[ok its too long, broken into 2 parts - summary and earnings reports]
the latest in earnings
Feb/Mar 2020
I have been posting these more in real time as earnings have released, and seems popular enough to keep doing it that way. But weirdly the company I thought would be most popular got the least recs (Zoom), but perhaps because the market was in freefall right after I posted it. Even though I posted many of these before, information keeps trickling in, so there are links here that are new (like Starrob’s CC & Q&A recaps for OKTA, and how ESTC got Fedramp approval).
Besides the companies I own or just owned, I took a peek at several high-performing growth companies that are at the “leveraging operations” stage, from my watch list as well as from some of the portfolios here. I most like COUP (accelerating revenue) and NET (accelerating revenue, right as a new & highly relevant product line arises). WORK (Slack) is pretty interesting too, and ZS may get a rebound. DOCU is riding a huge trend right now in contactless agreement handling. I’ll pass on FSLY, WDAY, PAYC, VEEV. FSLY stays on my watch list to see if the mid-30s to mid-40s jump in rev growth in 1Q was a blip or sustainable new level, but I fear the answer is no, especially as its customers may have recession issues.
Prior reports:
Nov/Dec 2019: https://discussion.fool.com/the-latest-in-earnings-34388629.aspx…
Aug/Sep 2019: https://discussion.fool.com/the-latest-in-earnings-34329275.aspx…
May/Jun 2019: https://discussion.fool.com/the-latest-in-earnings-34231103.aspx…
Feb/Mar 2019: https://discussion.fool.com/the-latest-in-earnings-34161547.aspx…
Oct/Nov 2018: https://discussion.fool.com/earnings-boil-downs-thus-far-3406063…
NOTE on my NOTES below: ^^ is “accelerating”, and !! is an especially important/impressive bit IMHO.
Holdings:
AYX 18%
OKTA 17%
CRWD 15% ... increased
ZM 11% ... added in Feb & done well
NET 11% ... added in Feb & done well
DDOG 10%
ROKU 7%
MDB 5% ... significantly lowered, to sell
COUP 4% ... added in Feb
SMAR 0% ... sold
TTD 0% ... sold
ZS 0% ... sold
Summary:
I love looking at all the quarterly stats together in this condensed summary at the top of my recaps. I am sorting by rev growth now, which makes my tiers, esp the cream of the crop, stand out. So I divided these companies into 3 tiers - top tier (>75%, tier 2 (>40%), tier 3 (<40%). (See my prior post on how I use tiers: https://discussion.fool.com/graceful-landings-34426354.aspx ) One change though – top tier companies are executing so well, I consider tier 1 to now be >75% (was >50%), and overall “hypergrowth” to be >40%.
Of course, a large caveat – lots of these companies announced these earnings numbers before the panic set in with the global pandemic. I just posted about my thoughts on each of these companies and their immediate prospects in my “Tremors” post before this. So execution in this current reality may differ significantly from last few quarters. Companies that I think will be benefiting from all the work-from-home are marked with a *.
Tier 1: Top Tier Hypergrowth ------
*CRWD = rev +89% ^^, sub rev +90% !!, opex +98%, $NER >120%, custs +116% ^^
DDOG = rev +85% !!, opex +71%, custs +36%, $NER >130%
*ZM = rev +78%, RPO +94% !!, op inc +292% !!, FCF +367% !!, opex +80%, custs +61%
AYX = rev +76% ^^, intl +84% ^^, op inc +93% !!, opex +67%, $NER 130%, custs +30%
… Top 4 are all growing >75%. Compared to the strong companies in tier 3 means these are growing MORE THAN DOUBLE those strong companies in the mid-30%s! And even better if it has profitability now (only DDOG doesn’t), and will maintain heavy usage through this pandemic.
Tier 2: Solid Hypergrowth ------
ESTC = rev +61%, sub rev +63% (all CCURR), opex +65%, $NER >130%
*NET = rev +51% ^^, opex +44%, custs +34%
SMAR = rev +51%, sub rev +53%, custs >100K +138%, $NER 135% !!
*COUP = rev +49%, sub rev +46%, op inc +454%, FCF +197%, opex +35%
ROKU = rev +49%, platform rev +71%, opex +68%, active accts +36%, stream hrs +60%
*WORK = rev +49%, custs +25%, $NER 132%
*OKTA = rev +45%, sub rev +46%, RPO +66%, FCF +277%, opex +50%, custs +30%
MDB = rev +44%, sub rev +46%, Atlas +80%, opex +55%, custs +27%
FSLY = rev +44% ^^, custs 288, $NER 136%
… Great set of companies but markedly less growth than tier 1. Most of these have growth slightly dropping over time, but NET and COUP are rising. A recent purchase is NET, which has accelerating growth, but also just released a whole new product line for Zero Trust & SWG (Zscaler clone). ESTC and SMAR have >50% growth, but I put them in tier 2 due to rising opex that is consistently growing faster than rev. With FSLY, it jumped from mid-30%s to mid-40%s growth in 1 quarter, but I would like to see proof that it is a new sustained level – but they are going through leadership change at an extremely non-ideal time, AND I don’t think a wide swath of its customer base will handle this stay-at-home recession well, as I see lots of retail and travel apps as customers (see my Tremors post for more).
Tier 3: Solid Growth & Profits ------
*ZS = rev +36%, RPO +32%, op inc +11%, $NER 116%
TTD = rev +35%, inc +40%, opex +47%
TWLO = org rev +36%, $NER 124%
*TEAM = rev +37%, sub rev +50%, cffo +67%, opex +19%
*DOCU = rev +38%, op inc +200%, opex +19%, custs +24%
VEEV = rev +34%, sub rev +33%, inc +20%, custs +20%, sub ARR 121%
WDAY = rev +24%, sub rev +25%, inc +26%
PAYC = rev +29%, inc +43% !!
… I’m not in any of these now (now out of TTD). DOCU has me most interested, as operations are being leveraged to crank up its profitability, it has big goals with its new Agreement platform which is sure to benefit from the contactless world we now live in. ZS’s potential to rebound has me intrigued, as its product is sure to be in high demand right now, but given its sales woes, I prefer to see proof that it is executing. TEAM’s sub rev is doing well, while cash flows are surging and opex costs are extremely well contained. VEEV’s growth rate accelerated in Q4 over the FY, but I have no idea how recession would impact them.
The View from Today:
However, last Q may not be next Q given the near global stay-at-home going on right now. Let’s review these companies again, but looking at companies through my tier lens plus taking into account what I think the impact is from the pandemic and recession (see my Tremors post just before this: https://discussion.fool.com/Message.aspx?mid=34452726 ).
So lets look at those same companies in a broader view than the latest numbers…
Tier 1: Top Tier Hypergrowth ------
CRWD = rising tier 1, plus now has strong gains from stay-at-home; has very strong cash flow and is at edge of profitability; exploding cust growth
ZM = rising tier 1, plus now insane gains from stay-at-home; has very strong cash flow and profitability; exploding cust growth
DDOG = steady tier 1; likely shrinking enterprise budgets but app economy is going strong – and this is a required service over infrastructure and services; just swung into positive profitability and cash flow; strong cust growth
AYX = rising tier 1; unknown effect from pandemic but likely shrinking spend; very profitable; strong cust growth
Tier 2: Solid Hypergrowth ------
NET = tier 2 rising to tier 1, plus now has likely gains from stay-at-home (esp the slew of enterprises that need it’s new Zero Trust / SWG product); not yet profitable but strong improvement; strong cust growth
ESTC = steady tier 2; nowhere near profitable and has costs growing slightly above rev; strong cust growth
SMAR = steady tier 2, likely affected by reduced spend; moving wrong direction on profitability; current custs spending more and more
COUP = rising tier 2, plus likely benefit due to heavy focus by companies on spend mgmt; exploding profitability and cash flow
MDB = sinking tier 2; heading towards profitability, but costs are growing slightly above rev; decent cust growth
OKTA = steady tier 2, plus likely strong gains from stay-at-home; has very strong cash flow and is at edge of profitability; strong cust growth & larger deals
ROKU = steady tier 2 with platform rev at top tier hypergrowth; dripped back towards being unprofitable as costs rose with int’l moves; strong player device & accounts growth, and streaming hours growth is likely to accelerate with all the stay-at-home; ad spend likely to decrease however, but should remain top dog through it all
WORK = rapidly sinking tier 1 to tier 2, but will strongly benefit from massive shift into working remotely; cash flows swung positive, and heading towards profitability; strong margins; strong cust growth
FSLY = rising tier 3 to tier 2, but I foresee some its customers (retail & travel) scaling back heavily; not moving towards profitability; pretty crummy margins for SaaS
Tier 3: Solid Growth & Profits ------
ZS = rapidly declining tier 1 to tier 3, but now likely has strong gains from stay-at-home; profitable but declining in having to deal with sales issues & revamp; now has direct competitor in NET
TTD = rapidly declining tier 2 to tier 3; profitable; likely impacted by decreased spend but may be offset somewhat by the surge in Connected TV (where it is a leader)
TWLO = rapidly declining tier 1 to tier 3; unknown affect from pandemic but communications is probably vital; teeters on the edge of profitability
TEAM = steady tier 3; strong cash flow and profitability
DOCU = steady tier 3, plus strong gains from stay-at-home; strong profitability; all new platform that is ideal for contactless transactions
VEEV = rising tier 3 with growth accelerating; decent profitability
WDAY = low tier 3; decent profitability; vital service so likely okay through pandemic but new custs disappearing
PAYC = low tier 3; profitability increasing; vital service so likely okay through pandemic but new custs disappearing
EARNINGS REPORTS IN PART 2 >>>>>
-muji
long many of these