I dove some more into $RELY today. I’m not gong to invest in them, but I thought I’d share my findings in case they help anyone.
I thought I’d try screening based on momentum and it looked to me like $RELY may have inflected recently in terms of momentum and Analyst upgrades. So I looked back over the excellent past $RELY discussions here and reviewed a few CCs including their most recent. I also took a cursory look at the current remittance landscape by checking up on Wise and $PAYO.
It seems $RELY is still growing at a decent clip however rate of growth is slowing: 49% → 48 → 42 → 38 → 32 → 30%
They have been cutting costs. And they have been getting some FX tailwinds from the strengthening U.S. dollar.
It all added up to a good quarter, and the CEO in their last CC went on at length several times, painting a picture of inflection, bottom-line growth, greenfield and adjacent revenue streams.
Another interesting tidbit is their YTD stock-price chart and that of Wise’s look eerily similar…and that makes me wonder how much this good quarter is attributable to macro conditions.
Also I noticed that they have been talking for some time about wanting to do more than just remittances, but don’t seem to have made any headway on that front,
I concluded that it seems like a decent business, they seem to have a moat built up by the reliability, speed and transparency of their network, they are still growing revenue and are starting to show profits and operating leverage.
However,…to me I just can’t see them having the potential to outperform what I already have in my portfolio, so for now I’m passing on any investment in $RELY.
Hopefully this is useful to someone…if not, my apologies
RELY’s valuation is one of the most compelling among companies that have a fairly stable revenue stream.
Their recent quarter growth accelerated to 39%, which was a big surprise. However, I am just forecasting 25%, since they only guided 28% ~ 29% growth. They recently turned cash flow positive in a fairly significant way, and are starting to see operating leverage.
The biggest worry for this company in my mind is when Trump curbs immigration, it may impact its growth. To what extent is anyone’s guess.
I held a 2 ~ 3% position for the majority of the past 12 month, and increased it to 6% ~ 7% after the latest earnings report. I think once the cash flow growth trend becomes more obvious and they can maintain 25% growth rate, the market will give it the valuation it deserves, which can easily be a double from here.
A President can create new barriers to entry just by changing the orders given to the border patrol. Trump promised that on “day one” (his words). Biden did exactly the other way around on his first day in 2021. So there is no question that new arrivals will be reduced. But people already in the US will still send money out. But for how long? The US can tax remittances flowing out of the country. I don’t know if that requires Congressional action or just executive orders. I would bet that the idea is already being floated.
“The Congress shall have the Power to lay and collect Taxes, Duties, Imposts and Excises to pay the Debts and provide for the common Defense and general Welfare of the United States ."
But the president can put restrictions on banks on sending money out of the United States.
The US is approximately 2/3s of Remitly’s revenue. Its highly dependent on money leaving the United States.
I’m a bigger fan of Wise and you can see my writeup here. I love that they are growing their credit card revenue at 54% YoY and its their highest gross margin product. I think macro conditions caused the price drop on both of the companies and they shot up in value after they both continued to executed.
I looked into this report from Remitly because the 39% revenue growth and the switch over to profitability on both net income and EBITDA on GAAP basis.
There were a few things that gave me pause though,
they just got a new CFO
the revenue guide is sequentially flat
adj EBITDA and net income are guided down significantly
currency tailwinds has a big impact helping them this quarter
I’m interested to see how upcoming quarters turn out though and if the trend of accelerating metrics continues.
