K. Liu's Week in Review
Stamps.com (STMP) stole the show this week as shares basically doubled following the release of the company’s Q4 ’19 results. As noted in our recap, Strong Results and Guidance Remove Major Overhang, the big surprise was management’s outlook for growth in FY ’20 when many, us included, had assumed newly negotiated terms between the United States Postal Service (USPS) and its reseller partners would present a headwind to growth over a multi-year horizon. Instead, the economics afforded to the USPS’ resellers appear to be far less diminished than feared, and perhaps more importantly, are expected to remain at relatively stable and predictable levels throughout the four-year term of the agreements. We would also be remiss if we failed to highlight the post-earnings pop at American Software (AMSWA), for which K. Liu & Company provides investor relations services. Improved close rates on larger supply chain transformation deals coupled with a few sizable license wins resulted in both another quarter of accelerating growth in the company’s Cloud Services Annual Contract Value and a significant beat versus expectations. As far as getting in front of the next compelling opportunity, we suggest perusing our Q4 ’19 Earnings Preview for CTG, Inc. (CTG), a Sponsored Research client.
Other standout performers amongst the remaining dozen or so companies that reported this week included Dropbox (DBX), Everbridge (EVBG), ShotSpotter (SSTI) and Zix (ZIXI). At Dropbox, the company’s latest release has already been adopted by millions of users and has driven improved engagement to boot. That said, investors were probably most encouraged by stronger than anticipated operating margin guidance for the year as well as an increase in management’s long-term operating margin and free cash flow targets. Continued strong demand for Everbridge’s Critical Event Management (CEM) platform drove upside results in Q4, and we surmise investors may view the company as a potential beneficiary of the angst and disruption caused by coronavirus. ShotSpotter also beat expectations, but more importantly, saw no churn in the quarter and highlighted a number of promising opportunities in the pipeline as well as efforts to spearhead legislation that would carve out $10 million annually for a gun fire detection technology grant. Finally, Zix’s results again reflected significant synergies from its merger with AppRiver, and management expressed confidence in sustaining mid-teens top line growth over the next three to five years.
Five9’s (FIVN) earnings call provided one of the more interesting nuggets this week as CEO Rowan Trollope expressed his view that Microsoft Teams is a potentially huge disruptor to the Unified Communications as a Service (UCaaS) space and may well emerge the long-term winner. Five9 also beat expectations this quarter and guided revenues ahead of consensus. In addition, the company announced the acquisition of Virtual Observer, a provider of Workforce Optimization (WFO) solutions, although the company was quick to note that it would continue to offer Verint’s (VRNT) WFO product for large, complex enterprise deployments. Rounding out our earnings commentary this week, Appian (APPN) and Wix (WIX) both came under pressure following disappointing outlooks. Shares of Zscaler (ZS) also sold-off despite a beat and raise as billings growth decelerated against a difficult compare.
Capital markets activity this week included a secondary offering of 25 million shares of Dynatrace’s (DT) common stock by selling stockholders, which priced at a 1.8% discount to the close price prior to the announced offering. Pegasystems (PEGA) priced an upsized offering of $525.0 million aggregate principal amount of 0.75% Convertible Senior Notes due 2025 with an initial conversion price of $135.05, representing a 34.8% premium to the close price prior to the announcement of the planned offering. Turning to notable executive moves, Fastly (FSLY) appointed its President, Joshua Bixby, as CEO, succeeding Artur Bergman, who transitions to the role of Chief Architect and Executive Chairperson. Lastly, Upland Software (UPLD) hired three new executives to scale its go-to-market efforts, all of whom held key roles at Spredfast in the past. Jim Rudden joins Upland as Chief Marketing Officer, Virginia Miracle as Chief Customer Officer and Joseph Rodriguez as Senior Vice President of Global Account Sales.
Mergers and Acquisitions
Five9 (FIVN) has agreed to acquire Virtual Observer, a provider of cloud-based Workforce Optimization (WFO) solutions.
Virtual Observer has been a Five9 partner for over three years and the two companies have over 150 joint customers.
The acquisition expands Five9’s portfolio to include an integrated WFO offering with capabilities such as omnichannel recording and screen recording, advanced security, quality management, speech analytics, surveys, workforce management and pre-built connectors to leading CRM applications.
For large, complex enterprise deployments, Five9 will continue to work with Verint (VRNT) and other WFO providers.
Earnings Releases
American Software Reports Preliminary Third Quarter of Fiscal Year 2020 Results
American Software (AMSWA) reported Q3 ’20 results above expectations.
Total revenues were $30.6 million (+13% Y/Y), above consensus of $27.9 million. Adjusted EBITDA was $5.3 million (17.2% margin), ahead of consensus of $3.4 million. Non-GAAP EPS of $0.12 beat consensus of $0.07.
Key metrics: Cloud Services Annual Contract Value of $25.5 million (+58% Y/Y); added eleven new customers in Q3.
The strong results were driven by a marked improvement in close rates as well as the closure of a few large perpetual license transactions for customers preferring a capital expense to an operating expense.
Q3 started strong and after a quiet holiday period, finished very strong; the momentum exiting the quarter has continued into Q4 with a few new contracts already signed and a solid pipeline still intact.
American Software also introduced a new value-added service model, Planning-as-a-Service, that leverages its technology to produce optimized planning outputs enabling customers to meet their strategic and tactical business goals.
Appian Announces Fourth Quarter and Full Year 2019 Financial Results
Appian (APPN) reported Q4 ’19 results above expectations but guided FY ’20 below consensus.
Under ASC 605, total revenue was $70.5 million (+17.0% Y/Y), ahead of guidance for $69.1-$70.1 million and consensus of $69.7 million. Non-GAAP operating income was $(8.7) million (-12.3% margin), above guidance for $(10.0)-$(9.5) million and consensus of $(9.6) million. Non-GAAP EPS of $(0.10) beat guidance for $(0.15)-$(0.14) and consensus of $(0.14).
Key metrics: subscription revenue of $42.1 million was within guidance for $42.0-$42.5 million; added 109 net new subscription customers in 2019; subscription revenue retention rate was 116%; 48 seven-figure ARR customers at year-end.
Appian Cloud has proven to be a differentiator, especially with new logo customers as 93% of total contract value for new customers was related to Appian Cloud.
The addition of robotic process automation (RPA) capabilities to the platform makes Appian a one-stop shop for automation.
Guidance for Q1 includes revenue of $71.0-$71.5 million, adjusted EBITDA of $(12.0)-$(11.0) million and non-GAAP EPS of $(0.20)-$(0.18), which was mixed versus consensus of $70.8 million, $(5.2) million and $(0.12), respectively.
Management’s FY ’20 outlook calls for revenue of $296.0-$298.0 million, adjusted EBITDA of $(34.0)-$(32.0) million and non-GAAP EPS of $(0.58)-$(0.55), below consensus of $309.3 million, $(12.7) million and $(0.36), respectively.
Bandwidth Announces Fourth Quarter and Full Year 2019 Financial Results
Bandwidth (BAND) reported Q4 ’19 results above expectations and guided FY ’20 ahead of consensus.
Revenue of $62.0 million (+18.5% Y/Y) exceeded guidance for $58.4-$58.9 million and consensus of $60.0 million. Adjusted EBITDA was $1.2 million (2.0% margin), well above consensus of $(2.9) million. Non-GAAP EPS of $(0.02) beat guidance for $(0.17)-$(0.15) and consensus of $(0.14).
Key metrics: CPaaS revenue was $53.4 million (+21.1% Y/Y), exceeding guidance for $50.3-$50.8 million; active CPaaS customers of 1,728 (+40.5% Y/Y); dollar-based net retention rate of 113%.
Outperformance in CPaaS revenue was driven by broad-based growth across voice, messaging and 911.
The sales and marketing team has grown from 150 to 212, new sales leaders have been brought in and new levels of hunters and farmers as well as other go-to-market functions have been added.
Platform innovation over the past year included implementation of the STIR/SHAKEN call authentication regime, the launch of a full suite of messaging products and a powerful 911 notification engine.
Q1 guidance includes revenue of $63.2-$63.7 million and non-GAAP EPS of $(0.12)-$(0.10), comparing favorably versus consensus of $61.3 million in revenue and $(0.11) in non-GAAP EPS.
Management’s FY ’20 guidance calls for $272.7-$274.7 million in revenue and $(0.27)-$(0.17) in non-GAAP EPS, exceeding Street expectations for $268.3 million in revenue and $(0.32) in non-GAAP EPS.
Brightcove Announces Financial Results for Fourth Quarter and Fiscal Year 2019
Brightcove (BCOV) posted Q4 ’19 results shy of Street expectations and provided a mixed outlook for FY ’20.
Revenue was $47.6 million (+16.5% Y/Y), at the low-end of guidance for $47.6-$48.1 million and short of the Street’s $47.8 million. Adjusted EBITDA was $3.5 million (7.4% margin), within guidance for $3.4-$3.9 million but shy of the Street’s $3.7 million. Non-GAAP EPS of $0.06 was at the high-end of guidance for $0.05-$0.06 and a penny above consensus.
Key metrics: average annual subscription revenue per premium customer was $83,400 (+11% Y/Y), excluding starter customers who had average annualized revenue of $4,600; recurring dollar retention rate was 89%; 3,595 customers at quarter-end, of which 2,338 were premium.
Brightcove experienced a challenging sales quarter as the company aggressively reorganized its go-to-market team in the second half of 2019 to enter 2020 with a fully trained and product-certified team.
Q4 marked an important milestone with the release of Brightcove Beacon, the company’s first purpose-built application to enhance the user experience and deliver greater value for customers in its target markets.
While revenue growth in 2020 will be impacted by the sales challenges exiting 2019, management expects to deliver double-digit backlog growth this year.
Q1 guidance includes revenue of $46.8-$47.8 million, adjusted EBITDA of $2.8-$3.8 million and non-GAAP EPS of $0.03-$0.05, which was mixed versus consensus of $48.3 million, $2.4 million and $0.01, respectively.
For FY ’20, guidance calls for $192.0-$196.0 million in revenue, below consensus of $202.3 million; $14.0-$18.0 million in adjusted EBITDA, in line with consensus of $15.5 million; and $0.19-$0.29 in non-GAAP EPS, in line with the Street’s $0.22.
Dropbox Announces Fourth Quarter and Fiscal 2019 Results
Dropbox (DBX) reported Q4 ’19 results above expectations and guided FY ’20 margins ahead of consensus.
Revenue of $446.0 million (+18.6% Y/Y) was ahead of management’s $442.0-$444.0 million guidance and consensus of $443.4 million. Non-GAAP operating income was $69.5 million (15.6% margin), above consensus of $64.9 million and guidance for a 14.0%-15.0% operating margin. Non-GAAP EPS of $0.16 beat consensus of $0.14.
Key metrics: annual recurring revenue of $1.820 billion (+19% Y/Y); 14.3 million (+13% Y/Y) paying users; average revenue per paying user of $125.00 (+4.5% Y/Y).
Millions of users are now active in the new Dropbox desktop experience, and this cohort is engaging with Dropbox more frequently while leveraging differentiated features like suggested folders.
The company’s primary focus in 2020 is to drive adoption of the new Dropbox, highlight new add-on products and promote partner SKUs to its user base.
Q1 guidance includes revenue of $452.0-$454.0 million and a non-GAAP operating margin of 13.5%-14.0% (implies $61.0-$63.6 million in non-GAAP operating income), exceeding consensus expectations for $448.4 million in revenue and $54.5 million in non-GAAP operating income.
For FY ’20, guidance for revenue of $1.890-$1.905 billion and a non-GAAP operating margin of 17.5-18.0% (implies $330.8-342.9 million in non-GAAP operating income) compared favorably with Street expectations for $1.902 billion in revenue and $273.9 million in non-GAAP operating income.
By 2024, management expects to generate a non-GAAP operating margin of 28%-30% and free cash flow of over $1 billion.
Everbridge Announces Strong Fourth Quarter and Full Year 2019 Financial Results
Everbridge (EVBG) reported Q4 ’19 results above expectations but provided a mixed outlook for FY ’20.
Revenue was $57.1 million (+36.5% Y/Y), above guidance for $56.1-$56.4 million and consensus of $56.2 million. Adjusted EBITDA was $5.6 million (9.8% margin), ahead of guidance for $4.9-$5.2 million and consensus of $4.7 million. Non-GAAP EPS of $0.05 was at the high-end of guidance and a penny above consensus.
Key metrics: added 173 net new enterprise customers and had 5,024 (+13.6% Y/Y) customers at quarter-end; signed 58 (+81% Y/Y) deals valued at over $100,000 per year; average selling price was $73,000 (+9% Y/Y) on a TTM basis; dollar-based net retention rate remained above 110%.
Everbridge saw steadily growing demand for its core critical event management (CEM) suite throughout the year with a further spike in demand during Q4.
Key initiatives in 2020 include the rollout of CEM to the international salesforce, a continued push into the healthcare vertical and ongoing penetration of the market with both the core mass notification offering and newer products like IT Alerting, Safety Connection and Visual Command Center.
Q1 guidance includes revenue of $57.5-$57.9 million, adjusted EBITDA of $(5.9)-$(5.5) million and non-GAAP EPS of $(0.39)-$(0.38), which was mixed versus Street expectations for $57.4 million in revenue, $1.6 million in adjusted EBITDA and $(0.07) in non-GAAP EPS.
Management’s FY ’20 guidance for $260.3-$262.3 million in revenue, $6.0-$7.0 million in adjusted EBITDA and $(0.77)-$(0.75) in non-GAAP EPS was also mixed relative to consensus of $257.7 million, $11.0 million and $(0.09), respectively.
Fastly Announces Fourth Quarter and Full Year 2019 Financial Results
Fastly (FSLY) reported Q4 ’19 results ahead of expectations and guided FY ’20 in line with consensus.
Revenue of $58.9 million (+44.5% Y/Y) was above guidance for $52.5-$56.5 million and consensus of $54.8 million. Non-GAAP operating income was $(9.4) million (-16.0% margin), near the high-end of guidance for $(13.0)-$(9.0) million and above consensus of $(10.4) million. Non-GAAP EPS of $(0.10) also met the high-end of guidance and beat consensus of $(0.11).
Key metrics: enterprise customer count of 288 (+5.1% Y/Y); average enterprise customer spend of $607,000 (+5.6% Y/Y); dollar-based net expansion rate of 136%.
The strong results reflect increased adoption of Fastly’s edge cloud platform, including its security products by both new and existing customers.
Management’s focus for 2020 is on further strengthening customer relationships through its land, adopt and expand approach in which customers adopt Fastly for a particular use case and then incorporate additional products and features over time.
Q1 guidance includes revenue of $58.0-$60.0 million, non-GAAP operating income of $(13.0)-$(11.0) million and non-GAAP EPS of $(0.13)-$(0.11), generally consistent with consensus of $58.1 million, $(10.9) million and $(0.11), respectively.
Management’s FY ’20 outlook for $255.0-$265.0 million in revenue, $(43.0)-$(33.0) million in non-GAAP operating income and $(0.43)-$(0.32) in non-GAAP EPS was also in line with the Street’s $256.5 million, $(38.3) million and $(0.41), respectively.
Five9 Reports Fourth Quarter Revenue Growth of 28% to a Record $92.3 Million
Five9 (FIVN) reported Q4 ’19 results above expectations and guided FY ’20 revenue ahead of consensus.
Revenue of $92.3 million (+27.5% Y/Y) exceeded guidance for $86.0-$87.0 million and consensus of $86.7 million. Adjusted EBITDA was $19.6 million (21.2% margin), above consensus of $16.5 million. Non-GAAP EPS of $0.27 beat guidance for $0.21-$0.23 and consensus of $0.22.
Key metrics: 59 customers generated ARR over $1 million in Q4; Enterprise now comprises 81% of annual revenue; TTM dollar-based retention rate was 105%; average concurrent seat count of 131,954 (+25% Y/Y).
Five9’s growth was driven by strong traction upmarket as Enterprise bookings reached record levels, the pipeline hit another all-time high, deal sizes continued increase and over 60% of deals were influenced by partners.
Investments will be made to leverage public clouds as Five9 continues its international expansion.
Q1 guidance includes revenue and non-GAAP EPS of $89.0-$90.0 million and $0.15-$0.16, respectively, comparing favorably versus Street expectations for $86.4 million and $0.15.
For FY ’20, revenue guidance of $380.5-$383.5 million exceeded consensus of $372.5 million, while non-GAAP EPS guidance of $0.83-$0.87 was in line with Street expectations.
HealthStream Announces Fourth Quarter and Full-Year 2019 Results
HealthStream (HSTM) beat on the bottom line in Q4 ’19 and guided operating income ahead of consensus for FY ‘20.
Revenues of $62.7 million (+4.8% Y/Y) were within guidance for $60.6-$64.6 million and in line with the Street’s $62.6 million. Adjusted EBITDA was $11.2 million (17.9% margin), above consensus of $9.6 million. EPS of $0.11 beat consensus of $0.06.
Key metrics: added approximately 370,000 hStream subscribers for a total of 3.15 million contracted hStream subscribers at quarter-end; over 200 contracted VerityStream customers at quarter-end.
HealthStream ended the year with $38.8 million in contract order value for the new Red Cross Resuscitation Suite program, well ahead of the $10.0 million originally budgeted for the year.
The acquisition of CredentialMyDoc in December adds approximately 300 new customers to VerityStream and is expected to contribute $1.5 million in revenues during 2020.
12 months into a 36-month journey to effect three major transitions, management believes the company has made real progress and will emerge as a higher margin, more profitable company.
HealthStream has partnered with National Quality Forum and Aspenti Health to develop solutions addressing the national opioid crisis.
Guidance for FY ’20 includes revenue of $247.5-$255.5 million and operating income of $12.0-$14.5 million, comparing favorably versus Street expectations for $250.1 million in revenue and $11.3 million in operating income.
ShotSpotter Reports Fourth Quarter and Full Year 2019 Financial Results
ShotSpotter (SSTI) reported Q4 ’19 results above expectations and reaffirmed guidance for FY ’20.
Revenues of $10.9 million (+12.4% Y/Y) were slightly above guidance for $10.2-$10.7 million and consensus of $10.5 million. Adjusted EBITDA of $3.2 million (29.1% margin) exceeded consensus of $2.4 million. EPS of $0.11 beat consensus of $0.04.
Key metrics: added 34 net new “go-live” square miles of coverage; revenue retention rate of 111% in 2019.
The international pipeline remains strong with opportunities in South Africa, The Caribbean and Latin America, and management expects international to contribute 4%-6% of sales in 2020.
The addition of two new VP positions in the sales organization and a new Tier 4 sales initiative staffed by inside sales reps leave ShotSpotter well positioned for sustainable, profitable growth.
The company has been advocating for the creation and adoption of a house authorization bill, H.R.5385, which would direct the Attorney General to carve out $10 million annually from FY ’20-FY ’23 for a gun fire detection technology grant program.
ShotSpotter instituted a base rate price increase from $65,000 to $75,000 per mile effective January 1 but does not anticipate much of an impact until later in the year.
As 3G networks will not be turned off into early 2022, management does not currently anticipate any material costs related to 3G sensor upgrades in 2020.
Management reaffirmed prior FY ’20 expectations for $48.0-$50.0 million in revenue and profitability on a GAAP basis.
Wix Reports Fourth Quarter and Full Year 2019 Results
Wix (WIX) reported mixed Q4 ’19 results and guided the midpoint of FY ’20 revenue below Street expectations.
Revenue of $204.6 million (+24.6% Y/Y) was within guidance of $204.0-$206.0 million but shy of the Street’s $205.5 million. Non-GAAP operating income was $17.2 million (8.4% margin), above consensus of $14.1 million. Non-GAAP EPS of $0.39 beat consensus of $0.31.
Key metrics: collections of $226.7 million (+28.8% Y/Y) was above guidance for $222.0-$225.0 million; ARR for Creative Subscriptions Revenue was $707.2 million (+21% Y/Y); added 89,000 net premium subscribers to reach 4.5 million (+13.0% Y/Y); added 5.8 million registered users for a total of 165 million (+16.1% Y/Y) at quarter-end.
As Wix now has many more offerings that differ from the original website builder, the company has moved to a new set of disclosures, including a breakdown into two segments: creative subscriptions and business applications.
Guidance for Q1 includes revenue of $215.0-$217.0 million, slightly below consensus of $217.9 million, and collections of $247.0-$249.0 million.
For FY ’20, management’s guidance calls for revenue of $946.0-$956.0 million, leaving consensus of $954.9 million near the high-end; collections of $1.020-$1.035 billion; and free cash flow of $155.0-$162.0 million.
Workiva Announces Fourth Quarter and Full Year 2019 Financial Results
Workiva’s (WK) Q4 ’19 results beat expectations but guidance for FY ’20 was mixed.
Total revenue was $80.3 million (+24.6% Y/Y), exceeding guidance for $75.3-$75.8 million and consensus of $75.7 million. Non-GAAP operating income was $(4.6) million (-5.8% margin), ahead of guidance for $(8.8)-$(8.3) million and consensus of $(8.5) million. Non-GAAP EPS of $(0.09) beat guidance for $(0.16)-$(0.15) and consensus of $(0.16).
Key metrics: added 56 customers for a total of 3,510 (+5.1% Y/Y) customers at quarter-end, including 652 (+47.2% Y/Y) with an annual contract value over $100,000; 94.7% retention rate excluding add-on revenue and 113.0% including add-on sales.
Strong revenue growth in Q4 was driven by new logos, new solutions and conversions to solutions-based licensing.
Workiva’s program of converting customer contracts to its solutions-based licensing model is nearing a successful completion.
One of the top priorities for this year is upgrading customers to Workiva’s next-generation platform, which enables customers to connect data from ERP, GRC and CRM platforms and other third-party applications and systems of record.
Q1 guidance for $82.8-$83.3 million in revenue, $(7.5)-$(7.0) million in non-GAAP operating income and $(0.13)-$(0.12) in non-GAAP EPS was mixed versus consensus of $81.4 million, $(3.1) million and $(0.08), respectively.
Management’s FY ’20 guidance for $341.5-$343.5 million in revenue, $(38.0)-$(36.0) million in non-GAAP operating income and $(0.67)-$(0.63) in non-GAAP EPS was also mixed versus the Street’s $341.7 million, $(14.0) million and $(0.31).
Zix Reports Fourth Quarter and Full Year 2019 Results
Zix (ZIXI) reported mixed Q4 ’19 results and guided FY ’20 revenue ahead of Street expectations.
Revenue was $50.4 million (+173% Y/Y), above guidance for $49.0-$50.0 million and consensus of $49.6 million. Organic revenue growth was 15% across Zix and AppRiver. Adjusted EBITDA was $11.5 million (22.8% margin), just shy of the Street’s $12.2 million. Non-GAAP EPS of $0.13 were a penny below management’s guidance and consensus.
Key metrics: annual recurring revenue (ARR) of $209.7 million (+177% Y/Y); ARR on an organic basis across Zix and AppRiver was +16% Y/Y; billings were $49.3 million (+12.1% Y/Y); added over 77,000 net seats in the quarter and nearly 11,000 mailboxes; started over 600 trials of ZixEncrypt and ZixArchive with AppRiver customers and Managed Service Providers.
Gross dollar retention remains over 90% while net dollar retention was just over 101%.
Adjusted EBITDA and non-GAAP EPS were short of guidance due to $1 million in incremental expenses, primarily related to AppRiver commissions.
Guidance for Q1 includes revenue of $52.2-$52.7 million, an adjusted EBITDA margin of approximately 23% (implies adjusted EBITDA of $12.0-$12.1 million) and non-GAAP EPS of $0.12-$0.13, which compared favorably with Street expectations for $50.2 million in revenue, $12.1 million in adjusted EBITDA and $0.13 in non-GAAP EPS.
Management’s FY ’20 outlook calls for $220.0-$225.0 million in revenue, $51.0-$53.0 million in adjusted EBITDA and $0.56-$0.58 in non-GAAP EPS, which also compared favorably versus consensus of $211.4 million in revenue, $51.7 million in adjusted EBITDA and $0.56 in non-GAAP EPS.
Zix remains confident that building sales momentum will enable the company to maintain steady revenue growth of 14%-16% and adjusted EBITDA growth of 11%-15% over the next three to five years.
Zscaler Reports Second Quarter Fiscal 2020 Financial Results
Zscaler (ZS) reported Q2 ’20 results above expectations and raised its guidance for the year.
Revenue of $101.3 million (+36.3% Y/Y) was above guidance for $97.0-$100.0 million and consensus of $99.0 million. Non-GAAP operating income was $10.9 million (10.7% margin), exceeding guidance for $3.0-$4.0 million and consensus of $3.5 million. Non-GAAP EPS of $0.09 beat guidance and consensus of $0.03.
Key metrics: billings were $135.4 million (+17.7% Y/Y); remaining performance obligations totaled $609 million (+32% Y/Y); dollar-based net retention rate was 116%.
Billings faced a tough compare arising from a private cloud sale to a large public sector customer a year ago but would have increased 30% if adjusted for the transaction.
Adoption of SaaS and Office 365 remain key drivers in large ZIA deals, while ZPA remains the fastest growing product line.
Zscaler implemented a new sales enablement program, which is expected to enable new hires to ramp faster; adopted new AI-based tools and systems to provide visibility into leading sales indicators; expanded and deepened its sales leadership structure; and continues to hire aggressively in sales in anticipation of a 60% increase in headcount by year-end.
Guidance for Q3 includes revenue, non-GAAP operating income and non-GAAP EPS of $105.0-$107.0 million, $1.0-$3.0 million and $0.01-$0.03, respectively, which was mixed versus consensus of $104.6 million, $4.2 million and $0.04.
Management raised its FY ’20 guidance across the board and now anticipates revenue of $414.0-$417.0 million, billings of $512.0-$517.0 million, non-GAAP operating income of $16.0-$18.0 million and non-GAAP EPS of $0.14-$0.16.
Notable News
Dynatrace Announces Pricing of Follow-On Offering by Selling Stockholders
Dynatrace (DT) priced an underwritten public offering of 25 million shares of common stock by certain selling stockholders at $34.50 per share, representing a discount of 1.8% from the close price prior to the announcement of the planned offering.
The selling stockholders have also granted the underwriters a 30-day option to purchase up to an additional 3.75 million shares of common stock.
All proceeds from the offering will be received by the selling stockholders.
Fastly Announces Leadership Transition
Fastly (FSLY) has appointed its President, Joshua Bixby, as Chief Executive Officer, succeeding Artur Bergman, who has transition to the role of Chief Architect and Executive Chairperson.
In his new role, Mr. Bergman will oversee the company’s long-term strategic direction and focus on product development.
Fastly also announced that Board member David Hornik has been appointed Lead Independent Director.
Pegasystems Inc. Prices $525.0 Million Convertible Senior Notes Offering
Pegasystems (PEGA) priced an offering of $525.0 million aggregate principal amount of 0.75% Convertible Senior Notes due 2025 with an initial conversion price of $135.05, reflecting a 34.8% premium to the prior day’s closing price.
The offering was upsized from initial plans to offer $450.0 million aggregate principal amount, and the company has granted the initial purchasers an option to purchase up to an additional $75.0 million aggregate principal amount of the notes.
Of the $512.5 million in estimated net proceeds (or $585.9 million if the initial purchasers exercise their option in full), $45.4 million will be put towards capped call transactions with the remainder used for general corporate purposes.
Upland Software Announces New Executive Hires to Scale Key Go-To-Market Functions
Upland Software (UPLD) has hired Jim Rudden as Executive Vice President and Chief Marketing Officer, Virginia Miracle as Executive Vice President and Chief Customer Officer and Joseph Rodriguez as Senior Vice President of Global Account Sales.
Mr. Rudden joins the company from Spredfast, where he also served as Chief Marketing Officer.
Ms. Miracle will join the company later this quarter from ScaleFactor, where she was Chief Customer Officer, and she previously served in that same capacity at Spredfast.
Mr. Rodriguez joins the company from HASL, a sales leadership consultancy, and prior to that was Vice President of Sales for North America at Spredfast.
Disclosure(s):
K. Liu & Company LLC has received compensation from American Software (AMSWA) for non-investment banking services within the past 12 months.
K. Liu & Company LLC has received compensation from CTG, Inc. (CTG) in the past 12 months for “Sponsored Research.”
Sponsored Research produced by the firm is paid for by the subject company in the form of an initial retainer and a recurring monthly fee. The analysis and recommendations in our Sponsored Research reports are derived from the same process and methodologies utilized in all of our research reports whether sponsored or not. The subject company does not review any aspect of our Sponsored Research reports prior to publication.
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).
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).