Portfolio Update: 5/16
No moves last week as I am building my cash position (through cash infusions, not selling). The market is in a clear, powerful downtrend and I am taking a wait-and-see approach. I’m also evaluating where I want to deploy cash, based on earnings results. With that being said, here are my thoughts on portfolio holdings that reported in the last week.
Pubmatic (PUBM) Earnings
Revenue: $54.6M (met expectations)
Non-GAAP EPS: $0.14 (beat by $.04)
Net dollar-based retention: 140%
Total impressions: 32.6 trillion (+76% YoY)
41% growth in CTV (5x over Q1 2021)
176 CTV publishers
Added 3 of top 5 CTV manufacturers to the platform
Expanded partnership with GroupM (CTV-focused programmatic marketplace)
Maintained guidance
I thought the report was great. As usual, the company met or beat expectations while providing consistent guidance. CTV is clearly a focal point, which is not surprising considering it is one of the fastest growing ad sectors in digital advertising. Business-wise, I love what I am seeing.
My plan going forward is to add more shares to this name. This is already ~4% of my portfolio, which is getting pretty close to my maximum position size. However, unlike a number of holdings, this company is profitable and nearing dirt-cheap levels. I’ll be looking to make another purchase in the coming weeks.
GoodRx (GDRX) Earnings
Revenue: $203M (+27% YoY)
Net Income: $12.3M (+637% YoY)
Monthly active consumers: 6.4M (12% growth)
Subscription plans: 1.23M (29% YoY growth)
Lowered guidance
GoodRx had a horrible Q4 2021, and seemed to (temporarily) redeem themselves with a pretty good showing in Q1. Revenue growth was solid, net income numbers were very impressive, and active users/subscription plans came in with decent growth numbers as well. The problem is that they lowered guidance due to a potentially thesis-altering PBM issue. Basically, a specific grocery chain stopped accepting PBM discounts for certain drugs. Seeing as this is GoodRx’s primary business model, this could be extremely bad for business. I am watching to see if this can be resolved, but as of right now it is concerning.
The good is that the financial numbers were good and they closed the vitaCare acquisition. This will help bolster subscription services by improving the likelihood a patient will fill a prescription. GoodRx paid all cash ($150M from their $993K cash balance), which is nice because it is a relatively low-medium risk acquisition that does not dilute shareholders.
My plan for GoodRx - I am not adding to this position right now. There is too much up in the air and announcements like this PBM problem do not bode well for the future of this company (if they cannot get it resolved). I still think this could be a great company long-term because I love what they bring to consumers, but I will be cautious with adding in the near future.
Unity (U) Earnings
Revenue: $320M (+36% YoY)
Non-GAAP EPS: ($0.08)
Dollar-based net expansion: 135% (140% in Q1 2021)
Customers over $100K revenue: 1083 (837 in Q1 2021)
Free cash flow: $86M (vs $100M Q1 2021)
$1.2 Billion in cash
The results were pretty good, but the stock got destroyed because of the company’s lowered guidance. Unity apparently had an issue with their AI ingesting some bad data from one of their customers. This, in turn, caused some monetization issues that they expect to impact the next several quarters. On one hand, I appreciate the transparency. However, this is a serious problem for near-term performance because it will impact the rest of the fiscal year. It also begs the question of how this happened in the first place. I’m not really sure what this “bad data” consists of, but I am placing a lot of faith in management in the hopes that this does not happen again.
With the sell-off in this stock, I am undecided about what to do. As cash comes in, I will probably keep this in the ~3% range, but it is not at the top of my add list right now.
Trade Desk (TTD) Earnings
Revenue: $315M (beat by $11M) +43% YoY
Non-GAAP EPS: $0.21 (beat by $0.07)
95% customer retention rate
Cash: $844 (almost doubling YoY)
Revenue guidance unchanged but management noted they expect to “at least” meet guidance
Trade Desk reported another outstanding quarter. Jeff Green and his team continue to beat expectations and outperform in a tough macroeconomic environment. They continue to make CTV a focal point, especially amidst the news that Netflix and Disney+ intend to adopt advertising models. In fact, “Netflix” was spoken 36 times over the course of the conference call, indicating that Trade Desk may be hoping to capture what could potentially be an enormous market opportunity.
This company continues to be my highest conviction holding, and I plan to keep deploying cash to keep this a 5% position as the general market drags the entire portfolio down.
Olo (OLO) Earnings
Revenue: $42.8M (slight beat) +18% YoY
Non-GAAP EPS: $0.01 (beat)
Locations: 82,000 (+19% YoY)
Average Revenue per User (ARPU): -2% YoY but +2% sequentially
Dollar-based net revenue retention: 107% (down from 120%)
$463M Cash balance
The numbers overall look pretty good, considering most online commerce took a hit from the pandemic levels. Olo attributed ARPU drop and lower NDBRR to this as well as the end of operations under a door dash agreement. Management stated that they expect these two numbers to accelerate in coming quarters. I was, however, a bit discouraged by the negative cash flow ($3.4M). The company is still sitting on a nice cash position and that number is only down $7M from Q1 2021, so this isn’t anything I’m worried about.
Olo demonstrated the ability to expand into new verticals by deploying the ordering module at Kwik Trip, which represents a potential 55,000 location market. Management also noted that customers were extremely excited about Olo pay, which is the latest product released on the platform. Adoption of new products always excites me. These are positive developments that will only serve to expand Olo’s moat.
I was very encouraged by the Q1 results, and will be continuing to slowly add to this position, which at this point is around 3% of the portfolio.