K. Liu's Week in Review
Results from the initial slate of off-calendar reporting companies were generally well received and largely reflected the varying degrees of resiliency and recovery highlighted by those following the traditional reporting cycle. American Software (AMSWA), for which K. Liu & Company LLC provides external investor relations services, exhibited sequential improvement in its net Annual Contract Value (ACV) growth, but shares came under pressure as the market set aside a solid performance in gross new bookings and honed-in on elevated churn in the quarter. Despite management’s assurances that the pipeline of upcoming renewals has been thoroughly scrubbed and portends a return to more normal retention rates in the coming quarters, as well as commentary that the pipeline of new business has reached the highest level in seven quarters, investors appear to be in “show me” mode. We invite interested investors to reach out to us to learn more about the company. Also reporting was QAD (QADA), which outperformed Street expectations top to bottom. Our recap of QAD’s results, “Resurgence in North America Drives Strong Q2 Results,” provides further details. As for other updates on our coverage universe, monthly data provided by the United States Postal Service (USPS) revealed a 64% increase in PC Postage revenue in July, consistent with Stamps.com’s (STMP) recent commentary that U.S. dollar volume growth across its shipping partners increased over 50% in July. Should shipping volumes rise at a similar pace throughout the remainder of Q3, Stamps.com would meaningfully outperform Street expectations once more. Of course, there is still considerable uncertainty in the near-term economic outlook, so all we’ll say at this juncture is that the downdraft in shares since the initial post-earnings pop seems unwarranted.
Outside of our coverage list, Anaplan (PLAN), Nutanix (NTNX), Salesforce (CRM) and Workday (WDAY) all saw massive gains following their respective earnings updates. Nutanix’s results were actually released early as the company secured a $750 million capital infusion from Bain Capital Private Equity and announced a CEO succession plan. Box’s (BOX) Q2 results and raised outlook reflected increased Suite adoption and the benefits of an ROI-based approach to spending. Elastic (ESTC) delivered a beat and raise too and welcomed Paul Appleby, who most recently served as CEO of Kinetica, as President, Worldwide Field Operations. Although Palo Alto Networks (PANW) also posted results and guidance ahead of expectations, shares traded lower as investors questioned the sequential deceleration in billings growth implied in management’s outlook. The company also agreed to acquire The Crypsis Group, a cyber consulting firm focused on incident response, risk management and digital forensics, whose capabilities are expected to augment Palo Alto’s Cortex XDR platform.
In other M&A news, Fastly (FSLY) agreed to acquire Signal Sciences in a cash and stock deal valued at $775 million. Signal Sciences’ programmable platform protects web applications and APIs, and its technology will be bundled with Fastly’s existing solutions to form a new security offering, Secure@Edge. The acquisition adds approximately $28 million in annual recurring revenue and is accretive to Fastly’s growth and gross margin profile. Smartsheet (SMAR) shelled out $155 million in cash and stock to acquire Brandfolder, which provides a digital asset management platform. The combination is expected to enhance Smartsheet’s workflows around content and collaboration. Additional details will be shared during Smartsheet’s upcoming earnings call. Lastly, VIAVI Solutions (VIAV) acquired Expandium, a provider of core network monitoring and assurance solutions. Together with its existing portfolio of core and RAN assurance solutions, the acquisition enables VIAVI to offer visibility into fully virtualized 5G service provider networks.
Rounding out the news this week, AudioEye (AEYE) priced an upsized offering of 411,513 shares at $17.75 per share, a 6.6% discount to the close price prior to announcement of the planned offering. Affiliates of Thomas H. Lee Partners and Ceridian’s (CDAY) Chairman and CEO, David Ossip, sold 7,217,347 and 500,000 shares of CDAY common stock, respectively, to the underwriters in a secondary offering at a price of $72.18 per share, a 3.8% discount to the last unaffected close price. Finally, NICE (NICE) priced an offering of $400 million aggregate principal amount of 0% Convertible Senior Notes due 2025.
Mergers and Acquisitions
Command The 5G Network: VIAVI Acquires Expandium to Complete Virtualized Assurance Portfolio
VIAVI Solutions (VIAV) has acquired Expandium, a provider of core network monitoring and assurance solutions.
The acquisition adds Expandium’s cloud-native, microservices-based and 5G-ready mobile core assurance technologies to VIAVI’s NITRO Mobile portfolio of core and RAN assurance solutions.
Expandium also provides monitoring platforms for railway mobile services.
Fastly Announces Agreement to Acquire Signal Sciences
Fastly (FSLY) has agreed to acquire Signal Sciences, which offers a fully programmable security platform to protect web applications and APIs, for $200 million in cash and $575 million in stock.
The acquired technology will be bundled with Fastly’s current solutions to form a new security offering, Secure@Edge.
Signal Sciences exited Q2 ’20 with $28 million of annual recurring revenue, 265 customers and gross margin over 85%.
Palo Alto Networks Announces Intent to Acquire The Crypsis Group
Palo Alto Networks (PANW) has agreed to acquire The Crypsis Group, a cyber consulting firm with over 150 security consultants focused on incident response, risk management and digital forensics.
The Crypsis Group’s security consulting and forensics capabilities are expected to enhance Palo Alto’s Cortex XDR platform by strengthening its ability to collect security telemetry, manage breaches and initiate incident response actions.
Smartsheet to Acquire Brandfolder Adding Content Management to Workflow Automation Offering
Smartsheet (SMAR) has agreed to acquire Brandfolder, which provides a platform for sharing, storing and tracking all forms of digital content, for $155 million in cash and stock.
The acquisition is expected to enhance Smartsheet’s workflows around content and collaboration.
Additional details will be provided during Smartsheet’s Q2 ’21 earnings call on September 2, 2020.
Earnings Releases
American Software Reports Preliminary First Quarter of Fiscal Year 2021 Results
American Software (AMSWA) reported mixed Q1 ’21 results.
Revenue of $27.3 million (-0.4% Y/Y) was below consensus of $28.5 million. Adjusted EBITDA was $3.1 million (11.4% margin), just shy of the Street’s $3.3 million. Non-GAAP EPS of $0.09 beat consensus of $0.05.
Key metrics: Cloud Services Annual Contract Value (ACV) of $27.5 million (+36% Y/Y); net new ACV of $1.2 million.
Seasonality was more pronounced than anticipated in Q1 as employees and customers took time off, resulting in lower than anticipated services utilization and delays in deal closures.
Over $2.0 million in gross ACV was booked in the quarter but was partially offset by elevated churn.
Management expects churn to return to more normal levels going forward and sees a positive growth trend in 2H as the pipeline has reached a seven-quarter high and includes a number of seven-figure opportunities.
Anaplan Announces Second Quarter Fiscal Year 2021 Financial Results
Anaplan (PLAN) reported Q2 ’21 results above expectations and reinstated FY ’21 guidance ahead of consensus.
Revenue of $106.5 million (+26.0% Y/Y) was ahead of guidance for $103.0-$104.0 million and consensus of $103.4 million. Non-GAAP operating income was $(9.6) million (-9.0% margin), exceeding guidance for a (16.0)%-(15.0)% margin and consensus of $(16.1) million. Non-GAAP EPS of $(0.04) beat consensus of $(0.12).
Key metrics: billings were $109 million (+22% Y/Y); 391 customers (+31% Y/Y) with over $250,000 in annual recurring revenue; dollar-based net expansion rate of 116%; remaining performance obligations of $703.1 million (+36% Y/Y).
Approximately 60% of Q2 bookings came from existing customers as the company increased its focus on the existing base in response to the challenging business environment and corresponding impact on customer decisions.
Most of Anaplan’s deals in excess of $500,000 were partner-influenced, and the company’s partners added nearly 600 new certified model builders to their respective practices.
Spending will increase in the coming quarters as Anaplan moves forward with investments in the go-to-market and product and engineering organizations.
Management remains confident in the long-term digital transformation trend and the relevance of Anaplan’s connected planning platform but expressed caution with respect to the broader demand environment in the latter half of this year.
Q3 guidance for revenue of $109.0-$110.0 million was above consensus of $108.3 million, while guidance for a non-GAAP operating margin of (13.5)%-(12.5)% was in line with Street expectations for $(13.9) million in non-GAAP operating income.
Management reinstated FY ’21 guidance calling for revenue of $437.0-$439.0 million and implying non-GAAP operating income of $(52.7)-$(48.1) million versus consensus of $433.3 million in revenue and $(56.3) million in non-GAAP operating income.
Autodesk, Inc. Announces Fiscal 2021 Second Quarter Results
Autodesk (ADSK) reported Q2 ’21 results above expectations and narrowed its FY ’21 guidance ranges.
Revenue of $913.1 million (+14.6% Y/Y) was above guidance for $890.0-$905.0 million and consensus of $899.3 million. Non-GAAP operating income was $262.4 million (28.7% margin). Non-GAAP EPS of $0.98 beat guidance for $0.86-$0.92 and consensus of $0.90.
Key metrics: billings of $787 million (-12% Y/Y); net revenue retention rate within range of 100%-110%.
The online channel delivered strong double-digit billings growth, although the pace of closing larger transactions slowed.
Product subscription renewal rates improved steadily throughout the quarter, while new business was impacted by the current environment.
Usage in China, Korea and Japan was above pre-COVID levels, recovered in some parts of Europe and ticked up slightly in the Americas, which should translate into improved new business performance in the coming quarters given a positive correlation between usage and new business.
Q3 guidance for revenue of $930.0-$945.0 million and non-GAAP EPS of $0.91-$0.97 was in line with Street expectations for revenue of $939.1 million and non-GAAP EPS of $0.95.
Management narrowed its FY ’21 guidance ranges, which now include billings of $4.07-$4.17 billion, revenue of $3.715-$3.765 billion, non-GAAP operating margin of 27.5%-29.0% and non-GAAP EPS of $3.72-$3.90.
Box Reports Revenue of $192 Million for Fiscal Second Quarter 2021, Up 11 Percent Year-Over-Year
Box (BOX) reported Q2 ’21 results ahead of expectations and raised its outlook for FY ’21.
Revenue of $192.3 million (+11.4% Y/Y) was ahead of guidance for $189.0-$190.0 million and consensus of $189.6 million. Non-GAAP operating income was $30.1 million (15.6% margin), exceeding consensus of $20.9 million. Non-GAAP EPS of $0.18 beat guidance for $0.12-$0.14 and consensus of $0.12.
Key metrics: billings of $188.8 million (+9% Y/Y); closed 64 deals over $100,000 (-6% Y/Y); annualized net retention rate of 106%; remaining performance obligations of $726.7 million (+13% Y/Y).
Q2 results were driven by expansion within the existing enterprise base as demand for products like Shield and Relay drove higher adoption of Box Suites, particularly in six-figure transactions for which the attach rate of Suites was 30%.
Overall sales productivity has increased due to improvements in the enterprise segment and the reallocation of resources into higher performing regions; marketing leverage has also increased following a shift towards more efficient digital channels.
Following initiatives to optimize workforce expenses, improve gross margin and approach spend with an eye on ROI, management now anticipates a 12%-13% operating margin for the year versus prior expectations for 11%-12%.
Q3 guidance for revenue of $193.0-$195.0 million and non-GAAP EPS of $0.13-$0.15 was ahead of Street expectations for $192.8 million in revenue and $0.12 in non-GAAP EPS.
Management raised its FY ’21 revenue and non-GAAP EPS guidance ranges from $760.0-$768.0 million and $0.47-$0.52, respectively, to $767.0-$770.0 million and $0.56-$0.60.
Elastic Reports Strong First Quarter Fiscal 2021 Financial Results
Elastic (ESTC) reported Q1 ’21 results above expectations and raised its guidance for the year.
Revenue of $128.9 million (+43.7% Y/Y) was above guidance for $119.0-$122.0 million and consensus of $120.9 million. Non-GAAP operating income was $(4.3) million (-3.3% margin), surpassing guidance for a (12.0)%-(11.0)% margin and consensus of $(14.2) million. Non-GAAP EPS of $0.06 beat guidance for $(0.19)-$(0.17) and the Street’s $(0.18).
Key metrics: billings of $130.0 million (+45% Y/Y); over 12,100 subscription customers (+38% Y/Y) at quarter-end; over 630 customers with Annual Contract Value (ACV) over $100,000 (+33% Y/Y); net expansion rate over 130%.
Despite softness in sectors hit hard by the pandemic and slightly longer sales cycles, Elastic benefited as customer spending priorities increasingly shifted to digital transformation efforts and distributed business models, which align well with the company’s search, observability and security solutions.
A significant piece of the acquired Endgame product has already been folded in ahead of schedule, so this quarter’s beta release will include malware prevention as part of the Elastic stack.
Q2 guidance for revenue of $129.0-$131.0 million, a non-GAAP operating margin of (11.5)%-(10.5)% and non-GAAP EPS of $(0.22)-$(0.20) was ahead of Street expectations for $128.9 million in revenue, $(18.9) million in non-GAAP operating income and $(0.24) in non-GAAP EPS.
Management raised its FY ’21 guidance across the board and now anticipates revenue of $544.0-$550.0 million, non-GAAP operating margin of (13.5)%-(11.5)% and non-GAAP EPS of $(0.83)-$(0.69).
Intuit Full Year Revenue Up 13 Percent
Intuit (INTU) reported Q4 ’20 results well ahead of Street expectations.
Revenue of $1.816 billion (+82.7% Y/Y) exceeded consensus of $1.570 billion. Non-GAAP operating income was $616 million (33.9% margin), nearly doubling Street expectations for $332 million. Non-GAAP EPS of $1.81 beat consensus of $1.05.
Key metrics: total U.S. TurboTax units of 42.7 million (+11% Y/Y); Canada TurboTax units of 3.4 million (+13% Y/Y); Online Services Revenue (+21% Y/Y; +12% ex-PPP revenue); Online Ecosystem Revenue (+29% Y/Y; +25% ex-PPP revenue); Small Business and Self-Employed Group Revenue (+16% Y/Y; +13% ex-PPP revenue).
Q4 results reflect the shift of a significant portion of tax filings out of the prior quarter.
Excluding stimulus filings, Intuit’s do-it-yourself category share increased two points this season, and customer growth increased 11% Y/Y, raising the company’s share of total returns.
In the Small Business and Self-Employed Group, retention rates, payments volume and employees paid all improved, demonstrating the resiliency of the company’s platform.
In Q4, investments were refocused to ensure capabilities were aligned with Intuit’s AI-driven expert platform strategy and big bets, resulting in the departure of over 700 employees; a similar number of employees will be hired in strategic areas such as systems, full stack and data engineering; data science; customer success and sales.
Management refrained from providing guidance for FY ’21 but reaffirmed its long-term expectations for 8%-12% growth for the Consumer Group, 10%-15% growth for the Small Business and Self-Employed Group and over 30% growth for Online Ecosystem revenue.
Nutanix Reports Fourth Quarter and Fiscal 2020 Financial Results
Nutanix (NTNX) reported Q4 ’20 results above expectations.
Revenue of $327.9 million (+9.3% Y/Y) was above consensus of $320.0 million. Non-GAAP operating income was $(73.6) million (-22.5% margin), exceeding consensus of $(129.3) million. Non-GAAP EPS of $(0.39) beat the Street’s $(0.67).
Key metrics: Key metrics: 17,360 customers (+22% Y/Y) at quarter-end; billings of $388.5 million (+5% Y/Y); Annual Contract Value (ACV) billings of $139.9 million (+13% Y/Y); Run-rate ACV of $1.22 billion (+29% Y/Y); Software and Support billings of $387.1 million (+8% Y/Y); ACV dollar-based net expansion rate of 125% for FY ‘20.
The Americas region is now experiencing more negative impacts from COVID than other regions as both APAC and EMEA were hit hard earlier on but have progressed through the pandemic quicker.
Nutanix is shifting from a TCV to ACV-based focus and thus moving to a comp plan that reduces incentive for salespeople to sell long-term contracts that often come at the expense of higher discounts.
The $750 million capital investment from Bain Capital provides Nutanix with staying power to build on its success in hyperconverged infrastructure and to build out a new HCI category, hybrid cloud infrastructure.
Q1 guidance calls for ACV billings of $118.0-$121.0 million, gross margin of approximately 81% and operating expenses of $350.0-$360.0 million.
Palo Alto Networks Reports Fiscal Fourth Quarter and Fiscal Year 2020 Financial Results
Palo Alto Networks (PANW) reported Q4 ’20 results above expectations and guided Q1 ’21 ahead of consensus.
Revenue of $950.4 million (+17.9% Y/Y) exceeded guidance for $915.0-$925.0 million and consensus of $923.5 million. Non-GAAP operating income of $188.4 million (19.8% margin) also exceeded consensus of $169.7 million. Non-GAAP EPS of $1.48 beat guidance for $1.37-$1.40 and the Street’s $1.39.
Key metrics: billings of $1.39 billion (+31.5% Y/Y) beat guidance for $1.19-$1.21 billion; added approximately 2,400 customers.
Palo Alto finished the year strong due to significant growth in its Next-Generation Security business as well as solid execution in its Firewall as a Platform business.
Management’s analysis of the performance of its acquired companies reveals that the company has achieved its stated goal of increasing a target company’s internal business plan by 30%-40% in the first year of ownership; the aggregate annual run rate of its acquired businesses is now 4x pre-acquisition levels.
While many companies are becoming more cost and cash conscious, companies are also accelerating investments in technologies to secured more dispersed work environments, a trend management views as a multi-year opportunity.
Q1 guidance for revenue of $915.0-$925.0 million and non-GAAP EPS of $1.32-$1.35 compared favorably with Street expectations for $901.1 million and $1.19, respectively; guidance also calls for billings of $1.03-$1.05 billion (+15%-17% Y/Y).
Salesforce Announces Strong Second Quarter Fiscal 2021 Results
Salesforce (CRM) reported Q2 ’21 results ahead of expectations and raised its outlook for FY ’21.
Revenue of $5.151 billion (+28.9% Y/Y) exceeded guidance for $4.890-$4.900 billion and consensus of $4.901 billion. Non-GAAP operating income was $1.040 billion (20.2% margin), well above consensus of $780.3 million. Non-GAAP EPS of $1.44, which includes a $0.58 benefit from mark-to-market accounting of Salesforce’s strategic investments, beat guidance for $0.66-$0.67 and consensus of $0.67.
Upside in Q2 was driven by better new business generation, higher license revenue, modestly better than anticipated revenue attrition, achievement of certain performance obligations associated with a large telecom transaction and foreign exchange.
Revenue performance by cloud was +13% for Sales Cloud, +20% for Service Cloud, +66% for Platform and Other (of which Tableau contributed 41%) and +21% for Marketing and Commerce.
Salesforce plans to reallocate resources to better position the company for continued growth and customer success in the new all-digital, work-from-anywhere environment and intends to pull-forward spending in go-to-market and product.
Remaining performance obligation (RPO) was $30.6 billion (+21% Y/Y), including current RPO of $15.2 billion (+26% Y/Y).
Q3 guidance for revenue of $5.24-$5.25 billion and non-GAAP EPS of $0.73-$0.74 was mixed relative to consensus of $5.01 billion in revenue and $0.77 in non-GAAP EPS.
Management raised it FY ’21 revenue and non-GAAP EPS guidance from ~$20.0 billion and $2.93-$2.95, respectively, to $20.7-$20.8 billion and $3.72-$3.74.
Splunk Inc. Announces Fiscal Second Quarter 2021 Financial Results
Splunk (SPLK) reported mixed Q2 ’21 results and provided a mixed outlook for Q3.
Revenues of $491.7 million (-4.8% Y/Y) fell short of guidance for $520.0 million and consensus of $522.5 million. Non-GAAP operating income of $(63.0) million (-12.8% margin) was within guidance for a non-GAAP operating margin of (15.0)%-(10.0)% and ahead of Street expectations for $(69.2) million. Non-GAAP EPS of $(0.33) were in line with consensus.
Key metrics: annual recurring revenue (ARR) of $1.93 billion (+50% Y/Y); cloud ARR of $568 million (+89% Y/Y); 396 customers with ARR over $1 million (+45% Y/Y); dollar-based net retention rate of 132%; RPO of $1.75 billion (+42% Y/Y).
Purchasing trends experienced in the prior quarter continued or accelerated in Q2 with some customers remaining hesitant to commit to long-term contracts, especially for larger orders, but many existing customers expanding their use of Splunk.
Cloud momentum continued to accelerate as cloud-based products contributed over half of total software bookings for the first time and should result in Splunk reaching its cloud mix target of 60% two years ahead of schedule.
Q3 guidance for $600.0-$630.0 million in revenues and a non-GAAP operating margin of 2.0%-5.0% (implies non-GAAP operating income of $12.0-$31.5 million) was mixed relative to Street expectations for $644.7 million in revenue and $1.1 million in non-GAAP operating income.
Management reaffirmed its prior ARR growth targets, including growth in the mid-40% range this year and a three-year CAGR of 40% through FY ’23.
Veeva Announces Fiscal 2021 Second Quarter Results
Veeva (VEEV) reported Q2 ’21 results ahead of expectations and raised its guidance for FY ’21.
Revenues were $353.7 million (+32.5% Y/Y), ahead of guidance for $339.0-$341.0 million and consensus of $340.1 million. Non-GAAP operating income was $144.4 million (40.8% margin), exceeding guidance for $126.0-$128.0 million and consensus of $125.2 million. Non-GAAP EPS of $0.72 beat guidance for $0.63-$0.64 and the Street’s $0.64.
Demand was strong across the product portfolio in Q2 with Commercial Vault having a great quarter, QualityDocs posting its strongest bookings performance ever and both QMS and CTMS seeing increased uptake.
Billings outperformed due to better than anticipated billings duration for new business closed in Q2 as well as fewer than expected customer requests for billings changes.
Veeva’s life sciences customers have indicated that Q2 was as expected with fewer patient visits, delayed procedures and the reversal of Q1 stockpiling but some areas are improving, leading to more optimism for 2H.
More clinical trials are restarting as clinical research sites reopen; roughly half of studies that were disrupted have resumed.
The company is working with three early adopters for its first Data Cloud offering pertaining to longitudinal patient data.
Q3 guidance for revenues of $360.0-$362.0 million, non-GAAP operating income of $138.0-$140.0 million and non-GAAP EPS of $0.66-$0.68 exceeded Street expectations for $347.0 million, $125.2 million and $0.63, respectively.
Management raised its FY ’21 revenue, non-GAAP operating income and non-GAAP EPS guidance ranges from $1.380-$1.395 billion, $500.0-$510.0 million and $2.50-$2.55, respectively, to $1.415-$1.420 billion, $540.0-$545.0 million and $2.64-$2.67.
VMware Reports Fiscal Year 2021 Second Quarter Results
VMware (VMW) reported Q2 ’21 results above expectations and guided FY ’21 ahead of Street expectations.
Revenue was $2.875 billion (+9.2% Y/Y), above guidance for $2.800 billion and consensus of $2.803 billion. Non-GAAP operating income was $950.0 million (33.0% margin), well above consensus of $774.4 million and guidance for a 28.0% non-GAAP operating margin. Non-GAAP EPS of $1.81 beat guidance for $1.44 and consensus of $1.45.
Key metrics: billings of $3.042 billion (+2% Y/Y); License and Subscription and SaaS billings of $1.386 billion (+12% Y/Y); RPO totaled $10.3 billion (+17% Y/Y); total backlog was $36 million, including license backlog of $8 million.
VMware saw good sales execution in the Asia Pacific and EMEA regions and some COVID-related challenges in the Americas.
Amidst the pandemic, many customers accelerated their cloud plans while some slowed on-premises projects.
Management views the VMware telco cloud as the software operating system for 5G and beyond, and the company is collaborating with Intel to develop an integrated software platform for virtualized RAN to accelerate the rollout of networks.
Q3 guidance for revenue of $2.8 billion, a non-GAAP operating margin of 27.5% (or non-GAAP operating income of $770.0 million) and non-GAAP EPS of $1.42 compared favorably with consensus of $2.8 billion, $728.1 million and $1.36, respectively.
Guidance for FY ’21 includes revenue of $11.6 billion, a non-GAAP operating margin of 30.5% (or non-GAAP operating income of $3.5 billion) and non-GAAP EPS of $6.62, ahead of Street expectations for $11.5 billion, $3.3 billion and $6.10.
Workday Announces Fiscal 2021 Second Quarter Financial Results
Workday (WDAY) reported Q2 ’21 results ahead of expectations and raised guidance for FY ‘21.
Revenues of $1.062 billion (+19.6% Y/Y) were above guidance for $1.041-$1.043 billion and consensus of $1.043 billion. Non-GAAP operating income was $257.7 million (24.3% margin), exceeding guidance for a 19.0% margin and consensus of $197.9 million. Non-GAAP EPS of $0.84 beat consensus of $0.66.
Key metrics: subscription revenue backlog of $8.60 billion (+22% Y/Y), of which $5.78 billion (+21% Y/Y) will be recognized in the next 24 months; gross retention was over 95% and net retention over 100%.
Despite the challenging environment, Workday saw healthy demand across all product areas and geographies.
Conversion rates improved in Q2 relative to the March-April timeframe as businesses seemingly settled into the uncertain environment and recognized the need to move forward with digital transformation initiatives.
Subscription revenue outperformed on favorable new business linearity as well as a one-time benefit of $6 million from the acceleration of revenue on a customer contract.
Q3 guidance for revenue of $1.083-$1.085 billion and a non-GAAP operating margin of 19.0% (implies non-GAAP operating income of $205.8-$206.2 million) surpassed Street expectations for revenue of $1.045 billion and non-GAAP operating income of $179.6 million.
Management raised its FY ’21 revenue guidance from $4.170-$4.190 billion to $4.255-$4.265 billion and increased its non-GAAP operating margin guidance from 16.0% to 18.0%.
Notable News
AudioEye Announces Pricing of Upsized $7.3 Million Public Offering of Common Stock
AudioEye (AEYE) priced an offering of 411,513 shares of its common stock at $17.75 per share, a 6.6% discount to the close price prior to announcement of the planned offering, generating gross proceeds of $7.3 million.
The company has also granted the underwriter a 30-day option to purchase up to an additional 61,726 shares.
Net proceeds from the offering will be used for working capital and general corporate purposes.
Ceridian Announces Pricing of Secondary Public Offering
Ceridian (CDAY) priced a secondary offering of 7,217,347 and 500,000 shares of common stock held by affiliates of Thomas H. Lee Partners and the company’s Chairman and CEO, David Ossip, respectively.
The underwriters agreed to purchase the shares from the selling stockholders at a price of $72.18 per share, a 3.8% discount to the close price prior to the announced offering.
The company will not receive any proceeds from the offering.
Elastic Appoints Paul Appleby President, Worldwide Field Operations
Elastic (ESTC) has appointed Paul Appleby as President, Worldwide Field Operations, a role in which he will be responsible for driving growth and customer success.
Mr. Appleby most recently served as Chief Executive Officer of Kinetica, and prior to that was President of Worldwide Sales and Marketing at BMC.
NICE Announces Pricing of Offering of $400,000,000 of 0% Convertible Senior Notes Due 2025
NICE (NICE) priced an offering of $400 million aggregate principal amount of 0% Convertible Senior Notes due 2025 with an initial conversion price of $299.19, a 32.8% premium to the close price prior to announcement of the planned offering.
The initial purchasers have also been granted a 13-day option to purchase up to an additional $60 million aggregate principal amount of the Notes.
Net proceeds from the offering are expected to be used for general corporate purposes, including the potential repayment of NICE’s outstanding term loan at or prior to maturity in December 2021.
Nutanix (NTNX) announced that Bain Capital Private Equity will purchase $750 million aggregate principal amount of 2.5% Convertible Senior Notes due 2026 with an initial conversion price of $27.75 per share, which may be adjusted to an amount in the range of $25.25-$27.75 per share at the 12-month anniversary of the original issuance of the notes.
Interest on the notes will be paid in kind, and the Board of Directors has authorized the repurchase of up to $125 million of its class A common stock to offset the dilutive effect of any potential conversion of the notes.
David Humphrey and Max de Groen, both of whom are Managing Directors at Bain Capital Private Equity, will join the company’s Board after closing of the transaction, which is expected to occur next month.
Nutanix Announces CEO Succession Plan
Nutanix (NTNX) announced that Co-Founder and CEO Dheeraj Pandey plans to retire once a successor has been selected and appointed as the company’s next CEO.
Workday Promoted Chano Fernandez to Co-CEO
Workday (WDAY) has promoted Chano Fernandez, most recently co-President of Workday, to co-CEO.
Mr. Fernandez’s responsibilities will expand to include all aspects of the customer journey, while co-CEO Aneel Bhusri will oversee product and technologies as well as corporate functions such as HR, finance and operations.
Disclosure(s):
K. Liu & Company LLC has received compensation from American Software (AMSWA) for non-investment banking services within the past 12 months.
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 Box (BOX).
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).