Brief thoughts on key metrics below, as I haven’t digested the transcript in detail.
Revenue growth of 74% YoY
o Remains strong, but note that this represents their lowest beat (7%) in their brief history as a public company. Might simply be improved accuracy as they mature forecasts.
RPO remains strong at 76% YoY
o Remains strong, but note that the raw $’s added is basically in-line with last quarter. Last year, they added double the RPO sequentially in Q2 compared to Q1. In fact, they added more RPO $’s this quarter last year
Operating expenses (non-gaap) increased 40% YoY
o While still high (107% of revenue), trend remains positive. Down from 133% of revenue this time last year, and 119% last quarter
o Good to see S&M as a percentage of revenue continue its downward trend to 65% (from 73% this time last year)
Operating income (non-gaap) of -$27M
o Good to see OpMargin improve from -30% last quarter to -27%
5,864 base customers (>$5k ARR); 593 enterprise customers (>$100k ARR)
o Largest number added in a single quarter (696)
o Note that enterprise customer growth was lower than this time last year (and even lower than last quarter)
Guidance
o $414 total revenue (increased by 3%, same as last quarter)
o Operating loss $109 (decreased by ~$20M, same last quarter)
My key open question: If management is so keen that there has been no impact from macro, then why were both land (RPO) and expand (>$100 customers) disappointing?
My take: While this was not a completely knockout quarter, this is a $7B company that is (a) growing its top-line >70% YoY, (b) improving its path towards profitability, and (c) not seeing any impact from the macro environment. If you’re looking for a company that is printing money today, this is definitely not a company for you. But if you’re someone like wsm007 who was looking for a company that meets most of Sentinel’s criteria (below) [1], or someone lamenting the lack of IPO’s this year, then this provides an enticing opportunity at an EV/NTMRev in the mid-teens.
I don’t know of any SaaS company (or elsewhere for that matter - perhaps someone can weigh in if they know of one!), which combines the following:
1. has some scale: run-rate revenue > $300m pa
2. gross margins above 65%
4. guiding for organic next Q revenue growth above 90% (and total revenue growth above 100%.)
5. guiding for full-year revenue growth of ±100%
6. NRR above 130%
7. operating margins improved by >30%pts yoy
8. guiding for operating margins improving a further ±30%pts in the coming year
9. In a market with big tailwinds and which is expected to see limited pullback of spend in the expected coming economic recession
-RMTZP
[1] https://discussion.fool.com/wsm8217s-portfolio-30-aug-2022-35160…