topline growth can drive active users. So I think given all of those factors and given the given the long runway we have in terms of gaining market share at this point, we're not really offering up any sort of longer term guidance in terms of margin, but we feel that given 2023 and what we've put out.

There.

Set us on the right path going forward.

Sure.

Very clear thank you very much for that and then.

Maybe I.

I can touch on complementary products, obviously, an important to longer term are pooling loyalty potential, but maybe just.

Can you just go a little bit deeper in terms of what.

Focus means and.

How we should think about.

Portfolio of a couple of minor products for your customer.

Overtime.

What that will look like specifically, thanks a lot.

Yes, thanks, Andrew and great to see it.

Appreciate the question so yeah as I mentioned, we're actually excited about how we're narrowing our focus to products that solve.

Pacifically problems or remotely customers. So with passbook, we saw that users were really loving and using the product, but we didn't see that customer segment.

Overlap with our existing <unk> customers. So on a standalone basis, we saw strong growth with passbook users the product wasn't going to achieve the scale necessary fast enough to contribute to meaningful return because it was just a different segment from remotely customers. So we didn't get that synergy. So now that does get to your question Andrew.

With that context, what we mean by narrowing we think it makes sense to deploy our resources to high returning investments targeted at our core remittance customer where there are those synergies so on a go forward basis.

We're continuing to see that immigrants have very specific.

Needs and challenges regarding.

Remittances and other ancillary services that aren't being met by traditional financial services products and we're investing in our platform to meet those needs and so complimentary products you can view and that way, we will enhance our remittance business. It will give us unit economic strength in the long term and it's something that obviously as we continue to invest and we will share more.

Details in terms of the products that we're launching and building their once they are live and ready to talk with folks about but excited about the opportunity.

Got it. Thank you very much guys congrats again.

Thank you one moment for our next question.

Our next question comes from Ramsey El <unk> with Barclays. Please go ahead.

Hi, guys. This is Allison on for Ramsey. Thank you for taking our question today, just wondering if you could elaborate just a bit further on the macro assumptions that are baked into your 2003 guide and know your customer is generally pretty resilient what expense levers could you potentially Paul.

Guidance targets in the case of economic downturn or just less favorable market conditions.

Yes, Thanks, Allison for the question in terms of sort of the macro just broadening the assumption, we're making here is that the macro environment on the FX environment will be broadly stable to what we saw in Q4 I think as <unk> seen in the first nine months or so of last year, there was a pretty big strengthening of the U S.

And some of the stronger currencies.

Started to stabilize a little bit more is required for the second part of the Q4. So we are assuming a degree of stability around that environment as we've looked at our projections.

This year.

In terms of your question around the expense I was first of all I just wanted to reinforce again that we have a lot of resiliency in our customers and we have been through multiple cycles. When we've seen continued active customer act.

Activity growth even in cycles around.

<unk> environments that are similar to what we're talking about now and so we do think that there is a high degree of resiliency when it comes to our customers and their repeat behavior on very specifically on the expense levers we have definitely a lot of opportunity to cut back in areas that are non discretionary and some of the other places that we can we can go final final.

Our into our P&L and take action. So I think we have given our strong transaction margin profile given the fact that we have a high degree of variability in our marketing spend which is largely direct marketing towards new customer acquisition, we have multiple levers in our P&L to manage any significant downturn.

Great. Thanks, so much.

Thank you one moment for our next question.

Our next question comes from Bob Napoli with William Blair. Please go ahead.

Thank you and good afternoon nice results.

Well done.

Just any.

The geographic expansion in the number of new corners, you've added has been pretty pretty dramatic and I mean, you've been I guess underweight in the middle East and you've added.

<unk>.

UAE what are your thoughts on first of all of the new markets, you've added which of those are standing out where you're getting more traction and what are your thoughts around the.

The ability to be that very important middle eastern market to have success there over the long term.

Yes, Thanks, Bob appreciate the comment and question.

As it pertains to number of corridors. Yeah. We're 4300 corridor is now 170 countries and we've done that in a very methodological way.

Both over the last several quarters and years and as we think about on a go forward basis.

And so the way that I would think about it as a continuation of that strategy. So the UAE. We just launched second largest outbound remittance market as I mentioned.

New Zealand, we just launched and I think those should be viewed as planting the seeds for returns in the quarters and years to come just like.

A few quarters ago or a few years ago, we were talking about markets like Europe that were relatively new.

We're launching and starting to add healthy cohorts of new customers you can see those kind of stacked bar chart in terms of power business work, but we enter markets, we add healthy cohort of new customers a great unit economics, and then just given the size of our business that starts to compound and have a more meaningful impact in the quarters and years to come and in terms of where I'm excited yes, a lot of the countries.

We just launched regions that as you mentioned, we're just starting to expand to.

Including the Middle East I think there is a big opportunity for us to both grow a large business in those regions and that make a really positive impact to our future customers lives given that I think we can leave some of the digitization that's happening in some of the markets can we just recently launched are more to come and excited about the foundation that we're continuing to set for future.

Countries to contribute meaningful to the business.

Thank you there's been some.

I guess some of your competitors that have been around a while have become a little more.

I guess using promotional pricing.

Looking at your numbers I don't see any slowdown in your business. So just some thoughts on the competitive environment and yes, I mean.

Are you seeing any effect from some of the pricing moves that some of the competitors have made.

Yeah. Thanks, Bob we are seeing the punch line is we're seeing price stability and no real changes in the competitive landscape.

Rightly longer answer provide thats the cases, I think customers choose remotely for a multitude of reasons and pricing is one of those factors, but the thing that I've learned time and time again over that over a decade of building. This business is things like trust peace of mind are foundational and very hard to deliver and that we.

We are exceptionally good at and getting better and better with scale, which ties back to the premium products that I mentioned as well as the transaction numbers the loyalty the predictability and consistency of our business. So that's a long winded answer but the punch line again is stacked.

Price stability no no material changes in the competitive landscape.

Thank you and nice to see the free cash flow positivity that move to free cash flow positive alright. Thank you.

Thanks, Bob.

One moment for our next question.

Our next question comes from Darrin Peller with Wolfe Research. Please go ahead.

Yeah, Hey, guys. Thanks.

Looking at some of these metrics on slide 16.

By the way it was very helpful. So thanks for that I mean, when we look at the improvements we're seeing in transaction expense and obviously the fraud management was really helpful.

Can you give a little more color on what's actually driving that gross margin improvement and the sustainability of that because it was a big step.

Big step function that obviously is going to help allow for flow through to the bottom line, which you are seeing now and so on and on that follow up on that on the profitability side, it's really great to see the breakeven to positive 10.

Just can you give us a little bit more color on the dynamics of what you're building into that around G&A now maybe also stock comp and what contribution youre going to have there versus other expenses. Thanks guys.

Yes, thanks, Darren so in terms of fraud, I mean to your point, we're really pleased with the progress we made in Q4 in particular I think it was exceptional in many ways in terms of bringing down our loss rate.

Although that really is the scale that we're continuing to build and the data that we're getting and injecting into our fraud models and algorithms. We did launch some new algorithms in Q4, and we're continuing to test test with our algorithms and we're seeing really positive signs around that we saw that obviously in Q4, and we continue to remain optimistic in that.

What are those models will do for us, but the point that fraud, as well here, which Matt alluded to in his comments too is that we're also looking to make sure we're minimizing any friction with our customers.

So there is a balance with their debt covenants.

And our model take that into Carnival, we're balancing making sure. We don't we introduced very little friction for our customers and at the same time, making sharp fraud loss rates.

Continue to be at the levels that we saw in Q4.

With regard to fraud to your question around what's baked in into adjusted EBITDA.

Again, we've been saying that really anchored on our top line growth.

You can see we've guided here to 30% to 30, 35% revenue growth for the year and that really drives a lot of what's happening in the P&L in terms of our ability to get to breakeven to $10 million of EBITDA for the year.

On the expense side of things.

We certainly are focused on moderating the growth of our expenses more broadly speaking G&A, we talked about Anniversarying, our public company expenses, which will likely start moderating.

Sure.

But we continue at the same time.

Investments in our product and technology area, which we think are the right high return on investment.

Thanks to continue to do for the long term.

Balancing between.

Restaurants were making as well as driving some scale efficiencies in various parts of the business that we think we can given the scale of our business and where we are where we're at today and the other point I'd make on this as well as we do our completely appreciate it.

The higher risk premium and cost of capital out in the market and so we continue to be focused on driving high returns, but we're doing this for the long term so by 2023.

Revenue growth, that's in our guidance and break even at 10 million $10 million EBITDA profitability, but really focused on continuing making investments for the long term.

Alright Thats helpful.

Matt If you could just touch one more just one quick follow up the complementary new products comment on one of your slides around the plan.

I know.

I know the deal Israel was the rewire.

Probably going to come with some incremental offerings around insurance you mentioned, but just can you give us a little more thoughts on what that what you intend on by saying complementary new products for this year ahead.

Yes, thanks Darren.

Appreciate the question so on <unk>, specifically, we closed the acquisition last month.

The strategic rationale was twofold, one was the geographic complementary nature of the deal being able to launch Israel as an origination market as well as grow with a few other countries and a few other countries that theyre in and then the second was to expand exactly what your question alludes to.

Around our vision of complementary products and I think that in.

In addition to just the capabilities that they are the products that they have built the capabilities of that team in terms of their product and engineering expertise as it pertains to complementary products and just our core business I think will be a great addition.

So excited about that and as it pertains to complementary products. It's similar to Andrew's question is is what I'd say is that we're much more narrowly focused on where we can improve and enhance our existing remittance customers' lives with additional products that are.

Complementary to remittances and so we're not breaking out the specifics there yet, but I think our increased focus and the pain points, we're seeing from our customers. There will result in some exciting things down the road and we'll obviously share those when the time is right.

Alright, guys. Thanks, John Thanks, a lot.

Thank you one moment for our next question.

Our next question comes from Tencent Wang with Jpmorgan. Please go ahead.

Thank you great results. So can you hear me Okay I'm at the airport I just wanted to ask.

A lot of moving pieces here very encourage your outlook thinking about 'twenty three versus 22.

And how the <unk>.

Composition of growth will be different how would you summarize that.

<unk>.

Users volume <unk>.

I know youre cohorts are aging, but youre going after some new core doors as well. So how do you think there will be different given everything you've talked about.

Today, if you follow my question.

Yes, thanks consent and safe travels whoever youre, adding to it so I think in terms of.

As we looked at 2023 years 'twenty to 'twenty, two I'd say broadly it's going to be on a very similar trajectory again to the point that we have about a 2% market share.

Large remittance market, we have a ton of opportunity across all of our corridors. We continue to grow in our sort of core core growers are north America certain destinations to multiple sort of destinations around the world.

But as we talked about we've also continued to increase our international mix. So we do see that that will continue to increase through the year as we.

Those markets were already launched particularly in the last couple of years.

Will help us to continue to grow both active users and new customers in these international markets, We've talked about Japan I think at Q3 as you enter Q4.

We just recently launched UAE as we talked about now so.

Pretty optimistic in terms of the growth prospects, we have internationally.

And Thats a lot of what's getting baked in into our top line forecast.

Yes, the only thing I'd add there Tien tsin and thanks for the comments and question is I think that.

<unk>.

Or is something that I appreciate about me and see how this business is the predictable.

Repeat nature of our business and the loyalty that our customers have both of their loved ones and families that they are sending money back to and teasing remotely to send money back to their families and so.

That is something that we go into the year with confidence around repeat behavior and then it is about how do we continue to add on healthy cohorts of new customers in both our existing and new markets and really important to keep in mind that within the remittance space or approximately 2% of the one six trillion Tam that we've talked about and so while.

The room to grow and it's both by maintaining that trust with our existing customers and then very scientifically and with a high return on investment, adding those cohorts of new customers across the globe.

Mark mentioned.

Got it and then just as my.

A follow up if you don't mind just thinking about.

Well you just hit there as well I think Darren and others questions just on the M&A side and consolidation.

Assuming that some of your peers are also.

Tightening their belts and including on the private side I know you just did rewire.

Is your appetite to do acquisitions changed at all.

Are you more willing to do things now.

Maybe some of the changing.

Landscape or is it time to.

Focus I know you have required but.

Are you more focused organically at this stage versus maybe six months ago.

Yes, yes. Thanks, Great question, historically, we found organic growth and internal build to be both foundational and the best opportunities. So that's what I'd say first and foremost we.

<unk> review as we did with the <unk> acquisition, where we actually ended up doing that transaction. We review all opportunities as they become available, but we have a high bar for any M&A transaction and will remain disciplined in deploying capital.

Alright, good well done thank you.

Thank you one moment for our next question.

Our next question comes from David Scharf with JMP Securities. Please go ahead.

Hey, good afternoon. Thanks for thanks for taking my questions squeezing me in here.

Hey, Matt.

Maybe one one sort of general and one granular question.

And.

More of the sort of top down.

As it relates to the guidance.

As well as the Q4 performance that we just saw.

You clearly have.

Lot of levers you can pull.

And the path to profitability could take several different forms.

If you wanted to even accelerated.

Im just curious.

Kind of stuck to your guns.

And then very very consistent in terms of the long term vision and.

Investment in broad new products other customer acquisition strategies.

What are the types of things externally.

<unk> potentially could make the company shifted its focus.

Or perhaps accelerate.

Not just its path to profitability, but.

It's kind of magnitude of near term profitability.

Send a clear message, obviously kind of youre sticking to your guns in terms of the long term build out I'm. Just curious is there anything externally that would kind of shift this kind of longer term plan and philosophy.

Yes, thanks, yes, it really really thoughtful question I think.

The way that I view.

Capital deployment and ultimately in service of accomplishing our long term vision, which as you said remain unchanged remains unchanged unchanged, which is really to transform and improve the lives of immigrants and their families by providing the most trusted financial services on the planet I think that in our journey to that there will be different times, where capital costs.

Barry and I view, it in a little bit less binary in a little bit more on a spectrum and so what we've seen in capital markets recently, obviously with interest rates rising.

The cost of capital has increased and thats, okay, especially for a business like ours, but I think it's very disciplined about the investments that we make in very quantitative and analytical in terms of how we deploy those investments and so we have increased the hurdle rate for the investments that we're making you can see some of that with the profitability. In Q4, you can see some of that.

With our guidance in 'twenty, three and pulling forward some of the guidance.

In terms of the.

The past two and now being profitable and what I would say is that we do continue to.

To monitor and look at the cost of capital as we.

March towards our long term vision, but we're also still very committed to that long term vision. So proud of being able to do both but I think it's a reflection of our discipline in terms of capital management and also our customers in terms of the resilience and the importance of the service that can kind of.

Withstand various macroeconomic shifts given the criticality of our service. So that's how I'd think about it overall is less binary more on a spectrum with a good handle of the investments, we're making and able to adjust those based on what the cost of capital is in the market.

So we've now got it no. That's very helpful. I mean, its been a very very consistent sort of vision and execution and it sounds like externally interest rates and capital cost has probably been the only factor thus far.

And that's a change things on the margin.

Hey wanted to follow up a little more granular question.

I wanted to ask you a little bit about some observations on our core corridor not all quarters are created equally.

U S to Mexico is the largest in the world.

It tends to be the most profitable for most of emitters and.

And I think relative to some of your other.

Markets that probably has a lower.

Mix of of banked customers ones that can send online who can fund.

Remittances with.

With a debit card out of the demand deposit account.

Can you just talk.

Which also speaks to just how much incredible opportunity. There is ahead of you.

Just globally, but especially in the world's biggest corridor.

Can you talk a little bit about what you're seeing in terms of I guess the trends towards.

The Latin American centre in the U S outbound in terms of adopting banking products, becoming.

Part of your true Tam addressable market.

Because something is clearly kind of moving a little more.

And then it was a few years ago when it lag so many other markets in terms of being bank.

Noticing a change in the opening up of that funnel, even wider for that corridor.

Yeah phenomenal.

Customer centric question as we would call it I think that.

The punch line is yes, we're seeing.

Actually first let me say I love your comment that not all markets are created equal what we call that internally and in some of the external messages that we've shared is localization at scale and that's something that I think that we've done well and is part of understanding various markets. It's important to understand what you just said, which is what is their comfort level and ultimately trust with digital channels, specifically trusting an moe.

<unk> two.

Send money back dot com and that has varied historically, so thats one of the reasons. If you look back 10 years, we started with the Philippines. Then we went to India and then we launched Mexico in that order. We're talking 10 11 years ago now and what we've seen in Latin America and broadly is the phenomenon that we knew we would see which is additional smartphone.

The affordability and access and then reliable and affordable data access and I think we are seeing more and more customers.

<unk>.

Use their mobile phones and cuts it for financial services and that certainly includes the Mexico and Latin America market. So it's an exciting time in that way to be in digital money transmitter not only because of the growth in Tam and the growth in our business, but also because we provide us a much better experience we've taken a bunch of costs out of the system and were improving those customers lost up depending upon.

The trend is absolutely accurate.

Great. Thanks, Thanks for all the color Matt.

Thank you Juan let me for a next question.

Our next question comes from Alex <unk> with Keybanc. Please go ahead.

Hey, Thanks for taking my question today.

Actually I have a couple of maybe first I wanted to come back to the slide 16.

With some of the helpful disclosure.

Particularly around marketing expense improvements just curious I guess thinking about 2003, and some of the more sustainable execution wins as you've titled them here that could carryover.

Versus the macro factors is there any way to just kind of roughly.

Attribute.

Of that 660 basis points.

How much is more related to macro factors and asking just kind of wanted to understand.

And that.

Kind of a worst case scenario, where the AD environment does.

Become far more competitive in 'twenty to 'twenty, three that youre expecting just kind of what the headwind could be.

Some of the expected efficiencies.

Yes. Thanks, Alex is something that we think about a lot here as well and as we continue to monitor what's going on in the advertising market. So I think as we called out on slide 16.

Brand awareness and word of mouth effects continue to increase for us and I think we've talked about that for a number of quarters now, but just given the repeat behavior. We're seeing we're seeing that customers really want to come back to us through them. The water market that is continuing to spread so that is a growing effect and as we get bigger and bigger.

We're really optimistic about where that could take us.

And we're also continuing to work on the unpaid channel side of things, whether it's search engine optimization that landing pages and all of the things that we would do to continue to increase.

The mix towards more unpaid versus versus paid channels and Matt also talked about localized digital marketing, which we think is another thing that we can continue to sustain but they all get better with scale. So I would say those are some of the factors. We feel good about in terms of what we can control from an execution perspective.

And what our customers bring to us in terms of some of the word of mouth effect.

In theory.

Sustain and improve over time.

The advertising market is obviously something that we don't fully control there's multiple dynamics that get played out there, but we do think that to a degree that with our growing scale and particularly as we get more and more international.

Do localization at higher scale that we should be able to offset to a degree some of those effects as we as we get bigger and bigger so.

I don't have a specific answer for you on the actual breakdown, but I would try those are some of the drivers.

One way or the other.

Yes, that's helpful commentary and then just maybe one last quick one.

Hey, Martha I think you've talked about international growth being kind of a bigger factor than the topline formula for 'twenty. Three I was just curious if you could maybe it's just simply kind of describe any sort of like pricing differentials. When you think about.

Youre very ascending geographies and some of the <unk> implications if there are any.

The mix of international to the.

U S. Canada, it's still relatively small for us, but what we've been seeing is that our LTV CAC. When we look at from an acquisition perspective and unit economics more broadly.

I continue to be strong for us. So we are focused on.

Obviously make provide the right pricing for our customers and which remains a dynamic regardless of which corridor we look at.

We also continue to improve our cost structure, so whether expand payout costs, which also go to a transaction margin as we get more and more bigger international there.

There is opportunity to grab to continue to improve our margin those will take a little bit of a longer time, but overall nothing we're seeing here would suggest that we would have any sort of pressure in terms of.

Lesser unit economics, as we grow our grow our mixed internationally.

Okay, great. Thanks for all the color.

Thank you one moment for our next question.

Our next question comes from Bob Napoli with William Blair.

My question is primarily has been answered and I guess, maybe just on rewire.

Any learnings from that that you may apply.

Are you seeing that be.

<unk> and helping you to expand into other corridor and does it make you more likely to look for tuck ins I know you've talked with.

Tien Tsin question on organic versus acquisition you are clearly focused on.

Primarily organic that is are there any learnings from weekly wire that maybe could accelerate growth and to jumpstart second quarters.

Do you see.

Yeah, Thanks, Bob Yes, I think that.

Its FERC.

First learning is I think that the early results and again, we just closed the acquisition in January and so we're just in the process of integrating the team and the first 30 days, but obviously, we've got to know the team well and I think that there has to be a foundational not only cultural alignment, but cultural additions and when we talk about culture internally at <unk> that we deal with our growth plans.

Net of having strengths and weaknesses. So I think the rewire team can learn a lot from us and I think we can learn a ton from them in different ways of working but foundational you theres a lot of overlap there. So I think we're going to work really well together from that standpoint, and then the strategic rationale in terms of complementary geographies. It's great that there's real online as I mentioned and I would expect us to be able to leverage some of their.

Product and technology and customer Centricity and new markets that are similar to the Israeli market. So that's great and then second as I mentioned I think around complementary products there'll be able to help us there. So early days given that it's just been 30 days, but.

The foundation of learning is culture is foundational for any acquisition, we feel like we got that right with this one and excited about the strategic rationale that I just went through.

Thanks, and I apologize if I missed it but did you give any financial metrics on what you expect me why are they contribute in 'twenty three.

Revenue and EBIT in that.

Yes, we did not.

Okay great.

Thank you I'm showing no further questions at this time I would now like to turn it back to Matt Oppenheimer for closing remarks.

Great. Thanks, so much so thanks.

Thank you everybody for the thoughtful questions as we always do it remotely I'd like to hand, the call just by highlighting one of our amazing customers. The customers name is James and James joined <unk> in June of 2022, and send money from the U S to his family in Kenya, and James commented it is easy efficient and fast.

Way to send money I would recommend it and have done so to others and so we think James and his family for using in recommending remotely to others I think that's another benefit as we talked about scale conceptually when you look at it more practically theres a lot of customers that are having a great experience like game and are kind enough to tell there.

<unk> friends and acquaintances about remotely and recommending it to others. So thank you to customers by Kent and thanks, everybody for joining US. We appreciate your support we're excited about the opportunities ahead in 'twenty, three and look forward to sharing our progress as we continue to execute on the vision that I mentioned earlier around really improving and transforming the lives of immigrants and there.

Families by providing the most trusted financial services on the planet.

Thank you for your participation in today's conference. This concludes the program you may now disconnect.

Goodbye.

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Didn't hear an automated message advising your hand is raised.

To withdraw your question Press Star one again.

Be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Stefan Schulz Senior Vice President Investor Relations. Please go ahead.

Thank you good afternoon, and thank you for joining us for <unk> fourth quarter 2022 earnings call. Joining me on the call today are Matt Oppenheimer co founder and Chief Executive Officer of our Bentley, and Hey, Marc <unk>, Our Chief Financial Officer.

Our results and additional management commentary are available in our earnings release and presentation slides, which can be found at IR at <unk> Dot com.

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 no guarantee.

<unk> and involve risks and uncertainties that may cause actual results to vary materially from those presented here.

Should not place any undue reliance on any forward looking statements.

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 metric. Please see our earnings release, which is available on the IR section of our website now I will turn the call over to Matt to begin.

Thank you Stephanie and thank you all for joining us to discuss our strong fourth quarter results and our outlook for 2023.

This past year was a momentous year for <unk> and we made significant progress on our long term vision with benefits for both our customers and shareholders.

We are grateful to be in a business that matter so deeply to our customers. They depend on us every day to get money home to family and friends safely and quickly.

On slide four you can see why I am so confident about <unk> future first our customers are resilient and predictable over many years of spending.

This matters, even more in volatile times and gives me comfort that we will be able to deliver strong growth across economic cycles.

Our investments to provide a world class experience for our customers have resulted in a premium product the customers loyally use and keeps getting better as we scale.

Third we are proud of our track record of execution as we have consistently exceeded expectations since our IPO.

Finally, as a result of these foundational investments we have made solid execution and the continued strength in customer behavior, we have been able to increase the returns on our investments.

As a result, we expect to be adjusted EBITDA positive in 2023.

We believe we can continue to deliver strong revenue growth with high return investments over many years, while efficiently scaling the business to deliver increased efficiencies.

Turning to our exceptionally strong results for the fourth quarter revenue increased by 41% to $191 million.

Our top line result efficiencies across many areas of our cost structure and favorable market dynamics resulted in a strong adjusted EBITDA performance of $7 5 million in the quarter.

We believe the results in the fourth quarter display our strong product loyal customer base and an intentional approach to delivering high returns on our investments.

Turning to the drivers of our fourth quarter quarterly active customer growth of 48% on slide five.

We continue to take share and our growing customer significantly faster than the overall remittance market, whether that traditional brick and mortar or digital.

We also benefited early in the fourth quarter as developed market currencies were strong compared to emerging market currencies.

Our focus later in the fourth quarter was the pick up increased demand during the holidays, especially for corridor.

Seasonal spending spikes for Christmas a goal that we successfully executed.

Our business outside North America also delivered a record number of new customers as we continue to focus on providing localized marketing experiences contributing to a strong holiday demand capture.

Finally, our product improvement, leading the customer peace of mind also made it easier to attract and retain customers.

Our retention remains strong at an average of 90% of revenue retained after the first full year of growth and our recent cohorts continue to show <unk>.

<unk> retention trends as we focus on acquiring high quality customers, who continue to transact with us over many years.

This retention is the result of our premium product and our commitment to investing in reducing customer friction along with pricing that delivers long term value for our customers.

Our retention is also driven by the resilience of our customers and the reasons why they use our product our customers typically send money home to their families and friends multiple times a quarter to help with basic non discretionary living expenses.

Finally, we survey our customers every quarter and the results remain consistent the.

The vast majority of customers expect to send money at the same frequency or more often than they did in the past year.

This gives us additional comfort around the visibility and predictability of our customer behavior in 2023.

We continue to invest in our strategic priorities as shown on slide six.

Our investment in these four priorities will allow us to deliver efficient new customer growth and drive additional retention and customer loyalty in both the near and long term.

Our focus on new customer acquisition at a highly attractive unit economics, and growing our geographic footprint will help us drive efficient customer growth and.

Enhancing our remittance products and our vision of serving our customers with complementary new products.

Will allow us to drive even higher retention and customer engagement.

As we continue to invest across these four areas, we are maintaining our disciplined focus to ensure our robust and our investments have even higher long term returns consistent with our history of making investments at very strong unit economics.

As the cost of capital has increased we have increased our hurdle rates.

Around these investment priorities in 2022, and also increased focus on scale efficiencies.

Had the benefit of allowing us to accelerate our path to adjusted EBITDA profitability to the full year 2023, while at the same time, ensuring we are we are able to generate generate sustainable high returns for many years to come.

Turning to slide seven our efficient new customer acquisition has been has been driven by increasing brand awareness are highly localized approach across 170 countries.

And increasing scale, which drives low cost of word of mouth customer acquisition.

One of our strengths is deploying and measuring the impact of our marketing investments at a quantitative detailed and actionable level specifically.

Specifically, we focused on the elasticity of our marketing investment and making sure our paid marketing spend is bringing the right level of return in a short term time horizon.

Along side that we have continued to invest in unpaid channels and awareness building effort, making sure we're building medium and longer term demand, which in turn drive even more efficiency into our marketing program as our brand awareness increases.

While <unk> is a key driver for marketing efficiencies. It is important to note. We look at CAC in the context of LTV to CAC or customer lifetime value remains incredibly strong driven by high retention customer resilience, our premium product durability and pricing and.

<unk> leverage in transaction expense.

Even as our business has grown substantially and geographically our LD LTV to CAC for our 2022 cohort is similar to the six X we shared during the IPO.

Our second investment priority is expanding our geographic footprint, which includes opening up new corridors as well as expanding our disbursement option.

As you can see on slide eight we continue to add new send markets, including New Zealand in the fourth quarter and the United Arab Emirates market last month.

The UAE is the second largest source market for remittances after the U S with significant recede corridor, so we already serve well, including India, Pakistan, Philippines and Bangladesh.

And are looking for more convenient option and a better experience that we believe we can deliver.

Looking ahead, we have the opportunity to further expand into additional markets, including in the Middle East and Europe helped by the re wire acquisition, which we closed last month.

Additionally, we continue to believe the quality of our disbursement option, including 4 billion Bank accounts 435000 cash pickup locations and $1 1 billion mobile wallets remained one of the many compelling value propositions for our customers.

Our geographic expansion has allowed us to further grow and diversify our revenue as can be seen on slide nine.

While all regions have had a greater than 50% revenue CAGR since 2020.

We have seen our business outside North America grow even faster and achieve scale of more than $100 million in revenue in 2022.

Our business outside of North America, now represents 15% of total revenue, which is up over 400 basis points compared with 2020.

In addition, our three largest received market.

By revenue, Mexico, India, and the Philippines represented approximately 65% of total revenue in 2022, which is down from approximately 75% in 2020.

Our growth and scale outside North America is critical for many reasons.

Including lessening our risk exposure to regions specific macroeconomic issues.

Diversifying our foreign exchange exposure.

And lowering our caf outside North America, as we gain relevant scale and brand presence.

Our third priority is to deliver a premium customer experience as we scale by continuing to invest in the remittance product.

Customers are offered peace of mind from the moment. They open our app until funds are safely delivered in the hands of their family and friends around the world as you can see on slide 10.

From ensuring our customers have the widest selection of payment options delivering a frictionless experience, while minimizing exposure to risk.

Enabling the ability to track funds anytime.

Accessing self help and live customer support.

The operating one of the fastest most reliable and extensive disbursement networks in the industry. We are reinventing the remittance experience and building a premium product that our loyal customers Love and trust.

Accordingly, once we have received customer funds more than 90% of transactions are dispersed and less than one hour.

Additionally, we are able to maintain an uptime of 90, 994% even as our volumes continue to show significant growth.

All of this leads to high retention of existing customers and helps us build a premium experience and a trusted brand in the communities we serve.

Broad losses always a balancing act between delivering a frictionless customer experience and an acceptable fraud loss rate.

In Q4, both the customer experience and fraud loss rates were strong.

These updates were the results of improvements we made to our broad machine learning models, which with the addition of scale and sophistication gives us better data and better tools to train our models to more effectively identify bad actors. This will ultimately enable us to improve the customer experience while also improving.

Moving our fraud loss rate.

Finally, turning to our long term vision of complementary new products on slide 11.

Our strategy has narrowed the focus on solving customer problems that are complementary to the international payment needs. We are already serving.

We believe this focus will drive valuable outcomes for customers deepen customer loyalty and retention and further improve efficiency with new customer acquisition.

As a result of this strategic evolution, we have made the decision to sunset our path to put brand.

While past book were gaining traction with customers and was growing it was ultimately outside our core customer segment.

We believe it makes sense to redeploy our resources to higher returning investments targeted at our core remittance customer.

We're taking the best of learnings from past book and integrating them into products or features to deliver greater value through innovative solutions that are directly relevant to our customers remittance needs and that we are uniquely equipped to deliver.

Before I turn the call over to him I'd like to reiterate our strategic priorities for 2023 on slide 12, which are all about continuing to deliver on our promises to cut to our customer and shareholders over the long term.

This is all supported by building a world class culture rooted in serving our customers are.

Our focus on long term sustainable return remains the common thread across all of these priorities.

Geographic expansion, there remains a significant amount of new market opportunities and opportunities in existing markets as we still only represent approximately 2% of total remittance volume or scale and prior investments will allow us to enter new market, even more efficiently and effectively.

Right.

Third we will strive to deliver customer peace of mind with a flawless remittance experience, which drives customer loyalty and improved margins.

And finally for with our complementary new products, we will solve problems are unique to our remittance customers driving additional engagement and loyalty.

Executing on this vision and look forward to what we can accomplish together for all of our stakeholders with that I will turn the call back.

To provide more details on our financial results and 2023 outlook.

Thank you, Matt I'm very pleased with our exceptional financial performance for the fourth quarter. Our teams have strong execution in the quarter and we also benefited from some favorable market conditions and both of these factors led to our outperformance in the quarter.

I'll finish with our outlook for 2023, and our investment priorities.

With that let's turn to our fourth quarter results.

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 transaction costs related to acquisitions and foreign exchange gain or loss reconciliation to GAAP results are included in the.

The earnings release.

Beginning on slide 15, with our high level financial performance in the fourth quarter, we're pleased to deliver a high active customer and revenue growth and adjusted EBITDA profitability quarterly active customers grew by 48% year over year to $4 2 million sand volume grew 35% year over year to approximately $8 1 billion.

While the resulting in revenue growth of 41% year over year to $191 million on a constant currency basis, both in volume and revenue growth rates would have been approximately 500 basis points higher on a year over year basis.

<unk> revenue outperformance combined with significantly lower transaction expense and marketing efficiency led to adjusted EBITDA of $75 million in the quarter. Our GAAP net loss was $19 million in the quarter and included $27 million of stock compensation expense recognized in the quarter.

Now, let's turn to some of the key factor that drove the exceptional performance in the fourth quarter on slide 16, we detail both our execution wins and some macro factors that led to our strong results in the quarter.

Let's begin with revenue, which was up 41% year over year in the fourth quarter and approximately up 46% year over year on a constant currency basis. Our strong revenue growth was driven by high retention of existing customers and benefit from earlier international expansion.

Existing customer activity contributed to a significant portion of total revenue in the fourth quarter, which reflects the consistent spending behavior of our customers and our premium customer experience in.

Okay.

While our customers that typically sending money home for basic need there are some markets that are more sensitive to foreign exchange rate changes, especially those that tend to also have larger transaction sizes.

In addition, we also benefited from lower advertising costs at strong developed market currencies tend to encourage certain prospective customers.

Thanks for <unk> options to take advantage of favorable foreign exchange rates.

Turning to our transaction expenses, which includes costs relating to our payer partners disbursement partners and fraud losses.

Transaction expense as a percentage of revenue was down 410 basis points year over year. This was primarily due to significantly lower fraud loss rates in the fourth quarter as a result of improved algorithms, which harness our increasing amount of data and analytical sophistication. This helped drive substantial improvements in fraud loss rate.

On a year over year basis.

We're excited about the improvements in fraud loss rate in Q4, and we will continue to invest in our data and analytics capabilities to manage both our fraud loss rates and provide our customers with frictionless experiences. However.

However, we expect some variability in fraud loss rate in any quarter, while making sustainable improvements in the long term.

As customer acquisition costs or CAC makes up the vast majority of marketing expense, we were able to deliver a 600 basis points year over year decline in our overall marketing expense as a percentage of revenue.

We're able to significantly drive down fourth quarter, GAAP, 35% year over year, and 6% sequentially a number of factors drove declines in CAC, including increased benefit from localized digital marketing brand awareness, what amount effects and increasing scale in our business outside North America.

This has allowed us to bring down our rest of the world gap closer toward North American CAC levels. We also believe the strength of certain developed market currencies attracted some customers requiring less marketing effort. In Q4, we also observed increased competition in the advertising market.

It is a seasonally high period for remedies activity.

However, it was still weaker than expected both year over year and on a sequential basis.

We were pleased to be able to take advantage of this environment in the fourth quarter.

Overall, we're very pleased with the significant gains we have made in CAC efficiency through 2022, but with a relatively low market share in the global remittance market, we expect to remain dynamic in managing CAC within our investment thresholds.

Ensure that we continue to aggressively grow our customer base.

We will continue to monitor the advertising market trend during 2023 with the expectation that 2023, we'll have a more normalized competitive environment.

We're also focused on delivering additional scale efficiencies while at the same time investing in our growth opportunities in the fourth quarter G&A expense declined 150 basis points year over year as the as we Anniversaried the increase in public company expenses, and we maintain discipline and focus on the highest returning investments.

That will allow us to scale effectively for many years to come.

Acknowledge and development expenses increased to 70 basis points year over year and reflects the investments, we're making in our remedies platform and developing complementary new products. We expect to continue to invest in delivering a premium experience and are being opportunistic about hiring high quality talent given the dislocation seen recently in.

The tech hiring market.

Customer support and operations expenses were especially flat year over year as a percentage of revenue, we expect to see improved efficiencies and customer support over time as we continue to scale and reap the benefits from product investments and automation.

Our focus for 2023 and beyond is on four key areas to drive sustainable long term returns as you can see on slide 17. These.

These are to continue to deliver strong revenue growth improved transaction expense sustain our improved marketing efficiency and increased scale efficiencies in other operating expenses.

By focusing on executing across these four areas, particularly with the additional focus on efficiencies. We believe we can deliver sustainable long term high returns.

First we expect to consistently deliver high double digit revenue growth, even as we scale. This will be driven by robust growth in active customers high retention and pricing, but delivers value for our customers.

Active customers are driven by customer loyalty highly effective marketing and a premium experience.

Enabling us to continue our market share gains in the fourth quarter. These factors helped deliver 41% year over year revenue growth.

Second we see opportunities to continue to improve our transaction expense cost structure as we increase our volume of remedies transactions. We expect our transaction expense leverage will be driven in the medium to long term, but reduce costs relating to partner integrations.

<unk> trends with payment processing, and disbursement partners and improvement to risk and fraud management systems, especially as we increase the volume of customer data that we integrated integrate into a fraud models and algorithms.

These drive Don fraud loss rates, while at the same time, improving the customer experience.

We expect some variability in transaction expense from quarter to quarter as some fraud costs remain inherently unpredictable.

Turning to marketing efficiency marketing expenses on our largest operating expense and the vast majority of marketing expenses related to new customer acquisition efforts. We plan to continue investing in high return marketing with a focus on customer growth and sustaining our cash efficiency gains.

Our technology and development expense reflects the investments, we're making to deliver a world class <unk> experience for our customers and to position us to deliver complementary new products and engineering efficiencies to investments in our platform.

We expect to continue prioritizing these investments as they are crucial to attracting and retaining customers.

Our customers the postcards are influenced by the level of new customer adds in the quarter as new customers tend to have higher initial support contacts.

We're focused on automating key customer support features so customers have more self help options with the goal of reducing both the contact rate and the cost of servicing these contacts overtime.

By focusing on executing on these four areas. We believe we are positioning <unk> to deliver both strong topline revenue growth and increasing returns on our investments for the foreseeable future.

On efficiencies, while continuing to make investments that we expect to deliver high returns for the long term.

Our 2020 outlook reflects the following assumptions.

We're planning for a macro and FX environment that remains relatively stable to what you've seen in the fourth quarter of 2022. We also believe that strong developed market currencies in 2022 had a partial beneficial impact on our customer spending behavior for some corridors and enabled some new customer acquisition.

From a planning perspective, we assume that customer spending behavior returns to a more normalized pattern. In 2023. However, this is a highly dependent on how currencies move in 2023.

<unk> global diversification will help mitigate some of that impact as well as other localized macroeconomic trends.

We expect to continue to see modest leverage on transaction expense as we expect to benefit from improving terms with both days and disbursement of partners, giving the given the increasing volume flowing through our network on fraud costs. We expect to continue to benefit from advanced technologies data and algorithms to reduce fraud, while continuing to improve our <unk>.

Customers experience.

Forever certainly broadcasts are inherently unpredictable in any quarter and we believe we are being prudent in our assumptions.

In 2023, we expect to sustain CAC efficiencies, we were able to achieve last year as our CAC is also partially impacted by the competitive environment for the advertising market for planning purposes, we have assumed a benefit from an improving competitive AD market will be more modest in 2020 versus what we experienced.

In 2022.

We also plan to maintain our ability to invest EBIT more in new customer acquisition, if the unit economics become even more compelling.

We expect to continue to broadly see leverage on our operating expenses as we scale globally and focus on high return on investment by continuing to invest in our technology and development as we prioritize improving our renovated experience to our resilient customers and building complementary new products.

We also expect the normal seasonality of remittance activity will apply to 2023 with the first quarter revenue being the lowest and fourth quarter revenue being seasonally the highest this was the same seasonal pattern last year.

We're pleased to be able to accelerate our path to adjusted EBITDA profitability in 2023, while maintaining very strong topline growth at our scale. This along with our strong balance sheet as seen on slide 19 positions us to keep investing in our strategic priorities to deliver for both our customers and shareholders for many years to come we ended the year.

With approximately $300 million of cash and cash equivalents on our balance sheet and zero debt, which provides us with substantial liquidity to execute on our strategic priorities.

Our primary focus for capital allocation remains our organic growth priorities of new customer acquisition geographic expansion remittance product enhancements and complementary new products.

These standby, while we compile the Q&A roster.

Our first question comes from Andrew Schmidt with Citi. Please go ahead.

Hey, Matt months' Stephane create results here, thanks for taking my questions.

I wanted to start off just with a longer term question.

Good job sort of outlining the marketing efficiencies and narrowing our focus and the other opex efficiencies I'm just curious with the work that you've done so far.

Possible to provide.

Framework for intermediate to longer term margin structure.

Just curious clearly you know a lot of work has been done in terms of getting our profitability. Just curious if there is a framework for the longer term view. Thanks, a lot guys.

Yeah. Thanks, Andrew Kevin I think we've had a really strong Q4 performance and also really pleased that in 2023, you were able to pull forward and accelerate our adjusted EBITDA profitability to your question in terms of the long term I think we're still in the process of looking at what our ultimate margin.

I would look like for the company, but given our guidance of getting to a $60 to $8 million range in terms of our revenues.

And profitability at a range of breakeven to $10 million, we think it sets us in the right place to continue on a trajectory of increasing margins over time, we talked about.

<unk> expenses, there is opportunities in terms of improving our transaction expense profile and the margin that comes out of that gap continues to be efficient, although like we said.

There is a little bit of an industry impact there when you think about the advertising market. When you looked at Q4, we expected the market to be hotter. It wasn't as competitive as we thought it will be so the reason I call that out as we have a small market share in a large remittance industry and we will continue to invest in things.

Like marketing.

To drive our topline growth and drive active users. So I think given all of those factors and given the given the long runway we have in terms of gaining market share at this point, we're not really offering up any sort of longer term guidance in terms of margin, but we feel that given 2023 and what we've put out.

They're set us on the right path going forward.

Sure.

Very clear thank you very much for that and then.

Maybe.

I can touch on complementary products, obviously, an important to longer term, Bob pooling loyalty potential, but maybe just if you.

Can you just go a little bit deeper in terms of what.

Focus means and.

How we should think about.

Portfolio of a couple of minor products for your customer.

Overtime.

What that will look like specifically, thanks a lot.

Yes, thanks, Andrew and great to see it.

Appreciate the question so yeah as I mentioned, we're actually excited about how we're narrowing our focus to.

So products that solve specifically problems or remotely customers. So with passbook, we saw that users were really loving and using the product, but we didn't see that the customer segment had a high overlap with our existing <unk> customers. So on a standalone basis, we saw strong growth with passbook users the product wasn't.

To achieve the scale necessary fast enough to contribute to meaningful return because it was just a different segment from remotely customers. So we didn't get that synergy. So now that does get to your question Andrew with that context, what we mean by narrowing we think it makes sense to deploy our resources to higher returning investments targeted at our core.

<unk> customer where there are those synergies so on a go forward basis.

Sure.

We're continuing to see that immigrants have very specific.

Median challenges regarding.

<unk> and other ancillary services that aren't being met by traditional financial services product and we're investing in our platform to meet those needs and so complimentary products you can view it that way it will enhance our remittance business. It will give us unit economic strength in the long term and it's something that obviously as we continue to invest and we will share more.

In terms of the products that we're launching and building their once they are live and ready to talk with folks about but excited about the opportunity.

Got it. Thank you very much guys congrats again.

Thank you one moment for our next question.

Our next question comes from Ramsey El <unk> with Barclays. Please go ahead.

<unk> targets in the case of economic downturn or just less favorable market conditions.

Yeah.

Yes, Thanks Allison for the question in terms of some of the macro just broadening the assumption, we're making here is that the macro environment and the FX environment will be broadly stable to what we saw in Q4 I think as we've all seen in the first nine months or so of last year. There was a pretty big strengthening of the U S dollar and some of the stronger.

We've started to stabilize a little bit more of a car to the second part of the Q4. So we are assuming a degree of stability around that environment as we've looked at our projections.

For this year.

In terms of your question around the expense I was first of all I just want to reinforce again that we have a lot of resiliency in our customers and we have been through multiple cycles. When we've seen continued active customer.

Activity growth even in cycles around.

Our environments that are similar to what we're talking about now and so we do think that there is a high degree of resiliency when it comes to our customers on their repeat behavior on very specifically on the expense levers we have definitely a lot of opportunity to cut back in areas that are non discretionary on some of the other places that we can we can go finer and finer.

Into our P&L and take action. So I think we have given our strong transaction margin profile given the fact that we have a high degree of variability in our marketing spend which is largely direct marketing towards new customer acquisition, we have multiple levers in our P&L to manage any significant downturn.

Great. Thanks, so much.

Thank you one moment for our next question.

Our next.

Comes from Bob Napoli with William Blair. Please go ahead.

Thank you and good afternoon nice results.

Well done.

Just any.

The geographic expansion in the number of new corners, you've added has been pretty pretty dramatic and <unk> been I guess underweight in the middle East and you've added.

Some.

UAE what are your thoughts on first of all of the new markets, you've added which of those are standing out where are you getting more traction and what are your thoughts around that.

The ability to be that very important middle eastern market to have success there over the long term.

Yes, Thanks, Bob appreciate both comment and question.

Yeah as it pertains to number of corridors. Yeah. We're 4300 corridors now 170 countries and we've done that in a very methodological way.

Both over the last several quarters and years and as we think about on a go forward basis.

And so the way that I would think about it as a continuation of that strategy. So the UAE. We just launched second largest outbound remittance market as I mentioned.

New Zealand, we just launched.

I think though it should be viewed as planting the seeds for returns in the quarters and years to come just like.

A few quarters ago or a few years ago, we were talking about markets like Europe that were relatively new that we were launching and starting to add healthy cohorts of new customers. You can see those kind of stacked bar chart in terms of power business work, but we enter markets, we add healthy cohort of new customers a great unit economics, and then just given the size of our business.

The compound and have a more meaningful impact in the quarters and years to come and in terms of where I'm excited yes, a lot of the countries. We just launched regions that as you mentioned, we're just starting to expand to.

Including the Middle East I think Theres, a big opportunity for us to both grow a large business in those regions and that make a really positive impact to our future customers lives given that I think we can lead the digitization that's happening in some of the markets can we just recently launched so more to come and excited about the foundation that we're continuing to set for future.

Our countries to contribute meaningful to the business.

Thank you there's been some.

I guess some of your competitors that have been around a while have become a little more.

I guess using promotional pricing.

And looking at your numbers I don't see any slowdown in your business. So just some thoughts on the competitive environment then.

Yes.

Are you seeing any effect from some of the pricing moves that some of the competitors have made.

Yes. Thanks, Bob we're seeing is we're seeing price stability and real no real changes in the competitive landscape in the slightly.

Slightly longer answer.

That's the cases I think customers choose <unk>.

Leave for a multitude of reasons and pricing is one of those factors but.

Thing that I've learned time and time again over that over a decade of building. This business is things like trust peace of mind are foundational and very hard to deliver and that we are exceptionally good and getting better and better with scale, which ties back to the premium products that I mentioned as well as the transaction numbers the loyalty.

Predictability and consistency of our business. So that's a long winded answer, but the punch line again.

Price stability no no material changes in the competitive landscape.

Thank you and nice to see the free cash flow positivity that move to free cash flow positive.

<unk>.

Okay. Thank.

Thank you one moment for our next question.

Our next question comes from Darrin Peller with Wolfe Research. Please go ahead.

Yes.

Guys. Thanks.

Looking at some of these metrics on slide 16.

By the way was very helpful. So thanks for that I mean, when we look at the improvements we're seeing in transaction expense.

Do you see the fraud management was really helpful.

Can you give a little more color on what's actually driving that gross margin improvement and the sustainability of that because it was a big step.

Yes, thanks Darren.

Terms of Brian to your point and we're really pleased with the progress we made in Q4 in particular I think it was exceptional.

Many ways in terms of bringing down our loss rate.

Although that really is the scale that we're continuing to build and the data that we're getting at ingesting indoor fraud models and algorithms.

Did launch some new algorithms in Q4, and we're continuing to test test with our algorithms and we're seeing.

Really positive signs around that we saw that obviously in Q4 and we continue to remain optimistic in terms of what those models will do for us, but the point that the fraud as well here, which Matt alluded to in his comments too is that we're also looking to make sure we're minimizing any friction with our customers.

There is a balance there that we're cognizant of and our models take that into Carnival, we're balancing making sure. We don't we introduced very little friction for our customers and at the same time, making sharp fraud loss rates.

Do you need to be at the levels that we saw in Q4. So that's with regard to fraud to your question on what's baked into adjusted EBITDA I'll, just begin with saying that really anchored on our top line growth.

You can see we've guided here to 30% to 30, 35% revenue growth.

For the year and that really drives a lot of what's happening in the P&L in terms of our ability to get to breakeven to $10 million of EBITDA for the year.

On the expense side of things, we certainly are focused on moderating the growth of our expenses more broadly speaking G&A, we talked about Anniversarying, our public company expenses, which will likely start moderating.

But we continue at the same time make investments in our product and technology area, which we think are the right high return on investment.

Thanks to continue to do for the long term.

We're balancing between the investments, we're making as well as driving some scale efficiencies in various parts of the business that we think we can given the scale of our business and where we are.

Where we're at today and the other point I'd make on this as well is that we do are completely appreciative of the higher risk premium and cost of capital out in the market and so we continue to be focused on driving high returns, but we're doing this for the long term so by 2023.

Strong revenue growth, that's in our guidance and breakeven at $10 million EBITDA profitability, but really focused on continuing making investments for the long term.

Okay, Alright thats helpful.

Matt If you could just touch one more just one quick follow up the complementary new products comment on one of your slides around the plan.

I know I.

I know the deal in Israel was the rewire.

<unk> is probably going to come with some incremental offerings around insurance you mentioned, but.

Can you give us a little more thoughts on what that what you intend on by saying complementary new products for this year ahead.

Yes, thanks Darren.

I appreciate the question so on <unk>, specifically, we closed the acquisition last month.

The strategic rationale was twofold, one was the geographic complementary nature of the deal being able to launch Israel as an origination market as well as grow with a few other countries in a few of the countries that they're in and then the second was to expand exactly what your question alludes to.

Around our vision of complementary products and I think that.

In addition to just the capabilities that they are the products that they have built the capabilities of that theme in terms of their product and engineering expertise as it pertains to complementary products and just our core business I think will be a great addition.

So excited about that and as it pertains the complementary product. It's similar to Andrew's question is is what I'd say is that we're much more narrowly.

Focus on where we can improve and enhance our existing remittance customers' lives with additional products that are.

Alright, guys. Thanks, John Thanks, a lot.

Thank you one moment for our next question.

Our next question comes from Tien Tsin Huang with Jpmorgan. Please go ahead.

Thank you great results. So can you hear me, Okay I am at the airport I just wanted to ask.

A lot of moving pieces here very encourage your outlook thinking about 'twenty three versus 22 in and.

And how the <unk>.

Composition of growth will be different how would you summarize that across.

Users volume <unk>.

I know youre cohorts are aging, but youre going after some new core doors as well. So how do you think there will be different given everything you've talked about.

Good day, if you follow my question.

Yes, Thank you and safe travels whoever youre heading to it so I think in terms of.

And we looked at 2023 years 'twenty to 'twenty two.

Broadly, it's going to be on a very similar trajectory again to the point that we have about a 2% market share in a large remittance market, we have a ton of opportunity across all of our corridors. We continue to grow in our sort of core corridor North America send destinations to multiple sort of destination.

As all of the World.

As we talked about rewards continue to increase our international mix. So we do see that that will continue to increase through the year as we.

Those markets were already launched particularly in the last couple of years.

Will help us to continue to grow both active users and new customers in these international markets.

Talked about Japan, I think in Q3 and as you enter Q4.

We just recently launched UAE as we talked about now so.

Pretty optimistic in terms of the growth prospects, we have internationally and.

That's a lot of what's getting baked in to our top line forecast.

Yes, the only thing I'd add there Tien tsin and thanks for the comments and question is I think that.

There is something that I appreciate about me and see how this business is the predictable and repeat nature of our business and the loyalty that our customers have both of their loved ones and families that they are sending money back to and teasing remotely to send money back to their families and so.

That is something that we go into the year with confidence around repeat behavior and then it is about how do we continue to add on healthy cohorts of new customers in both our existing and new markets and really important to keep in mind that within the remittance space for approximately 2% of the $1 six trillion Tam that we've talked about and so.

Lots of room to grow and it's both by maintaining metro with our existing customers and then very scientifically and with a high return on investment, adding those cohorts of new customers across the globe as Mark mentioned.

Got it and then just.

My follow up if you don't mind just thinking about.

Well you just hit there as well I think Darren another question just on the M&A side and consolidation.

Assuming that some of your peers are also tight.

Neither belt.

Building on the private side I know you just did rewire.

Is your appetite to do acquisitions changed at all.

Are you more willing to do things now given maybe some of the changing.

Landscape or is it time to go.

I know you have rewire, but.

Are you more focused organically at this stage versus maybe six months ago.

Yeah, Yeah. Thanks, Vincent its great question, historically, we found organic growth and internal build to be both foundational and the best opportunity.

What I would say first and foremost.

We continuously review as we did with the Rewire acquisition, where we actually ended up doing that transaction. We review all opportunities as they become available, but we have a high bar for any M&A transaction and will remain disciplined in deploying capital.

Very good well done thank you.

Thank you one moment for our next question.

Our next question comes from David Scharf with JMP Securities. Please go ahead.

Hey, good afternoon. Thanks for thanks for taking my questions squeezing me in here.

Hey, Matt.

Maybe one one sort of general and one granular question.

More of the sort of top down.

As it relates to the guidance.

As well as the Q4 performance that we just saw.

You clearly have.

A lot of levers you can pull.

And the path to profitability could take several different forms.

If you wanted to even accelerate it.

Just curious.

Kind of stuck to your guns.

<unk> been very very consistent in terms of the long term vision and <unk>.

Investment in broad new products are there.

Customer acquisition strategies.

What are the types of things externally.

<unk> potentially could make the company shifted focus.

Or perhaps accelerate.

Not just its path to profitability, but.

It's kind of magnitude of near term profitability.

A clear message, obviously kind of youre sticking to your guns in terms of the long term build out I'm. Just curious is there anything externally that would kind of shifts this kind of longer term plan and philosophy.

Yes, thanks, yes, it really really thoughtful question I think.

The way that I view.

Capital deployment and in ultimately in service.

Accomplishing our long term vision, which as you said remain unchanged remains unchanged unchanged, which is really to transform and improve the lives of immigrants and their families by providing the most trusted financial services on the planet I think in our journey to that there will be different times, where capital costs, Barry and I view it in a little bit less binary in a little bit more on a spa.

And so what we've seen in capital markets recently, obviously with interest rates rising.

The cost of capital has increased and thats, okay, especially for a business like ours that I think is very disciplined about the investments that we make in very quantitative and analytical in terms of how we deploy those investments and so we have increased the hurdle rate for the investments that we're making you can see some of that with the profitability. In Q4, you can see some of that.

With our guidance in 'twenty, three and pulling forward some of the guidance.

In terms of the.

The past two and now being profitable and what I would say is that we do continue.

To monitor and look at the cost of capital as we.

Withstand various macroeconomic shifts given the criticality of our service. So that's how to think about it overall is less binary more on a spectrum with a good handle of the investments, we're making and able to adjust those based on what the cost of capital is in the market.

Got it no. That's very helpful. I mean, its been a very very consistent sort of vision and execution that it sounds like externally interest rates and capital cost has probably been the only factor thus far.

Change things on the margin.

Hey wanted to follow up a little more granular question.

I wanted to ask you a little bit about some observations on our core corridor not all corridors are created equally.

U S to Mexico is the largest in the world.

It tends to be the most profitable for most of our emitters and.

And I think relative to some of your other.

Markets that probably has a lower.

Mix of of banked customers ones that can send online who can fund.

Remittances with.

With a debit card out of the demand deposit account.

Can you just talk.

Which also speaks to just how much incredible opportunity. There is ahead of you.

Just globally, but especially in the world's biggest corridor.

Can you talk a little bit about what youre seeing in terms of I guess the trends towards.

The Latin American centre in the U S outbound in terms of adopting banking products, becoming.

Part of your true Tam addressable market.

Because something is clearly kind of moving a little more.

And then it was a few years ago when it lags. So many other markets in terms of being bank.

Noticing a change in the opening up of that funnel, even wider for that corridor.

Yes phenomenal.

Customer centric question is as we would call it I think.

The punch line is yes, we're seeing.

Actually first let me say I loved your comment that not all markets are created equal what we call that internally and in some of the external messages that we've shared is localization at scale and that's something that I think that we've done well and is part of understanding various markets. It's important to understand what you just said, which is what is their comfort level and ultimately trust with digital channels specifically <unk>.

<unk> two.

Send money back background and that has varied historically, so thats one of the reasons. If you look back 10 years, we started with the Philippines. Then we went to India and then we launched Mexico in that order. We're talking 10 11 years ago now and what we've seen in Latin America and broadly is the phenomenon that we knew we would see which is additional smartphone.

Affordability and access and then reliable and affordable data access and I think we are seeing more and more customers.

<unk>.

Use their mobile phones and test it for financial services and that certainly includes the Mexico and Latin America market. So it's an exciting time in that way to be in digital money transmitter not only because of the growth in Tam and the growth in our business, but also because we provided a much better experience, we take a bunch of costs out of the system and we're improving our customers lives. So youre picking up on.

The trend is absolutely accurate.

Great. Thanks, Thanks for all the color Matt.

Thank you one moment for our next question.

Our next question comes from Alex <unk> with Keybanc. Please go ahead.

Yes, thanks for taking my question today.

Actually I have a couple of maybe first I wanted to come back to the slide 16.

With some of the helpful disclosure.

Particularly around marketing expense improvements just curious I guess thinking about 2003 and some of the.

On a more sustainable execution wins as you've titled them here that could carryover.

Versus the macro factors is there any way to just kind of roughly.

Attribute.

Of that 660 basis points.

How much is more related to macro factors and asking just kind of wanted to understand.

And that kind of worst case scenario, where the AD environment does become far more competitive in 'twenty to 'twenty three that youre expecting just kind of what the headwind could be.

Some of the expected efficiencies.

Yes. Thanks, Alex is something that we think about a lot here as well and as we continue to monitor what's going on in the advertising market. So I think as we called out on slide 16.

The brand awareness and word of mouth effects to continue to increase for us and I think we've talked about that for a number of quarters now, but just given the repeat behavior. We're seeing we're seeing that customers really want to come back to us through them the water market as secretary of the spreads. So that is a growing effect and as we get bigger and bigger.

Sure.

We are really optimistic about where that could take us.

And we're also continuing to work on the China side of things, whether its search engine optimization that landing pages and all the things that we would do to continue to increase our <unk>.

Mix towards more unpaid versus versus paid channels and Matt also talked about localized digital marketing, which we think is another thing that we can continue to sustain but they all get better with scale.

I'd say those are some of the factors we feel good about in terms of what we can control from an execution perspective.

And what our customers bring to us in terms of some of the word of mouth effect.

And that should in theory.

Dana and improve over time, the advertising market is obviously something that we don't fully control there's multiple dynamics that get played out there, but we do think that to a degree that without growing scale and particularly as we get more and more international.

And do localization at higher scale that we should be able to offset to a degree some of those effects as we as we get bigger and bigger so.

I don't have a specific answer for you on the actual breakdown, but I would say those are some of the drivers.

One way or the other.

Yes, that's helpful commentary and then just maybe one last quick one.

Hey, Martha I think you talked about international growth being kind of a bigger factor than the topline formula for 'twenty. Three I was just curious if you could maybe it's just simply kind of describe any sort of like pricing differentials. When you think about your.

Various sending geographies and some of the <unk> implications if there are any.

The mix of international too.

Canada is still a relatively small for us, but what we've been seeing is that our LTV CAC. When we look at from an acquisition perspective and unit economics more broadly.

Our continued to be strong for us. So we are focused on continuing to obviously make provide the right pricing.

For our customers and which remains a dynamic regardless of which corridor we look at.

We also continue to improve our cost structure, so whether it's banned pellet costs, which also go to a transaction margin.

As we get more and more bigger international.

Lesser unit unit economics, as we grow our grow our mixed internationally.

Okay, great. Thanks for all the color.

Thank you one moment for our next question.

Our next question comes from Bob Napoli with William Blair.

Thanks, John My question, primarily had been answered, but I guess, maybe just on rewire.

Any learnings from that.

You may apply.

Are you seeing that be.

<unk> and helping you to withstand the Dallas corridor and does it make you more likely to look for tuck ins I know you've talked with.

Tien Tsin question on organic versus acquisition you are clearly focused on.

Primarily organic but is are there any learnings from the wire that maybe could accelerate growth and to jumpstart second quarters.

Do you see.

Yeah, Thanks, Bob Yeah, I think that.

It's.

FERC learning is I think that the early results and again, we just closed the acquisition in January . So we're just in the process of integrating the team and the FERC 30 days, but obviously, we've got to know the team well and I think that there has to be a foundational not only cultural alignment, but cultural additions and when we talk about culture internally at <unk>, we do it with the gross line.

Net of having strengths and weaknesses. So I think the rewire theme can learn a lot from us and I think we can learn a ton per man and different ways of working but foundation really theres a lot of overlap. There. So I think we're going to work really well together from that standpoint, and then the strategic rationale in terms of complementary geographies. It's great that there's real online now as I mentioned and I would expect us to be able to leverage some of their.

The foundation of learning is culture is foundational for any acquisition, we feel like we got that right with this one and excited about the strategic rationale that I just went through.

Thanks, and I apologize if I missed it but did you give any financial metrics on what you expect me wire to contribute in 2003.

Revenue and EBIT in that.

Yes, we did not.

Okay, great. Thank you.

Thank you I'm showing no further questions at this time I would now like to turn it back to Matt Oppenheimer for closing remarks.

Great. Thanks, so much so.

Thank you everybody for the thoughtful questions as we always do remotely I'd like to hand, the call just by highlighting one of our amazing customers to other customers and James and James joined <unk> in June of 2022, and send money from the U S to his family in Kenya, and James commented it is easy efficient and fast.

Way to send money I would recommend it and have done so to others and so we think James and his family for using in recommending remotely to others I think that's another benefit as we talk about scale conceptually when you look at it more practically theres a lot of customers that are having a great experience like game and are kind enough to tell there.

Sure <unk>.

And acquaintances about remotely and recommending it to others. So thank you to customers by Kent and thanks, everybody for joining US. We appreciate your support we're excited about the opportunities ahead in 'twenty, three and look forward to sharing our progress as we continue to execute on the vision that I mentioned earlier around really improving and transforming the lives of immigrants and their families.

Providing the most trusted financial services on the planet.

Thank you for your participation in today's conference. This concludes the program you may now disconnect.

Q4 2022 Remitly Global Inc Earnings Call

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