PERFORMANCE
MTD
Me: 7.34%
S&P 500: 0.62%
6.72 points better
YTD
Me: 4.91%
S&P 500: 12.01%
7.1 points worse
*****
Tier 1 (10-25%):
Crowdstrike (CRWD) - 20%
Datadog (DDOG) - 19%
Upstart (UPST) - 15%
Roku (ROKU) - 11%
Tier 2 (5-9%):
Zoom (ZM) - 7%
Twilio (TWLO) - 7%
Asana (ASAN) - 5%
Pinterest (PINS) - 5%
Tier 3 (2-5%):
Snowflake (SNOW) - 4%
Digital Turbine (APPS) - 3%
Fubo TV (FUBO) - 3%
Cash - 0%
11 positions, including cash (12 last month)
Crowdstrike (CRWD) - 20%
Datadog (DDOG) - 19%
Upstart (UPST) - 15%
Roku (ROKU) - 11%
Tier 2 (5-9%):
Zoom (ZM) - 7%
Twilio (TWLO) - 7%
Asana (ASAN) - 5%
Pinterest (PINS) - 5%
Tier 3 (2-5%):
Snowflake (SNOW) - 4%
Digital Turbine (APPS) - 3%
Fubo TV (FUBO) - 3%
Cash - 0%
11 positions, including cash (12 last month)
*****
ACTIONS FROM THIS PAST MONTH
Added:
Sold:Celsius Holdings (CELH)
*****
GENERAL THOUGHTS
At one point mid-month my portfolio hit a bottom for the year at around minus 16% (I had 84% of what I started the year with). But then it turned abruptly and went straight up to finish the month just under positive 5% YTD. A lot of that had to do with Upstart, but really all my stocks just went up together. Perhaps the sector rotation has passed.
*****
PORTFOLIO THOUGHTS
I still have 11 positions and would like to narrow it further to 9 or 10. I imagine that will come in June but we'll see how earnings shake out in the coming week.
*****
COMPANY UPDATES
*****
*****
NEW LINEUP GOING FORWARD
Exact same. Maybe lose Digital Turbine and Zoom depending on how earnings look.
Watchlist:
Olo (OLO)
Added a lot to Upstart (UPST)
Sold:
*****
GENERAL THOUGHTS
At one point mid-month my portfolio hit a bottom for the year at around minus 16% (I had 84% of what I started the year with). But then it turned abruptly and went straight up to finish the month just under positive 5% YTD. A lot of that had to do with Upstart, but really all my stocks just went up together. Perhaps the sector rotation has passed.
*****
I still have 11 positions and would like to narrow it further to 9 or 10. I imagine that will come in June but we'll see how earnings shake out in the coming week.
*****
Datadog
Market cap: $28 billion
MTD performance: 6%
YTD performance: (8%)
T6M performance: (8%)
T12M performance: 31%
Recent company performance:
Datadog reported in the first week of May and it was right on track. The QoQ growth was only 12% and I was looking for more like 14%, but everything else was solid. Datadog has now shown YoY slowdown in revenue for the past three quarters due to the one bad Covid quarter. But now that trend will play out in reverse and they will show accelerating YoY growth for the next three or four quarters going forward. It's likely they'll be showing 60%+ growth going forward.
They already raised yearend guidance this quarter from 38% to 47%. They will raise it again after next quarter. I have a high amount of confidence in this.
- Revenue was up 51% YOY and 12% QOQ to ~ $199 million. They had guided for 42% YOY and 5.3% QOQ
- For next quarter, they guided for 52% YOY growth and 7.28% QOQ, which they will beat.
- Cash on the balance sheet was up 94% YOY and 2% QOQ to ~ $1.5 billion
Market cap: $28 billion
MTD performance: 6%
YTD performance: (8%)
T6M performance: (8%)
T12M performance: 31%
Recent company performance:
Datadog reported in the first week of May and it was right on track. The QoQ growth was only 12% and I was looking for more like 14%, but everything else was solid. Datadog has now shown YoY slowdown in revenue for the past three quarters due to the one bad Covid quarter. But now that trend will play out in reverse and they will show accelerating YoY growth for the next three or four quarters going forward. It's likely they'll be showing 60%+ growth going forward.
They already raised yearend guidance this quarter from 38% to 47%. They will raise it again after next quarter. I have a high amount of confidence in this.
- Revenue was up 51% YOY and 12% QOQ to ~ $199 million. They had guided for 42% YOY and 5.3% QOQ
- For next quarter, they guided for 52% YOY growth and 7.28% QOQ, which they will beat.
- Cash on the balance sheet was up 94% YOY and 2% QOQ to ~ $1.5 billion
- Cash from operations was up 112% yoy to ~ $52 million. That's a margin of 26% compared to 18% last year. That's great!
- FCF was up 130% YOY to ~ $44 million. That's a margin of 22% compared to 15% last year. Fantastic!
- Adj gross margin was 77% compared to 80% last year. Down, but I feel it's in-line. Their gross margins move between about that range. In fact, Q1 2020 was the only time their gross margin was in the 80's going back to 2017.
- Adj operating margin was 10% compared to 12% last year. Down. But I feel like the lower revenue growth has put pressure on these margins. They have trended down since Q2 2020. So we should see margin improvement as well in Q2. This is a big point and something to watch.
- Adj net margin was 10% compared to 14% last year. Exact same note as above on the adj opex.
- Adj eps was 6 cents compared to 6 cents last year. That's good actually considering the margins had all declined.
KPI'S
- As of March 31, 2021, we had 1,437 customers with ARR of $100,000 or more, an increase of 50% from 960 as of March 31, 2020. This is big!
From the call:
- Billings were $220 million, up 59% year over year. There were no major pro forma impacts to call out in the quarter.
- Remaining performance obligations or RPO was $464 million, up 81% year over year. Contract duration continued to be at an increased level from the year-ago period.
What to look for in the future:
Accelerating YoY revenue for the next 3-4 quarters. The Covid quarter that plagued their growth starting in Q2 2020, will now become an easy comparable and make the company appear to be accelerating.
Upstart (UPST)
Market cap: $11.3 billion
MTD performance: 36%
YTD performance: 264%
T6M performance: 403%
T12M performance: N/A IPO'ed in December
What the company does:
Upstart is a lending platform that sits between banks and customers. They use proprietary artificial intelligence (AI) and machine learning (ML) models to evaluate applicants. Their platform is capable of more accurately identifying risk than traditional, credit-score based lending models.
Recent company performance:
The company reported mid-month and it was simply a blow-out. I had a fair amount of confidence going in. I'm not sure how much of that was warranted, but I just sort of felt like it was going to be really good. Simply put, they are growing revenues at a fast rate AND showing rapidly improving metrics of profitability. That's what we want!
It's important to develop instincts for the market. Over time, I can see how stocks trade based on the numbers they report. I'll see patterns. If the earnings report is good in certain ways like if the company posts near-triple digit revenue growth, a big improvement in operating margin, and drastically increases their revenue guidance for the remainder of the year, the stock will jump 20% or more on the day. Obviously, numbers like that warrant big stock moves. Upstart reported just like that. And their stock ... FELL by a couple of percentage points. The market was manic that day. Absolutely positively manic. And it had been manic the previous couple of weeks. All my stocks, and particularly Upstart were battered.
When Upstart reported the numbers it did, and the stock price fell, I considered it a fat pitch. And when you get fat pitches you have to swing for the fence. I did just that by increasing my allocation from about 6% to 13%. And sure enough, the stock proceeded to go up by about 70% over the next week and grew into a 17% position at one point. It was just up every day.
The numbers were incredible.
- Revenue was up 90% YOY to ~ $ 121 million.
- More importantly, they raised FY guidance from $500 million to $600 million. That is a change from 114% to 157%!! And they indicated in the call that they'll likely get to $700 million by the end of the year, which would be 200%+ growth.
- GAAP Operating Margin of 13% vs 1% last year. Wall Street loves improving profitability.
- GAAP Net Margin of 8% vs 2% last year.
- GAAP EPS of 11 cents per share.
- Worth noting that Shares Outstanding only increased by 1% sequentially
- Cash from operations increased YOY from MINUS ~ $87 million to POSITIVE ~ $43 million. That's an Operating Cashflow Margin of 36% vs negative 135%!!
- Contribution Profit increased 117% YOY and 26% QoQ to ~ $ 56 million.
- Contribution Margin improved to 48% vs 38% last year. Great!
- Adj EBITDA increased 472% YOY and 26% QoQ to ~ $21 million. That's a margin of 17% vs 6% last year. An improvement to 17% shows they are further along on the journey.
- Adj Net Income increased 479% YoY and 267% QoQ to ~ $20 million. Adj net margin improved YoY from 5% to 16%! Fantastic
- Adj EPS improved YoY to 22 cents from 5 cents. Amazing!
KPI'S:
- Number of loans contracted increased 102% YoY to ~ 170 million
- Conversion on rate requests was 22% in the first quarter of 2021, up from 14% in the same quarter of the prior year.
- Fully Automated loans was 71% compared to 70% last year.
What to look for in the future:
More of the same. Next quarter will be an easy comparable because of the Covid quarter last year. So we'll watch QoQ growth and want to see them now hit QoQ growth of around 28% in each of the next three quarters as indicated in the call.
Roku
Market cap: $46 billion
MTD performance: 1%
YTD performance: 4%
T6M performance: 18%
T12M performance: 207%
Recent company performance:
Roku reported on the same day as Datadog. Other than Upstart, Roku had the strongest earnings report this month. It was astonishing. I can't really seem to wrap my head around Roku as an investment. I just don't have quite the conviction with them as I do with Datadog and Crowdstrike. Over the past 6 months, I've continued to trim while they just continue to blow expectations out of the water. This quarter was no different and might have been the time to really use the superlatives.
The company reported 79% revenue growth vs 54% guidance. What!? How is that possible? A truly stellar quarter. And they guided for 74% for next quarter. Part of the reason I don't have as much conviction in Roku is because their income statement is messier than SAAS companies'. But this quarter showed true operational leverage at scale.
- Revenue increased 79% YOY to ~ $574 million. Wow. They had guided for 54% YOY. That was also only a 13% sequential decline when it's usually closer to 30% decline going from the seasonally strong Q4 to the seasonally weak Q1.
- They guided for 74% revenue growth in Q2, which they will crush. I could see YOY revenue growth over 100%. It doesn't really matter though, it's an easy comp. H2 will be harder to beat. But still, this quarter now makes H2 YoY comps somewhat easier to beat.
- They are showing extreme leverage. It will most definitely come down over time. Their GAAP operating margin was 44% compared to minus 17% last year.
- They guided for a GAAP loss of $16-23 million and instead reported positive $76 million. Wow.
- GAAP eps was 54 cents compared to minus 45 cents last year
- Cash increased 253% YOY and about 100% QOQ, to ~ $2 billion. BUT they raised approximately $1 billion through an At-The-Market (ATM) stock offering
- FCF was up 130% YOY to ~ $44 million. That's a margin of 22% compared to 15% last year. Fantastic!
- Adj gross margin was 77% compared to 80% last year. Down, but I feel it's in-line. Their gross margins move between about that range. In fact, Q1 2020 was the only time their gross margin was in the 80's going back to 2017.
- Adj operating margin was 10% compared to 12% last year. Down. But I feel like the lower revenue growth has put pressure on these margins. They have trended down since Q2 2020. So we should see margin improvement as well in Q2. This is a big point and something to watch.
- Adj net margin was 10% compared to 14% last year. Exact same note as above on the adj opex.
- Adj eps was 6 cents compared to 6 cents last year. That's good actually considering the margins had all declined.
KPI'S
- As of March 31, 2021, we had 1,437 customers with ARR of $100,000 or more, an increase of 50% from 960 as of March 31, 2020. This is big!
From the call:
- Billings were $220 million, up 59% year over year. There were no major pro forma impacts to call out in the quarter.
- Remaining performance obligations or RPO was $464 million, up 81% year over year. Contract duration continued to be at an increased level from the year-ago period.
What to look for in the future:
Accelerating YoY revenue for the next 3-4 quarters. The Covid quarter that plagued their growth starting in Q2 2020, will now become an easy comparable and make the company appear to be accelerating.
Market cap: $11.3 billion
MTD performance: 36%
YTD performance: 264%
T6M performance: 403%
T12M performance: N/A IPO'ed in December
What the company does:
Upstart is a lending platform that sits between banks and customers. They use proprietary artificial intelligence (AI) and machine learning (ML) models to evaluate applicants. Their platform is capable of more accurately identifying risk than traditional, credit-score based lending models.
Recent company performance:
The company reported mid-month and it was simply a blow-out. I had a fair amount of confidence going in. I'm not sure how much of that was warranted, but I just sort of felt like it was going to be really good. Simply put, they are growing revenues at a fast rate AND showing rapidly improving metrics of profitability. That's what we want!
It's important to develop instincts for the market. Over time, I can see how stocks trade based on the numbers they report. I'll see patterns. If the earnings report is good in certain ways like if the company posts near-triple digit revenue growth, a big improvement in operating margin, and drastically increases their revenue guidance for the remainder of the year, the stock will jump 20% or more on the day. Obviously, numbers like that warrant big stock moves. Upstart reported just like that. And their stock ... FELL by a couple of percentage points. The market was manic that day. Absolutely positively manic. And it had been manic the previous couple of weeks. All my stocks, and particularly Upstart were battered.
When Upstart reported the numbers it did, and the stock price fell, I considered it a fat pitch. And when you get fat pitches you have to swing for the fence. I did just that by increasing my allocation from about 6% to 13%. And sure enough, the stock proceeded to go up by about 70% over the next week and grew into a 17% position at one point. It was just up every day.
The numbers were incredible.
- Revenue was up 90% YOY to ~ $ 121 million.
- More importantly, they raised FY guidance from $500 million to $600 million. That is a change from 114% to 157%!! And they indicated in the call that they'll likely get to $700 million by the end of the year, which would be 200%+ growth.
- GAAP Operating Margin of 13% vs 1% last year. Wall Street loves improving profitability.
- GAAP Net Margin of 8% vs 2% last year.
- GAAP EPS of 11 cents per share.
- Worth noting that Shares Outstanding only increased by 1% sequentially
- Cash from operations increased YOY from MINUS ~ $87 million to POSITIVE ~ $43 million. That's an Operating Cashflow Margin of 36% vs negative 135%!!
- Contribution Profit increased 117% YOY and 26% QoQ to ~ $ 56 million.
- Contribution Margin improved to 48% vs 38% last year. Great!
- Adj EBITDA increased 472% YOY and 26% QoQ to ~ $21 million. That's a margin of 17% vs 6% last year. An improvement to 17% shows they are further along on the journey.
- Adj Net Income increased 479% YoY and 267% QoQ to ~ $20 million. Adj net margin improved YoY from 5% to 16%! Fantastic
- Adj EPS improved YoY to 22 cents from 5 cents. Amazing!
KPI'S:
- Number of loans contracted increased 102% YoY to ~ 170 million
- Conversion on rate requests was 22% in the first quarter of 2021, up from 14% in the same quarter of the prior year.
- Fully Automated loans was 71% compared to 70% last year.
What to look for in the future:
More of the same. Next quarter will be an easy comparable because of the Covid quarter last year. So we'll watch QoQ growth and want to see them now hit QoQ growth of around 28% in each of the next three quarters as indicated in the call.
Roku
Market cap: $46 billion
MTD performance: 1%
YTD performance: 4%
T6M performance: 18%
T12M performance: 207%
Recent company performance:
Roku reported on the same day as Datadog. Other than Upstart, Roku had the strongest earnings report this month. It was astonishing. I can't really seem to wrap my head around Roku as an investment. I just don't have quite the conviction with them as I do with Datadog and Crowdstrike. Over the past 6 months, I've continued to trim while they just continue to blow expectations out of the water. This quarter was no different and might have been the time to really use the superlatives.
The company reported 79% revenue growth vs 54% guidance. What!? How is that possible? A truly stellar quarter. And they guided for 74% for next quarter. Part of the reason I don't have as much conviction in Roku is because their income statement is messier than SAAS companies'. But this quarter showed true operational leverage at scale.
- Revenue increased 79% YOY to ~ $574 million. Wow. They had guided for 54% YOY. That was also only a 13% sequential decline when it's usually closer to 30% decline going from the seasonally strong Q4 to the seasonally weak Q1.
- They guided for 74% revenue growth in Q2, which they will crush. I could see YOY revenue growth over 100%. It doesn't really matter though, it's an easy comp. H2 will be harder to beat. But still, this quarter now makes H2 YoY comps somewhat easier to beat.
- They are showing extreme leverage. It will most definitely come down over time. Their GAAP operating margin was 44% compared to minus 17% last year.
- They guided for a GAAP loss of $16-23 million and instead reported positive $76 million. Wow.
- GAAP eps was 54 cents compared to minus 45 cents last year
- Cash increased 253% YOY and about 100% QOQ, to ~ $2 billion. BUT they raised approximately $1 billion through an At-The-Market (ATM) stock offering
- Cash from operations increase 108% yoy to ~ $96 million from ~ $46 million. That's a margin of 17% vs 2%. Although it seems like Q1 is generally higher for this margin
- FCF improved 100% YOY to ~ $92 million vs ~ $0 last year. That's a FCF margin of 16% vs 0%. Capex was only $3 million though. They've already said that OPEX is going to increase, which will dent cash from operations, which will dent FCF.
- Adj EBITDA increased to ~ $126 million, which was a complete and utter blowout vs $34 million forecasted. That's a margin of 22% vs minus 5% last year. They've already said it will come down later in the year
- Adj operating margin was 51% vs minus 8% last year. Wow. (I just back out SBC from their GAAP operating income)
- Adj net margin was 20% vs minus 15% last year. Wow. Same as above on calculation. But again we know the margins aren't going to be this good going forward.
KPI'S
- Active Accounts up 35% YOY to 53.6 million. HOWEVER the sequential gain was only 4.7%. This is where we see that the growth is already slowing, and need to watch it.
- Streaming Hours up 49% YOY to 18.3 billion. HOWEVER the sequential gain was only 7.65% compared to 12.84% in Q1 2020. Same as above, this is where we see that the growth is already slowing.
- Average Revenue Per User up 32% YOY to $32.14. AND up 11.75% sequentially, which is more than usual. This is because monetization lags user growth. It will be up again next quarter and then probably start to slow in H2
- Platform Revs up 101% YOY to ~ $467 million. Sequential decline was only minus 1% too. This is why revenue was so strong. How long can it last? Or better how long can the acceleration last?
- Platform Revs as a % of Total increased to 81% vs 73% last year. And 73% in Q4. This might be the most important number of the entire report. However, can it sustain?
- Platform Gross Margins improved to 67% vs 56% last year. Pretty incredible.
What to look for in the future:
Last year when the pandemic came down, people went inside and started watching more Roku than ever. However, because ad dollars evaporated from the system at large, Roku's revenue took a hit. In other words, they added users but saw a decline in revenue. However, starting in Q3 and then continuing into Q4 and now Q1, they are monetizing those users.
Now, we are coming out of the pandemic, so user growth will slow. The thing to watch from a high level is that ad dollars are continuing to pour into the system. So that means that even if users don't grow as quickly in the near-term, the revenue could still continue to grow through the end of the year. I don't think it can accelerate YOY, but it can sustain high YOY comps. That's if the ad dollar thesis is correct.
Twilio
Market cap: $58 billion
MTD performance: (9%)
YTD performance: (1%)
T6M performance: 5%
T12M performance: 69%
Recent company performance:
Twilio reported Q1 earnings early this month and the company is just so solid. From a high level, we can say that they are growing very well but are not improving profitability. And yes, their gross margins are lower than other companies. But they are a really high conviction Tier 2 holding for me because they seem to have so many tailwinds. The question will be, can they continue growing revenue at a high enough rate? We'll see how long it lasts, but as I've said before, this company seems to have the pedigree of a Salesforce.
- Revenue grew 62% YOY to ~ $590 million. That was off guidance of 47% at the high end. Wow that's a huge beat.
- Approximately $45 million of that was from Segment. Excluding Segment, revenue grew 49% year-over-year.
- They guided for 50% next Q. Also great
- Cash increased 47% sequentially to ~ $5.7 billion but they raised $1.8 billion in a follow-on offering during the quarter.
- Long-term debt increased 75% sequentially to $1.2 billion. Because they Issued and sold $1.0 billion aggregate principal amount of senior notes. The net proceeds from the debt offering were approximately $985.1 million.
- Cash from operations fell 71% YOY to ~ 4.5 million. That's a margin of 1% compared to 4% last year. That's bad.
- FCF was ~ minus $11 million in the quarter. That's a margin of minus 2% compared to 0% last year. That's pretty bad honestly. It's not great at least. It shows how capital intensive their business is.
- Adj gross margin fell yoy from 57% to 55%. And sequentially from 56%. That's bad.
- Adj op margin was 3% compared to 2% last year. And 2% last quarter. That's also bad, really.
- Adj net margin was flat YOY at 2%. And up from 1% last quarter. That, also, is not good.
- Adj eps was 5 cents compared to 6 cents last year. also not good.
- Active customer accounts was up 24% yoy to 235,000 from 190,000. That's great!
- DBNER was 133% compared to 143% last year (although they said: Excluding SendGrid, it would have been 135%)
What to look for in the future:
We want to see 50%+ revenue growth and some improving profitability. I think we'll likely see more acquisitions too. The company has $5 billion in cash.
- FCF improved 100% YOY to ~ $92 million vs ~ $0 last year. That's a FCF margin of 16% vs 0%. Capex was only $3 million though. They've already said that OPEX is going to increase, which will dent cash from operations, which will dent FCF.
- Adj EBITDA increased to ~ $126 million, which was a complete and utter blowout vs $34 million forecasted. That's a margin of 22% vs minus 5% last year. They've already said it will come down later in the year
- Adj operating margin was 51% vs minus 8% last year. Wow. (I just back out SBC from their GAAP operating income)
- Adj net margin was 20% vs minus 15% last year. Wow. Same as above on calculation. But again we know the margins aren't going to be this good going forward.
KPI'S
- Active Accounts up 35% YOY to 53.6 million. HOWEVER the sequential gain was only 4.7%. This is where we see that the growth is already slowing, and need to watch it.
- Streaming Hours up 49% YOY to 18.3 billion. HOWEVER the sequential gain was only 7.65% compared to 12.84% in Q1 2020. Same as above, this is where we see that the growth is already slowing.
- Average Revenue Per User up 32% YOY to $32.14. AND up 11.75% sequentially, which is more than usual. This is because monetization lags user growth. It will be up again next quarter and then probably start to slow in H2
- Platform Revs up 101% YOY to ~ $467 million. Sequential decline was only minus 1% too. This is why revenue was so strong. How long can it last? Or better how long can the acceleration last?
- Platform Revs as a % of Total increased to 81% vs 73% last year. And 73% in Q4. This might be the most important number of the entire report. However, can it sustain?
- Platform Gross Margins improved to 67% vs 56% last year. Pretty incredible.
What to look for in the future:
Last year when the pandemic came down, people went inside and started watching more Roku than ever. However, because ad dollars evaporated from the system at large, Roku's revenue took a hit. In other words, they added users but saw a decline in revenue. However, starting in Q3 and then continuing into Q4 and now Q1, they are monetizing those users.
Now, we are coming out of the pandemic, so user growth will slow. The thing to watch from a high level is that ad dollars are continuing to pour into the system. So that means that even if users don't grow as quickly in the near-term, the revenue could still continue to grow through the end of the year. I don't think it can accelerate YOY, but it can sustain high YOY comps. That's if the ad dollar thesis is correct.
Twilio
Market cap: $58 billion
MTD performance: (9%)
YTD performance: (1%)
T6M performance: 5%
T12M performance: 69%
Recent company performance:
Twilio reported Q1 earnings early this month and the company is just so solid. From a high level, we can say that they are growing very well but are not improving profitability. And yes, their gross margins are lower than other companies. But they are a really high conviction Tier 2 holding for me because they seem to have so many tailwinds. The question will be, can they continue growing revenue at a high enough rate? We'll see how long it lasts, but as I've said before, this company seems to have the pedigree of a Salesforce.
- Revenue grew 62% YOY to ~ $590 million. That was off guidance of 47% at the high end. Wow that's a huge beat.
- Approximately $45 million of that was from Segment. Excluding Segment, revenue grew 49% year-over-year.
- They guided for 50% next Q. Also great
- Cash increased 47% sequentially to ~ $5.7 billion but they raised $1.8 billion in a follow-on offering during the quarter.
- Long-term debt increased 75% sequentially to $1.2 billion. Because they Issued and sold $1.0 billion aggregate principal amount of senior notes. The net proceeds from the debt offering were approximately $985.1 million.
- Cash from operations fell 71% YOY to ~ 4.5 million. That's a margin of 1% compared to 4% last year. That's bad.
- FCF was ~ minus $11 million in the quarter. That's a margin of minus 2% compared to 0% last year. That's pretty bad honestly. It's not great at least. It shows how capital intensive their business is.
- Adj gross margin fell yoy from 57% to 55%. And sequentially from 56%. That's bad.
- Adj op margin was 3% compared to 2% last year. And 2% last quarter. That's also bad, really.
- Adj net margin was flat YOY at 2%. And up from 1% last quarter. That, also, is not good.
- Adj eps was 5 cents compared to 6 cents last year. also not good.
- Active customer accounts was up 24% yoy to 235,000 from 190,000. That's great!
- DBNER was 133% compared to 143% last year (although they said: Excluding SendGrid, it would have been 135%)
What to look for in the future:
We want to see 50%+ revenue growth and some improving profitability. I think we'll likely see more acquisitions too. The company has $5 billion in cash.
Snowflake
Market cap: $70 billion
MTD performance: 3%
YTD performance: (15%)
T6M performance: (27%)
T12M performance: N/A company IPO'ed in September.
What the company does:
In short, Snowflake = data.
Snowflake created what they call "the Data Cloud", which allows organizations to mobilize data with near-unlimited scale. Wherever data or users live, Snowflake delivers a single and seamless experience across multiple public clouds. Snowflake’s platform is the engine that powers and provides access to the Data Cloud, creating a solution for data warehousing, data lakes, data engineering, data science, data application development, and data sharing.
Recent company performance:
Snowflake is the elephant in my portfolio – the company with the outlying ridiculously high valuation. But one that everyone knows they will grow into. So in a way, it's what I consider to be a conservative investment (although many people would scoff at that).
But the company is simply putting up numbers on another level. They IPO'ed earlier in their journey than other SAAS companies. So we aren't used to seeing numbers like this from a public company. Zoom had similar numbers, but they didn't IPO until year 8 or 9, whereas Snowflake IPO'ed in year 6.
It's important to remember that new customers take 6 to 9 months before their revenue impact starts to show up. So watching RPO growth is important.
Here are the numbers from my notes:
Market cap: $70 billion
MTD performance: 3%
YTD performance: (15%)
T6M performance: (27%)
T12M performance: N/A company IPO'ed in September.
What the company does:
In short, Snowflake = data.
Snowflake created what they call "the Data Cloud", which allows organizations to mobilize data with near-unlimited scale. Wherever data or users live, Snowflake delivers a single and seamless experience across multiple public clouds. Snowflake’s platform is the engine that powers and provides access to the Data Cloud, creating a solution for data warehousing, data lakes, data engineering, data science, data application development, and data sharing.
Recent company performance:
Snowflake is the elephant in my portfolio – the company with the outlying ridiculously high valuation. But one that everyone knows they will grow into. So in a way, it's what I consider to be a conservative investment (although many people would scoff at that).
But the company is simply putting up numbers on another level. They IPO'ed earlier in their journey than other SAAS companies. So we aren't used to seeing numbers like this from a public company. Zoom had similar numbers, but they didn't IPO until year 8 or 9, whereas Snowflake IPO'ed in year 6.
It's important to remember that new customers take 6 to 9 months before their revenue impact starts to show up. So watching RPO growth is important.
Here are the numbers from my notes:
- Revenue grew 110% YOY to ~ $229 million. That was up from ~ $109 million btw. Sequential growth was 20%. Wow that's great. They had guided to $200 million at 96% growth YOY
- Cash held steady sequentially at ~ $ 5.1 billion!
- And no debt!
- Current deferred revenue fell 1% sequentially to ~ $ 635 million. Their RPO did not grow substantially this quarter.
- Deferred revenue noncurrent fell 15% sequentially to ~ $3.6 million. It's almost insubstantial. Which means their RPO balance is big but it's not necessarily money in the bank because they are consumption based I'm guessing. So it's important to look at RPO instead of deferred revenue.
- Cash from operations in the quarter was ~ $22 million compared to minus ~ $6.6 million last quarter. That's great. Op cash flow margin of 10% vs minus 6% last year.
- FCF was ~ $13 million vs minus ~ $11 million last year. That's a FCF margin of 6% vs minus 10%. That's great
- Cash held steady sequentially at ~ $ 5.1 billion!
- And no debt!
- Current deferred revenue fell 1% sequentially to ~ $ 635 million. Their RPO did not grow substantially this quarter.
- Deferred revenue noncurrent fell 15% sequentially to ~ $3.6 million. It's almost insubstantial. Which means their RPO balance is big but it's not necessarily money in the bank because they are consumption based I'm guessing. So it's important to look at RPO instead of deferred revenue.
- Cash from operations in the quarter was ~ $22 million compared to minus ~ $6.6 million last quarter. That's great. Op cash flow margin of 10% vs minus 6% last year.
- FCF was ~ $13 million vs minus ~ $11 million last year. That's a FCF margin of 6% vs minus 10%. That's great
- Adj gross margin improved to 68% vs 62% last year. Good improvement especially for Gross margin
- Adj operating margin improved to minus 16% vs minus 67% YOY. That's what we're looking for. That is great.
- Non-GAAP S&M expense was 49% of revenue vs 84% last year. Great!
KPI'S
- Total customers grew 9% sequentially to 4532. I don't know what to think of that. 9% isn't on par with revenue and they don't give customer count last year.
- However, Customers with TTM product revenue greater than $1 million increased 26% sequentially to 104 total. That's great.
- RPO balance grew 7% sequentially to ~ $1.4 billion. It grew 206% YOY, but all of that growth came from last quarter. RPO / Quarterly revenue fell sequentially from 6.8 to 6.1. Not great IMO, but that number may come down over time.
- NRR held steady sequentially at 168%, which is an absolutely out of this world metric for a public company.
- It looks like the trailing P/Sales is 98 down from 118 last quarter. Is that good??? Who cares. The company's market cap fell about 1 billion from last quarter. And after falling 22 billion the previous quarter.
What to look for in the future:
I will likely continue to increase my allocation over time.
Simply, will it grow faster for longer than the market is predicting? Like, will it grow at 100% for another year and then drop to 80%, whereas the market is more like expecting 80% and then 60%. That sounds like not a big deal, but would have big implications. I don't actually know. But it seems like it's a safe investment in the sense that it will grow into it's current market cap. That might mean no capital appreciation for me, but at the same time it's sort of a conservative investment by my standards. I could easily sell the bottom half of my portfolio and just put everything into Snowflake. I've said that several times now. In fact, if I really wanted to narrow the portfolio, that's exactly what I'd do.
FuboTV
Market cap: $3.3 billion
MTD performance: 18%
YTD performance: (15%)
T6M performance: (14%)
T12M performance: N/A they IPO'ed in October
Recent company performance:
Fubo reported on May 11th, same day as Upstart, which was near the nadir for my stocks. Around that time, all my stocks were completely beaten down. Just down and down and down some more each day. Fubo was getting battered. When they reported I think any sort of positive news would have caused the stock to pop. They did report what I thought were great numbers and, like Upstart, the stock went no where. It fell on the day. But then it popped over the following week.
From a high level, I'd say that there is clearly traction for the company. This isn't just a story stock. However, they are still very unprofitable. That said, I'm happy to keep at a very modest less than 3% allocation.
Coming in, we wanted to see 100%+ revenue growth and some kind of improvement in profitability. We wanted an update on sports betting. And most importantly, we didn't want to see a shiny Shareholder Letter that explains away near-term progress with lots of great stories about opportunities ahead. And the company delivered on all of those.
Further, they called this an "inflection point" because they didn't show seasonality going from Q4 into Q1. They used "inflection point" many times in the report and call.
- They raised guidance for the year from 78% to 101%. That is exactly the kind of stuff we want to see.
- Increased revenue by 135% YoY to ~ $120 million. That's up from ~ $51 million. It's a 14% QoQ increase too when they expected a small decrease due to seasonality. They also beat their guidance by 16%. Amazing!!!
- They are guiding for a 2% sequential gain in revenue. And 174% YoY. I'm not sure how seasonality usually is
- Op margin improved YOY from (101%) to (54%). Amazing improvement.
- Net margin improved YOY from (131%) to (59%). Amazing improvement.
- Cash was up 71% sequentially to ~ $460 million. This included the impact in the quarter of $390 million net proceeds from the closing of our convertible senior notes offering on February 2, 2021
- Long-term debt increased to $305 million as mentioned above.
- FCF margin was minus 46% compared to minus 143% in Q4
- Adj EBITDA margin improved to MINUS 39% compared to MINUS 72% last year. And MINUS 133% in 2019. Great improvement!
MISC KPI'S
- Subscribers increased 106% YoY to ~ 590 thousand
- Content hours streamed increased 113% to 228 million hours
- ARPU was up 28% YoY to $69.09 from $54.16
- Advertising ARPU was up 57% YoY to $7.11 from $4.54
What to look for in the future:
FuboTV is similar to Roku in that user growth could slow in the back half of the year, but ad dollars pouring back into the system should offset that. Plus Fubo is a smaller and faster growing company.
Celsius Holdings (CELH)
Market cap: $4.7 billion
MTD performance: 14%
YTD performance: 30%
T6M performance: 103%
T12M performance: 637%
What the company does:
Celsius Holdings is an energy drink company. It's the #3 energy drink in the US behind Red Bull and Monster. The company is growing rapidly and is easy to understand but I sold it for all the reasons I list below.
Recent company performance:
I sold Celsius Holdings after the company released earnings on 13 May.
I wrote this in my notes:
It's funny coming into this report I was looking for reasons to sell this stock because the market had been really manic. And just yesterday the Nasdaq crossed some line-in-the-sand technical level that Knox warned about. And the stocks in my portfolio have been in free-fall for close to 3 months now. They've gone up but mostly down over time. So now I'm really on guard. I'm really looking for ways to raise cash and focus.
And immediately when I scanned the report I started seeing things that I didn't like. Whether that was me just looking or actually seeing the truth and reality I'm not sure. But I decided then and there that I was going to sell it. Even before inputting the numbers myself I saw:
- No guidance for next quarter
- Slow international growth at 25%
And I thought
- "This is a complicated story with the acquisitions"
And then I also thought:
- "This isn't a Star business. They aren't the leader in their field (Red Bull and Monster are). And that's one of my first principles, to only own Star businesses."
- Adj operating margin improved to minus 16% vs minus 67% YOY. That's what we're looking for. That is great.
- Non-GAAP S&M expense was 49% of revenue vs 84% last year. Great!
KPI'S
- Total customers grew 9% sequentially to 4532. I don't know what to think of that. 9% isn't on par with revenue and they don't give customer count last year.
- However, Customers with TTM product revenue greater than $1 million increased 26% sequentially to 104 total. That's great.
- RPO balance grew 7% sequentially to ~ $1.4 billion. It grew 206% YOY, but all of that growth came from last quarter. RPO / Quarterly revenue fell sequentially from 6.8 to 6.1. Not great IMO, but that number may come down over time.
- NRR held steady sequentially at 168%, which is an absolutely out of this world metric for a public company.
- It looks like the trailing P/Sales is 98 down from 118 last quarter. Is that good??? Who cares. The company's market cap fell about 1 billion from last quarter. And after falling 22 billion the previous quarter.
What to look for in the future:
I will likely continue to increase my allocation over time.
Simply, will it grow faster for longer than the market is predicting? Like, will it grow at 100% for another year and then drop to 80%, whereas the market is more like expecting 80% and then 60%. That sounds like not a big deal, but would have big implications. I don't actually know. But it seems like it's a safe investment in the sense that it will grow into it's current market cap. That might mean no capital appreciation for me, but at the same time it's sort of a conservative investment by my standards. I could easily sell the bottom half of my portfolio and just put everything into Snowflake. I've said that several times now. In fact, if I really wanted to narrow the portfolio, that's exactly what I'd do.
FuboTV
Market cap: $3.3 billion
MTD performance: 18%
YTD performance: (15%)
T6M performance: (14%)
T12M performance: N/A they IPO'ed in October
Recent company performance:
Fubo reported on May 11th, same day as Upstart, which was near the nadir for my stocks. Around that time, all my stocks were completely beaten down. Just down and down and down some more each day. Fubo was getting battered. When they reported I think any sort of positive news would have caused the stock to pop. They did report what I thought were great numbers and, like Upstart, the stock went no where. It fell on the day. But then it popped over the following week.
From a high level, I'd say that there is clearly traction for the company. This isn't just a story stock. However, they are still very unprofitable. That said, I'm happy to keep at a very modest less than 3% allocation.
Coming in, we wanted to see 100%+ revenue growth and some kind of improvement in profitability. We wanted an update on sports betting. And most importantly, we didn't want to see a shiny Shareholder Letter that explains away near-term progress with lots of great stories about opportunities ahead. And the company delivered on all of those.
Further, they called this an "inflection point" because they didn't show seasonality going from Q4 into Q1. They used "inflection point" many times in the report and call.
- They raised guidance for the year from 78% to 101%. That is exactly the kind of stuff we want to see.
- Increased revenue by 135% YoY to ~ $120 million. That's up from ~ $51 million. It's a 14% QoQ increase too when they expected a small decrease due to seasonality. They also beat their guidance by 16%. Amazing!!!
- They are guiding for a 2% sequential gain in revenue. And 174% YoY. I'm not sure how seasonality usually is
- Op margin improved YOY from (101%) to (54%). Amazing improvement.
- Net margin improved YOY from (131%) to (59%). Amazing improvement.
- Cash was up 71% sequentially to ~ $460 million. This included the impact in the quarter of $390 million net proceeds from the closing of our convertible senior notes offering on February 2, 2021
- Long-term debt increased to $305 million as mentioned above.
- FCF margin was minus 46% compared to minus 143% in Q4
- Adj EBITDA margin improved to MINUS 39% compared to MINUS 72% last year. And MINUS 133% in 2019. Great improvement!
MISC KPI'S
- Subscribers increased 106% YoY to ~ 590 thousand
- Content hours streamed increased 113% to 228 million hours
- ARPU was up 28% YoY to $69.09 from $54.16
- Advertising ARPU was up 57% YoY to $7.11 from $4.54
What to look for in the future:
FuboTV is similar to Roku in that user growth could slow in the back half of the year, but ad dollars pouring back into the system should offset that. Plus Fubo is a smaller and faster growing company.
Celsius Holdings (CELH)
Market cap: $4.7 billion
MTD performance: 14%
YTD performance: 30%
T6M performance: 103%
T12M performance: 637%
What the company does:
Celsius Holdings is an energy drink company. It's the #3 energy drink in the US behind Red Bull and Monster. The company is growing rapidly and is easy to understand but I sold it for all the reasons I list below.
Recent company performance:
I sold Celsius Holdings after the company released earnings on 13 May.
I wrote this in my notes:
It's funny coming into this report I was looking for reasons to sell this stock because the market had been really manic. And just yesterday the Nasdaq crossed some line-in-the-sand technical level that Knox warned about. And the stocks in my portfolio have been in free-fall for close to 3 months now. They've gone up but mostly down over time. So now I'm really on guard. I'm really looking for ways to raise cash and focus.
And immediately when I scanned the report I started seeing things that I didn't like. Whether that was me just looking or actually seeing the truth and reality I'm not sure. But I decided then and there that I was going to sell it. Even before inputting the numbers myself I saw:
- No guidance for next quarter
- Slow international growth at 25%
And I thought
- "This is a complicated story with the acquisitions"
And then I also thought:
- "This isn't a Star business. They aren't the leader in their field (Red Bull and Monster are). And that's one of my first principles, to only own Star businesses."
And most importantly, I saw this sentence in the report:
- Margins were impacted due to increases in input costs associated with the global can shortages as well as increased repack fees. It’s anticipated that input costs associated with cans will normalize towards the end of 2021 and throughout 2022. Margins were also impacted by increases in freight costs and processing costs. As the company realigns co-packer volumes in the second half of 2021, it anticipates co-packer toll fee savings to materialize
And then I thought:
- "Inflation will have a direct impact on this company as input costs for things like sugar and aluminum rise relative to the US dollar."
And those last two items pretty much sum it up. This is a physical product. Yes it's a simple concept to understand – energy drinks – it's a fast-growing product within a fast-growing industry. But it's still a physical product that has to get constantly re-manufactured, re-sold, and re-shipped. And if my goal is to own a highly concentrated portfolio of the best businesses out there, then this just isn't it. Not compared to software companies that can scale to infinity (with marginal additional cost) and are mission-critical. These are the reasons I sold Peloton.
And sure enough, the gross margin took a 5% (500 bp) hit YoY. And an 8% hit (800 bp) hit QoQ!!! And it's only in the 40% range to begin with, so there goes the operating margin. They have absolutely no way to overcome that large of a hit.
And so this has been a short but fun ride, and a good lesson, but I'm done putting my money on the line. If we were still in a bull market this thing would probably continue to rip higher. But when the market turns ugly, the best defense I have is to own the absolute best businesses. I don't want to own stories or even companies selling physical products.
The numbers from their report looked like this:
- Revenue increased 78% YoY to ~ $50 million.
- It also increased 40% QoQ. Wow, that's really impressive. Something else!!!
BUT
- GAAP gross margin fell from 46% to 41% YoY. And it fell from 48% QoQ. That's a really bad sign.
- GAAP op margin fell from 3% to 2% YoY. It was 1% last quarter. So much for scaling revenue by 78% YoY!
- GAAP net margin fell from 2% to 1% YoY. And from 5% last quarter. Bad!
- GAAP EPS was 1 cent vs 1 cent last year, and 1 cent last quarter.
- Cash is down 37% QoQ to ~ $31 million. That's bad! They do have a negative cash from operations.
- Cash from operations was MINUS ~ $13 million vs MINUS ~ $3.8 million last year. That's a cash from operations margin of MINUS 27% vs MINUS 14% last year. They were bleeding cash this quarter.
- FCF was basically the same at MINUS ~ $14 million vs MINUS ~ $3.9 million last year. FCF margin of MINUS 28% vs MINUS 14%.
- The adjusted EBITDA increased 81% YoY to ~ $5 million vs $2.7 million last year. That's a margin of 10% vs 10%. And it was 9% last quarter. If revenue grows by 78%, the business should be scaling and showing greater profitability YoY, not stagnant profitability. That's what happens when a company selling physical products gets caught in supply chain shortages with simultaneously rising inflation.
- Margins were impacted due to increases in input costs associated with the global can shortages as well as increased repack fees. It’s anticipated that input costs associated with cans will normalize towards the end of 2021 and throughout 2022. Margins were also impacted by increases in freight costs and processing costs. As the company realigns co-packer volumes in the second half of 2021, it anticipates co-packer toll fee savings to materialize
And then I thought:
- "Inflation will have a direct impact on this company as input costs for things like sugar and aluminum rise relative to the US dollar."
And those last two items pretty much sum it up. This is a physical product. Yes it's a simple concept to understand – energy drinks – it's a fast-growing product within a fast-growing industry. But it's still a physical product that has to get constantly re-manufactured, re-sold, and re-shipped. And if my goal is to own a highly concentrated portfolio of the best businesses out there, then this just isn't it. Not compared to software companies that can scale to infinity (with marginal additional cost) and are mission-critical. These are the reasons I sold Peloton.
And sure enough, the gross margin took a 5% (500 bp) hit YoY. And an 8% hit (800 bp) hit QoQ!!! And it's only in the 40% range to begin with, so there goes the operating margin. They have absolutely no way to overcome that large of a hit.
And so this has been a short but fun ride, and a good lesson, but I'm done putting my money on the line. If we were still in a bull market this thing would probably continue to rip higher. But when the market turns ugly, the best defense I have is to own the absolute best businesses. I don't want to own stories or even companies selling physical products.
The numbers from their report looked like this:
- Revenue increased 78% YoY to ~ $50 million.
- It also increased 40% QoQ. Wow, that's really impressive. Something else!!!
BUT
- GAAP gross margin fell from 46% to 41% YoY. And it fell from 48% QoQ. That's a really bad sign.
- GAAP op margin fell from 3% to 2% YoY. It was 1% last quarter. So much for scaling revenue by 78% YoY!
- GAAP net margin fell from 2% to 1% YoY. And from 5% last quarter. Bad!
- GAAP EPS was 1 cent vs 1 cent last year, and 1 cent last quarter.
- Cash is down 37% QoQ to ~ $31 million. That's bad! They do have a negative cash from operations.
- Cash from operations was MINUS ~ $13 million vs MINUS ~ $3.8 million last year. That's a cash from operations margin of MINUS 27% vs MINUS 14% last year. They were bleeding cash this quarter.
- FCF was basically the same at MINUS ~ $14 million vs MINUS ~ $3.9 million last year. FCF margin of MINUS 28% vs MINUS 14%.
- The adjusted EBITDA increased 81% YoY to ~ $5 million vs $2.7 million last year. That's a margin of 10% vs 10%. And it was 9% last quarter. If revenue grows by 78%, the business should be scaling and showing greater profitability YoY, not stagnant profitability. That's what happens when a company selling physical products gets caught in supply chain shortages with simultaneously rising inflation.
*****
MACRO THOUGHTS
None. It does appear the sector rotation is behind us. We'll see how the overall market behaves once we get into Q3 and Q4 which will show decelerating growth at the macro level. Who knows what inflation will do, but I imagine it will also decelerate at the same time as GDP growth.
None. It does appear the sector rotation is behind us. We'll see how the overall market behaves once we get into Q3 and Q4 which will show decelerating growth at the macro level. Who knows what inflation will do, but I imagine it will also decelerate at the same time as GDP growth.
*****
NEW LINEUP GOING FORWARD
Exact same. Maybe lose Digital Turbine and Zoom depending on how earnings look.
Watchlist:
Olo (OLO)
UI Path (PATH)
*****
*****
ACTIONS FOR NEXT MONTH
None
None
