Earnings Reports (August 12th-16th)
Taking a Look at Earnings for Boston Omaha (BOC), DLocal (DLO), Global-E (GLBE), Global Crossing Airlines (JETMF), & AST SpaceMobile (ASTS).
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1. Boston Omaha (BOC)
Boston Omaha (BOC) reported their Q2 2024 earnings last week. Releasing a revenue increase of 5.6% YoY for Q2 2024, totaling $11.4M. The company's gross margin improved slightly to 66.1%, while net income surged by 53.2% to $2.1M. Adjusted EBITDA also saw a significant rise of 18% YoY, reaching $4.6M for the quarter.
Business Segment Updates
Link Media Outdoor:
Achieved a record quarterly revenue of $9.4M, marking a 10.1% YoY growth.
Adjusted EBITDA rose by an impressive 49.5%, driven by ongoing efforts to reduce land costs and optimize operations.
Boston Omaha Broadband:
The broadband segment reported a 171% YoY revenue increase, totaling $0.4M.
Despite the growth in subscribers and fiber passings, the segment faced a net loss of $1.7M, partly due to high capital expenditures and overhead costs.
General Indemnity Group:
The insurance arm saw a significant rise in gross written premiums, up 76.2% YoY, with total revenue growing by 28.2% to $5.8M.
The unit also achieved a 95.7% increase in net income, highlighting strong operational performance.
Strategic Investments & Changes
BOC continues to manage its investments strategically, with key highlights including:
An equity method income of approximately $3M related to Sky Harbour Group.
A non-cash gain of $2M from transferring Sky Harbour shares to the former Co-CEO, who departed during the quarter.
Authorized buyback program up to $20M (in effect as of August 15th).
Outlook
BOC's Q2 2024 results reflect a pretty solid operational performance and strategic growth across its diverse business units, considering the segments they are operating in and the size of each operation. The company remains focused on optimizing its existing operations while strategically investing in new growth opportunities, especially in their broadband unit. Also, the departure of the former Co-CEO Rozek had some one-time financial impacts, but the overall outlook remains positive.
My Take
BOC has navigated several challenges over the past year, including a Co-CEO split and the winding down of an overpromised business segment, Boston Omaha Asset Management. It’s crucial for both bulls and bears to acknowledge that these issues, while significant, are now largely behind the company—hopefully for good. As we move forward, it’s essential to temper our expectations regarding BOC’s performance in both the short and long term.
In the short term, we may see some volatility, but gradual gains are likely, driven by factors such as stock buybacks and the appreciation of the SKYH investment. Additionally, the company appears undervalued at the moment, which could provide further upside. The long-term outlook, on the other hand, carries more optimism as BOC’s segments continue to compound.
If you’re viewing this company as a “get rich quick” opportunity or treating it like a casino, you’re likely setting yourself up for disappointment, and holding onto the stock will be challenging. However, if you recognize that BOC’s segments, while slow-growing and perhaps unexciting, are steadily compounding, this investment could prove to be rewarding over time. The key here is patience—without it, short-term frustration is almost guaranteed.
In the past, there was uncertainty about BOC’s future, particularly regarding Adam Peterson’s approach to capital allocation compared to Rozek’s, who was seen as the superior allocator. However, it’s becoming apparent that those roles might have been misunderstood, with Peterson proving his capability in this area.
Personally, I’m comfortable with my current position in BOC. However, if the stock continues to decline, I’m likely to consolidate further unless I see a thesis-breaker.
2. DLocal (DLO)
DLocal (DLO) announced their earnings last week. Although the company has enjoyed rapid growth, 2024 has seen a slight deceleration. Over the three years since its IPO, DLO's stock has plummeted by 70%, shifting from an overvalued status to what many now consider undervalued territory.
Key Financial Highlights:
Total Processed Volume (TPV): Reached a record $6.0B in Q2 2024, marking a 38% increase year-over-year (YoY) and a 14% increase quarter-over-quarter (QoQ).
Revenue: $171M, up 6% YoY but down 7% QoQ.
Net Revenue Retention Rate: Maintained at 100%.
Gross Profit: $70M, down 1% YoY but up 11% QoQ.
Adjusted EBITDA: $43M, down 18% YoY but up 16% QoQ.
DLocal continues to operate in US dollars, following IFRS as issued by the IASB.
Performance Overview
DLO has shown robust growth, with a new quarterly record of $6B in TPV during Q2 2024, reflecting a nearly 40% YoY increase. This growth is particularly noteworthy given the tough comparison against last year’s 80% growth during the same period. This TPV growth underscores DLO’s ability to expand its market share among global merchants while attracting new clients. It also highlights the company’s strong value proposition as a trusted partner for some of the largest and most sophisticated companies in emerging markets.
The TPV performance was solid across multiple verticals, with continued strong growth in commerce, on-demand delivery, and remittances. There was also accelerating growth in SaaS and ride-hailing sectors. The company’s diversified TPV growth, coupled with a focus on low-risk, high-reputation verticals, positions the company for long-term success. The sustained growth in reputable sectors sets DLO apart from its peers, which either grow at a slower pace or focus on high-risk verticals.
Despite some unfavorable events, such as repricing by DLO’s largest merchant at the beginning of the year, material currency devaluations in Nigeria and Egypt, and general currency weakening across most emerging markets, the company managed to maintain stable net take rates sequentially. This stability, combined with growing TPV, led to an 11% QoQ increase in gross profit.
Operating expenses, excluding non-cash share-based compensation, grew by only $1M sequentially, following quarters of more significant sequential growth. This moderation in spending reflects DLO’s strategic adjustments in response to weaker gross profit. The company remains committed to key investments crucial for long-term success, particularly in engineering, back-office capabilities, and licensing. However, they are also revising discretionary spending to ensure it aligns with top-line performance and its philosophy of frugality. Consequently, Adjusted EBITDA reached $43M, reflecting DLO’s lean structure and disciplined spending. Cash generation also accelerated, with $35M in Free Cash Flow from own funds, representing a 77% conversion rate, up $23M and 7 percentage points compared to Q2 2023.
Challenges & Strategic Initiatives
Despite these successes, they have faced challenges, particularly with flat YoY gross profit performance, driven by a 13% decline in LatAm. This decline was mainly due to the Argentine FX devaluation and repricing by the company’s largest merchant in Brazil and Mexico. However, stellar gross profit growth of 79% YoY in Africa and Asia helped offset these challenges.
Looking beyond the short-term, DLO remains a strong company with a vast total addressable market, an attractive business model, and a promising future. The company’s long-term potential is expected to be reflected in its capital market performance over time.
Capital Allocation & Future
DLO’s optimism for the future is also evident in its capital allocation strategy. With a strong cash generation profile and upside potential in its stock, the company has been actively buying back shares during the quarter.
Emerging markets are inherently volatile, which can impact short-term results. However, the company’s long-term outlook remains positive. The company’s quarterly review of its pipeline and contracts projects a strong performance for the rest of 2024, with the following revised outlook:
TPV: $24.5B-26.5B, impacted by slower volume ramp-ups, pipeline volume skewed towards Tier 0 merchants, and weakening currencies.
Gross Profit: $280-300M, driven by increased local-to-local flows.
Adjusted EBITDA: $180-200M, supporting crucial long-term investments.
My Take
The company's platform supports major global clients, including Amazon, Microsoft, Google, Spotify, Nike, Uber, and more, handling transactions in over 40 local currencies. Despite the recent challenges, there are signs that a momentum shift could be starting, potentially marking the beginning of an uptrend in August.
This company operates one of the top payment processing platforms in emerging markets, catering to merchants and businesses alike. The company has been expanding its transaction volumes at a healthy pace, though recent investor concerns over declining profit margins have overshadowed this growth. This shift in sentiment has moved the stock from being extremely overvalued a few years ago to a potentially undervalued position as of mid-2024, assuming revenue growth continues strongly in the years ahead.
Today, the company serves over 600 major merchants through more than 900 payment methods, enabling transactions in over 40 emerging market nations across Latin America, Asia, and Africa. In 2023, DLocal processed $17.7B in transactions, and this figure is expected to rise by approximately 50% in 2024, reaching $26B.
A closer look at the numbers reveals that the market may have overreacted. With a forward PEG ratio nearing 0.3x, DLO presents a compelling value proposition. For me personally, I will be holding my shares since I’m comfortable with my current sizing. However, if this starts to slide again, I will look to add.
3. Global-E (GLBE)
Global-e
Q2 2024 Financial Performance
GMV: $1.082B, up 31% from the same period last year.
Revenue: $168M, a 26% increase YoY, consisting of $82.2M from service fees and $85.8M from fulfillment services.
Non-GAAP Gross Profit: Reached $80.2M, up 39% YoY; GAAP gross profit was $77.4M.
Non-GAAP Gross Margin: Improved to 47.8%, a rise of 450 basis points compared to 43.3% in Q2 2023; GAAP gross margin was 46.1%.
Adjusted EBITDA: Came in at $31.3M, up from $21.0M in Q2 2023.
Net Loss: Reported at $22.4M for Q2 2024.
Recent Business Developments
The company has successfully onboarded a diverse range of new merchants across various regions and sectors:
In the US: New partners include Pair Eyewear, Tuckernuck, MNML, Assouline, Escada, and Club Monaco.
In the UK: Added merchants such as Cordings, Clarks, Hawes & Curtis, and Revolution Beauty.
In Continental Europe: Expanded with AMI Paris, Isabel Marant, Closed, JOOP!, FC Barcelona, Pinko, and Magda Butrym.
In APAC: Welcomed GeekJack, Nagano-market, FASCINATE, Orient Star, Shona Joy, Outcast Clothing, and Gentle Monster.
Launched Victoria’s Secret as the first of several large enterprise merchants expected to come online in the second half of 2024.
Expanded existing merchant relationships, including with Michael Kors, Karl Lagerfeld, Bang & Olufsen, and Kurt Geiger.
The strategic partnership with Shopify continues to progress, with nearly all historical merchants now migrated to the new native integration and further growth in managed markets.
Outlook for Q3 & Full-Year 2024
Looking ahead to Q3 2024, GLBE expects GMV to range between $1.070B and $1.110B, with revenue anticipated to be between $165.7M and $171.7M. For the full year of 2024, the company has updated its guidance, forecasting GMV to fall between $4.605B and $4.845B. Revenue for the year is projected to be in the range of $710M to $750M. Additionally, Global-e has revised its expectations for Adjusted EBITDA, now anticipating it to be between $127M and $143M for the year, reflecting an upward adjustment from previous estimates of $124M to $140M.
My Take
This quarter delivered solid results, and I was particularly pleased to see the expansion of their partnerships and business developments. Global-e (GLBE) appears to be on track to becoming a strong cash-flow generator in the future, provided they continue to execute effectively. While my current position in the company is small, I'm fully content with its size and plan to hold onto it.
4. Global Crossing Airlines (JETMF)
Global Crossing Airlines (JETMF) announced their Q2 2024 earnings results last week, achieving profitability and winning a major government contract.
Financial and Operational Summary
Q2 2024 vs. Q2 2023
Net Aircraft Available: 14.4, up 84% from 7.8.
Total Block Hours: 6,591, an 84% increase from 3,585.
Average Utilization Per Aircraft: Remained consistent at 458.
Revenue: Increased by 83% to $57.5M, compared to $31.5M, marking the best quarter in GlobalX’s history. This growth was primarily driven by higher block hours flown, fleet expansion, and increased revenue per block hour for both ACMI and charter services.
Total Operating Expenses: Rose to $55M, compared to $38.3M, due to higher aircraft rent, maintenance, and personnel costs associated with fleet expansion, as well as increased travel costs linked to the expansion of a government contract. This also includes approximately $1.2M in expenses related to the lease return of an aircraft, the unwinding of non-core businesses, and other one-time items, including severance costs from an internal reorganization.
Net Income (Loss)/EPS: Net income improved to $0.3M, compared to a loss of $(7.5)M. Earnings per share increased to $0.01 per basic and diluted share, compared to $(0.13) per share.
EBITDAR: Increased approximately 37 times to $18.7M, compared to $0.5M, driven by the benefits of increased scale and efficient execution of the company’s core business plan.
Operational Highlights
Government Contract: Awarded a five-year contract, with option periods, to provide air operations charter services on behalf of U.S. Immigration and Customs Enforcement (ICE), as a subcontractor to CSI Aviation, Inc., the prime contractor. This new contract is expected to generate approximately $65M in annualized revenue.
Department of Defense: Completed the company’s first flight for the Department of Defense, a key customer representing an important milestone for GlobalX.
Fleet Expansion: In the first half of 2024, GlobalX took delivery of three additional aircraft—two A320 passenger aircraft and one A321F cargo aircraft. The company also signed letters of intent to lease five more aircraft, which are expected to enter service over the next 15 months.
Liquidity
Cash and Restricted Cash: The company held $10.4M in cash and restricted cash as of June 30, 2024, compared to $12.1M as of March 31, 2024, and $17.7M as of December 31, 2023.
My Take
This was an outstanding quarter, and the company's future prospects are becoming increasingly clear. They have been strategically investing in growth by expanding its fleet and increasing headcount, recognizing that the airline industry can be limiting if you’re not prepared for expansion. Their proactive approach, combined with the continued execution and the development of their cargo segment, positions them to potentially become a significant winner at current levels. For investors, the key here is patience and confidence in the company’s ability to deliver. If they continue to execute effectively, this stock could gain traction and attract more attention. In fact, I was confident enough in their direction that I bought more shares last week, lowering my average cost to $0.75 per share.
5. AST SpaceMobile (ASTS)
AST SpaceMobile (ASTS) the pioneer in building the first space-based cellular broadband network directly accessible by everyday smartphones, announced their Q2 2024 earnings results last week.
Business Highlights
1. Satellite Launch Progress
Commercial Satellites Ready for Launch:
First five commercial satellites, the largest-ever communication arrays for low Earth orbit, are on schedule for a dedicated launch in early September.
Final assembly and environmental testing have been successfully completed at ASTS’ Texas manufacturing facilities.
Satellites have been transported to Cape Canaveral for launch vehicle integration, with a confirmed launch date.
FCC approval has been secured with an initial license for this launch.
2. Expansion of Commercial Ecosystem
Strategic Partnerships:
Verizon has joined as a strategic investor and customer, adding to AT&T's existing partnership in the U.S.
Verizon's $100M investment includes $65M in commercial prepayments and $35 million in convertible notes.
Together with AT&T, this partnership aims to achieve 100% geographical coverage of the continental U.S. using the premium 850 MHz low-band spectrum.
Discussions with additional strategic partners are ongoing, following a model of commercial prepayments paired with agreements.
3. Service Capabilities and Future Expansion
Initial Service Launch:
The first five satellites will enable U.S. nationwide, non-continuous service with over 5,600 cells in the low-band spectrum.
Initial service, expected within months, will be available to AT&T and Verizon beta users after in-orbit activation.
Coverage and service quality will improve as more satellites are launched in the Block 2 series.
4. Technological Advancements
Chip Development:
Completed tape-out phase of the AST5000 ASIC chip with TSMC, promising a 10x improvement in processing bandwidth per satellite.
This novel, low-power architecture has been in development for five years, costing approximately $45M.
5. Satellite Production
Block 2 Satellites:
Planning and production of 17 Block 2 BlueBird satellites have begun at AST SpaceMobile’s Texas facilities.
The company is 95% vertically integrated, controlling the manufacturing process for satellite components and subsystems.
6. U.S. Government Engagement
Government Contracts:
Initial in-orbit and ground tests for non-communications applications were successful, leading to completed contractual milestones and revenue.
Recent months have seen additional contract awards from the U.S. Government, with expectations for more significant future contracts.
Second Quarter 2024 Financial Highlights
1. Liquidity and Capital
Cash Position:
As of June 30, 2024, AST SpaceMobile held $287.6M in cash, cash equivalents, and restricted cash.
An additional $51.5M in gross proceeds is available under the Senior Secured Credit Facility, pending conditions and approvals.
2. Operating Expenses
Total Operating Expenses:
Q2 2024 total operating expenses reached $63.9M, including $29.3M in depreciation, amortization, and stock-based compensation.
This represents a $7.9M increase from Q1 2024, driven by:
$5.6M rise in general and administrative costs.
$1.7M increase in engineering services costs.
$0.4M increase in depreciation and amortization.
$0.2M increase in R&D costs.
Adjusted Operating Expenses:
Adjusted operating expenses for Q2 2024 were $34.6 million, a $3.5 million increase from Q1 2024.
This includes:
$2M rise in adjusted general and administrative costs.
$1.3M increase in adjusted engineering services costs.
$0.2M increase in R&D costs.
3. Capitalized Costs
Capital Expenditures:
As of June 30, 2024, AST SpaceMobile has incurred $347.5M in gross capitalized property and equipment costs, with $99.3M in accumulated depreciation and amortization.
Capitalized costs cover satellite materials for BlueBird satellites, launch payments, BlueWalker 3 satellite, assembly and integration facilities, and ground antennas.
My Take
ASTS has proven to be a significant winner for investors, transforming from a once extremely high-risk investment into a stock that has delivered remarkable returns. The company has successfully navigated several critical de-risking events, bolstering confidence among both institutional and retail investors. As a result, ASTS has become a ten-bagger year-to-date, soaring from its previous lows. Personally, I haven't quite reached ten-bagger status, but I'm still enjoying a respectable five-bagger return, which I’m more than happy to accept!
That said, it’s important to note that ASTS is best suited for aggressive investors right now. The company is upfront about its financial challenges, explicitly stating in its 10-K risk section that it will continue to incur operating and net losses each quarter until it begins generating revenue from its planned commercial satellite launches. Even after revenue starts flowing, there’s a possibility that the company may still face operating or net losses (not saying they will, but we must be reasonable).
The immediate goal for them is to successfully launch the five satellites it currently has ready. Following that, the company needs to produce and launch an additional 20 satellites, a task that could cost as much as $400M, according to the latest estimates. However, this is just the beginning. The company’s long-term vision includes deploying a total of 95 satellites in orbit. If 20 satellites are estimated to cost $400M, the cost of building 95 could escalate to approximately $1.8B, excluding potential inflationary pressures or cost efficiencies that might arise from large-scale production.
Considering these substantial future costs, there’s a possibility that investors may be getting ahead of themselves with the current stock price. While the long-term potential could make today’s price seem reasonable in hindsight, the significant amount of work still ahead means that only the most aggressive investors should consider buying ASTS at current levels.
That said, they have made impressive progress on the business front in a short period of time, which is a positive indicator for its future and could potentially make it a big winner. However, this business success has led to a sharp increase in the stock price, possibly reflecting a lot of positive expectations in a very short time frame. Young companies like ASTS, which are heavily investing to build their business, often experience volatility, even if the overall stock trend is upward in the long run. Given the rapid price advance, it wouldn’t be surprising to see a sharp pullback.
As I've stated in previous articles, being a long-term shareholder, I don't plan to add to my position until commercialization proves successful. Some might argue that waiting until then could be too late, but the reality is we still don't know how well the company will execute once revenue starts coming in. I'm satisfied with my current position size and will consider adding more shares if there’s a sharp pullback or if commercialization is indeed a success