K. Liu's Week in Review
Ahead of an upcoming vote on Founder Germain Lamonde’s proposal to go-private, EXFO (EXFO) reported fiscal Q3 ’21 results reflecting double-digit top line growth and robust bookings growth. The strong sales performance was attributed to the resumption of fiber deployment projects previously delayed by the pandemic as well as a good performance in the EMEA region. Our interest is primarily in EXFO’s Service Assurance, Systems and Services (SASS) segment given the potential read-throughs to NetScout Systems (NTCT). In this regard, EXFO doubled its SASS bookings from the year-ago period, resulting in a book-to-bill ratio of 1.8x. However, the company also indicated that an ongoing lab evaluation with a Tier-1 service provider in North America has been delayed by the scope of transformation and functionality required. All told, the strong bookings performance coupled with the timing of the take-private offer leave us more confident in NetScout’s ability to deliver renewed growth in its FY ’22. NetScout reports its fiscal Q1 ’22 results on Thursday, July 29.
Supply chain-focused E2open (ETWO) posted Q1 ’22 revenue and adjusted EBITDA slightly ahead of Street expectations and reaffirmed its prior guidance for FY ‘22. Per management, bookings on both a gross and net basis increased 80% Y/Y, exceeding the company’s internal plan and leaving E2open well positioned to achieve its 10% organic revenue growth target for the year. The strong bookings growth reflected improved close rates against a still-growing pipeline and the signing of two platform contracts that more than doubled the subscription revenues associated with those clients. Management believes the company has over 300 more enterprise clients that could become platform customers in time, which combined with the E2open’s pending acquisition of BluJay Solutions should support ample opportunity for growth within the installed base.
Both eGain (EGAN) and SolarWinds (SWI) also pre-announced results above their prior guidance. For the former, new logo acquisition more than doubled exiting its fiscal year, while the latter’s announcement coincides with the imminent spin-off of its subsidiary, N-able (NABL). Ahead of the spin-off, N-able agreed to sell 20,623,282 shares of common stock at a purchase price of $10.91 per share in a private placement transaction led by Canada Pension Plan Investment Board. The estimated net proceeds of $216 million will be distributed to SolarWinds prior to the spin-off, meaning N-able will not retain any of the proceeds.
ZoomInfo (ZI) entered the Conversation Intelligence market with a $575 million bet on Chorus.ai, which captures and analyzes prospect and customer calls, meetings and emails. The combination of ZoomInfo’s top-of-funnel capabilities with Chorus.ai will enable customers to improve existing workflows and identify next-best-actions that enhance sales performance. Management estimates the acquisition expands ZoomInfo’s total addressable market to $70 billion. Near-term, Chorus.ai is expected to contribute less than $10 million in GAAP revenue in 2021 and add less than $10 million to net expenses this year. However, the acquisition is expected to contribute positive adjusted operating income within 12 months and be accretive to cash flow by the latter half of FY ’22. Funding for the deal includes cash on hand and the offering of an additional $300 million of ZoomInfo’s existing 3.875% Senior Notes due 2029.
Mergers and Acquisitions
ZoomInfo (ZI) has agreed to acquire Chorus.ai, which captures and analyzes prospect and customer calls, meetings and emails to discover insights that enhance sales outcomes, for $575 million in cash.
The acquisition expands ZoomInfo’s total addressable market to an estimated $70 billion and is expected to be immediately accretive to growth, generate positive operating income on an adjusted basis within 12 months and to be accretive to cash flow in 2H ’22.
Chorus.ai more than doubled its revenue over the past year and is expected to contribute less than $10 million to ZoomInfo’s GAAP revenue and less than $10 million in net expenses in 2021.
Earnings Releases
E2open Announces Fiscal First Quarter 2022 Financial Results
E2open (ETWO) reported Q1 ’22 results slightly ahead of Street expectations and reaffirmed its prior guidance for FY ’22.
Non-GAAP revenue was $88.8 million (+6.9% Y/Y), ahead of consensus of $88.4 million. Adjusted EBITDA was $29.2 million (32.9% margin), above consensus of $29.0 million.
Q1 was a very strong bookings quarter with both gross and net bookings increasing 80% Y/Y.
Signed two platform contracts in which subscription revenue doubled from those clients, and management indicated that the company has over 300 more enterprise clients that could potentially become platform customers.
E2open is on track to sign three to five strategic partnerships per year for the foreseeable future.
The pending combination of E2open’s platform and trading partner network with BluJay’s logistics execution platform is a transformative event expected to be both strategically and financially accretive.
Management reaffirmed its prior FY ’22 guidance for non-GAAP revenue of $369.0-$371.0 million and adjusted EBITDA of $120.0-$122.0 million.
eGain Expects Fiscal 2021 Revenue and Earnings to Exceed Guidance
eGain (EGAN) pre-announced FY ’21 results above its prior guidance.
Both SaaS and total revenue are expected to be at or above the high-end of management’s prior guidance for $66.0-$66.4 million and $77.3-$77.9 million, respectively, while non-GAAP EPS is expected to exceed prior guidance for $0.19-$0.22.
The strong performance was attributed to the company’s focus on new logo acquisition, which resulted in new SaaS logo wins more than doubling from the prior year period.
eGain ended the quarter with approximately $63 million in cash and no debt.
EXFO reports third quarter results for fiscal 2021
EXFO (EXFO) reported Q3 ’21 results but did not host an earnings call due to its pending transaction to go-private.
Sales were $72.6 million (+9.8% Y/Y), adjusted EBITDA was $4.3 million (5.9% margin) and EPS were $(0.07).
Bookings totaled $87.0 million (+47% Y/Y), including Test & Measurement (T&M) bookings of $59.7 million (+28% Y/Y) and Service Assurance, Systems and Services (SASS) bookings of $26.8 million (+106% Y/Y).
Book-to-bill ratio was 1.2, T&M book-to-bill ratio was 1.0 and SASS book-to-bill ratio was 1.8.
Management attributed the strong results in the quarter to the resumption of fiber deployment projects previously delayed due to the coronavirus pandemic and a good performance in EMEA.
A service assurance lab evaluation with a tier-1 US network operators is ongoing but has taken longer than anticipated due to the level of transformation and functionality required.
SolarWinds and N-able Announce Second Quarter 2021 Preliminary Financial Results
SolarWinds (SWI) pre-announced Q2 ’21 non-GAAP revenue of $260.8-$262.1 million and adjusted EBITDA of $108.5-$111.5 million, above guidance for $254.0-$258.0 million and $102.0-$104.0 million, respectively, and ahead of consensus of $256.4 million and $106.0 million.
N-able (NABL) is expected to report revenue of $84.8-$85.0 million, slightly above SolarWinds’ initial guidance for $83.5-$84.0 million.
Notable News
Anaplan Appoints Vikas Mehta as Chief Financial Officer
Anaplan (PLAN) has appointed Vikas Mehta as Chief Financial Officer, effective July 19, 2021.
Mr. Mehta most recently served as CFO of Nike’s direct business, and he previously held multiple leadership roles at Microsoft (MSFT), spanning its commercial business, cloud computing and digital transformation efforts.
N-able Announces Pricing of $225 Million Private Placement
Ahead of its upcoming spin-off from SolarWinds (SWI), N-able (NABL) agreed to sell 20,623,282 shares of its common stock at a price of $10.91 per share in a private placement transaction led by Canada Pension Plan Investment Board.
The estimated net proceeds of $216 million will be distributed to SolarWinds prior to the closing of the spin-off and will not be retained by N-able.
ZoomInfo Announces Pricing of $300 million of 3.875% Senior Notes due 2029
ZoomInfo (ZI) priced an offering of $300 million aggregate principal amount of its existing 3.875% Senior Notes due 2029.
The offering was in addition to ZoomInfo’s issuance of $350 million aggregate principal amount of the notes on February 2, 2021 and the additional notes will be issued at a price equal to 99.25% of their face value plus accrued interest from February 2 to the expected closing date on July 15, 2021.
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)