Q2 2023 Remitly Global Inc Earnings Call
Good day and thank you for standing by welcome to the remotely Q2 2000 twenty-three earnings call. At this time all participants are in a listen only mode. After the speaker's presentation that will be a question and answer session to ask a question. During the session you will need to press star one on your.
You will then hear an automated message advising that your hand is raised to withdraw your question. Please press star one one again please be advised for today's conference is being recorded I would now like to hand, the conference over to your house today, Stephanie Sharp pain, Vice President of an Investor Relations. Please go ahead.
Thank you good afternoon, and thank you for joining us for appropriately second quarter of 2023 earnings call. Joining me on the call today are not Oppenheimer.
Co founder and Chief Executive officer, or permanently and Hey, Mark menopause.
Chief Financial Officer.
A result in additional management commentary.
<unk> was released presentation slides, which can be found at <unk> dot <unk> dot com.
Please note that this call will be simultaneously webcast on the Investor Relations Web site.
Before we start I would like to remind you that will be making forward looking statements within the meaning of federal securities laws, including but not limited to statements regarding permanently future for natural result of management expectations and plans. These statements or any of the promises no guarantee that involve risks and uncertainties may may cause the actual results to very mature really from those presented here.
You should not place undue reliance on any forward.
Please refer to earnings releases and assess your politics more information regarding the risk factors that may affect our results any forward looking statements Man This conference call.
Response to your questions are based on current expectations as of today ever mentally it seems no obligation you update or revise them, where there is a relatively developments or otherwise except as required by law. Following presentation contains non-GAAP financial measures for reconciliation of these non-GAAP financial measures to the most directly comparable GAAP metric. Please see our earnings release.
In the appendix or announced presentation, which are available on the I R section of our website and now I will turn the call over to match it again.
Thank you and thank you all for joining us to discuss our exceptional second quarter results and our increased outlook for 2023.
I'm grateful to our amazing customers and our global teams, who are the drivers of our consistent performance quarter after quarter.
Our second quarter results demonstrate the resilience of our loyal customers who consistently prioritized.
<unk> to their families and friends to help support everyday living expenses and we appreciate that they continue to choose <unk>.
Are consistent execution over many quarters has allowed us to make significant investments.
Do you expect to drive growth this year and for many years to come.
And you can see on the side for our investments across our strategic priorities have delivered clear wins for our customers and shareholders.
We now have the opportunity to deliver additional growth and long term returns as we deploy capital to fund additional investments.
Our new customer acquisition investment have delivered superior active customer growth from many quarters with quarterly active customers nearly doubling since we went public in the third quarter of 2021.
Our unit economics remain incredibly strong and are currently higher than the six times L. T data cap that we shared at or Ikea.
Our focus on delivering our promises on our promises to customers is paying off as we see the benefit of word of mouth acquisition across regions are.
Multiyear geographic expansion strategy has developed as delivered new market.
Contributed substantially to our growth rate and scale benefits.
Our investments in our disbursement network and our product had led to improvements in speed reliability and overall user experience leading to strong customer reviews declining customer contact rate higher retention and engagement and a lower cost structure.
Finally, we believe our remittance customers have unmet need and combined with the large opportunity we have in the remittance market. We are optimistic that we will be able to drive additional customer engagements and scale across our business.
We are in a unique position in the industry.
And the global payments industry at large to make the necessary investments that will allow us to capture even more than or approximately 2% share of the large 1.6 trillion dollar remains market.
Given the significant opportunity and our prior success and capturing market share and delivering high returns, we expect to increase our investment across our strategic priorities in a targeted and disciplined manner.
For new customer acquisition, we have the opportunity to make additional high return marketing investments to drive 2024 growth as our LTV has been increasing as we see improving customer activity.
And leverage in our transaction costs are.
Geographic expansion investments will allow us to continue to enter new markets more quickly and efficiently driving even more customer growth and scale benefits.
Estimates of new partnerships to enabling faster more reliable and constipation network will provide customer and cost benefits Dylan.
Delivering a flowers experience for customers is very difficult, especially without scale, but is paramount to maintain a trusted <unk> experience to drive retention and word of mouth recommendations and that is what we are focused on with our <unk> product and backgrounds.
We have been prudent stewards of capital across economic cycles, and we remain focused on delivering high long term returns or our investors.
We will take a balanced approach as we focus on delivering near term progress combined with investing to ensure we can deliver high growth and returned for many years to come.
Now turning to our second quarter financial results on five five we delivered $234 million revenue, which was a 49% increase year over year and work on an annualized basis is now approaching $1 billion. We are very pleased with the high revenue growth, we've been able to achieve over the longer term which include.
58% revenue compound annual growth rate since the second quarter of 2020.
Our top line results in the quarter and scale efficiencies across transaction cost marketing expenses and other operating expenses resulted in an exceptionally strong adjusted EBITDA of $20 million in the quarter.
As a result of this strong performance, we are pleased to be raising our outlook for both revenue and adjusted EBITDA once again.
And the second quarter quarterly active customers grew 47% year over year as you can see on five six.
We know serve more than 5 million quarterly active customers and added $1.6 million quarterly active customers in the past year alone.
We continue the significantly outpaced the overall growth and the remittance market as we continue to deliver for our customers.
Our new customer acquisition this quarter with once again a record high.
And we continue to benefit from scale.
Multiyear focus on brand building create a velocity and experimentation and optimization across marketing channels.
Significantly grill are active customer base with highly efficient marketing investments with customer acquisition passed down more than 15% year over year.
As I mentioned before we are currently delivering exceptionally strong either economics above the six times L. T V to catch that we shared a R. I P. O in 2021, which provides us an opportunity for us to make additional marketing investments in the second half of 2023 to drive even higher 2024 growth.
Now, let's turn to more details on our customer acquisition success on slide seven.
The drivers of strong new customer acquisition had many sustained multiyear focus on dad, gribben measurable and optimize new customer acquisition supported by our proprietary marketing platform technology with which results in a large and satisfied customer base the den drive strong brand awareness and.
Word of mouth effects.
We believe that continued investment in delivering peace of mind to our customers will drive increasing word of mouth customer acquisition and brand awareness.
The majority of our marketing investments are performance oriented marketing.
We are also seeing early success and selective investments at the top of the phone, which tribe higher returns across our entire marketing spin.
One example of our brand awareness approach is are integrated campaign focused on senders to Mexico, and Central America, which include the traditional media and digital channels combined.
We are also pleased with our continuously expanding geographic presence and the quality of our global payment and disbursement network as seen on slide eight.
We serve customers and their families in more than 170 countries and territories and now across approximately 4800 corridors how.
However, there are significant opportunities for geographic expansion and we will enter new markets in the same way, we have always done but focus on compliance providing a localised customer experience and ensuring we have the most relevant K N and disbursement partners.
Looking ahead, we have the opportunity to further expand in the middle East.
Europe Asia, Latin America and Africa.
As we scale. These geographic expansion has become more efficient and we have the opportunity to replicate the success and market share gains we have achieved in markets that we entered a number of years ago.
The scale and quality of our Pan and disbursement options, including approximately 4 billion bank accounts over 460000 cast pickup location and approximately 1.2 billion mobile wallet.
Is another structural advantage difficult to replicate.
Our network allows customers to <unk> with their preferred funding method and allows recipients the optionality to receive funds and either cash mobile wallet bank account or even home delivery in certain markets.
Are increasing direct integration with disbursement partners enhances the quality and reliability of our network we differ.
Network quality with a number of metrics, including speed transaction delay customers support contact Ray and many others, which we have seen improvement as we have scaled over the past few years.
Our geographic expansion has allowed us to further grow and diversify our revenue as can be seen on slide nine.
R U S and Canada <unk> are still seen very healthy growth and there is still a significant opportunity for market share gains in the U S and Canada.
However, as we have seen our business outside North America grow even faster and achieve scale of nearly $200 million of revenue on an annualized run rate basis.
Our visit outside North America with more than 20 per cent of total revenue in second quarter and grew 120% year over year.
Our growth and scale it outside North America is critical for many reasons, including lessening our risk of exposure to region specific macroeconomic issues <unk>.
Diversifying our foreign exchange exposure and lowering our customer acquisition costs outside North America, as we gain relevant scale and brand presence.
Our global network and our investments in increasing direct partnerships deliver a superior and continuously improving customer experience, which ultimately drive loyalty and additional customer transaction activity or.
Our strategy is to deliver an instant reliable transparent and low cost cross border money movement globally.
In order to do this we established strategic partnerships with Pan and payout partners as well as participate in local banking networks.
The disbursement side, we have made significant progress in establishing direct relationships, enabling faster disbursement lower costs and ultimately a better customer experience.
Over the last quarter, we watched several key integration partners, including in <unk> in Africa, which ultimately.
Expand the coverage of our network increases the percentage of transactions disbursed instantly and lowers the cost of the network.
Our partnership with an <unk> is a great example of the success we are seen as we increase our direct integrations.
For example, in Tanzania, approximately 50 per cent of our volume dose and pace a wallet and this partnership allows us to instantly deliver mobile wallet transactions to and pizza wallet in Tanzania, with lower cost and lower error rates, providing a much better customer experience.
We're excited about the potential to expand to other African countries, where in pace of his presence such as Mozambique in Kenya.
And more broadly are opportunity to serve more customers in Africa.
Just as we have made progress in our disbursement network. We are also focus on improving our pay in capabilities over the last quarter, we continued to make progress.
Providing our customers with the ability to pay with the payment method of their choice.
And our largest send market, we enabled apple pay or Google pay for our customers.
We are also exploring new opportunities to drive additional improvements to the customer experience by integrating with emerging instant payment networks more broadly overtime. We believe we have more opportunities to speed up the payments leg of the transaction, whether it's avoiding delays of the existing ECH system in the U S or emerging payment.
<unk> and some of the other 37 countries we support.
These network investments are only possible with scale and we believe we are uniquely positioned to drive these improvements that mattered to our customers.
While improving our cost structure.
Turning to slide 10, using a remittance product that they can trust is paramount for our customers and speed reliability and great customer service when needed are always that we build and maintain trust.
In the second quarter more than 92% of transaction were dispersed in less than an hour, which improved more than 200 basis points from the second quarter of last year.
We have been able to successfully reduce the rate of transfers to take greater than an hour to disperse even as our volumes have increased substantially.
Reliability is a key driver of customer preferences, well customers need to know that our service will be available when they need it given the critical nature of remittances for recipients.
Hi platform availability, which was 99.99% in the second quarter.
Scraped our commitment to our customers and the continued benefits from our investments and our technology platform.
We are also proud of our customer service, which can be easily access in the app for both self-help and chat.
And over the phone.
We support more than 15 languages with the combination of native speakers and real time chat translation.
[noise] helps our <unk>, our customer solve problems quickly in their native language and build loyalty. We're also excited about the potential of generative AI.
To help improve the customer experience and drive down costs.
Our investments and our product and network have already reduced the need for customers to contact us over time, and this provides a better customer experience and lower costs across millions of transactions.
This premium customer experience has significant trust in our platform and you can see by the approximately 1.2 million ratings.
Sure there were mentally app in the App store with an average of 4.9 stars and approximately 650000 ratings and the Google Playstore with an average of 4.8 scars. This crust drive additional flywheel benefits for new customer acquisition, while also driving strong retention for existing customers.
Turning to slide 11, we continue to make progress on building a scalable platform that will enable us to introduce complimentary new products to our remittance customers. We believe our complimentary product strategy will result in a deeper and stick your relationship with our customers over time, which will drive even more business too.
<unk> platform strengthen engagement of existing customers and drive more efficient customer acquisition.
We continue to build additional products that solve critical problems for our customers and we look forward to sharing more about these products in the future.
And we look ahead, we remain focused on delivering on our vision on slide 12.
Transformed the lives of immigrants and their families by providing the most trusted financial services on the planet.
We believe we are in a unique position to drive sustainable growth and increased long term returns as we aim to reinvent international payments for our customers.
With that I'll turn the call to him up to provide more details on our financial results <unk> 2023 outlook.
Thank you, Matt I'm pleased with the exceptional financial performance were delivered in the second quarter teams had strong execution in the quarter and we benefited from continued strong active user growth expanding transaction margin and operating leverage.
Start with a review of second quarter financial highlights and then discuss a revised 2023 outlook.
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 flight, 1% commitment transaction and integration costs with acquisitions and foreign exchange gain or loss reconciliations to GAAP results are included in the.
Earnings release.
With that let's go into our second quarter results beginning on slide 14, with a high level financial performance.
Pleased to deliver another quarter of high active customer and revenue growth and increase adjusted EBITDA profitability.
The active customers grew by 47% year over year to $5 million, sending volume grew 38% a year over year to approximately $9.6 billion, all resulting in revenue growth of 49% year over year to $234 million.
Our GAAP net loss was 19 billion in the quarter and include it $35 million of stock compensation expense.
Strong growth in revenue combined with significantly lower transaction expense as a percentage of revenue and operating expense efficiency led to an exceptionally strong adjusted EBITDA $20 million in the quarter now, let's turn to slide 15 for some of the key factors that draw performance.
Let's begin with revenue, which was up 49% a year in the second quarter on a reported basis and 51% on a constant currency basis.
A strong revenue growth was primarily driven by the 47 per cent increase in quirky active customers, which includes a record number of new customers are quite in the quarter and high retention of existing customers are existing customers contributor to the vast majority of revenue in the quarter as they continue to send regularly to support family and friends back home regardless of <unk>.
Canonic cycles, the large number of new customers, we acquired in the quarter at highly efficient acquisition cars will help drive future growth.
Ah revenue also benefited from continued mix shift in our transactions sizes and increasing transaction intensity.
Continue to see the trend of customer preference with digital disbursement options in key markets with drive transaction sizes down, particularly for a mobile wallet, but increase the frequency of those transactions given the speed ease and convenience of digital receive options.
On a year over year basis, the transaction make some visually see you options, which includes bank deposit in mobile wallets have increased by 700 basis points.
Why the transaction sizes and revenue may fluctuate in any quarter due to mix shifts relating to various factors, including payment acceptance options disbursement options. Another corridor specific customer behaviors. Our focus remains on optimizing our LTV to tack ratio as we deliver exceptional value for our customers.
The lifetime value considered revenue less transaction expenses over the long term.
The unit cost of declined we have the ability to invest in delivering more value for our customers, while maintaining strong unit economics at the same time.
Now, let's done good transaction expenses, which in conjunction with revenue are a key driver of lifetime value.
Transaction expenses, primarily include costs related to our pain partners disbursement partners and fraud losses.
Transaction expenses, a percentage of revenue improved 440 basis points year over year is another example of how we are benefiting from growing scale and transaction volumes that flowed through our network.
Of the 440 basis point improvement in transaction expense abroad.
<unk> 340 basis points with you to improve economics, with Bacon and disbursement partners Advil demonstrated scale and are increasing value to our partners across a global pay and disbursement network.
The reference in queue to be processed about $9.6 billion of send volume, which grew 38% on a year over year basis.
We expect sustained improvements in reducing the cost for a distribution network as we add more direct integration, which also improves the customer experience and reduces customer contact race.
<unk> previously noted the refill integration with Amfesco is an example of the value we provide to our customers, while lowering distribution costs and improving the overall customer experience.
We also benefited from continued improvement in our fraud loss rates in the second quarter are improved algorithms hunters are increasing amount of data and analytical sophistication to more precisely delineated between good and productive fraudulent transactions, resulting in lower costs and a better customer experience.
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, as we have noted before we expect some variability in fraud last raced in any quarter, while continuing to make sustainable improvements in the long term.
Consistent with recent quarters, a key driver if I strong results in the second quarter, where the officials and our new customer acquisition marketing as we continue to focus on delivering high returns on our marketing spent.
Marketing expenses as a percentage of revenue declined 520 basis points year over year in the second quarter.
<unk> declined more than 15% year over year and was relatively flat sequentially as we are able to sustain our marketing efficiencies.
Overall, a number of factors drove decline the <unk>, including increased benefits from localized digital marketing increased create a velocity improving brand awareness what amount of pets and increasingly came in our business outside of North America.
We expect to remain dynamic in managing cat within our investment specialist to ensure that we continue to aggressively grow our customer base.
Given the strong payback with C from a marketing investments.
Additionally, with the improvements in transaction costs as a result of our growing scale. We have observed an increase in the LTV up our customer cohorts.
Further enabled us to make additional targeted marketing investments in the back half of the year that will deliver long term returns will continue to sustain a strong L. T V. The cap ratio as Matt also discussed.
In the second quarter of customer support and operational expenses were down 150 basis points year over year as a percentage of revenue.
Benefited from increasing automation product improvements. We also we're also excited about the opportunity overtime to use AI to improve the customer support experience for our customers more broadly we expect to see improved efficiencies in customer support and we continue to scale and reap the benefits on product enhancements direct integration.
And automation.
Technology and development expensive increased 100 basis points year over year and reflects the investments, we're making in a limited platform, including our fraud risk and compliance technologies <unk>.
Developing complementary new products, and increasing automation across customer service and back and transaction processing.
We expect to continue to invest in delivering a superior experience for our customers and are confident in the longterm returns this will deliver.
In the second quarter G&A expense decreased 190 basis points year over year as we delivered leverage on both headcount and non had gone expenses. We did benefit from a one time prior period adjustment related to certain indirect tax items that are recognized and G&A expense.
G&A expensive the percentage of revenue would have still decrease year over year. After the adjustment and we continued to maintain discipline and evaluate opportunities across our operating expenses we.
We expect to moderate overall growth rates and head count this year, while continuing to make high return yielding investments strategic focus areas for the long term.
Our GAAP net loss in the quarter was $19 million an improvement from our 38 million net loss in the second quarter of last year or.
Net loss included $35 million stock compensation expense in the second quarter compared with $33 million in the second quarter of last year.
As a reminder, we recognized at one time prior period adjustment of $6.3 million to stock based compensation in the second quarter of last year Normalising for the one time adjustment in the second quarter of 2022 are GAAP net loss would have improved by $13 million.
We are actively focused on managing stock based compensation and target to maintain an appropriate balance between rewarding employees for the for the value of the deliver while managing shared valuation.
Our focus for 2023 and beyond remains four key areas to drive sustainable Longterm does as you can see on slide 16.
These are the continues delivered strong revenue growth improved transaction expense sustainer improved marketing efficiency and increased scale efficiencies and other operating expenses.
Firstly, we believe we can consistently deliver high double digit revenue growth, even as we scale the investments, we're making in our process marketing in a global network will help us drive robust growth in active customers and sustain high retention.
Secondly, we're making significant progress on improving our transaction expense cost structure as we increase our volume of relatives transactions, which allows for more direct and abbreviations over.
Over the medium to long term, we expect continued leverage on transaction expenses as we scale.
<unk> volume of over $33 billion on our latest 12 months basis gives us materials scale in negotiations with various payment processors globally in order to reduce costs and provide the payment options that our customers prefer.
We're also making progress I, improving terms with our disbursement partners as we will scale, although timing can be available.
As the volume of data increases in our proprietary fraud models were able to drive down transaction loss rates without adding significant friction to the customer experience. Our goal is to reduce blood fraud loss rates and customer friction. Although the balance of this is constantly being optimized across our network as we test new approaches.
Turning to marketing efficiency, improving with tons of marketing has been a large driver of our operating leverage or the past few quarters.
Scale has allowed us to optimize an experiment rapidly to determine the highest returning mix of marketing channels.
Over the past year, we've applied this to a newer markets, resulting highly efficient marketing spent.
Our multiyear investment in building brand awareness has also resulted in marketing efficiencies at the bottom of the funnel as more customers know and trust the mentally and tell their friends and family about their great experience using our product and Mac mentioned, we have an opportunity to invest more in marketing, including targeted Brian investment and new channel experimentation.
And while still delivering high returns and ensuring that would deliver high top line growth for many years to come.
Finally, turning to other operating expenses, which includes technology and development customer support and G&A.
Our technology and development expense reflects the investments, we are making and relatives product enhancements and building a platform for a complementary new products. The investments also include risk and compliance with helping to drive down fraud loss rates and customer support automation, which are helping to moderate customer support contacts add cost as <unk>.
<unk>.
Our G&A costs reflect the investments we have been making to ensure we have the right infrastructure to support our growth initiatives Adjmi scale, we expect to see longterm leverage on G&A costs.
Delivering all these priorities has allowed us to increase our outlook for both revenue and adjusted EBITDA in 2023 as you can see on slide 17, specifically, we expect revenue to be between $915 million and $925 million.
Which reflects a year over year growth rate of 40% to 42% and is a 35 million an increase in the mid point from our prior outlook.
Increasing our revenue outlook is primarily driven by the strong Prince you, a seamless second quarter and our expectations for continued strength and customer activity from the record number of new customers. We recently acquired the resiliency of our existing customers.
We expect adjusted EBITDA to be between 33, and $40 million, which is of 26.5 million increase at the midpoint from my <unk> the.
The increase in our adjusted EBITDA outlook is primarily driven by strong performance in the second quarter. We expect results in the back half of the year to reflect continued strong execution, an additional targeted investments that Mag discussed, which we fully expect to deliver high longterm retarded and also drive growth in 2024.
While these investments reduced adjusted EBITDA in the back half of this year, we expect them to drive strong active customer growth and improve profitability for the medium and long.
<unk>.
We are planning for a macro and FX environment that remains relatively stable to what we've seen in the second quarter of 2023.
Continued global diversification and increasing scale helps us to mitigate localized macroeconomic issues.
We expect to leverage our exceptional marketing capabilities that we have demonstrated over the past year to continue to drive strong new customer growth at compelling unit economics <unk>.
We expect to sustain the significant structural improvements we have made in marketing. We also face tougher comparisons in the back half of the year.
We anniversary some of the significant efficiencies delivered in marketing starting middle of last year.
We also expect the competitive advertising market tailwind that we have seen over the past year to normalize.
Finally, we expect to continue prioritizing investments in technology and development organization and ensuring that these investments are aligned towards strategic priorities.
Our balance sheet position.
Strongly to support our growth and deliver a strategic priorities.
At the end of the quarter, we had $228 million of cash and access to a $250 million working capital facility of which approximately.
Approximately $200 million of their working capital facility was available.
It is important to note that are casually working capital balance at the end of the second quarter was impacted by timing is the last day of the quarter. It wasn't a Friday.
A multi holiday weekend.
We generally have higher prefunding amounts relate reflected on our balance sheet give the quarter closes before the weekend or in advance for long weekend, such as a holiday.
Creates variability in customer transaction related balances Peter were period and can temporarily reduce our cash position at a particular point in time.
Our primary focus from capital allocation remains our organic good priorities of new customer acquisition geographic expansion relatives product enhancements and complimentary new products.
Overall, our business remains strong as yourself customers that have a recurring need to send money back home our product keeps getting better with scale. We continued to improve our cost structure and you have access to substantial liquidity.
These advantages physician as well to make the investment necessary to continue capturing market share and delivered high growth and increasing returns over the long term with that <unk> will open up the call for your questions. Operator, certainly as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced.
To withdraw your question. Please press star one one again, please stand by while we compiled the Q&A roster.
And our first question will come from Andrew Andrew Smith, a city global market to your line is open.
Hey, guys. Thanks for taking my questions. Congrats on the great results here.
Thanks, Andrea can say.
So I I think you know I'd like to dig into the just the commentary and your economics pretty constructive talking about you know the above <unk>.
<unk> you were talking about during the the IPO clearly benefit and the CAC side benefits and a platform side and also obviously painting, obviously mentioned, but as we can.
Forward just in terms of continuing to improve the economics, what are the biggest levers and your opinion, our biggest opportunities and maybe this ties into your your comments and investments map, but would love to your perspective on continued to drive that metric. Thanks a lot.
Yeah, Great question, Andrew Thanks for a team that up I think when we think about <unk> economics, I've, just kind of step back a little bit here really focused on having strong unit economics and these are investments that we've been making now for for many years, where we've seen as we've continued to get scared and we're getting benefits in terms of transaction expensive <unk>.
<unk> transaction margin has been growing up.
And some of the drivers there, which we've talked about a little bit which is our fraud losses have continued to come down as we continue to manage or.
Improve the fictional ex experience with our customers.
Pain or pain, and paled costs improve and I read a lot of that is is a scalar been getting so when you think a little bit more longer term.
The effect of having scale and the data that were gathering around customers. So we can get.
Get better and better in terms of customer experience is there also helps us get better economics with our partners with with the distribution side of the equation and so that's <unk>. That's a part of the drivers are LTV map and the same thing applies in terms of our marketing efficiencies as well as the look.
We've been much more global now compared to what we were a couple of years ago, and we've seen that we've been able to apply our marketing capabilities across the globe and being able to localize that scale and get word of mouth globally as well and so <unk> a globally as well. So those are structural improvements continued to give.
Efficiencies without a cat in the long term.
So what we Wanna do now with Magenta. We're in is just take some of the cable easily built up and the improvements we've seen in L. T V and a cat and reinvest them with that so we can continue to be on the back of.
Long long growth in terms of <unk> continued.
Could you need will be on the path of active user growth.
For years to come.
Got it very helpful. And then just follow up maybe I could drill down on the on the CAC piece clearly.
You're anticipating some marketing vestments in the back have given the you know given the returns that you're seeing but as the advertising environment normalizes, what's the right way to think about just your ability confused <unk> continuing to keep that flat or decreased at over time given the chance.
<unk> just would love to hear just the just any comments on how to think about the CAC pieces. The the marketing of normalizes. Thanks, a lot guys.
Yeah, when we think cats I think it's also we need to think about LTV at the same time I think what we're saying here is that we do expect a degree of normalization in the advertising market. We haven't seen that in the last several quarters. So we've kind of benefited from that available, but some of the core and structural improvements we've made in terms of our marketing.
And fees, we expect to sustain and what we're really saying is that we Wanna, We Wanna take some of the nineties, there and plug that back in more globally. So we get it we can focus on focused on growth across across the globe and and ultimately my solving for Ltv's a calculation. So it's not just <unk>.
Efficiency, we think we will get that will <unk> will continue to sustain that Ah, but we also want to make sure that we're continuing to focus on the LTV side of it and the more we can do in terms of providing value to our customers that'll create fly with a tax for us. So so that's the other benefit that we're looking to achieve here.
And the only the only thing I'll add Andrew strategically is because I love a good question on unit Economics, and then I'll talk about the CAC element is I mean, it's foundational to the P&L growth and performance are both from the top and bottom line. So we talked about today, but we have a very very I think disciplined investment approach.
And as we said today, we're pleased that our unit economics are stronger than what they were at the IPO above that <unk> ratio that we share and I think I'm. The ltv's side that is foundational the foundational input into that is <unk> resilient customer base a product that we offer there's nondiscretionary through <unk>.
Through various economic cycles, and then a differentiated products to our customers come back and use US again and again and then you add on top of that given the L. T. V is calculated with a cumulative transaction profit leverage that we're getting on the variable cost side with scale and.
We're really pleased with the results and continued kind of predictability on the LTV side and then on the CAC side because the returns are so favorable whether you measure it from L.
L T V to CAC standpoint, and IRR standpoint.
We're in this business to continue to really transform and change this industry, where 2% of the 1.6 trillion that sent every year.
In remittances and we're gonna continue to invest in growth, but do it in a disciplined measured manner as we've done in the past and expect to be able to continue to do but the the punch line. There is a lot of that under our control in terms of being able to invest more grow faster and best last drive more to the bottom line and we think the right thing for our shelter shareholders and customers.
Is to take that continued disciplined approach to both to growth on both the top and bottom line.
Very clear thank you, Matt <unk>, Congrats can guys one.
One moment pardon et cetera.
And our next question will come from <unk>, one of J P. Morgan your lines open.
Okay, Great could afternoon, great incredible results on the growth side I want to ask I know with us before.
Matt just wishing.
Pushing and making some of these promotional price changes and things like that have you seen any change in.
Sort of competitiveness up there, obviously, it's showing or not showing up in your results with 49 per Sudbury studied growth quarter on quarter.
But.
Are you seeing anything on the ground month to month that kind of thing with respect to price. Thanks.
Yeah, Thanks tension great to hear from you.
The headline answer there is we haven't seen any short term price changes or fluctuations that have had an impact on our business. Some of the legacy players I know have I think that you know what I go back to his wife customers use our product and it's around trust, it's around peace of mind, and having a transparent and <unk>.
Price is part of that but it is a lot more than that as well as making sure. The money gets there reliably and quickly making sure that our customers can both we can collect funds in a way that customers want symptoms to us and disperse funds in a wide range that we mentioned during the earnings call in and the desk that we shared and we're getting better at that everyday.
In terms of just the differentiated products so no.
Short term price movements that have impacted us as you as you said you know you kind of see that in our results for the quarter as well and continued investment in our differentiated product to make sure that that remains.
<unk> remains the same in the future.
The value of your comments allotment. So I wanted to ask you. The name of the results speak for themselves just slide nine quickly the rest of world.
120 per cent I mean, Canada is obviously doing great as well, but I'm curious any standouts.
To underline here amongst the rest of the world.
Up under 20 per cent. Thanks, so yeah.
Yeah.
Yeah, I love that question and the reason I Love that question is because I think that it's the way I answer. It can give you insights into how we think about geographic expansion a lot of that geographic expansion or <unk>.
Countries that we launched years ago that are building momentum, we're adding new cohort of customers that very healthy rates those new cohorts with customers come back again, and again and you start to layer on these new cohorts of customers and that starts to build a large business as we as we talked about today on the international front, where you're not see contributions yet.
But why we have launched them now and you will see contributions in the quarters in years to come our markets like the UAE that.
We just recently launched but haven't had time to mature in scale, yet, but the reason we.
Launched them just like the reason that we launched various European countries, Australia countries like that years ago is because those are seeds or planting to be able to pay dividends and continued growth in the quarters in years to come.
Alright, Thank you guys.
And one moment for our next question.
And our next question will come from Robert Nepali of William Blair. Your line is okay.
Thank you and good.
Good afternoon.
<unk> really impressive performance congratulations on that.
So I guess just on I mean, with the credit that you have and the infrequent in L. T V to <unk>, it's a relatively.
Impressive is that your take rate has actually gone up year over year isn't.
Any thoughts on as you said you only have 2% of the market.
Okay and does pricing even now at this rate even have an effect then again with your improvement in.
He ended economics.
Could get more aggressive on pricing, but does that does.
Does that really even enter into the equation today.
Yeah, Thanks, but I'm good to hear from you I think that the way that we think about again the businesses often times on me in an economic basis and so what we're optimizing for is cumulative profit per customer and so we're pricing and building the product and the way that establishes a really valuable longterm relationship with our.
Summer so no.
Immediate material changes on the pricing front.
Especially looking at a short term window, we're looking at longer term and sang what's going to be best for our customers and business in that window.
Yeah. Thank you and then the investment very clear on the investment you're making the back half of the year makes sense of how should we think about that as as we go into next year, obviously, you're driving some much higher profitability than what was.
Expected you are investing that but it is.
As we think about next year to those types of investments.
Reeker or what what areas would you look to increase that investment.
Yeah, Robert <unk>, I think I would just look at the next year and beyond.
Somebody whose investments have different payback period close to them. So obviously the marketing investments are one that we we get a lot of shorter term payback on that and we understand the returns on that really well that some of that will flow into into into next year and we have a lot of visibility in terms of timing around around back to you about it.
A detailed understanding of LTV at <unk> economics somebody other investments will geographic expansion investments will generally take a little bit longer for for there comes to be seen we're already seeing.
The benefits of investments, we've made a coupla years ago as we've seen the rest of the world now growth rates to be over 100 per cent on that your your your basis for the last two three quarters.
And then the platform investments generally will take a little bit longer as well and I think when we think about investments. We wanted to make sure. There is a balanced portfolio of these investments will continue to maintain a high return slash hold on them, but they will have different payback associated with it and and some other than the other 2024, some will be 2025 it'd be off so.
How I would think about the horizon.
Getting returns on those investments.
Thank you great results, it's good to see.
One moment for our next question.
And our next question will come from.
Ramsey <unk> a Barclays. Your line is open.
Hi, there. Thanks, so much for taking my question.
I wanted to ask you about the recent World Bank report on remittances. It was released and I'm, just curious whether that <unk>.
Projection factors into your own outlook, whether it correlates historically to your.
Performance at all whether it's irrelevant sort of indicator that the the the the projections were a little bit softer than I thought they would be but it may not have a correlation that I do know they often were advisors up at the end of the year, regardless, but just curious about your your view on that.
Yeah, Yeah. Thanks, Ramsey Yeah, Great question, and we certainly read that forecast as well I think that you know they haven't been uhm very correlated to our performance I think for two reasons one.
Because of the fact that the shift to digital and digital money transmitters I think is.
Far outpaces kind of overall remittance growth remittance industry growth and obviously, that's a big part of the structural advantage of what we brain and then the second is as you said they're estimates. So they are further revised like if I go back to when Covid hit they had an estimate and then they came back and revise their assumptions that go into those that uhm.
I appreciate and respect that they do because it's good to have a estimate out there, but it is just an estimate so but for US yeah <unk>. The digital growth I think it's a bigger part of the story and we're really pleased to be leading.
There's a digital first player at scale and helping a lot of customers send money back in a fundamentally easier and more affordable.
Great great. So there's a secular tailwind for digital overpowers whatever.
Whenever he sort of seeing wherever the world Bank is necessarily seeing from the entire market, which makes 10 a sense of.
Follow up for me is just I wonder if you could give us your updated thoughts on on FX volatility both in general in terms of you know update us on the degree to which have X volatility might have an impact on your clothes and then just very tactically in the quarter there've been some currencies moving around have you seen any any any impact you know.
Manifests itself in the in the near term.
Yeah. It's a question I think we obviously monitor effects quite a bit and particularly in terms of customer behavior at boxing. What we've seen is that generally speaking on on higher dollar has been there's a little bit more sensitivity to F X rayed, so you'll see that in certain cargoes at certain times.
But as we just sort of data and increasingly diverse portfolio corridors, and particularly with international focus.
The effects were seen there on a global basis are quite muted we serve.
Pretty large segment of customers ovarian from some of the smaller dollar sign customers to have a required need to send money to their friends and family on a pretty repeatable basis.
Hello to send that lets occasionally and with higher dollars. So we see that given the just the breath of our customer segments and the geographic diversification.
The impact.
X volatility largely muted for.
For our business at this point.
Got it thanks, so much.
One moment for our next question.
And our next question comes from will Nance of Goldman Sachs. Your lines open.
Hey, guys. Appreciate you taking the question I know there's been a lot of questions. After all the incremental investment, but I figured I was highlands.
Is there any way you can kind of dimensionalize, what you're thinking about in terms of.
Magnitude for the investments in the back half of the year that you called out.
Yeah, well I think I mean, our guidance really reflects reflects that I mean, we've we certainly are factored in the trenches, we've been seeing at the business the strength of the transaction Marjai.
Disciplinary putting in terms of our headcount not had gone invest notes.
So if you look at our guidance, you'll see that sort of factors and give me a good investment again these are.
Yeah, it's gonna be very targeted around our strategic priority areas that math talked about so we're going to be a pretty disciplinary it can be the best place, but we think they will generate a really long term it does for us what 2024 and beyond.
Got it okay and maybe it's just a question on transaction margins I know, there's been a lot of improvement and sort of the underlying fraud costs and the transaction expense and I know you helped kind of dimensionalize some of the efficiency gains and some of the moving pieces there, but maybe can you just talk about how.
How sustainable with the level of fraud costs are.
How likely is do you think that we might see a rebound on that in the near term just trying to think about things that can kind of go in the other direction. After so many things have gotten in your favor over the last year or so.
Yeah again, there's a couple of pieces that make up the transaction expense or the pain and payout costs as well as fraud as as you pointed out in particular Medcup subscribed. We certainly a piece of sustained improvements is given are the sophistication in our algorithms are on fraud.
And we expect to sustain that that will continue to be watchful thought of this space that it's a key capability for us but at the same time. It's also a space where there are certainly bad actors out there. So we continue to watch for that and there could be some variability in terms of how we see fraud losses. So two at any given order, but the structural improvements we're making in terms.
Managing fraud losses at the same time, making sure our customer experience as frictionless are sustainable and in the longterm with increasing scale and data we should continue to see improvements in that space.
One obviously is in the pain and pay outside which particularly can benefit quite significant scale, we talked about the importance of getting scale. The last few quarters and was trying to see some of that flowed through now and the P&L.
And while we do think there is this potential for that to continue to improve in.
In the long term.
Got it under so I appreciate you taking the question is very nashville's today.
One moment for our next question.
And our next question will come from it is Zachary gun F. F. T partners. Your line is open.
[noise] Hey, there guys. Thanks for taking my question I just wanted to ask you a quick you've added something like 1600 corridor year over year. So I was just wondering if you could help us maybe unpack hello much of that customer growth is coming from those newly added corridors versus maybe the ones that had been on the platform for awhile. Thanks.
Yeah, I can take that and I think that yeah. We're really proud of the fact that we're now in 4800 corridors, and we're getting faster and better and adding new corridors in terms of where the growth is coming from it's a portfolio, including corridor. We've been in for a very long time corridor as we learnt we launched five or 10 years ago, we've been around for 12 years now.
And the more recent co corridor that we launched probably aren't contributing materially yet, but again as I talked about the UAE and some of the other markets earlier. The reason we're launching those corridors is not to deliver returns necessarily in the quarter, but to plant those seeds, just like we planted seeds years ago.
For growth in the quarters in years to come so some of the newer car doors, probably less material from a piano standpoint, but excited about.
What the what they'll be in the future.
Alright. Thanks.
And one moment for our next question.
Our next question will come from Daniel Cramps of Wolf Research your lines open.
Hi, This is daniella and for Darren Thanks for taking my question I wanted to ask about the EBITDA cadence from here.
Is shorter term continuing to invest for growth, but if I remember back to the I P O process.
Looking for 20 per cent EBITDA margins longer term, how should investors think about the bridge to get there over the coming years.
Yeah. Good question, Daniel I think we yes, we did we did reference that at the time of the IPR, but I think you just contextualize. This available everywhere. We believe we are still in the early stages.
Gaining share in a very large market you worry about 2% of a 1.6 trillion Remington this market. So at this point, what we're really focused on is making sure our unit economics.
Strong as we add a new quarter, new customers and corridors.
To our portfolio and continue to focus on some of the fundamentals of the business I believe.
Transaction margin, having high discipline around.
Investments in all areas.
The business.
That will ultimately resolved, we think in a pretty healthy.
EBITDA margin in the long term.
But at this time, just given the evolving mix our business is particularly grow much more globally.
We are where you have to put out a specific target our own EBITDA were also focused on not just EBITDA, but also are operating income.
Making progress in terms of reducing our our net income losses as well. So early days yet just given that we're we're around too smart and a large market and are are <unk>.
Understood. Thanks, guys.
I would now like to turn the conference back to Matt Oppenheimer C E O for closing remarks.
Thanks, so much and thank you everyone for the thoughtful questions Uhm as we always do at <unk> I'd like to end the call by highlighting another one of our amazing customers. That's why we're here. That's why we do what we do is why we have the amazing performance, though we went through today and this customer's name is Anna Anna sends money from the U S.
To her family in Uganda, and Anna joined <unk> last year and was one of the many customers who came to us via word of mouth B a recommendation from one of our friends and and assured I was recommended to this app by my friend, who loves it it is fast and easy to use so we want to thank Anna for her loyalty to <unk>.
<unk> and appreciate her friend as well who recommended <unk> to her thanks, everybody for joining US. We appreciate your support we are excited about the opportunities ahead, and we look forward to sharing our progress as we continued to execute on our vision, which is to transform the lives of immigrants and their families by providing the most trusted financial services Unimplanted. Thanks, everybody.
This concludes today's conference call. Thank you for participating you may now disconnect.
Goodbye.
Mmm.
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