February Portfolio Company’s Earnings Report

Fiverr

Financial Year (FY) ended December 2020

3 highlights

  • Revenue increased 77% year over year to close at $189.5 million.
  • Active buyers grew to 3.4 million, from 2.4 million a year ago, an increase of 45% year over year.
  • Spend-per-buyer reached $205, compared to $170 a year ago, an increase of 20% year over year.

Chances are high you’ve heard about the Fiverr before. Fiverr is a platform that connects service providers with those who need such a service. It reported its Q4 and full-year report in February.

Fiverr is a high-growth company at the edge of reinventing the future of work. Its revenue grew 77% YoY to $185.5 million. The gross margin for the year was 82.5% compared to 79.2% from 2019. While still a loss-making company, its net loss in 2020 was $14.8 million, this is a great improvement from 2019 that ended with a net loss of $33.5 million.

The numbers are impressive and we see a company that is ready and positioned to capitalize on its advantages. Especially when those advantages present themselves as they did in 2020.

COVID-19 accelerated the gig economy trend that has been growing in silence for the past 10 when Fiverr was founded. And Fiverr undoubtedly was well-positioned to be a primary benefactor. The company saw active service buyers on its platform increase by 1m to 3.4m. As of 2019, they were just 2.4m and that’s a journey that took 10 years. These active buyers also increased the average amount that they spend on the platform from $170 to $205, a 20% increase YoY.

This full-year report shows a company that is set to accelerate growth in the future since the gig economy trend is expected to continue growing. From the numbers, we can also deduce that platform users are willing to spend more and service providers naturally will flow in once there is a demand for their skill.

As the founder and CEO, Micha Kaufman said during the earnings call, “2020 was a landmark year for our business with 77% year over year revenue growth driven largely by bringing more freelancers and businesses together during a critical time of global change.” He continued and said, “We are carrying that momentum into the new year and I’m thrilled about what lies ahead for us in 2021.” In FY 2021, Fiverr expects about 50% revenue growth.

We have no intention of rotating out this fast-growing company from the portfolio yet. So you can keep an eye on it just as we are keeping ours on it.

Trade Desk

FY ended December 2020

3 highlights

  • Revenue grew 26% year over year from $661.1 million to $836 million.
  • Customer retention still maintains a record level of 95% for 6 years in a row.
  • Increased partnership. Trade Desk added 10 new partnership deals in 2020 and expanded some contracts on existing partnerships.

Trade Desk is not a typical company that we would expect that you’ve heard about before. The company is not consumer-facing and hence, you may not have heard about them as you would Google.

Trade Desk is The Trade Desk™ is a technology company that empowers buyers of advertising. Their cloud-based platform empowers partners to maximize their ad spend for maximum and impact.

2020 was a particularly tough year in digital advertising. With research expecting a decline in ad spends due to the COVID19 impact. Yet, Trade Desk increased all its numbers across revenue growth, earnings per share, and partnership and including winning an industry award.

Revenue grew 26% year over year and earnings per share grew to $4.95 in 2020 from $2.27 in 2019. The number of partners, those that use its platform increased significantly as well adding 10 new partners and expanding service offering to existing partners. Notably, TikTok the new media sensation in the market.

The CEO admitted that COVID19 impacted their business and that they would expect the impact to last into 2021. He said during the earnings call that “the business has been impacted by the COVID-19 pandemic that has significantly impacted advertiser demand. Like many companies that are ad-funded, we are facing a period of higher uncertainty in our business outlook. We expect our business performance could be impacted by issues beyond our control.”

Yet, putting matters which are under their control into consideration, the company expects revenue of $214 — $217 million in the first quarter of 2021. With the COVID19 vaccine proving to be effective, we expect it wouldn’t impede Trade Desk business.

Trade Desk remains in our portfolio and we will keep you updated about its business operations.

Upwork

FY ended December 2020

3 highlights

  • Gross service value (a measure of all money spent on the platform) increased year over year by 21% to $2.5 billion.
  • Net loss increased to $22.9 million from $16.7 million in 2019.
  • Revenue grew by 24% to $376.6 million in the year.

With a similar business model to Fiverr, Upwork is the world’s largest work marketplace that connects businesses with independent talent, as measured by gross services volume. 2020 was a year when we all migrated online to get our work done. And some migrated to provide their services online. Upwork is at the forefront of enabling that transition.

Upwork grew Gross Service Value in 2020 by 21% and increased revenue by 24%. Increasing marketplaces take rate by 13.6% from 13.1% from 2019. Net loss during the same period increased to $(0.19) per share compared to $(0.15) per share in the previous year.

During the earnings call, Hayden Brown, the President, and CEO said “there is a new openness across the spectrum of our clients to rethink not just where work happens, but to rethink who does the work and how it gets done.” He continued and noted that “to unlock the tremendous potential ahead requires Upwork being the work marketplace for the work.” And this will be the focus of Upwork in 2021.

In her revenue guidance for FY 2021, Upwork expects revenue in the range of $460 — $470 million. Which will represent another 25% revenue growth for the year. This is bearing in mind considerations of COVID19 impact.

Upwork plays at the edge of a new normal that is rapidly growing. It will remain in the portfolio and we will keep an eye on its growth.

Square

FY ended December 2020

3 highlights

  • In 2020, Square reported a gross profit of $2.73 billion, a 45% increase over 2019.
  • Cash App generated $1.23 billion in gross profit, up 168%.
  • Subscription and services-based revenue were $1.54 billion, up 49% year over year.

Square’s stock price grew by almost 250% in 2020. A high level of optimism for a company like that. An optimism which we share and the numbers came in to support that.

Revenue grew 34%, 64%, 140% and 140.5% for Q1, Q2, Q3/and Q4 respectively. In the full financial year, revenue grew 101% to $9.5 billion. With all margins also growing at a high double digits rate.

In a note to shareholders, Square said “in 2021, we are focusing our investments on customer acquisition and product innovation. We have achieved attractive returns on our sales and marketing investments as customers have turned to our ecosystems to help them in dynamic environments, and we intend on continuing to expand and strengthen our product offerings.”

2020 was a phenomenal year for Square growing at 3 digits rate. We look forward to more growth and we will keep our eyes on the company and its many attempts to continue on its growth path.

Berkshire Hathaway

FY ended December 2020

  • Bought back about $25 billion of stock in 2020.
  • Available cash and short-term Treasury bonds totalled more than $138 billion.
  • Net investment gains were $30.8 billion, up by 24.6% year over year.

Run by Warren Buffet and Chalie Munger, Berkshire is like any typical company that is reporting earnings this week. The business of Berkshire is to invest in companies that the managers believe worthy of investment. And with a trove of cash of $138 billion, Buffet noted that he could find no business at a good value to invest in and so they made a share repurchase of up to $25 billion in 2020.

In his annual investor’s letter, Buffet wrote, expressing optimism about the American economy, “despite some severe interruptions, our country’s economic progress has been breathtaking. Our unwavering conclusion: Never bet against America.”

You know what, we are currently betting on America not against it. Never against it. We believe strongly in the economy just as much as Buffet does.

Domino’s Pizza

FY ended December 2020

3 Highlights

  • Global retail sales increased by 12.5%.
  • Domino’s had 624 net store openings.
  • Earnings Per Share (EPS) was $12.39, up 29.6% over the prior year.

“We celebrated our 60th year as a company in 2020, and while it was a challenging year in so many ways, it was also a year that saw the Domino’s brand rise to the occasion all over the world,” said Ritch Allison, Domino’s CEO. Despite the pandemic and the eventual lockdown, global sales rose to $4.1 billion, an increase of $13.9% from the previous year.

Metrics across all business segments also increased. Net income as a percentage of revenue increased from 11.1% in 2019 to 11.9% in 2020. Global retail sales increased by 12.5% in fiscal 2020, and U.S. same-store sales grew 11.5% for the full year. Fiscal 2020 diluted EPS was $12.39, up 29.6% over the prior year.

In the fourth quarter alone, a share repurchase of up to $225 million was executed and the board of directors has approved another plan to repurchase up to $1 billion in a new plan. The implication of share repurchase on stock price is the reduced liquidity of the stock which may lead to an increase in the price of the stocks.

Commenting about the fiscal, the CEO said “we led with our values first and delivered an outstanding year of growth and financial performance. This past year, a year like none other, reminded me once again that Domino’s has the best group of global franchisees and team members in the restaurant business.”

We can’t wait to see what this best group of global franchisees and team members have in stock for us in 2021. One thing though, make sure to buy Domino’s Pizza always whenever you want to. Domino’s Pizza retains its position in our portfolio.

Extended Stay America

FY ended December 2020

3 Highlights

  • Net income of $96.3 million for the Full Year. A decrease of 41.6% from 2019.
  • For the full year of 2020, total revenues declined 14.4% to $1.04 billion driven by the decrease in hotel revenues as a result of the impact of the COVID-19 pandemic.
  • Announces quarterly distribution of $0.09 per Paired Share

Extended Stay America operates in one of those industries that were negatively affected by COVID19, the hotel industry. Yet, the company had a good financial outcome relative to the industry benchmark. As the President and CEO Bruce Haase, commented, “We are pleased with another strong quarter as we continue to outperform every industry benchmark, improving our Re PAR (revenue per available room) index by 40% against our closest competition during the fourth quarter. Through last week, Extended Stay America has now had 65 consecutive weeks of RevPAR index gains dating back to well before the pandemic, demonstrating the growing strength of our model relative to the overall lodging industry.”

The numbers no doubt suffered a lot of declines. Net income declined by 41.6% and revenue declined by 14.4%. However, the management has shown enough resilience to wither the challenges. A quality we look out for while choosing a company to invest in.

The President and CEO, commenting about 2021 said “As we move into 2021, we are very excited about our growth prospects and opportunities. Today we unveiled our new brand segmentation strategy with the launch of the Extended Stay America Premier Suites brand, in addition to our core hotels to be branded as Extended Stay America Suites. And, we continue to see opportunities for growth from improvements to our commercial engine and operating performance as well as unlocking value in our REIT through accretive asset transactions.” These are ambitious plans and we are waiting for them to come to fruition.

In the meantime, note that once we get the fourth-quarter dividend, we will reinvest them for you.

February was an interesting month and the stock portfolio overall returned a positive 5.97%.

Thank you for trusting us with your money. Our commitment remains giving you access to the best investment opportunities available within a risk threshold.

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Categorized as Stocks