Remitly Global, Inc. (RELY) Earnings Call Transcript & Summary

All right. I think we're ready to go. Great. Thanks, everyone, for joining. I get the thumbs up. This is Tien-Tsin Huang. I'm really happy to have Matt Oppenheimer here from Remitly following up against Western Union. So get some -- an hour of remittance talk, which is great. Only a nerd like me appreciates that. So we had Matt here in different sessions in the past, always learn a ton from Matt as a CEO and of course, a founder of Remitly. I always like you starting or ending with the customer story. So I know it sounds a little corny, but I thought maybe you could start with that just to set the table for us before we get into the Q&A.

Yes, absolutely love that. Thanks. I'll tell one that's pertinent actually. So when I was taken Uber from the airport last night. There was a customer, [ McKale ], who sends money back to Morocco, just chatting with him about him, his family. He has 2 kids, a lot of shared personal similarities there. And he said -- I asked him just stuff about family back from Morocco, and he said he's been sending money back for a long time. His dad originally sent money back. He used to send money with a legacy provider, but his wife told him about Remitly. And he was just talking about Morocco. He has a lot of aunts, uncles, cousins there. He's going back to travel there in July. He said, I don't need to take any money with me. I can use Remitly, it will get there instantly, and it just gives him the trust and peace of mind that he was looking for. And the most meaningful thing was him saying how far that money went with his family back in Morocco, and it's a theme we'll talk about today. But part of the benefit of that from a business perspective is a resiliency and a predictability that comes with being in the remittance business. And I say this once a day. especially right now, given all the uncertainty in the market. My job as CEO is much, much easier because of that resilience, grit, tenacity and commitment that our customers have with their families back home.

Yes, grit matters. Good. No, thanks for sharing that, Matt, and thanks for being here. So maybe I'll kick it off. It's been almost a couple of years now since the IPO, and I know there's been a lot of ups and downs. The market has been crazy, but Remitly seems to be in a really good rhythm is what I've been saying to investors, why do you think that's the case?

Yes. Yes, we feel -- obviously, you read our latest quarterly results, but growing quickly, 50% up year-on-year in terms of revenue, $204 million in revenue for the quarter. So solid growth at our stage and size. And I think that it's a reflection of increasingly differentiated product that comes from scale. I will tell you, the ability to build a trusted product that builds a peace of mind with our customers now compared to when we started this business 12 years ago is dramatically different. And I'll get to some of those themes of why. But scale really matters in remittances, just like any payments business. And then the second is a digital-first approach. It's much, much easier to innovate in this space, building from the grounds up, a next-generation remittance business. I worked for a large bank before I started Remitly, doing digital channels, I know how hard it is. And while there are other challenges, especially for a subscale money transmitter that's digital for us, scale, digital first enables us to really reinvent international payments in a way that builds unparalleled peace of mind, instant transfers, 90% of our transactions now are delivered less than 1 hour. We have over 1 million app store reviews, with 4.9 star app rating. There are so many examples I could go through, but ultimately, that digital-first scale -- digital-first with scale is just creating this flywheel effect that helps us deliver an exceptional experience for customers.

So since going public, Matt, would you say that there are any important changes that you've made or pivots that you've made that may put you in a better spot than say, at the beginning of the journey of the IPO?

It's an interesting question. Yes, I think that the IPO was a continuation of a much longer journey and vision that we've been on now for 12 years. And it gave us the capital that we wanted to continue to accomplish our vision. It gave us I think some additional visibility from a customer standpoint. I think customers, we talk about trust and peace of mind. I mean, I think some of our customers do notice and look that we're a public company and look at the stability and predictability of our business and have peace of mind from that. But ultimately, it's been a continuation of our vision, which has been the same for many years. It's around really transforming the lives of immigrants and their families by providing the most trusted financial services on the planet.

Yes. So customer growth is up 50% as you called out here. So can you build up the growth for us across retention, new geos, corridors, same-storage growth? How would you build it up for us?

Yes. So we're investing in 4 areas that all have different timelines of return, and that's how I think we've sustained really high-growth return over multiple years. First is acquiring new customers at great unit economics. Building that top of funnel trust is hard. But there's also, I mentioned scale, a lot of scale effects in terms of word of mouth. That's how [ McKale ] who was talking about at the beginning of the meeting found out about us. His wife, found out about Remitly via one of her friends that trusted the service. So that's number one, adding new customers, great unit economics. The second is around expanding new geos. We talk about UAE and some other markets that we launched. That's planting seeds for future growth in future quarters and future years. The third is building unparalleled peace of mind with our customers. And when I say that, it's everything from really going deeper in our 170 countries that we operate in to really -- I can go to more depth later, but provide end point integrations and distributions with now over 400,000 cash pickup locations, billions of bank accounts, billions of mobile wallets now across the globe. That's one example. We can go into the data and analytics required with our risk systems, et cetera. But all of that make transactions faster and more reliable and more predictable. And then the fourth area we're investing in is complementary new products and services. We have a deep relationship with our customers, and we know we can expand to additional services over time. So those 4 areas [ and ] a really disciplined investment approach to those areas is, I think, why we've not only seen growth this last quarter, but why we've seen a lot of growth over now many years.

So you're doing this with the CAC moving in your favor, you saw some marketing efficiencies. I think I wrote down, CAC was down 31%. So how sustainable is that? Is this sort of a one-timer? Or is this something that we can count on?

Yes, we've seen -- if you look at the overall customer acquisition costs over the last year, we've seen really encouraging improvements. And I think that's because of some of the scale benefits, word of mouth, it's because of our marketing team, we have an amazing CMO in place that is now, I think, building a team and executing in a way that has always been true to our strategy, unit economic focus, data-driven, more bottom funnel, so you can really measure and dial up and down marketing spend depending on the elasticity that we're seeing. And then some of it has been the tailwinds in terms of the competitive advertising being less competitive, especially in a lot of the digital channels that we use. And so I would expect on a year-on-year basis for it to moderate, but I think that the trends that we've seen in terms of acquiring customers at great unit economics. And we measure internally things like payback period, LTV to CAC. Those are really encouraging right now. And you see that ultimately in the P&L when you see the kind of growth rates, combined with some of the leverage we're seeing on the marketing side that's resulted in a couple of quarters now of adjusted EBITDA profitability as well.

Yes. Glad to hear it. So let's talk about pricing then. I know I always ask you about the pricing philosophy of the company. We just heard from Western Union. I know they're doing a lot of promotional activity, and they're shifting more towards market-based pricing. So how do you benchmark pricing, Matt, when you think about going to market and serving the mission that you talked about?

Yes. Yes, I mean customers want fair and transparent pricing, but they don't always want or require the best pricing in the market, and that's our pricing philosophy overall. What they want, it's interesting actually going back to [ McKale ] and what he mentioned, he didn't mention pricing once. He mentioned that it's a service he can trust, get money -- that gets money back to his family in the ways that he wants his family to receive it in Morocco or himself when he's traveling there. And that peace of mind, ease-of-use, distribution options is ultimately what customers care about the most. And you see that in the stability of our pricing. So over the last now 11 quarters that we've reported, it's been in the 2% to 2.5% take rate range. And within that range, it's a lot of just mix shift. Different countries have different take rates depending on average transaction size. But the stability of pricing, I think, is indicative of the fact that once we've taken a bunch of costs out of the system compared to the legacy providers, once you're within that new kind of equilibrium, then customers say, hey, what do you can do with my personal information as the new immigrant to the U.S.? And hey, is my money actually going to get back to I love the U.S. the customer story upfront because we can make it more tangible to Morocco, such that my family can get it at like what might be a cash pickup location, bank deposit, mobile wallets. Those are the things customers care about. And we're good at those things. And what excites me is I mean we're 2% of the market. And so that flywheel that I mentioned has so much runway to continue to really drive down any sort of delays, any sort of exception rates. And we're far from perfect there, but I think we're on the track to really build unparalleled peace of mind for our customers, which is ultimately what they care about.

So to wrap up the customer sort of discussion here, Matt, do -- I mean the customers ultimately choose Remitly because of the trust. You said price is not something that is recall in your example. Is it really just come down to trust? I mean, what else can you do to go from that 2% to something higher?

Yes. Yes, I think that -- well, I think there's a couple of things. One, with scale, there -- because we're looking at the take rate component with scale, we can continue to drive our cost down. We can push our disbursement partners. We can push how much we pay to collect funds from things like debit cards or bank accounts. So with scale, there is the ability to continue to drive down our variable costs, which gives us the ability to continue to have competitive pricing or drive more to the bottom line depending on what we decide to do. But what we found time and time again via customer testing, via being in this business over 12 years is price is an element of trust, again, it needs to be transparent, it needs to be fair. But it kind of makes sense when you take a step back and think about it. For the Uber driver that I met last night who, let's say, makes $30,000 a year, $34,000 a year, moved here when he was 23, probably a little bit reticent to like provide -- we have to do for compliance reasons. We have to collect name, address, data birth, assess social security number or tax ID. And then we're asking customers to give us hundreds of dollars usually, and their hard-earned money. And then we're asking them to trust us to deliver it halfway across the globe. So what usually goes through our customers' minds is "Hey, can I trust this company? And will it get the funds where I want the funds to go instantly or quickly?" Because a lot of our customers also don't have the privilege of being able to wait for funds to be delivered, because funds need to get there quickly. And because they don't make as much, they can't wait for those funds to arrive. They don't have as many savings to kind of smooth that sending. And that's hard to do. When I started the business 12 years ago, I used to think like, oh, sending money internationally is going to be super easy, it's like it can't be that complicated. You start adding the risk systems, fraud and compliance. You start adding payment acceptance, payment disbursement. And then you think about doing that across 4,000 corridors -- 4,000 corridors' a -- corridor's like a country at a country be 170 countries. And what you find is that there's so many delays, unexpected hiccups, things that happen to customers that really erode that trust. And then that is even more painful for the customer base that I just described, and they're I'm never touching that company, and then they'll tell their community and friends that don't go -- do not use remittance company X because there's real issues there, they stole my funds, they delayed my funds, not because that company had bad intent, but because it's incredibly hard to send money internationally. So I go back time and time again, and I did not think or know this when I started the business 12 years ago. I was living in Kenya. I was having a pain sending money internationally. And I thought it was just going to be about price, but ultimately, it's much more than that. And it's about that trust and peace of mind. That trust is very, very hard to build and very easy to lose. And so we just need to continue to get better every day. So we don't have those delays. And I think we can do that with our digital-first approach at scale.

Right. So you've got the scale, and you've talked about trust, and the network is quite large, but there's still a lot of opportunity, right? I mean, I wrote down -- you mentioned the 4,500 corridors, 48 bank accounts, $1.2 billion wallets that you serve, the race to make that bigger versus balancing the trust must be pretty tough. So as we evaluate the company, is the network on expand sort of significantly from here? Or is it going to be more methodical in terms of growth if you follow my question?

Yes. Yes, absolutely. Yes, we've added thousands of corridors since the IPO. And we're able to do that faster with our corridor expansion playbook. So the breadth is important. But depth to your point, is equally important. And so that's where looking at things like how many -- what percentage of transactions are distributed in less than an hour is what we've shared, but we monitor a lot of metrics in terms of the speed and reliability. Because what you also see is, let's say, a transaction is delayed, is it delayed by 2 hours? Is it delayed by 4 days? And so how you really reduce those delays is you go deeper and deeper into those disbursement networks. So let me give you an example just because [ jargon-y ] terms like disbursement networks, et cetera. And also because the headline number at times cannot give enough appreciation to the depth. Headline number, meaning like the billions of bank accounts, hundreds of thousands of cash pickup locations. So when we started in India, let's say, we worked like a global aggregator where aggregator, I mean, like one company that you can partner with to get a good headline number in terms of number of bank accounts that we could distribute to in India. That's fine but higher costs, because it went from aggregator to like payment system or one bank in India that went to payment systems, et cetera. So then as we got more scale, we integrated with our first bank in India, I think it was Yes Bank in India. And in yet, we integrated with Yes Bank. Yes Bank gave us access to 2 local payment rails, Neft and IMPS. Now you can also think about UPI and other payment rails that are well known in India. That's good. That was good. Faster, better. If there was any sort of like downtime with like pick [ your random, make in ] India, we have more visibility so we could proactively tell customers. If that disbursement bank needed information from a compliance standpoint, we had a direct integration with at least one bank in India to be able to clear that transaction. So there's more visibility. It's still not good enough, because there's thousands of banks in India, right? With our additional scale at first, banks like State Bank of India or some of the largest either government-owned banks or private banks like HDFC, as a subscale money transmitter, they'd be like it's just not worth the time, like I'll just go work with this aggregator because it's not worth the time for me to do a direct integration. With our scale and size now and growth rate, we now have so many partners, including the India example, where we've done, I don't have the exact number off the top of my head, but countless integrations with direct banks in India, so we don't have to rely on IMPS and Neft. And that makes a much more reliable transaction, much faster transaction, a lower-cost transaction. And that's just one element, by the way, when I talk about the -- you brought up depth, which is why I'm talking about this example. But whenever I talk about the disbursement network, I really like to up-level it, because there's a tangibility to the disbursement network that people can understand. What people often don't understand is the whole path of complexity of remittances and how digital for scale can improve that path. And I'll just say it really, really briefly. It's everything from localization across 4,000 corridors. It's all of the KYC, know your customer, identification, again, across 4,000 corridors, there are different requirements. It's payment acceptance, talking about payment disbursement, but we need to collect funds from customers. And so whether that's a bank account or whether that's a debit card, it really varies. Like pick your European country versus U.S., ACH is very different than like so forth or ideal and how well you do that is super important. Then on the back end, it's all the treasury cash management. As a remittance company, there aren't as many like just like core banking systems that you can buy off the shelf. We have to build a lot of that custom internally, and it's so much better now than it was. Fraud and compliance, I can go into those examples later. But yes, the machine learning and AI that we can apply to elements in the fraud and risk space are compelling, especially at scale. So we delineate between bad customers we want to prevent and then good customers that we want to have that instant experience. And then pricing across 4,000 corridors and doing that with a lot of sophistication and then finally, the disbursement network. So it's kind of -- remittances are one of these businesses where it's kind of like, if you want to go deep, you can almost choose your own adventure of going into any of those areas, and we could spend an hour on each one. I spent a little time on the depth and breadth of our disbursement network. The reality is that digital first scale that I talked about really applies to all of those areas.

Right. I mean it really sounds like, Matt, thematically, you're talking quite a bit about scale and I think that makes life easier for you, right, to break through and get these integrations done and -- because you can [ repeat ] and you have a playbook to build against all those things. I mean I'm hearing that as a theme. Am I wrong here?

Yes, that's right. And I think that's true of a lot of payments businesses, of which remittance is one of type of payments business. And so that scale and that's also -- great thing about being an entrepreneur and founder, as I've seen this business over 12 years, and it was harder subscale. And there are a lot of subscale money transmitters out there with our scale, the amount of customer improvement that we can drive in our business and to our product is exciting.

So you -- I know, since I first met you, I've always asked you about what countries you're going to enter next in terms of send. UAE is one that you announced last quarter. I know Middle East is a big sort of send region. Why UAE?