News of the Week (September 6 - 10)
CrowdStrike; SoFi Technologies; Upstart; Penn National Gaming; Facebook; CuriosityStream; GoodRx; JFrog
1. CrowdStrike (CRWD) — CEO George Kurtz Interviews with Deutsche Bank
a. Kurtz on the Competitive Landscape:
“When you compare like-for-like, the value we provide far exceeds anything that’s out there. We have the best prevention in the marketplace today and we actually test it and put it in writing.”
Kurtz highlighted the difference between stopping malware and preventing breaches. With half of breaches not using any malware today, that’s imperative.
Kurtz on SentinelOne:
“We see SentinelOne and a lot of competitors out there which is a symptom of legacy players not doing a good job. When you look at our success — and we’re only 1 year older than SentinelOne — I think what we’ve built is indicative of what customers are looking for.”
“If we get into a bake-off with SentinelOne we typically win. The reasons are centered around our true platform, our multi-module support and our service offerings built around it as well as the fact that people are looking for something that’s easy to use, easy to deploy and actually works. We’ve won several SentinelOne accounts in the past because of their scalability issues and false positives.”
“When we lose to SentinelOne it’s generally on price or personal relationships. But what we’ve found is that if we lose on price it generally boomerangs back to us because their technology struggled to be deployed. You can buy something that’s cheap, but odds are you’ll be back to us.”
“We are real-time and they’re batch mode. If you look at their system requirements, it’s 25 gigabytes all stored locally. We stream that data to the cloud with a 50 megabyte requirement. That’s the difference between marketing and actual technology.”
Batch mode defined: “Computer processing in which commands are input from a batch file and not interactively.” — Collins Dictionary
Kurtz on Microsoft:
“There is a bit of a crisis of trust for [Microsoft’s] customers. There was just another Azure vulnerability exposed today. Microsoft will always be successful in certain areas, but a lot of these ransomware outbreaks were being protected by Microsoft technology.”
Kurtz on where CrowdStrike is in replacing legacy solutions:
“There’s a massive amount of legacy displacement left. We have 13,000 customers and there are hundreds of thousands of customers that McAfee and Symantec have. Overall spend for cloud security is also around 1% and should be around 5%.”
b. Kurtz on the next 12 months for CrowdStrike:
“Two factors continue to be sustainable tailwinds. Number 1 is that the threat environment just continues to get worse making this a top 1 or 2 risk focused on for every board of directors. Number 2 is the digital transformation which comes with a security transformation. As companies look to re-tool their systems, they’re looking for more modern security technology like CrowdStrike to secure these systems.”
2. SoFi Technologies (SOFI) — Leadership Interviews with Goldman Sachs
a. On the impact of its banking license
“This license will increase our strategic flexibility. Today we finance our loans through warehouse facilities and our own equity capital. The warehouse facilities are not cheap — they’re significantly more expensive than the cost of funds if we had our own deposits. The bank license will allow us to use our deposits to fund our loans.” — CEO Anthony Noto
“Today, we are regulated today by 50 states for lending. We have to comply with 50 different state compliance rules. Once we have a bank license, we will be regulated by the FDIC the Fed and the OCC rather than 50 different states.” — Noto
“The mortgage business will no longer have to limit the number of mortgages we can authorize by state based on our licenses and the limit on what loans we can hold on our balance sheet will also go away with a national bank license.” — Noto
“The bank license will allow us to provide an interest rate on checking and savings that we determine. Interest rate is something we can differentiate on quite meaningfully. Today — because we are not a bank — we rely on a sweep partner that determines the interest rate… all of Galileo’s clients have these sweep partners and need sponsor banks — which SoFi bank will be able to provide.” — Noto
b. On how Global SoFi will be in the next 5 years
“We chose to go to Hong Kong with our SoFi Invest through a very small acquisition and we have increased AUM there by 5X since we bought it a year and a half ago. We will use this to land and expand throughout Asia with SoFi Invest and then other products.” — Noto
“Galileo gave us immediate access into LATAM. We power 4 of the largest fintech’s in Mexico today and will expand into more countries with Galileo in the coming months and years.” — Noto
“3 to 5 years from now, hopefully we are on 4 different continents not including North America.” — Noto
Click here for my broad overview of SoFi.
3. Upstart (UPST) — Another Win
In what is starting to become a wildly encouraging cliché, Upstart added another credit union to its partner network.
Water and Power Community Credit Union (WPCCU) has officially partnered with Upstart on its personal loan offerings. The organizations began working together in June of 2021 and this marks a significant deepening of that relationship with WPCCU being added to Upstart’s referral network.
At the time of Upstart’s IPO, it was working with 10 bank and credit union partners. Less than 1 year later and that number is now above 25 total partners. That rapid growth should greatly help Upstart continue to mitigate the concentration risk still prevalent in its business.
WPCCU and its sub-$1 billion AUM is not nearly as large of a win as Patelco was a few weeks ago — but it’s still good news. With Upstart now the preferred AI-lending partner of the National Association of Federally-Insured Credit Unions (NAFCU) these wins should just keep coming.
Click here for my broad overview of Upstart.
4. Penn National Gaming (Penn) — Barstool Dives Deeper into Television
Following the announcement that Barstool had acquired the naming, broadcasting and merchandise rights to College Football’s Arizona Bowl, Barstool and Penn have made another interesting move.
Sling TV and its nearly 2.5 million subscribers now offers a Barstool channel where loyal fans can access the content of their favorite personalities 24/7.
Why does this matter? Sports gambling as a business is not all that attractive on its own. The sector is low margin, low barrier to entry, and predominately a commodity. The reason I like Penn so much is NOT because of the Barstool Sportsbook. It is because of the roughly 70 million passionate fans Barstool has at its disposal to monetize. That monetization will take the form of sports gambling, but it will also include podcasts, night clubs, live entertainment and now Television. Gambling is a small piece of the puzzle here — Barstool’s brand is the crown jewel.
The Barstool Sportsbook also debuted in Tennessee & Arizona during the week to add to its quickly growing footprint.
5. Facebook (FB) — A product Launch with Ray-Ban
“This is an important step towards a future when phones are no longer a central part of our lives. You won’t have to choose between interacting with a device or interacting with the world around you.” — CEO Mark Zuckerberg
Facebook and Ray-Ban have launched the first iteration of their smart glasses starting at $299 per pair. The frame of the glasses features 2 cameras for taking videos or pictures and it directly syncs with Facebook View — a camera roll app — where these pictures can be edited and shared to other platforms.
Consumers can access the camera by saying “Hey Facebook, take a video” or through a button on the frames. Importantly, when the camera is activated, a bright light turns on ensuring the people around know when they’re being photographed. The glasses also come with a speaker for listening to music, podcasts or to take a phone call via Bluetooth.
This is merely the first product version between the two companies with many, many more planned in the future. Utility will only be enhanced from here.
6. CuriosityStream (CURI) — Leadership Interviews with DA Davidson
a. Leadership on why CuriosityStream was able to maintain a 72% retention rate — above the rates of every single other streaming provider on the market:
“We believe this is due to quality, uniqueness, value and indispensability. The $3 per month for our service is less than I used to pay for a DVD. We’ve also learned that many consumers consider the spending decision on CuriosityStream to be independent of their traditional entertainment budget. We are also helped by over 75% of our subscribers being on annual plans.” — CEO Clint Stinchcomb
“We promote the service not a particular program. Once people understand our service, they get hooked on it. With a lot of other services, consumers come to watch 1 or 2 series and there is no depth which leads to the higher churn.” — CFO Jason Eustace
b. CEO Clint Stinchcomb on bundling:
“Today, it’s clear that bundling is a key to victory with services like Disney+ getting more than half of its subscribers from deals like with Verizon. Our highest average revenue per user (ARPU) customers are our direct subscribers. Still, we like the fact that bundling deals give us 3-5 years of recurring revenue which allows us to build a strong factual war chest of content to build scale over time.”
c. Stinchcomb on why CuriosityStream bought One-Day and why it invested in Nebula:
“One Day University’s content alone would have cost us 3 times what we paid to acquire the company. One Day University is somewhat similar to Masterclass but we think our instructors are better.
“Companies like Nebula create a tremendous marketing channel for us with their 120 million YouTube subscribers. It’s easy to see how they become a $1 billion+ company in the long term.”
d. CFO Jason Eustace on the pandemic impact:
“There has been no change in CuriosityStream’s DTC subscriber growth from the beginning of 2020 to today. There has been no cadence change in that time period. We haven’t seen any pull forward or acceleration of subscriber growth but the same, consistent growth across that timeline. We are in a different category of retention and acquisition than some of our competitors.”
e. Final Notes:
CuriosityStream is one of 3 post-merger SPACs with an offering of under $200 million still trading above its net asset value. While the asset class has plummeted, CuriosityStream has shown its relative strength. The remaining warrants left on the CuriosityStream balance sheet should be taken care of in the next year.
“We are a leader in the SPAC category and we have none of the traditional balance sheet hangovers typically found with SPACs.” — Eustace
The lack of fractured content rights present in CuriosityStream’s business is why it has had so much success with international expansion. The issue of inconsistent rights precludes many entertainment services from taking this leap — but not CuriosityStream.
The company is full-speed ahead with its brand sponsorship approach to advertising. It plans to launch a direct AVoD (advertising video on demand) service in response to a greater preference from consumers to watch ad-supported free content than the industry had previously expected. This AVoD service will aggressively market CuriosityStream’s paid subscription service.
CuriosityStream believes that the value of its content library is in excess of $1 billion. It has been able to acquire a great deal of this content at below market rates to bolster its offerings.
Click here for my broad overview of CuriosityStream.
7. GoodRx (GDRX) — Leadership Interviews with Morgan Stanley & a New Survey
a. On the importance of the SureScripts Deal:
“Our agreement with SureScripts creates an opportunity for us to strengthen our physician relationships by making it easier for professionals to use GoodRx. We will help providers address cost concerns for patients and reduce medicine adherence friction by ensuring physicians are offering patients the best possible GoodRx price.” — CFO Karsten Voermann
“This is allowing us to go further up the prescription flow and to help consumers more by grabbing more share.” — Voermann
Because physicians spend 14.6 hours per week trying to get their patients to take medications — according to the American Medical Association — this deeper presence (& massive savings) will save time and boost productivity.
b. On the new healthcare legislation introduced this week
“Every administration has tried to fix the broken healthcare in this country and none have had any material impact. Nothing we are seeing right now — regardless of it being passed or not — has any material impact on our business.” — Co-CEO Doug Hirsch
c. On the GoodRx take rate
“This is where being the largest market share player by a lot really matters because it gets us better pricing with all of our constituents. Our better pricing takes 2 forms. First is better pricing for consumers where we have better pricing than anyone else in our space. Second is as we generate better consumer pricing our take rate rises as well. The take rate has risen a few percent over the last few years with our savings rate rising 20% in that time.” — Voermann
d. A new GoodRx Internal Survey
GoodRx published a new internal survey asking 700 healthcare professionals about their experience with using the GoodRx platform.
Here were the key findings:
2 million providers have a patient using GoodRx with more than 80% of providers recommending GoodRx to patients vs. 68% at the time of its IPO.
Healthcare professionals represent 17% of GoodRx website visits.
93% of providers believe GoodRx boosts medication access.
89% of providers believe GoodRx saves them and their staff time on administrative tasks.
88% of providers believe GoodRx helps patients stay on their medications.
None of this should be surprising to us, but it’s still an encouraging reiteration of GoodRx’s value proposition. These providers are graded on patient outcomes so better access and adherence to medications not only makes patients healthier, but physicians more successful as well.
8. JFrog (FROG) — A New Partner in Japan
JFrog announced a new partnership with SoftBank Commerce & Service (SB C&S) to bring JFrog’s suite of dev-ops products to Japan. The partnership “enables 12,000 companies across 43,000 locations to offer the JFrog platform for Universal Software Delivery.”
JFrog will now be able to offer its complete platform (including: Artifactory, Xray, Pipelines, Distribution and Mission Control & Insight) in Japan — a country with a GDP of nearly $5 trillion.
9. My Activity
I added to Cresco Labs (CRLBF) and Ayr Wellness (AYRWF) during the week.
10. The Week Ahead
Tuesday, September 14th
Green Thumb investor conference at 11:45 AM Eastern
GoodRx investor conference at 12:10 PM Eastern
Tattooed Chef investor conference at 3:20 PM eastern
JFrog investor conference at 4:00 PM Eastern
Wednesday, September 15th
Progyny investor conference at 10:55 AM Eastern
Thank you for reading!