K. Liu's Week in Review
Despite fears that those serving small and medium-sized businesses (SMB) may face greater risk amidst the COVID-19 pandemic, vendors enabling SMBs to pivot online continue to thrive. The latest evidence comes from website hosting, design and digital marketing services provider Endurance International Group Holdings (EIGI), which pre-announced Q2 ’20 results above consensus and reinstituted FY ’20 guidance ahead of Street expectations. The strong performance was highlighted by the addition of over 97,000 net subscribers across the company’s brands, a stark reversal of the subscriber losses reported in recent years. Recall that GoDaddy (GDDY), which offers a similar portfolio of solutions, also pre-announced upside to its Q2 revenue performance in recent weeks. Also worth noting, in its filing to go public this week, BigCommerce (BIGC) indicated its business has benefited from the shift to e-commerce during the COVID-19 pandemic with sales of its Essentials plan growing 33% Y/Y, 106% Y/Y and 86% Y/Y in March, April and May 2020, respectively.
Both Qumu (QUMU) and RealPage (RP) also pre-announced upside Q2 results, but both did so while separately disclosing key executive changes. Qumu attributed its strong sales performance to pandemic-related demand as customers continue to embrace large scale broadcasts, virtual events employing video and self-service broadcasting. The company also benefited from the closure of a multi-million dollar deal in the prior quarter for which a significant portion was recognized in Q2. Subsequent to releasing its preliminary results, Qumu named TJ Kennedy, who most recently served as Chief Executive Officer and a director of Allerio, as its President and CEO. He succeeds Vern Hanzlik, who is departing to pursue other opportunities. Worth noting, Qumu and Synacor (SYNC) recently agreed to terminate their planned merger, so the change in leadership is not overly surprising in that context. As for RealPage (RP), Q2 revenue, adjusted EBITDA and non-GAAP EPS are all expected to exceed management’s prior guidance, and Tom Ernst, Chief Financial Officer, plans to leave the company in mid-August to pursue other opportunities. In a similar vein, Cornerstone OnDemand’s (CSOD) Chief Financial Officer, Brian Swartz, is leaving the company effective August 14 to pursue another opportunity. However, no indication of Cornerstone’s Q2 performance was provided in conjunction with the announcement.
Rounding out this week’s news, Dell Technologies (DELL) disclosed that the company is exploring a spin-off of its 81% ownership stake in VMware (VMW). Dell noted that it would seek to formalize mutually beneficial commercial arrangements between the two companies ahead of any spin-off and also negotiate the payment of a special cash dividend to all VMware shareholders. The dividend to be paid would leave VMware with an investment grade rating and accelerate the timeline for Dell to achieve an investment grade rating of its own. As far as timing, a spin-off would not occur prior to September 2021 and would be expected to qualify as tax-free for U.S. federal income tax purposes.
Mergers & Acquisitions
Dell Technologies Explores VMware Spin-Off
Dell Technologies (DELL) is exploring a spin-off and other strategic options for its 81% ownership stake in VMware (VMW).
In the event of a spin-off, Dell would expect to formalize mutually beneficial commercial arrangements between the two companies and negotiate terms such as the payment of a special cash dividend by VMware to all shareholders.
A spin-off would not occur prior to September 2021 and would be expected to qualify as tax-free for U.S. federal income tax purposes.
Earnings Releases
Endurance International Group (EIGI) pre-announced Q2 revenue and adjusted EBITDA of $274.0 million and $84.0 million, respectively, exceeding consensus of $271.3 million and $71.2 million.
The strong performance was driven by the addition of 97,300 net subscribers in the quarter, resulting in a total subscriber count of 4.877 million at quarter-end.
Cash bookings increased approximately 5% Y/Y to $281.6 million, cash at quarter-end totaled $150.8 million and net debt stood at $1.550 billion.
Endurance also reintroduced guidance for FY ’20 calling for approximately $1.100 billion in revenue and $300.0 million in adjusted EBITDA, both of which exceeded Street expectations for $1.086 billion and $288.0 million, respectively.
Qumu Announces Preliminary Second Quarter 2020 Revenue
Qumu (QUMU) pre-announced Q2 revenue of $9.3 million, which was above consensus of $6.7 million, and raised its FY ’20 revenue guidance from $28.0 million to $29.0 million.
The strength was attributed to several COVID-19 related sales, including a multi-million dollar contract that closed late in Q1 but for which a significant portion was recognized in Q2.
RealPage Announces Preliminary Second Quarter 2020 Financial Results
RealPage (RP) expects its Q2 ’20 revenue, adjusted EBITDA and non-GAAP EPS to exceed the high-end of its prior guidance ranges of $276.0-$280.0 million, $66.0-$70.0 million and $0.38-$0.42, respectively.
Consensus called for revenue, adjusted EBITDA and non-GAAP EPS of $277.6 million, $68.7 million and $0.40, respectively.
Notable News
Cornerstone Announces Departure of Chief Financial Officer and Sets Date for Q2 Earnings Call
Cornerstone OnDemand’s (CSOD) Chief Financial Officer, Brian Swartz, is leaving the company effective August 14 to pursue another opportunity.
Trish Coughlin, Chief Accounting Officer, has been named interim CFO, and a search for a permanent CFO is underway.
Ernst to Resign August 15th as CFO of RealPage
RealPage (RP) announced that Tom Ernst, Chief Financial Officer (CFO), is leaving the company, effective August 15, 2020, to pursue new opportunities.
The company has commenced a search for its next CFO and Mr. Ernst will continue working as a consultant through year-end to ensure a smooth transition.
Qumu Appoints Veteran Technology Executive TJ Kennedy as President and CEO
Qumu (QUMU) has appointed TJ Kennedy as President and Chief Executive Officer, effective July 20, 2020.
Mr. Kennedy joins Qumu from Allerio, a telemedicine platform as a service company where he was CEO and a director.
He succeeds Vern Hanzlik, who has resigned as President and Chief Executive Officer and as a director of the company to pursue other interests.