Upslope Capital Management, an investment management company, released its third-quarter investor letter. A copy of the letter can be downloaded here. The third quarter was a strong one for the fund despite unusual volatility in the macro environment. The fund returned +8.8% (net) in Q3 compared to +5.5% and +3.8% for the S&P Midcap 400 ETF (MDY) and HFRX Equity Hedge Index, respectively. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025. In its third-quarter 2025 i ...

Core Viewpoint - The article critiques the speculative nature of quantum computing stocks, particularly IonQ, while highlighting the potential of companies like Remitly Global and Portillo's that are currently creating value in the market [2][12]. Group 1: Quantum Computing Stocks - IonQ has seen a significant increase in stock price, up hundreds of percent in the last year, reaching a market cap of $25 billion despite generating less than $100 million in revenue [2]. - The company is characterized as highly speculative with little to no viable business model, making it a risky investment [2][12]. Group 2: Remitly Global - Remitly has experienced a 34% year-over-year revenue growth last quarter, with a 40% increase in send volume, indicating strong performance despite concerns over immigration policies affecting cross-border payments [6][5]. - The company generated $1.46 billion in trailing revenue with an EBIT of $27 million, showcasing its path to profitability and operational leverage compared to IonQ's significant losses [7]. - Remitly is positioned to capture market share from traditional players due to its low fees and user-friendly mobile application [6]. Group 3: Portillo's - Portillo's is expanding its restaurant chain into new markets like Texas and Florida, despite facing challenges from a slowdown in consumer spending [8]. - The company reported a modest 3.6% annual revenue growth, with plans for significant expansion in the coming years as new store openings are scheduled for the latter half of 2025 [9]. - Portillo's generated $65 million in EBIT on $728 million in revenue over the last 12 months, contrasting sharply with IonQ's $53 million in revenue and $351 million in losses [11].

Core Thesis - Remitly Global, Inc. is positioned as a leading digital remittance platform, transitioning from a cash-heavy model to a high-retention, annuity-like business, with strong revenue growth and customer retention metrics [2][5]. Financial Performance - As of Q2 2025, Remitly is experiencing a revenue growth rate of 34% year-to-date and is projected to achieve over 25% free cash flow margins, trading at less than 8 times estimated 2027 unlevered free cash flow [2]. - The company's stock was trading at $19.68 as of September 4th, with a trailing P/E ratio of 324.33 [1]. Competitive Advantage - Remitly's competitive edge stems from its effective marketing strategies, efficient customer acquisition, and product-led retention, offering a superior user experience compared to traditional cash-based networks like Western Union and MoneyGram [3]. - The company demonstrates increasing returns to marketing scale while maintaining a gross profit payback period of less than 12 months on customer acquisition [3]. Market Dynamics - The adoption of stablecoins poses a minor threat to consumers, as their usage is still in the early stages, and regulatory challenges are likely to hinder mainstream adoption [4]. - Recent immigration policy shifts are favorable for digital remittance flows, penalizing cash transfers while promoting app-based remittances [4]. Long-term Outlook - With ongoing product innovation and a strong foundation of customer trust and retention, Remitly is well-positioned for high-margin free cash flow generation, making it an attractive investment opportunity in the digital remittance market [5][6].

Financial Data and Key Metrics Changes - The company has achieved eight consecutive quarters of double-digit transaction growth and high single-digit revenue growth in its digital business, indicating a strong performance in this segment [7][16][18] - The retail business outside of the Americas has stabilized and is now a growing asset, with non-Americas business growing over 10% [5][6] Business Line Data and Key Metrics Changes - The retail business in Europe has shown high single-digit transaction growth with mid single-digit revenue growth, marking a significant turnaround from previous years [6][35] - Non-remittance services, including bill pay and foreign exchange, have experienced strong double-digit growth, contributing to overall revenue [10][15] Market Data and Key Metrics Changes - The political situation in the Americas has disrupted migratory patterns, leading to a decline in transactions, particularly in Latin America, while the U.S. market has seen higher principal amounts sent but fewer transactions [51][54] - The company has a mid to upper single-digit market share in key corridors like India and Guatemala, indicating significant room for growth [22][24] Company Strategy and Development Direction - The Evolve '20 '25 strategy has transformed the company from a declining business to one with positive growth, focusing on stabilizing the retail business and enhancing digital offerings [5][6] - The company aims to be a globally diversified provider of everyday financial services, expanding beyond remittances into areas like foreign exchange and bill pay [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term trends in global migration patterns, which are expected to support business growth despite short-term challenges [71][72] - The potential introduction of a remittance tax could significantly impact demand, with management noting that it would effectively double the cost of sending money [58][60] Other Important Information - The company has invested significantly in modernizing its retail point of sale systems, which has improved transaction efficiency and customer experience [37][43] - The company is exploring the use of stablecoins for settlements, although regulatory clarity is needed before significant implementation [75][81] Q&A Session Summary Question: What are the key achievements of the Evolve '20 '25 strategy? - The strategy has stabilized the retail business and driven growth in the digital segment, with a focus on high-growth corridors and enhancing customer experience [5][6][24] Question: How does the company plan to address the potential remittance tax? - Management indicated that the tax would likely be passed on to consumers, significantly increasing the cost of sending money [58][60] Question: What is the company's outlook on global migration trends? - Management believes that inbound migration is essential for GDP growth in developed countries, which will positively impact the business long-term [71][72]

Financial Data and Key Metrics Changes - The company reported first quarter revenue of $361.6 million, representing a 34% year-over-year increase, and adjusted EBITDA of $58.4 million, resulting in a 16% adjusted EBITDA margin, marking a "rule of 50" quarter [30][31][40] - Quarterly active customers increased by 29% year-over-year to over 8 million, with send volume per active customer growing by 9% year-over-year, the highest growth rate since 2021 [31][32] Business Line Data and Key Metrics Changes - Send volume grew by 41% to $16.2 billion, outpacing revenue growth, with a gross take rate of 2.24% [32][34] - The company saw strong growth in high amount senders, with send volume related to transactions over $1,000 accelerating to over 45% year-over-year growth [16][36] Market Data and Key Metrics Changes - U.S. revenue grew by 35%, while the rest of the world grew by 41% year-over-year, with revenue from regions outside of India, the Philippines, and Mexico increasing by 45% [33][34] - The company launched remittance services to Nigeria, Burkina Faso, and Mali, expanding its geographic footprint and enhancing financial inclusion [14][15] Company Strategy and Development Direction - The company aims to build a resilient business model that can deliver across economic cycles and geopolitical changes, focusing on diversifying its business to capture more growth and reduce risk [7][13] - The strategy includes enhancing customer experiences through technology, expanding payment options, and leveraging partnerships to improve transaction efficiency [15][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of remittances and the strength of the diversified business model, despite macroeconomic uncertainties [28][40] - The company raised its full-year outlook for both revenue and adjusted EBITDA, expecting revenue between $1.574 billion and $1.587 billion, reflecting a growth rate of 25% to 26% [41][42] Other Important Information - The company reported a GAAP net income of $11.4 million, a significant improvement compared to a net loss of $21.1 million in the same quarter last year [40] - The company continues to invest in technology and product innovation to enhance customer experience and drive long-term growth [90][95] Q&A Session Summary Question: What is driving the increase in send volume per active user? - Management indicated that increased engagement, higher send limits, and diversification into micro business segments are key drivers of the increase in send volume per active user [50][52][53] Question: Are there any environmental factors influencing the numbers? - Management noted that the majority of revenue comes from prior quarter cohorts, providing high visibility and confidence in revenue durability, with similar drivers expected to continue [58][59] Question: Can you elaborate on direct partner integrations? - Management highlighted that direct integrations lead to faster transactions, lower costs, and improved reliability, contributing to higher customer satisfaction and retention [63][66] Question: What is the strategy for high dollar senders and micro business customers? - The strategy involves targeting specific corridors, improving marketing efficiency, and tailoring products to meet the needs of these customer segments [78][80] Question: What is the significance of the WhatsApp partnership? - Management expressed excitement about the WhatsApp integration, viewing it as a significant opportunity for customer acquisition and improved service delivery, particularly in Latin America [83][85]

Company Overview - Remitly Global is a remittance provider with a market cap of $4.1 billion, experiencing significant growth and market share gains [2][4]. - The company has 7.8 million active customers as of Q4 2024, reflecting a year-over-year growth of 32% [3]. Market Position - Remitly is gaining customers from Western Union due to lower fees and user-friendly services, targeting key immigrant groups in the U.S. [4]. - The company currently holds approximately 3% market share in the remittance sector, processing $15.4 billion in volume in Q4 of the previous year [4]. Growth Potential - The remittance market is expanding, providing Remitly with a dual advantage of market share growth and sector growth, leading to a cumulative revenue increase of 130% over the last three years [6]. - Revenue growth is expected to continue, with projections indicating that Remitly could achieve over $3 billion in annual sales within five years [11]. Profitability and Financials - Remitly's gross margin is approaching 60%, despite posting a slight operating loss last year due to high spending on marketing and technology [7][8]. - The company is expected to reach operating leverage as it scales, with potential profit margins approaching 20% in the next five years [9]. Investment Appeal - The current market cap undervalues Remitly's profit potential, with a projected P/E ratio dropping below 10 if revenue growth continues [12]. - Investing $2,000 today could yield 100 shares of a fast-growing company at a reasonable price compared to other high-growth stocks [2][12].