FoolishJeff February Portfolio Update

2022 - (-24.9% YTD)

Portfolio Breakdown vs Last Month

DDOG – 20.1% (19.5%)
MNDY - 13.9% (16.8%)
ZS – 12.6% (12.0%)
S – 12.6% (11.9%)
SNOW – 10.7% (10.4%)
BILL - 10.4% (NEW)
NET – 9.7% (8.8%)
ZI – 3.1% (11.1%)
CASH - 6.9%

Watchlist - CRWD, AMPL, UPST

YTD Returns

DDOG - (-2%)
MNDY - (-47%)
ZS - (-21%)
ZI - (-11%)
S – (-13%)
NET - (-8%)
SNOW – (-20%)
BILL - 2%

Summary: The pain and irrationality continues even as most of our companies met or exceeded expectations during earnings. It is just a reminder that the Efficient Market Hypothesis (EMH) and other so-called conventional wisdom is pure nonsense. Yes, you can beat the market but you have to tune out the noise, the fear, and focus on owning the best, and let time heal all wounds.

DDOG (Datadog) - Datadog continues to be my highest conviction stock after it reported another blowout quarter in February.

  • Revenue $326.2m (+84%YOY) beats by $34.7M, up 20.6% QoQ!
  • Non-GAAP EPS of $0.20 beats by $0.09
  • Record Adj Gross Margin of 80.3%
  • Operating cash flow $115.8m
  • Free cash flow $106.7m
  • FCF margin = 32.7%
  • Adj. operating margin = 22%
  • 216 customers > $1m ARR (+114%YOY)
  • 2,010 customers > $100K ARR (+63%YOY)
  • FY 2022 revenue guidance ~+50%YOY
  • Q1 guide > 70% YoY

Wow, look at the acceleration from 51% to 67% to 75% to 84%. Customer Product growth was also impressive.

2021 - Q4 - 78% of customers use 2 or more products
2020 - Q4 - 72% of customers use 2 or more products

2021 - Q4 - 33% of customers use 4 or more products
2020 - Q4 - 22% of customers use 4 or more products

2021 - Q4 - 10% of customers use 6 or more products
2020 - Q4 - 3% of customers use 6 or more products

On top of all the great numbers, Datadog doesn’t seem much to have much in the way of competition:

CEO: “…we don’t actually see the competition all that much. So I don’t wake up every morning asking myself how are we going to win or whether we are winning. We mostly compete against customers building it themselves or building on their tool then starting in the cloud without a clear idea what’s going on.”

Analyst question: “I wanted to talk a little bit about your comment about the early days of the opportunity…If I look at some of the big software companies that we’ve seen, whether it’s Salesforce or VMware or other large companies, they have north of hundreds of thousands of customers, right? And you’re sort of sitting at 18,000. I was wondering in terms of your guys’ vision, do you envision Datadog getting to this sort of customer count levels?”

CEO: “we build a product and a company that serves the whole market, like the whole gamut of potential customers. We think that developers at small companies behave, especially in the cloud, they have to behave very much the same way as developers in very large enterprises. They have the same toolbox. They work the same way largely. And so we built a product that serves everyone. We do expect to have very large counts of customers in the end…we also see, right now, a lot of the demand, a lot of the growth is coming from mid-market and large enterprises and also the higher end of the market. And we feel good about that part of the market, like we see it successfully standardizing Datadog. We see it successfully land and expand with us. I think we’re growing faster. Well, I would say we’re an equivalent size and growing faster than anybody else in the market for that specific part of the market.”

I am going to stick to my rule of keeping the allocation around 20% and it is very much deserved.

MNDY ( - They reported a good quarter but Mr. Market didn’t seem to like it as much. It was a ridiculous response in my opinion and I took advantage and bought more shares.

-Revenue was $95.5 million, an increase of 91% year-over-year, down from 91% last quarter
-GAAP operating loss was $31.6 million compared to a loss of $61.7 million in the fourth quarter of 2020
-GAAP operating margin was negative 33% compared to negative 123% in the fourth quarter of 2020.
-Net-dollar-retention rate for customers with 10+ users was over 135%
-Number of Customers with $50k ARR grew 200% year over year


Total revenue of $100 to $102 million, representing year-over-year growth of 70% to 73%.

Mr. Market didn’t seem to like the increased spend next year but I think it’s time to land and expand while they can so it seems reasonable to focus more on the top line at this point.

ZS (Zscaler) - They reported a very solid Quarter on 2/24.

Revenue grows 63% year-over-year to $255.6 million, the highest growth in 22 quarters
• Calculated billings grows 59% year-over-year to $367.7 million
• Deferred revenue grows 70% year-over-year to $759.9 million
• GAAP net loss of $100.4 million compared to GAAP net loss of $67.5 million on a year-over-year basis
• Non-GAAP net income of $19.2 million compared to non-GAAP net income of $14.0 million on a year-over-year basis
-FCF was 29.4M or 12% of revenue, FCF margin 23%,
-customers with 100K or more up 135 to 1,751

  • I was initially concerned by billings being so low but they explained on the earnings call that it was due to low Fed spending which I expect to pick up. Also, other metrics such as deferred revenue (up 70%)and RPO(up 90%)looked solid

ZI (ZoomInfo) - They reported an ok quarter in November

-Revenue- $222.3M, 59% YoY, 13% QoQ
-uFCF - $84M, 23% YoY
-$100k TTM Customers - 1,452 total, 71% YoY
-Gross Margins (adj) 89%
-Op Margins (adj) 39%
-DBNRR 116% vs 108% Q4 of last year

I can’t really complain too much except the guidance good have been better. They only guided for 49% (226-228 million). Also, initial 2022 Guidance is only 36%, which could be higher at this point.

With the amazing FCF and Operating Margins, this is an impressive company but I’m not sure the market really know about it. If the growth were accelerating, it might have more to show off, but right now, it looks solid, but not exciting.

NET (Cloudflare) - They reported another good quarter in February.

-The fastest annual and Q4 yoy growth in revenue of the last 4 years.

  • 2020 - 21 : 52% full-year yoy | 54% Q4 yoy
    -Traffic up 88%, 71% increase in large customer growth, 5th straight year of 50% CAGR, 1st quarter of positive FCF, RPO up 63% YoY
  • RPO came in at $624m, which is up 14% qoq and 63% yoy
  • cRPO was $480m, up 17% qoq and 67% yoy which is an acceleration vs prior quarters and represents the highest proportion of run-rate revenue of the last 3 years, at 62% vs 57% in 2020 and 53% in 201
    -NRR the highest it’s ever been, at 125%, up 1%pt vs prior q and 6%pts vs a year ago.
    -Total customers grew 26% yoy to 140k, and ARPU was up 22% yoy continuing a steady multi-quarter upward march indicative of larger customer success.
    -Customers with ARR >$100k was up 70% yoy (to 1416), >$500k up 70% (to 121), and $1m up 75% (to 56

“We had a most excellent 2021, capping off the year with fourth quarter revenue growth up 54% year-over-year. The full year represented a 52% year-over-year increase in revenue growth and a 71% year-over-year increase in large customer growth. It was also the fifth straight year we achieved 50 percent, or greater, compounded growth,” said Matthew Prince, co-founder & CEO of Cloudflare. “Our continued success is fueled by a culture of relentless innovation on top of a highly scalable platform. That’s why we’re uniquely positioned to extend our network, introduce new Zero Trust capabilities, and grow our total addressable market. We’ve never been more motivated to take on this huge opportunity as corporate networks transition to the cloud, and developers line-up to build on our edge.”

BILL - I got out of my small position in BILL due to the complicated story but after the blowout earnings on 2/3, I’m back in at 10%ish.

-Total revenue of 197%, QoQ growth at 34.5%! (BILL’s QoQ is seasonal but 34.5% is more than double of 16.9% a year ago)

-Organic core revenue growth further accelerated to 85% YoY! (73%->78%->85%!)

-Organic subscription revenue accelerated to 51% from 39% last quarter

-Q2 Transaction Fees Increased 313% Year-Over-Year

-Organic transaction revenue remains at very high 121% YoY and 30% QoQ! (23.2%->21%->30%)

-Organic TPV was 56.4m - 20.3% QoQ!

-Organic take rate further improved to 0.1% from 0.09% last quarter (11% QoQ growth)

-NG gross margin improved to 85.3% (see Divvy)

NG operating margin improved to 2.17% (shows operating leverag)

FCF margin also improved to -10%

Strong Outlook: 142% growth on $158 million (67% organic)

SNOW -excited for earnings on 3/2

S (Sentinel One)

-excited to see earnings on 3/30


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