REG - Wise PLC - Presentation of financial information

WiseAnnouncement

29/05/2024 10:45

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RNS Number : 2789Q  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
(https://forms.gle/6x2cUKSgmY61xKzv7) or joining the live stream using this
https://vimeo.com/event/4289959 (https://vimeo.com/event/4289959) .

 

 

Enquiries

Martin Adams / Lawrence Nates - Investor Relations

owners@wise.com (mailto: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 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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