I decided to follow up with another earnings preview post, since the last one was well received[1]. The purpose of this post is to provide a high-level overview of how Q2 earnings can unfold based on the leading indicators that we have. This should definitely be an interesting quarter, as it is the one-year lap from the “peak Covid” quarter.
While I hope that this analysis is somewhat useful, it is important to remember that this is an extremely simplistic, top-down view. Companies and their business performance cannot be compared apples to apples. This analysis also lacks an assessment of margins, profitability, customer adds, and many other indicators that are discussed at length in the individual earnings posts on this board.
Pt. 1 – A Look Back at Q1 Results
The strongest “real revenue beat” came from Docusign, while Crowdstrike disappointed the most. From a guidance standpoint, Okta surprised the most, while Snowflake was the biggest disappointment. Finally on deferred revenue, Zoominfo was the biggest surprise, while Snowflake again came last.[2]
Company Real Revenue Beat[3] Guidance Beat over Consensus[4] Deferred Revenue Beat over Consensus
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Docusign 3.1% 1.6% 13.0%
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Twilio 1.7% 3.0% N/A
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Zscaler 1.3% 7.0% 5.8%
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Asana 0.3% 10.7% 14.7%
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Zoominfo -0.7% 4.9% 19.5%
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Cloudflare -1.0% 5.0% 12.4%
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Datadog -1.8% 7.8% 4.1%
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Okta -2.3% 14.5% 14.6%
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Crowdstrike -2.8% 4.4% 3.4%
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Zoom -3.1% 5.6% 1.3%
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Snowflake N/A 0.8% -2.4%
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Monday N/A N/A N/A
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UiPath N/A 2.9% N/A
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Shopify N/A N/A N/A
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Pt. 2 – Q2 Expectations[5]
We begin this week with the cloud titans reporting, so we’ll get insights on GCP and Azure on Jul-27, followed by AWS on Jul-29.
Company Earnings Date CY21’Q2 Rev Growth Guidance Avg Rev Guidance Beat (%)
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Snowflake TBD (late Aug) 78% 9.00%
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Crowdstrike TBD (early Sept) 62% 6.90%
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Asana TBD (early Sept) 57% 9.40%
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Datadog Aug-5 51% 8.20%
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Zoom TBD (early Sept) 49% 8.4% [6]
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Twilio Jul-29 49% 9.60%
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Okta TBD (late Aug) 48% 7.60%
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Zscaler TBD (late Aug) 48% 7.10%
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Cloudflare Aug-5 46% 6.60%
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Zoominfo Aug-2 46% 6.20%
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Docusign TBD (early Sept) 41% 5.30%
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Shopify Jul-28 TBD 5.3% [7]
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Monday TBD TBD N/A
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UiPath TBD (early Sept) 31% [8] N/A
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Pt. 3 – Projected Growth Endurance
Cloudflare and Datadog are expected to suffer the less revenue growth decline over the next twelve months, while Shopify and Zoom are expected to observe the most significant drops. It’s worth remembering that historically, analysts have been very poor at projecting growth endurance. The ones that are able to “disprove” their growth decay will likely observe strong share price appreciation[9].
It is also worth observing how much the law of large numbers is projected to kick in here. Cloudflare, Datadog, Asana, Zscaler and Zoominfo all reported quarterly revenue of <$200M, while Zoom and Shopify reported nearly $1B. Clearly, it is much more difficult to sustain a high growth rate at a larger business, although Shopify has surpassed expectations again and again.
Company LTM Revenue Growth Consensus NTM Revenue Growth Projected Growth Endurance
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Okta 40% 48% 120% [10]
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Cloudflare 51% 38% 75%
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Datadog 58% 43% 74%
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Asana 58% 41% 72%
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Zscaler 54% 38% 71%
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Zoominfo 55% 37% 68%
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Snowflake 116% 77% 66%
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Docusign 54% 35% 65%
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Twilio 57% 36% 64%
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Crowdstrike 77% 48% 62%
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Monday 95% 50% 53%
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UiPath 75% 34% 45%
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Shopify 100% 36% 37%
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Zoom 296% 26% 9%
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Pt. 4 – Market Sentiment
I will repeat the caveat that this analysis is a macro-viewed oversimplification of business performance. That being said, with this context – we get nuggets of partial explanation for share price movements over the past few months.
Company Biz Days since Earnings Share Price Change Since Earnings CDGR Since Q1 Earnings Share Price Change YTD
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Asana 37 97% 1.8% 149%
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Cloudflare 57 70% 0.9% 57%
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Shopify 63 28% 0.4% 50%
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Docusign 37 58% 1.3% 39%
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Crowdstrike 37 25% 0.6% 34%
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Twilio 58 22% 0.3% 22%
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Datadog 57 56% 0.8% 22%
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Zscaler 44 38% 0.7% 22%
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Zoominfo 60 8% 0.1% 18%
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Okta 43 5% 0.1% 3%
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Zoom 39 10% 0.2% 0%
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Snowflake 43 13% 0.3% -5%
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UiPath 34 -16% -0.5% N/A
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Monday N/A N/A N/A N/A
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Pt. 5 – Expert Perspectives
GP Bullhound notes “As the world continues to move online, we saw numerous trends emerge, continue and even escalate in Q2. **Identification technology is growing as businesses look to reduce fraud, and companies are utilising sales-assisting SaaS to increase deal-making success. Outsourced big data handling is in high demand as companies aim for faster data-driven decisions, and logistics and retail businesses are focusing on applying machine learning solutions to optimise inventory management and merchandising.**We are bullish the Cloud will continue to grow rapidly over the next several years in all areas of enterprise and B2B.”[11]
BVP notes “One thing is clear — a wave of startups enabling the next generation of data-driven businesses is on the rise, as they offer better and easier-to-use infrastructure for accessing, analyzing, and furthering the use of data…We believe we are still in the very early days of a revolution in the data stack. Just as the cloud changed the way we work today, harnessing data through modern cloud-native infrastructure is becoming essential to companies of all sizes and industries.”[12]
ScaleVP notes “The majority of enterprise security leaders (63%) responded to the events of 2020 — a year bookended by the pandemic and the SolarWinds cyberattack — by increasing budgets to fortify their organizations against security threats, with 45% of those nearly doubling spend. Headcount also expanded, growing by 40% last year alone.This data underscores a central theme in the report: Security departments have more resources and visibility inside their organizations than ever before. But those resources are stretched very thin.”[13]
Morgan Stanley published their 2Q21 CIO survey results. The most relevant bullish findings are that “CEOs expect software to be the fastest growing segment in 2021,” and “cloud computing and digital transformation top the priority list, followed by security software moving from #4 to #3.” Less bullish is CIOs expectation that "total applications expected to run in the public cloud by 2023 to be 37%, down from 49% a year ago.” MS indicates that this may reflect “more realistic expectations from CIOs.”[14]
-RMTZP
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[1] https://discussion.fool.com/q1392021-earnings-preview-34819176.a…
[2] Some of Snowflake’s guidance and deferred revenue disappointment might be the result of analysts undermining the strong seasonality of Snowflake’s billing cycle
[3] “Real revenue beat” is the extent the company beat its guidance, compared to its usual guidance beat
[4] “Guidance beat over consensus” is extent guidance was beat, compared to consensus analyst expectations. We know analysts are far from perfect, but it provides a baseline to compare a company’s guidance against
[5] I noticed that I incorrectly stated the “average revenue guidance” beats on my last post. I had included their average guidance beats over investor presentations rather than comparing their revenue results to their own estimates – apologies.
[6] Excluding three Covid outlier quarters in 2020
[7] Excluding 2020 as Shopify refrained from providing guidance
[8] ARR is a better metric than revenue growth here, but they don’t reveal quarterly ARR in their S1. My guesstimate is that their ARR was ~$450M last year, so their ARR growth would be 57%
[9] https://twitter.com/jaminball/status/1369757359728250881
[10] Includes large inorganic acquisition (Auth0)
[11] https://www.gpbullhound.com/insights/q2-2021-software-insigh…
[12] https://www.bvp.com/atlas/roadmap-data-infrastructure/?from=…
[13] https://www.scalevp.com/blog/here%E2%80%99s-what-cisos-are-b…
[14] Morgan Stanley Access Verification (ms.com)