30 November 2021

 

Wise plc

Unaudited results for the six months ended 30 September 2021

 

"We're on a mission to make moving and managing money across borders faster, easier, cheaper and more transparent for everyone, everywhere.

 

Each quarter we strive to make progress on this mission. Over the first half of this year we've improved our products and engineered away substantial points of friction in the payments process, enabling us to sustainably lower prices while continuing to invest in growing the business for the long term. So a virtuous circle of investment continues, and our service gets faster, better and cheaper than ever for our personal and business customers.

 

Whilst we have made significant progress, millions of people and businesses continue to be overcharged and poorly served by banks and other payment providers."

 

Kristo Käärmann, Co-founder and Chief Executive Officer

 

Highlights for the six months ended 30 September 2021¹

 

We've made progress on our Mission

-       We managed to reduce the average price our customers pay for moving money across borders to 0.62% in Q2 FY22, down 7bps compared to the average prices in Q4 FY21;

-       Our payments got faster too. 40% of all transfers were delivered instantly in Q2 FY22;

-       We enhanced our Wise Account; excitingly we launched our Assets feature for customers in the UK, and made the account more useful for businesses around the world, who can now issue company cards to their employees and manage their expenses on Wise;

-       We've increased our platform partners with a further 10 partnerships commencing, taking the total

number to 30, and

-       We expanded our customer base: we served 3.9 million active customers in Q2 FY22, an increase of 7% from Q1 FY22 or 23% as compared to Q2 FY21;

-       Combined, this progress is driving our growth: we transferred over £34 billion for our customers in the period, 44% more than H1 FY21 (£24 billion).

 

We've become a stronger business, as we continue to generate healthy gross margins whilst reducing prices for our customers and investing in our long term growth

-       While growing volume by 44%, we also engineered and optimised away marginal costs and passed back the savings to customers;

-       As a result, whilst take rate reduced by 6bp to 0.75%, revenue grew by 33% to £256 million;

-       Gross profit grew by 46% to £174 million, with gross profit margin expanding from 62% to 68%;

-       Adjusted EBITDA margin of 24% was slightly lower than the 26% margin last year due to planned investment in our teams and products;

-       Free Cash Flow remains healthy, growing 39% to £59.0M compared to H1 FY21.

 

Outlook

-       Based on our progress and current outlook for volumes and price drops, we now expect annual revenue growth for FY22 to be mid-to-high 20s on a percentage basis;

-       As a result of the larger than anticipated cost savings flowing through into price reductions in the first half, we continue to expect the take rate to be slightly lower in the second half and for the gross margin to be c.65-67% for FY22, subject to foreign exchange-related costs continuing to remain broadly stable.

 

¹ All comparisons are against the six months ending 30 September 2020, unless otherwise stated.

Financial information

 

Selected financial Information: 

 

	Half-year ended 30 September		YoY Movement (%)
	2021	2020
Revenue	256.3	192.2	33%
Gross profit	173.8	119.2	46%
Gross profit margin	67.8%	62.0%	5.8 pps
Adjusted EBITDA¹	60.6	50.6	20%
Adjusted EBITDA margin²	23.6%	26.3%	-2.7 pps
Free cash flow (FCF)¹	59.0	42.3	39%
FCF conversion3	97.4%	83.6%	13.8 pps
¹ Refer to note 1.4 of the financial statements for definitions of adjusted EBITDA and FCF.
² Adjusted EBITDA as a proportion of revenue. 3 FCF as a proportion of Adjusted EBITDA.

 

Growth metrics:

 

	FY22			FY21			YoY Movement (%)
	Q1	Q2	H1 *	Q1	Q2	H1 *	Q1	Q2	H1
Customers (million)¹	3.7	3.9	-	2.8	3.2	-	29%	23%	-
Personal (million)	3.4	3.7	-	2.7	3.0	-	28%	22%	-
Business (million)	0.22	0.23	-	0.14	0.16	-	56%	44%	-
Volume Per Customer² (£ thousand)	4.5	4.6	-	3.8	4.2	-	19%	10%	-
Personal (£ thousand)	3.6	3.7	-	3.0	3.4	-	18%	6%	-
Business (£ thousand)	18.6	19.4	-	17.5	17.7	-	6%	9%	-
Volume³	16.4	18.0	34.4	10.7	13.2	23.9	54%	36%	44%
Personal (£ billion)	12.4	13.5	25.9	8.2	10.4	18.6	50%	30%	39%
Business (£ billion)	4.0	4.5	8.5	2.4	2.8	5.3	66%	57%	61%
Revenue	123.5	132.8	256.3	86.3	105.9	192.2	43%	25%	33%
Personal (£ million)	96.9	103.4	200.3	70.8	87.0	157.8	37%	19%	27%
Business (£ million)	26.6	29.4	56.0	15.5	18.9	34.4	72%	56%	63%
Cross-currency revenue take rate⁴ (%)	0.66%	0.64%	0.65%	0.75%	0.74%	0.74%	-9 bps	-10 bps	-9 bps
Take rate⁵ (%)	0.75%	0.74%	0.75%	0.81%	0.80%	0.81%	-6 bps	-6 bps	-6 bps
* We do not report the number of customers or volume per customer on a half-yearly basis.
¹ Total number of unique customers who have completed at least one cross currency transaction in a given period.
² Average volume per each active customer, calculated as total volume divided by total active customers in the period.
³ Total cross-currency funds converted by customers.
⁴ Total fees on international transfers as a proportion of volume.
⁵ Total revenue as a proportion of volume.

 

Results presentation

A presentation of the half-year results will be held at 9.30am Tuesday 30 November at Wise's offices in Shoreditch.Please contact Owner Relations if you wish to attend. A live webcast will be available via our website, www.wise.com/owners, and will be available for on-demand replay shortly after the presentation concludes.

 

Enquiries

Martin Adams - Head of Owner Relations

[email protected]

 

Abigail Daniels - Global Head of Public Relations

[email protected]

 

Brunswick Group

Charles Pretzlik / Sarah West / Samantha Chiene

[email protected]

+44 (0) 20 7404 5959

 

About Wise

Wise is a global technology company, building the best way to move money around the world. With the Wise account 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 11 million people and businesses have used Wise since it was founded. Today we process over £5.5 billion in cross-border transactions every month, saving customers over £1 billion a year.

 

Forward looking statements and other important information

This report may include forward-looking statements, including within the meaning of the US Private Securities Litigation Reform Act of 1995, 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", "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. 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. No representation or warranty is made or will be made that any forward-looking statement will come to pass.

 

Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Details of the potential risks and uncertainties affecting the Wise Group are described in the Group's filings with the London Stock Exchange, including in the TransferWise Ltd Annual Report and Accounts 2021.

 

The forward-looking statements in this report speak only as at the date of this report.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.

 

An update from Kristo, our Co-founder and CEO

 

We started Wise 10 years ago with the mission to make international banking faster, easier, cheaper and more transparent for everyone, everywhere. We've come a long way since then, including some significant strides forward in the last six months: we lowered costs and dropped prices (even faster than expected!), our payments got faster, we developed more features for businesses, initiated more platform partnerships and we launched our exciting new 'Assets' feature for customers in the UK.

 

Wise: infrastructure built for speed and efficiency

Improving our infrastructure allows us to lower our unit costs, letting us charge substantially less than leading traditional banks and consistently below many payment companies. We proudly charge our customers a transparent fee for each of our services, without cross-subsidising between customers, products or routes. We calculate the precise costs of our offering, and we charge the customer that amount plus a margin which we reinvest in the business. When our costs go down, we aim to lower our prices as soon as possible. We do this because we can, because it's fair, but also because we believe that over time this approach will ensure we create the lowest cost way to move money around the world.

 

In the most recent quarter, this average customer price was just 0.62%, a reduction of 7 basis points as compared to the average prices in Q4 FY21. This is a substantial reduction for millions of customers, with an exceptional 5 basis points coming in the most recent quarter. This reflects the amazing work from the team to reduce costs and our commitment to invest in sustainably lower prices.

 

We're continuously increasing the speed of our transfers as we develop our infrastructure, and in the most recent quarter 40% of our transfers were instant, 58% were delivered in under one hour, and 86% arrived in under 24 hours. We're able to estimate the time of delivery with an accuracy of nearly 80% which our customers value as important information. This compares to the two to five business days, on average, it takes a traditional bank to complete an international transfer with a high level of uncertainty on the exact time-frame for delivery.

 

Our coverage took an important step forward in the period as we launched in India, allowing Indian residents to send money to 40+ countries at the real exchange rate, with lower and more transparent fees. We then went on to make sending money to India a lot faster and more convenient. With the rollout of payouts via Unified Payments Interface (UPI), Wise customers can also send money to India instantly, and without needing to know their recipient's bank details.

 

Product and platform enhancements

Our Wise account continues to drive our growth as demonstrated by the 33% increase in our customer balances from £3.7 billion as at the year end to almost £5 billion as at 30 September 2021.

 

The Wise account enables our personal and business customers to send, receive, hold, convert, and spend money in a growing number of currencies, all in one place with only a few taps or clicks. In the past six months we made the account even more useful: UK customers can now invest with the UK launch of Assets. Assets give customers a potential return on their balance held with Wise by holding it in an index fund, while still being able to spend and send in an instant as though it were held as cash. We're also very pleased to be announcing today the launch of cards in Canada.

 

Our Wise Business proposition improved in the period with the launch of a number of new features, including the ability to attach receipts and notes to card transactions; and enhanced controls such as the ability for an account holder to delegate tasks, payment approvals and assign spending limits to accountants and team members.

 

Additionally, we have made further progress in serving customers through our platform partners. Wise Platform allows many more people and businesses to conveniently access Wise's cheap, fast and transparent international money transfers. Over the last six months we are delighted to have announced partnerships with Google Pay, Sable, Shinhan Bank, Temenos and Thought Machine, while enhancing the service provided with existing partners, most notably with Monzo and OnJuno. It's still early days but we're excited to help these Partners and their customers with their cross-border needs.

 

We've been investing in our infrastructure for a long time, and there is still a lot more to build. But it seems to be working. Our most recent Net Promoter Score was 75, Wise is rated 4.6/5 on TrustPilot with over 135,000 reviews and scores 4.7 out of 5 on the Apple App Store. This helps drive our growth in customers, as approximately 68% of new customers came through "word-of-mouth". In the last six months customers moved £34 billion through our platform, which represents a 44% growth over the same period last year.

But there are still many trillions moved outside of our platform, largely through the world's banks. So we have a long way to go to help these customers and achieve our Mission. Onwards.

Kristo.

 

 

A financial update from Matt, our CFO

 

Our mission is to create the best way to move and manage money around the world. We have a relentless focus on solving the problems facing our customers whilst building a sustainable and profitable business to support this mission. In doing this, and in particular, bringing transparency and fairness into how we price our products, we've found a common ground of creating value for our customers and also for our shareholders. A fundamental part of our mission is to reduce prices where we have engineered process friction and costs away, or as a result of scaling.

 

In the second quarter of FY22, 3.7 million personal customers and 230 thousand business customers used Wise Transfer and the Wise account to move and manage money across borders. This was an increase of 22% in the number of personal customers and 44% in the number of business customers as compared to the same period last year which were 3.0 million and 160 thousand respectively.

 

Across the first six months of the year, we processed £34.4 billion in cross-border payments (£23.9 billion in H1 FY21) which was a 44% increase as compared to the same period last year. Our personal customer and business customer volumes grew by 39% and 61% to £25.9 billion and £8.5 billion respectively.

 

The volume growth was faster than the growth seen in the number of customers, driven by the average volume per customer. This was significantly lower in the first quarter of last year due to the impact of the COVID-19 pandemic on customer demand for international payments, but quickly rebounded in the second quarter of prior year.

 

Furthermore, businesses typically send larger volumes compared to personal customers, and, as they represent a growing proportion of the total number of customers, the average volume per customer for the Group is gradually increasing and in the second quarter it stood at its highest point to date of £4.6 thousand.

In the first six months of FY22 we generated £256.3 million in revenue, a 33% increase versus £192.2 million in the same period last year. Revenue is largely a function of the volume our customers move and the prices we charge them.

 

Our cross-currency take rate reduced by 9bps to 0.65% in the first six months of FY22  as compared to 0.74% in the same period in the prior year. This was primarily as a result of the price drops mentioned above, however, the comparison to the prior period is also impacted by route mix volatility at the onset of the pandemic where we saw more volume being moved on higher priced routes. The reductions in price were enabled by reduced unit costs from more favourable terms with our banking partners and lower FX costs. With price reductions being funded in this way we are able to grow the business and strengthen our market position while generating the same level of gross profit to reinvest into our future.

 

The total take rate reduced by 6bps to 0.75% in H1 FY22 as compared to 0.81% in the same period in FY21, and is in line with the 0.75% in H2 FY21. This was less than the decline in the cross-currency take rate due to the growth in other fees which now represent 13% of our revenue for the period. The popularity of the Wise account has seen growth in other fees such as interchange fees on the account's debit card and fees on domestic transfers.

 

We produced £173.8 million of gross profit, a 46% increase as compared to £119.2 million in the same period last year and equivalent to a 68% gross margin (H1 FY21: 62%). This was due to cost of sales only increasing by 13% to £81.2 million from £71.8 million in H1 FY21. Increase in cost of sales is less than the increase in volumes over the same period due to the aforementioned reductions in unit costs that we passed on to our customers. This growth in gross profit, which is in line with our growth in volume, demonstrates that reductions in price can be made whilst sustaining our ability to invest.

 

We have three primary areas of investment focus: marketing, our product and sustainably lowering prices; all of which we believe in the long term drive more volume and more scale. This means we get to a lower unit cost and even more capacity to invest. This is how we create sustainable shareholder value.

 

Administrative expenses increased 56% to £152.2 million in the first six months of FY22 (H1 FY21: £97.6 million) which is primarily due to increase in employee costs and outsourced services and other administrative costs.

 

Employee costs increased £17.1 million or 25% to £84.8 million in the first six months of FY22 (H1 FY21: £67.7 million) as we continue to invest in our team to support further growth. We have expanded the size of the team by 688 people or 32% over the last year, with 2,883 Wisers working to deliver our mission at the end of H1 FY22.

 

Outsourced services and other administrative costs grew 101% to £58.3 million as compared to £29 million in H1 FY21. This increase was primarily due to additional costs incurred as part of becoming a public company, additional IT and marketing investments, as well as other costs relating to travel and events returning post-pandemic.

 

Capitalisation in the first six months reduced versus the same prior last year by 74% to £2.5 million (£9.6 million in H1 FY21). We expect our capitalisation to remain broadly at this lower level going forward. This change does not impact our cash flows and we continue to expand and invest in our engineering team.

 

Our Adjusted EBITDA margin was 24% for the period (H1 FY21: 26%) which corresponds to £60.6 million of Adjusted EBITDA (H1 FY21: £50.6 million) and a 20% increase over the prior year which reflects our commitment to investment in future growth whilst maintaining sustainability in our approach.

 

In the first six months of FY22 our profit before tax was £18.8 million compared to £20.0 million in the same period last year. This level of profit was slightly lower than the previous year as we continue to reinvest the majority of the additional gross profit delivered in the period while also incurring exceptional costs in the completion of our direct listing.

 

Free cash flow increased 39% over the prior year to £59.0 million (H1 FY21: £42.3 million) giving a free cash flow conversion ratio of 97% relative to Adjusted EBITDA (H1 FY21: 84%). This year-on-year increase in free cash flow reflects the underlying growth in Adjusted EBITDA.

 

As at 30 September 2021 we held £5.4 billion of cash and highly-liquid investment grade assets, up 32% from the end of FY21 (£4.1 billion). The majority of these assets are used to cover the £4.9 billion of Wise account customer deposits (£3.7 billion at the end of FY21), which we keep safeguarded and readily available. We also hold £344.6 million of Wise's "own cash", which is increasing thanks to the cash generating qualities of the business we've built.

 

We are well capitalised for the future and as at 30 September 2021, our group eligible capital of £230.7m is significantly above the minimum requirements set by our regulators around the world. We expect Wise to be subject to the new capital regime for investment firms in the UK known as Investment Firm Prudential Regime (IFPR). This will become effective from 1 January 2022 prospectively. Wise is well in excess of the upcoming new requirement and we do not expect any impact to our capital management policy in the near term as a result of this change.

 

In summary, our growth has been fuelled by building products and features that customers love and recommend. We re-invest our margins into improving our product and customer experience, marketing to help spread the word, and sustainably lowering prices. Our focus on our mission will not change as we continue to grow and scale, and neither will our focus on building a strong, sustainable and cash-generating business that is best placed to address the evolving needs of our customers and, in so doing, deliver shareholder value.

 

We're on a mission that will take a long time. It'll take investment, patience and commitment to our strategy. But it's working.

 

 

Financial outlook

 

Based on our progress and on our current outlook for both volumes and price drops in the second half of the year, we now expect annual revenue growth for FY22 to be mid-to-high 20s on a percentage basis.

 

As previously guided, our strategy of reducing costs first and then lowering our prices means that the take rate is expected to be slightly lower in the second half of FY22 compared to the first half. Our expectation for the gross margin for FY22 also remains unchanged at c.65-67%, subject to foreign exchange-related costs continuing to remain broadly stable.

 

 

Share issuance

 

As disclosed in the prospectus in respect of our direct listing on the London Stock Exchange in July 2021, several legacy employee share plans existed which, following admission, were to be closed to any further options or awards being granted under any of these employee share plans.  As at the date of the prospectus, 93,959,944 vested and unvested options were outstanding under these legacy employee share plans.

 

Wise operates an Employee Share Trust which can be used for the purpose of providing benefits to employees and former employees of the Group, including satisfying options and awards granted under the Company's employee share plans through the provision of Class A Shares.

 

The Employee Share Trust held 48,852,622 Class A Shares as at the date of the prospectus, which were available to satisfy the exercise or vesting of options and awards under the Company's employee share plans. Comparing the number of Class A Shares held in the Employee Share Trust with the number of options outstanding indicated 45,107,322 additional Class A shares which may, at some time, be required to provide the benefit offered under the legacy employee share plans.

 

Today, we have announced our intention to issue 30,000,000 Class A shares to be allotted to and held in the Employee Share Trust until they are required to satisfy the exercising of vested options.  We will review our need to issue Class A shares in relation to legacy and new employee share plans on at least an annual basis. In line with best practice for employee benefit trusts, the Employee Share Trust will not, without prior shareholder approval, hold Class A shares representing more than 5% of Wise's then issued share capital.

 

Adoption of the UK Corporate Governance Code

 

Following the direct listing on the London Stock Exchange in July 2021, we have formally adopted the UK Corporate Governance Code as published by the Financial Reporting Council (FRC) and will be making the required disclosures in our FY22 Annual Report and Accounts.

 

 

Responsibility statement of the directors in respect of the interim financial statements

 

We confirm that to the best of our knowledge:

 

●      the condensed set of financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as contained in UK-adopted IFRS;

 

●      the condensed set of financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group;

 

●      the interim management report includes a fair review of the information required by:

 

a)    DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and   

 

b)    DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

On behalf of the Board of directors:

 

 

 

Kristo Käärmann, Director

 

Date: 30 November 2021