Wise plc

Martin Adams, I'm the head of owner relations here at. Following the release of our half year results this morning, we're now gonna give you a short presentation. We'll take you through the strategic progress and the financial outcomes from the first half of the year. The presentation's gonna be given to you by Christo, our co-founder and CEO, and Matt, our CFO. If you have any questions as we go through, please do just hold on to them for the Q&A session at the end. And because we've got a hybrid format this morning with people in the room and some people on Zoom, then I'll just explain just before we head into the Q&A how that will work. And with that, over to you, Christy. Thanks.

Thanks, Martin. Thanks, everyone, for joining us for the first time. We're going to be doing this every six months. So those who missed today, you'll have the chance next time. Thanks, everyone, for joining us on Zoom. We can't see you at the moment, but we know you're going to be there with us. And we're looking forward to you joining us for the Q&A. Just to kick off, I'm going to talk us through the progress that we made over the last six months, much how our customers would view the progress that we've made, and then Matt's going to talk us through the numbers, the financials, and the impact to the company, and then we have the QA. It's going to be plenty of time, don't worry. As we go into this, As a reminder of why I started this company with my co-founder 10 years ago, is to make money work without borders. And very specifically, in spite of country borders and national currencies, the world is getting more online, more connected, more digital, especially now. And we expect the money to work instantly, conveniently, transparently, and for less and less friction, cheaper and cheaper cost across the borders as it works locally for us. Well, that's not the case today. Most of the money is moving through retail banks. It's expensive, it's slow, it's quite inconvenient to the level of unpleasantness. And I actually don't know what you're being charged. And when we look in the numbers of this, it's 18 trillion moving cross currency per year. Maybe even the more interesting part is the fee. So who's picking up the tab for this? It's more the businesses, small businesses and individuals. There's some logic to this because most of these fees are not transparent. Most of this is just exchange rate markups that perhaps are not as easily understood by small businesses as they are to the enterprise CFOs. But the problem to solve for the world is pretty enormous. It's 190 billion pounds in annual fees erected by mostly retail banks. And back then, we started TransferWise to address each of these fundamental problems of making something that is cheap, fast, convenient, pleasant, and transparent to use across borders. And when we started working on this, we realized that we have to actually change the entire plumbing beneath. So we had to give up on the traditional corresponding banking model and completely build up our network. That's the reason why I'm going to start from that perspective. So here's a world map. With the countries in dark blue, these are the countries where Transwise or now Wise is more embedded. We serve people sending money to this country and also from this country. So you can go from the US to Sweden or US to Australia and from Australia to the US. The countries in light blue are the ones where we send money to, but we don't send money from these countries. So these are one-way routes for us. Now, if we just take some examples of how we developed our own underlying network over the last six months, we'll see things like we launched in India. So we started serving transfers and moving money from India. We also added destinations like Fiji, On the side of operational efficiency, we improved the way how we monitor fraud and bad behavior in the US, how we negotiate banking contracts in the Nordics and we optimized things that we do in Japan around safeguarding. So you're gonna be hearing Matt talking through the operational efficiencies. These are just some examples that have given rise to that. On the other hand, some improvements on the network gave us a lot more speed. So that example is more Asia focused where we're just able to move much more money movement into instant. And some of these improvements have been global. So things that we've done on treasury have actually affected all of the routes at the same time. So these are pretty sweet as well. Now when we look at what's come out of this and starting to go into the fundamentals, and the first thing is we've lowered our fees for almost 2.5 million customers. And it kind of comes out in numbers as well, where it used to be around 69 basis points. And we brought it down to 62 basis points. This might be something slightly unusual for a company, kind of an unusual achievement for a company to celebrate. But let me kind of take you through why we do. the lower transparent fees is the number one reason. It's the number one reason why people and businesses switch their international banking from their bank or from PayPal or from somewhere else to WISE. It's the number one reason. Second, it's the number one discussion topic when our customers recommend WISE to their colleagues, to their peers, to their family and friends. It's the number one thing that they talk about when they talk about WISE. And perhaps kind of less obvious, it's also a big reason, the wise fees and the transparency around these fees is one of the big reasons why our integrated bank partners choose to integrate wise into their own offering. For the neobanks, it's to... For the neobanks and the challengers, it's basically to win the primary bank accounts from their traditional competitors. And from the traditional banks, it's more to fend against the challengers. So overall, we're setting the expectation by lowering these fees. We're doing this sustainably. Matt's going to give a little bit more color on the financials, how that's looking like. But this is a very, very central thing It makes wise what it is today. And then moving on to other fundamentals. So the speed of transfers, thanks to many of our network improvements, is going up. Now 40% in the most recent quarter, 40% of transfers arrived in less than 20 seconds on the recipient's bank account on the other side of the world. So money leaving someone's account in one country, and boom, 20 seconds later, it's already there with the recipient. So that, of course, blows their mind if you're used to the two to five business days with your bank. But actually, it's also slightly cheaper first to operate thanks to the time-based cost that they're involved in, liquidity, FX exposures, and such. And also, I should say, customer support, because when the money is already there, you can't really ask, where's my money? Moving on from the fundamentals, it's really, we've now been talking through moving money, and moving money is really kind of central to everything that we do. The response to the problem of how we move monies is our Wise Transfer product. But it's not just the transfers that customers use us for. Increasingly, both individuals as the Wise account or businesses as the Wise business offering, use us for something more, something that does their entire international banking. And then this infrastructure that we built to operate these transfers, to move money, to hold and receive money for our customers, we then open as the platform to our bank partners, to other products that build it into their own offering. We'll go through some more of those. First of all, you might remember actually, perhaps because some of you might have had access to that, This concept of international banking, I never had it because I was not in the group. It was there for the very privileged. It was available from the largest banking brands in the world. You could get multiple currencies, multiple bank accounts around the world. in your pocket. It's there with a couple of taps. We completely democratized this concept of international banking. We brought it to everyone. We lowered the barriers for this. And guess what? This resonates with people. In the six months, the balances we hold for our customers, or rather that they hold in their Wise account, has gone from 3.7 billion pounds to close to 5 billion pounds now. at a rate that's pretty incredible. And this is partly thanks to the way we're able to move money around the world, but it's also these features that we've added to the Wise account to make it a more complete international banking offering, and a modern one. Now, while people really like it, there's more features that we're adding, such as assets. Assets is a feature we added only a month ago, and it's starting to roll out in the UK where we enable people and businesses holding their balance, not just as cash, but actually hold the balance invested in the world stock markets. So they can choose to have their current account that still works for them, its current account. When they put the debit card in the wall, money's gonna come out. But they get the capital gains from being invested in 3,000 of the world's largest companies. This just started rolling out in the UK. Other components of the Wise account are already there in many countries and rolling out around the world. Only today, we... announced the WISEcard launched in Canada to complete the WISE account offering for Canadians. And then moving to WISE business, while individuals really care about the WISE account, they love it, about 50% of our businesses use WISE for more than just transfers. So they receive money with WISE, they hold money with WISE, they use the WISE account for their international banking. And of course, for that, they benefit from a few extra features. How do they sync with their accounting tools? How do they manage their team on the Wyze account? A slightly more complete service for the growing complexity of them. of the businesses that we're able to serve and it does show 61% of growth, of volume increase for business volumes or volumes from business customers in our numbers that Matt's gonna share in a bit later. And eventually, I kind of started talking a little bit when we talked about price, why Wise Platform, how that fits in. This is the place where we open our, the same network that we're building for our own tools, we open it up to our partners because we believe that to get the benefit of that new paradigm of moving money around the world and international banking, you shouldn't need to download the Wise app. You should be able to use it from where your money already is mostly slightly in your bank. Banks get very excited about this, so the neobanks like Monza and N26 use this as a way to lure customers away from their traditional competitors because they have so much better international banking experience built in than their traditional competitors can do based on their corresponding banking. But then of course, the traditional players are interested in this for the same reason. and it opens up new avenues. We can imagine accounting tools and expense management tools taking care of your international payments in the future, more built into your business processes. And this last six months, as you see again in the world map, we've kind of rolled these out from east to west, west to east, but also from more traditional players like Shinhan Bank, one of the largest banks in South Korea, to the more newer challengers like Fortu and Onyuno, but also tech companies like Alphabet integrating Wwise into their Google Pay offering for international transfers in the US. Following from this kind of thinking of using the WISE network as a platform or other companies, other parties using it as a platform, we recognize that we are redefining the expectations of what people and businesses expect and how they can use money internationally. It comes from those instant cross-border transfers that blow people's minds. It comes from demonstrating that we can sustainably reduce fees. Guess what? That becomes an expectation. As we demonstrate this can be done, this is going to be expected from us as well as every other bank on the street. And we brought this international banking experience now widely to pretty much everyone in their pocket. And with that, we see that the industry or the other players in the market are taking notes. So banks are trying to figure out how to respond to this. They haven't given much love to their international banking services for decades now. but there will be because they see this happening. Incumbent payment providers are seeing that working with the cash and the manual processes is going to be expensive and people are not willing to pick up the cost, so they're moving more towards digital incentives. There's digital challenges in different, and different areas kind of starting to scale across border. And then there's a lot of excitement around decentralized clearing on blockchain or other means that are looking for use cases for cross-jurisdiction movement of value. This is all in the making. And With the WISE platform, we see ourselves helping many of them, like banks. We've talked through a few examples of what we do. Other, especially digital propositions, we can help get to this new radically better paradigm and other mechanisms like we're integrating instant payment systems all the time and if there's more ways how we can move money then you should expect us to make some of these new features available in our own network to our customers. What we should expect from the next one, so we've had the first results meeting. And in the next ones, we're going to be talking about price, speed, talking about transparency, because that's what really quite largely defines the expectations to international payments. And as we go on, we're going to be setting these expectations to this industry and our customers are going to be voicing this to their banks and others. Because what we see today is we talked a lot about payments are getting faster, cheaper, pleasant, and transparent. We do measure this. We see that our net promoter score stays at 75. We see that this word of mouth recommendation rate brings 68% of our new customers. So remember when I said, talked about why did we lower our fee base? Because that's what people talk about. And that's that 68% that plays back here. And that goodwill advocacy is leading to more customers. So we see 22% increase in individuals, 44% increase in business customers being active. And that, again, leads to scale. £34 billion of volume moved through our network cross-currency, so that's cross-currency volume that moved across our network in the last six months, which is a 44% growth on a year-to-year basis, which gives us a nice boost to scale, being able to do more with the same assets and infrastructure that we built up. Matt now, I'm going to hand over to him, is going to take us through what does this £34 billion number really mean and give us in terms of the company financials? Thank you.

Thanks, Christo. Morning, everybody. Nice to see some new faces and familiar faces. So I'll talk through the financial results, something close to my heart. Talk through five numbers in summary, and then we can kind of go into a bit more depth. Remember, we've done our quarterly updates, so some of these won't be new to you, but I think looking at them in aggregate kind of sets some good context. We have £34 billion, as Christo said, growing 44% year-on-year. That's the absolute growth there and significant volume to kind of continue growing through our platform. Actually, our customers paid us £256 million in fees, or revenue, as businesses like to call this, which is growing 33%. And remember, on these calls, we explained the reason that's growing slower is we managed to drop prices because we could over this period, which means actually to move that volume, it cost our customers less. And that's partly because it cost us less. We'll go into this. So the new numbers we'll talk today around what does that mean for gross profit, adjust the debit dial, and then fundamentally as well, cash flows for our business. We generated 174 million pounds of gross profit. That's growing 46% year on year, despite these price drops. So if you think about that, we've kind of become fundamentally stronger over this period in that it costs us less to offer this service to our customers. We pass that back to our customers, but we still have this very healthy gross profit for our business. And as we explained in our listing, we invest this in a few areas. In addition to prices, we invest this in our teams and our product. People in this building and the many offices we've got around the world. And we've grown our team. We've hired, we've grown the team by over 30% over this period. And we're building the products. You know, the products you're seeing launched now is a function of what we've launched over the last, we've invested over the last years. And actually what we're investing in now will continue to build products over the coming decade. Despite that, we have a healthy EBITDA. We talked around maintaining and sustaining an EBITDA margin. We're not in the business of growing that yet. We want to invest rather in the long term. We hope to share that alignment with our investor base. But we still generated $61 million. That's a 24% EBITDA margin for the period. But actually, if you look at the cash flow, we generated 59, almost 60 million pounds of free cash flow, and that's growing nearly 40% year over year. If you look at the fundamentals of this business, growing volumes very healthily, managing to offer that product at a cheaper price while still having a very healthy gross profit. We've ramped our investment with our engineering teams, our banking teams, to launch our products around the world, but still have some healthy fundamentals. Right, so let's get into that. So what's driven that volume growth? You've seen these numbers before. Remember, this is around growth in our customer base, personal and business customers. Look over this long period of time, the sustained growth that we're seeing over these periods. And this is partly because, remember, two in three of these customers, whether people or businesses, are coming through recommendations off the back of the investments we've made in our products. Which money are they moving? This is very stable over the long term. It's been a little noisy over the last year, maybe understandably with the pandemic, but actually the volume per customer is kind of back to pre-COVID levels. It's been growing slightly year on year as well, which has boosted our volume growth. So our volume is growing 44% year on year and businesses, as Christo said, the volume that small businesses are moving through us is growing over 60% year over year. Actually in itself is a big business now, around 25% of our volumes. So let's talk about how that translated. And normally people talk about revenue first, but actually it starts with this. This is our marginal cost, our cost of sales divided by the cross-border volume that people move through us. We think about this as our marginal unit cost. As you reduced things Christo spoke about, working hard, our engineering teams, our treasury teams, to optimize away and engineer away some of the costs or the friction that sits between us and our customers. It's gone from 31 basis points to 24 basis points. Four of that came out of reduced bank and partner fees, and three of that came out of lower FX costs. We've passed that back to our customers. So you ask, why did we drop our prices? Because we could, and in the long term, this is our strategy, and this is how we managed to do it. And this is the price drops that you've seen. But actually, when you look at the take rates, you can see it actually didn't drop as much, partly because those price drops didn't happen at the start of that given quarter. They'll flow through, and we'll talk about that a bit. But actually, this drop in the cross-currency taste rate is a little bit offset by some improvements in other fees. So come back to the Wise account. The products that customers are really using today at scale are spending on their card, doing domestic payments, maybe other account fees. In the future, maybe assets, but today this is where these other fees are coming from. So you can start to see there that actually there's other things that we've introduced and built that's starting to broaden the base of what customers are using us in and paying us for. So this is our revenue growth, 256 million growing 33% year over year. When you look at gross profit, this is up 46% year on year to 174 million pounds. And this gross margin improvement is fundamentally, but we've still got a very healthy gross margin, divided through a lower fee. We've had to charge our customers less to generate it, if that makes sense. So this has supported a higher gross margin for the first half of the year. That number's a little bit flattered in the sense that we made these changes to our, for example, on FX. We made the changes, saw the benefits, so actually saw a higher margin, and then passed through the price drops. So it's a little bit higher than, as you may know, we guided to for the full year. So what do we do with this? As we said in the listing, and we may have spoke to some of you at the time, we've invested this in three areas. We talk about prices, but the other things we can invest in marketing, but importantly, invest in our products and our technology. We can also pass this through as margins, but that's not the point, that's not the chapter that we're in as a business, and we've got a long way to go before we run out of things to invest in for our customers for long-term growth. So we've hired. We actually announced the other day, I think, that we hit our 3,000th wiser. But actually, by the end of the period, you can see the numbers here. And actually, across the year, we've grown that number by 32%. So that growth has continued through the year. We said last year that our margins are a little higher, partly because of this. So we've hired. We're a bit busy building product now. And this has continued into this period as well. And that translates through to some costs. If you look at some of these categories of admin expenses, you can see that employee benefit costs is growing around 30%, roughly in line with our hiring trends. Other outsourced services are growing much faster. There's a few things going on in here. We actually have some costs. This time last year, we weren't traveling at all. And we weren't putting on, doing anything like this. We weren't in our offices. So some of those costs, like I'm sure in your businesses, have started to come back now, which is good because we benefit from being in the same place as a team. We've invested in marketing, but also there's some costs associated with just being a public company as well that's ranked this number. But actually, when this is presented in aggregate in our accounts, you'll see that it's net of this capitalization. So we capitalize and have capitalized some of our engineering activities. Essentially, we capitalize some of our expense. And the rate at which we've capitalized has reduced in this period. So what that means is we follow the relative accounting standards when we look at each of the projects that we're working on. And given the scale and the way that the team has grown, let's take the engineering team, We've basically now capitalized less in this period than we have in the past. I look at Harsh and his team. They're still working on building new products and features, but we're iterating the products we have and building new products as well. There's no change in our strategy as to what we're investing in, but when we follow the policy, we end up capitalizing less. So that net has an impact that those costs appear to be growing and are growing faster, including the capitalization impact. So when you flow that through as to what's happened to EBITDA margin, I have a 24% adjusted EBITDA margin, which is above where we've set expectations for this. Why is that growing? Well, actually we spent a lower percentage on cost of sales at 32%. The employee benefit grew because actually the capitalization flows through that line item. And then we saw the fastest spend in outsourced services, but still a 24% margin for the period, which is more than enough that we need to generate the capital and keep our reserves growing and support our basis as a business. So this is it. It's growing at 20% year over year, in part because a big driver is the change in capitalization has impacted that. Because when you look at cash flow, this is growing at 39% year on year. And actually, the cash flow has converted 97% of that adjusted EBITDA in the period. And you can see this is very healthy and solid growth, actually closer in line with how . And if you just look at the differences between the adjusted EBITDA and the free cash flow, actually, if you just add back the capitalization, you can see that EBITDA excluding that capitalization trend is still growing around 40% year-over-year. So coming back to where we started. We're moving an awful lot of volume now, but actually it's still a tiny share of this market, growing healthily at 44% year over year. We've managed to reduce prices, and everyone in this building is particularly pleased we managed to do that. We've done that in an entirely sustainable way. We're still generating this gross profit. We still generate a healthy EBITDA margin in our products, which means we've invested much of that gross profit. And as you hopefully understand, we've got very strong cash fundamentals in this business. We're generating cash and capital, at least at the rate we need to. And we're essentially funding all of the things that we're doing on price and speed with some very strong fundamentals from a financial perspective. So on that note, just one more page. We're eight months into the year now. What does this look like? We've already spoken about gross margins. On the back of this, we expect full year at around 65% to 67% take rate. Those price drops that we've put through in Q2 only had a partial quarter impact. And if we can drop prices, we'll continue to do this. But hopefully, you understand the sustainable manner in which we're going to be doing this. And then our revenue growth, as we get towards the end of the year, we can sharpen our pencils, and we now expect revenue growth in the mid to high 20s for the year instead of the low to mids. So thanks for your time. I'll pass back to Christiane, then I'm sure we'll have a go.