News of the Week (September 27-October 1)

Teladoc Health; SoFi Technologies; GoodRx; Nanox; The Trade Desk & CrowdStrike; Penn National Gaming; Cresco Labs; Ayr Wellness; Microsoft; Facebook

1. Teladoc Health (TDOC) — J.D. Power Results, an Approval and a Partnership

J.D. Power surveyed nearly 5,000 consumers about their usage of telehealth over the last 12 months. As you may have expected, adoption from these patients skyrocketed with 36% of them reporting utilization of virtual care services during the period. This compares to 9% in the previous period.

Among direct-to-consumer brands, Teladoc received a consumer satisfaction score of 874 (on a scale of 1,000) which was the highest in the group and beat the mean by 28 points. Teladoc also outperformed every single competitor in all subcategories.

This could be because the most common complaint among telehealth users was the limited services provided. Teladoc is actively aiming to fix that pain point with its whole-person care approach.

Teladoc has now won this award twice since J.D. Power created the category 3 years ago, and in a field where some commoditization is likely coming, scale and customer service are vital. Teladoc has both.

In other news, the company was named as a vendor by Canada Health Infoway to bring its whole-person care services to the roughly 21 million Canadians that Infoway covers.

The busy week did not end there for Teladoc. The company also inked a new partnership with Philips. Together, the 2 organizations will pool their virtual care capabilities to offer a “scalable, end-to-end service” to health systems in Australia and New Zealand. Philips claims to have a suite of virtual care products using its AI and analytics capabilities that cuts a patients stay by 30% while reducing patient mortality by 26%.

2. SoFi Technologies (SOFI) — New Debt Offering

SoFi announced a $750 million convertible note offering during the week before raising that amount to $1.1 billion.

These notes carry an interest rate of 0.0% but that’s entirely due to the conversion rights of the holders. The holders of the notes will be able to convert the debt instrument to equity until the maturity date in 2026. The conversion rate is 44.615 shares per $1,000 in debt principal which represents a price per share of roughly $22.41.

If SoFi’s common stock exceeds 130% of the $22.41 conversion price, the company can redeem these notes for cash at the conversion rate at various points throughout the debt’s schedule.

SoFi’s net proceeds are expected to be roughly $1.08 billion and it will use $104.3 million of this amount to enter into capped call transactions. These capped call transactions work to reduce possible dilution rising from the conversion of debt to shares by placing a finite ceiling on the number of new shares that can be issued from the offering.

Interestingly — upon the closing of its anticipated bank charter — SoFi will be expected to infuse $750 million into Golden Pacific Bank (the bank entity it purchased). Perhaps the original plan to raise $750 million was a sign that the banking charter is a done deal and soon on the way.

This is virtually identical to Upstart’s (UPST) debt offering from a couple months ago.

Click here for my broad overview of SoFi’s business.

3. GoodRx (GDRX) — New Partner

GoodRx signed an exclusive deal to become the sole prescription savings provider for Fetch Rewards. Fetch is the largest rewards app in the United States with a user base of 10 million active consumers and 1.8 billion total receipts submitted. Now a Fetch user will be able to access GoodRx’s savings within the app.

In recent interviews, Co-CEO Doug Hirsch has spoken at length on the importance of business to business (B2B) deals like the ones GoodRx signed with DoorDash and USAA. He also explicitly told us that more of these deals were on the way. Clearly, he was right.

Click here for my broad overview of GoodRx’s business.

4. Nano-X Imaging (NNOX) — Various Updates

Zebra Medical Vision — a company that Nanox is in the process of buying — secured its 8th 510K FDA clearance on its solution for Coronary Artery Calcium (CAC). Zebra uses its AI capabilities to assist Radiologists in the diagnostics process.

Nanox still expects this deal to close next month.

The company’s outgoing CEO (Ran Poliakine) and the incoming CEO (Erez Meltzer) also gave a presentation with Cantor Fitzgerald this week. The only interesting note to report was Ran reiterating that the company would re-submit its multi-source application for FDA clearance this year.

A note on Nanox:

With the stock cratering, bears are loud and out in full force. Some of their concerns are somewhat valid but — to me — the potential upside for Nanox if it can execute is too overwhelmingly positive to pass up on.

This is — however — undeniably my most speculative and risky holding — so it’s also my smallest. I have no plans to add to my stake amid the current stock weakness due to the operational blunders the company has reported in previous months. Still, I have no plans to sell any shares either. If it goes to zero, I lose roughly 1% of my investable funds and my winners more than make up for it. If the company can execute (FAR from a guarantee), the returns should be immense. There’s a long way to go.

Click here for my broad overview of Nanox’s business.

5. The Trade Desk (TTD) and CrowdStrike (CRWD) — New Accolades

Crain’s named The Trade Desk as the one of the best places to work in New York City for the 8th consecutive year. It placed 60th overall and 29th among large employers.

CrowdStrike earned a place on the Great Places to Work UK list. According to its survey, 97% of its employees are proud to work there with 92% calling it a great place to work.

Both awards simply continue a long trend of evidence pointing to great workplace cultures for both high growth disruptors. This will help to keep talent engaged and loyal.

Click here for my deep dive into The Trade Desk’s business.

6. Penn National Gaming (PENN) — More Barstool Product Launches

Dave Portnoy — the Barstool Sports founder — frequently tries and rates pizza on social media to millions of viewers. Before trying the pie, Portnoy famously says “one bite, everybody knows the rule.”

He’s leveraging this bit into Barstool’s very own frozen pizza product launch in partnership with Happi Foodi. The product is now available in 50% of Walmart stores nationwide and with plans to eventually be carried in 90% of Walmart’s roughly 4,700 stores in the USA.

The company has tens of millions of monthly active users across its entire platform. These consumers are engaged, passionate and loyal which means Barstool should continue to find new product launches met with more success. The fan base is already built-in and ready to support the brand.

The food news doesn’t stop there for Penn. Barstool Sports is also launching Barstool Bites — a ghost kitchen that will sell food items commonly associated with tailgating and watching sports. The company will partner with several restaurants to keep this endeavor as asset light as possible.

Finally, this week CEO Erika Nardini in an interview with Front Office Sports predicted the company would generate more than $200 million in revenue for this year which represents at least 33% growth vs. 2020. Keep in mind that the 2020 comparison features a shutdown world where demand for Barstool’s digital media platform invariably soared. Comparisons for measuring growth will get easier going forward.

“The world is opening up for us” — Barstool CEO Erika Nardini

7. Cresco Labs (CRLBF) — An Operational Shift in California

Cresco Labs terminated distribution agreements with 3rd party cannabis companies to focus efforts on its owned-brand distribution in California. The move is an attempt to bolster profit margins in this key state and serves as more evidence of Cresco Labs finding meaningful traction in California for its brands. It already has a top 10 selling brand in the state.

Cresco Labs also posted a new investor presentation. There was nothing new or all that interesting to report but the link can be found here.

8. Ayr Wellness (AYRWF) — Florida Expansion

Ayr launched its Sun Gems THC-Infused gummies in Florida and opened its 42nd dispensary in the state as well. The new store is in Pasco County which has a population of 560,000 people.

Click here for my broad overview of Ayr’s business.

9. Microsoft (MSFT) — App Store News

Microsoft’s Widows store will allow 3rd party app stores on its platform; Epic Games and Amazon Games have both been announced as initial partners in this endeavor. Microsoft will not take a chunk of revenue from these 3rd party stores so this will likely not have a material impact on its business.

It does — however — placed added pressure on Apple’s app store to continue moving towards a more open and lower cost philosophy. As I’ve previously discussed, companies in my portfolio such as Duolingo and CuriosityStream would benefit from any downward movement in Apple’s take rate. This take rate appears more vulnerable than it ever has with mega-cap competition like Microsoft as well as a judge ruling forcing Apple to allow external payment methods in its app store.

10. Facebook (FB) — Reels Expansion

Facebook is launching Reels (its short-form video product) on its Facebook app for both iOS and Android across the United States.