Hello Investors. The quarterly earnings season has kicked off again and it has been an erratic one already. The TEAM earnings call (a SaaS company) forecasted challenging growth ahead in the cloud sector. For some companies, perhaps that will be the case, but I did NOT see that to be the case with AYX. Certainly ALL cloud companies have taken a fall and lost some skin as the entire sector got revalued a bit. What is is critical for me is to keep it all in long term perspective. The companies I invest in are multi-year investments. While my returns at the end of July were 101% and have been cut in half this year to “only” 50%, I also have to keep in mind these same investments are up more than 125% since January 1, 2018, taking almost the last two years into consideration. To be clear, I am always adjusting my holdings, selling those that show cause for concern, deceleration in growth or other problems. Of the companies I own, the ones that might be in that bucket for various reasons are SQ, PINS and possibly TWLO, which is showing some slow down. Companies still showing incredible growth in all areas include AYX, MDB and ESTC. I will discuss AYX earnings call briefly next…it has taken a haircut with the rest of the sector and may be the best opportunity in months to pick up some shares. It is still highly valued, but they blew the doors off their earnings call last Thursday…in all the right ways!
AYX: Revenues in the most recent Q3 grew 65% y/y!! After a y/y revenue growth rate the prior quarter of 59%, this was an incredible achievement and shows the demand for this companies service is not just continuing to grow, but accelerating at an industry best in class. When you consider this company is already doing annualized revenues of half a billion dollars, that is blistering growth. Their 132% net retention rate indicates that their “land and expand” strategy is working. This tells us that their average customer spent 32% more this year over last year. Their TAM is increasing as companies scramble to harness their own data. AYX margins are the highest in the industry at a whopping 92% and another big differentiator from most other SaaS companies is that they have positive Free Cash Flow and positive earnings. At around a $6.0B market cap, they are trading up about 8% since the earnings call last Thursday, but are still down significantly from their high of $150 in late July. I added to my position prior to and just after the earnings call. This company and its stock will continue to be my single largest holding with no red flags in this quarterly call. To buy more shares of AYX, I chose to reduce my TWLO holdings slightly and to sell most of my PINS holdings, which was a very small position.
User comment: TTD Earnings this week also
