1. CrowdStrike (CRWD) — CFO Burt Podbere Interviews with Jefferies and Needham + A Case Study & Some Market Share Data
a. Podbere Interviews
On competition (he was specifically asked about SentinelOne in both conferences) and pricing pressure:
“SentinelOne does a great job setting up awesome demos that look great. What happens after that is another story. We frequently talk about vendors choosing them and then boomeranging back to us because it just doesn’t scale and doesn’t deploy without a lot of false positives. This has been the most favorable competitive environment that we’ve ever seen.”
“Our win rates against the competition have never been stronger while we maintain and increase our pricing… This goes back to what we’ve been talking about — we’re selling a platform and value. We’re actually going in and offering better efficacy and lower total cost of ownership when you pull out the extraneous tools and consolidate on CrowdStrike. Better efficacy at a lower price which you can see in our numbers. People are willing to pay for the best. I think about our market leadership role and where it stands as similar to a Salesforce or ServiceNow. As they increased their leadership, competitors fell by the wayside. That’s what we’re seeing.”
The demand pipeline is currently sitting at record size. While the pandemic did serve as a tailwind (needed to protect all the new remote endpoints for distributed workforces), the company continues to have no trouble finding new annual recurring revenue (ARR).
CrowdStrike continues to grow its proportion of multi-year deals vs. single year deals — this inherently lends itself to better retention and more cross-selling.
On sentiment that other players have more AI and automation built into their platform:
“When you’re known for better efficacy and lower false positive rates that is evidence of our AI/ML working better.”
On why CrowdStrike chose to be cloud native with no parallel on-premise platform:
Burt pointed to two key benefits of being cloud native and exclusive:
- Ability to ingest, organize and conceptualize data more seamlessly with more scale.
- Immediate “time to value” for on-boarded customers.
“With respect to if a lack of an on-premise (prem) offering prevents us from expanding into different industries or geographies, we sell everywhere — across the world and to every industry. We have turned down many opportunities that have asked for on-prem, and what happens is that those companies end up coming to the cloud. Eventually it will happen for everybody.”
He reminded us that Salesforce also has no on-premise solution.
On the Cybersecurity and Infrastructure Security Agency (CISA) win:
“The CISA deal was extremely competitive and we won because of our efficacy. We’ll start in a few agencies. From there, we’ll be able to sell to more and more agencies. They’re a big seat at the table for all civilian agencies so winning that is an on-ramp into much bigger things. The ARR will ramp over the next 3 quarters.”
CrowdStrike expects this to become “one of its largest clients” and is currently contributing $0 in ARR for the company. The growth here is entirely ahead of it.
On the cloud workload opportunity:
“Cloud workload protection (CWP) is a greenfield opportunity. It’s not like there’s a legacy player out there and we’re taking market share from them. There’s not even a legacy player there. The $10-$15 billion market is completely underserved. We think there’s a real opportunity for net new ARR to be 50% or more from CWP in the future.”
On costs moving forward:
R&D spend will outpace S&M spend going forward.
CrowdStrike expects share dilution to be in the 5-6% annual range going forward to compensate employees in a tough environment for hiring and retaining cybersecurity talent.
b. Transpak Case Study
Transpak — a logistics company founded 70 years ago in Silicon Valley — was struggling to fend off malware attacks and other breaches amid its rapid growth. The company evaluated several close alternatives and chose CrowdStrike’s Falcon Platform due to its ease of deployment, seamless anti-virus replacement/upgrading, and immediate time to value.
“The tools that CrowdStrike Falcon provides give me the ability to sustain our business processes to keep the systems running. I wish I had more tools that were as easy to deploy, maintain and manage as the CrowdStrike Falcon Platform. It increased the value of my security program.” — Direct of IT at TransPak Mark Sauer
Transpak also purchased Falcon OverWatch to take advantage of CrowdStrike’s managed hunting team.
c. Market Share Update
In late 2020, CrowdStrike published a graphic depicting its 12% market share within modern endpoint security. For 2021, it was ranked #1 by IDC for modern endpoint security share. CrowdStrike now boasts a 14.2% market share. There remains a long, long runway of legacy business for next-generation vendors like CrowdStrike to take.
2. Upstart (UPST) — New Partner
Upstart announced AgFed Credit Union as the newest member of its referral network. The two companies had been working together for a few months, but this now frees Uptart.com-sourced loans to be referred to this credit union. Referral fees are Upstart’s largest revenue segment by a sizable margin.
AgFed is quite small with only a few hundred million in assets under management (AUM) but any bank and credit union adoption is positive as it creates a more defensible take rate and growth trajectory for Upstart. Click here to learn why.
My Upstart deep dive will be published later this month.
Click here for my broad overview of Upstart’s business.
3. Teladoc Health (TDOC) — CEO Jason Gorevic and CFO Mala Murthy Present at J.P Morgan’s Healthcare Conference
a. Preliminary Q4 2021 results and a reiterated 2021 investor day outlook
Teladoc Health released an 8K in conjunction with this presentation which offered a glimpse into the company’s most recent quarter. Gorevic augmented that release with more information on the period. Here’s what we learned:
- Teladoc now expects $2.03 billion in 2022 sales vs. $2.015-$2.025 billion previously guided to. This implies a 2% 4th quarter beat.
- Teladoc’s total visits are now expected to be at or above 14.7 million for the quarter vs. previous guidance of 14.5-14.7 million.
- Retention rates remained in the 90% range.
- Total membership is expected to be in line with expectations at 76.5 million.
- The company remains “very comfortable” with its 2023 revenue guidance of $2.6 billion.
- Teladoc continues to expect $260-$265 million in EBITDA for 2021 and 1-1.5% annual EBITDA margin expansion through 2024.
“We will continue driving operating leverage while investing back into our business. This is a unique moment for us where we have an unrivaled ability to expand our competitive lead.” — CFO Mala Murthy
“The 4th quarter selling season was the biggest and most successful we’ve ever had at the company. We delivered 35% sequential bookings growth vs. the 3rd quarter and we are set up well for 2022… We’ve had some great early results and launches of Primary360 in the beginning of 2022.” — CEO Jason Gorevic
b. Gorevic on data
Teladoc’s unmatched scale (2 billion unique data points powering 500 million annual virtual interactions) gives it an unparalleled data treasure chest to offer more actionable and granular insights to its members. This fosters an ability to provide whole-person care (mental/chronic/primary) all in a remote setting and unlocks several more virtual use cases. In a field like Telehealth where barriers to entry are low and competition is abundant — this is how Teladoc differentiates itself.
“In virtual care, there have always been very low barriers to entry but significant barriers to success and scale. It’s the combination of all these leading capabilities that builds our moat which continues to get bigger.”
Examples of why data matters:
- More relevant referrals for pre-diabetics to go see a dietician.
- Better patient/provider matching — especially in mental health where the quality of the first match powers sustainable engagement. This drives better results and lower costs for all parties involved.
Along those lines, I still believe that the Livongo transaction was a great decision. Yes, it will continue leading to bloated net losses through the end of 2022 — but that has nothing to do with the underlying profitability of the combined entity. Livongo frees Teladoc to pursue exponentially more per member per month (PMPM) fees and will be a core growth driver this decade.
Specifically, Teladoc expects PMPM expansion (so product cross-selling) to power more than 80% of its revenue growth through 2024 thanks to its chronic care management, Primary360 and myStrength Complete products all being less than 20% penetrated. Livongo was a key piece to rounding out Teladoc’s whole-person care goals and creating a true industry leader — in my biased opinion. For evidence of cross-selling traction gaining steam, 25% of Teladoc members are enrolled in multiple programs vs. less than 3% in 2019. 75% of its new business in 2021 came from multi-product sales. There’s a fully mature opportunity of $68 PMPM for Teladoc’s portfolio of products vs. the $2.57 PMPM it realizes now.
“When you bring this all together, we give a better overall experience to the consumers and more value for the clients buying on their behalf. We’re becoming the default first stop for the consumer and the very first place a consumer can go for all their healthcare needs.”
Whether it’s relationship issues, inadequate primary care service, an ailment or a biomarker gone astray, Teladoc now has actionable services to seamlessly connect the end user to help. All of these pieces of healthcare are inherently connected — think about a relationship between mental health and weight loss for example — meaning gaps in care capabilities will have an adverse impact across all services provided. This reality makes whole person care not just more convenient for the employee, but more efficient and cost effective for the client. The company seamlessly integrates with hospital systems to plug people into physical care delivery wherever need be.
Gorevic frequently discusses how the separation of Teladoc from the rest of its competition is transforming the company from a vendor to a true partner for its clients and from a fee for service model to a model based on the risks of a population and the value Teladoc can provide.
“The more we expand our offering, the more we can take care of a population, positively impact their healthcare costs and therefore command a bigger part of the healthcare dollar in a value-based arrangement. We see a lot of interest from clients in leaning into value-based contracts. We’re in a unique position to do this in a way that others in the market simply can’t.”
c. Murthy on healthcare staff shortages pressuring Teladoc’s margins:
“There is some amount of inflation that we are keeping an eye on but we see no material impact on our P&L (profit & loss) in the short or medium term.”
d. Gorevic on competition and M&A/vertical integration:
“Our relationships with Centene, Aetna and Aon for virtual primary care are evidence of clients looking for a full suite of virtual solutions. They’re building an entire product and benefits package around our Primary360 product that can’t be done with a point solution.”
“With payers buying telehealth companies, it’s an interesting dynamic. Other payers are not interested in relying on a competitor for that strategic role in their product portfolio. When we think about Cigna buying MDLIVE that was actually very positive for us. It opened up a lot of the MDLIVE payer clients looking for a more neutral solution. We’ve seen growth result from that move.”
“We have a great relationship with UnitedHealth Group and Optum and we provide multiple products and services to them. We continue to grow our revenue and our role within their portfolio.”
e. Gorevic on the stock
“One of our values is keeping our promises. We’ve laid out appropriately ambitious growth targets and I’m hopeful we’ll be rewarded for keeping those promises. As we get into the second half of this year and put up more results around our new products — the investor community will begin to appreciate the returns on the investments we are making.”
4. Olo (OLO) — TikTok News + Founder/CEO Noah Glass Presents at the ICR Conference & With Needham
a. TikTok
TikTok announced plans to launch deliver-only kitchens across the U.S. starting in March. The social media giant will partner with Virtual Dining Concepts on the project — a company that already launched the wildly successful Mr. Beast Burger in tandem with Olo. The concept will operate out of established chains like Buca di Beppo with the menu being based on the app’s “most viral food trends.”
Olo has officially partnered with TikTok on this project to bring popular food concepts on the platform directly to fans and interested consumers. It will provide its digital ordering know-how along with its delivery bidding service that can make “12-minute from store-to-door fulfillment possible for the majority of the population.” The deliver-only concept is set to open 1,000 kitchens across the U.S. this year.