K. Liu's Week in Review
After rumors first surfaced a couple weeks ago, Intuit (INTU) confirmed that the company has agreed to acquire Mailchimp for $12 billion in cash and stock. Through its customer engagement and digital marketing platform, Mailchimp enables small and mid-market businesses to establish a presence and sell online, create and send messages across various digital channels, manage customer data, and leverage analytics and reporting tools to improve the effectiveness of marketing campaigns. Strategically, the acquisition adds $30 billion to Intuit’s total addressable market and accelerates its bets on being the center of small business growth and disrupting the small business mid-market. Financially, Mailchimp generated approximately $800 million in revenue last year, reflecting a growth rate of 20%, and the transaction is expected to be accretive to Intuit’s non-GAAP EPS in FY ’22. As an aside, competitor Squarespace (SQSP) also generates approximately $800 million in revenue with a growth rate in excess of 20% yet trades considerably below the 15x sales multiple garnered by Mailchimp. Intuit plans to finance the cash portion of the deal through cash on hand and new debt of $4.5-$5.0 billion.
Turning to another e-commerce play, ChannelAdvisor (ECOM) issued long-term financial targets ahead of its virtual analyst day, calling for revenue of at least $250 million and adjusted EBITDA of at least $50 million in FY ‘25. The revenue outlook implies sustained double-digit growth going forward, while the adjusted EBITDA target implies margins should hold at current year levels for the foreseeable future. Underpinning management’s confidence in ChannelAdvisor’s growth trajectory is traction with brands, which has yielded accelerating ARR growth, higher net revenue retention rates and a larger cohort of customers generating over $100,000 in ARR. As for the lack of margin expansion implied in the long-term guidance, management indicated that the $50 million figure represents a baseline, meaning margins will remain intact even as the company invests in its growth initiatives and the FY ’25 adjusted EBITDA target is likely to prove conservative. Given its anticipated growth and margin profile, management believes ECOM shares are undervalued as comparable companies trade at EV/Sales multiples ranging from 5x to 17x with average and median multiples around 10x, which is more than double the company’s present valuation. As such, the Board of Directors has approved a $25 million share repurchase program through August 2022.
As far as other notable developments, Radware (RDWR) is reportedly in talks to be acquired by Siris Capital. Oracle (ORCL) reported mixed fiscal Q1 ’22 results, reflecting a beat on the bottom line despite a modest miss on the top line. That said, management noted that currency movements in the quarter were a headwind, and the company beat its constant currency revenue guidance by $100 million. As for the outlook, management guided Q2 revenue in line with consensus and non-GAAP EPS ahead of Street expectations. Reflecting the next phase of its integration of NetMotion, Absolute Software (ABST) appointed John Herrema as Executive Vice President of Product & Strategy and Joe Windels as Chief Marketing Officer. Mr. Herrema joins the company from Blackberry, where he was Senior Vice President of Product Management, and Mr. Windels joined the company in July through the acquisition of NetMotion, where he was Chief Marketing Officer. Lastly, AppFolio (APPF) named Fay Sien Goon as its Chief Financial Officer. Ms. Goon joins the company from ServiceNow (NOW), where she served as Chief Accounting Officer.
Mergers and Acquisitions
Intuit (INTU) has agreed to acquire Mailchimp, a customer engagement and marketing platform targeting small and mid-market businesses, for $12 billion in cash and stock.
Mailchimp’s tools for acquiring and retaining customers include E-commerce, Marketing Automation, Customer Relationship Management and Insights.
Mailchimp generated approximately $800 million in revenue in 2020 (+20% Y/Y) and boasts 13 million total users globally, 2.4 million monthly active users and 800,000 paid customers.
The purchase price will be split equally between cash and shares of INTU with the latter being valued at $562.61 per share.
Intuit expects to finance the cash portion via cash on hand and new debt of $4.5-$5.0 billion.
Private equity firm Siris Capital in talks to acquire cybersecurity firm Radware, sources say
Per CNBC, Radware (RDWR) is in talks to be acquired by Siris Capital.
Neither Radware nor Siris Capital commented on the rumor, and CNBC’s sources said no deal is assured and the discussions may still fall apart.
Earnings Releases
Oracle Announces Fiscal 2022 First Quarter Financial Results
Oracle (ORCL) reported mixed Q1 ’22 results and guided Q2 non-GAAP EPS ahead of consensus.
Revenues of $9.728 billion (+3.9% Y/Y) were in line with guidance for growth of 3.0%-5.0% but just shy of consensus of $9.770 billion. Non-GAAP operating income was $4.334 billion (44.6% margin), ahead of consensus of $4.147 billion. Non-GAAP EPS of $1.03 beat guidance for $0.94-$0.98 and the Street’s $0.97.
Key metrics: Over 8,000 Fusion ERP cloud customers and over 28,000 NetSuite ERP customers at quarter-end; Fusion ERP cloud revenue +32% Y/Y; NetSuite ERP cloud revenue +28% Y/Y; RPO of $38.7 billion (+10% Y/Y in constant currency).
Oracle plans to make MySQL with HeatWave available on other public clouds, thereby competing more aggressively with Amazon’s Aurora and Redshift as well as Snowflake.
Q2 guidance for revenue growth of 3.0%-5.0%, implying revenues of $10.094-$10.290 billion, was in line with consensus of $10.245 billion, while guidance for non-GAAP EPS of $1.09-$1.13 was ahead of the Street’s $1.08.
Notable News
Absolute Software (ABST) has appointed John Herrema as Executive Vice President of Product & Strategy and Joe Windels as Chief Marketing Officer.
Mr. Herrema joins the company from Blackberry, where he served as Senior Vice President of Product Management, and Mr. Windels joined the company in July through the acquisition of NetMotion, where he served as Chief Marketing Officer.
Ameer Karim, who was Executive Vice President of Management, and Sandra Toms, who was Chief Marketing Officer, will be leaving the company as part of the transition.
AppFolio Names Fay Sien Goon as Chief Financial Officer
AppFolio (APPF) has appointed Fay Sien Goon as Chief Financial Officer, effective October 18, 2021.
Ms. Goon joins the company from ServiceNow (NOW) where she served as Chief Accounting Officer.
ChannelAdvisor Announces Long-term Financial Targets, Share Repurchase Authorization
ChannelAdvisor (ECOM) is targeting revenue of at least $250 million and adjusted EBITDA of at least $50 million in FY ’25, reflecting sustained double-digit revenue growth with strong margins and cash flow.
The Board of Directors has also authorized a $25 million share repurchase program through August 2022.
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 Squarespace (SQSP).