Wise plc

Preliminary results for the financial year ended 31 March 2024

"2024 was another strong year of growth for Wise. We moved £118.5bn around the world for 12.8m customers, 29% more customers than last year, with much of this growth driven by the popularity of the Wise account. This led to a 31% growth in underlying income^[1] to £1.2bn with an underlying profit before tax of £242m (up 226%). We are investing in infrastructure and customer experiences to serve as much of this huge, under-served cross-border payments market as possible, including starting FY25 by reducing fees further for our customers."

Kristo Käärmann, Co-founder and Chief Executive Officer

Highlights for the twelve months ended 31 March 2024

Growth driven by 13 years of investment into our vision of money without borders

●   12.8m active customers served in FY24 (+29% YoY), moving £118.5bn (+13% YoY) across borders, with growth across segments and regions.

●   More customers than ever have adopted multiple features with their Wise account; 48% of personal and 60% of business customers - holding more than £16bn (+44% YoY) through the account (cash and Assets), with usage growing rapidly.

Growing fast and increasingly profitable

●   Customer growth, account adoption and higher interest rates drove underlying income up +31% YoY to £1.2bn (Revenue £1.1bn). After accounting for costs and reinvestment, we generated £242m of underlying profit before tax (+226% YoY), equivalent to an underlying profit before tax margin of 21%. 

●   Reported profit before tax rose to £481m (+229%) with basic earnings per share of 34.2p.

Investments made in FY24 will contribute to future growth

●   We continue to enhance our infrastructure: connecting to the Australian domestic payment system (NPP) increasing our direct connections to 5; achieving a tier 1 licence in Japan removing the ¥1m transfer limit; and collaborating with Swift to make it easier for banks and their customers to use Wise.

●   Operational efficiencies achieved in FY24 enabled a reduction in cross-border pricing of more than 2bps (effective from Q1 FY25), while 62% of payments are now instant.

●   Wise Assets 'Interest' launched in 5 more European countries, allowing more customers to earn an interest-like return by holding their money in government guaranteed assets.

●   We made it easier to receive money around the world, including introducing Wise Invoicing for business customers.

Investing relentlessly to serve as much of this huge, under-served market as possible

●    We will continue to invest in the substantial opportunity that exists for Wise.

●    Over the medium term we expect to operate to an underlying profit before tax margin of 13-16% (equivalent to an underlying adjusted EBITDA margin of 20-23%); sustainably reinvesting into the flywheel of growth, while generating the capital needed to support a fast-growing global financial services business.

●    Driven by customer growth, we expect underlying income growth of 15-20% CAGR over the medium term from FY24. FY25 underlying income growth over FY24 expected to be between 15-20% (20-25% when adjusting for outperformance in FY24 which led to price reductions at the start of FY25).

Financials - underlying basis

Growth Metrics

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

¹ Total number of unique customers who have completed at least one cross-border transaction in the given period.

² Average cross-border volume per each active customer, calculated as cross-border volume divided by total active customers in the period.

³ Cross-border volume only.

⁴ Customer balances do not include Assets Under Custody which are not recognised on the balance sheet.

⁵ Underlying income is an alternative performance measure comprising revenue, first 1% of gross yield of interest income on customer balances, and any interest expense on customer balances. It does not include interest income above the first 1% gross yield or benefits paid on customer balances.

⁶Total fees on cross-border transfers as a % of volume.

An update from Kristo, our Co-founder and CEO

We're building the best way to move and manage the world's money, making Wise increasingly useful and valuable to people and businesses globally

At Wise, we're solving a massive problem for people and businesses. It is estimated that people around the world move £2 trillion worth of money across borders each year, while businesses move an additional £9 trillion.

Most of this money moves on a slow, expensive, inconvenient and opaque legacy financial system. We're fundamentally changing this. Making it faster and easier to move money around the world, at a much lower and more transparent price. We've done this by building an alternative infrastructure and network for cross-border transactions.

In 2011, we started by building the infrastructure needed to send money from one country to another. Guided by our customers' feedback, we've built more products they need and love. Today, with their Wise accounts, people and businesses can send, spend and hold money in over 40 currencies, receive money using domestic account details, and use a debit card to spend like a local. And via Wise Platform, we're also able to offer people and businesses this same Wise experience through their local bank.

This customer-led approach is driving our growth. 12.8m customers used Wise to move money across borders in FY2024, 29% more than last year. Driven by customer growth, account adoption, and higher interest rates, we have seen underlying income grow by a CAGR of 41% and underlying profit before tax by a CAGR of 83% over the last three years.

We continue to grow quickly but sustainably. We remain well-controlled; reinvesting and generating a growing level of profitability.

Infrastructure that sets us apart

Our products and services are powered by our unique and increasingly powerful infrastructure as a replacement to the traditional correspondent system. We do this by connecting directly to local payment systems, and working with 90+ banking and payment partners around the world to ensure our service is effective and always available.

This network is connected in real time through our proprietary technology and global operations, as we operate under our 65+ regulatory licences around the world. We moved over £118bn across borders through this network last year.

We continue to invest in the network. This year we completed our integration with the New Payments Platform in Australia 一 meaning we are now directly connected to a total of 5 domestic payment systems globally.

We also continue to deepen our global licensing footprint. This year we completed a rigorous multi-year process to obtain a Type 1 Funds Transfer Service Provider licence in Japan. We are one of the first international financial services companies operating in the country to be granted this kind of licence, removing the 1 million yen limit on individual transfers we were subject to under the previous licence.

Operationally, we serve our customers at speed, with greatest convenience and, critically, with controls in place to protect both them and us from financial crime. This includes the design of our products, the checks completed when onboarding new customers and the continuous real-time monitoring of all transactions using machine learning to support the team.

The components of our infrastructure combine to enable a service which is reliable, fast (with more than 62% of transfers completed instantly in Q4 FY2024), and low cost (at an average price of 0.67% in FY2024).

Delivering products and features our customers love

We serve our customers with cross-border transfers and other services through three products: the Wise Account for personal customers, Wise Business for small and medium-sized businesses and Wise Platform for banks and other enterprises.

In FY2024 we continued to expand our products' availability. This includes launching a service for expats in China to send money home, removing charges for holding balances in Australia, enabling businesses in Brazil to receive up to 10,000 USD from Wise customers and increasing limits on transfers to Indonesia to 2bn IDR.

We rolled out Wise Assets 'Interest' into 5 European countries in FY2024, allowing more customers to earn an interest-like return on their euro (EUR) and sterling (GBP) balances via investments in low-risk funds backed by government assets. Wise Assets 'Stocks' launched in 11 European countries, letting customers hold their balances as ownership in the world's largest public companies.

We continued to increase functionality too. With the launch of WiseTag (a unique link or QR code) customers can now easily receive or request money from other Wise users without needing a mobile number or account details.  We took it a step further for business customers, who got access to Wise Invoicing which makes it easier for businesses to receive money in more than 9 currencies.

Wise Platform enables banks, other financial institutions and enterprises to bring the benefits of the Wise infrastructure to their customers conveniently through their own existing apps and accounts. In FY2024 Wise Platform continued to grow cross-border volumes in line with the rest of the business as we added more partners including Mox, Agoda, and Webexpenses, bringing the total to more than 85. We began to expand the features we provide to Platform partners too, for example providing Wise-issued cards to Tiger Brokers customers in Singapore and Parpera's in Australia.

Championing price transparency

Recent regulatory changes in the EU and warnings from the US consumer protection body, the Consumer Financial Protection Bureau (CFPB) to operators in the US are a big step forward towards bringing price transparency to life for consumers and businesses around the world. These changes are recognition of the value that clear and honest communication has for customers.

We believe that transparency should be non-negotiable. People and businesses should be clearly told upfront what a service is going to cost them so they can make a well-informed decision, rather than being tricked by 'fee-free' marketing or inflated exchange rates to disguise the real fees. That's why we always show customers a clear breakdown of what they will pay with Wise and why we have a fee comparison table on our homepage.

It's good to see more policymakers agree with us. We expect price transparency to become a basic expectation over time from customers and regulators. Over that time we will continue to build a great, transparent service for customers, available at the lowest cost.

Investment in growth is paying off

Investing in our growth is continuous and over the last 3 years to FY2024 we've been able to demonstrate the value of these investments with active customers growing by a 29% CAGR, cross-border volumes by 30% CAGR to £118.5 billion, and customer balances rose by a 53% CAGR to £13.3 billion.

The growing level of adoption, a growing customer base, and higher central bank rates were the drivers behind a 31% growth in underlying income to £1,172.7 million in FY2024 over FY2023.

After spending what is required to provide our services, we reinvest back into the growth of the business through marketing, better service, more products and infrastructure, and lower prices. All of which contributes to customer growth over time.

After accounting for these costs and reinvestments, we generated £241.8 million pounds of underlying profit before tax in FY2024. This represented a 226% increase over FY2023 and an underlying PBT margin of 21% in FY2024.  Reported profit before tax increased significantly to £481.4 million and basic earnings per share to 34.2 pence, an increase of more than x3 over FY2023 for each.

Onwards

I'm really pleased that we were able to help 12.8 million customers move money across borders in FY2024, but that equates to less than 5% of the people who have such a need and less than 1% of businesses. We have come a long way from our first customer and already shifted people's expectations to money without borders, but we're still in the beginning of our mission.  We will keep focusing on the things that make our customers evangelical about Wise, we'll continue to scale a company which creates massive value for customers and owners alike over the long-term. The best is yet to come.

A financial update from Kingsley, our interim CFO

We're serving more people and businesses with more products and features, making Wise increasingly valuable for all.

FY2024 was another year of strong customer-led growth and progress for Wise. We continued investing in building the products and features that customers need to move and manage their money around the world. This is working. Over 12.8 million customers used Wise for cross-border transactions in FY2024 and a growing number of customers are using us for much more. This has resulted in higher levels of profitability and growth across a broad base of geographies, customers and products.

Basis of presentation

For FY2024, we made the decision to change the way we present our financial information. As part of our commitment to transparency in everything we do, we believe these changes will provide a better representation of our underlying financial performance, as well as a clearer presentation of Wise's core business performance and longer term growth trajectory.

This change of reporting consists of:

-     A presentation of and focus on "underlying" financial performance, which excludes net interest income above the first 1% gross interest yield.

-     The lead earnings metric in our reporting will be "underlying profit before tax".  To date the lead earnings metric has been "Adjusted EBITDA".

-     From underlying profit before tax, we will then report the adjustment needed to reconcile to our reported profit before tax. This consists of:

-     Interest income above the first 1% yield; less

-     Benefits paid relating to customer balances.

More customers, more growth

In FY2024 active customers grew by 29% to 12.8 million, with 5.4 million new customers joining Wise and completing their first cross-border transaction. This growth in customers drove a 13% growth in cross-border volumes to £118.5 billion (16% growth on a constant currency basis), with double-digit growth across all five of our geographical segments (Europe, United Kingdom, North America, Asia Pacific, and the rest of the world).

Active Personal customers grew 29% to 12.2 million, with Personal volumes growing by 14% to £87.2 billion. At the end of FY2024, with an adoption rate of 48%, almost half of all Personal customers are now using the Wise Account.

The roll-out and popularity of the Wise Account is driving strong growth in the smaller (<£10k per quarter) Personal volume per customer (VPC) segment. In particular, when a Wise Account customer only uses their card for cross-border activity in a quarter ('card-only', as opposed to completing transfers), they typically have a cross-border VPC of £500 to £1,000, and the proportion of these 'card-only' customers in a given quarter is growing fast.

In Q1 FY2021 the proportion of active personal customers who were 'card-only' in this way was c. 3%, compared to our most recent quarter, Q4 FY2024, when this had risen to 17%.

The Personal segment VPC in Q4 FY2024 was c£3,000, which was down 11% compared to Q4 FY2023. Excluding these fast growing, lower-VPC 'card-only' customers, Personal VPC would be c.15% higher than reported in Q4 FY2024 and would have decreased by c. 6% compared to Q4 FY2023. Approximately half of this reduction is explained by translation into GBP and the other half mainly by the slower pace of growth among higher VPC customers (e.g. >£10k per quarter) since interest rates began to rise.

Active Business customers increased by 20% to 0.63 million, with 60% having adopted the account and with Business volumes increasing by 12% to £31.3 billion. The onboarding of new business customers in the second half of FY2024 was slower compared to the first half as we temporarily paused onboarding in the UK and EU due to operational capacity constraints at a time of high demand. We re-opened on a phased basis across countries, with some initially applying refined criteria to prioritise higher quality applications. Entering FY2025, we had resumed business customer onboarding across all major markets.

In total, cross-border revenue grew by 17% to £795.2m, driven by the growth in customers and volumes in addition to a 2bps higher cross take rate of 0.67%.

Rising adoption of the account resulted in 'Card and other revenue' growing by 54% to £256.8m. Underlying interest income rose by 2.4x to £120.7m, due to a 24% growth in customer balances to £13.3 billion combined with higher interest income yields as rates began to rise mid-way through FY2023.

Underlying income, which consists of cross-border revenue, card and other revenue, and underlying interest income, increased 31% to £1,172.7 million (Revenue £1,052.0 million, up 24% over FY2023). This includes Personal and Business segments growing 30% and 37% respectively. When we look at our different regions, we see all regions growing at pace.

The appeal of the Wise Account has driven customer growth and the value of these customers is noticeable. Within a quarter, Personal Wise account customers generate on average c25% more underlying income than Personal customers who only complete cross-border transfers. For Wise Business account customers it's even higher at c100%. Account customers tend to be more active over time with longer lives too.

Underlying gross profit grew 51%, creating capacity to reinvest back into growth

Cost of sales and net credit losses reduced by 2% to £319.9 million in FY2024. The implementation of enhanced controls reduced the levels of account-related costs such as chargebacks and overdrawn balances. We also continue to refine our management of FX costs which, especially in a period of low FX volatility, resulted in significantly lower costs in FY2024. Product losses and FX costs vary over time and we consider a year-on-year reduction in absolute terms as an exception that is unlikely to be repeated given the growth of the business.

Rapid underlying income growth of 31% and falling cost of sales combined to drive underlying gross profit up 51% in FY2024 to £852.8 million. This represents an underlying gross profit margin of 73%, significantly higher than the 63% in FY2023. Reported Gross profit was £1,092.4 million, an increase of £454.2 million (71%) on FY2023.

Gross profit provides us with the capacity to cover our operating expenses, invest in building a better experience for our customers and deliver our target underlying profit margin. Through reinvestment, we deepen our competitive advantage with infrastructure and products that continually improve, attracting more and more customers which leads to more gross profit to reinvest, and so the cycle continues.

Striving to reduce prices sustainably over time is an important form of investment for Wise. In recent years we have seen more price increases than decreases as we've needed to cover growing investments in our operational capabilities and have seen certain other costs fluctuate, such as FX and product losses. Entering FY2025 we were pleased to reduce cross-border prices by over 2 basis points, sustainably reinvesting gross profit margin into lower prices - the most common reason customers choose to join Wise.

Administrative expenses for the year increased by 25% to £615.9 million. This reflects investment into future growth as well as in the capacity required to onboard and serve a fast growing active customer base who are increasingly using more features.

At 31 March 2024, we had over 5,500 Wisers, a more than 2,000 increase over the last two years. The growth in our team resulted in employee benefit expenses increasing 28% to £377.3 million in FY2024. We expect to add around 1,000 roles over the course of FY2025. These Wisers will help us on our mission; building products, improving our infrastructure, supporting our core functions and helping to attract and serve even more customers.

For example, investing in our servicing teams will help us better manage any rapid rises in demand, such as we saw earlier this year. We are also continuing to grow the teams responsible for combating financial crime, overall compliance and risk management, which remain essential in a fast-moving and ever-changing regulatory environment. 

A focus on the effectiveness of incremental marketing through FY2024 resulted in spend of £36.5 million which was broadly flat on FY2023 and our marketing team growing by 27%, while the number of new customers rose by approximately 20% to 5.4 million. We expect our enhanced understanding of the incremental benefits of marketing across segments and channels to unlock greater levels of marketing investment through FY2025. This is planned to include targeted expansion into brand marketing in a couple of markets (with an initial campaign already launched in Australia in Q1 FY2025), as well as greater levels of performance marketing spend.

Our economics remain healthy, as the combination of products that customers love, efficient marketing and evangelical customers means that our marketing investments remain small relative to the number of customers joining Wise, with the blended payback within 6 months in FY2024.

Technology costs increased by 25% to £53.5 million and expenses relating to consultancy and outsourced services increased by 28% to £90.4 million, both reflecting the greater services required to support the growth of the business.

We remain highly profitable and well capitalised

In FY2024 we generated an underlying profit before tax of £241.8 million, a 226% increase over FY2023 with a margin that was high at 21%.

To then arrive at our reported IFRS profit before tax, our 'interest income above the first 1% yield' of £364.5 million, less the value of 'benefits paid relating to customer balances' of £124.9 million, is added to the underlying profit before tax.

As per our interest income framework, of this £364.5 million of interest income, it is intended for 20% (£72.9 million) to be retained while aiming to return the remaining 80% (£291.6 million in FY2024) to customers. We partly achieved this with £124.9 million being paid to customers in the year, leaving £166.7 million being incidentally retained, the majority of which relates to the UK where we are currently unable to pay interest to Wise Account holders under the terms of our licence.

Reported profit before tax increased significantly to £481.4 million and earnings per share to 34.2 pence, a 2x increase over FY2023 for each.

As at 31 March 2024, we held £14.5 billion of cash and highly liquid investment grade assets, up 26% from £11.5 billion at the end of FY2023. This includes assets in respect of the £13.3 billion of customer balances. It also includes £1.1 billion of our 'own cash' (£0.7 billion at the end of FY2023), with the increase driven by the £486.6 million of reported free cash flow generated by the business (see definition in appendix). On this basis, our reported free cash flow conversion rate for FY2024 was 101% of reported profit before tax (107% in FY2023, based on comparison to reported profit before tax, rather than Adjusted EBITDA as previously).

We are well capitalised for the future and as at 31 March 2024, our Group eligible capital was £870.4 million, including the now audited FY24 profits, significantly above our minimum regulatory capital requirements.

Our capital position, built through sustained profitability, enabled us to initiate a programme in FY2023 to reduce the dilutive impact on share count that arises through stock based compensation. £10 million of our capital was used in FY2023 by our Employee Benefit Trust to fund such share purchases and this rose to £69.9 million in FY2024, covering the impact of new grants issued during the year. We intend to continue this programme into FY2025, purchasing shares to cover new grants at a broadly similar level to FY2024.

Looking beyond the short term with a relentless focus on the long term opportunity

We have grown quickly, doubling the active customers we serve over just three years, but the opportunity for Wise remains substantial; many millions of people and small businesses move trillions of pounds across-borders while over-paying for a poor service.

To further unlock this opportunity we will continue to invest into our long term growth potential. We fundamentally believe that the market leader over time will be the provider of the cheapest, fastest and most convenient service, with the broadest coverage. This can only be achieved through building the best global infrastructure while driving growth through relentlessly pursuing incremental improvements in price, speed and convenience. 

We plan to continue reinvesting back into our growth each year over the medium term while organically generating the capital needed for a fast growing global financial services business.

We therefore expect to operate at an underlying profit before tax margin of 13-16% over the medium term, equivalent to targeting an underlying adjusted EBITDA margin of 20-23%.

We expect our reported profit before tax to continue to be higher than underlying profit before tax as long as the effective interest rate we achieve on customer balances is greater than 1%. Under our framework, 20% of any interest above the first 1% yield will be retained and added to profit before tax (£72.9 million in FY2024). 

The other 80% will be returned to customers where possible. In FY2024, 35 percentage points (ppts) of the 80ppts were paid to customers. We were unable to return the other 45ppts for several reasons including where the deposits are in jurisdictions where we're unable to pay interest for regulatory reasons (eg the UK, c30ppts), where we do not yet pay interest on all currencies, and in some geographies such as the US where customers are required to 'opt-in' to receiving interest but have not yet done so. Where customers do not currently receive interest on their balance, our priority is to launch and promote our Assets Interest product, which provides a market rate of interest, while still providing all of the other benefits of the Wise Account. This option is currently available for UK, EU and Singapore customers.

Over the medium term, we expect our investments to drive a continuing high level of customer growth, resulting in a 15%-20% CAGR growth in underlying income from a FY2024 base.

Underlying income growth in FY2025 is also expected to be within this range of 15-20%. Improvements in efficiency were gained in FY2024 resulting in an inflated level of earnings and providing the opportunity to reduce our average cross-border pricing by more than 2 basis points, which was effective from early in Q1 FY2025. Adjusting for the connected nature of this outperformance in FY2024 and price reduction in FY2025, our expected growth would have otherwise been 20-25% in FY2025.

We have also initiated a second re-price in Q1 FY2025, off the back of a significant improvement in our cost allocation methodology, in order to ensure customers only pay in proportion to the costs we incur in providing the specific service. This is intended to be broadly revenue neutral overall, but will lead to price reductions for higher value transactions, particularly on main currency routes.

Growing fast and increasingly profitable

We have built a business with world-class fundamentals, and our rapid growth and increasing profitability is a testament to that. With continuing investment into long term growth, we are poised to capture even more of the massive market opportunity ahead.  We are delivering on our mission and creating massive value for both our customers and shareholders. 

Results presentation

A presentation of the full year results will be held at 9.30am BST Thursday, 13 June 2024 at Wise's London offices in Shoreditch. We invite you to join the live stream using this https://vimeo.com/event/4289959.

Enquiries

Martin Adams / Lawrence Nates - Investor Relations

owners@wise.com

Sana Rahman - Communications

press@wise.com

Brunswick Group

Charles Pretzlik / Sarah West / Nick Beswick

Wise@brunswickgroup.com

+44 (0) 20 7404 5959

About Wise

Wise is a global technology company, building the best way to move and manage the world's money. With Wise Account and Wise Business, people and businesses can hold over 40 currencies, move money between countries and spend money abroad. Large companies and banks use Wise technology too; an entirely new network for the world's 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.

In fiscal year 2024, Wise supported around 12.8 million people and businesses, processing approximately £118.5 billion in cross-border transactions, and saving customers over £1.88 billion.

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 "target", "believe", "expect", "aim", "intend", "may", "anticipate", "estimate", "forecast," "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, 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.

The information contained in this report is not intended to provide, and should not be relied upon for, investment, tax, legal or financial advice. To the maximum extent permitted by applicable law and regulation, Wise disclaims all representations, warranties, conditions and guarantees, whether express, implied, statutory or of other kind. To the maximum extent permitted by applicable law and regulation, Wise shall not be liable for any loss, damage or expense whatsoever, whether direct or indirect, howsoever arising, whether in contract, tort (including negligence), strict liability or otherwise, for direct, indirect, incidental, consequential, punitive or special damages arising out of or in connection with this document, including (without limitation) any course of action taken on the basis of the same