Remitly Global, Inc. ($RELY)

All right. Let's get started. Thanks, everybody, for joining. My name is Tien-Tsin Huang. I cover the payments and IT services sector at JPMorgan. And we've had Remitly come to the conference, support the conference many times in the past. And so super excited to have them back. Sebastian Gunningham, the new CEO is here. So welcome. Thank you for being here.

Thank you.

And we've got Vikas Mehta as well the CFO. So I prepared a lot of questions. So hopefully, we covered all the topics that investors have sent through. So thank you for sending that. But Sebastian. Again, thanks for being here. I thought we just kick it off with you what's been 90 days or so.

Coming up on 90 days, yes.

Surprises. What are you excited about? What have you changed? What are some of the callouts that you call you'd mentioned to investors that maybe are a little bit familiar with the story.

When you join a company, one of two things happened, you begin to peel the onion and you, A, this is a terrible decision. The more you peel the worse it gets, or b, is as you begin to peel the anion, the more you peel the better it gets. And I'm happy to report that Remitly is the latter. I'd call out a few things. Number one is, we have a very unique customer base and the size of those markets is larger than I thought and even the adjacent markets. And so there's a lot of people -- the problem of moving money around the world is very complicated for most of these customers. And so the problem is still there, whether you're a business, whether you want to send $5,000 India today, it's complicated. And so the markets are very large. There seems to be a large opportunity. We've built a fantastic network. And so surprise number one is I think there's a lot of runway for this business. Surprise number two is it takes many years to build trust and the full second to lose it. And Mehta and the team really over these 10 years. I think they were very focused on making sure that the service was fantastic. And so surprise number two is it's a very well put together company. We solve problems for us. This customer that's sending $100 back to their family needs a person to solve stuff. So I'd say that a very solid trust infrastructure. And the third surprise, which is a little bit newer is, I think we're probably all looking, AI is a big tailwind in all sense. I mean, obviously, we're all talking about the AI cost, dividend, but the benefits of speed that AI brings really affects this business and helps this customer the benefits of trust that AI can -- I mean, we solve some pretty complicated problems. And so I'd say that the third surprise is, and I think we're all kind of waking up to this every morning is there are fantastic tailwinds and on the positive side of AI for our customers, for employees and for the business in general.

Yes. I think sometimes too much talk of fear mongering and things like that around AI. So I'm glad you're speaking to it from a positive standpoint. We'll talk a little bit more about AI, but I think before we dig in, just thinking about -- and I really like your operating priorities that you called out, smaller team, speed, some of it is AI oriented, right? And then focusing on your growth accelerators and core, like anybody coming in that's new, putting in changes, what do you think -- where do you think we'll see the most immediate impact across your operating priorities?

When you -- a fresh set of eyes on any company usually, you uncover the bottlenecks that are not so obvious for all of us work in different work environments, and we get into the rhythm of different things and so a fresh set of eyes. And I think probably the biggest impact is going to be the rate of change in our products and releases. So we have a lot of ideas. If you -- we have these cards that are launching and the team told me that, a list of 100 ideas, and I was like, okay, listen, so -- and what's different, what's changing the world is usually you have to do a lot of choosing between A and B with AI and the speed and very small teams, you get to really increase the cadence of product. And anecdotally, I think there's a direct correlation between more product and more revenue than just this. And so I think we have that ahead of us. And so we [indiscernible] organizing the company to be very fast. AI, in some ways, you really have to change -- when you come in on Monday morning to a company that's moving with the speed of AI, is most uncomfortable. So you've got to change the machinery inside of how people work, the size of the teams, how the decisions are made, how the process are done, where do you take risk with AI and where you don't. Both in the financial industry, it's not a free for all with risk, that's for sure. So I think that you're going to see a very fast cadence of products and something that I think our customers are really going to enjoy.

Good. Now I do want to talk about product because, again, with the trust you have and the large installed base, it feels like an opportunity, right, to attach more product and expand ARPU. But before we get there, just the question around the decision process of going into the corporate workforce reduction in the 10%. The question of offense versus defense and what motivated that decision for you to do that? Again, I know it wasn't an easy one. And it sounds like you're redeploying the bulk of the savings there. But walk us through what changed there? What was impacted and what kind of savings -- redeployment of savings should we expect?

Yes. I'm going to -- I'm going to give that over to Vikas. I'm not -- it was a little bit overlapping with my first day, so and then I'll give you some comments on how I see it going forward.

Great. First of all, I'd say that we have remained very cost disciplined over the past number of years, and this was just another example of being very thoughtful and disciplined. The decision was something that we took with a lot of months of preparation and just deeply understanding the organization and how to frame it in a way that helps us be more and more productive over time. So it was something that we very well thought out. And as Sebastian said, we made that decision in February, but a lot of the planning was done prior to that. As you think about, call it, the way in which we did that was -- it was more broad-based rather than focused on one particular function or one particular region. The second thing I'd say is that exactly as you were saying, we were looking at the future and saying what are the areas where we want to put our bets in and whether it is moving into the Remitly business, customer category, whether it is expanding further into send now, pay later or wallet or with other like card. So a lot of it was to say, how do we free up the capacity, so we can put it to use in places which can accelerate our growth for the long term.

Yes. And looking forward, there's no doubt that with AI, you can do more with less. And the killer app with AI right now is in the software factory, right? And so I think all of us have this interesting dilemma going forward, which is if you're saving $100 on people with AI, a, are you going to spend tokens. Is the person going to be -- is the $200,000 engineer going to be replaced by $200,000 as a token. Number two is to give it to the bottom line. Number three is, if you've got a lot of growth markets, you put those $100 into growth. And so you all our investors are going to I think ask every company, okay? It's clear that there's $100 somewhere in this tailwind of AI, what are you going to do with it? And I think there's different answers for different situations. We're looking at all our options. We're very biased to the growth. We have very large markets. We have lots of opportunities. So to do more with less, I think is going to benefit the overall top line more. And obviously, balance some give here on the bottom line also. But it's a happy problem in some ways that we all face for the next 2 or 3 years.

Okay. No, good. I'm glad to...

And I'm going to add, which is in net balance of equation, what you saw was raising EBITDA guide beyond the Q1 beat by approximately $10 million was essentially, as Sebastian said, passing it to the bottom line, while redeploying it growth initiatives.

So organizing things will be something we need to prioritize. I like the 4 x 4 matrix that you talked about, right? And I wrote it down without my reading glasses core centers, high-value centers, businesses, receivers. And then, of course, you're competing in your core end business, and then there's borrowers talked about that with John quite a bit. So how should we organize across that matrix in the what you're focusing on first?

Well, the -- it's a very simple matrix in the sense that I'll give you comfort that we didn't invent this customer pieces. So the high value -- we were looking at our data, and so most of our core centers are sending $200, $300, $250 home on average. But we start to look at the data and there's a bunch of $5,000, $10,000, $20,000, $30,000 remittances. So -- and that customer is different. They're usually sending for investment, for real estate, they're sending to themselves. You need a white glove service. So that -- when we saw that, then we're going to double down. It's a huge market. And so we're going to build -- we've built a team that's dedicated to that. The same with business. We found a lot of businesses using Remitly to send money all over the world. And so we said, okay, that's a different -- they need to do bulk send, they need to send to 3 people, not just one. You can imagine all the business use cases. And then this other market, which is the millions of receivers around the world who get money, and we don't do anything with them. They've interacted with Remitly. They've had a great experience. They receive the money. It's a happy moment. And so we've got that big market ahead of us. And then on the other side, we've got the [indiscernible] is one, which is the big box, which is the. We've got a bunch of boxes that are already non-zero. So we think we have a very right to play in all of them. We're going to prioritize obviously the biggest opportunities. Right now, we're looking at it from the customer perspective. But we've been testing some what we call send now, pay later, which is a killer idea. Customers love it. We give them $100 to $200 for 30 days for a short-term liquidity. We know the customers invite only -- we're very excited about that program. We've obviously got all kinds of debit cards and credit cards, not credit -- debit cards, where we can inject loyalty. So it's just -- there's an overall relationship that -- remember, this person usually comes to a country. It doesn't have a credit history. We can help them with that. It doesn't have access to the financial system in general. So if you put that all in a package, we have a lot of products we can inject that. Lending is one, spending is one with a debit card, and saving is another. We can have a current account. We can do multicurrency, all the very basic needs of this segment. So we're going to go after our 4 x 4. We've got a lot of boxes to fill. And we think there's a lot of growth in those areas.

Let's just stay with this, if you don't mind, an important subject for me, right? You have the trust with that user, right? They're probably underserved from a banking perspective. So you mentioned the you're going to push borrow, spend and save, which means you're going to compete more against some of these neobanks that are all trying to do the same thing, right? They're all familiar including the NPL companies who are trying to bank their users -- the concept of making a finance, but it feels like the remittance side because you already have the inflow of money gives you a natural opportunity to extend into these areas. But do you view the competitive landscape there, Sebastian, as you study it from the outside. Is this how real or easy hard will this be given the competition is all trying to do the same thing?

Yes. It's somewhat ironic that all the banks are going to remittance want to get into banking. That's right. But I'd say -- well, number one, I'd say these are very big markets. There's not a one winner. This is not a winner takes there'll be a lot of great winners and you're seeing a lot of new banking often. I was this putting the bucket into a banking bucket or a remittance bucket. I think that if you really just chase and like Chad have probably done this very well. Would you just chase what the customer needs, you end up in the right place. And some of it is services that the banks provide and some of it is services that are very unique to our customer base. For us, and send is our anchor. So we're -- we've built this global cross-border infrastructure to send money. And so when we think of lending, when we lend you $100 our customer base, you can only do one thing with those $100. That's send it to your family. If you can't go by shoes, you can't go buy candy, we lend it to you and the Remitly account and that money goes one place only, that's the same. And we'll do the same with all the products -- so we're anchored on sand. That makes us a little bit different than a bank. And then we're going to build out, and we'll see in some places, overlaps, some places partnerships. I think there'll be -- it's a big world out there and a lot of unsolved problems. So I think that the best will win. I will say just to wrap up the thought, you got to be low cost, you've got to send money fast and you've got to provide a great service. If you don't do that, you're not winning in this market because there's a lot of great players that are participating.

How much of a differentiation do you can drive with this strategy to further support or amplify your core set business? Because the question from investors Vikas you know this is pricing, is it a raise to the bottom on the pricing side. But could this change the competitive dynamics as you think about just core send, if you bring it back to the core business?

I think at the highest level, and you're getting a certain revenue per customer right now, and this is basically with the remittance business. I think there are many opportunities to grow that revenue percent. The revenue per customer around all these or and use the money. So I think that the -- I think remittances is a great anchor to start. Like if you gave me a choice current accounts while we like if you give me a choice, I look at all the financial infrastructure of your life. And I'd say where would I like a starting point to be able to build on. I think sending money abroad is pretty. It's a pretty good place to start, and that's where we are.

Agree. You're getting the inflows right up front. I mean.

That's right. Right is a value. So I didn't want to did say a couple of points -- the first one is the incrementality. As you said, I think we have seen already we have run this program now for 12 months. And we have seen cohorts of users where if they have sent now pay later, they are sending more than what they used to. So clearly, that's driving growth, which drops to bottom line. The second is we are -- as Sebastian said, we are only lending to our existing customers. So we have underwriting history, and we have seen that behavior. So that's another I'd say, strength that we have and a differentiator. The final point I'd make is a lot of these are adjacencies that we are going into, which means that from a cost perspective, there's a natural advantage. We are not really doing step function changes. A lot of it is just redeployment as we spoke earlier. So the inherent economies of scale continue to accrue even as we move into send now pay later or Remitly business or other thing that you mentioned.

Okay. Good. -- incrementality is important. Look, I think it's a fun thing to talk about is why I want to spend time upfront. I'm feeling the heat from not asking some stock questions. So I'll get into that, but thanks for going through that. So let's bring it back to the quarter and sort of the outlook, a popular question people had me ask you here is just thinking about the second quarter and the implied reaccelerating in the second half. What's driving that confidence to show the acceleration in the second half? Maybe just getting back to the business here.

Yes. I'd see that, first of all, as you saw really in Q1 sets the foundation for the full year. The second is, I think the way even we shared that in our earnings prepared remarks, which is a lot of it was timing changes. One-timers, which were creating a little bit of Q1 to Q2 change there. If you combine Q1 and Q2 and just look at H1 and then look at H2 or look at Q3, Q4 it looks much more linear. So there's no real big change happening. And this is important to understand because our business has a lot of predictability, and it is linear growth. So what we are really excited is the growth accelerators as they kick in. Our core is strong. Our U.S. growth was 25%, really strong growth in volume really growth in QAU, record net new customers, which always is helpful because that sets the base for years to come. So really feeling confident about solid setup to the year. Looking at H1 in entirety is the right way to do it. And second is growth accelerators kicking in second half, of course, much more in '27 and '28. That's what excites us.

I think 8 If you think about the inputs of the business, we continue to improve our cost structure. We continue to add new partners around the world that can distribute money. So when you're sending money to any country, you've got 4 or 5 options we continue to grow the number of new corridors in -- we continue to grow the number continues to send money out. So we've got 3 or 4 announcements coming up new countries that can now send money out. We continue to grow the speed of the money. We continue to grow the quality. We continue to launch new fee. So all the inputs, these are all small little pieces service is just continuously getting better with the help of AI, the speed at which we answer calls and solve problems. So you just put all that in a cocktail and there's a good momentum to the business in addition to some of the fact things that are driving the growth.

No, thanks for going through that. How about just the incremental margins then because there's a -- I know you did a reduction in force, but there's also a need to spend in market and drive awareness of some of these new products also but continue to grow the core, including corridors, as you both mentioned, is there any change in the incremental margin trajectory?

So I'll give you the numerical view and Sebastian can add more of the and national view. If you look at our history, we've had, call it, margin expansion every single quarter over the past many, many quarters, even as we look into Q1 and we have leverage across each line, right? So the incremental margin potential in this business is strong and solid. The other important part, which we touched a little bit, but I can be more which is investing in new growth, which is the growth accelerators is done very thoughtfully. And in a way, that is redeploying some savings, but also dropping some of that to the bottom line. So we feel really good about incremental margin potential of the business. Again, we explained a lot of one-timers in Q1, which make it a little noisy, but if you parse that out and look at just a incremental margins that should continue?

Yes. I'm being good in this business has a scalable flywheel. -- communities -- all these communities close it. They share their experiences. I use remitted to send money. It was really well priced. It was very fast. It was great. And then on the receiving side, you also get -- the business has unit economic scaling, but it's also got appeal scaling like in a way that the larger you get, the more people get to know about you the more, especially if you're good, those grown I live this at Amazon. We did very little marketing, but just the word of mouth in the school yard just got that flywheel spinning. And I think that's a very important part of our future, too. Yes, probably underappreciated.

Staying with -- I do want to ask about CAC, but just thinking about 1 nerdy question around the model and expenses. It does feel like transaction loss has been on the low side PAUSE -- there's a lot of ways for me to ask this, but it feels like some potential the base set of baseline lower than the 9% to 13% that you've talked about, whether it be with using stable coins settlement or just seeing better data. But on the other flip side, you are doing higher spend, higher bond business as well, which could expose you to more risk. So how do those things melt together to think about transaction expense because it does feel like it could go lower.

Yes. So I'll pass that into 2 transaction expense and transaction loss transaction expense, I think we've been very disciplined and continue the leverage. Again, mix has rolled to play, and we have talked about it paying payout different choices. And thus far, we have seen the shift to digital has been very helpful, especially on the payout side, and that's been driving some of I think the more interesting point, which is what you were highlighting was the transaction loss where we saw a step change reduction in fact, Q4, we had 7.2 bps. That was the low that we hit for a long, long period of time and then more recently, 9.3 bps. Now what is underpinning this success is a shift in the models, we were able to incorporate a lot of learnings and use AI ML to make it more powerful model. And what was most impressive here is that we were not degrading the user experience at all. The sideline rates were also at its best. At the same time, the transaction loss was about best of both worlds. That's what we want to see. Now keep in mind that last year, in Q2, our transaction loss was right? So it hit another end of the spectrum. And this is what we are dealing with here, which is sometimes it's 2 steps forward, 1 step back. And I'd say give us a few more quarters. Right now, the range I'm using -- we are using is 9 to 13 bps. That's what we have communicated historically, which is taking 11 bps as an average. If we continue to see this performance over the next couple of quarters, I think it will be a good opportunity for us to rebase line it. And then the stablecoin low-cost rail settlement opportunity, how real is that?

So this is an interesting fast. We've analyzed all 5,000 of our carriers, the pay in, pay out, the exact unit cost, FX, et cetera. So we know in detail the cost of every corridor. And we've compared it to what would stablecoin cost be. And as of today, Monday, 90% of our corridors using it using the old-fashioned system are lower cost than stable coin. There's about 10% that are more efficient using stable coins and we're all in using stable point in those corridors. So as of right now, it's a small piece of our overall infrastructure. We're very efficient already in our cost structure. But remember, it's not only just the rails, you've got to do all the KYC, AIML, in this business, you need to know who's sending the money and do you allow that transaction through, as you know. And so if you put all together some really nice places to use stable coins, but the majority is still our old-fashioned infrastructure works very well.

Yes. The 90-10 is a great stat to have. On the just -- or almost out of time just thinking about the actives, quarterly active subactions and you mentioned Amazon and what you've learned. I think you're growing close to 20%, I believe, on the consumer side. So is the CAC model changing? Do you see some opportunity to maybe dial that up or down? And then I have a follow-up on the customer side.

Yes, I think -- well, let me put it this way. It's not going to go up. I think that AI -- I think every marketing organization in the world, every is starting to rethink how you do marketing. And we've got a lot of unknowns around the corner, which is what role the LLM is going to be. We've launched we've launched WhatsApp, which is growing very fast as a way to acquire customers and for customers to use it. We've launched Went to query the prices. So there's a lot of change I think -- and we can obviously continue to get efficient when you start to get unstructured with these LLMs combined with structured data and all these machine learning in marketing. I think you've got a lot of opportunity. So I can't -- we have our CAC. It's part of our business. I think that next few years, we're going to get a lot of leverage on some of the new ideas and how marketing evolves in our space.

Good. It's just the health of the user base that you have, especially observing it. I know resiliency has been something Matt has reached to us for quite some time. But with higher energy prices, I know tax refunds just happen. There's a lot of geopolitical concern out employment seems full in this category. What signals are you watching on the consumer? Is that a high high-risk area for you?

Yes. It's a very price-sensitive consumer you got to -- you got to win with cost. If not, you're not going to win. The -- we see -- we have a -- like all consumer base, we've got a very loyal base. We've also got consumers that shop around a lot. But in general, we're very happy with how the models are playing out. We see people just grow all the cohort and as so we do. This is a service that people come back to. And the team, Matt and the team and all the team has been here, build something that's very structurally very customers love Remitly, they come back. And I think that bodes well for the future of the products that we're going to start to introduce to the future.

Yes. So send out day later is one. I know you've got the wallet, the card. So you're going to learn a lot of line of credit What guardrails do you have in place to that you're extending credit and can pivot if things change same.

Yes. I'd say that we learned a lot over the last 12 months. We and the Flex program. And we did a few experiments with different membership rates, call it, $7, $10, we had models where we would look at different cohort types. And through that experience, we learned about. And we felt really confident that this business is unit economics and the business model as Sebastian joined, we made the decision to get to the next stage of it, which is banking partner and create an arrangement where all the credit access is even through that bank. We own the risk because we, again, know the benefits of learning from the underwriting data and hence, we can get low cost of capital from the bank. So it's really a good model in that sense. And then bringing that and pushing that forward with a card product which is really important glue to that whole initiative is how we want to take it further. But overall, we feel really good about the unit economics. We have the data, which helps us keep those guardrails. In terms of loss provisions. Third is it's invite only. So we are the ones who decide whom and how much credit we want to give. So overall, really good checks and balances very strong leadership behind it, people who have done it for decades, and that gives us a lot of confidence to keep it going.

And I did get a couple of investors that which is the is that banking product specific to consumers? Or is it also applicable to small business as well thinking about because that's a big theme in payments small.

Very, very good question. I see us not yet, but it's in -- it's on our list. I think that a very big industry and a very big business out there to do small business lending well done. And we not this and all our planning all the ideas right it's on the list, but not immediate.

And you could take another end to it, which is the receiver credit. We know our receivers also well, they receive money from our centers on a regular basis. So Sebastian said hundreds of ideas and a lot to work through.

Okay. No, I know it's growing very quickly, so natural to think that, that maybe is something down the road. Okay. Almost out of time, just thinking about M&A, I think mentioned on the call, you said you're building the muscle, but not ready to do anything that's obvious, but to get to where you want to be again, especially with some of these newer products, I know the velocity is moving up internally, but would it be easier to buy in and give some scale in some of these tangential spaces? Is that a...

Yes, we're building the machinery to at the right time, go on offense. We've got these 16 boxes. I think every box has a different answer. One could be a partnership, one could be an acquisition. In some cases, you may want to acquire PAUSE -- in some cases, you may want to acquire market share. In some cases, you may want to acquire technology. So we're doing a lot of work. We're building a team. We're going to get very good at this. We're generating the that we need and obviously building up the equity value. So I think the time will come. It's not now. We're very focused. I think we have to put some -- a few more pillars in place, but I see us going on the offense in the future.

Okay. Good. We're less than 2 minutes left. So I thought we'd close it out. Maybe just ask you this fashion is the easy question of -- we talked about a lot of different things and going after it. What are you most excited about, right? If we're spinning it forward a year from today and you're back to talk about something new that we haven't discussed, is it something there? Or is it back to the matrix what would you tell us that you're most excited about?

I think that the company does have a bit of a missionary feel to it. This is a customer question -- and this customer has a rock and roll in their life with everything that goes on around them that they don't control. You mentioned gas prices. And so we have a really nice list of things to help customer. And I think it's kind of -- and I've run into a few I was talking to some people at home, the other day, we're using idle -- this is amazing set money to arrive on 15 seconds. Now I can do this and now I can do that. And so I think that it's fun to join a company. I mean we always have to -- workers work, you work very hard. We have to generate money. We've got to keep everybody shareholders customers happy. But I think the next -- I think I'm very looking forward to the next 12 months to all this sequence of products that I think we're going to get a very, very good reception in our customer base, and of course, grow the company, which is the ultimate objective here.

Yes. No. It seems like product velocity is a big theme in payments and fintech.

Yes, definitely.

There's going to be a lot to track with. But thanks for giving us the update. I appreciate you being here.

Awesome. Thank you very much.

Thank you, both.

That's great.