Zeta (ZETA), Talkspace (TALK), RxSight (RXST) and EverQuote (EVER) Deliver
New kid on the block Zeta (ZETA) is starting the week off with a bang after the Q1 report yesterday sailed past expectations. Revenue grew +23.7% to $194.9 million to beat by $7.8 million (4.2%) while adjusted EPS of -$0.23 improved by 40% and beat by $0.02. Forward guidance was raised by 3% and EBITDA margin was maintained at 19% (i.e. higher revenue not costing more to generate). Pretty much all the growth initiatives and key numbers I was looking for are playing out. Business with the Agency HoldCos is very strong, the sales teams are clicking, auto insurance recovery is playing out and political contribution is seen ramping up (estimated at $15 million). The new mobile solution (launching the back half of this year) is not factored into guidance but is expected to become a meaningful revenue contributor (management has called it the next $100 million product). Shares are rallying. We started with a half-sized position and I’ll keep at buy half so feel free to add a few shares. Will look for the next sizeable drawdown before suggesting adding larger positions/second half. BUY HALF
Talkspace (TALK) is heading south today despite Q1 results that beat expectations as analysts interpret the results and no change to full-year guidance as indicating 2024 revenue may come in lower than expected. That might reflect that management isn’t baking in any contribution from the Medicare launch as they think it’ll take a little time to “figure it out” just like it did with the teen segment (which is now going very well).
First-quarter revenue grew 36% to $45.4 million, beating by a slim $900,000, while EPS of -$0.01 met expectations. Most things looked good, with eligible lives up 34% (131.4 million), completed Payor sessions up 65% (284.2 million) Direct-to-Enterprise up 14% and Payor revenue up 92%. It’s worth repeating that Payor revenue carries lower margins than other categories. Consumer revenue fell by 29%. This is likely a reflection that some individuals are now getting access to Talkspace through an employer, insurance provider or other organization (i.e. New York City, Baltimore Country Public School System, etc.). I listened to the conference call and didn’t love the tone of questions, and obviously the stock’s reaction isn’t great. We’ll step aside from our half-sized position today. SELL
RxSight (RXST) is about flat today after delivering a Q1 beat yesterday after the closing bell, however shares ran to new highs in the four days leading up to the report. Revenue was +68.7% to $29.5 million and beat by $2 million. Adjusted EPS of -$0.25 beat by $0.04. Full-year guidance moved up by $3 million (more than the Q1 beat) to a range of $132 to $137 million (+48% to 54%). It sounds like Light Delivery Device (LDD) capital sales are trending well which is pushing consumables, the Light Adjustable Lens (LAL and LAL+), sales higher and also utilization of previously placed LDD equipment is on the rise. In short, the trends are good. And profit margin has room to expand with a more efficient LDD coming out next year and premium lenses (i.e. the LAL+) now in the mix. We’re up 20%. BUY
EverQuote (EVER) is up today after another beautiful quarter. Revenue dipped 16.6% to $91.1 million but that was $10.7 million (13.3%) better than expected and should be the last quarterly decline. Remember Q1 2023 was a crazy strong quarter when everybody thought the auto insurance market was going to recover (that recovery imploded in Q2). Adjusted EPS of $0.05 beat by $0.12. The quote of the day was management saying they are enjoying “higher volumes and higher pricing” as a small number of carriers (i.e. Progressive) have accelerated spending to more normal levels. Management expects a multi-year recovery, though the team is trying to keep expectations in check and suggested that the next wave of carriers hasn’t yet ramped up spending. That means they see Q3 as being a little soft (trying to leave room to beat, I think). Second quarter was guided ahead of expectations by 31% to a range of $100 - $105 million. Keeping at hold for now and suggest looking to add shares on dips. We’re up about 65%. HOLD THREE QUARTERS
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