REG - Wise PLC - Wise Plc Q4 FY23 Trading Update

WiseAnnouncement

18/04/2023 07:00

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RNS Number : 5072W  Wise PLC  18 April 2023

Wise plc

Q4 FY23 Trading Update

18 April 2023

 

Wise Account drives 33% customer growth YoY for Q4

and 73% growth in Total Income for FY23

 

"At Wise we are focused on our mission of building money without borders and
bringing faster, fairer options to more people and businesses around the
world. To deliver on this mission we're building a resilient, profitable
business that our customers can trust to be here for them through good times
and through the challenges of a more uncertain macroeconomic environment.

 

"Customers continue to choose the Wise Account to manage their finances around
the world, with customers in the UK, EU and the US now able to receive a
refund on a portion of their fees or earn a return while retaining instant
access to their money. Too many banks offer near-zero rates of interest on
deposits and we don't think this is fair. Our new features set a global
standard in how people and businesses can hold their money. Customers trust us
to hold £10.7 billion of their money, a 57% increase YoY.

 

"In March, we also launched a new look inspired by the millions of customers
we serve around the world. With accessible layouts, and fonts that work across
146 languages, the new look matches the ambition of our customers going
international and supports our continued global expansion.

 

"Our financial results this quarter show great progress on our mission. Over 6
million people and businesses used Wise for moving and managing their money
internationally during the quarter; a 33% increase YoY. And these customers
moved nearly £27bn (+25% YoY). This growth drove a 45% YoY increase in
revenue, and when combined with net interest income from the Wise Account,
resulted in total income growth of 83% YoY for the quarter and 73% YoY for
FY23."

 

一 Kristo Käärmann, CEO & co-founder, Wise

Mission highlights Q4 FY23

Our mission is clear - to build 'money without borders' and make moving and
managing money faster, easier, cheaper and more transparent for people and
businesses around the world.

 

During the quarter, we helped 6.1 million active customers move £26.7 billion
in cross-border volume; an increase of 33% and 25% YoY, respectively. Most of
these new customers are joining to use the Wise Account, proof of the
increasing appeal for both people and businesses around the world.

 

As a result, revenue for the quarter grew 45% YoY and total income of £279.5
million grew 83% YoY. This brought total income for FY23 to £964.3 million,
which at 73% growth YoY is above our most recent guidance of 68-72%.

 

Improving our product is key to how we grow and attract more customers. This
quarter we launched new features that allow customers to take advantage of the
higher interest rate environment while retaining full access to funds in their
Wise Account. There are two main ways we've done this:

 

●     First, we have expanded the Wise Assets product to provide more
customers with access to interest earning assets. This includes launches
across Singapore, France, Spain, Austria, the Netherlands, Finland and
Luxembourg, in addition to the UK, which launched in December 2022. These
funds allow our customers to earn returns in line with central bank rates.

 

●     Second, in Europe and the US(( 1  (#_ftn1) )), we're now giving
customers a return on cash held in their Wise Accounts by sharing some of the
income we generate on these customer balances.

 

These new features enhance the proposition of the Wise Account for people and
businesses, by providing a return as central bank rates rise, whilst
continuing to make sure our customers' money is safe and highly liquid.

 

Sustainably lowering prices for customers over the long run remains core to
our mission. We charge our customers what it costs us to offer our service,
plus a small margin, rather than what we can get away with. So our price,
which reflects our cost to deliver payments, changes when our costs go up or
down. At 0.65%, the average price remained broadly stable when compared to the
previous quarter's price.

 

It is our underlying infrastructure that powers our products and our
customers' ability to manage their money and move it around the world at rapid
speed. FY23 has been a milestone year for speed; with 55% of our cross-border
payments completed instantly and over 90% completed within 24 hours in Q4. Now
customers can expect instant payments from Hong Kong, instant top ups in
Brazil and 80% of all payments to Poland to be delivered within the day.

 

                    Q4 FY2023  Q4 FY2022  YoY Movement  Q3 FY2023  QoQ Movement
 Customer price¹    0.65%      0.61%      +4 bps        0.66%      -1 bps
 Instant transfers  55%        49%        +6 pps        52%        +3 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.

 

Wise Platform also went live with numerous new partners. This marks continued
momentum with tech partnerships and our early progress in onboarding large
banks to bring Wise-powered payments to their customers. This quarter we
integrated with Bank Mandiri, Indonesia's largest bank by assets and one of
the top established retail banks in the country. We have also seen momentum in
integrating US-based business service platforms including: Brex, Ramp, and
Bluevine; automated global electronic broker, Interactive Brokers; and global
employment platform, Globalisation Partners.

 

These product improvements, innovations and partnerships mark continued
progress toward our long-term mission to help more people and businesses
access fast, cheap, convenient and transparent payments.

 

By operating a profitable and sustainable business, we have the capacity and
confidence to continue investing in future growth, through the cycle, and
continue building the products and features our customers love.

 

As always, more detail on our mission highlights for the quarter can be found
on our website, including our mission roadmap
(https://wise.com/mission-roadmap/) , which sets out future product
improvements we have planned.

 

Growth and financial highlights

 

                                                        Q4 FY2023  Q4 FY2022  YoY Movement  Q3 FY2023  QoQ Movement
 Volume (£ billion)¹                                    26.7       21.4       25%           26.4       1%
 Revenue (£ million)                                    223.5      153.8      45%           225.2      (1%)
 Net interest income on customer balances (£ million)   56.0       (0.8)      nm⁵           43.5       29%
 Total income (£ million)²                              279.5      153.0      83%           268.7      4%
 Take rate (%)³                                         0.84%      0.72%      +12 bps       0.85%      -1 bps
 Total income take rate (%)⁴                            1.04%      0.71%      +33 bps       1.02%      +2 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

5.     Not measurable

 

The appeal of Wise for customers around the world continues to drive strong
active customer growth of 33% YoY and 6% QoQ, with 6.1 million active
customers in Q4 FY23, comprising 5.8 million personal (+34% YoY, +6% QoQ) and
340K business customers (+27% YoY, +7% QoQ). This growth primarily reflects
customers joining Wise to use the Wise Account.

 

Continued growth in active customers drove cross border volumes higher in Q4
FY23 to £26.7 billion, representing 25% growth YoY and 1% QoQ(( 2  (#_ftn2)
)). Personal customers moved £19.5 billion, 23% growth YoY, while Business
customers moved £7.3 billion, 30% growth YoY.

 

The average Volume Per Customer "VPC" reduced by 7% YoY and 4% QoQ. This was
driven by Personal VPC which reduced by 8% YoY and 3% QoQ as we continue to
see a slower pace of growth in higher-volume customer cohorts (>£10k). We
believe payments amongst these cohorts, such as for property purchases and
investments, to be more discretionary in nature and influenced by
macroeconomic conditions to a greater extent. For example, as seen at times of
FX volatility and USD strength like earlier in FY23 when we saw a pull-forward
of volume in these cohorts. This slower pace of growth in the higher-volume
customer cohorts (>£10k) combines with continued strong growth among the
more populous, lower-volume customer cohorts (<£10k), resulting in the
reduction of the average. Business VPC grew by 3% YoY as we continue to see
business customers scaling their use of Wise as they mature, and decreased 8%
QoQ reflecting seasonality.

 

Revenue for Q4 FY23 was £223.5 million up 45% YoY and down 1% QoQ. Our take
rate of 0.84% was up +12 bps YoY and down -1 bps QoQ. Revenue growth continues
to be supported by higher Other Revenues generated from the greater adoption
of the Wise Account, notably higher debit card spend which drives interchange
revenue.

 

The Wise Account and its value to customers has seen the cash customers hold
with Wise grow to £10.7 billion (+57% growth YoY), excluding the growing
balances that are held through our Assets features, reflecting the trust
customers continue to place in us.

 

Balance growth, combined with higher yields on invested assets, led to an
increase in gross interest income, to £71.6 million for the quarter. Interest
expense increased to £15.6 million, reflecting the progress in our plans to
share this benefit with more customers. As a result, net interest income was
29% higher QoQ, at £56.0 million (equivalent to a c.2% net yield). Consistent
with our approach of sharing economics with customers, which supports loyalty
and trust, we are still working to share more of this interest income with
customers. This will likely result in a lower net yield, and thus a smaller
proportion flowing to EBITDA, over time.

 

Total income, inclusive of net interest income, for Q4 FY23 was £279.5
million, 4% growth QoQ and 83% growth YoY. This resulted in total income for
FY23 of £964.3, 73% growth YoY, and above our most recent guidance of 68-72%.

 

We will update the market on our FY24 guidance at our full year results in
June 2023. Our previously provided medium term forward-looking guidance
remains unchanged:

●     Total income growth greater than 20% (CAGR)

●     Adjusted EBITDA margin at or above 20%

 

 

Please see the appendix for further historical financial information.

 

 

Analyst & Investor call

A call hosted by Matthew Briers (CFO) will be available for analysts and
investors at 9:00am (UK) this morning, 18 April 2023.  Webinar details can be
found here (https://vimeo.com/event/3316362) : https://vimeo.com/event/3316362
(https://vimeo.com/event/3316362)

 

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 / Daniel Holgersson

Wise@brunswickgroup.com

+44 (0) 20 7404 5959

 

About Wise

Wise is a global technology company, building the best way to move and manage
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 16 million people and businesses use Wise. Today we process on average
£9 billion in cross-border transactions every month, saving customers around
£1.5 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 "forward looking", "guidance", "target", "believe",
"expect", "intend", "may", "anticipate", "estimate", "forecast," , "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.

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                          Q4 FY2021  Q1 FY2022  Q2 FY2022  Q3 FY2022  Q4 FY2022  Q1 FY2023  Q2 FY2023  Q3 FY2023  Q4 FY2023  QoQ        Q YoY      FY2023  FY2022  FY YoY

                                                                                                                                       Movement   Movement                   Movement
 Customers (million)                3.5        3.7        3.9        4.3        4.6        5.0        5.5        5.8        6.1        6%         33%        10.0    7.4     34%
 Personal (million)                 3.3        3.4        3.7        4.1        4.3        4.7        5.2        5.5        5.8        6%         34%        9.4     7.0     35%
 Business (million)                 0.20       0.22       0.23       0.25       0.27       0.29       0.30       0.32       0.34       7%         27%        0.52    0.41    27%

 Volume per customer (£ thousand)   4.4        4.5        4.6        4.7        4.7        4.9        4.9        4.6        4.4        (4%)       (7%)       10.5    10.3    2%
 Personal (£ thousand)              3.6        3.6        3.7        3.7        3.7        3.8        3.9        3.5        3.4        (3%)       (8%)       8.1     8.1     0%
 Business (£ thousand)              18.1       18.6       19.4       21.6       20.8       22.2       22.9       23.2       21.4       (8%)       3%         53.7    47.7    13%

 Volume (£ billion)¹                15.6       16.4       18.0       20.6       21.4       24.4       27.0       26.4       26.7       1%         25%        104.5   76.4    37%
 Personal (£ billion)               12.0       12.4       13.5       15.1       15.9       18.0       20.1       19.0       19.5       2%         23%        76.6    56.9    35%
 Business (£ billion)               3.6        4.0        4.5        5.5        5.6        6.3        6.9        7.4        7.3        (1%)       30%        27.9    19.5    43%

 

 

 

 

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                                                 Q4 FY2021  Q1 FY2022  Q2 FY2022  Q3 FY2022  Q4 FY2022  Q1 FY2023  Q2 FY2023  Q3 FY2023  Q4 FY2023  QoQ        Q YoY      FY2023  FY2022  FY YoY

                                                                                                                                                              Movement   Movement                   Movement
 Revenue (£ million)¹                                      116.9      123.5      132.8      149.8      153.8      185.9      211.5      225.2      223.5      (1%)       45%        846.1   559.9   51%
 Personal (£ million)                                      93.7       96.9       103.4      114.7      118.4      144.4      164.8      173.7      173.4      (0%)       46%        656.3   433.4   51%
 Business (£ million)                                      23.2       26.6       29.4       35.1       35.4       41.5       46.7       51.5       50.1       (3%)       42%        189.8   126.5   50%

 Net interest income on customer balances (£ million)⁶     (0.6)      (0.6)      (0.6)      (0.8)      (0.8)      1.2        17.5       43.5       56.0       29%        nm⁵        118.2   (2.8)   nm⁵
 Personal (£ million)                                      (0.3)      (0.3)      (0.3)      (0.4)      (0.4)      0.6        9.1        23.2       29.8       29%        nm⁵        62.7    (1.4)   nm⁵
 Business (£ million)                                      (0.3)      (0.3)      (0.3)      (0.4)      (0.4)      0.6        8.4        20.3       26.2       29%        nm⁵        55.5    (1.4)   nm⁵

 Total income (£ million)²                                 116.3      122.9      132.2      149.0      153.0      187.1      229.0      268.7      279.5      4%         83%        964.3   557.1   73%
 Personal (£ million)                                      93.4       96.6       103.1      114.3      118.0      145.0      173.9      196.9      203.2      3%         72%        719.0   432.0   66%
 Business (£ million)                                      22.9       26.3       29.1       34.7       35.0       42.1       55.1       71.8       76.3       6%         118%       245.3   125.1   96%

 Take rate (%)³                                            0.75%      0.75%      0.74%      0.73%      0.72%      0.76%      0.78%      0.85%      0.84%      -1 bps     +12 bps    0.81%   0.73%   +8 bps

 Total income take rate (%)⁴                               0.75%      0.75%      0.74%      0.72%      0.71%      0.77%      0.85%      1.02%      1.04%      +2 bps     +33 bps    0.92%   0.73%   +19 bps

 

1.     Revenue for the periods Q4FY22, Q2FY23 and Q3FY23 have been
restated due to a reclassification of revenue type

2.     Includes revenue and net interest income on customer balances

3.     Revenue as a % of volume

4.     Total income as a % of volume

5.     "nm" indicates not measurable

6.     FY data is the sum of the quarters.

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

(( 1  (#_ftnref1) )) (In Europe this applies to our customers in the EEA
holding GBP, EUR and USD, and is applied automatically. In the US, customers
opt-in and earn returns on their USD balances.)

(( 2  (#_ftnref2) ))On a constant currency basis, Q4 FY23 total volumes grew
25% YoY and 1% QoQ and 35% YoY for FY23. On a constant currency basis, volume
is converted to GBP using the average rates of the prior financial period.

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