Welcome to Tidal Wave, an investment and research newsletter about software, internet, and media businesses. Please subscribe so I can meet Matt Levine one day. Given this is an investment-focused post, a quick disclaimer: this is not investment advice, and the author holds positions in the securities discussed.
Great article as usual.
"Workday’s revenue retention is ~98% vs. ~93% for Core Salesforce (~90% for Core Salesforce plus Tableau, Mulesoft, and Slack)" -- where are you getting that data from, verbally on earnings calls? Or do they report these numbers as part of their quarterly reporting packet?
Asking a simple question: for a subscription business, if a company doesn't show operational leverage, is that a churn problem or simply a byproduct of growth? Say management doesn't disclose churn, how do you look at reported financials to infer churn?
Thanks for sharing! This is a fantastic post. One Q- "In this example, Company A and Company B are both trying to grow 20% YoY. Because of the differences in churn, Company A, which in this case is representative of Salesforce, needs to add 22% more Net New ARR to meet that goal than Company B. Assuming the same “Cost to Book” for both companies, the S&M for Company A will also be 22% higher." Do you mean gross new ARR in this example/chart? Company A has to add $28M of gross ARR vs $23M for Company B - those are gross figures.