Chit Chat Stocks - Alsea (Ticker: ALSEA) with Ian Bezek

Episode Date: April 13, 2023

Alsea operates fast food, cafeteria, casual food, casual fast food, and family restaurants in Latin America and Europe. The company franchises common franchise restaurants from America such as Domino's Pizza, Starbucks, and many others. Listen as Brett and Ryan ask questions about the company, its business model, and valuation. Enjoy the show! ***************************** This episode is sponsored by Stratosphere.io, a web-based terminal for financial data, KPIs, and more. Try it out for FREE or use code “CCM” for 15% off any paid plan. Sign up here: https://www.stratosphere.io/ ***************************** Want updates on future shows and projects? Follow us on Twitter: https://twitter.com/chitchatmoney  Subscribe to our Substack to receive free show notes and charts that go along with every episode: https://chitchatmoney.substack.com/ Interested to see more of Ian's work? Check out their Twitter here: https://twitter.com/irbezek?s=20 Contact us: [e-mail] Timestamps Alsea | (3:39) Domino's Pizza | (8:12) Competition | (19:02) Management | (28:07) Disclosure: Chit Chat Money hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Brett Schafer and Ryan Henderson are general partners and portfolio managers at Arch Capital. Arch Capital and its partners may hold securities discussed on this show. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Money. My name is Ryan Henderson, and I'm joined by my co-host, Brett Schaefer, as always. Today, we've got our Thursday deep dive episode where we interview an analyst to discuss a single stock or industry. Today, we have on the show Ian Bezek to talk about Alsea. I will say this now, and you're probably going to notice this after listening to the show. Ian, every time he's come on the show, which has only been twice, but even when we talk after the He uncovers some hidden gems that are really fascinating, and he has a really good grasp on the Latin American companies in particular, which it seems like that's a great pond to be fishing in right now.

And I think he kind of expresses why, especially the Mexican market, which is where a lot of Alsea's revenue comes from. But either way, I think you'll really enjoy this interview. Before we get to that, though, today's episode is presented by our sponsor, Stratosphere. They are our investing home screen for fundamental research. We use them every day. You guys hear us talk about them all the time if you're a regular listener to the show, but we think it's a wonderful platform.

They continue to update and iterate on it. You can get all the press releases for your entire watch list in one place. You can get all the SEC files from there. You can get awesome data visualizations. And then the best part is they have custom built KPI tools that you really can't find anywhere else. We talk about this all the time. but they've got data for companies that are specific to them that date back more than 10

years in a lot of cases. I really can't think of any other platform where you can find a lot of that stuff. So I really recommend checking it out. If you're interested in any of the paid plans, use promo code CCM, you get 15% off. It's stratosphere.io. Go ahead, check it out. If you're more interested in the platform, stick around after the episode, we have a little three minute interview with the Stratosphere's founder, Brayden Dennis. They actually just had a nice private funding round too, which they announced on Twitter. So we're happy that they will continue to be around. Very exciting stuff going on there. Anyways, without further ado, here's our interview with Ian Beswick. Welcome to Chit Chat Money. On this show,

hosts Ryan Henderson and Brett Schaefer interview industry experts and riff on the world of investing. As a quick reminder, Chit Chat Money is a CCM Media Group podcast. Ryan and Brett are also general partners at Arch Capital, and Arch Capital may have positions in the securities discussed in this podcast. Anything discussed on Chit Chat Money by Ryan or Brett or any other podcast guests is not formal advice or recommendation. Now, please enjoy this episode. All right, welcome in. Today we are joined by now two-time guest Ian Bezek. He is the author or the writer, the founder, I guess if you want to call it that, of Ian's Insider Corner. You can find it on Substack or Seeking Alpha. Lots of good write-ups on there and a lot of

Latin American focus too, if you're interested in those markets. Now, before I talk about the company we're going to be discussing, I do want to say, if you're interested in hearing more of Ian's work, we did a podcast that has aged quite well a couple of months ago on Pacifico Airports, which is another really interesting model. But today we're talking about Alsea. So I guess the business model maybe isn't that intuitive for someone who hasn't looked at these kind of companies before so could you describe how alcea's business actually works and i guess welcome to the show and thank you it's great to be back i really enjoyed talking about the airports and happy to be presenting another mexican uh idea here today yeah so i'll say

it started out in the early 1990s uh with the idea that the franchise restaurants particularly fast food restaurants were going to be a big market opportunity in mexico and at the time there was very very few of them but with the passage of nafta in the beginning of free trade they realized it would be much easier to bring american intellectual property into mexico and make that a viable model and so they started out with domino signing a franchise agreement for domino's in mexico and began to build that out then in 2001 2001 i believe they signed to franchise for starbucks for mexico and then just kind of from there it snowballed the company has become a large franchise operator of restaurants in mexico south america europe

more than 4 000 locations today with domino's and starbucks being the primary brands but also some other ones burger king cheesecake factory stuff like that okay and we're going to get into the specifics of their business model unit economics and all that great stuff later in the episode but for some context for the listeners because i think the majority of our audience is going to be from north america um how are qsrs different in latin america compared to the united states if at all or do they really run a similar model there are other big differences here yeah i'd say the differences aren't that big probably the most notable one is that they tend to be fairly expensive or at least as expensive as you'd get with other restaurant options in

latin america and so you're not going like in the us you might order a pizza from domino's because it's cheaper than most of the other food options that you could get whereas in latin america you would order from domino's because you know you're going to get a higher quality or not just some random person making a pizza that could be good or could be terrible if you bought it off the street in mexico whereas with domino's like you know you're gonna get good pepperoni you know the the crust is going to be crunchy it's just kind of brings you the american quality standards but yeah they sell at a higher price point and in a lot of cases you're competing against like if you're competing against somebody that has a taco taco truck on the street they're not

going to pay into social security they're not going to comply with labor laws and all and so you can you have some challenges from uh kind of you actually have to comply with regulations whereas your competitors don't which was not the case in the u.s and so that's kind of the the one primary difference from the u.s market how how do the economics work for like the the franchisers in uh these markets and then maybe what's their like relationship with the actual parent company brands yeah so i don't think the exact take rates are disclosed for all of them but i've done some digging and i believe for dominoes it's uh they pay six percent of whatever they sell back to the Domino's parent. And then usually they get a master franchise agreement for

whatever countries they've signed, meaning like they get to distribute all of Domino's in Mexico, in Argentina, in Colombia, a couple of other countries. And then they can either operate all the stores themselves, as I'll say, a corporate owned, or they can sub-franchise it out to a local partner if they so choose. So it's up to them. They could, yeah, they can either franchises themselves or you have a third party under them and so do they kick back up a certain uh percentage of their revenue to the parent brand that's yeah is that the six percent that you were talking about or just for yeah i'll say it pays i believe it's six percent of their dominoes revenues back to dominoes us um but then like for columbia for example i believe those

stores are run but run by a columbian partner and so that columbian partner would pay some percentage of their royalties back to i'll say mexico right so sometimes they are the franchise operator just to be clear for the listeners and then sometimes there's three companies in the chain and then i'll say it's kind of always in the middle there yeah there's some markets like in europe where i think i'll say i felt that they didn't quite have the local knowledge in some of the markets particularly they run some stores and non-spanish speaking markets and so they've relied on local people that would understand the market better there. So how, I know you said they started with Domino's

and, you know, obviously they got that relationship somehow, but, you know, they've expanded to Starbucks and stuff like that. How did they obtain these relationships with the parent company brands? Are they trying to get as many brands under their umbrella and, excuse me, with these master agreements as possible?

Have they explicitly said that or do they want to stick kind of with their core Domino's, Starbucks, Burger King? Yeah. I'd say the core is the most advantageous, but nowadays they're the single largest franchisor of restaurants in Latin America. And so if you are like a cheesecake factory, for example, wanted to open a few in Latin America, just kind of for prestige to say we operate in Latin America and check out our store in Panama or check out our store in Buenos Aires or whatever. And so they can go to Alcea and say, we'll give you a really attractive unit economics if you open 10 cheesecake factories for us because we want our flag in South America and we know you're the largest operator. So some of it is inbound, like U.S. chains that want to go overseas know that this firm is successful.

But yeah, their core markets, they've had close relationships with Starbucks and Donner's for many years. So aside from the 6% that they kick up to the parent, what are some of the major costs for Alsea? Aside, I mean, obviously, if they're operating their own stores, there's clearly costs in that. But is there costs associated with them using a franchise model, as in Alsea's franchisees? Yeah, I think from the corporate level, probably the biggest costs, they have to do marketing within each region. So they spent a ton of marketing money kind of in particular explaining the Starbucks brand to Mexican consumers. They've also spent a lot on technology. They had an app for ordering pizza prior to the pandemic, thankfully, in Mexico.

And so once the pandemic started, they saw sales go up by a third for Domino's because they were the only major nationwide chain in Mexico where you could order through WhatsApp or on your phone and get it delivered to you. And so the fact that they'd already spent that money ahead of time. uh gave them a strategic advantage there but yeah marketing certainly uh there's costs in terms of bringing where they have some franchisees kind of planning out new stores normal corporate development stuff right and i i forget the number you probably you probably know it is you know i'm kind of thinking like what dictates their growth strategy does dominoes tell them they have a certain allocation that they can add you know in their footprint each year or is it all up to alsea and how quickly do you think they can grow their store footprint or

what you know what do they project for the management team yeah so in the countries where they have a master franchise agreement it's totally up to them how how much saturation uh they want to pursue in the market um as far as unit growth um i believe they opened 100 units last year, close to 100. They've particularly been pushing Starbucks lately. Prior to the pandemic, they've been growing faster than that, but obviously they stopped all store growth for a couple of years due to that. I think it'll be a mix of organic store growth and also acquisitions. They're always on the lookout for more acquisitions. But yeah, it's been a tremendous growth story. 2010, they did $9 billion in Mexican peso revenue, so like $500 million.

And then prior to the pandemic, it was $60 billion Mexican peso. So more than 6X in 10 years on the top line. Yeah, the growth has been quite impressive. And I guess one clarification there, are they mainly, okay, are they trying to go for a capital light model and having, excuse me, a lot of other franchisees? I forget the exact term, but having other people build the stores for them? or are they trying to do almost having like company owned where they build out the stores

and yeah they're still kicking that you know back up to the american parent brands but i don't know just kind of it's are they running a sub franchisee yeah i get confused i get confused but i guess yeah are they you know from a growth perspective i guess this is important and from their you know margin perspective are they trying to run the capital light model or are they trying run the capital intensive model and kind of own more of the union economics and the real estate uh no it's certainly capital in terms of third they don't own the land under other restaurants and uh i don't recall the exact number of fans i believe it's 70 percent of their stores are company run and then 30 percent are sub-franchised out uh but yeah management runs us with a lot of

leverage um that's why the stock did so poorly during the pandemic because i believe they were three and a half times uh levered going into the pandemic when like a third of their stores were totally shut down and another third were delivery only which obviously something like starbucks doesn't do great in a delivery only model and so uh actually that had been like the biggest bearish argument against the company prior to the pandemic was it was overly levered because management put every every peso that came in the door to either acquire more stuff or build more stores and then And obviously the pandemic put that to the ultimate test, but they got through it without diluting shareholders.

They've rolled all the debt out to 2027 and beyond now. And so management can be aggressive again. And in fact, they just started buying back stock last quarter. So they emphasize having a higher return on equity and they're at it again. Nice. I guess this is maybe more subjective and maybe what you think as opposed to any sort of data around it,

but what other models, you mentioned Starbucks is doing well or they're investing a lot in there. Are there any other models under their umbrella that you think could be a good growth driver for them? Domino's has done very well with the ordering through the app and that was growing at more than 30% a year during the pandemic. It's still growing in high teens now. and i think that will continue to work um yeah particularly with uh we've seen telework just

start to become a thing in mexico so more people are staying at home and i think the companies that have strong delivery programs are in a good position they've also invested heavily in loyalty programs they've they have the largest starbucks loyalty program outside of the u.s for example so uh we've seen that's done wonders for kind of how often people go to starbucks in the US. I think their investments in technology there will be pay off for them. As far as the other brands, I don't particularly love Burger King. I mean, I think it's fine, but I wouldn't expect much growth there. And then the other stuff's just too small to really matter from the overall size of the company. Gotcha. And one more kind of on the

context for the business, and this one is a little bit speculative for you, I guess, But they are trying to grow quickly, as you said. How many stores do you think, and yeah, economies can change quickly. We'll talk about how quickly the Mexican economy might be changing. But how many stores do you think they could reasonably operate in their geographies? And I guess I'm trying to get at is how close are they to market saturation? Yeah, I think you could argue the Mexican market is probably, at least in their main two brands, They've been there for 15 or more years.

I think they've probably scoped out the best locations. But just since like 2015, most of the South American expansion has happened. South America is still only 20% of their store base. When I moved here to Columbia in 2018, there were two Starbucks in the country. That's, I'll say, Columbia. And there were, I think, about a dozen prior to the pandemic. And then I was just in Bogota last week, and I saw like a dozen while we were driving around. I don't know the exact number, but they're springing up like daisies.

I've seen Domino's take off here in Colombia just over the past couple of years. So I think in the secondary markets, Colombia, Argentina, they've really just started to scratch the surface. They just opened the first Starbucks in Uruguay earlier this year, so they're still doing new markets. So yeah, Mexico is probably turning into more of a slower growth story, but there's plenty of opportunities elsewhere. or they can always bring another brand as well right right yeah we'll talk about competitors and maybe that landscape of the the acquisitions and stuff like that but one question i want to hit on and you've been talking about this say tweeting about it writing about it is being bullish on the you know quote unquote how people have been talking about the reshoring into mexico

and latin america away from asia and how that can help consumer spending Do you think this can benefit Alsea and why or why not? And maybe explain for anyone that hasn't read it, what that thesis entails for the consumer spending. Yeah, absolutely. So we're seeing Mexico has received a huge amount of new foreign direct investment since 2020. Companies are looking to move some of their manufacturing from Asia back to North America. Mexico is the cheapest part of that supply chain. If you want to build a car or an airplane in North America, you would put the nuts and bolts assembly work in Mexico and then do the more skilled labor in the US or Canada.

And so all that stuff's moving to the border, places like Tijuana or Juarez, right on the border. But then for slightly more educated jobs in bigger cities like Monterrey or Guadalajara, we've seen tremendous growth. Monterrey is adding like 75,000 people a year, new people, and that's primarily driven from manufacturing. and where it gets really interesting from the consumer perspective like you've got a guy that was picking avocados or or lettuce or whatever uh kind of subsistence labor he was probably earning ten dollars a day prior to the manufacturing boom now he moves to the new tesla factory and once a day and he's going to make fifty dollars a day and so what happens when his income goes up fivefold he can go buy a starbucks drink on his way to work when he gets home he can

order a pizza instead of having to cook it's when you add that much income to somebody's balance sheet and and they're busy like instead of maybe when he was doing construction or doing subsistence farming he didn't work most days and so he had more time to be around home but now he needs food on the go and so you give him a lot more money he's probably going to buy a lot more consumer products which would include fast food what about competition um i imagine also is not the only uh concept like this so who are also his main competitors um i guess maybe this is kind of a naive question but what's stopping the brands american brands from just going and doing it directly in mexico

yeah there's certainly some that open their own stores in mexico and then there's a lot of privately held operators that will just run one brand like i don't know wingstop or whoever in mexico that sort of publicly traded stuff there's really only one big one which would be arcos dorados which is the mcdonald's franchisor for latin america that's kind of the main if you're just looking at i want a restaurant stock in in latin america these would be kind of the main two you would look at and i want to hit on um i guess it might not be relevant but i remember reading it within their investor pages is the european exposure i know they they're in spain and i guess what are your thoughts on the i know the american fast food brands have historically

somewhat struggled uh getting a large presence in europe but what are your thoughts on i'll say expanding in the european market yeah yeah there's actually two elements there's spain like you said where they've operated for longer and there should be more cross-cultural ties due to both speaking spanish and more familiarity kind of with each other's cuisine um so yeah i think spain is a natural market for them uh obviously the spanish economy has had its troubles both short-term and long-term the population's going down uh demographics aren't great so to the extent that you would want to sell to like millennials and all it's not going to be a growth market just because the population is shrinking and aging so i don't think you're going to see a ton of growth

but i don't know still probably still some demand i saw a lot of burger kings when i was in spain that's all i'll say so i would just consider that to be more cash flow rather than growth opportunities the other part of the business in europe's probably more interesting because this So it's Starbucks that they took over in Benelux. So it was like France and Netherlands and whatnot. And that was because Starbucks' previous franchisor in Europe was performing poorly and wanted to exit the business and Starbucks didn't want the stores themselves.

And so they kind of talked to their other franchisees and said, hey, we've got a struggling partner here who wants it. And so Alsea was willing to take it over and Starbucks US trusted Alsea to be able to run it. And so they took it over in 2018. and that hit results that's kind of why the margins and the stock were down in 2019 because management was still trying to figure out how to turn all these stores they got around but I think longer term it's great to diversify the business outside of just the core Latin American market

and it's great to get more Starbucks I think Starbucks is a tremendous brand that has more global reach and being kind of their trusted partner with Starbucks US I think will pay dividends for them, both in terms of operating the business directly in Europe, but also just having more partnership with the parent company. Right. Yeah. I was going to have a quick follow up there. Do you think having that symbiotic relationship where the more Alsea succeeds, the more revenue that gets kicked back up to the parent company gives them a competitive advantage versus say some upstart company that's like, hey, we want to take over some sort of master agreement in blank country where starbucks can say no we have our preferred partner here that's

all saying that they have that brand that starbucks and domino's both like do you think that is a key for the durability of this business yeah i think obviously being a key partner for starbucks and i mean starbucks has invested so heavily in china and we'll wait and see if that ends up being a good investment for them or not obviously it's had some challenges with the pandemic i think investors have been somewhat frustrated with that and so having this franchisee in in mexico that's doing very well for starbucks allows them to say look our international strategy is having success gives them more time to work through their problems that they're having in asia pacific uh and then more broadly just like i said with 4 400 units now they're by far the biggest

franchise group in latin america and so any us chain that is thinking about opening in latin america is going to give us a call and see what kind of economics they could get for having a partnership. I think that scale, just saying we operate restaurants across nearly a dozen countries. We've been in this game for 30 years. We can operate in all of these economies with wildly different labor laws, regulatory conditions. I think that gives US companies that they don't want to do the diligence. Like how do I open a store in Argentina? I don't know. What's the difference between the Argentine market and the Mexican market? It's much easier to just outsource that. Right. Totally makes sense. I'm going to keep this one simple and you can go with wherever

you want how are you valuing i'll say a stock today yeah so between 2010 and 2019 so i call it the decade prior to the pandemic it grew eps free cash flow and sales all at 20 or more compounded which i think would support a pretty healthy multiple in a normal market based on where right now earnings are a little bit suppressed due to the high input costs for meat and other issues from inflation and also ironically enough because the value of the euro dropped like 20 against the peso last year they took a big hit from fx because the peso was too strong which was probably the first time anyone's ever invested in latin american stock and lost money because the currency went up um but anyway so their earnings were artificially low last year

uh in part due to the weak year but i think based on normal earnings power you can see like three to 350 pesos a share earnings they did two last year um i think you're still probably 10 or 15 short on sales due to coming back from the pandemic so i think putting all the pieces together it can earn like three to 350 pesos a share and maybe people can debate what the right multiple is but if it's growing at 20 a year 25 times earnings doesn't seem like too much of a stretch to a stock price 75 80 pesos versus 42 today all right uh no i should add they've started buying back stock they bought back two percent of the stock last quarter seems like they're going to be pretty aggressive as well and so that can add some torque to eps as

well what's their cash position right now do they have a lot of firepower for that are they you know raising it through debt or is it just kind of when the cash comes in They have $300 million on balance sheet, which is enough to deal with any near-term cash problems. But yes, they're still three times levered now, I believe, on even that basis. But that's where management ran the business all throughout the 2010s. So I just keep firing off buybacks or more acquisitions anytime they get cash beyond that. I should note, just because people probably haven't looked at the stock chart, But it went public at one peso 25 cents at the turn of the century, and it traded up to 70 before the pandemic started.

So it's like 5,000% return over 20 years. Decent returns. Yeah, decent returns. I guess another maybe naive question, in a lot of these markets that Alsea is operating on behalf of parent brands, is there already strong brand awareness? Like, is there limited, like, how much marketing, I guess, does Alsea have to do? Or are they, is Alsea kind of starting from, like, the ground floor? Yeah, can they ride the coattail of these parent company brands that might be internationally known? Yeah, that's a great question. I think it really depends on the region. Mexico was the easiest because a large number of Mexicans have lived in the U.S. for a time or travel there. The city I

lived in in Mexico, the mayor's office estimated that 25% of the population had lived in the U.S. at one point. And so that gives you a large starting base. People are familiar with these brands and they might tell their friends, oh, check this out. When I lived in Florida or when lived in Texas, I ate here at school. But with a country like Argentina or Colombia, there would be much less built-in brand support. You have to introduce the brand more from the beginning. I'd also add that I think Instagram and TikTok are doing wonders for selling something like Starbucks internationally. I think people are just curious because they see coffee drinks on their social media and want to check it out.

Then they walk by a Starbucks and they're like, hey, what's this? All right. Well, hopefully TikTok doesn't get banned, but I guess maybe it wasn't. I don't know what the... Hey, it's Latin America. It's not the United States. Yeah, it's a separate market. Yeah, true. All right. Thoughts on management? You've kind of touched on capital allocation there briefly. What do you think of the team there? Just thoughts overall. yeah i think i haven't talked to them i i don't know anything that's not available from their annual reports um but just based on public information i'm impressed with i think their track record speaks for itself in terms of what they built prior to the pandemic but then i was

also impressed just because they're kind of these gunslingers and their reputation was that they're in it like uh to the maximum of leverage and at some point they might run into the wall if they made a bad acquisition or something that was kind of always the bear case on the on the stock then you get into the pandemic they immediately they stopped building new stores they slash cost 20 overnight uh they cut their own salaries it was just like they immediately went from like these gunslingers to playing defense but playing it beautifully they they rolled that like the moment that things started going bad they just kind of hunkered down leaned into the apps i think they did a tremendous job managing through the pandemic without diluting the shareholders to the smithereens

which is kind of what I would have expected. And so now I think they've earned the right to be aggressive again. I'm very pleased to see a buyback. I think they're paying a very good price for shares. From reading the last quarterly report, they kind of said, they didn't say it directly, but they kind of apologized for not paying a dividend for the past four years. And so it seems like they might reinstate a small dividend as well.

So that might be kind of a catalyst to get some dividend funds to own the stock again as well. But they seem focused on the right stuff. there's a lot of growth but they also care about the shareholders yeah it's funny how the pandemic i don't want to say exposed maybe exposed exposed who management teams really were if they were kind of pretending that they cared about shareholders or in this case with all said it seems like they actually were ryan you had something to add no i i forgot my question but i guess maybe we can just hit on the last one unless you have any other questions

Brett but it sounds like actually I do remember my question how much exposure do they have to Mexico sorry it's how much of their business is in Mexico versus some of these other Latin American countries yeah so it's 50%

Mexico a third Europe and then some 17% other Latin America perfect so if you if you believe in the Mexican economy doing well this it makes a lot of sense um i guess what do you think is the downside here or kind of our pre-mortem how do you think this would go poorly is it a lot of it predicated on just like

the upside for the mexican economy not showing up or is there anything else yeah i mean i think probably the biggest existential risk would be they make a huge new acquisition of some other brand that just doesn't work or they overpay um you kind of have to trust their their capital allocation here because they've done just in recent years they did the starbucks for mexico and then starbucks for south america starbucks overseas they bought dominoes for south america they've bought several chains in spain and so it's just they're constantly doing stuff uh and i applaud the share buyback i hope they reinstate a small dividend um but ultimately, most of the cash is going to more stores. And so management needs to keep making

good moves there. If the Mexican economy has another bad decade, like, I'll say I managed through the last one, right? Like Mexico 2013 to 2020, there's virtually no GDP growth in real terms. And the peso went down in the USD, yeah, a ton, right? Yeah. And so that was a challenge for them i mean the the stock didn't go down but it certainly didn't go up like it did in the 2000s and so if something happens like if we become best friends with china again and reshoring goes away i don't know uh imagine that drug war gets worse or something happens that the u.s and mexican ties uh diminish that would really hurt my thesis um if inflation keeps running out of control i mean think you can raise prices pretty heavily but stuff like just higher meat prices is bad news

if that keeps up uh like the the war in ukraine was quite bad news for them just because grain and cattle prices go up so much and if your burger prices go up 50 you can't really raise the price of a hamburger 50 you might be able to raise it 20 but it's just uh you don't get full full inflation protection there um what else um i think those are probably the biggest risks makes sense brett any more questions okay he's shaking his head um and this is uh another fun interview for people that i know i already mentioned at the start of the show but for people that want to keep track of you or follow any of your thoughts what's uh what are the best places to do that yeah so i'm on twitter uh just about whenever the market's open at irb

irb easy ek and then um can find my work either on seeking alpha and substack uh just search for ens insider corner there's a weekly newsletter kind of covering anything interesting that happened that week and updating on portfolio companies and then kind of two or three new ideas a month kind of deeper dives kind of like we discussed here today perfect well that is going to do it We want to remind listeners that Brett and I are not financial advisors. Anything we say or discuss here on Chitchat Money is not formal advice or recommendation. We are, however, general partners at Arch Capital, so clients may have positions in the securities discussed in this podcast.

Thank you all for listening. Thank you, Ian, for coming on the show again, and we will see you all next time. Okay. I'm welcomed by the founder of our exclusive sponsor, Stratosphere.io, Brayden Dennis. Brayden, welcome. I wanted to basically give listeners that are interested in Stratosphere more context around what the platform is. So let's start there. What is Stratosphere? And then why did you decide to start it? Yeah. Thanks for having me. I appreciate it. And I'm glad to be sponsoring the podcast as as a listener myself i like the deep dives i like the different guests the different perspectives

on uh some interesting companies so i think it's a good concept for a podcast which is kind of what led me down to making stratosphere in the first place which was i was making content online and frustrated with the tools that were available to me so i started building a very scrappy version of the product just for free, just to figure out how can I overlay 10 years of financial side by side, up to 35 years we have now, and how can I actually build out a proper database of company KPIs that are not just revenue, but if you're looking at Costco, how many warehouses do they have? How many paid members are in our Costco members? Or if I want to do a comp against the streaming? How many Netflix subs versus HBO+, Discovery+, Disney+, how do I build up proper

comps of those? Because those are the metrics that actually move the business. Those are the ones that actually move the needle more than any gap financial metric you'll find. And so it started off as just purely a passion project. And I figured, let's just make the leap into entrepreneurship and uh see where it goes and you know it brought brought us here today yeah and like you mentioned it is the stuff that you can't find anywhere else at least not now i mean you could find it page by page and on their finance exactly you can go through 35 uh pdf filings and find it be my guest and that and that's basically what we did for a long time so what do i guess maybe describe the pricing model so people know, but you're going to say it, there's a free platform.

What do free users get? Yeah. Good thing. Because our mission was to always build a free platform. And so we really kept true to our mission and give like an amazing platform for free, which gives you 10 years of financial statements on 40,000 global security. So we don't list you just took US securities. It's on global stocks. We give you a watch list, the screener, comparisons on competitors, fundamental charting up to 10 years, filings, transcripts. You can look at the press releases right inside the app, news, ETFs, funds, super investors, hedge fund letters, investor holdings, and financial calendars. Those are all the features you'll get on the free tier. Now, on the middle tier, the personal tier, you're going to unlock up to 35

years of financials and just kind of like nice to have, like quality of life, like notifications being built in, price targets for building models, like business owner mode where you can hide prices, like kind of like just that next level for individual investors who want to level up. And then the top tier is for like investment teams and professionals who want to unlock that KPI data and request KPI coverage as well. Like a firm will be like, here, we want these 10 names in our coverage and in your coverage. And then you'll have basically our entire universe that we're looking at, which is great, right? Because like earning season comes around and we have it updated within 15 minutes when Netflix comes out with their net subscriber ads, like it's right

there in one place, especially easy to handle around the peak of earning season that matters a lot for these people. And so we have a premium tier for that as well. That's the three plans that are available today. And now a perfect time to shameless plug our code. If you use CCM, you get 15% off any of the paid plans, but I think that covers it pretty well. If you're interested, please go ahead and check out stratosphere.io. We'll have a link in the description as well, But thank you, Braden, for joining us. Brian, keep it up. I really like what you and Brad are doing and I'll be listening along.