Hello, and thank you for standing by, and welcome to Remitly's Second Quarter 2022 Earnings Call. [Operator instructions] Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker today, Stephen Shulstein, Vice President of Investor Relations. Please go ahead.

Thank you. Good afternoon, and thank you for joining us for Remitly's second quarter 2022 earnings call. Joining me on the call today are Matt Oppenheimer, Co-Founder and Chief Executive Officer of Remitly; and Hemanth Munipalli, our Chief Financial Officer. Our results and additional management commentary are available in our earnings release and the presentation slides, which can be found at ir.remitly.com. Please note that this call will be simultaneously webcast on the Investor Relations website. Before we start, I would like to remind you that we will be making forward-looking statements within the meaning of federal securities laws, including, but not limited to, statements regarding Remitly's future financial results and management's expectations and plans. These statements are neither promises nor guarantees and involve risks and uncertainties that may cause actual results to vary materially from those presented here. You should not place undue reliance on any forward-looking statements. Please refer to our earnings release and SEC filings for more information regarding the risk factors that may affect our results. Any forward-looking statements made in this conference call, including responses to your questions, are based on current expectations as of today, and Remitly assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law. The following presentation contains non-GAAP financial measures. For a reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP metric, please see our earnings press release, which is available on the IR section of our website. Now I will turn the call over to Matt to begin.

Thank you, Stephen, and thank you all for joining us to discuss our strong second quarter, which is our fourth quarter as a public company and the fourth quarter in a row in which we delivered strong results that beat expectations. To start, I'd like to turn to our vision, as seen on Slide 4, to transform the lives of immigrants and their families by providing the most trusted financial services on the planet. We are proud of the continued progress we are making toward achieving this vision and our ability to support immigrants that do so much for their families and communities back home. To execute on this vision, let me introduce Hemanth Munipalli, our new CFO, who joined us last month. We are excited to welcome Hemanth to the team. His experience with scaling technology companies and global organizations, including Expedia and General Motors, will be invaluable to Remitly as we execute against our vision. Hemanth has 20-plus years experience as a dynamic finance leader. The strategic insight he brings will help drive our growth and deliver long-term value to shareholders. I'll begin with a brief overview of our second quarter results, and then I'll discuss how our customers continue to prioritize sending money back home to their families in a volatile macroeconomic environment. I'll then review the progress we are making on our growth investments and the progress we are making in driving even more efficiencies across our growth investment priorities to reflect the current market environment and the increasing cost of capital. Now let's turn to our results for the second quarter. We delivered exceptional results in the quarter, as you can see on Slide 5. Our active customer base increased by 43% year-over-year to more than $3.4 million. Revenue increased 42% year-over-year to $157 million.…

Thank you, Matt. I'd like to start by discussing why I joined Remitly. The core business is strong as evidenced by continued strong quarterly growth and with immense opportunities to deepen our relationship with our customers with complementary financial products and services and scale efficiently. By executing well, we expect to deliver sustainable, long-term profitable growth for our shareholders. I believe Remitly is just getting started, and I'm excited about its future. I also look forward to driving continuous improvement across the finance function at Remitly, and I'm excited to meet with the analyst and investor community over the coming months. Now let's start with the details of our second quarter results. To reiterate Matt's comments, our momentum continued this year, and we delivered very strong second quarter results across all metrics. This strong performance and our expectations for continued growth, even while setting more aggressive investment return thresholds enables us to raise the midpoint of our revenue and adjusted EBITDA outlook for full year 2022. I will begin by reviewing the drivers of our second quarter financial performance, and then we'll provide more detail on our outlook for 2022. As a reminder, I will discuss non-GAAP operating expenses and adjusted EBITDA in my remarks. These metrics exclude noncash items, such as stock-based compensation in all periods. Reconciliations to GAAP results are included in the earnings release. Beginning on Slide 16, active customers grew by 43% year-over-year to more than $3.4 million. Send volume grew 40% year-over-year to approximately $7 billion all resulting in revenue growth of 42% year-over-year totaled $157 million, which was above our expectations. As you can see on Slide 17, a number of factors drove the 43% active customer growth, including acquiring a record number of new customers in the quarter and a high retention of…

[Operator instructions] Our first question comes from Ramsey El-Assal with Barclays. You may proceed with your question.

Hey, guys. This is Allison on for Ramsey. Hope all is well, and welcome, Hemanth. Just on the competitive environment, how do you -- are you guys thinking about market share? So when you win a customer, where are they coming from? Or really, in other words, what is most common here that they were previously using brick-and-mortar? Were they using a different digital platform? Or are they just completely new to remittances? Some color there would be really helpful. Thanks.

Great. Yes, happy to, Allison, and thanks for the question. I think that the -- if you look at the market share that we are gaining, as I mentioned in the opening remarks, guiding the 36%, 37% compared to an industry growth rate of 4%, we are growing much faster in the market. In terms of where that is coming from, I think it's a mix of a lot of legacy and offline players, given that the majority of remittances based on our data are still sent via legacy players, as well as digital players where we have a superior solution. And the reason I think that we are gaining that much market share strategically or structurally is because the combination of being a digital-first player with scale enables us to invest more in our distribution network, invest more in our risk systems, invest more in the customer experience. All of that ultimately brings less friction to customers and more peace of mind which not only attracts record new customers, as we mentioned, but also maintains that long-term relationship, which we are continuing to see.

Great. That's really helpful. Thanks.

Thank you. One moment for questions. Our next question comes from Andrew Schmidt with Citi. You may proceed.

Hey, Matt, Stephen, and welcome, Hemanth. Good to have you on. First question on customer acquisition costs. I'm wondering if you just elaborate about delevering on the sustainability and good to see the step down. But maybe talk about the sustainability of lower levels of CAC. And then over intermediate to longer term, perhaps you could just elaborate a little bit more on the strategy to create more organic customer adds versus paid. Any insight on those two would be helpful. Thanks a lot.

Yes. Thanks, Andrew. I think that what -- if you look at the reasons why we're seeing the 11% increase in -- or improvement in cash sequentially, it's due to a variety of factors. I think our team has never been stronger. When you look at our CMO that we promoted internally, Rina Hahn, if you look at the creative and brand execution cash sequentially, it's due to a variety of factors. I think our team has never been stronger. When you look at our CMO that we promoted internally, Rina Hahn. If you look at the creative and brand execution and velocity. If you look at the external advertising environment, that's been favorable, I think, for us. And I think that ultimately, we have the ability -- when we think about CAC, we ultimately look at it from a return on investment standpoint. And we have a very good handle around payback guardrails and how we deploy marketing dollars to make sure that we are doing it efficiently. And so I see the ability to continue to certainly have a lot of sustainability around our marketing investments. And because of those variables that I mentioned, we are really excited about not only customer acquisition costs that we are paying but the unit economics, meaning the lifetime value side of the equation, the payback period that we are seeing across the globe. So excited about Q2 and excited about the place that we are in overall.

Very clear. Very helpful. And then, Hemanth, if you don't mind if I put you on the spot. Obviously, a big question we get from investors is path and timeline to profitability and don't expect any big announcements here. You’ve only -- you haven't been on for too long. But maybe you could just tell us just a framework for how you think about just investments and returns in the business and how you sort of think about balancing profitability versus growth? Any color there would be helpful. Thanks.

Yes. Thanks for the welcome and I think thanks for the question, certainly on top of mind, I know for investors. I would say that, one, we certainly are long-term focused in terms of value creation. And there's a couple of things that we've started doing, I think we talked about a little bit here in terms of we're increasing our thresholds on our ROI, which was also reflective in the CAC improved performance in Q2 as well. So there's certain things here as we get a little bit more discipline on how we think about investments that will give us -- put us in a better place as we look forward in terms of our path to profitability. From my perspective, obviously, very early days and getting to understand and learn the business and mode of share. We did talk about we are coming up a year in terms of our being a public company pretty soon, and there's opportunity for us as we get into our strategic and financial planning processes to look at certain areas in the business that we can probably get more efficient or start looking to scale. But again, there's early days yet, top of mind for us, and we will have more to come on that topic.

Very helpful. Thank you very much. Good quarter, guys.

Thank you. One moment for questions. Our next question comes from David Scharf with JMP Securities. You may proceed.

Great. Good afternoon, everyone. Thanks for taking my question. Hey, Matt, I apologize if this is redundant, I wanted to just dig into CAC trends a little bit more. And specifically, I'm looking at my notes from last quarter, and I know there was a specific comment that you guys were experiencing more competition in most of the digital acquisition channels. it was putting a little bit of pressure there. And can you expand on whether or not some of the favorable CAC trends this quarter are purely sort of organic? Or is it also a result are you seeing some digital competitors actually step back in terms of their demand?

Yes. Thanks, David, and happy to go into more depth on the CAC side, especially as it pertains to Q1. I think that the comments and what we experienced in Q1, I think, was more specific to Q1. I think that if you look at Q2 and the general trend that we are seeing, we are able to both, as we mentioned, bring down customer acquisition costs while adding a record number of new customers. If you look, as I mentioned in the opening remarks, we added as many new customers and -- nearly as many new customers in Q2 of '22 than we did the entire year of 2019. And I think the reason for that is a lot of variables that are within our control in terms of, as I mentioned, creative brand execution, rigorous focus on payback at both the channel -- marketing channel and geographic perspective. I think that there's some advertising environment in terms of the digital channels being less competitive. But I think that we know how to leverage that and how to test elasticity in a way that is very effective. And so that may be why we stand out compared to others in the market. Hard to stay there, obviously. But I think we're really proud of our results. We have a good handle, again, around the return on the investments that we're making and marketing is just one of those examples. And the good thing as well about new customer adds is that it also is kind of the leading indicator of revenue growth because you add these cohorts of new customers. But then, as I mentioned, it may cost us more in that first year, given that we have approximately a 1-year payback period. But when you look at the revenue growth that is in the quarters to come, it's a good bellwether for that. So really pleased with the customer acquisition, both numbers and cost and overall unit economics in Q2.

Got it. That's very helpful. I appreciate the detail. And maybe just as a follow-up, sort of interested in getting a feel for sort of corridor mix and how that might impact -- it impacted growth lately as well as maybe over the next few quarters, specifically, LatAm has been very strong performer for a lot of tradition -- even for all the traditional walk-in players. I know Mexico is kind of #3 of your big three. But is there any change -- general change in the mix of where remittances are going among Philippines, India and Mexico? And also, just as importantly, as you look at the nature of the customers that you've most recently added, is there anything about their likely geographic sense that then might alter the mix and impact growth?

Yes. Thanks, David. I think that the punch line would be that there's increasing geographic mix in terms of our customer base, both from a send perspective, meaning North America, Europe and Asia, as well as receive perspective, meaning primarily Asia, Africa and Latin America. And we added 900 new corridors just last quarter, which is a lot of corridors in the context that we now send at well over 3,000 -- between -- well over 3,000 corridors. o I think you're seeing that increased mix which is exciting from -- for a whole host of reasons, but most importantly, kind of sustainable long-term growth because the 900 corridors we launched last quarter, they are not going to materially contribute to revenue this quarter, next quarter. They're going to contribute to revenue in the years to come. And that's just like a year or two ago when we said the corridors that we launched at that point will not contribute to revenue until the quarters and years to come. And we're now benefiting from those really intentional launches. And that's, I think, a unique part of Remitly's strategy that's often, I think, underappreciated, is this really methodological process of rolling out new corridors and planting the seeds for future revenue growth. And that's how we've gotten the kind of multiyear high double-digit compounding growth rate is that second investment area, which is geographic expansion. So Hopefully, that provides some context, David. And what I'd say is the punch line is increasing geographic expansion and planting the seeds for multiyear double-digit revenue growth.

Got it. Understood. Thanks so much, Matt.

Thank you. Our next question comes from Bob Napoli with William Blair. You may proceed.

Hey, this is Noah Katz on for Bob Napoli. Congrats on a great quarter. Thank you, guys, for telling us a little bit more about the Passbook initiative. But is there anything you can tell us about the Remitly for developer initiative? Previously, I think you gave us some sizing on it as a percent of revenue, but any color on that would be great, where it stands today.

Yes. Great to see you, Noah. And we are -- we continue to be excited about Remitly for developers. As you know, we’ve announced a couple of partnerships there in the crypto space. But if you look at the pipeline of companies that have a need to be able to disperse funds in emerging markets, it's a much broader pipeline than that. And so excited about the types of companies that are interested, the size and scale of a lot of those companies. And excited about our unique value proposition, which includes both our disbursement network and a wide range of disbursement options, as well as a lot of the fraud, risk management, FX pricing. Once businesses have actually looked at the complexity of remits is again a theme folks often under appreciate the complexity, including other businesses. Once they get a sense of the complexity of international payments we're seeing good uptick there. So no specific new partnerships to announce but continuing to invest in a disciplined way in that area and seeing a lot of interest from a wide range of types of companies.

Great. Thanks for answering my question. If I could fit one more in. I know you guys expanded into five new send markets last year throughout Europe. It might be too early, but do you guys have any initial observations from these newly entered markets and how they're comparing to your more stable markets that you guys are in?

Yes, I think that if you look at the new markets, we are continuing to roll out the same kind of corridor expansion Playbook. And so the punch line is they might mirror other markets that we've launched when you look at some of the early active rates and other metrics that we look at to kind of estimate the lifetime value of customers and the behaviors. But given that we're in so many markets now, we can look at those leading indicators and get a pretty good sense of the lifetime value of customers and then the amount we're willing to pay from a customer acquisition cost. And so it ties a bit to David's question earlier in terms of just planting those seeds for future growth, more similarities than differences. And we are also just getting faster at rolling out new markets because the payment acceptance, the compliance experience and identity verification, all of those things, you start to get pattern matching, and there's only so many ways to do identity verification or collect payments. So there's still some optimization that needs to be done, but it gets faster with each incremental market. And so that would probably be the only notable thing in those five new send markets is that we're getting faster given the scale that we have and the pattern matching that we can do among different markets.

Thank you. Congrats again.

Thanks, Noah.

Thank you. [Operator instructions] Our next question comes from Mark Markgraff with KeyBanc. You may proceed.

Hey, guys. This is Alex Markgraff. Matt, nice to speak with you. Hemanth, nice to meet you. Just a couple of quick ones from me. First, thinking about the kind of implied second half based on guidance. Can you talk about what's assumed around some of the leverage and transaction expense? What should we kind of anticipate the benefit to be realized versus what was seen in the second quarter?

Yes, thanks for the question, and thanks for the welcome as well. I'd say when we look at transaction expenses we called out, there is some level of variability around the margin piece. We are making continued improvements on the fraud side of things, using technology, et cetera. So current expectation is for the margins to be relatively at the same level for the balance of the year. And -- but continued progress around how we can make improvements, but the expectation that we built in is mostly stable.

Great. I appreciate the extra detail there. And then, Matt, maybe one for you. Just around your comments about narrowing the focus on complementary products. I apologize if I missed some detail on that, but would you mind just kind of expanding in terms of how your thinking has perhaps change versus this time last year when we were speaking about Passbook?

Yes. Yes, absolutely. And I'm happy you picked up on the word complementary, which was used very intentionally. And I think that when you think about the broader products that we can offer our customers, the ones where we believe we can add the most value and they will increase and deepen the relationship, which should show up in the form of engagement and increase active customer rates, is via complementary products to remittances. And so there's a store value aspect with Passbook in that, obviously, but you, I think, should expect us to think about that more broadly in terms of other problems that are adjacent to remittances to deepen the relationship with the now 3.4 million customers and rapidly growing remittance customers to establish that long-term relationship with them and looking forward to being able to share more in the future as we launch products in that space.

Understood. Thank you.

Thank you. One moment for questions. Our next question comes from Ramsey El-Assal with Barclays. You may proceed. If your line is on mute, please unmute. I'd now like to turn the call back to Matt Oppenheimer for closing remarks.

Great. Thanks so much, operator. So -- and thank you all for the thoughtful questions and for joining today. As we always do at Remitly, I'd like to end the call by highlighting another one of our amazing customers. This customer's name is Bibi. Bibi joined Remitly in May of 2022, one of the many new customers that we just added and sends money from the U.K. to family in Pakistan. A family member recommended -- and this is what Bibi said, a family member recommended Remitly to me. They shared that it was a reliable way to send money back home from the comfort of your home. I like many things about my experience using Remitly. The charges were clear to understand. I received updates every step of the way, and I really appreciated the message directly to me when the money was collected by the recipients. I recommend Remitly to all of my friends and family. So we thank Bibi and her family for using Remitly and recommending Remitly to others. And we are very excited about 2022 and beyond and look forward to sharing our progress as we continue to execute on our very important vision.

Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.