Remitly Global, Inc. Q3 FY2021 Earnings Call

Good day, ladies and gentlemen. Thank you for joining Remitly’s Third Quarter Fiscal 2021 Earnings Conference Call. I will now turn the call over to Stephen Shulstein, Vice President of Investor Relations, to begin.

Good afternoon, and thank you for joining us for Remitly’s third quarter 2021 earnings call. Joining me on the call today are Matt Oppenheimer, Co-Founder and Chief Executive Officer of Remitly; and Susanna Morgan, our Chief Financial Officer. Our results and additional management commentary are available in our earnings release, which can be found on the Investor Relations section of the website at ir.remitly.com. Please note that this call will be simultaneously webcast on the Investor Relations section of the company’s 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 for the business. 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 obligations 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 today for our first earnings call as a public company. It’s been a pleasure to meet many of you throughout the IPO process, and we look forward to building relationships with those of you who we’ve not yet met. I’d also like to recognize our customers and our employees who are central to our vision and success and have been instrumental in our transition to becoming a public company. We’re proud of our results this quarter and excited about the outlook for the future. Q3 revenue grew 69% year-over-year and key metrics were strong across the board. Quarterly active customers increased by more than 50% year-over-year with strong average revenue per active customer. This demonstrates the value our customers find in our platform as they send more frequently with us, with send volume up 61% year-over-year. The third quarter was a strong start to our new chapter as a public company. And as we often say, we’re just getting started. Before Susanna dives into the numbers, I’d like to give a brief overview of Remitly for those of you who are less familiar with our story. Remitly’s vision is to transform the lives of immigrants and their families by providing the most trusted financial services on the planet. Achieving that vision begins with solving the key pain point our customers face within financial services, which is the need for fast, convenient, transparent and affordable cross-border remittances. In Q3, 2.6 million customers trusted Remitly to safely deliver their hard-earned money home to their loved ones. We are grateful to serve those customers. As we look towards the future, we want to continue to transform remittances and broader financial services to serve millions more customers in the years ahead. Today, there are over 280 million immigrants worldwide, who may be excluded from fair access to everyday financial services that can be used to support their loved ones, build wealth and achieve financial security. The inspiration behind Remitly came when I was living and working in Kenya and saw how difficult and painful it was to send and receive money overseas. I learned just how far those funds go in the communities where they are received. I also learned just how complex cross-border remittances really are, much more complex than most people realize due to a myriad of hurdles, including regulatory compliance, payment collection, payment disbursement, fraud prevention and core infrastructure challenges inherent in the industry. Additionally, challenges all have to be solved at a local level across thousands of corridors. Remitly was founded to answer these challenges and to transform the industry by creating fair and inclusive financial services products for immigrants around the world. Remitly has a differentiated approach based on four pillars. First, we’re mobile-centric. Second, we have a vast global network of funding and disbursement partnerships. Third, we are localized at scale. And fourth, we’re highly data-driven, leveraging a sophisticated and proprietary technology stack. These pillars guide our strategy, and I will be highlighting the first two on today’s call. Let me begin with our first pillar, our integrated mobile-first platform, which is the foundation upon which the company was built. It is incredibly challenging to create a mobile interface that is easy to use, fast, secure and tailored to exactly what each customer needs. Knowing this, we built our digitally native platform from the ground up to ensure it could answer the demands of our customers who are clearly migrating to the convenience and security of our mobile platform. Remitly’s platform executes each transaction individually, factoring in the customer’s risk profile, transaction size, speed and geography among many other considerations. We do all of this within a seamless and easy to navigate user interface. For our customers, this means onboarding and repeat log-ins are quick, easy and secure. We leverage multiple security layers to keep customer data safe. With our machine learning, we can assign a risk score to each customer to designate the amount of information we need from them based on their risk profile. We also have machine learning-based electronic KYC, or know your customer, fraud scoring and payment authentication processes, which take place in real time to give our customers immediate feedback and peace of mind. With this digital mobile mindset, we are uniquely able to solve some of the biggest problems our customers face, including inconvenient and limited store hours, long wait times and manual forms, not to mention exorbitant fees that mean fewer funds in the hands of their loved ones back home. We are incredibly proud of the methodological work we have put in to localizing the Remitly journey for our customers to make sure each transaction is flawless, no matter the geography, whether you are sending the money in Mexico or Kenya or any of the more than 120 received countries. Of course, to deliver this unique mobile experience at scale, it was also critical to build out a network capable of supporting it, which is where our second pillar comes in, our vast global network. Our global disbursement network conveniently puts money in the hands of our customers’ families wherever they are, via our leading global network of payment collection and disbursement partners. This enables our customers to send to over 3.6 billion bank accounts, over 660 million mobile wallets and approximately 380,000 cash pickup locations. All of this results in a powerful flywheel in which improved customer experience drives more transactions, which gives us more scale to invest in our network, which improves the per transaction unit economics, driving even more transactions. The velocity of these integrations is ever-increasing, and our network moat is growing, all thanks to the quality of the disbursement network that we’ve built. And while the breadth of this network is remarkable, the depth and quality are equally important. Our extensive compliance and risk management capabilities as well as our focus on extending our partnerships have been and will continue to be key to capturing more of our large total addressable market, which we estimate to be $1.5 trillion. Remitly has now completed more than 100 direct integrations with financial institutions in Asia, Africa, Europe and Latin America. We have executed these integrations in the right way, leveraging our custom-built API to ensure transactions with these partners are state-of-the-art and create a best-in-class customer experience. These direct integrations result in more peace of mind for our customers by making transactions easier, compliance checks more streamlined, partner outages more transparent and transactions faster. Given the scale, complexity, expertise and years required to build out a network like ours, we recognized the opportunity to offer other businesses the ability to integrate cross-border payments in order to provide locally relevant payout options to their customers with a simple and custom-built API. To that end, we are proud to have launched our B2B product offering, Remitly for Developers, or RFD. We’re seeing businesses value RFD because of our locally relevant payment methods, fast delivery speeds and superior customer experience. Last month, we announced that Remitly supports Novi’s pilot of next-generation digital wallet using RFD. This partnership enables Novi customers in Guatemala to off-ramp funds from their Novi wallet to convenient cash pickup locations powered by Remitly’s robust distribution network. Due to the quality of our network and our unique capabilities, we expect to enter into additional partnerships of a similar nature in the future. The projected unit economics of the RFD product will drive high returns and more transactions flowing through our distribution network which enables us to invest more into it, creating an even better customer experience, more defensibility and lower costs for Remitly. We view this as an opportunity to increase our penetration in our serviceable addressable market since the use cases for these products are often, if not always, fundamentally different than our core customer use case. Additionally, in a market that is rapidly shifting digital and where Remitly’s share is growing quickly but is still nascent, we believe we can gain share of the overall market. RFD as well as Passbook, our digital banking service uniquely designed for immigrants in partnership with Sunrise Banks, reflect Remitly’s long-term vision to transform the lives of immigrants and their families. Focusing on the long term also means laying a foundation for a strong ESG strategy. As part of our commitment to ESG, we joined the Pledge 1% campaign while still a private company and plan to donate 1% of the company’s equity over 10 years to philanthropic efforts that work towards increasing financial inclusion for immigrants. We made our first contribution of approximately 182,000 shares at the IPO. While our philanthropic and ESG strategies are still evolving, they’re core to our culture and to our mission. To close, I’d like to share that building a mission-driven business as operationally complex as Remitly takes a team of highly engaged people who are united in a singular vision with a clear and unique culture. As a global organization now spanning five continents, we invest in hiring and developing a workforce that is diverse in lived experiences and identities, including ethnicity and gender. Additionally, we have a set of values that define our culture, and our culture is how we interact and how we get things done at Remitly. We take these cultural values very seriously, and central to our values is customer centricity. You can trust that the entire Remitly team will continue to stay laser-focused on adding long-term value to the lives of our customers as well as our shareholders. This has been the key to Remitly’s success over the last 10 years, and we believe is what will make us successful for many years to come. With that, I’ll turn the call to Susanna.

Thank you. To echo Matt, we had a very strong Q3 and brought our mission to life by serving a growing customer base. To guide you as I walk through the results, I wanted to share a few key financial principles and themes. First, our main focus going forward is driving continued strong revenue and customer growth. We are anchoring on top line growth rather than on profitability in the near term as we are prioritizing high confidence investments that allow us to continue to capture an increasing share of the large addressable market that we serve. We will continue to scale investment with discipline and a constant eye on unit economics and high return on investment. Second, I will focus on non-GAAP operating expenses and adjusted EBITDA in my remarks, as these metrics exclude noncash items, such as stock-based compensation and the impact of Pledge 1%. This will help you better understand and analyze the underlying trends in our business. Third, I’d like to provide our philosophy around guidance. We plan to provide annual guidance for revenue and adjusted EBITDA, along with additional color on how we are thinking about growth and the investments we plan to make to drive us towards long-term profitable growth. We are committed to running the business in a way that will benefit our customers, employees and shareholders over the long term. Now let’s turn to our third quarter results. Our Q3 revenue was $121 million, up 69% year-over-year, exceeding our expectations. This increase was primarily due to an increase in send volume as a result of strong customer growth and increased transaction frequency, reflecting our differentiated offering and high levels of customer engagement. As a reminder, our revenue primarily comes from the remittance business, where we earn revenue on transaction fees and foreign exchange spreads applied to the customer’s principal. The trusted relationships we foster with our customers and the repeat nature of their sending behavior has resulted in strong revenue retention rates. This provides a reoccurring revenue stream with high visibility and predictability. Send volume increased 61% to $5.2 billion compared to $3.2 billion in Q3 of 2020, driven primarily by the growth of active customers and also by the existing customers sending more money home to support their families. Active customers, defined as those that transact at least once in the quarter, increased by 51% year-over-year to approximately 2.6 million in Q3. This growth was driven by an increase in new customers as a result of marketing investments, our seamless user experience, global network expansion and the continued growth in digital adoption. During the quarter, average revenue per active customer grew 12% year-over-year to over $47 as active customers transacted more frequently and sent more money than in the prior year, demonstrating their reliance on Remitly. This was influenced by an improvement in employment in many of our send markets and the mix of new and repeat customers within the quarter. Moving down the P&L: transaction expense was $47.6 million or 39% of Q3 revenue, flat as a percentage of revenue year-over-year. Transaction expense primarily includes fees paid to disbursement partners and payment processors, transaction losses and tools supporting fraud prevention and compliance. The remaining expenses will be discussed on a non-GAAP basis, excluding stock-based compensation expenses and a $6.9 million noncash charge associated with the donation of our common stock in connection with our Pledge 1% commitment, which is recorded in GAAP G&A expense. Customer support and operations expense, which primarily includes personnel expenses related to worldwide customer support, was $12 million or 10% of revenue compared to 11% in Q3 of 2020 as a result of process improvements that increased our efficiency. Marketing expense in Q3 was $29.9 million, up 61% year-over-year, driven primarily by higher direct marketing spend focused on new customer acquisition. As a percentage of revenue, marketing expenses decreased slightly to 25%. This is due to our existing customer base becoming a larger portion of revenue while our marketing spend is primarily dedicated to acquiring new customers. We expect marketing spend as a percentage of revenue to increase in the fourth quarter since Q4 is typically a seasonally high period for new customers to join Remitly. Those customers will drive a return in 2022 and beyond. Technology and development expense was $16.4 million, up 67% over Q3 of 2020, driven by increased headcount and personnel-related expenses as well as software costs for employee tools and cloud services. As a percentage of revenue, technology and development expenses remained flat at 14%. G&A expense was $15.1 million, up 113% year-over-year due to increased headcount and personnel-related expenses along with higher public company-related costs. As a percentage of revenue, G&A expense increased to 12% for Q3 of 2021 compared to 10% in Q3 of 2020. Q3 GAAP net loss was $13 million compared to a $2.4 million net loss in the third quarter of 2020. This increase was primarily due to the donation of common stock in connection with Pledge 1% as well as incremental stock-based compensation expense. Q3 adjusted EBITDA was $325,000 as we recognized stronger-than-expected revenue fueled by growth in active customers and transaction frequency. This was partially offset by transaction costs and other operating expenses. As reflected in our guidance, we don’t expect positive EBITDA in the fourth quarter as we continue to make investments that we believe will have high returns in the long term. We expect to continue to make significant investments in our business next year as well. Turning to our balance sheet. Working capital at the end of the quarter was approximately $475 million, which included $305 million of net proceeds from our September initial public offering and concurrent private placement. Working capital is an important liquidity metric for us and a good proxy for operating cash as it removes the impact of customer funds that are included in our balance sheet within cash and cash equivalents and disbursement prefunding which represents cash held in partner banks to be distributed to customers but which has not yet been distributed at the end of the period. Looking ahead to the full year, we expect 2021 revenue will be between $445 million and $450 million, up 73% to 75% year-over-year, driven primarily by recurring revenue from our existing active customers, along with continued growth in new customers. We expect 2021 adjusted EBITDA will be between negative $17 million and negative $19 million as we typically see higher new customer acquisition activity in Q4, which drives higher transaction costs and higher marketing investments that pay off in future quarters. We will also incur a full quarter of public company expenses and plan to continue to invest in product innovation. While we don’t guide on earnings per share, we will see a significantly higher share count going forward due to the conversion of our preferred shares and the shares issued in our IPO and private placement. Looking ahead, we continue to believe that the investments we are making in areas, including marketing and technology and development will generate high long-term returns as we benefit from strong unit economics and a large total addressable market. In closing, we’re proud of everything we accomplished this quarter and are grateful to be able to provide our services to customers as they support their families during this time. With that, Matt and I will open up the call for your questions.

Our first question or comment comes from Tien-Tsin Huang from JP Morgan.

Congrats guys on your first earnings call as a public company. The results look good here. I wanted to hone in on the revenue upside that was better than what we had expected, as you had called out here. Any interesting macro trends from month to month in the quarter worth sharing here? I’m specifically curious if you saw a lift in users or volume with certain nations locking down as some of your walk-in peers called out this earnings season.

Thanks, Tien-Tsin. In terms of macro trends, I’d say the revenue upside was primarily due to the growth of active customers, which was really strong, along with more transaction activity for those active customers as well. We saw a 51% growth in actives really due to acquiring new customers with pretty strong payback and strong retention of the customer base as well. On the revenue per active customer and the transaction activity, in particular, we do believe that some of that may be due to an improvement in employment in many of our send markets. It’s also due to the mix of new and repeat customers and some of our investments in engagement programs that really support our customers throughout their life cycle. So I think there was potentially some tied to macro conditions there, but also just strong performance overall.

Got you. No, that makes sense. And then just my quick follow-up, if you don't mind. Regarding the Novi partnership, could you share a little more about your involvement and the revenue model for Remitly? When this news came out, I received many questions about why you chose to partner, especially if Novi could potentially be a competitor in the long term. What is the thinking behind collaborating with them? I'd like to hear your thoughts on that.

Yes, absolutely, Tien-Tsin. Let me start with the kind of strategic rationale on crypto. I’ll focus on the direct-to-consumer elements of crypto, though I’m happy to talk about infrastructure and kind of back-end crypto opportunities later. But, on direct-to-consumer, I think it’s important to recognize that remittance companies are fundamentally good at onboarding and offboarding funds into different currencies and coming through all the complexity that’s required to do that. Those currencies can be fiat currencies, they can be cryptocurrencies. The biggest threat to remittances, as you alluded to potentially with Novi, would be that there is a global default currency where there’s no need to exchange funds between currencies. And with that context, it’s still something that we keep a healthy level of focus on; we turn that focus into a really clear strategy to ensure that Remitly benefits from any changes in the remittance landscape. This is where we’re excited about our RFD partnerships broadly with a few leading crypto companies that we find the most compelling. While there’s still, I think, as you know, some major trust scaling and regulatory complexities around the globe that make their success a bit uncertain, we’ve spent really years cultivating these relationships and establishing partnerships to be part of any upside that results from a broader adoption of cryptocurrencies. So with that context, we’re really excited about the partnership with Novi. Novi has been an active partner of ours for over a year, and they’re able to take advantage of the significant work we’ve done to simplify the complex and really valuable remittance space into a simple tech-forward product integration. This allows us to monetize the large quality network that we’ve built into potential different use cases than our core remittance customer in a very large market where we only have 3% market share. While remittances are a feature of the Novi wallet, it’s a cross-border wallet and not a remittance-specific product. It’s possible that customers who are interested in those products are different from our core customers at Remitly, which gives us an opportunity to expand into adjacent customer segments. But the thing that I’m most pleased about, as it compares to other companies in the space, is that instead of reacting, we’ve taken a proactive approach, and we have material upside given our partnership in a highly fragmented market. Lastly, Tien-Tsin, just to comment on the business model since you asked about that. We charge a fee per transaction dispersed, and the unit economics for RFD are strong since the marketing costs are much lower for us and the potential cumulative transaction profit is sizable. It’s very early days for some of those businesses, but we’re excited about the proactive approach in a very large market.

Our next question or comment comes from the line of Bob Napoli from William Blair.

Congratulations, Matt and Susanna, on the IPO and your first call. The numbers look really good. It's encouraging to see. We received numerous questions regarding Novi, and I appreciate your thorough answer. Regarding the competitive landscape, you’re increasing your marketing efforts. The metrics, such as active accounts, transactions per account, and revenue per account, are impressive. What are your observations about price competition in the market? How is the trend in cost per account? How effective has your marketing been as you ramp up growth?

Yes, Bob, thanks for the question. Is your inquiry more focused on advertising pressure in terms of pricing, or is it related to overall pricing in the industry?

I think it’s the pricing in the industry overall, but plus how effective is your marketing, your cost per account trending as you’ve ramped up marketing.

Got it. Yes, that makes sense. If you think about pricing overall, before I kind of jump in there, I think the important thing to recognize first and foremost, if you think about why customers use our product is ultimately, they come to us for peace of mind. And peace of mind is something that is our brand positioning and is much, much more difficult to deliver than meets the eye, given the complexity in our business, whether that’s the regulatory complexities, the compliance experience, the payment collection, the payment disbursement, the core infrastructure. When you think about it from that angle, that is what I have learned over the last 10 years of building this business. I used to think it was much more about price. You have to build that piece of mind in order to acquire and retain customers, and it’s hard to do that with complexity. So with that context, I think that from an industry standpoint, if you look at some of the digital players that have emerged like us, we do take out some sizable costs from the system because we originate funds digitally. I predict if you look at the kind of global average of 6%, 7% that the World Bank quotes down to our kind of 2%, 2.5%, once you get into that new equilibrium, as I call it, there is some elasticity because you’re taking sizable costs out of the system. There are real variable costs to our business, and we have scale advantages given our scale with some of those variable costs. At the end of the day, there’s a lot less elasticity given that the complexity, peace of mind, and trust are what customers care about. If you put yourself in their shoes, which is important to do, and you think about a customer who’s sending a few hundred dollars who has to provide us with a lot of sensitive information about themselves for compliance and risk reasons and is sending a sizable portion of their funds back home, they are asking themselves; is my information going to be treated with the security that it deserves? Is my transaction going to have a reliable experience that gives me peace of mind as a customer? That is what customers care about the most. That is where we continue to focus our effort into building great peace of mind for customers.

In terms of your question around marketing spend and customer acquisition, Bob, just to continue on that thread, we focus much more so on payback than on customer acquisition cost itself, just in terms of context, and we feel really good about the unit economics and our payback and LTV to CAC metrics. At the same time, in Q2 to Q4 of last year, customer acquisition costs were positively impacted by the fact that the digital advertising environment was less competitive during COVID. So we’re continuously expanding our marketing channels, testing new packaging options and really looking for more efficient and effective ways of driving growth as well.

And then my follow-up question is just you guys have expanded the corridors that you serve pretty rapidly over the last couple of years. Can you provide any color on the continued plans to expand corridors and needed to expand send markets as well? Where do you see the largest opportunities?

Thank you, Bob. To give everyone on the call some context regarding the development of Remitly, it's essential to understand how we've approached our growth. We adopted a localized strategy due to the complexities in remittances. Initially, we operated solely from the U.S. to the Philippines for a couple of years, then expanded to U.S. to India, and subsequently to U.S. to Mexico in the early years to refine our product and customer experience. Over the past five to six years, we've expanded into various corridors worldwide, prioritizing the needs of our customers. This approach allows us to grow in our established markets, as well as in newly launched ones; currently, we operate in 1,700 corridors, many of which were introduced recently. We have additional growth opportunities in corridors we have yet to launch, though we won't announce those until they are operational. You can be assured that we're establishing the groundwork for these future launches, which will support our medium- to long-term growth.

Our next question or comment comes from the line of Ramsey El-Assal from Barclays.

This is Ben on for Ramsey. I wanted to follow up on the question earlier about the upside you’re seeing in the Q4 guidance. Can you just maybe parse out a little bit? I know you mentioned that Q4 is typically like a heavy quarter in terms of acquiring new customers. Just the puts and takes between new customer growth in the quarter versus what you expect from a revenue per customer perspective?

Yes. Thanks for the question, Ben. In terms of the puts and takes for Q4 on the revenue side, we do feel really good about the revenue growth that’s implied in the 2021 guidance for Q4. That’s 52% to 58% implied in Q4 revenue, in particular, that we believe is exceptional growth at our scale, and the transition to digital will continue to remain a tailwind. We’re in an excellent position to capture demand due to our strong mobile offerings, our vast global network, our ability to localize at scale and our data-driven approach. The take from the very short term, as I mentioned, just on EBITDA guidance, is that in terms of framing how we think about EBITDA, revenue growth is our top priority because it’s such a large market and we have such low market share. In Q4, typically, it’s a less profitable quarter due to the seasonality of new customer acquisition, customers sending home for the holidays and such. This drives higher transaction costs as a percentage of revenue and higher marketing costs in the quarter, which negatively impacts EBITDA as we don't see the full profit impact of those new customers when we acquire them in the quarter itself. These will drive higher revenue growth and profitability in future quarters, which is why we continue to invest in them. We’ll also see a full quarter of public company costs, and we also plan to continue investing in technology and development. We have high confidence that these investments will pay off in 2022 and beyond. Those are some of the puts and takes with respect to the Q4 guidance.

Okay, that’s very helpful. If I could ask one more, maybe like a higher-level question. As you kind of go through, now starting to come out of the pandemic a little bit, are you seeing any changes in cohort behavior from new customers that perhaps were once part of the unofficial remittance channels who moved into digital or more formal remittances? As borders are opened up, is there any change in behavior? Or are you seeing a lot of stickiness with that new customer group?

Yes, I can take that one. I think that, first and foremost, if you think about just the impact that COVID has had on our customer base, it’s nothing short of inspiring, given the fact that it reminds us how important remittances are to the customers’ loved ones. Even during a pandemic, especially during a pandemic, and even during a recession, the amount that they have prioritized getting money home to their families makes rational sense when you think about how our customers are leaving close family members, parents, siblings, children at times, extended family members. I just want to call that out because it shows the resilience and inspiring nature of who our customers are. Shifting to the question around how our cohorts have performed, the strength, as you’ve seen, in aggregate in our financial performance is an output of the customers we’ve acquired recently and customers who have been with us for a long time, continue to prioritize sending money back to their families. For many customers, the shift that was gradually happening to digital and the trust hurdle that was required, changed during a pandemic where it may have been more attractive to trust digital alternatives. Once we delivered peace of mind to our customers, we continue to see repeat behavior as they’ve had a good experience.

Okay, great. I’ll echo my congratulations on the successful IPO.

Our next question or comment comes from the line of Darrin Peller from Wolfe Research.

Congratulations again. I have a follow-up question that is a bit more detailed regarding customer growth. Could you break it down further by the new corridors from which you are acquiring customers compared to the big three you've been involved with for some time? How much traction are you gaining in some of the new investment areas? Additionally, following up on the previous question, after 1.5 years of the pandemic, are you noticing any changes in the patterns of your customer acquisition? Can we expect a similar trend in the upcoming quarters in terms of the additions we've been seeing?

Thank you for the question, Darrin. Regarding the first question about corridor dynamics, we are experiencing higher growth outside of the U.S., particularly in some of our newer corridors in Europe and other regions, which are growing more rapidly than our traditional ones. We are continuing to diversify geographically and shift away from the main three corridors of the U.S. to India, the Philippines, and Mexico. We see this as a significant positive for our business. As for the second question about customer acquisition patterns, we are still seeing strong new customer acquisition and were a high-growth company before COVID. I anticipate that we will maintain our high-growth status after COVID as well. During the pandemic, we did experience some digital acceleration. Overall, we feel optimistic about customer growth, and there isn't anything particularly unusual to note regarding acquisition, aside from the diversification across corridors.

Yes, absolutely. Thanks, Darrin. First, going back to the kind of complexity that’s inherent not only in remittances but broad financial services. It also means that it takes more time to innovate. It’s complex due to everything we've discussed. It requires building out core features as well as differentiated features, all with the right regulatory partnerships and infrastructure. Thus, Passbook is still relatively new, and it takes time to gain traction. We continue to believe that providing broader financial services for immigrants is a significant opportunity that we’re uniquely positioned to solve. We look forward to sharing more progress on that in future calls.

Our next question or comment comes from the line of Andrew Schmidt from Citi.

Matt and Susanna, congratulations on your first quarter as a public company. I wanted to discuss the important topic of pricing related to remittances. Could you share your philosophy on pricing and your current market position? When people think about remittance pricing, they often focus solely on that aspect, but there are other important factors involved, such as trust and low friction. It would be helpful if you could describe your pricing strategy and how it influences the decision-making process for customers when selecting a provider.

Yes, absolutely, Andrew. I’ll circle back on some of the points to start. I’ve learned over the last 10 years of building this business that it’s important to first and foremost, build peace of mind with customers. If historical pricing is very high, there is a sensitivity as you bring it down to that new equilibrium. But once we’re in that new equilibrium, customers care more about other features, such as whether their money will make it home or whether their information will be secure; elements like that. Our pricing philosophy is not always to be the best. It’s to be competitive, transparent, and focus on the long-term relationship with our customers. That’s how we set our pricing every day, both in terms of fee and foreign exchange. The last thing I’ll say in terms of pricing philosophy is that the industry often talks about take rate. While that’s important at an industry level, when we talk about the numbers I mentioned earlier, customers do not think in terms of take rate; they think about the total revenue they’re paying for a transaction. That’s fee and foreign exchange combined. For larger transactions, as you can easily do the math when talking about take rate, the take rate drops significantly. It’s also important to recognize that when customers send higher dollar amounts, they’re still sensitive to how much they pay overall, not just in percentage terms. When considering how we set our pricing, it’s long-term focused, transparent, and customer-centric to build more peace of mind.

Makes sense. Sorry if I doubled up on the question there. Appreciate the comments. If I could ask about send volume per active customer. Obviously, that took a hit during 2020 in the pandemic, and we’ve seen a pretty strong recovery this year. Are we in a more stable place here? Or is there more recovery as it pertains to the volume per active customer metric?

No, that’s an interesting question. My gut would be that we’re at a pretty stable place. You’re right, we did see a dip in send per active customer, particularly during the height of COVID in Q2 of 2020. It’s recovered to above $2,000 this quarter, while in prior periods we saw it a bit higher than that. But I would think it’s around or close to the normalized rate.

Our next question or comment comes from the line of Alex Markgraff from KeyBanc Capital Markets.

I wanted to revisit the revenue per active customer and gain insight into how we might approach this through the end of the year, taking into account the positive factors you mentioned for the third quarter concerning frequency and employment trends, as well as potential challenges related to the new customer mix and pricing for new customers. Any thoughts on this in comparison to the fourth quarter of last year would be helpful.

Yes. In terms of what’s driving the uptick in revenue per active customer, as I mentioned, it’s primarily driven by transaction activity. Some of that can be influenced by our own efforts. For instance, we have engagement programs to support customers through their first transaction and encourage them to refer and continue to transact. Obviously, the simpler our product is to use, it encourages repeat transactions as well, along with outstanding customer service and similar elements. We think it’s exciting to see customers transacting more frequently. Moving forward, there is perhaps some potential continued upside from that, but we’re not necessarily focused on that as a guaranteed outcome. External factors may come into play. I think things are probably reverting towards the norm in 2022, and we see this as a steady outlook.

Our next question or comment comes from the line of David Scharf from JMP Securities.

Matt, I want to skip the usual congratulations on the IPO and instead commend you on the Pledge 1% contribution. I’m currently reviewing their website and am amazed at the number of companies involved in this great initiative. I have two questions. Most of my queries have been addressed, but I'd like to follow up regarding the revenue per active user. This quarter's figure of over $47 is impressive. Looking ahead, there seem to be conflicting factors to consider. On one hand, the improving employment situation post-COVID should help. You also mentioned having tools to enhance engagement. On the other hand, as you ramp up marketing efforts and bring in new customers, there might be an initial dip in transaction frequency for these newcomers, which could pose challenges. With this context, I’m curious if you see that $47 as a potential ceiling or just a peak as you welcome more new customers. Any insights on these competing factors would be appreciated.

Yes. That’s a really good point. There are competing factors at play. I wouldn’t necessarily think of it as a ceiling. If I step back in terms of revenue per customer and how we think of it as a growth lever, the major drivers could include a more frequent transactions per customer like we saw this quarter, which can be influenced by various factors. As I mentioned, it could be influenced by higher revenue per transaction due to pricing changes or shifts in the corridor mix. Furthermore, the longer-term lever would be additional products as we innovate and deliver on our mission. There is a blend of dynamics that could drive continued growth in revenue per active customer. You’re correct that there is a mix effect. In Q4, we will likely see more new customers because of the seasonality that we see in the business. Thus, I wouldn’t necessarily assume that number will definitively increase in Q4.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.