Remitly Global, Inc.

adding more than 1.2 million since our IPO. Our geographic footprint is now over 170 countries, up from 135. We provide service to approximately 4,200 corridors, an increase of 2,400 corridors in the past year alone. Our third quarter annualized SIN volume now stands at $30 billion. This growth has resulted in significant scale as we look to become the largest remittance provider with complementary products for immigrants and their families. We have delivered a track record of consistent execution versus expectation. And finally, we have done all of this while maintaining our unique customer-centric culture with an authentic focus on ESG priorities across our business. Now let's turn to a brief overview of our third quarter results. Our track record of solid execution continuing in the third quarter as shown on slide five. Our active customer base increased by 49% year over year to more than 3.8 million. Revenue increased 40% year over year to 169 million above our expectations. This is exceptionally strong growth at our scale. This growth was driven by increases in active customers as we continue to take share from legacy providers, subscale digital providers, and the informal remittance market as more transactions shift digital. Repeat transactions from loyal customers also contributed to growth. Given that Remitly has only 2% of the global remittance market combined with a very strong product offering that drives repeat usage, these new and repeat customers will drive revenue growth for many quarters to come. Our revenue continues to be highly visible and predictable due to high customer loyalty and the non-discretionary nature of remittance transactions. As a result of this strong top-line performance and our outlook for the fourth quarter, we are once again increasing our revenue outlook for 2022. Our adjusted EBITDA performance in the third quarter was also above expectations. We delivered strong efficiencies in our marketing investments and robust active customer growth. Given that the fourth quarter provides the greatest seasonal opportunity to acquire even more new customers at Strong Unit Economics, we are maintaining our 2022 adjusted EBIT outlook. Consistent with what we saw last quarter, our customers remain resilient in the face of a volatile macro environment, as you can see on slide six. Remittances tend to perform well across economic cycles, and digital adoption remains a long-term tailwind for remittances. The reasons that remittances perform well over economic cycles is due to their non-discretionary function and the determination of our customers to send money back home on a regular basis, no matter the obstacles they face. We saw this clearly during COVID, for example, when many of our customers who worked in jobs such as hospitality that were impacted by shutdowns were able to quickly pivot to finding other sources of income such as food delivery. The diversity of our customers across various occupations from blue collar to white collar and now in more than 25 send countries lower the risks of potential changes in specific areas of local economies. We consistently monitor the underlying transaction and send volume trends and we have continued to see resilience in our customer base and loyalty to Remitly. We do not see reductions in transactions per customer or average transaction size that are not driven by shifts in customer disbursement preferences. We believe our customers prioritizing sending money back home to family and friends over other more discretionary spending. While our send volume per active customer was down year over year, this was primarily due to the increasing mix of new customers versus existing customers in the third quarter and foreign currency translation headwinds. Excluding new customers in both periods and on a constant currency basis, send volume per active customer was up slightly in the third quarter year over year. We also surveyed our customers last month and found that nine in 10 customers expect to send the same amount of money or more in 2023 versus 2022. Similarly, most customers say they expect to send money abroad at the same frequency or more often than they did in the past year. This is similar to findings found in our second quarter survey and gives us confidence that our customers continue to prioritize remittances. While not a primary driver of results, foreign currency movements, particularly the recent strength in the U.S. dollar, do impact our business in numerous ways. First, in certain markets, especially those with larger transaction sizes, we see customers taking advantage of the ability to get more local currency to their families and friends. Second, we believe the strength of the US dollar and the strength in other developed market currencies versus emerging market currencies make it easier to acquire new customers in certain markets. Finally, year over year growth in our revenue metrics were negatively impacted by foreign currency translation as our international business continued to grow and currencies such as the British pound and Euro weakened against the US dollar. Turning to some key trends in our three largest received markets, Mexico, Philippines, and India. In Mexico, our largest received markets by revenue, we are seeing consistent customer behavior as the vast majority of customers are sending money back home to family for basic household needs. The customers that send to Mexico tend to be less affluent, and we continue to see strong employment trends for lower wage occupations, especially in the U.S. In fact, the Mexican Central Bank reported that remittances to Mexico reached a record high in July as Mexican families received $5.3 billion from abroad, an annual increase of 17%. The strong trend continued in August with remittances to Mexico up 8%. Our growth in Mexico was significantly higher than these industry numbers as we continue to take market share. Customers in the Philippines continue to shift their disbursement preferences to mobile wallets and other digital receive methods, which we are encouraging and leading with our digital first approach. We support customers if and when they're ready to make the shift to digital receive with our highly localized marketing and product experience. Finally, in India, as the rupee depreciated materially against the U.S. dollar and other currencies, we saw a very strong year-over-year growth in both send volume to India and new customers in the quarter. While these three large received countries remain very important to our business, it's important to keep in mind that we continue to diversify our corridor portfolio across both send and receive countries. We saw this diversification play out in the third quarter as more than 50% of new customers acquired in the third quarter were sending to countries outside of Mexico, Philippines, and India. Given our high retention rate, adding new customers tends to be the leading indicator of revenue growth for the quarters and years to come. And as a result, we expect our revenue to become even more diversified across corridors. In the third quarter, we made progress across our investment priorities, as you can see on slide seven. We are very focused on new customer acquisition at strong unit economics, geographic expansion, remittance product enhancements, and complementary new products. With these priorities, we are laying the foundation for sustainable outsized growth and returns for many years to come. Consistent with the second quarter, we were able to drive significant customer acquisition efficiencies in the third quarter, as you can see on slide eight. We continued to manage customer acquisition costs via elasticity testing and a focus on lower cost channels, all while maintaining strong new customer acquisition growth. As a result, CAC improved 18% sequentially from the second quarter and 19% year over year from the third quarter of last year. Our increasing brand awareness in both the US and international markets, along with rapid scaling of active customers is driving efficiency and resulting in word of mouth network effects. We have seen a moderate softening in the competitiveness of the advertising environment in the third quarter, both sequentially and year over year, and we were able to take advantage to drive even further efficiency. As we look ahead to the fourth quarter, we would expect customer acquisition costs to increase sequentially but decline year over year as we remain focused on driving efficiencies across the marketing funnel. The fourth quarter is typically the most seasonally expensive media quarter while also providing the best opportunity for us to acquire new customers as the holiday season drives additional sending behavior across remittance corridors. Our geographic expansion is accelerating, as you can see on slide nine. At the end of the third quarter, we serve customers in more than 170 countries and territories worldwide. We now serve nearly 4,200 corridors, and we added approximately 1,000 corridors in the third quarter alone, another record quarterly geographic expansion for us. We also saw an opportunity to further expand into complementary geographies in the Middle East and Europe with the pending acquisition of rewire. It is important to note that it is both the number of corridors we serve and the quality of the disbursement network that drive new customer growth and repeat sending behavior. As a result of the quality of our network and the foundational investments we have made, In general, every new send country we add results in more than 150 new corridors, allowing us to continue to scale rapidly. Our disbursement options within our global network continue to grow and remain an important driver of customer loyalty. Our growing network of banks, mobile wallets, and tax pickup locations allows our customers to choose what works best for them. As digital payout options continue to grow in adoption, we are pleased to be able to add more than 170 million mobile wallets in the third quarter. This expansion includes our launch of PayTN in India, one of the largest mobile wallet providers in that market. We also expanded our relationship with Visa by making Visa Direct available to Remitly customers in Canada. This provides another convenient disbursement option for our customers. We continue to believe the quality of our network and our focus on customer preference and disbursement options remains a compelling differentiator. The focus on improving the customer experience and delivering peace of mind drives our investments in our ribbon platform, as you can see on slide 10. We made significant progress in the quarter on reducing customer friction as we enhanced a number of key features to drive peace of mind. These investments drive retention, product differentiation, and will ultimately lower customer service costs as customers will contact us less frequently. Some key examples in the third quarter that helped drive customer peace of mind included reducing customer pain points by expanding rapid refunds to Visa and MasterCard in the U.S., and enhancements to the customer experience in the send funnel by allowing global customers to import their recipient contacts or scan their card to add it as a payment method in their profile. Our global uptime of 99.96% in the third quarter reflects our commitment to our customers as downtimes are among the worst-case scenarios for our customers, ranging from losing trust when new customers are shopping around to devastating for existing customers, especially during a family emergency. We continue to have high customer ratings in both the iOS App Store and Google Play Store. And as we continue to scale, we believe we will be able to make investments in our platform that other competitors will simply be unable to make. This drives an increasing preference for Remitly's service and delivers peace of mind to our customers. We talked last quarter about narrowing our focus to complementary products that deepen relationships with remittance customers, as you can see on slide 11. We believe our product strategy will result in a deeper and stickier relationship with our customers over time, which will drive even more business to our remittance platform and increase retention of existing customers. We continue to iterate and test demand for additional products that solve critical problems for our immigrant customers and their families and are pleased with the progress so far. Our pending acquisition of Rewire and their account-based remittance platform will help us execute and accelerate this product strategy. In addition, the critical investments we are making across our platform will ensure we can serve our customers across multiple products with the same peace of mind that we deliver with our remittance product. The portfolio of four strategic investment areas positions us to drive sustainable growth in the near, medium, and long term, as seen on slide 12. The overlapping return profiles and our strong balance sheet gives us the confidence that we can deliver on our promises to customers, shareholders, and employees. Before I turn the call over to Hemant, I'd like to return to our vision on slide 13. Our vision is to transform the lives of immigrants and their families by providing the most trusted financial services on the planet. This is what drives us and energizes us and will remain our North Star. Our focus on the long term and our customers also drives our commitment to ESG. As part of this commitment, we will publish more about our ESG strategy soon, and we plan to provide additional reporting across ESG metrics in 2023. In addition, as part of our commitment to ESG, we made our second annual contribution to pledge 1% of approximately 182,000 shares during the third quarter. It is our strong belief that our ESG programs and initiatives ultimately improve our product, our ability to serve customers, and our employees' experience with us. This is what drives a long-term sustainable business that delivers returns for all stakeholders. With that, I'll turn the call to Himash, who will provide more details on our financial results and outlook. Thank you, Matt.

I'm pleased with our strong third quarter results, our continued track record of execution, and the resilience of our customers. This has allowed us to raise our revenue outlook for 2022 once again. Over the past quarter, I've also had the opportunity to dive deeper across Remedy's significant growth opportunities and our investments, and I'm excited and confident about the return potential. With that, let's turn to the details of our third quarter results. I'll begin by reviewing the drivers of our third 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 items such as stock-based compensation, the donation of common stock in connection with our pledge 1% commitment, and transaction costs related to acquisitions. Reconciliations to GAAP results are included in the earnings release. Beginning on slide 15 with our high level top line performance, active customers grew by 49% year over year to more than 3.8 million. Send volume grew 44% year over year to approximately $7.5 billion, all resulting in revenue growth of 40% year over year to $169 million, which was above our expectations. As you can see on slide 16, a number of factors drove the strong 49% active customer growth, including setting another record number for new customer acquisitions in the quarter and high retention of existing customers, who in many cases continued to transact with us over many years. Our differentiated product, highly effective marketing, and increasing global scale all contributed to the outsized active customer growth we saw in the quarter. We also believe in the strength in the U.S. dollar helped drive incremental new customers dramatically in certain markets. We saw particular strength in new customer acquisition in the USA to Mexico and USA to India corridors where we delivered record new customers and surpassed the previous new customer record set at the beginning of the pandemic. This was driven by marketing efficiencies as we scale, including improved referrals and word of mouth, upper funnel investments, localized promotions, and product and landing page optimization. We also saw a strong growth in some of our newer and smaller corridors, including to Africa, where we benefited from our Sub-Saharan Africa awareness campaign and additional scale. Turning to slide 17, robust growth in active customers and high retention drove the 40% 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. Revenue growth in the quarter was impacted by approximately 300 basis points, unfavorably due to foreign currency translation, as we saw the British pound and euro decline against the euro dollar. Turning to transaction expense on slide 18, transaction expense was $70 million of 41% of revenue compared with 39% of revenue in the third quarter of last year. We saw higher than expected fraud loss rates in the third quarter as we onboarded a record number of new customers who generally have a higher risk profile. However, the fraud losses were well within our guardrails for new customers, and we continue to invest in improving our fraud and risk systems while at the same time improving our customer experience. We continue to see leverage on send and destination fees in the third quarter as we globally scale and we're able to drive better terms with our payment and disbursement partners. On a year-to-date basis, transaction expense as a percent of revenue has improved by 140 basis points. Over the long term, we expect to continue to benefit from increasing scale and improved 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 19, which reflects the investments we're making to allow us to scale our remittance business and execute on our long-term strategy of delivering complementary new products to immigrants and their families. Overall, we saw moderation in year-over-year office growth rates in the third quarter as compared with the second quarter, including in both technology and development and G&A expenses. As Matt discussed earlier, we also continue to drive efficiencies in customer acquisition costs. Our marketing expense, of which the vast majority is targeted at new customer acquisition, was $40 million in the quarter, and it reflected a 100 basis point year-over-year improvement as a percent of revenue. This leverage was driven by marketing efficiencies in customer acquisition, while at the same time delivering a record number of new customers serenity. Our efficiencies came from elasticity testing, improved overall brand awareness, and a moderately less competitive advertising market. We plan to continue to invest in high return marketing with a highly disciplined focus on driving efficiency gains. Customer support and operations expense was $18 million in the third quarter and was up 70 basis points year over year on a percentage of revenue basis. The primary driver of this increase was due to higher than expected number of new customers added in the quarter. New cohorts of customers on average contact us at a significantly higher rate than older cohorts. It is our goal to drive this contact rate down over time as we make technology investments in our product, payment, and disbursement networks to deliver peace of mind for our customers. As we scale, we expect new customers to be a smaller proportion of active customers. We also expect our peace of mind product enhancements to drive contact rates lower. Both of these factors should help drive leverage in customer support costs over the medium term. Technology and development expense was $23 million in the third quarter and was essentially flat year-over-year as a percentage of revenue. Our investments allow us to deliver peace of mind, drive retention and loyalty, and enable the development of complementary new products. This ultimately deepens our relationships with our customers and provides additional revenue opportunities. 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 improvements, new product development, and corridor additions. G&A expense was $22 million in the third quarter. Our year-over-year growth rate in G&A expense has moderated as we begin to anniversary the ramp in public company expenses. We expect the year-over-year growth rate in G&A expense to continue to moderate in the fourth quarter. Turning to slide 20, adjusted EBITDA, which excludes stock-based compensation expense, the donation of common stock in connection with pledge 1% and transaction costs was negative approximately 4 million in the third quarter of 2022. Our adjusted EBITDA performance was better than we expected, primarily due to higher than expected revenue and lower customer acquisition costs. Third quarter gap in net loss was $33 million compared to a $30 million net loss in the third quarter of 2021. The increase in net loss was primarily due to $21 million of incremental stock-based compensation expense. Turning to our balance sheet, working capital at the end of the quarter was approximately $450 million and reflects cash on our balance sheet of $376 million. Our strong balance sheet is a key differentiator from many other competitors, especially subscale ones, and allows us to execute our strategic priorities to drive long-term profitable growth. Moving to our 2022 outlook on slide 21, we expect revenue to be between $635 and $640 million. This is a $10 million increase to the midpoint from our prior outlook and implies a year-over-year growth rate of 38 to 40%. We're increasing our outlook to reflect the strong performance we delivered in the third quarter with both existing customers and new customers. Our strong new customer growth during the first three quarters of the year will be a tailwind for growth in the fourth quarter, 2023 and beyond. We're maintaining our adjusted EBITDA outlook for 2022 at negative 35 million to negative 30 million. Due to seasonally strong new customer acquisition in the fourth quarter, we expect the fourth quarter to have lower adjusted EBITDA than the third quarter. While acquiring these new customers in the quarter impacts short-term profitability, we fully expect these customers will continue to drive dramatically strong growth going forward. As I've also now completed my first 90 days, I'm even more confident that we have an attractive investment return profile that I look forward to discussing when we provide guidance for 2023 early next year. We're executing strongly with financial discipline and continue to build an attractive return profile with the momentum of our strong revenue growth, predictable and resilient customer behavior, global scale operating leverage opportunities, and a healthy balance sheet. With that, Matt and I will open up the call for your questions. Operator.

Thank you. If you have a question at this time, please press star 1-1 on your touchtone telephone. One moment for our first question.