Wise plc

We'll get started. So thanks for joining everybody who's been able to make it here into offices and also those who are on Zoom. Welcome to a half yearly presentation. My name is Harsh. I've been with Wise for about eight and a half years. And in that time, I've been CTO and also I'm currently interim CEO, filling in while Krista is taking a well-deserved break. He'll be back in a few weeks. I'm also going to be joined by Matt, who you all know. He's going to talk through the financials and the numbers later in the presentation. And also I have Martin, who you all probably know. He's going to help us stay on time and manage QMA. So this is our mission, Money Without Borders. This is why I and 5,000 other wisers show up to work every day to help people and businesses manage their finances across the globe in a better way. And the problem is pretty big. It's 2 trillion pounds that move cross-border every year. for consumers and other than 9 trillion pounds that moves cross border for businesses, small and medium businesses every year. And when we talk to our customers, people tell us that accessing the finances and moving money around borders is pretty tough to do. It's slow, inconvenient and expensive. But beyond that, Overall, the international banking proposition really doesn't exist at a global scale such that you can manage your lives in different countries and different currencies. And finally, the underlying technology that has been built and the network that has been built to build products on top of to solve the cross-border problem is not really that great. It hasn't changed in decades. And hence, what we're doing about it is building the wise account. which allows consumers to move funds across borders very well and manage their finances. Wise Business, which allows businesses to embed these cross-border money movement and managing their finances into their workflows, and also building the network that manages the world's money. And we've been at it for about 13 years, and we're pretty proud of how far we've come, but we're still pretty small. We've taken about 5% of the personal market share, And we're still less than 1% of the SMB market share. So we're pretty proud how far we've come. We still have a long, long way to go. But we are building this in a fast and increasingly profitable manner. And that's how we continue to build Wise. If you look at our active customers over the last quarter, 7.2 million active customers on our platform. And also the volume over the last six months, about 57 billion pounds moved. This is more than double from three years ago. And we continue to be increasingly profitable with tripling our income and quadrupling our adjusted EBITDA. So this is a framework that we introduced in June when we did the yearly results with Chris, Tommy, and Matt. We think about WISE as a generational company. And there are four big things in building this company. First, we have a massive problem. And the problem is big for people and businesses. Second, We continue to build wise, as we've built before, in a fast growth but a profitable manner. And Matt's going to come on and talk about that. But what we believe really makes us generational is the way we invest in our customers and our products. So we believe in word-of-mouth-led growth. And we do that by building an amazing product that leads to evangelical customers and also building a network, a new way to move money and manage your finances across the world, on top of which we build these experiences for our customers. So I'm going to talk about the middle two more. Evangelical customers. So we invest in these three products. The Wise account for consumers, allowing you to manage your finances across the world. Wise business for businesses, allowing you to embed into your workflow how to move and manage your finances across the world and use international business banking proposition. And finally, Wise platform that allows non-banks and big banks who have workflows which have cross-border needs to embed Wwise into the platform. So what have we done in the last six months? For the account, we've rolled out more features in more places. So you roll out the assets product across a lot more European countries. Today, our assets under custody in this product is 1.7 billion pounds. We've also launched a new product for expats in China. If you live in China as an expat, the current products are pretty poor to enable you to move money out of China. So we've started that journey there. We've also removed charges that we used to have before in Australia for holding balances. Given we now hold balance for Australian customers, we had some interest there. So we are giving back and reducing the charges. And finally, we allow you to now send money to businesses in Brazil. These are some of the highlights. You should look at our mission update that we do regularly on a quarterly basis if you want to go deeper into more launches and releases we've done. But flushing out the wise account leads to this kind of adoption. 44% of our customers on the consumer side are now wise account customers. To give you some context, last year about a third of them were wise account customers. And then businesses, 58% are now wise account customers. And I'll give you some color on this. We've noticed that if you're a Wise account customer versus just a transfer or a send customer, you are 3x more likely to transact on Wise. And as they continue to use the features and the products that we build, it leads to our customers being more evangelical to their friends and family about Wise. 67% of our customers and new customers joining are coming from word of mouth, which leads to us having this insane growth around word-of-mouth-led growth versus spending a lot more on marketing. And these evangelical customers not only experience WISE from our own apps, but they also experience WISE from different experiences that are embedded into their own platforms, whether it's banks and non-banks. So this is the WISE platform product that we've built. And we have a diverse set of partners now across the globe, across all geographies, as you can see on the map. Actually, I'll give you one more thing. Today, we're having our Wise Connect conference in Singapore, which is an enterprise conference for banks to come and see how they learn about the Wise platform. And we did one of these in London in May, which is a pretty big success. So over the last six months, we have added more partners. We have now more than 70 partners connected to Wise, to the Wise platform product. To call out a few here... Blue Vine is another business neobank in the U.S. that has been added. So we basically have now covered most of the business banking proposition, neobanking proposition in the U.S. They're all powering the cross-currency through WISE. We've also added new partners for new use cases like a multi-currency account usage and card issuance with Parpera and ProSpend. And then looking at non-financial services companies, Agoda was added where they're a travel platform very well known in Asia. They're using us for some of the cross-currency needs. So that's overall about imagining customers and how and where they use Wwise and how they interact with Wwise. The second part is the network that we are building. I fundamentally believe that this is the biggest differentiator in the longer run for Wwise, and this is the competitive mode we are building. So our infrastructure is what enables fast and low-cost payments. We are significantly faster on payment speeds if you compare us to banks, but also non-banks who are providing a similar service. 60% of transfers now unwise are instant, which means it goes from the source account to the destination in less than 20 seconds. But I'm also very, very proud of the numbers beyond the instant number. 81% of the transfers make it to the destination within one hour and 95% within a day. Compare that to a traditional setup where most transfers still take two to four days to show up on the other side. Talking about price, We are significantly cheaper in low cost than banks. 0.67% is our average price right now. Compare that to 3% to 4% for most banks in most markets. And in some markets, it's even higher. And it is this infrastructure that is getting increasingly difficult to replicate. So those who have heard us talk about this before, we think about our infrastructure in four parts. There's the expansions and the regulatory aspect and how we operate in every country and how we do licensing. and manage those relationships. And there's also the technology and operational aspect of how we service our customers and build our product. So I'm going to really quickly cover on both these what we've done in the last six months. So on the licensing and connectivity, we fundamentally believe in connecting directly to more and more payment systems. Direct connectivity gives us two things. It gives us those instant speeds that our customers are wowed by and really love and what makes them evangelical. And also it reduces costs drastically by removing partners, which allows us to then have a lot more leverage on volume and the scale that we are operating at. In the last six months, we have now directly integrated into Australia's payment system. So we are now the first non-bank in Australia to have direct connection to NPP, which is Australian payment system. This allows us to provide cheaper and faster payments to Australians, but also it gives us complete independence in that market going forward for Wise to operate. Where we don't have direct connections, we continue to build on a network of partners. We add redundancy in our network by having multiple partners for all the products we have in major markets. And one of the examples in this one is how in the U.S. we were able to recently shift from one partner to the other very quickly when we wanted to provide a different set of services for our customers. So Along with that, we've also been investing a lot into how we allow our partners outside WISE, say the WISE platform partners to connect to the WISE infrastructure. And some of you may have heard about the announcement we did around Swift Correspondence Services with our partnership with Swift. This basically allows banks who want to connect to the WISE infrastructure to not have to do a very heavy lift API integration, but actually make a config change and quickly make WISE their correspondent. So this allows them to then send instructions to us to enable the cross currency movements. On our operational side of stuff, we are the biggest engineering team in the world now, we believe, to be working on this problem. Over 800 engineers are focused singularly on solving the cross-border problem. Along with that, we have over 1300 operational agents who are helping our customers work through when the challenges come up or make sure that they can continue to provide a great service for our customers. Also, the global product that we have built and the data that we collect from all these customers transacting across the world allows us to build very sophisticated machine learning models to help us continue to work on fighting financial crime and also increase payment speeds such that we can continue to build a great product for our customers. I'll give you one example on this one. So as things change and the macro environment continues to change and regulatory environments change, I believe we are able to adapt and iterate faster given how much we can automate the work around servicing and operations that continue to build these machine learning models, whether it's how the sanctions routines are changing, when things change in the macro environment, or whether there's new regulations that are coming in. So this allows us to continue to adapt without throwing too many people at the problem as compared to banks. So, Overall, I want to summarize what are we building here. The problem we're working on, cross currency, money movement, and managing finances across the world, the market's very big, and we're still a small part of the overall market. And we're building this company in a fast growing and profitable way, which I'm going to ask Matt to come on and talk about soon. But reminding you, the reason why we grow and continue to grow in this way is because we build products that are really resonating with our customers, 7.2 million active in the last quarter, and continue to grow that base by word-of-mouth-led growth. And all of this is powered by the longer-term investment we're making into building one of the world's best infrastructure to manage your finances across the world. With that, give it to Matt.

Thanks, Ash. Hey, everyone. Nice to see you all. So let me talk you through the results I always... I always think that's what we're here for every six months, some of us. So some of this you've seen already, but it's worth just pausing on. You've seen in our quarterlies how we continue to compound our customer base at around 30% year over year. And that's driving a lot of growth, but also profitability in the company. It's in volumes. That's driving our volumes. It's driving our customer balances. And it's also driving our revenue and then our income. But also what's news today, Here's the level of profitability that we see in the business. We generated £241 million of EBITDA in the period. That's a 37% EBITDA margin and some 2.6 times what we saw this time last year. Let me talk about what's driving each of these and why. It's around active customer growth, as we said a few months ago. Both people and businesses continue to compound that and grow year on year at around 30% year over year. That's actually what's happening underneath this, which is quite interesting. The increasing share of these customers are using multiple features of the accounts. So they're not just sending money, but they're doing more things, as we've said. And actually, so therefore, the number of customers that are using multiple features is growing even faster than the active base. And this is really important because this is fundamentally what's driving the financial performance of the company and will continue to do so. And there's three things in there that we need to think about. To what extent is this active customer base growing cross-border volumes? And we've seen that grow at around 12% year over year. So that's active customers driving this, and that drives our cross-revenue. But there's also two others which are really important. We have this other revenue line, which is predominantly card spend. So if those customers in the audience, you'll know you'll be able to spend on your card. So that drives interchange income and other fee income. And that's growing 90% year over year. It continues to grow really strongly as more and more customers use multiple features and use the card. And that's contributing significantly to our revenue growth. And then finally, customers are trusting us more and more as they use our account to hold balances with us. And this is in addition to the 1.7 billion that we now hold in the assets product. And that's going 33%. And with a different interest rate environment, that's driving a significant amount of interest income into our business today. So let's go through each of these. Volumes actually have compounded broadly in line with customer growth over the Over the longer term, you can see 34% CAGR over the last three years. In the last year, they've grown 12%, partly because we've lapped a very strong VPC a year and two years ago. But also we've seen there's no change in the trend is what we talked about in the last few quarters as to what's happened to VPC. We've seen that reduce over time. But still, this active customer growth is really what's driving volume growth. Then the take rate, and we define take rate as all our revenue divided through by this volume growth. has actually grown. So on cross take rate, as we've seen, we're trying to put downward pressure in the market on prices. Actually, the cross take rate stayed relatively stable. But actually, the contribution to take rate of this interchange income and other account features really driven this overall take rate up to almost 0.9% in the last quarter. And this is really driving revenue growth. Revenue is through 25% year over year in the period. Underpinned by the growth in customer base, underpinned by the volume and the trend on take rate, but also really kind of powered by the dynamics that we're seeing of adoption of the WISE account across people and businesses. And actually, this is pretty, we talk globally, we think about ourselves as a global company, but actually when you disaggregate this into the regions, you can see here that I think I've got some investors who've been here for five or six years in the audience, like it's a very different picture now, actually. Only 20% of our revenue is from customers based in the UK, actually 80% distribute around the world. And this is an incredibly diverse global customer base and company now. And actually, our growth is really being driven by all of these regions as well, which shows us that this problem really resonates everywhere we go around the world. And we're making great progress in solving it in many jurisdictions. So moving on to income, these customers, our customers are holding more and more balances with us. So this is over 30% balance growth, but this excludes the balances that customers are holding in our assets products. And over the period, we've seen changes to the interest rate environment. It's not been as stark over this last period as we saw before, somewhat stabilized, as we know. But we saw gross yields on our balances we earned of around 3.7%. What we shared before, we shared in our last results, like how do we manage our business relating to this interest income? We talked around how we wanted to share 80% of some of this interest income back with our customers. We paid our customers 50 million, 53 million pounds in the last half year. but that's only 35% of this interest income over this 1% that we keep for ourselves. So we've made progress, but it's not at the 80%. So we have a lot more net interest income than we aspired to in this framework. So you can see this come through in our overall income. Income grew 58%. As you know, this is not news for you over the period. Obviously, underpinned by this customer growth, and those multiple drivers, but also interest having an impact on that versus our revenue growth. So what happens? How does that come through to profitability? So let's start with gross profit. So we had a gross profit margin of 75% for the half year and almost £490 million of gross profit. There was a couple of things here. Yes, this increased level of net interest income would have boosted the gross profit margin, but also we saw lower costs relating to FX during the period. So that's when we make gains or losses on FX. We had a very good or lean and successful period, if you like, on this. And we also saw some scale over our operating costs. Some of these hopefully will endure, but some of these FX costs can be volatile and cyclical through the period. But fundamentally, a very healthy gross profit margin for the first half of the year. So this gross profit margin is what we use, and the gross profit is what we use to invest in our teams. And ultimately, as harsh... funds harsh, and all of these teams in building this network for the future. Our OPEX operating expenses grew almost 50% year over year, but that growth was largely driven by the hiring we did in the previous period rather than the hiring we've done in this period, if that makes sense. So actually, the period-on-period growth between the second half of last year and the first half of this year, actually, as you can see here, was only 6%. We'll continue to invest in our teams, whether it's in our product engineering teams – or into our operational teams to make sure we kind of keep up with the demand and the requirements we have around the world. But fundamentally, this shows that we do make sure that we keep these costs under control and keep an eye on scaling the business relative to how we're growing the overall customer base. But this all led to a much higher EBITDA. So we had 241 million of EBITDA, which was a 37% EBITDA margin. So fundamentally, you can see that the profit potential in the business is clear. The question is, why is this? As we shared in June, we shared this framework. We tried to lay out clearly how we're managing this new dynamic of interest income into our business. And broadly, I won't go into detail, but three things. First is, we'd use the first percentage point, only the first percentage point of this interest income to make sure we hit our at or above 20% EBITDA guidance. of the remaining interest, we'd aspire to share up to 80% of that back with our customers, which means that 20% of that would flow through to EBITDA. So that means we're not going to become dependent on interest income. And then structurally, as we see higher interest rates, we'll see higher profit margins. So what did we see? So let's go back to this 37%. This 37%, how does that compare to this at or above 20? Well, if we'd have managed to return 80% of the interest to our customers, and we remember, as I said, we returned 35%, that 37% would have been a 29%, almost a 30% EBITDA margin for the period. And then actually, if you just considered interest rates only at 1%, and we said we'll only use 1% in order to have a 20% EBITDA margin, we'd have seen a 25% EBITDA margin in the quarter. And what does this tell you? One is that you can see here that Roughly four-point contribution to EBITDA of a higher rate environment, but also this 25% shows you an underlying very healthy EBITDA margin relative to what we've guided. So fundamentals of lower costs of goods sold, some scaling on OPEX, but also just good fundamental underlying profitability in the business. And then this flows straight through. Importantly, yes, we have adjusted EBITDA, but we have bottom-line profits and EPS. Almost 200 million in profit before tax. and a significant year-on-year change, a total step change in the level of earnings per share. So what does this mean going forwards? Well, there's no change really to our guidance. As you recall, we recently upgraded our income guidance for the full year. You saw that 33% to 38%, and that's upgraded five points and really fundamentally underpinned by the strength we've seen going into the start of the year. And then our medium-term guidance is unchanged, which, as I recall, is – an income growth CAGR of above 20%. And what gives us confidence here is really supported by the opportunity in front of us, the rate at which we're compounding our customer base, and the products that those customers are using on what. And our adjusted EBITDA margin, no change to the guidance there of after above 20%. And as you know, that's fundamentally got a tailwind in a slightly higher – in a higher rate environment. Structurally, the way our products are working means that – We'll only become dependent on 1% of interest, but also with a higher interest rate, you'd see a higher profit margin, as we're seeing already flow through. So that's actually it for me. Remember, there's a couple of things. One is we've got a massive market opportunity here, and very exciting. We've said this for many years, and nothing's changing. And we're building a really fast, profitable business. But if you look under the skin and really try and understand what we're building here and spending more time with our teams, Hopefully you'll understand what special is. We really do build a product that customers love. And that's only able because we're building this network for the world's money, which is all of these financial results are just a proof point that we can continue to invest in that over the last 10 years and over the next 10. Right. That's all for me. So let's do some Q&A. So Martin's got the power with Mike.

Yeah. Thank you, Harsh. And thank you, Matt. We'll open up to Q&A. We've got attendees in the room and we have attendees online. We'll start by taking Q&A in the room. So if you could raise your hands. You won't need a mic. The ceiling mic will pick you up. But if you could just say your name and the company you're from and we'll take your questions through the room and then we'll move on to Q&A online. Thank you.