Good morning and welcome, everybody. I am David Scharf, analyst at Citizens JMP, who covers payments and fintech. My pleasure to welcome you to the tech conference, to kick it off with Matt Oppenheimer from Remitly Global, which is really sort of the founder and pioneer of all digital remittance. And listen, I got a bunch of things I want to ask you.
Excited.
Before that, always turn it over to the guest to kind of conduct your if you want to do one-minute, three-minute commercial, but why don't you give us kind of the background of sort of your background, why you founded Remitly, and so forth.
Perfect. I'm going to also put my phone on Do Not Disturb so I'm not distracted. All right, so one minute of why I founded Remitly. I was living in Nairobi, Kenya, and running mobile and internet banking initiatives for Barclays Bank Kenya. That was where it most poignantly came from. But I've traveled to close to 100 countries, lived and worked on three continents. Sending money internationally was just incredibly expensive and inconvenient, all stuff that we know. But as we'll talk about, it's a very complex industry that's rooted in trust. So what I think has been unique about our journey at Remitly, whose vision is really to transform lives by providing cross-border financial services, is that we have been able to execute in a very complex industry and really build unparalleled trust across the board.
We'll talk about the scale and size, and you all can read that publicly. That's the origin story. As we often say internally at Remitly, we're just getting started.
Great, great. So I'm going to start off with a little bit of a devil's advocate question because I've been covering the company since your IPO, which I think it's about 2.5 years now. I've often gotten a question from investors who may not know anything about the remittance business. They may know some payments processing, some payment stocks, but nothing about money transfer. And what more than a few have said is, "Hey, I pay my kids with Venmo. I bought stuff on eBay with PayPal like 15 years ago." I mean, big deal, transferring money. Anybody can do this, right? So what's the response to that? Because clearly there are some unique things about the industry you operate in.
Yeah, yeah, it is. Yeah, you used the word unique. I think what is fascinating, even when I started the business now 13 years ago, I didn't have a near deep enough appreciation for the complexity of international remittances and how specific and unique it is. And we can talk about that in a lot more depth. But when you think about everything from payment acceptance to localization across 5,000 corridors, if I use corridor as a term, it's country A to country B. We're talking about 150 countries, but 5,000 corridor pairs that takes localization to identity verification, to all of what I call kind of like the middle where we have to build a lot of our own systems because you can't go buy like a core banking system.
You got to build your own treasury, FX, cash management, risk systems like fraud and compliance, which take a lot of machine learning and other elements that we can talk about. And then finally, you have the disbursement network, which is our customers can send money to over 4 billion bank accounts, over 1 billion mobile wallets, hundreds of thousands of cash pickup locations, even door-to-door delivery. Each one of those, so much complexity that is so different than domestic P2P payments. And that's why this has always been a very distinct industry in the sense that you've had the legacy kind of money transmitters compared to domestic banks or compared to international wire transfers. All three of those have different segments. And we're really excited about the impact we're making in the kind of money transmission segment.
Got it. So I want to stay on that, on the complexity because listen, we're at a tech conference. So at the end of the day, is it more technology barriers that make what you do unique, or is it just, "Hey, we've spent 10 years getting approval from Bank of India and setting up all these payout networks"? I mean, do you see it more structural or more technological? Or maybe you can kind of address some of the technology barriers.
Yeah, it's a great question because I think it is a combination of both. Like you'll see in a lot of fintech, financial technology companies, there's certainly a lot of very complex regulation. In the U.S. alone, we have to have money transmission licenses in nearly every state. There's a couple of states that don't require it, but close to 50, including D.C. And then obviously, any other country we originate funds from, there's the money transmission, not only obtaining the license, but then managing a program that can be audited and maintaining trust with regulators. There certainly is an element of partnerships that's very important to our business, whether that's collecting funds, meaning partnering with whether it's major card schemes like Visa and Mastercard, or whether it's partnering with payment processors, bank accounts.
13 years ago, when I started this business, as a subscale money transmitter with no track record, we couldn't even get a corporate bank account. Now, thankfully, I came from corporate banking. I worked in corporate banking in the U.K. before I went to Nairobi. So I knew how to navigate that world. But subscale is very, very hard to get any of those partnerships, whether it's payment acceptance or payment disbursement. So whether it's the compliance or partnership components, that's the element that's the non-tech side. And then the technology side, I mentioned the localizing across 5,000 corridors. There's a lot what folks, I think, underappreciate at times is how robust the risk systems need to be.
So if you think about fraud prevention, we're tasked with delineating between bad customers or bad actors and customers that we want to go through and have a transaction that's instant and seamless. There's technology like machine learning that you can imagine we can use, especially with the scale that we have, to delineate between a bad actor and a good customer and still have transactions go through immediately while maintaining low fraud loss rates and while maintaining a compliant overall product. So there's technology aspects there. There's obviously large technology aspects of just building a delightful, fast, trusted user experience. And I can give you examples of that as we continue the conversation. So it is this mix of operating in a highly regulated environment that requires partnerships and deep technological expertise to be able to deliver a great customer experience.
Got it. So since AI is such a buzzword these days, you referenced Machine Learning. Can you give some more examples on just some of the compliance hurdles that you always have to be faced in terms of Know Your Customer and fraud rules? And more importantly, how's that evolving? Because once again, getting back to this theme of what makes you so different, can somebody else come in and do this? What are some of the technological head starts?
Yeah, yeah. So maybe I'll start with going a little bit deeper into the compliance and risk components, and then I'll talk a little bit about AI. On the compliance and risk components, we are tasked as a money transmitter to verify a customer's identity. It's called KYC, Know Your Customer. And there are certainly next-generation ways that we've been able to do that, whether it's our own resolution center to where customers can clear their own transaction much faster and easier by providing us information digitally and automatically, or whether it's on the back end, as I mentioned, the machine learning algorithms that we use to delineate between good and bad transactions. And that applies to not only fraud, but also to compliance. And then on the AI side, I think there's enormous potential, some of which we've already started to leverage.
I think that when transactions do go into a review, and why would that be the case? It could be because, as I mentioned, the Machine Learning algorithm said we needed a bit more information about a customer from a risk standpoint. A transaction might also need to contact customer support because maybe the sender entered in the recipient's bank account and routing number of their receiver incorrectly. And when that happens, there's a lot of technology solutions that I'll talk about before we get to AI that we're starting to implement to improve the experience, things like account number validation. So pre-us and pre a lot of the technology we've built, you might have a customer go through and enter the wrong account number for their mom in India.
And what happens in that instance is there's a whole chain of contacts and frustration and issues where now we've built out account validation because we've done end-to-end integration to where we'll proactively notify the customer and say, "Hey, the name on this specific account number doesn't match." And more and more of our account networks have technology like that. So those are the non-AI elements. On the AI elements, there are opportunities, I think, almost in a co-pilot-like capacity for our agents to become more efficient and effective with things like large language models. And you're seeing leverage, not necessarily because of AI yet because we're in the early stages of that, but you're seeing a lot of leverage in our overall CS support costs improve 240 basis points year-over-year. And that, to me, is an indication that our product is getting better every day.
I think there's big opportunities both on the risk and customer support side for AI.
Got it. So clearly, this isn't as simple as paying your kids' allowance with Venmo. So given all that, let's talk about the market and specifically your competitors. I mean, everybody here knows what Western Union is, whether they've used it or not. You got a couple of big global brands out there that have been around for over 100 years that are in. They've got upwards of 500,000 agent locations. There's MoneyGram. There's a couple other all-digital players. They might not be pure-play consumer. But I mean, is that it? Who is the competition, really? I mean, or is it just the secular shift?
Yeah, so it's something that, again, surprised me 13 years ago when I started looking at this industry is it's very fragmented. And so even the largest players have 15%-20% market share. The largest, second largest, has about 5%. And what we're seeing in the industry is a shift to companies that have two characteristics, in my view. One is that they have scale because scale is necessary across so many fronts to be successful in this industry, to provide much more seamless, lower-cost customer experience. And the second is digital first. It's just harder for incumbents to innovate, I think. I worked for a bank before I started Remitly. It's much harder. And so that being said, who's the competition?
There's a lot of, given that the business comes down to trust, there are a lot of subscale, what I will call legacy, meaning cash-based players that I think are having a harder time keeping up with where the world is headed. Most folks listening to this or in the room may not have heard of a lot of those folks because if you're sending money to the Philippines, you would know the Philippine bank brands that used to have physical cash locations. Some still do. Those folks are having a hard time building a digital product, and especially a digital product that's reliable. So you see consolidation. As Remitly, being a digital-first player at scale, we have you see that in our growth rate. You see it in our overall trust we have with customers, retention rates.
We're, I think, in very much a good position to continue to capture more market share and continue to just deliver to customers in a way that's never been done before as we kind of reinvent that international remittance experience to emerging markets.
Got it. Hey, so that's a good point at which to maybe take a step back and talk about who actually uses your service because I'm fairly confident every single person in this room has a bank account. I'm also fairly confident that companies like Western Union or a lot of the kind of MoneyGram or street corner bodegas might have a local option, have a lot of people coming in without bank accounts, and it's cash on the counter, and it winds up at their destination. I need a bank account, don't I, to use Remitly? I mean, can you talk more about who exactly the current user is in terms of how banked they are and how you think about just the overall market and TAM? Because clearly, you're serving a subsegment to the extent that it's only immigrants that have bank accounts right now.
Yeah, yeah. I think so. Our overall TAM is $1.8 trillion, of which we're 2% of that overall market. So one thing that is very clear about this industry is there's huge opportunities in terms of just how large it is. When you start to break down that TAM, there's fully banked, banked being a broad term of access to broad financial services digitally. There's underbanked, and there's unbanked. The research that we've done in the past, that underbanked segment is a segment that I think that is very large that we're focused on. And what's important to recognize, even for folks in this room that have a bank account, is if you wanted to send money in minutes to Mexico, you probably don't have the need to do that, or at least many of you don't.
Or if you wanted to send money in minutes to the Philippines, to India, to Kenya, to the 150 countries that we operate, most banks have not built out the infrastructure to be able to do that very effectively. And so for our customer segment, they may have a bank account. And even if you're an undocumented immigrant in the U.S., you may have a tax ID. You may have a bank account. But one, the hurdle to build trust with that customer segment is going to be higher. And two, the ability with that bank account, whether it's with one of the largest banks out there or whether it's with a local credit union, is not going to have the ability to send money to the network that we talked about and to do it instantly because they're going to rely on correspondent banking, SWIFT, et cetera.
The market that we have, when you combine banked and underbanked, is very large and is a big opportunity for us to continue to grow.
Got it. So let's turn to growth. I mean, you just came off a couple of years of upwards of 40% plus top-line growth. You just gave 2024 guidance a couple of weeks ago, another 30, what was it, 30%-32%?
30%-32%. Yep, yep.
You've obviously had a fairly robust track record of exceeding kind of guidance. So obviously, a lot of big numbers haven't caught up with you yet based on the 2024 outlook. Can you help an investor understand what the maybe rank the drivers of growth? Because you've talked about one, obviously, is just the secular shift to digital. You're building out a bigger footprint. Obviously, I would imagine the number of corridors you build out. And then just kind of call it same-store growth within corridors. I mean, what ultimately is behind that 30%+ growth? I mean, how do you rank them? If I'm an investor, what do I, quite frankly, care about the most? What's the canary in the coal mine of things improving or decelerating? What's most important?
Yeah, yeah, great question. Yeah, so David mentioned a few of the stats, but just to give you context, we did $944 million in revenue in 2023, and we've guided to 30%-32% growth. So as you said, the law of large numbers, especially for companies our scale and size, oftentimes is there. I think that what drives our growth and what has driven it the last 13 years is, first and foremost, it's a very large market that is moving towards digital-first players at scale, and that we've already covered well. The second, in terms of just how you model and think about the business, is we have, once you build that top-of-funnel trust, there is high retention of our existing base that's very predictable.
So if you look at slide 9 of our Q4 earnings, you can see on there how much of the business is very recurring and predictable from our base because it's a recurring need. People are sending money for basic living expenses, emergency medical expenses, et cetera. And the product that we've built is getting better and better every day and has high stickiness and high repeat rate because of that. So then the way that you kind of model out 2024 and beyond is you look at what are the cohorts of new customers that you're bringing in, meaning how efficiently and effectively are we building that top-of-funnel trust? Because again, we're asking our customer base to provide us with name, address, last four of social or tax ID, date of birth.
And then while trust is important in all financial services, we're asking customers to give us their hard-earned money, oftentimes we've picked up in cash. And so building that top-of-funnel trust is important, and doing it in a way that has a high measurable return is important. And that's something I think that's also been differentiated for us. Our full-funnel marketing approach, combined with maniacal focus on unit economics, we've shared in the past 6x five-year LTV to CAC ratios, less than 12-month payback. What you see is bringing on record number of new customers, which we've shared, I think, every quarter since we've gone public. Record number of new customers is something that is not necessarily easy to do, especially at bigger scale. And that's buoyed by the fact that, one, we're building a trusted brand. That's not our marketing efforts. That's the product that's delivering.
Two, we have a very intentional corridor expansion playbook to where we're planting the seeds to be able to address even a larger portion of that market, but we're doing it systematically, not scattershot all at once, which gives us steady growth. Three, I think that the marketing team that we've built and the analytical marketing engine that we've built is differentiated. It's that combination of repeat usage combined with new customer cohorts coming in at strong unit economics that has and continues to fuel our predictable growth.
Okay, so when I take a look at the company a few years ago, and it was more concentrated in certain corridors, and I think it was only U.S. sends to where you are today, 2.5 years after being public, a much bigger geographic footprint, non-U.S.-based sends, is there anything about the geographic mix of this business that changes the economic model, either lifetime value, repeat business, anything an investor ought to be paying attention to?
Yeah, yeah, nothing at an aggregate level. I think that it's important to recognize that for the last 13 years, we've viewed the business, and this is the way we've scaled our customer acquisition, as here's the CAC and here's the LTV, not on average, but here is what it is on a de-averaged basis by corridor, by marketing channel. And so that is something that's existed since we founded the business. No recent trends that are out of line with what we've seen in the last decade. The important point that you mentioned is just to put some numbers behind it, and Stephen, our head of IR, can correct me if I'm wrong, but it's $199 million of revenue from what we call rest of world, which is outside of U.S. and Canada, that was up 90%+ year-over-year.
And so that kind of puts some numbers behind that corridor expansion playbook that I mentioned. And the trends in unit economics of those customers outside of U.S. and Canada is also very strong. So feeling good about that.
Good, good. So let's switch to the question that so many companies that are growing as quickly as yours ultimately get asked, if not on an earnings call up on stage. That is balancing growth and customer acquisition versus profitability. There have been some quarters where you've demonstrated not only top-line upside but significant EBITDA upside. There's a constant kind of not struggle, but balancing act. Right now, are there any target EBITDA margins or profile 4, 5, 6 years you're looking at, or is it fully focused on acquiring customers that can deliver at least 6x LTV to CAC?
Yeah, yeah, great question, David. So if you get a sense, obviously, you can read this, but just kind of anchor us in the facts out of the gate. We did $44 million in adjusted EBITDA last year. We've guided to $70 million-$90 million, $75 million-$90 million in adjusted EBITDA for 2024. And so what you see is rapid acceleration on our adjusted EBITDA line. And I also, similarly, internally, we look a lot at net income to make sure that we're also taking into account dilution and stock-based comp, which I can talk about separately. But with that, it's important to recognize, and then I'll get into marketing, we're investing in four areas while showing that leverage. We're investing in marketing at great unit economics, which I'll come back to. The second is new geographies, planting the seeds not for 2024 but for 2025, 2026, and beyond growth.
We're investing in what I call reinventing P2P international payments, and that's continuing to improve the pay-in network, the payout network, all of that infrastructure that I mentioned that's getting better every day and driving long-term retention. And then the fourth is complementary products and services and investing in this technology platform that we've built to offer a wide range of services over time. So with all four of those areas, we're still showing leverage in the business given the place that we're at right now in terms of the scale that we've achieved. Now, going into both the marketing element and kind of how we think about long-term margins, the way on the marketing side, it is a balance. I think you said the word balance.
The way we think about marketing internally is that it is a function of what is the customer acquisition cost and then the total number of new customers that we acquired. You multiply those two, you get the marketing cost for the quarter, which pays back not only in that quarter but coming quarters in the future. We are, I think, if you look at the NPV and IRR or LTV to CAC and payback that we've shared. It's very favorable returns. I think in some ways, we probably could spend more and grow even faster. Even when you look at we also look at CAC on an incremental or marginal basis as opposed to just the average. So a lot of science around that. But we also recognize that it's important to continue to show leverage at the scale and size that we're at.
So it is a balancing act there. And what the important thing is over time to recognize in our business, and you're seeing this in terms of our growth of Adjusted EBITDA for 2024, is the highly profitable nature because when you go through each line of the P&L, you can see how, whether it's variable costs, whether it's OPEX, whether it's marketing, whether it's CS, that there's a lot of leverage that, like most payments businesses, that as we achieve more scale, deliver solid operating margins in the years to come. So we haven't guided to a specific number, but happy to talk through what some of those areas of leverage are in addition to marketing.
Got it. So I'll close out my questioning. We're kind of running up on the end here. Haven't talked about just the macro environment. Yeah, and quite frankly, whether it matters. Yeah, so talk about whether it's immigration trends, immigration trends in the U.S. or other countries, employment levels, I mean, rates, inflation, yeah, or any of these things have been factoring into a company growing this quickly? Can you even see it when you're growing this quickly?
Yeah, yeah. This is a good segue too to also just say a couple of things about our customers that'll tie into that. I think one thing that is unique about our business is the nondiscretionary nature of the service. As I mentioned, people are sending money home for basic living expenses, emergency medical expenses, college tuition. They're sending their parents, their kids, their siblings. So one, nondiscretionary. Two, is the fact that I think part of what defines our customer base is, and our customer base is very diverse in terms of job sector, et cetera, but part of the defining thread of the immigrant journey is grit, tenacity, perseverance. And so we've seen various economic cycles from 2008 to, or not 2008, we started after that, but from COVID to a lot of other various economic cycles over the last 13 years.
You can look even at 2008. World Bank shared some other data on remittance flows during various economic times. The resilience is there. It's very predictable and very resilient. In the last 20 seconds that I'll share, let me just make sure actually I answer that last component. So the resilience and predictability is material. I think that the purpose, or in terms of immigration trends, things like that, there has not been a lot of concern on that front, and I can talk about why that's the case. I can talk about that in more depth, although we're out of time.
What is the most important thing I want you to take away from this 30 minutes or whatnot that we had together is that what gets the 2,700 Remitlians up every day working to build this very special business is the fact that our customers are remarkable, and they make huge sacrifices to be away from their families, away from their loved ones. There are a lot of folks who working in this hotel are helping clean our rooms, are helping service our food. And there's also highly educated technology workers that are sending money back to India and other geographies that our customers serve. But what is incredible about this business is that thread that I talked about of the sacrifice, the grit, the tenacity.
You've got a team at Remitly that is every day waking up to say, "How do we reinvent how this is done so we can not only build a very large business, but we can make a real dent and positive impact in their lives?
Great. Matt, thanks, thanks so much. I'm glad you got that plug-in at the end. Really important point.
Awesome. Thanks, David.