Axie to Infinity
The #1 most downloaded app. Docebo update. The hottest month ever recorded.
Hi all 👋
heads-up: I will be switching to a bi-weekly cadence, as I am following several interesting technologies and companies on which I want to dive deeper and write up analyses without sacrificing research quality. This means that every other week I will cover a specific topic or company in more detail, starting next time on Aug. 29th and then every other Sunday.
Let’s dive in!
NEWS RUNDOWN | PORTFOLIO | OUTSIDEUnity
Whether or not you know the company, you’ve almost certainly used something built with its software. It’s the 2D/3D engine powers many of the video games out there, regardless of what console or platform we’re talking about. Studios use it to make animated movies. Automakers use it to help design cars.
This week Unity announced its intent to make its biggest acquisition to date with the $320 million purchase of Parsec.
One company buying another is hardly rare news, but Unity’s Senior Vice President suggests that it could be the beginning of a bigger shift.
So what is Parsec?
Parsec started as a way to stream games from you to your friends, allowing for long-distance multiplayer in games that otherwise didn’t support it.
During the pandemic with everyone being at home, the company found that many of the features it had built for playing games remotely (like low latency streaming) were also very important to the developers building games remotely.
They embraced their newfound customer group and quickly rolled out plans and features specifically for game developers. The shift worked out well for them and the company went from raising $25 million to now getting acquired for nearly 13x that within less than a year.
“I think you’re gonna see that Parsec is a great foundational block for a broad sort of cloud ambition that we have as a company,” he says. “You’re going to see a lot more from us in that particular regards.” - Unity SVP Marc Whitten
Even only considering what Parsec immediately brings to the table, there’s multiple potential paths to the cloud here. They could use Parsec to help Unity developers more easily add multiplayer to their games; they could use it to build a Stadia/Amazon Luna-style game streaming service that showcases Unity-powered games sans downloads; they could use it to offer up beefier hardware-in-the-cloud rentals to help smaller studios iterate more quickly or test on a wider range of devices.
Softbank China
Following China’s crackdown on Tech companies which I briefly wrote about last week, SoftBank is holding off on new investments in China until the situation cools down. Link
TikTok
.. has overtaken Facebook as world's most downloaded app, according to data compiled by Nikkei based on data from App Annie. Link
Axie Infinity
The Ethereum-based NFT game, was launched in 2018 and already generated over $1 billion in sales. There are not only people quitting their jobs because they earn more money playing Axie, but also there are companies providing loans / sponsorships to players to pay the set-up costs of a few hundred dollars. Looking at the user experience of the game, I am surprised by this success story. Link
NEWS RUNDOWN | PORTFOLIO | OUTSIDEActive Investments
Bill.com (BILL) - Target price: $100. Analysis
Pexip (PEXIP) - Target price: $15. Analysis
Docebo (DCBO) - Target price: $85. Analysis
Docebo reported its Q2-21 performance this week.
Financials:
Annual Recurring Revenue (ARR) of $93.4 million, an increase of $36.4 million from $57.0 million at the end of the second quarter of 2020, or an increase of 64% YoY
Revenue of $25.6 million, an increase of 76% from the comparative period in the prior year; beating estimates by 11%
Subscription revenue of $23.6 million, representing 92% of total revenue, and an increase of 76% from the comparative period in the prior year
Gross profit of $20.5 million, or 80% of revenue, decline from the comparative period in the prior year
Net loss of $7.2 million, or $0.22 per share, compared to net loss of $3.5 million, or $0.12 per share for the comparative period in the prior year, and vs an estimated loss of $0.08 per share
Cash balance of $216.3 million
Overall this is in line with what we see at other SaaS companies in Q2: Many beat revenue expectations but disappoint in earnings. Companies focus on driving growth by increasing their spending (mostly sales & marketing). Docebo has enough cash on its balance sheet to finance growth with higher cash burn in the short term.
Operations:
The number of customers increased from 1,923 at the end of June, 2020 to 2,485 customers June this year and the average contract value jumped from $29,616 to $37,569
Significant new logo wins include Lululemon, world-leading retailer in athletic apparel, RE/MAX, global real-estate leader, Red Roof Inn, leader in the lodging industry, JELD-WEN, global manufacturer of high-performance interior and exterior building products, TotalEnergies, a multinational integrated oil, gas and new energies company, and SkinCeuticals
Launched Docebo Community, a centralized place to connect with other customers, partners, and Docebo experts to share best practices, get answers, and find inspiration to get the most out of the Docebo experience
My take-aways:
The company continues to perform well beyond the pandemic-driven boost from 2020.
Management prioritizes growth over profitability, which is the right thing to do. Right now enterprises are looking for a cloud-based learning platform for employees, customers, partners, etc. So gaining market share now is crucial. Stickiness in the market is high, customers are unlikely to switch to another platform once they are installed. So growth is most important at the moment, profitability can come later when a more dominant market position has been established. Docebo has sufficient liquidity to finance additional growth in the foreseeable future.
Since I initially recommended the stock in February, the share price has increased +61%. At an enterprise valuation of 22.6x ARR today, Docebo is not cheap anymore. However, based on the company’s strong performance, Docebo is still slightly undervalued and I adjust my price target to $85.
ECOMI (OMI) - Target price: MOON. Analysis
NEWS RUNDOWN | PORTFOLIO | OUTSIDE🔥 July 2021 was officially the hottest month humans have ever recorded.
🌎 Just 11% per cent of the Pentagon’s $716bn annual budget would be enough to produce wind and solar energy to power every home in America.
😎 The $80,000 James Bond-experience travel package.
If this was this forwarded and you want to get your own copy every other Sunday 👇
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Thanks for reading! Until next time
Christopher