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REG - Wise PLC - Strong momentum in Q2, supports outlook for year

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RNS Number : 1788D  Wise PLC  18 October 2022

Wise plc

Q2 FY23 Trading Update

18 October 2022

 

 

Strong momentum continued in Q2, supporting our improved outlook for the year

 

 

Wise is disrupting a massive and underserved market and in the second quarter
we helped 5.5 million active customers move £27 billion across borders, a 50%
increase on the same period last year.

 

Our success is thanks to our superior products that customers love. Our team
continued to improve our products. Wise is now available to more people and
businesses, easier to use, and more secure.

 

These products are powered by our infrastructure, and we delivered more than
half of our payments instantly for the second consecutive quarter. Whilst we
continue to work hard to lower prices, the average price increased in Q2 in
response to higher FX costs.

 

We will continue to invest heavily in products and infrastructure and take the
lead in driving down the cost of cross-border transfers; and at the same time
we maintain a profitable business model that is highly cash generative.

 

Kristo Käärmann, CEO and co-founder said:

"This quarter 5.5 million customers moved £27 billion with us, 50% more than
in Q2 last year and for the second consecutive quarter more than half our
payments were instant. The Wise Account and Wise Business products continue to
see good levels of adoption and this increased engagement with our product,
higher volumes and faster speeds are a result of the longer term investments
that we have been making.

 

We've seen extreme macroeconomic conditions persist throughout the second
quarter, and whilst unfortunately this meant we had to raise prices slightly
for some customers, we've been working hard to limit these increases and are
working to bring them back down again."

 

 

 

 

Mission highlights for Q2 FY23

 

                    Q2 FY2023  Q2 FY2022  YoY Movement  Q1 FY2023  QoQ Movement
 Customer price¹    0.64%      0.62%      +2 bps        0.61%      +3 bps
 Instant transfers  50%        39%        +11 pps       52%        -2 pps

 

1.         Customer price is based on a fixed basket of representative
currencies which reduces the effect from route mix and other factors, making
it a more accurate representation of our progress in reducing the cost of
international transfers over time.

 

We have four pillars that drive our mission: price, speed, convenience and
transparency.

 

Our mission is to lower prices for customers over time. During this quarter,
high levels of FX volatility led to higher costs and as a result, the average
customer price increased to 0.64% compared to 0.61% in Q1 FY23 and 0.62% in Q2
FY22.

 

However, we were able to lower fees for some currency routes. Through a new
partnership, we reduced fees when sending money to Chile and we negotiated
cheaper fees for sending money to China. In Brazil, we now use our own FX
licence, which has reduced the cost to deliver, and we've passed these savings
on to our customers.

 

For the second consecutive quarter, we completed more than half of our
transfers instantly. Some of our payments in Brazil were slower, but we are
rectifying this by connecting directly into our partner bank's API. After
integrating with new partners, it's now faster to send money to Japan and
Chile and transfers to Hong Kong got faster too. We're also continuing our
work to speed up financial crime checks, which once completed is expected to
help reduce delays. Overall, approximately 90% of all transfers were completed
within 24 hours and speed remains an important feature for overall customer
experience.

 

Improvements made to our product and controls meant transactions are being
paused less often and as a result customers contacted us less than last
quarter. We also grew our Support Team so our wait times dropped by 50% when
contacted by phone and email.

 

Product enhancements in the last few months have made it easier for customers
to onboard with us and have made Wise Account and Wise Business easier and
more secure to use. Below are some examples of improvements we've made:

 

●     Ability to use wire transfers to send to USD, previously only ACH
payments were available; and increased transfer limits when funded by Wise
Account balance.

●     Over 200 countries and territories can now get USD SWIFT account
details, so customers can receive USD from pretty much anywhere in the world.

●     When sending money through Alipay in China, customers can now send
directly to Alipay Wallet.

●     Ability to move money with INTERAC e-Transfer Request in Canada.

●     We've added ways to get customer ID verified faster and easier.

●     Extra security on your account with a unique communication code.

●     Improved scam prevention and scam reporting.

●     Re-designed Business dashboard making it easier to find the
features that matter most to customers.

●     Businesses can get paid directly through Wise by sharing 'payment
request' links.

●     The new "International Receive
(https://platform.wise.com/solutions/intl-receive?utm_campaign=Wise%20Platform%20Awareness%20Generic&utm_source=wiseblog&utm_content=swiftreceive)
" feature allows our Platform partners to use Wise as a correspondent,
leveraging our SWIFT connection to receive funds from all over the globe,
rather than being connected to the SWIFT network themselves.

●     We expanded our partnership; adding the Swiss finance disruptor,
Yapeal, and financial wellbeing platform, Wagestream.

 

On our website you can find more detail on our mission highlights for the
quarter, and our mission roadmap (https://wise.com/mission-roadmap/) , which
sets out future product improvements we have planned.

 

Growth and Financial highlights

 

                                                        Q2 FY2023  Q2 FY2022  YoY Movement  Q1 FY2023  QoQ Movement
 Volume (£ billion)¹                                    27.0       18.0       50%           24.4       11%
 Revenue (£ million)                                    211.5      132.8      59%           185.9      14%
 Net interest income on customer balances (£ million)   17.5       (0.6)                    1.2
 Total income (£ million)²                              229.0      132.2      73%           187.1      22%
 Take rate (%)³                                         0.78%      0.74%      +4 bps        0.76%      +2 bps
 Total income take rate (%)⁴                            0.85%      0.74%      +11 bps       0.77%      +8 bps

 

1.     Cross-border volume only

2.     Includes revenue and net interest income on customer balances

3.     Revenue as a % of volume

4.     Total income as a % of volume

 

As previously announced, we will now be presenting the components of "total
income" comprised of revenue (as previously definand net interest income from
customer balances. Our adjusted EBITDA margin will now therefore be calculated
as adjusted EBITDA as a percentage of total income. Previously, net interest
income from customer balances and operating assets was included in EBITDA but
presented between gross profit and operating profit. A historical income
statement for H1 FY22 and FY22 on this basis is provided in the appendix to
this announcement.

 

5.5 million customers transacted on Wise in Q2 FY23, an increase of 40% YoY
and 10% QoQ, comprising 5.2 million personal and 300K business customers. This
increase in active customers was mostly driven by greater adoption of the Wise
Account and Wise Business products, where customers tend to transact more
frequently and use more features. Regionally, the growth in active customers
across our established markets has been consistent, and we're seeing strong
growth in newer markets where we currently have a smaller share.

 

Total cross-border volumes for Q2 FY23 were £27.0 billion, 50% higher YoY and
11% higher QoQ. Personal volumes increased 49% YoY to £20.1 billion and
Business volumes increased 55% YoY to £6.9 billion. Volume growth was driven
by the higher number of active Wise Account and Wise Business customers, who
typically have a higher average volume per customer (VPC). VPC continued to
increase for both personal and business customers. The growth also reflects to
a lesser extent FX translation impacts and higher FX volatility. On a constant
currency basis(1) volume grew 43% YoY.

 

Revenue for Q2 FY23 was £211.5 million, growing 59% YoY and 14% QoQ. Revenue
for the first half of FY23 was £397.4 million, 55% higher than the first six
months of FY22.

 

Total income (revenue plus net interest income on customer balances) for Q2
FY23 was £229.0 million, a 73% increase on last year. This included £17.5
million of net interest income, and we expect this to increase in the second
half of the year given the interest rate outlook. We will share much of this
interest income benefit with our customers, through pricing, but we will also
use some to invest in growth. Total income for H1 FY23 was £416.1 million,
63% higher than the same period last year.

 

Total income take rate, which includes net interest income, was 0.85% in the
quarter. Excluding net interest income, our take rate increased 2bps QoQ to
0.78% from 0.76% in Q1 FY23, reflecting the impact of price rises announced in
August 2022 and an increase in the other revenue line items. Other revenue
benefited from greater uptake of customers using the Wise Account in the form
of higher debit card spend and interchange fees.

 

As a result of the continued strong momentum, and as outlined on 29 September
2022, our financial guidance for the year has been upgraded. Our revised
expectations are set out below:

 

·          Total income growth between 55-60% in FY23 and greater
than 20% (CAGR) over the medium-term

·          Adjusted EBITDA margin over the medium term at or above
20% of total income

 

Please see the appendix for further historical financial information.

 

 

(1) Volume is adjusted for translational exchange rates using the average
rates applied in the prior financial year.

 

 

 

 

 

Analyst & Investor call

A call hosted by Matthew Briers (CFO) will be available for analysts and
investors at 9:00am (UK) this morning, 18 October 2022.  Pre-registration
details can be found here:
https://transferwise.zoom.us/webinar/register/WN_aQXQKNtuSHe2N2epTRbdQw
(https://transferwise.zoom.us/webinar/register/WN_aQXQKNtuSHe2N2epTRbdQw)

 

Enquiries

Martyn Adlam - Head of Owner Relations

martyn.adlam@wise.com

 

Sana Rahman - Global Head of Communications

press@wise.com

 

Brunswick Group

Charles Pretzlik / Sarah West / Nick Beswick

Wise@brunswickgroup.com

+44 (0) 20 7404 5959

 

About Wise

Wise is a global technology company, building the best way to move money
around the world. With Wise Account and Wise Business, people and businesses
can hold over 50 currencies, move money between countries and spend money
abroad. Large companies and banks use Wise technology too; an entirely new
cross-border payments network that will one day power money without borders
for everyone, everywhere. However you use the platform, Wise is on a mission
to make your life easier and save you money.

 

Co-founded by Kristo Käärmann and Taavet Hinrikus, Wise launched in 2011
under its original name TransferWise. It is one of the world's fastest growing
tech companies and is listed on the London Stock Exchange under the ticker
WISE.

 

Over 13 million people and businesses use Wise. Today we process on average
over £9 billion in cross-border transactions every month, saving customers
over £1 billion a year.

 

 

FORWARD LOOKING DISCLOSURE DISCLAIMER

This report may include forward-looking statements, which are based on current
expectations and projections about future events. These statements may
include, without limitation, any statements preceded by, followed by or
including words such as "target", "believe", "expect", "aim", "intend", "may",
"anticipate", "estimate", "forecast," "plan", "project", "will", "can have",
"likely", "should", "would", "could" and any other words and terms of similar
meaning or the negative thereof. These forward-looking statements are subject
to risks, uncertainties and assumptions about Wise and its subsidiaries. In
light of these risks, uncertainties and assumptions, the events in the
forward-looking statements may not occur. Also, Past performance cannot be
relied upon as a guide to future performance and should not be taken as a
representation that trends or activities underlying past performance will
continue in the future, and the statements in this report speak only as at the
date of this report. No representation or warranty is made or will be made
that any forward-looking statement will come to pass and there can be no
assurance that actual results will not differ materially from those expressed
in the forward-looking statements.

Wise expressly disclaims any obligation or undertaking to update, review or
revise any forward-looking statements contained in this report and disclaims
any obligation to update its view of any risks or uncertainties described
herein or to publicly announce the results of any revisions to the
forward-looking statements made in this report, whether as a result of new
information, future developments or otherwise, except as required by law.

Appendix - Historical Financials

 

 

 Quarterly                          Q2 FY2021  Q3 FY2021  Q4 FY2021  Q1 FY2022  Q2 FY2022  Q3 FY2022  Q4 FY2022  Q1 FY2023  Q2 FY2023  QoQ        YoY

                                                                                                                                       Movement   Movement
 Customers (million)                3.2        3.4        3.5        3.7        3.9        4.3        4.6        5.0        5.5        10%        40%
 Personal (million)                 3.0        3.2        3.3        3.4        3.7        4.1        4.3        4.7        5.2        10%        40%
 Business (million)                 0.16       0.18       0.20       0.22       0.23       0.25       0.27       0.29       0.30       5%         31%

 Volume per customer (£ thousand)   4.2        4.4        4.4        4.5        4.6        4.7        4.7        4.9        4.9        1%         7%
 Personal (£ thousand)              3.4        3.5        3.6        3.6        3.7        3.7        3.7        3.8        3.9        1%         6%
 Business (£ thousand)              17.7       19.1       18.1       18.6       19.4       21.6       20.8       22.2       22.9       3%         18%

 Volume (£ billion)¹                13.2       15.0       15.6       16.4       18.0       20.6       21.4       24.4       27.0       11%        50%
 Personal (£ billion)               10.4       11.5       12.0       12.4       13.5       15.1       15.9       18.0       20.1       11%        49%
 Business (£ billion)               2.8        3.5        3.6        4.0        4.5        5.5        5.5        6.3        6.9        9%         55%

 

1.     Cross-border volume only

 

Note: Differences between 'total' rows and the sum of the constituent
components of personal and business are due to rounding.

 

Appendix - Historical Financials (continued)

 

 

 Quarterly                                              Q2 FY2021  Q3 FY2021  Q4 FY2021  Q1 FY2022  Q2 FY2022  Q3 FY2022  Q4 FY2022  Q1 FY2023  Q2 FY2023  QoQ        YoY

                                                                                                                                                           Movement   Movement
 Revenue (£ million)                                    105.9      111.9      116.9      123.5      132.8      149.8      153.8      185.9      211.5      14%        59%
 Personal (£ million)                                   87.0       89.8       93.7       96.9       103.4      114.7      118.3      144.4      164.7      14%        59%
 Business (£ million)                                   18.9       22.1       23.2       26.6       29.4       35.1       35.5       41.5       46.8       13%        59%

 Net interest income on customer balances (£ million)   0.5        0.2        (0.6)      (0.6)      (0.6)      (0.8)      (0.8)      1.2        17.5
 Personal (£ million)                                   0.3        0.1        (0.3)      (0.3)      (0.3)      (0.4)      (0.4)      0.6        9.1
 Business (£ million)                                   0.2        0.1        (0.3)      (0.3)      (0.3)      (0.4)      (0.4)      0.6        8.4

 Total income (£ million)¹                              106.4      112.1      116.3      122.9      132.2      149.0      153.0      187.1      229.0      22%        73%
 Personal (£ million)                                   87.3       89.9       93.4       96.6       103.1      114.3      117.9      145.0      173.8      20%        69%
 Business (£ million)                                   19.1       22.2       22.9       26.3       29.1       34.7       35.1       42.1       55.2       31%        90%

 Take rate (%)²                                         0.80%      0.75%      0.75%      0.75%      0.74%      0.73%      0.72%      0.76%      0.78%      +2 bps     +4 bps

 Total income take rate (%)³                            0.80%      0.75%      0.75%      0.75%      0.74%      0.72%      0.71%      0.77%      0.85%      +8 bps     +11 bps

 

1.     Includes revenue and net interest income on customer balances

2.     Revenue as a % of volume

3.     Total income as a % of volume

 

Note: Differences between 'total' rows and the sum of the constituent
components of personal and business are due to rounding.

Appendix - Historical Income Statement re-presented

 

 

                                            FY22     H122

 Revenue                                    559.9    256.3
 Interest income on customer balances       3.9      1.5
 Interest expense on customer balances      (6.7)    (2.7)
 Total Income                               557.1    255.1
 Cost of sales                              (185.8)  (81.2)
 Net credit losses on financial assets      (2.2)    (1.3)
 Gross profit                               369.1    172.6

 Administrative expenses                    (321.4)  (152.2)
 Net interest income from operating assets  -        -
 Other income                               5.8      0.9
 Other operating expenses                   (4.8)    -
 Operating profit                           48.7     21.3

 Finance expense                            (4.8)    (2.5)
 Profit before tax                          43.9     18.8

 Income tax expense                         (11.0)   (6.1)
 Profit for the period                      32.9     12.7

 

 

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