K. Liu’s Week in Review
This past week started with a bang as long-time stalwart Ultimate Software (ULTI) announced its sale to a group of private equity firms led by Hellman & Friedman for $331.50 per share in cash. The ~$11B transaction valued ULTI at TTM EV/Recurring Revenue, EV/Sales and EV/EBITDA multiples of approximately 11x, 9.5x and 40x, respectively. These valuation multiples illustrate in part how quickly multiples in software have rebounded since the start of the year. After all, Vista Equity Partners’ announced take-private of MINDBODY (MB) at the end of last year equated to a TTM EV/Sales multiple of 6.9x. Granted, ULTI has had a long-track record of consistent 20%+ growth and strong profitability to boot, which may have garnered the company a significant premium even absent improved market sentiment. More importantly, the transaction suggests financial buyers remain active acquirers in the software sector and are willing to ante up for attractive assets. Strategic buyers also remained active with several notable tuck-in acquisitions: Pegasystems’ (PEGA) acquisition of business intelligence and data visualization vendor Infruid Labs; New Relic’s (NEWR) acquisition of an event correlation and intelligence platform provider, SignifAI; and Tyler Technologies’ (TYL) acquisition of a citizen engagement application provider, MyCivic.
Aside from M&A, the calendar Q4 earnings season continued with reports from nearly two dozen software companies. Nearly every company delivered top and bottom-line results ahead of expectations with only a couple instances where numbers technically missed but the magnitude was negligible enough to be considered in line. Guidance for the quarter and year was also almost universally positive from a revenue standpoint with more companies opting to leave profitability expectations intact if not slightly lower, which we surmise reflects confidence that further investments will pay dividends, a degree of conservatism, or perhaps both. The table below depicts the companies’ share price performance for the week, reported results versus consensus and subsequent adjustments to Street estimates for the current quarter and year.
In other news, we highlight PROS Holdings’ (PRO) launch of its next-generation Revenue Management solution, which airlines are likely to find particularly compelling given the ability to unbundle airfares to target customers with more personalized offers drawing from a range of ancillary options. We believe the company is worth watching given its pedigree in Artificial Intelligence (AI) and Machine Learning (ML), and the aforementioned airline industry shift to unbundling airfares, which could provide a catalyst to further accelerate the company’s SaaS transition. PRO subsequently delivered strong results and guidance. In a similar vein, Nuance (NUAN) unveiled its Project Pathfinder, a technology leveraging machine learning to train virtual assistants and chatbots. While comparisons were challenged by the adoption of a new accounting standard and divestiture of its Imaging business, the company’s results and guidance were also strong. Finally, Carbon Black (CBLK), FireEye (FEYE) and Zendesk (ZEN) all announced new additions to their Boards.
Mergers and Acquisitions
NEWR: New Relic Advances AIOps Strategy with Acquisition of SignifAI
NEWR announced the acquisition of SignifAI, a SaaS-based event correlation and intelligence platform targeted at DevOps teams.
SignifAI boasts over 60 integrations with a range of monitoring tools and leverages AI and machine learning to correlate incidents and provide added context so DevOps teams can quickly identify the root cause of issues and reduce the mean time to resolution.
Neither terms of the transaction nor historical financial results were disclosed, but given NEWR’s statement that the company plans to bring SignifAI’s technology to market, the transaction appears immaterial to results.
PEGA announced the asset purchase of Infruid Labs, which provides a self-service business intelligence and data visualization tool called Vizard.
Pricing for Vizard begins at $40 per user per month for those working with data, while a $10 per user per month option is available for viewing the created dashboards only.
PEGA plans to integrate Infruid Labs’ advanced interactive visualization capabilities with its AI-powered customer engagement and digital process automation solutions.
Neither terms of the acquisition nor historical financials were provided.
TYL: Tyler Technologies Acquires MyCivic
TYL announced the acquisition of MyCivic, a provider of citizen engagement applications.
MyCivic’s applications connect constituents with the services, resources and information available from their city such as bill pay, events calendars, business directories and other reporting features.
Neither terms of the transaction nor historical financials were disclosed.
Private equity firm Hellman & Friedman along with Blackstone, GIC, Canada Pension Plan Investment Board and JMI Equity reach an agreement to take Ultimate Software (ULTI) private.
ULTI stockholders to receive $331.50 per share in cash, representing an aggregate value of ~$11B.
The purchase price represents a 32% premium over ULTI’s volume-weighted average price over the past 30 days ended February 1, 2019, and reflects TTM EV/Sales and EV/EBITDA multiples of 9.5x and 40x, respectively.
Current CEO Scott Scherr and the rest of the executive team will continue to lead the company post-acquisition.
The agreement includes a 50-day “go-shop” period with an anticipated closing date in mid-2019.
Notable News
CBLK: Carbon Black Appoints Vanessa Pegueros to Board of Directors
CBLK announced the appointment of Vanessa Pegueros, VP and Chief Information Security Officer for DocuSign (DOCU), to the company’s Board of Directors.
Ms. Pegueros joins as Paul Maeder, General Partner and Founder of Highland Capital Partners LLC, vacates his seat.
FEYE: Zendesk President of Products Adrian McDermott Joins FireEye Board of Directors
FEYE announced the appointment of Adrian McDermott, who has led Zendesk’s product management and engineering teams since 2010, to the company’s Board of Directors.
At its Customer Experience Summit, NUAN unveiled Project Pathfinder, a technology utilizing machine learning and Nuance AI to create and train virtual assistants and chatbots.
Project Pathfinder leverages chat logs and transcripts of conversations between contact center agents and customers to automatically build dialog models that may be used to create and support two-way conversations between virtual assistants and consumers.
Some strategic customers already have access to Project Pathfinder, but the technology is expected to be generally available by Summer 2019.
PRO: PROS Accelerates Airlines’ Journey to Offer Optimization
PRO announced the launch of its next-generation PROS Revenue Management platform.
The platform leverages AI to automate analysis and enable decision making, which allows customers in the airline industry to adjust prices dynamically and target customers with personalized offers while still optimizing for revenue targets.
Earnings Releases
ABT-CA: Absolute Reports Fiscal 2019 Second Quarter Financial Results
ABT-CA reported Q2 ’19 adjusted EBITDA and EPS ahead of Street expectations on in line revenues.
Revenues of $24.4MM (+5.3% Y/Y) were approximately in line with consensus of $24.5MM, while adjusted EBITDA of $4.5MM (18.4% margin) beat consensus of $3.6MM. EPS of $0.04 also exceeded consensus by a penny.
Management raised its FY ’19 adjusted EBITDA margin guidance range from 14%-17% to 16%-19%, while leaving prior expectations for $96.0MM-$99.0MM in revenues, a 10%-14% operating cash flow margin and $3.5MM-$4.0MM in capital expenditures unchanged.
The ACV base reached $95.3MM, up 6% Y/Y. Enterprise and Government comprised 65% of total ACV and increased 12% and 17% Y/Y, respectively. Education accounts for the rest and declined 4% Y/Y.
In CEO Christy Wyatt’s first earnings call, she highlighted the company’s significant growth opportunity as the only provider of a cross-vendor Persistence platform, which is embedded in the BIOS of hundreds of millions of devices in the market today.
The company’s R&D efforts are focused on new capabilities like Reach, the ability to remotely execute scripts from the endpoint, and Application Persistence, the ability to self-heal other third-party agents within ABT-CA’s Resilience ecosystem.
ULTI: Ultimate Reports Full Year and Q4 2018 Financial Results
ULTI’s Q4 ’18 results were consistent with management’s prior guidance and ahead of Street expectations.
Total revenues of $304.8MM (+21.2% Y/Y) and non-GAAP operating income of $64.1MM (21.0% margin) was above consensus of $300.6MM and $63.9MM. Non-GAAP EPS of $1.95 was well above the Street’s $1.44.
Due to the company’s pending acquisition by a private equity group led by Hellman & Friedman, management did not host an earnings call or provide any guidance.
DATA: Tableau Reports Q4 and Full Year 2018 Financial Results
Under ASC 605 (for comparability purposes), results exceeded Street expectations.
Total revenues of $275.7MM (+10.6% Y/Y) were above consensus of $272.0MM. Non-GAAP operating income of $(8.3)MM (-3.0% margin) also exceeded consensus of $(11.9)MM. Non-GAAP EPS of $(0.03) beat the Street’s $(0.08).
Management’s FY ’19 guidance compared favorably with consensus, but guidance for Q1 was mixed with profitability lower on in line revenues.
Key operating metrics: total ARR of $840.9MM (+41.0% Y/Y); customer accounts added exceeded 3,900 bringing the total to over 86,000; 634 deals in excess of $100k were closed; nearly 80% ratable licensing versus 50% the year prior.
MANH: Manhattan Associates Reports Record Fourth Quarter 2018 Total Revenue
MANH reported Q4 ’18 results above Street expectations.
Total revenue of $144.4MM (flat Y/Y) was above consensus of $139.2MM. Non-GAAP operating income of $39.7MM (27.5% margin) exceeded consensus of $32.2MM. Non-GAAP EPS of $0.46 beat consensus of $0.37.
Management’s FY ’19 guidance calls for total revenues of $564MM-$576MM, non-GAAP operating margin of 21.0%-21.2% (implies $118.4MM-$122.1MM) and non-GAAP EPS of $1.38-$1.42. Guidance was consistent with the Street’s targets of $564.2MM in revenues, $119.8MM in non-GAAP operating income and $1.39 in non-GAAP EPS.
“While some global and retail macroeconomic conditions give us reason to be cautious, we are very bullish on the market opportunity ahead of us.” – Eddie Capel, CEO
Management says global pipelines are solid and trending up for both cloud and services. The pipeline for license deals also remains solid, but license revenues are still expected to trend down over the course of the year as customers opt for cloud. Approximately half of the deal opportunities are represented by net new logos.
Competitive win rates for Manhattan Active Omni remain strong at 70% with about 40% of license and cloud sales from new customers
PAYC: Paycom Software, Inc. Reports Fourth Quarter and Year-End 2018 Results
PAYC reported Q4 results ahead of Street expectations and guided revenues above consensus.
Total revenues of $150.3MM (+31.8% Y/Y) exceeded management’s $142.5MM-$144.5MM guidance and consensus of $144.1MM. Adjusted EBITDA of $57.5MM (38.2% margin) also surpassed guidance of $49.5MM-$51.5MM and consensus of $51.3MM. Non-GAAP EPS of $0.61 beat consensus of $0.56.
Management’s Q1 and FY ’19 guidance calls for revenues of $194.0MM-$196.0MM and $710.0MM-$712.0MM, respectively, both of which exceeded consensus of $191.0MM and $696.7MM. Adjusted EBITDA was guided to $97.0MM-$99.0MM for Q1 and $288.0MM-$290.0MM for FY ’19. Consensus called for $96.2MM in Q1 and $290.3MM for the year.
Key operating metrics: 92% annual client retention rate in 2018 vs. 91% in the six years prior; opened four new sales offices, bringing total to 49 teams.
Growth has primarily been driven by new business wins.
ZEN: Zendesk Announces Fourth Quarter and Full Fiscal Year 2018 Results
ZEN reported Q4 results above expectations, while guidance for Q1 and FY ’19 was mixed with revenues higher and non-GAAP operating income lower.
Total revenues of $172.2MM (+41.3% Y/Y) exceeded management’s $164.0MM-$166.0MM guidance and consensus of $165.6MM. Non-GAAP operating income of $4.8MM (2.8% margin) was also above management’s guidance and the Street’s $0.7MM. Non-GAAP EPS of $0.10 beat consensus by $0.07.
Management’s Q1 and FY ’19 revenue guidance calls for $178.0MM-$180.0MM and $795.0MM-$805.0MM, respectively, above the Street’s $172.8MM and $779.3MM. Guidance for non-GAAP operating income fell short, however, as expectations for Q1 and FY ’19 include $(2.0)MM-$0 and $13.0MM-$18.0MM, respectively, versus consensus of $0.7MM and $25.1MM.
Other key metrics: ~136.6k paid customer accounts versus ~118.9k last year and ~133.7k last quarter; MRR from customers with 100+ Zendesk Support agents increased from 38% last year to 40%; number of contracts signed in excess of $50k in annual value was 6% higher than last year with the average value ~60% higher; dollar-based net expansion rate was 119%, consistent with Q4 ’17.
Launched new CRM platform, Zendesk Sunshine, at the company’s annual Relate user conference during Q4.
ZEN also announced the appointment of Thomas Szkutak to the Board of Directors. Mr. Szkutak served as Amazon.com’s SVP and CFO from October 2002-June 2015 and is currently on the Boards of Intuit and athenahealth.
BLKB: Blackbaud Announces 2018 Fourth Quarter and Full Year Results
Non-GAAP revenue was $221.2MM (+1.2% Y/Y), above consensus of $220.4MM. Non-GAAP operating income was $42.3MM (19.1% margin), exceeding consensus of $35.7MM. Non-GAAP EPS of $0.65 also beat the Street’s $0.55.
Management’s FY ’19 revenue guidance of $880.0MM-$910.0MM and non-GAAP operating margin guidance of 16.7%-17.2% compared favorably with consensus of $888.8MM and 16.6%, respectively, but guidance for non-GAAP EPS of $2.11-$2.28 was below the Street’s $2.11-$2.28.
Recent acquisition of YourCause is expected to add $20.0MM-$25.0MM in revenues, but is dilutive to profitability and cash flow for the full year.
Finished the year with over 45,000 customers and millions of individual users worldwide.
Developed a joint solution with Microsoft called Nonprofit Resource Management, which enables non-profits to source, track, distribute and measure the impact of their resources.
Increased direct sales headcount by 20% in 2H ’18 and will continue to invest in 2019.
CDAY: Ceridian Reports Fourth Quarter and Full Year 2018 Results
CDAY reported Q4 results above expectations and guided Q1 and FY ’19 ahead of Street expectations.
Total revenues of $200.3MM (+9.8% Y/Y) was above consensus of $196.6MM and management’s $195.0MM-$197.0MM guidance. Adjusted EBITDA of $43.5MM (21.7% margin) also exceeded consensus of $39.4MM and management’s $36.5MM-$39.5MM guidance.
Management’s Q1 guidance calls for revenues of $203.0MM-$205.0MM and adjusted EBITDA of $46.0MM-$48.0MM, both of which exceeded consensus of $199.5MM and $45.5MM. Similarly, management’s FY ’19 revenue and adjusted EBITDA guidance ranges of $810.0MM-$815.0MM and $182.0MM-$187.0MM compared favorably with the Street’s $808.7MM and $175.4MM.
Key customer metrics: 3,718 customers live on Dayforce, up 253 from the prior quarter; 3.1MM active users; annual Cloud revenue retention rate was 96.3% versus 97.0% last year; ARR was $506.2MM (+29.5% Y/Y).
In 2018, approximately 20% of sales were add-on features to existing customers.
DSY-FR reported Q4 results above consensus. Q1 guidance was also ahead of expectations, while the outlook for FY ’19 was in line.
Total revenue of €1.04B (+14.5% Y/Y) exceeded consensus of $1.0B. Non-IFRS operating income of €390.8MM (37.4% margin) also beat the Street’s €358.1MM. Non-IFRS EPS of €1.10 was €0.09 ahead of consensus.
Management’s Q1 guidance calls for revenues of €925.0MM-€945.0MM and non-IFRS EPS of €0.78-€0.82, above consensus of €882.4MM and €0.70, respectively. Guidance for FY ’19 of 10%-11% constant currency revenue growth and a 32.0%-32.5% non-IFRS operating margin was in line with Street expectations, while non-IFRS EPS guidance of €3.35-€3.40 was just shy of the Street’s €3.41.
All core industries had double-digit software growth and five of nine diversification industries did as well during 2018.
FEYE: FireEye Reports Financial Results for Fourth Quarter and Full Year 2018
FEYE delivered a mixed print and guide.
Q4 revenue of $217.5MM (+5.7% Y/Y) exceeded consensus of $216.8MM and billings of $265.2MM also beat the Street’s $251.2MM. Non-GAAP operating income of $11.5MM (5.3% margin) was below consensus of $13.5MM. Non-GAAP EPS of $0.06 was a penny ahead of consensus.
Management’s Q1 guidance was below consensus across the board. However, FY ’19 guidance was in line or better for billings, non-GAAP operating margin and non-GAAP EPS, while the revenue outlook was just short of consensus.
Key operating metrics: ~90% retention rate; 354 new logo customers in Q4, up 19% Y/Y; record transaction volumes for deals over $1MM.
Expect to exit 2019 with an Endpoint solution that runs on all major operating systems and supports hybrid deployment options.
FTNT: Fortinet Reports Fourth Quarter and Full Year 2018 Financial Results
FTNT reported Q4 results above management’s guidance and Street expectations.
Total revenue of $507.0MM (+21.7% Y/Y) was above consensus of $496.3MM and management’s $490.0MM-$500.0MM guidance. Non-GAAP operating income of $130.6MM (25.8% margin) exceeded the Street’s $119.1MM and guidance for a 24.0%-24.5% margin. Non-GAAP EPS of $0.59 also beat consensus of $0.52 and guidance of $0.50-$0.52. Finally, billings of $649.2MM were above the Street’s $629.1MM and management’s $620.0MM-$635.0MM guidance.
Management’s Q1 guidance was mixed relative to consensus with revenues in line, but all other items lower. However, guidance for FY ’19 was slightly higher than consensus across the board.
No impact on results from the partial U.S. Federal government shutdown, Brexit or the slowing Chinese economy.
2018 benefited from an enterprise product refresh cycle, but strong growth will continue over the next few years due to integrated Secure SD-WAN and 5G products; positioning of Secure Fabric as customers look to consolidate to a single security vendor; and competitive advantage stemming from the company’s security processor unit, ASIC technology and new high-performance E-Series product.
NEWR: New Relic Announces Third Quarter Fiscal Year 2019 Results
NEWR delivered a beat and raise in Q3.
Total revenue of $124.0MM (+35.0% Y/Y) exceeded management’s $118.5MM-$120.5MM guidance and the Street’s $120.1MM. Non-GAAP operating income of $7.8MM (6.3% margin) also exceeded management’s $3.5MM-$4.5MM guidance and consensus of $4.2MM. Non-GAAP EPS of $0.19 beat guidance of $0.12-$0.13 and consensus of $0.12.
Management’s Q4 guidance of $126.5MM-$128.5MM in revenues, $0.5MM-$1.5MM in non-GAAP operating income and $0.04-$0.06 exceeded the Street’s targets of $126.0MM, $0.5MM and $0.03, respectively. The strong print and guide also prompted management to raise its prior FY ’19 outlook.
Key operating metrics: 816 paid business accounts in excess of $100k versus 629 a year ago; 56% of ARR from Enterprise paid business accounts vs. 52% last year; dollar-based net expansion rate of 122%, down from 125% in Q3 ’18.
PCTY: Paylocity Announces Second Quarter Fiscal Year 2019 Results
PCTY delivered a beat and raise quarter.
Total Q2 revenues of $107.2MM exceeded management’s guidance of $104.0MM-$105.0MM and consensus of $104.7MM. Adjusted EBITDA of $26.1MM (24.3% margin) also surpassed guidance of $23.5MM-$24.5MM and consensus of $24.3MM.
For Q3, management guided to revenues of $135.0MM-$136.0MM and adjusted EBITDA of $52.0MM-$53.0MM, above consensus of $134.7MM and $50.2MM, respectively. Additionally, management raised its prior FY ’19 outlook from $453.0MM-$455.0MM in revenues and $126.5MM-$128.5MM in adjusted EBITDA to $459.0MM-$460.0MM and $129.0MM-$130.0MM, respectively.
Broker referrals again represented 25% of new business as PCTY continues to invest in the channel.
Seeing positive momentum in HCM product adoption with talent management suite performing particularly well across clients of all sizes.
RDWR: Radware Announces Fourth Quarter and Full Year 2018 Earnings
RDWR reported Q4 results above Street expectations and guided Q1 generally in line with consensus.
Total revenues of $63.8MM (+9.2% Y/Y) was above consensus of $63.3MM. Non-GAAP operating income was $9.8M (15.4% margin), and non-GAAP EPS of $0.24 beat consensus of $0.17.
Management’s Q1 guidance includes revenues of $58.5MM-$60.0MM and non-GAAP EPS of $0.12-$0.13. Consensus stood at $59.7MM in revenues and $0.11 in non-GAAP EPS. For FY ’19, management guided to revenue growth of 7%-9%, implying revenues of $250.8MM-$255.5MM versus the Street’s $256.4MM.
Acquired ShieldSquare, a leader in bot mitigation, in January. The acquisition will be immaterial to 2019 revenue and be dilutive to non-GAAP EPS by $0.09-$0.10.
Pleased with underlying performance in EMEA and APAC, and Americas grew despite signs of softness amongst Tier 1 carriers.
ATEN: A10 Networks Reports Fourth Quarter and Year 2018 Financial Results
ATEN reported Q4 results ahead of expectations, but guided Q1 below consensus.
Total revenues of $61.8MM (+11.4% Y/Y) were slightly above consensus of $61.1MM, while non-GAAP EPS of $0.05 beat Street expectations for $0.01. Non-GAAP operating income was $3.3MM (5.3% margin) in Q4.
Management’s Q1 guidance included revenues of $49.0MM-$53.0MM and non-GAAP EPS of $(0.10)-$(0.03). Consensus called for $55.9MM in revenues and $(0.02) in non-GAAP EPS.
Sales productivity improved by 7% Y/Y with double-digit product growth in North America, Japan, APAC and Latin America. Security pipeline also up 31% Y/Y.
New disclosures provided for revenues by vertical: service provider was 43% of revenue for 2018 and up 28% Y/Y in Q4; enterprise was 39% of revenue for the year and down 11% Y/Y in Q4; and web giants accounted for 18% of 2018 revenue and increased 46% Y/Y in Q4.
EGAN: eGain Reports 53% SaaS Revenue Growth in Fiscal Second Quarter; Raises Annual Revenue Guidance
EGAN reported Q4 results above expectations and raised its prior FY ’19 SaaS and Subscription revenue growth targets.
Total revenues of $17.7MM (+14.3% Y/Y) exceeded consensus of $16.3MM. Non-GAAP operating income was $2.5MM (14.3% margin). Non-GAAP EPS of $0.08 beat consensus of $(0.03).
Management raised its prior FY ’19 SaaS revenue growth target from 25%-30% to 30%-35%. Subscription revenue growth is now expected to increase 13%-16% versus 10%-15% previously.
With increased focus on the U.S., seeing a significant uptick in opportunities after being evenly split in North American and Europe historically.
Low-90s % retention and migration of legacy on premise customers to cloud should be complete by CY ’20.
EIGI: Endurance International Group Reports 2018 Fourth Quarter and Full Year Results
EIGI reported Q4 adjusted EBITDA ahead of consensus on in line revenues. Guidance for FY ’19 was in line with expectations.
Total revenue of $282.4MM (-4.0% Y/Y) was approximately in line with consensus of $283.0MM. Adjusted EBITDA of $79.3MM (28.1% margin) was above the Street’s $77.9MM. EPS of $0.09 beat consensus of $(0.02).
Management’s FY ’19 guidance includes revenues of $1.14B-$1.16B and adjusted EBITDA of $310.0MM-$320.0MM. Consensus called for $1.14B in revenues and $330.2MM in adjusted EBITDA.
Key metrics: total subscribers on platform were ~4.802MM versus 4.852MM last quarter and 5.051MM last year; average revenue per subscriber for Q4 ‘18 was $19.50 versus $19.28 last year.
2019 plan calls for increased investments in analytics and progressive tests into brand and channel expansion, expanded international operations
FSCT: Forescout Technologies Reports Fourth Quarter and Full Year 2018 Financial Results
FSCT reported Q4 results above expectations. Q1 guidance was mixed with higher revenues offset by higher losses, but management’s FY ’19 loss expectations were in line on a stronger revenue outlook.
Total revenue of $84.7MM (+34.7% Y/Y) exceeded consensus of $77.8MM and management’s $75.8MM-$78.8MM guidance. Non-GAAP operating income of $0.2MM (breakeven margin) also topped expectations for $(10.0)MM. Non-GAAP EPS of $(0.01) beat the Street’s $(0.25) and management’s $(0.26)-$(0.24) guidance.
For Q1, management guided for non-GAAP EPS of $(0.45)-$(0.43) on revenues of $71.9MM-$74.9MM. Consensus called for non-GAAP EPS of $(0.33) on revenues of $71.6MM. For the full year, management’s guidance included revenues of $363.1MM-$373.1MM, above consensus of $348.7MM, and non-GAAP EPS of $(0.45)-$(0.37), consistent with the Street’s $(0.39).
Landed over 500 net new logos in 2018, bringing total customer count to nearly 3,300; salesforce tenure has increased from 35% last year to ~50 at the end of 2018.
NUAN: Nuance Announces First Quarter 2019 Results
NUAN reported Q1 results ahead of expectations, although a change in presentation to account for its divested Imaging business made that difficult to discern in the reported financials.
On an apples-to-apples basis, non-GAAP revenues of $514.0MM exceeded management’s guidance and consensus of $505.0MM. Revenues from continuing operations totaled $465.7MM (+2.8% Y/Y). Non-GAAP EPS of $0.30 also beat guidance and consensus of $0.28.
As prior consensus estimates included the Imaging business, comparisons to management’s Q2 and FY ’19 expectations are challenging. Management’s Q2 revenue and non-GAAP EPS guidance ranges sit below consensus, while management’s commentary suggests no changes to its prior revenue target for FY ’19 on a continuing operations basis along with an uptick in its non-GAAP operating margin and non-GAAP EPS expectations.
Accounting for both ASC 606 and the divestiture, management’s primary message is the company over-delivered on its core financial metrics and sees momentum across its remaining businesses.
Guidance still incorporates the automotive business, which is expected to be spun-off.
PRO: PROS Holdings, Inc. Reports Fourth Quarter and Full Year 2018 Financial Results
PRO reported Q4 results ahead of expectations and guided Q1 and FY ’19 above consensus.
Total revenues of $52.6MM (+13.5% Y/Y) was above consensus of $50.9MM and management’s guidance of $50.0MM-$51.0MM. Adjusted EBITDA of $(2.0)MM (-3.8% margin) also compared favorably with consensus of $(4.4)MM and management’s $(5.0)MM-$(4.0)MM guidance. Non-GAAP EPS of $(0.06) beat the Street’s $(0.13) and guidance of $(0.14)-$(0.12).
Management’s Q1 guidance calls for revenues of $54.0MM-$55.0MM, adjusted EBITDA of $(5.1)MM-$(4.1)MM and non-GAAP EPS of $(0.15)-$(0.13). Consensus called for $53.5MM, $(5.0)MM and $(0.14) in revenues, adjusted EBITDA and non-GAAP EPS, respectively. For FY ’19, management guided revenues to $231.0MM-$233.0MM and adjusted EBITDA to $(13.0)MM-$(11.0)MM. Consensus estimates called for $226.6MM and $(13.5)MM, respectively.
Subscription revenues over 50% for the first time in company’s history, and PRO declared the end of its SaaS transition and that it’s fully a SaaS company.
RPD: Rapid7 Announced Fourth Quarter and Full-Year 2018 Financial Results
RPD announced Q4 results above expectations and guided FY ’19 ahead of consensus.
Total revenues of $68.8MM exceeded management’s $65.8MM-$67.2MM guidance and consensus of $66.6MM. Under ASC 605, revenues increased 22.4% Y/Y. Non-GAAP operating income of $(2.7)MM (-3.9% margin) also exceeded guidance and Street expectations for $(4.6)MM. Non-GAAP EPS of $(0.05) beat consensus by $0.04.
Although management’s Q1 guidance was mixed relative to Street expectations with revenues higher and non-GAAP EPS lower, FY ’19 guidance was above consensus across the board. Specifically, management’s FY ’19 guidance includes revenues of $304.0MM-$312.0MM, breakeven operating income and non-GAAP EPS of $0.05. Consensus included $290.7MM in revenues, $(1.1) in non-GAAP operating income and $(0.01) in non-GAAP EPS.
Key metrics: ARR growth accelerated for the sixth consecutive quarter to 53% and RPD ended 2018 with over 7,800 customers; ARR per average customer increased 38% Y/Y to over $32k; 90% expiring renewal rate and 120% renewal rate.
Three main goals for 2019: focus on strong ARR growth (targeting 30%+); make it easier for customers to adopt RPD’s platform and optimize customer economics; and drive leverage in the business.