Remitly Global, Inc.

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 to $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 existing customers who, in many cases, continue to transact with us over many years. We believe strength in the U.S. dollar helped drive some incremental new customers dramatically. We also saw continued growth in our new customer acquisition across corridors, which helps us broaden our portfolio and create more revenue and operating leverage opportunities over time. Our unit economics in new customer acquisition remain highly compelling as we drive marketing efficiencies, resulting in lower CAC as Matt discussed. Our unit economics also benefited from our increasing leverage on transaction costs, which I will detail later. On average, customers continue to send multiple transactions per month, and our pricing, which is influenced by multiple factors such as speed, method of payment, mix of fee, and foreign exchange spread and local competition, continues to deliver value for customers. The consistency in our customer sending behavior once we acquire them as an active customer translates into a predictable revenue stream and minimal revenue turn. Turning to slide 18, strong growth in active customers and high retention drove the 42% year-over-year revenue growth that we delivered in the quarter, as we continue our multi-year track record of healthy double-digit revenue growth at scale. Turning to costs on slide 19, we continue to benefit from increasing scale and improvements in our fraud and risk systems. The benefits of this are most visible on the transaction expense line. Transaction expense was $61 million or 39% of revenue, an improvement of over 300 basis points from 42% of revenue in Q2 of last year. Our teams have worked hard to make this happen through more direct partner integrations, better terms with payment processing partners driven by increasing scale, and advanced risk and fraud management systems, which drive down transaction loss rates while at the same time improving the customer experience. We expect to continue to benefit from increasing scale and improve precision on fraud losses, although we expect some variability in transaction expense from quarter to quarter. Now I'll turn to our non-GAAP operating expenses on slide 20, which reflects the investments we're making to allow us to scale our remittance business and execute on our long-term vision of serving immigrants and their families with the most trusted financial services on the planet. Our largest operating expense is marketing, which represented 41 million in the quarter, or 40% of total operating expenses. The vast majority of marketing expense is related to new customer acquisition efforts. This marketing investment delivered a record number of new customers acquired at an 11% lower cap compared to the first quarter, as our teams identified efficiencies and by raising our investment thresholds. To be clear, we could have grown active customers even more at strong unit economics, but we made the decision to drive even higher returns. We continue to monitor our marketing spend actively in light of our focus to drive higher returns while driving strong customer growth. Customer support and operations expense was $70 million in the second quarter, or 16% of total operating expenses, and was flat year over year on a percentage of revenue basis. As we scale, we expect to continue to benefit from increased automation and efficiencies. Our customer support costs are also influenced by the level of new customer ads in a quarter, as new customers tend to have higher initial support contacts. Over time, as we scale, we expect new customers to be a smaller proportion of active customers, which would help drive leverage in customer support costs. In addition, our remittance product investments in ensuring a frictionless customer experience will also drive leverage in customer support costs over time as our customers will need to contact us less often. We believe our continued investments in technology and development are critical to ensure a trusted customer experience and deepen our relationships with them through complementary products. Technology and development expense was $22 million in the quarter as we've been making investments to enhance our products, continue to build our platform capabilities, and improve security. Our investments also allow us to localize at scale much faster as we add new corridors, payment methods, and disbursement options at a more rapid pace, allowing us to capture more market share. For example, in the second quarter, we were able to add approximately 900 corridors. The most we have added in a quarter, a level of growth that would not have been possible without the scaling, investments, or making in our technology platform. As we mentioned on our last call, we expect technology and development expense to increase as a percentage of revenue in 2022 compared with 2021 as we prioritize product investments, new product development, and corridor additions. G&A expense was $22 million in the second quarter, or 22% of total operating expenses. This includes an investment in our human resources, finance, and legal teams, and additional public company operating costs, which will allow us to effectively scale to support our growth initiatives. We expect the year-over-year growth in G&A expense to moderate as we begin to anniversary public company costs in the fourth quarter of 2022, and we expect to see leverage in G&A later this year. Turning to slide 21, adjusted EBITDA, which excludes stock-based compensation expense, was negative 5.3 million in the second quarter of 2022. Our adjusted EBITDA performance was better than we expected, primarily due to higher than expected revenue and improving returns on our customer acquisition investments. Before turning to bottom line results, I would like to summarize that our growing revenue base, strong unit economics, and high ROI on marketing provides a significant opportunity to accelerate scaling across other expense categories as we head into our first anniversary as a public company. I look forward to sharing additional thoughts and progress as we shape our profitability trajectory. Now, turning to the bottom line, second quarter gap net loss was $38 million, compared to a million-dollar net loss in the second quarter of 2021. The increase in net loss was primarily due to a $30 million of incremental stock-based compensation expense driven by hiring top-tier talent to execute our strategic priorities. Additionally, we recognize the $6 million adjustment related to prior periods. WE EXPECT QUARTERLY STOCK COMPENSATION EXPENSE IN THE REMAINING QUARTERS OF 2022 TO BE RELATIVELY CONSISTENT WITH THE AMOUNT WE RECOGNIZE IN THE SECOND QUARTER, EXCLUDING THE $6 MILLION OF PRIOR PERIOD ADJUSTMENTS WE RECOGNIZED IN THE SECOND QUARTER. TURNING TO OUR BALANCE SHEET, WORKING CAPITAL AT THE END OF THE QUARTER WAS APPROXIMATELY $452 MILLION AND REFECTS CASH ON OUR BALANCE SHEET OF $430 MILLION. WORKING CAPITAL IS AN IMPORTANT LIQUIDITY METRIC FOR US AND A GOOD PROXY FOR OPERATING CASH. in that it removes the impact of customer funds that are included in our balance sheet within cash and cash equivalents and disbursement pre-funding, which has not yet been dispersed at the end of the period. Our balance sheet provides us significant flexibility to execute on our main growth drivers of acquiring new customers at highly attractive unit economics, expanding corridors in new geographies, enabling a world-class remittance experience and building complementary new products for immigrants and their families. Moving to our 2022 outlook, on slide 22, we expect revenue to be between $625 and $630 million. This is a $12.5 million increase at the midpoint from our prior outlook and implies a year-over-year growth rate of 36 to 37%. we're increasing our outlook to reflect the strong performance we delivered in the second quarter. In the near and mid-term, we expect increased transactions from new customers to benefit us through the rest of 2022 and beyond. As a result of our better than expected performance in the second quarter, we're narrowing and raising the midpoint of our 2022 adjusted EBITDA outlook to be between negative 35 million and negative 30 million from our prior outlook of between negative 40 and negative $30 million. Due to the seasonality of new customer acquisition, we expect the fourth quarter to have lower adjusted EBITDA than the third quarter. With that, Matt and I will open up for the call for your questions. Operator.

Thank you. As a reminder, to ask a question, you will need to press star 1-1 on your telephone. Please stand by while we compile the Q&A roster. Our first question comes from Ramsey Alassal with Barclays. You may proceed with your question.

Hey, guys. This is Allison on for Ramsey. Hope all is well and welcome. Hey, Mom. Just on the competitive environment, how 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.