Marathon Partners' Mario Cibelli updates the Remitly Thesis $RELY

- You're about to listen to the Yet Another Value podcast. Today we have Mauro Cibelli from Marathon on the podcast. Mauro, this is his fifth time on the podcast. That means he's getting, he asked me on the podcast. It is a very high quality Yet Another Value podcast shirt on the back end. But Mauro is one of the people's favorite guests and for a good reason. His ideas have been, you know, not investing advice. He's seen a disclaimer at the end of the podcast, but his ideas have been bangers. And more importantly than that, he's a super thoughtful investor. So the conversations we have are great. Today he is coming back on to talk about Remitli, which he pitched about a year ago. The stock has, it's worked out okay, but it went up quite a bit and it's come back down. And he talks about everything Remitli. We talked about stable coins risk. We talked about, ooh, don't get him started on comparing Remitli to Wise, but we talked about everything Remitli. I think you're gonna find it a fascinating podcast on a fascinating idea. So we're gonna get there in one second, but first, a word from our sponsors. Today's podcast is sponsored by TriChata.com. Look, you've heard me pitch TriChata several times on this podcast. If you're watching on the YouTube, you can see me wearing the TriChata.com hat, but TriChata is awesome. You should try it. It is expert calls for Biciders. And that means it's two Biciders who hop on and discuss a stock that they know. And then you get to see, you can either be part of the interview, be one of the Biciders, or you can just go read a transcript. And it is an incredible way to get up to speed on new ideas. You're about to listen to a podcast on Remitli. Guess one of the big ways I prep for this podcast. A, I read a ton, a ton of conferences and earnings and everything that they did. But B, I went on, TriChata had a Remitli call in the past month, went on, read about it, saw how two people who are invested in the stock, who are thinking about investing in stock, how they're thinking about stablecoin risk, how they're thinking about other types of risk. And then I can see that I can think about them. I can prep for my podcast with them. I've loved the podcast. I think you will too. Go to TriChata.com. That's Tri, Trata, T-R-A-T-A.com to give them a try. - All right, hello and welcome to yet another value podcast. I'm your host, Andrew Walker. With me today, I'm happy to have on Mario, Mario Semele from Marathon Partners. Mario, how's it going? - All right, how are you doing? - Doing good. I think, is this your fifth time? I think this is the fifth podcast. - Yeah, we did four new ideas. This is the first repeat of an idea, but you know, it's worth repeating an idea if the opportunity is high potentially. - Yeah, I think it is. So like here we are. - Well, let me just do the quick disclaimer and then we'll hop into it. 'Cause I agree and I'm telling you, I know that a lot of people agree 'cause I was getting just tons of inbounds on this one. But before we get there, quick disclaimer, mind everyone, nothing in this podcast, investing advice, please see the full disclaimer at the end of the podcast. Mario, the company we wanna talk about today, Refresh, Remitly, we did a podcast on them. The ticker there is R-E-L-Y. Did a podcast on them. I can't believe it was almost a year ago, but about a year ago, Sock did well, came back and you, I will always remember one line from that podcast. You said, "Sometimes you just see it." And right now I'm seeing it so clearly, like it's about to hit the inflection point. And I've actually tried to really mentally incorporate that to my investing process where wait till you like see something and you like really got your teeth in the meat, I think is the direct quote you said. But anyway, why don't we do a quick refresher on what Remitly is and then we can hop into the new stuff, the old stuff, whatever it is. - Yeah, you know, Neil, one little thing I'd say is that, you know, I'm not getting ahead of the quarter here. And actually I kind of tend not to want to have podcasts about anything kind of ahead of a quarter. And, you know, I think the opportunity here is quite interesting and the share price has been super weak. But, you know, anything I say here is definitely not like, hey, you know, make a big bet on this going into the quarter. So other than that, yeah, you know, it's simply described. It's a, Remitly is a digital remittance provider. It's kind of like an online version of West Union. They don't have any stores. It's 100% digital. So it's all, you know, all done through the app and online. And so it's a different spin on an old business, which is cross-border transactions and payments, you know, essentially from developing nations, developed nations to developing nations. And they tend to be small send amounts. So lots of small transactions that kind of add up over time into a, into a pretty big business. So you got West Union, you had MoneyGram, that one private, you had a company called International IMXI, International Remittances or something like that. I, the name's escaping me at the moment. That's going private now, being bought by West Union. You have, why is that's public? Though they're not kind of directly in the business. You know, and there's lots of banks, of course, that do this. Banks do a lot of transactions. They still do the most overall. But yeah, just, so think of a digital version app-based West Union. - Let's, great overview. The most frequent question, so maybe we can just dive into that. We addressed it on the first podcast, but I got asked it so much when I said you were coming on this podcast. It's worth remembering. Why has been off and on a market darling, a compounder darling? The most frequent question I get from people is, why remittly over wise? Why wise over remittly? They, you know, can you compare and contrast? - I start hate, I hate that question, man. You know, it's the most frequent one. It's the worst one. - Look, I'm not agreeing or disagreeing. I'm just saying, you know, at some point you got to give the people what they want. And when you put out a, hey, Mario's coming to the podcast, talk remittly and you get 20 and bound to asking, why won't wise kill them? Or will they kill wise? You got to, you got to mention it. - Wise has a fanatic fan base of shareholders. And that's good. There's strategic asset in this market. Wise send them outs are multiples, multiples of remittly. Wise's take rate is a function of mix, which is a, you know, a much, much lower percentage of low send them outs. So, you know, if you were to look at wise, you know, on a low send them out in the same corridors remittly, you would see these prices are kind of more in line. So, you know, wise isn't sending $225 from US to Mexico for 40 biffs or 30 biffs. It's not doing that. It doesn't make any sense. These transactions are generating $6 or $7 of, you know, a revenue per transaction. That's before a lot of other costs. So it's not a business that banks really love. And that's part of the reason why the whole industry exists. Western Union kind of pulled out that business from within banks and streamlined and made it a lot easier for a segment of the population that likes it and uses it, you know, kind of frequently. But I just, I think wise and remittly are kind of going, you know, in different directions at the margins they may compete. I am not a plumbing financial engineering expert, but, you know, I know remittly pretty well and I've followed the business for a long time, the remittance business. So I'm not an expert on the actual under plumbing underneath wise versus remittly. I don't think it's the same. Both have a platform and a brand that appeals to consumers. So I honestly don't think about wise too, too much. They may make good merger partners one day. I mean, one day that wouldn't be the craziest and nuttiest thing. And I'm not suggesting that they would at any point in time. But they have different sets of muscle and skill set. The, what remittly is built, which I think is difficult, and I think people would probably acknowledge, you know, now especially that it's actually difficult to build what they built. Now that's like, I'll send your payment, you know, in their set markets, I'll send these funds, you know, I'll take any form of payment you want to give me except cash and I'll deliver them, you know, to digital wallets, I'll deliver them cash, I'll deliver them to bank accounts digitally, I'll do it fast, I'll do it really efficiently. And I'll charge you, you know, a pretty fair price for that. It's not gonna be zero. So, you know, the ability to pay out in all the modalities that there's demand is kind of a difference between the two. But I honestly don't think it makes a lot of time and makes a lot of sense to kind of think about these two companies competing. Maybe they'll compete very directly one day, but I think that they both have like very long runways before that's kind of a possibility. - Perfect, let's go to something else. Now, I've got so much I want to talk to you about. I keep looking at my notes and then pulling up, highlights, having conferences and everything, but let's just rewind. We did this podcast roughly a year ago, I think it was the beginning of September, 2024. Remitly stock was, let's just make the numbers easy and say around where it was today. After we do the podcast, they report Q3 earnings, Donald Trump gets elected. I mean, the stock is a rager, right? It basically doubles from there. And then over the past six months, it's come back. We can talk about all sorts of things, but high level, I would say, hey, Mario, 2025 looks like it's going pretty well for them, right? They gave guidance. They've increased it twice, I believe. The initial guidance was 1.57 billion of revenue. Now they're over 1.61. They were guiding to 190 in the just at EBITDA. Now it's over 225, their repurchase is serious. So if I just laid all that out and backed out and say, Mario, what is the market worried about when it seems like things are going pretty well right now? - Yeah, and I think just to technically, the share price is about 13 and a half when I was on the podcast. So they got a little bit of appreciation. - Mario takes great pride in his perfect record on the yet another value podcast. You can't do it. - If we're going to have a perfect record, this thing's going to have to do pretty well from here. I think this would be a blemish if this is fairly valued. In that past year, the revenue is up 35%. Gross profits are up 35%, EBITDA is up well over 200%. So they've made a lot of progress, and then they've dipped cleanly into the gap operating profit. And I think that's losses are in the rear view mirror here. That should be gone and never seen again. So they made a lot of progress. And I think a year ago, coming up in a year ago when they reported Q3, they had another good result and they talked about growth rate for 2025 that they're now exceeding and beating, but that got people excited. So the shares did really well for a period of time. I think a couple of things happened. There was a whole big discussion about taxes on remittances and that weighed on the shares kind of like in February. That ended up being resolved in their favor. There's going to be a 1% tax on cash remittances starting on January 1st. So that actually got resolved in their favor. So I'm going to kind of put that in, that part's been settled. There's been, I mean, so and then in general, kind of the Trump administration, there's fears about like, well, they're ice, so they're pulling out to immigrants, people are being deported. That at the margin, I think that's something that people see and can visualize and think about, but the opportunity in front of remitly is so big that I just think that that's really not something that can affect them for a period of time. The big thing, and I'm happy to jump into this, is stablecoins. It's the stablecoin crypto narrative has become very loud and very intense since March. And I think there's stablecoins are kind of an interesting product, but it is a narrative driven market, it's a momentum driven market. And this overlay has been, it has cast such a dark cloud on this business model, I think it's completely unfair. It hasn't showed up in any numbers or anything yet, but I think there's a perception that remitly is at risk for a very low terminal value. And in fact, at today's prices, with some assumptions that I make, that the terminal value, the terminal value multiple, like on kind of, I think, a pretty reasonable estimate for 2030 that using pretty unspectacular growth, but nice margin expansion is absurdly low, like less than four times. So I think that is the main thing. The debate I hear, I talked to three or four Sheryls just in the past week, is what is this business going to look like in a couple of years? Because stablecoins and cryptos, and it's more specifically stablecoins now, they're gonna make this business really easy and very commodity life. I think that's patently wrong, very likely to be wrong. And I do think there's some legitimate use cases for stablecoins, but a lot of things have to happen really, really right for stablecoins to kind of have an effect on this business. And so essentially, remitly is in a basket of stablecoin losers around with eight or nine other names, including MasterCard, Visa, DeLocal, West Union, EuroNet, PayPal, a number of them. And so I think it's being shorted rather indiscriminately against longs and Robinhood, Circle, Internet Group, and Coinbase. And that's been a great trade. It's been a great trade, it's worked really well. That happened about a year ago. People are long, fast, long, short, Uber, and that was an awesome trade from the election through about mid-December, and then it kind of unwound. I think we're looking at the same thing. So to me, that is the answer of kind of why we're here a year later, even though they've made awesome progress in their P&L and these profit inflection, it's not like coming in 20 weeks or seven, it's happened. It's happening right now. They're in the midst of a fairly intense profit inflection. And second, in Q2, I'll stop in a second. Long run-on sentence here. In Q2, they went from like neg 15 to positive 15 in gap operating income. Like, not even da, gap operating income. They're swinging it, it's happening. - So let me pause you there. And now that you've paused yourself, let me pause you there. Okay, I think the bear case, and you are right. Like every time, aside from remittly versus wise, the most common question you get is stable coins, right? And I think the bear case is, hey, remittly will transfer money from US to Mexico, US to Philippines, whatever corridor you want, and it'll take two to 4% of the transaction if you're doing low dollar figures. I think people look at stable coins and say, that is basically free and instantaneous. Why doesn't this eat, why doesn't this eat all transfer business? So I will just pause there. Why doesn't, what are people who are saying stable coins will replace remittly, West Virginia and all these? What are they missing? - Well, and just for starters, remittly isn't a two to 4% range. It's weighted take rate is like 2.1%. And then, you know, I looked at World Bank data just before we got on the call here. There's a digital remittance player only take rate. That's like 3.55%. And then a cash take rate, that's even higher than that. So remittly is actually a low cost producer of this service. And, you know, it's kind of like the cost code, the remittance space, just kind of funny to think about. Because it's certainly not getting that reputation right now. - And they're launching a membership model too. So there's one more, they want to be Amazon Prime. And I want to ask about membership in a second, but please continue. - Yeah, so look, I think stable coins are an interesting technology. There's lots of knocks to them, by the way. If you're an investor and you think stable coins are going to get a high rate of penetration with consumers, and there's lots of reasons why that may not happen, or wouldn't happen quickly. Like there's lots of problems, including like wicked mismatches between assets and liabilities and banks, right? So be careful. It's one of those things, be a little bit careful what you wish for, but specifically on remittances and payments, stable coins are cheap, and they're really fast and they're instantaneous. And, you know, oh, by the way, you know, is remittantly going to use them, kind of like to make its business easier when it has pre-funded deposits everywhere to kind of make this, the magical service that is, make something look instant when it's actually really not instant. Yeah, they're going to be a beneficiary of that. But, you know, a couple simple things, which is, you know, I think a stable coin, you know, delivers the most value in savings when it doesn't have to be off-ramped into anything else. And currently, you know, the remittance businesses, you know, there's a high level of frequency for remittances. You know, I think greater than once a month for remittantly, that was implied in their S1 when they went public. That's a high degree of frequency. That's kind of telling you this money's being consumed very quickly. So this is not being, you know, other than India, which has some different dynamics, this is money that's being spent rather quickly. So if you were just kind of going to use a blockchain and move money from point A to point B and leave it there and not need to spend it on utilities and food and healthcare, car payments and mobile phone payments and all that, that might make sense. But once it needs to kind of go into a fiat currency, that's spendable. That's where the remittance companies come into play. So, you know, I've heard use cases, to me, the one of the major ones is kind of, even internal movements of funds, the big companies kind of moving around very quickly. But then there's this whole other thing about stablecoins that are so weird, which is they have to be managed. You know, stablecoins are an attempt to create digital cash. Well, cash has some traits and characteristics that are way better than stablecoins. Digital cash has to be managed. It's like a tradable money market fund or something. You're like, how does that work in a zero interest rate policy, right? They're already have been waves of, you can look back for years on kind of a money market assets and how interest rates affect demand for that. And they're at all time highs and they come crashing down. That is a component to stablecoins. That's very different than typical cash. Typical cash is printed and replaced periodically every now and then, but it just gets passed around if I want to another, you don't have anyone monitoring it. So there's this whole level of layer of complexity that has to exist and has to be managed, including is the possibility of breaking the buck on some of these things that underlie the speed and cheapness that has to be taken into account. So they're not some magical pixie does thing just darting all around the world, kind of making life easier for everyone. It's a complicated thing. So I think that they'll have use cases for sure, but I just don't think, you know, like it isn't cheap. Sorry, it isn't expensive right now to move money between major currency pairs globally for a big wholesale buyer like Remitley. It's extremely cheap. Remitley's costs are about 75 dips. Transactional costs about 75 dips. 90 to 95% of those costs come in the form of what's the payment mechanism the customer prefers and what's the payout mechanism the receiver wants, right? So it's somehow in some bizarre way, like there's suddenly like, you've been incentivized. How are they gonna incentivize Andrew Walker to use a bunch of stable coins? Well, they'll probably have to reward you something or this or that, but let's say anyway, you do it. Even in that scenario, Remitley would gladly take a lower cost quicker form of payment and pass that savings onto its customer. So one of the things I look at is I look at Remitley's net take rate. What's their take rate after their costs which are largely chosen by the customer? It's only 1.5%. So stable coins even did get high penetration and I don't think they will with consumers. Then as long as the take rate, they can drop the take rate dramatically and still preserve those unit economists 'cause now they have a funding mechanism that costs them very little. - Mario, can I pause you there? I'm gonna be willing to sound and look stupid here because this is the thing I've been trying to put together in my mind and I just haven't quite got it right. I think the bearer case would be you Mario are working in the United States and you decide to send me, Andrew, who's working in the Philippines some money to 50 bucks and remittances. Right now you do it through Remitley and Remitley would take, Remitley plus all the fees. You just said 1.5%, it'd be 2.1% all in. It would charge you for that $50 about a buck. I think the bearers with stable coins would say, "Hey, in this future, Mario's gonna take USDC "and send it to Andrew and Andrew will convert it "to whatever the dollar of the Philippines is "and then take it that way." What do the bears have wrong about that stable coin? And the bears would say, "Hey, that will be basically free "using all stable coins." What do the bears have wrong about that process? - Just look, I said you'd have to, it has to be off ramp into a currency. And once you do that, there's costs involved. So if you just want, you could do this right now with cryptos. If you want to pay your friend in Singapore 500 bucks to settle a bet and that person values- - We're making some big bets here. - Yeah, that's very easy to do. You don't need to do a remittance company to do that. Just move it over there. Now it's their fault. Now, if they want to convert it into something, that's gonna add friction and costs. So as long as it's something that's on chain, I would agree that that's very low cost, but it's not valuable on chain right now. And I don't think the Philippine government is gonna be like, "Yeah, you know, it's okay. "All these merchants, everything like that, "we're gonna go on the US dollar. "Everyone could accept the US dollar "or all that kind of stuff." And we're gonna formalize that and digitize that and we're, you know, the Filipino pays so, I think that's what it's called. Thai bot, you know, Mexican pay so. You're all the names of the various currencies. - This makes total sense. If I'm hearing you correctly, the issue is going to be, so I'm in the Philippines, you sent me the money. The issue is going to be when I try to convert it from the USDC stablecoin or the Philippines stablecoin, if that's the thing, into actual money that I can spend, you know, to pay a credit card bill, to pay it, whatever it is, I'm going to pay more because I'm gonna get rate through the call on FX fees. I have to go to a bank and say, "Hey, take this USD stablecoin or Philippines stablecoin, "if that's the thing, and convert it into money "that I can use to spend." And the bank is gonna rate me through the fees on the FX, all that sort of stuff. It will end up having been cheaper to use remitly with all their, ignoring the anti-fraud and everything, but just with their bulk scale of FX fine, it would have been cheaper for you to send through remitly in that case. Am I kind of driving to that correctly? - I think that, I think that's fair. I think it costs 10 bits or something or less for wholesale transactions between currency pairs. So the, look, people that are remitly would use stablecoins if there's demand for it. And if it actually comes attached with super low costs, they'll pass that along to the consumer. But the cost of being the remittance business is not the transfer of money. That's a component of it. The real costs are all the KYC, AML, knowing all the rules, GNA, marketing, tech developing, all the things you have to do to make a really good compelling consumer service. People aren't gonna offer to do it for free. They're just not. So I think it is a misnomer that stablecoins are gonna magically make the remittance business easier. It has the potential to do that, but stablecoins are very focused on speed, and efficiency, and that is not the only two factors when it comes into like a currency ecosystem. And I said, this is excluding this whole other layer of someone is behind the scenes managing this and making sure it doesn't break the buck and thinking about interest rates and what their revenue is. What if the interest rates go to zero? Do they like, what do they do? How do they cover their costs? Because it's gonna cost something to manage stablecoins. So, remittal is a low cost producer. It is on the leading edge of the transformation of high cost remittances into lower cost remittances. So I just think like, there's a lot of wood to chop before you kind of come at remittal and say, hey, you know, you're really, you're charging way too much for the service. This is not where the market's going. So I think they're the Costco versus kind of Neiman Marcus or something like that. That's not a great analogy. - One thing that blew my mind is in the Q2 call, they said, hey, provision for transaction losses was 15.2 basis points of send volume, 15.2 basis points. And that was high for them. And they called out a sophisticated fraud incident in May that cost them almost $3.8 million. Without that, it was 13.1 basis points. But I was just looking at that and I was like, hey, like they had one giant fraud attack that resulted in two basis points of extra spend. But I was thinking of that in relation to stablecoins where, you know, if you're sending me, how many times is that getting hacked on the other end, ignoring the KYC and AML? Like these guys, they're dealing with fraud at $4 million of big check, but it's a very small percentage of them. And I just, I don't know where I'm driving with that, but I was very impressed by that number. And it kind of put into account like, hey, if they're charging 2%, their take rate is 2%. If 15 basis points is going to cover fraud, then about 10% of their take rate is covering just these fraudulent transactions. I think that's very interesting. And we can talk about, you know, that there is an AI component and machine learning, all this sort of stuff that enables all that fraud. But I just thought that was really interesting and spoke to their mode. You can take that wherever you want. I'm kind of rambling on it. - Fraud is a hidden cost in the business and also a hidden barrier to entry. The general thing that happens is that if you're bad at fraud, you slow down the movement of money to your consumers, which they don't like and you charge them less. A lot of people will compare that price to remitly's price. If you're really good at fraud and you're tech forward, you know, in the West Coast companies tend to be kind of more cutting edge on these kinds of things versus, you know, a company headquartered in Dallas or Denver, that's trying to kind of have an apt to and compete with the West Coast guys. They tend to be very good at this. So they are better at detecting and spotting fraud. So essentially, they're giving, and I said this in the first podcast, but they're giving a higher percentage of their customers with their very best customer experience. And of course, this then bleeds into retention, frequency, LTVs and what you can pay to acquire customers. So I think there's a huge, huge advantage with the companies and the fact that fraud exists, and of course fraud exists, the very sophisticated criminal organizations out there that kind of test everything at all times nonstop. It's a constant game of cat or mouse. But essentially, the tech forward, tech first companies could handle it better. And so therefore, they don't have to slow down their movement of money as much as others that are less forward on that. So it's really a buried entry and it shows up. I mean, here, Remently is gonna be bigger than Western Union and send volume in a couple years, right? And the internet's been around for two decades. So Western Union's had a long time to make their products good, but it is not a simple thing to get right. So I do think that Remently's, you know, the platform they built is definitely valuable, not easy to replicate and has lots of direct connections with banks all over the world so they can offer the very, very best possible service. So the fraud component is a part of the barriers to entry in this business for sure. - Let me ask you a weird risk factor. Again, this is just Andrew being weird in his head and I've got tons of other stuff, but maybe I'm too domestic focused, but it seems to me that KYC and AML in the current regulatory administration, whether you like them or don't like them, it seems to me those requirements are going down. Would that be a bear case for Remently? Just like, hey, KYC and AML are huge regulatory burdens and if those barriers are going down, is that an ability for a legacy competitor to lower their costs and catch up? Or does that kind of incentivize new startups who maybe care a little bit less? And, you know, if you give them money, they send it, no questions asked. - That is not my perception, you know, as far as the money transfer organizations go, I think there's actually more of an effort to be like, let's, I don't want, you know, I don't want undocumented workers, unscheduled border crossers using, you know, these rails, I'm gonna make that effort, I'm gonna tax them if they do that. Now, ironically, where I'd say where I'd say that is like, you know, you know, cryptos, obviously, I think are, you know, you can move money around and there's some-- - That might be where the question is coming from, yeah. - And I do think, by the way, you know, one of the biggest use cases for stablecoins right now, there's very, very little demand to pay and move stablecoins around, you know, on remittance networks. It's really about crypto trading, right? - Over 90% of the use cases funding crypto trading right now, yep. - Yeah, that to me is like a bit of an unusual dynamic. So, you know, the regulatory bodies usually catch up with some delay on some of these things. And, you know, like I said, that this money is spent rapidly when it shows up in the Philippines or Mexico or somewhere else. So, you know, cryptos and stables is just the last thing. I think a lot of these customers are asking for it, though there are some use cases when you have a rapidly depre-- and remittantly with its new products or addressing some of this, never rapidly depreciation, depreciating currency. No, you may want to stick it in a stablecoin and kind of like pull the money out kind of more slowly. - Yep. - So stick it in US, move it over there, have it in US DC and kind of convert it differently. But in general, you can almost solve that anyway. You could just send a smaller amount, you could do more frequent sends, like, you know, that could be taken care of just by kind of using this, the platform a little differently. - I completely agree with you though. I do laugh every time they say, hey, if your currency is rapidly depreciating, you might want to keep it in US DC and they just announced a partnership with Circle, keep it in US DC, and then switch it to convert your currency as needed, exactly like you're saying. And I do kind of laugh because I'm like, well, the US dollar is kind of rapidly depreciating these days. - Oh, that's the funny thing, that didn't really, yeah, gold's done pretty well recently here, maybe Bitcoin too. But yeah, like the dollars, like our US government isn't, truck and sailors, you know, like into oblivion possibly, hopefully not in our lifetime, but whatever. That's a different topic. - Let me ask a slightly different question. You know, stablecoins, I've done some work on them. Mastercard and Visa will say, hey, we are stablecoin beneficiaries, not stablecoin losers, because stablecoins basically, kind of what you're hitting at, they involve an extra piece of the ramp, right? Like you have to get back into the traditional banking service at some point from the stablecoin into the traditional banking service, and then back out to the stablecoin. So Mastercard will say, hey, we'll verify that on off, that's an extra piece of the ramp. This is great for us. Remittly's kind of said it differently, but as you've said, they said, hey, if you're in a rapidly depreciating currency, maybe you want to keep it in your remittly wallet and keep it in a stablecoin, or we can use stablecoins, you know, to move money into your company, as you're kind of saying, and lower our funding costs have to deal with less FX. And I'd love to just ask you, is remittly, like, do you see a world where remittly is, maybe not a full-out stablecoin winner, but a stablecoin beneficiary, and like, do you kind of believe the beneficiary to a piece that they're pitching? - I think growth bros and VC guys are kind of having a hot moment with stablecoins. And, you know, my instinct is, is that they are additive to the financial ecosystem and not completely transformative. Like, big US retailers like Walmart and Target and Amazon, four years, decades, have wondered about how can I avoid interchange? How could I get more of my retail sale? They've done joint ventures in the past, they've tried everything, you know, and a lot of times that's just to kind of try to negotiate, kind of a lower, you know, more favorable rate, you know, of interchange that they end up having to pay. I, to some extent, you know, Visa Mastercard, you know, they have, you know, such a good business model. And, you know, if you bought those companies when they demutrized years ago, like congratulations, that was totally awesome. But, you know, to some extent, I think, you know, they do provide a service. They are pretty good things. They, there are a couple of things they do well. And, you know, they charge kind of a, you know, a fair price for it. Now, they're regulated in many parts of the world and, you know, all that kind of stuff. And there's some, you know, debit, you know, interchange, regulation, all that kind of stuff. Other people know that better than me. You know, but to some extent, this has been something that people have wanted to kind of, they've wanted to disrupt kind of the traditional payment rails, including MasterCard and Visa, including other things for a very, very long period of time. And I just don't think stablecoins are the instrument to do it. What is your incentive to pay Walmart with a stablecoin? What would you care? I don't, you don't have a big problem. You can pay with your credit card, you can pay with your debit card, you can pay with cash and payment. Like, so they would have to motivate you. What would motivate you? - Yes. - On a discount. Well, the discount, they'd have to give you to motivate you in order to pay for that and kind of mint it at Chase or Wells Fargo, probably would exceed the cost, the blended cost of every thing that they're already doing. - I mean, Walmart is better and you will spend more at Walmart than Panera. But it's not loss of me that Panera all the time, you get, hey, buy $50 worth of gift cards and get 10 free. And if you'll allow me to say, that's basically a 20% discount on gift cards to get you to give Panera money, which by the way, I've been paying with credit card, but you know, Walmart-- - Yeah, that's one that's still with the cards. - I'm sure Walmart could come to you and say, hey, pay with ACH and buy Walmart stablecoin and we'll give you 5% discount. But then they just got paid a lot more than the margin. So I'm completely with you there. I wanna take this conversation to a few other interesting new areas that have come up recently, but I just wanna pause there. Stablecoins is the behind why is the thing everybody asked. So if there's anything else you wanna talk about or get out there, I'm happy to go there. - Well, really, I think stablecoins are actually have some really fascinating use cases. And like I said before, I do think remittances have beneficiary them. Remittances in general, there are tricks. Like there's tricks to making the service instantaneous, right? 'Cause it's coming across a rickety old fiat banking system and remittly made it appear instantly on the other side of the world. But remittly's main funding mechanism are debit cards. Debit cards don't clear instantly and there's fraud involved in them. Yet they're making that payment on the receive side very quickly. They have to pre-fund deposits all over the place and negotiate with banks and all that kind of stuff. And I think stablecoins will probably be in working capital enhancer for remittly over time. And by the way, their scale, just their sheer scale of like delivering so much value coming into these banks, they're flipping the funding back to the banks in some of these cases and that's like a multi-year negotiation. These things are happening. So I think that dynamic along with stablecoins probably will create a working capital windfall for remittly over time, meaning that they'll be able to grow pretty significantly but their working capital demands will be less sharp than their kind of growth send volume demands, which is a positive thing for them. So yeah, I don't have anything further to say. I do think it's this hot moment, and all these VCs wanting to go over, like they're gonna go over and these companies are coming public now. By the way, every kind of company that comes public that has a stablecoin or blockchain narrative goes on the long side, that puts more pressure on the short side, including remittly in the short basket. So like one went public like two weeks ago, I can't remember the name. It's like FIGR was the symbol of something like that. It was like blockchain technology. It had three or four different businesses. It was not the easy- - I'm sure it's a great company. - More and more pressure. It's like 10 billion market cap when I last looked. More and more pressure on the short side. So I think stablecoins are in a hot moment. They definitely gonna have some use cases, but this is a tradable money market fund to me is not the worst way to think about it. - Remittly should just take the lessons of 2021. Instead of fighting it, they should just announce the remittly stablecoin, merge it into a SPAC and just do it. Just do it, figure out the details later. Let me ask you a different question. As I told you at the start of this podcast, and people, long-time listeners will know I'm serious, because on my podcast with Arden Foken, I mentioned to it, I was like the thing Mario said, where he said, "I can just see the ball clearly. I can, I feel like I've got my teeth in the meat." It's actually really stuck with me. And I know you told me before this, you listened to the podcast with Arden 20 times and you liked that reference. So you're, you're welcome. - Would I listen to it? - I'm kidding, I'm kidding. But if this doesn't work, if remittly doesn't work, right now I think the average bear would say stablecoin bro, whatever. What do you think would have caused, if you and I are filming this podcast four years from now and remittly didn't work, why did remittly not work? - That they had penetrated into their market more than I thought. - So just the markets, they're saying the TAM is huge. And it turns out actually the TAM is a lot smaller and growth just is kind of stalling out. And this is a GDP growing from here on out. - Growth stalls out. Though, you know, it's kind of fascinating. And this to me points to like the skewed nature of the opportunity right now. You know, we, we did a terminal value analysis on it. We grew their business like 20, 21% in 2026. And then we took that growth right down to 13.5% through 2030. Now we did an important thing. You know, the CEO, Matt Oppenheimer is on record saying that over time, that they believe that they could exceed West Union's margins, West Union's gap operating margin, I think is like 18 and a half percent, 18, 19%, you know, right about now that if, and look, we talked to this management team, we give them feedback. We're trying to be helpful to them. We've had a very constructive dialogue with them. We are very, very big believers that there's a profited inflection coming. What I'm saying here is that the model is sensitive to growth rate, but it's really sensitive to margin. So if I take remitly, and I think this is a very reasonable thing to do because they have a very different cost structure than West Union, right? West Union has much higher variable costs than remitly. If I take them to 19% operating margins in 2030, like they're gonna have half a billion dollars of gap after tax, after SBC net income in 2030, that's on a 13 and a half percent growth rate kind of looking out. Now, yes, I did do something good with the margins. So growth could stall out here, but if they deliver on the margins and deliver strong incrementals, like they are in the first half of 2025, it's not gonna be a disappointing investment. It's gonna be a great investment to a very, very good investment. Now, perhaps that won't happen, but it's already in process. And I'm telling you, we are coaching them as hard as we can on this. I am very confident they've bought in to this notion. And it's logical, of course. It has to happen. And we went through it with Uber, you know, Uber. I do think profit inflections drive narrative. Right now, the narrative for remitly is terrible. It's shockingly bad as far as I'm concerned. And maybe I got it wrong. I don't know. But once Uber turned the corner on that profit inflection, and you have profits growing much, much faster than top line, and they still have some nice top line growth, and you're improving the quality of earnings while that's going on. So stock based comp as a percentage of revenue is going down and down and down. It is really hard for someone to sit back and be like, "Hey, you know, I'm gonna stay short this thing "because the terminal value of terminal multiple "is gonna be really low." Yeah, they're gonna really drive profits through the roof, but I'll be able to cover it five times earnings 'cause that's where West Union's trading. I just think that's totally unrealistic and not how it's gonna work. And I'll say one more quick thing. - And I'll pause. You know, there is a problem with remitly. There's not a good comp anymore. Like MoneyGram went private. There is wise, but they're not in the exact same business. West Union has 11% dividend yield. If you bought any Remittance company over the past 10 years, you've done nothing but lose money. So a lot of people have really kind of negative thoughts about the space. It is kind of like a smaller corner of payments that exists, but they're not kind of putting any thought that this could be a digital category killer. This could be like a booking or Flutter or Uber of its space. And that's what I'm kind of playing for. So I think, you know, if you go out a couple of years in the business, it has much higher margins, generating lots of free cash, way more profitable. But even let's say, let's say by 2030, they're a high single digit grower and low double digit grower profits, but they have way more profits they have now. And it's clear that they've kind of like, they are a player in this space. Those kinds of businesses tend to get pretty high multiples. - Mark, that was a really fascinating framing. The way I almost say it is, look, you've got these legacy remittance players that have been the only public equity game in town for legacy remittance. And all of them are shrinking, high dividend yield. They've been great funding shorts, to be honest with you. - 100%. - And now you've got funding, which is funny for remittances. And now you've got remitly, which is kind of, I'm just gonna say category killer growthy company, but everybody applies to legacy framing. Like it's almost a capital cycle type framework, right? Where you've got a chemicals company that there's been no investment in the chemicals for 10 years. And everybody says, oh, everybody's got their brains blown out buying chemicals companies. And then, you know, the cycle kind of turns like, this is almost, I get it's not one to one, but it reminds me of the capital cycle stories that people really like to invest in. You've got a new growth company, all the people in the space have been killed. I'll let you comment on anything there. I did have some other questions about remittly run and remittly biz I wanted to ask you. - Yeah, you're channeling my old boss, Bob Robotti there, you know, kind of like picking off industries that have been in a bad place for a long time. Yeah, that's true of this space, 100%. I've seen it, I've gone to luncheons where people say, that's interesting, that's interesting, that's interesting. Yeah, but you're just a remittance company, so you're never gonna get a multiple. - Can you believe, I'll ask you that offline. That was a funny joke. Let me ask about remittly. So remittly also in the past few months has launched two new products, remittly business, which remittly for businesses and remittly one. Both of them kind of interest me. I'll let you go first. You can give an overview of whichever one you think's more interesting. I've got a few quick questions on them. - Yeah, actually, you know, this is something I wouldn't spend too much time on. You know, the new product launch was, you know, a little bit poorly received by the marketplace, which was surprising. You know, I thought the products were pretty good ideas. They're not costing a lot to launch either. That's like the most interesting thing. - Yes, I agree with that. - I got, you know, I got an entrepreneurial management team, you know, that, you know, founder led team, and he's trying to grow the business still. You know, I like that. And I don't think they're spending a ton of money on that. I do, I am definitely intrigued by a subscription product in the space because the business historically has always been highly transactional. - Yes. - High frequency. So is there some trade, some combination of benefits you could do and kind of create like an Uber one likes Uber? So we're like the, the, the, they'll create a new flywheel of, you know, within their active customer base of this lower churning, happier, higher LTV customers that essentially are paying to be members that get some benefits. And that to me is like going to be hard to pull off, but I think they could do it. They're saying that they're seeing, they like what they're seeing so far, you know, and they could kind of tweak that. And you like, Uber one had zero members at one point. Now it's like 30 million plus people. So I think that's a good thing that they should be going for. But I don't think it's a negative. It's like a, it's a free call on them doing something smart. - I completely agree with everything you said. I will tell you, I thought it was weird. So remittly one, as Maro was saying, it's their membership model. And they've got like a lot of bonuses in the headline one. I'm looking at the remittly one landing page. And the first bonus they mentioned is instant access to $250 send now pay later. So you could send it today, pay it three months from now, right? And the reason I thought that was the, I was worried about it was I was saying, okay, they're gonna charge $10 per month for remittly one. And there are other benefits, but the headline benefit is send 250 today, pay it three months from now. I mean, who is so short of money that they need $250 kind of a three month bridge loan, but they can pay $10 a month for a remittly subscription. I was kind of looking at it. I was like, that seems like a weird product market fit, if that makes sense. - Yeah. And again, I wouldn't think about this too much, right? So let's call it kind of send now pay later. - In this market, it might be better not to think, just go along the quantum computing stuff and stop thinking. - That's not to be to poo poo your question. That's to say that they'll have to find the right mixture of things, if it works. I think a buy now, pay later kind of service for remittances, to grease the wheels at the margin. Let's see how that goes. But do I think that they're looking to put on like big loans and be a bank? I've talked about that, no way. I don't think that's the case to do. - A lot of people ask that question. And I think they pretty clearly like, hey, they've got data. These people have been sending payments for six months. Like they know the data, they've got the history, this is a bridge, but I just kind of thought- - They're not going to do that, yeah. - They may have to tweak this product, maybe it costs a little bit less. They'll have to throw in new benefits. Maybe they'll have to do a little bit of a discount on the fees or something like that. There'll be some, I believe there's some combination of benefits and costs that will work for a portion of their customers. And they'll be able to figure that out. But I don't think this is, this doesn't portend like a slowdown in their business or their TAM or something like that. I don't think they're desperate. Many big companies at the margin will grease the wheel for extra transactions on top to layer in additional transaction and gross profit dollars off their basic customers. I think that's what they're doing. - The one I thought was really interesting, again, I realized this product is literally, it's in beta coming soon, but the remitly personal, one of the benefits is $5 per month when you send a transaction. If you sign up for this, they'll give you $5 cash back per month if you do it over ACH or something. But I thought that was really interesting because you could imagine if people have been funding it one way, you shift them to ACH, which is a less, a less expensive means of funding it. You encourage continuous monthly volume. So you build that repeat customer base. You drop the customer acquisition costs because it's a repeat customer. And you're basically funding the monthly payments with this discount. I thought that was a really, I could see how that could unlock a lot of kind of just customer captivity and volume. So pause there if you had anything else. - No, we'll see how they do. I think I have a motivated, smart CEO that will be able to figure some things out. If there's anything, if there's a product market fit out there for some of these things, I think you'll find it. They may not be where I'm not, I don't own this kind of on the new products needing to do well. - The small business, by the way, I do think-- - That was my last question, go. - Micro businesses make some sense. And they have talked to me about that in detail. I do not think at this time that that is kind of like, a Trojan horse into like wise business or anyone else. And I really think they're looking at these smallest of the small types of businesses, maybe an accountant in the US paying, four or five different kind of Philippine workers that's helping him or her run their business, that kind of stuff. I think that that's what they're focused on. I don't think that they have some secret intention to kind of go upscale and like, hey, let me go compete with these other people that do that pretty well. - No, that makes total sense. It's just, look, they come out and they say, hey, remittly business takes our tan from, I think they said two trillion to 22 trillion. You start saying that. And obviously I was having trouble in my head like, hey, who is the right person for international remittances at very small scale for business? It just seems weird. But as you said, it's not like we're buying the same, hey, remittly business is going to be the next global international small business, small business winner. - We're at eight and a half times next year's EBITDA and we're solidly gap profitable. They are, there's not a lot of expectations at the share price right now for that kind of stuff to kind of pan out and work. - That's great. Mario, this has been about an hour. This has been an awesome update. I just, again, I had tons of questions. We got through pretty much all of them, but anything else you want to leave listeners thinking about anything else on your mind when it comes to remittly? - Well, I don't know, a couple of things. We've talked to the team about some of the insiders selling. I think, I'm hopeful that the management team will show some sensitivity to prices at one point. I do think the company's valuation is so low that it's not impossible that someone might look at that business model and say, I see that generating a lot of cash a couple of years out for me for now, that could kind of be interesting. I actually think a pure financial sponsor could actually make a go at this as well. That is not an outcome that I'm looking for to have capped upside here. But MoneyGram did go private. It's been in and out of public ownership. West Union actually go back some time, kind of traded hands in and out. So I do think they've kind of gotten themselves down to evaluation where it is not impossible that someone might kind of think that is an interesting business to own. Especially if they believe kind of this profit inflection that we see out there that I think is really out there. - Oh, go ahead, please. - Go ahead. - Just on the insider selling, you had mentioned this in our pre-talk and I hear it, but it doesn't look extreme to me. I mean, the CEO, he owns over 4 million shares. Most of this share sales have been for low-cost basis stock option, tax covering, some gifting. Do you think the, are you hearing a lot of people saying, hey, the insider selling here is an issue? Or what is kind of, I mean, look, I am somebody who loves, I want big PSU packages with giant EBITDA share buybacks and insider buy, and I love that and all my things. But when I was reviewing this, it just didn't strike me as a huge issue here. So I was just surprised to hear you say it twice. - Yeah, well, you know, kind of ironically, remitly, and you know, they didn't even twist their arm. I mentioned it. I said, so we'd like it, but like, you know, they approved it to the board, approved the 200 million share repurchase at the last board meeting. So that, you know, gives you some clue about what they, you know, where they think the value is. So we kind of had that happen. Sorry, I just lost my train of thought. You, I just say one second again, what you asked me. - It was, you were talking about the repurchases as a counter to the insider selling. Like it just didn't jump off the screen as- - I don't think it's terrible. And there's lots of tech companies that, you know, have CEOs that kind of diversify via sales. And sometimes those sales come with, many times in big tech, you know, companies repurchasing shares and all that. I think that's a minor conflict of interest, you know, and kind of not really a red flag, the fact that the company has a buyback and you have some insider selling. That's very common in growth land, tech land. But I would say for a, a, a, a submit cap growth name that is kind of not getting any respect, you know, multiple wise and, you know, and has done really well growing its business. You know, I would say like at the margin, let me nitpick and let me try to see if, you know, there's, there's things that could improve it. I would love to see that company remove that red flag, that tiny red flag of insider selling, showing some sensitivity to price. So, you know, we've, we've kind of discussed that with them. And, you know, we'll see what, if anything they do there. But I hit his, a couple of things. His, his salary is very, I think it's less than 300,000. It's very modest. He hasn't taken any grants or anything in three years. So that speaks to me that this is not a person that just is trying to max out, you know, cash in their, in their pocket. So that, that talks to me a little bit like a person on a mission, but at the margin, you know, would I be like, Hey, you know, maybe if I was on the cop committee and say, Hey, maybe we give, maybe we give the CEO a bit of a race and, you know, in exchange for that, maybe we can get them to stop selling shares. I don't know, that would be an interesting trade to me. I would do it if I was on the cop committee. - It's just, it's so funny. Again, the CEO here is selling $500,000 worth of shares a quarter, right? Which is not nothing, but it's pretty small in comparison to, I think he's got memory serves $50 million of equity or so, I can't remember for sure, but pretty small. - North of that, I think he owns two or three percent of the company and what it's a three billion company right now, right? - Yeah, so roughly right. But you compare it to like, you know, Ion Q, which is every quantum computing's favorite growth darling. And I think their executive chair sold all of his stock over the summer or something or Carvana, you know, the bears always say, oh, look at the CEO and the chairman's insider selling and that stock is just up every day. And it's just, it's funny how here you've got like a, and I'm not hating on either of the companies. I'm just saying like, those companies have just worked and nobody except for the extreme bears talks about the insider selling there. And then here you have a company where the CEO is selling a, to me, reasonable-ish amount of equity, very small. And people are like, oh my God, the insider selling. It's just, it's funny how narratives and price just changed the discussion. - Narratives is a key word. I do think Matt holds himself to a pretty high standard. I think he's a very high-quality CEO, high-quality person. So, you know, this is something that I think they could improve upon. And if, you know, if they want to, they can't. I had two little things, if you- - At least. - Before I go, because you said the word narrative and I mean, like narrative is like, okay. I did get on with you, we talked about zometry and we did talk about remitly. Zometry has a great narrative right now. And it's just funny to me. So I just kind of was going to mention this. Remitly's narrative, they have a narrative too, but it's quite, quite negative. So not that these are comparable companies, but like remitly is like 25% bigger in market cap than the zometry. The zometry has this great, like AI, you know, kind of narrative reshoring. It's like, it's going to be very sensitive to U.S. manufacturing. So they got that and it's been a huge winner for us. - Remitly is projected to grow faster next year. So they have that. But they have two and a half times the revenue is zometry. They have, on next year's estimates, like eight times the level of EBITDA. And, you know, zometry is just breaking in to kind of like, kind of profitability here, EBITDA profitability. That to me, again, these are just two companies I follow closely on both of them. The zometry, you know, has a pretty aggressive valuation here and we own it. We have done some hedging. And I'm also telling you kind of, you know, it's up a lot from when we kind of mentioned it. So like, it definitely has high expectations. Remitly doesn't, it's grown a lot. And the share price is just up a little bit since we did it. But the stark difference between the valuations, just based on narrative, it just to me kind of highlighted like the weirdness of this market where you could have like crazy disparities like that. And narratives are stories and stories can change. And so like on both sides of that, you kind of would have the risk that there's a different narrative that kind of prevails at, you know, at a period of time. - Yeah, it's great. And I do, as you say it, I remember like, I've been thinking about 2021 a lot recently because how many, you know, killer growth companies were there in 2021 and then the narrative changed and the business model, it turned out a lot of it was COVID one-time fads and those stocks are down 90, 95%. The geometry I tell is going to be down 90, 95%. But there are going to be huge winners coming out of this as things shift and there's going to be some big losers. All right, Mario, this has been great. This was time five, so we're going to be shooting you the very exclusive yet another value podcast shirt. And I am looking forward to having you back on for the six podcasts, whether that's a recap of another idea or one of the hot new picks. - Is the shirt cotton, is it a high quality shirt? - Oh, it's high quality, my friend. This is an exclusive podcast. It's, well, right now it's Roan and we get the stitching done. - Oh, definitely, send me one then. - Oh, you were going to turn it down if it was just a normal cotton shirt. - I like to wave things, you know, I don't like to do that. - I appreciate you saving me the money, but yeah, it's high quality. I'm going to get your address after this and we'll send it later, Mario. - A quick disclaimer, nothing on this podcast should be considered an investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. please do your own work and consult a financial advisor. Thanks.