Introducing Remitly ($RELY)

Before going into the details, I’d like to say that Remitly ($RELY) is the one IPO (September 22) that I’m most excited about even though we’re expecting a handful of decent companies to go public soon. And this is mostly for 3 reasons:

1: The story and how the CEO/Co-Founder thinks about immigrants and how he wishes to better serve them (I was an immigrant once and used to work and send money back home)

2: The huge potential of penetrating the TAM (estimated at 960 billion by 2026) and increasing the SAM (Serviceable Addressable Market)

3: High almost-triple-digit Revenue Growth (92.2% for the last quarter)

What does RELY do?

According to their S-1… Our vision is to transform the lives of immigrants and their families by providing the most trusted financial service products on the planet.

That is a clear vision and a very inspiring one (if you ask me). In simple words, Remitly allows immigrants to send money (remittance) to their families in over 135 countries around the world.

The Trustpilot reviews are pretty decent with a 4.3/5 score and 83% rated Remitly excellent

I’m even surprised to see that they have 11 local providers where I live (Cyprus). 85% of their clients use the service through the Remitly App(as of June 30, 2021, the app had a 4.9 iOS App Store rating with more than 450,000 reviewers and a 4.8 Android Google Play rating with more than 170,000 reviewers).

In 2020, Remitly also launched Passbook in partnership with Sunrise Bank N.A., a digital banking service available through a mobile app and uniquely designed for immigrants.

The numbers

Revenue in millions

2019 126
2020 256
FH21 202

Revenue growth (very high growth)

2020 103%
FH21 92.2%

Gross profit margin (decent for the industry)

2019 55.87%
2020 57.03%
FH21 56.65%

Operating profit margin (improving significantly)

2019 (40%)
2020 (11.4%)
FH21 (5.2%)

Remitly currently offers

  • 75 currencies
  • 1700+ corridors (as defined on the S-1: corridor is the pairing of a send country, from which a customer can send a remittance, with a specific receive country to which such remittance can be sent)
  • $16 billion send volume
  • 6x+ avg 5-year LTV/CAC (how many times the customer is worth relative to the amount spent to acquire)

Final thoughts

Remitly is set to go public this Wednesday, September 22 with an estimated market cap of about 6.5 billion. This would give it an EV/Sales of around 17. Compared to PayPal (PYPL) that has an EV/Sales of 13 and currently growing at 25%, then RELY seems fairly valued. From what I’ve seen and read so far I like the potential and might buy some on day 1 and add RELY to my 5-6 stock portfolio.


This is certainly an interesting company that I also considered to introduce here. One important item to consider:

The dollar net retention rate is typically below 100%. What I understood from the S-1 is that the cohort in year X has a high net retention rate in year X+1 (presumably because they only used the service for some part of the year in year X and as of 1 January in year X+1) but after that, the net retention rate for that cohort goes below 100% because:

  • Some people drop off the service, e.g. no longer need to send money to family
  • The people that continue using the service will not necessarily use it more and more every year as the amount of money they are able send is limited to their income. Their income will typically stay stable over time and therefore, there is no room to increase the remittances consistently

=> Note here that they are extending to other financial services to existing customers, which may result in increased income from existing customers in the future, however they are just getting started here.

This also means that customer growth is very important to predict revenue next year, as almost all incremental growth will come from new customers rather than existing ones. Customer growth slowed down significantly YoY in Q2 due to extremely high COVID induced growth in Q2 last year (no time to figure out the complex formatting of TMF so excuse the layout):

2020 Q2-------2020 Q3----2020 Q4----2021 Q1-------2021 Q2

  • 385K-------+167K------+199K-------+245K---------+261K
    34% seq------11% seq------11.7% seq—12.9% seq—12.2% seq
    ----------------------------------------------- 87% YoY-----57% YoY

This leads me to conclude that it is likely that revenue growth will slow down towards 60%ish over the coming quarters.


I largely agree with the concerns and have one supporting argument, and also a counter argument.

Counter - they may still see some growth as:

  1. there will still be more immigration
  2. there may be some market share capture taken from high cost providers (WU)

But, I doubt that it has long term double digit growth potential.

Supporting - Crypto. There are numerous crypto options that are effectively low fee ways of transferring anywhere in the world in the next few years. I think that RELY and Western Union have some long term growth risks. Tech challenges to crypto transfers? All they need is a phone.


“There are numerous crypto options that are effectively low fee ways of transferring anywhere in the world in the next few years.”

Agree 100% - except it’s not the next few years, it’s now. People can send Bitcoin over the lightning network today for almost free. Anyone with a cell phone can do this using Strike - This is one of the major reasons El Salvador made Bitcoin legal tender for the entire nation. Their people get a large % of their money from remittances, but they were losing a big cut to companies like Western Union. By getting the whole nation to use Bitcoin on their phones, they speed up the enabling of free transfers of remittances and thereby increase their GDP by 25%.

I don’t know anything about RELY, but if their main source of revenue is taking a cut from people transferring remittances, I would personally not invest in that.


Hi Pavlos21,

Thanks for the write-up and bringing Remitly to the board. I have used Remitly (and other websites) for sending remittances abroad and thought I would offer my two cents as a user. Needless to say, take the following with a pinch of salt as I’m just one person and I have only sent remittances over one corridor.


  1. Lower rate vs peers (by lower rate I mean that the receiver received a lower amount for every $1 debited from my bank account)
    Since March 2020 I have been sending remittances abroad almost every month (sometimes twice a month). Over this period, I have used Remitly, Western Union, Instarem and Wise. For the first seven to eight months I would always compare the exchange rates offered by Remitly, WU and Instarem. However, for the past few months I have stopped bothering to check Remitly and WU, since the rates are lower than Instarem. Remitly was pretty much always the lowest rate as compared to Instarem and WU. I checked again today and though the rate was slightly better than I expected (slightly better than WU in fact), it was still about 0.5% lower than Instarem. Now, that maybe an inconsequential amount to a lot of users but once I realized that I could get more bang for the buck elsewhere, I never used Remitly again.

  2. Potentially high cost to acquire customers for a not-so-sticky service
    The only reason I used Remitly the one time was because of the referral bonus. I remember they offered an excellent exchange rate on the first transaction. Once I used the bonus, I just switched back to Instarem (also offers a referral bonus) and WU (no referral bonus).
    Now, the question here is would other users have the time and inclination to do the same? A friend evidently did not and he continues to use Remitly because he finds it easy to use and for the pro mentioned below (even though I have tried to convince him that Instarem is better!).

Express remittance
It is the only service that I know of that offers an express payment option. For a lower rate (about 1% lower than the rate offered by Instarem), the receiver would receive the money in a few hours instead of a few days later. WU and Instarem do not offer this service and while I have personally not needed to use the express payment option, I do see the value in case of emergencies.

In terms of UI, Remitly and Instarem are definitely better than WU. But, to me, that was less important as compared to the rate. I distinctly remember that I used WU for a few months because it had a better rate even though I had to navigate the clunky UI.

Since I’m not a massive fan of the service I’ll probably wait a few quarters for the numbers to prove out before I dive in.




Why is the gross margin much lower than Xoom’s?

I looked at the last public 10Q for Xoom from June 2015, before they were bought out by Paypal.
Xoom classifies its cost of revenues as:
-fees paid to disbursement partners for paying funds to the recipient
-paying bills to utility providers or processing mobile phone reloads
-provision for transaction losses
-fees paid to payment processors for funding transactions
-and the costs of certain promotional activities to acquire gross additional customers

The gross margin you show for Remitly is only calculated with use of “transaction expenses”
They define transaction expenses as:
-fees paid to disbursement partners for paying funds to the recipient
-provisions for transaction losses
-fees paid to payment processors for funding transactions
-bad debt expense
-fraud prevention costs
-costs for compliance tools.

There’s a key difference here, Remitly does NOT include costs of marketing promotions, which Xoom does include. Remitly also says "incentive costs that would have caused the customer level revenue to be negative are classified as advertising expenses and are included as a component of marketing expenses. In addition, referral credits given to a referrer are classified as marketing expenses."

Unforunately, we don’t know how much promotions/discounts/free transactions are given to customers each quarter, as they do not break that down from the marketing expense category.

So, their gross margins are going to be lower than the currently calculated 55%.
For reference, Xoom’s gross margins were 71% as of June 2015.

Remitly also has highly variable fraud losses. They say for Q2 2020, Q3 2020 and Q2 2021 the transaction expenses as percentage of revenue decreased primarily because of lower than average fraud, but that they increased in Q4 2020 and Q1 2021. What’s going on here? Will they demonstrate better fraud prevention/control over time?

Finally, they state many times that COVID was a primary driver of their accelerated growth since 2020. Will this abate over time as the pandemic presumably winds down? Their YoY active customer growth has slowed. I guess a positive here is that their revenue growth continued in 2021, as we have gotten farther away from March 2020. Their send volumes increased significantly (74% to 81%) despite YoY active customer growth slowing down from 87% to 57% in the last two quarters. That does look good.

That being said, they cite COVID as the reason marketing expenses were less than expected “starting in the second quarter of 2020, online marketing became less competitive due to COVID-19, allowing us to rapidly acquire new customers” and that “in the fourth quarter of 2020, online marketing competition started to return to pre-COVID-19 levels.”