Tech Public Modeling
I’m preparing on the SM side and was curious how you approach revenue builds for companies with limited disclosures or atypical or complex business models.
For basic software companies like DOCU or Zoom, you can build an ARR waterfall. For some semis/AI names, you can use a % market share approach, while for consumer tech companies like SPOT, CART, it’s typically P*Q.
How would you approach companies that don’t fit those frameworks like SNOW or Nebius? I’ve defaulted to a simple P*Q build, but that doesn’t seem right.
Also, how many quarters do you typically model? Just enough to bridge to FY end or for the entire underwriting period?
It all depends on the key drivers that will move the stock. For different sub-sectors its all different. Internet you got Free->Paid user growth, MAUs, GMV, etc...Those are resulted from diff levers...For a business like snow that you mentioned its going to be split into Product rev and professional service rev tho what matters most is % breakdown...So for product rev it might be something like Beginning Product Revenue × NRR + Net New Logos × New-Customer Cohort Revenue. These metrics are all disclosed in company 10ks. What helped me was spamming building a rev build bc you get the hang of it... and then you just update priors once you have your framework.
im still in college so only familiar with internet/saas names but ive heard semis is a whole other beast so dont have info there
Really helpful man thanks
I will add that for some of these really esoteric revenue builds you can ask the CFO or IR for help if you are at a fund that can get a meeting
I personally don't recommend that approach as your main model driver (as a substitute or just for analysis, that would be good) unless you are pinging the person every other time for data points that's not regularly disclosed. While good for a Q or 2, it's esp tricky once they decide to not disclose or share, and you lowkey lose your "edge" have to rethink and rebuild everything.
Buddy we are talking about revenues BUILDS... not the direction of the Q. stay in IB buddy its painfully obvious you have never attended one broker conference and sat in a group meeting with the mgt team and 7 investors
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