stocknovice's September Portfolio Review

And that’s a wrap!

September means the end of another earnings season. Sadly, as with any earnings close, it also means investors and commentators can now switch their attention from individual companies back to broader, noisier, and scarier things. After giving most stocks an initial “hey, that’s a great report!” bump, a skittish market couldn’t help but quickly find its next worry. No surprise there given September’s long-held narrative as the worst month for stocks (

If I’ve got my memes right this time around, our current fears du jour are rising interest rates and an overleveraged Chinese real estate company (…). Always one to play it safe, Mr. Market reacted by immediately assuming every growth stock was going to zero. Also one who tends to act before he thinks, Mr. Market eventually came to realize that might be a bit extreme. All that angst made for a roller coaster September in which our portfolio went from solidly up to slightly down to squeaking out a positive return on the very last day. Let’s just call it a buzzer beater of a month……

2021 Results:

	Month	YTD	vs S&P
Jan	5.0%	5.0%	6.1%
Feb	-3.0%	1.8%	0.4%
Mar	-15.9%	-14.4%	-20.1%
Apr	9.1%	-6.6%	-17.9%
May	3.1%	-3.7%	-15.7%
Jun	18.4%	14.0%	-0.4%
Jul	2.8%	17.2%	0.1%
Aug	20.3%	40.9%	20.5%
Sep	0.3%	41.2%	26.6%

September Portfolio and Results:

	%Port	%Port	
	30-Sep	31-Aug	1st Buy
UPST	26.9%	20.4%	03/18/21
DDOG	19.1%	18.8%	12/09/19
CRWD	13.2%	17.7%	06/12/19
LSPD	9.7%	9.3%	04/05/21
ROKU	5.9%	7.2%	12/22/20
ZS	5.6%	6.2%	06/10/21
DOCU	5.2%	10.3%	06/09/20
NET	3.3%	1.7%	08/07/20
MNDY	2.6%	-	09/20/20
DCBO	2.3%	-	09/17/21
Cash	6.2%	8.3%	 
		Return	vs S&P
	Month:	0.3%	5.0%
	2021:	41.2%	26.6%

Past recaps:

December 2018:…
December 2019 (contains links to monthly reports):…
December 2020 (contains links to monthly reports):…
January 2021:…
February 2021:…
March 2021:…
April 2021:…
May 2021:…
June 2021:…
July 2021:…
August 2021:…

Stock Comments:

Our portfolio ends September in a minor transition stage. The changes include several allocation tweaks and a couple new faces. While our current snapshot is detailed below, I’d say less of those details than usual have been written in ink.

CRWD – Other than presenting at the Deutsche Bank Technology Conference in early September, all was quiet on the CrowdStrike front. I’ve trimmed this position a fair amount recently after the slightly slowing numbers and hints of increased competition I gathered from CRWD’s August 31 report. However, I still see CrowdStrike as one of our stronger performers.

DDOG – After a stellar August earnings, there’s not much to report on Datadog’s September. October’s highlight will be its upcoming Dash 2021 user conference. The opening keynote is scheduled for October 26 with a virtual investor meeting scheduled the next day. Further details can be found here if interested:….

DCBO – A new position this month. Docebo is a Learning Management Systems (LMS) software firm helping corporations train and educate employees, partners, and customers. Traditionally used more for Human Resources functions, LMS is quickly making inroads into other departments as remote and digital interaction becomes a bigger part of today’s business world. Docebo’s products are truly global, supporting 32 languages, right-to-left pagination, and non-Western characters like Arabic and Chinese. Specialized algorithms in DCBO’s platform analyze usage to enhance the learner experience while simplifying content management for administrators. It already has a notable customer list including Amazon Web Services, Thomson Reuters, Hewlett-Packard, and BMW. This quote from CEO Claudio Erba gives a great overview of the general platform along with specific use cases from major customers:

“Unlike a traditional LMS that is specifically designed for use in an HR environment for employees, some skills training and compliance, our customers are using Docebo as a productivity enablement tool across a wide range of use cases, from internal upskilling to sales enablement and, importantly, as a tool to strength relationship with customer and partners through online training. This has been a fundamental differentiator for us that also significantly expands our total addressable market and potential ACV [Annual Contract Value]. The rate of our customer growth and size of our ACV continue to increase as more and more organizations became aware that a platform like Docebo exists.

In the second quarter, we added 152 net new customers, including some great new logos that exemplify the traction we are getting across many industry verticals. One great example is RE/MAX, the leading global real estate franchise. RE/MAX selected Docebo as their learning solution to grow user adoption, address user management needs, and create a custom dashboard for their use cases. With Docebo, RE/MAX will be able to service a rapidly growing user base and create impactful learner experiences.

We are also seeing business pick up in industry verticals that are recovering from the pandemic and adjusting to the new normal, sectors like retail, travel, and manufacturing. In the second quarter, Lululemon, the world’s leading athletic apparel retailer, selected Docebo to provide a comprehensive learning solution to train and engage their employees around the globe.

We also added three new logos in the travel industry, including Red Roof Inn. Red Roof is an award-winning leader in the lodging industry, with more than 650 properties in US, Brazil, and Japan. Red Roof selected Docebo as their learning suite to enhance the internal customer experience. With a simple sign-on process, organization of content, mobile accessibility, automated reporting, and more, Docebo allows Red Roof to allocate more of its resources to the development and delivery of content, versus spending excessive hours managing the platform.

We added JELD-WEN, a leading global manufacturer of high-performance interior and exterior building products. JELD-WEN employs approximately 21,000 people and has manufacturing distribution and showroom locations across the US and 24 countries. They selected Docebo to consolidate their learning system to deliver worldwide learning, instructor-led training, and the combination of course and micro-learning for ongoing professional development."

This new business has produced interesting results. Q2 marked DCBO’s second consecutive quarter of record growth in revenue and ARR [Annual Recurring Revenue]. Though $25.6M in revenue means this is still a very small company, YoY growth has accelerated from 53% to 61% to 76% the last three quarters. Likewise, QoQ growth has been 16.5%, 15.9%, and 17.9%. A one-time accounting bump of $1.1M makes Q2’s true growth 69%, but management’s guide suggests Q3 should push 75%+ YoY and 12%+ QoQ (or closer to 17% QoQ excluding the $1.1M add). ARR shows similar acceleration from 57% to 60% to 64% YoY. The CFO stated there were “no large deals” carrying ARR but rather increasing awareness and acceptance of Docebo’s platform. Subscriptions have generally tracked revenues and now account for roughly 92% of the total. Nearly 78% of new logos and upsell contracts are multiyear deals, suggesting most if not all this recent traction should be sustainable.

This supports management’s contention its recent success is not a temporary COVID bump but a systemic change in the way companies communicate. Said the CFO, “as we look forward, all signs support our confidence and continued momentum over the foreseeable future…[and] I don’t see anything in the near to medium term that would suggest the strong momentum we’ve been seeing in our sales pipeline and reflecting in our ARR performance has materially changed. We have multiple growth levers that are all tracking well, including new logo sales, upsells, and cross-sells, and OEM partnership revenue.”

Digging deeper, Docebo has seen steady growth in both customers and annual contract value (ACV). This quarter saw a record 2,485 clients combine for a record average ACV of $37,569. ACV from new customers was even stronger at ~$46,000, meaning DCBO appears to be landing bigger contracts as it goes. This quarter also marked the launch of Docebo Community, a dedicated forum for users to connect with other customers, partners, and company experts to share skills, use cases and best practices. Management is obviously hoping to create a network effect here ( As a shareholder, I’d hope for the same.

Expenses and losses have both been reasonable for a company (hopefully) this early in its growth curve. More impressively, cash burn has been low and adjusted EBITDA steady.

Operating Cash Flow						% Revenues						% QoQ					
	Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR
2019	 	 	-$1.89	-$3.50	-$4.58		2019	 	 	 	 	-11.1%		2019	 	 	 	84.9%	 
2020	-$2.55	$0.20	$0.46	$7.00	$5.16		2020	-18.8%	1.4%	2.8%	37.3%	8.2%		2020	-27.3%	-107.9%	127.5%	1438.5%	-174.1%
2021	-$2.18	-$0.63	 	 	 		2021	-10.0%	-2.5%	0.0%	 	 		2021	-131.2%	-71.1%	-100.0%	 	 
2022	 	 	 	 	 		2022	 	 	 	 	 		2022	 	 	 	 	 
2023	 	 	 	 	 		2023	 	 	 	 	 		2023	 	 	 	 	 
non-GAAP Free Cash Flow					% Revenues						% QoQ					
	Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR
2019	 	 	-$1.99	-$3.55	-$4.95		2019	 	 	 	 	-11.9%		2019	 	 	 	78.9%	 
2020	-$2.71	-$0.04	-$0.14	$6.59	$3.71		2020	-20.0%	-0.2%	-0.9%	35.2%	5.9%		2020	-23.8%	-98.7%	300.0%	-4810.0%	-149.4%
2021	-$2.35	-$0.83	 	 	 		2021	-10.8%	-3.2%	0.0%	 	 		2021	-135.7%	-64.7%	-100.0%	 	 
2022	 	 	 	 	 		2022	 	 	 	 	 		2022	 	 	 	 	 
2023	 	 	 	 	 		2023	 	 	 	 	 		2023	 	 	 	 	 
Adjusted EBITDA						% Revenues						% QoQ					
	Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR
2019	 	 	-$1.39	-$1.04	-$5.59		2019	0.0%	0.0%	-13.1%	-8.4%	-13.5%		2019	 	 	 	-25.3%	 
2020	-$2.39	-$0.89	$0.58	$0.47	-$2.22		2020	-17.7%	-6.1%	3.6%	2.5%	-3.5%		2020	130.4%	-62.9%	-165.1%	-17.9%	-73.8%
2021	-$2.47	-$2.01	 	 	 		2021	-11.4%	-7.8%	0.0%	 	 		2021	-621.7%	-18.7%	-100.0%	 	 
2022	 	 	 	 	 		2022	 	 	 	 	 		2022	 	 	 	 	 
2023	 	 	 	 	 		2023	 	 	 	 	 		2023	 	 	 	 	 

One thing I’ll be watching going forward is the relatively low 108% Net Retention Rate reported at the end of last year. Management’s comments hint it is rising, but that still makes this more of a “land” business than “land & expand” so far. Luckily, there appears to be plenty of market to sell into. Management did mention expanded offerings in its pipeline but still needs to prove it can turn them into actual upsells.

Docebo also has a couple developments beyond the numbers which pique my interest. First, management has made considerable progress on expanding its partner channel. It added four more from May to August and now has more partnerships outside the Human Resources space than in. Erba believes this demonstrates the breadth of the platform and notes DCBO has seen an uptick in the tailored solutions it is creating as a result.

Next, I’m intrigued by the recent addition of Rudy Valdez as Chief Operating Officer. In 3Q20, Docebo signed an agreement with Amazon Web Services (AWS) “to power its training and certification products across the globe.” According to Valdez’s bio, he joins Docebo after “16 years at Amazon AWS, where he helped to establish and build the sales and business development function at AWS, working closely with their largest cloud customer through their transformational growth years. More recently, he led the development of the AWS training and certification programs, helping to educate millions of customers and partners in the AWS ecosystem on cloud technologies and approaches.”

Coincidence? I doubt it. Maybe I’m overreaching, but this implies someone who almost certainly played a role in implementing Docebo for AWS ultimately found the platform impressive enough to leave Amazon for Docebo. While I have no idea if Valdez will be a good COO or not, we certainly can’t say he lacks experience designing and implementing learning programs at scale which just happens to be the pain point Docebo is designed to solve. In that respect, I could see this hire as a major positive.

With Valdez coming on board, Martino Bagini will move to Chief Corporate Development Officer. In this new role Bagini will focus more on mergers and acquisitions as a potential area for growth. Though I generally prefer organic growth, I’m not adverse to acquiring tech, geographies, or verticals which can quickly be accretive. For instance, companies like Twilio and Lightspeed have executed this strategy incredibly well. Of course, Docebo would have to prove it can do the same if it does indeed head down that path. I’ll be watching either way.

In total this appears to be a small, fast-growing company at an inflection point. I view an investment here as a bet that basic work for many enterprises will permanently become more connected and software driven. In many ways this is the same dynamic we are starting to see play out for collaboration software with firms like Asana,, and Smartsheet. If nothing else, Docebo’s recent performance suggests it is seeing traction through the early adopter stage. The question is whether this is a temporary surge or sustainable trend. I’m intrigued enough to grab a small position and follow along for a while. I’m guessing we’ll know for sure in a quarter or two.

DOCU – DocuSign was the first of two holdings to report this month. In breaking down the quarter, I thought it appropriate to use the same layout that previously earned DOCU a double-digit allocation (oldest to newest quarter):

• Revenue Growth: 39%, 45%, 54%, 57%, 58%, 50% (Q3 guide 39%; I’d expect 45% give or take)
• Subscription Revenue: 39%, 47%, 54%, 59%, 61%, 52%
• Billings: 59% 61%, 64%, 46%, 54%, 47% (36% guide and just +0.3% sequentially; I’d expect better but still… :nauseated_face:)
• International Revenue: 46%, 59%, 77%, 83%, 84%, 71%
• Contract Liabilities – Current: 43%, 55%, 62%, 54%, 50%, 47%
• Total Customer Growth: 31%, 40%, 46%, 51%, 50%, 40%
• Total Customers Added: 72K, 88K, 73K, 70K, 106K, 65K
• Enterprise Customer Growth: 48%, 55%, 64%, 67%, 53%, 50%
• Enterprise Customers Added: 14K, 10K, 14K, 12K, 11K, 12K
• Net Retention Rate (NRR): 119%, 120%, 122%, 123%, 125%, 124%
• Gross Profit: 37%, 45%, 54%, 60%, 64%, 57%
• Subscription Gross Profit: 36%, 44%, 53%, 61%, 64%, 57%
• Operating Margin: 8%, 10%, 13%, 17%, 20%, 19%
• Net Margin: 8%, 10%, 12%, 18%, 20%, 19%

Hmm. Despite some flashes of relative strength, the bulk of these sequences look like a larger company starting to stall. Particularly disappointing is the decrease in total customer adds, the drop in international growth, and the uninspiring billings guide. Frankly, most of these trends look like a law of large numbers decline writ large. That might sound harsh, but this is simply not the quarter I was looking for. Q1’s acceleration in international growth and NRR hinted DOCU juuuuust might be able to squeeze a bit more 50%+ growth out of e-signatures while awaiting its other products. This quarter’s regression strikes me as a near certain signal DocuSign settles in at more 40-45% going forward. While that’s nothing to sneeze at, it does make DOCU less attractive in my eyes.

I’d been waffling for a while on whether DocuSign and its management team were sneaky good or just ultracompetent. The Q1 surprise had me giving sneaky good the edge, but I believe Q2 hands ultracompetent a stark and decisive win. Don’t get me wrong. I still see DOCU as a market-beating investment with a sturdy runway. However, the deeper I dig the more it looks like a maturing, cash cow type business. While that’s a great holding for many portfolios, it not what I want leading the charge for ours. Consequently, I’ve reduced it to something more appropriate for a back-half stabilizer. It also puts DOCU on the short list as a place to go for further cash and/or to make room for another option.

Sorry, kid. Them’s the breaks (…).

GLBE – Full disclosure, I owned Global-E online Ltd for about 48 hours mid-September. GLBE is a 90% grower facilitating cross-border e-commerce transactions for larger merchants. Its revenues are split between Service Fees from transactions run through its platform and Fulfillment Revenue from shipping and handling done on behalf of merchants. Despite the impressive topline growth, the combination of two lower margin businesses has historically kept gross margins in the 30% range. To Global-E’s credit, that number crept to a record 36% last quarter with management expecting it to keep rising as the business scales.

One of the big selling points in my initial research was an exclusive deal with Shopify which should keep GLBE growing at a strong clip in 2022. Almost immediately after my purchase, a tweet from Shopify itself trumpeted the following (

“it’s international love baby
it’s Shopify Markets baby

cross-border selling just got a major glow up

merchants everywhere can now manage one global store to create localized storefronts in different countries.”

As a brand new Global-E shareholder, I thought that was excellent news. So did Twitter user Rick Watson, who commented, “This sure looks like the results of the global-E partnership. Can someone confirm?” (

That lead to a clarification from Rohit Mishra, a product lead from Shopify (

”Shopify Markets is separate from our partnership with Global-e, which is a great solution for a subset of merchants looking for high-touch service to meet more complex cross-border needs. Shopify Markets will work for brands of all sizes looking to act on their global aspirations”

I must admit that was kind of a buzzkill. So, is this Shopify partnership a big deal or not? ZoroSGInvesting here at Saul’s (also @Zoro on Twitter: was kind enough to email IR directly on the issue and got the following response (…:slight_smile:

”We are aware of the ‘Shopify Markets’ solution and the offering is consistent with our original understanding with Shopify that they will continue to develop their native solution targeting the wide base of small merchants. ‘Shopify Markets’ is a repackaging of Shopify’s current native solution tools (Payments, currencies) with a new add-on of a tax estimation calculator. The target audience for this solution is the small merchants of Shopify, for which the self-service limited solution may serve well, not the larger more sophisticated merchants that our solution targets. Few examples for the difference:

- Taxes are based on estimations only, no guarantee for merchants for differences based on classification or rate difference
- No hedging of currencies for returns
- No local registration on behalf of merchant for tax in markets that require it
- No returns solution
- No tailored guidance to merchant for optimized best practice (it is based of a generic setup)
- Limited local payments
- Etc

This solution is geared towards the very wide base of small merchants that either don’t trade cross-border currently or trade at very low level.

Global-e is the exclusive 3rd party end-to-end cross border solution on the Shopify platform, including tailored to merchant services and optimization, risk mitigation (hedge and taxes) and fulfillment. Our solution, as we and Shopify view it, is geared towards the larger more sophisticated Shopify merchants [15-20K] which represent a large share of the cross-border e-com potential.

Since this structure was pre-agreed and the solutions target different audiences, we do not expect any significant impact the partnership.”

While this may not impact the partnership from GLBE’s perspective, it certainly impacted the way I viewed the investment. “Exclusive with Shopify” sounds a heck of a lot sexier than “exclusive with a specific subset of merchants at Shopify that decide not to use Shopify’s in-house offering.” Can Shopify’s bigger international clients move Global-E’s needle? Absolutely given GLBE’s small size. However, GLBE’s services are already a bit niche. Now that niche appears smaller than I originally thought. Given the capital requirements of Global-E’s shipping component and its lower gross margin profile, I decided there were better immediate spots for our money. And since any Shopify contribution isn’t expected to fully kick in until the back half of FY22 anyway, I feel I have time to better understand the business dynamic and potential upside here. I’d rather get in at a higher price with more conviction than jump in now simply hoping it works out. That puts GLBE on the watch list, but I did enough work on it to want to leave myself full notes here.

LSPD – Lightspeed was having a pretty peaceful month until all heck broke loose September 29. That day a firm named Spruce Point Capital come out with a short report causing a 12%+ drop in the stock. I read somewhere the report was 125 pages, but I caught the CliffsNotes here instead:…. I also took a look at Spruce Point’s smoking-gun letter to management:….

I’m obviously biased but didn’t find these arguments very compelling. Most of the complaints seem to be nitpicking over some point-in-time figures from 2019 and 2018 with no real reason why Lightspeed will be a poor investment going forward other than…wait for it…IT’S TOO DARNED EXPENSIVE! Well, since LSPD had run from $90 to $130 in a heated market on no real news, I can’t say I disagree. However, I’m more concerned with the business than the stock, and that seems to be doing just fine (last quarter’s write up here:…).

Everyone should do their own due diligence, of course, but I have a hard time seeing these snippets referencing 2019, 2018, and even 2014 as very relevant today. With its recent acquisitions Lightspeed is a drastically different company than any of those time frames. I mean, one of Spruce Point’s arguments is “hardware sales, formerly a profit center where Lightspeed received upfront payments from customers for long-term software contracts, is now a cost center for Lightspeed while competition gives hardware away for free.” Well, duh. LSPD has expanded its ecosystem so far beyond point-of-sales hardware it just formally changed its corporate name from Lightspeed POS to Lightspeed Commerce. Given the additional revenue streams, hardware is no longer a profit driver but a lower-margin gateway to Lightspeed’s other solutions (which is basically the same playbook run by every other company in the space). This frankly seems like sloppy work by Spruce Point, but it didn’t need to be entirely accurate. It only needed to sound smart enough to move its short position in the right direction, which it certainly did. Good on them, I guess.

In the end it seems a major stretch to conclude everything Lightspeed has accomplished recently is a mirage. But who knows? Maybe Spruce Point is right. After all, I myself wrote when buying LSPD in May I found its past comments and materials somewhat scattered (…). The difference is management has tightened its messaging considerably in recent months, including this short-and-to-the-point response to Spruce Point’s report (…). In it, management stands strongly behind its numbers and encourages investors “to consult credible sources” like its audited regulatory filings rather than a report from a firm “which itself has disclosed that it stands to profit in the event that the stock price of Lightspeed declines.” The release concludes with, “The Company will not be providing further comment on the report at this time as it maintains its focus on building its business and delivering exceptional products and services for customers.” That’s good enough for me. In fact, at this point I’d bet good money LSPD sees new highs before it sees Spruce Point’s potential 60%-80% drop.

Oh, wait…my current allocation says I already have. Wish me luck. :smirk:

MNDY – Joining Docebo as a new position this month is A collaborative software firm which IPO’d in June, MNDY’s platform revolves around no-code/low-code modular building blocks rather than pre-packaged software limited to specific tasks. In theory, this makes customizable to more use cases than most competitors. It can easily be expanded beyond a project management tool to include adjacent functions like inventory and back-office reporting. Management calls it a “Work OS” letting users create apps and work management tools as needed. Its platform is currently available across 200 industries in 190 countries and 14 languages.

MNDY’s most recent quarter shows interest is very strong. Revenue came in at $70.6M for 94% YoY growth, an acceleration from 85% last quarter. Sequential growth jumped to 19.7% from 17.6% in Q1 and 14.2% last year. GAAP gross profit grew 95% for a record 87.1% gross margin. Non-GAAP figures were even better at 97% and 89.7%. A reasonable beat of next quarter’s $75M guide (+76%) would have MNDY again challenging 90% growth with similar supporting metrics. That’s impressive.

On the customer side, MNDY reported 113,888 total clients at the end of 2020 and 127,294 as of April 30 in its last filing prior to IPO. Management says this number will be updated annually going forward. It will, however, release quarterly figures for customers spending >$50K, and growth here has been excellent. Q2 saw a record 135 new customers enter this category, bringing the total to 470 and 226% YoY growth. 96% of customers currently use 2 or more modules with 63% using 3+. Net retention for all customers was 111% and 125% for customers with 10+ users. Management also notes revenue growth for customers with 10+ users has outpaced the rest of the business in each of its previous fiscal years, which bodes well for growth into larger enterprises.

Having owned competitor Smartsheet in the past, I’ve always wondered about the ability of these firms to create positive cash flows and operational leverage. To this point, collaboration software has seemed more of a neat add-on than a mission critical offering with true pricing power. is the best example I can find as far as creating leverage this early in its progress. Here are the non-GAAP figures I have so far (the 3Q21 and FY21 figures are current guides which I’d expect to be beaten):

non-GAAP Operating Income					% Revenues				
	Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR
2018	 	 	 	 	 		2018	 	 	 	 	 
2019	 	 	 	 	-$70.68		2019	 	 	 	 	-90.5%
2020	-$16.78	-$14.89	 	 	-$86.19		2020	-52.5%	-40.8%	 	 	-53.5%
2021	-$23.31	-$9.91	-$25.00	 	-$91.00		2021	-39.5%	-14.0%	-30.5%	 	-32.3%
2022	 	 	 	 	 		2022	 	 	 	 	 
non-GAAP Net Income						% Revenues				
	Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR
2018	 	 	 	 	 		2018	 	 	 	 	 
2019	 	 	 	 	 		2019	 	 	 	 	0.0%
2020	-$16.64	-$15.10	 	 	 		2020	-52.1%	-41.4%	 	 	0.0%
2021	-$24.42	-$11.33	 	 	 		2021	-41.4%	-16.0%	 	 	 
2022	 	 	 	 	 		2022	 	 	 	 	 

Early cash flows are also trending strongly in the right direction:

Operating Cash Flow						% Revenues				
	Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR
2018	 	 	 	 	 		2018	 	 	 	 	 
2019	 	 	 	 	-$36.65		2019	 	 	 	 	-46.9%
2020	-$5.13	-$13.85	 	 	-$37.18		2020	-16.1%	-38.0%	 	 	-23.1%
2021	-$0.60	-$0.36	 	 	 		2021	-1.0%	-0.5%	 	 	 
2022	 	 	 	 	 		2022	 	 	 	 	 
Adjusted Free Cash Flow					% Revenues				
	Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR
2018	 	 	 	 	 		2018	 	 	 	 	 
2019	 	 	 	 	-$38.42		2019	 	 	 	 	-49.2%
2020	-$5.96	-$15.03	 	 	-$40.69		2020	-18.7%	-41.2%	 	 	-25.3%
2021	-$1.60	-$1.48	 	 	 		2021	-2.7%	-2.1%	 	 	 
2022	 	 	 	 	 		2022	 	 	 	 	 

These numbers are definitely stronger than most of MNDY’s competitors at the same stage. We’ll see if it can keep bucking that trend in Q3.

Another thing to note is while most software firms offer a complimentary tier to hopefully produce paid upgrades, has reached this point without a free offering. Its free tier just launched in Q2 and is limited to two seats only. Anything beyond that requires a paid plan. How the heck any software firm gets to a $250M+ run rate without an easily accessible free tier is beyond me, but MNDY deserves full credit for making it happen. Bully for shareholders if the new free offering helps keep the growth train going.

As with Docebo (see above), an investment in is a bet the world is permanently moving to more remote and digital work. Management estimates its total addressable market as $56B at the end of 2020 and $88B in 2024, which means there is plenty of room for continued growth. Co-CEO Roy Mann (one glitch here is I can’t say I’m crazy about a co-CEO structure) says, “If the last 10 years were defined by the SaaS cloud, then the next 10 years will be focused on giving people the power to create software that treats their own needs. We believe that we are best positioned to be the leaders in this change.“ I’ve decided MNDY’s success thus far merits a starter spot to see if they can actually pull it off.

NET – Cloudflare’s September was dominated by the two most recent installments of its ongoing Weeks series: Speed Week ( and Birthday Week (…). The initial Speed Week announcement on Monday, September 13 was a 25% increase in the size of Cloudflare’s network (…). That means NET now has a direct presence in 250+ cities in over 100 countries. It also interconnects with 9,800+ networks around the globe. With Cloudflare being all about creating a faster, more reliable internet, this expansion is a clear step in that direction.

Tuesday brought speed enhancements for logging (, website loading times (, routing (, and tiered caching ( Don’t ask me to explain all the technical mumbo jumbo. That’s way outside my lane. I’m only conversant enough to know small gains in each of these areas will almost certainly create a better, faster experience when surfing the web.

Wednesday saw upgrades in web analytics to detect where slowdowns occur ( and tools for optimizing images on the internet (

On Thursday Cloudflare issued a press release declaring it the first company “to implement server support at scale for Early Hints” (…). Early Hints is “a new internet standard that can help speed up websites on its network by 30% or more for free.” This upgrade should be especially appealing to online businesses using Cloudflare’s network since data shows a faster customer experience generally leads to a measurable increase in sales.

Friday was the release of Project Turpentine, an upgrade converting sites built on a 15-year-old language named Varnish into a format compatible with Cloudflare’s state-of-the-art Workers platform ( Besides being a rather creative name – turpentine/varnish, get it? – this seems like a slick move to bring more users into NET’s ecosystem. For those more technically inclined, you can find the details on how it all works at the link.

Birthday Week kicked off with the Annual Founders’ Letter linked at the top of this section. That was followed by a Monday, September 27 press release announcing Cloudflare was entering email security (…). The new features allow users “to create custom email addresses, manage incoming email routing, and prevent email spoofing and phishing on outgoing emails—all for free.” According to CEO Matthew Prince, customers have asked Cloudflare to address email security for years. These enhancements are the company’s initial attempt at a comprehensive answer.

Tuesday was the release of a major storage upgrade (…). This upgrade allows developers to store a larger number of items like photos, videos, and graphics directly on Cloudflare’s network rather than their own servers. Housing these items one step closer to end users will greatly increase reliability and speed. As an enticement for developers to take advantage of this service, Cloudflare is bypassing the other major cloud providers and offering a significant cut in egress bandwidth fees. I guess NET could see a bump in storage revenue from increased volume, but the main thrust here looks like another way for the company to increase the usage and stickiness of its edge platform.

Wednesday saw an extension of Cloudflare’s network to prominent office buildings around the world allowing customers even easier access (… and Cloudflare will now be directly available in “iconic properties like Salesforce Tower in San Francisco, Willis Tower Chicago, John Hancock Tower in Boston, and 30 Hudson Yards, 4 Times Square & 520 Madison in New York, as well as the planned further expansion into thousands of other office buildings and multi-dwelling units globally. This dramatic expansion will allow businesses to easily connect to Cloudflare’s network from offices and co-working spaces instead of relying on costly, rigid hardware solutions.” I have no idea of the logistics here – they would seem pretty complicated – but NET clearly thinks it’s worth it. And man, talk about taking your product directly to customers.

On Thursday, NET announced an improvement in its speed and efficiency for delivering digital communication (…). The onset of COVID led to an exponential increase in online communication. It is now apparent much of that increase is here to stay. That puts pressure on content providers to provide as seamless an experience as possible for end users. This upgrade allows Cloudflare customers to house more content in its data centers and therefore closer to users. That will in turn lessen time lags and create a more real-time feel to digital audio and video presentations. It’s easy to see how this could be a big deal to companies relying on digital communication as a significant part of operations.

With Thursday being the end of the month, you’ll have to check out Friday’s update yourself. The easiest place to find it is here:

Squeezed between these Weeks, Cloudflare announced an expanded partnership with Microsoft (…). The company is now a member of the Microsoft Intelligent Security Association, “an ecosystem of independent software vendors and managed security service providers that have integrated with Microsoft Security to better defend against a world of increasing cybersecurity threats. The collaboration makes it even easier for customers to enable integrations supporting security and performance needs.” With almost every digital company needing to head in this direction, it’s nice to see NET taking an active role in where things go.

As usual, Cloudflare continues to innovate at a blistering pace. Also as usual, most of its moves look like free carrots dangled now in hopes of increasing stickiness, usage and monetization down the road. As I noted last month, what could be for Cloudflare is extremely large (…). Because of that, I added back a few of the shares I sold post-earnings on the recent dip below $115. However, what actually is for Cloudflare isn’t quite as attractive of some of our other holdings, so it will remain a smaller allocation for now.

[As an aside, did you know Cloudflare uses lava lamps to help encrypt the internet?!?!? Trippy, man. ( ]

ROKU – Roku gave us several updates this month. First was the launch of Roku players in Germany (…). This marks another international market in which Roku is looking to gain a foothold.

Next were upgrades to Roku’s streaming stick (…) and overall operating system (…). During last month’s earnings call, management noted increased supply chain costs which pressured player margins. I’m glad to see these issues didn’t seem to affect the release of its latest streaming hardware.

Finally – and maybe most significantly – Roku announced a partnership with Shopify to design an app for small and medium-sized businesses “to easily build, buy, and measure TV streaming advertising campaigns” (…). According to the release:

”Roku’s application, which is slated to launch in advance of the holiday season, will enable Shopify merchants of any size to easily create TV advertising campaigns using precise audiences and measurement throughout their marketing funnel. This is a significant advancement from traditional linear and cable TV advertising solutions, which offer limited targeting and measurement options.”

This deal is yet another example of Roku leveraging its first-party data. With 55M+ active accounts, Roku can provide advertisers a large, immediate audience at scale. Shopify is just the latest partner looking to access this viewership. With the stated intention of launching this program by the holidays, the benefits to Roku could come quickly here.

Despite these positives, I must admit to questioning my assessment of Roku’s last quarter. While it met every expectation I had for the ad business (which is the part of the business I believe matters most), I wonder if I was too lenient on the dip in customer growth, viewing hours, and player margin even though management’s explanations make perfect sense. The market is certainly saying I’ve been wrong so far. Am I taking on too much opportunity cost waiting for next quarter’s report? Maybe. I only know recent nervousness about competition from Google, Apple, and Amazon is mostly a rehash of old news (not to mention a validation of the move to streaming). I also know recent Summer Olympics viewing could create a pleasant Q3 surprise. Lastly, I’ve owned Roku long enough to know it can be crazy-volatile. Yeah, I might be deluding myself, but the swing from $280 in May to $480 in July to $313 now isn’t all that different from some of Roku’s past moves. That’s one of the risks in owning a visible stock tied so strongly to consumer sentiment.

Regardless, I’m trying not to get too caught up in the stock. I’d prefer Roku’s business determine whether it keeps its place in our portfolio. In that respect, Q3 appears to be setting up as a binary outcome. Roku either proves the summer viewing lull was a one-time blip so the market can breathe a sigh of relief, or it likely exits our portfolio and goes back to the watch list. Even if I still believe in the eventual shift to streaming (which I do), there’s no room for wait-it-out dead money given our other options.

UPST – September was yet another month of steady progress for Upstart. First, it formally released the Spanish version of its service (…). The Spanish-speaking community is a hugely underserved portion of the US loan market, and Upstart has spent considerable time making sure this offering complies with the applicable rules and regulations. If UPST can produce even a portion of its success with English-speaking borrowers, this product could be a huge winner.

Upstart followed up with two more partnerships. The first is Water and Power Community Credit Union [WPCCU] joining its referral network (…). WPCCU has over 38,000 members and five branches in Los Angeles County. More importantly, this is likely another win influenced by Upstart’s recent alliance with the National Association of Federal Credit Unions. Hopefully, there’s plenty more where that came from.

Next was a partnership with WSFS Bank, the primary subsidiary of WSFS Financial Corporation (…). WSFS Financial is a Nasdaq-listed bank (ticker: WSFS) with 112 offices along with “$15.1B in assets on its balance sheet and $26.7B in assets under management and administration” as of June 30, 2021. That type of large partner is exactly what shareholders are looking for. Every win with a bank this size not only increases loan volume but serves as yet another feather in Upstart’s street-cred cap.

Though I try to focus on the businesses in these recaps, it’s hard to mention Upstart without a reference to the stock. After rising 89.7% in August, it jumped another 38.1% in September. That’s a tidy 162% gain since August 1. That now has UPST sitting at 26.9% of our portfolio even after a small trim when it first cleared 25%. Ultimately, I can’t fault Upstart for forcing its way to such a large allocation. With its numbers and narrative both firmly intact, it deserves to keep its runaway #1 position.

ZS – Zscaler’s September 9 report was our last this earnings season. I’m glad to say it was another solid quarter with “growth across all verticals, customer segments, and geographies.” Revenue came in at $197M for 57% YoY and 12% QoQ growth. That marked ZS’s third consecutive 55%+ quarter and fifth straight with double-digit sequential growth. Based on management’s guide, I’d anticipate that streak continuing for both metrics next quarter.

That expectation is bolstered by a record $332M in billings this quarter (+71% YoY). Remaining performance obligation was even better at $1.55B for a 98% annual increase and record 28% QoQ. Existing customers are spending more as well with net retention ticking up to 128% from 126% last quarter and 120% a year ago. CEO Jay Chaudry said he was “very excited to see our ARR [Annual Recurring Revenue] approaching $1 billion and pleased to note that our new annualized bookings and new logo acquisition accelerated throughout the year.” Those new logos are joined by a record 1480 customers now spending >$100K annually. Chaudry also cited a record number of seven-figure deals this quarter leading to an all-time high 202 customers now spending $1M+ in ARR. Growth in both these cohorts has accelerated nicely the last three quarters:

Customers ARR >$100K					% YoY							% QoQ				
	Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR
2017	 	 	 	 	 		2017	 	 	 	 	 		2017	 	 	 	 	 
2018	 	 	 	 	 		2018	 	 	 	 	 		2018	 	 	 	 	 
2019	 	 	 	 	 		2019	 	 	 	 	 		2019	 	 	 	 	 
2020	763	810	871	973	 		2020	 	 	 	 	 		2020	 	6.2%	7.5%	11.7%	 
2021	1,057	1,182	1,314	1,480	 		2021	38.5%	45.9%	50.9%	52.1%	 		2021	8.6%	11.8%	11.2%	12.6%	 
2022	 	 	 	 	 		2022	-100.0%	-100.0%	-100.0%	-100.0%	 		2022	-100.0%	 	 	 	 
Customers ARR >$1M					% YoY							% QoQ				
	Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR
2017	 	 	 	 	 		2017	 	 	 	 	 		2017	 	 	 	 	 
2018	 	 	 	 	 		2018	 	 	 	 	 		2018	 	 	 	 	 
2019	 	 	 	 	 		2019	 	 	 	 	 		2019	 	 	 	 	 
2020	72	80	91	108	 		2020	 	 	 	 	 		2020	 	11.1%	13.8%	18.7%	 
2021	120	136	163	202	 		2021	66.7%	70.0%	79.1%	87.0%	 		2021	11.1%	13.3%	19.9%	23.9%	 
2022	 	 	 	 	 		2022	-100.0%	-100.0%	-100.0%	-100.0%	 		2022	-100.0%	 	 	 	 

Continuing the large customer theme, Chaudhry is very enthusiastic about ZScaler’s potential for US federal government business:

“Finally, we continue to invest to capture our large Federal opportunity. With a sizable Fed sales team and the highest FedRAMP certifications, we count well over 100 government agencies and federal integrators as customers. In Q4 alone, we added over 20 new Federal customers, including 4 with over $1 million in annual contract value, each purchasing ZIA and ZPA together. Driven by the President’s recent Executive Order, we are seeing increased interest in our Zero Trust Exchange across all levels of the government. We are among a select group of companies chosen by NIST, a national standards body, to run a pilot program in support of the Executive Order. We are excited about this opportunity to help our country dramatically improve our security posture while significantly reducing legacy IT costs.” [bolding mine on both sentences]

Through the program referenced in the second bolded comment, ZScaler will serve as “a key partner for the new Zero Trust Architecture Project by the National Institute of Standards and Technology (NIST)’s National Cybersecurity Center of Excellence (NCCoE).” In this role Zscaler “will work alongside the NCCoE and other top Federal IT vendors on innovative approaches for implementing zero trust architecture.” As with any initiative along these lines, it is always preferable to have a seat at the table rather than being at the mercy of decisions passed down by others. Not to mention the fact ZScaler’s role in this program should be an excellent selling point when approaching future federal customers. Kudos to Chaudhry and Gang for earning this distinction.

Personally, I view the above as a big part of ZScaler’s ongoing thesis. While every company even remotely touching cybersecurity is touting this Executive Order as a path to future business, ZS appears better positioned than most. First, it already possesses certification for selling to departments with higher security requirements. Next, its products are geared toward replacing entire legacy systems at once, which is likely what many agencies will need to do. Lastly, I believe ZScaler’s top-down sales motion could be an advantage here. Its sales team is used to convincing C-suite honchos to buy its product. It is also adept at navigating the longer sales cycle and approval process for many top-down deals. That’s quite different from the developer-driven, bottom-up sales motion some other firms are accustomed to. If there’s one sector I can almost guarantee is driven top-down with a long approval process, it’s the US government. Of all the companies I own which might benefit from this federal overhaul, ZS might very well be the one who sees the biggest gains.

Since a 2020 stumble from self-inflicted sales issues, ZScaler has strongly reestablished itself as an efficient, profitable 50%+ grower. Even better for shareholders, its current guide, accelerating pipeline, and potential government business suggest it could hold that profile for some time to come. While it’s business may never be as dynamic as some others, it’s hard not to appreciate the rock-solid performances ZS keeps churning out. This quarter was no exception, and that’s plenty good enough for ZScaler to stick around.

My current watch list in rough order is GLBE (see above), ZoomInfo (ZI), Snowflake (SNOW) and Asana (ASAN).

And there you have it. Let’s call a spade a spade. For the second consecutive month Upstart almost single-handedly drove our returns. We once again hit several new all-time highs with a peak of 53.1% YTD on September 23 before settling in at 41.2% after this week’s semi-washout. That means our entire portfolio has gained just over a double from the depths of the May lows just over four months ago.

Was this week’s pullback a minor blip or the start of something bigger? I have no idea, though I know a major drop is inevitable at some point. Am I worried about it? Not really. One of the things I’ve learned is if you’re on the right track, you’ll not only see higher highs at each peak but higher lows in each valley. Lucky for us, a double in four months leaves a lot of wiggle room on the way down. For example, if September’s late fade is actually the start of our next 30% pullback – just to pick a scary number – it’s comforting to know our next low would still be 40% higher than the last one. Here’s the quick-and-easy math:

• Starting at $100 for the last low…
• a 100% return from May to September bumps it to $200…
• minus a 30% drop leaves $140…
• which would make the hypothetical next low 40% higher than our last one.

And that 40% spread will only get bigger if this week is simply a temporary dip on the way to higher highs before the next correction. Unfortunately, in the thick of those corrections we often forget the market has a perfect track record of eventually resuming its up-and-to-the-right trek over time. We individuals are simply chasing a similar shape for our portfolios. The hope, of course, is creating the steeper upward slope of market-beating returns. Easier said than done, but it helps to remember the market’s history and math are both strongly on our side.

I once again end the month with more cash than I’m accustomed to but also find myself in a strange sort of limbo. I own as much as I want of current holdings, lack watch listers I feel immediately compelled to own, and find myself totally uninterested in managing more than ten positions. So, the excess isn’t part of any intentional cash strategy. It’s mostly the result of wanting less DOCU and CRWD while not having an immediate place for the money. I’d rather not force things, so I’ll just keep working through it. Oh well, good problem to have.

Thanks for reading, and I hope everyone has a great October.


A quick DCBO update after a note from Zoro. In estimating next Q, I referenced a management guide. That’s incorrect. They didn’t issue one. The numbers I’d anticipate are based on DCBO’s recent trends and the CFO’s comments about acceleration continuing. Unfortunately, I can’t edit the original post. Below is how the numbers paragraph should read. Thanks to Zoro for catching the mistake.

"This new business has produced interesting results. Q2 marked DCBO’s second consecutive quarter of record growth in revenue and ARR [Annual Recurring Revenue]. While $25.6M in revenue means this is still a very small company, YoY growth has accelerated from 53% to 61% to 76% the last three quarters (though a one-time accounting bump of $1.1M makes Q2’s true growth 69%). Likewise, QoQ growth has been 16.5%, 15.9%, and 17.9%. Management did not issue a Q3 guide, but based on DCBO’s recent trends I’d anticipate something around 75%+ YoY and 12%+ QoQ (or closer to 17% QoQ excluding the $1.1M add). ARR shows similar acceleration from 57% to 60% to 64% YoY. The CFO stated there were “no large deals” carrying ARR but rather increasing awareness and acceptance of Docebo’s platform. Subscriptions have generally tracked revenues and now account for roughly 92% of the total. Nearly 78% of new logos and upsell contracts are multiyear deals, suggesting most if not all this recent traction should be sustainable.

This supports management’s contention its recent success is not a temporary COVID bump but a systemic change in the way companies communicate. Said the CFO:

…as we look forward, all signs support our confidence and continued momentum over the foreseeable future…[and] I don’t see anything in the near to medium term that would suggest the strong momentum we’ve been seeing in our sales pipeline and reflecting in our ARR performance has materially changed. We have multiple growth levers that are all tracking well, including new logo sales, upsells, and cross-sells, and OEM partnership revenue."