Wise Group plc (WISE) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Wise Q2 Trading Update Analyst and Investor Call. [Operator Instructions] Please be advised that this conference is being recorded today, Tuesday, the 19th of October 2021. [Operator Instructions] I would now like to hand the conference over to your speaker for today, Mr. Matt Briers. Please go ahead.

Thanks very much, and good morning, everyone. Thanks for joining. On the call this morning, you've got me, I'm Matt Briers, CFO of Wise. And you've got Martin. Martin Adams is our Head of Owner Relations. So we're pleased to be publishing our Q2 trading update today. I'll take a couple of minutes to recap the main points from this morning's announcement. And then, of course, I'll happily take any questions. So we've made great progress in the recent quarter. We dropped prices, our speed has increased, and we've launched the new features for our customers, all of which we believe will continue to drive volume -- cross-border volume in the future. But fundamentally, we've also become stronger as a business in this time. Remember, our mission is to drive down the cost of moving money around the world, but we only do things sustainably. So in order to drop prices for our customers, we actually have to engineer and optimize away the marginal costs of moving money around the world. We've become efficient in many areas, but most notably, recently, if you've read the blogs, we've become more efficient in how we manage our FX exposures. We've got leaner. And so if you're a customer, you're likely to seen through -- or heard through the last quarter that we've dropped prices. This means, if you step back from this, this means that we can generate the same level of gross profit needed to invest in all of our future growth, whilst actually giving customers a lower price, which is why I think about this as a stronger business. This is at the heart of our strategy and mission as it encourages more customers to join us. Price is one of the main reasons why people join, and also deepens our competitive advantage for the future. So for our call today, we'll cover two main areas, just as we did last quarter, and I probably will do in quarters to come. So first, an update on our mission and the progress we're making. And then an update on some key numbers, mainly revenue and volume as we do quarterly and obviously, the number of customers using Wise. So first, let's have that update on our mission. Wise's mission is to make money -- is to make moving and managing money across borders faster, easier, cheaper and more transparent for everyone everywhere. And our teams made great progress this quarter on price, as I mentioned, but also on speed, our product's features improved, and we also made some further steps on our platform. On price, in the first quarter of this financial year, we're able to reduce pricing by 2 bps to 67 bps. In the second quarter, the one just passed, we reduced by an exceptional further 5 bps to 62 bps, is much faster than we'd actually hoped. On speed, 40% of all transfers were delivered instantly within the quarter. That's within 20 seconds, you sent the money and it's with the recipient. That's up from 38% in Q1 and significantly up year-on-year. So for example, we've integrated with the payment network in India so that Wise customers can send money to India and have the TransferWise within 20 seconds. And we continue to enhance our proposition through several new features. We launched Assets, which gives customers the option to switch their Wise Account balance into a different asset class with the possibility of return. It's actually more useful to use the Wise Account. And we've launched new features for business account holders allowing them to set account commissions tailored to individual employees or their accountants. Finally, on our platform, we recently partnered with U.S. neobank Sable to give their customers faster, cheaper international money transfers directly by there. And also, we're now still working with existing partners like Monzo to give their customers a better UX for cross-border payments. And OnJuno, enabling their customers to send money direct to India, China, Europe, U.K. and Philippines. So as always, on a quarterly basis, we'll shortly publish our full mission update block on our website. So please do take a look and have a good read through and you'll get a much broader sense for the improvements we made for our customers over this quarter. So moving on to the financials for the quarter. 3.9 million customers transacted on Wise in quarter 2. The number of personal customers grew 22% year-on-year to reach 3.7 million. Our business customers grew 44% over the same period last year. So 230,000 business customers are active in the quarter as we continue to broaden the appeal of our proposition. So overall, volume grew by 36% year-on-year to GBP 18 billion. Now the growth in the customer base continues to be the main driver behind our volume growth, but the average volume per customer was also up 10% year-on-year, partly reflecting the growing proportion of business customers, but also the adoption of our Wise Account, which typically sees a higher average volume per customer. Revenue grew 25% year-on-year to reach GBP 132.8 million, in line with our expectations. The difference between volume growing 36% and revenue by 25% is obviously explained by the take rate, which reduced 6 bps year-on-year. And this is in part driven by a change in route mix year-on-year, but also due to price reductions linked to the leaner marginal costs, as I mentioned earlier. Looking at the quarter-on-quarter movement. As always, I'll repeat my health warning on Q-on-Q trends because they can be volatile. But it's worth reflecting on these given our growth in Q1 was actually flat -- year-on-year growth in Q1 which was flatted by soft comps post from COVID year before. In Q2, we've seen active customers grow 7% Q-on-Q for both personal and business customers. And with business customers in this growing proportion now 25% of volume in Q2, and this is a driver behind the increase in volume per customer, which grew 2% Q-on-Q. So volume increased 10% Q-on-Q and revenue by 8% Q-on-Q. VPC continuing to steadily increase and the take rate decreased slightly 1 bp compared to Q1 as the price reductions in the latter stages of Q2 began to flow through into the take rate, but they only flow through during the quarter, remember. So in conclusion, we're pleased this financial year, FY '22 started well with -- got more customers, more volume. We've got lower prices for customers whilst we've maintained a very healthy and sustainable gross margin to invest in the future, which we're actively doing. And as I said at the beginning of the call, our strategy of lowering unit cost means that we can continue to generate the cash required to sustainably run and grow Wise while also giving customers a better price, encouraging more customers to join us and strengthening our position in the market. So this strategy leads to two things when it comes to our financial KPIs. All other things being equal, lower marginal costs and lower prices lead to lower take rates, but higher gross profit margins. I'll put it another way, we've managed to engineer away our unit costs or some of our unit costs. So we have to charge our customers less to create the same cash gross margin, which is good news, a stronger business. So looking ahead, we expect the take rate to be slightly lower in H2 versus H1. The price cuts only came in midway through this quarter, but we continue to expect revenues to grow by low to mid-20s on a percentage basis for the year. And importantly, at the same time, we expect gross profit margin to be higher than I previously guided to at around 65% to 67% for this financial year FY '22. I mean this is, of course, subject to FX costs, which can ebb and flow on a monthly basis, it's subject to them continuing to being broadly stable at the recent levels that we've seen. The guidance on adjusted EBITDA margins remains unchanged as we'll continue to invest as fast as we can in our growth, but obviously doing that sustainably in the near term. So with that, I'm happy to take any questions that anyone might have.

[Operator Instructions] The first question comes from the line of James Goodman from Barclays.

Just a couple for me, please. So the first one on the volume. A strong sequential increase, I think GBP 1.6 billion, way ahead of the last couple of quarters. And I just wondered whether you sort of got any further view there in terms of how much of that is the seasonal uplift in the business and the extent to which that's still sort of valid in the current environment versus an underlying acceleration. And what that might tell us about your volume expectations for H2? And the second question is around the gross profit margin guidance increase, which for me is probably a better way of looking at the net revenue really of this business. But we don't actually have the gross profit disclosure, I don't think, for Q1 and Q2. So I wondered if you could help us a bit in terms of what's happening maybe in terms of the gross profit take rate, if you divide the gross profit into the volume. And when we look at the H2 guidance, is that really the gross profit take rate being flat, i.e., coming back to the first question, is it being driven by the higher volume increase? Or are you actually expecting also to be making more gross profit as a percentage of volume? Does that make sense?

Let me try and break these down. So the first question is what's been driving that we did see a GBP 1.6 billion jump in the volumes? We have seen in the past some movements around summers and things like this. But actually, I think with -- the way the world is working, it would be, I think all sense of seasonality is still somewhat out the window based on what was -- based on, certainly some holidays have been seen. So I've said on a quarterly basis, we've seen some volatility, and we will continue to do so. But I don't think I would point to some radical underlying acceleration in our volumes, but it just shows good. If you look across the longer term, which I hope everyone is doing, it just shows good solid progression in our customer base. And there's dynamic -- that's built in dynamics in there, which you're seeing with the shift to business customers and the shift to the Wise Account, which is supporting like more active customers that are moving more money through the platform. Second question, I think, was maybe the second and the third, James. So the second question was gross profit. So how to think about this? We haven't disclosed our actual results for Q1 and Q2, you're right. And then what do we expect going forward? We will be obviously giving our first half year results around the end of November 30, I think [indiscernible] where we'll disclose the rather than disclosing on a quarterly basis, our gross profit number, we're just updating our guidance for the year, although we think that will come out, which is obviously higher than we previously guided to. We will have a gross profit number for you in due course, obviously. But I would just take this guidance as a steer on where we think we'll come out for the full year based on what we've seen in the first. Obviously, it's based on what we're seeing in the business in the first half of the year and the longer-term trend. It's interesting, and I think it's very healthy, actually, to look at this the way you're thinking about it, James, around fundamentally, like the generation of gross profit is the cash and the value generation that funds all of our future investment and ultimately any margin that we create and the COGS or the cost of sales that sit on top of that are the one way to think about that definitely is some of the friction between us and our customers through using financial intermediaries to the extent to which we engineer those away is a great thing for everyone involved. Going forward, I think the -- what are we expecting on gross profit? Well, I would just -- we've given some guidance, which hopefully, given what people understand that our volume growth and where our take rates moved, it should give you a good steer hopefully as to how you think about that in the round going forward.

Okay. And so just to be clear, I mean, in terms of, I guess, unchanged gross revenue, gross profit up as to whether that's coming from basically a higher volume or higher gross profit divided into volume, it sounds like it's perhaps a little bit of both that's driving that.

Next question comes from the line of Adam Wood.

I've also got two things. Maybe just first of all on the improvements on the engineering and the technology side. Obviously, this is a pretty big price drop during the quarter that, I guess, you probably flagged it a little bit unusual. But could you just talk a little bit around the pace of improvements that you're seeing from a technology point of view and the benefits of scale that you get? Is it possible that you're actually seeing accelerations here and then maybe we shouldn't see these kind of price drops as so unusual in the future? So if you can just talk a little bit about pace of engineering change and how that could play into price movements going forward? And then secondly, could you maybe talk a little bit about what you've seen in the past in terms of the price drop starting to drive volumes in the business? Do you -- what sort of correlation you see between prices coming down and getting extra volumes coming through from both business and consumers?

Yes. Thanks, Adam, for the questions. So the question around momentum on engineering and tech, so the rate at which they're working on this is somewhat relentless. But as most things in life, the rate of outcome and progress is rarely linear. So we've -- the teams are consistently driving now across our infrastructure as to where can we integrate with more partners, where can we integrate directly into payment systems and why can we negotiate away costs with scale or even in this situation with what we've done here is where can we optimize our processes such that we can change our products such that we can reduce the exposure. So for example, by increasing payments feed, we reduced the time at which we would carry an exposure on a payment which actually reduces down the potential gain or loss or hedging requirement, which then flows through to a lower unit cost. So the momentum is not going to be linear, but you're right, Adam, this was definitely one of the bigger from a quarterly basis, the bigger shifts that we've had. And I don't think we should necessarily expect shift like this on a good quarterly basis. The corollary to that is actually that whilst these shifts are driven by reducing cost of sales, somewhat in the sense of our ability to generate gross margin is somewhat that we don't need -- kind of don't need to worry about that because, actually, we're reducing away the COGS whilst not really driving -- affecting this gross margin. So I think there will be more things to come, Adam, I hope, and we need to in order to compete on our mission. But these things won't be steady, and I'm afraid they won't be steady and linear, but this quarter was somewhat exceptional. On the -- but from a momentum perspective, we have now got 500 engineers working on this across the world in all of our infrastructure. So in that sense, like we do have strong momentum, we're incredibly focused on this. So I'd expect more progress. On the price versus volume, right? I can look at this two ways. On the one hand, it undoubtedly does help us from a volume perspective in two manners. One is, the main reason people talk about Wise and even TransferWise, as we knew it, is because we're radically cheaper than our -- than the alternative, which is typically banks. And that gap has remained as we continue to put pressure on price, and it keeps our identity as the -- if you think about other tech firms that have done this, they just continue to reinvest their economics in their customer base to build this recognition that you can trust Wise to be the lowest cost and the lowest price and fairly price. So that's driven our word of mouth growth, which is still 2/3 of our customers coming through word of mouth in the last year, as you saw in the prospectus. But then going forward as well, if you look at this, you need to look at it on the very long term, which is -- 3 years ago, we were really still really charging 50 bps or 60 bps in some markets that are now in the 30s of bps. And there's no doubt that for us to be in the next -- if you're looking at this over the 10 years, which -- or 5 or 10 or 15 years, however long people want to look, but over the long term, which is the period over which we're investing, it's clear in our minds at least that actually building that lowest cost platform is what's really going to determine the long-term success. So we do look at it, James -- Adam on the short term, it's really rather with the focus on the long term that we're making this investment. And that's why we have to do this profitably and sustainably, so it's very easy to do without continuing demand.

The next question comes from the line of Josh Levin from Autonomous.

I have two questions. So obviously, you've guided up quite a bit on gross margin for the year. And you've talked about how that results from lower unit cost. But how should we think about that beyond this year? I mean, can it continue to go higher than 65% to 67%? Or at some point, I'd imagine it's capped because at some point, you do have to pay some amount of bank fees? And then the second question is you've talked about your mission, you've used the word mission a few times today, and you have this Mission Zero. You ultimately want to get customers pay nothing to transfer money across borders. But given -- I mean given that is basically your revenue model, what does it mean for your revenue model in a world where customers pay nothing or almost nothing to transfer of funds? Because as you've shown this quarter, I mean, you can have price drops happen more quickly than you would have thought in a given quarter. So you could see prices dropping faster than we all thought.

Josh, thanks for the questions. Very, very cool questions. So on gross margin, we're really guiding for this year. And we've guided -- so previously, we guided 62%. And now we're guiding to this other range, 65%, 67%, and we're not guiding beyond that. But fundamentally, this is where we see -- we've managed to get our gross margins too. In the past, we have seen a dynamic where whilst we engineer away some of these costs, we also might enter new routes that have got a effectively a higher marginal cost. So whilst we've kind of driven up gross margins in some routes, we've effectively accepted new routes that have got lower gross margins. But at the minute, where we've moved to is, we've seen the shift. So we're not guiding any longer term than this. Ultimately, in the very long term, just going to your second question, Mission Zero, one thing is, in order to be free, we have to engineer away all of these costs at some point in the future. But that's going to take a very long time. So first is like which -- and then secondly, you'd obviously have to kind of scale away all of our operating costs, and that's going to take even longer. However, the reason we have this Mission Zero focus is because at some point, a, we've got to work out, for example, on our lowest price routes, say, GBP-euro or euro-GBP. Then how can we get from, say, 35, 40 bps down to -- 30 bps down to 25 bps? And it's this incredibly stretching goal of Mission Zero, which brings this discipline inside the company. And without that, it would be too easy for us to relax because we're quite cheap. But actually, like as an owner of the business, we hope you take confidence in the fact that it's incredible focus on and relentless focus on Mission Zero over time is what's going to really differentiate us from having the lowest cost platform in the long term. You're right to suggest that. Well, how -- when do you get there? What's going to happen to the revenue model? And frankly, like we're not desperately worried about that in a minute. It's like the way we're managing it is every quarter and every year, like how do we sustainably do this such that we're growing a very healthy business that's valuable for customers and valuable for shareholders at the point of which we -- we're a long way from working out how to get to be below 30 bps in the U.K. or 20 bps let alone getting anywhere near free. We've got -- that's a problem that's quite a long way down the road.

The next question comes from the line of Mohammed Moawalla from Goldman Sachs.

Just couple from me. So first of all, just coming back on this dynamic that, look, if you're going to reinvest back in the business, some of the sort of gross profit benefits, you're obviously cutting pricing. Over the medium term, when we think of just sort of the pace of volume growth, implicitly, you should sort of continue to gain market share. So can you talk us through how perhaps you expect some of the kind of volume growth benefits to come through? And secondly, just in terms of these investments, I know that at the IPO, you talked about continuing to invest in the platform, continuing to hire. You've had a kind of viral model from a marketing standpoint. But as you think of these incremental investments, are they going in the same areas? Or are any additional areas, which again would again point to further stimulation of growth. And I don't know, internally, if you have a sort of metric or how you look at sort of every extra pound of incremental investment and how you gauge the kind of payback on that? That will be super helpful to know. And then I had one more. We've talked a lot about price cuts. But when we think of the other side of the equation on the take rate, you've obviously been moving into a lot of these other ancillary areas. Could you give us an update on kind of the investment product and what are some of the economics there? And then also, if you do have any updated stats on kind of how the Wise Card and kind of the interchange revenue from that is coming in? And how that should sort of impact the take rate in the other direction?

Let me talk about what's happening -- how do we think about volume on the back of price investment. Are we -- from the investment, are we -- what are we investing in. And how are we rationing this. And then third, talk a little bit about new products, assets and Wise Account and the impacts that may have on take rate. So we haven't guided on our volume numbers. Essentially, when we reinvest in price, like as we -- when we invest in our engineering and our marketing, we do that because it drives long-term volume. Now we obviously expect that to have an impact and help -- this both helps us grow, but also gives us competitive advantage and resilience as a business. But we haven't -- we don't explicitly kind of give a pound-for-pound or a rate return on these price drops. Rather, the way we think about this, as we said earlier, this is like we're investing in the long term just kind of resilience, sustainability and defensibility, if you like, of the business. We -- that said, you have seen volumes growing healthily. And if you were to ask customers why they joined and why new customers are joining and people are active, it's really a function of the prices, but also the speed and the convenience of the product. The question is then when we generate this gross profit like what do we invest in? As we said in the listing, we invest that in price, but we also invest that in our products, I mean, our product engineering team, and we do also invest that in marketing. And I would say the mix there is relatively stable. It's not significantly different. And we certainly -- we're continuing to grow as fast as we can onboard the engineering teams through hiring engineers around the world and also investing in marketing across a range of channels, which includes digital channels, but also for our platform, growing sales and marketing capabilities. We're hiring engineers. And as we said earlier, with our EBITDA guidance, we're continuing to be able to hire and scale our investments kind of consistent with managing to that level of EBITDA. You asked really cool question which is how do we rate govern the extra pound that we would spend in each area? And it's a little bit different, like in marketing, we've always said that we can invest as much as we possibly can in marketing as long as we get the healthy payback. In the past, that's been 12 months payback. We limited that. We'll continue to review that on an ongoing basis as we get more confidence with the types of customers especially -- for example, business customers we're onboarding. But we think about it as a payout rather than a fixed budget. So if we could spend twice as much on marketing, we absolutely would as long as we have the capital. And then in engineering, the way we would choose which engineering projects to work on would really be by the cross-border volume impact because if we can grow volume, then we're essentially really growing. Obviously, that's what customers use us for primarily. So even when we would launch new features, we think about them from the impact that they can have on our overall proposition and the extent to which they can drive volume. So we would stack, frankly. Practically, what does that mean? We just stack rank the products we'd have based on the volume made impact. And obviously, that is always above a sensible payback on the engineering investment. But these engineering investments tend to be much more long term and obviously have a stronger annuity effect to the market, for example. And then on the price cap side, we've spoken about the -- you asked about the new products. So there's two there. We'll talk about assets and then talk about the Wise Card interchange. Assets is really exciting. It launched in the U.K., and we're working feverishly to try and do that elsewhere in the world that you'd expect. And in the U.K., if you use -- for those of you who are using it, I hope -- please try it out. It's -- you'd see that we're charging around 40 bps as a charge on the assets that you would hold in that on top of the fund fee. So that should give you a sense of how the economics work in the sense that we'll own a return based on the quantum of assets that we hold. It's going to be small to start with. Please don't get too excited from a revenue here yet. But essentially, we're charging our customers like we would across our products like a fair price. So we think about what it costs us and what it will cost us in the medium term, and we're charging that plus the margin. We're quite excited to launch this product. We think it's a really useful feature. It's different from what's offered elsewhere, and it's a real enhancer for the Wise Account. On the Wise Card, we haven't disclosed numbers on the Wise Card. And under the Wise Card it's just one feature of the Wise Account. We did say the Wise Account continue to grow very healthily and it's driving volume growth, as you can see in some of the metrics. And as you'd expect, obviously, the faster that growth, that will have a contributing effect to our take rate. We'll talk more about this in detail when we get through to the half year results. But there's no major change in the momentum on that side.

The next question comes from the line of Kim Bergoe from Numis.

I had two, and I think the first one about the gross margin. I think that's been answered. My second question is you flagged this before, and you mentioned it here again about opening up for additional features in India. And could you give us an idea of what to expect there? It's obviously a very big market in terms of number of people there, but how significant is this?

It's -- on the one hand, it's really exciting because it's the combination of we've got a lot of customers or -- sorry, a lot of people wanting to be customers when they request our products in India, and it's also a massive market. So on the one hand, it's something we're investing in. But on the other hand, we need to recognize that a couple of things. One is it takes time, like it's not all under our control. So we're working with the regulator to find a way to launch an awesome product in India. And then I would expect -- I think, actually, if you look back in the prospectus, we showed a chart that shows the rate at which markets grow, and they all tend to grow at a similar rate. They start and they grow through viral growth, which you can see is like a slow and steady, but ramps. So rarely do we see a market turn on and then suddenly like a massive impact on total volumes. So I think if you're thinking medium term to long term, it's very exciting. Obviously, it's why we're investing our time in it. But this thing will ramp steadily as and when we're successful. Kim, I hope that helps. I'll refer back to that base chart. I think they give a first tier as to like how a market will grow and what to expect.

Your next question comes from the line of Omar Keenan from Credit Suisse.

I just had one or two questions, please. So just a follow-up on the engineering and tech momentum question. I was just -- you did say that it was going to be quite lumpy as you would expect. So I was wondering if you could just give us perhaps a bit more color around the time line for further reduction in unit costs? I guess that's kind of the Australian infrastructure development. So it'd just be interesting to kind of get a little bit of a time line around that? And what else that is significant within the pipeline? And then maybe just a bigger picture question. So thanks for all the color on the mission statement. And clearly, you're focused on running the race faster than anyone else. That's very clear. But when you look at your shoulder, have you detected any changes in the competitive environment in terms of whether that's the IXB initiative from banks or what other fintechs are doing, be interested in your thoughts on how big you think the gap is versus other fintechs? And just the last question as well. Could you give us any color on the exit rates on the customer price, please, so we can think about what it looks like in the coming quarters?

Cool. Okay. So let me talk about the engineering and tech, what's underway? A little bit about competition and what's coming. You mentioned speed, I think it's interesting. And then I think the question was like how to think about take rate going into the coming quarters as we exit Q2? Cool. Thanks, Omar. So on the pipe, it's -- I won't try and share a pipeline out. But actually, I would say, I think we're way more transparent here than most companies, if you go to our blog and check out the product road map. We actually use this to tell our customers what's coming and also excite a bunch of engineers around what they're going to work on. If you look on the product road map, you'd probably be able to see in there some of the types of things that we're working on as to like -- and you'd be able to see like which of these might be driving efficiency or which ones might drive speed and which ones might open new markets. But check this out. I certainly wouldn't commit to saying, right, this is going to drop in a month, this is going to drop in 2 months. You called out the integration in Australia. That's really exciting because that essentially puts us directly on the metal like we are in the U.K., which has been transformational for us because, yes, it lowers our unit cost, but also it gives us total control over our products and how we manage and move money around. So the customer experience just gets way better. But as and when these drop and these go live and we're able to disentangle the existing cost structure is, is sometimes within our gift and often not. So just on the one hand, there's -- don't worry, there's plenty that's coming. We're able to like -- we're engineering and working on this, and I have confidence that it will come. On the other hand, it can't also works the way this would work as the ones recently as they -- we move away some of these cost of sales, but actually the fundamental kind of gross margin generation of the business is pretty intense. Now -- so please refer back to this pipeline, it should give you a sense as to some of the things that are coming. Question then, looking over our shoulder around these things. IXB, it's great call out actually. It's very interesting. But then also maybe talk around what other banks are doing and what other fintechs might be doing. IXB is really interesting. So for those that are not aware, this is a development where certain banking platforms, including SWIFT, are trying to get together, how do they better connect world's payment system. SWIFT fundamentally has been trying to do this for a while. So Clearing House and SWIFT, I think they've been working together for 5 or 6 years trying to do this. And then there are plenty of other examples, actually, this is not the only one, like, for example, in India and Singapore are connecting -- trying to get their payment systems working seamlessly together. This is all really good news, frankly. What does it do? So one, it validates these payment systems need to be connected. That's what we spent the last 10 or 11 years doing, is actually stitching together the world's payment systems in order to make money move around these really healthy. But just connecting 1 or 2 of these is, one, is bloody hard. And two, actually, like, it's not the only part of the solution. If you understand our infrastructure, how Wise works, it stitch together all these solutions, it runs effectively a ledger and a treasury platform that can move money instantly around these platforms. And move always know where it is at what point in time so it can predict when the money is going to be paying out. And that has all of the other UI around this. And infrastructure, for example, compliance infrastructure that helps you manage and understand where the money comes from, where the money is going. So we definitely need to be able to stitch these payment systems together, and we've made great progress on that, and we're continuing to do that. Part of what IXB is doing, on the one hand, it totally validates. That's an important thing to do. If IXB works, that's great. We definitely use it. Of course, we expect to have access to this. But we also know how long and hard these things are doing. This is fundamentally putting together technology that already exists, but we'll see, only time will tell as to how efficient that is and how easy that is to integrate into. So we'll keep an eye on it. Hopefully, we'll participate. But it's certainly not the silver bullet that we see, but something that might help us over time. So the question is then what is everyone else doing? So think about banks and let's think about fintech. On the fintech side, we haven't seen anything radically shift over time, like we haven't seen -- we continue to see some good fintechs making progress in their domains. And that's great. We need -- kind of world needs all the help it can get in payments and making banking easier for people, but nothing radically changed there. We've seen on the other bank side, remember, 80%, 3/4, roughly about customers are coming from banks. Sort of that mean -- obviously, the rate at which banks can improve that is quite interesting. We've got quite hopeful. I think Santander announced a couple of years ago that PagoFX would launch and they'd offer a similar maybe competitive to us. Unfortunately, they've shut that down which is a shame because we're quite excited to see banks start to like compete with each other on this and start to raise awareness of this problem, but I think this just demonstrates it's pretty hard for them to make this work. And I think that we're charging a reasonably healthy rate -- FX rates on that as well. HSBC had made -- tried to make some progress on this, unclear how that's worked. So generally, we haven't seen anything really changed from the bank's perspective, and they got their hands full. So generally, across that competition, I don't see any transformational change on the infrastructure perspective, like if things are changing, it should help us. And then on banks and fintechs like this, nothing really changed in the fintech world. But actually on the banks, like a few things that we've seen have maybe slowed down a little bit. Hope that answers that question, Omar. And then thirdly, like just practically like take rate going into Q3. We haven't guided on this one, and I won't right now. But the way -- maybe a way to look at this is we -- you've seen what happened between Q1 and Q2. And obviously, these price changes happened through Q2 and some of the announcements towards the end of August and September. So that can give you a sense. You don't need to get too creative to work out like what might happen in the coming quarters for the overall take rate.

The next question comes from the line of Richard Watts from Jupiter.

Yes, and well done on a strong trading update. Two questions from me. So firstly, coming back to the gross margin guidance and on the revenue guidance, it seems to suggest a GBP 20 million to GBP 30 million uplift in gross profit for the year. And I just wondered just in terms of the amount of cost increase that means to absorb that kind of number pretty feels significant. So can you just talk a little bit more around that? And then the second question is around the Google Pay relationship. And can you just give an update on that as well, please?

So on Google Pay, I won't share anything specific. Yes, we continue to work with them and make progress. And this is -- it's -- obviously it's an awesome partner to work with, and we'll invest in that relationship. I think it's too soon to give any sense of quantum or progress, and certainly something that we see we've been successful so far, and we'll continue to work with them on. Remember, we started relatively narrow with alongside Western Union and only moving currencies from one -- from the U.S. up to markets like India and Singapore. And like any partnership, hopefully, we want to try and grow that over time. On gross margin, you're right, actually. So we have guided for a high number from a percentage basis. But we are -- we have success. Our goal is to generate healthy kind of fundamental economics in our products, which may be pointing to gross margins is a pretty sensible way to look at this. But then invest as fast and heavily as we can in the future. And we do -- we don't have any change to our adjusted EBITDA outlook. We're hiring across our engineering, across our -- all of our teams to improve the service we can give our customers, making sure we scale the business. When I say the business, I mean the kind of support and overhead functions to kind of scale our business around the world and obviously, hiring in our product engineering teams to build products now that we can release in the future and that will drive volume growth beyond that. So I don't see any change to the overall guidance we've given on the adjusted EBITDA. But fundamentally, I think there are things to take away from this is like with the fundamentals of the business of what we're growing, how we're growing and we're leaner, but still generating the same ability to invest. These have improved, and it's on us now to be investing in that for future growth.

Our next question comes from the line of [ Patrick Beswick ] from [ Fincap ].

I've got maybe two or three because one of them might have just explained. So the first one, I'm looking at your take rates between your business and your personal business lines. There was a relatively, let's say, sharp decline in the take rate in the business segment. Maybe can you give us a bit of understanding how does the price reduction works between the 2 business segments? The second question. I'm sorry, I'm going to maybe a little disagree with you a little bit. Recently, Rapid has been on a bit of a marketing campaign and kind of showing their payments -- business payment solutions to number of people. And I had a chat with them, they really stressed that the key differentiator in that segment is the ability to automate payments, it's about connectivity to ERP, CRM, accounting system, KYC system and so forth and so forth. Can you maybe give us a bit of a color how are you thinking about that area of the business payments? And the third question, which might have been answered, I was kind of asking about OpEx. So the basic cost below the COGS. And you sort of mentioned that you are expecting the margins to be more or less the same despite the sort of really good bump in the gross profit margin. Is that correct?

Thanks for the questions. So the take rate in personal business is actually fundamentally at the transactional level, we charge businesses pretty much the same as we charge people. We try not to discriminate between any customer or have subsidy between any customer and another. What you see on business is, a couple of things. One is, you see a different route mix slightly, which would drive this difference. And then a few other differences and maybe the average transaction size, which might drive these differences. But we don't actively say we can get away charging people slightly higher than businesses. We fundamentally charge fairly across all of these differences. And then from the difference of a quarter-on-quarter movement, it's slightly down to just the exposure of businesses rather than we haven't done anything differentially for businesses versus what we've done for people. On Rapid, it's pretty true actually. So -- and they're right, which is -- the way we think about our platform is for larger businesses and for people, like we think about like -- over time, like -- so far in our journey, people have been coming to Wise, opening an account and using our platform directly through the app or through our website. In the future, we're working out like that will continue to happen, but also how do we take Wise to where the money is, frankly. Make it easier and more convenient. So tell me, if you want to use Wise through your own bank, it's going to be much more convenient to use, subject to them as being convenient than necessarily opening up another account, just like it is for -- small businesses are quite happy to use us directly. Maybe there are single person or even a couple of people in the business. As businesses get larger, they clearly have financings, they have accounting platforms. And it's much more convenient for them to actually -- for much larger businesses to be able to interact directly through. So we integrated with Xero. As with Xero, you have pay with Wise, which essentially helps you instruct payments directly from the accounting platform. And this is a way for us to reach different -- much -- a different set of small businesses and then maybe large businesses as well. So they're right in this approach and like in order to reach customers, you can do it directly, but also indirectly through partners and our partners might be banks, they might be accounting partners, platforms, there might be account payable software. And the focus on our platform in the long term and in the future is to work out how do we take Wise as a platform to these types of customers. As we disclosed, it's still a small proportion of our volume. It's growing healthily. But it's the focus for how do we make Wise as the platform and bring our infrastructure to where the money is. The third question you had was on OpEx. So this is right. So we are continuing to grow our OpEx as we -- from the pounds and a dollar basis. But we still expect roughly the same EBITDA margin as we guided to before. So kind of work through your sales [ number ]. But what we -- we have this EBITDA margin as a sustainable margin, which generates enough cash and capital for us to run the business and have a healthy balance sheet. But we're a growth business, and we're trying to think about ourselves from how we're growing and investing for the next 10 years, whilst making sure we generate to have a robust, sustainable business in the short term. So we don't plan on increasing that over time in the near term. It's rather like it gives us a governing factor for how much we can invest in our growth. And we've been successful so far in continuing to invest in our growth, which reflects no change to that EBITDA guidance. So thank you for your questions. Sorry, is there one other?

No, I just wanted to say thank you. Those are Very, very useful answers.

Cool. Thanks very much, everyone. Are there any more questions?

No further question at this time. Please continue, sir, to your closing remarks.

Okay. Well, I think I hopefully covered it all. This is our quarterly update. We're -- we've actually got our full results in -- at the end of November. So we'll talk more then. But there's not going to be anything different on volumes and revenues, obviously. So hopefully, that gives us the flavor. But I look forward to speaking to you soon. And thanks for your questions. And no doubt, catch up with some of you shortly. Thanks very much.

This concludes our conference today. Thank you all for participating. You may all disconnect. Have a good day, everyone, and stay safe.