LockerDome Cuts CI Research Time In Half With Sentieo

About the Customer

LockerDome (“an ad platform with a brain”) is a software designed specifically for performance-based advertising. LockerDome, headquartered in St. Louis, Missouri, is trusted by leading advertisers and publishers to drive revenue. Advertisers trust LockerDome’s ad platform to generate revenue from product sales, and publishers trust LockerDome to maximize revenue from their website, in-app, and email traffic.

Mark Lewis, CFO, is LockerDome’s head of finance and accounting. Mark also oversees competitive intelligence (CI) analysis for the company.

Challenge/Problem

LockerDome competes with public adtech companies such as Critteo, The Trade Desk, and Rubicon. As the CFO, Mark manages all of LockerDome’s admin, accounting, legal, and HR teams. This makes for a lot of responsibilities and limited time for CI research, especially at a rapidly growing, lean tech company.

Before using Sentieo, Mark was investing far too many hours searching through documents and manually tracking competitor activity. He was using Excel or Google spreadsheets to track comparable company metrics: funds raised, valuations (at private round, IPO, current, exit), revenue, net income, EBITDA, valuation multiples, acquisitions, board seats, and more.

Mark was spending hours on gathering, tracking, and updating these metrics — all manually. Unfortunately, this made it easy for him to miss insights and difficult for him to maintain updates and scale his work. He was also dealing with many different sources of information that he was unable to easily access.

All of these issues led him to try Sentieo.

Solution and Results

In 2018, Mark invested in Sentieo as his principle corporate research platform in order to accelerate his research process. The goals of this investment were to:

• Dramatically decrease the time he and his team spent
researching competitor news and public filings
• Reduce the risk of LockerDome missing a change in strategy
by a competitor that would have impacted their business
• Get visibility into competitor insights to drive the process of
adapting and growing their corporate strategy

Want to see how Sentieo solved LockerDome’s pain points? Read the full story here.

Save More Time with Sentieo’s New Category Search

About Sentieo Document Search

Clients love Sentieo’s industry-leading Document Search for its depth, precision, and workflow integration. Users save hours with the ability to search across all companies, watchlists, individual entities, or by excluding tickers from searches.

Easy document specification with our IN: function covers the most common document types. (For example, search just 10-Ks or just transcripts). Our in-section search lets you search within a specific document section (in:10k MD&A or in:transcript), or by speaker (statements by CFO, by analysts, etc). You can also search PPT presentations, or get very granular document-level controls like “8-K Credit Agreements.” Filter down your search by industry classifications, geographies, market caps, and timeframes. 

Add another layer with our large library of Boolean operators, like “OR” for parallel searches and “BEFORE/NEAR/FAR” for proximity and order control. In the background, we have three levels of synonym control for the thousands of synonym/acronym groups. For example, sales and revenue will “pick up” each other, so you don’t need to know the exact term that the company uses in order to find what you’re looking for.

Machine learning-based Document Search will dynamically suggest synonyms based on your specific query, in addition to autofilling text in your query based on your document set. And if you do not have a query, Sentieo will suggest trending terms based on the searched ticker.

We have extensive Document Search statistics that let you see real trends, and you can drill down quickly with one or two clicks. Imagine seeing all companies that mention China within 25 words of Vietnam, clicking on Consumer Discretionary, and then seeing the top companies that mention your query most frequently. You can also do a “search within a search.” 

On the workflow side, you can save all positive hits as a watchlist for future work (for example, all Industrial companies with a market cap over $1 bn that mention Mexico in their 19-K Risk Factors). You can even automate your workflow with saved searches. All of our searches can be saved and turned into email and/or desktop alerts at the frequencies of your choice.

Highlight and label text as you read, and these annotations will be all stored and automatically ticker-tagged in your Notebook. You can even call out your team members with comments: “are you ready to take a look at this note on [x]?” Take screenshots from presentations and use the web clipper to bookmark webpages. All of your internal documents including uploads, emails, notes, and built-out theses are searchable, too. 

So What’s This New Category Search?

We’ve had in-table search functionality for years, enabling users to find numbers that are broken out in tables. For example, find mentions of EMEA Revenue only in tables, rather than everywhere in the doc. In our latest release, we’ve taken locating numbers to the next level. 

With the newly-released v3.9, users can search for specific types of numbers based on our very extensive categorization system. A Category is a set of keywords which are not synonyms but have similar meanings or constructs.

Category search allows you to search for an entire class using one search term. You can now look specifically for categorized numbers, such as currency, percentages, duration, length, area, temperature, volume, and a lot more. So now finding the “sales growth percentage” or “production volumes” takes a second. 

Moving forward, we will show a few examples of what is now possible in Sentieo’s Document Search.

In this query below, we are searching transcripts for revenue growth within 10 words of a percentage. You can also see how “revenue” picked up “sales” as a part of the synonym search. 

Swapping out the percentage from the query above with the currency categorization, we can look for currency amounts, like dollars or euros. 

Staying on top of KPIs is also easy with our new numbers categories. You can search for specific information like oil/gas production volumes or leasable area in real estate. 

You can search 8-K Credit Agreements for leverage ratios using the Ratio classification:

Need to call up a company? Search all filings (in:CF) for the headquarter phone number listed on the front page. 

The numbers we classified do not even need to be numeric. As a part of this update, we have fractions, time periods and more. 

These are just a few of our new Document Search use cases. Sentieo offers many more categories that help you find exactly what you need, faster.

To find out more about our new Category Search, or any part of Sentieo’s research workflow solution, please get in touch.

[Guide] Don’t Miss Insights Next Earnings Season: 5 Ways to Optimize Your Time

Why We Wrote This Guide

With companies releasing a multitude of documents every hour of the day during earnings season, getting insights quickly can feel like an impossible task.

The hundreds of companies that analysts track each produce hundreds of data points, documents, and news — any of which could inform a change in corporate strategy or competitive response.

During earnings season, competitive intelligence professionals are often drowning in data, and can miss important insights as a result.

 

 

 

We came up with 5 ways that you (and your team) can optimize your time during earnings. Download the full whitepaper here.

You can easily gain a competitive edge by staying ahead of emerging global or industry trends, including:

• consumer/customer preferences
• trends that are favorable/unfavorable to you or your competitors
• new or disruptive ideas and products

Ask yourself and your team:

What are the macro, global market, and consumer trends happening right now that are impacting my business and my peers?

How To Do It

Alternative datasets can give you great insight into market trends. Try a tool that includes datasets like:

• Twitter mentions – Observe globally trending topics, your competitor’s brand mentions, and their number of followers. Are they spending advertising money on Twitter?

• Alexa website visits – Are your competitor’s website visits going up or down? How come?

• Google Trends – How are people searching for your competitors on the web?

Understanding macro trends can also help you focus your efforts during earnings season. A tool that allows you to plot both financial and document data can expedite this step in your workflow.

In the example below, we plotted document mentions of “wage inflation” (green bars) against EBIT Margins for Cheesecake Factory and Texas Roadhouse (purple & orange lines). We see that as wage inflation has risen, there has been a substantial decline in the margins for the two chains. With visualization tools, CI analysts are able to see the factors that drive trends, and stay ahead of competititors.

Key catalysts to track include earnings announcements, product launches, and transactions. Use a calendar tool that automatically feeds in from your company watchlists.

For example, below we used our watchlist “Big Tech” to auto-populate our Sentieo earnings calendar for easy tracking.

 

Want to learn the 3 other ways that you (and your team) can optimize your time during earnings? Download the full whitepaper here.

How to Plot Metrics Across An Entire Company Watchlist

With v3.9 of Sentieo, you can now run comparable analysis or obtain sector-level insights (e.g. Sector Gross Margins, a stock’s multiple relative to the sector) by entering a watchlist in any ticker input box in Plotter. 

Using Watchlists In Sentieo Plotter

You can now plot metrics across an entire watchlist, allowing you to (1) run comparable analysis across a peer group or (2) generate aggregate metrics for a sector. When you arrive at the ticker input box, simply start typing in the name of a watchlist to select it:

watchlist tokenization

Peer Group Comparisons

Use the watchlist function on Stock Price to find outperformers in a peer group:

 

Aggregate Metrics Across a Watchlist

Use the watchlist function on P/E and combine it with Weighted Line to generate a sector-level P/E:

 

The watchlist function is among the most powerful tools in Plotter. We also recommend trying out the following use cases:

  • Comparing recent changes in EPS Estimates
  • Generating sector KPI’s
  • Relative P/E vs. a peer group

 

Other Improvements We Made

 

Saved Series

We made it easier to tag series to tickers and topics, and have also made them easier to find. Try using this with Table Explorer or CSV Uploads to manage your own KPIs.

Correlations

We simplified the correlation section so that you can more easily determine what key factors are driving stock prices and valuations.

Templates

We simplified the templates section and added them to the “Add Series” search results to make them easier to use.

 

Join our upcoming webinar to learn more about our financial data updates in Sentieo v3.9!

WeWork Skepticism From 300 Real Estate Conference Calls

WeWork’s unsuccessful IPO attempt has generated a lot of media attention over the last two months. In Forbes, we ran a comparison of the disclosed related party transactions versus recent high profile IPOs. Our Head of Research was interviewed extensively at IPO Edge regarding the governance, valuation and business model considerations surrounding the offering. The same outlet also wrote about the disappearing references to cash flow in the amended S-1 filings with the SEC.

While the dust has not settled yet (the company is going through a radical overhaul, with the founder/CEO stepping down, the staff members closest to him on their way out, and a curtailment of new leasing activity), we decided to take a look at what has been said about WeWork on conference calls by publicly traded players in the real estate industry. 

We went through 300 (yes, 300) transcripts of global real estate companies going back two years, with our Sentieo-powered document search including mentions of WeWork, co-working, or coworking. The industry comments overall are mixed: while all acknowledge the rapid growth of co-working, some seem happy to partner with WeWork and many of the other providers, others are rolling out their own versions of the product, and some players have been expressly skeptical on the model, both in terms of its durability through the cycle, and regarding coworking as a defacto direct competitor. We will highlight several of these comments chronologically, emphases ours. 

 

Empire State Realty Trust (NYSE: ESRT), a Manhattan-focused entity, has been perhaps the most consistent skeptic. In November 2017, the company said this about WeWork (and its tenants): “On WeWork, and I’ll just — maybe, John will join me here as well. But look, we’ve commented before that — we said in the past, we will not lease space to WeWork. Not only do we prefer the direct relationships with the end users of our space but in our view, WeWork’s model makes it difficult, if not impossible, to have a secure building, and their transient users tend to beat up on the buildings. We don’t think we should underwrite the risk of their variety of short-term rental income streams when we have great tenants to whom we can lease directly.”

 

Workspace Group PLC out of London in June 2018 were also skeptical: “I think some of the co-working, to use your expression, some of these kind of quick startup reactionary businesses, it will be interesting to see how long they last.

 

ESRT again in September 2018: “I think, from our perspective, we don’t have WeWork as a tenant in our portfolio. Our view, as Tony has articulated, is we don’t like the proposition of providing a long-term lease to someone who’s, in turn, entering into short-term agreements. And then, we generally not, very often, not creditworthy entities, not that the enterprise business is different. But we don’t see it as a good credit.

 

Paramount Group (NYSE: PGRE) operates in NYC, SF and Washington, DC (top WeWork markets). They have also been consistently skeptical. This quote is from the Merrill Lynch Real Estate Conference in September 2018: “We have been focusing on the leasing side on long-term, financially-stable companies. That — we haven’t been focusing on co-working activities. We have not taken the easy way or the easy route of filling up our space while it was vacant. With co-working space, which would have been very easy to do. We wanted long-term stable with growth for the next couple of years future tenancy for our portfolio. And I’ve seen it before, after the bubble burst in the last tech crisis. The predecessor had a 98% leased portfolio and in the 2 years after, where the whole market was screaming about how bad it was, our portfolio was stable. The cash flow was coming in and that’s a very comforting situation when the market gets difficult. Today, nobody thinks about it and we might be filling the gap between 98% leased and 99% or so with some of the co-working opportunities, as an amenity to our tenants or for our tenants, but we want to build a very stable platform. And we are confident that if the market gets a little rougher that investors realize that some companies are different than others.”

 

Ichigo Inc. from Tokyo, in October 2018, invokes the famous “bubble” saying: you can look stupid now, missing out on the hot thing, or, you can look stupid later, having a big loss: “The one thing to be very clear that we are not doing and will not do, and to that extent, we are not WeWork. We care about cash earnings. Every single corner — quarter making money. You will not ever get Ichigo to bet the ranch, we’re going to lose $5 billion, but potentially we’re going to be worth 50 billion. And so that is our fundamental problem with the business model is that we’re not willing to do massive upfront spend with a — with what we think of potential unknown payout. And that possibly makes us a less interesting investment, and I fully recognize, because our basic position, as everyone else is smart and we’re stupid. And so we are very involved and we study these other business models, but that has been the main reason why we’re not participants because none of these are breakeven businesses. They are significant loss creators since, potentially, the fact loss they did when they turn into significant revenue generators over time, but that’s the reason we have chosen not to enter this space, in this sort of gateway.”

 

ESRT again in November 2018 openly criticized what they saw as giveaways: “I think that focusing in on WeWork perhaps understates the — what’s going on when you’ve got WeWork, Industrious, Serendipity, Knotel, Convene. The New York City market, the shared office environment is without question, and has for some time been the single largest tenant. And we just don’t understand why landlords don’t pay attention to what is motivating people to go to these different user of space, who then turn around and relet it to others. We think that it’s important for landlords to recognize that in New York City alone landlords have probably invested over 3/4 of $1 billion in shared office space providers in the form of tenant installation free rent commissions. And I think it’s just a very easy things for people to do, and we don’t see a reason to do it.” 

 

Alstria Office REIT, out of Hamburg, in November 2018 was point plank: target is zero exposure: “So to your first question, our target exposure to co-working space, et cetera, is actually 0.”

 

ESRT was critical again in February 2019, shining the spotlight on the competitive aspect of the coworking model and issued a warning to the industry: ”Three, we have no exposure to the new wave of coworking enterprise office providers. I have been very clear for years and the world now recognizes that these companies seek to disrupt the relationships amongst tenants, landlords and brokers with outsized risk from weak equity-dependent business models. I maintain that landlords, investors and lenders will regret the day, they decreased the probability of their future cash flows with the leases they have made with these tenants.”

 

On the same call, ESRT went further, calling the model weak and a “shiny penny”, criticized consultants’ projections, and said the co-working golden age is over: “Look, I would not be surprised to see other major players other than the CBRE begin to offer this up. I think it’s the bright shiny penny and the fact is if I thought it were a good business with which we should engage, we’d lease to them. I don’t. Thing is disruptive on the one hand. And on the other hand, I think that their models are weak. Their business models are weak. So we’re watching it. Again, we see no need. We had no need. We’ve demonstrated terrific results without going into this category of tenant as — in our portfolio. And I read the summaries of the consultants’ reports on what they think about the future for shared office space and enterprise-leasing models are and I think that it’s unusual to go to some of these firms economist for true economic advice, anybody can put together a straight line graph. I think under some of the statistics, which have been embedded about even on the calls which you guys have hosted on this matter. The 7 years from now, 135% of all office space will be handled by co-working and other enterprise office providers. And I just don’t think that’s going to happen. I think it’s seen its bright spot, and I think that it’s dimming. Not going away, but I don’t see the big expansion. Either way, we don’t have to expose ourselves and our stakeholders to it.”

 

Derwent London PLC in February 2019 discussed reduced per-building exposure: “We’re always quite choosy how we let our buildings, and we’ve decided that we’d rather have them in part of a building as complementary to the office occupiers of the buildings, a bit going back to what I said about core and flex.”

 

Kilroy Realty Corp (NYSE: KRC) at the Citi Global Property Conference in March 2019 describes the issues around the credit risk of having a SPE as a tenant: “We haven’t needed to go that way. I think co-working is a wonderful thing, and we have probably across the platform a couple hundred thousand square feet, I guess. And so we have a little bit of it. And I think there is a place for that. I am — I really don’t want — I want to be in control as much as we can of our destiny. And if you let – do a big lease for the co-working space, you’re paying for the tenant improvements. They’re marking it up. And they’re leasing space to — sometimes your own clients. There is a credit issue. And — let’s just say that we’re not going to go big in co-working, okay? We’ll have a little bit here and there.. .So I don’t like the idea of a lot of this stuff, and I’m not going to speak about any particular companies, but they tend to come in. They have a special-purpose entity, that’s your tenant. You always have to ask if something happens, what leverage do they have on you? I don’t want to be in that position

 

PGRE, mentioned above already, at the same conference in March 2019 says that the model is not proved in a recession: “To the general marketplace, I want to say that our perspective on co-working has been very selective. We have not done a single deal with any co-working because it’s a fundamental belief that, that type of a model is not proven in a recession. So I think notwithstanding that, it might not have an impact to our business per se, it could have a impact to the marketplace.” 

 

Further in the same transcript, we get reminded of Regus “ We think that the co-working model is clearly not proven in a recession. It has become popular after 2010, especially with the growth of WeWork. We have been very skeptical from the get-go. And because of our long-term experiences in this market, we have seen how similar models in previous cycles have worked out to be difficult. One of the similar models is Regus, and some of you might be familiar with that exit there during a recession. So this model hasn’t been proven in a normal recession, and that’s why we want to focus on credit tenants. And we have been focusing on that in our re-leasing efforts, and we are very proud of it. So we want to be ready in case of a downturn with a portfolio that is really long-term leased with growth, embedded growth, and avoiding less credit-worthy tenants in the portfolio.”

 

Boston Properties (NYSE: BXP) at the same conference in March 2019 describes how volatile the model is: “But there’s a volatility issue that’s associated with the business. So the larger the enterprise business becomes and the more space that is leased on a short-term basis to the extent there is a downturn, if you talk to WeWork, you’ll get a different answer, but our view is that, that’s likely to be the space that is probably disposed of by companies who are looking to cut costs. And so therefore, you have sort of a double-edged risk. In a normal situation, we do a lease with Citibank. They decide they’re going to downsize and they sublet space, but we saw Citibank on the lease. We have WeWork or we have an industrious or yard or a Cambridge Innovation Center or an office by Regus, spaces by Regus center in our portfolio and the major enterprise tenant leaves, they have a conversation they’re going to have with the landlord about whether or not they should “get a different rental stream” because they “make shut down that branch,” right, that’s the conversation that you worry about having occurring. And the security behind that is not 15 years of Citibank credit, it’s an LC or a guarantee that’s probably at a maximum 2 years and probably at this point is burned down into a year or 8 months or something like that.”

 

Like BXP, Equity Commonwealth (NYSE: EQC) at the same March 2019 conference went into great detail about their concerns, and how they see a demand contraction playing out: “We look to reduce capital where we can and we don’t take credit risk from co-working firms that have no credit. …The mismatch between the liability from a lease perspective for the co-working tenant, the actual co-working company and its tenants, I think, is an additional risk. They have an obligation to you as a landlord — sorry, David, they have an obligation to you as a landlord that’s longer than their customers have to them. And they’ve isolated themselves intelligently from a liability perspective so that they don’t have parent guarantees on the leases. And I think if there’s a downturn, we’re going to see a giveback of space that will be unlike what we’d seen in the past…There’s got to be a downturn, we just don’t know when it’s going to be. And what’s going to happen is WeWork is going to take its 8 locations and they’re going to consolidate those people under the 3 tenants — 3 landlords, then make a deal with them to recut their lease at a market rate that they can afford. They’re going to say to the other landlords, “I can’t pay your rent because I have no one paying me rent.” And the landlord is, if history is any guide, going to say, “Well, I don’t have anyone else for that space, so do what you can and we’ll share.” It’s a wrong way bet for a landlord, that’s for sure. What’s it — the root if it is, is that businesses want, at least at the margin when times are good and they’re taking incremental space, they want flexibility. But you can be sure that when things slow down and the real estate guy gets a call from the CFO and the CFO says we need to reduce our footprint by 10% and he has a choice to give back his 9-year remaining lease term with us or his 9-month remaining lease term with WeWork, I can assure he’s going to give back the WeWork space.”  

 

Mapletree Commercial Trust (traded in Singapore) call in April 2019 express skepticism about the multitude of players in the space: “We are not going to go for any coworking space operator, maybe a select one or few. We are likely to spread. One is — I don’t want to have coworking operators, 2 or 3 in one building. The other thing is I need to make my best. It’s a moving industry or should I say, a sector in recent times for the singular market. How many can last? How many has the staying power? How many has the longevity? We have to take a bet.” 

 

EQC (the long-ish segment just above) on their quarterly call in April 2019 gave some metrics about the current size of coworking demand, and how they are working to mitigate their exposures: “Turning to office fundamentals. In the first quarter, roughly 15 million square feet of new supply was added to existing inventory across the U.S. with positive net absorption, pushing the vacancy rate down 50 basis points year-over-year to 12.5%. National vacancy is the lowest it’s been since 2007 and lower by 430 basis points versus peak vacancy in 2010. I would add one footnote to that vacancy number. We see a lack of breadth in demand for office space. In 2018 alone, co-working operators accounted for more than 50% of net absorption. The vast amount of space leased to co-working operators in the past few years is not at the same nature or tenor as traditional tenants. Shared office operators are meeting marginal demand, and their customers are paying a premium for flexibility. When the cycle turns, likely they will return that supply to the market. We’re addressing this risk by limiting our exposure to riskier credits while also competing for high-quality tenants by operating upgraded building amenities…”

 

On the same call, EQC spelled out the prior outcomes of coworking booms, and reiterated that they see coworking space losing tenants first: “But our experience has been this is the third iteration of the co-working. The first 2 did not end well certainly for landlords. They are such a factor in the market, and there’s really a couple of issues you need to consider. One is there is no barrier to entry to get into the business, and they are essentially disintermediating credit between the landlord and their tenant. So I think you’ll see more landlords get involved in the business. You’re starting to see that. What happens in a downturn, my guess is if people get back to space, they can get back, and that would be probably the operational — the space that’s been taken up in the last 3 or 4 years, they’ve been maybe 50% of the market along with tech. We see a real lack of breadth in demand. As those co-working spaces empty out, we’ll close even quicker because they can, especially in cases where there’s no credit on a lease.”

 

ESRT during the June 2019 NAREIT conference point blank stated that they do not have nor do they want to do business with coworking entities, in part due to increased building strain due to higher density “I’d start by saying, WeWork — we do not have any exposure to WeWork as a tenant in our portfolio. I think that’s for a couple of reasons. First, that we don’t want to introduce a third-party operator in between our direct relationship with our tenants. We also don’t like the density that they bring in terms of the number of people and the pressure it puts on elevators and building systems, et cetera.”

 

KRC at the same conference in June 2019 expressed deep skepticism about WeWork’s then-valuation: “The valuations, a lot of people talk about WeWork sort of interesting. If you take Boston Properties, Alexandria, Kilroy, maybe a couple of others, our combined market cap is maybe WeWork. We actually have a lot of really positive cash flow and a lot of money in the bank and so forth. I’m old-fashioned. I am the oldest guy in the room. I like money that you can spend. I like it when you got revenue but that’s just me.

 

Ichigo, mentioned once above, on their call in July 2019 contrasts cash-burning unicorns Uber and WeWork to themselves: “For better or for worse, we’re not WeWork or The We Company or Uber, meaning we’re never going to put $1 billion into something because we think we can possibly turn profitable. It’s just not who we are. But what I think you can expect from us is a relentless focus on cash generation from delivering value to tenants and customers.”

 

Armada Hoffler Properties (NYSE: AHH) showed overt skepticism about their relationship with WeWork: “We don’t want to be too much vested in any particular tenant, particularly one that doesn’t have the kind of long-term track record in credit that we all vie for. We most probably will end up having the Durham project up for sale, partially due to the fact that we don’t want to have WeWork become one of our top tenants. At the same time though, we have no reason to believe they won’t be successful. The space in Durham is nearly 100% leased, according to their numbers looks fantastic, and activity is really strong. But through an abundance of caution, we really don’t what to get too well entrenched with that particular tenant

 

PGRE were asked about WeWork during their early August 2019 call: “I would say, no comment at this point. I mean they’re in the process of doing their IPO. I think it’s pretty well known in the market what I think about WeWork. So I don’t want to go into further details. We had opportunities, I’ve said, before. We could have leased all of our vacant space to coworking companies. We have chosen a different route because we like long-term credit tenants in our space with the growing rents. We want to establish the most stable portfolio and I think the leasing team has done a great job there. The property — the properties are long-term leased, we don’t have much of expirations for the next couple of years. Peter and his team are already leasing at this point 2020 and 2021 expirations. We want to really create a rock-solid portfolio, and I think it will show if you see a downtime.”

 

Piedmont Office Realty Trust (NYSE: PDM) gave the number on co-working percentage in a building where problems with transactions and refinancings start: “So I think it’s still unproven as to what the market will accept. Given that, though, we do set not a formal policy but an expectation that if you were to trip up above 20% threshold for a building, that it would potentially impact its ability to either transact or refinance. And so we’re mindful to play below that, in most instances well below that threshold and level for a single asset. I think we also overlay in our perception as well that given our concentration and continued concentration in specific submarkets, how much coworking is within that submarket, how much coworking is within our portfolio in that submarket as well. Continuing to be very mindful, given the historical nature of this type of product and its propensity to have credit issues, we’re very, very conscious of that

 

We will close out with this quote from legendary credit investor Howard Marks of Oaktree (now part of Brookfield) from Brookfield’s Investor Day on September 26, 2019, answering the question “What lessons, valuable lessons do you think we should draw from the WeWork IPO debacle?”

 

Howard Marks: “How long do you have? I think that one of the great things you have to keep in mind in the investment businesses is that if it seems too good to be true, it is, and you can’t make such easy money. How can it be easy, a sure thing to rent large quantities of space for long periods of time and sublet it for short periods of time and just do that and make a fortune and sell at an astronomical valuation. And then of course, when that company, which is labeled as a technological miracle, sells at a vastly higher price than other people who are in the same business, but not so considered, you have to take cognizance. And this is just like — this was just like ’99 with the crazy valuations on the TMT and all you needed was for Hans Christian Andersen’s little kid to step out of the crowd and say, the Emperor has no [clothes] and then it falls apart.”

 

Try DocSearch for yourself with a free trial of Sentieo.

Our 8 Favorite Sentieo Use Case Videos

Have you visited our YouTube channel? We have been uploading short videos focused on single functions of our versatile platform. Below, we will highlight a few of these. 

Seasonality of stock price returns

Everyone knows that certain businesses, like retailers and cruise lines, have seasonal characteristics. But did you know that individual stock returns also display seasonality, in some cases? In this example, we look at the seasonality of returns of a cruise line operator (by month and by quarter) in order to inform possible decisions around position management, such as covered call selling. 

 

Interactive consensus-based model

The ability to quickly pre-qualify investment ideas is of paramount importance in active management. To assist with this, we have built an online interactive income statement and valuation model where users can plug in their own assumptions (about sales, margins, and valuation), save scenarios, and compare to the consensus estimates. 

 

Twitter data integration to assess buzz around movie titles

The ability to benchmark discrete events (such as movie releases, game releases, or calls for boycott) is easy to do with our Twitter data integration. In this example, we plot the Top 5 movies year-to-date (all from Disney) to see the real winner. 

 

Creating a custom sub-industry index and visualizing valuation against the broader market

Broad industry groups, like Consumer Staples, might hide valuation dynamics within that group. So we create our own “Household and Personal Care” group, calculate its market-cap weighted valuation, and compare it to the S&P 500 in just a few clicks, using our visualization tool Plotter. 

 

Adding screenshots to your write-ups 

Company investor presentations offer a wealth of information in their powerpoint decks. Sentieo’s screen capture tool enables fast and efficient screenshots (with annotations, ticker tagging, labeling, teammate tagging, and more). 

 

Combining alternative data with financial data

We look at visualizing search trends versus revenue for a leading online real estate brokerage. It took us a few simple clicks to see both seasonality and YoY direction for the topline growth of the company.

 

Table data extraction from PDFs and PowerPoint decks

A lot of data lives in ppt/pdf deck tables. Sentieo’s “Export Table” button enables fast, easy, and error-free export of data from pdf/ppt tables to Excel. (We also have this functionality for filings; not shown here). 

 

Scatterplot visualizations and trendlines of comparable company metrics

Comparable company tables are widely used for benchmarking of business and valuation metrics, such as sales growth and EV/EBITDA multiples. But your work does not have to stop there. Using our Comps scatter plot visualization, you can answer questions in seconds such as, “do companies in this industry with faster 3-year EBITDA growth trade at a higher EV/EBITDA multiple, or is it EBITDA margin that is more predictive?” Simply add a trendline in one click.

 

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Alternative Data + “Back to School Season”: A Retrospective

About two weeks ago, we posted an extensive blog post going through the various alternative data indicators for retailers with “Back to School” season exposure. We specifically looked at where our alternative data composite is vs. the most optimal (or predictive) metric. In some cases, the index works better for overall revenue growth and, in other cases, the index works better for KPIs (comparable store sales, in the case of retailers, but we do have others, like Bookings for tech companies). To find out more about how we use alternative data across our platform, including screening, visualizations, and alerts, please watch our recorded webinar

The retailers on our list have by now reported their results, and some have provided “color” on the current quarter (August sales trends). In this post, we will review how we did. 

We wrote “We see the potential for strong overall YoY revenue growth in FIVE, PVH, DBI, AEO, CAL, ZUMZ, and VRA. We see the best potential for comparable store sales growth for BBY, BURL, SCVL, and DLTR.”

For the overall revenue growth names:

FIVE: Five Below saw an extremely robust 20% revenue growth (comps were +1.4%). This is an exceedingly rare double-digit growth number for a physical retailers. (FIVE was also one of our H1 long ideas) (Interactive chart link)

 

PVH: PVH total revenue grew 3% on a constant-currency basis, above Street estimates, though the company did bring down its H2 revenue guidance. (interactive chart link

 

DBI: Designer Brands (formerly known as DSW or Designer Shoe Warehouse) total revenue growth of +8% disappointed vs. consensus. (interactive chart link)

 

AEO: American Eagle (parent of the eponymous brand and aerie) saw total revenue growing at 7.9% for the quarter (vs. consensus of 4.2%), with very strong comps at aerie. The stock did sell-off only to fully recover the very next day. (interactive chart link

 

CAL: Caleres (parent of brands such as Famous Footwear and Allen Edmunds) total revenues increased 6.5%, also above consensus. (interactive chart link)

 

ZUMZ: Zumiez reported really strong numbers, and guided up for the year. Revenue increased 4.3% while the August comp was up 7.1%. The stock is trading up about 8% on the day after the earnings. (interactive chart link)

 

VRA: Vera Bradley total revenue increased 5.4% (at the high end of their guidance). However, there were a lot of puts and takes. There was a partial recognition of an acquisition-related revenue in the quarter, combined with reduced clearance sales. (interactive chart link)

 

We are able to summarize these results very quickly by using our industry-leading document search: we simply brought up all 8-Ks and all press releases for these tickers at once. 

 

For the strong comparable stores growth names:

BBY: Best Buy was perhaps our biggest “miss”. Comps of only +1.6% domestically and well below Street estimates. Additionally, the company narrowed its full-year comparable store sales growth forecast unfavorably. (interactive chart link)

 

BURL: Burlington Stores, on the other hand, was our biggest “win.” Comps there exceeded the company’s own guidance and accelerated QoQ (+3.8% vs. +0.1% in prior quarter). The company also raised its comparable store sales growth guidance. (interactive chart link)

 

SCVL: Shoe Carnival beat the Street comparable store sales growth estimates very slightly (+1.4% vs 1.3%). More interestingly, the company said that its August SSS are coming in strong, at +3.5%. (interactive chart link)

 

DLTR: Dollar Tree (also parent of Family Dollar) reported a 2.4% growth in their comps, well above the 1.9% consensus, mostly driven by Family Dollar. The company re-iterated its low single digit guidance. (interactive chart link)

 

How did we do overall? 

An equal-weighted portfolio consisting of these 11 stocks returned over 13% in the last month, versus roughly flat returns for the broader retail ETF XRT. (interactive chart link)

 

To find out more about the alternative data integrations in our platform, please get in touch with us

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SmileDirectClub: a True “Megatrends” IPO with Good Alternative Data Metrics

The US IPO market continues to be very healthy, and we continue to publish our notes here on some of the more interesting companies coming to market. Today’s post focuses on SmileDirectClub (proposed ticker SDC) but also do check out our recent posts on Chewy, Slack, WeWork, Beyond Meat, and Pinterest.

You might already be familiar with Invisalign, (by Align Technology, a company with an almost twenty year history in the public markets), the clear plastic “braces” that have grown in popularity tremendously over the years for treatment of certain cases of malocclusion. From a client’s perspective, the main difference between ALGN and SDC is that SDC’s service does not require in-person visits to an orthodontist, and SDC is lower cost. Looking at ALGN’s most recent 10-K filing, we can see that the company has grown revenue at a 27% CAGR since 2014, and finished 2018 with almost $2 billion in revenues.

There is a more recent crop of entrants in the clear aligners space, the most notable of which is SmileDirect. We read the S-1 and the S-1/A with great interest because SmileDirect is at the intersection of several mega-trends. This is not hype: we really mean this. SmileDirect has both the sales growth and, by now, the sales volume to prove it. Revenue grew 7x from 2016 to 2017, then almost 3x’ed from 2017 to 2018, and is now on track to more than double in 2019. Patients (or, if you prefer the company’s more modern word choice, “members”) are now at over 700k cumulatively. 

By way of comparison, it took ALGN from 2010 to 2014 double from $387 million in revenues to $761 million, while it looks like it will take SDC just one year to double from roughly the same starting point of approximately $400 million in revenues. 

SDC’s explosive growth has been, in our view, powered by true megatrends. These megatrends are:

  • Direct to Consumer (DTC) with subscription and omnichannel characteristics
  • Healthcare delivery innovations
  • Healthcare access and affordability  
  • Beauty

And SmileDirect appears to be winning across the board with a vertical integration of advanced technology, in-house financing, high skill offshoring/regulatory arb, and good marketing.  

The customer journey at SDC begins with either a visit to one of 300+ “SmileShops” (co-located at CVS and Walgreens in the US; also UK, Canada, PR, Australia) for a scan, or with an at-home impressions kit. The company staff in Costa Rica (orthodontists and technicians) then prepares a treatment plan, which the customer approves, with the final approval (prescription) happening through a state-licensed US-based orthodontist. The sequence of aligners is shipped at once from a US facility (one in TN, one being built in TX), with periodic check-ins required. The major benefits, as described in the S-1, are (1) lower cost (list price of under $2,000 vs. $5,000-$8,000); (2) expanded access to treatment through teledentistry (no office visits; the company also states that fewer than 40% of US counties have orthodontists); (3) shorter time frame for treatment (5-10 months vs. 12-24 months, though it is unclear how much of this is due to case specifics), and (4) captive financing (with recently expanded “in network” access with two major US insurers). 

We see the “megatrends” every step of the way: DTC infrastructure enables direct relationships, omnichannel presence increases reach, and, obviously, the product/service is 100% personalized. The combination of DTC and lower cost, high skilled operations expand access by lowering cost (though two state dental boards, in AL and GA, have taken issue with the latter- we see it as a bit of a regulatory arbitrage to have the last “touchpoint” done in the US-, and SDC is currently suing both entities). There is quite a bit more from the management presentation on the total market potential and other aspect on Retail Roadshow (link generally available prior to the actual offering). The management story is very interesting: the CEO David Katzman has a long history of involvement in disruptive services (Quicken Loans being the most famous but also a direct lenses business sold to the leader in that space, and an earlier venture acquired by Home Depot). The subscription element is the growing retainers business post-treatment (a substantial percentage of patients are people who had braces years ago but whose teeth moved back). 

The in-house financing part is also an interesting aspect of the operation: the company offers a “no credit check” financing option at 17% APR ($250 downpayment, which covers the cost of the aligners, and then $85 monthly payments over 24 months). The default rate is under 10%. The most recent data is that 65% of the customers use SmilePay, indicating both the importance of having an affordable and transparent option for discretionary procedures. The CEO on the roadshow said that prior experience with third-party financing was negative (too high drop-offs). The complications around the consumer financing regulation are an additional “moat” for the model. 

We were also interested in the marketing aspect of this remarkable growth story: the company says that it has around five million unique visitors to its website every month, and that it is able to convert about 1% of them to new customers, up from 0.5% in 2016. The company has also been improving its appointment show rates at the SmileShops and the acceptance of the impression kits. The company also lists over 300,000 followers on Instagram and over 500,000 likes on Facebook, as of June 2019. These numbers as of right now are over 360,000 followers on Instagram (20% growth in three months) and 531,000 Likes on Facebook. The company also boost very high review ratings (4.9/5.0), and 57 Net Promoter Score (extraordinarily high, on par with Zappos, per the roadshow linked above). 

Since we incorporate alternative data sets very heavily in our platform (see our recent webinar and white paper on the topic), we were interested in seeing how the data looks. 

We are seeing very good long-term trends for the broad search trends for clear aligners, as a search topic (a broader collection of searches, versus a specific term). This is a valid signal as aligners are a high investment purchase, both in terms of money and in terms of time (or, as the company calls it, a “highly considered purchase” with long lead cycles: the roadshow presentation mentioned that a lot of customers are 7-12 month leads). We can also see the January spikes in search interest, similar to fitness interest and other self-improvement topics. (Interactive chart link

 

The customer journey might start with broad searches but then a lot of the research is done on the companies’ websites. We pulled the Alexa data for SDC, ALGN, as well as the DTC competitors that SDC lists in the S-1: CandidCo, SnapCorrect and SmileLove. We can clearly see that overall industry web traffic has been growing, and that SDC is now bigger than ALGN. We are showing 30-day moving averages (Interactive chart link)

 

Perhaps most interesting to us is the web traffic “market share” that SDC has vs. the incumbent leader ALGN build from the overall chart above (what percentage of the industry traffic goes to the two major players). We can see that SDC is now consistently capturing more traffic vs. ALGN, likely indicative of future real share growth. (Interactive chart link

 

We fully expect that this offering will be very popular given the defensible growth characteristic of the business, and the current investors’ relaxed attitude around governance/related issues. (Not the topic of this piece, but SDC is a JOBS Act IPO, with multi-class shares, classified board, numerous related party transactions including a Tax Receivable Agreement, underwriter conflicts, corporate structure, and quite a bit more). 

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Just How Unusual Are the Related Party Transactions Disclosed in The We Company’s S-1 Filing?

To find out, the Sentieo team took a look at other recent high profile IPOs to compare against what we saw in The We Company’s expansive 800+ page S-1 filing. The document also contains 198 separate tables. Inside the filing, the Company (proposed ticker: WE) spends ten pages on discussing various transactions with “related parties.” Contrary to widespread understanding, related parties are not limited to just insiders and large owners. In this case, the underwriters of the equity IPO are also considered related parties, since there are multiple non-IPO business transactions that have occurred prior to the filing. If you are interested in finding out more about the regulations, there are extensive SEC publications regarding these disclosures (for example, there is a 436-page PDF published by the Commission on the topic).

Part of what we see is attributed to the fact that as a real estate company, WE uses bank financing. Another aspect is that as a remarkably fast growing company in the physical world, the company has needed trusted JV partners in different geographies.

WE has disclosed various transactions with four “levels” of insiders: the founder, Adam Neumann and his family, its executives, its pre-IPO investors, and its banks. In fact, “related party” or “related parties” is mentioned 110 times in the document.

In the first group, WE has business relationships with the founder across several dimensions: it leases a small number of buildings from him, there are unusual supervoting stock, succession, charitable giving, real estate, and compensation arrangements. There are several family members employed or doing business with the firm. The founder was paid almost $6 million for the renaming of the company (since he personally had a company called We Holdings), and he has borrowed several times from the company, and separately from its offering underwriters.

WE also disclosed related party transactions with several executives, including loans and bonuses that were used to repay these loans.

SoftBank and Hony are investors in WE but are also partners for WE in its various Asian joint ventures.

The IPO underwriters (a collection of bulge bracket banks) also have several “related party” disclosures: ownership of preferred stock, loans to the company, as well as personal loans to the founder: almost $500 million secured either by WE stock or by personal properties.

So how unusual is this level of related party transactions in recent high profile IPOs? We took at look at Slack, Uber, Lyft, Chewy, Pinterest, Levi Strauss, and Zoom Video to get an idea. 

In Slack’s filing, we see a few mentions. There have been several rounds of convertible preferred financings and executives selling shares. There have been transactions with Square (since the Square CFO is on the Board of Slack, she’s a related party), some content partnerships with the wife of the CTO and the former domestic partner of the CEO, and the son of a BOD member works at the company. The VC investors are also partners with Slack in an “in house” VC fund. (We dug deep into Slack’s business model back in May).

Uber, like Slack, has had several rounds of convertible preferred financing. Its executives, like Slack’s, have had pre-IPO liquidity events with company involvement. It has a co-investment with Softbank (and Toyota) in an AV venture. Uber has a relationship with Google Maps, Google’s ad business and Google Pay, all owned by Alphabet, an investor. The daughter of an executive is employed at the company. There are a few other bits and pieces, like their relationship with DiDi.

Lyft’s related party transactions are almost a carbon copy of these at Uber: investors with convertible preferreds, and business relationships with several related parties, such as Google, General Motors and Rakuten. (Our five big AV takeaways from Uber’s and Lyft’s filings are written up here).

Chewy, the fast-growing online pet product retailer, was mostly owned by pet product physical retailer PetSmart. Its related parties disclosure is relatively plain, and almost entirely focused on its operational relationship with PetSmart: purchasing, product, tax and governance matters, not unusual in the case of subsidiary IPOs. (Our read of Chewy’s full IPO filing is here).

Pinterest, similar to the tech companies described above, has disclosures around its relationships with its VC investors, and there is one family member of an executive employed in a non-executive function. (We wrote a very long post analyzing Pinterest after the IPO).

Beyond Meat disclosed a consulting agreement with its Chairman and an advisory contract with a Board of Directors member. There was a one-time consulting agreement with another BOD member (the former CEO of McDonald’s), and loans to BOD members that were repaid in 2018. (We recently dug around Beyond Meat’s secondary offering documents).

Levi Strauss & Co. has a fairly straight-forward 2-page disclosure: the descendents of the founder have certain rights as shareholders, some executives have sold stock back to the company, and there is some overlap between the executive team of the company and that of the Levi Strauss Foundation, to which the company also donates. There is one former BOD relative employed at the company.

Similar to LEVI, Zoom has a short disclosure doc: relationships with the VC investors, its founder had sold some stock to a fund and had a loan in 2015-2016, and a BOD member is from Veeva, which is also a small client.

It is fair to say that WE’s relationships with its related parties go well above and beyond what we have seen in the other recent high profile initial public offerings. The most common are: governance arrangements with pre-IPO VC investors, followed by ordinary course of business relationships with investors such as Google (it is hard for a consumer-facing business to avoid working with Alphabet properties), and finally, cases of founders and executives getting some liquidity for their equity stakes over the years.

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Doing Better Analysis with Non-Financial Data Sets in Sentieo Plotter

Sentieo’s main data visualization tool, Plotter, contains a veritable treasure trove of data series. While some financial and valuation data sets are commonly available, Sentieo Plotter stands out with its numerous non-financial data sets that are available within Sentieo, or created by you. (For example, you may have pulled Document Search statistics or data generated from Table Explorer, our ML-driven SEC filings table chaining tool).

Sentieo users can also upload their own data sets. Your individual data series and full charts can be saved for future use. Your charts can then also be added to longer notes or a formatted thesis. They can also be shared with your team or publicly to non-Sentieo viewers.

Below, we’ll go over a few of the non-financial data sets that can help you do better analysis.

 

FRED Macro

We recently integrated around 1,000 of the most popular data series from the data site maintained by the Federal Reserve Bank of St. Louis. 

An analyst needs to understand the macro currents that affect the companies and sectors under her coverage. For example, below we plotted the Civilian Unemployment Rate from FRED vs. a simple average rolling NTM P/E of four staffing companies. We can immediately see that the sector valuation is very closely tied to the unemployment rate. 

Interactive chart link

 

Online Activity Data and the Sentieo Index

Sentieo Plotter pulls Twitter mentions, Alexa website traffic, Google Search trends, and Instagram mentions. Through our Mosaic module, we also run a multivariate regression on these data sets against Wall Street estimates for revenue growth and KPIs. This Sentieo Index is also available inside Plotter, ready to be displayed alongside other data sets. 

For example, here is what one-month moving average page views, search trends, and Twitter mentions of the recent IPO Fiverr look like. Plotter lets you customize your data set display options, including moving averages (for smoothing) or YoY change metrics. 

Interactive chart link

 

Document Search Statistics

Part of your own IP is your ability to see trends: but how can you quantify trends with non-financial data sets? One way is to generate your own document search statistics to see if documents with key term mentions are going up or down. For example, below we searched all restaurant transcripts for mentions of “delivery.” We can see a clear increase in document mentions starting in 2017.  

Interactive chart link

 

Company-Specific KPIs

In some cases, investors and industry analysts give more weight on KPIs and KPI trends. Sentieo Plotter has company-specific KPIs that can help users “paint a picture” of the underlying business trends. 

In this example, we have pulled KPIs (comparable store sales) for five casual dining stocks, and have done an unweighted average for our “custom index” to see what is going on in this segment of the industry. 

Interactive chart link

 

Custom KPIs

Not all KPIs that an analyst might find relevant are available through legacy standardized data providers, but are disclosed in company filings. Sentieo’s Plotter is integrated with Sentieo’s machine learning-based Table Explorer tool, which identifies and chains past tables in SEC filings. 

For example, here we are pulling Royal Caribbean Cruises’ APCD (Available Passenger Cruise Days) in a few clicks into Plotter.

Interactive chart link

 

Linguistic Sentiment

Sentieo uses NLP (Natural Language Processing) for analyzing quarterly transcripts (management and analyst sentiment + spread between the two, along with keyword surfacing for both groups). These sentiment metrics can also be pulled into Plotter. For example, here we are looking at Tesla’s management sentiment reaching a high point when reported sales growth reached its highest point (summer of 2018, when the company started filling its backlog). 

Interactive chart link 

 

Your own data sets

Sentieo Plotter enhances your workflow, efficiency and visualization capabilities with two other very useful functions: uploading your own data in CSV format and giving you the ability to save generated data sets for quick recall in other Plotters so that you can re-use your IP. 

What we have seen is that some Sentieo clients upload their own proprietary data to combine with and visualize against what Plotter already has. Other clients like using publicly available but obscure data sets, such as very niche US Census data or BLS statistics. 

Sentieo can do a lot more than just data visualization. Please get in touch to request a demo

 

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