K. Liu's Week in Review
American Software (AMSWA) had a meme stock moment of its own as shares rocketed higher following the company’s fiscal Q4 ’21 earnings release. Full disclosure, K. Liu & Company LLC provides American Software with investor relations services. Although the usual revenue and profitability measures reflected a solid quarter, the enthusiasm was further fueled by strong growth in the company’s Cloud Services Annual Contract Value (ACV), a leading indicator for growth in subscription revenue. Growth in the metric reaccelerated to 45% as net new ACV added in Q4 more than doubled from American Software’s prior record for any quarter, benefiting in part from the closure of two seven-figure ACV deals. The average term for the company’s larger transactions also increased, resulting in a 51% expansion in backlog. As far as sustaining the performance going forward, management noted that the pipeline remains at robust levels and continues to rise. While no formal guidance was offered, management expressed comfort with expectations for double-digit growth and an adjusted EBITDA margin in the low- to mid-teens range in FY ‘22.
Coupa Software (COUP) also highlighted a doubling of new business in its fiscal Q1 ’22 results. Per management, the selling environment continues to improve but has yet to return to pre-pandemic norms. Of relevance to American Software, Coupa’s management highlighted the fragility of supply chains as one of three megatrends that continue to drive its pipeline higher. In order for businesses to navigate constant changes in the environment, management believes that the integration of supply chain data with traditional procurement solutions will be critical. Consistent with this view, the company acquired LLamasoft late last year. In Q1, billings contribution from LLamasoft outpaced management’s initial expectations. One caveat, however, was that Coupa hopes to convert LLamasoft’s legacy term license business to SaaS, and the performance in Q1 was more reflective of strength in the former, thereby limiting the contribution to subscription revenue in future periods. In any event, the strong start to the year prompted both an above-consensus outlook for Q2 and an uptick in the company’s expectations for FY ’22. Coupa also announced a couple of changes in its finance organization, promoting CFO Todd Ford to President of Finance and Operations and naming Chief Accounting Officer Tony Tiscornia as its new CFO.
Switching gears to M&A, EXFO (EXFO) agreed to be taken private by its founder and majority shareholder, Germain Lamonde, for $6.00 per share in cash. The purchase price represents a 62% premium to the last closing price prior to the announcement and corresponds to TTM EV/Sales and EV/EBITDA multiples of 1.2x and 13x. Based on consensus estimates, EXFO was expected to grow at a high single-digit rate and generate an adjusted EBITDA margin of similar magnitude. From a valuation perspective, the transaction suggests the 12x EV/EBITDA multiple we use to derive our $33.00 price target on NetScout Systems (NTCT) may be conservative. Of more significance is the timing, however, as both EXFO and NetScout have highlighted increasing opportunities to support service providers in their next-generation network rollouts. That EXFO’s founder opted to take the company private now perhaps signals a more favorable spending cycle may finally be emerging.
As for other notable developments, Tyler Technologies (TYL) updated its FY ’21 guidance to reflect the anticipated contribution from its acquisition of NIC. Aside from the upward revision to the outlook, management highlighted two key synergies arising from the combination: an increase in Tyler’s take rate on transaction fees from leveraging NIC’s back-end payment processing capabilities and the ability to move Tyler’s solutions through NIC’s state enterprise master contracts. MicroStrategy (MSTR) priced an offering of $500 million aggregate principal amount of senior secured notes due 2028 bearing interest at an annual rate of 6.125%. The company plans to utilize the net proceeds to add to its stash of 92,079 bitcoin. As for a more traditional approach to capital allocation, Pegasystems (PEGA) upped its existing share repurchase authorization from $21.7 million to $60.0 million and extended the expiration date of the program to June 30, 2022.
Mergers and Acquisitions
EXFO announces going-private transaction by its Founder and Majority Shareholder, Germain Lamonde
EXFO has agreed to be taken private by its founder and majority shareholder, Germain Lamonde, for $6.00 per share in cash, representing a premium of 62.2% to the last closing price prior to announcement of the transaction.
Mr. Lamonde controls 3,672,474 subordinate voting shares and 31,643,000 multiple voting shares, which collectively represent 61.5% of the issued and outstanding shares and 93.5% of the voting rights attached to such shares.
On a TTM basis, the purchase price represents EV/Sales and EV/EBITDA multiples of 1.2x and 13.3x, respectively.
Consensus estimates for EXFO reflected expectations for growth and adjusted EBITDA margin in the high single-digits.
ZoomInfo Acquires Insent to Enable Businesses to Implement Chat at Scale
ZoomInfo (ZI) has acquired Insent, a conversational marketing platform used to identify website visitors in real time and initiate chat sessions to improve conversion rates.
Insent’s lead routing capabilities will be combined with ZoomInfo’s buyer intelligence and will be available as a new solution, ZoomInfo Chat, in Q3.
Earnings Releases
American Software Reports Fourth Quarter and Fiscal Year 2021 Results
American Software (AMSWA) reported Q4 ’21 earnings ahead of expectations on in line revenues.
Revenues of $28.6 million (-2.4% Y/Y) were approximately in line with consensus of $28.7 million. Adjusted EBITDA was $3.7 million (13.0% margin), above consensus of $3.1 million. Non-GAAP EPS of $0.11 beat the Street’s $0.06.
Key metrics: added net new Cloud Services Annual Contract Value (ACV) of $6.7 million for cumulative ACV of $38.3 million (+45% Y/Y) at quarter-end; remaining performance obligations of $116 million (+51% Y/Y).
American Software generated record net new ACV in the quarter, more than doubling the company’s prior high, and closed two deals with ACV in excess of $1 million.
Backlog increased significantly as customers entered into longer duration agreements with the company.
Due to record bookings and backlog, management anticipates expanding its services capacity via direct hires and by leveraging the growing partner ecosystem.
Although no formal guidance was provided, management indicated that double-digit revenue growth and an adjusted EBITDA margin of 12%-15% was achievable in FY ’22.
Coupa Software Reports First Quarter Fiscal 2022 Financial Results
Coupa Software (COUP) reported Q1 ’22 results above expectations and raised its guidance for FY ’22.
Revenues of $166.9 million (+40.0% Y/Y) were above guidance for $151.5-$152.5 million and consensus of $151.1 million. Non-GAAP operating income was $7.0 million (4.2% margin), exceeding guidance for $(12.0)-$(10.0) million and consensus of $(11.3) million. Non-GAAP EPS of $0.07 beat guidance for $(0.21)-$(0.18) and the Street’s $(0.19).
Key metrics: billings of $149 million (+46% Y/Y); $2.6 trillion in cumulative spend under management.
Although the global business and economic environment has yet to return to pre-pandemic norms, Coupa saw further signs of improvement and delivered strong results, including a doubling of new business.
The acquisition of LLamasoft contributed $18.5 million to billings.
The attach rate for Coupa Pay was in excess of 30% on new deals closed in Q1, and payment volumes processed in the first four months of this year have already outpaced all of last year.
Coupa continues to see meaningful growth in its sales pipeline driven by megatrends such as supply chain fragility, the ongoing pandemic and a low interest rate environment and enters Q2 with its largest pipeline ever.
Q2 guidance for revenues of $162.0-$163.0 million, non-GAAP operating income of $(3.0)-$(2.0) million and non-GAAP EPS of $(0.07)-$(0.05) was ahead of Street expectations for $160.0 million, $(6.3) million and $(0.09), respectively.
Management raised its FY ’22 guidance from $675.0-$678.0 million in revenue, $(10.0)-$(7.0) million in non-GAAP operating income and $(0.27)-$(0.23) in non-GAAP EPS to $681.0-$684.0 million, $(7.0)-$(2.0) million and $(0.20)-$(0.14).
Verint Announces Strong Cloud Growth in the First Quarter
Verint (VRNT) reported Q1 ’22 results above expectations and raised its non-GAAP EPS guidance for FY ’22.
Non-GAAP revenue was $201.9 million (+6.8% Y/Y), ahead of guidance for “nearly $200.0 million” and consensus of $196.5 million. Adjusted EBITDA was $48.9 million (24.2% margin), above consensus of $40.1 million. Non-GAAP EPS of $0.44 beat the Street’s $0.35.
Key metrics: non-GAAP cloud revenue of $81.1 million (+39% Y/Y); perpetual license equivalent bookings (PLE) of $61.0 million (+28% Y/Y); new SaaS ACV of $18.8 million (+58% Y/Y); RPO of $619 million (+30% Y/Y).
Per management, Verint’s differentiated platform has positioned the company to win new customers and to capture white space within its customer base.
Verint’s cloud momentum is expected to continue and management raised its PLE bookings growth outlook for the year.
Q2 guidance for revenue of $205.0-$210.0 million and non-GAAP EPS of $0.40 was mixed relative to Street expectations for revenue of $208.7 million and non-GAAP EPS of $0.52.
Management reiterated its prior FY ’22 guidance for revenue of $860 million ± 2% and raised its non-GAAP EPS guidance from $2.20 to $2.23.
Notable News
Coupa Announces Leadership Moves in Finance and Operations
Coupa Software (COUP) has appointed Todd Ford as President of Finance and Operations, a role in which he will dedicate more time to the company’s global initiatives.
Mr. Ford previously served as Chief Financial Officer and will be succeeded by Tony Tiscornia, who was previously Coupa’s Chief Accounting Officer.
MicroStrategy Announces Pricing of Private Offering of Senior Secured Notes
MicroStrategy (MSTR) priced an offering of $500 million aggregate principal amount of senior secured notes due 2028 bearing interest at an annual rate of 6.125%.
The company plans to utilize the net proceeds, estimated at $488 million, to purchase additional bitcoins.
MicroStrategy currently owns approximately 92,079 bitcoins, which will be held by a newly formed subsidiary, MacroStrategy LLC, and expects to incur an impairment loss of at least $284.5 million in Q2.
Pega Expands Current Share Repurchase Program
Pegasystems (PEGA) has increased its existing share repurchase authorization from $21.7 million, which is the amount remaining under the prior authorization, to $60.0 million.
The expiration date of the share repurchase program has also been extended by a year to June 30, 2022.
Tyler Technologies Updates 2021 Annual Guidance
Tyler Technologies (TYL) updated its 2021 annual guidance to reflect the expected contribution from the acquisition of NIC Inc. beginning on April 21, 2021 and its strong year-to-date performance.
Guidance for FY ’21 now calls for non-GAAP revenue of $1.510-$1.540 billion, including contribution from NIC of $310-$315 million, and non-GAAP EPS of $6.65-$6.77.
Tyler’s initial guidance for FY ’21 included non-GAAP revenue of $1.190-$1.220 billion and non-GAAP EPS of $5.65-$5.77.
On a pro forma basis, NIC would have been expected to contribute non-GAAAP revenues of $475-$480 million, including COVID-related revenues of $57 million not expected to recur in future years.
Key synergies anticipated from the merger are Tyler’s ability to leverage NIC’s back-end payment processing capabilities to retain a greater share of transaction fees and the opportunity to move Tyler solutions through NIC’s state enterprise master contracts
Separately, management noted that VendEngine, an acquisition expected to close in Q3, has about $20 million in ARR and is growing approximately 30%.
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 NetScout Systems (NTCT).