K. Liu's Week in Review
Despite the short week post-Labor Day, there was much to absorb with a slew of companies reporting results, a number of notable acquisitions, and a couple of secondary offerings in the mix. Investors in MAM Software Group (MAMS) returned from the break to find that the company reached an agreement to be bought by Kerridge Commercial Systems for $12.12 per share in cash, representing a 14% premium to the last closing price and an equity value of $154.2 million. The purchase price values the provider of business management solutions to the automotive parts, tire, and distribution industries at 4.1x TTM sales and 24.9x TTM adjusted EBITDA. The announcement was also timely from our perspective as we subsequently initiated coverage of QAD Inc. (QADA), a manufacturing-focused ERP software vendor, and believe the acquisition multiples support our contention that the stock is attractively valued. In the cybersecurity world, Palo Alto Networks (PANW) agreed to acquire Zingbox, an IoT security company whose cloud-based service and technology will be integrated with its Next-Generation Firewall and Cortex platforms, for $75 million in cash. The company also reported a strong finish to its fiscal 2019 and hosted an investor event in which management provided a three-year outlook calling for a 20% CAGR in revenue and billings through FY ’22, at which time Palo Alto Networks should return to an operating margin of 25% and generate $4 billion in free cash flow. Elsewhere, Ceridian (CDAY) continued its push into the Australian and New Zealand markets with the acquisition of RITEQ, a provider of enterprise workforce management solutions with over 325 customers. The deal follows Ceridian’s recent launch of its Dayforce Payroll solution in Australia and enables the company to provide an end-to-end platform to manage all aspects of the employee lifecycle in the region. Separately, Ceridian priced a secondary offering of 9.0 million shares, all of which were sold by a group of selling stockholders comprised of affiliates of Thomas H. Lee Partners, Cannae Holdings, and Ceridian’s Chairman and Chief Executive Officer, David Ossip. The offering was upsized from initial plans to sell 8.0 million shares and priced at $56.30, representing just a 2% discount to the close price prior to the announced offering. Low-code platform provider Appian (APPN) also launched a secondary offering of 2.329 million shares, comprised of 1.825 million primary shares and 504,000 shares offered by selling stockholders. Talend (TLND), a provider of data integration solutions, sought to raise capital as well and priced an offering of €125.0 million aggregate principal amount of 1.75% convertible senior notes due 2024. The initial conversion price of approximately €51.75 per American Depositary Share, reflected a premium of 38.7% to the close price prior to the announcement of the planned offering. Anticipated net proceeds of €120.4 million (or €138.5 million if the initial purchasers exercise their option to purchase an additional 18.75 million aggregate principal amount in full) will be used for working capital and other general corporate purposes.
Amidst a pile-up of earnings releases, Cloudera (CLDR) was the top performer from a share price perspective following a beat and raise in its fiscal Q2 ’20 results. The stock had cratered following last quarter’s results, but a rebound in renewal activity, rising win rates against cloud service providers, and an improving pipeline provided a welcome respite. A search for a permanent CEO remains underway and the company also announced plans to align its licensing and distribution practices with industry standards set by Red Hat, which will take effect beginning next year. Additionally, Cloudera will acquire certain assets of Arcadia Data and merge its ArcEngine technology into Cloudera Data Warehouse, enabling customers to more quickly extract data and insights from modern data stores. Both Secureworks (SCWX) and DocuSign (DOCU) also popped with the former reporting a rebound in sales activity, pipeline conversion and pipeline growth, and the latter exhibiting accelerating billings growth and raising its revenue and billings outlook for the year. At the other end of the spectrum was Domo (DOMO), which reported in line sales and a lower than anticipated loss but reduced its outlook for the year. Management attributed a disappointing sales performance to delays in closing larger enterprise transactions as well as a slowdown in the Asia Pacific region. Initiatives to reaccelerate growth include message refinement, increasing focus on self-service proof of concepts, the hiring of a new Chief Strategy Officer, and expanding go-to-market partnerships. Despite posting strong results and guidance, Smartsheet (SMAR) and PagerDuty (PD) were also hard hit and others like Medallia (MDLA), Slack Technologies (WORK), and Zoom Video Communications (ZM) also traded lower while delivering a beat and raise.
Verint Systems (VRNT) was also under pressure upon posting muted sales results this week, reflecting a business model still in transition. Management highlighted strong growth in both cloud revenue and SaaS ACV bookings within its Customer Engagement segment as evidence that the company’s “Cloud First” strategy is paying dividends. The company’s software model strategy within its Cyber Intelligence segment is also progressing faster than anticipated, resulting in lower hardware sales during the quarter but a major boost to gross margin. On the whole, the revenue shortfall was not particularly disheartening, in our view, and with management’s outlook for the year still intact, an activist investor involved, and shares falling 14% for the week, a closer look may be in order. As usual, the table that follows depicts each reporting company’s share price performance for the week, results versus expectations, and subsequent estimate revisions for the current fiscal quarter and year.
Executive moves this week largely reflected new sales leadership at several companies. Everbridge (EVBG) announced the hiring of Vernon Irvin as Chief Revenue Officer, a newly created role in which he will lead the global sales and field services organization. Mr. Irvin joins the company from Syniverse, where he was Head of Global Enterprise Business Development. Sailpoint (SAIL) named Matt Mills as its Chief Revenue Officer, a role in which he will lead the company’s global sales organization. Mr. Mills previously served as Chief Executive Officer of MapR Technologies and prior to that was Senior Vice President North America Sales at Oracle (ORCL). At SS&C Technologies Holdings (SSNC), Ken Bisconti and Bob Petrocchi take over as co-heads of SS&C Intralinks. Mr. Bisconti has been Chief Product Officer at SS&C since joining in 2017 and Mr. Petrocchi most recently served as SS&C’s Chief Revenue Officer and has been with the company since 2016.
Guidewire Software (GWRE) added Margin Dillon, Mike Keller, and Cathy Lego to its Board of Directors. Both Ms. Dillon and Mr. Keller bring insurance industry expertise to the company’s Board with the former having previously served as Senior Vice President and Chief Financial Officer, Personal Insurance at Liberty Mutual Insurance Company and the latter previously serving as Executive Vice President and Chief Information Officer at Nationwide Insurance and Financial Services. Ms. Lego is currently on the Boards of three other public companies and provides additional financial expertise. Guidewire also reported fiscal Q4 ’19 results ahead of expectations this week. While the company’s FY ’20 guidance fell short of Street expectations, the results and outlook were still well received as management indicated annual recurring revenue (ARR) is expected to accelerate to 14%-16% in the current fiscal year with fully ramped ARR growing at a faster rate. In other words, the guidance shortfall largely reflects a business increasingly shifting towards subscriptions and the underlying growth of the business is improving. Finally, MongoDB (MDB) appointed Archana Agrawal, Atlassian’s (TEAM) Head of Enterprise and Cloud Marketing, to its Board of Directors. The company was also amongst those reporting results, delivering a beat on the heels of strong Enterprise Advanced and Atlas adoption and raising its FY ’20 revenue guidance.
Mergers and Acquisitions
Ceridian Announces Agreement to Acquire Australian Workforce Management Solutions Provider, RITEQ
Ceridian HCM Holdings (CDAY) has entered into an agreement to acquire RITEQ, a provider of enterprise workforce management solutions with over 325 customers.
The combination of RITEQ with Dayforce Payroll positions the company as a leading HCM provider in the Australia and New Zealand markets.
Cloudera Agrees to Acquire Arcadia Data to Accelerate Time-to-Insight for Data Analytics
Cloudera will acquire certain assets of Arcadia Data, a provider of cloud-native business intelligence and real-time analytics.
The company anticipates merging Arcadia’s ArcEngine technology, which leverages machine learning and enables enterprises to extract data and insights from modern data platforms, into Cloudera Data Warehouse.
MAM Software Group (MAMS) has agreed to be acquired by Kerridge Commercial Systems, a provider of integrated trading and business management software to companies in the trade, wholesale, manufacturing, and distribution verticals, for $12.12 per share in cash, representing an equity value of approximately $154.2 million.
The purchase price represents a 14% premium to MAMS last closing price and reflects TTM EV/Sales, EV/Recurring Revenue, and EV/EBITDA multiples of 4.1x, 5.0x, and 24.9x, respectively.
Approval from over 50% of MAMS stockholders has already been received and no other approvals by the Board or other stockholders are required to complete the transaction, which is expected to close in or before Q4 ’19.
Palo Alto Networks Announces Intent to Acquire Zingbox
Palo Alto Networks has agreed to acquire Zingbox for $75 million in cash.
Zingbox provides cloud-based IoT security and is expected to be integrated with Palo Alto’s Next-Generation Firewall and Cortex platforms.
The acquisition is expected to close during Palo Alto’s fiscal Q1 ’20.
Earnings Releases
Cloudera Reports Second Quarter Fiscal Year 2020 Financial Results
Cloudera (CLDR) reported Q2 ’20 results above expectations and raised guidance for FY ’20.
Revenue of $196.7 million (+74.1% Y/Y) exceeded management’s guidance of $180.0-$183.0 million and consensus of $182.3 million. Non-GAAP operating income was $(7.4) million (-3.8% margin), well above consensus of $(27.9) million. Non-GAAP EPS of $(0.02) also beat guidance of $(0.11)-$(0.08) and consensus of $(0.10).
Key metrics: annualized recurring revenue (ARR) was $681.9 million (+16% Y/Y); added 24 customers with ARR over $100,000 for a total of 953 at quarter-end; dollar-based churn was in line with Q1 and is expected to decline to an annualized rate of 12%-13% in 2H ‘20.
Cloudera has delivered an initial release of its cloud-native data management and analytics offering, Cloudera Data Platform.
Per management, internal metrics and pipeline generation have materially improved from prior quarter levels with basic renewal activity rebounding in Q2, win rates rising against cloud service providers, and pipeline continuing to build.
Cloudera is aligning its licensing and distribution model with industry standards set by Red Hat, meaning all Cloudera software will be licensed under an OSI-validated open source license beginning early next year and binaries will no longer be freely available to nonpaying customers.
Guidance for Q3 calls for revenue of $187.0-$190.0 million, in line with consensus of $188.6 million, and non-GAAP EPS of $(0.08)-$(0.06), below consensus of $(0.05); ARR at quarter-end is expected to be $685.0-$695.0 million.
Management’s FY ’20 guidance now calls for revenue of $765.0-$775.0 million and non-GAAP EPS of $(0.28)-$(0.24), up from $745.0-$765.0 million and $(0.32)-$(0.28) previously; ARR at year-end is expected to be $685.0-$720.0 million.
Coupa Software Reports Financial Results For the Second Quarter of Fiscal 2020
Coupa Software (COUP) reported Q2 ’20 results well above expectations and raised guidance for FY ’20.
Revenues of $95.1 million (+54.3% Y/Y) topped management’s guidance of $84.5-$85.5 million and consensus of $85.4 million. Non-GAAP operating income was $4.8 million (5.1% margin), exceeding guidance of $(7.5)-$(6.5) million and consensus of $(6.7) million. Non-GAAP EPS were $0.07, beating guidance of $(0.12)-$(0.10) and consensus of $(0.10).
An uncharacteristically large quarter for professional services contributed to the upside as Coupa took on a few strategic customer implementations in the federal sector.
Key metrics: billings of $107.7 million (+57% Y/Y); gross renewal rate at 95% plus and dollar-based expansion rate at the high-end of the company’s historical 110%-112% range.
The Q3 Coupa Business Spend Index, which analyzes hundreds of billions of dollars in aggregated and anonymized spend behavior, indicates that businesses globally may be growing more cautious about the economy, at least through year-end.
Guidance for Q3 includes revenue of $95.5-$96.5 million, above consensus of $87.0 million, and non-GAAP operating income and EPS of $3.5-$5.5 million and $0.05-$0.08, respectively, both of which were in line with the Street’s $4.9 million and $0.06.
Management raised its FY ’20 revenue, non-GAAP operating income, and non-GAAP EPS guidance ranges from $342.0-$344.0 million, $7.0-$9.0 million, and $0.07-$0.10, respectively, to $369.0-$372.0 million, $10.0-$13.0 million, and $0.11-$0.16.
CrowdStrike Reports Fiscal Second Quarter 2020 Financial Results
CrowdStrike Holdings (CRWD) reported Q2 ’20 results above expectations and raised guidance for FY ’20.
Revenue of $108.1 million (+94.1% Y/Y) exceeded management’s guidance of $103.0-$104.0 million and consensus of $103.8 million. Non-GAAP operating income was $(20.6) million (-19.1% margin), ahead of guidance for $(29.1)-$(28.6) million and consensus of $(29.0) million. Non-GAAP EPS of $(0.18) also beat guidance of $(0.24)-$(0.23) and consensus of $(0.23).
Key metrics: added 730 net new subscription customers for a total of 3,789 at quarter-end; annual recurring revenue (ARR) of $423.8 million (+104% Y/Y); 50% of subscription customers have adopted four or more modules.
The volume of transactions coming through the AWS Marketplace has increased significantly over the past six months.
To help foster innovation within its ecosystem, CrowdStrike has established the Falcon Fund in partnership with Accel.
Guidance for Q3 includes revenue of $117.1-$119.5 million, non-GAAP operating income of $(27.7)-$(26.1) million, and non-GAAP EPS of $(0.12)-$(0.11), all of which were ahead of Street expectations for $111.1 million in revenue, $(29.7) million in non-GAAP operating income, and $(0.13) in non-GAAP EPS.
Management raised its FY ’20 revenue, non-GAAP operating income, and non-GAAP EPS guidance ranges from $430.2-$436.4 million, $(113.4)-$(110.4) million, and $(0.72)-$(0.70), respectively, to $445.4-$451.8 million, $(97.9)-$(93.5) million, and $(0.65)-$(0.62).
Descartes Announces Fiscal 2020 Second Quarter Results
Descartes Systems Group (DSGX) reported Q2 ’20 results ahead of expectations.
Revenue of $80.5 million (+20.0% Y/Y) was slightly above consensus of $80.3 million. Adjusted EBITDA of $30.2 million (37.5% margin) was also ahead of the Street’s $29.6 million. EPS of $0.10 beat consensus of $0.08.
Visual Compliance continues to deliver growth ahead of expectations and management sees more product synergies ahead such as combining Visual Compliance’s offerings with Descartes’ CustomsInfo solution.
Management expects adjusted EBITDA to continue to convert to cash flow at a rate of 80%-90% for the balance of the year.
The completion of an equity offering during the quarter and its existing credit facilities leave the company with significant dry powder to pursue additional acquisition opportunities.
The acquisition pipeline remains strong with a number of opportunities for the company to expand its geographic reach, functional capabilities, trade data and content, or community of participants on its network.
Calibration for Q3 includes the acquisition of BestTransport, resulting in baseline revenues of $78.2 million and adjusted EBITDA of $24.8 million.
DocuSign Announces Second Quarter Fiscal 2020 Financial Results
DocuSign’s (DOCU) Q2 ’20 results were mixed versus consensus, but FY ’20 revenue and billings guidance moved higher.
Revenue was $235.6 million (+41.0% Y/Y), exceeding guidance of $218.0-$222.0 million and consensus of $220.8 million. Non-GAAP operating income was $(0.6) million (-0.3% margin), below consensus of $4.9 million. Non-GAAP EPS of $0.01 were within management’s implied guidance of $(0.03)-$0.09 but below consensus of $0.04.
Key metrics: added 29,000 new customers for a total of 537,000 customers at quarter-end; 370 customers with ACV over $300,000; billings were $252.4 million (+47% Y/Y); net dollar retention rate was 113%.
Guidance for Q3 includes revenue and billings of $237.0-$241.0 million and $260.0-$270.0 million, respectively, above consensus of $231.9 million and $254.9 million; and implies non-GAAP EPS of $(0.02)-$0.12, in line with consensus of $0.03.
Management raised its FY ’20 revenue and billings guidance from $917.0-$922.0 million and $1.010-$1.030 billion, respectively, to $947.0-$951.0 million and $1.063-$1.083 billion; and narrowed its implied non-GAAP EPS guidance from $(0.09)-$0.38 to $(0.08)-$0.36.
Domo Announces Fiscal 2020 Second Quarter Financial Results
Domo (DOMO) reported Q2 ’20 non-GAAP EPS above consensus, but lowered guidance for FY ’20.
Revenue was $41.7 million (+21.6% Y/Y), in line with management’s guidance of $41.0-$42.0 million and consensus of $41.7 million. Non-GAAP operating income of $(23.7) million (-56.9% margin) was slightly above consensus of $(24.6) million. Non-GAAP EPS of $(0.96) beat consensus of $(0.99).
Q2 was negatively impacted by Domo’s pursuit of larger enterprise transactions, many of which were not closed in the quarter, as well as deal slippage in Asia-Pac excluding Japan.
Key metrics: billings were $38.8 million (+9% Y/Y); gross retention rate approached 90%; dollar-based net retention rate remains over 100%; RPO increased 28% Y/Y.
Efforts to improve growth include simplifying the company’s message, increasing focus on self-service proof of concepts, the hiring of John Mellor as Chief Strategy Officer, and expanding go-to-market partnerships.
Guidance for Q3 calls for revenue of $41.5-$42.5 million and non-GAAP EPS of $(1.04)-$(1.00), below consensus of $44.3 million and $(0.91), respectively; guidance for billings is approximately $36.5 million.
Management lowered its FY ’20 revenue and non-GAAP EPS guidance from $173.0-$174.0 million and $(3.87)-$(3.79), respectively, to $168.0-$169.0 million and $(4.10)-$(4.00); guidance for billings is approximately $172.0 million.
Dynatrace Reports First Quarter of Fiscal Year 2020 Financial Results
Dynatrace (DT) reported Q1 ’20 results above expectations and guided FY ’20 above consensus.
Revenue of $122.6 million (+24.8% Y/Y) was ahead of the Street’s $120.6 million forecast. Non-GAAP operating income of $27.1 million (22.1% margin) exceeded consensus of $21.5 million. Non-GAAP EPS of $0.04 beat consensus by a penny.
Key metrics: added 214 customers to reach 1,578 at quarter-end; annualized recurring revenue (ARR) of $437.6 million (+43% Y/Y); dollar-based net expansion rate was over 120%; Dynatrace ARR represents 75% of total ARR versus 70% in the prior quarter; RPO of $614 million (+83% Y/Y).
The company is now five quarters into what management anticipates will be a 10 to 12 quarter transition of customers from the company’s legacy platform to its new Dynatrace platform.
The average ARR in the Dynatrace platform per customer is north of $200,000 today and management thinks each of those could be a $1 million ARR opportunity over time.
Guidance for Q2 includes revenue of $123.0-$124.0 million, non-GAAP operating income of $24.0-$25.0 million, and non-GAAP EPS of $0.04, below consensus expectations for $130.7 million in revenue, $27.2 million in non-GAAP operating income, and $0.05 in non-GAAP EPS.
Management’s FY ’20 guidance calls for revenue of $521.0-$524.0 million, non-GAAP operating income of $112.0-$115.0 million, and non-GAAP EPS of $0.20-$0.22, all of which were above consensus of $512.0 million in revenue, $104.3 million in non-GAAP operating income, and $0.17 in non-GAAP EPS.
eGain Reports 37% Growth in SaaS Revenue for Fiscal 2019; Exceeds Full Year Revenue Guidance
eGain (EGAN) reported Q4 ’19 results above expectations but guided FY ’20 slightly below Street expectations.
Revenue was $16.8 million (+7.9% Y/Y), above consensus of $16.5 million. Non-GAAP operating income was $1.3 million (8.0% margin), also above consensus of $0.7 million. Non-GAAP EPS of $0.02 beat consensus of breakeven.
eGain is ramping investments in its partner ecosystem, focusing on both product integrations as well as channel enablement.
Remaining performance obligations (RPO) totaled $61.9 million, including $42.4 million of short-term RPO.
Management would like to see legacy revenues comprise just 10% of revenues by the end of calendar 2020 and expects professional services revenue to fall to the high-single digit range in fiscal 2020 as SaaS deployments require less services.
Guidance for Q1 calls for revenue of $16.8-$17.2 million, in line with consensus of $17.0 million, and non-GAAP EPS of $0.02-$0.03, above consensus of $0.00.
For FY ’20, management guided to $72.0-$73.6 million in revenue and $0.00-$0.06 in non-GAAP EPS, leaving consensus expectations for $73.7 million in revenue and $0.06 in non-GAAP EPS at the high-end.
Guidewire Software Announces Fourth Fiscal Quarter and Fiscal Year 2019 Financial Results
Guidewire Software (GWRE) reported Q4 ’19 results above expectations, but guided FY ’20 short of consensus.
Revenue was $207.9 million (-13.5% Y/Y), above the high-end of management’s $199.0-$207.0 million guidance and consensus of $204.6 million. Non-GAAP operating income was $51.1 million (24.6% margin), exceeding guidance of $41.0-$41.7 million and consensus of $44.3 million. Non-GAAP EPS of $0.56 also topped guidance of $0.47-$0.53 and consensus of $0.50.
After signing eight new customers and closing business with 23 existing customers that opted for 53 additional Guidewire products, the company now has a total of 380 customers.
81% of new software sales came in as subscriptions driven primarily by six new deals for InsuranceSuite via Guidewire Cloud.
On a constant currency basis, annual recurring revenue (ARR) increased 13% for the full year while fully ramped ARR, which refers to the annual amount after three to five years due to subscription fees scaling with usage, increased 24% Y/Y.
The mix of term and subscription sales, investments in cloud operations and organizational infrastructure, and stronger SI enablement will impact FY ’20 results, so management believes ARR, which is expected to accelerate to 14%-16% in FY ’20 with ramped ARR growing at a faster rate, is the most effective way to evaluate performance.
Guidance for Q1 calls for revenue of $149.0-$153.0 million, non-GAAP operating income of $(3.0)-$1.0 million, and non-GAAP EPS of $0.01-$0.05, well below consensus expectations for $187.2 million in revenue, $21.7 million in non-GAAP operating income, and $0.27 in non-GAAP EPS.
Management’s FY ’20 guidance includes revenue of $759.0-$771.0 million, non-GAAP operating income of $96.0-$108.0 million, and non-GAAP EPS of $1.10-$1.22, falling short of Street expectations for $799.9 million in revenue, $114.9 million in non-GAAP operating income, and $1.28 in non-GAAP EPS.
Medallia Reports Record Second Quarter Fiscal 2020 Financial Results
Medallia (MDLA) reported Q2 ’20 results above expectations and guided FY ’20 ahead of consensus.
Revenue was $95.7 million (+26.8% Y/Y), above consensus of $91.3 million. Non-GAAP operating income was $(2.4) million (-2.5% margin), exceeding consensus of $(6.5) million. Non-GAAP EPS of $(0.06) beat consensus of $(0.15).
The Medallia Experience Cloud had over 4 million users worldwide, captures 4.9 billion experiences annually and has performed 8 trillion calculations in a single day to drive business decisions.
Management estimates the company’s total addressable market is in excess of $60 billion.
Key metrics: added 48 customers for a total of 613 customers (+26% Y/Y) at quarter-end; dollar-based net retention rate was 119% on a TTM basis; billings growth of 33% on a TTM basis; remaining performance obligations of $548 million.
Medallia has expanded its sales force to pursue large enterprises, plans to expand within new and existing verticals, created a mid-market product and sales capability, is developing deeper partnerships, and is investing in international expansion.
Guidance for Q3 calls for revenue of $95.0-$97.0 million, in line with consensus of $95.3 million, and non-GAAP operating income of $(4.5)-$(3.5) million, ahead of the Street’s $(6.7) million.
For FY ’20, management’s guidance includes $385.0-$388.0 million in revenue and non-GAAP operating income of $(10.5)-$(9.0) million, exceeding Street expectations for $381.4 million in revenue and $(13.8) million in non-GAAP operating income.
MongoDB, Inc. Announces Second Quarter Fiscal 2020 Financial Results
MongoDB reported Q2 ’20 results above expectations and raised revenue guidance for FY ’20.
Revenue of $99.4 million (+66.7% Y/Y) was above management’s guidance of $90.0-$92.0 million and consensus of $91.7 million. Non-GAAP operating income was $(14.8) million (-14.9% margin), also ahead of guidance and consensus of $(15.9) million. Non-GAAP EPS of $(0.26) beat guidance of $(0.29)-$(0.27) and consensus of $(0.28).
Strength in the quarter reflected positive contribution across every region as well as strong adoption of both Enterprise Advanced and Atlas, which grew over 240% Y/Y and is now at a $150 million annualized revenue run rate.
Outperformance in the quarter was also helped by the closure of a few meaningful Enterprise Advanced transactions, which were previously expected to close in Q3.
Key metrics: added over 800 customers to reach 15,000+ customers at quarter-end; 1,850+ direct sales customers; 13,200+ MongoDB Atlas customers; 622 customers (+42% Y/Y) with over $100,000 in annualized recurring revenue (ARR) and annualized monthly recurring revenue; net ARR expansion rate remained above 120%.
Guidance for Q3 calls for revenue of $98.0-$100.0 million, above consensus of $94.9 million, and non-GAAP operating income and EPS of $(16.5)-$(15.5) million and $(0.29)-$(0.27), respectively, in line with consensus of $(16.1) million and $(0.28).
Management raised its FY ’20 revenue guidance from $375.0-$381.0 million to $390.0-$395.0 million and narrowed guidance for both non-GAAP operating income and EPS from $(63.0)-$(59.0) million and $(1.11)-$(1.04), respectively, to $(62.0)-$(59.0) million and $(1.11)-$(1.06).
PagerDuty Announces Second Quarter Fiscal Year 2020 Financial Results
PagerDuty (PD) reported Q2 ’20 results above expectations and raised guidance for FY ’20.
Revenue of $40.4 million (+45.5% Y/Y) was above guidance of $38.5-$39.5 million and consensus of $39.1 million. Non-GAAP operating income was $(7.1) million (-17.7% margin), ahead of the Street’s $(8.5) million. Non-GAAP EPS of $(0.07) beat guidance of $(0.10)-$(0.09) and consensus of $(0.10).
Key metrics: added 365 net new customers to reach 12,045 customers at quarter-end; 274 customers (+51% Y/Y) with annual recurring revenue over $100,000; dollar-based net revenue retention was 132%.
Dollar-based net retention came down due to a couple of primary competitors churning or downgrading within the quarter.
PagerDuty saw robust demand for its platform as well as strong adoption of new products, including Event Intelligence, Modern Incident Response, Visibility, and Analytics.
Guidance for Q3 includes revenue of $41.5-$42.5 million and non-GAAP EPS of $(0.10)-$(0.09), in line with consensus of $41.6 million in revenue and $(0.09) in non-GAAP EPS.
Management raised its FY ’20 guidance slightly from $161.0-$163.0 million and $(0.38)-$(0.37) in revenue and non-GAAP EPS, respectively, to $162.0-$164.0 million and $(0.37)-$(0.36).
Palo Alto Networks Reports Fiscal Fourth Quarter and Fiscal Year 2019 Financial Results
Palo Alto Networks (PANW) reported Q4 ’19 results above expectations, but provided a mixed outlook for FY ’20.
Revenue of $805.8 million (+22.4% Y/Y) was above management’s guidance of $795.0-$805.0 million and consensus of $803.0 million. Non-GAAP operating income was $174.1 million (21.6% margin), above consensus of $172.0 million. Non-GAAP EPS of $1.47 beat guidance of $1.41-$1.42 and consensus of $1.42.
Key metrics: added nearly 3,000 new customers for a total of nearly 65,000 at quarter-end; billings of $1.057 billion (+22.5% Y/Y); top 25 customers spent at least $39.1 million (+23% Y/Y) in lifetime value.
Performance in Prisma and Cortex, which are collectively referred to as next-gen security, was especially strong with next-gen security billings of approximately $192 million in Q4.
The recent acquisitions of Demisto, Twistlock, and PureSec along with the pending purchase of Zingbox reduce non-GAAP EPS by $0.08-$0.09 in Q1 ’20 and by $0.34 in FY ’20.
Guidance for Q1 calls for revenue of $760.0-$770.0 million and non-GAAP EPS of $1.02-$1.04, both of which were below Street expectations for $789.0 million in revenue and $1.33 in non-GAAP EPS; billings guidance is $875.0-$890.0 million.
For FY ’20, management guided for revenue of $3.440-$3.480 billion, in line with consensus of $3.451 billion, and non-GAAP EPS of $5.00-$5.10, below consensus of $6.26; billings guidance is $4.095-$4.155 billion, including next-gen security billings of $800.0-$810.0 million.
Management anticipates a 20% CAGR for total billings and revenue over the next three years, reaching $6 billion and $5 billion, respectively, and expects to return to a 25% operating margin while generating $4 billion of free cash flow by FY ’22.
Pivotal Reports Second Quarter Fiscal Year 2020 Financial Results
Pivotal Software (PVTL) reported Q2 ’20 results above expectations.
Revenue was $193.0 million (+17.4% Y/Y), above management’s $185.0-$189.0 million guidance and consensus of $186.5 million. Non-GAAP operating income was $(4.5) million (-2.3% margin), ahead of guidance and consensus of $(10.4) million. Non-GAAP EPS of $0.00 beat guidance of $(0.04)-$(0.03) and consensus of $(0.03).
Key metrics: 397 subscription customers (+12% Y/Y); dollar-based net expansion rate of 139%.
Due to the company’s pending acquisition by VMware (VMW), guidance was not provided for Q3 and FY ’20 and Pivotal did not host an earnings call.
Secureworks Reports Second Quarter Fiscal 2020 Results
Secureworks (SCWX) reported Q2 ’20 results above expectations and raised the midpoint of its FY ’20 guidance.
Revenue of $136.6 million (+6.1% Y/Y) was above management’s $132.0-$134.0 million guidance and consensus of $133.1 million. Adjusted EBITDA was $1.3 million (1.0% margin), exceeding consensus of $(0.9) million. Non-GAAP EPS of $(0.01) beat guidance of $(0.05)-$(0.04) and consensus of $(0.04).
Key metrics: average annual subscription revenue per customer was $106,000 (+5.5% Y/Y); closed nine deals with total contract value over $1 million; annual recurring revenue of $437.6 million.
The annual contract value of deals closed during the quarter improved across all markets relative to Q1, revenue retention was 99% and both the sales pipeline and conversion rate improved from the prior quarter.
Red Cloak Threat Detection and Response (TDR) was launched at the end of Q1 and is the company’s first cloud-native software built on its security analytics platform; early response from the market has been positive with a handful of multi-year deals already closed.
Guidance for Q3 calls for revenue of $135.0-$137.0 million and non-GAAP EPS of $(0.04)-$(0.03), consistent with consensus of $135.2 million in revenue and $(0.03) in non-GAAP EPS.
Management raised the low-end of its revenue guidance, which now calls for $540.0-$545.0 million, maintained its adjusted EBITDA guidance of $2.0-$5.0 million, and increased its non-GAAP EPS guidance from $(0.13)-$(0.10) to $(0.11)-$(0.08).
Slack Announces Second Quarter Fiscal Year 2020 Results
Slack Technologies (WORK) reported Q2 ’20 results above expectations and raised guidance for FY ’20.
Revenue of $145.0 million (+57.5% Y/Y) exceeded management’s guidance of $139.0-$141.0 million and consensus of $141.3 million. Non-GAAP operating income was $(55.6) million (-38.4% margin), beating guidance for $(77.0)-$(75.0) million and consensus of $(76.2) million. Non-GAAP EPS were $(0.14), also above guidance of $(0.20)-$(0.19) and consensus of $(0.19).
Slack outperformed on the revenue line despite a one-time headwind of $8 million related to credits issued for service level disruptions; the credits issued will also result in a $5 million headwind to billings for the full year.
Key metrics: over 100,000 paid customers (+37% Y/Y) at quarter-end; 720 paid customers (+75% Y/Y) with over $100,000 in annual recurring revenue; billings of $174.8 million (+52% Y/Y); net dollar retention rate was 136%.
Guidance for Q3 calls for revenue of $154.0-$156.0 million, above consensus of $153.8 million, and non-GAAP operating income and EPS of $(49.0)-$(47.0) million and $(0.09)-$(0.08), respectively, below consensus of $(41.3) million and $(0.07).
Management raised its guidance for FY ’20 across the board and now anticipates revenue of $603.0-$610.0 million, non-GAAP operating income of $(180.0)-$(176.0) million, non-GAAP EPS of $(0.42)-$(0.40), billings of $740.0-$760.0 million, and free cash flow of $(110.0)-$(100.0) million.
Smartsheet Inc. Announces Second Quarter Fiscal Year 2020 Results
Smartsheet (SMAR) reported Q2 ’20 results above expectations and raised its revenue outlook for the year.
Revenue of $64.6 million (+52.5% Y/Y) was above guidance of $63.0-$64.0 million and consensus of $63.6 million. Non-GAAP operating income was $(10.8) million (-16.7% margin), well ahead of management’s $(18.0)-$(17.0) million guidance and consensus of $(17.2) million. Non-GAAP EPS of $(0.08) also beat guidance of $(0.16)-$(0.15) and consensus of $(0.16).
Key metrics: billings of $79.5 million (+52% Y/Y); 82,186 domain-based customers at quarter-end; 7,673 customers (+55% Y/Y) with annualized contract values (ACV) of $5,000 or more; 635 customers (+113% Y/Y) with ACV of $50,000 or more; 226 customers (+128% Y/Y) with ACV of $100,000 or more; average ACV per domain-based customer of $2,972 (+48% Y/Y); dollar-based net retention rate of 134%.
Many of the customer expansions in Q2 were driven by a record 750 unique customers that bought one or more capability-based products with July seeing record bookings for Smartsheet’s Accelerator offerings.
Just over a third of the 1,900 net new logos added in the quarter were attributable to the acquisition of 10,000ft.
Guidance for Q3 includes revenue of $69.0-$70.0 million, above consensus of $68.9 million, and non-GAAP operating income and EPS of $(23.0)-$(22.0) million and $(0.19)-$(0.18), respectively, below the Street’s $(16.7) million and $(0.15).
Management raised its FY ’20 revenue guidance from $262.0-$265.0 million to $265.0-$268.0 million, reduced its non-GAAP operating income guidance from $(65.0)-$(60.0) million to $(70.0)-$(66.0) million, and narrowed its non-GAAP EPS guidance from $(0.59)-$(0.54) to $(0.58)-$(0.54).
Tufin Announces Second Quarter 2019 Results
Tufin Software Technologies (TUFN) reported Q2 ’19 results above expectations and raised its FY ’19 revenue outlook.
Revenue of $25.1 million (+35.5% Y/Y) was just above the high-end of management’s $23.0-$25.0 million guidance and consensus of $24.0 million. Non-GAAP operating income of $(5.1) million (-20.2% margin) was within guidance of $(6.4)-$(4.9) million and above consensus of $(5.7) million. Non-GAAP EPS of $(0.18) beat consensus of $(0.21).
Tufin continues to see strong demand across all verticals and geographies driven by large organizations that need to get a handle on their network security posture and to automate their network change processes.
Average deal sizes remain fairly consistent at $120,000 overall and at $200,000 in the Global 2000.
Given a large addressable market ahead of the company, management sees the next couple of years as investment years and plans to strengthen its technological leadership as well as grow its sales and marketing organization.
Guidance for Q3 includes revenue of $24.0-$26.0 million and non-GAAP operating income of $(6.3)-$(4.8) million, in line with consensus of $24.9 million in revenue and $(5.2) million in non-GAAP operating income.
Management raised its FY ’19 revenue guidance slightly from $105.0-$110.0 million to $106.0-$111.0 million and maintained prior expectations for non-GAAP operating income of $(12.7)-$(10.7) million.
Verint Announces Q2 FY2020 Results with Strong Cloud Growth
Verint Systems (VRNT) announced mixed Q2 ’20 results and reiterated prior guidance for FY ’20.
Non-GAAP revenue of $331.3 million (+7.4% Y/Y) fell short of the Street’s $334.5 million. Non-GAAP operating income of $65.9 million (19.9% margin) was ahead of consensus of $55.2 million. Non-GAAP EPS of $0.82 beat consensus of $0.80.
More large customers are embracing cloud deployments, opting to deploy new software in the Verint Cloud as well as converting existing on-premise deployments to the Verint Cloud, the latter of which drives a 2x uplift in recurring revenue.
Customer Engagement metrics: non-GAAP constant currency growth of 8.9%; non-GAAP cloud revenue growth of 41.4%; SaaS ACV growth of 84% in 1H ’20 driven in part by 11 cloud orders in excess of $1 million in total contract value.
Cyber Intelligence metrics: non-GAAP constant currency growth of 8.0%; gross margin was up over 500bps as the company’s software model strategy ran ahead of plan and reduced the mix of hardware sales; added 50 new customers in 1H ’20.
At the end of Q2, Verint completed the tuck-in acquisition of Transversal, a cloud company with annual revenues of $8 million that is expected to accelerate the development of machine learning and artificial intelligence capabilities to better deliver contextual knowledge to agents and self-service bots.
Management reaffirmed prior FY ’20 guidance for non-GAAP revenue of $1.375 billion +/- 2% and non-GAAP EPS of $3.65.
Zoom Video Communications Reports Second Quarter Results for Fiscal Year 2020
Zoom Video Communications (ZM) reported Q2 ’20 results well above expectations and raised guidance for FY ’20.
Revenue of $145.8 million (+95.7% Y/Y) easily exceeded management’s guidance of $129.0-$130.0 million and consensus of $130.3 million. Non-GAAP operating income of $20.7 million (14.2% margin) was also well ahead of guidance and consensus of $3.8 million. Non-GAAP EPS of $0.08 beat guidance of $0.01-$0.02 and consensus of $0.02.
Key metrics: approximately 66,300 customers (+78% Y/Y) with over 10 employees; 466 customers (+104% Y/Y) contributing over $100,000 in TTM revenue; TTM net dollar expansion rate over 130% in customers with over 10 employees; remaining performance obligations totaled $458 million (+117% Y/Y).
The company has partnered with Verizon Business Group to offer Zoom’s platform as a cloud service.
Zoom will continue to invest in sales and marketing to drive international and upmarket growth.
Guidance for Q3 includes revenue of $155.0-$156.0 million, non-GAAP operating income of $6.0-$7.0 million, and non-GAAP EPS of $0.03, all of which exceeded consensus expectations for $140.5 million in revenue, $(4.5) million in non-GAAP operating income, and $(0.01) in non-GAAP EPS.
Management raised its FY ’20 guidance for revenues, non-GAAP operating income, and non-GAAP EPS from $535.0-$540.0 million, $0-$3.0 million, and $0.02-$0.03, respectively, to $587.0-$590.0 million, $42.0-$45.0 million, and $0.18-$0.19.
Notable News
Appian Announces Pricing of Public Offering of Class A Common Stock
Appian (APPN) announced that pricing of an underwritten public offering of 2,329,000 shares of its Class A common stock, comprised of 1,825,000 primary shares and 504,000 shares offered by existing stockholders, will be at market prices prevailing at the time of sale, at prices related to prevailing market prices, or at negotiated prices.
The offering is expected to close on or about September 9, 2019 and the net proceeds will be used for working capital and other general corporate purposes.
Ceridian Announces Pricing of Secondary Public Offering
Ceridian HCM Holding (CDAY) priced an underwritten secondary offering of 6.5 million, 2.0 million, and 500,000 shares held by affiliates of Thomas H. Lee Partners, Cannae Holdings, and David Ossip, the company’s Chief Executive Officer, respectively, at a public offering price of $56.30, representing a 2.0% discount to the close price prior to the offering.
The offering was upsized from 8.0 million shares to 9.0 million shares.
All proceeds from the offering will be received by the selling stockholders.
Guidewire Appoints Margie Dillon, Mike Keller, and Cathy Lego as Board Members
Guidewire Software (GWRE) has appointed Margie Dillon, Mike Keller, and Cathy Lego to its Board of Directors.
Guy Dubois and Peter Gassner will retire from the company’s Board following the 2019 annual meeting of stockholders.
Ms. Dillon held various roles at Liberty Mutual Insurance Company from December 1993 to September 2017, including Senior Vice President and Chief Financial Officer, Personal Insurance.
Mr. Keller was Executive Vice President and Chief Information Officer at Nationwide Insurance and Financial Services from June 2001 to June 2018.
Ms. Lego current serves as a member of the Board at Cypress Semiconductor, IPG Photonics, and LAM Research.
MongoDB Appoints Archana Agrawal to the Board of Directors
MongoDB (MDB) has appointed Archana Agrawal, Head of Enterprise and Cloud Marketing for Atlassian (TEAM), to the company’s Board of Directors.
SailPoint Names Matt Mills as Chief Revenue Officer
SailPoint Technologies Holdings (SAIL) appointed Matt Mills as Chief Revenue Officer, a role in which he will lead the company’s global sales organization.
Mr. Mills joins the company from MapR Technologies, where he was CEO, and prior to that spent over 20 years as Oracle’s Senior Vice President North America Sales.
SS&C Unveils New SS&C Intralinks Team
SS&C Technologies Holdings, Inc. (SSNC) named Ken Bisconti and Bob Petrocchi as co-heads of SS&C Intralinks.
Mr. Bisconti has been the company’s Chief Product Officer since joining in 2017, and Mr. Petrocchi most recently served as the company’s Chief Revenue Officer and has been with the company since 2016.
Talend S.A. Announces Pricing of €125 Million Convertible Notes Offering
Talend (TLND) priced an offering of €125.0 million aggregate principal amount of 1.75% convertible senior notes due 2024 with an initial conversion price of approximately €51.75 per American Depositary Share (ADS), representing a premium of 38.7% to the closing price prior to the announced offering and a EUR/USD exchange rate of €1.00 to $1.1036.
The initial purchasers of the notes have also been granted a 13-day option to purchase up to an additional €18.75 million aggregate principal amount of the notes.
Conversions of the notes will be settled in cash in euros, Talend’s ordinary shares to be delivered in the form of ADSs, or a combination thereof, at Talend’s election.
The offering is expected to generate net proceeds of €120.4 million (or €138.5 million if the initial purchasers exercise their option in full), which will be used for working capital and other general corporate purposes.
Vernon Irvin Appointed as Everbridge Chief Revenue Officer
Everbridge (EVBG) announced the hiring of Vernon Irvin as Chief Revenue Officer, a newly created role in which he will lead the global sales and field services organization.
Mr. Irvin joins the company from Syniverse where he was Head of Global Enterprise Business Development.
Robert Hughes, who has led Everbridge’s go-to-market efforts for the past two years, will be leaving the company.