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Xoom, Inc. (NASDAQ:XOOM)

Q2 2014 Earnings Conference Call

July 22, 2014, 05:00 PM ET

Executives

Sharrifah Al-Salem - Director, Investor Relations

John Kunze - President and Chief Executive Officer

Ryno Blignaut - Chief Financial Officer and Chief Risk Officer

Analysts

Darrin Peller - Barclays

Mayank Tandon - Needham & Company

Andrew Jeffrey - SunTrust

Wayne Johnson - Raymond James

Rayna Kumar - Evercore

Yanni Koulouriotis - Buckingham Research

Operator

Good day, ladies and gentlemen, and welcome to Xoom's second quarter 2014 earnings conference call. (Operator Instructions) I would now like to hand the conference over to Sharrifah Al-Salem, Director of Investor Relations. Ma'am, you may begin.

Sharrifah Al-Salem

Thank you, operator. Good afternoon, everyone, and welcome to Xoom's second quarter 2014 financial results conference call. On the call with me today are John Kunze, our President and CEO; and Ryno Blignaut, our Chief Financial Officer and Chief Risk Officer. We'll begin the call with some prepared remarks from John and Ryno, and then we'll open up the line for questions.

A more complete disclosure of our results can be found in our press release issued about an hour ago as well as in our related Form 8-K furnished to the SEC earlier today. To access the press release and the financial details, please see the Investor Relations section of our website.

As a reminder, today's call is being recorded and webcast replay will be available on our website following the conclusion of the call. In addition, copies of materials, which we will present to members of the investment community from time to time, after today's call, will also be available on the Investor Relations section of our website.

During the call, we will be referring to both GAAP and non-GAAP financial measures. A reconciliation of our GAAP to non- GAAP financial information is provided in our press release, which is available on our website. All of the non-revenue financial measures we will discuss today are non-GAAP, unless we state that the measure is a GAAP measure.

The primary purpose of today's call is to discuss our second quarter 2014 result. However, some of the information discussed during this call and contained within the investor presentations on our website, including any statements about our expected financial results, our markets and the implementation of our business strategy may constitute forward-looking statements within the meaning of the U.S. federal securities laws. These statements are subject to risks, uncertainties and assumptions and are based on financial information available as of today or with regard to the presentations posted on our website as of the date posted there on.

We disclaim any obligation to update any forward-looking statements or outlook. Risks and uncertainties that would cause our results to differ materially from those expressed or implied by any such forward-looking statements include those summarized in the press release that we issued today. These risks and additional risks are described in our filings with the SEC, including the Xoom's Annual Report on Form 10-K, and any subsequently filed reports on Forms 10-Q and 8-K, all of which are available on the SEC's website and which I encourage you to read.

I will now turn the call over to John.

John Kunze

Thank, Sharrifah. Good afternoon, and thank you for joining today's second quarter 2014 earnings call. We had a strong quarter with continued growth in active customers, low transaction losses, ongoing momentum in the move to mobile and important service enhancements that will further improve our customer experience.

In the second quarter, revenue was $39.8 million with adjusted EBITDA of $5.1 million. Gross sending volume increased 12% year-over-year to $1.8 billion for the quarter, and on a trailing 12-month basis, Xoom processed $6.3 billion of gross sending volume. We ended the quarter with more than 1,195,000 active customers, where our customers had transacted at least once in the past 12 months, which is up 30% year-over-year.

This increase was due to the addition of new customers, increased retention of our current customers and win backs or customers that came back to Xoom, after not transacting in the past year. We added 133,540 new customers, which was down about 1% year-over-year and up 14% sequentially.

This year-over-year decrease can likely be attributed to significant volatility in the Indian rupee in Q2 of last year. While the precise impact is difficult to quantify, we believe the fluctuations in the currency contributed higher new users in the year-ago period.

In addition, due to increased advertising cost during the World Cup, we temporarily reduced Latin American marketing spend, which we believe also impacted new customer growth in the quarter. As a reminder, new customers can only be counted as new, once, in this metric.

In the quarter, we continue to leverage our risk management systems and expertise. Our Q2 loss rate of 22 basis points came in below our targeted range of 25 basis points to 30 basis points.

Our ability to generate low transaction losses through our industry-leading risk management system is the significant competitive advantage for Xoom, and we are able to balance this with low customer friction to provide our customers with a great user experience.

As a result, during the second quarter, our risk screening rates remained in the low-single digits, and over 90% of our volume was funded from the ACH system with more than 95% of that volume processed instantly. In addition, our existing market opportunity is substantial and with our current estimated market share of 7.7%, based on a trailing 12-month gross sending volume, there are tremendous opportunities for growth.

Providing an incredible and fast user experience is integral to how we operate the business, and we continue to execute along this product path in the quarter with two major announcements, the launch of our fully-functional mobile app and our expanded partnership with Punjab National Bank in India.

First, as you know, we launched our fully-functional app for both iOS and Android mid-quarter. This app upgrade allows customers to sign up and send money within the app, without having to use our mobile or desktop sites. This is a major step forward in our mobile offering, and we are already seeing a migration from mobile site use to use of the app.

As we have discussed before, mobile is a very important strategic driver for the company. We believe mobile increases the size of our serviceable market, simply because some prospects, who use smartphones, are now able to access digital services like Xoom via their first internet connection. We see this more clearly in our Latin American markets and in Mexico, in particular, where most of the volume originates from a mobile device.

In the quarter, 48% of our transactions were sent via mobile devices, up 59% year-over-year. We are also very excited to tell you that more than half of our active customers are now using Xoom mobile. The Xoom mobile experience is so convenient to use that we observe Xoom mobile customers sending more frequently than their desktop-only counterparts, and therefore have higher projected lifetime value.

Mobile is important for our new customers and is also critical for our repeat customer experience. As has been the case in the past, our repeat customers comprise a significant proportion of our send volume, and in Q2 they sent more than 95% of GSV. Repeat Xoom customers continue to enjoy the Xoom Quick Send feature for most of their send volume, and we believe the one tap, one swipe feature on the Xoom app provides an unparalleled money transfer experience.

We believe mobile remains a big opportunity as the product and the app marketing channels mature over time. But we do know that the launch of the app has not yet yielded a material lift in acquiring new customers. As we only launched mid-quarter, these are very early days and we will do here what we always do. Relentlessly optimize both our product and our marketing to capture more of the mobile app channel opportunity.

In addition to our fully functional mobile app launch, this quarter we built upon our partnership with Punjab National Bank or PNB in India to begin rolling out 24x7 365 instant bank deposit services to even more bank accounts in India.

Moving money to bank accounts is challenging and we are constantly optimizing the operations of our deposit rails, and identifying and solving many complex problems, including partner outages, typos and transaction instructions, off-hour processing, local compliance nuances and name mismatches, just to name a few, in our pursuit to offer 24x7 365 instant payments throughout our entire network.

Our mission to provide instant money transfer drives every function in the company, increases customer loyalty, and we believe provides a significant competitive differentiator. We are able to offer instant access through our well operationalized networks, which give our customers peace of mind for critically important transactions, and this magical experience helps us drive acquisition and retention of Xoom customers.

In fact, we already offer instant service throughout our largest cash pickup networks in the Philippines and Mexico, to most of our Filipino bank deposit partners and via PNB and HDFC Bank in India. Now, with our expanded partnership with PNB, we will be adding more Indian banks on 24x7 365 instant bank deposit service levels on an ongoing basis.

We have already launched with Kotak Mahindra and we expect to launch more banks over the coming months. Specifically, we are among the first to take advantage of India's immediate payment service or IMPS through certified member banks, who can offer instant deposit.

Over 60 banks in India are current members of IMPS. And we hope that over the long run, every bank in India will have access to this network. Our goal is to grow 24x7 365 instant service levels in India to be 100% of our volume, and we expect IMPS to be a big enabler of this objective.

In summary, we had a strong quarter, as we continue to execute against our initiative to create the best money transfer experience for our customers. We did this by further enhancing our mobile offering, expanding on our mission to provide 24x7 365 instant payouts to all of our bank partners and relentlessly improving our risk management systems and leveraging our expertise to run our business on low loss rate with very little customer friction.

Now, I would like to turn the call over to Ryno for his comments on the business. Ryno?

Ryno Blignaut

Thanks, John. Good afternoon, everyone. Q2 2014 was a strong quarter and in line with the guidance we provided during the last earnings call. I'll first do a quick recap of those results, followed by more color on our updated Q3 and rest of year 2014 guidance.

Revenue for the second quarter of 2014 was $39.8 million, an increase of 19% from the same quarter a year ago. Revenue from our Indian business still grew a very respectable 13% year-over-year, despite the tough comp from the Q2 2013 surge in activity, driven by the sudden devaluation of the rupee during that quarter.

During the Q2 2013 earnings call, we attributed up to $6 million of revenue to this surge, and you should also keep this in mind when comparing the year-over-year earnings and gross profit numbers.

As a result, we have often spoken on previous earnings calls about the positive impact a volatile U.S. dollar-Indian rupee exchange rate has on our Indian sent volumes and to a slightly lesser extent on new customer acquisition. However, despite the Indian government elections in May, the rupee was very stable during the past quarter and traded within a tight INR58.5 to INR61 range to the U.S. dollar.

We ended the quarter with 1.195 million active customers, an increase of 30% from the same quarter a year ago. The key customer and transaction metrics continue to perform well with active customers averaging 2.7 transactions each during the quarter and average revenue per transaction of $12.50. This revenue per transaction number has been stable for a while, and has only been impacted by shifts in our country mix from quarter-to-quarter as we have made no material price changes during the last 18 months.

Our mathematical quarterly churn rate calculated as opening act of customer balance, plus new customers required, less closing active customer balance was 6.1% in Q2 2014, up from a historically low 4.4% in Q1 2014. As mentioned during our last call, this increase was expected primarily due to the large number of Indian customers transacting. In Q2 2013, some of them have not sent additional transfer since then.

Gross profit for the second quarter of 2014 was $26.9 million, an increase of 15% from the same quarter a year ago. Gross margin for the quarter was 67%, well within our targeted range of 65% to 70%, but down from a record 73% last quarter for two reasons. Firstly, transaction losses increased to 22 basis points of GSV for the quarter, up from 17 basis points last quarter, but still below our targeted range of 25 basis points to 30 basis points. As a reminder, these lost rates are inherently volatile in Asia and you should therefore continue to expect some variability in these numbers going forward.

The second reason relates to our incentive-based marketing programs. We are so confident in the great quality of our service and the resulting expected lifetime value of a newly acquired customer, that we are on various promotions in order to incentivize prospective customers to try Xoom.

Although, usually represented by our ongoing Refer a Friend Program, we also run promotions during which we offer gift cards to prospective customers upon completion of their first transaction with Xoom. In Q2 this year, we spend approximately an incremental $1.5 million on these programs, which reduced the reported gross margin by 4% as a portion of the cost of these programs or classified as cost of good sold for GAAP purposes.

Importantly, we include these costs in the non-GAAP cost per acquired customer or CPA metric we publish every quarter. Belatedly, the CPA for the quarter came in at $50. This is at the high end of our stated $40 to $50 range, but was within our expectations given the seasonally important Q2 Mother's Day period. We also continue to estimate the CPA for the full year to be within this range.

GAAP operating expenses for Q2 2014 totaled $25.3 million, an increase of 35% from the same quarter a year ago. It is important to note that included in this increase, there's an incremental $1.4 million in stock-based compensation compared to Q2 2013.

Our Xoom Guatemala City or XGC operations continue to expand according to plan and contributed approximately $750,000 to the Q2 GAAP operating expenses. This was made up of $550,000 in mainly product and engineering related staff and facilities expenses and $200,000 in amortization of the technology we acquired as part of the acquisition earlier this year.

We are still within the annual $3 million expense budget expectation we mentioned on previous earnings calls. We continue to expect our bill pay and mobile phone top-up offerings to launch later this year, but we do not include any incremental revenue from these products in our annual guidance.

The construction work on our new San Francisco headquarters is also going according to plan and we currently expect an August 2014 move. As mentioned on our last earnings call, this move has added approximately $600,000 per quarter to our operating expenses starting in Q1 of this year.

We allocate rent internally based on headcount, so the above impacts all OpEx line items with the largest impacting technology and development, where most of our headcount resides. We're also making good progress in subletting our existing office space for the remainder of our current lease and we will provide summary details on the final overall financial implications when we're moved in the Q3 earnings call.

Adjusted EBITDA for the second quarter of 2014 was $5.1 million compared to $6.1 million for the same quarter a year ago. GAAP net income for the quarter was $1.4 million compared to $4.1 million in Q1 2013. GAAP diluted earnings per share was $0.03 compared to $0.11 for the same quarter a year ago. Non-GAAP diluted EPS for the quarter was $0.09 on a weighted average number of shares of 41.6 million

Full reconciliation tables between all GAAP and non-GAAP metrics are included in our earnings press release issued earlier today. We ended the quarter with $246 million in cash, cash equivalents, disbursement prefunding, and short-term investments and had no outstanding borrowings under our line of credit.

Now, let's move onto our Q3 and updated full year 2014 guidance. For Q3 2014, we are targeting the following: revenue to be between $39 million and $41 million; adjusted EBITDA to be between $1.5 million and $3 million; in estimating both the quarterly and annual EBITDA ranges, we continue to use our previously stated target gross margin range of 65% to 70% and CPA range of $40 to $30; we are targeting our GAAP diluted net loss per share to be between $0.08 and $0.05; and non-GAAP diluted income or loss per share to be between a loss of $0.01 and income of $0.02.

For the full year 2014, we are now targeting the following: revenue to be between $158 million and $162 million; adjusted EBITDA to be between $13 million and $16 million; GAAP diluted net loss per share to be in the range of $0.09 to $0.02; and non-GAAP diluted earnings per share to be in the range of $0.16 to $0.24.

Thank you very much, everyone. I will now turn it back over to John for final comments before we move onto Q&A.

John Kunze

Thank you, Ryno. In conclusion, we are very pleased with the quarter, which was underpinned by strength that will continue to drive value for our shareholders. We continue to experience a secular shift to digital, which is enabling us to disrupt a very large and mostly offline market. And we have tremendous opportunity in current and new corridors and in adjacent services.

In addition, our ongoing product and service enhancements will continue to drive growth at Xoom and our leading risk management capabilities and expertise will further enhance our competitive advantages. We are very well-positioned in this large and expanding market as a leading digital pure-play in money transfer, and we are excited by the opportunity in front of us.

With that, let's open the line for questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) And our first question comes from Darrin Peller from Barclays.

Darrin Peller - Barclays

I just want to start-off. And it looks like the overall trends were strong in the quarter, obviously when we compare to last year second quarter having a pretty big benefit from the Indian rupee. Backing that out, the growth rate seem similar to the trends you've been seeing continuing.

And I guess when we look at the quarterly beat on EPS by, let's call it, $0.04 or $0.05 versus the high end of your range last quarter, you're only raising your full year by just a couple of pennies. Just wondering why you're not passing through more the beat in terms of the second half dynamics? Anything we should be aware of in terms of profitability?

Ryno Blignaut

Darrin, this is Ryno. No, I think probably what you should be expecting is, obviously last year's trends were little skewed by the massive rupees spike in both Q2 and to a lesser extent in Q3. The more typical seasonality is, Q3 that's similar or flat with Q2, because of Mother's Day in Q2 and then you get about a 10% Christmas bump, all things being equal with a flatter rupee. So other than that I think the ranges we've said, it's just the usual, we do the model and then we have a range on gross margin, and we have on the CPA, and that just drops the bottomline. Nothing else going on.

Darrin Peller - Barclays

No, I guess it makes sense, Ryno, except for the -- when we look again, I mean just looking at your guidance for the quarter previously, I think it was around $0.04 of the midpoint, right, for EPS and coming in $0.05 above. I mean, I guess you already expected it to be $0.05 at the midpoint. And so just curious why I guess you're only raising by a penny. It sounds like you're just explaining the typical seasonality. And understanding third quarter last year also had a benefit, I mean I guess you knew that going into your guidance also there, right?

Ryno Blignaut

No, we did. I mean I think as I said, it's just -- if you look at the EBITDA guidance and then obviously we gave you the full reconciliation table just to get back down to the EPS number. There is nothing else going on there. And importantly, we use the middle.

As we've said before we use the middle of the gross margin range when we said these numbers. And if you do the quick gross margin and recon for this quarter, obviously it came in at 67%. But if you back out the 4% marketing that was in COGS, this quarter you get to about 71% margin, which is the big part of the beat, but we don't assume that going forward for the rest of the year.

Darrin Peller - Barclays

And just tell me, when we look at these trends, if you can give us a little more color on the actual sort of dynamic as the drivers, I mean it seems like there is a higher level of revenue per -- I'm sorry, transaction numbers per quarter per active customer, a little bit higher than the sequential basis, maybe that's just seasonal. But it looks like the trends are better. Is that the mobile percentage? I mean, what's really driving that or is it just a mix shift that's going on in terms of corridors?

John Kunze

No. It's definitely a little bit of mobile. So you're referring to the 2.7 active transactions per active customers per quarter. That's definitely being trending up. Mobile is one of the factors in there. And I think the other factor in there as well is if you think of the dynamics that underlie in that number, which is obviously it includes customers, more recent customers who might have joined during the quarter.

So they, of course, do less than the 2.7, because they haven't been around that long. And then as you kind of migrate towards the right of our cohort curve, where you get to be a more mature customer, you're actually doing significantly more than the 2.7 average. So as we get a bigger and bigger install base, that numbers just trend up naturally as well.

Darrin Peller - Barclays

Well, just one last question, and I'll turn it back to the queue. When we look at your guidance for the third quarter, I mean you're calling for, I think $40 million of the midpoint for revenue. Just remind us, I mean in second quarter there was about a $6 million benefit in second quarter '13 for the rupee, I think you called out. You estimated what for the third quarter. Was it about a $3 million benefit?

John Kunze

Yes. Exactly, it was about a $3 million, when we have the rupee break 70 and then come all the way back down again in Q3.

Darrin Peller - Barclays

So in essence, you're basically still calling for close to 40% growth in revenues in the next couple of quarter, next quarter, at least. I mean is that kind of the trend we should be seeing? Do you think that's going to hold for a while?

Ryno Blignaut

Well, I mean obviously, we can't give any further guidance other than the ones we've given, but yes, if you do the same math that you've just done for Q2, you get to about 45% revenue growth year-over-year. So as you said, still very strong trends.

Darrin Peller - Barclays

And then the operating margin trajectory. I mean a while back you had said towards the end of '15, we'll be getting closer to 20%. Is that still on track you think?

Ryno Blignaut

I don't think we've given long-term operating margin guidance, Darrin.

Darrin Peller - Barclays

Just remember thinking, as discussions came out around the initial time of the company going public. All right, well, overall it looks the quarter was pretty strong to us in terms of trends, but I'll turn it back to the queue.

Operator

And our next question comes from Mayank Tandon from Needham & Company.

Mayank Tandon - Needham & Company

Ryno, if I heard you right, you said, India was up 30% year-over-year. I just wanted to understand is that revenue or would that be the transaction volume?

Ryno Blignaut

I think that might have been the accent, India revenue was up 13% year-over-year.

Mayank Tandon - Needham & Company

So just to piggyback off that question, I wanted to get a sense, again, qualitatively how each of the key markets did? Did you notice any changes at the margin going from 1Q to 2Q in terms of trends in Latin America or Philippines, given just the dynamics in the market?

Ryno Blignaut

As I said earlier, so India grew 13% year-over-year, which obviously means the revenue overall grew 19%. So the other corridors did better than that, better than the 19%, with LAC being stronger than the Philippines. Whereas Philippines, where we have our highest market there is growing slightly less than Latin America. But they all grew very nicely.

Mayank Tandon - Needham & Company

And then, any changes on the pricing front intra-quarter? And also maybe you could just comment on competition? There has been a lot of rhetoric in the market. Just give us a sense of what the reality is in the marketplace?

John Kunze

No, we didn't see any big changes in the quarter, relative to competition. I don't know what rhetoric you're referring to, maybe you could comment further on that, and then I would be able to comment. But we saw a fairly consistent, steady condition during the quarter.

Mayank Tandon - Needham & Company

What I meant was just the feedback from the larger players, the legacy players, so to speak, who have talked about offering digital services, and then potentially taking share from the digital-only players like Xoom for example?

John Kunze

I think the only thing that we've seen recently changing is westernunion.com return to an old strategy of theirs, mid-July to reduce their ACH funded low service down to a fee-free transaction, and that just started a week ago or so. But again, this is return to an old strategy that we showed in the beginning of 2012, when this first started through the third quarter of '13, that our customers were very loyal to us. We didn't see any attrition or erosion, and didn't harm our business in ways that we could see.

And so knowing that customers on slow service rails retain a very low rate and they're very high-touch customers from a customer operations point of view, we think that strategy probably isn't going to be well-served and we'll keep an eye on it.

Mayank Tandon - Needham & Company

And just one final question from me, I want to go back to the 3Q guidance. Ryno, is it fair to say then, I heard what you said, but is it possible that, given that you pulled back some of the investments in marketing in 2Q, because of the World Cup, there is some push into 3Q, and that's why you're seeing the EPS not flow through entirely into the second half of the year, the beat that you had in 2Q?

Ryno Blignaut

I think probably best answer, it's not marketing, Mayank. As I said on the call, we still expect the CPA for the year to be in that $40 to $50 range. And for Q2, the CPA was $30 because, remember, on Q2 marketing you really have to add the $1.5 million that's in COGS to the marketing P&L line.

So we spent quite a bit on marketing in Q2, we just spent at pre-World Cup, so that's important to note. Now, the beat in the range really is just related to those two factors I mentioned earlier, which is we use the range on gross margin and the range on CPA, when we get to the guidance ranges.

Operator

Our next question comes from Andrew Jeffrey from SunTrust.

Andrew Jeffrey - SunTrust

Ryno, recognizing that you're still below your target range on losses, is there anything to specifically call out in the sequential loss rate uptick? Any specific events or trends that changed or is this just part of what you'd expect to see in terms normal loss rate volatility?

Ryno Blignaut

It's just business as usual, Andrew. As we've said before, our loss rates really are a combination of four variables that are independently volatile daily. And those are credit card charge-backs, ACH charge-backs, other ACH returns like bounced checks, and then finally, the recoveries on those.

So we're constantly just optimizing our screening rates, our cancel rates, our loss rates and our speed against those variables. So there was nothing out of the ordinary, just this usual volatility. Remember the 22 is very much comparable to the quarters we had last year, 17 was a little bit of an outlier last quarter.

Andrew Jeffrey - SunTrust

And just to be clear, you said about 400 basis points of gross margin related to the card-based incentives or the gift card based incentives?

Ryno Blignaut

Yes, exactly. So the gross margin recon is if you start with the 73% last quarter, it's $1.5 million or about 4 percentage points, absolutely percentage points, is in marketing. And then there is another 2 percentage points in the slightly higher losses, which gets you to the 67% this quarter.

Andrew Jeffrey - SunTrust

And when I think about, I guess, for John, when I think about the Philippines, you mentioned you've got sort of your highest share there. Are some of the marketing initiatives, the mobile marketing initiatives, specifically to what you're referring, can that sort of reaccelerate the Philippines? I guess, how should we think about that market is potentially contributing to Xoom's long-term organic revenue growth, as a call out, given it is such an important market?

John Kunze

Well, the Philippines is a very important market to us, as you pointed out, and will always remain important. We think the way to get faster growth into the entire business, including the Philippines, is with continued advancement on the product side. We continue to separate the value proposition from both offline and now new online players.

As we continue to do, like last quarter, when we launched the fully functioning apps for iOS and Android that was a big step for us, although just the first step and it is early days there. We do look forward to the app helping us to contribute to growth on customer acquisition.

And the announcements in India, where we have started on a journey to get more and more bank on to instant service levels, where bank deposit is really exciting, is good examples of ways that we can push the product, take that news and put it into brand new creative, and take that creative to prospect to get to better growth.

Andrew Jeffrey - SunTrust

And so it sounds like that, the way you characterize that is an iterative process that should start to bear results that we can see on a consolidate basis, perhaps next year. And I'm thinking specifically for example about the win-back campaigns and the new apps in terms of perhaps driving faster customer growth, which I think Ryno you mentioned, doesn't inform your thought process this year, but perhaps maybe in future periods?

Ryno Blignaut

Well, I think you want to keep your eye on the active customer now, because that's the number that as you well know drives the revenue in the model. And that's why we disclose the transaction of frequency by active per quarter and the average revenue per transaction, so everyone has a good shot at, trying to model out revenue.

And that active number is a combination of news that we're adding on top of retention rates, which are improving, because of an improved product and improved service levels, and world-class customer operations and win-backs. So hopefully what we're going to see is continued good growth on the active customer side, because that's the number, that's the most important one to watch.

Operator

Our next question comes from Wayne Johnson from Raymond James.

Wayne Johnson - Raymond James

First, a housekeeping item. So in the third quarter of last year, you called out the $6 million of incremental revenue from the weak rupee. Did you ever call out, if you wouldn't mind refreshing my memory, how many incremental subscribers were added during that quarter or what you think that number might be?

Ryno Blignaut

I think you're referring about Q2.

Wayne Johnson - Raymond James

Yes, Q2. Sorry, I apologize. Yes.

Ryno Blignaut

So in Q2, we called out $6 million revenue and $3 million of revenue in Q3. We did not call out incremental new customers. We definitely did get some incrementals, that's obviously tough to quantify, because you're never 100% sure, why the brand new customer comes to Xoom and actually uses the product for the first time. It could have been the Amitabh Bachchan campaign, it could have been Refer a Friend or it could have been the rupee. So we can make estimates on that, but we never did disclose those numbers, because we just wouldn't know.

Wayne Johnson - Raymond James

Is there anyway to, sorry to arguing on this, but any way to give us kind of a range do you think? I mean just on the rupees, because I'm sure you have some statistics that would kind of highlight that rationale?

John Kunze

Well, we can't tell you, Wayne. When we're experiencing the days, where the rupee is volatile, and especially abruptly volatile; and we're seeing lots of volume, we're seeing commensurate excitement and customer acquisition from those consumers who are waiting for that moment to finally use them. And the differences are substantial. They can be as much as two times or three times the daily average.

Wayne Johnson - Raymond James

I will try again and think upon to that some more. I appreciate that. And then, just a follow-up here, any call outs on any strengths of a particular corridor, whether it's U.S. to Mexico or South America or the Philippines in the second quarter, and kind of trends for the third quarter that you're seeing right now of some of those major corridors?

John Kunze

I think as Ryno pointed out earlier in the comment, we're seeing strength across the board, Wayne. So there is nothing worth noting in any specific corridor. When the rupee is, boring, throughout the quarter, we like to see every corridor strong and we did in Q2.

Operator

And our next question comes from Rayna Kumar from Evercore.

Rayna Kumar - Evercore

Do you anticipate another decline in customers departed in the third quarter, given the heavy rupee volatility from the third quarter of '13?

John Kunze

We don't give forward guidance on customer acquisition, because that's a volatile number, Rayna. So we're going to be doing everything we can to continue to drive that number for growth. And we do acknowledge that we do have another year-over-year comp issue in the number.

Rayna Kumar - Evercore

Does that comp issue go away in the fourth quarter or is that still there?

John Kunze

The rupee driven comp issue goes away in the fourth quarter, yes.

Rayna Kumar - Evercore

And if you can just discuss your plans for introducing ACH-based money transfer services to other countries and your expectations for timing?

John Kunze

Are you asking when you would expect us to enter new receive markets or new send markets?

Rayna Kumar - Evercore

Both.

John Kunze

Well, as you know at 7.7% share, we have a long way to go on the current markets we're addressing, which is, as we have said before where we're spending most of our time. However, with that said, we are working on new receive market. We do have a frequency of work going on in China at the moment.

We certainly hope to build or open up more receive market in the next six to 12 months, with a first priority on China and subsequent priorities in the other markets that are fairly sizeable and synergistic to our current receive market. On the origination side or at the sending market side, we are not yet working on the infrastructure and technology to get us new other send markets and when we do we'll certainly let you know.

Operator

Our next question comes from [ph] Alex Veytsman from Monness, Crespi.

Unidentified Analyst

A quick question on the BlueKite diluted costs. Were all of them incorporated in the first half of '14 or do you expect any of them to trickle down into the second half?

Ryno Blignaut

This is Ryno. Remember, we said, when we bought BlueKite in Q1, we said a $3 million GAAP budget expectation for the year, which is we're still tracking towards that. So there will be additional BlueKite expenses for the second half of the year. It's also I think important now, we now call it Xoom Guatemala City, because we're actually very aggressively staffing up our engineering efforts down there, including moving them to new building as well. So it's not so much as BlueKite now anymore, as it is kind of a second Xoom office down in Guatemala.

Unidentified Analyst

And the expenses, will they be mostly on the G&A side?

Ryno Blignaut

They will mostly be in product and engineering. So that should be -- that's the line item that you're going to see probably grow the quickest outside of the marketing that's CPA driven, as there are mainly product and engineering stuff down there.

Unidentified Analyst

And then, the BlueKite-related business, you don't expect it to hit like, like any numbers in '14, right? I mean as far as the topline, and the impacts would probably come around in '15?

Ryno Blignaut

Correct, Alex. The OpEx is in the guidance, but there is no revenue in the guidance. And as I said earlier on the call, we do still expect to launch the products later on in this year.

Unidentified Analyst

And just one final question regarding Vietnam. There wasn't any impact in Vietnam for the second quarter, correct?

Ryno Blignaut

Are you asking about revenue, Alex?

Unidentified Analyst

About the revenue, yes.

John Kunze

Yes, nothing material. Such a new market and growing at a nice rate, but not material.

Operator

And our final question comes from Yanni Koulouriotis from Buckingham Research.

Yanni Koulouriotis - Buckingham Research

Can you please give more color on when do you expect the rest of your partnering banks in the IMPS ecosystem to move to the instant money transfer?

John Kunze

Yes. Thank you for the question. IMPS is really exciting. This is a national network that is quickly taking on new member banks. They have more than 60 member bank at the moment. And they are also, as quickly as possible, trying to certify those banks from a quality perspective, so that they can receive deposits on an instant basis and on the 24x7 365 basis.

As soon as those banks get certified, we are then turning them on or lightning them up in our network, as new banks in our network that offer instant 24x7 365. I think there are probably about a half dozen certified, now moving pretty quickly to maybe a dozen, and they will intent to add them as fast as possible over the next year.

Yanni Koulouriotis - Buckingham Research

And given that you are the first ones to provide service, do you expect your market penetration in India to increase? And as a result of that do you include that in your guidance for the rest of the year?

John Kunze

We would certainly hope that by offering more coverage or broader coverage of bank in a very large market like India on instant service levels 24x7 365. I mean, if you can think about actually pressing authorize on Xoom and having the money show up into moms bank account instantly, any time of day, seven days a week, is quite magical.

And if we can spread that message far and wide, we would certainly hope that it could drive new customer acquisition and our active customer account in the market, which in turn would drive our market share and help us grow our position there. So we certainly would hope that this would help generate growth in the business.

Yanni Koulouriotis - Buckingham Research

It's something though that you include in your guidance for the year?

John Kunze

Yes. To the extent that we have forecasted these member of banks coming online and helping to generate growth in active customers, that would be in our number. But I would say, at this point, because it's so new, that it's a small part of the number.

Operator

Thank you. I am showing no further questions. I would like to hand the conference back over to Mr. John Kunze for closing remarks.

John Kunze

Thank you, everyone, for joining our call today. We really appreciate it. And we look forward to speaking with you all again. Have a great day.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This concludes our program. You may all disconnect. Have a wonderful day.

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