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No. of Recommendations: 279
Now that most of my portfolio/watch list has reported their earnings, I jotted down some of my thoughts on each. The majority of the businesses are owned and discussed here on this board. I figured I would share my thoughts here with the group to try and give a little back after I have received so much. They are listed in the order in which they reported.

ZoomInfo - ZI kicked off this quarters earnings and I thought they turned in a terrific quarter. Revenue accelerated to their fastest pace in over a year coming in at 13.6% QoQ. We have now seen their revenue grow by 50% - 56% - 60% YoY so far this year. A similar 8% beat next quarter would result in 60% YoY growth again. Their recent acquisition, Chorus.ai, is far exceeding expectations (which certainly played a role in the acceleration this Q). While their profitability has declined slightly this year, I don't think it is anything to be concerned about. 39% adjusted operating margins are still unbelievably strong, especially while the business is growing 60% YoY. For a business that is going to do about $750m in revenue this year with ~40% adj op margins, I would say they are pretty undervalued at only $28B opposed to most other SaaS names. I added to my position the day after earnings at $67/share.

Roku - I was disappointed with the earnings report from Roku. Revenue came it at a respectable 51% YoY however, growth slowed to 5% QoQ. For me, the most important part of this report was going to be the active account growth. This metric disappointed again as this years sequential growth has been 5% - 3% - 2%. That simply is not going to cut it. Supply chain issues played a role but 2% is extremely weak. Like last month, the saving grace was the growth in ARPU which clocked in above $40 for the first time up 10% QoQ. Ultimately, while the increased monetization is nice to see, I would much prefer to see them focusing on account growth. The lack of it indicates to me they are not making great inroads with their international expansion. The good news is I had a feeling this was going to be a lackluster report so I trimmed slightly ahead of earnings at $314/share. I am undecided what I want to do with the remainder of the position but I do not like to see them battling with Google. It might not be around in the portfolio much longer..

Cloudflare - At this point I am not really sure what to make of Cloudflare. Like many on this board, I have also been perplexed as this stock has gone parabolic the last two months. Not understanding the reasoning for the run, I trimmed the position on its trip from $90 to $200 (whoops). I decided to leave the rest going into earnings because it is still a high conviction business, I just had concerns over the stock. The Q3 report was business as usual for NET, and they turned in another very solid quarter. It does look like revenue is slowly beginning to accelerate as they turned in 13% QoQ growth and they look to come close to this next Q with a similar beat. 13% sequential growth would result in 63% YoY growth over four quarters. I think this is what the market is expecting to see out of Cloudflare going forward. Can they get there? With all their innovation and new products, I wouldn't bet against them.

Datadog - I thought DDOG had one of the better reports out of all the companies I own. Similarly to NET, this was another ho-hum quarter of business improving as usual but across most metrics. Some highlights - revenue growth of 16% QoQ and with a similar beat, it should be around 17% next quarter (pretty impressive since they are now above a $1B run rate). Adjusted operating margins came it at a record 16% and they continue to add customers with ACV > $100K at a solid clip. This company is clearly crushing it and one of my highest convictions so I went ahead and added recently at $194/share.

Peloton - Oof. This one hurt. With the tough comps of 232% growth last year, PTON was only able to increase revenues by 6% YoY this quarter. To make matters worse, they cut FY guidance severely resulting in the stock tumbling by 30% plus. I believe this drop was warranted given their poor execution over the last 6-12 months. This was a tough one for me as I rode it up from $40 to $160 and back down. I thought we might see growth pick up thanks to the launch of the new tread but that did not materialize. I also followed a similar path with Zoom this year and sold out way too late once it was obvious their growth had really slowed. Tough lessons but I took my licks and sold the entire position. I will keep it on the radar as I still believe in the business, but I won't be along for the ride until we see growth return.

The Trade Desk - TTD's stock price took a dive going into earnings after several other ad dependent businesses struggled due to issues with supply chain shortages. Much to my liking, TTD reported a strong quarter with YoY growth of 39% and the stock price rebounded accordingly. TTD is the slowest growing business I own however, they are very profitable and I feel confident in the long-term thesis and Unified ID 2. I have high confidence in Jeff Green and think this is a business that can continue to grow at 30%+ with ~40% adj EBITDA margins well into the future.

Upstart - Ah, the talk of the town. Like many here, I was feeling confident going into Upstart's report and added slightly to my position at $322 and $310/share ahead of their earnings. While I was not expecting another 25% beat this quarter, I was hoping to see revenue come in somewhere between 20-30% QoQ. Unfortunately for us, revenue only grew 18% sequentially and the stock has tumbled 20%+. In addition to this, the number of loans transacted and transaction volume both came in below what I was hoping for. With that being said, I think the saving grace for this report was the guidance. If they beat by 9% again next quarter, that will mean revenue accelerates to 24% QoQ. While I can understand the disappoint to see revenue go from 60% to 18% QoQ, I don't think it should be too unexpected given that there is very little recurring revenue with this business. Overall, I did not see many red flags this quarter and think the best is still yet to come for this business. As a result, I added slightly to my position after earnings at $264/share, however I will probably let the dust settle before adding any more. It is important to note that unlike many here, I did not have a 20%+ allocation going into earnings. I feel comfortable with it around 12% of my portfolio today as I believe they we could see a strong year in 2022 thanks to their auto loans and potentially in 2023 if they can crack into mortgages. I think it is certainly possible UPST continues to grow around a 20% clip sequentially next year as they continue to add bank and CU partners in addition to auto loans. My hope is this does not turn around to be another Zoom like scenario but given their Q4 guidance and pipeline, I don't foresee that happening.

Monday - I would rank this report as up there with DDOG as one of the best of the quarter. Revenue grew 95% YoY and 18% QoQ while adj gross margins improved to a record of 88%. A similar beat over their guidance next quarter would result in the exact same growth. Adj operating margins improved from -72% to -11% YoY !! Enterprise customers (those with ARR > $50K) grew to 613, up 30% sequentially while their NDRR expanded to a record of 130%. Overall, a super strong quarter in my eyes. The stock ripped up ahead of earnings then tumbled right back down after this great print. I took advantage and added to my position at $375 and $360/share. The lock up expires tomorrow so I would expect more volatility over the next 24 hours but I will likely continue to add as this is becoming a high confidence position.

Affirm - I had a good feeling about this report as Affirm have been on a tear adding new partners left and right - Amazon, Shopify, Target, American Airlines, etc. I also expected them to provide very strong guidance as we embark on the holiday season in the US. Thankfully for me, both of these theories proved to be accurate. Revenue grew 55% YoY however it is the guidance that gets me giddy. The $325m guidance at the midpoint would result in 21% growth QoQ, their highest in two years !! And I am sure they will beat this by a fair amount. Additionally, this guidance does not even include any revenue from the Amazon partnership! Which, by the way, just expanded to become available to support all eligible purchases of $50 or more on Amazon in the US! And, Affirm will serve as Amazon's only third party, non credit card, buy now, pay later ("BNPL") option in the US! Wow! For Affirm to be fully entrenched as the BNPL partner for both Amazon and Shopify tells me all I need to know. In this quarter alone, Affirm increased their active merchants from 29,000 to over 102,000 thanks to the Shopify launch. I see them as the defacto leader in this space. I also believe their Debit+ card will see a big adoption. The stock went on a wild ride over the last 48 hours as it was down ~16% yesterday only to rebound 16% today. The stock market is fun, isn't it :) As for me, I added to my position before and after earnings around $154/share and will likely continue to add. I bet they blow the doors off their $325 guidance in Q4.

Celsius - This is a business that does not get much, if any, attention on this board. I suspect that is likely because it sells an energy drink and has no software/recurring revenue feature. I figured I would share it here because I think it deserves some attention. They just reported this morning so I am still working through it (did not get to listen to the CC this AM and their IR website is terrible), but the report looks strong at first glance. Revenue was $95M good for 158% YoY and 46% QoQ growth !! This is the fastest they have ever grown and I believe the trend will continue. Anecdotally, my wife and I plus many of our friends love their drinks. We subscribe to receive a 12 pack every month via Amazon (some recurring revenue for CELH, I suppose). It is stealing market share from Monster and Red Bull as it is tabbed a healthier option. Because I see how much people love this brand first hand, plus their amazing growth, I took a small position prior to earnings and added to it today at $99/share. It is the smallest position in my portfolio at only 2% however I think there is plenty of room for this business to run at its current valuation of $7B. It will never demand a SaaS premium but it deserves some recognition if it is going to continue to grow 30%+ sequentially as its done each quarter this year.

Cheers,
Rex
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No. of Recommendations: 61
Rex,

Thank you for this post. I will add a couple of comments regarding NET, since I had the same struggles trying to understand the stock growing valuation.

I believe the egress fee elimination on the R2 public cloud data storage was the biggest driver for the recent jump, as CloudL talked about it on Saul's thread about NET last week. However, this is a price decision and, to me, pricing is not MOAT. AWS could do the same (it would suffer, but would recover).
So, it had to be something else. So I started talking to others in the industry, including a friend at Google Cloud. Then it came to me: what does NET has that AWS and Azure do not? It comes down to local networking and connectivity. NET is building a global network where, according to their IR presentation for Q3, 95% of the world population is within 50 milliseconds from their cloud (aka their datacenters, this is a big deal. Most, if not all apps, run well with this latency). This is huge! All this points of presence (more than 250 cities, +100 countries) bring Cloudflare networks really close to their customer's business. In some cases, they can even be ion your building and you would need to buy nor manage firewalls and routers.

AWS and Azure don't have this capillarity. They will serve your business with scale, but only once you are in their network. NET is getting their network closer to your business. And the sentiment is that AWS and Azure are too late to start building a network like this.

To expand on this point, Matthew Prince said this on the call:
I'll predict that the sleeper announcement from our Birthday Week that might be the most impactful to our business over the course of the next 10 years will be Cloudflare for Offices. And what we have seen is that the excitement from landlords and real estate groups about being able to offer Cloudflare services to their tenants is much higher than we actually expected, not only at the time of the announcement, but then subsequently.

I checked NET's balance sheet and they have an asset item called "Operating lease right-of-use assets" at $101M (from $43M at December 31st, 2020), which shows how Cloudflare is executing on this network and Point-of-Presence expansion.

In summary, the fee structure is the current competitive advantage, but the real moat is the network capillarity. I had exited as well and now I'm building the position back up again. I'm convinced that NET is in for a long run.

Rod
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