Remitly Global, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023; filed August 3, 2023. Remitly provides digital cross-border money transfers and related financial services. Financial amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | First half 2023 | First half 2022 |
|---|---|---|---|---|
| Revenue | $234.0M | $157.3M | $437.9M | $293.3M |
| Operating loss | $18.2M | $39.4M | $46.3M | $62.6M |
| Net loss | $18.9M | $38.2M | $47.2M | $61.6M |
| Adjusted EBITDA (non-GAAP) | $20.4M | $(5.3)M | $25.8M | $(17.4)M |
| Operating cash flow | Not separately provided | Not separately provided | $(51.5)M | $26.0M |
Q2 revenue grew 49% year over year; net loss per share was $(0.11), versus $(0.23). Revenue growth and lower operating losses improved GAAP operating performance; the operating loss margin was approximately 7.8%, compared with 25.0% in Q2 2022. Adjusted EBITDA is a company-defined non-GAAP measure and excludes, among other items, stock-based compensation, foreign-exchange gains and losses, and certain acquisition costs.
Q2 send volume rose 38% to $9.6 billion; active customers increased 47% to 5.0 million. First-half send volume increased 39% to $18.1 billion. Management attributed revenue growth mainly to customer growth, customer retention, and a mix shift toward digital disbursements; Rewire contributed about 2% to year-over-year revenue growth.
In Q2, transaction expenses were 34% of revenue, versus 39% a year earlier; marketing was 23%, versus 28%; customer support and operations were 9%, versus 11%. Technology and development remained 23%. These ratios show scale efficiencies in transaction costs, marketing, and support, alongside continued technology investment. First-half technology and development expense rose 74% to $103.7 million.
At June 30, cash and cash equivalents were $227.5 million, down from $300.6 million at year-end 2022. Total current assets were $679.2 million and current liabilities $226.7 million; these balances include substantial customer-related funds and prefunding. The company had $34.0 million outstanding under its $250 million revolving facility, $190.0 million of unused borrowing capacity, and $26.0 million of undrawn letters of credit. The $34.0 million balance was repaid July 3, 2023. The company reported compliance with its facility covenants and said cash and available facility capacity should meet working-capital needs for at least 12 months.
First-half investing cash use was $44.8 million, including $40.9 million net cash paid for the Rewire acquisition. Financing cash flow was positive $23.2 million, reflecting facility borrowings and repayments and repayment of acquired debt. The company reported $36.4 million of total debt at quarter-end, including $34.0 million of revolving borrowings and $2.4 million of assumed short-term debt.
Material changes and notable items
- Rewire acquisition: Completed January 5, 2023, for $77.9 million of consideration. The acquisition added $54.9 million of goodwill and $19.1 million of net identifiable intangibles. Rewire contributed $3.7 million of Q2 revenue and a $9.7 million net loss since acquisition. Purchase-price allocation remained preliminary in certain respects.
- Cash flow: First-half operating cash flow shifted from positive $26.0 million to negative $51.5 million. Management primarily attributed the change to growth and timing of customer transaction balances, including a $117.9 million increase in disbursement prefunding; the quarter ended on a Friday, affecting settlement timing.
- Foreign exchange: Other expense was $1.5 million in Q2, versus $1.7 million of other income a year earlier, mainly reflecting foreign-exchange remeasurement. Management estimated that a hypothetical uniform 10% currency move would change the fair value of customer transaction-related assets and liabilities by approximately $24.0 million at June 30, 2023; the company does not currently use derivatives to hedge this exposure.
- Prior-period adjustment: Q2 2022 included a $6.3 million stock-compensation correction recorded as an out-of-period adjustment. Management said it was not material to historical periods individually or in aggregate, though material to Q2 2022; comparisons of general and administrative expense should account for it.
Outlook, risks, and contingencies
The filing provides no numerical revenue, profit, or Adjusted EBITDA guidance. Management expects to increase marketing investment and continue investing in technology, product development, risk and security infrastructure, and geographic expansion; these investments may affect short-term profitability. The company notes seasonal peaks in customer activity and working-capital needs, particularly in Q4, and that customer acquisition can weigh on results initially.
Key risks include maintaining money-transmission licenses and regulatory approvals; fraud, transaction losses, and security or service availability; dependence on payment and disbursement partners; foreign-exchange and macroeconomic volatility; customer acquisition and retention; and the ability to sustain profitability. The company had accrued approximately $7.1 million for indirect taxes, compared with $6.0 million at year-end, and cautioned that final audit or settlement outcomes could differ materially. Management did not believe ordinary-course litigation presented a reasonably possible material loss. Disclosure controls were judged effective at a reasonable assurance level, with no reported quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Whether customer, send-volume, and revenue growth translate into sustained GAAP profitability, and how recurring stock-based compensation affects that assessment.
- How Rewire performs against acquisition expectations, including its reported losses, integration costs, and final purchase-price allocation.
- Whether negative operating cash flow reflects temporary settlement timing or a continuing funding requirement as transaction volumes grow.
- Revolving-credit usage, interest costs, covenant compliance, and liquidity needs during seasonal peaks; confirm the reported July 3 repayment of the quarter-end draw.
- Potential changes in indirect-tax liabilities, transaction-loss reserves, foreign-exchange exposure, and regulatory or partner-related risks.