K. Liu's Week in Review
With the COVID-19 pandemic prompting organizations to rethink processes for operating virtually, DocuSign (DOCU) sought to accelerate the launch of its next Agreement Cloud product, DocuSign Notary, by acquiring Liveoak Technologies for $38 million in stock. Liveoak leverages web-based videoconferencing, collaboration, identity verification and other tools to assist customers with the remote completion of transactions typically requiring in-person facilitation and an audit trail. DocuSign’s eSignature product is already integrated with Liveoak’s platform, and DocuSign Notary is expected to be available for early access later this summer. Collaboration software provider Slack (WORK) also continues to reshape how people within and across organizations connect, acquiring enterprise directory provider Rimeto. Slack plans to integrate Rimeto’s advanced profile and searchable directory features into its own product but will also offer Rimeto on a standalone basis. Also noteworthy, IBM (IBM) acquired WDG Solucões Em Sistemas E Automacão De Processos LTDA, a Brazilian software provider of robotic process automation (RPA), intelligent automation, interactive voice response and chatbots. The company plans to integrate over 600 of WDG’s pre-built RPA functions into its Cloud Pak for Automation and Cloud Pak for Multicloud Management offerings and further advance its AI-infused automation capabilities.
On the earnings front, EXFO (EXFO) was the only reporting company this week. Considering its fiscal Q3 encompassed the full brunt of the global pandemic and related fallout, EXFO’s outperformance relative to Street expectations was very well received. Of course, growth from both a bookings and revenue standpoint was challenged by the COVID-19 crisis, which limited the company’s ability to ship instruments and perform services. On a positive note, proof-of-concept trials for its Nova SensAI solution as well as 5G-related RFPs for its Service Assurance, Systems and Services segment increased during the quarter, leaving management optimistic that several significant awards may be secured in short order. The performance and qualitative outlook were consistent with the backdrop assumed in our near-term estimates for NetScout Systems (NTCT), which reflect sales declines in the June and September quarters followed by a rebound in the latter half of the company’s fiscal year.
Amidst ongoing uncertainty and with the onset of another earnings season around the corner, a number of companies offered a glimpse into their calendar Q2 ’20 performance. A10 Networks (ATEN) pre-announced Q2 revenue slightly below consensus but indicated both non-GAAP operating income and EPS came in higher. PTC (PTC) disclosed that ARR growth at quarter-end was +9% Y/Y with revenue and free cash flow both growing double-digits in its fiscal Q3, leaving the company seemingly on track to meet its prior FY ’20 guidance. SAP’s (SAP) Q2 results were mixed versus Street expectations with revenues light but operating income higher. Management noted that business improved over the course of the quarter with license sales better than anticipated but offset by weaker cloud revenues due to lower pay-as-you-go transaction revenue. Veritone (VERI) raised its revenue and non-GAAP loss expectations for Q2, attributing the upside to higher than anticipated revenues from its content and licensing businesses as well as strong bookings for its aiWARE platform from government, legal and compliance customers. Last but not least, Ping Identity Holdings (PING) pre-announced upside to its prior ARR, revenue and free cash flow guidance in conjunction with a follow-on offering by selling stockholders. The performance was well received and made for a successful offering, which was upsized from 7.5 million shares to nearly 9.0 million shares and priced at slight premium to the close price prior to disclosure of the planned sale.
One final note pertaining to our coverage universe, Pitney Bowes (PBI) announced the departure of Lila Snyder, Executive Vice President and President, Commerce Services, who is leaving to become Chief Executive Officer at a privately-held company at the end of this month. Ms. Snyder led Pitney’s growth initiatives in ecommerce, which include shipping APIs and cross-border shipping solutions that compete with several of Stamps.com’s (STMP) offerings.
Mergers & Acquisitions
DocuSign continues agreement cloud expansion with Liveoak Technologies acquisition
DocuSign (DOCU) has acquired Liveoak Technologies for $38 million in stock.
Liveoak Technologies leverages web-based videoconferencing, collaboration, identity verification and other tools to help customers complete auditable transactions remotely.
DocuSign expects Liveoak’s technology to accelerate the launch of a new product in its Agreement Cloud suite, DocuSign Notary, which is slated for early-access availability later this summer.
The Liveoak platform will also still be used for other “assisted transactions” requiring in-person facilitation and an audit trail, including account openings and virtual inspections.
IBM to Acquire WDG Automation to Advance AI-Infused Automation Capabilities for Enterprises
IBM (IBM) has agreed to acquire WDG Solucões Em Sistemas E Automacão De Processos LTDA, a Brazilian software provider of robotic process automation (RPA), intelligent automation, interactive voice response and chatbots.
The acquisition is expected to further advance IBM’s AI-infused automation capabilities.
IBM plans to integrate over 600 pre-built RPA functions from WDG Automation into its Cloud Pak for Automation and Cloud Pak for Multicloud Management offerings, enabling customers to identify opportunities for automation, accelerate the deployment of bots and streamline workflows.
Terms of the transaction, which is expected to close in Q3 ’20, were not disclosed.
Reimagining the Company Directory
Slack Technologies (WORK) has acquired Rimeto, which offers a searchable enterprise directory.
Slack plans to integrate Rimeto’s advanced profile and directory features into its product but will also continue offering Rimeto as a standalone solution and support their existing customer base.
Terms of the transaction were not disclosed, and the acquisition is not expected to have a material impact on FY ’21 results.
Earnings Releases
A10 Networks Provides Business Update and Second Quarter 2020 Expected Results
A10 Networks (ATEN) pre-announced Q2 ’20 results that were mixed relative to consensus.
Q2 revenue, non-GAAP operating income and non-GAAP EPS are expected to be in the range of $51.7-$52.2 million, $5.8-$6.3 million and $0.07-$0.08, respectively, versus consensus of $53.1 million, $4.3 million and $0.05.
A10 will release its Q2 ’20 results on Tuesday, July 28, 2020.
EXFO reports third quarter results for fiscal 2020
EXFO (EXFO) reported Q3 ’20 results above Street expectations.
Sales of $66.1 million (-10.1% Y/Y) exceeded consensus of $59.6 million. Adjusted EBITDA of $10.7 million (16.1% margin) was well above consensus of $0.2 million. Non-IFRS EPS of $0.09 beat consensus of $(0.03).
Key metrics: book-to-bill ratio of 0.89; Test & Measurement (T&M) bookings of $46.6 million (-7.0% Y/Y); Service Assurance, Systems and Services (SASS) bookings of $13.0 million (-33.9% Y/Y).
Government imposed restrictions in several countries within the Americas and Europe limited EXFO’s ability to ship test instruments and deliver services, and EXFO also saw a pause in large-scale fiber installations.
Adjusted EBITDA and non-IFRS EPS benefited by $3.3 million and $0.04, respectively, from a wage subsidy under the Canada emergency wage subsidy program.
Management indicated that seven proof-of-concept trials are underway for Nova SensAI, and RFP activities and trials for SASS solutions related to 5G core applications have increased, creating potential for several significant deals to close in Q4.
PTC to Announce Fiscal Q3 ’20 Results on Wednesday, July 29th, 2020
PTC (PTC) pre-announced Q3 ’20 ARR growth of +9% Y/Y and also indicated both revenue and free cash flow are expected to increase double-digits Y/Y.
The company previously guided for FY ’20 ARR and revenue growth of +9%-12% and +11%-14%, respectively, and thus appears on track to attain its prior targets.
PTC will release its Q3 ’20 results on Wednesday, July 29, 2020.
SAP Pre-Announces Strong Second Quarter Results Amid COVID-19 Crisis
SAP (SAP) pre-announced mixed Q2 ’20 results.
Non-IFRS revenue of €6.74 billion was short of the Street’s €6.87 billion while non-IFRS operating income of €1.96 billion was above consensus of €1.83 billion.
Current cloud backlog is expected to increase 20% to €6.65 billion.
Per management, business improved over the course of Q2 with software licenses recovering more than expected but cloud revenue negatively affected by lower pay-as-you-go transactional revenue.
The company also reaffirmed its prior FY ’20 guidance and longer-term 2023 ambition.
SAP will release its Q2 ’20 results on Monday, July 27, 2020.
Veritone Improves Revenue and Non-GAAP Net Loss Guidance for the Second Quarter of 2020
Veritone (VERI) raised its Q2 revenue and non-GAAP net loss guidance from $11.8-$12.2 million and $(6.5)-$(6.1) million, respectively, to $13.1-$13.3 million and $(6.0)-$(5.8) million.
The upside was driven by higher than anticipated net revenues in Veritone’s Advertising and Content Licensing businesses as well as record bookings for it aiWARE platform from Government, Legal and Compliance customers.
Veritone will release its Q2 ’20 results on Monday, August 10.
Notable News
Ping Identity Holding (PING) priced an upsized offering of 8,977,968 shares of common stock by selling stockholders, including Vista Equity Partners, at $32.00 per share, a slight premium to the close price prior to disclosure of the planned offering.
The selling stockholders have also granted the underwriters an option to purchase up to an additional 1,346,695 shares.
The selling stockholders had initially planned to offer 7.5 million shares with an option to purchase up to another 1.25 million.
In the accompanying S-1 filing, Ping Identity updated its Q2 ’20 guidance to reflect ending ARR of $234.5-$235.0 million, revenue of $55.5-$56.5 million, and free cash flow of $2.0-$2.5 million, ahead of prior guidance for ARR of $231.5-$234.5 million, revenue of $49.0-$53.0 million and free cash flow of $0-$2.0 million.
The company will not receive any proceeds from the offering.
Pitney Bowes Announces Resignation of Lila Snyder
Pitney Bowes (PBI) announced the resignation of Lila Snyder, Executive Vice President and President, Commerce Services.
Ms. Snyder is leaving the company effective July 31, 2020 to become Chief Executive Officer at a privately-held company.
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).
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).