K. Liu's Week in Review
We spent a couple of days in Vegas to start the week, attending Pegasystems’ (PEGA) annual customer conference and Investor Day. Pega has a credible claim to being the platform for digital transformation, in our opinion, and has its sights set on substantial addressable market opportunities in the areas of customer engagement (CX) and robotics process automation (RPA). Stay tuned for our takeaways from the event in the coming week. Outside of sin city, it was a busy week across the software industry with off-calendar earnings continuing, several companies raising capital, another sizeable deal in cybersecurity, and a few notable executive announcements.
We begin with earnings, which resulted in several eye-popping moves. Cloudera (CLDR) and Pivotal Software (PVTL) had the ignominy of subjecting investors to the most carnage with each company’s stock down over 40% for the week. Amidst the integration of a transformative deal, Cloudera cited increasing competition from public cloud providers and the forthcoming launch of its new hybrid and multi-cloud offering as underlying factors in the postponement of renewals and expansion opportunities with existing customers. This resulted in a haircut to revenue and billings expectations and coincided with the announced retirement of CEO Tom Reilly. Pivotal Software also cited elongating sales cycles and a complex technology landscape as factors impacting its sales execution, and management reduced its revenue outlook for the year. The two were not the only ones faced with longer sales cycles, however, as Box (BOX) and DocuSign (DOCU) also indicated attempts to shift towards multi-product transactions resulted in delayed deal closures. Domo (DOMO) may also be experiencing this to an extent as management indicated a new pricing model is being piloted to ensure its per-seat pricing does not dissuade customers from adopting its platform across their organizations. On the other side of the coin, winners this week included Coupa Software (COUP), MongoDB (MDB), Salesforce.com (CRM), Smartsheet (SMAR), and Zoom Video Communications (ZM). Coming off a beat and raise, Coupa also priced a $700 million offering of convertible senior notes due 2025 bearing interest at 0.125% per annum and with an initial conversion price of $159.60 per share, representing a premium of approximately 35% to the prior day’s close. MongoDB rallied over 20% for the week as Atlas continues to fuel strong growth and a favorable revenue outlook. Recent IPO Zoom raced higher on its beat and raise despite a seemingly stratospheric valuation already. The following table depicts each reporting company’s stock price performance for the week, quarterly results versus expectations, and subsequent estimate revisions for the current fiscal quarter and year.
On the deal front, Elastic (ESTC) announced plans to acquire endpoint protection, detection, and remediation provider Endgame for $234 million in stock and the repayment of $14 million in debt. Endgame generated approximately $20 million in billings in the past twelve months and will be integrated with Elastic’s efforts in the security information and event management (SIEM) market. Elastic expects the deal to close by its fiscal Q3 and has included nominal revenue contribution along with a two percentage point drag on operating margin in its FY ’20 guidance. Altair Engineering (ALTR) priced a $200 million convertible note offering due 2024. The notes bear interest at a rate of 0.250% per annum and are convertible at a price of approximately $46.50 per share, representing a 30% premium to the prior day’s close. Also tapping the capital markets this week, Avalara (AVLR) priced an equity offering of approximately 3.6 million shares at a price of $69.40 per share, a premium of 6.0% to the close price prior to the announced offering, and The Descartes Systems Group (DSGX) sold 6.0 million shares at a price of $35.50 per share, a 9.0% discount to the close price prior to the announced offering.
In other news, Nuance Communications (NUAN) announced that Sanjay Dhawan has been selected to lead its Automotive business and will be appointed CEO and a member of the Board of Directors once the planned spin-off is complete. Mr. Dhawan joins the company from Harman International, where he most recently served as President of Harman Connected Services and Chief Technology Officer. HubSpot (HUBS) revealed that Chief Sales Officer Hunter Madeley has resigned to return to Toronto, where he has accepted a CEO job. HubSpot is now on the hunt for a Chief Customer Officer to assume Mr. Madeley’s duties in addition to responsibilities for marketing and service. Absolute Software (ABT-CA) announced the appointments of Sandra Toms, Karen Reynolds, and John Robinson as Chief Marketing Officer, Chief Communications Officer, and Chief Human Resources Officer, respectively, joining from RSA Security, People.ai, and Tapestry Solutions. 2U named Ebony Lee, previously Senior Vice President, Strategic Development at Comcast Cable Communications, as its Managing Director for Graduate Programs. Finally, the proxy fight between Verint Systems (VRNT) and shareholder Neuberger Berman drew to a close with the latter withdrawing its three director nominees and Verint indicating a new director with experience in the software industry would be named this year.
Mergers and Acquisitions
Elastic Announces Intent to Acquire Endgame
Elastic (ESTC) announced that the company has entered into an agreement to acquire endpoint protection, detection, and response provider Endgame for $234 million comprised of stock and the repayment of $14 million in debt.
The acquisition is expected to close in fiscal Q3 ’20 and will be integrated with Elastic’s SIEM efforts and enable customers to extend threat hunting to the endpoint.
Endgame’s trailing-twelve-month billings were approximately $20 million and guidance for FY ’20 includes revenue from Endgame in 2H along with a negative impact on operating margin of approximately 2 percentage points.
Notable News
Absolute Strengthens Executive Team to Accelerate Next Stage of Growth
Absolute Software (ABT-CA) announced the appointments of Sandra Toms as Chief Marketing Officer, Karen Reynolds as Chief Communications Officer, and John Robinson as Chief Human Resources Officer.
Ms. Toms joins the company from RSA Security, where she led and curated the RSA Conference and oversaw the company’s corporate communications engagement and strategy.
Ms. Reynolds joins the company from People.ai and has also held senior roles at HP, BMC Software, Centrify, and Good Technology.
Mr. Robinson joins the company from Tapestry Solutions, a software subsidiary of Boeing, where he led global HR strategy and execution in 11 countries.
Altair Announces Pricing of Offering of Convertible Senior Notes
Altair Engineering (ALTR) priced its offering of $200 million aggregate principal amount of convertible senior notes due 2024.
The offering was upsized from the previously announced offering size of $175 million and Altair has granted the underwriters a 30-day option to purchase up to an additional $30 million aggregate principal amount of the notes offered.
The notes will pay interest semiannually in arrears on June 1 and December 1 each year at the rate of 0.250% per year, will be convertible prior to December 1, 2023 only under certain circumstances and during certain periods, and will be convertible thereafter regardless of circumstances at a conversion rate of 21.5049 shares of Altair’s Class A common stock per $1,000 principal amount, which is equivalent to a conversion price of approximately $46.50 per share and represents a 30% premium over the prior day’s closing price.
Altair plans to use a portion of the proceeds from the offering to repay outstanding indebtedness under its revolving credit facility and the remainder for acquisitions or other general corporate purposes.
Avalara Announces Pricing of Public Offering of Common Stock
Avalara (AVLR) priced an underwritten public offering of approximately 3.6 million shares of its common stock at $69.40 per share, a 6.0% premium to the close price prior to the announcement of the planned offering.
The offering was upsized from 3.0 million shares and Avalara has granted the underwriters a 30-day option to purchase up to an additional 539,215 shares of common stock at the public offering price.
Cloudera Announces CEO Transition
Cloudera (CLDR) announced the retirement of Tom Reilly as Chief Executive Officer and as a member of the Board of Directors, effective July 31, 2019.
Martin Cole, Chairman of the Board, has been named interim Chief Executive Officer, effective at the end of Mr. Reilly’s transition period, and the Board has commenced a search for the company’s next permanent Chief Executive Officer.
Coupa Prices $700 Million Convertible Senior Notes Due 2025
Coupa Software (COUP) priced its offering of $700 million aggregate principal amount of convertible senior notes due 2025.
The offering was upsized from $500 million and the initial purchasers have also been granted an option to purchase up to an additional $105 million aggregate principal amount.
Interest on the notes will be payable semi-annually in cash at a rate of 0.125% per annum on June 15 and December 15 of each year and will have an initial conversion rate of 6.2658 shares of common stock per $1,000 principal amount, equating to an initial conversion price of approximately $159.60 per share, a premium of approximately 35% to the prior day’s close.
Proceeds from the offering are expected to be put towards general corporate purposes, potential acquisitions and strategic transactions, and to pay the cost of capped call transactions.
Descartes Announces Pricing of Public Offering
Descartes Systems Group (DSGX) priced an underwritten offering of 6 million shares of its common stock at a public offering price of $35.50 per share, a 9.0% discount to the close price prior to the announced offering.
The company has also granted the underwriters a 30-day option to purchase up to an additional 900,000 shares.
Descartes plans to utilize the proceeds from the offering to repay outstanding indebtedness under its revolving debt facility, for potential acquisition opportunities, and for general corporate purposes.
Ebony Lee Joins 2U, Inc. Leadership Team as Managing Director for Graduate Programs
2U (TWOU) announced the appointment of Ebony Lee as managing director for graduate programs, responsible for overseeing the execution and growth of the graduate program business.
Ms. Lee previously served as senior vice president, strategic development at Comcast Cable Communications.
Nuance Selects Industry Veteran Sanjay Dhawan to Lead Automotive Business
Nuance Communications (NUAN) announced that Sanjay Dhawan has been selected to lead its Automotive business and become its CEO and a member of the Board of Directors following the planned spin-off of the business.
Mr. Dhawan joins the company from Harman Industries International, where he served as President of Harman Connected Services and Chief Technology Officer.
HubSpot (HUBS) announced that Chief Sales Officer Hunter Madeley has resigned to return to Toronto, where he has accepted a CEO job.
HubSpot plans to look externally for a Chief Customer Officer responsible not only for Mr. Madeley’s prior sales responsibilities but also for marketing and service.
Verint and Neuberger Berman Announce Resolution of Proxy Contest
Verint Systems (VRNT) announced that shareholder Neuberger Berman has agreed to withdraw its nominations of three directors to Verint’s Board of Directors.
The Board plans to add a new director this year with operating experience in the software industry.
Earnings Releases
Box Reports Revenue of $163.0 Million for Fiscal First Quarter 2020, Up 16 Percent Year-Over-Year
Box (BOX) reported Q1 ’20 results above expectations, but revisions to management’s prior FY ’20 guidance were mixed.
Revenue of $163.0 million (+16.0% Y/Y) was above management’s $161.0-$162.0 million guidance and consensus of $161.5 million. Non-GAAP operating income was $(3.0) million (-1.9% margin), ahead of consensus of $(7.5) million. Non-GAAP EPS of $(0.03) beat management’s $(0.06)-$(0.05) guidance and consensus of $(0.05).
Box has been evolving its product to extend its cloud content management capabilities and advancing its go-to-market strategy to focus more on customer-oriented solution selling.
The company closed fewer deals over $100,000 than anticipated, but was encouraged to see over 90% of these include at least one add-on product, resulting in add-on product revenue increasing 57% Y/Y.
Key metrics: closed 33 deals over $100,000, including three over $1 million; net retention rate of 107%; full churn rate of 4.2% on an annualized basis; 12.2 million paid users; 89% of recurring revenue from customers paying at least $50,000 annually; billings of $118.4 million (+1.4% Y/Y); remaining performance obligations of $637.4 million (+16% Y/Y).
Tom Addis, who joined Box in 2012 and has led Global Sales since January 2018, will be leaving the company; Box is in the late stages of hiring a new Global Sales leader.
Management expects to grow the sales force in the mid-single digit range in FY ’20 versus its prior target of 10%-15% growth.
Guidance for Q2 includes revenue of $169.0-$170.0 million, slightly below consensus of $170.9 million, and non-GAAP EPS of $(0.02)-$(0.01), in line with consensus of $(0.02).
For FY ’20, management lowered its revenue guidance from $700.0-$704.0 million to $688.0-$692.0 million and increased its non-GAAP EPS guidance from $(0.03)-$0.01 to $0.00-$0.02.
Management is no longer providing a specific timeframe for achieving $1 billion in revenue, but remains committed to achieving a non-GAAP operating margin of 6%-7% in FY ’21 and anticipates the sum of revenue growth and non-GAAP operating margin will be roughly 30% by FY ‘23.
Cloudera Reports First Quarter Fiscal Year 2020 Financial Results
Cloudera (CLDR) reported mixed Q1 ’20 results and provided a mixed outlook for Q2 and FY ’20.
Total revenue was $187.5 million (+81.2% Y/Y), within management’s $187.0-$190.0 million guidance but below consensus of $188.3 million. Non-GAAP operating income was $(34.7) million (-18.5% margin), above consensus of $(62.1) million. Non-GAAP EPS were $(0.13), beating management’s $(0.25)-$(0.22) guidance and consensus of $(0.23).
Per management, increased competition from public cloud vendors and anticipation of the company’s new hybrid and multi-cloud offering, Cloudera Data Platform, resulted in some customers electing to postpone renewal and expansion activities.
The integration of Hortonworks is on track with people-related integration work complete and previously identified cost synergies validated and being realized ahead of plan; back office system integration remains the final piece of work required.
Key metrics: annualized recurring revenue (ARR) was $672.0 million (+21% Y/Y); 929 customers with ARR over $100,000; won 59 new customers; dollar churn was 16% in the quarter.
Guidance for Q2 calls for $180.0-$183.0 million in revenue, below consensus of $202.9 million, and $(0.11)-$(0.08) in non-GAAP EPS, in line with consensus of $(0.10).
Management’s FY ’20 guidance now calls for flat to 10% growth in ARR, implying $680.6-$748.7 million versus $800.0-$825.0 million previously, $745.0-$765.0 million in revenue versus $835.0-$855.0 million previously, and $(0.32)-$(0.28) in non-GAAP EPS versus $(0.36)-$(0.32) previously.
Coupa Software Reports Financial Results For the First Quarter of Fiscal 2020
Coupa Software (COUP) reported Q1 ’20 results above expectations and raised guidance for FY ’20.
Revenues of $81.3 million (+44.3% Y/Y) exceeded management’s $73.5-$74.0 million guidance and consensus of $73.8 million. Non-GAAP operating income was $2.2 million (2.7% margin), also above management’s guidance and consensus of $(2.7) million. Non-GAAP EPS were $0.03, beating guidance of $(0.06)-$(0.03) and consensus of $(0.05).
Key metrics: cumulative spend under management of nearly $1.2 trillion (+60% Y/Y); billings of $75.1 million (+50% Y/Y).
Management noted that the robust billings performance was driven by an uncharacteristically strong Q1 for new business.
The acquisition of Exari in early Q2 will have minimal revenue and billings contribution in the quarter but has a negative impact on operating expenses; Exari should contribute approximately $25 million in revenue in FY ’21.
Guidance for Q2 includes $84.5-$85.5 million in revenues, $(7.5)-$(6.5) million in non-GAAP operating income, and $(0.12)-$(0.10), which was mixed versus consensus of $78.1 million, $(0.3) million, and $(0.01).
Management raised its FY ’20 outlook for revenues, non-GAAP operating income, and non-GAAP EPS from $325.0-$327.0 million, $3.0-$7.0 million, and $0.04-$0.10, respectively, to $342.0-$344.0 million, $7.0-$9.0 million, and $0.07-$0.10.
DocuSign Announces First Quarter Fiscal 2020 Financial Results
DocuSign (DOCU) reported Q1 ’20 results above expectations and raised its FY ’20 revenue guidance.
Total revenue was $214.0 million (+37.3% Y/Y), above management’s guidance of $205.0-$210.0 million and consensus of $208.2 million. Non-GAAP operating income of $10.3 million (4.8% margin) was within management’s guidance and above consensus of $7.6 million. Non-GAAP EPS of $0.07 beat consensus of $0.05.
Key metrics: added 31,000 new customers, including 4,000 direct; 508,000 paying customers (+25% Y/Y) at quarter-end; 324 customers with ACV greater than $300,000; net dollar retention rate of 112%; billings of $215.0 million (+27.3% Y/Y).
Management noted that an increase in multi-product sales has added more complexity in terms of integration designs and related SOWs, which elongated some upsell cycles in the quarter and impacted billings and dollar net retention.
DocuSign Agreement Cloud expands the company’s product portfolio beyond signing to the entire agreement process before and after that signature, which could potentially double DocuSign’s TAM from the $25 billion eSignature TAM.
The rollout of specialized sales teams focused on new customer acquisition while others focus on the installed base is already benefiting growth in new logos and expansion of use cases within the existing base.
Guidance for Q2 includes revenue of $218.0-$222.0 million and implies non-GAP EPS of $(0.03)-$0.09, in line with consensus of $219.9 million in revenue and $0.04 in non-GAAP EPS.
Management raised its prior FY ’20 revenue guidance from $910.0-$915.0 million to $917.0-$922.0 million and reduced the low-end of its implied non-GAAP EPS guidance from $(0.04)-$0.38 to $(0.09)-$0.38 to account for up to $10.0 million in expenses related to the RPost litigation; guidance for billings was unchanged at $1.01-$1.03 billion.
Domo Announces Fiscal 2020 First Quarter Financial Results
Domo (DOMO) reported Q1 ’20 non-GAAP EPS above expectations and raised its non-GAAP EPS guidance for FY ’20.
Total revenue was $40.8 million (+27.7% Y/Y), near the high-end of management’s guidance and in line with consensus of $40.7 million. Non-GAAP operating income of $(26.8) million (-65.7% margin) was ahead of consensus of $(24.6) million. Non-GAAP EPS of $(1.08) beat management’s $(1.30)-$(1.26) guidance and consensus of $(1.28).
Key metrics: 458 enterprise customers; over 1,800 total customers; net revenue retention above 100%; billings of $41.1 million (+21.8% Y/Y).
In the past quarter, Domo began piloting a new pricing model that focuses on the value of the components of the platform and is designed so that per seat pricing doesn’t hamper its customers’ ability to expand Domo across their organizations.
Management plans to get additional leverage out of its subscription cost of revenue by effectively managing data center operations to find efficiencies and better utilize certain services.
Guidance for Q2 includes revenue of $41.0-$42.0 million, below consensus of $42.3 million, and non-GAAP EPS of $(1.02)-$(0.98), in line with Street expectations for $(1.00).
Management’s FY ’20 reaffirmed prior revenue guidance of $173.0-$174.0 million and increased its non-GAAP EPS guidance from $(4.07)-$(3.99) to $(3.87)-$(3.79).
Subsequent to its earnings call, Domo filed an 8-K disclosing expectations for billings of $47 million and $68 million in Q3 and Q4, respectively, and adjusted net cash used in operating activities of $17.3 million and $14.5 million in Q3 and Q4.
Elastic N.V. Reports Strong Fourth Quarter and Fiscal 2019 Financial Results
Elastic (ESTC) reported Q4 ’19 results above expectations but provided mixed guidance for Q1 and FY ’20.
Total revenue was $80.6 million (+62.6% Y/Y), above management’s $74.0-$76.0 million guidance and consensus of $75.6 million. Non-GAAP operating income was $(17.5) million (-21.7% margin), also above guidance and consensus of $(18.9) million. Non-GAAP EPS of $(0.28) were at the high-end of management’s guidance and in line with consensus.
Key metrics: over 8,100 subscription customers versus 7,200 at the end of Q3; over 440 customers with ACV greater than $100,000; net expansion rate remained in excess of 130%; billings of $115.4 million (+57.4% Y/Y); remaining performance obligations of $352 million (+66% Y/Y).
The company plans to continue adding sales capacity and expand market coverage and realize leverage gradually over the long-term as the business scales.
Management’s Q1 guidance includes revenue of $82.0-$84.0 million; a non-GAAP operating margin of (34)%-(32)%, implying non-GAAP operating income of $(28.6)-$(26.2) million; and non-GAAP EPS of $(0.44)-$(0.42), which was mixed relative to the Street’s $81.3 million, $(22.7) million, and $(0.32) in revenue, non-GAAP operating income and EPS, respectively.
For FY ’20, management’s guidance was also mixed with revenue of $397.0-$403.0 million above consensus of $365.1 million, but non-GAAP operating income and EPS of $(100.8)-$(91.3) million and $(1.49)-$(1.33), respectively, falling short of the Street’s $(90.7) million and $(1.24).
Guidewire Software Announces Third Quarter Fiscal Year 2019 Financial Results
Guidewire Software (GWRE) reported Q3 ’19 results above expectations, but guided Q4 below consensus.
Total revenue was $162.9 million (+14.6% Y/Y), above management’s guidance of $152.5-$156.5 million and consensus of $155.2 million. Non-GAAP operating income was $12.6 million (7.7% margin), also above guidance and consensus of $3.3 million. Non-GAAP EPS were $0.18, ahead of management’s $0.05-$0.09 guidance and consensus of $0.08.
A portion of the outperformance in Q3 was due to a ClaimCenter term license deal with a large Japanese customer, which was expected to close in Q4.
Management indicated that the company’s strong year-to-date bookings performance is underrepresented in its reported financials owing to a faster shift to cloud as evidenced by 60% of Q3 bookings tied to subscriptions.
Key metrics: added two InsuranceSuite Cloud customers; seven customers selected Data products; 11 customers chose Digital products; 21 customers selected additional Guidewire Insurance Platform products.
Expectations for subscription sales as a percentage of bookings to reach the high-end of management’s 40%-60% target and higher revenue attrition than usual for both Cyence and InsuranceSuite will weigh on near-term results.
Management’s Q4 guidance calls for revenue of $199.0-$207.0 million, non-GAAP operating income of $41.0-$47.0 million, and non-GAAP EPS of $0.47-$0.53, all of which were below consensus expectations for $226.4 million in revenue, $55.0 million in non-GAAP operating income, and $0.61 in non-GAAP EPS.
For FY ’20, management lowered its prior revenue guidance from $725.0-$732.0 million to $711.0-$719.0 million, maintained its non-GAAP operating income guidance of $112.0-$118.0 million, and raised its non-GAAP EPS guidance from $1.35-$1.41 to $1.36-$1.42.
MongoDB, Inc. Announces First Quarter 2020 Financial Results
MongoDB (MDB) reported Q1 ’20 results ahead of expectations but provided mixed guidance for Q2 and FY ’20.
Total revenue of $89.4 million (+78.3% Y/Y) exceeded management’s $82.0-$84.0 million guidance and consensus of $83.5 million. Non-GAAP operating income was $(12.6) million (-14.1% margin), above management’s $(14.0)-$(13.0) million guidance and consensus of $(13.3) million. Non-GAAP EPS of $(0.22) beat guidance of $(0.25)-$(0.23) and the Street’s $(0.24).
Atlas has seen rapid adoption with revenue growing over 340% Y/Y and now representing 35% of sales versus 14% last year.
Key metrics: over 14,200 customers; over 12,300 MongoDB Atlas customers; over 1,800 direct sales customers; 598 customers (+51.8% Y/Y) with $100,000 or more in annualized recurring revenue and monthly recurring revenue.
MongoDB had its strongest performance ever with partners in Q1, including several large deals through its IBM relationship, and recently announced an expanded partnership with Google, who will offer MongoDB Atlas on the Google Cloud Platform.
Current Board Chairman Kevin Ryan is leaving the Board following the company’s Annual Meeting in July to devote more time to other early-stage companies he has incubated; current Director Tom Killalea will succeed him as Chairman and the company anticipates Archana Agarwal, Head of Enterprise and Cloud Marketing at Atlassian, will be appointed to the Board.
The acquisition of Realm has a de minimis impact on revenue and the associated expenses more than offset better than anticipated operating performance in the core business.
Q2 guidance includes revenue of $90.0-$92.0 million, above consensus of $87.9 million, and non-GAAP operating income and EPS of $(16.5)-$(15.5) million and $(0.29)-$(0.27), respectively, just shy of Street expectations for $(15.0) million and $(0.27).
Management’s revised outlook for FY ’20 reflects an increase in revenue expectations from $363.0-$371.0 million to $375.0-$381.0 million and decreases in non-GAAP operating income and EPS guidance from $(59.0)-$(55.0) million and $(1.06)-$(0.98), respectively, to $(63.0)-$(59.0) million and $(1.11)-$(1.04).
PagerDuty Announces First Quarter Fiscal Year 2020 Financial Results
PagerDuty (PD) reported Q1 ’20 results above expectations and guided FY ’20 above consensus.
Total revenue was $37.3 million (+49.1% Y/Y), above consensus of $35.0 million. Non-GAAP operating income of $(7.9) million (-21.2% margin) also exceeded consensus of $(9.1) million. Non-GAAP EPS of $(0.22) were a penny above consensus.
Key metrics: added 468 net new customers; over 11,600 customers at quarter-end; 242 customers with annual contract value in excess of $100,000; net revenue retention of 137%;
Management estimates its core offering for the incident management market targets a $25 billion opportunity.
Engines for growth include the company’s viral platform for real-time operations, new use cases arising from PagerDuty’s broad applicability and ease-of-use; new product automation; land and expand motion; and regional expansion.
Guidance for Q2 includes revenue of $38.5-$39.5 million, above consensus of $37.2 million, and non-GAAP EPS of $(0.10)-$(0.09), in line with the Street’s $(0.10).
Management issued FY ’20 guidance calling for revenue and non-GAAP EPS of $161.0-$163.0 million and $(0.38)-$(0.37), respectively, above the Street’s $155.8 million and $(0.39).
Pivotal Reports First Quarter Fiscal Year 2020 Financial Results
Pivotal Software (PVTL) reported Q1 ’20 results above expectations, but guidance for Q2 and FY ’20 disappointed.
Total revenue was $185.7 million (+19.3% Y/Y), slightly above management’s $183.0-$185.0 million guidance and consensus of $184.1 million. Non-GAAP operating loss was $11.8 million (-6.3% margin), also ahead of guidance and consensus of $(13.0) million. Non-GAAP EPS of $(0.03) beat guidance of $(0.06)-$(0.05) and consensus of $(0.05).
Key metrics: subscription customers reached 383 (+13% Y/Y); added six net new customers in the quarter; dollar-based net expansion rate was 143%; remaining performance obligation of $880 million (+10% Y/Y).
Management stated that fewer deals were closed than anticipated due to sales execution issues and a complex technology landscape that resulted in elongating sales cycles.
Several of the slipped deals have closed and the company is addressing sales execution by putting a new Head of Sales for the Americas in place, increasing demand-generation and sales-enablement activities to build pipeline, and introducing a new version of Pivotal Application Service that runs on Kubernetes.
Management’s Q2 guidance calls for $185.0-$189.0 million in revenue , $(11.0)-$(9.0) million in non-GAAP operating income, and $(0.04)-$(0.03) in non-GAAP EPS, falling short of Street expectations for $197.5 million in revenue, $(7.9) million in non-GAAP operating income, and $(0.03) in non-GAAP EPS.
For FY ’20, management lowered its revenue and non-GAAP operating income guidance from $798.0-$806.0 million and $(38.0)-$(36.0) million, respectively, to $756.0-$767.0 million and $(49.0)-$(44.0) million, and maintained prior guidance for $(0.15)-$(0.13) in non-GAAP EPS.
Salesforce Announces Record First Quarter Fiscal 2020 Results
Salesforce reported Q1 ’20 results above expectations and raised its FY ’20 non-GAAP EPS guidance.
Revenue of $3.74 billion (+24.3% Y/Y) exceeded management’s $3.67-$3.68 billion guidance and consensus of $3.69 billion. Non-GAAP operating income was $682.0 million (18.2% margin), above consensus of $645.9 million. Non-GAAP EPS of $0.93 were well ahead of management’s $0.60-$0.61 guidance and consensus of $0.61, due in part to a $0.27 benefit from mark-to-market accounting on the company’s strategic investments.
In U.S. dollars, Sales Cloud grew 11% Y/Y, Service Cloud grew 20% Y/Y, Marketing and Commerce grew 33% Y/Y, and Platform and Other grew 46% Y/Y.
Key metrics: dollar attrition remains below 10%; remaining performance obligation (RPO) of $24.0 billion (+22% Y/Y), including current RPO of $11.8 billion (+23% Y/Y).
Management’s Q2 guidance includes revenue of $3.94-$3.95 billion, in line with consensus of $3.94 billion, and non-GAAP EPS of $0.46-$0.47, below the Street’s $0.65.
For FY ’20, management maintained its prior revenue outlook of $16.10-$16.25 billion and raised its guidance for non-GAAP EPS from $2.54-$2.56 to $2.88-$2.90.
The company remains on track to organically double revenue again in four years and achieve a revenue target of $26-$28 billion in FY ’23.
Smartsheet Inc. Announces First Quarter Fiscal Year 2020 Results
Smartsheet (SMAR) reported Q1 ’20 results ahead of expectations and raised its billings and revenue outlook for FY ’20.
Revenue of $56.2 million (+54.7% Y/Y) was above guidance of $54.0-$55.0 million and consensus of $54.7 million. Non-GAAP operating income was $(14.1) million (-25.0% margin), ahead of management’s $(20.0)-$(19.0) million guidance and consensus of $(19.4) million. Non-GAAP EPS of $(0.12) beat guidance of $(0.19)-$(0.18) and consensus of $(0.18).
Key metrics: 80,280 domain-based customers; 6,779 customers (+56% Y/Y) with annualized contract values (ACV) over $5,000, including 518 (+117% Y/Y) with ACV over $50,000 and 189 (+139% Y/Y) with ACV over $100,000; average ACV per domain-based customer of $2,675 (+48% Y/Y); dollar-based net retention rate of 134%; billings of $69.1 million (+52% Y/Y).
Services revenue growth was tempered by the continued success of Accelerators, prebuilt solutions that reduce the consulting time for deployment compared to configuring custom solutions and that create an uplift to subscription revenue.
Smartsheet’s previously announced acquisition of 10,000ft is expected to contribute $2 million in revenue and $4 million in billings to management’s revised FY ’20 guidance.
Management’s Q2 guidance includes $63.0-$64.0 million in revenue, $(18.0)-$(17.0) million in non-GAAP operating income, and $(0.16)-$(0.15) in non-GAAP EPS, which was mixed versus consensus expectations for $60.9 million in revenue, $(14.2) million in non-GAAP operating income, and $(0.13) in non-GAAP EPS.
Management raised its FY ’20 revenue and billings guidance from $253.0-$257.0 million and $305.0-$310.0 million, respectively, to $262.0-$265.0 million and $316.0-$320.0 million, while leaving non-GAAP operating income and EPS expectations generally intact at $(65.0)-$(60.0) million and $(0.59)-$(0.54), respectively.
Zoom Video Communications Reports First Quarter Results for Fiscal Year 2020
Zoom Video Communications (ZM) reported Q1 ’20 results above expectations and issued FY ’20 guidance above consensus.
Total revenue of $122.0 million (+103.1% Y/Y) exceeded consensus of $111.7 million. Non-GAAP operating income was $8.2 million (6.7% margin), above consensus of $0.8 million. Non-GAAP EPS of $0.03 beat consensus of $0.01.
Key metrics: approximately 58,500 customers (+86% Y/Y) with over 10 employees; 405 customers (+120% Y/Y) with over $100,000 in TTM revenue; net dollar expansion rate above 130% on a TTM basis with customers with over 10 employees; remaining performance obligations of approximately $377 million (+127% Y/Y).
Zoom’s FedRAMP authorization has been approved with sponsorship from the U.S. Department of Homeland Security, partnerships continue to deepen with HP, Salesforce.com and Slack; core technologies continue to be enhanced through additional smart features to Zoom Meetings such as real-time transcriptions; and Zoom Phone is extending its reach.
Guidance for Q2 includes revenue of $129.0-$130.0 million, above consensus of $122.1 million, and non-GAAP operating income and EPS of $2.0-$3.0 million and $0.01-$0.02, respectively, in line with consensus of $2.6 million and $0.01.
Management issued FY ’20 guidance calling for $535.0-$540.0 million in revenue, non-GAAP operating income of $0-$3.0 million, and non-GAAP EPS of $0.02-$0.03, all of which were above Street expectations for $520.3 million in revenue, $(5.6) million in non-GAAP operating income, and $(0.02) in non-GAAP EPS.