Earnings Updates: RVLV, INSP, And Quick Note on QTWO
Revolve (RVLV) announced Q3 revenue of $244.1 million, up 62% and ahead of the $228.6 million (+60%) analysts had expected. By segment, REVOLVE grew by 56% (to $204.2 million) while FORWARD grew 95% (to $39.9 million). Domestic sales were +65% while international was +49%. Big picture, it’s very encouraging to see success across the board and it’s hard not to be impressed with the growing scale of the FORWARD segment. Management discussed how sales have increased to well above pre-COVID levels and customers are buying more items at full price, while also buying higher price point items. Active customer count is on the rise as well. That all said, it’s not full speed ahead. Challenges remain in terms of certain supply constraints and as an international player there are areas where lockdowns and/or other COVID issues are holding back sales. The upshot is that if those areas improve, Revolve could surpass expectations. Lots going on behind the scenes here and it’s an expensive stock, but looks to be a continued winner in retail. We’ll keep at hold. HOLD
A quick note on Inspire Therapy (INSP). After the company reported we increased it to BUY yesterday, but in today’s Issue INSP was rated Hold. It should be BUY. Thank you to an alert subscriber for pointing out the mistake. BUY
Finally, our old friend Q2 Holdings (QTWO) reported earnings yesterday and the stock is showing signs of life (+13% today). We had let go of our final stake, but I’ve been keeping an eye on it. The earnings report showed the beginnings of what it would take to get QTWO working again, namely bookings growth and large deals (three Tier 1 signed in the quarter). Also, the BaaS (Banking as a Service) solution is showing traction at the top end of the market (bigger banks) and could be a meaningful part of the story in a few years. If we run the numbers out, revenue growth will still likely be below 20% in 2022 due to delays in go-lives, but moving into 2023 it should pop up into the low-20% range. I’m not officially adding QTWO back to the portfolio today, but I wouldn’t argue with anybody that wanted to take a swing at it. Clearly, follow-through after today is important so if you buy in just keep an eye on it since if the stock falters and heads back toward 80 more time might be required before QTWO can work.