Earnings Update: 5 Disruptors Reported This Week

A Q4 overview of PINS, ENPH, UBER, CCJ, and PRLB

For the broader market, earnings season is about 70% done, but for disruptors it’s just getting started. While we focused on some of the weaker areas of the market the past couple weeks, I’m happy to say I’ll be a lot more upbeat in this article because of the promise of these companies. To understand the market, it’s best to know the good and the bad, and while some industries are looking at a definite earnings recession, the outlook for the disruptors continues to be solid.

This week, we had 5 disruptors report, one on each day:

Monday – Pinterest (PINS)

Tuesday – Enphase (ENPH)

Wednesday – Uber (UBER)

Thursday – Cameco (CCJ)

Friday – Proto Labs (PRLB)

Side note: if you follow me on twitter, you can find threads on PINS and CCJ reports, and the recaps here will basically be the same thing.

Anyway, here’s what’s happening with these 5 disruptors:

Pinterest:

On the surface, you may not see a reason to be overly thrilled about Pinterest’s Q4 report. However, if you dig a little deeper there’s a lot to be excited about in 2023.

First, here are some of their stats for Q4:

$877m in revenue – up 4% YoY

Revenue outside US/CA/EU up 26% YoY – important to grow this because it accounts for 51% of their user base

450m monthly active users (MAU) – up 4% YoY

Mobile MAU (80% of user base) up double digit % YoY

$1.7b cash/equivalents vs no debt and $581m total liabilities

Now, I want to highlight 2 key things Pinterest has prioritized for 2023:

1.)    Growing monetization/engagement per user

This is key for not only increasing their sales, cash flow, and profits, but creating an environment where their users are more likely to spend more money also will have a massive impact on their margins, which we know by now is critical for a sustainable business.

Essentially, 2022 was a year dedicated to invest in exactly this. And now, we can see that engagement is growing faster than user base. In fact, Q4 recorded Pinterest’s largest weekly/active monthly user ratio in company history (61%) in Q4. That means users are using the platform more frequently, which is a big step in the right direction.

On the earnings call, management highlighted that the ways to achieve this goal are to target Gen Z users and video content. That’s because their Gen Z user base is up double digit % YoY, 30% of their revenue is from short-form videos, and video content is up 30% YoY.

2.)    Expanding margins

As I said, revenue was only up by 4% in Q4. However, operating costs were up 31%. That’s a problem!

In a low-demand environment like the current one, you have to increase engagement and cut any costs you can. Now, Pinterest is doing just that – in Q1, they plan on seeing operating expense grow shrink by over 10%.

YoY headcount will be lower as they lay off employees, and they’re also cutting back the amount of brand/marketing campaigns that they put out. This gives them more room to continue to invest in AI, especially with making videos more shoppable. In 2022, they expanded their ML/AI models 100x to give higher-quality info to users.

Overall, if Pinterest can continue to increase revenue from huge international user base, grow engagement per user, show more relevant products to users, and cut frothy operating costs, I believe they’re positioned to continue to outperform other ad-based marketplaces by a long shot in 2023.

Enphase:

While a lot of companies struggled in 2022, Enphase was certainly an exception. As you can see with these numbers, Q4 was a great end to a great year:

Record revenue $724.7m, up 59% YoY

Europe revenue up more than 130% YoY

Shipped 4.9m microinverters (up 62% YoY) totaling 1952 mwh (up 80% YpY)

Shipped 122 mwh of batteries, up 22% YoY

Shipped 7600 EV chargers in Q4, up 19% QoQ

Gross margin went from 39.6% to 42.3% YoY

Operating margin went from 14.2% to 21.9% YoY

Free Cash Flow totaled $237.3m

$1.61b cash/equivalents vs $1.3b in debt (only $91m due in the next year)

2023 looks to be another huge year for Enphase as they have some huge international product releases scheduled. The way it looks, their 130% growth in Europe was just the beginning!

Within the next few months, they look to start selling their IQ8 microinverter (the newest and best model by far) to more European countries after introducing it to the Netherlands and France in Q4. They also recently started shipping their IQ batteries (primary battery product) to Germany and Belgium, and aim to expand that in the first half of 2023 as well. They’re also on track to begin manufacturing at their new Romania plant soon, which will increase their total annual microinverter capacity from 5 million to 6 million.

One thing that was a little surprising to see was that they fell way short of their IQ8 distribution estimate (it can’t all be perfect, right?). They expected 90% of their total microinverter sales to be IQ8s by Q2 2023, and in Q4 2022, it was only 55%. Of course, 90% is still doable, but the CEO even said they probably won’t hit it. That’s not a huge deal though, as their growth is still incredible and the IQ8 sales expansion to more countries will help increase that number faster. And since the IQ8 is cheaper to make, this is going to have a good effect on their margins as well.

As for their US business, 2023 looks to be a year of shifting some production to the States. Beginning in Q2, Enphase will be producing microinverters domestically with a new partner, as well as with 2 additional current production partners starting in the second half of the year. I’m excited to watch Enphase as they look to be setting out on another fantastic year!

Uber:

Enphase is a tough act to follow, but Uber’s Q4 report actually stuck out to me as the most impressive one in this list. Here are some of their numbers from their report:

2022 -- Revenue $19.66b, up 110% YoY (expenses up 58.3% YoY)

Q4 -- Revenue $8.61b, up 49% YoY (expenses up 38.3% YoY)

Over 2 billion trips taken in a quarter for the first time

5.4m people using Uber to earn money

Mobility MAPCs up 17% YoY -- over 100m customers for first time

Mobility trips up 24% YoY

Trips/MAPC 5.4 per month, up from 5.0 YoY

Driver earnings roughly $10b, up 37% YoY

$4.3b in cash/equivalents vs $9.3b in debt ($0 due in the next year)

The main reason their Q4 was so impressive to me is because they’ve sustained a high level of growth for so long that it clearly isn’t only the 2021 reopening that’s driving it; it’s the ability of management to drive the growth and keep their product better than the competition. For example, they brought in $4.14b from their “mobility” segment, which is the ride sharing business everyone thinks of when they think “Uber.” That $4.14b is up 94% YoY, which means that long after everything reopened, Uber is seeing their user base increase in size as well as frequency.

Not only that, but the tough macro conditions are actually helping Uber grow even more. When money is tight, people look for extra income, and Uber is a giant beneficiary of that. As a result, the amount of new drivers using Uber grew by 34% over the past year.

The more that number grows, the better it’ll be for Uber to sustain their growth. That’s because more drivers mean more availability; the drivers are the center of the product and make it more efficient for people to use the service. So, it creates a flywheel: more drivers = more demand = more data = Uber’s AI becomes better at targeting demand to match right driver to right rider.

Uber’s advertising business is also a big hit already. They just started this service in Q3, and by the end of Q4 it had reached a $500m annualized run rate, so they’re already way ahead of their goal to have a billion-dollar run rate in 2024.

Their Uber One membership is also driving a ton of growth for the company. On average, Uber One members spend 4.1x the amount that nonmembers do, while also saving money on rides and deliveries. It’s now available in 12 countries and they have 12 million members signed up (that almost doubled in 2022).  

So far in 2023, management said they’re seeing continued strength in mobility and delivery, and that the number of trips taken in mobility actually accelerated YoY in January. As we move through 2023, I think Uber will continue to impress and surprise people with how much their business grows.

Cameco:

Uranium remains one of my favorite sectors in the market, and $CCJ is one of the most promising companies in that sector.

Here’s a look at some of their Q4 numbers:

Revenue $524m, up 13% YoY

Uranium revenue $397m, up 23% YoY

Uranium Production 3.7m lbs, up 32% YoY

Uranium Sales volume 6.9m lbs, up 6% YoY

Cash/equivalents $2.3b vs LT debt $997m

To give some background, 2022 was a pivotal year for Cameco. As the demand for nuclear power increased dramatically throughout the year, producers began to take notice. As a result, Cameco has gradually been increasing their production (emphasis on gradually).

We’re coming out of a nuclear bear market, so the process of getting your operations back online is very complex and needs to be thought through very carefully, so Cameco is being very intentional about this. Considering that, it was great to see them increase their 2024 production targets at their 3 “Tier-1” facilities, which account for pretty much all of their production at this point.

They’re also in a great position, being well known as one of the most reputable and high-quality producers in the space. Because of their reputation and huge capacity, they signed a massive deal with Energoatom, which operates all 4 nuclear power plants in Ukraine. Cameco already does lots of business in Ukraine and already had a good relationship with Energoatom, so this was a great fit. And the deal is massive: it has the potential to drive 67m lbs of production demand for Cameco over the next 12 years.

This improves Cameco’s already-great backlog. For 2023, they already have 29-31m lbs of committed uranium sales, as well as 21m lbs of commitments on average over the next 5 years. This is why they increased their production targets for 2024, and I think this trend is just getting started.

In addition, they’re still on track to close their Westinghouse deal in the second half of the year, which will significantly expand their customer base as they’ll be the largest nuclear reactor servicer in the world. Overall, things are extremely bright for $CCJ, and I’m excited to see what 2023 has in store for them.

Proto Labs:

2022 was a pretty rough year for Proto Labs, which is no secret if you look at their stock price. However, throughout the year, they were making necessary changes to improve their business for 2023, which is why I still believe they’ll be successful.

They have a distinct advantage when it comes to the 3D printing market, as they not only create custom 3D printed parts for a wide variety of applications, but they also have a global network of affiliates (called Hubs) who can fulfill orders that Proto Labs doesn’t have the capability to make.

Here’s how their Q4 looked:

Revenue $115.6m, down 6% YoY

Hubs revenue $14.8m, up 50% YoY

Europe revenue $23.3m, up 5% YoY (20% YoY accounting for FX adjustment)

Gross margin down from 44.8% to 42% YoY

Hubs gross margin 25.4%

$80m in cash/equivalents vs no debt and $104.5m total liabilities

Obviously, you don’t want to see revenue go down 6% as a “growth” company, but I’m still bullish on Proto Labs. Part of the reason is because I think 3D printing is inevitably going to be adopted on a massive scale over the next few years, and partially for the reason I already mentioned – they have a unique business that provides extra value to customers. And then there’s their financial situation, where they produce consistent cash flow and have lots of cash with no debt.

So why was 2022 a bad year in terms of sales and margins? First, the global macro conditions got markedly worse, which created a serious slowdown in product orders. Proto Labs didn’t escape this effect, and they saw their biggest segment, Injection Moldings (basically 3d printed prototype parts) get hit hard. In fact, revenue for this segment fell by 11.3% for the year.

Now for the good part, why will 2023 be a better year? According to management, they’re making improvements to adjust for the macro conditions by focusing on a few core aspects of their business.

For Injection Molding, they aim to make product lead times (basically the time between when customers order a product and receive the product) faster. This plan is already in action; earlier this year, they shortened the standard lead time for prototypes to 7 days, which is twice as fast as competitors.

For CNC, which is their 2^nd biggest segment, they’ve integrated the feature I mentioned before, where the “digital factory” meaning Proto Labs’ internal production, merges with the “digital network” which is their Hubs service of outsourced production. As you saw in their Q4 stats, Hubs revenue stood out with its 50% revenue growth over the past year.

Proto Labs is also placing a higher priority on launching new products, as well as cutting any costs they can to bring their margins back up. So far, management said they’ve seen a bounce-back in demand in 2023, especially in Europe which had a relatively strong end to Q4 as well.

Overall, I’m excited about the improvements that 3D printing will bring to the manufacturing industry, and I still believe Proto Labs will be a beneficiary of that.