Did you listen to any of the earnings calls or read any of the quarterly earnings releases last week? The companies in our portfolio started releasing earnings last week. The dates for all of them are as follows:
| NET | 5/6/21 |
| DDOG | 5/6/21 |
| ROKU | 5/6/21 |
| NARI | 5/11/21 |
| UPST | 5/11/21 |
| LSPD | 5/20/21 |
| SNOW | 5/26/21 |
| ZM | 6/1/21 |
| CRWD | 6/3/21 |
| DOCU | 6/3/21 |
If you choose to invest in individual companies, there is no better source of direct information than at minimum reading the company’s own quarterly earnings release (takes about 10 minutes unless you analyze their financials) and listening to their 60 minute call. Waiting for the analysts and news outlets to summarize their earnings and upgrade or downgrade the company can come weeks later and far too late; And it can be catastrophic for your investments as other investors and institutions buy or sell, driving the stock up or down in between. There is not substitute for doing a little homework…homework that can take as little as 1 hour every three months.
The past 2 weeks has seen another sector rotation out of our SaaS and cloud companies and out of technology as a whole. There is no way to tell how long this could last and I don’t even try. I have been asked and the answer is “No, I have not been selling during this sector rotation”. I have great conviction in the 10 companies I own and in their fundamentals and continue to hold them long terms and to add to them as the company continues to perform, regardless of the stock price. There is no argument that valuations in the SaaS sector are still high on a historical basis after the recent 20% correction. It is not unreasonable to think this rotation could continue a good while longer (though the sector did have a nice rebound on Friday), but companies that continue to grow at 50-100% per year are cutting those valuations in half every 1-2 years. Eventually (and that can sometimes take a year or two) great companies will prevail and their stock prices will follow their fundamentals.
The portfolio had three very big earnings reports last week for DDOG, ROKU & NET. To summarize, all three “crushed it”…in a great way and all three reinforced my conviction in the companies, in their fundamentals and in their growth. Just a few quarterly highlights from these three companies:
DDOG
- Revenue: $198.6M
- Revenue Growth: 51.3% Y/Y quarterly and 12% sequential growth
- RPO: $464M
- NDBRR: >130% for the 14th straight quarter
- Gross Margins: 76.8%
- Customer Growth: 1030 new customers; sequential growth of 14.7% and 49.7% y/y for customers over $100k
- Cash: $1.55B
- Increased their quarterly and annual guidance
- Very positive, upbeat call, great guidance and strong plan
ROKU
- Revenue: $574.2M
- Revenue Growth: 79% Y/Y quarterly (101% platform revenue growth!)
- ARPU: $32.14 (Average Revenue per User) up 32% Y/Y
- Streaming hours: Up +49%!
- Gross Margins: 67%
- Customer Growth: 2.4 million new accounts to 53.4m active accounts
- Cash: $2.1B
- Increased their quarterly and annual guidance significantly.
- Very positive, upbeat…even giddy and excited earnings call.
NET
- Revenue: $138.1M
- Revenue Growth: 51.3% Y/Y quarterly growth
- RPO: $439M
- NDBRR: 123% (up from 119% last quarter)
- Gross Margins: 77.1%
- Customer Growth: 117 new customers > $100k (70% growth!)
- Cash: $1.04B
- Increased their quarterly and annual guidance
- Very positive, upbeat call, good guidance and strong plan. 88% of customers now use 4 or more products. Many new products and growth opportunities.
These are just a few highlights, folks. You can google any of these companies or go to their investor relations website and you can get a plethora of information, so it would be pointless for me to go into too much detail recounting them all here. Suffice to say, I will not be selling any of the three companies above and in fact added a small amount to ROKU and NET. ROKU in particular was absolutely stunning. No one could have predicted the breakout in growth they exhibited and its even more impressive at their current revenue run rate of $2.3B. They are enduring a disagreement on terms with Google right now, which could be impacting their stock price also and I’ll be watching for the resolution. Two more earnings releases tomorrow. Hope you can listen to a call or two this quarter. Cheers! -Poleeko
