K. Liu's Week in Review
We have included several news items from last week to this week’s recap as there were some notable developments during the shortened holiday week. The most pertinent to us was the publication of the United States Postal Services’ monthly trial balance data prior to Thanksgiving, which revealed a 39% Y/Y increase in PC Postage revenue in October. On the surface, the growth rate appears to support expectations for continued robust growth in e-commerce during the 2020 peak season and begs the oft asked question of why Stamps.com’s (STMP) updated FY ’20 guidance implies a sequential revenue decline in Q4. The October numbers actually provide important context for the conservative outlook, however, as this is the first time we have ever observed a sequential decline in PC Postage revenue dollars going from September to October. For reference, our data set goes back to 2012 although we suspect a further look back would only confirm that 2020 is a year unlike any other. With the October data in hand, our analysis of various growth scenarios in the remaining months of Q4 suggests that it is indeed plausible for PC Postage revenue, and by extension Stamps.com’s revenue, to decline relative to Q3 levels. That said, any marked deceleration in growth during November and December would significantly alter the seasonal trends typically observed around the holiday period, which seems unlikely even in this unprecedented year. We therefore still believe the company is likely to outperform its own outlook by a comfortable margin. The main point we hope to convey at this juncture, however, is that there is in fact a rational basis for management’s cautious approach to guidance, which in turn should assuage any concerns that something more sinister may be rearing.
As for how the rest of the holiday season may unfold, several e-commerce platform vendors provided a glimpse into Cyber Week sales this week, further reinforcing our view that Q4 seasonality this year should not differ dramatically from prior years. Both BigCommerce (BIGC) and Shopify (SHOP) reported similar growth rates of +74% Y/Y and +76% Y/Y, respectively, in gross merchandise value (GMV) sold by merchants on their platforms. More relevant to our focus on shipping volumes, BigCommerce indicated that orders during Cyber Week increased 48% Y/Y, while Shopify highlighted a 50% Y/Y increase in consumers purchasing from brands powered by its platform. Salesforce (CRM) also offered its Cyber Week insights, which revealed a 36% Y/Y increase in global online sales (+29% Y/Y in the U.S.) and a 22% increase in the number of consumers participating in Cyber Week. Given that Stamps.com targets merchants in the SMB segment, we surmise its results are like to index more closely to those reported by BigCommerce and Shopify as opposed to Salesforce, which tends to serve larger enterprises. Thus, our wager would be on shipping volume growth well in excess of 30% for November, leaving Stamps.com on track to deliver another quarter of robust growth and upside to expectations. We await the release of PC Postage data later this month to confirm the validity of our view.
Despite ongoing uncertainty created by the pandemic, the pace of M&A activity has seemingly accelerated as we approach year-end, culminating in Salesforce’s acquisition of Slack (WORK) for an enterprise value of $27.7 billion. The purchase price represents TTM and forward EV/Sales multiples of 33x and 25x, respectively. Salesforce sees Slack becoming the UI for its Customer 360 platform, connecting employees, customers and partners while empowering users to act on information surfaced across a slew of integrated applications and systems. Whether that justifies the lofty valuation remains in question, but we would much rather speculate on who could be next. Our money (quite literally) is on Box (BOX), a cloud content management provider that we believe would prove highly complementary to the collaborative capabilities envisioned for Customer 360. Admittedly, Box’s present growth rate leaves something to be desired although the sales engine has exhibited fits and starts throughout the past year and both margins and free cash flow have improved significantly. BOX shares took a step back this week in concert with the company’s reported fiscal Q3 ’21 results, which beat expectations for the most part but included a slowdown in billings growth from lower professional services bookings. This in turn weighed on guidance for Q4. In our view, Box’s billings performance in Q4 is of far more importance to gauging its growth prospects in the new year, but the company is nonetheless a compelling acquisition candidate even absent better business momentum.
Nearly two dozen companies have reported results in the past two weeks, and their performances have largely followed the same positive trajectory as those that reported earlier. Splunk (SPLK) was the clear outlier in this regard as lower than anticipated close rates across its largest deals precipitated a miss in Q3 and a guide down for Q4. Management also withdrew its longer term growth targets for ARR and operating cash flow pending more clarity on the impact of pandemic-related macro factors on its operations. Splunk’s results stood in stark contrast to Elastic’s (ESTC), another vendor with aspirations in the observability space that beat and raise, although differences in scale should certainly be considered here. As for other earnings-related takeaways, COVID-19 beneficiaries like DocuSign (DOCU) and Zoom Video Communications (ZM) continued to smash expectations, although questions regarding their ability to lap difficult comparisons in the coming year are moving to the fore. Other security-focused beneficiaries such as CrowdStrike (CRWD) and Zscaler (ZS) have actually accelerated their business momentum since the onset of the COVID-19 pandemic as their zero trust platforms resonate with buyers. More generally, the market continues to reward those exhibiting improving growth trends as was the case with Domo (DOMO) and PagerDuty (PD) this week. Conversely, those showing any signs of softness in growth or in key metrics like dollar-based net retention remain out of favor, a group that included Box, Medallia (MDLA) and Yext (YEXT) this week. Against this backdrop, Zuora (ZUO) may be worth a look here as the company’s results and outlook point to a more positive growth trajectory ahead but we surmise its reported revenue growth and TTM dollar-based net expansion rate of 99%, which was hampered by unusually high churn in Q2, dampened the response to a seemingly solid print and guide.
In the capital markets, LivePerson (LPSN) priced an offering of $450 million of 0% Convertible Senior Notes due 2026 with an initial conversion price of $75.23 per share, representing a 29% premium to the close price prior to disclosure of the planned offering. The company plans to utilize the proceeds for general corporate purposes. Veritone (VERI) priced an offering of 3.0 million shares of its common stock at $18.50 per share, a 24% discount to the close price prior to announcement of the planned offering. The company also granted the underwriters an option to purchase up to an additional 450,000 shares. Finally, ZoomInfo (ZI) announced that certain selling stockholders, including TA Associates, The Carlyle Group and 22C Capital, priced a secondary offering of 12.5 million shares of its Class A common stock at $45.00 per share, representing an 8% discount to the close price prior to disclosure of the planned offering. The selling stockholders have also granted the underwriters an option to purchase up to an additional 1.875 million shares.
Mergers and Acquisitions
Avalara Acquires Impendulo to Help Manage and Streamline Insurance Premium Tax Requirements
Avalara (AVLR) has acquired Impendulo, a provider of insurance tax compliance management technology and services.
The acquisition expands Avalara’s reach into a new market segment focused on multi-national insurers.
HealthStream to Acquire ANSOS Staff Scheduling from Change Healthcare
HealthStream (HSTM) has agreed to acquire Change Healthcare’s staff scheduling business, which includes the ANSOS Staff Scheduling application and related products, for $67.5 million in cash.
ANSOS Staff Scheduling is used by over 300 hospitals and health systems to optimize staff deployment and will be added to HealthStream’s Workforce Solutions segment.
The acquisition is expected to contribute modestly to revenue in Q4 and generate incremental revenues of $16.5-$19.5 million after accounting for an estimated reduction of $7.0-$8.0 million in related deferred revenue write-downs.
Excluding the deferred revenue impact, adjusted EBITDA from the acquired business is expected to be $3.2-$4.5 million.
Salesforce Signs Definitive Agreement to Acquire Slack
Salesforce (CRM) has agreed to acquire Slack for $26.79 per share in cash and 0.0776 shares of Salesforce common stock for each Slack share, representing an enterprise value of approximately $27.7 billion.
The purchase price values Slack at a TTM EV/Sales multiple of 33.2x and at a forward EV/Sales multiple of 24.6x based on the consensus forecast for FY ’22.
The combination of Slack with Salesforce Customer 360 is expected to provide customers with a unified platform connecting employees, customers and partners and the ability to take action on information from all other integrated apps and systems.
ServiceNow to Acquire AI Pioneer Element AI
ServiceNow (NOW) has agreed to acquire Element AI, a leading artificial intelligence (AI) company with expertise in applying modern AI to text and language, chat, images, search, question response and summarization.
The acquisition enables ServiceNow to further enhance the embedded AI and analytics capabilities within its Now Platform and workflow products.
Splunk to Acquire Network Performance Monitoring Leader Flowmill
Splunk (SPLK) has agreed to acquire Flowmill, which offers a network performance monitoring (NPM) solution providing real-time observability into network behavior and distributed cloud applications.
The acquisition furthers Splunk’s vision to offer the world’s most comprehensive Observability Suite, enabling customers to ingest, analyze and take action on additional cloud network and infrastructure data to resolve network-related issues, optimize network performance and reduce network costs.
Earnings Releases
Anaplan Announces Third Quarter Fiscal Year 2021 Financial Results
Anaplan (PLAN) reported Q3 ’21 results above expectations and guided Q4 revenue ahead of consensus.
Revenue was $114.9 million (+28.5% Y/Y), exceeding guidance for $109.0-$110.0 million and consensus of $109.6 million. Non-GAAP operating income was $(6.1) million (-5.3% margin), ahead of guidance for a (13.5)%-(12.5)% margin and consensus of $(14.0) million. Non-GAAP EPS of $(0.05) beat the Street’s $(0.10).
Key metrics: 417 customers with ARR over $250,000; billings of $145 million (+27% Y/Y) were above guidance for $133.0-$135.0 million; dollar-based net expansion of 113%; remaining performance obligation of $740 million (+25% Y/Y).
Approximately 60% of bookings came from existing customers, while growth in new enterprise logos was also healthy.
Anaplan’s annual Connected Planning conference, CPX, saw record attendance with over 7,000 registered attendees (+250% Y/Y) and over 1,000 partners participating.
Q4 guidance for revenue of $118.5-$119.5 million was above consensus of $118.3 million, while guidance for a non-GAAP operating margin of (11.5%)%-(10.5)%, which implies non-GAAP operating income of $(13.7)-$(12.4) million, was in line with the Street’s $(13.1) million.
Management currently anticipates revenue in FY ’22 of approximately $550.0 million, in line with consensus of $550.2 million.
Autodesk, Inc. Announces Fiscal 2021 Third Quarter Results
Autodesk (ADKS) reported Q3 ’21 results above expectations and guided Q4 in line with consensus.
Revenue of $952.4 million (+13.0% Y/Y) was above guidance for $930.0-$945.0 million and consensus of $942.2 million. Non-GAAP operating income was $287.1 million (30.1% margin), ahead of consensus of $267.8 million. Non-GAAP EPS of $1.04 beat guidance for $0.91-$0.97 and consensus of $0.96.
Key metrics: billings of $1.01 billion (-1% Y/Y); RPO of $3.6 billion (+21% Y/Y); net revenue retention rate remained within the 100%-110% range.
Enterprise deal activity with large customers accelerated in Q3, which combined with healthy subscription renewal rates, digital sales, sequential improvement in new business trends and foreign exchange rates enabled Autodesk to deliver results above expectations despite volatile macroeconomic conditions.
Usage levels returned to pre-COVID levels in China, Korea, Japan and most of Europe but remained below pre-COVID levels in the U.S. and U.K.
The pipeline entering Q4 is strong but new business and multiyear contracts are likely to remain under pressure.
Q4 guidance for revenue of $999.0-$1,014 million and non-GAAP EPS of $1.04-$1.10 was consistent with Street expectations for revenue of $1,003 million and non-GAAP EPS of $1.06.
Management anticipates low to mid-teens revenue growth in FY ’22 and free cash flow growth of 20%.
Box Reports Revenue of $196 Million for Fiscal Third Quarter 2021, Up 11 Percent Year-Over-Year
Box (BOX) reported Q3 ’21 results above expectations but provided a mixed outlook for Q4.
Revenue was $196.0 million (+10.6% Y/Y), above guidance for $193.0-$195.0 million and consensus of $194.3 million. Non-GAAP operating income was $35.2 million (18.0% margin), exceeding consensus of $24.8 million. Non-GAAP EPS of $0.20 beat guidance for $0.13-$0.15 and the Street’s $0.14.
Key metrics: billings of $185.5 million (+8% Y/Y); closed 62 deals over $100,000; annualized net retention rate of 103%; full churn rate of 5%; remaining performance obligations of $755.9 million (+19% Y/Y).
Growing demand for products like Box Shield and Box Relay drove more Suite adoption, including an attach rate of 35% in six-figure deals closed during Q3.
Billings were impacted by greater pressure on professional services bookings than anticipated as a higher mix of sales came from customer expansions as opposed to new customers.
Margins, earnings and cash flow were much improved due to workforce expense optimization, improved gross margin and overall cost discipline.
Q4 guidance for revenue of $196.0-$197.0 million and non-GAAP EPS of $0.16-$0.18 was mixed relative to Street expectations for $198.8 million in revenue and $0.15 in non-GAAP EPS.
Cloudera Reports Third Quarter Fiscal 2021 Financial Results
Cloudera (CLDR) reported Q3 ’21 results above expectations and guided Q4 ahead of consensus.
Revenue was $217.9 million (+9.9% Y/Y), above guidance for $207.0-$210.0 million and consensus of $209.2 million. Non-GAAP operating income was $49.3 million (22.6% margin), exceeding guidance for $27.0-$31.0 million and consensus of $29.4 million. Non-GAAP EPS of $0.15 beat guidance for $0.08-$0.10 and the Street’s $0.09.
Key metrics: annualized recurring revenue (ARR) of $756 million (+12% Y/Y); 1,008 customers with ARR over $100,000; 179 customers with ARR over $1 million (+23% Y/Y).
With CDP Private Cloud now available, Cloudera is beginning to see an acceleration in migrations from its legacy products with over 150 customers already making the move and over half of customers with over $1 million in ARR now migrating.
The dramatic increase in operating profit during Q3 is not expected to repeat as expenses will increase modestly in Q4; the return of certain expenses to pre-pandemic levels coupled with investments in product, sales and marketing as CDP gains traction will also keep the operating margin level for the foreseeable future.
Q4 guidance for revenue of $219.0-$222.0 million, non-GAAP operating income of $35.0-$40.0 million and non-GAAP EPS of $0.10-$0.12 compared favorably with Street expectations for $215.7 million, $32.5 million and $0.10, respectively.
CrowdStrike Reports Fiscal Third Quarter 2021 Financial Results
CrowdStrike (CRWD) reported Q3 ’21 results above expectations and guided Q4 ahead of consensus.
Revenue was $232.5 million (+85.8% Y/Y), above guidance for $210.6-$215.0 million and consensus of $212.6 million. Non-GAAP operating income was $18.9 million (8.1% margin), exceeding guidance for $(1.4)-$1.6 million and consensus of $0.6 million. Non-GAAP EPS of $0.08 beat guidance for $(0.01)-$0.00 and the Street’s $0.00.
Key metrics: added net new ARR of $116.8 million for a total of $907.4 million in ARR (+81% Y/Y); added 1,186 net new subscription customers for a total of 8,416 (+85% Y/Y) at quarter-end; dollar-based net expansion rate over 120%.
Strength was broad based in Q3 with multiple large deals across the business and demand well balanced between new customers and expansion business as well as between large enterprises and mid-market and commercial accounts.
The heightened threat environment drove record demand for services, which was reflected in a record number of seven-figure subscription ARR deals resulting from services engagements.
Combining workload security with identity protection is foundational for establishing zero trust environments, and the acquisition of Preempt Security enables CrowdStrike to deliver an end-to-end zero trust solution.
Preempt Security contributed $6.8 million to ending and net new ARR in the quarter and added $1 million in expenses.
Q4 guidance for revenue of $245.5-$250.5 million, non-GAAP operating income of $18.5-$22.1 million and non-GAAP EPS of $0.08-$0.09 exceeded Street expectations for $230.3 million, $2.4 million and $0.01, respectively.
Descartes Announces Fiscal 2021 Third Quarter Financial Results
Descartes (DSGX) reported Q3 ’21 results above expectations.
Revenues of $87.5 million (+5.4% Y/Y) were above consensus of $86.0 million. Adjusted EBITDA was $36.4 million (41.6% margin), above consensus of $34.8 million. EPS of $0.15 beat the Street’s $0.14.
Strength in the quarter was driven by e-commerce as well as a recovery in areas impacted by the pandemic such as the ocean and air businesses.
Areas of opportunity for the company include e-commerce, U.S. policy changes, vaccine distribution, Brexit and pandemic working conditions, all of which have associated uncertainties but should benefit the logistics and supply chain industries.
Baseline expectations for Q4 include revenues of approximately $83 million and adjusted EBITDA of $29.5 million.
DocuSign Announces Third Quarter Fiscal 2021 Financial Results
DocuSign (DOCU) reported Q3 ’21 results above expectations and guided Q4 revenue ahead of consensus.
Revenue was $382.9 million (+53.5% Y/Y), exceeding guidance for $358.0-$362.0 million and consensus of $361.2 million. Non-GAAP operating income was $49.1 million (12.8% margin), above consensus of $28.2 million. Non-GAAP EPS of $0.22 beat the Street’s $0.13.
Key metrics: billings were $440.4 million (+63% Y/Y), exceeding guidance for $380.0-$390.0 million; nearly 822,000 customers (+46% Y/Y), including 113,000 direct customers (+64% Y/Y) at quarter-end; dollar net retention rate of 122%.
Results significantly outperformed as the international business showed substantial strength, the company landed 73,000 new customers and existing customers expanded their use of DocuSign at the highest levels seen to date.
The partner ecosystem was also an area of strength and growth in Q3, and new partners continue to join at a healthy clip due to the company’s recent momentum.
Q4 guidance for revenue of $404.0-$408.0 million was above consensus of $387.3 million and implies non-GAAP operating income and EPS of $25.4-$63.8 million and $0.10-$0.31, respectively, versus consensus of $30.9 million and $0.15.
Domo Announces Third Quarter Fiscal 2021 Financial Results
Domo (DOMO) reported Q3 ’21 results above expectations and guided Q4 in line with consensus.
Revenue was $53.6 million (+19.8% Y/Y), above guidance for $51.2-$52.2 million and consensus of $51.8 million. Non-GAAP operating income was $(8.7) million (-16.3% margin), above consensus of $(10.1) million. Non-GAAP EPS of $(0.40) beat guidance for $(0.46)-$(0.42) and the Street’s $(0.44).
Key metrics: billings were $55.7 million (+25% Y/Y); remaining performance obligations of $248.8 million (+21% Y/Y).
The strength in Q3 was attributed to new customer account growth, upsells and expansions, and high retention rates, which reached a record high of over 90% on a gross basis.
Domo achieved its goal of positive operating cash flow without the need to raise additional capital and expects to sustain positive operating cash flow going forward.
Q4 guidance for revenue of $53.3-$54.3 million and non-GAAP EPS of $(0.46)-$(0.42) was in line with Street expectations for revenue of $53.3 million and non-GAAP EPS of $(0.43).
Elastic Reports Strong Second Quarter Fiscal 2021 Financial Results
Elastic (ESTC) reported Q2 ’21 results above expectations and raised its outlook for FY ‘221.
Revenue of $144.9 million (+43.3% Y/Y) exceeded guidance for $129.0-$131.0 million and consensus of $130.5 million. Non-GAAP operating income was $(1.7) million (-1.2% margin), ahead of guidance for a (11.5)%-(10.5)% margin and consensus of $(14.3) million. Non-GAAP EPS of $(0.03) beat guidance for $(0.22)-$(0.20) and the Street’s $(0.20).
Key metrics: billings of $177.7 million (+42% Y/Y); over 12,900 subscription customers (+33% Y/Y); 650 customers with Annual Contract Value over $100,000 (+24% Y/Y); net expansion rate over 130%.
Despite some headwinds from COVID-19 related to overall spending and slightly elongated sales cycles, demand was strong across the business in Q2 driven by tailwinds in cloud and adoption of Elastic’s solutions.
EMEA produced the fastest growth followed by the Americas and then APJ, and management highlighted strength in the U.S. Federal business within the Americas.
ElasticON Global, the company’s first virtual user conference, garnered over 25,000 registrants from more than 80 countries.
Q3 guidance for revenue of $145.0-$147.0 million, a non-GAAP operating margin of (8.5)%-(7.5)% and non-GAAP EPS of $(0.16)-$(0.14) exceeded Street expectations for revenue of $139.8 million, non-GAAP operating income of $(22.0) million and non-GAAP EPS of $(0.28).
Management raised its FY ’21 guidance across the board and now anticipates revenue of $568.0-$572.0 million, a non-GAAP operating margin of (7.0)%-(6.0)% and non-GAAP EPS of $(0.40)-$(0.32).
Medallia Reports Record Third Quarter Fiscal 2021 Revenue
Medallia (MDLA) reported Q3 ’21 results above expectations and guided Q4 revenue ahead of consensus.
Revenue of $121.0 million (+17.4% Y/Y) was above guidance for $115.6-$117.6 million and consensus of $116.9 million. Non-GAAP operating income was $2.1 million (1.7% margin), exceeding guidance for $0.2-$0.7 million and consensus of $0.5 million. Non-GAAP EPS of $0.01 beat the Street’s $(0.01).
Key metrics: subscription billings of $395.2 million (+20% Y/Y); over 1,000 enterprise customers (+45% Y/Y) at quarter-end; dollar-based net retention rate was 115%; remaining performance obligations of $732 million (+25% Y/Y).
Q3 was Medallia’s best new logo quarter ever with 64 new enterprise logos accounting for nearly 50% of new bookings.
Contribution from tuck-in acquisitions has been small but growing, and the number of implementation partners has increased 70% from a year ago.
Q4 guidance for revenue of $123.5-$125.5 million was above consensus of $122.8 million, while guidance for non-GAAP operating income of $0.2-$0.7 million was in line with the Street’s $0.4 million.
Management’s initial outlook for FY ’22 calls for revenue of $555.0 million, ahead of Street expectations for $549.8 million.
Nutanix Reports First Quarter Fiscal 2021 Financial Results
Nutanix (NTNX) reported Q1 ’21 results above Street expectations.
Revenue of $312.8 million (-0.6% Y/Y) exceeded consensus of $299.2 million. Non-GAAP operating income was $(85.2) million (-27.2% margin), well above consensus of $(110.8) million. Non-GAAP EPS of $(0.44) beat the Street’s $(0.57).
Key metrics: annual contract value (ACV) billings of $137.8 million (+10% Y/Y) were above guidance for $133.0-$135.0 million; run-rate ACV of $1.291 billion (+29% Y/Y); billings of $380.0 million (-12% Y/Y); added 680 net new customers.
Linearity was very good in the quarter, Nutanix generated a record amount of new pipeline and a substantial amount of ACV was added to backlog as opposed to the typical usage in prior Q1s.
Q1 was Nutanix’s best ACV bookings quarter ever as its ACV-based sales compensation strategy resulted in shorter average contract terms and a corresponding decrease in discounting, and new product attach rates increased while driving demand for core software licenses.
The virtual .NEXT conference had record attendance of over 40,000 prospects, customers and partners, delivering strong pipeline generation at a significantly lower cost than in-person events.
Q2 guidance calls for ACV billings of $145.0-$148.0 million (+4%-6% Y/Y), a non-GAAP gross margin of approximately 81.5% and non-GAAP operating expenses of $360.0-$370.0 million.
ACV billings in Q3 are expected to exhibit typical seasonality of a slight sequential decline, and run-rate ACV is expected to remain on a strong growth trend and increase 25% Y/Y.
PagerDuty Announces Third Quarter Fiscal 2021 Financial Results
PagerDuty (PD) reported Q3 ’21 results above expectations but provided mixed Q4 guidance.
Revenue of $53.8 million (+25.8% Y/Y) was above guidance for $52.0-$53.0 million and consensus of $52.5 million. Non-GAAP operating income was $(6.3) million (-11.7% margin), above consensus of $(7.9) million. Non-GAAP EPS of $(0.09) beat guidance for $(0.11)-$(0.10) and the Street’s $(0.10).
Key metrics: 13,725 customers at quarter-end; dollar-based net retention was 119%.
Strength in the enterprise and mid-market segments drove momentum in Q3 with many large enterprises seemingly finding a new normal and making strategic investments in PagerDuty’s digital operations platform.
The reception to new products launched in September has exceeded expectations, especially with respect to the expanded automation and auto remediation capabilities acquired from Rundeck.
Q4 guidance for revenue of $57.0-$58.0 million and non-GAAP EPS of $(0.12)-$(0.11) was mixed relative to Street expectations for revenue of $55.6 million and non-GAAP EPS of $(0.10).
Salesforce Announces Strong Third Quarter Fiscal 2021 Results
Salesforce (CRM) reported Q3 ’21 results ahead of expectations but provided mixed guidance for Q4.
Revenue of $5.419 billion (+20.1% Y/Y) was above guidance for $5.240-$5.250 billion and consensus $5.251 billion. Non-GAAP operating income was $1.073 billion (19.8% margin), above consensus of $904.9 million. Non-GAAP EPS of $1.74, which includes a benefit of $0.86 from mark-to-market accounting of Salesforce’s strategic investments, beat guidance for $0.73-$0.74 and consensus of $0.75.
Key metrics: current remaining performance obligation of $15.3 billion (+20% Y/Y) was ahead of guidance for growth of 19%.
Salesforce saw strength across geographies and across clouds with service, marketing, commerce, and platform and other all growing in excess of 20%.
After analyzing its global lease commitments, Salesforce plans to consolidate and sublease select locations, which will result in a one-time charge of $80-$100 million.
Q4 guidance for revenue of $5.665-$5.675 billion and non-GAAP EPS of $0.73-$0.74 was mixed relative to Street expectations for revenue of $5.520 billion and $0.86, respectively.
Management’s FY ’22 guidance includes assumed contributions of $600 million and $150 million, respectively, from the acquisitions of Slack and Acumen Solutions.
Guidance for Q1 and FY ‘22 calls for revenue of $5.680-$5.715 billion and $25.450-$25.550 billion, respectively, exceeding Street expectations for $5.651 billion and $24.501 billion.
Salesforce also announced the retirement of President and CFO, Mark Hawkins, and the appointment of Amy Weaver, its current President and Chief Legal Officer, as his successor.
Slack Announces Strong Third Quarter Fiscal Year 2021 Results
Slack (WORK) reported Q3 ’21 results ahead of expectations.
Revenue of $234.5 million (+39.0% Y/Y) was above guidance for $222.0-$225.0 million and consensus of $224.6 million. Non-GAAP operating income was $(3.1) million (-1.3% margin), exceeding guidance for $(27.0)-$(23.0) million and consensus of $(23.9) million. Non-GAAP EPS of $0.01 beat guidance for $(0.06)-$(0.05) and the Street’s $(0.04).
Key metrics: billings of $252.4 million (+36% Y/Y); added 12,000 net new paid customers (+140% Y/Y); 1,080 customers spending over $100,000 annually (+32% Y/Y); over 520,000 connected endpoints on Slack Connect (+240% Y/Y).
Due to Slack’s pending acquisition by Salesforce, no earnings call was held to discuss the results.
Splunk Inc. Announces Fiscal Third Quarter 2021 Financial Results
Splunk (SPLK) reported Q3 ’21 results below expectations and guided Q4 below consensus.
Revenues of $558.6 million (-10.8% Y/Y) were below guidance for $600.0-$630.0 million and consensus of $613.0 million. Non-GAAP operating income of $(9.5) million (-1.7% margin) fell short of guidance for a 2.0%-5.0% margin and consensus of $19.6 million. Non-GAAP EPS of $(0.07) missed the Street’s $0.09.
Key metrics: Total ARR was $2.07 billion (+44% Y/Y), including Cloud ARR of $630 million (+71% Y/Y); 444 customers with ARR over $1 million; remaining performance obligations of $1.7 billion (+18% Y/Y).
Splunk fell short of its bookings target as close rates for its largest deals were much lower than normal due to customers hesitating to commit to long-term contracts amid current macro conditions.
In October, the company hosted over 30,000 customers, partners and Splunkers at its .conf20 user conference.
The Q4 pipeline is robust, demand is growing and customers are buying more over time via data and infrastructure expansion.
Q4 guidance for revenue of $650.0-$700.0 million and a non-GAAP operating margin of (4.0)%-3.0% (implies non-GAAP operating income of $(28.0)-$21.0 million) fell short of Street expectations for revenue of $777.7 million and non-GAAP operating income of $93.1 million.
Management withdrew its prior FY ’23 ARR and operating cash flow growth targets pending a greater understanding of the macro factors affecting the operating environment.
Secureworks Reports Third Quarter Fiscal 2021 Results
Secureworks (SCWX) reported Q3 ’21 results above expectations and guided Q4 in line with consensus.
Revenue of $141.6 million (+0.2% Y/Y) was above guidance for $137.0-$139.0 million and consensus of $138.2 million. Adjusted EBITDA was $11.3 million (8.0% margin), exceeding consensus of $8.5 million. Non-GAAP EPS of $0.08 beat guidance for $0.04-$0.06 and the Street’s $0.05.
Secureworks increased the number of customers on its Threat Detection and Response (TDR) application by 36% sequentially and now has nearly 300 customers on the new security analytics platform.
The company continues to invest in training and enablement, marketing and demand generation as it builds out its global partner program.
Q4 guidance for revenue of $138.0-$139.0 million and non-GAAP EPS of $0.00-$0.02 was in line with Street expectations for revenue of $138.6 million and non-GAAP EPS of $0.02.
Veeva Announces Fiscal 2021 Third Quarter Results
Veeva (VEEV) reported Q3 ’21 results above expectations and guided Q4 ahead of consensus.
Revenues of $377.5 million (+34.4% Y/Y) exceeded guidance for $360.0-$362.0 million and consensus of $361.8 million. Non-GAAP operating income was $155.5 million (41.2% margin), above guidance for $138.0-$140.0 million and consensus of $139.3 million. Non-GAAP EPS of $0.78 beat guidance for $0.66-$0.68 and the Street’s $0.68.
Bookings and services performance were better than expected with notable acceleration in Development Cloud applications.
Reduced travel and the move to virtual customer events provided a 250 basis point benefit to operating margin.
Q4 guidance for revenues of $378.0-$380.0 million, non-GAAP operating income of $136.0-$138.0 million and non-GAAP EPS of $0.67-$0.68 was ahead of Street expectations for $367.6 million, $129.7 million and $0.62, respectively.
Looking to next year, management expects Commercial Cloud customers to reduce field reps by 10% and adopt Veeva’s digital solutions to gain efficiencies, anticipates increasing market share in CRM along with further adoption of add-on products, and expects greater adoption of Veeva Link.
Management’s FY ’22 guidance for revenues of $1.700-$1.720 billion and a non-GAAP operating margin of 37% (implies non-GAAP operating income of $629.0-$636.4 million) was consistent with Street expectations for revenues of $1.701 billion and non-GAAP operating income of $635.2 million.
VMware Reports Fiscal Year 2021 Third Quarter Results
VMware (VMW) reported Q3 ’21 results above expectations and guided Q4 ahead of consensus.
Revenue of $2.864 billion (+7.8% Y/Y) was above guidance for $2.800 billion and consensus of $2.809 billion. Non-GAAP operating income was $888.0 million (31.0% margin), exceeding guidance for a 27.5% margin and consensus of $776.6 million. Non-GAAP EPS of $1.66 beat guidance for $1.42 and consensus of $1.44.
Key metrics: billings of $2.714 billion (-4.2% Y/Y ex-impact of Carbon Black); RPO of $10.2 billion (+10% Y/Y).
VMware’s “Any Application, Any Cloud, Any Device” strategy continues to resonate with customers and its subscription and SaaS revenue surpassed on-premise license revenue for the first time.
COVID-19 again impacted large transformational on-premises projects although the pipeline points to some recovery in Q4.
Management raised its FY ’21 revenue and non-GAAP EPS guidance to $11.7 billion and $7.03, respectively, implying Q4 revenue and non-GAAP EPS of $3.227 billion and $2.04 versus consensus of $3.199 billion and $1.88.
For FY ’22, management currently anticipates high single-digit revenue growth and an operating margin of approximately 28%, implying revenue and non-GAAP operating income of $12.5-$12.8 billion and $3.51-$3.57 billion, respectively, versus consensus of $12.8 billion and $3.9 billion.
Yext, Inc. Announces Third Quarter Fiscal 2021 Results
Yext (YEXT) reported Q3 ’21 results above expectations but provided a mixed outlook for Q4.
Revenue of $89.1 million (+16.6% Y/Y) was above guidance for $86.0-$88.0 million and consensus of $87.2 million. Non-GAAP operating income was $(2.5) million (-2.8% margin), exceeding consensus of $(11.5) million. Non-GAAP EPS of $(0.02) beat guidance for $(0.09)-$(0.07) and the Street’s $(0.08).
Key metrics: ARR of $346 million (+18% Y/Y); nearly 2,300 customers (+28% Y/Y) at quarter-end; over 405 million structured facts in the Yext Knowledge Graph (+58% Y/Y); TTM net dollar-based retention was 103%.
Q3 was a solid sales quarter as Yext closed 107 new and renewal deals with at least $100,000 of total contract value.
Gross retention was consistent with historical levels but upsells to customers with retail footprints and in EMEA were muted.
Yext closed 86 Answers led deals that comprised 30% of new and upsell ACV in the quarter versus 20% in Q2.
Quota-carrying sales reps numbered close to 240 at quarter-end, leaving Yext on track to reach 255 by the end of FY ‘21.
Q4 guidance for revenue of $87.0-$89.0 million and non-GAAP EPS of $(0.10)-$(0.08) was mixed relative to Street expectations for revenue of $94.0 million and non-GAAP EPS of $(0.08).
Zoom Reports Results for Third Quarter Fiscal Year 2021
Zoom (ZM) reported Q3 ’21 results above expectations and guided Q4 ahead of consensus.
Revenue of $777.2 million (+367% Y/Y) was above guidance for $685.0-$690.0 million and consensus of $694.0 million. Non-GAAP operating income was $290.8 million (37.4% margin), exceeding guidance for $225.0-$230.0 million and consensus of $234.6 million. Non-GAAP EPS of $0.99 beat guidance for $0.73-$0.74 and consensus of $0.76.
Key metrics: 433,700 customers with over 10 employees (+485% Y/Y) at quarter-end; 1,289 customers with over $100,000 in TTM revenue (+136% Y/Y); TTM net dollar expansion rate in customers with over 10 employees was above 130%.
Results exceeded expectations due to strong sales and marketing execution in both the online and direct businesses as well as lower than anticipated churn.
Gross margin continues to be impacted by the dramatic increase in usage related to the pandemic, a higher mix of free users and higher utilization of public cloud services.
Zoom plans to invest in additional sales capacity and marketing programs over the next several quarters to capture market share and deliver on its growth opportunities.
Q4 guidance for revenue of $806.0-$811.0 million, non-GAAP operating income of $243.0-$248.0 million and non-GAAP EPS of $0.77-$0.79 beat Street expectations for $730.1 million, $206.6 million and $0.66, respectively.
Zscaler Reports First Quarter Fiscal 2021 Financial Results
Zscaler (ZS) reported Q1 ’21 results above expectations and raised its guidance for FY ’21.
Revenue of $142.6 million (+52.3% Y/Y) was above guidance for $131.0-$133.0 million and consensus of $132.3 million. Non-GAAP operating income was $19.7 million (13.8% margin), exceeding guidance for $8.0-$10.0 million and consensus of $8.9 million. Non-GAAP EPS of $0.14 beat guidance for $0.05-$0.06 and the Street’s $0.06.
Key metrics: billings of $144.7 million (+64% Y/Y); net retention rate of 122%; remaining performance obligations of $864 million (+56% Y/Y).
The strong start to the fiscal year was attributed to growing traction with large enterprises as evidenced by a record number of seven-figure ACV deals closed, an optimized go-to-market engine that is driving significant velocity in the pace of new logo acquisitions, and the power of the Zero Trust Exchange platform, which is resonating with CXOs.
Inbound customer requests have greatly increased and Zscaler is becoming an integral part of a growing number of larger transformation projects.
A number of emerging products, including ZDX, Workload Segmentation and CSPM, will run in the public cloud until Zscaler scales them into its own data centers in the future, resulting in lower gross margins than for core products in the near-term.
Q2 guidance for revenue of $146.0-$148.0 million, non-GAAP operating income of $11.0-$12.0 million and non-GAAP EPS of $0.07-$0.08 compared favorably with Street expectations for $140.3 million, $10.5 million and $0.07, respectively.
Management raised its FY ’21 guidance across the board and now anticipates revenue of $608.0-$612.0 million, billings of $755.0-$765.0 million, non-GAAP operating income of $55.0-$57.0 million and non-GAAP EPS of $0.37-$0.38.
Zuora Reports Third Quarter Fiscal 2021 Results
Zuora (ZUO) reported Q3 ’21 results above expectations and guided Q4 revenue ahead of consensus.
Revenue of $77.2 million (+7.6% Y/Y) was above guidance for $73.0-$75.0 million and consensus of $73.9 million. Non-GAAP operating income of breakeven exceeded guidance for $(5.5)-$(4.5) million and consensus of $(5.3) million. Non-GAAP EPS of $(0.01) beat guidance for $(0.05)-$(0.04) and the Street’s $(0.05).
Key metrics: billings of $70.8 million (+14% Y/Y); added 25 new customers; 653 customers with ACV of $100,000 or more (+11% Y/Y); dollar-based retention rate of 99%; $14.6 billion in transaction volume (+31% Y/Y).
The enterprise pipeline continues to grow as big brands embrace subscription models, resulting in larger deal sizes and higher ACV per customer.
Momentum with partners is building as evidenced by a near doubling of ACV from deals sourced with partners and over a third of go-lives in the quarter involving a SI partner.
Q4 guidance for revenue of $75.0-$77.0 million was ahead of the Street’s $74.3 million, while guidance for non-GAAP operating income and EPS of $(5.5)-$(4.5) million and $(0.06)-$(0.05) were in line with the Street’s $(4.5) million and $(0.05).
Notable News
BigCommerce Merchants Experience Highest Ecommerce Sales Ever During Cyber Week
BigCommerce (BIGC) reported that its merchants saw a 74% Y/Y increase in gross merchandise volume during Cyber Week.
The number of orders during Cyber Week increased 48% Y/Y and average order value increased 17% Y/Y.
Blackbaud Announces Long-Term Financial Goals and Strategic Outlook
Blackbaud (BLKB) put forth its long-term aspirational goal of achieving the “Rule of 40,” which the company defines as non-GAAP organic revenue growth plus adjusted EBITDA margin of 40% or more.
Blackbaud anticipates its “Rule of 40” measure will equate to at least 25% in the midst of the pandemic and expand to 35% or more over the mid-term, which the company defines as three to four years post-pandemic.
Underlying its mid- and long-term aspirations are non-GAAP revenue growth expectations in the mid single-digit and mid to high single-digit ranges, respectively.
Management noted that the pandemic has amplified the variability in Blackbaud’s transactional revenue, most of which is payment processing revenue but also includes usage-based revenue comprising less than 5% of total revenue.
Declines in transactional revenue are likely to see more of a V-shaped recovery, while the shortfalls in bookings thus far in the pandemic may recover more gradually.
Crexendo Announces Appointment of Chief Revenue Officer
Crexendo has appointed Jon Brinton as Chief Revenue Officer, a role in which he will oversee revenue operations, direct sales and channel sales, including Value-Added Resellers and Agents.
Mr. Brinton joins the company from Avaya, where he was Vice President of Channel Sales for North America.
LivePerson (LPSN) priced an offering of $450.0 million aggregate principal amount of 0% Convertible Senior Notes due 2026 with an initial conversion price of $75.23 per share, representing a 28.8% premium to the last close price prior to announcement of the planned offering.
The initial purchasers have an option to purchase up to an additional $67.5 million aggregate principal amount of notes.
Approximately $40.1 million of the estimated net proceeds of $439.6 million (or $505.7 million if the initial purchasers exercise their option in full) will be put towards the cost of capped call transactions with the remainder used for general corporate purposes.
Salesforce Data Reveals All-Time High $60 Billion in U.S. Cyber Week Digital Sales
Salesforce (CRM) released its Cyber Week insights, which revealed a 36% Y/Y increase in global online sales to $270 billion and a 29% Y/Y increase in the U.S. to $60 billion.
The number of consumers participating in Cyber Week increased 22% Y/Y.
Social media platforms drove 9% of global traffic and 10% of U.S. traffic to commerce websites during Cyber Week, but comprised just 3% of global digital orders and 4% of U.S. digital orders placed during the week.
Digital sales powered by commerce cloud increased 41% Y/Y on Thanksgiving, 42% Y/Y on Black Friday and 31% Y/Y on Cyber Monday.
Shopify (SHOP) announced that businesses powered by its platform generated sales in excess of $5.1 billion for the Black Friday/Cyber Monday weekend, representing an increase of 76% Y/Y.
Holiday shopping in general started earlier this year with daily total sales increasing 19 days before Cyber Monday and up 84% Y/Y in the week leading up to Cyber Monday.
Over 44 million consumers globally purchased from brands powered by Shopify, which represents an increase of 50% Y/Y, and spent an average of $89.20 per order throughout the Black Friday/Cyber Monday weekend.
Apparel and accessories was the top sales category for the weekend followed by health and beauty and home and garden.
Veritone, Inc. Prices Public Offering of Common Stock
Veritone (VERI) priced an offering of 3.0 million shares of its common stock at a price of $18.50 per share, a 23.9% discount to the last close price prior to disclosure of the planned offering.
The underwriters have also been granted an option to purchase up to an additional 450,000 shares.
ZoomInfo Announces Pricing of Secondary Offering of Shares of Class A Common Stock
ZoomInfo Technologies (ZI) announced that certain selling stockholders, including TA Associates, The Carlyle Group and 22C Capital, priced an underwritten public offering of 12.5 million shares of its Class A common stock at $45.00 per share, representing a discount of 7.7% to the last close price prior to disclosure of the planned offering.
The selling stockholders have also granted the underwriters an option to purchase up to an additional 1.875 million shares.
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 Box, Inc. (BOX).
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 Stamps.com (STMP).