Presentation of financial information

Wise PLC

29 May 2024

 

Presentation of financial information

Wise plc ("Wise") today announces a change in the presentation of its financial information to present the underlying financial performance of Wise. This will provide a clearer presentation of Wise's core business performance and longer term growth trajectory.

The change in presentation will be reflected in our FY2024 results to be published on Thursday 13 June 2024. To aid comparability with prior periods, historical financial information reflecting the new presentation is provided below in Appendix 1.

This change of reporting consists of:

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

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

'Underlying' Basis of Reporting

The growing popularity of the Wise Account has brought with it a significant growth in customer deposits (£13.3bn as at the end of FY2024) which, since interest rates began rising in FY2023, resulted in Wise receiving substantial amounts of interest income with almost half a billion pounds received in FY2024.

In 2023 we created a framework to ensure that this substantial, cyclical source of income was used fairly, sustainably and to the greatest effect for the company and our customers. The intention of the framework is that the first 1% of yield received will contribute to the costs of running the Wise Account, with an ambition to share the remainder as follows: 20% flows to profit before tax and the remaining 80% we aim to return to Wise Account customers.

However, to date, sharing all 80% with customers has not been possible. This is mainly due to a combination of customers holding balances in currencies which do not currently qualify for interest and customers holding balances in certain jurisdictions (such as the UK) where Wise is currently unable to return interest to customers under the terms of its regulatory licences and permissions.

In Q4 FY2024, of this 80%, almost half (35%) was returned to customers, with the rest (45%) remaining with Wise. The continuing retention of interest intended for customers under our framework has historically inflated margins to exceptional levels and we believe risks obscuring underlying performance trends over time.

Therefore, to provide a clearer presentation of Wise's performance and longer term growth trajectory, going forward we will present additional Alternative Profit Measures. This will consist of showing Wise's income statement, through to profit before tax, on an underlying basis, which excludes net interest income beyond the first 1% yield.

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

1.   Interest income above the first 1% yield.

2.   Benefits paid relating to customer balances.

Change in focus from Adjusted EBITDA to Underlying Profit Before Tax

At Wise we believe in aligning the interests of Wisers (our employees) with those of our owners such that both can benefit from the value we create for customers through our infrastructure and products over the long term. All Wisers are therefore eligible to receive stock-based compensation.

At the time of our listing in 2021, stock-based compensation was satisfied through the issuance of new shares and we therefore elected to remove this non-cash expense from our chosen lead metric for earnings ('Adjusted EBITDA').

Our strong cash generation and capital position has allowed us to initiate a programme of purchasing Wise shares through our Employee Benefit Trust to reduce the dilutive impact of stock-based compensation. Given the purchasing of stock is currently a cash expense, it no longer requires an adjustment of earnings for this item. We retain the option to issue shares as needed for stock-based compensation or other purposes.

Stock-based compensation has consistently been the largest item in the adjustment from our IFRS profit before tax to Adjusted EBITDA. 

Therefore the Adjusted EBITDA measure of earnings has, in our view, become less useful in understanding the performance of the underlying business and as a result our reporting going forward will focus to a greater extent on 'underlying profit before tax' and its representation as a margin of underlying income.

To support this transition we will continue to provide the Adjusted EBITDA metric as previously reported, as well as Adjusted EBITDA on an underlying basis in our reporting for a short period of time to support this transition.

FY2024 Results

Wise will release FY2024 results along with expectations for FY2025 and the medium term on this revised basis of reporting on Thursday 13 June 2024. The stock exchange release will be shared at 07:00 BST, followed by a presentation and Q&A at 09:30 UK time. We welcome registrations for in-person attendance using this https://forms.gle/6x2cUKSgmY61xKzv7 or joining the live stream using this https://vimeo.com/event/4289959.

Enquiries

Martin Adams / Lawrence Nates - Investor Relations

[e-mail]

Sana Rahman - Communications

[e-mail]

Brunswick Group

Charles Pretzlik / Sarah West / Nick Beswick

[e-mail]

[phone]

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 2023, Wise supported around 10 million people and businesses, processing approximately £105 billion in cross-border transactions, and saving customers over £1.5 billion.

Appendix 1 - Underlying basis of presentation

£m	FY21	FY22	FY23	FY24*		H1 FY21	H2 FY21	H1 FY22	H2 FY22	H1 FY23	H2 FY23	H1 FY24	H2 FY24*
Revenue	421.0	559.9	846.1	1,052.0		192.2	228.8	256.3	303.6	397.4	448.7	498.2	553.8
Interest expense on customer balances	(1.4)	(6.7)	(3.7)	-		-	(1.4)	(2.7)	(4.0)	(3.6)	(0.1)	-	-
Underlying interest income (first 1% yield)	-	-	49.6	120.7		-	-	-	-	-	49.6	57.1	63.6
Underlying income	419.6	553.2	892.0	1,172.7		192.2	227.4	253.6	299.6	393.8	498.2	555.3	617.4
Cost of sales	(151.7)	(185.8)	(308.2)			(71.8)	(79.9)	(81.2)	(104.6)	(148.5)	(159.7)	(160.7)
Net credit losses on financial assets	(8.8)	(2.2)	(17.8)			(1.2)	(7.6)	(1.3)	(0.9)	(5.2)	(12.6)	(6.4)
Underlying gross profit	259.1	365.2	566.0			119.2	139.9	171.1	194.1	240.1	325.9	388.2
Administrative expenses	(217.5)	(321.4)	(494.5)			(97.6)	(119.9)	(152.2)	(169.2)	(214.9)	(279.6)	(296.5)
Net interest income from corporate investments	(2.4)	-	2.8			(1.6)	(0.8)	-	-	0.3	2.5	7.3
Other operating income, net	3.8	1.0	10.7			1.1	2.7	0.9	0.1	7.2	3.5	3.9
Underlying operating profit	43.0	44.8	85.0			21.1	21.9	19.8	25.0	32.7	52.3	102.9
Finance expense	(3.8)	(4.8)	(10.7)			(2.1)	(1.7)	(2.5)	(2.3)	(3.7)	(7.0)	(9.3)
Underlying profit before tax	39.2	40.0	74.3			19.0	20.2	17.3	22.7	29.0	45.3	93.6
Interest income above the first 1% yield	1.9	3.9	90.6	364.5		1.0	0.9	1.5	2.4	22.3	68.3	154.0	210.5
Benefits paid relating to customer balances	-	-	(18.4)	(124.9)		-	-	-	-	-	(18.4)	(53.3)	(71.6)
Profit before tax	41.1	43.9	146.5			20.0	21.1	18.8	25.1	51.3	95.2	194.3
Income tax credit (expense)	(10.2)	(11.0)	(32.5)			(5.4)	(4.8)	(6.1)	(4.9)	(14.0)	(18.5)	(53.7)
Profit for the year	30.9	32.9	114.0			14.6	16.3	12.7	20.2	37.3	76.7	140.6
Underlying basis of reporting - Margins (%)
Underlying gross profit margin	61.7%	66.0%	63.4%			62.0%	61.5%	67.5%	64.8%	61.0%	65.4%	69.9%
Underlying profit before tax margin	9.4%	7.2%	8.3%			9.9%	8.9%	6.8%	7.6%	7.3%	9.1%	16.9%
Adjusted EBITDA - as previously reported
Adjusted EBITDA	111.1	121.4	235.8			52.2	58.9	60.6	60.8	91.6	144.2	241.1
Adjusted EBITDA margin %	26.4%	21.8%	24.4%			27.0%	25.8%	23.7%	20.1%	22.0%	26.3%	36.7%
Adjusted EBITDA - underlying basis
Underlying Adjusted EBITDA	111.1	121.4	167.3			52.2	58.9	60.6	60.8	91.6	94.4	140.4
Underlying Adjusted EBITDA margin %	26.4%	21.8%	18.7%			27.0%	25.8%	23.7%	20.1%	22.0%	18.9%	25.3%

 

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