K. Liu's Week in Review

A month after the initial rollout of measures to reduce the spread of coronavirus across the U.S., the economic toll continues to climb with another 5.2 million unemployment claims filed. Even so, the software industry has fared reasonably well considering the circumstances with the group exhibiting gains on average for the second consecutive week. Whether the underlying fundamentals will hold up as well remains in question, but with a few more companies providing preliminary updates on the state of the union and the calendar Q1 earnings season around the corner, we should have more answers in the coming weeks. In our coverage universe, NetScout Systems (NTCT) pre-announced FY ’20 results this week, which reflected non-GAAP EPS within the high-end of management’s guidance despite a slight revenue shortfall. While results were affected by disruption from COVID-19 in the final weeks of the quarter, the company noted that a revenue shortfall of just 1% points to the necessity for its solutions. We tend to agree that this is the case for many of NetScout’s service provider customers, although we surmise sales cycles on the enterprise side of the business may remain elongated in the current environment. As such, we reduced our estimates and price target but continue to advocate owning the stock given the company’s exposure to the service provider vertical and potential to recoup any delayed deals by the end of its fiscal year. Our report, “NetScout Systems Provides Business and FY ’20 Financial Update,” has all of the details.

Website building platform provider Wix (WIX) also updated investors on its observations during the coronavirus crisis. Per management, the importance of an online presence has never been greater and rising unemployment has prompted individuals and businesses alike to start new online ventures. Since mid-March, Wix has experienced increases in new registered users, premium subscriptions and cohort collections to a greater degree than seen in the weeks prior and at a level above typical seasonality. The company therefore anticipates reporting Q1 revenue and collections consistent with its prior guidance. Additional updates to the outlook, which likely refers to management’s guidance for the year, will be provided during Wix’s formal earnings call in May.

As for other noteworthy news, ServiceNow (NOW) committed to protecting the jobs of its support staff and contractors unable to work due to office closures, pledging that no layoffs will be made in 2020. The company also anticipates over 1,000 new hires in the U.S. with additional hires planned worldwide by year-end. On the activist front, MobileIron (MOBL) entered into a cooperation agreement with Altai Capital Management, which owns approximately 7% of outstanding shares. Terms of the agreement call for Altai’s President and Chief Investment Officer, Rishi Bajaj, to join the Board of Directors. At Mimecast (MIME), Bradon Rogers was appointed Senior Vice President of Global Sales Engineering, and assumes responsibilities for the company’s worldwide sales engineering teams. Mr. Rogers previously led the global sales engineering, product marketing and sales enablement organizations at D2iQ, a startup in the cloud-native DevOps space. Lastly, Nutanix (NTNX) promoted Keith Moran to Senior Vice President of Sales for the Americas, filling the role vacated by Chris Kaddaras, who was promoted to Executive Vice President of Worldwide Sales earlier this year. Mr. Moran has been with Nutanix for nearly six years and most recently served as Vice President of Sales for the Central Region. Additionally, the company promoted eight-year veteran Dave Gwyn to the newly created position of Worldwide Sales Chief Operating Officer. He had most recently served as Senior Vice President of Sales for the U.S. West, East, Public Sector and Latin America.

Earnings Releases

NETSCOUT Provides a Business and Fiscal Year 2020 Financial Update

  • NetScout Systems (NTCT) announced preliminary FY ’20 results, which were mixed relative to Street expectations.

  • The company now anticipates FY ’20 revenue and non-GAAP EPS of $890.0-$892.0 million and $1.54-$1.56, respectively, versus prior guidance for $900.0-$910.0 million in revenue and $1.51-$1.56 in non-GAAP EPS.

  • Cash and equivalents at quarter-end totaled approximately $385.0 million and outstanding debt stood at $450.0 million.

  • FY ’21 guidance will not be provided until there is more visibility into the duration and magnitude of the COVID-19 pandemic.

Notable News

Industry Veteran Bradon Rogers Joins Mimecast as SVP of Global Sales Engineering

  • Mimecast (MIME) has appointed Bradon Rogers as its new Senior Vice President of Global Sales Engineering, a role in which he will manage the sales engineering teams worldwide to help drive technical excellence, increase operational efficiencies and influence corporate strategy and product positioning.

  • Mr. Rogers joins the company from D2iQ, a startup in the cloud-native DevOps space where he led the global sales engineering, product marketing and sales enablement organizations.

MobileIron Enters Cooperation Agreement with Altai Capital Management

  • MobileIron (MOBL) has entered into an agreement with Altai Capital Management, which owns approximately 7% of outstanding shares, under which Rishi Bajaj will join the company’s Board of Directors, effective immediately.

  • Mr. Bajaj currently serves as President and Chief Investment Officer of Altai.

Nutanix Promotes Keith Moran to Senior Vice President of Sales for the Americas and Dave Gwyn to Worldwide Sales Chief Operating Officer

  • Nutanix (NTNX) promoted Keith Moran to Senior Vice President of Sales for the Americas, succeeding Chris Kaddaras, who was promoted to Executive Vice President of Worldwide Sales earlier this year.

  • Mr. Moran joined Nutanix nearly six years ago and most recently served as Vice President of Sales for the Central Region.

  • Nutanix also promoted Dave Gwyn to the newly created position of Worldwide Sales Chief Operating Officer.

  • Mr. Gwyn has been with the company for eight years and most recently served as Senior Vice President of Sales for the U.S West, East, Public Sector and Latin America.

ServiceNow Makes No Layoff Pledge for 2020

  • ServiceNow (NOW) plans to continue hiring across the globe this year and has committed to no layoffs for 2020.

  • Currently, the company anticipates over 1,000 new hires in the U.S. and more worldwide by year-end.

  • ServiceNow continues to protect the jobs and salaries of support staff and contractors who are not working due to the closure of the company’s offices.

Wix Publishes Letter to Shareholders

  • Wix (WIX) provided an update on the company’s observations amid the current crisis in a letter to shareholders.

  • The importance of an online presence has never been greater, and as global unemployment continues to grow, people and businesses are turning to Wix to create new ventures online.

  • New registered users, premium subscriptions and cohort collections began increasing in mid-March relative to the prior weeks and beyond usual seasonality, a trend which has continued to date.

  • Ascend by Wix adoption has increased as users are communicating with and marketing to their customers more frequently.

  • Subscription cancellations have increased slightly in recent weeks but have been offset by the growth mentioned above.

  • Previously scheduled price increases on renewals have been suspended, and Wix Answers Call Center software and Knowledge Base products are being offered free for any company looking to ramp up support efforts at this time.

  • Given these factors, revenue and collections in Q1 are expected to be within management’s prior guidance, although the company will await its Q1 earnings call in May before updating its outlook.

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 NetScout Systems (NTCT).