K. Liu's Week in Review
In its quest to become the cloud compliance platform behind every transaction around the globe, Avalara (AVLR) acquired Transaction Tax Resources (TTR), which offers a database of sales and use tax content as well as other enterprise tax automation solutions to over 1,400 enterprise customers. The $377 million all-cash purchase price equates to a multiple of nearly 19x projected sales for 2020. As far as the strategic rationale, the acquisition expands Avalara’s capabilities in the enterprise segment of the market, where TTR’s content is typically used in tandem with a tax automation solution from competitors like Thomson Reuters and Vertex (VERX). TTR also adds a new subscription revenue stream for content, which Avalara plans to cross-sell into its existing customer base. Lastly, the combination will support the development of a market leading platform for certificate management.
Also announcing tuck-in acquisitions were Altair (ALTR) and Ping Identity (PING). The former acquired M-Base Engineering + Software, which offers a material database and material information systems focused on plastics. The integration of M-Base’s plastics data with Altair’s solvers is expected to assist designers and engineers in the selection of materials for product development and production. Ping Identity (PING) acquired ShoCard, a provider of technology enabling users to collect and store verifications of their personal identity on their phones. As ShoCard also supports the sharing of those verifications with other parties to prove identity and gain access to services, the integration of the acquired technology into the Ping Platform is expected to provide customers with a new model for privacy and customer engagement.
With the calendar Q3 ’20 earnings season still a couple weeks out, EXFO (EXFO) was the only company to report results, posting fiscal Q4 ’20 revenue ahead of Street expectations but falling short from a profitability standpoint. Bookings were down from the prior year period, which management attributed to reduced economic activity amid the global pandemic. Although no specific financial guidance was provided for the new fiscal year, commentary pertaining to demand for field testing equipment and EXFO’s Nova Adaptive Service Assurance platform points to renewed growth in 2021. Specifically, major fiber deployment projects on the horizon and the migration to cloud-native, standalone 5G network architectures by service providers are already contributing to funnel growth and an uptick in RFQs. Combined with recent efforts to reallocate resources away from lower growth areas to higher growth market opportunities, EXFO appears poised for profitable growth in the coming year.
Executive transitions at Alteryx (AYX), Model (N), Talend (TLND) and Veritone (VERI) were also in the news this week. At Alteryx, Mark Anderson, who sits on the company’s Board and was formerly President of Palo Alto Networks (PANW), was appointed CEO, succeeding Co-Founder, Chairman and current CEO, Dean Stoecker. In conjunction with the announcement, Alteryx pre-announced Q3 ’20 revenue ahead of its prior guidance. Similarly, Model N disclosed that its Q4 ’20 results exceeded all revenue and profitability targets provided in its initial guidance along with news that CFO David Barter is leaving the company for a new opportunity. Talend has expanded Jamie Kiser’s role to COO in addition to her current role as Chief Customer Officer following the resignation of Laurent Bride. Finally, Veritone appointed Michael Zemestra as its new CFO, succeeding Peter Collins who will serve as an advisor during a transition period. Mr. Zemestra joins Veritone from LiveXLive Media, where he also served as CFO.
Mergers and Acquisitions
Altair Acquires M-Base Engineering + Software GmbH, Leader in Plastics Material Data and Technology
Altair (ALTR) has acquired M-Base Engineering + Software, a supplier of material database and material information systems focused on plastics.
The integration of M-Base’s plastics data with Altair’s solvers will assist designers and engineers in the selection of materials for product development and production.
Avalara (AVLR) has acquired Transaction Tax Resources, Inc., which provides over 1,400 enterprise businesses with U.S. sales and use tax rates, laws, software and customer support, for $377 million in cash.
The acquisition is expected to bolster Avalara’s enterprise capabilities and expand its reach into new industries, including automotive, construction and financial services.
The combination of the two companies is expected to drive the development of the most robust compliance content library, new content subscription revenue streams and an industry-leading platform for certificate management.
On a standalone basis, Transaction Tax Resources would have produced an estimated $20 million in GAAP revenue and breakeven GAAP operating income in 2020.
Ping Identity (PING) has acquired ShoCard, which provides technology that allows users to collect and store verification of their personal identity on their phone and to share that information with others to prove identity and gain access to services.
ShoCard’s technology will be integrated into the Ping Platform, providing customers with a new model for privacy and customer engagement.
Earnings Releases
EXFO Reports Fourth Quarter and Fiscal 2020 Results
EXFO (EXFO) reported mixed Q4 ’20 results and refrained from providing guidance for FY ‘21.
Sales of $70.6 million (+0.6% Y/Y) exceeded consensus of $65.3 million. Adjusted EBITDA of $4.9 million (6.9% margin) fell short of Street expectations for $6.7 million. Non-IFRS EPS of $0.01 missed consensus of $0.06.
Key metrics: bookings of $63.0 million (-11.2% Y/Y), including Test & Measurement (T&M) bookings of $43.5 million (-13.7% Y/Y) and Service Assurance and Services (SASS) bookings of $19.8 million (-4.7% Y/Y); book-to-bill ratio of 0.89.
Bookings were negatively impacted by the pandemic, which reduced economic activity worldwide.
While SAAS sales were negatively impacted throughout 2020 by pandemic-related restrictions that limited deal closures and system installations at customer sites, the SASS business exited the year on a positive note, securing five multi-year, multi-million dollar deals with new logos.
In August, resources were realigned towards high growth areas, including fiber, 5G and cloud-native deployments, while investments in lower growth areas were reduced, yielding annual cost savings of $5 million.
Management expects demand for field testing equipment to recover in 2021 as major fiber deployment projects are on the horizon, assuming of course that a second wave of virus infections does not result in extensive lockdown restrictions.
The Nova Adaptive Service Assurance Platform is also expected to garner more traction in 2021 as mobile operators migrate to cloud-native 5G standalone architectures, which in turn should enable EXFO to build upon its 10% global market share in the probe-based monitoring system market.
Due to the ongoing uncertainty related to the pandemic, EXFO refrained from providing quarterly or annual guidance.
Model N Announces Preliminary Fourth Quarter Results
Model N (MODN) indicated that Q4 ’20 results exceeded all revenue and profitability measures in its original guidance, which called for revenues of $40.1-$40.5 million, adjusted EBITDA of $4.6-$5.0 million and non-GAAP EPS of $0.07-$0.09.
CFO David Barter is leaving the company for a new opportunity, and a search for his replacement is underway.
Notable News
Alteryx Announces Mark Anderson to Succeed Dean Stoecker as CEO
Alteryx (AYX) has appointed Mark Anderson as Chief Executive Officer (CEO), succeeding Co-Founder, Chairman and current CEO Dean Stocker, who has been appointed as Executive Chairman and will remain Chairman of the Board.
Mr. Anderson currently serves on Alteryx’s Board of Directors and was formerly President of Palo Alto Networks (PANW).
In conjunction with the announcement, Alteryx pre-announced Q3 revenue of $126.0-$128.0 million versus its prior guidance of $111.0-$115.0 million.
nCino Announces Upsizing and Pricing of Secondary Offering of Common Stock
nCino (NCNO) priced an offering of 6,706,944 shares of common stock to be sold by selling stockholders at a public offering price of $72.00 per share, a 4.8% discount to the close price prior to announcement of the planned offering.
The offering was upsized from initial plans to sell 5.5 million shares, and the selling stockholders have granted the underwriters an option to purchase up to an additional 1,006,041 shares.
The company will not receive any proceeds from the offering.
Talend Appoints Jamie Kiser to Expanded Role of Chief Operating Officer and Chief Customer Officer
Talend (TLND) has appointed Jamie Kiser, who joined the company earlier this year from SAP, as Chief Operating Officer in addition to her role as Chief Customer Officer.
She succeeds Laurent Bride who resigned as Chief Operating Officer and Chief Technology Officer.
Veritone Appoints New Chief Financial Officer in Planned Transition
Veritone (VERI) has appointed Michael Zemetra as Executive Vice President, Chief Financial Officer and Treasurer, succeeding Peter Collins who will serve as an advisor during a transition period.
Mr. Zemetra joins the company from LiveXLive Media, where he most recently served as Executive Vice President and Chief Financial Officer.