Remitly ::UPDATE:: ADD

We added to our Remitly position (NAS:RELY). Remitly reported its earnings yesterday after the market closed. Despite posting a solid earnings report, the market responded negatively, sending the stock down as much as 23% in after-hours trading. As I write, RELY is trading at $15.35, marking a new 52-week low. Here’s a snapshot from the company’s press release:

First Quarter 2024 Highlights and Key Operating Data
(All comparisons relative to the first quarter of 2023)

  • Active customers increased to 6.2 million, from 4.6 million, up 36%.
  • Send volume increased to $11.5 billion, from $8.5 billion, up 34%.
  • Revenue totaled $269.1 million, compared to $203.9 million, up 32%.
  • Net loss was $21.1 million, compared to $28.3 million.
  • Adjusted EBITDA was $19.3 million, compared to $5.4 million.

2024 Financial Outlook
For fiscal year 2024, Remitly currently expects:

  • Total revenue in the range of $1,225 million to $1,250 million, representing a growth rate of 30% to 32% year over year.
  • To remain in a GAAP net loss position for 2024 and for Adjusted EBITDA to be in the range of $85 million to $95 million. This outlook reflects an increase from our prior Adjusted EBITDA outlook of between $75 million and $90 million.

Some analysts have pointed out a slight/tiny revenue miss, but all metrics were within the range management had anticipated. The management team continues to execute on their growth strategy, and the business is scaling as expected. Critics may point to high stock-based compensation, but this aligns with norms for early-to-mid stage tech companies. Adjusted EBITDA continues to show robust growth, demonstrating the scalable nature of the business. With Remitly’s capital-light model and minimal debt, scaling should increasingly translate into positive cash flow. The CEO noted on the call, “From just over $5 million in adjusted EBITDA a year ago to $19 million in the first quarter this year, and now guiding to $85 million to $95 million for the year. This ramp gives you a sense of how the business is gaining leverage.”

One of our core principles (Our Beliefs) is that market prices are generally wrong but should be respected. Said differently, market prices generally overshoot or undershoot a company’s true value, but analysts should always try hard to prove their argument against market prices. We have been wrong in the past and have no problem stating such with a clear voice. That being said, we see no evidence to suggest our thesis is challenged with Remitly. The company continues to perform and gain market share in a growing sector. We remain confident in our analysis, expecting the fundamentals to ultimately prevail and lead to a proper revaluation of Remitly’s stock. Until then, we recognize that patience will be our ally.

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