I believe the posts are gloomy, pessimistic.
But, as my position was average in a (relatively) diversified portfolio, I just raised the value back to pre ER, or nearly so. Didn’t even wait out the 3-day rule, which I may rue.
KC
2 Likes
Point being…if anything, things appear better than they looked after the last earnings call and from my two links above. Everyone here knew, or should have known about these issues of concern regarding decelerating concentrated enterprise level customers.
Not touting this company for sure as you can see from my prior two posts but, it surprises me that there is such sanguine posting when all these issues were previously known.
So the ER was good but not great and the stock was priced for greatness. Now that it has been repriced, is it still a buy or not? I’m holding onto my shares for now until I have greater clarity or when/if there’s a bounce. This is when I appreciate having a less concentrated portfolio, lol.
I great appreciate your insights and that of others here.
As anticipated, do not sell into the initial morning panic. The company is not a disaster. The attitude is the disaster. It just hit me wrong. It seemed to hit the analysts wrong as well as they asked about the sales issue (mostly brushed off as we are pleased with it), they asked about deferred revenues (a figure everyone gives, mostly brushed off), they asked about comparisons to last year with the figure given of forward obligations (whatever they referred to this metric as) although they have the number, not given.
I have better places to put my money. I think PVTL is fairly valued here. Thus I am selling now and moving on. I do not invest in companies that are not disruptive or dominating. Pivotal does great stuff for their customers, incredible stuff for them. Perhaps they have 30 logos in the closet for next Q. But if they did, why is their guidance indicative of that simply not being the case? Sandbagging? I mean this company has great vision into their revenues due to the business model. They know who is coming out of Pivotal Labs. They have to have a pretty good idea as to how many new logos are coming onboard, as unlike say MDB or Zs, customers do not just suddenly show up and say sign me up out of the blue.
Whatever the case. The company is not a disaster. It clearly can grow its way into being a cash cow. Given all it has going for it this 15 logos an the attitude simply feels like a slap in the face. And I am the one to full admit that I have been here before only to see the company turn it around and having read too much into it. Hey, it is one of my failings!
So be it. I just needed to vent, and I was not alone in that it just did not feel right the attitude on the call. Here is to them getting it right as they move forward. I will let others enjoy that. I am moving on myself.
Heck, I had moved on, but I guess worthwhile to have given them a shot. I really thought the VMWare tie up would be more valuable than this for Pivotal. Maybe it will be. It was to today, and no indication is given by Pivotal that it will be tomorrow either. Perhaps they are simply sandbagging without giving us any reason but hope to think so at this time.
Don’t shoot me when they pull in 35 new logos next Q - not. But who the heck knows. And therein lays the problem of hope.
Tinker
9 Likes
I think that maybe the reason why the company’s management is please with the new logos is not how many they got but which ones they got.
I had a substantial position >10% before the drop this morning. I also has short puts and leaps. I went ahead and sold it all. I put some of the proceeds into ZS, some into NVDA, sold more NTNX puts and sold more NVDA puts. I left a large chunk in cash because I will have an enormous short term capital gains bill to pay in April…not leaving this tax liability in cash is a form of leverage which I continue to reduce.
Chris
4 Likes
Hello Tinker,
I understand your angst, but do not agree that there is a problem with only 15 logos added. What do we know about the sales cycle? There is a stated emphasis on new logos that is about 3 months old. When VMware leads a customer to PVTL Labs, how long might it take before they are metered by PVTL as a new customer that spent more than $50,000 with us this past quarter?
There may be a sales problem, but it just may be early to see the results you “hoped” for.
Best regards,
Mike
2 Likes
If you take this quarter:
- 51% subscription growth
- gross margin improving 8% YOY
- net margin improving 13% YOY
and say they are going to do that every quarter for a year or two, I’m a happy camper and odds are good this stock is going higher.
The new information I have is:
-
I have lost some confidence in management because of the conference call.
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With a net retention rate of 150, and subscription growth of 51%, they basically only achieved 1% growth from customers within the last year. Last quarter was 156 and 69% growth, so 13% from new customers.
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With the focus on sales and marketing to new customers, they achieved less new customers in quarter 2 (15) vs quarter 1 (20), although better than last year, and we are dealing with the law of small numbers so you would expect it to be lumpy.
So I see this as going as 1 of 2 ways:
- They are making progress in the sales front, it is just taking time, and we will see the progress in coming quarters. New customers will offset the slowdown in existing customer spending and high subscription growth will be maintained.
- pivotal labs growth was up 9% (higher than companies expectation), so more customers are coming into pivotal labs than are “graduating” to subscription customers
- conservative method of counting customers, so it takes longer to show up
- they started ramping up sales and marketing spend at the beginning of the year, so it has only been 6 months for training, getting thru pivotal labs, etc
- management on cc saying thing are progressing well, new customers are coming
- The first customers, 2016 cohort and before, are their best customers, and as growth slows in these customers they won’t have enough sales from new customers to maintain high subscription growth, sales slow down.
- 2017 and 2018 cohorts are not showing much progress yet (we are in 2019 for PVTL)
- only 1% in growth coming from new customers
- this business is only for the biggest of big companies, not many customers left
- management is adding new metrics, being evasive on conference call, to hide these issues
Not sure if 1) or 2) wins out.
I’m going to wait a couple days to decide what I’m going to do. Most likely will sell half of my position as there is more uncertainty in my mind. I do think the price drop is overdone.
Jim
11 Likes
Does anyone know the 15 new customers they added? Mgmt’s tone annoyed me and seemed too casual, but all customers are not created equal. Simply looking at the number of customers added seems arbitrary, don’t we care more about revenue and the value added from each customer, or is this just me?
2 Likes