Hey, everyone. My name is Daniel Krebs. I work with Darrin Peller on the Payments Processors and IT Services team. Happy to be joined here this morning with Remitly CFO, Vikas Mehta. Welcome.
Daniel, it's great to be here. Thank you for the invitation. I'm looking forward to.
Yeah, happy to have you here for your first time at the FinTech Forum. Maybe if we could start a little higher level. Obviously, Q4 2024, very strong exit rates, 33% revenue growth, 32% customer growth, 38% on the volume side. Could you maybe help us break down the bridge between those growth rates and the 24%-25%, 2025 guidance?
Yeah. First of all, it's been an exciting journey for me. I've been here for six months. We really exited FY 2024 on a high note, on a strong note. In fact, if you zoom out, the strength of our cohorts and the durability of the business that you see continue to transpire across FY 2024 was really strong in H2 specifically. As you said, we ended the year with 33% growth for Q4, but for the full year, 34% growth. In the second half of the year, we had 40% volume growth. Overall, great stats there. The most important one there was we had new customer acquisition that was at a record high. That gives us a lot of confidence going into FY 2025. As you think about FY 2025, we've guided Q1 to 28%-29% growth.
If you keep in mind, that's even while it's lapping a leap year, Q1 tends to be a slower quarter from a seasonality perspective. As we start the year, we feel great. It's a great start to the year. What gives us confidence in the FY 2025 full year is just the fact that a lot of our revenue, significant majority, comes from cohorts that we added in the prior years. As we even double-click into that, once a cohort stays on our platform for more than a year, we retain majority of the revenue going forward. It's a pretty nice plateau of a curve that we have. That gives us a lot of great confidence. As we think about the full year 2025, we have a plan that is growth plus profitability plus investment. That sets a foundation for a strong future for us.
Great. You mentioned just about six months in the CFO seat now. Could you maybe describe for investors how you want your guidance philosophy to be perceived broadly? Is this the world as you see it? Are we baking in any sort of room or conservatism?
Yeah. First of all, as I was sharing with you earlier, I deeply care about the investor feedback. That's been sort of a key foundation into my thought process on guidance as well. When I came into my role, I did an investor listening tour, talked to sell side as well as buy side. A few things that came out from that, we started a formal guidance process, which was a quarterly guidance, both on top line, bottom line. In addition to that, we increased our transparency across the specific drivers of the business. We talked the same language as the investors, just unpacking revenue, unpacking revenue less transaction expense, unpacking the leverage across different expense items. We've been a lot more, I'd say, deliberate in creating that transparency.
Overall, I'd say that guidance philosophy is balanced for the growth opportunities we have ahead and prudent with the current macro environment.
Yeah. Great. Moving to the second pillar that you talked about, growth plus profitability, it's been a margin improvement story from mid-single digits a few years ago to now, strongly in the low double-digit range in terms of adjusted EBITDA margin for 2025. Could you maybe unpack in past years, you've shown a lot of great leverage on whether it's customer support, the G&A side of things. Now it looks like that shift might be towards the marketing expense in 2025. Is that accurate? Is that kind of the main lever to pull here in 2025?
Yeah. You're spot on. As we think about FY 2 02 5, the thought process is to really drive durable growth, to drive profitability along with that, and invest in building a strong future. As we do that, I talked about this in our Q4 earnings, but we think about our flywheel strategy. This is essentially at the core of your question there as to how we build growth along with leverage and profitability and invest in future. Let me unpack that for a little bit. As we drive great product experiences, we attract strong growth in volume and customers. That helps us lower our cost structure. That we can then invest in the business, pass to the bottom line, and invest in more service selection. That fuels our growth. That flywheel continues to drive.
That's what you saw over the last, I would say, five years. Since IPO, our revenue has doubled, but RLT has tripled. If you see in the second half of fiscal year 2024, our revenue grew 36%, but our RLT dollars grew 37%. Even as you think about leverage below that, if you take customer support and operations, it was 10% of revenue a couple of years back. Now it is 6.5%. Pretty significant improvement there. If you think about G&A, given the IPO time frame in 2021, the expenses had spiked, but there has been a significant improvement in the leverage there. The other aspect, if you look at 2024, we saw leverage across each and every line. We feel that the margin potential of this business is really good given the flywheel approach that we have.
Now, to your question, as we look at FY 2 02 5, we feel that the strong growth that we have had and the cohort durability that we have gives us an ability to leverage on the marketing side. We will continue to be hyper-focused on growth. We will be focused on customer acquisition. At the same time, we feel that given our strong product experiences, given our data-driven approach to marketing, and given the focus on incremental ROI in marketing that we are driving, we feel that all of this is just part of the flywheel. As we keep building that, we start driving more leverage. Overall, I feel really good about FY 2 02 5 and our ability to, again, grow, drive profitability, and invest in the future.
Great. It sounds like, and to give a common point of concern from the investor community, is that if Remitly has to turn down the marketing dial, what does that do to growth? It sounds like you're seeing whether it's increased evidence of word-of-mouth acquisition or stronger data-driven opportunities, you remain focused on that topic regardless.
Yeah. We are not pulling back on marketing. I think that that's one thing that, look, the positive thing is when we see good ROI, we feel good about it. We don't want to invest in low ROI approach. For example, going back to the marketing point, we draw a pretty good line at 6X CAC to LTV, LTV to CAC. Our payback periods have been under 12 months. These are really, really high-class numbers. As we think about the incremental dollar investment, we want to be very thoughtful that we draw, again, a line to say, hey, for a particular channel, we don't want to go below 4, even though the average may be 7.5 or 7. That discipline has enabled us to make the right bets rather than just pursue growth at all cost.
Sure. Absolutely. Similar topic, if we could hone in on the RLT and the gross margin side for a minute. As you mentioned, that's tripled. Those revenues have doubled over the past few years. Now there's an expectation that the margin should be relatively stable from here or show much more incremental changes. Could you talk about some of the drivers of that, especially some of the lapping commentary that you had last quarter?
Again, going back to the flywheel, I feel that the core of the business is strong. As we can accelerate volume growth, our ability to work with our partners to bring better pricing to our customers as well as driving higher profitability continues to improve. That is at the core of the thesis. As I shared in my prior question, you have seen RLT as a percentage of revenue grow from around 60% to 66%. It was 60% in 2022. We have seen a pretty dramatic improvement there. A lot of this improvement is step changes. It does not happen in a single year. A few things are at the core. The first is the integrations, the product experiences that we build that help drive that. Secondly, mix plays a role. That is also something we have to constantly think through.
Finally, similar to what you were saying earlier, as we think about specific things, we had a couple of partner renewals that happened or negotiations that happened in FY 2023 Q4. That gave us a pretty nice bump in terms of RLT as a percentage of revenue for FY 2 02 4.
That's on the direct integration side?
That is on the, I'd say, the pay-in and pay-out partnerships that we had. As we did that, these are multi-year agreements. They do not accrue every single year and now are part of our base. That is at the crux of, call it, the thought process on the specific, call it, commentary we gave on RLT as a percentage of revenue for FY 2025. At the same time, as I said, as our volume continues to grow at a local as well as at a global level, it gives us a much better play in terms of driving continuous improvement.
Yeah. Over time, that volume base gives you more essentially negotiating power and a bigger seat at the table, correct?
Absolutely.
That's kind of always.
Yeah. It's a win-win for our partners as well. Yeah.
Got it. Okay. I'd like to spend a minute on some customer behavior and potential behavior changes. We've seen, I don't want to call it cyclicality, but changes throughout the last, on a longer horizon, three to five years, changes in the amount that customers are sending on a quarterly or annual level, however you want to look at it. That volume per customer metric has been elevated recently. Could you kind of unpack what you see as the drivers of late?
Yeah. First, we are really excited about the fact that in Q4, we had volume per customer growth of 5.5%. This was the highest we've seen in the last three years. The underlying key driver was the transaction frequency, which was at a record high in Q4. We saw a little bit of that trend in Q3 also. It was a continuation of that trend. As we even look at FY 2025, we believe the broader trend should persist. What gives us really good confidence there is going back to the product experiences that we have built, which create a lot of stickiness in the product. Secondly, the focus on delivering trust and committing to what we have said and fulfilling those promises has helped us take much more market share as well as consolidate the wallet share that customers are spending.
That gives us great confidence. We feel that the volume per customer going up is a great testament to that. In addition to that, a couple of other things. Mix also plays a role in this. Especially as we focus on high-dollar senders or SMB, while this is at a very early stage, it will start impacting that as well in a positive way. Finally, I would say that it is just a good metric to help us understand that being able to drive more activity at a user level is something that we have been focusing on from product experience as well as our flywheel approach. That just gives us confidence that it is working well.
Do you think there were any discrete updates, changes in the product or anything, whether it was in 2Q or 3Q that maybe led to this or?
I think it's more incremental from our perspective. No big step changes there, but more focused on the high-dollar sender kind of experiences where if we increase our send limits and we can improve our risk-based scoring, that just helps us improve the send-per-customer.
Great. I'll squeeze in one more on the send-per-customer. Then I'd love to move to those new cohorts that you're referencing there with the high dollar. A lot of the feedback and commentary that we get is, how do we know that it's product improvement and increased retention versus, hey, the U.S. dollar is strengthening rapidly or now weakening rapidly and that's driving more activity on the platform?
Yeah. Yeah. One benefit of being a diversified business is exactly addressing the question that you asked, which is as we look at our revenue, both from a send and a receive perspective, we are becoming more and more diversified. For example, if you take Q4 or FY 2024 in general, the rest of world business that we have continues to grow at a rapid pace. We grew north of 40% in that business. If you look at the U.S. versus non-U.S., the U.S. share is now less than two-thirds compared to what it was a couple of years back. We continue to see this diversification. On the receive side, it is even more pronounced. We have three top corridors or three top countries from a receive perspective: Mexico, Philippines, and India.
If you remove that and look at just the non-top three, then our business grew north of 50% for those regions, the non-top three. It makes up more than 50% of our revenue. From both those perspectives, diversification happening. Now when FX changes happen, a strong U.S. dollar could be a weaker Canadian dollar or GBP or vice versa. You see that at more of a micro level, but at a macro level, things offset each other. For Q4, for example, we did not see any specific FX-related headwind or tailwind. It was offset within those categories. I would say going back to the benefit of diversification is that we are able to cruise through some of these volatility in a much more balanced way.
Got it. Yep. And that comes from the 30+ send markets, right, covering.
170+.
Most of the major markets, right, on the send side. Great. Let's talk about some of those incremental types of customers now. First, if you could describe, maybe put a finer point on when you say high dollar, what's Remitly's cutoff? How do you qualify someone as a high-dollar sender? Maybe what is the difference in terms of someone sending a $300-$400 transaction versus however you define high dollar?
First of all, the high-dollar sender amount depends on the market. It's not a specific dollar because Canadian market could be different than Australian to the U.S. We don't take a strict definition to that. The second point is more around the experiences that we deliver. If you think about someone who is sending a large amount, the trust that is needed in the system is much higher. It's not just $200. It's $1,000, $2,000. The customer wants a very strong service support system where they can feel that my money will be reaching my recipient timely in an assured way and with a very trustful experience with different options, pay-in and pay-out, that work best for them. This market is also, I would say, much more sensitive about trust and experience than they are about pricing.
That's, again, another reason why it's an interesting market and something that we are excited about. If you look at our trust scores, whether it's the Trustpilot scores or whether it's the scores on the apps that we have both on iOS as well as Google App Store, we are 4.9, 4.8 with total number of reviews around 4 million. There's a lot of very strong processes we have built that helps us get this high feedback. We are continuing to invest to make sure that the customer experience is top-notch. There's a little bit of thought process on the targeting and marketing that is specific to these types of customers. Overall, it comes back to the trust and customer experience.
Do you see a customer, when you acquire a high-dollar customer, are they testing the product with sort of a quote-unquote normal-sized transaction and then ramping up over time? Or is this something where they gain trust through reading reviews and then kind of go all in at their normal activity levels?
Yeah. A lot of it is word of mouth for us. That, again, goes back to the marketing leverage and all of the points that we were talking about earlier. That is the flywheel effect where once we start seeing good reviews, these reviews are not just made on the App Store, et cetera. Behind the scenes, they are talking to their friends. That starts shaping the perception. We deeply care about the perception of our platform. We feel it is much more word of mouth.
In terms of potentially going to get the same answer again of word of mouth, do you have to change the product in any way? Or is this just shifting where you're directing marketing spend in order to acquire these kind of new areas of customer growth? To be clear for the audience, it's not just high-dollar senders, but you've also talked about micro -SMBs and the seafarer cohorts. Could you talk a little bit about the go-to-market motion there?
Love it. As you think about the newer experiences, I'd say first of all, the investment that we have made on a scalable, extensible platform is extremely helpful. Everything comes from the same platform. We don't have to really spin up a new process completely or a new app. We are using the platform to drive that. The second is these are unique experiences, whether it's seafarers, whether it's micro-SMB , whether it is high-dollar senders. They all have different, call it endpoint needs, if you may. Take micro -SMB, for example, instead of Know Your Customer, there would be Know Your Business. There's a different workflow for that, which has to be efficient. It has to be comprehensive. At the same time, it has to be very high fidelity because these are business transactions happening and they want a high degree of certainty.
There is, I'd say, one-to-many kind of a transaction system, like one sender is sending to many recipients. There is a different workflow to that. The product plays a critical role in that. Absolutely. Send limits, for example, is true for high-dollar senders, for example. They want assurance, but they want good pay-in and pay-out approaches so that the higher dollar amount can be sent through more trusted mechanisms. At the same time, they are all different target markets and the marketing effort needs to be more targeted at those specific markets. It is an end, both product experiences and marketing that helps us get traction with these different use cases.
If I was a micro business on the Remitly product today, could I send that sort of batch recipient payroll type transaction out there? Or does it need to be a one-to-one right now?
I'd say it's early days right now where we are using more of the consumer experiences to drive the micro -SMB. Over time, we'll continue to enhance it. I'd say it's more of the consumer platform. What we realized with micro-SMB was a lot of customers were already sort of micro -SMBs that were on our platform. They reached out to us to say, hey, if instead of a KYC, there would be a KYB or a few other things in the workflow, it'll make it easier. We love that because that's a very clearly articulated need. We understand that these are our customers who want a better experience. For us, that's music to our ears. Early days, but we'll work on different stages in that process.
Do they want or need more reconciliation reporting or some sort of maybe automated software solution so that they can track what they're doing on your platform? Is that provided to them now? Is that, again, maybe a longer tail?
Yeah. That's the reason we are very specific about calling it micro business than SMB specifically. As we go stepwise, I'd say this is the, call it cusp of the consumer and the business. As we get deeper into micro -SMB and SMB, the feature list will continue to include all the things that you're talking about. At this point, early days.
Okay. We've talked a lot about how you're trying to deepen your relationship with customers in current markets. I think maybe what gets overlooked and potentially has been on the back burner for Remitly is expanding geographically in terms of just total corridors. I believe 5,100 corridors served now. Hasn't really moved much materially higher over the last year. Maybe could talk about how you balance that opportunity between current corridors and there's 20,000 potential out there for the future.
Yeah. Similar to what you said earlier, we have more than 30 send countries and more than 170 receive countries. Really a very strong foundation. If you even go back a couple of years back at IPO, we had around 1,400 corridors. Right now, 5,100 corridors in around four years. We have really scaled fast. At this point, we realize that a lot of the corridors that we added over the last couple of years are very nascent. We can improve our market share in these specific corridors and build more critical mass. That gives us the flywheel effect with better volumes, better partner ecosystem, lower cost structures, profitability. I'd say as we think about a lot of these corridors, it's more in the early innings. We are really excited about Middle East and North Africa.
That's where we have made a lot of investments over the last, I'd call it, two years. We are seeing good traction. As we think about our corridor expansion strategy, we have a very clear playbook for that given sort of 5,100 corridors. We are following that playbook.
Got it. Okay. Great. Maybe if we could move on towards talking about, we've mentioned investments and continuing to invest in things like tech and development side moving forward. Could you help frame for us how much is going into or maybe take it a step back and let's talk about how over time, and this maybe predates you by a year or so, but the movement to a singular platform to build everything for Remitly and then how that maybe shapes what proportion of your investments are now going towards optimizing the current product versus building for more product building.
First of all, we are a growth company. We do not see shortage of growth opportunities. This is where a strong technology and development platform plays a role in creating a durable, long-term, scalable growth strategy. As we think about that long-term growth, and again, keep in mind we are only 3% market share in a $2 trillion market that is growing approximately 8%. As we think about that massive opportunity, and even as we open up newer verticals like the micro-SMB and high dollar sender and send to send, et cetera, investment in platform is where we felt we will get the highest ROI. That is what we have done over the past couple of years where we have really focused on creating a platform where new innovation cost is very low.
In order to do that, we have to invest in authentication, security, and all the different services in a very thoughtful way that it can start scaling. That is where we feel really excited. That is why, as you have seen over the last year, we have been talking a lot more about the newer use cases. That is all enabled by the platform. For us, the investment in platform has started to pay off from our ability to innovate quickly and unlock some of that opportunity. At the same time, if you look back, similar to what I said earlier, each and every expense category leveraged in FY 2024. So did tech and dev. It was small because we have been investing in it. We have been investing in a very thoughtful and a disciplined way.
Again, goes back to growth plus profitability and disciplined execution plus investment as an approach.
How do you view thinking about newer ancillary products to serve your current customers and the wealth of opportunities from a competitive landscape in terms of what people can use now in terms of a neobank, a digital wallet? Everyone is trying to have every product for every consumer. You have been very disciplined about taking the time to build out the product correctly. Is there any rush? Do you feel confident that you can retain the customers? Are your customers using someone else for those products now that you are trying to take them from? Is this kind of a net new for your clients?
First, I'd go back to the volume per customer growth that we have seen. That makes us feel that we are doing the right things from a product experience perspective. That is helping us take more share and even have a higher wallet share. We feel really good about that. At the same time, we feel that our customers who use Remitly, we can broaden the use case for them. Right now, they are using for the remittance and transaction. We can think about the value chain all the way from storing value to creating liquidity and being able to package that in a long-term way. I'd say that's, again, early days for that.
We feel that if we can do it thoughtfully, do it in a platform-centric approach that we have been talking about, I think we will be able to deliver rich experiences for our customers. Then the flywheel effect will start happening. I'd say that's the service selection aspect of our flywheel, which, again, we are very excited about.
To be clear, there's potential services to offer for both the customers on the send side and the customers on the receive side.
100%. I think that you're spot on. I think that there is a huge opportunity on both sides. Even if you think about send to send markets, that's an interesting opportunity. The receive side is a whole new TAM in that sense. I get really excited as I think about that.
If we kind of walk down that path a little bit and go back towards customer behavior, in order to get that consumer adoption on the receive side, you need a much more digitally native receiver. Can you maybe talk about how I know you've talked about increased penetration on digital receive.
Correct.
Could you maybe size that for us a little bit? Or where are we in that sort of evolution? Maybe you have to talk about it by region in order to do it accurately.
Yeah. First of all, you're right. I think it's a mixed effect. Every receive region corridor has a different digital maturity. Overall, we have seen one simple trend that digital receive continues to increase. We saw that even in the most recent quarter where digital receive increased 350 basis points. It's a really nice inflection there. That also helps drive that high frequency of transactions, which reached a record last quarter. That's a given. Now, as you connect that to, as those receive markets get mature from a digital adoption perspective, our ability to leverage those receive markets can open up a huge market. Again, it's very market-centric. In general, the trend has been digital adoption has been increasing. Overall, I would say it's middle innings and not maturity by any scale of imagination. We feel really excited about that.
Have you given a recent, even in the past couple of years, an overall what percentage of funds are distributed cash or digitally at Remitly?
We have not. As I said, it's middle innings right now. There is more opportunity there.
Sure. At this time, we'll open up the floor to any questions in the audience for a minute. As people are thinking, I'm not going to let you get out of this talk without asking about the current political environment and maybe how you see Remitly in the current being a digital-first provider, how that maybe insulates you or creates some more safety given the potential risks from the Trump administration, immigration policy, et cetera.
Yeah. A few layers to this question. First, if you think about remittances in general, they have been durable as a category given the non-discretionary type of spend. Even before we were born, like if you think about the 2008 financial crisis, remittances held up strong. We saw that during the pandemic where remittances were strong and durable, right? For us specifically, as you think about diversification, given all the stats I shared earlier, we are very well diversified both from a send perspective and a receive perspective. In fact, we are seeing more growth from the rest of the world as well as more growth from the non-top three receive countries. Diversification helps us.
Overall, we feel that given the strength of remittances as a category, given the strength of our cohorts, and what we have seen historically that it increases the predictability and the durability of that revenue, we feel really good about it.
Yeah. Especially on the digital send side, you've got that bank KYC already done in the background for you.
That's correct.
Potentially better insulated. If I could maybe push on the question though and take it to a higher level, I mean, generally on a global basis, nationalistic tendencies are increasing. You mentioned the total market growing, call it mid to high single digits annually. Is there risk to that over time? Or do you think that these things are cyclical and migration will bounce back on a global basis?
Yeah. No, look, we have gone back a couple of decades to see the trends. If you look at those trends, they are very durable in nature. We have seen it across different administrations. We have seen it in different countries and geographies. I'd say that the more diversified we are, the more balanced we can become. I'll go back to 3% market share in a $2 trillion market where we have not even opened up other opportunities like SMB, et cetera. We feel the bottom line for us is that there's no shortage of growth opportunities. There's a lot more for us to do. That's a lot more that we will do.
Great. Final call, any audience questions?