K. Liu's Week in Review
The United States Postal Service’s (USPS) monthly data for April reflected a 6.4% Y/Y decrease in PC Postage revenue. Although we never like to see declines, context matters. In this case, the year-ago period marked the first full month of frenzied e-commerce activity as the global pandemic took hold. Reflecting the tough comparison, our Q2 estimates for Stamps.com (STMP) are actually predicated upon a decline in the mid-teens range, so the more modest drop-off to start the quarter is quite positive. We are not too surprised by this development though as management’s tone during its last earnings call was less cautious with respect to near-term trends than we had anticipated. That said, the month of May poses a similarly challenging comp, so we will await another round of data before considering any changes to our assumptions. Also relevant to our coverage universe, we hosted a virtual non-deal roadshow with CTG (CTG) during which management discussed the benefits to growth and margins as the company’s evolution to a digital solutions provider progresses. For more, check out our write-up, “Takeaways from Virtual Non-Deal Roadshow.” Lastly, QAD (QADA) posted a strong start to its FY ’22 highlighted by robust growth in new customer bookings. Although guidance for the year was left unchanged, management sounded increasingly optimistic about the current demand environment. Our report, “Reports Strong Fiscal Q1 ’22 Results,” has all of the details.
Across the initial slate of off-calendar reporting companies this week, the sentiment was universally positive with respect to the current selling environment. Even Anaplan (PLAN), which was the only company we tracked that saw a meaningful downdraft in shares post-earnings, pointed to steady execution and growing interest in digitizing planning across multiple functions. Interestingly, analysts appeared to be disappointed by the company’s billings performance even as Anaplan slightly exceeded its own guidance for the quarter. Perhaps the deceleration implied in Anaplan’s near-term billings outlook exacerbated concerns about the current growth trajectory. In contrast, Zscaler’s (ZS) momentum continues unabated as the company again landed large enterprise deals across its core ZIA and ZPA businesses and highlighted early traction for its emerging ZDX and ZCP solutions, which are expected to be the growth engines of the future. Zscaler also entered into an agreement to acquire Smokescreen, adding active defense and deception technology to its platform. Smokescreen’s technology turns the table on attackers, forcing them to chase ghosts and enabling customers to better detect highly targeted attacks. As far as the most bullish commentary we heard, that came from Domo (DOMO), which delivered a beat and raise to start its fiscal year. In addition to highlighting record Q1 performances in both new business and retention, management suggested that the company has reached a tipping point in which its rising market profile should bring consistent growth and success. The catalyst appears to be the largest upsell to an existing customer in the company’s history. Moreover, Domo has seen a material increase in the number of seven-figure annual recurring revenue contracts won over the past year and is now engaging in discussions for $10 million annual deals.
We close with an update on Box (BOX), which we have previously written about for a myriad of reasons, including the presence of an activist shareholder, an outlook for improving growth and margins, and more recently, the conclusion of the Box’s evaluation of strategic alternatives. Box reported fiscal Q1 ’22 results above expectations, which reflected continued traction in landing deals over $100,000 and strong attach rates for multi-product suite sales within those deals. Billings growth was an impressive 24%, more than double the reported revenue growth rate as the company secured several early renewals from Q2. Still, management’s guidance for the current quarter implies 13% growth in billings for 1H ’22 and lends confidence to its contention that growth will accelerate in the coming years. Reflecting the strong start, management raised its revenue and operating income guidance for the year. The one knock, however, was guidance for non-GAAP EPS, which is now lower due to dilution from the company’s recent convertible preferred stock offering. Proceeds from that offering will be put towards a $500 million “Dutch auction” self-tender, the terms of which are expected to be announced this coming week.
Mergers and Acquisitions
Zscaler to Acquire Smokescreen to Enhance Zscaler Zero Trust Exchange with Advanced Active Defense Capabilities
Zscaler (ZS) has agreed to acquire Smokescreen Technologies, which offers active defense and deception technology to thwart potential attackers.
The integration of Smokescreen’s capabilities into the Zscaler Zero Trust Exchange will advance the company’s ability to detect sophisticated, highly targeted attacks.
Earnings Releases
Anaplan Announces First Quarter Fiscal Year 2022 Financial Results
Anaplan (PLAN) reported Q1 ’22 results generally above expectations but provided a mixed outlook for Q2 and FY ‘22.
Revenue was $129.8 million (+25.0% Y/Y), above guidance for $126.5-$127.5 million and consensus of $127.1 million. Non-GAAP operating income of $(12.4) million was within guidance for $(13.4)-$(12.0) million and ahead of consensus of $(12.6) million. Non-GAAP EPS of $(0.10) were a penny below consensus.
Key metrics: billings were $127 million (+32% Y/Y), above guidance for $122-$124 million; 473 customers with ARR over $250,000; over 1,700 customers at quarter-end; dollar-based net expansion rate of 118%; remaining performance obligations of $832 million (+29% Y/Y).
The solid start to the year was attributed to steady execution with new customer growth and growing interest in digitizing planning across every function.
Approximately 64% of new bookings came from expand deals, slightly above the company’s historical average of 60%.
Anaplan’s pipeline reflects interest in areas such as supply chain and HR as well as opportunities for multifunction deals.
Partners also remain a significant source of deals and influence and are scaling their Anaplan practices with investments in alliance managers, go-to-market leads, solution development, co-marketing funds and more.
CFO David Morton, Jr. plans to resign to spend more time with his family once his successor has been hired.
Q2 guidance for revenue of $133.5-$134.5 million and a non-GAAP operating margin of (15.0)%-(14.0)%, which implies non-GAAP operating income of $(20.2)-$(18.7) million, was mixed versus consensus of $132.4 million in revenue and $(12.3) million in non-GAAP operating income.
Management raised its FY ’22 revenue guidance from $550.0-$555.0 million to $555.0-$560.0 million but maintained its non-GAAP operating margin guidance for (9.0)%-(8.0)%, implying an increase in expected operating losses.
Box Reports Strong Fiscal First Quarter 2022 Financial Results
Box (BOX) reported Q1 results above expectations and guided FY ’22 revenue and operating margin ahead of consensus.
Revenue of $202.4 million (+10.3% Y/Y) was above guidance for $200.0-$201.0 million and consensus of $200.5 million. Non-GAAP operating income was $34.4 million (17.0% margin), above consensus of $30.7 million. Non-GAAP EPS of $0.18 beat guidance for $0.16-$0.17 and the Street’s $0.17.
Key metrics: billings of $159.4 million (+24% Y/Y); closed 59 deals over $100,000 (+48% Y/Y); net retention rate was 103%; remaining performance obligations of $864.8 million (+20% Y/Y).
Box’s strategy is aligned to three major trends driving the future of work: hybrid work environments; cloud and digital first businesses; and requirements for data security, compliance and privacy.
Multiproduct suite sales are gaining traction with customers as evidenced by a 49% attach rate in deals over $100,000.
Billings benefited by approximately $5 million in early renewals that had been slated for Q2, which combined with the mid- single digit billings guidance for Q2 implies accelerating billings growth of 13% for 1H ’22 versus the same period last year.
Q2 guidance for revenue of $211.0-$212.0 million and a non-GAAP operating margin of 18.0%-18.5% (implies non-GAAP operating income of $38.0-$39.2 million) was ahead of Street expectations for $209.5 million in revenue and $34.7 million in non-GAAP operating income but guidance for non-GAAP EPS of $0.17-$0.18 was short of the Street’s $0.19.
Management raised its FY ’22 revenue guidance from $840.0-$848.0 million to $845.0-$853.0 million, issued non-GAAP operating margin guidance of 18.0%-18.5% (implies non-GAAP operating income of $152.1-$157.8 million versus consensus of $143.5 million), and lowered its non-GAAP EPS guidance from $0.76-$0.81 to $0.71-$0.76.
Domo Announces First Quarter Fiscal 2022 Financial Results
Domo (DOMO) reported Q1 ’22 results above expectations and raised its guidance for FY ’22.
Revenue was $60.1 million (+23.7% Y/Y), above guidance for $56.5-$57.5 million and consensus of $57.5 million. Non-GAAP operating income was $(5.0) million, exceeding consensus of $(10.3) million. Non-GAAP EPS of $(0.26) beat guidance for $(0.47)-$(0.43) and the Street’s $(0.43).
Key metrics: billings of $58.2 million (+25% Y/Y); net retention rate remained over 100%; remaining performance obligations of $284.3 million (+24% Y/Y).
Domo had a record Q1 spanning both new business and retention and saw broad based strength across both the enterprise and corporate segments and in all geographies.
The company has seen increasing traction with customers signing seven-figure ARR deals over the past year and is now in discussions with customers about potential $10 million annual contracts.
Domo has hired over 20% more new sales reps compared to last year and is on track with its hiring plans to support its 20% growth target.
Q2 revenue of $60.0-$61.0 million and non-GAAP EPS of $(0.39)-$(0.35) was ahead of Street expectations for $59.7 million and $(0.40), respectively.
Management raised its FY ’22 revenue and non-GAAP EPS guidance from $240.0-$245.0 million and $(1.63)-$(1.53), respectively, to $246.0-$252.0 million and $(1.41)-$(1.33).
Intuit (INTU) reported Q3 ’21 results above the high-end of its pre-announced range and guided Q4 above expectations.
Revenue of $4.173 billion (+39.0% Y/Y) was above the pre-announced range of $4.165-$4.170 billion. Non-GAAP operating income of $2.201 billion (52.7% margin) was also ahead of the pre-announced range of $2.195-$2.200 billion. Non-GAAP EPS of $6.07 beat the pre-announced range of $6.00-$6.05.
Online Ecosystem revenue increased 28% Y/Y, and management expects a return to growth of 30% some time in FY ’22.
Tax results through the May 17 filing deadline reflect another strong season, which should translate into a one-point share gain in total returns, an increase in average revenue per return and 11%-12% growth in the Consumer Group this year.
Q4 guidance for revenue growth of 26%-28% and non-GAAP EPS of $1.55-$1.60 was well above consensus of $1.770 billion in revenue and $0.34 in non-GAAP EPS, reflecting the shift in timing of the IRS filing deadline from Q3 to Q4.
As previously communicated, Intuit raised its FY ’21 guidance ranges and now anticipates revenue of $9.362-$9.400 billion, non-GAAP EPS of $3.340-$3.360 billion and non-GAAP EPS of $9.32-$9.37.
Salesforce Announces Strong First Quarter Fiscal 2022 Results
Salesforce (CRM) reported Q1 ’22 results above expectations and raised its guidance for FY ’22.
Revenue of $5.963 billion (+22.6% Y/Y) was ahead of guidance for $5.875-$5.885 billion and consensus of $5.887 billion. Non-GAAP operating income was $1.206 billion (20.2% margin), exceeding consensus of $1.047 billion. Non-GAAP EPS of $1.21, which included a $0.23 benefit from mark-to-market accounting of the company’s strategic investments, beat guidance for $0.88-$0.89 and the Street’s $0.89.
Key metrics: current remaining performance obligation of $17.8 billion (+23% Y/Y) was above guidance for 19% growth; revenue attrition was between 9.0% and 9.5%.
The strong performance was driven by an all-time high in seven-figure plus transactions, representing growth of over 120% Y/Y, and reflected increasing inclusion of Tableau and MuleSoft in large deals.
The acquisition of Slack is on track to close near the end of Q2, so there is no anticipated revenue contribution from the deal in Q2 guidance.
Q2 guidance for revenue of $6.220-$6.230 billion and non-GAAP EPS of $0.91-$0.92 was ahead of Street expectations for revenue of $6.155 billion and non-GAAP EPS of $0.86.
Management raised its FY ’22 guidance of revenue, non-GAAP operating margin and non-GAAP EPS from $25.650-$25.750 billion, 17.7% and $3.39-$3.41, respectively, to $25.900-$26.000 billion, 18.0% and $3.79-$3.81.
Workday Announces Fiscal 2022 First Quarter Financial Results
Workday (WDAY) reported Q1 ’22 results above expectations and raised its outlook for FY ’22.
Total revenues of $1.175 billion (+15.4% Y/Y) were above guidance for $1.157-$1.159 billion and consensus of $1.160 billion. Non-GAAP operating income was $288.5 million (24.6% margin), exceeding guidance for a 19.0% margin and consensus of $221.0 million. Non-GAAP EPS of $0.87 beat the Street’s $0.73.
Key metrics: 24-month backlog was $6.59 billion (+20% Y/Y); subscription revenue backlog was $10.08 billion (+23% Y/Y).
Workday started the year with significant momentum driven by an increase in demand across all product areas and the company’s focus on industry solutions.
Geographically, North America and APJ saw outperformance while EMEA drove healthy bookings growth.
Management plans to increase its global workforce by over 20%, or 2,500 new hires, in FY ’22.
Q2 guidance for revenue of $1.240-$1.242 billion and a non-GAAP operating margin of 20.0%, or non-GAAP operating income of $248.0-$248.4 million, was ahead of Street expectations for revenue of $1.227 billion and non-GAAP operating income of $210.5 million.
Management raised its FY ’22 guidance for revenue and non-GAAP operating margin from $4.970-$4.990 billion and 17.0%, respectively, to $5.015-$5.030 billion and 18.0%-19.0%.
Zscaler Reports Third Quarter Fiscal 2021 Financial Results
Zscaler (ZS) reported Q3 ’21 results above expectations and guided Q4 revenue ahead of consensus.
Revenue of $176.4 million (+59.6% Y/Y) was above guidance for $162.0-$164.0 million and consensus of $163.7 million. Non-GAAP operating income was $22.9 million (13.0% margin), exceeding guidance for $11.0-$12.0 million and consensus of $11.6 million. Non-GAAP EPS of $0.15 beat both guidance and consensus of $0.07.
Key metrics: billings of $225.0 million (+71% Y/Y); dollar-based net retention rate of 126%.
The strong performance in the quarter was driven by a record number of seven-figure ACV deals with large enterprises, an increasing mix of sales from platform upsells and returns from last year’s investments in go-to-market.
The core ZIA and ZPA business has never been stronger, and management is excited about the early traction of ZDX and ZCP, which represent the next growth engines for the company.
The acquisitions of Trustdome and Smokescreen will have an immaterial impact on revenue, and Zscaler expects to incur an incremental $2.5-$3.0 million in related operating expenses in Q4 and $13.0-$14.0 million in FY ’22.
Q4 guidance for revenue of $185.0-$187.0 million, non-GAAP operating income of $13.5-$14.5 million and non-GAAP EPS of $0.08-$0.09 compared favorably with Street expectations for $173.9 million, $14.0 million and $0.09, respectively.
Zuora Reports First Quarter Fiscal 2022 Results
Zuora (ZUO) reported Q1 ’22 results above expectations and raised its revenue outlook for FY ’22.
Revenue of $80.3 million (+8.7% Y/Y) was above guidance for $78.0-$80.0 million and consensus of $79.0 million. Non-GAAP operating income was $(2.5) million, ahead of guidance for $(5.0)-$(4.5) million and consensus of $(4.7) million. Non-GAAP EPS of $(0.02) beat guidance for $(0.04)-$(0.03) and the Street’s $(0.04).
Key metrics: 677 customers with ACV of $100,000 or more (+5% Y/Y); dollar-based retention rate was 103%; $17.0 billion in transaction volume processed (+38% Y/Y).
Systems integration partners were involved in two-thirds of new business deals in Q1, the pipeline grew significantly and Zuora had a strong upsell quarter with triple-digit growth Y/Y in installed base bookings.
Q2 guidance for revenue of $82.5-$84.5 million, non-GAAP operating income of $(5.0)-$(4.5) million and non-GAAP EPS of $(0.04)-$(0.03) was mixed relative to consensus of $81.8 million, $(2.8) million and $(0.02), respectively.
Management raised its FY ’22 revenue guidance from $335.0-$337.0 million to $337.0-$339.0 million and maintained its prior outlook for non-GAAP operating income and EPS of $(12.0)-$(8.0) million and $(0.10)-$(0.06), respectively.
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 Box, Inc. (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 Inc. (STMP).