K. Liu's Week in Review
Well that was quick. Following a Bloomberg report last month that Monotype Imaging Holdings (TYPE) was exploring strategic options, the company agreed to be taken private by HGGC, a middle market private equity firm, for an equity value of approximately $895 million earlier this morning. The all-cash purchase price of $19.85 per share represents a 22.8% premium to yesterday’s close and equates to TTM EV/Sales and EV/EBITDA multiples of 3.5x and 10.9x, respectively. The agreement provides for a 30-day “go-shop” period and should Monotype enter into an alternative arrangement during this time, HGGC will be due a $12.375 million termination fee. That fee increases to $24.750 million should the company terminate the merger agreement outside of the “go-shop” window or for any other reason. Separately, the company also reported Q2 ’19 results well above management’s guidance and consensus. Given the pending acquisition by HGGC, however, Monotype cancelled its previously scheduled earnings call.
Earnings of course dominated headlines this week with the calendar Q2 ’19 earnings season now in full swing. Standout performers included Manhattan Associates (MANH), PROS Holdings (PRO), and SPS Commerce (SPSC). Manhattan Associates, a leading provider of supply chain software, posted a beat and raise driven by strong demand for its license and cloud offerings in all geographies. PROS Holdings, which aspires to provide the AI-enabled platform that powers its customers’ digital selling efforts, also delivered upside Q2 results and raised its revenue outlook for the year. PROS continues to benefit from adoption of its B2B commerce products and its next-generation solutions. SPS Commerce, which provides a cloud-based network connecting supply chain participants, highlighted a stabilizing retail environment and ongoing interest in drop shipping as the company reported strong results and raised its FY ’19 guidance. Others that delivered a beat and raise but saw less of a pop in shares this week included Brightcove (BCOV), Dassault Systèmes (DSY-FR), Proofpoint (PFPT), ServiceNow (NOW), and Wix.com (WIX). Honorable mentions also go to hospitality software provider Agilysys (AGYS), which posted results above expectations and noted sales activity to date would likely result in another record revenue performance this quarter, and LogMeIn (LOGM), which also outperformed in Q2 and raised its revenue outlook amidst continued traction for its growth products and investments to improve the health of its core meeting business.
Citrix Systems (CTXS) was the only company to miss Q2 results outright and lower guidance for the year, but the fallout was not especially painful as the cause was a significant shift in the mix of business towards subscriptions. Management noted that demand across all products and geographies was fairly consistent throughout the quarter, but with subscriptions now expected to comprise 60%-65% of new product bookings versus 50%-55% previously, reported results will remain pressured in the near-term. More dramatic moves to the downside were seen at Carbonite (CARB) and PTC (PTC). The former reported upside adjusted EBITDA and earnings on an in line revenue performance. However, a product quality issue and sales execution challenges in Carbonite’s data protection business prompted management to lower its growth outlook for the year and suggest that growth may remain depressed into next year. Further exacerbating concerns was the unexpected departure of CEO Mohamad Ali, who has agreed to assume that same role at IDG, a technology media, events, and research provider. Steve Munford, Chairman of the Board, has taken over as Interim CEO as the company searches for its next leader. PTC’s Q3 ‘19 revenue, non-GAAP operating income, and non-GAAP EPS results outpaced Street expectations, but total license and software bookings fell short. Management indicated that the company’s transition to subscriptions negatively impacted bookings on two fronts: certain geographies like China and Russia, which are served by channel partners, experienced material declines in bookings once perpetual license sales were cut-off, and conversions of Volume Purchase Agreement customers from support to subscription agreements has slowed. While not related to the SaaS transition, a reallocation of resources from the company’s productivity zone comprised of low growth, high margin products to its growth businesses also weighed on bookings. As these factors are expected to persist near-term, management reset its prior FY ’19 guidance and issued Q4 expectations below consensus. PTC also pushed out its long-term aspiration for $850 million in free cash flow from FY ’23 to FY ’24.
The following table summarizes each reporting company’s share price performance for the week, actual results versus expectations, and subsequent revisions to consensus forecasts for the current fiscal quarter and year:
Mergers and Acquisitions
Monotype to Be Acquired by HGGC for $19.85 Per Share in Cash
Monotype Imaging Holdings (TYPE) has entered into a definitive agreement to be acquired by HGGC, a middle-market private equity firm, for $19.85 per share in cash, which represents an equity value of approximately $825 million.
The purchase price represents a 22.8% premium to the prior day’s close and values TYPE shares at TTM EV/Sales, EV/EBITDA, and P/E multiples of 3.5x, 10.9x, and 16.1x, respectively.
The agreement provides for a 30-day “go-shop” process during which Monotype will actively initiate, solicit, encourage, and evaluate alternative acquisition proposals.
Should the company terminate the agreement with HGGC before the end of the “go-shop” period and enter into an alternative acquisition agreement, Monotype will be required to pay a termination fee of $12.375 million; termination by Monotype outside of this period or for another reason would be subject to a fee of $24.750 million.
Monotype will not pay its usual quarterly dividend through the closing of the transaction.
Earnings Releases
Agilysys Fiscal 2020 First Quarter Revenue Rises 12.9% to Record $38.4 Million
Agilysys (AGYS) reported Q1 ’20 results above expectations and reiterated guidance for FY ’20.
Net revenue of $38.4 million (+12.9% Y/Y) was above consensus of $37.8 million. Adjusted EBITDA of $3.2 million (8.4% margin) also topped consensus of $2.6 million. EPS of $(0.07) beat consensus of $(0.09).
Key metrics: 273,000 rooms served (+4% Y/Y) and 55,000 terminals deployed (+14% Y/Y).
Management noted that the annual contract value of sales closed in the quarter grew faster than reported revenue growth driven by continued success in Asia, Europe, the domestic Hotels, Resorts and Cruises vertical, and the Food Service management vertical.
The company’s point of sales solutions remain the primary growth drivers at present, while pipeline continues to build for its property management solutions.
Quota-carrying sales reps increased by 10% during the quarter.
Given current sales momentum, management anticipates Q2 will represent a sixth consecutive record revenue quarter.
Management reiterated prior FY ’20 guidance for revenue growth of approximately 11% and adjusted EBITDA growth of approximately 25%.
Atlassian Announces Fourth Quarter and Fiscal Year 2019 Results
Atlassian (TEAM) reported Q4 ’19 results ahead of expectations and guided FY ’20 in line with consensus.
Revenue of $334.6 million (+35.7% Y/Y) was above management’s $329.0-$331.0 million guidance and consensus of $330.6 million. Non-IFRS operating income was $55.9 million (16.7% margin), exceeding guidance for a 13% non-IFRS operating margin and consensus of $43.3 million. Non-IFRS EPS of $0.20 beat management’s guidance and consensus of $0.16.
Key metrics: added 8,689 net new customers in Q4, including 2,500 customers that upgraded to Trello Business Class; 152,727 total customers at quarter-end; customers spending $50,000 or more annually totaled 4,091 (+52.8% Y/Y).
In FY ’20, management plans to invest in Cloud for enterprises, migrate on-premises customers to the cloud, and optimize Cloud pricing and packaging.
The introduction of free editions at the entry-level user tiers for some Cloud products, free Cloud trials for on-premises customers, and a higher mix of ratable revenue are expected to result in a one-point headwind to revenue growth in FY ’20.
Guidance for Q1 includes revenue of $349.0-$353.0 million, a non-IFRS operating margin of 21% (implies non-IFRS operating income of $73.3-$74.1 million), and non-IFRS EPS of $0.24, all of which compared favorably with Street expectations for $349.6 million in revenue, $63.7 million in non-IFRS operating income, and $0.21 in non-IFRS EPS.
Management’s guidance for FY ’20 calls for revenue of $1.540-$1.556 billion, non-IFRS operating margin of 20% (implies non-IFRS operating income of $308.0-$311.2 million), and non-IFRS EPS of $1.00, in line with consensus expectations for $1.548 billion in revenue, $309.6 million in non-IFRS operating income, and $1.00 in non-IFRS EPS.
Brightcove Announces Financial Results for Second Quarter Fiscal Year 2019
Brightcove (BCOV) reported Q2 ’19 results above expectations and raised guidance for FY ’19.
Revenue was $47.6 million (+14.2% Y/Y), exceeding management’s guidance of $45.5-$46.0 million and consensus of $45.7 million. Adjusted EBITDA was a loss of $130,000 (-0.3% margin), above guidance of $(1.0)-$(0.5) million and consensus of $(0.6) million. Non-GAAP EPS of $(0.04) also beat guidance of $(0.07)-$(0.06) and consensus of $(0.06).
Management attributed the upside in the quarter to higher than anticipated overage revenue and the strongest performance from the European team in years.
Brightcove saw a material increase in six-figure wins and overall deal sizes increased materially driven by larger initial transactions and up-sell activity into the installed base.
Key metrics: average annual subscription revenue per premium customer was $83,500 (+11.3% Y/Y), excluding starter customers who had average annualized revenue of $4,500 per customer; recurring dollar retention rate was 87%; 3,761 customers at quarter-end including 2,350 premium customers.
Migration of acquired Ooyala customers to the Brightcove platform is expected to be completed in 2H ’19 and enable subscription and support gross margin to return to historically higher levels.
Q3 guidance calls for revenue of $47.0-$47.5 million, adjusted EBITDA of $2.6-$3.1 million, and non-GAAP EPS of $0.02-$0.04, in line with expectations for $47.4 million in revenue, $2.3 million in adjusted EBITDA, and $0.02 in non-GAAP EPS.
Management raised guidance for FY ’19 from $183.0-$186.0 million in revenue, $7.2-$9.7 million in adjusted EBITDA, and $0.02-$0.09 in non-GAAP EPS to $184.0-$186.0 million in revenue, $8.7-$10.2 million in adjusted EBITDA, and $0.06-$0.10 in non-GAAP EPS.
Carbonite Announces Second Quarter 2019 Financial Results
Carbonite (CARB) reported solid Q2 ’19 results, but provided a disappointing revenue outlook for Q3 and FY’19.
Non-GAAP revenue of $135.0 million (+69.1% Y/Y) was at the midpoint of management’s guidance and in line with consensus of $135.2 million. Adjusted EBITDA of $39.1 million (29.0% margin) exceeded guidance of $34.0-$36.0 million and consensus of $34.9 million. Non-GAAP EPS of $0.56 were well above consensus of $0.46.
Management highlighted positive momentum in the security software business, which included the first full quarter of contribution from the acquisition of Webroot, but expressed disappointment with execution on the data protection side.
Webroot contributed $59.8 million in revenue to Q2, generally consistent with expectations, but organic contribution of $75.2 million was short of management’s expectations due to lower pipeline conversion, fewer large deals, and the company’s determination that the Virtual Server Edition of its server backup product was not up to par with customer expectations.
Management’s outlook for the security business is unchanged, but with Virtual Server Edition no longer factored into growth expectations for the remainder of the year and the other execution challenges in the data protection business, organic growth is now expected in the low single-digit range for the combined business and may remain depressed into FY ‘20.
Guidance for Q3 includes non-GAAP revenue of $131.0-$133.0 million, below consensus of $138.1 million, and adjusted EBITDA of $34.0-$37.0 million, in line with Street expectations for $35.9 million.
Management reduced its prior FY ’19 non-GAAP revenue guidance from $491.0-$505.0 million to $477.5-$482.5 million, but maintained prior adjusted EBITDA expectations of $132.0-$137.0 million.
Separately, the company announced the appointment of Steve Munford as Interim CEO, succeeding Mohamad Ali.
Check Point Software Technologies Reports 2019 Second Quarter Financial Results
Check Point Software Technologies (CHKP) reported in line Q2 ’19 results and reiterated prior expectations for FY ’19.
Total revenue was $488.1 million (+4.3% Y/Y), in line with management’s $474.0-$500.0 million guidance and consensus of $487.6 million. Non-GAAP operating income of $241.8 million (49.5% margin) was also in line with consensus of $241.7 million. Non-GAAP EPS of $1.38 were within guidance of $1.32-$1.40 and beat the Street by a penny.
Subscription revenues increased 13% Y/Y driven by SandBlast zero-day threat protection, cloud, and Infinity solutions.
Maestro, which was released in Q1, demonstrated solid traction with many new projects, and Check Point continued to modernize and upgrade its core product line, introducing its mid-range 6500 and 6800 security appliances in Q1 followed by its high-end 16000 and 26000 appliances in Q2.
Asia Pacific was the standout region from a growth perspective in Q2, which management attributed to new leadership at the start of the year, while the U.S. was characterized as healthy with product growth resuming in the region.
In Q2, the company repurchased approximately 2.8 million shares at a total cost of approximately $325 million.
Management’s Q3 guidance includes revenue of $480.0-$500.0 million and non-GAAP EPS of $1.36-$1.44, in line with Street expectations for $490.8 million in revenue and $1.41 in non-GAAP EPS.
Expectations for FY ’19 remain unchanged at $1.940-$2.040 billion in revenue and $5.85-$6.25 in non-GAAP EPS.
Citrix Reports Second Quarter 2019 Financial Results
Citrix Systems (CTXS) reported Q2 ’19 results below expectation and reduced its guidance for FY ’19.
Total revenue of $748.7 million (+0.9% Y/Y) fell short of management’s $765.0-$775.0 million guidance and consensus of $772.0 million. Non-GAAP operating income was $200.9 million (26.8% margin), below consensus of $218.4 million. Non-GAAP EPS of $1.21 were below management’s $1.30-$1.35 guidance and consensus of $1.34.
Management indicated demand across products and geographies was consistent throughout the quarter, but the mix of subscriptions versus traditional licenses was far greater than anticipated, resulting in depressed revenue and earnings.
The mix of subscription bookings affected both the Workspace and Networking businesses, which saw subscription comprise 71% and 35% of their respective product mixes versus 58% and 11% in the prior year.
Key metrics: subscription ARR was $614 million (+33% Y/Y) and SaaS ARR was $418 million (+48% Y/Y); Citrix Cloud paid subscribers reached 5.4 million; future committed revenue increased 15% Y/Y to $2.23 billion.
Guidance now assumes subscriptions will comprise 60%-65% of new product bookings versus 50%-55% previously.
Management’s Q3 guidance calls for revenue of $700.0-$720.0 million and non-GAAP EPS of $1.15-$1.30, well below consensus expectations for $762.8 million in revenue and $1.54 in non-GAAP EPS.
Management lowered its prior FY ’19 ranges from $3.08-$3.09 billion in revenue, a 31.5%-32.0% non-GAAP operating margin, and approximately $6.00 in non-GAAP EPS to $2.97-$3.01 billion in revenue, a 29.0%-30.0% non-GAAP operating margin, and non-GAAP EPS of $5.35-$5.60.
Citrix also announced the promotion of Mark Schmitz to EVP and COO; Mr. Schmitz previously served as the company’s SVP, Business Operations.
Dassault Systèmes (DSY-FR) reported Q2 ’19 results above expectations and raised guidance for FY ’19.
Non-IFRS total revenue was €965.4 million (+16.2% Y/Y), exceeding management’s guidance of €920.0-$940.0 million and consensus of €948.1 million. Non-IFRS operating income was €296.2 million (30.7% margin), above consensus of €282.6 million. Non-IFRS EPS of €0.82 beat guidance of €0.74-€0.77 and consensus of €0.77.
Growth is being driven by the 3DEXPERIENCE platform and all regions are growing nicely with the Americas up 14% in Q2, Europe up 13%, and Asia up 9%.
From a product standpoint, CATIA was up 12% in the quarter and ENOVIA was up 9%, while SOLIDWORKS was a laggard at 4% growth. Other software increased 20% in Q2 led by strength in manufacturing with the DELMIA brand.
The company is a bit behind on R&D hiring, but expects to catch up in the September-October time frame.
The pending acquisition of Medidata Solutions (MDSO) is expected to close in Q3 or Q4.
Management’s guidance for Q3 includes €890.0-€905.0 million in revenue, a non-IFRS operating margin of 29.0%-30.0%, and non-IFRS EPS of €0.70-€0.74, below consensus expectations for €922.7 million in revenue, €274.2 million in non-IFRS operating income, and €0.75 in non-IFRS EPS.
For FY ’19, management raised its guidance ranges for revenue, non-IFRS operating margin, and non-IFRS operating income from €3.845-€3.875 billion, 32.0%-32.5%, and €3.40-€3.45, respectively, to €3.880-€3.910 billion, ~32.5%, and €3.45-3.50.
F5 Networks Announces Third Quarter Fiscal Year 2019 Results Including 91% Software Revenue Growth
F5 Networks (FFIV) reported mixed Q3 ’19 results and provided mixed guidance for Q4.
Revenue of $563.4 million (+3.9% Y/Y) was above management’s $550.0-$560.0 million guidance and consensus of $555.3 million. Both guidance and consensus excluded the acquisition of NGINX, which added $5.1 million in revenue to Q2. Non-GAAP operating income was $186.3 million (33.1% margin), below consensus of $189.7 million. Non-GAAP EPS of $2.52 were below management’s $2.54-$2.57 guidance and consensus of $2.54 due to a $(0.05) impact from NGINX.
The company is aggressively executing its strategy to transition to a software-driven model as evidenced by the reprioritization of development resources, the introduction of new consumption models, and the acquisition of NGINX.
Software growth increased 79% organically and rose 91% including NGINX, partially offset by an 11% decline in Systems.
By region, APAC was very strong with revenue growth of 22% Y/Y, EMEA was up 2% Y/Y, and Americas was down 1% Y/Y.
The integration of NGINX is going well with joint go-to-market efforts contributing to a 20% increase in net new pipeline.
Management’s Q4 guidance includes revenue of $577.0-$587.0 million and non-GAAP EPS of $2.53-$2.56, which was mixed versus consensus expectations for $578.9 million in revenue and $2.71 in non-GAAP EPS. NGINX accounts for less than $8.0 million of the Q4 revenue outlook.
HealthStream Announces Second Quarter 2019 Results
HealthStream (HSTM) reported Q2 ’19 results above expectations and raised its FY ’19 adjusted operating income guidance.
Revenues of $63.8 million (+11.9% Y/Y) were above consensus of $63.1 million. Adjusted EBITDA of $11.8 million (18.4% margin) exceeded consensus of $9.6 million. EPS of $0.07 were in line with consensus despite a $0.05 per share charge related to the CEO’s contribution of his personally owned stock to facilitate the grant of 78,520 shares to 820 employees.
Workforce Solutions revenue totaled $52.4 million (+11% Y/Y), while Provider Solutions generated $11.4 million (+14% Y/Y).
Workforce Solutions growth was attributable to a 17% increase in sales of legacy resuscitation products, continued growth in proprietary learning and compliance products, and the acquisition of Providigm, which added $1.8 million in revenue.
Sales of legacy resuscitation products are expected to decline by $2 million in Q3 and an additional $300,000 in Q4 en route to reaching zero in Q1 ’21; the new American Red Cross resuscitation suite has already generated $16.5 million in order value, but will contribute nominally to revenue this year as many customers run off their commitment to the legacy products.
Growth in Provider Solutions stemmed mostly from new subscriptions and professional services for the Verity platform, which has been contracted by approximately 100 customers.
HealthStream now has approximately 2.34 million contracted subscribers for hStream, its Platform-as-a-Service technology.
Management reaffirmed its prior FY ‘19 revenue and operating income guidance of $251.0-$258.0 million and $11.0-$13.0 million, respectively, but indicated expectations for the latter are actually $13.2-$15.2 million excluding the $2.2 million non-recurring item incurred in Q2.
LogMeIn Announces Second Quarter 2019 Results
LogMeIn (LOGM) reported Q2 ’19 results above expectations and raised its revenue outlook for FY ’19.
Non-GAAP revenue was $313.4 million (+2.0% Y/Y), above management’s guidance of $310.0-$312.0 million and consensus of $311.0 million. Adjusted EBITDA was $95.6 million (30.5% margin), also above guidance and consensus of $94.1 million. Non-GAAP EPS of $1.17 beat management’s $1.12-$1.14 guidance and the Street’s $1.13.
LogMeIn’s growth products performed exceptionally well in Q2 and accounted for 24% of revenue, and the company has made significant investments to enhance product performance, test pricing and packaging, and enhance retention programs in an effort to improve the health of its core meeting business.
By segment, UCC revenue was $172 million (-2% Y/Y), IAM revenue was $98 million (+12% Y/Y), and CES revenue was $43 million (-4% Y/Y).
The gross renewal rate across all products on an annualized dollar basis was approximately 80% for the quarter.
In Q2, LogMeIn repurchased 840,000 shares of stock at a total cost of $66 million and paid $16 million in dividends.
Guidance for Q3 includes revenue of $314.0-$316.0 million, adjusted EBITDA of $108.0-$109.0 million, and non-GAAP EPS of $1.35-$1.37, which was mixed relative to consensus of $317.0 million in revenue, $108.2 million in adjusted EBITDA, and $1.32 in non-GAAP EPS.
Management maintained its prior FY ’19 adjusted EBITDA guidance of $409.0-$413.0 million and raised expectations for non-GAAP revenue and EPS from $1.253-$1.263 billion and $4.96-$5.02, respectively, to $1.258-$1.263 billion and $5.05-$5.11.
The company also announced the promotion of Chris Manton-Jones from SVP & General Manager, International to SVP of Worldwide Sales, succeeding Larry D’Angelo, who is leaving the company in September 2019.
Manhattan Associates Reports Record Second Quarter 2019 Revenue
Manhattan Associates (MANH) reported Q2 ’19 results above expectations and raised guidance for FY ’19.
Total revenue of $154.3 million (+8.8% Y/Y) exceeded consensus of $146.0 million. Non-GAAP operating income of $36.2 million (23.4% margin) also beat consensus of $29.9 million. Non-GAAP EPS were $0.42, above consensus of $0.35.
Upside in the quarter was seen across all revenue line items with services especially strong, reflecting double-digit growth in all three geographies on strong demand for new license and cloud sales.
Competitive win rates remain at about 70% in head-to-head competition and the retail, consumer goods, and food and beverage verticals drove over 50% of license and cloud revenues in the quarter.
Pipeline strength remains solid across the globe with upward trends in cloud and services; approximately half of the deal opportunities in the pipeline represent net new logos.
Remaining performance obligations of $120.4 million, up from $58.4 million at the end of Q2 ’18.
In Q2, the company repurchased 301,984 shares at a total cost of $20.0 million; the Board has since authorized the repurchase of another $50.0 million of stock.
Management’s expectations for Q3 include revenue of approximately $148.8 million, non-GAAP operating income of $30.0-$31.5 million, and non-GAAP EPS of $0.36, all of which were consistent with consensus expectations for $147.2 million in revenue, $30.7 million in non-GAAP operating income, and $0.36 in non-GAAP EPS.
Management raised its FY ’19 revenue and non-GAAP EPS guidance from $582.0-$592.0 million and $1.42-$1.46, respectively, to $598.0-$604.0 million and $1.46-$1.50.
Mitek Reports 36% Revenue Growth in Record Quarter
Mitek Systems (MITK) reported Q3 ’19 results slightly above expectations and narrowed prior guidance for FY ’19.
Total revenue was $21.9 million (+36.0% Y/Y), slightly above consensus of $21.7 million. Non-GAAP operating income was $4.8 million (22.0% margin). Non-GAAP EPS of $0.12 beat consensus by a penny.
Over the years, Mitek has accumulated seven different systems focusing on the fast growing digital identity verification space, and the company is now in the process of rationalizing these platforms, creating potential for near-term revenue dis-synergy.
In Q3, Mitek restructured operations at its subsidiary, A2iA’s Paris offices, resulting in a one-time charge of $3.2 million as the company steps away from the non-check products portion of the business.
The company remains the market leader in Mobile Deposit with over 6,400 financial institutions using its product, while its identify verification solutions exhibited traction with SaaS transaction revenue up 71% Y/Y and transactions up 76% Y/Y.
Management narrowed its prior FY ’19 revenue guidance from $84.0-$86.0 million to $84.0-$85.0 million and maintained prior expectations for a non-GAAP profit margin of 18%-20%.
Monotype Announces Second Quarter 2019 Results
Monotype Imaging Holdings (TYPE) reported Q2 ’19 results well above expectations.
Revenue of $63.2 million (+4.2% Y/Y) exceeded management’s $54.5-$59.5 million guidance and consensus of $57.4 million. Adjusted EBITDA of $21.6 million (34.1% margin) was also well ahead of management’s $13.8-$17.3 million guidance and consensus of $15.8 million. Non-GAAP EPS of $0.38 beat guidance of $0.23-$0.31 and consensus of $0.28.
OEM revenue was $28.0 million (+25.8% Y/Y), while Creative Professional revenue was $35.2 million (-8.3% Y/Y).
Monotype cancelled its quarterly earnings call and did not update guidance for FY ’19 due to its pending sale to HGGC.
Proofpoint Announces Second Quarter 2019 Financial Results
Proofpoint (PFPT) reported Q2 ’19 results ahead of expectations and raised guidance for FY ’19.
Total revenue of $214.4 million (+24.8% Y/Y) was above management’s guidance of $210.0-$212.0 million and consensus of $211.3 million. Billings of $232.1 million (+17.3% Y/Y) also came in ahead of management’s $228.0-$230.0 million guidance and consensus of $229.1 million. Non-GAAP operating income was $28.4 million (13.2% margin). Non-GAAP EPS were $0.41, beating guidance of $0.34-$0.37 and consensus of $0.36.
Per management, overall business momentum remains strong due to demand for the company’s next-generation cloud security and compliance platform, the ongoing migration to the cloud, and Proofpoint’s visibility into the threat landscape.
The Advanced Threat segment grew 21% Y/Y and represented 73% of revenue, while the Compliance segment increased revenue 36% Y/Y and comprised the remaining 27% of revenue.
Q3 revenue and billings guidance of $223.0-$225.0 million and $274.0-$276.0 million, respectively, was in line with consensus of $224.1 million and $274.6 million, while non-GAAP EPS guidance of $0.37-$0.40 was above consensus of $0.36.
Management raised its FY ’19 guidance for revenue, billings, and non-GAAP EPS from $874.0-$878.0 million, $1.062-$1.066 billion, and $1.43-$1.49, respectively, to $878.5-$880.5 million, $1.064-$1.068 billion, and $1.61-$1.64.
PROS Holdings, Inc. Reports Second Quarter 2019 Financial Results
PROS Holdings (PRO) reported Q2 ’19 results above expectations and raised its revenue and ARR outlook for FY ’19.
Total revenue was $63.9 million (+34.7% Y/Y), exceeding management’s guidance of $61.0-$62.0 million and consensus of $61.5 million. Subscription revenue of $33.1 million (+50.1% Y/Y) also topped guidance and consensus of $32.9 million. Adjusted EBITDA was $(1.8) million (-2.8% margin), above guidance of $(4.0)-$(3.0) million and consensus of $(3.4) million. Non-GAAP EPS of $(0.07) beat management’s $(0.11)-$(0.09) guidance and consensus of $(0.10).
PROS’ vision is to provide the AI platform that powers its customers’ digital selling by leveraging third-party data to provide companies with a comprehensive view of their customers’ demand patterns, preferences, and purchase impact; enabling personalized sales agreements; and delivering a great buying experience across all channels.
All B2B commerce products are contributing to growth with more customers now adopting both Smart CPQ and Guidance Solutions, expansion with existing customers remains strong, and companies are embracing PROS’ next-generation solutions.
Deal volume has increased over 30% in 1H ’19, so management plans to accelerate investments in its go-to-market strategy and grow quota-carrying personnel by 23% this year.
Management’s Q3 total revenue and subscription revenue guidance of $63.0-$65.0 million and $36.0-$36.5 million, respectively, outpaced consensus expectations for $60.2 million and $34.1 million, but guidance for adjusted EBITDA of $(2.5)-$(1.5) million and non-GAAP EPS of $(0.09)-$(0.07) was short of the Street’s $(0.9) million and $(0.07).
For FY ’19, management raised guidance for total revenue, subscription revenue, and ARR from $241.0-$242.0 million, $135.0-$136.0 million, and $219.0-$221.0 million, respectively, to $247.0-$248.0 million, $137.5-$138.5 million, and $220.0-$222.0 million; expectations for adjusted EBITDA and free cash flow remain unchanged at $(9.5)-$(8.5) million and $0-$2.0 million.
PTC Announces Third Quarter Fiscal Year 2019 Results
PTC (PTC) reported mixed Q3 ’19 results and guided Q4 below expectations.
Under ASC 605, revenue was $322.4 million (+2.4% Y/Y), within management’s guidance of $320.0-$325.0 million and slightly above consensus of $320.6 million. Non-GAAP operating income of $60.9 million (18.9% margin) was above consensus of $59.5 million. Non-GAAP EPS of $0.36 were at the high-end of management’s guidance and beat consensus of $0.34.
Key metrics: subscription ACV of $49.4 million (+12.3% Y/Y) fell short of management’s $51.0-$55.0 million guidance and consensus of $53.2 million; license and subscription bookings totaled $109.4 million (-3.5% Y/Y); annualized recurring revenue (ARR) was $1,088 million (+9% Y/Y).
Headwinds to bookings growth arising from PTC’s subscription transition have arisen in geographies such as China and Russia, where sales are largely conducted via channel partners and have declined materially following the end of perpetual license sales, as well as in the conversion of Volume Purchase Agreements to subscription, which is occurring at a lower rate.
PTC’s core CAD and PLM businesses along with its IoT and AR growth businesses are expected to grow 20% on a combined basis for the year excluding the challenged areas, which represent a double-digit headwind to bookings growth.
The Rockwell Automation alliance resulted in 34 deals closing in the quarter and over 1,000 opportunities remain in the pipeline, while the alliance with Microsoft added another 36 deals and saw bookings double on a sequential basis.
Management’s Q4 guidance includes subscription ACV of $62.0-$67.0 million, revenue of $330.0-$338.0 million, and non-GAAP EPS of $0.42-$0.47, falling short of Street expectations for $80.3 million in subscription ACV, $339.8 million in revenue, and $0.49 in non-GAAP EPS.
Guidance for FY ’19 was reset lower due to near-term headwinds from PTC’s transition to a subscription model and operational changes made this year, and management also pushed out prior long-term expectations for $850 million in free cash flow by a year to FY ’24.
ServiceNow Reports Second Quarter 2019 Financial Results
ServiceNow (NOW) reported Q2 ’19 results above expectations and raised guidance for FY ’19.
Total revenues of $833.9 million (+32.1% Y/Y) were slightly above consensus of $832.2 million. Non-GAAP operating income of $153.0 million (18.3% margin) was above consensus of $144.9 million and management’s guidance of a 17.0% non-GAAP operating margin. Non-GAAP EPS were $0.71, exceeding consensus of $0.63.
Subscription revenues of $781.0 million (+33.4% Y/Y) were within management’s $778.0-$783.0 million guidance and just shy of the Street’s $781.9 million. Subscription billings of $816.9 million (+32% Y/Y) exceeded management’s $798.0-$803.0 million guidance and consensus of $801.4 million.
Per management, subscription revenues were negatively impacted by a few self-hosted renewals shifting from Q2 to Q3, including a federal customer expected to consolidate contracts and expand their relationship with the company.
Key metrics: closed 39 transactions in excess of $1 million in net new annual contract value (ACV), resulting in 766 total customers with over $1 million in ACV; remaining performance obligations of $5.4 billion (+35% Y/Y).
The company’s first application for its new Finance Operations Management product is Finance Close Automation.
Guidance for Q3 includes subscription revenues of $830.0-$835.0 million and subscription billings of $848.0-$853.0 million, which was mixed versus Street expectations for $833.5 million in subscription revenues and $877.8 million in subscription billings; non-GAAP operating margin is expected to be 23%.
For FY ’19, management raised its subscription revenues and billings guidance from $3.235-$3.250 billion and $3.725-$3.740 billion, respectively, to $3.245-$3.255 billion and $3.740-$3.750 billion, while maintaining prior expectations for non-GAAP operating margin and free cash flow margin of 21% and 28%, respectively.
SPS Commerce Reports Second Quarter 2019 Financial Results
SPS Commerce (SPSC) reported Q2 ’19 results above expectations and raised guidance for FY ’19.
Revenue was $68.5 million (+12.2% Y/Y), ahead of management’s $67.7-$68.2 million guidance and consensus of $68.0 million. Adjusted EBITDA was $16.4 million (23.9% margin), also above guidance and consensus of $16.1 million. Non-GAAP EPS of $0.60 were well above management’s $0.51-$0.53 guidance and consensus of $0.53.
Key metrics: 29,900 total recurring revenue customers (+14% Y/Y) at quarter-end; wallet share of $8,700 (flat Y/Y).
Drop ship remains top of mind for many of the company’s customers and partners and management believes the overall retail market has stabilized.
Customer churn remains between 12%-13%, while dollar churn is a bit less than half of that at approximately 7%.
SPS Commerce also announced that the Board of Directors approved a two-for-one split of all outstanding shares with a distribution date of August 22, 2019.
Guidance for Q3 includes revenue of $69.7-$70.2 million, adjusted EBITDA of $16.9-$17.4 million, and non-GAAP EPS of $0.55-$0.56 (or $0.27-$0.28 on a split adjusted basis), all of which topped consensus expectations for $69.5 million in revenue, $16.5 million in adjusted EBITDA, and $0.54 in non-GAAP EPS.
Management raised guidance for FY ’19 from $275.0-$276.5 million, $65.0-$66.5 million, and $2.16-$2.22 in revenue, adjusted EBITDA, and non-GAAP EPS, respectively, to $276.6-$277.7 million, $67.2-$68.3 million, and $2.30-$2.35 (or $1.15-$1.18 on a split adjusted basis).
Wix Reports Second Quarter 2019 Results
Wix.com (WIX) reported Q2 ’19 results above expectations and raised guidance for FY ’19.
Revenue of $185.4 million (+26.9% Y/Y) was above management’s guidance of $182.0-$184.0 million and consensus of $183.9 million. Non-GAAP operating income of $14.2 million (7.7% margin) easily exceeded consensus of $6.4 million. Non-GAAP EPS of $0.34 beat consensus of $0.18.
Key metrics: added 132,000 net premium subscribers for a total of 4.3 million (+17.4% Y/Y) at quarter-end; added 5.7 million registered users for a total of 154 million (+17.6% Y/Y) at quarter-end; collections were $199.6 million (+24.8% Y/Y), above guidance of $197.0-$199.0 million and consensus of $198.5 million; average annual revenue per subscription of $171.
Price and package changes affected the number of premium subscribers added and management now anticipates 450-500 thousand net additions for the year versus 550 thousand previously.
Management highlighted the success of Corvid, which now boasts over 1 million users, in expanding the company’s addressable market by attracting more professionals to Wix, including developers and large agencies.
Management’s guidance for Q3 calls for revenue of $196.0-$198.0 million and collections of $204.0-$206.0 million, which was mixed versus Street expectations for $196.2 million in revenue and $207.2 million in collections.
For FY ’19, management raised its prior guidance ranges for revenue, collections, and free cash flow from $758.0-$763.0 million, $822.0-$830.0 million, and $122.0-$126.0 million, respectively, to $761.0-$765.0 million, $825.0-$831.0 million, and $123.0-$126.0 million.
Notable News
Carbonite Names Steve Munford Interim Chief Executive Officer
Carbonite (CARB) announced the appointment of current Board Chairman, Steve Munford, as Interim Chief Executive Officer and Executive Chairman of the Board, effective immediately.
Mr. Munford succeeds Mohamad Ali, who has stepped down as President, CEO, and a member of the Board to join IDG, a technology media, events, and research company, as its new CEO.
Mr. Munford has served on Carbonite’s Board since 2014 and most recently served as Interim CEO of Absolute Software (ABT-CA).
James Liu Appointed to Board of Directors of Opera Limited
Opera Limited (OPRA) announced that James Liu has joined the company’s Board of Directors.
Mr. Liu currently serves as executive director and COO of Chinese social network Renren.
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 Brightcove (BCOV).