Remitly Global, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are with Q1 2021 unless otherwise noted. Remitly provides digital cross-border remittance services in more than 160 countries. Revenue primarily comes from transaction fees and foreign-exchange spreads.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $136.0 million | $91.1 million | +49% |
| Operating loss | $23.2 million | $8.6 million | Loss widened |
| Net loss | $23.3 million | $7.8 million | Loss widened |
| Adjusted EBITDA (non-GAAP) | $(12.1) million | $(5.8) million | Loss widened |
| Operating cash flow | $40.3 million | $62.9 million | Down $22.7 million |
| Cash and cash equivalents, March 31 | $444.6 million | $403.3 million at Dec. 31, 2021 | Up $41.3 million |
Transaction expenses were $56.3 million, or 41% of revenue, versus $41.1 million, or 45%, a lower share of revenue attributed to improved partner economics and scale. Marketing was $40.6 million (30% of revenue), technology and development $23.6 million (17%), and general and administrative $23.3 million (17%). The filing does not present a gross profit or gross margin measure.
At March 31, total assets were $627.5 million and total liabilities $156.0 million. The company had no revolver borrowings, with $231.1 million of unused capacity under its $250 million facility and $18.9 million of issued but undrawn letters of credit. It was compliant with facility covenants. Management said cash, cash equivalents, and available facility capacity should cover working capital needs for at least 12 months.
Material changes and management commentary
- Active customers increased 42% to 3.04 million; send volume increased 43% to $6.09 billion. Revenue growth was driven primarily by higher send volume and customer growth.
- Transaction expenses rose 37%, slower than revenue growth; management cited lower costs as a percentage of revenue from partner scale and direct integrations. Fraud and other transaction losses also increased, largely with customer and volume growth.
- Marketing expense rose 56%, partly reflecting customer acquisition investment and higher acquisition costs. Management expects customer acquisition costs to increase in 2022.
- Technology and development expense more than doubled, and management expects it to increase as a percentage of revenue in 2022 as the company invests in its platform, offerings, and geographic expansion. Management also expects operating costs to rise as business travel and events resume.
- Management described growth as stabilizing in 2022 amid inflation and labor shortages, while noting uncertainty about future customer behavior and the effects of macroeconomic conditions. The filing gives no specific revenue, earnings, or cash-flow guidance.
- Operating cash flow was supported by a $62.5 million reduction in disbursement prefunding, partly offset by a $14.5 million increase in customer funds receivable. The company cautions that prefunding and customer balances can vary with transaction timing and holidays.
Risks, contingencies, and unusual items
- Internal controls: Management concluded disclosure controls were not effective at the reasonable-assurance level. Material weaknesses involved IT change-management and user-access controls, as well as independent review of journal entries. Remediation was underway; management reported no resulting misstatement in these financial statements.
- Indirect taxes: An estimated $3.8 million liability was accrued at December 31, 2021 and remained unchanged at March 31, 2022. Final audit or settlement outcomes could differ materially.
- Transaction losses: The reserve was $3.8 million at quarter-end, after $10.6 million of provisions and $9.9 million of losses, net of recoveries, during the quarter.
- Foreign exchange: A hypothetical 10% move in the U.S. dollar against relevant currencies would have changed the fair value of foreign-currency-denominated assets and liabilities by approximately $8.7 million at March 31. The company did not use derivatives to hedge currency exposure.
- Equity compensation: Stock-based compensation expense was $9.6 million, versus $1.5 million a year earlier. A change in the ESPP offering period generated $3.6 million of incremental compensation cost to be recognized over the offering period.
- Subsequent lease: On May 4, the company renewed its Seattle headquarters lease for January 2023 through June 2025, with approximately $6 million in estimated incremental payments.
- Management said ordinary-course litigation was not expected to have a material adverse effect and reported no material off-balance-sheet arrangements. Risks identified include customer acquisition costs, fraud, competition, seasonality, regulatory requirements, COVID-19 effects, and macroeconomic and geopolitical developments.
Investor verification priorities
- Assess whether customer and send-volume growth can continue while losses and Adjusted EBITDA losses widen.
- Track customer acquisition costs, marketing efficiency, and the return on technology and geographic-expansion spending.
- Review cash-flow quality, particularly the effect of variable disbursement prefunding and customer settlement timing.
- Monitor remediation and testing of the disclosed material weaknesses in financial reporting controls.
- Evaluate potential changes to indirect-tax exposure, transaction-loss reserves, and foreign-exchange risk.
- Consider that Q1 2021 loss per share is not directly comparable with Q1 2022: the IPO-related preferred-stock conversion and substantially different weighted-average share counts affected the per-share comparison.