earnings boildowns - Feb/Mar-19
People seemed to appreciate this last Q, so maybe I’ll regularly write up my combined earnings notes after the quarterly deluge. One downside - this time you’re going to have read MY INTERTWINED THOUGHTS as well. It’s a touch long. It probably seems like a lot of work but hell, I already did it all for my own benefit (the note taking to keep track, and the write up of my own thoughts as a diary). I recommend searching as needed. today’s topics: MDB, OKTA, ZS, NTNX, ESTC, TTD, SHOP, AYX, TWLO, ROKU
My overall current feelings of “Saul stocks”, in a nutshell:
Top tier: TWLO, TTD, AYX, ZS, MDB.
Second tier: OKTA, SQ, ESTC, SHOP (selling).
Third tier: VEEV (selling) and NTNX (was Top Tier, now sold).
Exploring: ROKU and SMAR.
NOTE on my NOTES below: ^^ is “accelerating”, and !!! is an especially important/impressive bit IMHO.
TWLO = rev +77% ^^, custs +31%, NER 148% ^^
TTD = rev +56% ^^, mobile video +130%, CTV +525%, CTV spend 9x
ZS = rev +65% ^^, NRR 118%
MDB = rev +71% ^^, custs +130%, Atlas rev +400%, NER 120%
AYX = rev +57%, NRR 132%, custs +38%
OKTA = rev +50%, custs +40%, NER 120%
SQ = rev +52%, adj rev +64%, GPV +29%, Cash app MAUs +114%
ESTC = rev +70%, sub custs +14% seq, NER 130%
SHOP = rev +54%, sub rev +42%, merchants +35%, Plus +45%
NTNX = rev +48%, subs +112%, custs +7% seq
ROKU = rev +46%, platform rev +77% ^^, active accts +40%, streaming hrs +69%, ARPU +30%
Revenue 85.5M +71% ^^
Sub rev +73% ^^
Svcs rev +37%
Gross Margin 70% -500bps
Adj loss -9.7M vs -14.5M
Atlas 32% of total +400% !!!
Custs 13.4k +130% !!!
Custs >1M +77% !!!
Custs >100K 557 +57%
Atlas rev +400%, 32% of rev (vs 10%, 21% last Q!!!)
Atlas custs 11.4k (4200 from mLab)
- 60M+ total downloads, w/ 20M in last 12mo ^^
- 1.2M devs reg’d for MDB University
Me: Cutting thru the FUD around Amazon competition https://discussion.fool.com/cutting-through-the-fud-on-mdb-34145…
I disagreed w/ all the running for the exits, and I hope I convinced folks to stay the course on this one, because it shot up +25% on earnings and is +73% YTD.
Quick Sidebar: Amazon rightfully scares folks when it enters new industries, and beware when they enter your market on the Retail or Operations (warehouses and shipping) sides! However, in AWS they’ve been already competing against managed cloud-neutral services (aka trying to steal the customers of its customers!). Luckily for us, it’s been pretty moot, as Elastic and MongoDB have thrived FOR YEARS NOW even as AWS has put out competing products (AWS Elasticsearch Service, and DynamoDB and now DocumentDB).
My stance: I bought more, now 9% allocation and likely to go to 12% on any substantial dip again (likely!) in response to “bad news”. It’s my top performer of last 6mo (TTD, TWLO close behind). … PROS: Accelerating growth, customers more than doubling, 77% growth in >1M custs, 120% NER. Lovely double bonus of custs spending more PLUS new ones are starting higher. Future customers still coming, from 20M downloads TTM (also accelerating). CONS: Amazon! Okay, well the licensing changes are making people mad. But does it matter? Seriously, look at those numbers… 71% and ACCELLERATING. Another CON: MDB is so similar to ESTC that I like to watch the total % between them. Between them, I feel MDB has a bigger TAM but ESTC is probably more loyal as its DB provides a more unique service (huge staying power). MDB is 3x my ESTC position.
OKTA - Q419
Ethan take: https://discussion.fool.com/okta-q4-34152862.aspx
Bert take: https://www.tickertarget.com/okta-blowing-away-the-competiti…
Saul take (ignore guidance!): https://discussion.fool.com/my-take-on-okta39s-results-34152092…
Revenue 115.5M +49.6% (lower, vs 58.2% last yr)
Billing 158.8M +51.7% (lower)
Int’l only 15% of total
Sub Rev 108.5M +53%
Adj loss -4.4M (vs -8.5M)
Adj EPS -0.04 (vs -0.08)
Adj Profit 88.2M +54.8%
Gross Margins 76.38% +246bps
FCF 4.8M, 4.1% of rev - swung pos !!
Custs 6100 +40% (steady at 40%)
High end custs >100k 1038 +50% !!!
FY19 Rev 399M +56%
FY19 op loss 41.5M (10% of rev, vs 24% last yr)
FY19 Adj EPS -0.32 (vs -0.71)
FY19 FCF -7M (vs -37M last yr)
FY20 Guidance - Revenue 33-34% (sandbag, similar to last year 33-35% guidance vs actual 56%!!)
- Large customers spending more. “More deals happening, and happening faster.”
- 6k pre-built integrations (aka plugins to external systems).
- Cloud at tipping point. Very early stage and they help transform to cloud.
- Global trend happening everywhere. NA in lead, Asia growing fast.
- FCF going positive in FY20. !!!
- Acquired Azuqua for $52.5M, margins impacted -200bps. No-code, cloud-based integration platform that automates workflows between apps and services. Allows for more complex workflows (one SaaS event triggers action in another SaaS).
- Oktaane (annual conf) moved to Q1 (was Q2 last yr), so higher expenses.
- Expanding zero trust security framework w/ contextual access & continuous auth.
CC take: https://discussion.fool.com/some-quick-points-from-the-analyst-c…
sarks take: https://discussion.fool.com/okta-q4-2019-notes-34154791.aspx
CC find on security focus: https://discussion.fool.com/okta-and-identity-centric-security-3…
My stance: I amassed 9% at end of last year. Very sticky service, but I ultimately rate its potential in the lower 1/2 of my holdings (even with the optionality of their zero-trust initiatives). ZS is a sticker service and has (and deserves) higher allocation. But I’ll likely keep it where its at for the near term. Ultimately, I think they are acquired, but not sure I’ll still be an owner by then. CONS: Growth slowing to <50% bears watching. Plenty of competition amongst top tech cos, esp cloud providers. Could SSO service be disrupted? [Not easily, 6k integrations to backfill.] PROS: Valuable service that is as sticky as the wide-variety of SaaS services it sits over (HR, Office365, email, CRM, monitoring). Starting to expand into int’l (only 15% of total) and venture more into zero-trust security and improved workflows between SaaS apps (acq Azuqua). FCF just swung pos. Cust growth steady at 40%, then spending more w/ NER 120%.
ZS - Q219
Fool coverage: https://www.fool.com/investing/2019/03/01/zscaler-posts-rapi…
cc notes (starrob): https://discussion.fool.com/4056/zscaler-earnings-call-transcrip…
Revenue 74.3M +65% ^^, +17% seq !!
Billings 115M +74% ^^ !!!
Deferred Rev 206M +73% ^^
Net loss -3.6M (vs -6.5M)
Adj Income 11.6M
Adj EPS 0.09 (vs -0.03) swung pos
CFFO 15.7M (vs -1.1M) swung pos, 21% of rev
FCF 12M (vs -4.6M) swung pos
Opex +50.4% (way under rev growth)
Gross Margins 80% -100bps but at target
$NRR 118% (vs 122%)
- FedRAMP auth for ZIA-Govt
- Aggressively growing to ride current cloud trends, 100 new employees this Q
- Entered Japan last year, gaining traction and already new custs expanding (increased spend)
- Fortune 500 auto co started with basics, 6mo later has decided to buy it all, quadrupling spend
- That prior “largest deal ever” of $16M that occurred in Q418 already expanded spend another $11M !!!
- customer had huge throughput needs (>10x normal) w/ SSL inspection, ZS scaled their solution in hybrid cloud
- Overall, ZS is inspecting 65B tx each day
- 4th gen data centers have 1Tb/s peering capacity
- 99.999% (five-9s) availability … aka ~5 minutes of downtime/yr
- Customer summit going on the road, from 2 cities to 11 … 5 US and 6 int’l (Europe, UK, Oz, Japan)
My stance: Suddenly my favorite company of the bunch. I made a mistake keeping this at 3%, now bumped to 10%. Most sticky service of any Saul stock - companies aren’t going back to the patchwork of devices. Only thing stopping this company is further disruption which isn’t currently visible. PROS: Accelerating growth. EPS & FCF swung positive. FedRAMP opens up gov’t market. New custs rapidly increasing spend. CONS: Rapid sales team growth could be risk. Why is NRR only 118% vs endless fantastic cust expansion stories in CC?
Revenue 335.4M +48%
Billings 413.4M +57.5%
Software/Support Rev 297.4M +42%
Software/Support Billings 375.5M +37%
Sub Rev 157M +112%
Sub Billings 235.6M (57% of total)
Deferred Rev 779.9M +63%
Adj Gross Margin 76.8% +1330bps
Net loss -122.8M (vs -62.6M)
EPS -0.68 (vs -0.39)
Custs 12410 +920 +7% seq
High tier custs >$1M 779 +44%
Q3 guidance “reflects the impact of inadequate marketing spending for pipeline generation and slower than expected sales hiring. We took a critical look at these areas and have taken actions to address them.”
- was already having trouble pivoting to SaaS
- already difficult to quantify what they sell
- now has huge sales problem, after product lines diverged from core HCI
RetirementDough: it was a good quarter, it was guidance that stunk
Tinker: business model broken
Bear: deep dive into sales problems
Bert take: https://www.tickertarget.com/nutanix-was-the-guidance-that-b…
My stance: Sold it all on the sales wobble (as I did NVDA on their recent turmoil). Apparently difficult to understand products equals confused sales personnel, esp as products are branching from core HCI. I will likely watch NTNX numbers in case it warrants re-entry - but ultimately there are too many companies to choose from, no need for one with self-inflicted problems.
ESTC - Q319
Saul take: https://discussion.fool.com/elastic-results-with-cc-comments-mix…
Revenue 70.8M +70%
Billings 80M +68%
TTM Billings +76%
Adj Sub Gross Margin 81.1%
Deferred Rev 138M +73%
Adj EPS -0.16
Sub customers 7200 +14% seq !!
High tier >100k 380 +11% seq
Sub Rev 64.4M (91% of rev)
SaaS Rev 11.7M +67% (16.5% of rev)
Pro Svcs 6.4M +136% (9% of rev)
$NER >130% (for 9Q now)
- Elastic Stack 6.6 released
- Elastic APM in GA
- Elastic Cloud Enterprise v2.1
- new Auditbeat
My stance: I need to increase this from 3%, though likely won’t be as large as MDB (extremely similar company but I feel TAM is smaller and using it is more difficult). Insane growth, while custs grew 14% seq, NER steady >130%. See my prior post from their dev conference for a glimpse at their growth areas (APM, SEIM, helping custs sidestep Splunk and lower costs).
SQ - Q419
cochrane take: https://discussion.fool.com/thoughts-on-square39s-q4-34145397.as…
Revenue 933M +51.5%, +5.8% seq
Adj Rev 464M +64.0%, +7.6% seq
Adj EPS 0.14 +75%
GPV 23B +28.5%
Sub/Svc Rev 194M +145.6%, +16.9% seq
Organic Sub Rev 168M +112%
Capital: 72k loans for 472M +55%
Instant Deposit: huge factor in sub rev
Cash App: 15M MAUs +114%
- it’s about the ecosystem
- businesses starting to one-stop shop with Square, using it as a bank
- Square Card - business debit card for merchants (survey showed 40% of sellers didn’t have one)
- in-app payments SDK (was behind Paypal and Stripe here)
- Square Payroll: added mobile app and employee benefits
tidbits after earnings:
My stance: Holding 9% since last year. May be time to lower allocation. This company will continue to execute, but will performance of my higher convictions (MDB, ZS, TTD, TWLO) dwarf it? CONS: The already high Market Cap, tho its but a quarter of PYPLs. New CFO seems promising thus far but Friar leaves a high bar. Competition is everywhere (a lot of Clover and Stripe solutions out there in the wild) - yet SQ keeps succeeding. PROS: Ecosystem keeps getting stickier, plus keeps expanding. SQ is providing a vital need. New debit card for sellers (eats into Instant Deposit fees a bit, but very sticky service). Expanding Payroll app features.
TTD - Q418
CC notes (starrob): https://discussion.fool.com/4056/ttd-earnings-call-transcript-no…
Texmex take: https://discussion.fool.com/finally-got-a-chance-to-read-through…
Revenue 160.5M +56.4% ^^ (vs 50% last Q)
Cust retention >95% steady
Adj EPS 1.09
Mobile +69% w/ video +130%, in-app +90%
CTV +525%, spend up 9x, inventory up 6x
- Hulu dropped ad walls in Jan (serving 25M subs)
- Omni-channel is thriving
- growing twice the industry norm for last 5y
- Next Wave products released in June have better than expected adoption (70%) driving huge spend growth (+90%)
- Next Wave - Koa driving 20% CPM (cost) improvement
- Unified ID initiative to help custs (advertisers) better focus and manage ads
- advertisers spending more, 4 of top 10 global advertisers doubled their spend
- CTV opportunity is a perfect storm
- Int’l still a huge opportunity, expanding in Europe and Asia, partnership w/ every Chinese media co
- Int’l only 14% of total rev
- going slow with China and Alibaba, Baidu, Tencent partnerships
My stance: It sits at 10% alongside ZS, partially from my small buys a year ago (+300%) plus a lot of addl buys late last year to finally increase allocation. Very likely to increase to 15%. PROS: Accelerating growth, w/ expanding int’l markets and huge opportunity yet from CTV ads. CONS: Some huge competition, but that hasn’t really hampered anything TTD has done thus far. Can the disruptor get disrupted (by better ML/AI algo)? [Magic 8-ball so far says “Don’t count on it.”.]
Revenue 343.9M +54.3%
EPS -0.01 (vs -0.03)
Adj EPS 0.26 +73%
Sub rev 133.6M +42%
Merch Solutions rev 210.3M +63%
Shopify Shipping utilized by 40% of merchants
Shopify Capital 71.8M in credit +81% (loans & cash adv)
Monthly Recurring Rev (MRR) 40.9M +37%
Shopify Plus 10.4M (+65%), 25% of MRR
Mobile was 78% of traffic, 66% of orders
GMV 14B +54%
Payments facilitated 5.8B, 41% of GMV
7 languages now supported in 11 countries
820k merchants +35%
5300 Shopify Plus high tier +45%
2500 apps in app store
- Deceleration is increasing
BigECat disagrees: https://discussion.fool.com/hi-saul-since-there-seems-to-be-a-lo…
anthony take: https://discussion.fool.com/ok-whilst-we-waiting-for-the-conf-ca…
- strongest growth in lower margin line (merch sol)
Cochrane take: https://discussion.fool.com/thoughts-on-shopify39s-q4-34135095.a…
- Sub fees becoming a smaller piece
- Merchant services are paying off
- akin to SQ, continually evolving to solve more and more of merchant needs
- big push into int’l
Cheesehead take: https://www.fool.com/investing/2019/02/16/forget-the-rest-of…
- Sales/Mkt + R&D > Sub gross profit
- aka costs more to get user
My stance: Continuing to hold SHOP has been a great move thus far. But there are signs… and I think it’s finally time to shift it into one of the other companies here that have a big “accelerating” in these notes. CONS: Decelerating, strongest growth in lower margin Merch Solutions, costing more to obtain custs … PROS: but is becoming sticky ecosystem, fast innovation in merchant tools, expanding int’l.
AYX - Q418
Saul take: https://discussion.fool.com/alteryx-my-take-on-results-and-confe…
Frankdip take: https://discussion.fool.com/4056/q4-results-ticker-guide-take-34…
Revenue 60.5M +57% (acceleration tapered off)
Billing 116M +65%
Int’l 18M +92%, 29% of rev
Adj Gross Margin 93%
Adj Net Income 24M, EPS 0.37
$NRR 132% (>=129% for 9Qs)
cust 4694 +38%, +8% seq (vs 46% last yr)
high tier custs (>$1M) doubled
mid tier custs (>$500k) tripled
- opened/expanded in 12 cities globally
- Middle East & Africa doubled rev
- are changing $NRR metric for $NER
- getting more into selling in industry verticals (healthcare, govt, “tax & audit” coming soon)
- cust count is a bit moot, it hides license count
- need more details on acct chgs vs drop in growth
- Billing growth never included before
My stance: Continued solid results, clearly business love it. However, we have so many lovely companies to choose from. I’m going start lowering my 12% alloc somewhat, to shift into pure-r SaaS models that have high-r growth. PROS: Custs spending more over steady 40% cust growth. Expanding int’l, and selling into more industry verticals.
TWLO - Q418
cc notes (starrob): https://discussion.fool.com/4056/earnings-call-transcript-notes-…
cc Q&A notes (starrob): https://discussion.fool.com/4056/twilio-inc-nysetwlo-q4-2018-res…
Revenue 204.3M +77% ^^, +79% w/o Uber, +21% seq (vs 40% last yr)
Loss -42.2M (vs -18.9M)
EPS -0.47 (vs -0.20)
Adj EPS 0.04 vs 0.03
Gross Margins 54%
OpEx 152M +89%
custs +3100 +31%, 64.3k total
NER 147%, 148% w/o Uber (vs 118% last yr)
- new Chief Product Officer
- adding int’l focus to execs
- new BOD member Donna Dubinsky
- closed SendGrid acq
guidance: rev +74%, EPS 0.00
FY19 rev +65%, EPS 0.10 -9%
rev growing 2x faster than custs = higher spend in NER
EPS affected by higher stock price (stock-based comp)
this is last Q w Uber adj
4M registered developers in combined co
140K accts in combined co
added new CMO Chee Chew (ex AMZN VP, ex GOOG VP)
added Donna Dubinsky to BoD (CEO Numenta, ex CEO Palm & Handspring, ex Apple)
new hires for global VP, expanding EMEA, APAC teams
rev boosted by large intl cust ramping spending, and mid-term elections
hiring aggressively for Sales & Mkt and R&D positions
unifying sales format across combined Twilio + SendGrid
New Narrowband IoT product coming - smaller/cheaper sensor allows for wider use, sensors can have entire lifespan be connected
TWLO is first dev platform for Narrowband, protocols part of 5G rollout
TWLO as a whole starting to move from developer-lead to selling into VP/CTO level, SIGNAL event targeted those
Flex launched last Q, target is companies having 1000+ agents
Flex requires direct sales to mgmt vs developer-lead
bear increasing position: https://discussion.fool.com/twlo-dec18-q-all-in-34136958.aspx?so…
My stance: I amassed 15% position over past 5 mo, my #1. It’s top performance has only been bested MDB and TTD. I think this stock has a bright future. … PROS: Accelerating growth & NER (already at 147%!). Acquired SendGrid for email svcs, now 4M devs across 140K combined custs. New CPO, expanding int’l sales force. Still innovating, new Flex APIs to easily stitch together call center workflows. CONS: Change in marketing focus from devs to C level may have risk. Merger integration may not go as smoothly as expected. But so far, TWLO has executed to perfection, so hard to see them stumbling on their stated goals.
Revenue 275.7M +46%
Platform Revenue 151.4M +77% ^^
Device sales 124.3M +21%
Platform Gross Margins 72.2% (blade)
Sales Gross Margins 2.4% (razor)
Active Accts 27.1M +3.3M +40%
Streaming Hours 7.3B +69%
ARPU 17.95 +30%
- Open licensing of Roku OS to smart TVs
- huge upside of streaming TV ad market
- Int’l expansion
My stance: How’d I miss this one over past few months. New feeler position as I get to know it. PROS: Accelerating platform revenue growth seems enticing, huge opportunity around CTV ads (seems akin to TTD) and int’l expansion.
long MDB, OKTA, ZS, ESTC, TTD, SHOP, AYX, TWLO, ROKU