Ben’s Portfolio update end of November 2024

SlowAndFast · December 5, 2024, 9:39pm

Ben’s Portfolio update end of November 2024

Returns and portfolio holdings:

	Portfolio	Notes
2020	63.6%	Since May 12, 2020, when I started this portfolio with over 40 companies, mostly holding large cap tech & FAANG, but also some high-growth SaaS.
2021	13.1%	Discovered Saul’s board in February 2021 and started concentrating to 16 companies through December 2021.
2022	-60.7%	Concentrated a bit more through July 2022 from which point I started posting my monthly updates on Saul’s board, holding about 12 or fewer positions.
2023	77.8%

2024	YTD	Month
Jan	5.9%	5.9%
Feb	17.5%	10.9%
Mar	13.6%	-3.3%
Apr	6.4%	-6.4%
May	6.8%	0.4%
Jun	21.0%	13.3%
Jul	7.0%	-11.6%
Aug	12.6%	5.3%
Sep	13.0%	0.3%
Oct	19.5%	5.7%
Nov	39.3%	16.6%

Time stamp: November 30, 2024

These are my current positions:

	Nov 2024	Oct 2024	First buy*
Nvidia	21.9%	24.5%	5/13/2020

Cloudflare	13.7%	13.0%	11/2/2020
Datadog	12.4%	11.9%	5/13/2020
Snowflake	12.1%	8.5%	2/8/2021
Crowdstrike	10.5%	9.5%	5/13/2020
Axon	10.1%	7.7%	4/2/2024

Monday	6.8%	8.2%	9/13/2021
Samsara	4.6%	4.8%	1/8/2024
Zscaler	4.0%	4.0%	3/4/2021
TradeDesk	3.7%	4.1%	5/13/2020

Cash	0.2%	0.0%
NuBank	0%	2.2%	10/14/2024
Transmedics	0%	1.2%	10/7/2024
Enphase	0%	0.4%	5/15/2020

*held through today
Time stamp: November 30, 2024

Company comments

Cloudflare:

Key insights:

Sequential revenue growth accelerated for a second quarter in a row: 4.4% → 5.9% → 7.3% and I expect it around 6.7% in Q4 (26.6% YoY).
Cloudflare is moving from subscriptions to consumption with so-called “pool of funds” deals, which I view as an excellent move for the beginning AI era.
This creates a short-term headwind for some secondary KPIs, like NRR (which dropped to 110% from 112%) and cRPO (which despite that, accelerated to 30% YoY growth, from 26% YoY growth in Q2).
Because their products create tremendous value for their customers we see them using up their contracted consumption ahead of their planned timelines. This tells us that real value is created and points to accelerated consumption in the future.
RPO growth also accelerated to 39% YoY, from 37% YoY in Q2. Both RPO and cRPO growth are significantly higher than revenue growth pointing to future revenue growth strength.
Q2’s amazing customer growth (2x above usual quarterly adds) was not an outlier as Q3 customer growth was again super strong (11374 adds in Q3 and 13028 in Q2, while in-between 3600 and 8100 adds in the previous 13 quarters). They also added 219 large customers this quarter (>$100k), which was the highest net add since 10 quarters.
Continues to show great operational leverage resulting in operating income to grow 49% YoY, significantly faster than revenue growth. FCF margin held up at 10.5%, up from 10.4% last Q3 but with double the Capex spend on GPU upgrades to drive future AI edge inferencing revenue.
They saw a notable shift in the quarter from AI training to AI inference: “one of the leading AI companies signed a $7 million one-year contract with us to move their inference to our platform. What they saw was that they were able to get significantly better performance while also being able to run at a much higher ROI on the investment that they made over what they were seeing, trying to manage it themselves through hyperscale public cloud . That’s a story that is playing out over and over again. I think it’s a story that is accelerating .”

Cloudflare reported Fiscal Q3 2024 on 11/07/24. I thought this was an excellent quarter. Not only did they meet or exceed all my expectations, but we are starting to see clear signs that the AI inference thesis is playing out very well. But first, let’s review their numbers:

Revenue was $430M (7.3% QoQ, 28.2% YoY), versus my expected $431M (7.5% QoQ, 28.4% YoY) and beat their guide by 1.6%. Their Q4 revenue guide came in at $452M (5.0% QoQ, 25% YoY) versus my expectation of $453M (5.2% QoQ, 25% YoY). I now interpret this new guide as $459M (6.7% QoQ, 26.6% YoY), implying another 1.6% beat.

Coming to secondary growth metrics one might think that their expand-motion with existing customers is in trouble as their NRR dropped again, this time to 110%, from 112% last Q and 115% the Q before. But the reason I don’t see this as a problem (and in fact expected 110% this Q) is because Cloudflare is moving from a subscription business to a consumption business, where more and more customers now make so-called pool-of-funds contracts. “While customer churn remained consistently low, our shift to more pool of funds deals with our largest customers, which represented nearly 10% of new ACV booked in the quarter, up from 1% a year ago, has put downward pressure on dollar-based net retention and changed the shape of revenue recognition in the short term.” And from their Q2 transcript: “current RPO is also impacted, because the contract duration is longer. So, you recognize upfront less in current RPO. So, while the deals are very beneficial and healthy to the business, they generate some noise in this transition in our DNR and in the other metrics.” So while this motion creates NRR and cRPO headwinds on paper, I view this as a brilliant move from Cloudflare. This is because now their customers can use their contracted funds more freely between products without having to commit to subscriptions. Why is this good? Well it wouldn’t be good if Cloudflare’s products wouldn’t create a significant return of investment for their customers, but instead lock them into subscriptions which they will cancel as soon as they can. But what we see with Cloudflare is the opposite: Because their products create tremendous value for their customers we see them using up their contracted consumption ahead of their planned timelines. This tells us that real value is created and points to accelerated consumption in the future.

Another reason why I view the move from subscriptions to consumption as a great one for Cloudflare is because we are entering a new age of AI and as such we see companies hesitant to sign up for lengthy subscription contracts where they might worry that the services provided by these subscriptions might become obsolete 6 months from now due to novel AI solutions. Of course this makes revenue growth less predictable for Cloudflare, but it also creates significant upside potential if their products continue to drive significant ROI for their customers; why would you not spend consumption faster than planned if it creates immediate value for you? See more on driving ROI for customers on AI inferencing below, but their “Workers” product is a great example highlighting the advantage of consumption over subscription if you have a great product: “With Workers, I think that we are – I keep thinking we’re kind of in the beginning of the S-curve of growth, but before the S-curve, even in the beginning, is steeper than I imagined, and there’s a lot that’s there. But we are not, I would say, optimizing this as much for how do we extract the most revenue. I think we’re still optimizing very much for adoption . And what I like is that oftentimes, Workers becomes the conversation around how we actually adopt the entire platform because people want to – they want to sign a pool of funds deal because their developers are excited about what Workers delivers . They don’t know exactly how much of it that they’re going to use. They know that they’re going to use the overall platform. But Workers is then oftentimes a place where people say, listen, I want to put this in place, I want to make sure Workers is part of that. And then, oftentimes, we’re finding that customers will use up their ENTIRE pool of funds WELL BEFORE the contract duration . And oftentimes, what’s driving that is just the excitement of their teams around building new tools on Workers.”

And we do see this very real value creation also in the numbers, where for example RPO came in significantly ahead of my expectation and accelerated to 39% YoY growth, from 37% YoY growth in Q2. And despite headwinds, cRPO accelerated to 30% YoY growth, from 26% YoY growth in Q2. So both RPO and cRPO are now growing faster than revenue growth.

We also saw a lot of great action on the land-side of Cloudflare’s land-and-expand motion this Q3: Just as a reminder, in Q2 Cloudflare added an outstanding 13028 new customers, which was around double the add they got in each of the previous 8 quarters. With that I was prepared for a much lower customer add number this Q3 as Q2 could easily just have been an outlier. Instead, they again managed to add an incredible 11374 new customers, accelerating customer growth to 21.7% YoY, up from 20.7% in Q2 and 16.7% in Q3 a year ago - just amazing to see this acceleration. They also added 219 large customers this quarter (>$100k), which was the highest net add since 10 quarters. Here their net adds have gone up from 122 in Q1 to 168 in Q2 to now 219 in Q3, which is also up from 206 in the last Q3; again really amazing growth.

Now coming to profitability and going further down the income statement, we find that gross margins stayed around 79% in recent quarters, which is good. Next, while operating expenses as a percentage of revenue stayed unchanged from last quarter, YoY growth of operating expenses was only 24%, significantly below their 28% revenue growth. That’s great as this resulted in operating income to grow 49% YoY, significantly faster than revenue growth. So really nice operational leverage here!

Finally, free cash flow grew as I had expected by 30% YoY, resulting in an FCF margin of 10.5%, similar to last Q3’s FCF margin of 10.4%. One thing that was different though than in last Q3 was their significantly increased Capex spent of $50M, vs. $27M in the previous Q3. This brings me to the AI story I mentioned at the beginning. Recently, Cloudflare has upgraded their own one-of-a-kind worldwide distributed edge network to provide GPU-based, AI inferencing services with super-low latency. During this earnings call we heard that these GPU investments that enable AI inferencing services like no other company in the world can provide, created a direct return on investment for Cloudflare’s customers, strongly increasing adoption of products like Workers AI: “During the quarter, we saw a notable shift in customer conversations and buying behavior from AI training to AI inference , including our first multimillion dollar Workers AI contract. This gives us confidence to continue to increase our investment in higher end GPU as well as the breadth of our GPU rollout as we provision greater capacity to support demand in 2025 . As a result, we continue to expect network CapEx to increase again in the fourth quarter to reach 10% to 12% of revenue for the full year 2024.”

Prince elaborated on this point further in the Q&A:

“I am really amazed at how quickly the AI platform that we launched is taking off and how many people are getting real value from it. And so as we mentioned, one of the leading AI companies signed a $7 million one-year contract with us to move their inference to our platform. What they saw was that they were able to get significantly better performance while also being able to run at a much higher ROI on the investment that they made over what they were seeing, trying to manage it themselves through hyperscale public cloud . That’s a story that is playing out over and over again. I think it’s a story that is accelerating . And in order to support that, we have made the investments to increase, not only just the number, but also the power of the GPUs that we’re deploying around the world. But I think what’s unique about Cloudflare is two things. One, we are actually able to deliver inference incredibly close to where anyone is on earth because we’ve deployed the inference capabilities across at this point nearly all of our network. But in addition to that, we’ve actually done the work to get higher utilization out of those same GPU resources where what we see when we survey customers that are trying to manage this themselves through hyperscaler public cloud is that they’re getting utilization rates that are sort of in the 5% to 10% range of the resources that they’re buying. We’re able to deliver much higher utilization. And in the process of that, that means that we can actually pass on the effective savings to our customers . So they’re not only saving, not having to maintain their own team to manage these virtual machines and containers. But they also save because we can just do more with the same GPU resources that are being deployed. So I’m incredibly excited that this is something which we have sort of – we’re starting to shift to people who have built their models and now they actually want to deploy them in customer-facing ways. And when they do that, I think Workers AI is the most powerful platform to be able to deliver inference tasks at a global level”.

What a great way to summarize and show that the AI thesis for Cloudflare is starting to work out. And the best thing? Those are relatively moderate Capex investments which still allows Cloudflare to continue their improving FCF margin trend.

Datadog:

Key insights:

Stronger than I expected revenue growth with second quarter in a row of sequential growth acceleration (3.7% → 5.6% → 6.9%) and now expect Q4 growth to accelerate to 7.1% (25.3% YoY).
Delivered the second best sequential net new revenue ever for this company, at $44.7M, which was topped just once during the peak of the COVID boom in 4Q21
RPO duration was down, resulting in only 25.5% YoY growth, but was still in high 30s when adjusted for duration changes. Also RPO had tough comps due to a surge during this time last year; similar story with billings.
Reminder that management keeps telling us to not look at RPO and billings, but revenue growth instead. Indeed, both billings and RPO have jumped up and down significantly in the past, without seemingly having any strong correlation to revenue growth; at least on a quarterly basis.
Multi-product adoption on track with 6+ and 8+ cohorts expanding and NRR “continued to see an increase in recent quarters”.
Total customer adds continued to slow to +549, down from +621 in Q2, but large customer adds held up at +100, up from +50 in Q2 but implied ACV reached a new record level at $94k, up from $90k in Q2 and $82k last Q3.
Datadog’s moat likely intact as gross revenue retention stayed in the mid to high 90s and gross margin currently sits at 81% and hasn’t fallen below 80% in the last eight quarters, positioning them well to continue to capitalize on the move to the cloud and resulting workload growth which is “one of the big underpinning trends that we’re going to ride for the years to come”.

Datadog reported Fiscal Q3 2024 on 11/07/24 before the market opened. I thought that this was a mixed quarter with very good progress both on the top and bottom line, but I have some worries about forward-looking secondary metrics, which I’ll elaborate on below.

Starting at the top of the income statement, revenue came in at $690M (6.9% QoQ, 26.0% YoY), which was significantly better than my expected $686M (6.3% QoQ, 25.3% YoY) and beating their guide by 4.2%. The Q4 revenue guide also came in a bit better than I had expected at $711M, which I now interpret as $739M (7.1% QoQ, 25.3% YoY). Note the YoY slow-down from 26.7% in Q2 to 26.0% in Q3 to my expected 25.3% in Q4. While this slowdown is very moderate it is something to watch as I’d really like Datadog to stay at or above 25% YoY growth during the next, upcoming FY. In any case, seen from a net new revenue point-of-view, this Q3 was great, delivering the second best sequential net new revenue ever for this company, at $44.7M, which was topped just once during the peak of the COVID boom in 4Q21. Notably, while YoY revenue growth has been decelerating slowly in the last three quarters, QoQ net new revenue went from $21.6M to $34.0M to now $44.7M, which is also up significantly from last Q3 at $38.1M.

Coming now to the more worrying secondary forward looking metrics, we start with RPO, which was a clear miss in my book. They grew RPO only by 1.7% QoQ, down from 3.5% in Q2 and 16% last Q3. The reason they gave for this was that RPO duration was down and they quoted an adjusted RPO in the high 30s percent accounting for the shorter duration. While plausible, my guess why duration was down is that observability customers are hesitant to sign up for longer durations while potentially a lot might happen with AI software tools in the near future and there might be a thought that if Datadog doesn’t have the best products anymore or doesn’t provide the best ROI, customers don’t want to have committed to long-term consumption contracts. Another aspect that created a billings headwind this quarter was essentially that they were in a very good spot a year ago and now it’s coming back to normal. At least this is how I interpret the Q&A about this topic

Mark Ronald Murphy

JPMorgan Chase & Co, Research Division

Okay. Understood. And then, David, to the extent – and you’ve always said that revenue is a better indicator than billings and RPO. But to the extent the billings growth was affected by timing, as you mentioned, we’ve seen that before. We know it can bounce around. But did you have some invoices that would have gone out in September and instead, they were issued in October? In other words, would we see some recapture of the timing element in Q4 or perhaps in early next year? Or is it some other dynamic there?

David M. Obstler

Chief Financial Officer

Yes, it’s really some other dynamic. It’s that the timing of billing for last year was slightly different than for this year. And so it was more a factor of timing for billing last year that didn’t repeat this year . So we think that the weighted average, what we talked about, the average over the 12 months is a better indicator of the relationship between billing and revenues. And when you look at that, they’re much more closely aligned.

And similar on the topic of RPO: “we had a surge in this period, the period last year of longer-term contracts. That was really customer-led. We may well have that in the future. But in just comparing the timing of that, it doesn’t affect revenues . We had that kind of compare, I would say. When you look at adjusting for duration and looking at over a long term, we do find that all of these metrics are circling around revenue in the mid-20s.”

By the way, I don’t recall a single earnings call where they didn’t mention that billings and RPO can bounce around and shouldn’t be used to judge the health of their business. Looking back, it is true that both billings and RPO have jumped up and down significantly in the past, without seemingly having any strong correlation to revenue growth; at least on a quarterly basis. So maybe it is fair to take their word here and put less emphasis on those metrics.

At least expansion with existing customers was on track with multi-product adoption metrics increasing by 1% in two out of four cohorts (6+ and 8+ expanded and 2+ and 4+ stayed where it was a Q ago). Also, while they still quoted their NRR at mid-110%, just like in the last four quarters, they again told us that they have “continued to see an increase in recent quarters as we look at the NRR quarterly trend.”

On the “land” side they certainly struggled a bit to keep up with customer growth, which was only at 1.9% QoQ resulting in 549 net adds. This number is down from 621 last Q and 700 last Q3. On the other hand, large customer growth held up as I had expected and resulted in 2.9% QoQ growth and 100 net adds.

So the billings, RPO and customer growth story tells me that there is quite a bit of hesitation in the observability space which is maybe not a surprise given all the ongoing AI developments: “[talking about Datadog’s customers and their workloads on Datadog:] where the workloads could have grown maybe instead of growing 20%, they could grow 25%, maybe some of those 5% instead are being invested both in terms of infrastructure budget or innovation – time innovation budget. All that is going into AI, and that’s largely right now in experimentation and model training and that sort of thing. That’s probably right. But we see that also as a precursor to further workload growth in the future , like I would say, more traditional production application workload growth. So for us, it doesn’t really change the equation”. The question of course is if Datadog will come out of this as a winner or not. But given their leadership in the space and great track record as an extremely consistent execution machine, I am betting on them over any other competitor. At least their gross revenue retention stayed in the mid to high 90s and gross margin currently sits at 81% and hasn’t fallen below 80% in the last eight quarters, which tells me that Datadog’s moat is likely intact. Their improving profitability margins and 30% FCF margin this quarter were also very good and the latter was better than I had expected. And maybe we’ll see new products like LLM observability and/or any pent-up demand in observability lead to new growth acceleration in FY25. So far though, Datadog has proven to have very durable revenue growth at around 25%, now for six consecutive quarters and I think they’ll be in very good shape if they can keep this growth rate through and beyond FY25 as “this [workload-] growth and move to the cloud is going to last for a very long time and it’s going to be at a high – fairly high level for a very long time (…) and that’s one of the big underpinning trends that we’re going to ride for the years to come”.

Monday:

Key insights:

Q3 left me thinking that Monday still has to prove they can continuously increase their net new revenues, but not clear yet if weaker Q3 just appeared so, coming out of a monster Q2 (i.e. lumpiness) and not clear how much of Monday’s growth in the next few quarters will be driven by the price increase versus product growth.
Large customer growth ($50k+ & $100k+) was good and as I had expected ahead of earnings.
NRRs keep improving.
CRM account growth was strong while Dev account growth was weak.
New “Service” product will be released by end of 2024 and I see this as a great cross-sell opportunity.
OM and NM contracted, driven by increase operating expenses, especially in R&D, which isn’t necessarily a bad thing as it could drive incremental future revenue growth. FCF margin was strong at 32.8% and FCF was growing 27% YoY.

Monday reported Fiscal Q3 2024 on 11/11/24. Revenue came in at $251M (6.3% QoQ, 32.7% YoY), which was a bit below my expectation of $254M (7.5% QoQ, 34.2% YoY) and beating their guide by 2.4%. Their Q4 guide was $261M (4.0% QoQ, 28.8% YoY) which I now interpret as $269M (7.1% QoQ, 32.7% YoY). This is a down-revision in absolute dollars and YoY growth from what I had expected, but in-line with my expectation for QoQ growth. More importantly, sequential revenue increase was 14.9M, again closer to Q1 and significantly below Q2’s $19M. The big question here is if the strong Q2 was just a one-time benefit due to their price increase (which is ongoing for renewing customers) or if Q3’s lower number is just reflecting some lumpiness in revenue recognition. I am not sure if a clear cut case can be made for either scenario at this point and so I’ll be waiting for Q4 and their FY25 guide to get a clearer picture here.

Meanwhile, I thought there wasn’t much of a surprise with the Q4 guide, as it was a bit stronger than I had expected on a QoQ growth basis, but a bit weaker on a absolute dollar and YoY growth basis, which is mainly because of the less than I had expected Q3 revenue.

Coming to secondary growth indicators I thought land-and-expand / product growth metrics were largely on track. Customer growth in the $50k+ and $100k+ cohorts was as I had expected, reaching 2907 (vs. 2900 expected) and 1080 (vs. 1084 expected), respectively, so I am happy about that.

NRRs, which I wanted to see increase again, did so, by one percent in all but the 10+ cohort, which was unchanged from Q2. Notably the $100k+ cohort saw its second sequential increase from 113% in Q1 to 114% in Q2 to now 115% in Q3, establishing a nice trend and giving credence to the thesis that the other cohorts will also continue to improve going forward.

In terms of their new products, I was happy to see continued strength in CRM account growth which was up 19.1% QoQ (coming from 22.3% in Q2), but I thought their Dev accounts growth was a bit weak at only 15.9% growth (coming from 30.1% in Q2). It’ll be also interesting to see how their newest product, “Service” will do once it becomes generally available by the end of 2024. Similar to CRM and Dev, I see this as a great cross-sell opportunity.

Finally, coming to profitability, I thought operating and net margins were a bit on the weak side at 12.8% (contracting from 16.3% in Q2 and constant from 12.7% last Q3) and 17.9% (contracting from 20.9% in Q2 and roughly constant from 17.4% last Q3), respectively, driven by significantly increased operating expenses, especially in R&D, which of course can be a good thing if it helps drive future revenue growth. FCF margin was strong at 32.8% and FCF was growing 27% YoY.

I think especially the lower than I had expected net new revenue this quarter leaves Monday with something to prove in the next few quarters: Can they consistently grow their net new revenues from here on out or not? Only time will tell …

Snowflake:

Key insights:

Great revenue growth (8.6% QoQ, 29% YoY) with $71M net new revenue in the quarter, up from $58M last Q3. $58M was the highest sequential add in the previous 8 quarters, so $71M was a great leg up.
Q4 guide also stronger than I had expected and raised FY guide by 2.2%
RPO growth accelerated to an amazing 55% YoY. Management has historically pointed to RPO as most important growth metric. YoY growth went from 23% → 41% → 46% → 48% → 55% in the last 5 quarters. cRPO growth, which was around 30% YoY for the last 5 quarters accelerated to 36%.
NRR has stabilized at a world-class 127%, unchanged from Q2.
Sequential large customer growth reaccelerated QoQ to 6.5%, up from 5.4% in Q2, 5.7% in Q1 and 5.8% in Q4 and they added 18 new G2000 customers, up from 3 in Q2 and 13 in Q1.
Data sharing metrics and profitability trends remain on track and FCF margin expanded 1% QoQ despite increasing Capex spend by 160% QoQ.

Snowflake reported Fiscal Q3 2025 on 11/20/24. This is how I concluded my last Snowflake earnings recap:

“This makes Snowflake a very interesting investment, where investors patience continues to be tested to a point where even the most patient ones might start wondering whether the long-promised growth and profitability will eventually materialize. It is worth emphasizing though that my patience does not rely on hope, but rather on increasingly strong forward looking performance indicators like RPO, customer growth and data sharing trends but also stabilizing NRR. All of those positive trends are framed by a narrative that Snowflake will be a big beneficiary of the future data cloud market, driven by its innovative platform that leverages AI to enable organizations to efficiently manage, analyze and gain valuable insight from vast amounts of data. In there, and maybe also because of current investor sentiment towards “prove it!”, lies an opportunity for significant gains, but also a potential for significant opportunity costs until those gains show up. And as always, it is up to each and every investor in Snowflake to decide to not try to time this and stay invested, or try to find a better place for the money.”

Well, while I felt as if I was one of the last retail investors that was still invested in Snowflake after I wrote the above, it looks like the aforementioned patience is starting to pay off with Snowflake. What an amazing quarter! Product revenue grew to $900M (8.6% QoQ, 28.9% YoY) versus my expected $887M (6.9% QoQ, 27% YoY), beating their guide by 5.6%. Just to put this into perspective, this resulted in an incredible sequential net new revenue of $71M, which is up from $40M in Q2 and $58M in the last Q3.

They guided Q4 to $908.5M (0.9% QoQ, 23% YoY), which I now interpret as $950M (5.5% QoQ, 28.7% YoY). This would be up significantly from my original expectation for Q4 of $931M (5% QoQ, 26% YoY). Note, that Q4 is a seasonally slow quarter for revenue growth, where QoQ growth dropped from Q3s by 34% to 49% in each of the last three years. They also raised their FY guide by a healthy 2.2%, which is great. But wait, things are getting even better from here.

RPO, which Snowflake’s management has historically called out as one of the important metrics to watch, grew to an astounding $5.7b. That’s a QoQ growth of 9.6% and up 55% YoY. Kind of crazy how RPO growth has accelerated in the last four quarters, from 23% → 41% → 46% → 48% → 55%. cRPO, which stayed at 50% of RPO, grew 36% YoY, up from 30% in Q2 and 28% last Q3. So seeing both the longer term and shorter term future contracted revenue accelerate to growth rates that are significantly above the current revenue YoY growth rate of 29% speaks to the value Snowflake delivers to existing customers.

Another metric that clearly showcases the value of Snowflakes products is their NRR, which now has stabilized at a world-class 127%, unchanged from Q2, after it had dropped for quite a while now. So even though this is a 2-year backward looking metric, it is great to see it now stabilizing.

Things looked also pretty good on the “land” side, with total customers up 4% QoQ and 20% YoY. Even better, their sequential large customer growth reaccelerated QoQ to 6.5%, up from 5.4% in Q2, 5.7% in Q1 and 5.8% in Q4. And the cherry on top was G2000 customer growth, where they added 18 new, up from 3 in Q2 and 13 in Q1.

On the data sharing side, Marketplace listings grew by an OK 5.1%, a bit less than I had expected, but this has been historically a very lumpy metric. Also lumpy but very strong this quarter was stable edge customer growth at 10% QoQ, making now up 36% of all customers and adding 350 customers that have one or more stable edges (slightly up from 345 net adds in Q2).

Finally profitability metrics came in stronger than I had expected, with operating margin at 6%, net margin at 8% and fcf margin at 9%, so a 1% margin expansion QoQ, despite increasing their Capex spend by 160% QoQ. So really great to see Snowflake to be able to significantly increase capital investments, while staying disciplined and still be able to expand their margins QoQ.

Wrap up

In October I had opened two try-out position in Nu Bank and Transmedics. I sold out of both during November. I had opened these try-out positions to get some skin in the game and motivate myself to research them more closely. In retrospect, I think this was a mistake. Given my long investment horizon for individual companies (many years) it should be OK to research first in detail and then make an investment decision. In other words, if I can’t motivate myself to put in the effort, then maybe I shouldn’t invest in the first place. Hopefully lesson learned.

With regard to the individual investments in Nu Bank and TMDX I can’t really tell much other than finding Nu just too complicated given their LatAm market and geopolitical & forex uncertainty. I also wasn’t impressed by TMDX’s earnings short term, and long term I still worry that it is just a question of time before they’ll be disrupted, be it by things like NPR, or synthetically grown organs or something similar (thinking out ten years here). What did I see in TMDX then that brought me to take a try-out position? Well, basically the great numbers they had put out quarter after quarter, growing revenue over 100% YoY and their airline acquisition also had shaped out to having been a great move. So, I have no idea if Nu or TMDX will be great investments going forward or not, but until I find the time and motivation to research them much deeper I’ll stay on the sidelines and wish all investors great returns going forward.

I also finally sold my tiny Enphase position. The main reason I was holding on for so long was because I thought of this investment more of a play on interest rates falling than anything else. But with NEM3 being a headwind and the change in the political landscape it is not clear to me how much Enphase can still benefit from lowered interest rates. In any case, I also thought it was just too small of a position to keep following and with negative YoY growth it is really not a Saul stock.

So, what did I do with the proceeds? I split them among Cloudflare, Snowflake and Crowdstrike, all three of which surprised me positively with their earnings, detailed above.

I am wishing you all a great rest of December and a delightful holiday season!

Ben

Past recaps

Topic		Replies	Views
Ben’s Portfolio update end of October 2024 Saul’s Investing Discussions	0	1975	November 3, 2024
Ben’s Portfolio update end of August 2024 Saul’s Investing Discussions	1	2654	September 8, 2024
Ben’s Portfolio update end of July 2024 Saul’s Investing Discussions	0	2057	August 1, 2024
Ben’s Portfolio update end of November 2023 Saul’s Investing Discussions	1	3459	December 3, 2023
Ben’s Portfolio update end of May 2024 Saul’s Investing Discussions	0	2757	May 31, 2024

Ben’s Portfolio update end of November 2024

Ben’s Portfolio update end of November 2024

Returns and portfolio holdings:

These are my current positions:

Company comments

Cloudflare:

Datadog:

Monday:

Snowflake:

Wrap up

Past recaps

Related topics