K. Liu's Week in Review
Management changes typically warrant a fresh look at a stock given the potential benefits or fallout from a subsequent strategic or operational shift. In this regard, the past week provided a number of opportunities for investors to consider, although the market’s verdict is already in for 8x8 (EGHT). The unified communications-as-a-service vendor named Dave Sipes, formerly COO of competitor RingCentral (RNG), as its new CEO, succeeding Vik Verma, who will assist in an advisory role during the transition and is retiring from the Board. Considering RingCentral’s runaway growth and valuation, the enthusiasm accompanying Mr. Sipes addition is understandable to say the least. Nutanix’s (NTNX) hiring of Rajiv Ramaswami as its new President and CEO was also cheered. He was formerly COO, Products and Cloud Services at competitor VMware (VMW). The transition at the top was anticipated to an extent as Founder and CEO Dheeraj Pandey had previously announced plans to retire. At SolarWinds (SWI), Sudhakar Ramakrishna has been appointed President and CEO, and the company has filed a Form 10 registration statement as part of its evaluation of a potential spin-off of its MSP business. Mr. Ramakrishna joins the company from privately-held Pulse Secure, where he served as CEO.
Moving to the office of the CFO, Altair (ALTR) appointed Matthew Brown, who most recently served as interim CFO of NortonLifeLock, as its new finance leader following Howard Morof’s resignation to pursue other opportunities and interests. Ansys (ANSS) announced that Nicole Anasenes, Squarespace’s former CFO and COO, has stepped down from its Board to serve as CFO. Ansys’ current CFO, Maria Shields, will assume the role of SVP of Administration. Smartsheet (SMAR) named Peter Godbole, CFO of Hearsay, as its next CFO, succeeding Jennifer Ceran, who is retiring. Lastly, SharpSpring (SHSP) appointed its interim CFO, Aaron Jackson, as its permanent CFO. Also notable, American Software (AMSWA) named Keith Charron as COO, a newly created role focused on accelerating new account acquisition, customer success and growth. Mr. Charron previously served as Chief Sales Officer at Syncron and prior to that, he led worldwide sales and operations for ENOVIA/3DEXPERIENCE at Dassault Systèmes (DSY-FR).
Network security and network operations continue to converge with the second acquisition of a network performance monitoring vendor in the past few weeks. Recall that Splunk (SPLK) announced plans to acquire Flowmill prior to Thanksgiving, adding enhanced visibility into network behavior and distributed cloud applications to its Observability Suite. Earlier this week, Fortinet (FTNT) acquired Panopta, which offers a SaaS platform for network monitoring and remediation, for $34 million in cash. The combination of Panopta with Fortinet’s Security Fabric enables the company to offer its customers a comprehensive network and security operations management solution. While network visibility appears to be the new focal point in the highly competitive observability space, the never-ending race to bring the most comprehensive solution to market also saw New Relic (NEWR) agreeing to acquire Pixie Labs for $150 million in cash and stock. Pixie Labs provides developers with visibility into the performance of applications deployed in Kubernetes environments without the need for additional code, making it easier to debug and troubleshoot said applications.
No major surprises on the earnings front this week as all eight reporting companies we tracked posted quarterly results ahead of expectations. MongoDB (MDB) and Smartsheet were the big winners with the former seeing continued success in its self-serve channel and customer expansion activity returning to pre-COVID levels, and the latter benefiting from larger deals and a new high-water mark in its government business. Oracle’s (ORCL) indication that its fiscal Q2 results would have been even stronger if not for capacity constraints in its OCI business and its discussion of a new OCI managed services offering, HeatWave, caught our attention given the current hyper growth profile and commentary on competitive offerings from AWS and Snowflake. One final and completely unrelated note, MicroStrategy (MSTR) completed a $650 million offering of 0.750% convertible senior notes due 2025, which the company plans to invest in bitcoin. We can only shrug and say that’s 2020 for you.
Mergers and Acquisitions
Aspen Technology Acquires OptiPlant
Aspen Technology (AZPN) has acquired OptiPlant, which provides software to visualize plant and pipe layouts in 3D.
OptiPlant enables owner-operators and EPC companies to collaborate closely and optimize front-end engineering design (FEED) development, thereby reducing capital expenditures and accelerating time to market.
OptiPlant will be added to Aspen’s portfolio of solutions for Performance Engineering and will be integrated with Aspen’s modeling, cost estimating and FEED deliverables systems.
Fortinet Acquires Network Monitoring and Remediation Innovator Panopta
Fortinet (FTNT) has acquired Panopta, which offers a SaaS platform that provides visibility, automated management and alerting, and remediation for enterprise networks and infrastructure, for $34.0 million in cash.
The combination of Panopta with Fortinet’s Security Fabric will enable Fortinet to offer the most comprehensive network and security operations management solution.
As Panopta’s platform was built with partners in mind, MSSPs and other value-add partners can easily integrate the solution within their own offerings.
HealthStream Acquires myClinicalExchange
HealthStream (HSTM) has acquired myClinicalExchange’s SaaS application enabling healthcare organizations to track, manage and report the intern and clinical rotation education requirements of healthcare students for $4.5 million in cash.
The myClinicalExchange application has been used by 400 hospitals; 1,000 colleges and universities; and 50,000 medical, nursing and healthcare students, annually.
The acquisition adds healthcare professionals to HealthStream’s network during the education phase of their careers and positions HealthStream to introduce innovative synergies to the healthcare workforce.
New Relic (NEWR) has agreed to acquire Pixie Labs, which offers a solution that makes it easier for developers to troubleshoot and debug applications in Kubernetes environments, for $150 million in cash and stock.
Pixie Labs provides developers with access to telemetry data in Kubernetes environments without the need to add any code.
New Relic plans to integrate the best use cases for Pixie with New Relic One, which should complement its existing Kubernetes observability features such as the Kubernetes Cluster Explorer.
Earnings Releases
Adobe Reports Record Q4 and Fiscal 2020 Revenue
Adobe (ADBE) reported Q4 ’20 results above expectations and guided FY ’21 ahead of consensus.
Revenue of $3.424 billion (+14.4% Y/Y) was above guidance for $3.350 billion and consensus of $3.359 billion. Non-GAAP operating income was $1.538 billion (44.9% margin), above consensus of $1.45 billion. Non-GAAP EPS of $2.81 beat guidance for $2.64 and the Street’s $2.66.
Key metrics: net new Digital Media ARR of $548 million was above guidance for $540 million; Digital Media ARR of $10.18 billion at quarter-end, including Creative ARR of $8.72 billion and Document Cloud ARR of $1.46 billion.
Creative Cloud growth was driven by new user acquisition across all geographies and segments as well as strong performance in the imaging, video and stock categories.
Document Cloud growth was fueled by strong demand for Acrobat subscriptions and significant momentum in Sign.
Experience Cloud growth reflected accelerating platform and app services adoption, content and commerce momentum, and a recovery in the mid-market segment.
The acquisition of Workfront is expected to contribute $25 million to Q1 revenue and $140-$150 million for the full year.
Q1 guidance for revenue of ~$3.75 billion and non-GAAP EPS of ~$2.78 exceeded Street expectations for $3.50 billion and $2.59, respectively.
Management’s FY ’21 guidance for revenue of ~$15.15 billion and non-GAAP EPS of ~$11.20 was above consensus of $14.78 billion in revenue and $11.17 in non-GAAP EPS.
Coupa Software Reports Third Quarter Fiscal 2021 Financial Results
Coupa Software (COUP) reported Q3 ’21 results above expectations and provided mixed Q4 guidance.
Revenues of $133.0 million (+30.6% Y/Y) were above guidance for $123.0-$124.0 million and consensus of $124.0 million. Non-GAAP operating income was $14.3 million (10.7% margin), exceeding guidance for $4.5-$5.0 million and consensus of $4.6 million. Non-GAAP EPS of $0.18 beat guidance for $0.02-$0.03 and the Street’s $0.03.
Key metrics: billings of $140 million (+33% Y/Y); cumulative spend under management over $2.1 trillion.
Coupa saw improved trends in Q3 despite the persistent pandemic situation, meaningful growth in its sales pipeline and the scaling of its corporate and mid-market businesses.
Coupa Pay has been adopted by over 150 customers and has a 30% attach rate with new customers.
The U.S. House of Representatives has adopted the Coupa platform, and there is a robust pipeline of opportunities across several federal agencies.
Steven Winter, Chief Revenue Officer, is retiring and will be succeeded by Rob Glenn, Coupa’s SVP Americas.
The acquisition of LLamasoft, which generated just over $100 million in revenue on a standalone basis, is expected to contribute $13 million to revenue in Q4 and $22-$24 million in billings.
Q4 guidance for revenue of $145.0-$146.0 million, non-GAAP operating income of $(8.0)-$(6.0) million and non-GAAP EPS of $(0.13)-$(0.11) was mixed relative to Street expectations for $129.9 million, $2.8 million and $0.01, respectively.
Guidewire Software Announces First Quarter Fiscal Year 2021 Financial Results
Guidewire Software (GWRE) reported Q1 ’21 results above expectations and reaffirmed prior guidance for FY ’21.
Revenue of $169.8 million (+8.1% Y/Y) was above guidance for $162.0-$166.0 million and consensus of $164.6 million. Non-GAAP operating income was $2.8 million (1.7% margin), exceeding guidance for $(10.0)-$(6.0) million and consensus of $(7.5) million. Non-GAAP EPS of $0.17 beat the Street’s $(0.05).
Key metrics: annual recurring revenue (ARR) was $513 million, ahead of guidance for $509-$512 million; 18 go-live customers for 45 Guidewire products.
Despite Q1 typically being a seasonally slow quarter, results outperformed expectations as subscription revenue was stronger than anticipated and license revenue benefited from longer duration deals.
Over 7,700 registered members of the P&C community attended Guidewire’s virtual conference, Connections Reimagined.
Roughly 730 consultants across 28 partner companies have now earned advanced certifications for Guidewire’s InsuranceSuite Cloud implementations, up from 620 just a quarter ago.
Q2 guidance for revenue of $168.0-$172.0 million and non-GAAP operating income of $(5.0)-$(1.0) million was in line with Street expectations for $169.9 million and $(2.9) million, respectively.
Management reiterated prior FY ’21 guidance for ARR of $560.0-$571.0 million, revenue of $723.0-$733.0 million and non-GAAP operating income of $(5.0)-$5.0 million.
MongoDB, Inc. Announces Third Quarter Fiscal 2021 Financial Results
MongoDB (MDB) reported Q3 ’21 results above expectations and guided Q4 ahead of consensus.
Revenue of $150.8 million (+37.8% Y/Y) was above guidance for $137.0-$139.0 million and consensus of $138.7 million. Non-GAAP operating income was $(16.0) million, exceeding guidance for $(27.0)-$(25.0) million and consensus of $(25.5) million. Non-GAAP EPS of $(0.31) beat guidance for $(0.48)-$(0.45) and the Street’s $(0.44).
Key metrics: over 22,600 customers (+42% Y/Y), including over 21,100 MongoDB Atlas customers (+49% Y/Y) at quarter-end; 898 customers with $100,000 or more in ARR (+31% Y/Y); net ARR expansion rate over 120%.
MongoDB continues to benefit from changes made previously to make it easier for customers to get on its platform, resulting in strong Atlas customer additions on the self-serve side and a source of leads for the sales force.
Growth from new business was ahead of management’s expectations but continues to be impacted by COVID-19, while growth from existing Atlas customers has returned to pre-COVID levels.
The lower than anticipated operating loss was driven in part by the revenue outperformance as well as the lack of any return to normalization with respect to travel and facilities expenses.
Q4 guidance for revenue of $155.0-$157.0 million, non-GAAP operating income of $(23.0)-$(21.0) million and non-GAAP EPS of $(0.42)-$(0.39) was ahead of Street expectations for $146.1 million, $(24.7) million and $(0.43), respectively.
nCino Reports Third Quarter Fiscal 2021 Financial Results
nCino (NCNO) reported Q3 ’21 results above expectations and guided Q4 ahead of consensus.
Revenues of $54.2 (+43.2% Y/Y) were above guidance for $49.0-$50.0 million and consensus of $49.5 million. Non-GAAP operating income was $(2.7) million (-5.0% margin), exceeding guidance for $(9.0)-$(8.0) million and consensus of $(8.5) million. Non-GAAP EPS of $(0.03) beat guidance for $(0.10)-$(0.09) and the Street’s $(0.09).
nCino’s customer conversations this quarter, the increasing interest from potential customers and the pace at which projects are moving forward all indicate digital transformation of the global financial services industry is accelerating.
Subscription revenue benefited from $1 million in one-time catch-up revenues related to a PPP consortium using nCino’s software to process PPP loans, and 15 customers added seats to service the forgiveness portion of the PPP loan program.
Management highlighted the changes to nIQ, nCino’s analytics platform, as part of the fall release and noted that the company plans to launch a series of solutions on the nIQ platform over time that will be integrated into the Bank Operating System.
Q4 guidance for revenues of $53.0-$55.0 million, non-GAAP operating income of $(8.5)-$(8.0) million and non-GAAP EPS of $(0.09)-$(0.08) was above Street expectations for $50.6 million, $(9.6) million and $(0.11), respectively.
Oracle Announces Fiscal 2021 Second Quarter Financial Results
Oracle (ORCL) reported Q2 ’21 non-GAP EPS above expectations and guided Q3 ahead of consensus.
Revenues of $9.800 billion (+1.9% Y/Y) were in line with guidance for growth of 1.0%-3.0% and consensus of $9.795 billion. Non-GAAP operating income of $4.588 billion (46.8% margin) was above consensus of $4.407 billion. Non-GAAP EPS of $1.06 beat guidance for $0.98-$1.02 and the Street’s $1.00.
Key metrics: Fusion ERP revenues +33% Y/Y from over 7,500 customers; NetSuite ERP revenues +21% Y/Y from over 24,000 customers; and Fusion HCM revenues +24% Y/Y.
Continuing execution on the sales side and disciplined management of operations drove the outperformance relative to the midpoint of management’s guidance.
Management noted that if not for capacity constraints in OCI, which saw consumption revenue increase 139% Y/Y, revenue growth would have been higher in Q2.
Several new OCI managed services have been introduced, the most interesting of which is for the MySQL database and features an Oracle-developed query accelerator called HeatWave.
Q3 guidance for revenue growth of 2.0%-4.0% (implies revenue of $9.992-$10.188 billion) and non-GAAP EPS of $1.09-$1.30 was above consensus expectations for revenue of $9.951 billion in revenue and $1.04 in non-GAAP EPS.
Smartsheet Inc. Announces Third Quarter Fiscal Year 2021 Results
Smartsheet (SMAR) reported Q3 ’21 results above expectations and guided Q4 revenue ahead of consensus.
Revenue of $98.9 million (+38.3% Y/Y) was above guidance for $94.0-$95.0 million and consensus of $94.6 million. Non-GAAP operating income was $(15.0) million (-15.2% margin), exceeding guidance for $(28.0)-$(26.0) million and consensus of $(26.6) million. Non-GAAP EPS of $(0.12) beat guidance for $(0.23)-$(0.22) and the Street’s $(0.21).
Key metrics: billings of $112.4 million (+35% Y/Y); 11,172 customers with ACV of $5,000 or more (+33% Y/Y); average ACV per domain-based customer was $4,665 (+42% Y/Y); dollar-based net retention rate was 125%.
In Q3, Smartsheet saw continued strength in large deals, reached a new high-water mark for its government business and completed the acquisition of Brandfolder, which contributed $1.7 million in revenue and $7.9 million in billings to the quarter.
The virtual Engage customer conference was highlighted by nearly 60,000 registrants and over 250,000 streams of content.
Preliminary analysis of the Q4 pipeline suggests a continuation of customers choosing Smartsheet at scale.
Q4 guidance for revenue for $102.0-$103.0 million, non-GAAP operating income of $(18.0)-$(16.0) million and non-GAAP EPS of $(0.15)-$(0.13) was mixed relative to Street expectations for $99.5 million, $(15.6) million and $(0.13), respectively.
Verint Announces Q3 FY2021 Results
Verint (VRNT) reported Q3 ’21 results above expectations and reinstated FY ’21 guidance slightly above consensus.
Non-GAAP revenue of $331.1 million (flat Y/Y) was above consensus of $317.1 million. Adjusted EBITDA of $97.1 million (29.3% margin) exceeded consensus of $79.7 million. Non-GAAP EPS of $1.02 beat the Street’s $0.80.
In the Customer Engagement segment, Verint experienced significant cloud momentum as the company won new customers and displaced competitors on the strength of its cloud platform, AI and analytics innovation and agnostic partner strategy.
Verint also launched a conversion program in its Customer Engagement segment during Q3, which is expected to increase the pace and number of conversions to the cloud.
In the Cyber Intelligence segment, which will be named Cognyte post-separation, Verint saw strong sequential improvement due to the receipt of multiple large orders and is entering Q4 with improved visibility.
Management reinstated FY ’21 guidance calling for non-GAAP revenue of $1.280 billion +/- 1% and non-GAAP EPS of $3.40, comparing favorably with Street expectations for non-GAAP revenue of $1.271 billion and non-GAAP EPS of $3.37.
In FY ’22, management expects non-GAAP revenue to increase 5% Y/Y to $1.350 billion versus consensus of $1.376 billion and anticipates a similar growth rate in adjusted EBITDA.
Ahead of the planned separation of the two businesses, management introduced long-term targets for its Customer Engagement business calling for a 30% CAGR in cloud revenue over the next three years and $1 billion in revenue by FY ’24.
Cognyte is expected to increase revenue by 10% next year with further acceleration in FY ’23 and FY ’24.
Notable News
8x8 Appoints Dave Sipes as CEO
8x8 (EGHT) has appointed Dave Sipes as Chief Executive Officer and a member of the Board of Directors, succeeding Vik Verma, who will assist the transition in an advisory role and is retiring from the Board.
Mr. Sipes joins 8x8 from competitor RingCentral (RNG), where he most recently served as COO.
8x8 also reaffirmed its prior Q3 and FY ’21 guidance.
Adobe Outlines Growth Opportunities at Financial Analyst Meeting
In conjunction with its Q4 ’20 earnings results and financial analyst meeting, Adobe (ADBE) announced that its total addressable market has expanded to an estimated $147 billion in 2023.
The company’s total addressable market is comprised of a $41 billion opportunity for Creative Cloud, a $21 billion opportunity for Document Cloud and an $85 billion opportunity for Adobe Experience Cloud.
Adobe is exposing its services via open APIs to developers and ISVs in the ecosystem as it focuses more aggressively on the API economy.
A new stock buyback program allowing for the repurchase of up to $15 billion in stock through FY ’24 has been approved as the prior authorization of $8 billion is expected to be exhausted in 1H ‘21.
Altair Announces Chief Financial Officer Transition
Altair (ALTR) has appointed Matthew Brown as Senior Vice President, effective January 1, 2021, and as Chief Financial Officer, effective March 16, 2021.
Mr. Brown joins the company from NortonLifeLock, where he most recently served as interim CFO, and succeeds Howard Morof, who is resigning to pursue new opportunities and personal interests.
Altair also reaffirmed its prior guidance for Q4 and FY ’20.
American Software Names Keith Charron Chief Operating Officer
American Software (AMSWA) has appointed Keith Charron as Chief Operating Officer, a role in which he will focus on accelerating new account acquisition, customer success and sustainable growth.
Mr. Charron joins the company from Syncron, where he served as Chief Sales Officer, and prior to that, he led worldwide sales and operations for ENOVIA/3DEXPERIENCE at Dassault Systèmes.
Ansys Announces Leadership Appointments
Ansys (ANSS) announced that Nicole Anasenes has stepped down as a member of the company’s Board of Directors and has joined the company as Senior Vice President.
Ms. Anasenes was formerly Chief Financial Officer and Chief Operating Officer of Squarespace and will become Ansys’ Chief Financial Officer and SVP of Finance on March, 1 2021.
Maria Shields, Ansys’ current Chief Financial Officer, will assume the role of SVP of Administration on March 1, 2021 with responsibility for the company’s human resources, information technology, procurement and real estate functions.
Intuit (INTU) expects the acquisition of Credit Karma to contribute revenue of $545-$580 million and segment operating income of $15-$35 million in FY ’21.
The combination of Credit Karma’s 110 million members and Intuit’s 57 million customers provides significant scale, enabling Intuit to create a powerful data platform to better serve consumers.
Q2 guidance now calls for revenue of $1.935-$1.965 billion, non-GAAP operating income of $455.0-$475.0 million and non-GAAP EPS of $1.25-$1.31 versus prior expectations for revenue of $1.832-$1.849 billion and non-GAAP EPS of $1.31-$1.34.
Management’s revised FY ’21 guidance includes revenue of $8.810-$8.995 billion, non-GAAP operating income of $2.975-$3.045 billion and non-GAAP EPS of $8.20-$8.40 versus prior expectations for $8.265-$8.415 billion, $2.960-$3.010 billion and $8.40-$8.55, respectively.
MicroStrategy Announces Pricing of Offering of Convertible Senior Notes
MicroStrategy (MSTR) priced an offering of $550.0 million aggregate principal amount of 0.750% convertible senior notes due 2025 with an initial conversion price of $397.99 per share, an 18.4% premium to the close price prior to announcement of the planned offering.
The offering was upsized from initial plans to offer $400.0 million aggregate principal amount of notes, and the company has granted the initial purchasers an option to purchase up to an additional $100.0 million aggregate principal amount of notes.
Net proceeds from the offering are expected to be $537.2 million (or $634.9 million if the initial purchasers exercise their option in full), which MicroStrategy plans to invest in bitcoin, pending the identification of working capital and other general corporate purposes.
Nutanix Appoints Rajiv Ramaswami as Chief Executive Officer
Nutanix (NTNX) has appointed Rajiv Ramaswami as President and Chief Executive Officer, succeeding Dheeraj Pandey, who previously announced plans to retire.
Mr. Ramaswami joins the company from VMware (VMW), where he most recently served as Chief Operating Officer, Products and Cloud Services.
SharpSpring Appoints Aaron Jackson as New Chief Financial Officer
SharpSpring (SHSP) has appointed Aaron Jackson as its Chief Financial Officer.
Mr. Jackson has served as the company’s interim CFO since July and has held various finance and accounting leadership roles at the company over the past three years.
Smartsheet Appoints Peter Godbole as Chief Financial Officer
Smartsheet (SMAR) has appointed Peter Godbole as Chief Financial Officer, succeeding Jennifer Ceran, who is retiring.
Mr. Godbole joins the company from Hearsay, where he was Chief Financial Officer and a member of the Board of Directors.
SolarWinds (SWI) has filed a Form 10 registration statement as part of its evaluation of a potential spin-off of its MSP business into a standalone public company.
Assuming the spin-off occurs, the MSP business would provide cloud-based software solutions for managed services providers focused on assisting small and medium-sized enterprises with digital transformation.
SolarWinds would retain its Core IT Management business focused on selling software and cloud-based services to corporate IT organizations.
The spin-off would be structured as a tax-free, pro rata distribution to all SolarWinds stockholders and would be completed in the first half of 2021.
SolarWinds Appoints Sudhakar Ramakrishna as New President and Chief Executive Officer
SolarWinds (SWI) has appointed Sudhakar Ramakrishna as its President and Chief Executive Officer, effective January 4, 2021.
Mr. Ramakrishna joins the company from Pulse Secure, a privately-held company focused on zero trust access solutions for hybrid IT environments where he served as CEO.
Disclosure(s):
K. Liu & Company LLC has received compensation from American Software (AMSWA) for non-investment banking services within the past 12 months.