Remitly: Investigated and shutting down
A very disappointing guidance shrouds the core thesis
Remitly reported good numbers for Q3 2025, but Q4 guidance and 2026 commentary have me closing this position. Here’s why.
Q3 2025 Revenue growth slowed 10% to 25% YoY. That’s a big drop. Far bigger than any of the other growth companies I follow.
On the other hand SG&A have been accelerating over the past year:
To add on to that, after a few quarters of operating leverage, COGS is growing at the same pace as revenue:
This leads to declining FCF and OM - the anti thesis to the ‘turning point’ of the company. A payments company should be reaching leverage at this point. This isn’t healthy and makes me question the moat, marketing cost and TAM.
As I wrote very recently in what got me interested in the company in the first place:
Remitly have 8+ million active members, and based on the financial dynamics outlined, are finally seeing the benefits of scale play out. Revenues continue to grow nicely, while the costs of goods sold are increasing at a slower rate than revenue, leading to an increase in gross margin and, at the bottom end of the income statement, growing operating income.
This slowing down in operating leverage expansion would be acceptable for a company that was maintaining a 25% growth rate. That would mean that they’ll outgrow these pains quicker. But Remitly stated that 2026 will have high teens revenue growth - another large deceleration from Q4. This means that it will take Remitly much longer to achieve real operating leverage and meaningful FCF. Put that together with meaningful dilution (50% of adj EBITDA is SBC), this isn’t a pretty picture for shareholder returns in the next few years.
Remitly is valued at ~$3b, that’s ~27 times 2025 EBITDA. At a 25% growth rate that would be attractive, given the risks and early stage Remitly is at. At a 15-18% growth rate the valuation simply isn’t interesting enough to signify what I’m looking for in a core position.
Remitly needs for either revenue to pick up meaningfully, or achieve operating leverage.
→ I’ll be selling my Remitly invest and investigate position as I don’t believe the near term promises Remitly turning into a core position.
If you looked at y/y changes in OpEx (instead of quarterly changes, which are impacted much more by seasonality) you'd see a different picture. Adjusted EBITDA margins have been pretty stable at 15% over the TTM and much of that is because marketing remains elevated. They guided for ~12% in Q4 Adj. EBITDA margin, which is their largest marketing spend quarter as there are many holidays that drive remittance volume. 20% is the long-term minimum, and I think there's a pretty good argument to be made that they'll exceed that. If you only invest in companies that grow 20%+, I would just lead with that.