Remitly Global, Inc. — Q3 2023 Form 10-Q
Business context and period: Remitly provides digital international money transfers and related financial services. This unaudited filing covers the three and nine months ended September 30, 2023, compared with the same periods in 2022. Unless noted, amounts are in U.S. dollars.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $241.6 million | $169.3 million | $679.5 million | $462.5 million |
| Operating loss | $(36.9) million | $(35.6) million | $(83.2) million | $(98.2) million |
| Net loss | $(35.7) million | $(33.1) million | $(82.8) million | $(94.6) million |
| Net loss per share, diluted | $(0.20) | $(0.20) | $(0.46) | $(0.57) |
| Adjusted EBITDA, non-GAAP | $10.5 million | $(3.7) million | $36.3 million | $(21.1) million |
| Operating cash flow | Not separately reported | Not separately reported | $(19.1) million | $(27.8) million |
Q3 operating margin was approximately negative 15.3% and net margin approximately negative 14.8%, versus negative 21.0% and negative 19.5%, respectively, in Q3 2022. Nine-month operating and net margins were approximately negative 12.2% and negative 12.2%, respectively, compared with negative 21.2% and negative 20.5% in 2022. Adjusted EBITDA is a company-defined non-GAAP measure; the filing cautions that it excludes, among other items, recurring stock-based compensation and working-capital requirements.
At September 30, 2023, cash and cash equivalents were $223.3 million; cash, cash equivalents and restricted cash totaled $224.0 million. The company had $202.5 million of unused capacity under its $250 million revolving facility, with no revolver borrowings outstanding at quarter-end. Short-term debt was $2.4 million, related to Rewire’s advance for future deposits. The company reported compliance with facility covenants and said available cash and facility capacity should meet working-capital needs for at least 12 months.
For the first nine months, investing cash outflow was $47.5 million, including $40.9 million of net cash paid for the Rewire acquisition; financing cash outflow was $9.5 million. Cash, cash equivalents and restricted cash declined $76.7 million over the period.
Business trends and changes versus prior period
- Revenue grew 43% in Q3 and 47% for the nine-month period. Management attributed growth primarily to more active customers, retention, and a shift toward digital disbursements.
- Active customers increased 42% year over year to 5.4 million in Q3. Send volume rose 36% to $10.2 billion in Q3 and 38% to $28.4 billion for the nine months.
- Transaction expenses grew more slowly than revenue: 23% in Q3 and 28% for nine months. They declined to 35% of revenue in both 2023 periods, from 41% and 40%, respectively, reflecting partner economics and lower fraud and transaction losses.
- Marketing expense rose 42% in Q3 and 24% for nine months, while technology and development expense increased 58% and 68%, respectively. The latter was 24% of revenue in 2023 versus 21% in 2022, reflecting investment and higher personnel costs.
- Q3 net loss widened by $2.6 million year over year, despite higher revenue, while nine-month net loss narrowed by $11.8 million. Nine-month Adjusted EBITDA turned positive; Q3 also turned positive.
Outlook, commentary, risks and unusual items
- Guidance: The filing provides no clear numerical revenue, profit or EBITDA guidance. Management expects continued technology investment and expense growth to support product development, customer experience and geographic expansion, which may affect short-term profitability.
- Seasonality: Management expects customer activity and send volume generally to peak in Q4 around the Christmas holiday, typically alongside higher customer acquisition, marketing costs, transaction losses and working-capital needs.
- Rewire acquisition: Acquired in January 2023 for approximately $77.9 million of consideration. Rewire contributed $3.2 million revenue and a $10.0 million net loss in Q3; for the post-acquisition nine-month period it contributed $10.1 million revenue and a $28.2 million net loss. Purchase-price allocation remained preliminary in certain respects. The acquisition added $54.9 million of goodwill and $17.9 million of net intangible assets.
- Other unusual items: Q3 included $1.4 million in restructuring costs; initiatives were expected to be substantially complete by year-end and were estimated to generate $1.0–$2.0 million of annual savings. Stock-based compensation was $36.6 million in Q3 and $101.0 million for nine months. The company also recorded a $4.6 million stock donation expense in Q3 under its Pledge 1% commitment.
- Contingencies and exposures: Management accrued approximately $4.3 million for indirect taxes, down from $6.0 million at year-end 2022, but noted final audit or settlement amounts could differ materially. It reported no reasonable possibility of a material litigation loss. A hypothetical 10% currency move was estimated to change the value of customer transaction-related foreign-currency assets and liabilities by approximately $14.9 million at quarter-end; Remitly does not currently hedge this exposure with derivatives.
- Principal risks: Regulatory licensing and compliance, fraud and transaction losses, cybersecurity and service availability, partner and counterparty reliance, foreign-exchange movements, macroeconomic and geopolitical conditions, customer acquisition and retention, and the ability to achieve or sustain profitability. Management stated disclosure controls were effective at a reasonable assurance level.
Important facts for investors to verify
- Whether customer, revenue and send-volume growth can continue while operating expenses—especially technology, marketing and stock compensation—are managed relative to revenue.
- Whether positive Adjusted EBITDA translates into sustainable GAAP profitability and cash generation, considering its exclusions and the company’s working-capital demands.
- Rewire’s ongoing contribution, net losses, integration progress, final purchase-price allocation and settlement of the $13.8 million acquisition holdback liability.
- Quarter-end liquidity and cash-flow trends, including customer prefunding and receivable balances, facility availability, and the $2.4 million short-term debt maturity in November 2023.
- Developments in indirect-tax assessments, transaction-loss reserves, currency exposure, and regulatory or geopolitical risks.