I listened to the ZS and MDB earnings calls live yesterday, although I missed the beginning of MDB while ZS was ending.
Although I didn’t take detailed notes on my thoughts (I was in an airport waiting for a flight at the time), a few overall impressions:
ZS - My first thought right away was that Jay didn’t sound natural. However, he was well spoken and he sounded very rehearsed. The CFO, on the other hand sounded very natural. At first I didn’t like the way Jay came across, as he sounded more like a salesman than someone being open with the audience. But as the call went on, I started thinking more and more that a “salesman” is exactly what we need heading up this company in the stage that it’s in, looking to grow their sales tremendously in coming years. I believe Jay is from an IT, technical background, so the fact that he may not be as “natural” speaking on the earnings call, but still sounded so well prepared is probably an analogy for how he goes into any big client meeting (which again, being really well prepared and well spoken, isn’t a bad thing at all). So I ultimately came away viewing this as a positive.
I didn’t like that ZS started their call late. It was only a couple of minutes, but it’s not a great look, regardless of whether it was their tech that wasn’t working (this is a tech company after all) or their people that we’re ready on time. I can’t remember the last time I’ve been on the line waiting for a call to start when the admin had to jump on and let everyone know “thanks for your patience” as we’d be starting a little late.
The other thing I don’t like is ZS adjusting the expected growth in billings to back out the big $16 million billing they had in Q4. That’s fine and all that it was a huge, unusual transaction and that you don’t expect to have those every quarter, but we want and expect you to be going for more huge jobs with huge billings next year and in years going forward. If every company I own backed out the biggest customer out of their prior year’s number in order to calculate their expected go-forward growth rate, they would all have higher forward growth rates than they do. Don’t tell us how great you were for getting that big job (when it wasn’t even this quarter that you are announcing now) and not to ding them for it because it was a good thing to get that big job…tell us you’re gonna work your butts off to get the next big new client and try to get them to pay you ever more than $16 million next year!
MDB - I was a bit more distracted while trying to listen to their call, but I really liked how many clients they were able to list out by name in describing their wins. It shows not only their success, but that these clients are comfortable being named by management publicly assicted with Mongo. I especially liked that HMRC (essentially the UK’s IRS) was a big win, government wins are always good as far as I’m concerned. Also liked how they said that the change to their terms they made this quarter to require anyone using the free version to share their code when selling MDB as a service, wasn’t really a change. They say they believe that, legally it was always required, but they just made that fact more explicit in the legalese going forward to try to prevent others, especially overseas from taking advantage of it unfairly.
Nothing really stood out as a negative on the MDB call, I especially liked that they signed off when there were no more questions by saying “We’re gonna get back to work”. I’ve been a part of many board of directors meeting and investor earnings calls where the mindset of everyone after they ended was “we deserve a drink now”. But the fact that MDB management said “back to work”, really came across super positively to me. Really driving home that the investor presentation is something they have to do, but that their head is always in the operations and that’s immediately where they were turning their attention back to (driving forward and building the company) the moment that the call ended. Sure, it could have been scripted, but it felt natural and real to me, and I really liked that. This team is not going to take a break when it comes to working for their owners and getting the business to where they think it should be.
I can’t recall if it was ZS or MDB, but one of them called out the fact that, in nearly all of their customers, the customer is only using their services for a small percentage of where they could be rolling it out to, suggesting that there is lots of room to grow within companies they are already in, by getting them to roll out their product across more and more divisions (I think it was ZS that said this but probably applicable to both regardless even if MDB didn’t say it too).
Ultimately, these are two of my largest holdings (after Amazon), and I am very comfortable keeping them that way for the foreseeable future.