K. Liu's Week in Review
The Postal Regulatory Commission (PRC) filed an Order Approving Removal of Customized Postage from Mail Classification Schedule, marking the end of the United States Postal Service’s (USPS) customized postage program and Stamps.com’s (STMP) PhotoStamps offering. While we had hoped the PRC could be swayed by comments put forth by Stamps.com, Minted.com, the Alliance of Nonprofit Mailers and others arguing for the continuation of the customized postage program, we had already assumed that the program would be terminated and removed the associated revenue and costs from our estimates beyond Q2. One interesting tidbit from the order was a concurring opinion issued by commissioner Mark Acton in which he stated that his “latest PhotoStamp purchase was met with word that ‘due to overwhelming demand, some orders may be delayed,’ and he expressed hope that the USPS could one day revive the customized postage program with Forever stamps included. Between reports of peak season shipping volumes thus far in Q2 and perhaps a final rush by interested parties to procure PhotoStamps, Stamps.com appears poised for another strong quarter.
American Software (AMSWA), for which K. Liu & Company provides investor relations services, reported its fiscal Q4 ’20 results this week. While revenue and adjusted EBITDA exceeded Street expectations, the company’s net new SaaS Annual Contract Value (ACV) was negatively affected by the loss of a lifestyle products customer and the slippage of a few deals due to the COVID-19 outbreak. Management indicated that sales cycles stalled mid-quarter as customers and prospects focused on their responses to the pandemic. However, business momentum began to re-emerge in late April with further improvement in May and early June. While acknowledging that the near-term holds some uncertainty given the pandemic and typical seasonality, management expressed confidence in achieving ACV growth in FY ’21 with an upward trend anticipated in the latter half of the fiscal year. Results aside, the COVID-19 crisis has elevated the importance of supply chain management in the eyes of executives, prompting an uptick in transformational projects and boding well for growth in FY ’21 and beyond. On a separate but related note, Kinaxis (KXS-CA) agreed to acquire Rubikloud, which provides AI-based demand forecasting and trade promotion optimization to the retail and consumer packaged goods (CPG) industries, for $60 million in cash. Although details were sparse, the acquisition has no impact on Kinaxis’ outlook for the year, suggesting only nominal revenues at present. Kinaxis expects Rubikloud to enhance the demand planning capabilities within its RapidResponse platform, increase cross-sell opportunities into its existing base of CPG customers and provide an entrée into the retail space.
In other news, Oracle (ORCL) was also on the tape with its fiscal Q4 ’20 results. The company’s performance was mixed as revenues fell short of expectations due to delayed deals in industries hit hard by the pandemic, while non-GAAP EPS beat consensus by $0.04. Management noted that discussions with customers that delayed projects have largely resumed, and Oracle expects to ultimately book the business. Guidance for the current quarter was mixed with revenue slightly below the Street and non-GAAP EPS in line. Axon Enterprise (AAXN) raised gross proceeds of $276 million in a public offering of 3.0 million shares at a price of $92.00 per share, which represented an 8% discount to the close price prior to the announced offering. The company plans to use the proceeds for working capital and other general corporate purposes. Finally, FireEye (FEYE) appointed Brad Maiorino as its Chief Strategy Officer. He joins the company from Thomson Reuters, where he served as Chief Information Security Officer, and will be responsible for influencing the FireEye and Mandiant products and solutions strategy.
Mergers & Acquisitions
Kinaxis to Acquire AI-based Retail and CPG Demand Planning Provider, Rubikloud
Kinaxis (KXS-CA) has agreed to acquire Rubikloud, a provider of AI solutions designed to automate supply chain analytics and decision-making in the retail and consumer packaged goods industries, for $60 million in cash.
Rubikloud targets the retail and consumer packaged goods industries with solutions for demand forecasting and automation to manage and optimize trade promotions, pricing and assortment.
The acquisition is expected to enhance the demand planning capabilities in the RapidResponse platform, provide cross-sell capabilities into Kinaxis’ growing CPG customer base and serve as a springboard into the enterprise retail industry.
The transaction is expected to close within 60 days and does not affect the company’s prior revenue and adjusted EBITDA guidance for FY ’20.
Earnings Releases
American Software Reports Preliminary Fourth Quarter and Fiscal Year 2020 Results
American Software (AMSWA) reported Q4 ’20 revenue and adjusted EBITDA ahead of Street expectations.
Revenues of $29.3 million (+11.4% Y/Y) were above consensus of $28.4 million. Adjusted EBITDA was $3.9 million (13.3% margin), above consensus of $3.2 million. Non-GAAP EPS of $0.04 missed the Street’s $0.06.
Key metrics: Cloud Services Annual Contract Value (ACV) of $26.4 million (+53% Y/Y); added six new customers in the quarter and added $1.0 million in net new ACV.
Net new ACV was negatively impacted by approximately $0.6 million due to the loss of a lifestyle products company that experienced financial pressures and a few delays in deal closures.
The shift to virtual operations proved beneficial to professional services as implementations accelerated, resulting in strong services growth in the quarter.
Management noted that pipelines have continued to expand and are above year-ago levels, and business momentum has improved since April with a number of contracts already completed in May and early June.
Oracle Announces Fiscal 2020 Fourth Quarter and Fiscal Full Year Financial Results
Oracle (ORCL) reported mixed Q4 ’20 results and provided a mixed outlook for Q1 ‘21.
Revenues of $10.440 billion (-6.3% Y/Y) fell short of guidance for $10.913-$11.358 billion and consensus of $10.672 billion. Non-GAAP operating income was $5.142 billion (49.3% margin), above consensus of $5.089 billion. Non-GAAP EPS of $1.20 were at the low-end of guidance for $1.20-$1.28 but above the Street’s $1.16.
Fusion apps +31% Y/Y, Fusion ERP +35% Y/Y, Fusion HCM +29% Y/Y, NetSuite ERP +25% Y/Y and vertical SaaS +7% Y/Y.
Oracle entered Q4 with an enormous pipeline of transactional business but experienced a drop-off in deals, especially in industries most affected by the pandemic such as hospitality, retail and transportation.
Discussions with customers that delayed deals have already resumed in many cases, and management believes the business will ultimately be booked.
Q1 guidance calls for revenue growth of (1.0)%-1.0%, implying revenues of $9.126-$9.310 billion versus consensus of $9.111 billion, and non-GAAP EPS of $0.84-$0.88, which was in line with consensus of $0.85.
Due to uncertainty related to the pandemic, management refrained from providing guidance for FY ’21.
Notable News
Axon Announces Pricing of Public Offering of Common Stock
Axon Enterprise (AAXN) priced a public offering of 3.0 million shares of its common stock at a price of $92.00 per share, representing a discount of 8.3% to the close price prior to the announcement of the planned offering.
The company has also granted the underwriters a 30-day option to purchase up to an additional 450,000 shares.
Gross proceeds from the offering are expected to total $276 million, which will be used for working capital and other general corporate purposes.
FireEye Appoints Brad Maiorino As Chief Strategy Officer
FireEye (FEYE) has appointed Brad Maiorino as Chief Strategy Officer, a role in which he will influence the company’s product solutions strategy based on customer needs.
Mr. Maiorino most recently served as Chief Information Security Officer for Thomson Reuters.
Dislcosure(s):
K. Liu & Company LLC has received compensation from American Software (AMSWA) for non-investment banking services within the past 12 months.
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).