All right, let's get started. Thanks everybody for joining. My name is Tien-Tsin Huang. I cover the payments and IT services sector at JP Morgan, we've had Remitly come to the conference, support the conference many times in the past super excited to have them back. Sebastian Gunningham, the new CEO, is here, welcome. Thank you for being here.
Thank you.
We've got Vikas Mehta as well, the CFO. I've prepared a lot of questions, hopefully we covered all the topics that investors had sent through, thank you for sending that. Sebastian, again, thanks for being here. I thought we'd just kick it off with you. What, it's been 90 days or so?
Coming up on 90 days, yes.
Surprises, what are you excited about? What have you changed? What are some of the call-outs that you'd mention to investors that maybe are a little bit less familiar with the story?
When you join a company, one of two things happens. You begin to peel the onion, you, A, this is a terrible decision. The more you peel, the worse it gets. B is as you begin to peel the onion, the more you peel, the better it gets. I'm happy to report that Remitly is the latter. I'd call out a few things. Number one is, we have a very unique customer base, and the size of those markets is larger than I thought, and even the adjacent markets. There's a lot of people The problem of moving money around the world is very complicated for most of these customers.
Sure.
The problem is still there, whether you're a business, whether you wanna send $5,000 to India today. It's complicated. The markets are very large. There seems to be a large opportunity. We've built a fantastic network, and so surprise number one is I think there's a lot of runway for this business. Surprise number two is, you know, it takes many years to build trust and a full second to lose it. Matt and the team really over these 10 years, I think they were very focused on making sure that the service was fantastic. Surprise number two is, it's a very well put together company. We solve problems fast. This customer that's sending $100 back to their family needs a person to solve stuff fast.
I'd say that, you know, very solid trust infrastructure. The third surprise, which is a little bit newer, is, I think we're probably all living. AI is a big tailwind. I mean, obviously we're all talking about the AI cost dividend.
The, you know, the benefits of speed that AI brings really affects this business and, you know, helps this customer. The benefits of trust that AI can, I mean, we solve some pretty complicated problems. I'd say that the third surprise is, and I think we're all kinda waking up to this every morning, is, there are fantastic tailwinds on the positive side of AI for our customers, for employees, and for the business in general.
Yeah. I think it's sometimes too much talk of fear-mongering and things like that around AI. I'm glad you're speaking to it.
Yeah
From a positive standpoint. We'll talk a little bit more about AI, but I think before we dig in, just thinking about, you know, I really like your operating priorities that you called out, smaller team speed, some of it is AI oriented, right? Then focusing on your growth accelerators and course then like anybody coming in that's new, putting in changes, what do you think we'll see the most immediate impact across your operating priorities?
You know, when you a fresh set of eyes on any company, usually you uncover the bottlenecks that are not so obvious.
Right
For, you know, all of us work in different work environments and, we get into the rhythm of different things, and so a fresh set of eyes. I think probably the biggest impact is gonna be the rate of change in our products and releases.
Sure.
We have a lot of ideas. If you know, we have these cards that are launching, and the team told me they had a list of 100 ideas, and I was like, Okay, this is What's different, what's changed in the world is usually you have to do a lot of choosing between, you know, a and b. With AI and the speed and very small teams, you get to really increase the cadence of product. You know, anecdotally, I think there's a direct correlation between more product and more revenue.
There just is.
I think we have that ahead of us. I'm organizing the company to be very fast.
It's a, you know, AI in some ways, you really have to change, you know, when you come in on Monday morning to a company that's moving with the speed of AI, it's almost uncomfortable. You gotta change the machinery inside of how people work, the size of the teams, how the decisions are made, how the process is done. You know, where do you take risk with AI and where you don't. You know, we're both in the financial industry, so it's not a free-for-all with risk, that's for sure.
Yeah.
I think that you're gonna see a very fast cadence of products and something that I think our customers are really gonna enjoy.
Good. Now, I do wanna talk about product 'cause again, with the trust you have and the large install base, it feels like an opportunity, right, to attach more product and expand ARPU. Before we get there, just the question around the decision process of going into the corporate workforce reduction, the 10%, the question of offense versus defense and what motivated that decision for you to do that. Again, I know it wasn't an easy one, and it sounds like you're redeploying the bulk of the savings there, but walk us through what changed there, what was impacted and what kind of savings, redeployment of savings would you, should we expect?
Yeah, I'm gonna Vikas, I'm gonna give that over to Vikas.
Yeah.
It was a little bit overlapping with my first day.
Okay
let Vikas and then I'll give you some comments of how I see it going forward.
Great.
Yeah. First of all, I'd say that, you know, we have remained very cost disciplined. Over the, you know, past number of years, and this was just another example of being very thoughtful and disciplined. The decision was something that we took, you know, with a lot of months of preparation and, just deeply understanding the organization and how to, you know, frame it in a way that helps us be more and more productive over time. It was something that, you know, was very well thought out. As Sebastian said, we made that decision in February, but a lot of the planning was done prior to that.
As you think about, call it the way in which we did that was, it was more broad-based rather than focused on one particular function or one particular region. The second thing I'd say is that, exactly as you were saying, we were looking at the future and seeing what are the areas where we want to put our bets in, and whether it is moving into the Remitly for Business customer category, whether it is expanding further into, you know, send now, pay later, or wallet or with other initiatives like card. A lot of it was to say, how do we free up the capacity so we can put it to use in places which can accelerate our growth for the long term.
Yeah. You know, looking forward, there's no doubt that with AI you can do more with less, and the killer app with AI right now is in the software factory, right? I think all of us have this interesting dilemma going forward, which is if you're saving $100 on people with AI, are you gonna spend the $100 on tokens? Is the person gonna be is a $200,000 engineer gonna be replaced by $200,000 of tokens?
Right.
Number two is, do you give it to the bottom line? Number three is, if you've got a lot of growth markets, do you put those $100 into growth? you are all our investors are gonna I think ask every company, Okay, it's clear that there's $100 somewhere in the, in this tailwind of AI. What you gonna do with it? I think there's different answers for different situations. We, we're looking at all our options. We're very biased to the growth. We have very large markets. We have lots of opportunities. The do more with less, I think is gonna benefit the overall top line more.
you know, obviously we'll balance some give on the bottom line also, but there's. It's a happy problem in some ways that we all face for the next two or three years, I think.
Okay. No, good. No, I'm glad to you confirmed that.
I'll just add.
Please
which is, in that balance of equation, what you saw, us raising the EBITDA guide beyond the Q1 beat by approximately $10 million was essentially, as Sebastian said, passing it to the bottom line while redeploying it for growth initiatives.
Organizing things will be, you know, something we need to prioritize. I like the 4x4 matrix that you talked about, right? I wrote it down without my reading glasses. Core senders, high value senders, businesses, receivers, and then of course you're competing in your core send business, and then there's borrow, spend, and save.
Right.
You just talked about that with John.
Yeah
quite a bit. How should we organize across that matrix in terms-
Yeah
of what you're focusing on first?
Well, It's a very simple matrix in the sense that, I'll give you comfort that we didn't invent these customer pieces. The high value We were looking at our data, and so most of our core senders are sending two, $300, $250 home on average.
We start to look at the data and there's a bunch of $5,000, $10,000, $20,000, $30,000 remittances. That customer's different. They're usually sending for investment, for real estate. They're sending to themselves. You need a white glove service. When we saw that, we're gonna double down. It's a huge market. We've built a team that's dedicated to that. The same with business. We found a lot of businesses using Remitly to send money all over the world. We said, Okay, that's a different. You know, they need to do bulk send. They need to send to three people, not just one. You know, you can imagine all the business use cases.
There's this other market, which is these millions of receivers around the world who get money, we don't do anything with them. They've interacted with Remitly. They've had a great experience. They receive the money. It's a happy moment. We've got that big market ahead of us. On the other side, we've got the send, which as you know, sort of say there's 16 boxes. There's one which is the big box, which is the send, of course. We've got a bunch of boxes that are already non-zero. We think we have a very right to play in all of them. We're gonna prioritize obviously the biggest opportunities.
Right now we're looking at it from the customer perspective, you know, we've been testing what we call a send now, pay later, which is a killer idea. Customers love it. We give them $100-$200 for 30 days for a short-term liquidity. We know the customer. It's invite only. We're very excited about that program. We've obviously got all kinds of debit cards and credit cards, well, not credit yet, debit cards, where we can inject loyalty. It's just, there's an overall relationship that's come. Remember, this person usually comes to a country, doesn't have a credit history. We can help them with that. You know, doesn't have access to the financial system in general.
If you put that all in a package, we have a lot of products we can inject there. Lending is one. Spending is one with a debit card, and saving is another. We can have a current account. We can do multicurrency. All the very basic needs of this segment. You know, we're gonna go after our 4x 4. We've got a lot of boxes to fill. We think there's a lot of growth in those areas.
No, let's just stay with this, if you don't mind.
Yeah, yeah.
It's an important subject for me, right? You have the trust with that user, right? They're probably underserved from a banking perspective. You mentioned there, right, you're gonna push borrow, spend, and save, which means you're gonna compete more against some of these neobanks that are all trying to do the same thing, right? They're all familiar names, including BNPL companies who are trying to bank their users. This whole concept of embedded banking and embedded finance. It feels like the remittance side, because you already have the inflow of money, gives you a natural opportunity to extend into these areas.
Yeah
how do you view the competitive landscape there, Sebastian, as you've studied it from the outside? Is this. How real or easy or hard will this be given the competition is all trying to do the same thing?
Yeah. Well, somewhat ironic that all the banks want to get into remittances, all the remittance companies-
That's right.
wanna get into banking.
That's right.
I'd say, number one, I'd say these are very big markets. There's not a one winner. This is not a winner takes all market. There'll be a lot of great winners there, and you're seeing a lot of new banking offers. I resist putting the bucket into a banking bucket or a remittance bucket. I think that if you'd really just chase, and people like Chime have probably done this very well, which is just chase the what the customer needs, you end up in the right place. Some of it is services that the banks provide, and some of it is services that are very unique to our customer base. For us, send is our anchor. We've built this global cross-border infrastructure to send money.
When we think of lending, when we lend you $100, our customer base, you can only do one thing with those $100. That's send it to your family.
You can't go buy shoes. You can't go buy candy.
Right.
We lend it to you in the Remitly account. That money goes one place only. That's to send. We'll do the same with all the products. We're anchored on send. That makes us a little bit different than a bank. Then we're gonna build out. We'll see in some places overlap, some places partnerships. I think it's a big world out there and a lot of unsolved problems. I think that, you know, the best will win. I will say, just to wrap up the thought, you gotta be low cost, you gotta send money fast, and you gotta provide a great service. Like, you, if you don't do that, you're not winning in this market 'cause there's a lot of great players that are participating.
How much of a differentiation do you think you can drive with this strategy to further support or amplify your core send business? The question from investors, because you know this is, you know, pricing, is it a race to the bottom on the pricing side? Could this change the competitive dynamics as you think about just core send, if you bring it back to the core business?
I think at the highest level, you know, you're getting a certain revenue per customer right now, and this is basically with the remittance business. I think there are many opportunities to grow that revenue percent. The revenue per customer around all these borrow, you know, save and, and use the money. I think that I think remittances is a great anchor to start. Like, if you gave me a choice, a current account's probably a pretty good one too.
Yeah.
Like, if you gave me a choice, I'd look at all the financial infrastructure of your life, and I'd say, Where would I like a starting point to be able to build on? I think sending money abroad is a pretty good place to start, and that's where we are.
Agreed. You're getting the inflows right up front. I mean.
That's right. Right.
there's the value. Sorry, I didn't wanna-
Yeah. Didn't see a couple of points.
Go ahead. Yeah.
The first one is the incrementality, as you said.
Yeah.
I think we have seen already, we have run this program now for more than 12 months, and we have seen cohorts of users where if they have send now, pay later, they are sending more than what they used to. Clearly that's driving growth, which drops to the bottom line. The second is, you know, as Sebastian said, we are only lending to our existing customers. We have underwriting history.
Yep.
We have seen their behavior, so that's another, I'd say, strength that we have and a differentiator. The final point I'd make is a lot of these are adjacencies that we are going into, which means that from a cost perspective, there's a natural advantage. We are not really doing step function changes. A lot of it is just redeployment, as we spoke earlier. The inherent economies of scale continue to accrue even as we move into send now, pay later or Remitly for Business or other things that we mentioned.
Okay. Good. No, incrementality is important. Look, I think it's a fun thing to talk about. That's why I wanna spend time up front. I'm feeling the heat from not asking some stock questions, so I'll get into that, but thanks for going through that. Let's bring it back to the quarter and sort of the outlook. A popular question people had me ask you here is just thinking about the second quarter and the implied re-acceleration in the second half. What's driving that confidence to show the acceleration in the second half? Maybe just getting back to the business here.
Yeah. I'd say that first of all, as you saw, you know, really strong Q1 sets the foundation for the full year. The second is I think the way, you know, even we shared that, in our earnings, prepared remarks, which is a lot of it was timing changes or one-timers, which were creating a little bit of, you know, Q1 to Q2 change there. If you combine Q1 and Q2 and just look at And then look at H2 or look at Q3, Q4, it looks much more linear. So there's no real big, you know, change happening. This is important to understand because our business has a lot of predictability.
It is linear growth. What we are really excited in the second half is the growth accelerators as they kick in. Our core is strong. Our U.S. growth was 25%, you know. Really strong growth in volume, really strong growth in QAU. Record net new customers, which always is helpful because that sets the base for, you know, years to come. Really feeling confident about, you know, solid setup to the year. Looking at H1 in entirety is the right way to do it, second is growth accelerators kicking in second half. Of course, much more in 2027 and 2028. That's what excites us.
How about.
I think-
Go ahead.
you know, also the if you, if you think about the inputs of the business, we continue to improve our cost structure. We continue to add new partners around the world that can distribute money. When you're sending money to any country, you got four or five options. We continue to grow the number of new corridors that are launching. We continue to grow the number of countries that can send money out, so we've got three or four announcements coming of new countries that can now send money out. We continue to grow the speed of the money. We continue to grow the quality of the app. We continue to launch new features. All the inputs, these are all small little pieces.
Our service is just continuously getting better with the help of AI, the speed at which we answer calls and solve problems. You just put all that in a cocktail and there's a good momentum to the business in addition to some of the factual, things that are driving the growth.
No, thanks for going through that. How about just the incremental margins then? 'Cause I know you did a reduction in force, but there's also a need to spend in market and drive awareness of some of these new products, but also, you know, continue to grow the core, including corridors, as you both mentioned. Is there any change in the incremental margin trajectory?
I'll give you the numerical view, and Sebastian can add more of the call it, you know, organizational view. If you look at our history, we've had, call it margin, expansion every single quarter, you know, over the past many quarters. Even as we look into Q1 and future, we have leverage across each line, right? The incremental margin potential in this business is strong and solid. The other important part, which we touched a little bit, but I can be more explicit, which is, you know, investing in new growth, which is the growth accelerators, is done very thoughtfully and in a way that is redeploying some savings, but also dropping some of that to the bottom line. We feel really good about the incremental margin potential of the business.
You know, again, we explained a lot of one-timers in Q1, which may get a little noisy, but if you parse that out and look at, you know, of just the consistency of incremental margins, that should continue.
Okay.
Yeah. I, you know, being good in this business has a scalable flywheel. Communities, all these communities are quite close-knit. They share their experiences.
I used Remitly to send money. It was really well priced. It was very fast. It was great. On the receiving side, the business has unit economic scalings, but it's also got appeal scaling, like in a way that the larger you get, the more people get to know about you, the more Especially if you're good, those experiences grow. You know, I lived this at Amazon. We did very little marketing, but the just the word of mouth in the schoolyard just got that flywheel spinning and I think that's a very important part of our future too.
Yeah, probably underappreciated. Staying with I do want to ask about CAC, just thinking about one nerdy question around the model and expenses. It does feel like transaction loss has been running on the low side. It's a, it's a lot of ways for me to ask this, but it feels like some potential set a baseline lower than the 9-13 that you've talked about, whether it be with using stablecoins for settlement or just seeing better data. On the other flip side, you are doing higher send, higher amount business as well, which could expose you to more risk. How do those things, you know, meld together?
to think about transaction expense? 'Cause it does feel like.
Yeah
it could go lower.
Yeah. I'll parse that into two, transaction expense and transaction loss.
Please, yeah.
Transaction expense, you know, I think we've been very disciplined and continue to see the leverage. Mix has role to play, and we've talked about it being payout, different choices, and thus far we have seen the shift to digital has been very helpful, especially on the payout side, and that's been driving some of that leverage. I think the more interesting point, which is what you were highlighting, was the transaction loss, where we saw step change reduction. In fact, you know, Q4 we had 7.2 basis points. That was the low that we hit, you know, for a long period of time.
More recently, 9.3 basis points. What is underpinning this, you know, success is a shift in the models. We were able to incorporate a lot of learnings and use AI, ML to make it more powerful model. What was most impressive here is that we were not degrading the user experience at all. The decline rates were also at its best. At the same time, the transaction loss was the best. You know, best of both worlds, that's what we want to see. Keep in mind that last year in Q2, our transaction loss was 15. 3 basis points, right? It hit another end of the spectrum, and this is, you know, what we are dealing with here, which is, you know, sometimes it's two step forward, one step back. I'd say give us a few more quarters.
Right now, the range I'm using, we are using is 9-13 basis points. That's what we have communicated historically, which is taking 11 basis points as an average. If we continue to see this, you know, performance over the next couple of quarters, think it will be a good opportunity for us to re-baseline it.
Then the stablecoin low cost rail settlement opportunity, how real is that?
This is interesting. It's evolving fast. We've analyzed all 5,000 of our corridors, in the pay in, pay out, the exact unit cost, you know, FX, et cetera. We know in detail the cost of every corridor, and we've compared it to what would stablecoin costs be. As of today, Monday, 90% of our corridors using fiat, using the old-fashioned system, are lower cost than stablecoins. There's about 10% that are more efficient using stablecoins, and we're all-in using stablecoins in those corridors. As of right now, it's a small piece of our overall infrastructure. We're very efficient already in our cost structure. Remember, it's not only just the rails. You've got to do all the KYC, the AML.
Like, in this business, you need to know who's sending the money and do you allow that transaction through, as you know. If you put all the pieces together, some really nice places to use stablecoins, but the majority still, our old-fashioned infrastructure, works very well.
Yep. The 9-10 is a great stat to have. We're almost out of time. Just thinking about the quarterly actives, Sebastian, and you mentioned Amazon and what you've learned. I think you're growing close to 20%, I believe.
Yep.
on the consumer side. Is the CAC model changing? Do you see some opportunity to maybe dial that up or down? A follow-up on the customer side.
Yeah, I think, Well, let me put it this way. It's not gonna go up. I think that AI, I think every marketing organization in the world or every, is starting to rethink how you do marketing.
We've got a lot of unknowns around the corner, which is what role are the LLMs gonna play. We've launched, you know, WhatsApp, which is growing very fast as a way to acquire customers and for customers to use it. We're on ChatGPT to query the prices. There's a lot of change ahead. I think, we're, you know, and we can obviously continue to get efficient when you start to get unstructured data with these LLMs combined with structured data and all these machine learning models in marketing. I think you've got a lot of opportunity. I can't, you know. We have our CAC. It's part of our business.
I think that over the next few years, we're gonna get a lot of leverage on some of the new ideas, the data, and how marketing evolves in our, in our space.
Okay. Good. I'm interested in the health of the user base that you have, especially you coming in and observing it. I know resiliency has been something Matt has preached to us for quite some time. With higher energy prices, I know tax refunds.
Yep
happened. There's a lot of geopolitical, you know, concern out there. Employment seems.
Yeah
in this category. What signals are you watching on the consumer? Is that a high-risk area for you?
Yeah. It, you know, it's a very price sensitive consumer.
Yes.
You gotta win with cost. If not, you're not gonna win. The, we see, you know, we have a like all consumer bases, we've got a very loyal base. We've got, we've also got consumers that shop around a lot. In general, we're very happy with how the models are playing out. We see people just grow all the cohort analysis that we do. This is a service that people come back to.
You know, the team, Matt and the team, and all the team that's been here, you know, built something that's very structurally very solid. Customers love Remitly. They come back. I think that bodes well for the future of the products that we're gonna start to introduce to them.
Yeah. Send Now, Pay Later is one. I know you've got the wallet, the card, so you're gonna learn a lot.
Line of credit
Line of credit as well. What guardrails do you have in place, right, to ensure that you're extending credit, and can pivot if things change?
If things change.
Yeah. I'd say that, you know, we learned a lot over the last 12 months. We ran the Flex program, and we did a few experiments there with different membership rates. You know, call it $7, $10. We had, you know, models where we would look at different cohort types, and through that experience, we learned a lot, and we felt really confident that this business is really good unit economics, and the business model works. This is where, you know, as Sebastian joined, we made the decision to get to the next stage of it, which is work with a banking partner and create an arrangement where, you know, all the credit access is given through that bank.
We own the risk because we, again, know the benefits of learning from the underwriting data, and hence we can get low cost, you know, of capital from the bank. It's really a good model in that sense. You know, bringing that and pushing that forward with a card product, which is really important glue to that whole initiative, is how we want to take it further. Overall, we feel really good about the unit economics. We have the data which helps us keep those guardrails in terms of loss provisions. Third is it's invite only, so we are the ones who decide whom and how much credit we want to give. Overall, you know, really good checks and balances. Very strong leadership behind it, people who have done it for, you know, decades.
That, you know, gives us a lot of confidence to keep it going.
I did get a couple investors ask me to ask you all, Is that banking product specific to consumers or is it also applicable to small business as well?
Small business.
Thinking about 'Cause that's a big theme in payments right now.
is to bank those small businesses.
Very, very good question. I see us not yet, but it's on our list. I think that there's a very big industry and a very big business out there to do small business lending well done. We not on all our planning and all the ideas right there, it's on the list, but not immediate.
Since then you could take another end to it, which is the receiver credit. We know our receivers also well. They receive money from our senders on a regular basis. As Sebastian said, hundreds of ideas and lot to work through.
Okay. No, I know it's growing very quickly.
Yeah
Natural to think that that may be something down the road. Okay, almost out of time. Just thinking about M&A, I think, Sebastian, on the call you said you're building the muscle, but not ready to do anything that's too obvious. To get to where you wanna be again, especially with some of these newer products, I know the velocity is moving up internally, but would it be easier to buy in and get some scale in some of these tangential spaces? Is that a priority?
Yes. We're, we're building the machinery to, you know, at the right time, go on offense. We've got these 16 boxes. I think every box has a different answer. One could be a partnership, one could be an acquisition. In some cases, you may wanna acquire customers. In some cases, you may wanna acquire market share. In some cases, you may wanna acquire technology. We're, we're doing a lot of work. We're building the team. We're gonna get very good at this. We're generating the free cash flow that we need. And we're obviously building up the equity value. I think the time will come. It's not now. We're very focused.
I think you know, we have to put a few more pillars in place, but I see us going on the offense in the future.
Okay. Good. We're, you know, less than two minutes left, I thought we'd close it out. Maybe just ask you, Sebastian, just the easy question of, you know, we talked about a lot of different things. You sounds like you have a lot of energy in going after it. What are you most excited about, right? If we're spinning it forward a year from today and you're back to talk about something new that we haven't discussed, is it something there or is it back to the matrix? What would you tell us that you're most excited about?
I think that, you know, the company does have a bit of a missionary feel to it.
This is, this is a customer-
Very mission led, no question.
Yeah. Like, this customer has a, you know, a rock and roll in their life with everything that goes on around them that they don't control. You mentioned gas prices. We have a really nice list of things to help that customer. I think it's kind of, you know, I've run into a few. I was talking to some people at home the other day who are using Remitly, and it's just as you knock out, they say, Okay, this is amazing. I sent money to XYZ and it arrived there in 15 seconds, and now I can do this, and now I can do that. I think that it's fun to join a company. I mean, we always have to, you know, work is work. You work very hard. We have to generate money.
We've gotta keep everybody, shareholders, employees, and customers happy.
I, you know, I think I'm very looking forward at the next 12 months to all this sequence of products that I think we're gonna get a very, very good reception in our customer base. Of course, grow the company, which is, the ultimate objective.
Yeah, no. Seems like product velocity is a big theme in payments in fintech.
Yes, definitely.
there's gonna be a lot to track with Remitly.
To track.
No, thanks for giving us the update. Appreciate you being here.
Awesome.
Thank you. Thank you.
Thank you very much.
Thank you both.
That's great, thanks.