K. Liu's Week in Review
Earnings, earnings and more earnings largely sums up the week. Within our coverage universe, NetScout Systems (NTCT) posted fiscal Q2 results ahead of expectations and guided Q3 above consensus, sending shares up 10% on the week. We suggest reviewing our earnings recap, “Large Deals Drive Q2 ’20 Beat and Improved 2H Visibility,” for our thoughts on what to do with the stock now. Ahead of its earnings release, Fortinet (FTNT) acquired enSilo for $20 million in cash. The addition of enSilo’s endpoint detection and response platform extends the Fortinet Security Fabric to further protect endpoints and corresponding edge data. Fortinet subsequently delivered a beat and raise fueled by its SPU-driven FortiGate technology and strong adoption of its secure SD-WAN solutions. Shares of FTNT ended up 12% on the week. Tyler Technologies (TYL) also completed a tuck-in acquisition and reported this week, purchasing Courthouse Technologies for approximately $19 million in cash. The addition of a SaaS solution for jury management complements the company’s already robust courts and justice portfolio, although financial contribution will be nominal at the outset as management anticipates less than $5 million in annual revenues. As for its Q3 ’19 results, Tyler’s performance was short of Street expectations as several federal contracts at MicroPact were signed by partners at the end of the quarter but not executed until October. However, management’s revised FY ’19 guidance implies Q4 results consistent with Street expectations, and TYL shares ended up 4% for the week.
Supply chain software provider Kinaxis (KXS-CA) saw the biggest move up amongst the companies we tracked due to a strong Q3 performance and an upward revision to revenue expectations. Dynatrace (DT) was also a standout performer, assuaging fears of an increasingly competitive landscape by reporting fiscal Q2 results above expectations and raising its full year outlook across the board. At A10 Networks (ATEN), growth remains challenged by ongoing delays in large deals with enterprise and Web Giant customers, but the company surprised to the upside and guided Q4 ahead of expectations on strong adoption of secure application services for multi-cloud and 5G environments by strategic accounts within North America. A10’s review of strategic alternatives and a concurrent search for its next CEO remain ongoing. Varonis Systems (VRNS) also beat expectations in Q3 despite a faster shift to subscriptions than anticipated. Although Q4 guidance was optically below consensus, the outlook assumes a higher mix of subscriptions, and management noted that guidance would have been substantially higher on an apples-to-apples basis. Both Paycom (PAYC) and Paylocity (PCTY) were also amongst those that beat and raise this week, but with more muted reactions in their share price.
For those that prefer to run towards fires, MobileIron (MOBL) was hit hard following its Q3 miss and disappointing outlook for Q4. Management cited slowing growth in the U.K. and Germany arising from macroeconomic factors as the underlying cause of the shortfall. Expectations for annual recurring revenue (ARR) growth were notched down from 20% to 10%-12%, and shares of the Unified Endpoint Management (UEM) and zero trust technology provider tumbled 23% for the week. As an aside, several other companies reporting this week also called out the U.K. and Germany as areas of softness, although the vast majority benefited from upside elsewhere, typically the Americas or other European countries. By and large, most companies indicated macro concerns have not had any discernible impact on sales cycles, although all remain mindful of the possibility. Endurance International Group (EIGI) also took it on the chin as a revenue shortfall and subsequent lowering of top line expectations overshadowed efforts to focus investments on several strategic brands within its scale businesses. Management indicated that progress has been made in returning to unit growth, but the inflection point in renewed revenue growth has been slower to materialize. Finally, communications API provider Twilio posted headline Q3 results above expectations, but base revenues were below management’s guidance and the outlook for Q4 was below consensus. The lower base revenues were attributed to $5 million in credits refunded to customers that were erroneously billed on older systems, while growth in Q4 faces headwinds from strong political traffic and the ramp of a large international customer in the year-ago period, neither of which will recur this year.
In other news, 2U (TWOU) appointed Jennifer Ogden-Reese as Chief Marketing Officer, effective November 11, 2019. She joins the company from SeatGeek where she also served as Chief Marketing Officer. At Instructure (INST), Chief Financial Officer Steve Kaminsky plans to retire in 2020. The company has commenced a search for his successor, and he will remain in his role until one is appointed. Instructure also reported Q3 results above consensus this week, while providing a mixed outlook for Q4. Management noted that Canvas bookings remain on plan domestically, but a number of large public tenders in the U.K. and Australia have been delayed. Additionally, while Bridge bookings continue to grow, the pace of acceleration has trailed internal expectations. Instructure will host an Analyst Day next month during which management will convey more detailed plans to reduce stock-based compensation, increase the company’s focus on education, engage in a strategic review of the Bridge business, and incorporate near and long-term goals in its planning process. Several days after its earnings release, Reuters reported that Sachem Head Capital Management had accumulated a position in Instructure and planned to push the company to explore strategic alternatives. That’s the round-up for this week. The table that follows depicts each reporting company’s stock price performance for the week, actual results versus expectations, and subsequent estimate revisions for the current fiscal quarter and year.
Mergers and Acquisitions
Fortinet Acquires Advanced Endpoint Security Company enSilo
Fortinet (FTNT) has acquired enSilo, a privately-held endpoint detection and response vendor, for $20 million in cash.
enSilo’s endpoint security technology extends the Fortinet Security Fabric to protect endpoints and corresponding edge data.
Tyler Technologies Acquires Courthouse Technologies
Tyler Technologies (TYL) has acquired Courthouse Technologies, a leading provider of jury management systems, for approximately $19 million in cash.
Courthouse Technologies serves courts across the U.S., including five statewide agreements, and Canada.
The acquisition is expected to contribute less than $5 million in annual revenues.
Earnings Releases
8x8, Inc. Reports Second Quarter Fiscal 2020 Financial Results
8x8 (EGHT) reported Q2 ’20 results above expectations but guided for a larger loss in FY ’20 on marginally higher revenue.
Revenue of $109.5 million (+27.8% Y/Y) exceeded management’s $106.0-$107.0 million guidance and consensus of $106.8 million. Non-GAAP operating income was $(16.2) million (-14.8% margin), above consensus of $(18.2) million. Non-GAAP EPS of $(0.16) beat consensus by a penny.
The results reflected an upmarket focus on mid-market and enterprise clients, strong channel performance, good early contribution from communication platform as a service (CPaaS), and accelerating traction internationally.
Key metrics: total annual recurring revenue (ARR) of $389.7 million (+34% Y/Y); closed 30 deals with over $100,000 in ARR; 536 (+61% Y/Y) customers generated ARR over $100,000; channel bookings +80% Y/Y and comprised 59% of new bookings.
Recent developments across the competitive landscape, namely RingCentral’s partnership with Avaya and Zoom’s entry into unified communications as a service, do not concern management, which believes 8x8 is well positioned to benefit from continued migration of customers of legacy on-premise solutions to the cloud and disruption from partnership changes.
8x8 has entered into a strategic partnership with Poly and ScanSource to launch CloudFuel, a comprehensive cloud migration program targeted at the value-added reseller (VAR) community expected to be live by December.
Q3 guidance calls for revenue of $113.5-$114.5 million, in line with consensus of $113.7 million, and a pre-tax loss of $(16.5) million, implying non-GAAP EPS of $(0.17) versus the Street’s $(0.13).
Management raised its FY ’20 revenue outlook from $438.0 million to $440.0 million but expects a higher pre-tax loss of $(60.0) million due to an incremental $7.0 million in non-recurring expense for the Poly and ScanSource partnership.
A10 Networks Reports Third Quarter 2019 Financial Results and Fourth Quarter Outlook
A10 Networks (ATEN) reported Q3 ’19 results above expectations and guided Q4 above consensus.
Revenue of $52.8 million (-12.7% Y/Y) was within management’s $50.0-$54.0 million guidance and above consensus of $51.0 million. Adjusted EBITDA was $4.0 million (7.6% margin), also above consensus of $3.6 million. Non-GAAP EPS of $0.02 was within guidance of $(0.04)-$0.03 but fell short of the Street’s $0.04.
A10 continues to see strong engagement with customers adopting secure application services for multi-cloud and 5G environments, and the company added 185 new customers in Q3.
Improved traction for smaller-sized deal activity with strategic accounts in North America helped offset ongoing delays in larger deals within the Enterprise and Web Giant verticals.
Service provider comprised 50% of total revenue, Enterprise accounted for 38%, and Web Giant was the remaining 12%.
Management plans to execute a global reduction-in-force of 5% in Q4 with the full benefit to be realized by Q2 ‘20
Q4 guidance includes revenue of $55.0-$59.0 million, adjusted EBITDA of $5.4-$8.2 million, and non-GAAP EPS of $0.04-$0.08, versus consensus of $54.0 million in revenue, $4.0 million in adjusted EBITDA, and $0.09 in non-GAAP EPS.
Both the review of strategic alternatives and the search for a new CEO are ongoing.
Akamai Reports Third Quarter 2019 Financial Results
Akamai Technologies (AKAM) reported Q3 ’19 results above expectations and guided Q4 in line with consensus.
Revenue of $709.9 million (+6.0% Y/Y) exceeded management’s guidance of $692.0-$706.0 million and consensus of $701.3 million. Adjusted EBITDA was $300.6 million (42.3% margin), above guidance for a 40.0%-41.0% adjusted EBITDA margin and consensus of $284.2 million. Non-GAAP EPS of $1.10 beat guidance of $0.98-$1.02 and consensus of $1.00.
The strong results were driven by rapid growth in cloud security and international as well as strong growth in video, software and gaming download traffic, which did not experience the traditional slowdown in traffic during the summer.
By division, Web revenue was $390.2 million (+9.2% Y/Y) and Media and Carrier revenue was $319.7 million (+2.3% Y/Y).
By solution, Cloud Security revenue was $215.9 million (+28.0% Y/Y) and CDN and other was $494.0 million (-1.4% Y/Y).
Management highlighted a myriad of ways customers have historically used Akamai for Edge computing, including API governance, global traffic management and application load balancing, adaptive image and video optimization, bot management, IoT message broker and compute services, and blockchain ledger updates.
The recent acquisitions of krypt.co, ChameleonX and Exceda cost less than $50 million in aggregate and are expected to drive significant growth in the future.
Q4 guidance includes revenue of $735.0-$755.0 million and non-GAAP EPS of $1.10-$1.15, in line with consensus of $747.1 million in revenue and $1.11 in non-GAAP EPS.
Management reiterated its commitment to achieve a 30% operating margin in 2020 (versus 29% anticipated in 2019).
Alteryx Announces Third Quarter 2019 Financial Results
Alteryx (AYX) reported Q3 ’19 results above expectations and provided mixed guidance for Q4.
Revenue was $103.4 million (+65.2% Y/Y), exceeding management’s $88.0-$91.0 million guidance and consensus of $90.5 million. Non-GAAP operating income was $22.0 million (21.2% margin), well above guidance of $5.0-$8.0 million and consensus of $7.1 million. Non-GAAP EPS of $0.24 beat guidance of $0.06-$0.09 and consensus of $0.09.
Upside in the quarter was driven by continued strong execution, a favorable product mix in which upfront revenue was at the higher end of expectations, and a modest sequential increase in contract duration.
Key metrics: added 335 net new customers for a total of 5,613 (+30% Y/Y) customers at quarter-end; dollar-based net expansion rate of 132%; remaining performance obligations of $271.8 million.
Management sees the company benefiting from several trends expected to deliver growth for many years: automation, convergence of analytics personas, and community.
Q4 guidance calls for revenue, non-GAAP operating income, and non-GAAP EPS of $128.0-$131.0 million, $26.0-$29.0 million, and $0.27-$0.30, respectively, which was mixed relative to consensus of $126.2 million, $29.5 million, and $0.33.
AppFolio, Inc. Announces Third Quarter 2019 Financial Results
AppFolio (APPF) reported Q3 ’19 results ahead of expectations and guided Q4 revenue in line with consensus.
Revenue of $67.9 million (+35.5% Y/Y) was modestly above consensus of $67.1 million. Operating income of $4.1 million (6.1% margin) was above the Street’s $3.7 million. EPS of $0.14 beat consensus of $0.09.
Core solutions revenue was $22.5 million (+25.7% Y/Y), Value+ services revenue was $41.6 million (+35.2% Y/Y), and Other revenue totaled $3.7 million (+166.5% Y/Y).
Key metrics: 14,034 (+11% Y/Y) property manager customers at quarter-end; 4.41 million (+19% Y/Y) property manager units under management; 10,781 (+6% Y/Y) law firm customers; free cash flow of $3.7 million (5.4% margin).
AppFolio continues to invest ahead of several significant growth opportunities, including AppFolio Property Manager Plus for larger real estate property managers, AppFolio Investment Management for real estate investment managers, and Lisa, an AI leasing assistant now offered as a Value+ service.
Management noted that Q4 tends to generate less screening and payment services revenue from new tenant rental applications due to the seasonal slowdown in moving during the holiday period.
Management raised its FY ’19 revenue outlook from $253.0-$255.0 million to $254.5-$255.5 million, implying Q4 revenue of $65.9-$66.9 million versus consensus of $66.6 million.
Appian Announces Third Quarter 2019 Financial Results
Appian (APPN) reported Q3 ’19 results above expectations but guided Q4 below consensus.
Revenue of $69.4 million (+26.3% Y/Y) exceeded guidance of $65.0-$65.5 million and consensus of $65.2 million. Non-GAAP operating income was $(7.2) million (-10.3% margin), ahead of guidance for $(10.0)-$(9.5) million and consensus of $(9.6) million. Non-GAAP EPS of $(0.14) beat guidance of $(0.16)-$(0.15) and consensus of $(0.15).
Growth in the quarter was driven by EMEA, which was the fastest growing territory with subscription revenue growth of 65% and contributed one-third of new logos in the quarter; strength in the financial services, government, and life sciences verticals; and a doubling of new customers from partners.
The energy and manufacturing verticals are showing promise and could be ripe for expansion over time.
Subscription revenue retention rate was 119%.
In the emerging world of automation, management sees Appian as the orchestrator to rationalize, organize, manage and analyze the combined efforts of humans, bots and AI that work together to solve problems for organizations.
Appian’s headquarters build-out was completed in Q3, so no material capital expenditures are expected through year-end.
Q4 guidance calls for $69.1-$70.1 million in revenue, $(10.0)-$(9.5) million in non-GAAP operating income, and $(0.15)-$(0.14) in non-GAAP EPS, falling short of consensus expectations for $70.3 million, $(7.0) million, and $(0.11), respectively.
Aspen Technology Announces Financial Results for the First Quarter of Fiscal 2020
Aspen Technology (AZPN) reported Q1 ’20 results above expectations and raised its non-GAAP EPS guidance for FY ’20.
Revenue of $134.1 million (+17.4% Y/Y) exceeded consensus of $119.5 million. Non-GAAP operating income of $57.9 million (43.2% margin) was above consensus of $50.0 million. Non-GAAP EPS of $0.79 beat consensus of $0.64.
Key metrics: annual spend of approximately $548 million (+10% Y/Y); total bookings of $135 million (+40% Y/Y); free cash flow of $14.3 million (11% margin).
Demand trends in Q1 reflect ongoing strength across end markets, product suites and geographies, resulting in increasing pipeline volume for the company’s MSC and APM businesses and a recovery in pipeline for the engineering suite.
In the chemicals industry, customers are acknowledging that business has become more challenging due to global trade conflicts, but they remain focused on investing in their digitalization initiatives.
E&C trends remain favorable as evidenced by mid-single digit CapEx growth and incremental investments in LNG, leaving management confident that growth with these customers should improve further as contracts come up for renewal.
Aspen’s refining customers remain a stalwart in the adoption of asset optimization solutions.
Management increased its FY ’20 non-GAAP EPS guidance from $3.44-$3.85 to $3.47-$3.89 and reaffirmed prior FY ’20 expectations for annual spend growth of 10%-12%, bookings of $600.0-$650.0 million, revenue of $575.0-$615.0 million, and non-GAAP operating income of $272.0-$307.0 million.
Blackbaud Announces 2019 Third Quarter Results
Blackbaud (BLKB) reported Q3 ’19 results above expectations and reaffirmed its prior guidance for FY ’19.
Non-GAAP revenue was $221.4 million (+5.4% Y/Y), above consensus of $219.3 million. Non-GAAP operating income was $36.6 million (16.5% margin), also above consensus of $35.5 million. Non-GAAP EPS of $0.56 beat consensus of $0.50.
Key metrics: non-GAAP organic revenue growth of 2.7%; non-GAAP organic recurring revenue growth of 5.6%; non-GAAP free cash flow of $78.0 million (11.7% margin) year-to-date.
Within its first year of launch, Blackbaud Church Management is now used in over 25 states domestically.
The transformation of the sales organization and scaling is now largely complete, and the company’s focus has shifted towards increasing sales productivity and investing in marketing to more efficiently drive higher quality leads.
Management continues to evaluate acquisitions and internal product development initiatives that have the potential to expand the company’s TAM, which now stands in excess of $10 billion.
Management’s unchanged FY ’19 guidance implies Q4 non-GAP revenue, operating income, and EPS of $215.7-$225.7 million, $30.9-$37.0 million, and $0.38-$0.55, respectively, versus consensus of $235.6 million, $37.6 million, and $0.54.
Check Point Software Technologies Reports 2019 Third Quarter Financial Results
Check Point Software Technologies (CHKP) beat EPS expectations in Q3 and guided Q4 in line with consensus.
Revenue of $490.9 million (+4.3% Y/Y) was at the midpoint of management’s guidance and in line with consensus of $490.8 million. Non-GAAP operating income was $246.4 million (50.2% margin), above consensus of $242.8 million. Non-GAAP EPS of $1.44 were at the high-end of management’s $1.36-$1.44 guidance and above consensus of $1.40.
Check Point continues to transform from a traditional product business to an annuity model and is focused on both expanding its global field management and increasing its field and marketing activities to accelerate top line growth.
Strong subscription revenue growth of 13% was driven by advanced solutions, including next-generation threat extraction and protection, CloudGuard, and Infinity.
Per management, customers select Check Point over the competition for its real-time threat prevention, management capabilities, and the completeness of its security architecture.
With the launch of its new appliance models, the company has simplified its subscription pricing and processes, ensuring first year pricing matches subsequent renewal years with fewer choices to make.
Management’s Q4 guidance includes revenue of $527.0-$557.0 million and non-GAAP EPS of $1.93-$2.04, in line with consensus of $543.1 million in revenue and $1.97 in non-GAAP EPS.
Commvault Announces Fiscal 2020 Second Quarter Financial Results
Commvault (CVLT) reported Q2 ’20 results ahead of expectations and guided Q3 operating margin above consensus.
Revenues of $167.6 million (-0.9% Y/Y) exceeded consensus of $163.3 million. Non-GAAP operating income was $24.8 million (14.8% margin), well above consensus of $15.9 million. Non-GAAP EPS of $0.42 beat consensus of $0.28.
Key metrics: repeatable revenue of $121.8 million (+1.2 Y/Y); subscription and utility annual contract value (ACV) of $121 million (+59% Y/Y); number of deals over $100,000 was down 3% Y/Y; average enterprise deal size was $328,000 (+15% Y/Y).
Notable developments over the past quarter include the company’s first major acquisition, Hedvig; the introduction of a new SaaS data protection offering, Metallic; relaunching the company’s brand; and hosting 2,000 attendees at Commvault GO.
The company continues to simplify how it does business by improving the organizational structure, revamping core processes, driving better predictability and linearity in its sales pipeline, and making it easier for customers and partners to transact.
Consensus estimates for $73 million in software and products revenue in Q3 and a sequential uptick in services are consistent with management’s expectations, while guidance for a 14% operating margin compares favorably with the Street’s 12%.
Dynatrace Reports Second Quarter of Fiscal Year 2020 Financial Results
Dynatrace (DT) reported Q2 ’20 results above expectations and raised its FY ’20 guidance across the board.
Revenue of $129.4 million (+27.0% Y/Y) exceeded management’s guidance of $123.0-$124.0 million and consensus of $123.5 million. Non-GAAP operating income of $29.4 million (22.7% margin) also topped guidance and consensus of $24.2 million. Non-GAAP EPS of $0.06 beat guidance and consensus of $0.04.
Key metrics: added 250 Dynatrace customers for a total of 1,828 at quarter-end; annualized recurring revenue (ARR) of $470.9 million (+44% Y/Y), of which Dynatrace ARR represents 80% of total ARR; net expansion rate exceeded 120%.
The company remains in the early innings of Dynatrace adoption with expansion mostly driven by customers deploying the platform into new application stacks.
Classic ARR declined by $17 million to $94 million, representing 20% of total ARR, and the company has now converted over half of the approximately $200 million in ARR designated for conversion six months ago.
Gross margin expanded due to a nice step-up in subscription gross margin arising from the winding down of the Classic stack and the benefits of the Dynatrace platform, which has a single code base and over 90% of customers on a recent version.
Management believes its new module, Digital Business Analytics, expands its total addressable market by several billion dollars.
Q3 guidance for $137.0-$138.0 million in revenue, $30.0-$31.0 million in non-GAAP operating income, and $0.06-$0.07 in non-GAAP EPS was above consensus of $134.0 million, $28.9 million, and $0.06, respectively.
Management raised its FY ’20 outlook across the board and now anticipates ARR of $550.0-$555.0 million, revenue of $533.0-$535.0 million, non-GAAP operating income of $119.0-$121.0 million, and non-GAAP EPS of $0.23-0.24.
Endurance International Group Reports 2019 Third Quarter Results
Endurance International Group (EIGI) reported mixed Q3 ’19 results and guided Q4 below consensus.
Revenue was $277.2 million (-2.3% Y/Y), below consensus of $279.5 million. Adjusted EBITDA of $80.6 million (29.1% margin) was above consensus of $77.9 million. EPS of $0.05 beat consensus of $(0.01).
Q3 results reflected continued operational progress on the company’s strategy of focusing its engineering, sales and marketing investments on selected strategic brands in its scale businesses, email marketing and web presence.
Key metrics: added 10,700 subscribers, including 1,300 from the acquisition of Ecomdash, for 4.78 million (-1.5% Y/Y) total subscribers at quarter-end; average revenue per subscriber (ARPS) was $19.35 (-0.1% Y/Y).
Web presence: $143.2 million (-4.5% Y/Y) in revenue; 3.579 million (-2.8% Y/Y) subscribers; ARPS of $13.32 (-1.1% Y/Y).
Email marketing: $102.8 million (+0.6% Y/Y) in revenue; 491,000 (-1.6% Y/Y) subscribers; ARPS of $69.79 (+2.8% Y/Y).
Domain: $31.2 million (-1.7% Y/Y) in revenue; 710,000 (+5.8% Y/Y) subscribers; ARPS of $14.88 (-5.3% Y/Y).
Progress in revenue growth has trailed unit growth, prompting management to reduce expectations for the year.
Management’s revised FY ’19 outlook implies Q4 revenue and adjusted EBITDA of $252.1 million and $64.5-$74.5 million, respectively, below consensus of $283.1 million in revenue and $76.8 million in adjusted EBITDA.
FireEye Reports Financial Results for Third Quarter 2019
FireEye (FEYE) reported Q3 ’19 results above consensus and guided Q4 in line with expectations.
Revenue of $225.9 million (+6.7% Y/Y) exceeded guidance of $217.0-$221.0 million and consensus of $219.8 million. Non-GAAP operating income was $3.7 million (1.6% margin). Non-GAAP EPS of $0.02 were at the high-end of management’s guidance and a penny above consensus.
Key metrics: added 276 new logos; billings of $249 million (+13% Y/Y) were near the midpoint of management’s $245-$255 million guidance; annual recurring revenue of $576 million (+7% Y/Y) at quarter-end.
Growth in revenue and billings was driven by demand for FireEye’s cloud endpoint and cloud email security solutions, threat intelligence, the Helix platform, a near-record quarter for Managed Defense, and a record quarter for Mandiant Services.
FireEye has expanded its Expertise On Demand offerings to further accelerate growth in strategic services.
The products team has been realigned to enhance speed and accountability, improve the cost structure, refocus its customer retention efforts and accelerate new product introductions.
Verodin is on track to deliver $20 million in billings this year and $70 million in 2020.
Q4 guidance includes billings of $285.0-$295.0 million, revenue of $224.0-$228.0 million, a non-GAAP operating margin of 3%-5%, and non-GAAP EPS of $0.03-$0.05, in line with consensus of $224.1 million in revenue, $11.4 million in non-GAAP operating income, and $0.04 in non-GAAP EPS.
Fortinet Reports Third Quarter 2019 Financial Results
Fortinet (FTNT) reported Q3 ’19 results above expectations and guided Q4 above consensus.
Revenue of $547.5 million (+20.6% Y/Y) exceeded management’s $525.0-$540.0 million guidance and consensus of $532.5 million. Non-GAAP operating income was $144.6 million (26.4% margin), above consensus of $124.2 million and guidance for a 23.0%-23.5% margin. Non-GAAP EPS of $0.67 beat guidance of $0.55-$0.57 and consensus of $0.56.
The strong results were driven by the company’s SPU-driven FortiGate technology, integrated security fabric solution, hybrid and multi-cloud offerings, and significant adoption of its secure SD-WAN solution.
Slower growth in the U.K. and Germany was offset by strong growth in other EMEA countries, and the company also saw strong billings contribution from service providers, MSSPs, financial services, and the government segment.
Key metrics: 53 deals (+77%) over $1 million; 333 deals (+26% Y/Y) over $250,000; 130 deals (+26% Y/Y) over $500,000; billings of $626.6 million (+18.8% Y/Y) beat guidance of $600.0-$615.0 million; free cash flow of $203.7 million (37.2% margin).
Guidance for Q4 includes $595.0-$610.0 million in revenue, a 25.5%-26.0% non-GAAP operating margin, and $0.69-$0.71 in non-GAAP EPS, exceeding consensus expectations for $584.7 million in revenue, $147.5 million in non-GAAP operating income, and $0.64 in non-GAAP EPS.
Instructure Reports Third Quarter 2019 Financial Results
Instructure (INST) reported Q3 ’19 results above expectations, but provided mixed guidance for Q4.
Revenue of $68.3 million (+23.7% Y/Y) was within guidance of $67.7-$68.3 million and in line with consensus of $68.1 million. Non-GAAP operating income of $(3.7) million (-5.4% margin) was ahead of consensus of $(7.4) million. Non-GAAP EPS of $(0.11) beat guidance of $(0.20)-$(0.18) and consensus of $(0.19).
Canvas bookings remain on plan domestically, but Instructure has experienced delays in a number of international opportunities, including large public tenders in the UK and Australia, that have pushed bookings into 2020.
Bridge bookings continue to grow albeit at a lower pace than hoped for, while MasteryConnect and Portfolio are both tracking towards the results anticipated at the time of acquisition.
In a preview of its upcoming Analyst Day in December, management highlighted several aspects of its strategic plan: reducing stock-based compensation, increasing the company’s focus on education, engaging in a strategic review of the Bridge business, and incorporating both near and long-term goals in its planning processes.
Management’s Q4 guidance calls for revenue of $67.8-$68.8 million, below consensus of $70.1 million, and non-GAAP EPS of $(0.17)-$(0.14), in line with consensus of $(0.15).
Kinaxis Inc. Reports Third Quarter 2019 Results
Kinaxis (KXS-CA) reported Q3 ’19 results above expectations and guided Q4 revenue above consensus.
Revenue of $47.1 million (+28.8% Y/Y) was above consensus of $44.8 million. Adjusted EBITDA was $12.1 million (25.7% margin), well ahead of the Street’s $9.8 million. Non-IFRS EPS of $0.30 beat consensus of $0.23.
Adjusted EBITDA would have been even higher if not for a $2.5 million one-time write-off of previously booked receivables following the resolution of the company’s arbitration with a former Asian customer.
Strong results in the quarter reflected new customers closed in Q2 as well as traction from the company’s global salesforce expansion in 2018 and early 2019.
Total bookings were $80.2 million, of which SaaS bookings comprised $48.9 million, resulting in minimum contracted revenue backlog at quarter-end of $289.7 million, including $246.9 million in future contracted SaaS revenue.
Kinaxis recently announced a unique partnership with Flex, a long-time customer that is now demonstrating the power of RapidResponse to its extended customer base and has already contributed to a couple of wins.
Management’s increased FY ’19 guidance ranges imply Q4 revenue of $52.8-$54.8 million, above consensus of $52.6 million, and adjusted EBITDA of $11.2-$15.5 million, in line with consensus of $13.1 million.
MicroStrategy Announces Third Quarter 2019 Financial Results
MicroStrategy (MSTR) reported mixed Q3 ’19 results and appointed Lisa Mayr as Chief Financial Officer.
Revenues of $119.7 million (-2.0% Y/Y) were below consensus of $125.2 million. Non-GAAP operating income was $6.4 million (5.4% margin), above consensus of $4.7 million. Non-GAAP EPS of $0.94 beat consensus of $0.66.
Management noted that a higher than usual number of deals slipped in Q3, primarily in Europe where new regulations like GDPR have resulted in more complex contracting and approval cycles, although most have since closed.
Key metrics: closed about 40 HyperIntelligence deals for a total of approximately 120 since the launch ten months ago; over 500 customers have upgraded to MicroStrategy 2019.
Interest in the company’s cloud platform, which is now available on AWS and Azure, continues to build, and MicroStrategy has revamped its sales and marketing approach to further drive demand.
Sequential improvement in services revenues reflects improved product bookings of late, and management believes services revenues hit an inflection point in Q3.
Lisa Mayr has been appointed Senior Executive Vice President & Chief Financial Officer, succeeding Phong Le, who will continue to serve as the company’s Chief Operating Officer.
MobileIron Announces Third Quarter 2019 Results
MobileIron (MOBL) reported Q3 ’19 results short of consensus and guided Q4 below expectations.
Revenue was $52.2 million (+6.0% Y/Y), within guidance of $51.0-$54.0 million but shy of the Street’s $52.7 million. Non-GAAP operating income of $0.2 million (0.3% margin) fell short of the Street’s $1.3 million. Non-GAAP EPS of $(0.00) missed consensus of $0.01.
ARR growth was short of management’s expectations as steady improvements in the U.S. business were offset by slowing growth in Europe, primarily the U.K. and Germany, which management attributed to macroeconomic factors.
Key metrics: ARR of $174.3 million (+14% Y/Y), comprised of $108.6 million (+23% Y/Y) in subscription ARR and $65.7 million (+1% Y/Y) in perpetual license support ARR.
The company’s Zero Sign-On solution is in trials with some well-known customers in the financial, manufacturing, and pharmaceutical verticals.
Access and Threat Defense have been sold into a high single-digit percentage of MobileIron’s Unified Endpoint Management (UEM) customer base.
Guidance for Q4 includes revenue of $53.0-$56.0 million, below consensus of $57.9 million; ARR growth of 10%-12%, down from 20% previously; and non-GAAP operating income of $1.5-$4.9 million, below consensus of $7.1 million.
OpenText Reports First Quarter Fiscal Year 2020 Financial Results
OpenText (OTEX) reported Q1 ’20 revenue and adjusted EBITDA short of Street expectations.
Revenues of $696.9 million (+4.5% Y/Y) fell short of consensus of $700.8 million. Adjusted EBITDA of $254.2 million (36.5% margin) was also shy of the Street’s $257.2 million. Non-GAAP EPS of $0.64 beat consensus by a penny.
Key metrics: annual recurring revenues (ARR) of $556.6 million (+7% Y/Y); cloud revenues of $237.3 million (+14% Y/Y); maintenance renewal rate of 92%.
OpenText’s value creation playbook includes recurring revenue growth, margin expansion, accretive and strategic acquisitions, strong cash flows, customer-driven innovation, and a disciplined capital structure and approach to dividends.
While the company has yet to see a material impact from macro factors, the company has accounted for potential Brexit uncertainty, softness in Central Europe from a slowdown in manufacturing, and trade tensions affecting China in its outlook.
For Q2, management anticipates high single-digit revenue growth on a sequential basis and flat adjusted EBITDA dollars, implying $759.6 million in revenues at the high-end and approximately $254.2 million in adjusted EBITDA, below consensus expectations for $763.7 million in revenue and $307.5 million in adjusted EBITDA.
OpenText is tracking to its FY ’20 target model of high single-digit cloud growth and a 38%-39% adjusted EBITDA margin.
Paycom Software, Inc. Reports Third Quarter 2019 Results
Paycom (PAYC) reported Q3 ’19 results ahead of expectations and provided a strong Q4 outlook.
Revenues of $175.0 million (+31.3% Y/Y) were above guidance of $170.0-$172.0 million and consensus of $171.5 million. Adjusted EBITDA of $66.6 million (38.0% margin) also exceeded guidance of $61.0-$63.0 million and consensus of $62.3 million. Non-GAAP EPS of $0.70 beat consensus of $0.67.
The introduction of Direct Data Exchange, or DDX, is generating leads and delivering significant cost savings to those customers that have implemented it.
Half of the company’s clients have already enabled Ask Here, a tool providing employees with a direct line of communication to ask work-related questions and receive timely responses.
In Q3, Paycom purchased 107.5 acres of land adjacent to its corporate headquarters in Oklahoma City for $19.2 million.
Guidance for Q4 calls for revenues of $188.5-$190.5 million and adjusted EBITDA of $72.0-$74.0 million, comparing favorably with consensus of $188.6 million in revenues and $71.8 million in adjusted EBITDA.
Paylocity Announces First Quarter Fiscal Year 2020 Financial Results
Paylocity (PCTY) posted Q1 ’20 results ahead of expectations and raised guidance for FY ’20.
Revenue of $126.7 million (+26.1% Y/Y) was above guidance of $123.5-$124.5 million and consensus of $124.1 million. Adjusted EBITDA was $30.5 million (24.1% margin), also above guidance of $28.1-$29.1 million and consensus of $29.2 million. Non-GAAP EPS of $0.36 beat consensus of $0.27.
Growth continues to be driven by new client additions and an increase in average revenue per client arising from positive momentum with new product offerings.
Channel referrals represented over 25% of new business, and the company recently announced new partnerships with Compeat, a leading provider of restaurant software, and EvoShare, a microsavings technology company.
Early customer feedback on Community, a new employee-focused social communication platform, has been outstanding.
Guidance for Q2 includes revenue of $129.5-$130.5 million, in line with consensus of $129.8 million, and adjusted EBITDA of $30.0-$31.0 million, below consensus of $32.3 million.
Management raised its FY ’20 revenue and adjusted EBITDA guidance from $563.5-$565.5 million and $161.5-$163.5 million, respectively, to $567.0-$569.0 million and $163.5-$165.5 million.
Pluralsight Announces Third Quarter 2019 Results
Pluralsight (PS) reported Q3 ’19 results above expectations but guided Q4 mixed relative to consensus.
Revenue of $82.6 million (+34.2% Y/Y) exceeded guidance of $79.5-$80.0 million and consensus of $79.8 million. Non-GAAP operating income of $(13.1) million (-15.9% margin) was ahead of the $(19.0) million consensus estimate. Non-GAAP EPS of $(0.08) beat guidance of $(0.15)-$(0.13) and consensus of $(0.14).
Key metrics: 51% increase in customers with over $100,000 in annual billings; $92.1 million (+27.5% Y/Y) in billings, including $80.7million (+32.0% Y/Y) in B2B billings; net revenue retention of 124%; free cash flow of $(6.6) million (-8.0% margin).
A focus on high-end commercial and enterprise customers in Q3 resulted in Pluralsight’s highest average deal size to date (+30% Y/Y) but came at the cost of higher churn in smaller accounts, offsetting the new logos added in the quarter.
Pluralsight Flow, formerly known as GitPrime, exceeded internal billings expectations and grew over 100% Y/Y.
The company is on track to launch its unified SaaS offering in Q1 2020.
Management’s revised FY ’19 guidance implies Q4 revenue and non-GAAP EPS of $85.9-$87.9 million and $(0.15)-$(0.13), respectively, which was mixed relative to consensus of $89.3 million in revenue and $(0.13) in non-GAAP EPS.
For FY ’20, management anticipates marginal improvements in billings growth relative to the mid-20% growth realized in recent quarters, revenue growth to approximate recent billings growth, and higher losses than in 2019 due to deeper investments in customer success and other go-to-market initiatives.
Qualys Announces Third Quarter 2019 Financial Results
Qualys (QLYS) reported Q3 ’19 results ahead of consensus and provided a mixed outlook for Q4.
Revenue of $82.7 million (+15.4% Y/Y) was at the high-end of management’s guidance and modestly above consensus of $82.4 million. Non-GAAP operating income of $33.1 million (40.0% margin) was well above consensus of $26.4 million. Non-GAAP EPS of $0.66 beat guidance of $0.52-$0.54 and consensus of $0.53.
Qualys’ strategy to make its Cloud Agents ubiquitous and allow for seamless subscriptions to its paid apps is well underway.
Since launching its Global IT Asset Discovery and Inventory app as a free service, enabling all companies to automatically build their global IT asset inventory across on-premise, endpoint, cloud, container, and mobile environments, over 500 new customers and nearly 300 existing customers have begun using the service.
Key metrics: 27.9 million (+93% Y/Y) paid Cloud Agent subscriptions; 46% of enterprise customers have 3+ products and 26% have 4+; new products comprised 33% of total bookings versus 23% a year ago; average deal size +8% Y/Y.
Headcount increased sequentially, and the company benefited from attracting great talent in Pune as well as lower non-salary headcount costs and lower third-party expenses versus the prior year period.
Q4 guidance calls for revenue of $84.3-$84.9 million, slightly below consensus of $85.2 million, and non-GAAP EPS of $0.57-$0.59, above the Street’s $0.49.
Qualys repurchased 603,417 shares in the quarter at a total cost of $49.8 million, and the Board of Directors has authorized an additional two-year $100 million share repurchase program.
Qumu Reports Third Quarter 2019 Results
Qumu (QUMU) reported in line Q3 ’19 results and reaffirmed its prior FY ’19 revenue and adjusted EBITDA expectations.
Revenue of $6.7 million (+18.0% Y/Y) was in line with consensus. Adjusted EBITDA of $(0.5) million (-8.0% margin) was also in line with consensus. EPS of $(0.11) missed consensus of $(0.10).
Growth in the quarter was driven by large enterprise customers investing in major expansions.
Management indicated that several deals valued at $790,000 have already been secured in Q4, the sales pipeline remains robust, and customer retention remains at an all-time high of 94.2%.
Pipeline coverage currently stands at 3x revenue.
Self-service video is increasingly in demand in enterprise settings, and Qumu enables customers to create more videos with its unified communications gateway that turns popular video collaboration systems into video recording and broadcast tools.
Management’s unchanged revenue and adjusted EBITDA guidance for FY ’19 implies Q4 revenue and adjusted EBITDA of $7.9 million and $0.3 million, respectively, generally in line with consensus of $8.1 million and $0.2 million.
ACV bookings growth is now expected to be 6%-10% in FY ’19 versus 20%-25% previously, reflecting a less predictable mix of on-premise versus SaaS deals.
Shopify Announces Third-Quarter 2019 Financial Results
Shopify (SHOP) reported Q3 ’19 results above expectations, but Q4 guidance was mixed relative to consensus.
Revenue of $390.6 million (+44.6% Y/Y) exceeded management’s guidance of $377.0-$382.0 million and consensus of $384.5 million. Non-GAAP operating income was $10.5 million (2.7% margin), above guidance of $0-$3.0 million and consensus of $2.9 million. Non-GAAP EPS of $(0.29) were well below consensus of $0.11 due to a large one-time tax provision.
Shopify surpassed 1 million merchants worldwide on its platform with those outside of the company’s core geographies accounting the largest component of new additions.
Key metrics: Monthly Recurring Revenue (MRR) of $50.7 million (+34% Y/Y); Gross Merchandise Volume (GMV) of $14.8 billion (+48% Y/Y); Gross Payments Volume (GPV) of $6.2 billion (+51% Y/Y).
Shopify Plus MRR was $13.5 million (+27% Y/Y), representing 27% of MRR versus 24% last year; Shopify Shipping was used by 44% of eligible merchants; Shopify Capital issued $141 million (+85% Y/Y) in merchant cash advances and loans.
The acquisition of 6 River Systems has no material impact on Q4 revenue and is expected to add $25 million in operating expenses, of which $15 million is non-cash stock-based compensation and amortization of acquired intangibles.
Guidance for Q4 includes revenue of $472.0-$482.0 million and non-GAAP operating income of $10.0-$20.0 million, which was mixed relative to Street expectations for $472.6 million in revenue and $22.5 million in non-GAAP operating income.
SolarWinds Announces Third Quarter 2019 Results
SolarWinds (SWI) reported mixed Q3 ’19 results and guided Q4 in line with consensus.
Non-GAAP revenue was $242.7 million (+13.4% Y/Y), near the lower end of management’s $241.5-$246.0 million guidance and below consensus of $243.6 million. Adjusted EBITDA of $115.0 million (47.4% margin) was above guidance of $112.0-$113.5 million. Non-GAAP EPS of $0.21 beat guidance of $0.19-$0.20 and consensus of $0.20.
Over the past twelve months, SolarWinds had 857 customers with spending over $100,000, averaged approximately 7,000 new customers per quarter, and sustained a subscription net retention rate of 105%.
Strong sales performance in the Americas was driven by a record number of transactions over $100,000 and the second largest quarter ever for U.S. Federal license sales, and international growth continued despite some macro uncertainty.
Growth in subscription revenue reflected strong MSP billings growth and solid contributions from the company’s cloud infrastructure and application management products in addition to SolarWinds Service Desk.
Even as subscription growth has accelerated, management indicated that the company’s momentum has been hindered by insufficient levels of investment in go-to-market activities, which will be addressed by an incremental $2 million in spend for marketing and sales expansion during Q4.
Management’s Q4 guidance calls for non-GAAP revenue of $249.0-$254.5 million, adjusted EBITDA of $120.0-$122.0 million, and non-GAAP EPS of $0.22-$0.23.
Tenable Announces Third Quarter 2019 Financial Results
Tenable (TENB) reported Q3 ’19 results above expectations and provided solid guidance for Q4.
Revenue of $91.9 million (+32.3% Y/Y) outpaced guidance of $88.0-$89.0 million and consensus of $88.7 million. Non-GAAP operating income was $(7.7) million (-8.4% margin), ahead of guidance for $(12.0)-$(11.0) million and consensus of $(11.4) million. Non-GAAP EPS of $(0.07) beat guidance of $(0.12)-$(0.11) and consensus of $(0.11).
Momentum in the business is being driven by the company’s innovation around its Vulnerability Management capabilities, expansion into modern asset types, and delivery of prioritization and differentiated analytics.
Management has not seen any change in behavior associated with macro concerns, but continues to keep a close eye on performance, particularly in international markets like EMEA that have performed well thus far.
Key metrics: added 387 new enterprise platform customers; added 51 net new six-figure customers for a total of 589 at quarter-end; calculated current billings totaled $110.6 million (+28% Y/Y).
Lumin, an advanced visualization, analytics and measurement solution that correlates vulnerability data with threat context data, became generally available in Q3.
Q4 guidance calls for revenue of $93.5-$94.5 million, in line with consensus of $93.9 million, and non-GAAP operating income and EPS of $(12.0)-$(11.0) million and $(0.12)-$(0.11), respectively, above consensus of $(13.0) million and $(0.13).
Twilio Announces Third Quarter 2019 Results
Twilio (TWLO) reported Q3 ’19 results above expectations, but guided Q4 below consensus.
Revenue of $295.1 million (+74.7% Y/Y) exceeded management’s $286.0-$289.0 million guidance and consensus of $287.8 million. Non-GAAP operating income was $(3.6) million (-1.2% margin), slightly ahead of management’s $(5.0)-$(4.0) million guidance and consensus of $(3.9) million. Non-GAAP EPS of $0.03 beat guidance of $0.01-$0.02 and consensus of $0.01.
Base revenue of $275.5 million (+78.5% Y/Y) was just shy of management’s $276.0-$278.0 million guidance and was comprised of organic base revenue of $227 million (+47% Y/Y) and Twilio SendGrid revenue of $49 million (+31% Y/Y).
The shortfall in base revenue was attributed to $5 million in one-time credits being issued to customers that were erroneously billed under older systems.
Key metrics: 172,092 (+181% Y/Y) active customer accounts; dollar-based net expansion rate of 132%; over 7 million registered developer accounts on the platform.
Twilio supports robocall legislation passed by the House and Senate and anticipates a bill focused on the SHAKEN/STIR implementation to be signed in the coming weeks; Management expects to have calls in its platform signed under SHAKEN/STIR by year-end, consistent with the industry goal for initial go live.
Strong political traffic and the ramp of a large international customer boosted Q4 ’18 results, and management does not anticipate those to recur this year, making for a difficult comparison.
Guidance for Q4 calls for revenue, non-GAAP operating income, and non-GAAP EPS of $311.0-$314.0 million, $(6.0)-$(5.0) million, and $0.01-$0.02, respectively, falling short of Street expectations for $322.0 million, $6.3 million, and $0.07.
Tyler Technologies Reports Earnings for Third Quarter 2019
Tyler Technologies (TYL) reported Q3 ’19 results below expectations, but guided Q4 in line with consensus.
Non-GAAP revenues were $277.2 million (+16.7% Y/Y), below consensus of $282.2 million. Adjusted EBITDA was $77.1 million (27.8% margin), shy of the Street’s $79.7 million. Non-GAAP EPS of $1.35 missed consensus by a penny.
Key metrics: non-GAAP organic revenue growth of 8.3%; signed 288 new software contracts; software subscription arrangements were 51% of new software contract value; bookings were $259 million (+1.6% Y/Y); total backlog was $1.41 billion (+13.9% Y/Y), including software-related backlog of $1.38 billion (+14.9% Y/Y).
Revenue and bookings in the quarter were affected by delays in the timing of several federal contracts at MicroPact with several significant partner deals signed at the end of the quarter, but not executed until October.
The company added 150 new subscription-based arrangements and converted 20 on-premises clients, representing $47 million in total contract value.
The intentional reduction in the term of new subscription contracts also impacted bookings growth, which would have increased 4.3% Y/Y had duration remained unchanged versus the prior year.
Tyler has entered into a strategic collaboration agreement with Amazon Web Services to lay the groundwork for the future of cloud services for the public sector.
Management’s revised FY ’19 guidance implies Q4 non-GAAP revenue and EPS of $286.1-$299.1 million and $1.36-$1.49, respectively, in line with consensus of $290.5 million in revenue and $1.41 in non-GAAP EPS.
Varonis Announces Third Quarter 2019 Financial Results
Varonis Systems’ (VRNS) Q3 ’19 results beat but Q4 guidance was lower on a higher assumed mix of subscriptions.
Revenues of $65.6 million (-2.1% Y/Y) exceeded management’s $61.0-$62.5 million guidance and consensus of $61.6 million. Non-GAAP operating income was $(4.7) million (-7.2% margin), ahead of management’s $(10.5)-$(9.5) million guidance and consensus of $(6.2) million. Non-GAAP EPS of $(0.16) beat guidance of $(0.36)-$(0.34) and consensus of $(0.34).
Results outperformed despite a higher mix of subscriptions than anticipated, and management expects the transition to a subscription-based model will be substantially complete in the next few quarters.
Normalized revenue, which Varonis derives by applying a factor of 2.2 to subscription sales, grew approximately 30% Y/Y, and new customers continue to buy four to five licenses on average versus two to three licenses under the perpetual model.
Key metrics: added 148 (-21% Y/Y) new customers for a total of approximately 6,900 at quarter-end; annual recurring revenues (ARR) of $178.9 million (+52% Y/Y); 74% of total license revenue from subscriptions; 75% of customers have purchased two or more product families and 43% have purchased three or more.
If not for a higher assumed mix of subscription revenues of 75% versus 40% previously, guidance for Q4 and FY ’19 would have been meaningfully higher relative to the outlook provided last quarter.
Management’s Q4 guidance calls for revenues of $70.5-$73.5 million, non-GAAP operating income of $(3.5)-$(1.5) million, and non-GAAP EPS of $(0.13)-$(0.07), falling short of the Street’s $79.6 million in revenue, $3.5 million in non-GAAP operating income, and $0.10 in non-GAAP EPS.
Modeling considerations for 2020 include subscriptions accounting for approximately 80% of the mix, 1H ’20 subscription mix substantially higher than in 1H ’19, and a balanced approach to growth and profitability.
VIAVI Announces First Quarter Fiscal 2020 Results
VIAVI Solutions (VIAV) reported Q1 ’20 results above expectations and guided Q2 in line with consensus.
Revenue of $299.8 million (+11.7% Y/Y) exceeded management’s guidance of $282.0-$294.0 million and consensus of $287.3 million. Non-GAAP operating income was $52.7 million (17.6% margin), above consensus of $48.1 million. Non-GAAP EPS of $0.18 beat guidance of $0.15-$0.17 and consensus of $0.16.
By segment, Network and Service Enablement (NSE) revenue was $219.8 million (+15.3% Y/Y), while Optical Security and Performance Products (OSP) revenue was $80.0 million (+2.8% Y/Y).
Both the NSE and OSP business segments exceeded management’s expectations on strong customer demand.
Within the NSE segment, Network Enablement revenue was $198.9 million (+20.9% Y/Y) driven by strong performance in wireless lab, cable and access, and fiber products, while Service Enablement revenue was $20.9 million (-20.2% Y/Y), reflecting anticipated run-off in mature assurance products and weak demand for both growth assurance and data center products.
Results in the OSP segment were driven by demand for the company’s 3D sensing product.
Q2 guidance includes revenue and non-GAAP EPS of $292.0-$312.0 million and $0.18-$0.20, respectively, in line with consensus of $301.8 million and $0.18.
Zendesk Announces Third Quarter 2019 Results
Zendesk (ZEN) reported Q3 ’19 results above expectations and guided Q4 in line with consensus.
Revenue of $210.5 million (+35.9% Y/Y) was above guidance of $206.0-$208.0 million and consensus of $207.5 million. Non-GAAP operating income of $10.6 million (5.0% margin) exceeded guidance of $2.0-$4.0 million and consensus of $3.5 million. Non-GAAP EPS of $0.12 beat consensus of $0.06.
While the company continues to see some regional unevenness from macro conditions, demand for its products remains strong and management expects to manage those challenges moving forward.
Key metrics: 42% of Support ARR from paid customers with over 100 agents; dollar-based net expansion rate of 116%; free cash flow of $6.7 million (3.2% margin); remaining performance obligation of $558 million (+55% Y/Y).
Customer metrics: 79,600 (+10% Y/Y) on Zendesk Support; 43,600 (-7% Y/Y) on Zendesk Chat; 30,600 (+107% Y/Y) on other products; total paid customer accounts of 153,700 (+15% Y/Y).
The Zendesk Suite, an omni-channel bundle, now has over 5,000 customers and professional services increased over 40% Y/Y due to larger strategic implementations with mid-market and enterprise customers.
The partner ecosystem continues to grow with over 1,200 authorized partners, up over 60% Y/Y.
Management’s Q4 guidance calls for revenue of $226.0-$228.0 million and non-GAAP operating income of $8.0-$10.0 million, in line with consensus of $226.5 million in revenue and $9.7 million in non-GAAP operating income.
Zendesk remains well on the way to achieving its objective of delivering $1 billion in revenue in 2020.
Zix Reports Third Quarter 2019 Financial Results
Zix (ZIXI) reported Q3 ’19 results generally consistent with expectations and guided Q4 in line with consensus.
Revenue of $47.8 million (+167.6% Y/Y) was above the high-end of management’s $47.0-$47.5 million guidance and consensus of $47.3 million. Adjusted EBITDA of $11.5 million (24.0% margin) was shy of the Street’s $11.8 million. Non-GAAP EPS of $0.13 were at the midpoint of management’s $0.12-$0.14 guidance and in line with consensus.
Key metrics: added over 54,000 net new mailboxes in Q3; annual recurring revenue (ARR) of $200.3 million (+167% Y/Y); net dollar retention over 102%; gross dollar retention over 90%; backlog of $90.7 million.
Organic ARR growth was 18% across Zix and AppRiver, while organic revenue growth was 15% across Zix and AppRiver.
By solution area, productivity ARR was $87.6 million (+23% Y/Y) with average revenue per user (ARPU) of $103; encryption ARR was $72.8 million (+6% Y/Y) with ARPU of $17.96; advanced threat protection ARR was $22.8 million (-2% Y/Y) with ARPU of $13.34; emerging category ARR was $17.1 million (+8% Q/Q).
Zix successfully transitioned hundreds of customers in Q3 to the new AppRiver-based platform and plans to transition hundreds more in Q4 and thousands in 1H ’20 as the migration should ultimately fuel higher retention and attach rates.
Q4 guidance calls for revenue of $49.0-$50.0 million and non-GAAP EPS of $0.14, in line with consensus expectations for $49.2 million in revenue and $0.14 in non-GAAP EPS.
Notable News
2U, Inc. Appoints Jennifer Ogden-Reese as Chief Marketing Officer
2U (TWOU) has hired Jennifer Ogden-Reese as Chief Marketing Officer, effective November 11, 2019, with responsibility for digital marketing, brand marketing, advertising, and marketing analytics.
Ms. Reese previously served in that role at SeatGeek and has over 12 years of experience in senior-level marketing roles.
Instructure CFO Steve Kaminsky to Retire From Company in 2020
Instructure (INST) announced the planned retirement of Chief Financial Officer Steve Kaminsky in 2020.
Mr. Kaminsky has been with the company for nearly eight years and will remain in his role until a successor is appointed.
Disclosure(s):
The analyst, a member of the analyst’s household, and/or an account in which the analyst exercises discretion hold(s) a long position in the common stock of NetScout Systems (NTCT).