K. Liu's Week in Review
Within our coverage universe this week, Assurance Global Services (AGS) sweetened its bid to acquire CTG (CTG), offering $7.00 per share in cash. The upsized offer represented a 33% premium to the prior day’s close and topped AGS’ initial $5.50-$6.00 proposal in May 2019. For additional details, please see our Sponsored Research report, “Assurance Global Services Raises Offer to Acquire CTG to $7.00 Per Share in Cash.” In the talent management space, Cornerstone OnDemand (CSOD) agreed to acquire Clustree for approximately $18.5 million in cash. The integration of Clustree’s AI-powered skills engine and skills ontology into Cornerstone’s People Development solution will enable customers to take stock of their employees’ skills and match those to specific job roles, identify areas for growth and development, and make more informed recruiting decisions. The deal is expected to close this quarter, and additional details regarding the acquisition will be relayed during the company’s next earnings call.
As the calendar Q4 ’19 earnings season looms, Progress Software (PRGS) reported its fiscal year-end results highlighted by another quarter of outperformance. The acquisition of Ipswitch earlier in the year was again the primary driver of Progress’ strong results as revenue from both network monitoring and secure data transfer products outpaced expectations. Also contributing to the upside, albeit to a lesser extent, were several sizeable wins in the company’s Data Connectivity and Integration (DCI) segment. The year-end momentum is expected to carry forward into Progress’ FY ’20 as evidenced by both Q1 and full year guidance above Street expectations. Moreover, management indicated another accretive M&A transaction may be had this year with the potential to contribute upwards of 10%-20% growth to the top line. In conjunction with the earnings release, Progress also announced the retirement of Paul Jalbert, CFO, who will be succeeded by recently acquired Carbonite’s former CFO and Treasurer, Anthony Folger.
While not a formal pre-announcement, 8x8’s (EGHT) CEO stated that “8x8 had a very strong quarter ending December 31” in a press release announcing the hiring of Marge Breya as CMO and the promotions of Samuel Wilson and Homero Salinas. Ms. Breya joins 8x8 from MicroStrategy (MSTR), where she also served as CMO. Mr. Wilson assumes the role of Chief Customer Officer and Managing Director of EMEA after previously leading the company’s global small business and U.S. mid-market sales, and Mr. Salinas now serves as Global Vice President and Head of Commercial Sales after previously leading contact center sales efforts. The changes come as the company looks to fuel further growth while staying on its promised path to profitability. Competitor RingCentral (RNG) also bolstered its ranks, appointing Anand Eswaran as its President and COO, succeeding Dave Sipes, who plans to retire at the end of Q2. Mr. Eswaran most recently served as Corporate Vice President for Global Enterprise Business at Microsoft (MSFT).
Capping off the news this week were a number of other notable executive moves. Cloudera (CLDR) named Robert Bearden as its President and CEO, replacing the company’s Chairman and interim CEO, Martin Cole. Mr. Bearden was the co-founder and CEO of Hortonworks, which was merged with Cloudera in 2019. At PTC (PTC), Kathleen Mitford was promoted from EVP, Products to Chief Strategy Officer and will oversee the company’s strategy, M&A, strategic alliances, corporate marketing and academic groups. New Relic (NEWR) landed Bill Staples, who formerly led the global engineering team supporting Adobe’s (ADBE) Experience Cloud as its Chief Product Officer. Finally, Qualys (QLYS) announced Dan Barahona, who joins the company from threat intelligence solutions provider Anomali, as its CMO.
Mergers and Acquisitions
Cornerstone Acquires Clustree to Build Leading AI-Powered Skills Platform for People Development
Cornerstone OnDemand (CSOD) has agreed to acquire Clustree, the developer of an AI-powered skills engine and skills ontology enabling organizations to match their employees’ skills to specific job roles, for approximately $18.5 million in cash.
Clustree’s technology will be integrated into Cornerstone’s People Development solution, enabling customers to build a skills inventory, identify areas for growth and development, and make more informed recruiting decisions.
The acquisition is expected to close in Q1 ’20, and additional details will be provided during the company’s next earnings call.
Earnings Releases
Progress Reports 2019 Fiscal Fourth Quarter and Year End Results
Progress Software (PRGS) reported Q4 ’19 results above expectations and guided FY ’20 ahead of the Street.
Non-GAAP revenue was $123.4 million (+25.6% Y/Y), exceeding management’s $116.0-$119.0 million guidance and consensus of $118.1 million. Non-GAAP operating income was $47.3 million (38.3% margin), also exceeding consensus of $43.1 million. Non-GAAP EPS of $0.79 beat guidance of $0.73-$0.75 and consensus of $0.75.
The overachievement was mostly attributed to Ipswitch as revenue from both network management and secure data transfer products exceeded expectations, and the DCI segment also contributed to a lesser extent due to a few notable deals.
Accretive M&A opportunities in the infrastructure software space remain a key focus area for 2020 and are expected to contribute 10%-20% growth to the top line.
Guidance for Q1 includes non-GAAP revenue and EPS of $110.0-$113.0 million and $0.69-$0.71, respectively, both of which were above Street expectations for $104.3 million and $0.62.
Management’s FY ’20 outlook, which excludes any potential contribution from acquisitions, calls for $448.0-$455.0 million in non-GAAP revenue and $2.87-$2.92 in non-GAAP EPS, exceeding consensus expectations for $434.4 million and $2.83.
Notable News
8x8 Names Go-to-Market Execs to Fuel Next Stage of Growth
8x8 (EGHT) has appointed Marge Breya as Executive Vice President and Chief Marketing Officer, promoted Samuel Wilson to the role of Chief Customer Officer and Managing Director of EMEA, and promoted Homero Salinas to Global Vice President and Head of Commercial Sales.
Ms. Breya most recently served as Senior Executive Vice President and Chief Marketing Officer at MicroStrategy (MSTR).
Mr. Wilson previously served as 8x8’s SVP for global small business and U.S. mid-market sales.
Mr. Salinas was previously 8x8’s General Manager of Global CCaaS.
CEO Vik Verma also noted that “8x8 had a very strong quarter ending December 31.”
RingCentral (RNG) has appointed Anand Eswaran as its President and Chief Operating Officer with responsibility for products, engineering, sales, marketing, services, customer care, operations, and human resources.
Mr. Eswaran most recently served as Corporate Vice President for Global Enterprise Business at Microsoft (MSFT).
Dave Sipes, RingCentral’s Chief Operating Officer, will be retiring from the company at the end of Q2.
Bill Staples to Join New Relic as Chief Product Officer
New Relic (NEWR) has appointed Bill Staples as Chief Product Officer, effective February 14, 2020, with responsibility for the company’s platform strategy and the Product Management, Engineering, and Design functions.
Mr. Staples joins the company from Adobe, where he led the global engineering team supporting Adobe’s Experience Cloud.
Cloudera Appoints Robert Bearden President and Chief Executive Officer
Cloudera (CLDR) named Robert Bearden as its President and Chief Executive Officer.
Mr. Bearden was the co-founder and Chief Executive Officer of Hortonworks, which was merged with Cloudera in 2019.
Martin Cole, Chairman of the Board and interim CEO, will retire and Nicholas Graziano, a current Board member and Portfolio Manager of Icahn Capital will assume the duties of Chairman of the Board.
Cybersecurity Expert, Dan Barahona, Joins Qualys as Chief Marketing Officer
Qualys (QLYS) has appointed Dan Barahona as Chief Marketing Officer with responsibility for the global marketing team and oversight of Qualys’ strategy, brand, corporate communications, demand generation, and other go-to-market initiatives.
Mr. Barahona joins the company from Anomali, where he also served as Chief Marketing Officer.
Progress Software (PRGS) announced that Paul Jalbert, Chief Financial Officer, plans to retire on January 30, 2020.
Mr. Jalbert will be succeeded by Anthony Folger, who was most recently Chief Financial Officer and Treasurer of Carbonite.
PTC Appoints Kathleen Mitford to Lead Global Strategy Organization
PTC (PTC) has promoted Kathleen Mitford to Chief Strategy Officer, a role in which she will oversee PTC’s strategy, mergers and acquisitions, strategic alliances, corporate marketing, and academic groups.
Ms. Mitford previously served as PTC’s Executive Vice President, Products.
Disclosure(s):
K. Liu & Company LLC has received compensation from CTG, Inc. (CTG) in the past 12 months for “Sponsored Research.”
Sponsored Research produced by the firm is paid for by the subject company in the form of an initial retainer and a recurring monthly fee. The analysis and recommendations in our Sponsored Research reports are derived from the same process and methodologies utilized in all of our research reports whether sponsored or not. The subject company does not review any aspect of our Sponsored Research reports prior to publication.