In a world where money flows across borders as quickly as a swipe on a screen, Remitly Global (US:RELY) is sending shockwaves through the highly fragmented $1.6 trillion global remittance market. A small player with eyes on taking a bigger share of that opportunity, Remitly, pulled off an earnings coup, not only beating market expectations but also disproving the notion that growth must come at a high price.

With a robust balance sheet, skyrocketing revenues, and a keen eye on expanding frontiers, the company’s latest results are a playbook for digital disruption in a sector dominated by legacy providers, including Moneygram International (US:MGI) and Western Union (US:WU).

Let’s have a closer look at the numbers that sent RELY stock soaring 20.6% in Thursday’s trading.

Track Record of Rallies

To be sure, Remitly stock does have a track record of rallying on its “Earnings Day” each quarter, by a minimum of 10% according to data compiled by Fintel. The table below from Fintel’s earnings analysis page for RELY shows the performance of the stock before and after each result for the last few years.

Remitly’s second-quarter financials showed revenues reached $234 million, beating the Street’s $216 million consensus estimates. Adjusted EBITDA hit $20.4 million compared to a consensus of $1.3 million. The numbers are not just a sharp beat but also a telltale sign of the company’s vigorous push into unexplored markets. With nearly 280 million immigrants globally, the remittance field is vast, and Remitly has but skimmed the surface.

Expanding into new geographic markets, Remitly now has a presence in six out of the top 10 global remittance markets, with revenue from outside North America accounting for 20% of total revenues (versus 14% in the prior-year quarter), growing over 100% in the quarter.

The company’s expanding network, now with over 30 end markets and 4,800 corridors almost doubling in a year and a half, is not just an impressive feat but a calculated strategy to increase brand awareness, lower customer acquisition costs, and provide a buffer against region-specific macro trends.

This financial strength was emphasized by a significant raise in FY23 guidance, setting the stage for Remitly’s shares to materially outperform. The 2023 revenue guide was propped up by $35 million and adjusted EBITDA expectations raised to $33 million to $40 million (versus prior guidance of $5 million to $15 million).

Strong Unit Economics

This optimism is fueled by Remitly’s robust unit economics. During the June quarter, LIV-to-CAC (lifetime value to customer acquisition cost) exceeded the 6-times ratio disclosed during its IPO. Customer acquisition costs fell and transaction margins showed improvements, helping drive increased lifetime value. The take-rate also increased to 2.449 from 2.2586 a year ago, showcasing that growth isn’t price-driven.

Moreover, Remitly’s balance sheet continues to stand robust, with nearly $228 million in cash, giving the company substantial resources to invest aggressively in growth. Plans include incremental investments in brand marketing, new customer acquisition, geographical expansion, and complementary new products.

Remitly’s story is far from over. Capturing just a small share of the global remittance market, its growth story is in its early innings. The FXN revenue growth staying above the 50% level for the second consecutive quarter, and the 66% gross margins on elevated customer adds and pricing, further strengthens the company’s position as a growth powerhouse.

Management’s intentions to deepen engagement through non-core products and partnerships, such as the direct integration with M-PESA in Tanzania, hint at a future full of possibilities.

Goldman Weighs In

Goldman Sachs analyst Will Nance bumped up his ‘buy’ call target price from $22 to $25 following the bullish result, “encouraged by the trends in the business, particularly in the balance between topline growth and improvements in profitability”.

Nance believes Remitly is one of the most straightward market share gainer stories in the sector coverage with benefits from both customer acquisition and monetisation form th ongoing shift from remittance markets to digital cash channels.

Fintel’s consensus target price of $22.03 suggests the market thinks the stock could mount a further 20% rally over the next year. We think this consensus valuation could drift higher as analysts update modeling on stocks when rebasing expectations.

Remitly’s blowout second-quarter results are not just numbers but instead show how a company can use digital innovation, coupled with aggressive yet thoughtful expansion, to show success in a fragmented market.

Its meteoric growth, fueled by high trust earned from immigrant customers and strong network effects, paints a picture of a company that’s not just surviving but thriving. The stock’s 20.6% rally may just be a curtain-raiser for what lies ahead in Remitly’s enthralling journey through the complex web of global remittance.

Fintel’s forward sales projections driven by consensus estimates from analysts show the expectation for strong growth to continue in the coming years.  The trajectory thus far has been somewhat linear and may continue to do so with quality management.

This is a tale of tape and technology, money, and modernity, all woven into a mission-led growth story that’s just beginning to unfold.

This article originally appeared on Fintel

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