Earnings Season #4

Issue 4: Over 1,000 professionals now subscribe to Earnings Season. We have a diverse group of readers—Hedge Fund executives, SDRs, Investment Bankers, Marketers, Sales professionals….

In this issue:

Hubspot- Salesforce is not for everyone anymore.

Deere- What’s bright green and drives the economy besides US Dollars, John Deere

Shopify- It wasn’t enough for them to take over the internet.

Marriott- My favorite hotel brand comes cleaner than the robes at the JW.

James Hardie- Houses are cool, but the materials that make them are cooler.

Formula 1 Group- It’s not just racing, hard to believe but it’s true.

Why read Earnings Season?- Skip this is you already subscribe.

Every sales and marketing pro says they want to be an advisor to executives. But, over the years I’ve heard time and again, “I don’t know how to be relevant.” Well, here is the thing... Execs don’t think like sales and marketing people—they think like investors, and their language is the language of finance.

Earnings season is designed to help you unpack the business and financial information of the past week, and I don't mean the CNBC headlines. I want to help you pick up an insight, quip or bit of knowledge that you can share with your customers and prospects. To give you that bit of altitude you need to rise above just another product demo or cold email.

In every issue:

• What happened this week

• What's happening next week

• Government Data Release calendar

At the end of this issue: some ways you can incorporate these tips into your business!

-Chris Schaum

Over 1,344 Companies Released Earnings Information The Last Three Weeks.

The highlights:

HubSpot: $19.9B market cap. Earnings Per Share (EPS) Reported -$.2 beating consensus -$.4 (yes they were not profitable)

Why we care: For years no one would ever think of using a CRM that wasn’t Salesforce. Many tried, all failed. I remember sitting on a flight next to a Sugar CRM rep… the defeat in their voice. Then there was one company… that rose out of the darkness to challenge Salesforce. Hubspot, and guess what. They are starting to win. It’s not easy but David is taking on Goliath and it is starting to work. We can learn what strategies they have been employing and what their views are to help us grow.

If you sell anything you know that time to value, after the contract is a huge thing that most people don’t talk about, until it is too late. Hubspot knows this. Yamini Rangan their CEO said in their last earnings call

“Now in this environment, we're focused on helping our customers drive innovation and efficiency with a quick time to value, with customers taking under eight weeks on average to activate and see value. Throughout 2022, we had two key areas of focus: 1. maintaining our fast pace of product innovation while 2. driving consistent results.”

You can’t compete with Goliath if you are running all over the place. To that end Hubspot has gone through efforts to really niche down their target market. Here they break it down.

“Our first objective is to become the SMB market share leader in marketing, sales, and service.We are laser-focused on these three mega markets, and we'll enable more upmarket customers to adopt HubSpot with easier customization, greater extensibility and better governance capabilities. Average subscription revenue per customer grew 9% year over year in constant currency and 3% on an as-reported basis to $11,200.-“Kate Bueker

More specifically according to Yamini Rangan their target is companies with 200-2,000 customers.

So a few take aways.

First, if you are a rep trying to win Hubspots business I would focus hard on how to help them target the 200-2,000 employee range, in those 3 core products.

Second, If you are competing with them, know where they are focused and where they are not. If you know where your competition is aiming you can use that to target elsewhere and point to larger (2,001+ and smaller -199 customers and say… Hey you are clearly not Hubspot's priority, let me help you.

Deere: $126B market cap. EPS $6.55 beating consensus of $5.53

Why we care: The iconic green metal farming and construction equipment continues to tell us a lot about the broader economy. Prices are up due to inflation. Revenue is looking good… but they don’t believe it is uniform going forward.

Let's start with how John Deere executives view their opportunity. They stated on the earnings call that demand for their products is tied highly to the profitability of their clients. If farmers (agriculture) and construction continue to operate profitably… John Deere will be a ok. However, if the profit levels drop there may be a concern.

Specifically- “Taking a closer look at the individual segments, beginning with the production and precision ag business on slide four net sales of $5.198 billion were up 55% compared to the first-quarter last year and up versus our own forecast, primarily due to higher shipment volumes and price realization.

Industry sales of earthmoving and compact construction equipment in North-America are both projected to be flat-to-up 5%. And markets for earthmoving and compact equipment were expected to remain strong.

While housing has softened infrastructure, the oil and gas sector, and robust capex programs from the independent rental companies have continued to support [technical issue].

Retail sales have remained robust and dealer inventory is well below historic levels.

Global road building markets are forecast to be flat. North America remains the strongest market compensating for softness in Europe as well as in parts of Asia. “

So in summary-

Farming and Agg- Awesome…. Like really awesome.

Retail ie lawn mowers and small tractors- Good, for now because of supply constraints.

Most everything else including housing and infrastructure. Meh.

So i’ll leave you with this. Inflation is still here. Deere came out and said it is going to be a problem and they are looking to their suppliers to help them with this going forward…. Aka pass less of the cost on to them.

Shopify: $52B market cap. EPS reported -$.04 beating consensus -$.14

Why we care: More and more online businesses are powered by shopify. They have carved out a an ever growing niche. If you want to understand the future of web commerce you need to understand Shopify.

Shopify is doing well… really well. Historically Shopify has been focused from “First sale to scale.” Now they are adding an enterprise solution as they move up market.

“Our revenue grew 21% for the year, reaching $5.6 billion as we added nearly $4 billion to our top line since 2019. The growth rate we saw in 2022 is particularly noteworthy when you realize that this growth was on top of the incredible 57% growth we saw in 2021 and 85% growth in 2020” -Harley Finkelstein

Partnering with global brands is key to their go forward momentum. Brands such as Mars with over $35B in sales are using shopify to drive their online sales.

Shopify has also noticed that customers have headed back to stores. Major brands are now partnering with Shopify to power online and retail locations. If you are a rep and looking for a view in, understanding their customers such as Todd Snyder, Tecovas, and Velocity will help you grasp the Shopify vision.

The next few years are going to be interesting to watch how they expand.

Marriott: $52B market cap. EPS of $1.96 beating consensus of $1.84

Why we care: Sure it is fun to facetime and text with friends, family and business associates. But what about seeing a place in the flesh and sitting across the table from someone. Marriott is one of the businesses that can help us sort out whether or not business is back post covid.

Lets cut to the chase. Travel is back baby!

“January global RevPAR (Revenue per available room) rose 52%, with the U.S. and Canada up 43%. We anticipate that first quarter RevPAR could increase 25% to 27% in the U.S. and Canada, 47% to 49% in international markets and 30% to 32% worldwide.

I hesitate to call that a trend yet, but it's just worth mentioning that in January, we saw our top special corporate accounts improve another 9 points relative to '19. So in the classic areas of accounting and consulting or defense or healthcare, we are continuing to see good progress there, but we are only a month into '23 so far”.- Lenny Oberg CFO

Marriott is anticipating that the US is going to grow well from where it is at currently but most of the growth in travel is going to come from international where it has yet to pick up pace. Also, big corporate is getting back on the road.

What about your business? Are you hitting the road? I know I am starting to a bit. With all this new revenue, Marriott is poised to spend it somewhere. One of those areas is technology.

“So, as we look at rolling it out, you have probably seen our announcements of working with several third-party service providers to really transform several of our systems.”

Why does this matter? Let me spell it out.

Marriott, is buying technology rather than building it.

In the long term philosophical war of build or buy. Marriott is on the buy side. Happy selling.

James Hardie: 9.3B market cap. EPS report at $.29 a miss against consensus of $.36

Why do we care: You don’t need me to tell you that the construction market has slowed down. You already know that. Heck permits for new residential housing are down 30% year over year here in the US. But what we are not talking about is what is happening with construction and housing globally.

James Hardie has lowered their guidance on revenue for the remainder of the year for 4 reasons according to Jason Miele.

“We have lowered the guidance range for four primary reasons. Number one, North American volumes in the second half will be lower than we expected three months ago. Two, APAC volumes will also be lower than previously expected. Three, persistent inflation and four, the impact of restructuring charges in the second half."

This interesting and new part is APAC volumes will be lower than previously expected. APAC is the Asian pacific region, and James Hardie, one of the worlds largest building products manufacturers, didn’t know until this quarter that Asia was slowing down.

Inflation is not slowing down either. For large manufacturers like James Hardie, inflation is costing them millions. James Hardie says it is going to cost them between $160 and $170 million.

So don’t believe the hype. Inflation is still real.

Formula 1 Group: $17B Market Cap $2.1B in F1 Specific revenue.

Why we care: One of my favorite things F1. I’ve been following Formula 1 since the days of Michael Schumacher, but thanks to Netflix and Covid more people have fallen in love with the sport than ever before…. And it is awesome. I love formula 1 because it is the unabashed mix of technology companies, and adrenaline. Lets see what the business is up to.

Ok so it’s not just Formula 1. Formula 1 Group owns Sirius XM, Live Naiton and the major league baseball team the Atlanta braves. That is quite the conglomeration of assets.

There is no surprise the revenues from Sirius XM are decreasing. Live Nation is doing better with in person events picking up.

But the fun story is Formula 1.

F1 group makes its money off the races, licensing and running logistics for the races. Logistics are a big thing with Formula 1. Teams travel with all of their gear all over the world.

"Right into the 2022 year, attendance records were set, we were up 36% over 2019. Our fan base is increasing diverse with new fans being younger, and the share of females within the fan base 40% larger than the share in the established fan base. That's been the new fan base. The U.S. is especially strong. One in three fans globally started following F1 in the last four years in the U.S. Total revenue grew 20% in 2022 with growth across all primary revenue streams" Gregory Maffei

With all this growth, investors are concerned about sustaining the growth.

Stefano Domenicali closed out their call with a vision for F1’s future.

“in such a short time, we moved in a new dimension that has been the promoter in a way that no one was thinking before possible. So first step for us is to make sure that we need to make sure that Vegas is right first at the first attempt. So total focus on that. And then, of course, I'm sure that this will -- an incredible push for all the promoter to see what is really -- what can be done better.”

This Week: 733 Companies are filing their earnings with the SEC. Let’s see what happens in the next edition!

Crowd Strike- $27B Market Cap

The Austin Texas based technology security company may sponsor more motorsports teams than Gulf Oil. That said, I’ve never known what the heck they do. Let's find out.

Campbell soup-$15B Market Cap

The weather is all over the place. When that is the case three industries benefit, in my experience. Outdoor clothing, family practice doctors offices, and soup companies. I mean what do you want when you are not feeling great.

Oracle- $240B Market cap. My first exposure to Oracle was programing off of a Oracle mainframe in my first corporate job. Man those were the days. Now they sell everything technology. You don’t get to $240 billion in market cap with one product. Let's see what is working and what is not.

Vail- $9B Market Cap.

Snow is dumping world wide. That is wonderful for Vail. Let's see how the biggest winter playgrounds are doing this year.

Government Data Releases Next week:

Why we care: While alternative data is on the road to taking over, nothing moves the market like government data. Understanding this data can help craft your messaging and deals.

March 6: Factory Orders

March 7: Consumer Credit, Wholesale Inventoris

March 8: Job Openings, Beige Book (Anecdotes from the Fed.)

March 9: Jobless claims

March 10: Employment Report, US unemployment, Federal Budget

Examples of ways to use this info:

• Set up a 5 min call with your clients and prospects. "Susan—can we chat for 4-6 minutes? I read about the how Salesforce is changing the way their customer acquisition strategy and thought it might be of interest to you”

• Cold email: Subject: "Who is going to be impacted more mid market or enterprise?" Body— John, Last week both Sales Force and Workday reported earnings. One thing that was interesting was their leaders talked about how they are focusing on enterprise customers more than any other market. This could lead to some interesting opportunities for businesses like yours. Can we chat for 4-6 minutes to see who this might be valuable to?

• Meeting with your boss: a lot of big tech is focused on multi-lining their customers and heading up market, how can we use this to our advantage?

• Call with a client: "Kenny- did you see the unemployment rate this week? They came in at X. Are you seeing that in your market?"

• Linkedin Posts: 3 ways Ulta is crushing Saas. Put in some new lipstick, it’s time to pucker up for investors.

• Forward them the newsletter!

Thanks for reading!

If you have a tip or feedback, I’d love to hear it.

[email protected]

Executive Relevance Delivered- Financial information you need to become an advisor to your customers and prospects.