Motley Fool Money - Cybersecurity Soars, Cyclical Stocks Cycle

Episode Date: June 7, 2024

Gotta-have-it businesses like Crowdstrike aren’t seeing any slowdown this earnings season, but goods like RVs and high-end athleisure aren’t exactly flying off the shelves. (00:21) Bill Mann and Jason Moser discuss: - The strength of Crowdstrike’s recent earnings and cybersecurity spend, a cyclical company that looks interesting, and why even at valuation lows, Lululemon has some work to do. - Why some investors are interested in starting a new stock exchange in Texas and Spotify’s latest price hikes. (19:11) The regulatory environment continues to heat up – late last month the DOJ filed its latest antitrust suit against ticketing giant Live Nation. Motley Fool Canada analyst Nick Sciple unpacks the case and what it might mean for Live Nation and investors. (32:24) Jason and Bill break down two stocks on their radar: Docusign and Casey’s General Stores. Stocks discussed: CAVA, NDAQ, KR, ORCL, SPOT, SHOP, CVX, BUR Host: Dylan Lewis Guests: Bill Mann, Jason Moser, Nick Sciple Engineer: Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

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Just when you thought price hikes were over, they bring them back in. This week's Motley Fool Money Radio show starts now. That's why they call it money. The best thing. Cool global headquarters. This is Motley Fool Money Radio show. I'm Dylan Lewis. Joining me over the Airwaves, Motley Fool's senior analysts, Bill Mann and Jason Moser.

Fool is great to have you both here. Addie. Hey, fellas, how you doing? We've got a look at the latest DOJ antitrust case, the story of why some investors are trying to start their own stock exchange, and of course, stocks on our radar. But we're picking up today with the earnings beat. We have some fresh numbers out from full stocks, including CrowdStrike. We'll start there. Shares up 10% this week following earnings where the company came in ahead of expectations, bringing the stock right near all-time highs. Jason, you dove into the report.

What did you see? Yeah, tell me if you've heard this before. A CrowdStrike just reported another very strong quarter. I mean, listen, if they're spending fatigue in, in this industry. It surely doesn't seem to be showing up in crowd strikes results. The stock is feeling the love. It's up 120% just over the last year alone as they continue to pick up share. And when you look at these numbers, it becomes, it makes a lot of sense as to why, right? Total revenue is up 33% from a year ago to $921 million. Non-gap earnings per share up 63% from a year ago. And then the annual recurring revenue, what they refer to as ARR and the release, $212,000, million dollars. That was the net new ARR. I'm sorry, that was up 22% from a year ago. And ended the year with ARR of $3.65 billion. That's up 33% from a year ago.

And really, the encouraging thing is management, they believe they're firmly on their path, as they say, to $10 billion in ending ARR. So you can see there's still a lot of potential runway there. And, you know, the interesting thing about CrowdStrike, it's they talk about these modules that make up this Falcon platform. And subscription customers with five, six, and seven or more modules grew to 65%, 44% and 28% of subscription customers respectively. So a lot of growth there, and even more encouraging, deals with eight plus modules grew 95% from a year ago. And so all things considered, it really does feel like this is a business that's just firmly on track to to dominating the cybersecurity space here. There's a term for what Jason has described, a financial term, and it's called bazonkers.

Those are crazy numbers. And one of the really interesting things about Crowdstrike is it has gone from being a free cash flow negative company in 2020 to having a free cash flow margin of 35% this last quarter. And from what Jason described, you can see exactly where it comes from. It is much more expensive to bring on a new customer than to serve an existing customer more and more. And they are getting deeper and deeper in their relationships with their existing customers. And so that's why money is flowing like a river into CrowdStrike and to it, Sherwood. One other thing I thought was very interesting here.

And it just, I think it speaks to something that CrowdStrike is clearly doing very well from just a culture, a company perspective. I just found this number to be quite astounding, honestly. Over the past five quarters, they say they received more than 687,000 applications from individuals who want to work for crowd strike. That's, as Bill said, bazonkers, right? I mean, that really does speak a lot, too, how that business is growing and the culture they're developing there. And given the nature of cybersecurity, I think investors have to be very encouraged. Jason, as we've looked at results from as-a-service companies throughout this earnings season, and I'm thinking specifically about recent reports from Salesforce and from Octa.

The general narrative has been new customer acquisition, pretty tough in this environment. Expanded customer spend, pretty tough in this environment. Remaining performance obligations for CrowdStrike up over 40% year over year in this quarterly report, is this just a sign that there is so much resilience with cybersecurity spend? Yeah, I think that's part of it. It's kind of a one-to punch there. It speaks, I think, to the strength of CrowdStrike. business in what they're doing, right, what they're bringing to market with that Falcon platform.

And it also speaks to the nature of cybersecurity in general, right? And that's one of the reasons why it's such an attractive market is because it truly is mission critical. It's just a difficult market to really fully parse and understand. And we've seen over the last several quarters, big competitors like Palo Alto talking about that spending fatigue, we're just not seeing that same kind of language from a company like CrowdStrike. And given the mission critical nature of cybersecurity, security in general, it surely seems like they're on the right path. All right.

For our second earnings look, I think we're all about to learn a little bit. Bill, every once in a while, you bring a company into the conversation I've never looked at, never dug into the results on. We have one this week with Thor Industries. They're a manufacturer of RVs. Why do you want to bring this one into this week's earnings rundown? By calling them a manufacturer of RVs, you're selling them just a little bit short. They are the world's largest manufacturer of RVs.

So if you were looking for an RV bellwether, it would be Thor Industries. And so the theme for the RV industry is this. After COVID, everybody who wanted an RV currently owns one. And so in the industry, you have seen the market for new RVs drop by 50%. So Thor Industries had an incredible run. Their earnings this past quarter, their sales, I should say, were down 40%. It has been a really, really tough time for Thor. Oddly enough, though, if they're down 40 and the market is down 50, they are actually capturing share. So this is a company that goes through cycles. They are a fantastically

profitable company on the run. It's an industry and a company that I would be interested in from here because, let's face it, who, when they're looking at a company to invest in, starts with, hey, find me something that's had their sales decreased by 40%. Yeah, I've got a compelling declining revenue story for you, right, Bill? So just to be clear, we're not looking at this one because there's an interesting consumer spend story here. This is one that you would maybe even put on a watch list and are considering, you know, keeping an eye on. I guess you would call 50% down an interesting consumer spend story. But I guess my point is that companies that are cyclical cycle, I mean,

that's exactly what it means. These are big ticket items, and they have just gone through the best days that they could possibly imagine. But that doesn't mean that a company that has shown this kind of decline is on its way out. All right. Our final earnings story for the segment needs no introduction. We all know Lulu Lemon. Shares up this week following earnings where the top and bottom line came in above expectations. Jason, this is one you've followed for a while. What did you see inside the results. Yeah, I mean, this was a good quarter. It wasn't a great quarter. It was a good quarter. Let's not take away from what this company has done over the last several years. I mean, shares are up 630% over the last decade, but they could be hitting some growing pains here.

And I think that's something to keep in mind, given that investing is all about the future, right? But again, going to the quarterly numbers there, I mean, revenue is up 11%, which was well within the guidance management had laid out a quarter ago. Gross margin, encouragingly, was up 20 basis points. operating margin down just slightly as well, but both numbers better than guided. And when you look at Lulu, it's kind of a tail of two regions, right? America's were seeing a little bit of a slowdown there, whereas international, we're seeing a little bit more of an encouraging performance. America's net revenue was up just 4%, whereas international up a whopping 40%. So very encouraging from that perspective. And inventories at the end of the quarter were down 15%. And that's good because

is that just is a sign that this is a company that's not having to resort too terribly much to deals and they can maintain some of their pricing. The board approved a $1 billion increase to the repurchase program and share count is down incrementally over the last five years. But this is a retail business, right? And we've seen it before with companies like Nike and Under Armour, et cetera. It's just, they can only grow so much, right? That does start to slow down and you have to start asking yourself how much growth is left with Lulu. I'd imagine there is some left. It seems maybe a little bit more international than anywhere else, but again, a good court. It's an interesting time to check in on the business, because we saw some positive reactions here to the earnings result, Jason,

but shares down 35% for the year. And the company's currently trading at 26 times earnings. It's the cheapest it's been in five years. Given the growth outlook, does this feel like an opportunity, or is this kind of a wait-and-see quarter for them? I mean, I feel like it's a wait-and-see right now. They did raise earnings guidance slightly. And so if we're looking at that, on a forward basis, shares are around 23 times full year estimates. That's not terribly expensive for a business like this. But again, it really does boil down to can they reignite that America's growth because that is, of course, a very important part of the business. All right. Coming up after the break, we've got another round of price hikes in streaming.

Stay right here. You're listening to Motley Full Money. The old adage goes, it isn't what you say. It's how you say it, because to truly make an impact, you need to set an example and take the lead. You have to adapt to whatever comes your way. When you're that driven, you drive an equally determined vehicle, the Range Rover Sport. The Range Rover Sport blends power, poise, and performance. Its design is distinctly British and free from unnecessary details, allowing its raw agility to shine through. It combines a dynamic sporting personality with elegance to deliver a truly instinctive drive.

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I was particularly excited to talk to both you guys this week because we have two interesting market stories that I think deserve some diving into. The first one up, Bill, I think is right up your alley. There may be a new stock exchange on the street in the next few years. There's a company backed by BlackRock and Citadel Security is looking to start the Texas Stock Exchange, TXSE, for short. The entity is not currently registered with the SEC, but has raised over $100 million in business. backing. Bill, this begs the question for me. Why would anyone want to go out there and start a new stock exchange? You know, in the U.S., we tend to think of the New York Stock Exchange and the NASDAQ, but there are actually about a dozen stock exchanges around the country. So the Texas Exchange is

meant to compete directly with NASDAQ and with the New York Stock Exchange. It's funded by Citadel Securities and by BlackRock. And one of the things that they're pointing to is the fact that compliance for the listing rules for the New York Stock Exchange and the NASDAQ have started to include a bunch of things that have nothing to do with corporate governance. There are things like ESG, their board composition questions. And so they're basically saying, hey, let's have an exchange where we don't have those kinds of things on our plate and we don't require them. And so you're not going to believe this, but Alon Musk, who has recently moved

Tesla to Texas because of regulatory issues is very fond of this. The question really comes is, what is a market? So everyone gathers under the buttonwood tree, and you'd better have buyers and sellers. So if you're going to start a new market, you really need to figure out how to bring both. And that is the huge question. Bill, as you alluded to, there are other exchanges out there. it's also very hard to start stock exchange. And very often, some of the other ones that have been started of have been absorbed by NASDAQ or by some of the other exchanges for the average person at home who's just sitting there, you know, occasionally buying stocks. What does something like this mean? It doesn't mean much. It may mean if they get a little bit of traction,

a lot of people don't really think about this, but companies are listed on stock exchanges, not for our convenience, but for their convenience. So the companies are listed ultimately so that they can raise money and do things with their capital. So if there is another exchange that allows them to list more cheaply, they might get some momentum, but it's not going to happen unless buyers and sellers congregate there. And the weird thing about it to me is that we have definitely come to a period of time in which physical location means exactly nothing when it comes to exchanges. So it's not great analysis to say we'll see, but this is truly a we'll see moment. All right, over to our second interesting market

story this week. Jason, last year the SEC passed a rule requiring private funds, which is largely hedge funds, private equity, and some VC firms to disclose their fees, expenses, and also have more equal treatment of customers. This week, a federal appellate court struck that rule down. Why are you paying attention to this one? You know, it's going to be interesting to see how this shakes out. I mean, it was a three to zero ruling. So it's not like there was much debate on that matter. And it was actually three to two when the SEC decided to adopt this rule. So it wasn't exactly unanimous then. I mean, industry officials praise the decision. They say that the SEC rule was burdensome and costly and threatened to change how they do business. You know, on the one hand,

I totally get the SEC's point. I mean, transparency is generally regarded as a good thing, right? I mean, having a better understanding of fees and how deal structures work seems pretty darn reasonable to most of us. And certainly the SEC had some support from institutional investors there. But there is something also to the nature of these deals in their argument that their investors are more sophisticated than your average investor. This kind of makes me go back to Warren Buffett and that old saw that there are no called strikes in investing, right? They're not required to pursue or participate in these deals. Now, with that said, it's also interesting to note, based on SEC data, that assets under management at private funds increase from $9.8 trillion

to $26.6 trillion over the decade ending in 2022. So it's quite obvious just from those numbers alone that we're seeing a bit of a shift. So this is going to be something obviously that plays out in the courts. The SEC is going to decide how far they really want to pursue this. One of the things that has become part of this ruling is that they are going to make it harder or to ban what are called side letters, which are kind of sweetheart deals for big investors. And on the one hand, you could say, yeah, everyone should pay the same. I think that there is going to be a reaction in which it's going to be much harder for newer, smaller funds to get off the ground. Because a lot of times those side letters come with a large investor taking a risk with a new investor.

And so I think it's going to add to the conservatism of the industry. And I don't necessarily think that that's going to be a good thing long term. And the SEC is going to have to be careful here too, right? And there are legal intricacies here that you have to keep in mind because while this ruling is what it is, if the SEC believes in their case, they want to push it. I mean, they could push this all the way to the Supreme Court if they want. But, you know, if they do that and it gets shot down, I mean, there's a level of finality there that they may not want. So it will be fun to follow this.

Jason, you mentioned that the industry was not necessarily looking forward to this new ruling. Not surprising. They were pushing back because of higher costs. And if I see a through line with both of these stories, the Texas Stock Exchange story and this one here related to private funds, I say, you know, given the opportunity, people are going to avoid compliance. clients costs whenever they possibly can. Yeah, yeah, that end, it's to my understanding that everything is bigger in Texas. So there's that's right. All right, rounding us out with our news rundown this week.

Spotify users are set for another round of price hikes. The music streamer announced this week that U.S. subscribers on the ad-free premium plan will be paying a dollar more, bringing the cost to $11.99. We'll also see increases to the cost of the company's duo plan and family plans. plan. Bill, this is the second time that we have seen an increase from Spotify in less than a year. Are you surprised by that at all? I have to call Jason out here because the last time we talked about it, he said, well, I don't even notice how much I pay. So it just calls me whatever. Jason, how could you do this to us?

I was just, I'm so glad you led with that, Bill, because I had this note. I think it was just in April we were talking. I was carelessly talking about it to get charged whatever they want. Bill, called me out. So, Mia Culpah, I need to learn to keep my big fat mouth shut. I am so angry about this price hike. You heard it here first. My bad. I do think in addition to Jason being able to look into the crystal ball, I think there's an interesting angle here, Bill, in just price sensitivity in general. Daniel X, CEO of Spotify, has called this the year of monetization. Seems like price ikes are part of that monetization plan. They are the market leader here. And their church, rates and their cancel rates are something close to 0%. I mean, basically the people who cancel

Spotify do so because they die. So they have room to raise rates and see if their cancellation rates go up a little bit and they'll still make more money. Jason, anything you want to throw out there just for the universe to hear before we wrap up the segment. Yeah, I think you just want to keep an eye on gross margin with a business like this, right? I mean, this most recent quarter, 27.6% versus 25.2% a year ago. That's a sign those price hikes or having a positive impact for the business. Not inviting any more chaos, I see. All right, Bill Mann, Jason Moser.

We'll see you guys a little bit later in the show. Up next, we're diving into the latest antitrust case. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. I'm Dylan Lewis. The regulatory environment continues to heat up. Late last month, the DOJ filed its latest antitrust suit against ticketing giant LiveNation.

Here to unpack the case and what it might mean for Live Nation and investors. Motley Fool Canada analyst, Nick Seiple. Nick, let's start out with the basics of the DOJ's case here. We had suit details emerge in late May. What exactly is the DOJ alleging? Sure, Dylan, great to be here with you on May 23rd, the DOJ, together with attorneys general of 29 states and the District of Columbia. Suede Live Nation and its wholly owned subsidiary ticket master alleging unlawful monopolization, exclusive dealing, and tying in violation of the antitrust acts. According to the complaint, company has systemically and intentionally corrupted the competitive process, following a host of harms to fans, artists, and venues. This really continues a trend we've seen from the DOJ throughout this current administration.

There's more active monopolization cases currently pending right now than we've seen in total over the last 20 years. Getting into the specific allegations against Ticketmaster alleges that Live Nation, Ticketmaster, serves as the gatekeeper for delivery of nearly all live music in America today, using its power and influence to put itself at the center of virtually every aspect of the live music ecosystem. The complaint says LiveDation Ticketmaster Control 60% of concert promotions at major U.S. concert venues and over 80% of major concert venues. Alleges that Ticketmaster has prohibited venues from having multiple ticketers, you know, to offer at their facilities, have forced venues to sign long-term exclusive ticketing contracts, have acquired a number of large venues and festivals, entered into large

booking long-term booking agreements with other venues that they don't own in order to control the market and have required artists to use its large amphitheaters in order to use its promotion services. Notably, this complaint is going after structural relief. This is to break this company up. This is an extraordinary remedy. As far as I'm aware, this is the last big one of these that we had be awarded. What was the AT&T breakup back in the 80s? Also background of this case, this is a merger that was approved back in 2010 under the Obama administration, operated out of under a consent decree prohibiting the company from doing some of the things that are alleged here, threatening concert venues, from using competing ticketing firms. However, that decree

was extended in 2019. There's been a monitor looking over the company's actions for four years. And in this complaint, there's really only one allegation against that consent decree. I really think that's Live Nation's best argument here is that, you know, listen, you've been, you first off, have approved this merger 14 years ago. You've been, you know, closely monitoring our business practices for the past four years, haven't been able to come up with some real great examples of us violating that. A lot of these other allegations really are things that are out of the company's control. The artists really control the price of tickets, not ticket master. Higher ticket prices are the result of higher production costs. Taylor Swift is spending a lot

of money to put these shows on. Live Nation gets blamed for high fees, but its fees really aren't higher than anybody else in the ecosystem, and a lot of that money doesn't go to Live Nation. Another good argument, I think, is pretty good as well as for Omnopoly. There's really a lot of really not a lot of monopoly profit here. They only have a 1.4% net profit margin. Ticketmaster's market share has declined since 2010. So for me, I think Live Nation Ticketmaster really has the stronger case here. A lot of the allegations seem to be features of the industry and features that have been improved in the past by federal courts. I don't think it's a case that's strong enough to merit breaking up the companies. Even if it did, I don't know that it really

reduces fees and ticket prices, but I do think this gets great PR for the administration. This a company that is very unpopular. And, you know, I think, you know, maybe we get a settlement. Maybe you get some restrictions on exclusive ticketing agreements. I don't think this is going to radically, you know, shift the environment for tickets. I don't think you've got a lot of opportunity for prices to come down significantly, again, because of that profit margin I mentioned earlier. Nick, sometimes these antitrust cases get into things that are a little bit more obscure or a little bit lesser known. And I feel like with this one, it is right there in your face. if you attend any live events, you are overwhelmingly likely to be interacting with Ticketmaster.

You did a little bit of market definition there. Thank you. You threw out 60 and 80%. I know typically that's how a lot of these cases work. We look for things like overall control of the market. We also look for things like consumer harm. You started talking through some of those pieces, and it seems like those are the real angles that the DOJ is going to be focusing on with this case. Well, that's right.

I mean, it's not illegal to have high market share. And I think what Ticketmaster Live Nation would argue is that we are the best at offering these services. We get selected for these ticketing agreements. I mean, I know folks were upset by what happened with the Taylor Swift ticketing mess a couple years ago. Maybe that's part of what led us down this road finally. But there's not a lot of other companies that could have even attempted that in the way that the Ticketmaster was able to. So, again, I think it's not illegal to have high market share. It's illegal to engage in anti-competitive conduct. That's really what the government has to prove here. While I know Stubhub, lots of other competitors out there would love for Live Nation to be restricted and its ability to compete with these companies. The line that we have to draw is where the line crosses from normal competitive behavior in an industry into anti-competitive conduct. And that's really what the government is going to have to prove here. and what Live Nation is going to try to come back.

So it seems like your view is the case is actually one that Live Nation may have some success fighting. I'm curious what some of your answers would be to the government's claims here. Yeah, well, I think, so some of the government's claims are that, you know, Ticketmaster will only offer its, you know, will only offer its promotion services to venues that it owns and operates. That's kind of normal ticket, normal operation in business. You know, there's allegations that they require venues to sign long-term, exclusive ticketing arrangements. I think the number is like three to 14 years that were cited in the complaint.

Live Nation's response to that is that this is something that venues like and would want. This is something the Clinton administration investigated 30 years ago. In the case of venues, it's complex to integrate with these ticketing operators and would be costly to offer to multiple ticketing businesses. So the reason we're offering exclusive contracts here are because our customer wants it, not because of anti-competitive behavior. And again, back to what I said earlier about, you know, the higher fees are largely going to other participants in the ecosystem. The high ticket costs are something that artists control, the ticket master doesn't control. It really boils down to Ticketmaster exists in this industry to be the bad guy.

Artists would like to profit maximize. Venues would like to get as much profit as they would like. And part of Live Nation's job here is to be the one that everybody dislikes, that everybody throws the blame on for high costs in the industry. I think that's a lot of what Live Nation is going to argue, the government is going to argue, that fees but for Live Nation's behavior would be significantly lower. I just don't know if that's going to hold water. So you hinted at this a little bit earlier, but typically when you see a monopolist,

you would be expecting a company that would be extracting a lot of rent from that power. And in Live Nation's case, that would be revenue, net income, and ideally, shareholder returns for the people that own the stock. Comping the company to 2019, pre-pandemic, revenue has doubled over the last five years. Net income has more than four-xed over the last five years. In that time, shareholders are up 50%. S&P 500 is up 90%. It is a curious case to me, of a business that has gotten bigger, stronger, but not necessarily one that shareholders have enjoyed a wild ride with, even though the company is being viewed as this incredibly monopolistic business.

This business is really, it is a cash machine. It took a pandemic to throw it into a cash burden. I think it did about $900 million in free cash flow last year. Dominates its industry. However, there's really not that many more areas to conquer, given their market share in the business. They're going to be hamstrung and their ability to continue to roll up other operators in the industry because of this lawsuit and oversight that they face the past several years. I think going forward, this is going to remain a significantly cash generative business, but I think it might need to transform into more of a capital return de-leveraging story less so than the roll-up story it had been in the past. Relative to the market,

Is it going to be a market beater going forward? I think if you buy it right, this is a company that can perform well for you, but I do think, too, over the next several years, there's going to be heightened costs from the lawsuit. And then lots of uncertainty about what the in-state is of the industry, which I think is going to affect valuation. If a settlement that takes place, that's probably going to limit the ability for the company to expand margins and grow going forward.

And even if they win the case, the lawsuit's going to, going to hang over the business for a while. So, you know, I think this is going to remain a cash machine, but maybe not the same growth profile it had in the 2010s. There is the possibility with this case that there is some breakup or some corporate action that is being forced if the DOJ winds up winning. I know at one point you owned this business. You're not currently a shareholder, but how would you be looking at this as an investor in Live Nation? and the possibility that as it currently exists, it may not be the form of this company in a couple of years if the DOJ gets its way. Yeah, I think it's unlikely that a breakup happens, again, because of what I said earlier about the kind of the background allegations of the case.

But if that were to take place, it really blows up the flywheel where you use the money that you make from the ticketing side of the business to subsidize the promotion side of the business, to push back into the other parts of the business. If the business gets broken up, I think you'd see really a restructuring in how these different parts of the business operate, parts of the business that were offered maybe at a lower margin to get artists into that flywheel. They're going to have to change their structure to be priced higher. I think other parts of the business that maybe are generating higher profits today because of that structure will see their margins get squeezed. I do think that all the individual pieces still would retain significant value and still, I could argue that, you know, my might be worth more broken up. I don't know if that's necessarily likely, but you could argue

that on the multiple side. So I think you'd see a restructuring of the industry. Do I think that would change the overall cost that folks are paying for tickets long term? I don't think so. And would it change the overall value of the business? I'm not sure. It depends the structure of the settlement. A lot of uncertainty here. So for investors, maybe regulatory environment doesn't factor too, too closely into the thesis because it is so hard to predict? I'd say this is a business that, no matter what is going to be highly regulated throughout its entire history has been subject to investigation. I mentioned investigation back in the Clinton administration. I think this is a business that you could argue trends toward monopoly or as a natural monopoly because of the structure of the

industry. I think it's a business that is highly public. Everybody sees these fees and it creates demand from the voter base to do something about that. I don't think that's likely to change anytime soon. It was controversial in 2010 when the Obama administration approved the merger of Ticketmaster and Live Nation. The company remains controversial. I think if you're going to own this business, you have to acknowledge that. You have to say, listen, I own a royalty on a live events business in the United States. This is a business that is growing year over, year, over year. I know every year we're not going to have the Ares tour. We're not going to have Beyonce. But this is an industry that is a growth business. And I want to own the market leader here. And if you can look through some of the

you know, the overhang, the regulatory overhang that's really always going to be there and get comfortable with owning a business that nobody likes. I think this is a company that's going to continue to generate significant cash flow and, you know, likely, I think, going to return more of that to shareholders over time, given the structure that business is in and the regulatory oversight. So you just have to be comfortable with that to own the business. All right. Thanks for walking me through that, Nick. Listeners, don't go anywhere. Coming up next, Jason Moser and Bill Mann return with a couple stocks on their radar. Stay right here. You're listening to Motley Fool money.

As always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell anything based solely on what you hear. I'm Dylan Lewis, joined again by Bill Mann and Jason Moser. gents, as we tape here on Friday morning, it's National Donut Day here in the United States and all of the donut chains are getting in on the fun. You know you got those giveaways. They've got to lean into a fun holiday. Jason, if you're driving on the highway, getting a hankering for a donut, which chain are you most excited to see a sign for? Well, as someone who grew up in the low country

of South Carolina back in the 1970s, I'm old school, villain. I mean, I'm a Krispy Cream guy through and through. I like Duncan. That's fine. But I'm getting a aunt when I see those two Ks in the sky. North Carolina represent. Bill, you taking Krispy Kreme as well? I would, but I want to be a little bit, you know, I think I need to add some diversity. So if you are on the road and you are near Lewiston, Maine, the place you want to stop is called the Italian bakery and get you a blueberry chrome donut. They are life affirming. And for those who celebrate National Donut Day in that part, worth a journey. Life affirming is some high praise for a donut. I had to hold on to the wall. It was so good. You know, you mentioned Krispy Kreme, and this is not a business that has done

particularly well as a publicly traded company. And actually, donuts themselves have been a great investment. Duncan was taken private. Are you surprised, Bill, that fried dough is not a more lucrative business? They are the Minnesota Vikings of donut companies. I mean, they just, they can't win for losing. Yes, it should be a much better business, but actually the Krispy Cream issue wasn't so much the fact that they were bad at selling donuts. They were bad at selling franchises. And so...

They were bad at counting, too, right? Well, maybe they're a counting problem back in the day. To the extent that counting was part of their deal, yes, they were bad at it. So, yes, it should be a much better business. You know, ultimately the problem with donuts just moving nationals. nationwide is that the ticket costs or amount that you each customer sell buys, it's pretty small. All right. Let's get over to stocks on our radar. Our man behind the glass, Dan Boyd, is going to hit you with a question. Jason, you're up first. What are you looking at this week?

Yeah, DocuSign earnings came out Thursday after the market closed, ticker DOCU, and kind of a meh quarter. I mean, they're just doing what they do. They're making progress as things have normalized compared to the growth that was all pulled forward to the last. few years. Revenue was up 7% from a year ago. They saw Billings up 5%. Billings, that's always kind of funny. It can be lumpy and a little bit difficult to pin down. Gross margin hanging in there down just 60 basis points. But earnings for share encouragingly up 14%. And remember, this is a company, they've been in the headlines recently. Just with, they've got new leadership. There was talk of perhaps they may be acquired or maybe they were shopping themselves around. Then it turned out that maybe

they were asking too much or there were no really interested buyers and they've decided they want to try to try to go on their own as a publicly traded company. And so it seems like we're going to have DocuSign as a publicly traded company for the foreseeable future. They added $1 billion to the repurchase authorization there as well. And I think it's interesting to note their total customers increased by 11% year over year. That's always a good sign for a business like this continuing to grow that customer base. At the end of the quarter, the balance sheet is an asset. It's really in good shape. $1.2 billion in cash and equivalence with no debt. So they're forecasting growth for this coming year around the same, guiding for around 7% of the midpoint there. And I think we're just kind of

getting back to normal with this business. It kind of went out there over the last few years because of everything that went on with COVID and whatnot. It's a good business. Is it a great business? I don't know. They do provide a good service, but it's one that's going to require a little patience. and I'm not entirely convinced that they're going to make it too much longer as a public traded company. It seems like they'd be an attractive acquisition target, but we'll see. Dan, a question about DocuSign. Yeah, so when Dylan told me that DocuSign was on the bill for today, my question to him was, does DocuSign still stink?

And I don't know, man, it sounds like your dogs might think so in the background there, Jason. Well, you know, my dogs. Jason's dogs obviously hate DocuSyce. They always have to chime in. It could be one of those kind of like donuts. Great service. Maybe not such a great investment, but the jury's still out. Love that thread. Way to pull that one forward, Jason. All right, Bill, what's on your radar this week? Mine is Casey's General Stores, which is in the Midwest primarily. They have 2,500 gas stations, basically. It is one of the more profitable gas operations in the country. Their margin per gallon of gas is about 35 cents per gas per gas. down, which is really, really high. Gas prices have been all over the map. It'll be interesting to

see whether they are able to keep those margins up. The majority of their stores are in towns of fewer than 5,000 people. So it's a really interesting company that has minimal competition in its core markets. Dan, a question about Casey's General Stores. I've never been to a Casey's general store. Is there anything, Bill, that sets it apart other than gas? The fact that the they are in very small towns, is that's what they've focused on. I mean, when you, when you go into a Buckees, you know, you're in a Buckees. I wouldn't describe Casey's in the same way, but they're not opening another gas station right next to a case that's getting the size of the counts that they focused on. Dan, which one's going on any watch list this week? Well, I'm going to have to

agree with Jason's dogs and not pick DocuSign. So we'll go to Casey's General stores. I got to love it. Got to vote with the dogs. All right, that's going to do it for this week. Smoutly Full Money Radio show. The show is mixed by Dan Boyd. Appreciate Bill and Jason bring in their radar stocks. Appreciate you for listening. We'll see you next time.