K. Liu's Week in Review
As we head into the final quarter of a year like no other, any hope of a less eventful exit from 2020 quickly went out the window. That #RoseGardenMassacre is trending on Twitter and the NFL has postponed a couple of games after three weeks without issue serves as a stark reminder that this is no time for complacency. The election is just around the corner and the upcoming holiday season is likely to drive another massive surge in e-commerce volumes. Considering the potential for disruption, just a friendly reminder to stock up on essentials, vote early and above all, stay safe!
In software land, MobileIron (MOBL) agreed to be acquired by Ivanti, a private equity-backed provider of IT management and security software solutions, for $7.05 per share in cash. The purchase price represents a 27% premium to the close price prior to rumors emerging days earlier that the company was close to a sale and values MobileIron at a TTM EV/Sales multiple of 3.6x. In August, Bloomberg reported that MobileIron was exploring a potential sale, and the sale price reflects an 18% premium to the close price at the time. Coincidentally, Bloomberg reported this week that Endurance International Group (EIGI), a provider of web hosting and digital marketing solutions to small and medium-sized businesses, has restarted a review of strategic options, including a potential sale. Endurance had last considered a sale two years ago following competitor Web.com’s acquisition by Siris Capital Group.
Other M&A activity this week included BlackLine’s (BL) acquisition of Rimilia for $150 million in cash. Rimilia’s platform leverages AI and machine learning to simplify the order-to-cash process. The acquisition expands BlackLine into accounts receivable automation, a category adjacent to its core financial close capabilities. Additional details will be provided during the company’s earnings call later this month. Jamf (JAMF), which provides solutions for managing Apple products, acquired Mondada to expand its patch management capabilities for applications running on macOS. Separately, SAP (SAP) agreed to acquire Emarsys, which offers a platform enabling businesses to engage customers through personalized interactions across all digital channels.
Progress (PRGS) was the only company to formally report earnings this week. As the company had previously pre-announced quarterly results above expectations and raised its FY ’20 outlook when announcing plans to acquire Chef last month, both its Q3 performance and Q4 guidance held no surprises. Upside in the quarter was attributed to Progress’ OpenEdge product, and management indicated that Chef’s business has continued to perform very well over the past month. The acquisition is expected to close in short order and integration planning is already underway. Expectations for Chef to be accretive by Q1 ’21 and ultimately achieve an operating margin in excess of 35% exiting FY ’21 remain unchanged.
Rounding out this week’s financial disclosures, A10 Networks (ATEN) provided another update to its Q3 ’20 performance, indicating revenue and operating income are expected to come in at $55.5-$56.5 million and $4.8-$7.1 million, respectively. The company had previously pre-announced revenue expectations of $53.0-$56.0 million in connection with the resignation of its CFO last month. Lastly, ahead of its Investor Day, Twilio (TWLO) disclosed that its revenue for Q3 ’20 will exceed management’s prior guidance.
Mergers and Acquisitions
BlackLine (BL) has acquired Rimilia, a leading provider of accounts receivable automation solutions, for $150 million in cash.
Rimilia’s platform simplifies the order-to-cash process by automating the collection and allocation of customer cash.
Additional details will be provided during BlackLine’s Q3 ’20 earnings call on October 29, 2020.
Jamf Announces Acquisition of Mondada, a Leading Innovator in Patch Management
Jamf (JAMF) has agreed to acquire Mondada, the creator of Kinobi and Kinobi Pro.
The Kinobi solutions automate the monitoring and maintenance of patch updates for applications running on macOS.
MobileIron to be Acquired by Ivanti to Secure Every Endpoint and Power the Everywhere Enterprise
MobileIron (MOBL) has agreed to be acquired by Ivanti, a provider of IT management and security software solutions backed by Clearlake Capital Group and TA Associates, for $7.05 per share in cash, representing a TTM EV/Sales multiple of 3.6x.
The purchase price represents a premium of 27.3% to the close price on September 24, 2020, the date prior to rumors that the company was in advanced talks to be acquired emerged, and a premium of 17.5% to the close price on August 19, 2020, which was the date before Bloomberg first reported that the company was exploring a potential sale.
Ivanti has also agreed to acquire Pulse Secure LLC, a provider of Secure Access and mobile security solutions.
SAP to Acquire Omnichannel Customer Engagement Leader Emarsys
SAP (SAP) has agreed to acquire Emarsys, which offers an omnichannel customer engagement platform enabling businesses to deliver personalized interactions with customers across e-mail, mobile, social and other digital channels.
Emarsys boasts over 1,500 customers and will become part of SAP’s Customer Experience business unit.
Earnings Releases
A10 Networks Discloses Preliminary Results for the Quarter Ended September 30, 2020
In an 8-K filing, A10 Networks (ATEN) pre-announced Q3 ’20 results, including revenue of $55.5-$56.5 million and operating income of $4.8-$7.1 million.
The company had previously indicated in mid-September that Q3 revenue was expected to come in at $53.0-$56.0 million and non-GAAP operating expenses would range from $34.0-$35.0 million.
Consensus stood at $55.7 million in revenue and $9.2 million in non-GAAP operating income, leading us to believe the latter figure is not comparable to the (likely GAAP) operating income disclosed in the 8-K.
Progress Announces Third Quarter 2020 Financial Results
Progress (PRGS) reported Q3 ’20 results at the high-end of its pre-announced ranges and reaffirmed its outlook for FY ‘20.
Non-GAAP revenue of $110.9 million (-4.0% Y/Y) was at the high-end of management’s upwardly revised pre-announcement range of $109.0-$111.0 million. Non-GAAP operating income was $47.1 million (42.5% margin) versus consensus of $46.6 million. Non-GAAP EPS of $0.78 were at the high-end of the pre-announced range of $0.75-$0.78.
Upside in the quarter was largely driven by the OpenEdge product, while the decline in revenue versus the prior year was attributed to the timing of multi-year DCI term license renewals.
Reductions in travel and in-person events due to COVID-19 drove an 8% decline in total costs and expenses, which in turn resulted in better than anticipated margin improvement.
The acquisition of Chef, whose business has continued to perform well since the deal announcement, is expected to close shortly, and integration planning is already well underway.
Chef boasts over 700 customers, generates approximately $70 million in revenue that will boost Progress’ recurring revenue mix by two percentage points, and is expected to be accretive by Q1 ‘21.
Q4 guidance for non-GAAP revenue of $125.0-$129.0 million and non-GAAP EPS of $0.76-$0.79 left consensus of $128.5 million and $0.80, respectively, near the high-end.
In an 8-K filing ahead of its Investor Day, Twilio (TWLO) announced that revenue for Q3 ’20 is expected to come in ahead of the company’s prior guidance for $401.0-$406.0 million.
Street expectations for $407.9 million in revenue were already above the company’s guidance.
Notable News
Endurance International Group Revives Possible Sale Talks
Bloomberg reported that Endurance International Group (EIGI) has restarted a review of strategic options, including a possible sale of the company.
Endurance had previously considered a sale two years ago following the acquisition of Web.com by Siris Capital Group.