I starting to look at TEAM because of their absolutely dominate market position. Initially I was put off by their relatively “pedestrian” grown(i say that a little tongue in cheek) of 36-39% in combination with a relatively robust EV/S of 20. Then I noticed TEAM puts out HUGE amounts of free cash flow.
Rev FCF FCF margin Rev Growth + FCF margin 2018 Q3 223 86 38% 78% 2018 Q4 243.8 64 26% 66% 2019 Q1 267.6 74.2 27% 64% 2019 Q2 299 122 40% 80%
Rev Growth + FCF margin is a rough way to compare a company that is growing really quickly. Think MDB, AYX, OKTA but may not have as much free cash flow generation…i.e they are burning money for that revenue growth. NTNX was talking about how rare it is for a company to hit the rule of 40…well for TEAM you might was well call it the rule of 60!
For example from their latest quarters
Rev Growth + FCF margin
AYX 68% 58% revenue growth and 10% FCF margin
OKTA 59% 58% revenue growth and 1% FCF margin
MDB 42% , 57% revenue growth and negative 15% FCF margin
Not only that but team has been a good steward of their shareholders.
Weighted shares outstanding have grown on average a little over 3% year over year. (note, was easiest to find weighted shares outstanding. Ok to use in this case as the share count isn’t changing dramatically within a quarter)
Share count starting at q3 2018 and going to q2 2019
Share count YOY% change 232221 3.9% 234206 3.7% 236219 3.5% 237740 3.2%
Anyway, I was pretty darn impressed by their cash generation, their market position, revenue growth, and acquisitions along the way. Worth a good look.