November was a great month for many of us as we benefited from good results by many of our companies, a resilient US economy and some benign inflation numbers which led to a lowering of expected long-dated US interest rates. We also got some good news in Europe in the form of a lower inflation print. So the macro gods smiled on us for a change this month in addition to our companies performing rather well, on balance.
Performance
| 1 Jan 2023 to | YTD Return | % of starting capital change |
|---|---|---|
| Jan | +7.2% | +7.2% |
| Feb | +17.3% | +10.1% |
| Mar | +15.1% | -2.2% |
| Apr | +2.1% | -13.0% |
| May | +23.4% | +21.3% |
| Jun | +31.2% | +7.8% |
| Jul | +37.3% | +6.1% |
| Aug | +43.7% | +6.4% |
| Sept | +30.2% | -13.5% |
| Oct | +14.2% | -16.0% |
| Nov | +33.4% | +19.2% |
Portfolio
| Company | Ticker | 30/11 | 31/10 | 30/9 | 31/8 |
|---|---|---|---|---|---|
| Celcius Holdings | CELH | 17.1% | 20.2% | 15.0% | 19.0% |
| Axon | AXON | 13.1% | 18.6% | 14.7% | 16.8% |
| ELF | ELF | 12.3% | 17.9% | 10.7% | |
| Monday | MNDY | 11.9% | 12.1% | 12.4% | 7.8% |
| Samsara | IOT | 1.6% | 10.2% | 8.8% | 9.6% |
| Nvidia | NVDA | 4.4% | 4.5% | 1.7% | |
| Remitly | RELY | 4.9% | 3.6% | ||
| Transmedics | TMDX | 3.7% | 1.1% | 1.7% | 2.2% |
| Dlocal | DLO | 0.9% | 0.9% | 1.1% | 1.7% |
| Pure Storage | PSTG | 1.7% | 1.8% | 1.6% | |
| AEHR Test | AEHR | 0.8% | 1.0% | 12.2% | 9.0% |
| Shift4 | FOUR | 1.2% | |||
| Confluent | CFLT | 3.8% | 3.4% | 2.6% | |
| Global e-online | GLBE | 2.0% | 2.1% | 1.7% | |
| Tesla | TSLA | 4.9% | |||
| Okta | OKTA | 7.3% | |||
| Pagaya | PGY | 2.0% | |||
| Zscaler | ZS | 12.3% | |||
| Crowdstrike | CRWD | 4.3% | |||
| Cash | Cash | 28.1% | 2.3% | 9.7% | 2.0% |
| YTD Return | YTD | 33.4% | 14.2% | 30.2% | 43.7% |
Changes
Here is what I looked for last month in the results of the companies that I sold out of this month, and what actually happened.
Global-e: the launch of their Shopify product accelerates their revenue trajectory.
→ Didn’t happen. Sequential growth came in at zero…and yoy dropped from 53% to 27%. Easy decision to sell.
Confluent: looking for revenue to stay roughly at last quarters’ growth rates and for profitability to improve.
→ Growth came in ok-ish at 6% qoq (vs 9% prior q) and and 32% yoy (vs 36% prior q). However profitability went the wrong way and NRR dropped below 130% and the big one was that they guided for only 22% growth next year. The shares tanked and I sold.
Pure: a potential big order from Meta for their supercomputer, which is supported by Pure and which is not included in their forecast, and traction from their new products. The Meta order has become more plausible given Meta’s comments about their capex plans for the future in their recent ER.
→ In the end there was no big Meta order, there was slipped delivery of some of their products ($41 Telco sale slipped) and traction with their as a service offering cannibalising their product revenue. There also was no AI acceleration like NVIDIA/Microsoft had, which was a hope of mine. They had to lower this years guidance which now implies a yoy growth for the year of below 3%!! and the initial guidance for next year was way below expectations too. In stead of acceleration we got excuses, lower guidance and again a story of jam tomorrow. I sold.
I also started a small position in Shift4 (FOUR).
It’s valued at onlly 2x run-rate revenue and misunderstood imo. The market distrusts the constant impact which M&A has had for almost their entire history, but the CEO believes they are just good at M&A:
“I believe we are one of the best capital allocators in the industry, despite understandable skepticism regarding M&A in general. Our track record is really unmatched over the last decade. We have a playbook and it isn’t complicated: we identify differentiated technology assets with an embedded, under-monetized, payments opportunity. For the most part, we acquire these overlooked assets to support existing verticals, but at times it will take us in to new geographies or new markets. Not only has our strategy afforded us the ability to offer merchants a value proposition previously unavailable in the market, it has also resulted in our growth consistently exceeding industry averages. We owe our investors transparency on why the deals we do make sense and will have incredible returns, but the days of apologizing for being good at M&A are over.”
The CEO believes that they are at an inflection point - organic revenue growth was guided up for next Q to 28% from 24% this Q and total revenue growth was guided up 37% yoy due to the impact of M&A. The latter - the Finaro transaction - took 20 months to get regulatory approval. Much longer than what they had anticipated but it’s now in the bag. Finaro gives them their footprint to leverage for European expansion. And the inflection point is further driven by a new SaaS product - Skytab - (in addition to the pure payment business) which is seeing great success. Shareholder letter
I also think that they are good acquirers, and have managed to integrate their acquisitions well, as you can clearly see from looking at their gross margins and FCF over time:
| GP % | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 2021 | 49% | 54% | 40% | 53% |
| 2022 | 52% | 54% | 65% | 69% |
| 2023 | 69% | 70% | 70% |
| Adj FCF % | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 2021 | -9% | 0% | 15% | 3% |
| 2022 | 12% | 15% | 23% | 28% |
| 2023 | 29% | 28% | 31% |
I intend to watch this one and see how it develops together with my other small positions.
Current positions
Celcius
Remains my top position. They had a great quarter and recent Nielsen survey numbers show no sign of them slowing down. If there are any doubters out there, I thought to put down the key numbers.
| Revenue $m | Q1 | Q2 | Q3 | Q4 | Q1 YoY | Q2 | Q3 | Q4 |
|---|---|---|---|---|---|---|---|---|
| 2020 | 28.2 | 30 | 36.8 | 35.7 | ||||
| 2021 | 50.0 | 65.1 | 94.9 | 104.3 | 77% | 117% | 158% | 192% |
| 2022 | 133.4 | 154.0 | 188.2 | 178.0 | 167% | 137% | 98% | 71% |
| 2023 | 259.9 | 325.9 | 384.8 | 95% | 112% | 104% |
→ Revenue growth keeps on being off the charts, 104% yoy growth in Q3 at a run-rate revenue of >$1bn.
| GP % | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 2020 | 46.0% | 43.3% | 47.6% | 48.7% |
| 2021 | 41.2% | 43.3% | 39.7% | 39.9% |
| 2022 | 40.4% | 38.5% | 41.8% | 44.4% |
| 2023 | 43.8% | 48.8% | 50.4% |
→ Same on margins: They just keep on improving. And whereas a 50% gross margin is not in the same league as software, the improvement is fantastic: 9%pts in a year. And Celsius doesn’t have the same dependence on SBC as software companies.
| NP % | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 2021 | 1.2% | 1.2% | -9.9% | 11.4% |
| 2022 | 5.0% | 6.0% | -99.1% | -15.8% |
| 2023 | 13.2% | 12.5% | 18.3% |
→ And an 18.3% net profit margin. That’s just exceptional. In software-land there are only 7 other companies that have >1bn in ARR, growth of >30% and FCF positive. I don’t think any software company qualifies if you want net profit positivity.
For the visually inclined, I thought this youtube clip was an excellent overview of the investment case and some of the risks.
Axon
Last month I said that Axon’s revenue growth could increase further and that is exactly what happened. They put up a tremendous set of results, with revenue growth of 33% yoy accelerating. Here I do like to look at qoq growth trends. Q3 revenue growth was 10.4% qoq vs 9.2% in the prior q as well as in the same q last year. FCF margin was up to a record for Q3s of 13% and NRR held steady at 122%.
ELF
Same as Celcius, I thought it useful to put the numbers up. They really do speak for themselves.
| Revenue $m | Q1 | Q2 | Q3 | Q4 | YoY Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|---|---|---|---|
| 2021 | 64.5 | 72.4 | 88.6 | 92.7 | ||||
| 2022 | 97.0 | 91.1 | 98.1 | 105.1 | 50% | 26% | 11% | 13% |
| 2023 | 122.6 | 122.3 | 146.5 | 187.4 | 26% | 34% | 49% | 78% |
| 2024 | 216.3 | 215.5 | 76% | 76% |
→ Revenue growth of 76%, up from 34% a year ealier and 26% the year before. Also sneaking up on a $1bn revenue run-rate. Exceptional.
| GP % | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 2021 | 67% | 65% | 64% | 63% |
| 2022 | 64% | 64% | 66% | 64% |
| 2023 | 68% | 65% | 67% | 69% |
| 2024 | 71% | 71% |
→ Gross profit margins have shown exceptional improvement over the last several quarters, up 6%pts vs a year ago.
| NP % | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 2021 | 2% | 1% | 5% | 0% |
| 2022 | 9% | 6% | 6% | 2% |
| 2023 | 12% | 10% | 13% | 9% |
| 2024 | 25% | 15% |
→ And lastly net profit margins up 5%pts vs a year ago. Q2 is their seasonally weak quarter, so I’m happy to look vs the prior year and not vs the prior q. Fantastic.
Monday
Monday delivered the goods imo. Revenue growth came in at 38% yoy, even if the incremental revenue remained flattish at $13.5m and overall NRR dropped further to 110%. But they maintained their customer growth, with 50k+ customers growing by 57% yoy.
However the truly impressive part of this story for me is the relentless execution and march towards profitability as can be seen in their operating margin:
| Op % | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 2019 | -102% | -92% | -50% | |
| 2020 | -53% | -41% | -72% | -47% |
| 2021 | -40% | -14% | -11% | -10% |
| 2022 | -40% | -12% | -2% | 10% |
| 2023 | 0% | 9% | 13% |
→ Cast your eye to that Q3 % above. It is just remarkable how they have driven profitability. The same story is also true if you were to look at FCF which came in at 34%.
Those were my big positions going into earnings.
Samsara
This is a company in which I have a lot of conviction. But I got cold feet before earnings after having seen what happened to other highly valued stocks like Confluent when they had to guide lower and I greatly reduced my position before earnings, fearing something similar. In hindsight I shouldn’t have. Saul had it as his biggest position (hats off!), and I should not have hesitated. They delivered an exceptional set of results yesterday. One analyst said:
“just sounds like a truly marvellous quarter”
And the CFO gave some additional comfort when he commented on the outlook for next year and for Q4 when he said:
“I’d say that based on our current outlook, I think the initial FY2025 revenue dollar range that we provide will be higher than the current consensus number, given that we just beat Q3 and we raised Q4. And I would also frame that as de-risked.”
→ I will be looking to increase my position here big-time, but at a higher cost base. Some you win, some you lose.
Nvidia, Remitly, AEHR Test and Transmedics have all been discussed in detail elsewhere so I will not discuss them further. Together with Dlocal they remain small positions for me which I will evaluate as we go along.
In closing
Nice to be back in the game and sounds like many of us had a good month. Congrats to all.
-wsm
Previous reviews
October 2023
September 2023
Aug & Jul 2023
June 2023
May 2023
April & Mar 2023
Feb 2023
Jan 2023