K. Liu's Week in Review
The past week was notable for the number of secondary offerings and other capital raises completed. BlackLine (BL) priced a follow-on offering of approximately 4.9MM shares at $48.50 per share, representing just a slight 2.7% discount to the close price prior to the announcement of the offering. All of the proceeds went to selling stockholders, including funds affiliated with Silver Lake Sumeru, BL’s CEO Therese Tucker and Chief Strategy Officer Mario Spanicciati. Pluralsight (PS) also announced a follow-on offering of approximately 13.6MM shares held by various executive officers and board members as well as entities affiliated with Insight Venture Partners. The offering priced at $29.25 per share, an 11.3% discount to the close price prior to the announced offering. While PS did not receive any proceeds from the offering, the company concurrently raised $550MM in a private placement of 0.375% convertible senior notes due 2024. ShotSpotter’s (SSTI) secondary offering of 385.5k shares was comprised of shares held by various insiders and former purchasers of its preferred and common stock in private placements as well as 250k primary shares. The deal priced at $44.99, representing a 5.1% discount to the close price prior to the announced offering, and generated gross proceeds of $11.2MM to the company. SharpSpring (SSHP) generated net proceeds of $9.3MM in a secondary offering of 770k shares, which priced at $13.00 or a 7.2% discount. Rounding out the capital raises for the week was Sonic Foundry’s (SOFO) entry into a note purchase agreement with its Chairman Mark Burish, which provides funding of $5.0MM that will be used to replace its prior revolver with Silicon Valley Bank.
M&A this week included Okta’s (OKTA) $52.5MM cash purchase of Azuqua, a leader in no code, cloud-based business application integration and workflow automation. Management believes the combination of the companies’ solutions will enable customers to automate business processes and more effectively manage the flow of identities between applications and services throughout their organizations. The acquisition is expected to close in the company’s current fiscal quarter but contribute only nominally to revenue for the year, while negatively impacting operating margin by 200bps. In the human capital management software market, Ceridian (CDAY) announced the asset purchases of Clearview Logix and Paysa. The former’s decision support technology will be integrated into CDAY’s platform to assist employees with making benefit selections, while the latter’s machine learning models will be used to help employers compare internal compensation scales with market rates. Neither terms of the transactions nor historical or anticipated financial results were provided.
As most companies have reported their calendar Q4 ’18 results at this point, the pace of earnings releases slowed relative to the past few weeks. Of the eight companies we tracked, all but one beat expectations for the quarter. Yext (YEXT) posted the strongest share price performance for the week as a strong print and revenue outlook offset lower expectations for earnings. Guidewire Software (GWRE) and Upland Software (UPLD) were the standouts from a beat and raise perspective, but shares of the former still ended down over 5% for the week. SailPoint (SAIL) and OKTA were the biggest decliners of the group with SAIL hit by a lower full year revenue outlook, and OKTA guiding profitability well below consensus despite issuing higher revenue guidance. The table below depicts share price performance for the week, reported results versus estimates and subsequent adjustments to consensus estimates for the current fiscal quarter and year.
Following on the theme in prior weeks, we highlight Nuance’s (NUAN) launch of a new technology bundle to assist enterprises with Agent AI, the company’s term for the combination of human agents and artificial intelligence to improve customer experience. We note that LivePerson (LPSN) has also made reference to this dynamic, highlighting the tango between human agents and bots to seamlessly enhance customer experience. In our view, the contact center represents a major battleground for customer experience vendors touting next-generation platforms with embedded AI capabilities. Notable executive moves this week included Dr. Nicko van Someren’s appointment as CTO of Absolute Software (ABT-CA) and the additions of Rich Wenning and Clarence Hinton as VP of North American Sales and SVP of Corporate Development, respectively, at CyberArk (CYBR). Mr. Wenning joins CYBR from Palo Alto Networks (PANW), while Mr. Hinton joins from NUAN. Elsewhere, BL promoted Patrick Villanova to Chief Accounting Officer, and Service Now (NOW) appointed Teresa Briggs and Tamar Yehoshua to its Board of Directors.
Mergers and Acquisitions
CDAY: Global HCM Leader Ceridian Acquires Assets of Clearview Logix and Paysa
CDAY announced the acquisitions of substantially all of Clearview Logix’s assets and certain intellectual property assets, including paysa.com, from Paysa.
Clearview Logix provides analytics models that simplify health insurance choices, and CDAY plans to integrate Clearview Logix’s decision support technology into its platform to make benefit choices easier for employees to understand.
Paysa is an AI-powered personal career advisor, and CDAY will integrate its machine learning model to enable employers to compare their internal job scales with local market rates.
Neither terms of the transactions nor historical or anticipated financial results were provided.
OKTA: Okta to Acquire Azuqua to Connect Business Applications in the Enterprise
OKTA announced that the company has entered into a definitive agreement to acquire Azuqua, a cloud-based provider of application integration and workflow automation solutions, for $52.5MM in cash.
Combining the solutions of the two companies will enable customers to automate business processes and the flow of identities between applications and services across all parts of an organization.
Azuqua is expected to contribute only nominally to revenue this year and have an impact of 200bps on operating margin.
The acquisition is expected to close in OKTA’s Q1 ’20.
Notable News
ABT-CA announced that Dr. Nicko van Someren has been appointed the company’s Chief Technology Officer, responsible for the direction and strategic vision of ABT-CA’s product architecture and security roadmap.
Dr. van Someren was previously Chief Security Officer and Chief Information Officer at nanopay, a financial services technology company, and has previously held leadership roles at the Linux Foundation, Good Technologies, nCipher and Juniper Networks.
BL: BlackLine Prices Offering of 4,883,873 Shares by Selling Stockholders
Shortly after announcing the commencement of an underwritten public offering of 4,883,873 shares, pricing for BL’s secondary offering was set at $48.50 per share, representing a 2.7% discount to the close price prior to the announcement.
Sellers in the offering were Silver Lake Sumeru, which sold 3,983,873 shares; Therese Tucker, Chief Executive Officer and a Board Member of BL, who sold 500,000 shares; and Mario Spanicciati, Chief Strategy Officer and a Board Member of BL, who sold 400,000 shares.
BL will not receive any proceeds from the offering.
BL: Patrick Villanova Promoted to Chief Accounting Officer at BlackLine
BL announced the promotion of Patrick Villanova to Chief Accounting Officer, a role in which he will oversee the company’s global accounting operations.
Mr. Villanova joined BL in 2015 as corporate controller and serves as the company’s principal accounting officer.
CYBR: CyberArk Expands Industry-Leading Executive Team
CYBR announced the appointments of Rich Wenning as Vice President of North American sales and Clarence Hinton as Senior Vice President of Corporate Development.
Mr. Wenning joins the company from Palo Alto Networks, where he served as Vice President, Americas Enterprise Accounts. He will lead CYBR’s North American sales team and focus on expanding direct and channel opportunities.
Mr. Hinton joins from Nuance Communications, where he served as Senior Vice President, Head of Strategy and Corporate Development. He will focus on formulating, assessing and executing strategic growth initiatives at CYBR.
NOW: ServiceNow Appoints Teresa Briggs and Tamar Yehoshua to its Board of Directors
NOW announced the appointments of Teresa Briggs and Tamar Yehoshua to its Board of Directors.
Ms. Briggs currently serves as Vice Chair and West Region Managing Partner at Deloitte LLP and has held numerous roles during her 30+ years at Deloitte.
Ms. Yehoshua is currently Chief Product Officer at Slack, overseeing product strategy and development, design and research. She previously served as Vice President at Google, holding various product and engineering leadership roles spanning products like Search, Identity and Privacy.
NUAN: Nuance Reinvents Agent AI for the Contact Center
NUAN announced a new technology bundle to assist enterprises with Agent AI, the combination of human agents and artificial intelligence to enhance customer experiences.
NUAN provides human agents with best-of-breed biometric, analytics and intelligent customer engagement technologies, which increases agent productivity given easier access to information and proactive recommendations.
“Agent AI is not about replacing humans. Instead, it is about strengthening the confidence of agents. By leveraging AI, we are actually empowering agents to succeed and enabling them to deliver the best experience possible with less frustration for both them and the customers they are serving.” – Robert Weideman, EVP and GM, Enterprise Division at Nuance Communications.
PS: Pluralsight, Inc. Announces Pricing of Follow-On Offering by Selling Stockholders
PS announced the pricing of an underwritten public offering of 13,558,464 shares of its Class A common stock held by selling stockholders at a public offering price of $29.25, an 11.3% discount to the close price prior to the announcement.
The selling stockholders have also granted the underwriters a 30-day option to purchase up to an additional 2,033,770 shares of Class A common stock.
PS will not receive any proceeds from the offering.
PS: Pluralsight, Inc. Announces Upsize and Pricing of $550 Million Convertible Notes Offering
PS announced the pricing of $550MM aggregate principal amount of 0.375% convertible senior notes due 2024 in a private placement to qualified institutional buyers.
The convertible notes offering was upsized from $450MM and the initial purchasers of the notes have been granted a 13-day option to purchase up to an additional $83.5MM aggregate principal of the notes.
The initial conversion rate for the notes is 25.8023 shares of Class A common stock per $1,000 principal amount, or an initial conversion price of $38.76, which represents a 17.5% premium to the close price prior to the announcement of the proposed notes offering as well as a secondary offering by selling stockholders.
PS expects to receive net proceeds of approximately $535.3MM (or approximately $616.7MM if the initial purchasers exercise their option to purchase additional notes in full), of which $60.3MM will be used for capped call transactions and the remainder for working capital and other general corporate purposes.
SHSP: SharpSpring Announces Pricing of Public Offering of Common Stock
SHSP announced the pricing of its underwritten public offering of 770,000 shares of common stock at a price of $13.00 per share, a 7.2% discount to the close price prior to the announcement of the proposed offering.
The underwriters have also been granted a 30-day option to purchase up to 115,500 additional shares.
SHSP expects to generate net proceeds from the offering of approximately $9.3MM, which will be used for general corporate purposes.
SOFO: Sonic Foundry Secures $5 Million in Funding
SOFO announced a note purchase agreement with the Chairman of SOFO’s Board of Directors, Mark Burish, which provides $5.0MM of funding that will be used to replace the company’s prior revolving line of credit with Silicon Valley Bank.
In conjunction with the purchase agreement, Mr. Burish has been issued a warrant to purchase up to 728,155 shares of SOFO at an exercise price of $1.18 per share.
SSTI: ShotSpotter Announces Pricing of Public Offering of Common Stock
SSTI priced its previously announced underwritten public offering of 385,539 shares of common stock, comprised of 250,000 shares offered by the company and 135,539 shares offered by selling stockholders, at a public offering price of $44.99.
The secondary offering is expected to generate gross proceeds to the company of $11.2MM.
SSTI has also granted the underwriter a 30-day option to purchase up to an additional 57,830 shares.
Earnings Releases
CRM: Salesforce Announces Record Fourth Quarter and Full Year Fiscal 2019 Results
CRM reported Q4 ’19 results above expectations and raised its prior revenue guidance for FY ’20.
Total revenues of $3.603B (+25.8% Y/Y) exceeded management’s $3.551B-$3.561B guidance and consensus of $3.558B. Non-GAAP operating income was $2.165B (60.1% margin). Non-GAAP EPS of $0.70 beat management’s $0.54-$0.55 guidance and consensus of $0.55.
Sales Cloud grew 11% Y/Y at a run rate of more than $4.2B; Service Cloud grew 22% Y/Y at a run rate of over $3.8B; Platform & Other grew 54% Y/Y, including $156MM from MuleSoft, and is now at a $3.3B run rate; dollar attrition remained below 10%.
42% of new hires in the quarter were in regions outside of the Americas, while the total number of global partner certifications increased 41% Y/Y.
Remaining performance obligations (RPO) totaled $25.7B (+25% Y/Y) at quarter-end and included $450MM from MuleSoft; RPO to be recognized as revenue in the next twelve months totaled $11.9B (+24% Y/Y).
Management’s Q1 guidance calls for revenues of $3.67B-$3.68B and non-GAAP EPS of $0.60-$0.61, below Street expectations for $3.69B in revenues and $0.63 in non-GAAP EPS.
For FY ’20, management raised its prior revenue guidance from $15.9B-$16.0B to $15.95B-$16.05B. Non-GAAP EPS guidance of $2.74-$2.76 was in line with the Street’s $2.75.
Management provided a new long-term revenue target of $26.0B-$28.0B by FY ’23, representing a doubling of revenues on an organic basis in the next four years.
DSGX: Descartes Announces Fiscal 2019 Fourth Quarter and Annual Financial Results
DSGX reported Q4 ’19 results generally in line with Street expectations.
Revenues of $71.0MM (+12.X% Y/Y) were approximately in line with consensus of $71.2MM. Adjusted EBITDA of $25.0MM (35.2% margin) was also approximately in line with consensus of $24.8MM. EPS of $0.10 were a penny below consensus.
Management’s calibration for Q1 is $74.0MM in baseline revenues and $22.2MM in adjusted EBITDA.
Long-term expectations for EBITDA growth are in the 10%-15% range, but growth in FY ’20 should be in the mid- to high-20s given the acquisition of Visual Compliance.
The company has drawn $265.0MM against its $350.0MM line of credit and could expand that line to $500MM if necessary. DSGX has also filed a shelf prospectus for up to $750MM. Primary uses of capital are for additional acquisitions.
GWRE: Guidewire Software Announces Second Quarter Fiscal 2019 Financial Results
GWRE reported Q2 ’19 results ahead of expectations and raised its profitability expectations for the full year.
Total revenue of $169.3MM (+3.3% Y/Y) was above management’s $157.0MM-$161.0MM guidance and consensus of $159.7MM. Non-GAAP operating income of $27.9MM (16.5% margin) also beat guidance and the Street’s $14.6MM. Non-GAAP EPS of $0.34 were well ahead of management’s $0.17-$0.21 guidance and consensus of $0.19.
Subscription sales were 53% of new sales in the quarter; sold first InsuranceSuite Cloud deal of the fiscal year to TD Insurance; expanded relationships with 26 customers; won new Cyence customers, but also experienced higher than expected churn from existing customers.
For Q3, management guided for revenues of $152.5MM-$156.5MM, non-GAAP operating income of $0-$4.0MM and non-GAAP EPS of $0.05-$0.09, all of which compared favorably with consensus of $148.6MM, $1.3MM and $0.05, respectively.
Management raised the low end of its prior FY ’19 revenue guidance from $722.0MM-$732.0MM to $725.0MM-$732.0MM. Guidance for non-GAAP operating income and non-GAAP EPS was also raised from $106.5MM-$116.5MM and $1.24-$1.34, respectively, to $112.0MM-$118.0MM and $1.35-$1.41.
No change to ARR expectations provided at the company’s Analyst Day.
OKTA: Okta Announces Record Fourth Quarter and Fiscal Year 2019 Financial Results
OKTA reported Q4 ’19 results ahead of expectations, but provided mixed guidance for FY ’20.
Total revenue was $115.5MM (+49.9% Y/Y), above management’s $107.0MM-$108.0MM guidance and consensus of $107.9MM. Non-GAAP operating loss was $(4.9)MM (-4.3% margin), also exceeding management’s guidance and consensus. Non-GAAP EPS of $(0.04) beat management’s $(0.09)-$(0.08) guidance and the Street’s $(0.08).
Key metrics: added 500 net new customers in Q4; added 101 customers that spend over $100k per year with the company; dollar based retention rate of 120%.
Management’s Q1 guidance includes revenue of $116.0MM-$117.0MM, above consensus of $111.7MM. However, guidance for non-GAAP operating income and non-GAAP EPS of $(26.5)MM-$(25.5)MM and $(0.22)-$(0.21), respectively, trailed Street expectations for $(15.5)MM and $(0.12).
Similarly, management’s FY ’20 guidance calls for revenue of $530.0MM-$535.0MM, above consensus of $518.3MM. Non-GAAP operating income and non-GAAP EPS guidance of $(69.0)MM-$(63.0)MM and $(0.53)-$(0.48), respectively, fell short of the Street’s $(32.9)MM and $(0.22).
QUMU: Qumu Announces Fourth Quarter and Year-End 2018 Results
QUMU reported Q4 ’18 results generally in line with expectations and provided mixed guidance for FY ’19.
Total revenues of $6.9MM (-4.5% Y/Y) were slightly above consensus of $6.7MM. Adjusted EBITDA of $0.1MM were shy of the Street’s $0.2MM. EPS of $0.01 beat consensus of $(0.11).
ACV bookings grew to $5.8MM in Q4 and increased 21.3% Y/Y to $14.1MM for the year; customer retention was 91%, a record high for the company.
Revenues from key partners exceeded $6.3MM, representing 25% of sales for the year and 35% of ACV bookings.
Management’s guidance for FY ’19 calls for ACV bookings growth of 20%-25% Y/Y, total revenues of approximately $27.0MM and adjusted EBITDA of $(1.5)MM. Consensus called for revenues and adjusted EBITDA of $27.4MM and $(1.0)MM, respectively.
SAIL: SailPoint Announces Fourth Quarter and Full Year 2018 Financial Results
SAIL reported Q4 ’18 results ahead of expectations, but guided FY ’19 slightly below consensus.
Total revenue of $80.6MM was above management’s $70.0MM-$71.5MM guidance and consensus of $70.8MM. Under ASC 605, total revenue increased 14.8% Y/Y. Non-GAAP operating income was $18.4MM (22.8% margin), exceeding management’s $8.5MM-$10.0MM guidance and consensus of $9.4MM. Non-GAAP EPS of $0.19 also beat guidance and the Street’s $0.08.
SAIL added 240 net new customers in 2018 and had 1,173 customers at quarter end; the company maintained a 95%+ renewal rate in 2018.
For 2019, SAIL is focused on driving its market forward by helping customers govern all digital identities, govern deep into complex environments and govern smart by deploying Identity AI.
The company also plans to expand its geographical coverage, adding its first direct resources in Japan and additional go-to-market resources in South America.
Management’s Q1 guidance calls for revenue of $59.5MM-$61.0MM, non-GAAP operating income of $(0.5)MM-$1.0MM and non-GAAP EPS of $(0.02)-$(0.00). Consensus stood at $59.7MM in revenue, $1.2MM in non-GAAP operating income and $0.00 in non-GAAP EPS.
For FY ’19, management’s guidance includes revenue of $293.0MM-$299.0MM, non-GAAP operating income of $28.0MM-$31.0MM and non-GAAP EPS of $0.25-$0.29. Consensus called for revenue, non-GAAP operating income and non-GAAP EPS of $299.2MM, $30.7MM and $0.27, respectively.
UPLD: Upland Software Reports Fourth Quarter and Full Year 2018 Financial Results
UPLD reported Q4 ’18 results ahead of expectations and guided FY ’19 above consensus.
Total revenue was $45.2MM (+62.2% Y/Y), above management’s $41.8MM-$43.8MM guidance and consensus of $43.5MM. Adjusted EBITDA was $16.7MM (37.0% margin), ahead of management’s $15.3MM-$16.1MM guidance and consensus of $16.0MM. Non-GAAP EPS of $0.58 beat consensus of $0.49.
Net dollar retention rate was 98% in 2018; added 134 new customers and expanded 204 existing customer relationships in Q4; field sales headcount reached 28 and total sales headcount was 65 at year-end.
Management’s Q1 guidance includes revenue and adjusted EBITDA of $47.9MM-$48.9MM and $17.2MM-$17.8MM, respectively, above consensus of $46.4MM and $16.8MM.
For FY ’19, management guided to revenue of $194.8MM-$198.8MM and adjusted EBITDA of $70.8MM-$73.2MM, both of which exceeded the Street’s $190.3MM and $69.3MM.
YEXT: Yext, Inc. Announces Fourth Quarter and Full Year Fiscal 2019 Results
YEXT reported Q4 ’19 results above expectations and provided mixed guidance for FY ’20.
Revenue of $63.8MM (+32.8% Y/Y) exceeded management’s $62.0MM-$63.0MM guidance and consensus of $62.8MM. Non-GAAP operating income of $(3.9)MM was also ahead of management’s guidance and consensus. Non-GAAP EPS of $(0.03) beat management’s $(0.09)-$(0.08) guidance and the Street’s $(0.08).
Key metrics: added 128 new Enterprise logos; closed 169 deals in excess of $100k in total contract value and 18 over $1MM during Q4; net revenue retention for the year was 110%; remaining performance obligations of $262.0MM at quarter end.
YEXT added over 40 new quota-carrying reps in FY ’19 and exited the year with over 170; the company plans to expand sales capacity further by adding reps in all geographies.
Management’s Q1 guidance calls for $66.0MM-$67.0MM in revenue and $(0.11)-$(0.09) in non-GAAP EPS, in line with the Street’s $67.0MM and $(0.10).
For FY ’20, management’s guidance includes $295.0MM-$300.0MM in revenue and $(0.44)-$(0.40) in non-GAAP EPS. Consensus called for $297.6MM in revenue and $(0.38) in non-GAAP EPS.