K. Liu's Week in Review
After an on-again, off-again courtship, Broadcom (AVGO) and Symantec (SYMC) finally sealed the deal, albeit on a more limited basis than first rumored. Rather than acquiring the company outright, Broadcom will acquire Symantec’s Enterprise Security assets, including the Symantec brand, for $10.7 billion in cash. Depending on whether the assets’ $2.5 billion run-rate contribution to Symantec or Broadcom’s expectation of an incremental $2.0 billion in revenue is used, the purchase price equates to an EV/Sales multiple of 4.3x-5.4x. Post-synergies, Broadcom anticipates incremental adjusted EBITDA of $1.3 billion. Strategically, the acquired Enterprise Security assets complement the infrastructure software solutions Broadcom previously acquired via CA Technologies. Broadcom plans to finance the transaction with new committed debt, and management indicated that the company will utilize any excess cash flow beyond its dividend policy for debt reduction as opposed to share buybacks. As for Symantec, the company is left with its Consumer Cyber Safety business aka Norton LifeLock. Management believes the consumer business is capable of generating mid-single digit revenue growth, $1.50 in non-GAAP EPS, and $900 million in free cash flow on an annual basis. Given that the asset sale leaves behind $1.5 billion in stranded costs, management expects $1.0 billion in cash outlays over the next twelve months to eliminate the expenses. While a search for a permanent CEO is still underway, Symantec plans to return the net proceeds from the sale to shareholders through a special dividend of $12.00 per share. Additionally, the Board of Directors has approved a 67% increase in the company’s quarterly dividend to $0.125 per share as well as an increase in the company’s share repurchase authorization to $1.6 billion. Despite management changes and talk of a sale in recent months, Symantec still posted Q1 ’20 results ahead of expectations this week.
Just a week after completing its $15.7 billion acquisition of Tableau, Salesforce (CRM) was on the prowl again, acquiring ClickSoftware for $1.35 billion in cash and stock. ClickSoftware provides a cloud-based solution for field service management and is expected to accelerate Salesforce’s Service Cloud growth. The two companies have partnered since Salesforce’s introduction of Field Service Lightning in 2016, and the deal is also expected to fuel innovation for that solution. In an unrelated move, Dame Jayne-Anne Gadhia, Founder of Snoop and former CEO of Virgin Money, was named CEO, Salesforce UK and Ireland. Turning to other capital markets activities this week, both Alteryx (AYX) and BlackLine (BL) priced convertible debt offerings after reporting strong results and guidance last week. Alteryx priced $350 million aggregate principal amount of 0.50% convertible senior notes due 2024 and another $350 million aggregate principal amount of 1.00% convertible senior notes due 2026 at an initial conversion price of $189.36 per share, a 51% premium to the close price prior to the announcement of the offering. A portion of the net proceeds will be put towards retiring the company’s existing 0.50% convertible senior notes due 2023. BlackLine priced $435 million aggregate principal amount of 0.125% convertible senior notes due 2024 at an initial conversion price of $73.40 per share, a 34% premium to the close price prior to the announced offering. Net proceeds from the offering are expected to be used for general corporate purposes. Finally, Ceridian HCM Holding (CDAY) priced an overnight offering in which selling stockholders Thomas H. Lee Partners and David Ossip, Chairman and CEO, sold a combined 10 million shares for $49.75 per share, representing just a 1% discount to the prior day’s close. The offering was upsized from initial plans to sell 8 million shares.
Amidst another flurry of earnings this week, 21 of the 30 companies we tracked exceeded expectations for the quarter. Low-code platform provider Appian (APPN) took top honors with a gain of nearly 33% for the week, followed by multi-carrier shipping software provider Stamps.com (STMP; $59 PT) and data integration vendor Talend (TLND). Regarding Stamps.com, a Q2 beat combined with management’s more constructive commentary on the current status of the USPS’ negotiations with its reseller partners fueled a much-needed relief rally. We remain optimistic in the company’s prospects for securing a new strategic partnership with a major carrier in the months ahead, and refer readers to our Stamps.com Q2 ’19 Recap: A Few Green Shoots. Others that beat expectations and raised guidance this week included ANSYS (ANSS), Aspen Technology (AZPN), CyberArk (CYBR), Dropbox (DBX), Fastly (FSLY), HubSpot (HUBS), NICE (NICE), Upland Software (UPLD), and Workiva (WK). Interestingly, CyberArk, Dropbox, and recent IPO Fastly all came under pressure despite the positive results and guidance as investors fretted about underlying metrics, decelerating growth rates, or other factors. Avalara (AVLR) also warrants a mention given continued momentum in its business and stock.
On the other side of the coin, Asure Software (ASUR), New Relic (NEWR), and Quotient Technology (QUOT) were the hardest hit this week. Asure Software, a provider of human capital management solutions, delivered Q2 ’19 results above expectations, but reduced guidance for the year. Management noted that sales productivity has been strong, but the company has been slow to add capacity and plans to hire 20 net new reps this year. Moreover, the decision to reduce lower margin on-site professional services and external factors like the China tariffs and foreign currency fluctuations resulted in a lower outlook for FY ’19. Application performance management vendor New Relic also beat expectations in its fiscal Q1 ’20. However, management acknowledged that growth in deferred revenue and its dollar-based net expansion rate were short of internal expectations as the company fell behind on headcount targets and faced a different competitive dynamic as customers embraced the “observability” trend. Despite reaffirming guidance for the year, investors were spooked and headed for the exits. As for Quotient Technology, results for the quarter were mixed with adjusted EBITDA a touch light on a solid revenue performance. However, a significant guide-down and the return of founder Steven Boal to the CEO role signaled choppier waters ahead. Management attributed the disappointing outlook to a one-quarter delay in the go-live of its targeted offers at checkout, reductions in national coupon spend by three large CPG customers, and larger than anticipated declines in its specialty retail channel. Late in the week, Quotient announced a new $50 million share repurchase authorization. Other underperformers this week included Axon (AAXN), which missed expectations due to a component supplier issue and a design change that affected its TASER segment; ShotSpotter (SSTI), which reduced its outlook on uncertainty over the timing of certain international opportunities; and Shutterstock (SSTK), which missed and guided lower given a slowdown in enterprise sales and increasing customer acquisition costs in its e-commerce segment. The following table illustrates each company’s share price performance for the week, results versus expectations, and subsequent estimate revisions for the current fiscal quarter and year.
Several high-level executive changes and Board appointments were also announced this week. Most notably, Guidewire Software (GWRE) announced the appointment of Mike Rosenbaum as Chief Executive Officer and a member of the Board, succeeding Marcus Ryu, who is now Chairman of the Board. Mr. Ryu indicated that he initiated the change as he wishes to devote more time to personal obligations and believes Mr. Rosenbaum has the better skillset to scale the company in its next phase of growth. Mr. Rosenbaum joins the company from Salesforce, where he most recently served as EVP Product. Elsewhere, Anaplan (PLAN) announced the hiring of Mark Anderson as Chief Growth Officer. Mr. Anderson previously served as President and Chief Revenue Officer at Palo Alto Networks (PANW). Zoom (ZM) also added new sales leadership, appointing Ryan Azus as its Chief Revenue Officer. Mr. Azus joins the company from RingCentral (RNG), where he most recently served as executive vice president of sales and services. ChannelAdvisor (ECOM), which reported strong Q2 ’19 results this week along with a mixed outlook, promoted Beth Segovia to Chief Operating Officer. Ms. Segovia has been the company’s VP, Global Services since joining in 2017. Sonic Foundry (SOFO) announced the retirement of its Chief Financial Officer, Ken Minor, and Yext (YEXT) announced that Christian Ward has rejoined the company as its Chief Data Officer after a stint in that same role at SourceMedia. In terms of Board activity, Nuance Communications (NUAN) announced that its Automotive spin-off would be named Cerence Inc. Former Vodafone CEO Arun Sarin will be appointed Chairman of Cerence’s Board and the six other members of the Board were also identified. Absolute Software (ABT-CA) named Lynn Atchison to its Board, Aida Alvarez was appointed to Fastly’s Board, and Rachna Bhasin joins Shutterstock’s.
Mergers and Acquisitions
Broadcom to Acquire Symantec Enterprise Security Business for $10.7 Billion in Cash
Broadcom (AVGO) has agreed to acquire Symantec’s (SYMC) enterprise security business for $10.7 billion in cash.
Broadcom anticipates $2.0 billion in incremental revenues and $1.3 billion in adjusted EBITDA after synergies.
The acquisition will be financed with debt and post-acquisition, excess cash flow beyond the company’s dividend policy of returning 50% of free cash flow to shareholders will be put towards debt repayment in lieu of share repurchases.
Broadcom also reaffirmed prior FY ’19 revenue guidance of $22.5 billion, including $17.5 billion from semiconductor solutions and $5.0 billion from infrastructure software.
Salesforce Signs Definitive Agreement to Acquire ClickSoftware
Salesforce (CRM) has entered into an agreement to acquire ClickSoftware, a leading provider of field service management solutions, for approximately $1.35 billion in cash and stock.
The two companies have been partners since Salesforce introduced Field Service Lightning in 2016, and the acquisition is expected to accelerate the growth of Service Cloud as well as fuel innovation with Field Service Lightning.
The acquisition is expected to close in the company’s fiscal Q3 ’20.
Symantec Announces Sale of Enterprise Security Assets for $10.7 Billion to Broadcom
Symantec (SYMC) is selling its Enterprise Security assets, including the Symantec name, to Broadcom for $10.7 billion in cash.
The after-tax proceeds of $8.2 billion are expected to be returned to shareholders via a special dividend of $12.00 per share in Q4 ‘20 and the regular quarterly dividend is expected to increase by 67% to $0.125 per share.
The Board has also approved a $1.1 billion increase to the company’s existing share repurchase authorization, bringing the total authorization to $1.6 billion.
Post-transaction, the Norton LifeLock business is expected to generate $1.50 in annual non-GAAP EPS and generate mid-single digit revenue growth on an annual basis.
Management has also identified approximately $1.5 billion in annualized expenses to be eliminated over the next twelve months at a cash cost of approximately $1.0 billion.
A search for a permanent CEO to run Symantec’s consumer business is underway.
Earnings Releases
Altair Announces Second Quarter 2019 Financial Results
Altair Engineering (ALTR) reported mixed Q2 ’19 results and lowered revenue guidance for FY ’19.
Non-GAAP revenue was $109.0 million (+16.8% Y/Y), in line with guidance of $108.2-$110.2 million and consensus of $109.1 million. Adjusted EBITDA was $7.4 million (6.8% margin). Non-GAAP EPS were $0.06, missing consensus by a penny.
Billings were $108 million (+17% Y/Y) driven by momentum in the software product business.
Strong Q2 results were fueled by many wins and new accounts for Altair’s core engineering simulation and high-performance computing solutions as well as growing momentum for its recently acquired data science products.
Given Altair’s concentration of customers within manufacturing, which are being impacted by trade disputes, a stronger dollar and other macroeconomic challenges, management anticipates some headwinds to services and software growth in 2H ’19.
The softer outlook for 2H also factors in a more rapid transition to a subscription model for Datawatch software licenses.
Guidance for Q3 includes non-GAAP revenue of $105.2-$107.2 million and adjusted EBITDA of $3.0-$5.0 million, below consensus of $107.5 million in revenue and $5.2 million in adjusted EBITDA.
Management lowered its prior FY ’19 non-GAAP revenue guidance from $479.0-$483.0 million to $469.0-$473.0 million but maintained prior adjusted EBITDA guidance of $62.0-$66.0 million.
ANSYS Announces Record Q2 Financial Results Including Double-Digit Growth in Revenue, EPS and ACV
ANSYS (ANSS) reported Q2 ’19 results well above expectations and raised guidance for FY ’19.
Non-GAAP revenue of $370.5 million (+20.0% Y/Y) exceeded management’s $325.0-$345.0 million guidance and consensus of $338.4 million. Non-GAAP operating income of $169.0 million (45.6% margin) also outpaced consensus of $137.6 million. Non-GAAP EPS of $1.61 easily exceeded guidance of $1.18-$1.30 and consensus of $1.28.
Management attributed the upside in Q2 to the closing of a larger dollar value of multi-year lease transactions as well as a few large deals that were originally anticipated in 2H ’19.
Enabling deeper penetration of a single physics through new use cases and users is driving larger deal sizes and contributed to the closure of a $49 million single-physics deal in Q2.
ANSYS is seeing increasing interest from automotive OEMs, A&D companies, and their entire supply chains as the development of autonomous vehicles requires extensive use of simulation.
Key metrics: Annual Contract Value (ACV) was $326.1 million (+11% Y/Y); backlog totaled $717 million (+22% Y/Y).
Guidance for Q3 includes non-GAAP revenue of $320.0-$340.0 million and non-GAAP EPS of $1.15-$1.28, consistent with Street expectations for $334.2 million in revenue and $1.27 in non-GAAP EPS.
For FY ’19, management raised its ACV, non-GAAP revenue, and non-GAAP EPS guidance from $1.425-$1.470 billion, $1.430-$1.480 billion, and $5.75-$6.10, respectively, to $1.440-$1.475 billion, $1.460-$1.500 billion, and $5.98-$6.28, and maintained expectations for $470.0-$510.0 million in operating cash flows.
Appian Announces Second Quarter 2019 Financial Results
Appian (APPN) reported Q2 ’19 results above expectations and raised revenue guidance for FY ’19.
Total revenue of $66.9 million (+11.7% Y/Y) exceeded management’s guidance of $63.3-$63.8 million and consensus of $63.4 million. Non-GAAP operating income was $(6.6) million (-9.9% margin), surpassing guidance of $(11.5)-$(11.0) million and consensus of $(11.1) million. Non-GAAP EPS were $(0.10), beating guidance of $(0.18)-$(0.17) and consensus of $(0.17).
Subscription revenue increased 41% Y/Y to $38.0 million with subscription revenue retention remaining strong at 117%.
Partners accounted for 67% of new logo deals and these deals also closed at a faster pace than direct opportunities.
Launched Robotic Workforce Manager, the company’s second pre-built solution, which is used to manage bots and coordinate their work with humans.
Guidance for Q3 includes revenue of $65.0-$65.5 million, non-GAAP operating income of $(10.0)-$(9.5) million, and non-GAAP EPS of $(0.16)-$(0.15), which was mixed relative to consensus of $64.5 million in revenue, $(7.7) million in non-GAAP operating income, and $(0.11) in non-GAAP EPS.
Management raised its FY ’19 revenue guidance from $255.0-$258.0 million to $260.5-$262.5 million and narrowed its non-GAAP operating income and EPS guidance from $(35.5)-$(32.5) million and $(0.55)-$(0.50), respectively, to $(35.0)-$(33.0) million and $(0.55)-$(0.51).
Aspen Technology Announces Financial Results for the Fourth Quarter and Fiscal Year 2019
Aspen Technology (AZPN) reported Q4 ’19 results well above expectations and guided FY ’20 above consensus.
Revenue of $195.8 million (+23.1% Y/Y) topped consensus of $162.7 million. Non-GAAP operating income was $119.9 million (61.3% margin), easily exceeding consensus of $88.3 million. Non-GAAP EPS of $1.59 also beat consensus of $1.09.
Key metrics: annual spend of $541 million (+11% Y/Y); total contract value was $2.57 billion at the end of Q2; total bookings were $241 million (+43% Y/Y).
The strong bookings growth was attributable in part to a significant increase in the amount of term license contract up for renewal compared to the prior year period.
In just two years, Asset Performance Management (APM) has risen to contribute 20% of total annual spend growth and now has 76 customers in 24 countries accounting for nearly $14 million in annual spend.
The company repurchased approximately 648,000 shares at a total cost of $75 million in Q4.
Management’s FY ’20 guidance includes revenue of $575.0-$615.0 million, non-GAAP operating income of $272.0-$307.0 million, and non-GAAP EPS of $3.44-$3.85, comparing favorably with Street expectations for $566.9 million in revenue, $274.9 million in non-GAAP operating income, and $3.44 in non-GAAP EPS.
Additionally, guidance for FY ’20 also calls for annual spend growth of 10%-12%, implying annual spend of $595-$606 million versus consensus of $590.5 million, and embeds an attrition rate of 3.5%-4.5%.
In an 8-K filing, Aspen Technology also disclosed the resignation of Gary Weiss, Chief Operating Officer, for family reasons effective as of January 3, 2020.
Asure Software Announces Second Quarter 2019 Results
Asure Software (ASUR) reported Q2 ’19 results above consensus but lowered guidance for FY ’19.
Revenue of $24.8 million (+14.1% Y/Y) was slightly above consensus of $24.6 million. Adjusted EBITDA was $4.9 million (19.9% margin), also above consensus of $4.6 million. Non-GAAP EPS were $0.08, beating consensus by a penny.
Key metrics: bookings increased 6% Y/Y; short-term backlog increased 4% Y/Y; total backlog was up 8% Y/Y.
The Workspace pipeline has grown 3x-4x versus the prior year and continues to grow nicely.
HCM revenue was up 15% Y/Y, while Workspace was up 13% Y/Y.
Experienced a meaningful uptick in payroll resellers willing to leave their former providers to join the Asure ecosystem.
While sales productivity has been strong, the company has not had enough feet on the street and plans to hire a net new 20 sales reps this year.
Reflecting plans to reduce on-site consulting services and China-related tariffs, foreign currency fluctuations, and interest rate declines, management lowered its FY ’19 guidance slightly from $104.0-$107.0 million in revenue and $23.0-$25.0 million in adjusted EBITDA to $103.0-$105.0 million and $22.0-$24.0 million, respectively.
Avalara Announces Second Quarter 2019 Financial Results
Avalara (AVLR) reported Q2 ’19 results well above expectations but guided for larger losses on higher revenues.
Total revenue of $91.3 million (+42.9% Y/Y) exceeded management’s guidance of $84.0-$85.0 million and consensus of $84.6 million. Non-GAAP operating income was $(2.5) million, ahead of management’s $(8.5)-$(7.5) million guidance and consensus of $(7.9) million. Non-GAAP EPS were $(0.03), beating consensus of $(0.11).
All segments from small business to enterprise exhibited solid sales execution.
Key metrics: billings of $97.7 million (+41% Y/Y); 10,430 (+29% Y/Y) core customers at quarter-end; net revenue retention rate of 111%.
Cross-border e-commerce is expected to exceed $1 trillion by 2020 and represents a big opportunity for the company, which the company has begun to invest in as evidenced by its recent acquisition of Portway.
Avalara’s technical teams have demonstrated the ability to classify and identify products against several industry standards such as HS Codes, UPCs, SKUs, and others, a positive sign as the company looks to automate a range of critical operations.
Guidance for Q3 was mixed with revenue of $92.5-$93.5 million above consensus of $87.1 million, but non-GAAP operating income of $(8.0)-$(7.0) million below consensus of $(3.5) million.
Management raised its FY ’19 revenue guidance from $346.0-$349.0 million to $364.0-$366.0 million and lowered its non-GAAP operating income guidance from $(15.0)-$(10.0) million to $(20.0)-$(15.0) million.
Axon (AAXN) reported Q2 ’19 results below expectations but reaffirmed guidance for FY ’19.
Revenue of $112.4 million (+13.2% Y/Y) fell short of the Street’s $115.4 million estimate. Adjusted EBITDA of $11.6 million (10.3% margin) was below consensus of $14.9 million. Non-GAAP EPS of $0.14 missed consensus of $0.16.
Management attributed the shortfall in Q2 to operational challenges arising from an inventory shortfall related to a battery component supplier issue and engineering actions taken to improve the long-term cost structure of TASER 7 cartridges.
TASER revenue of $60.6 million (-0.1% Y/Y) was negatively impacted by a supplier issue, which shifted $3 million in forecasted TASER 7 sales to Q3, and a design change that led to a shortage of cartridges that also had a $3 million impact on revenue.
Axon Cloud sales were $31.8 million (+41.4% Y/Y) driven by customer adoption of body-worn cameras and digital evidence management, growth in Axon Fleet 2 users, and deployments on legacy Vievu contracts.
Sensors and Other revenue of $20.0 million (+24.0% Y/Y) declined Q/Q in anticipation of initial shipments of Axon Body 3.
Key metrics: annual recurring revenue of $129.5 million (+40% Y/Y); 397,800 (+30% Y/Y) cumulative Axon software seats booked; $142.0 million (+60% Y/Y) in Software and Sensors bookings; future contracted revenue of $1.05 billion (+40% Y/Y).
Guidance for Q3 calls for revenue of $120.0-$125.0 million, in line with consensus of $123.8 million.
Management reaffirmed prior FY ’19 guidance of $485.0-$495.0 million in revenue and $80.0-$85.0 million in adjusted EBITDA.
Benefitfocus Announces Second Quarter 2019 Financial Results
Benefitfocus (BNFT) reported Q2 ’19 results above expectations, but lowered guidance for FY ’19.
Revenue was $68.6 million (+13.2% Y/Y), slightly above management’s guidance of $66.5-$68.5 million and consensus of $67.5 million. Adjusted EBITDA was $0.1 million (0.1% margin), exceeding guidance of $(5.0)-$(3.0) million and consensus of $(4.0) million. Non-GAAP EPS of $(0.31) also beat guidance and consensus of $(0.43).
Key metrics: added approximately 1 million net benefit eligible lives for a total of 16.5 million (+34% Y/Y) at quarter-end; added over 160 premier brokers, bringing the total to over 450; expanded BenefitsPlace suppliers to 50 from 18 a year ago.
The company is transforming from a benefits administration solutions provider to a platform company, connecting a vast network of consumers and employers, brokers and providers, and data assets, which should support a 20% growth profile.
Management’s revised guidance reflects increasing access to BenefitsPlace, a higher mix of life and ancillary products than originally anticipated, and larger transactions that require more time between bookings and revenue recognition.
Guidance for Q3 was mixed relative to consensus with revenue of $70.0-$72.0 million in line with Street expectations for $71.2 million, but adjusted EBITDA and non-GAAP EPS of $(3.5)-$(1.5) million and $(0.43)-$(0.37), respectively, below consensus of $0.7 million and $(0.29).
For FY ’19, management reduced its guidance across the board and now anticipates revenue of $292.0-$300.0 million, adjusted EBITDA of $10.0-$15.0 million, and non-GAAP EPS of $(0.95)-$(0.80) compared with $301.0-$309.0 million in revenue, $15.0-$20.0 million in adjusted EBITDA, and $(0.83)-$(0.68) in non-GAAP EPS previously.
ChannelAdvisor Reports Second Quarter 2019 Results; Adjusted EBITDA Significantly Exceeds Guidance
ChannelAdvisor (ECOM) reported Q2 ’19 results above expectations and raised its adjusted EBITDA guidance for FY ’19.
Revenue was $31.9 million (-2.2% Y/Y), near the high-end of management’s $31.5-$32.0 million guidance and slightly above consensus of $31.7 million. Adjusted EBITDA of $3.0 million exceeded guidance of $1.5-$2.0 million and consensus of $1.8 million. Non-GAAP EPS of $0.05 beat consensus of $0.01.
Key metrics: total customer count was 2,715 (-4.0% Y/Y); TTM average revenue per customer was $46,757 (+3.8% Y/Y); 142 marketplace integrations globally versus 133 last quarter.
GMV performance was stable, reflecting ongoing weakness on eBay offset by strength on Amazon and Walmart.
Google Shopping Actions, which launched a year ago, is now the company’s fourth largest marketplace by GMV, while Target Plus remains early but has shown strong results for sellers.
Per management, bookings were at the best levels seen in two years, while churn and downgrades also improved, resulting in the company’s strongest net bookings performance since Q4 ’17.
Management’s medium-term growth outlook remains muted as strong momentum in India and Australia has been offset by headwinds in China and the U.S.
In July, the company implemented a reorganization of its business to improve profitability, which included the discontinuation of physical operations in China and headcount reductions in the U.S.
Guidance for Q3 calls for $31.5-$32.0 million in revenue, below consensus of $33.0 million, and adjusted EBITDA of $4.0-$4.5 million, in line with the Street’s $4.1 million.
Management’s updated guidance for FY ’19 reflects lower revenue expectations from $131.0-$134.0 million to $129.0-$131.0 million and an uptick in adjusted EBITDA from $15.0-$17.0 million to $17.0-$18.5 million.
Paul Forte, Chief Revenue Officer, has decided to leave ChannelAdvisor to spend more time with his family and pursue other opportunities; Paul Colucci will assume the role of Head of North American Sales.
Cornerstone OnDemand Announces Second Quarter 2019 Financial Results
Cornerstone OnDemand (CSOD) reported mixed Q2 ’19 results and raised the midpoint of its FY ’19 guidance ranges.
Revenue was $141.9 million (+7.1% Y/Y), above guidance of $137.0-$140.0 million and consensus of $138.8 million. Non-GAAP operating income was $16.6 million (11.7% margin), just shy of the Street’s $17.1 million. Non-GAAP EPS of $0.19 missed consensus of $0.21.
Q2 ’19 was the “best second quarter for new sales in the company’s history” driven in part by a strong performance from the U.S. commercial sales team as well as the first multi-million dollar deal for Cornerstone Content Anytime.
Added 37 net new clients for a total of 3,604 (+7.2% Y/Y) clients at quarter-end.
A few timing-related expense items planned for 2H ’19 were pulled into Q2 and thus will not occur later this year.
Guidance for Q3 calls for revenue of $141.0-$143.0 million, above consensus of $140.9 million, and subscription revenue of $135.0-$137.0 million, in line with consensus of $135.5 million.
Management raised its FY ’19 revenue guidance from $562.0-$570.0 million to $566.5-$571.0 million and increased the low-end of its non-GAAP operating income and unlevered free cash flow guidance ranges, which now sit at $79.0-$85.0 million and $85.0-$92.0 million, respectively; ARR guidance was narrowed from $578.0-$590.0 million to $579.5-$589.5 million.
Management no longer considers achieving the Rule of 40 an aspiration but rather an expectation for 2020.
CyberArk Announces Strong Second Quarter 2019 Results
CyberArk (CYBR) announced Q2 ’19 results above expectations and raised guidance for FY ’19.
Revenue of $100.2 million (+28.9% Y/Y) was above management’s guidance of $96.0-$98.0 million and consensus of $97.3 million. Non-GAAP operating income of $26.5 million (26.4% margin) also surpassed guidance of $22.0-$23.5 million and consensus of $22.7 million. Non-GAAP EPS of $0.59 easily exceeded guidance of $0.45-$0.48 and consensus of $0.47.
Demand for the company’s solutions was strong across the Americas, EMEA, and APJ with tailwinds from digital transformation and cloud migration strategies as well as heightened regulatory risk.
The insurance, manufacturing, media, pharmaceuticals, retail, and transportation verticals all grew 40% or more in Q2.
Won over 200 new logos in Q2 and ended the quarter with over 4,800 customers.
Guidance for Q3 includes revenue of $102.0-$104.0 million, non-GAAP operating income of $21.75-$23.25 million, and non-GAAP EPS of $0.45-$0.48, all of which were above Street expectations for $101.1 million in revenue, $21.1 million in non-GAAP operating income, and $0.44 in non-GAAP EPS.
Management raised its FY ’19 guidance from $415.0-$419.0 million, $100.5-$103.5 million, and $2.10-$2.16 in revenue, non-GAAP operating income, and non-GAAP EPS, respectively, to $419.0-$423.0 million, $106.0-$109.0 million, and $2.24-$2.30.
The company’s Chief Revenue Officer, Ron Zoran, plans to pursue other business opportunities but will remain in his role until September 30, 2019 and serve as an advisor through Q1 ’20.
Dropbox Announces Fiscal 2019 Second Quarter Results
Dropbox (DBX) reported Q2 ’19 results above expectations and raised guidance for FY ’19.
Revenue of $401.5 million (+18.4% Y/Y) was above the high-end of management’s $399.0-$401.0 million guidance and consensus of $401.1 million. Non-GAAP operating income was $40.5 million (10.1% margin), exceeding management’s guidance for a 9.0%-10.0% margin and consensus of $39.3 million. Non-GAAP EPS of $0.10 beat consensus by a penny.
Key metrics: paying users totaled 13.6 million (+14% Y/Y); average revenue per paying user was $120.48 (+3% Y/Y).
Expansion in average revenue per user was driven by strong adoption of Professional and Advanced plans by new customers.
In Q2, the new Dropbox was unveiled, which evolves from a “magic folder” to a “magic workspace” where all content, tools, and teams are connected in a unified workspace.
Guidance for Q3 calls for revenue of $421.0-$424.0 million, above consensus of $419.2 million, and a non-GAAP operating margin of 11.0%-12.0%, implying non-GAAP operating income of $46.3-$50.9 million versus consensus of $51.7 million.
Management raised its FY ’19 revenue guidance from $1.634-$1.646 billion to $1.648-$1.654 billion and reaffirmed its prior non-GAAP operating margin guidance of 11.0%-12.0%.
Everbridge Announces Second Quarter 2019 Financial Results
Everbridge (EVBG) reported Q2 ’19 results above consensus and maintained its FY ’19 adjusted EBITDA guidance on a higher revenue outlook.
Total revenue was $48.4 million (+35.1% Y/Y), above management’s guidance of $47.8-$48.1 million and consensus of $48.0 million. Adjusted EBITDA was $0.4 million (0.8% margin), also above management’s guidance and consensus expectations for breakeven. Non-GAAP EPS were $(0.07) beating the high-end of management’s guidance and consensus by a penny.
Key metrics: added 135 enterprise wins for a total of 4,667 (+12% Y/Y) global enterprise customers at quarter-end; average selling price on a TTM basis reached $79,000 (+72% Y/Y); dollar-based net retention rate remains over 110%.
Signed eight new and gross Critical Event Management (CEM) deals, the most ever in Q2, and closed 30 deals in excess of $100,000 along with 88 multi-product deals.
As not all components of the announced acquisition of NC4 will close until the end of Q3, the impact of the acquisition is not yet included in management’s guidance.
Guidance for Q3 includes $51.3-$51.6 million in revenue, $1.2-$1.5 million in adjusted EBITDA, and $(0.06)-$(0.05) in non-GAAP EPS, which was mixed relative to consensus expectations for $51.4 million in revenue, $2.5 million in adjusted EBITDA, and $(0.03) in non-GAAP EPS.
Management raised FY ’19 revenue and non-GAAP EPS guidance from $196.4-$197.4 million and $(0.28)-$(0.25), respectively, to $198.4-$199.0 million and $(0.25)-$(0.22), and maintained prior adjusted EBITDA expectations for $4.2-$5.2 million.
Fastly Announces Second Quarter 2019 Financial Results
Fastly (FSLY) reported strong Q2 ’19 results and guided FY ’19 ahead of Street expectations.
Revenue of $46.2 million (+34.0% Y/Y) was above consensus of $45.2 million. Non-GAAP operating income was $(9.4) million (-20.4% margin), also ahead of consensus of $(10.3) million. Non-GAAP EPS of $(0.16) were below consensus of $(0.13).
Key metrics: total customer count of 1,627 (+6% Y/Y); total enterprise customer count of 262 (+38% Y/Y); average enterprise customer spend of $556,000 (+4% Y/Y); dollar-based net expansion rate of 132%.
The company now has 64 POPs online providing access to 52 terabits per second of global network capacity.
Long-term, growth will be driven by adding new enterprise customers as well as expanding usage among existing customers and partners, and CapEx as a percentage of revenue should approximate 10%.
Guidance for Q3 calls for $47.0-$49.0 million in revenue, $(13.0)-$(11.0) million in non-GAAP operating income, and $(0.15)-$(0.12) in non-GAAP EPS, all of which were in line with consensus expectations for $47.9 million in revenue, $(12.3) million in non-GAAP operating income, and $(0.14) in non-GAAP EPS.
Management’s guidance for FY ’19 calls for $191.0-$195.0 million in revenue, $(40.0)-$(34.0) million in non-GAAP operating income, and $(0.59)-$(0.51) in non-GAAP EPS, which compares favorably with Street expectations for $191.3 million in revenue, $(41.4) million in non-GAAP operating income, and $(0.53) in non-GAAP EPS.
HubSpot Reports Q2 2019 Results
HubSpot (HUBS) reported Q2 ’19 results above expectations and raised guidance for FY ’19.
Revenue was $163.3 million (+33.2% Y/Y), exceeding management’s guidance of $156.5-$157.5 million and consensus of $157.3 million. Non-GAAP operating income was $13.8 million (8.4% margin), also exceeding guidance and consensus of $9.8 million. Non-GAAP EPS of $0.37 were well ahead of management’s $0.24-$0.26 guidance and consensus of $0.25.
Key metrics: billings of $167.9 million (+34% Y/Y); total customers of 64,836 (+35% Y/Y) at quarter-end; average subscription revenue per customer was $9,913 (-1% Y/Y).
HubSpot has nearly 25,000 multi-product customers, and Service Hub, the youngest product, has over 5,000 paid customers.
Operating leverage was better than hoped as the company has fallen behind on hiring, but HubSpot is rapidly catching up and hiring will accelerate in 2H ’19.
Guidance for Q3 includes revenue of $168.0-$169.0 million, non-GAAP operating income of $8.0-$9.0 million, and non-GAAP EPS of $0.22-$0.24, all of which compare favorably with consensus of $167.3 million in revenue, $8.4 million in non-GAAP operating income, and $0.22 in non-GAAP EPS.
For FY ’19, management raised guidance for revenue, non-GAAP operating income, and non-GAAP EPS from $655.5-$658.5 million, $50.0-$52.0 million, and $1.26-$1.30, respectively, to $663.0-$665.0 million, $54.0-$55.0 million, and $1.39-$1.41.
New Relic Announces First Quarter Fiscal Year 2020 Results
New Relic (NEWR) reported Q1 ’20 results above expectations and reaffirmed guidance for FY ’19.
Revenue of $141.0 million (+30.3% Y/Y) was above management’s $138.0-$140.0 million guidance and consensus of $139.6 million. Non-GAAP operating income was $7.4 million (5.2% margin), exceeding guidance of $0.5-$1.5 million and consensus of $1.5 million. Non-GAAP EPS of $0.19 were well above guidance of $0.07-$0.08 and consensus of $0.08.
Growth was driven by the company’s focus on moving up-market and cross-selling into the installed base.
Despite the upside in revenue, management indicated that the company missed its quarterly sales and headcount targets, which combined with the timing of the New Relic One release, resulted in lower than anticipated deferred revenue and dollar-based net expansion rate.
User adoption of “observability” emerged at a faster rate than anticipated and created a different competitive landscape.
The company completed an operating model change in its product organization, resulting in a general manager structure across five teams focused on application monitoring, client side, infrastructure, logging and AIOps, and also realigned the sales organization under a regional hierarchy.
Key metrics: 881 (+18% Y/Y) $100K+ Paid Business Accounts; 62% of ARR from Enterprise Paid Business Accounts versus 55% last year; dollar-based net expansion rate of 109%.
Guidance for Q2 was mixed with revenue expectations of $143.0-$145.0 million below consensus of $146.0 million, but non-GAAP operating income and non-GAAP EPS guidance of $5.0-$6.0 million and $0.14-$0.16, respectively, above the Street’s $4.2 million and $0.12.
Management reiterated FY ’19 guidance for revenue and non-GAAP operating income of $600.0-$607.0 million and $20.0-$25.0 million, respectively, and raised its non-GAAP EPS guidance by a penny to $0.55-$0.63.
NICE (NICE) reported Q2 ’19 results above expectations and raised guidance for FY ’19.
Non-GAAP revenue of $381.4 million (+11.0% Y/Y) was within management’s $373.0-$383.0 million guidance and ahead of the Street’s $378.8 million. Non-GAAP operating income of $101.3 million (26.6% margin) was also above consensus of $98.3 million. Non-GAAP EPS were $1.25, near the high-end of management’s $1.10-$1.26 guidance and beating consensus of $1.22.
Both Customer Engagement and Financial Crime and Compliance contributed to strong cloud growth.
The strong results were also supported by the company’s partner ecosystem, which now includes 135 engaged partners in the CXone DEVone program and over 20 partners on the X-Sight marketplace.
Guidance for Q3 calls for non-GAAP revenue of $380.0-$390.0 million and non-GAAP EPS of $1.23-$1.33, both of which were in line with consensus expectations for $386.0 million in revenue and $1.29 in non-GAAP EPS.
Management raised FY ’19 guidance for revenue and non-GAAP EPS from $1.558-$1.582 billion and $5.11-$5.31, respectively, to $1.563-$1.583 billion and $5.13-$5.33.
Nuance Announces Third Quarter 2019 Results
Nuance Communications (NUAN) reported Q3 ’19 results above expectations and guided Q4 in line with consensus.
Under ASC 605, non-GAAP revenue of $460.2 million (+1.9% Y/Y) was within management’s guidance of $453.0-$467.0 million and above consensus of $456.0 million. Non-GAAP operating income was $128.2 million (27.9% margin), above consensus of $118.5 million. Non-GAAP EPS of $0.31 exceeded guidance of $0.27-$0.30 and consensus of $0.28.
Management attributed the outperformance to higher than anticipated revenue in Enterprise, which benefited from higher cloud transactional volumes and services, and favorable expense management.
Automotive and Healthcare revenue rose 8% Y/Y and 2% Y/Y, respectively, and were in line with internal expectations.
International markets continue to scale with strong performance in German and France and could become a meaningful contributor to ARR in FY ’20 and beyond.
In Q3, Nuance repurchased 1.7 million shares at an average price of $17.36 per share, resulting in a total cost of $29.6 million.
Guidance for Q4 includes non-GAAP revenue of $473.0-$493.0 million and non-GAAP EPS of $0.24-$0.30, leaving consensus expectations for $488.6 million in revenue and $0.30 in non-GAAP EPS closer to the high-end.
Management narrowed its FY ’19 non-GAAP revenue guidance from $1.844-$1.876 billion to $1.850-$1.870 billion and raised the low-end of its non-GAAP EPS guidance, which now sits at $1.14-$1.20.
Pega Cloud ACV Grows 65% in the First Half of 2019
Pegasystems (PEGA) reported mixed Q2 ’19 results.
Total revenue of $205.6 million (+4.5% Y/Y) was above consensus of $203.1 million. Non-GAAP operating income was $(30.6) million (-14.9% margin), below consensus of $(10.4) million. Non-GAAP EPS of $(0.30) missed Street expectations for $(0.09).
Key metrics: total annual contract value (ACV) was $612.7 million (+19% Y/Y); Pega Cloud ACV was $136.1 million (+65% Y/Y); Pega Cloud RPO was $362.1 million (+69% Y/Y).
Results continue to reflect the company’s aggressive shift to selling software in the cloud, hence management’s focus on ACV.
Positive momentum in ACV growth reflects solid demand across the globe for digital transformation solutions.
Europe has been a little softer, but there is still a lot of business to be had and the pipeline there is “bountiful.”
With the company on plan for the year with even greater cloud demand than anticipated, management continues to invest and noted that some of that investment has been made earlier than anticipated, which is impacting near-term profitability.
Investments in Customer Engagement Summits, which typically attract 700-1,200 customers, have been increasing.
Quotient Technology (QUOT) reported mixed Q2 ’19 results and reduced guidance for FY ’19.
Revenue of $104.7 million (+16.9% Y/Y) was within guidance of $102.0-$106.0 million and slightly ahead of the Street’s $103.8 million. Adjusted EBITDA was $11.7 million (11.2% margin), also within guidance but shy of the Street’s $12.7 million. EPS of $(0.04) beat consensus of $(0.07).
Retail Performance Media has been a key catalyst for growth, Ahalogy continues to gain traction with CPG customers, and sponsored product search is now live at Albertsons.
Offsetting strong growth in media are headwinds in national coupon spend from three large CPG customers, and management noted that revenue would have increased 20% Y/Y if spend from those customers had remained flat.
Due to a delay in the go-live of targeted offers at checkout, increased conservatism pertaining to spend from the company’s three large CPG customers, and a larger decline in specialty retailing, expectations for 2H ’19 have been reduced.
Guidance for Q3 includes revenue of $108.0-$112.0 million and adjusted EBITDA of $11.0-$13.0 million, both of which were short of Street expectations for $126.1 million in revenue and $21.9 million in adjusted EBITDA.
Management reduced prior FY ’19 expectations for revenue and adjusted EBITDA from $460.0-$470.0 million and $66.0-$71.0 million, respectively, to $422.0-$432.0 million and $42.0-$48.0 million.
Founder and Executive Chairman Steven Boal has returned as CEO, replacing Mir Aamir, and Scott Raskin has resigned from the company’s Board of Directors and been named President.
Quotient completed its stock buyback program on July 16, 2019 with the repurchase of approximately 5.5 million shares for approximately $60.1 million.
SailPoint Announces Second Quarter 2019 Financial Results
SailPoint Technologies Holdings (SAIL) reported Q2 ’19 results above consensus and increased the midpoint of its FY ’19 revenue and operating income guidance.
Revenue of $63.1 million (+17.5% Y/Y) was above management’s $59.7-$61.2 million guidance and consensus of $60.4 million. Non-GAAP operating income was $(1.6) million (-2.5% margin), also better than guidance and consensus of $(2.8) million. Non-GAAP EPS were $(0.01), beating management’s guidance and consensus of $(0.05).
The addition of 59 net new customers, the introduction of SailPoint’s Predictive Identity, strength across the partner ecosystem, and operational improvements to improve go-to-market effectiveness all contributed to the outperformance.
To address go-to-market challenges experienced last quarter, SailPoint has improved its account qualification program, implemented new tools to better identify purchase intent, made changes to its web and digital assets, and deployed new instrumentation for sales management to better manage pipeline, health, and maturation.
Guidance for Q3 includes revenue of $69.5-$71.0 million, non-GAAP operating income of $3.0-$3.5 million, and non-GAAP EPS of $0.02, all of which were shy of Street expectations for $71.0 million in revenue, $4.7 million in non-GAAP operating income, and $0.04 in non-GAAP EPS.
Management raised the low-end of its revenue guidance, which now sits at $278.5-$281.5 million, increased its non-GAAP operating income guidance from $17.1-$18.6 million to $18.0-$19.0 million, and lowered its non-GAAP EPS guidance from $0.14-$0.16 to $0.12-$0.13.
SharpSpring Reports Second Quarter 2019 Results
SharpSpring (SHSP) reported Q2 ’19 profitability above expectations on in line revenues.
Revenues of $5.5 million (+24.2% Y/Y) were in line with consensus. Adjusted EBITDA was $(1.7) million (-31.1% margin), above consensus of $(2.2) million. Non-GAAP EPS were $(0.19), beating consensus of $(0.22).
Key metrics: added 290 new customers; 1,854 agency customers at quarter-end; over 8,000 businesses on the platform; net dollar retention for the quarter was 94%.
In early Q2, the company decided to switch incoming direct customers to annual subscriptions, which delayed the closure of certain deals and impacted new customer wins.
The company continued to build its account management group in Q2 and anticipates a sequential decline in gross margin, which should rebound in Q4 and ultimately exceed 80% over the long-term.
SharpSpring will begin providing an annual revenue outlook next quarter.
ShotSpotter Reports Second Quarter 2019 Financial Results
ShotSpotter (SSTI) reported Q2 profitability above expectations on in line revenues, but lowered guidance for FY ’19.
Revenues of $10.3 million (+14.9% Y/Y) were approximately in line with consensus of $10.4 million. Adjusted EBITDA of $2.4 million (23.3% margin) was above consensus of $2.0 million. EPS of $0.03 beat consensus of breakeven.
Key metrics: added 25 net new “go-live” square miles of coverage through an existing customer expansion and five new city captures; no attrition in the quarter.
Another 17 square miles have gone live thus far in Q3 and management anticipates minor attrition representing less than 1% of revenue in 2H ‘19.
The company has submitted budgetary and price quotes for international opportunities amounting to approximately $5 million in annual recurring revenue.
Management reduced its FY ’19 revenue guidance from $44.5-$45.5 million to $42.0-$44.5 million due to uncertainty over the timing of closing certain contracts, primarily in new international markets.
Shutterstock Reports Second Quarter 2019 Financial Results
Shutterstock (SSTK) reported Q2 ’19 results below expectations and lowered guidance for FY ’19.
Revenue of $161.7 million (+3.3% Y/Y) was below consensus of $170.5 million. Adjusted EBITDA of $25.1 million (15.5% margin) also fell short of consensus of $27.5 million. Non-GAAP EPS were $0.33, missing consensus of $0.37.
E-commerce revenue increased 5.8% Y/Y to $97.0 million, while Enterprise sales declined 0.2% Y/Y to $64.7 million.
Management is focused on enhancing the company’s sales effectiveness and go-to-market strategy in the Enterprise channel.
Customer acquisition cost has increased in the e-commerce channel, so Shutterstock is developing an integrated marketing strategy to optimize for customer lifetime value.
Key metrics: paid downloads totaled 46.6 million (+3% Y/Y); revenue per download was $3.44 (+1% Y/Y); image collection expanded to 280 million (+37% Y/Y) images; video collection expanded to 15 million (+37% Y/Y) clips.
Management lowered its prior FY ’19 guidance from $685.0-$695.0 million in revenue and $118.0-$123.0 million in adjusted EBITDA to $645.0-$670.0 million in revenue and $93.0-$107.0 million in adjusted EBITDA.
Stamps.com Reports Second Quarter Results
Stamps.com (STMP) reported Q2 ’19 results above consensus and raised the low-end of its FY ’19 guidance ranges.
Total revenue was $138.8 million (-0.6% Y/Y), above consensus of $130.0 million. Adjusted EBITDA was $39.3 million (28.3% margin), exceeding Street expectations for $33.0 million. Non-GAAP EPS of $1.25 beat consensus of $1.00.
Key metrics: paid customers totaled 742,000 (+1% Y/Y); monthly ARPU was $60.96 (flat Y/Y); USPS Postage Printed was $1.634 billion (+4% Y/Y); average monthly churn was 3.4%.
Negotiations between the USPS and its reseller partners appear to be more constructive with some contracts extended through year-end at existing margins; however, management still anticipates margin compression when all is said and done.
Per management, the company remains in active discussions with both domestic and international carriers as Stamps.com seeks new strategic partnerships to replace its previous relationship with the USPS.
Reflecting a lower anticipated headwind from potential changes to the USPS reseller program in 2H ‘19, management raised the low-end of its FY ’19 revenue, adjusted EBITDA, and non-GAAP EPS guidance ranges, which now sit at $520.0-$560.0 million, $120.0-$150.0 million, and $3.60-$4.85, respectively.
Symantec Delivers Better-Than-Expected Fiscal First Quarter 2020 Results
Symantec (SYMC) reported Q1 ’20 results above expectations and guided Q2 in line with consensus.
Non-GAAP revenue was $1.251 billion (+7.4% Y/Y), above management’s guidance of $1.175-$1.205 billion and consensus of $1.186 billion. Non-GAAP operating income was $379.0 million (30.3% margin), exceeding management’s 25.0%-27.0% guidance and consensus of $309.2 million. Non-GAAP EPS of $0.43 beat guidance of $0.30-$0.34 and consensus of $0.33.
Key metrics: total billings of $1.090 billion (+9.4% Y/Y), including Enterprise Security billings of $497 million (+9.7% Y/Y) and Consumer Cyber Safety billings of $593 million (+9.2% Y/Y); average monthly revenue per user was $8.83 (+2% Y/Y) for Consumer Cyber Safety; average direct customer count was 20.2 million (-3% Y/Y).
The Enterprise Security assets being sold accounted for approximately 50% of revenue and 10% of operating income in Q1.
Symantec also announced a restructuring plan in which global headcount will be reduced by 7% and certain facilities and data centers will be downsized, vacated, or closed at a cost of approximately $100 million.
Guidance for Q2, which includes the Enterprise segment as the sale of the business to Broadcom will not close until after the quarter, includes $1.155-$1.205 billion in non-GAAP revenue, a 31%-33% non-GAAP operating margin, and $0.40-$0.44 in non-GAAP EPS, all of which are in line with consensus expectations.
Given the pending sale of the Enterprise Security assets, the company is no longer providing FY ’20 guidance.
Long-term, the Consumer Cyber Safety business can grow revenue in the mid-single digits with an operating margin of approximately 50%, deliver earnings growth above revenue growth, and generate free cash flow of $900 million annually.
Synchronoss Technologies Announces Second Quarter 2019 Results
Synchronoss Technologies (SNCR) reported mixed Q2 ’19 results and reaffirmed guidance for FY ‘19.
Revenue was $77.8 million (+1.4% Y/Y), below consensus of $80.3 million. Adjusted EBITDA was $8.7 million (11.1% margin), exceeding consensus of $2.7 million. Non-GAAP EPS of $(0.28) also beat consensus of $(0.47).
Partnerships with Amazon, AT&T, Verizon and Wireless Advocates continue to advance with cloud remaining the company’s largest revenue generating platform, while success with Microsoft and new developer agreement with Tridium bode well for the company’s Smart Buildings platform.
Between deals already announced and others in the pipeline, management remains optimistic that growth will accelerate in 2H ’19 and into 2020.
Thus far, Synchronoss has spent approximately $7 million of the $20-$25 million investment in growth anticipated at the start of the year, suggesting spending will ramp in 2H along with the magnitude of deals being pursued.
Signed a developer agreement with Tridium to integrate open source solution Niagara.
Management expects to have ample liquidity to pay off its remaining convertible debt balance, which is due in mid-August, and support the needs of the business, but also mentioned that the company is in discussions with capital providers.
Management reaffirmed FY ’19 guidance for $340.0-$355.0 million in revenue and $30.0-$40.0 million in adjusted EBITDA.
Talend Reports Second Quarter 2019 Financial Results
Talend (TLND) reported Q2 ’19 results above expectations, but revisions to management’s FY ’19 guidance were mixed.
Revenue of $60.6 million (+21.8% Y/Y) was above management’s guidance of $58.8-$59.8 million and consensus of $58.9 million. Non-GAAP operating income of $(6.1) million (-10.0% margin) was also better than guidance of $(10.1)-$(9.1) million and consensus of $(9.4) million. Non-GAAP EPS of $(0.21) beat guidance of $(0.35)-$(0.31) and the Street’s $(0.32).
Key metrics: annual recurring revenue (ARR) of $218.0 million (+28% Y/Y); dollar-based net expansion rate of 118% on a constant currency basis; over 3,500 customers, including 1,500 cloud customers; Talend Cloud represented 43% of new ARR.
In 2H, three factors will impact the full year revenue performance: an accelerating move to the cloud that produces less services business, potential macro and political headwinds in Europe, and moderating growth in the premise business.
Talend remains on track to exit 2019 with half of ARR in the cloud, but the strategy to reduce pre-billed duration for both new and renewal transactions has worked faster than expected, creating a divergence between ARR and billings growth.
Guidance for Q3 of $61.5-$62.5 million in revenue, $(7.3)-$(6.3) million in non-GAAP operating income, and $(0.25)-$(0.22) in non-GAAP EPS fell short of Street expectations for $63.1 million in revenue, $(5.8) million in non-GAAP operating income, and $(0.19) in non-GAAP EPS.
Management lowered FY ’19 revenue guidance from $248.0-$250.0 million to $246.0-$248.0 million, but increased guidance for non-GAAP operating income and EPS from $(29.3)-$(27.3) million and $(1.01)-$(0.95), respectively, to $(28.5)-$(26.5) million and $(0.98)-$(0.92).
Upland Software Reports Second Quarter 2019 Financial Results
Upland Software (UPLD) reported Q2 ’19 results above expectations and raised guidance for FY ’19.
Total revenue was $53.0 million (+47.5% Y/Y), above guidance of $49.9-$51.9 million and consensus of $51.5 million. Adjusted EBITDA was $19.1 million (36.0% margin), also above guidance of $17.7-$18.7 million and consensus of $18.4 million. Non-GAAP EPS of $0.76 beat consensus of $0.51.
Organic growth was 5% and the acquisition pipeline remains robust.
Key metrics: added 150 new customer relationships and expanded 243 existing relationships; 38 new major customers that committed to over $250,000 in recurring revenue.
Between the closing of a $159.4 million equity raise and a $410.0 million credit financing, Upland Software has replenished its war chest for acquisitions.
Management targets $25-$50 million per year in acquired revenue and with $26 million completed in 1H, has its sights set on achieving the high-end in FY ’19.
Guidance for Q3 calls for revenue of $53.5-$55.5 million, in line with consensus of $54.3 million, and adjusted EBITDA of $19.8-$20.8 million, also in line with consensus of $20.3 million.
For FY ’19, management raised its revenue and adjusted EBITDA guidance from $202.4-$206.4 million and $73.7-$76.1 million, respectively, to $209.9-$213.9 million and $77.2-$79.2 million.
Workiva Announces Second Quarter 2019 Financial Results
Workiva (WK) reported Q2 ’19 results ahead of expectations and raised guidance for FY ’19.
Revenue of $73.5 million (+24.3% Y/Y) was ahead of management’s $68.6-$69.1 million guidance and consensus of $69.0 million. Non-GAAP operating income was $86,000 (0.1% margin), exceeding guidance of $(4.7)-$(4.2) million and consensus of $(4.3) million. Non-GAAP EPS of $0.00 also beat guidance of $(0.11)-$(0.10) and consensus of $(0.10).
Key metrics: 3,421 (+6.2% Y/Y) customers at quarter-end; 558 (+52.5% Y/Y) customers with an annual contract value (ACV) over $100,000 and 238 (+47.8% Y/Y) customers with ACV over $150,000; revenue retention rate of 95.4% and revenue retention rate including add-on revenue of 114.5%.
Given successes to date, Workiva will continue to invest in its EMEA expansion, global statutory reporting, integrated risk, and Wdata, which includes data prep, APIs, and connectors.
Guidance for Q3 includes revenue of $72.0-$72.5 million, non-GAAP operating income of $(8.0)-$(7.5) million, and non-GAAP EPS of $(0.17)-$(0.16), which was mixed versus Street expectations for $71.1 million in revenue, $(7.0) million in non-GAAP operating income, and $(0.16) in non-GAAP EPS.
FY ’19 guidance was raised from $284.0-$286.0 million, $(17.0)-$(15.0) million, and $(0.38)-$(0.34) in revenue, non-GAAP operating income, and non-GAAP EPS, respectively, to $290.0-$291.0 million, $(14.0)-$(12.0) million, and $(0.31)-$(0.27).
Notable News
Absolute Names Lynn Atchison to Board of Directors
Absolute Software (ABT-CA) announced the appointment of Lynn Atchison to the company’s Board of Directors.
Ms. Atchison most recently served as CFO of Spredfast and currently sits on the boards of Q2 Technologies, Convey, and RealMassive.
Alteryx (AYX) priced an offering of $350.0 million aggregate principal amount of 0.50% Convertible Senior Notes due 2024 and $350.0 million aggregate principal amount of 1.00% Convertible Senior Notes due 2026.
The initial purchasers have also been granted an option to purchase an additional $50.0 million principal amount of the notes.
Both the 2024 and 2026 notes have a conversion rate of 5.2809 shares per $1,000 principal amount, equating to an initial conversion price of approximately $189.36 per share of Alteryx Class A common stock, or a 51% premium to the close price prior to the announcement of the offering.
Net proceeds from the offering are expected to be $683.4 million (or $781.2 million if the initial purchasers exercise their over-allotment option in full).
Approximately $145.4 million of the proceeds along with the issuance of approximately 2.2 million shares will be put towards the repurchase, exchange, or retirement of the company’s existing 0.50% Convertible Senior Notes due 2023.
Anaplan Welcomes Mark Anderson as Chief Growth Officer
Anaplan (PLAN) announced that Mark Anderson has joined the company as Chief Growth Officer.
Mr. Anderson previously served as President and Chief Revenue Officer at Palo Alto Networks (PANW).
BlackLine, Inc. Announces Pricing of Offering of $435 Million of Convertible Senior Notes
BlackLine (BL) priced an offering of $435 million aggregate principal amount of 0.125% convertible senior notes due 2024.
The company has also granted the initial purchasers an option to purchase up to an additional $65 million aggregate principal amount of the notes.
The initial conversion rate will be 13.6244 shares of BL common stock per $1,000 principal amount, equating to an initial conversion price of $73.40 per share, a 34% premium to the close price prior to the announced offering.
Estimated net proceeds from the offering are expected to be $423.4 million (or $486.8 million if the initial purchasers exercise their over-allotment option in full), a portion of which will be used to pay the cost of capped call transactions with the remainder designated for working capital and other general corporate purposes.
Ceridian Announces Pricing of Secondary Public Offering
Ceridian HCM Holding (CDAY) priced an overnight offering in which affiliates of Thomas H. Lee Partners and David Ossip, Chairman and Chief Executive Officer of the company, sold 9.5 million shares and 500,000 shares, respectively, of CDAY common stock at a public offering price of $49.75 per share, representing just a 1.1% discount to the prior day’s close.
The offering was upsized from initial plans for affiliates of Thomas H. Lee Partners to sell 7.5 million shares and David Ossip to sell 500,000 shares.
Ceridian will not receive any proceeds from the offering.
ChannelAdvisor Promotes Beth Segovia to COO
ChannelAdvisor (ECOM) has promoted Beth Segovia to Chief Operating Officer, a newly created role in which she will have responsibility for operations, services, product and engineering, and human resources across the globe.
Ms. Segovia has been with the company since 2017, serving as Vice President, Global Services.
Dame Jayne-Ann Gadhia to Join Salesforce as UK and Ireland CEO
Salesforce (CRM) appointed Dame Jayne-Anne Gadhia as CEO, Salesforce UK and Ireland, effective October 1, 2019.
Dame Jayne-Allen Gadhia is the Founder of Snoop and previously served as CEO of Virgin Money from 2007 to 2018.
Salesforce previously announced plans to invest $2.5 billion in its UK business to increase headcount, data centre capacity, and office space.
Fastly Welcomes Aida Alvarez to its Board of Directors
Fastly (FSLY) announced the appointment of Aida Alvarez to its Board of Directors, replacing Gil Penchina, who is retiring.
Ms. Alvarez is the former administrator of the U.S. Small Business Administration and currently serves on the boards of Hewlett Packard, K12, and Oportun.
Guidewire Appoints Mike Rosenbaum as CEO; Marcus Ryu Transitions to Chairman Role
Guidewire Software (GWRE) announced the appointment of Mike Rosenbaum as Chief Executive Officer and a member of the Board of Directors, succeeding Marcus Ryu, who has transitioned to the role of Chairman of the Board.
Mr. Ryu indicated that he initiated the change, he believes Mr. Rosenbaum has the better skillset to scale the company in its next phase of growth, and he needs to devote more time to personal obligations.
Mr. Rosenbaun mostly recently served as EVP Product at Salesforce (CRM) and has been with Salesforce for over a decade.
The company also reaffirmed its prior revenue guidance and reported that six new InsuranceSuite deals were secured in Q4.
After announcing that its Automotive spin-off will be named Cerence Inc. earlier in the week, Nuance Communications (NUAN) announced the appointment of Arun Sarin, former CEO of Vodafone, as Chairman of Cerence’s Board of Directors.
The other six directors comprising the Board include Thomas Beaudoin, EVP, Business Transformation at Nuance; Marianne Budnik, CMO of CyberArk Software; Sanjay Dhawan, President and CEO of Cerence; Sanjay Jha, general partner at Eclipse Ventures; Kristi Ann Matus, executive advisor at Thomas H. Lee Partners; and Alfred Nietzel, an executive consultant.
The spin-off is expected to occur on October 1, 2019 at which time Cerence Inc. will become a publicly traded automotive software company.
Shutterstock Appoints Rachna Bhasin to its Board of Directors
Shutterstock (SSTK) announced that Rachna Bhasin has joined the company’s Board of Directors, bringing experience in business development, M&A, and strategic partnerships.
Ms. Bhasin is Founder and CEO of EQ Partners and a Co-Founder of Pacifica Investments.
Sonic Foundry CFO Ken Minor Announces Retirement
Sonic Foundry announced that Ken Minor, Chief Financial Officer, will retire effective October 1, 2019.
Mr. Minor will serve as Interim CFO until his responsibilities are transitioned and will remain a Senior Financial Advisor through September 30, 2020.
Yext Appoints Christian J. Ward as Chief Data Officer
Yext (YEXT) announced that Christian Ward has rejoined the company as EVP, Chief Data Officer.
Mr. Ward had previously served as Yext’s EVP of Data Partnerships and rejoins the company from SourceMedia, where he served as Chief Data Officer.
Zoom Appoints Ryan Azus as Chief Revenue Officer
Zoom Video Communications (ZM) announced that Ryan Azus has been appointed Chief Revenue Officer with responsibility for the company’s direct salesforce, channel, sales operations and enablement, customer success, and sales engineering teams.
Mr. Azus joins the company from RingCentral (RNG) where he most recently served as Executive Vice President of Sales and Services.
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 Stamps.com (STMP).