K. Liu's Week in Review

FedEx (FDX) provided a glimpse into how e-commerce is trending to start the year. Despite inclement winter weather in mid- to late-February, which had a pronounced impact on revenues and costs at quarter-end, FedEx delivered fiscal Q3 ’21 results ahead of expectations. Of particular interest to us, e-commerce volumes in FedEx Ground’s seven-day residential delivery service increased 70% Y/Y during the company’s fiscal Q3 and the small and medium business segment has seen fiscal year-to-date growth of 35% through the end of February. Looking forward, capacity is expected to remain constrained this calendar year although FedEx plans to prioritize capacity for home delivery and its small and medium customers. While management anticipates a deceleration in e-commerce growth relative to the lofty levels realized over the past year, the expectation is that volumes will continue to increase during the current fiscal quarter and into the next fiscal year. Long-term, management’s outlook assumes e-commerce grows at a CAGR in excess of 10% and comprises 90% of overall market growth. As for what this all means for Stamps.com (STMP), we already know that volumes across all of the carriers supported on its platforms increased 40% Y/Y in January with growth in United States Postal Service (USPS) volumes closer to 30% based on reported monthly PC Postage revenue. Given the severe winter weather in February, we surmise growth likely decelerated last month and will reaccelerate in March as delivery operations rebound from the weather-related challenges and as the recently issued stimulus checks in the U.S. boost spending. Worth noting, Adobe’s Digital Economy Index report for February indicated online spending increased 34% Y/Y in the first two months of 2021, a positive data point in our view. Regardless, we think the uncertain trajectory of e-commerce growth is likely to keep shares rangebound in the near-term, particularly given more difficult comparisons in calendar Q2 and Q3. That said, we remain of the mindset that investors ought to look beyond this year and consider Stamps.com’s exposure to the secular growth tailwind from e-commerce and the company’s opportunity to acquire and monetize merchants and their volumes both domestically and abroad.

Within the software space, only a handful of companies reported and despite some relatively sizeable beats, none ended the week above the prior week’s levels. Both Coupa Software (COUP) and CrowdStrike (CRWD) continue to exhibit robust growth and deliver substantial improvements on the margin front, so the only element missing this time around was the lack of follow through in the stock price. ON24 (ONTF), a recent IPO and major beneficiary of the COVID-19 pandemic, will be an interesting one to watch with respect to how the return to pre-pandemic ways of working affects demand for solutions powering a more virtual world. As far as reference points, ON24’s pre-pandemic growth rate was 31% and net dollar retention was approximately 110%. In Q4 ’20, the company posted 100% growth in ARR and a net dollar retention rate of 149%. On the other side of the coin, both PagerDuty (PD) and Smartsheet (SMAR) saw their growth rates affected by the pandemic and have seen a steady recovery in their businesses. Both companies reported strong finishes to their fiscal years highlighted by improving net dollar retention rates in excess of 120% and robust billings growth.

Rounding out the news this week, Palo Alto Networks (PANW) appointed Dipak Golechha as CFO, succeeding Luis Visoso, who is leaving to become CFO at Unity Software (U). Mr. Golechha joined Palo Alto Networks in late 2020 and has previously held executive roles at Procter & Gamble and Excelligence Learning Corporation. Jean Compeau, Palo Alto’s Senior Vice President and Chief Accounting Officer, is also expected to take on more responsibility within the finance organization following her appointment as Deputy CFO. Lastly, Rapid7 (RPD) priced an upsized offering of $525 million aggregate principal amount of 0.25% convertible senior notes due 2027 with an initial conversion price of $103.38 per share, a 31% premium to the close price prior to disclosure of the planned offering. The company has also granted the initial purchasers an option to purchase up to an additional $75 million of the notes. Rapid7 plans to utilize $183.0 million of the net proceeds and to issue approximately 2.2 million shares to repurchase $182.6 million aggregate principal amount of its outstanding 1.25% convertible senior notes due 2023.

Earnings Releases

Coupa Software Reports Fourth Quarter & Full Year Fiscal 2021 Financial Results

  • Coupa Software (COUP) reported Q4 ’21 results above expectations but provided a mixed outlook for FY ’22.

  • Revenues of $163.5 million (+46.7% Y/Y) exceeded guidance for $145.0-$146.0 million and consensus of $145.7 million. Non-GAAP operating income was $11.2 million (6.8% margin), well above guidance for $(8.0)-$(6.0) million and consensus of $(6.6) million. Non-GAAP EPS of $0.17 beat guidance for $(0.13)-$(0.11) and the Street’s $(0.11).

  • Key metrics: billings of $270 million (+49% Y/Y).

  • Q4 saw strong contributions from Coupa Pay, including Coupa Treasury and Coupa Supply Chain Management, the latter of which was formerly LLamasoft and contributed $22 million to revenue and $15 million to billings.

  • The broader sales environment continues to improve with increased activity and closure rates for larger opportunities.

  • Coupa’s e-sourcing platform has been a frequent add-on for customers over the past year.

  • Management’s outlook assumes a gradual return to normalcy, no billings or revenue contribution from Coupa Travel Saver, and LLamasoft revenues below its pre-acquisition run rate due to cloud conversions and partner-led implementations.

  • Q1 guidance for revenues of $151.5-$152.5 million, non-GAAP operating income of $(12.0)-$(10.0) million and non-GAAP EPS of $(0.21)-$(0.18) was mixed relative to Street expectations for $148.8 million, $(2.4) million and $(0.01), respectively.

  • FY ’22 guidance for revenues of $675.0-$678.0 million, non-GAAP operating income of $(10.0)-$(7.0) million and non-GAAP EPS of $(0.27)-$(0.23) was also mixed versus consensus of $664.1 million, $32.3 million and $0.36, respectively.

CrowdStrike Reports Fourth Quarter and Fiscal Year 2021 Financial Results

  • CrowdStrike (CRWD) reported Q4 ’21 results above expectations and guided FY ’22 ahead of consensus.

  • Revenue was $264.9 million (+74.2% Y/Y), above guidance for $245.5-$250.5 million and consensus of $250.4 million. Non-GAAP operating income was $34.4 million (13.0% margin), exceeding guidance for $18.5-$22.1 million and consensus of $20.5 million. Non-GAAP EPS of $0.13 beat guidance for $0.08-$0.09 and the Street’s $0.08.

  • Key metrics: ARR of $1.05 billion (+75% Y/Y); added 1,480 net new subscription customers for a total of 9,896 (+82% Y/Y); gross retention rate was 98%; dollar-based net retention rate was 125%.

  • CrowdStrike continues to see rapid module adoption and strong momentum with both enterprises and small businesses alike as organizations shed legacy and inferior next-gen security technologies and move to modern cloud-native solutions.

  • Increasing concern amongst Microsoft’s customer base following the SUNBURST attack is driving interest in CrowdStrike’s identity protection technologies, including the zero trust offerings acquired via Preempt.

  • The acquisition of Humio is expected to add net new ARR of $2 million in Q1.

  • Q1 guidance for revenue of $287.8-$292.1 million, non-GAAP operating income of $18.5-$21.7 million and non-GAAP EPS of $0.05-$0.06 exceeded Street expectations for $267.8 million, $12.6 million and $0.04, respectively.

  • Management’s FY ’22 guidance for revenue, non-GAAP operating income and non-GAAP EPS of $1.310-$1.321 billion, $94.8-$102.5 million and $0.27-$0.30 compared favorably with consensus of $1.219 billion, $85.3 million and $0.28.

ON24 Announces Fourth Quarter and Full Year 2020 Financial Results

  • ON24 (ONTF) reported Q4 ’20 results above expectations and guided FY ’21 ahead of consensus.

  • Revenue of $53.3 million (+123% Y/Y) was ahead of consensus of $52.3 million. Non-GAAP operating income was $11.1 million (20.8% margin), above consensus of $10.0 million. Non-GAAP EPS of $0.57 beat the Street’s $0.53.

  • Key metrics: ARR was $153.4 million (+100% Y/Y); 2,000 customers (+42% Y/Y), including 302 with ARR over $100,000 (+110% Y/Y); net retention rate was 149%.

  • ON24’s Digital Experience Platform enables businesses to convert prospects into customers by leveraging interactive webinars, virtual conferences and always-on multimedia content experiences.

  • Overages typically comprise 3%-4% of revenue but may be higher depending on customer usage of the platform.

  • The company is adding sales capacity to drive both new customer acquisition and customer expansion, is entering into new international markets and is developing new products to fuel further growth.

  • As COVID was an accelerant in 2020, management anticipates a return to more normalized growth rates as the company laps the periods of extraordinary growth in the quarters to come.

  • Q1 guidance for revenue of $48.5-$49.0 million, non-GAAP operating income of $0.5-$1.0 million and non-GAAP EPS of $0.00-$0.01 was above Street expectations for $47.1 million, $(0.6) million and $(0.02), respectively.

  • FY ’21 guidance includes revenue, non-GAAP operating income and non-GAAP EPS of $205.5-$208.5 million, $(5.0)-$(2.0) million and $(0.14)-$(0.07), respectively, ahead of consensus of $205.0 million, $(5.8) million and $(0.15).

PagerDuty Announces Fourth Quarter and Full Year Results for Fiscal 2021

  • PagerDuty (PD) reported Q4 ’21 results above expectations but provided mixed guidance for FY ’22.

  • Revenue was $59.3 million (+29.1% Y/Y), ahead of guidance for $57.0-$58.0 million and consensus of $59.3 million. Non-GAAP operating income was $(5.4) million, above consensus of $(9.0) million. Non-GAAP EPS of $(0.07) beat guidance for $(0.12)-$(0.11) and the Street’s $(0.11).

  • Key metrics: over 13,800 customers; dollar-based net retention was 121%.

  • Q4 results included the closure of the largest multi-year expansion in PagerDuty’s history, its first $1 million contract in EMEA and record transaction growth in the mid-market.

  • Many of the expansions in Q4 included early renewals as customers added users and upgraded plans in order to execute on their digital transformation and cloud migration initiatives more quickly.

  • Digital Operations Management plans accounted for 70% of total net new ARR and now represent 20% of total ARR.

  • Outside of enterprise and mid-market, PagerDuty is seeing good momentum in SMB, which combined with the success of its free offering has driven growth in both paid and free users in excess of 20%.

  • Q1 guidance for revenue of $61.0-$63.0 million and non-GAAP EPS of $(0.10)-$(0.09) was mixed versus consensus of $61.0 million in revenue and $(0.07) in non-GAAP EPS.

  • FY ’22 guidance for revenue of $264.0-$270.0 million was above consensus of $262.6 million, while guidance for non-GAAP EPS of $(0.43)-$(0.36) fell short of the Street’s $(0.21).

SharpSpring Reports Fourth Quarter and Full Year 2020 Results

  • SharpSpring (SHSP) reported Q4 ’20 results above expectations and guided FY ’21 revenue in line with consensus.

  • Revenue of $7.7 million (+24.9% Y/Y) was in line with guidance for $7.4-$7.8 million and ahead of consensus of $7.6 million. Adjusted EBITDA was $(0.9) million, above consensus of $(1.2) million. Non-GAAP EPS of $(0.09) beat the Street’s $(0.13).

  • Key metrics: MRR of $132,000 (-20% Y/Y); net new ARR of $1.6 million; 2,000 agency customers, over 500 direct customers and over 10,000 total businesses across all platforms; net revenue retention was 91.7%.

  • Within the customer base, attrition diminished and net revenue retention returned to pre-COVID levels driven by a second straight quarter of net positive agency client expansion.

  • All employees were returned to pre-pandemic salary levels in November and additional resources to drive new sales, marketing and product initiatives have been added subsequent to year-end.

  • In January, SharpSpring instituted annual client licenses for the first time and increased the price of a monthly license.

  • SharpSpring will eventually offer multi-tiered pricing and establish a freemium customer acquisition strategy.

  • Management’s FY ’21 guidance for revenue of $34.0-$36.0 million was in line with Street expectations for $34.2 million.

Smartsheet Inc. Announces Fourth Quarter and Full Fiscal Year 2021 Results

  • Smartsheet (SMAR) reported Q4 ’21 results above expectations and guided FY ’22 ahead of consensus.

  • Revenue of $109.9 million (+39.9% Y/Y) was above guidance for $102.0-$103.0 million and consensus of $102.7 million. Non-GAAP operating income was $(5.3) million, exceeding guidance for $(18.0)-$(16.0) million and consensus of $(16.9) million. Non-GAAP EPS of $(0.04) beat guidance for $(0.15)-$(0.13) and the Street’s $(0.13).

  • Key metrics: billings of $151.2 million (+49% Y/Y); 11,874 customers with ACV of $5,000 or more (+31% Y/Y); 588 customers with ACV of $100,000 or more (+68% Y/Y); average ACV per domain-based customer was $5,103 (+40% Y/Y); dollar-based net retention rate was 123%.

  • In Q4, Smartsheet saw success with large deals, which was supported by year-end customer budget benefits; strong performance from acquired brands; and the launch of its no-code WorkApps offering.

  • Smartsheet plans to deliver a new user experience for customers in 2021, the first phase of which is in beta testing with 35,000 users and is expected to launch globally next month.

  • Q1 guidance for revenue of $111.0-$112.0 million, non-GAAP operating income of $(19.0)-$(17.0) million and non-GAAP EPS of $(0.15)-$(0.14) was mixed relative to Street expectations for $109.0 million, $(15.6) million and $(0.12), respectively.

  • Management’s FY ’22 guidance includes revenue, non-GAAP operating income and non-GAAP EPS of $500.0-$505.0 million, $(55.0)-$(45.0) million and $(0.44)-$(0.36), respectively, comparing favorably with consensus of $488.8 million, $(56.0) million and $(0.42).

Notable News

Palo Alto Networks Announces CFO Transition; Dipak Golechha Appointed CFO as Luis Visoso Departs

  • Palo Alto Networks (PANW) has appointed Dipak Golechha as Chief Financial Officer, succeeding Luis Visoso, who is leaving to become CFO of Unity Software (U).

  • Mr. Golechha joined the company late last year as Senior Vice President of Finance and has previously served in executive roles at Procter & Gamble and Excelligence Learning Corporation.

  • Jean Compeau, Senior Vice President and Chief Accounting Officer, has been appointed deputy CFO and will take on more responsibility within the finance organization.

Rapid7 Announces Upsized Pricing of $525 Million Convertible Senior Notes Offering

  • Rapid7 (RPD) priced an offering of $525 million aggregate principal amount of 0.25% convertible senior notes due 2027 with an initial conversion price of $103.38 per share, a 31.3% premium to the close price prior to disclosure of the offering.

  • The offering was upsized from initial plans to offer $500 million aggregate principal amount of notes, and the company has granted the initial purchasers an option to purchase up to an additional $75 million aggregate principal amount of notes.

  • The company plans to use $183.0 million of the net proceeds and to issue approximately 2.2 million shares to repurchase $182.6 million aggregate principal amount of its outstanding 1.25% convertible senior notes due 2023.

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 Stamps.com (STMP).

Software IndustryKevin LiuCOUP, CRWD, ONTF, PANW, PD, RPD, SHSP, SMAR, STMP