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Tag: Profitability

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Enterprise Software Stocks

Confluent’s Strong Earnings Report: A Step Toward Profitability

Confluent (CFLT) Post Market $30.50 up 8%.

Confluent delivered better-than-expected results for the March quarter, with beats on revenue and adjusted earnings.

Adjusted Earnings came in at $0.05 per share against the $0.02 estimated and revenue at $217 v $211 expected.

Guidance was raised slightly in Q2 and FY 2024 as under:

Adjusted earnings – $0.04 to $0.05 V consensus of $0.04

Revenue $229-$230 v $229.3 expected. Growth 21.5%

EPS $0.19 to $0.20 v $0.18 consensus estimates

$957Mn revenue V $ 952.8 estimated – Growth of 23%

Confluent is swinging from adjusted losses into positive territory as promised to investors, though still far from GAAP profits, which would take at least two years.

Growth momentum remains, and I last accumulated at $28-29, which I plan to continue doing.

Will update further after the call.

Categories
Fintech

MoneyLion: A Fintech with Roaring Potential but Credit Risks to Watch

source

MoneyLion (ML) $76, Fintech

Positives

Diverse base of revenue (subscription fees, interchange, interest, etc.).

Both consumer and fast-growing enterprise segments, with more than 1.1K channel partners, enterprise now accounts for about one-third of its overall revenue.

The online marketplace for third party vendors is a great idea to increase its offering options in areas like insurance, credit cards, and mortgages. At the end of Q4, about 48% of the products used by its customers were from third parties, up from 26% at the end of last year, showing its expanding marketplace.

ML management striving for GAAP profitability should be a positive catalyst.

Ernst & Young, EY partnership is also positive.

Customer acquisition costs are low at $15, they can expand without hurting profits.

Negatives and Risks

The biggest risk is credit – so far it has been under control, but as we’ve seen with Fintech, things start spiraling out of control very fast, without proper guardrails in place.

Credit quality remained steady. Its provision expense as a percentage of total originations was 3.4% for the full year – THIS MUST BE WATCHED FOR DETERIORATION. Management usually warns and expects over 4% of losses so they’re not downplaying the credit risk.

Valuation

112x adjusted earnings per share, with the hope of 300% growth in 2025. Much lower on adjusted earnings. Still high, but if earnings materialize the P/E drops to 26. Clearly the lion needs to roar.

If you have the capacity for some credit risk, this is potentially good and can return in excess of 20% per year.

Categories
Enterprise Software

UiPath (PATH) Earnings Update: Impressive Growth and Profitability Achievements

Earnings update – UiPath (PATH)

Excellent results all around, a lot of growth initiatives from new products and partnerships, the emphasis on execution and profitability was appreciated. The 20% cash flow margin for FY2025 is impressive.They seem to be walking the talk. 

Q4 – FY 2024

  • Non-GAAP EPS of $0.22 beats by $0.06.
  • Revenue of $405.25M (+31.4% Y/Y) beats by $21.56M.
  • Achieves first quarter of GAAP profitability as a public company

Full Year Fiscal 2024 Financial Highlights

  • Revenue of $1.308 billion increased 24 percent year-over-year.
  • Net new ARR of $260 million.
  • GAAP gross margin was 85 percent.
  • Non-GAAP gross margin was 87 percent.
  • GAAP operating loss was $(165) million.
  • Non-GAAP operating income was $233 million.
  • Net cash flow from operations was $299 million.
  • Non-GAAP adjusted free cash flow was $309 million.

2025 Outlook: 

  • Revenue in the range of $1.555 billion to $1.560 billion, better than 1.550 expected.
  • ARR in the range of $1.725 billion to $1.730 billion as of January 31, 2025
  • Non-GAAP operating income of approximately $295 million – 18% margin.
  • Full Year Non-GAAP cash flow should be around 20% of revenues $310Mn
Categories
Fintech

Block Inc (SQ) at $66: HOLD, Profitability Focus Could Unlock Value

source:

Block Inc (SQ) $66 Previously known as Square. HOLD

Square has underperformed the market in the last 5 years in a big way, with a negative total return of 10%. When it started, it showed a lot of promise in a cyclical commodity industry of payment processing with the ease of installation, mobile applications and payments, good easy user interface, which differentiated it from the crowd. The Cash app also promised a good deal, with solid growth for years, and is now being well monetized. But the focus on crypto turned off investors from these strengths, especially when Block’s crypto trading account is heavily exposed to crypto performance and pricing. For example, out of $16Bn in 9 months of last year’s revenue, $7Bn was crypto trading VOLUME with a cost of $6.86 Bn with only $140Mn in gross commissions. Institutional investors and analysts like me object to such a loose interpretation of revenue accounting – Square is not a $16Bn company it is a 9Bn company. Secondly, out of the 25% revenue growth in the last 9 months, crypto volume grew 30% compared to the rest of the company’s 21% growth.

The rest of the payment processing business is good, but not GAAP profitable and for a company that has been around for 15 years, that is a sticking point – Stock Based Compensation for the last nine months was almost $1BN so that is going to take a while. However, adjusted operating profits are over $500Mn so that’s a plus and operating cash flow was $450Mn, decent but only 5-6% of revenues.

That said, this company has a lot of scope, especially in its cash application, which now has $22Mn MAU’s Monthly Active Users, and is growing well. Management has promised operating cost discipline in their last call, they have to – there are no significant, sustainable long term competitive advantages in payment processing – it’s a cookie cutter business, with some new wrinkles every few years.

Bottom Line – We saw how well Meta got rewarded last week with their focus on profitability, so if Block continues to execute and focus on it – this could be a surprise and a good gain. The stock has moved up more than 70% from its 52 week low of $39. The valuation is not bad with a P/E of 25x adjusted earnings with adjusted EPS growth of 25%

I would wait till I saw further signs of good execution.

Categories
AI

Palantir (PLTR) Surges 18% to $19.61 Post-Earnings: A Long-Term Buy Opportunity

source:paltnir

*Palantir – $19.61 Post Earning pop of 18%!*

*One can start nibbling at around $19.60 BUT spread out purchases on declines, there should be declines after this post earnings bump and since this is a long term story I still anticipate 15-16% of annual gains over the next 5 years.*

The Reasons for the post earnings pop.

I think the trend of rewarding profitability as in the case of Meta last week seems to be working for Palantir as well. 

Investors are seeing that Palantir is serious about cost control and better margins. With revenue growth in the low 20’s overall, with the main catalyst being commercial customers, Palantir is doing the right thing by focusing on profitability.

Consider these metrics for Q4, which indicate a lot of progress since the days when Palantir didn’t care about profitability….I guess the drop to $6.35 at its low changed their perspective quite a bit

Fourth consecutive quarter of GAAP operating profitability. 11% Margin.

Adjusted free cash flow of $305 million; 50% margin; 731Mn for the year.

Adjusted operating margin of 34%; 28% for the year.

Fifth consecutive quarter of expanding adjusted operating margins 

Fifth consecutive quarter of GAAP profitability; 15% margin

Commercial customer count grew at a very impressive rate of 55% – higher than the revenue of 32%, this is mostly normal for Palantir, they usually land and expand.

While the revenue guidance is just 1-2% higher than the previous estimate, there is  guidance for GAAP profits in each quarter, 40% commercial business growth and adjusted profit margins of 32+% and cash flow of 33% – that is very good.

The AIP (Artificial Intelligence Platform) seems to be getting a lot of attention.

I also suspect multiples and targets will also move up considerably, growth can accelerate from here.