SaaS Software Cloud Update – April 2018

Navidar | May 3, 2018

Public Markets and M&A Activity

The Navidar SaaS Software Cloud Index advanced +2.6% in April and +17.2% so far in 2018, compared with the NASDAQ’s +0.0% and +2.4%, the Russell 2000’s +0.9% and +0.5%, and the S&P 500’s +0.3% and -1.0%, respectively. Following is a summary of the company-specific issues related to selected stocks in our coverage universe that meaningfully out- or under-performed as well as relevant M&A activity.

Citrix Systems (NASDAQ: CTXS +10.9%)the enterprise software maker reported better than expected 1Q18 earnings. CTXS revenues increased by 5.2% to $697M in 1Q18, surpassing consensus estimate of $676M; 1Q18 adjusted earnings beating consensus estimates by 24 cents to $1.29 per share. Subscription revenues surged 49.3% to $103M, support and services revenues inched up 2.5% to $433M, while product and license revenues declined 6% to $161M. For 2Q18 and full year 2018, CTXS guided revenues in the range of $710-720M and $2.88-2.91B, respectively.

Asure Software (NASDAQ: ASUR +23.7%)the human capital management (HCM) and workplace management software provider closed two strategic transactions during the month and revised its guidance upwards for 2018. ASUR acquired Evolution HCM customer portfolio from Wells Fargo Business Payroll Services and Austin HR, a provider of outsourced human resources (HR), consulting, and professional services around payroll and employee benefits. The deals will expand ASUR’s footprint nationwide, provide opportunities to enhance its service offerings and penetrate in emerging growth markets. Following the closing of the deals, ASUR revised its revenue guidance to $85-88M, up from $79-82M, EBITDA to $19-22M from $18-20M.

Cloudera (NYSE: CLDR –34.0%)the big data specialist’s stock declined over weak guidance for the coming year (FY2019). CLDR reported strong 4Q18 earnings, with revenues growing by 42% to $103.5M, beating street estimates by ~$5M and non-GAAP EPS beating estimates by $0.13 to ($0.10). Core subscription revenues increased by 50% during the quarter. With management guiding for a huge decline in subscription revenue growth, combined with a forecast for continued operating losses and cash burn, the stock nosedived during the month. The company expects decline in growth rates from the current 42% to 20% in fiscal 2019, with 20% total revenue growth, 24% revenue subscription growth and non-GAAP net loss per share of ($0.62) to ($0.59).

Athenahealth (NASDAQ: ATHN –14.4%)the cloud-based healthcare applications provider’s stock weakened on soft bookings reported in 1Q18 (down over 32% YOY) and deteriorating client retention rates. Although ATHN reported strong 1Q18 results, with revenues of $329M, beating consensus estimates of $319M and adjusted earnings beating consensus estimates by ~71% at $1.25 per share. The company guided revenues to be $1.31-1.38B in 2018, in line with consensus estimate of $1.35B. ATHN fell short of its booking goals in 1Q18, down 32% YOY ($52M versus $77M), leading to concerns over long-term revenue growth. Also, the company failed to add any significant new customers since 1Q17.

Benefitfocus (NASDAQ: BNFT +23.8%)the cloud-based benefits management platform and services provider announced a new stock award program for its employees. The program gives current employees a one-time restricted stock unit award of ~ $2,000, at the time of the award. The new program will provide an opportunity to BNFT employees to own a piece of the company and benefit from its success.

ChannelAdvisor (NYSE: ECOM +46.2%)the cloud-based e-commerce solutions provider reported strong preliminary results for 1Q18, exceeding prior guidance. Total revenue is expected to be $31.2M, $1.4M higher than the guidance range of $29.4-29.8M. Adjusted EBITDA is expected to be ~$0.8M, $1.1M above the high end of the previous guidance range of a loss of ($0.7-0.3M). ECOM results reflect its continued emphasis on driving revenue growth while improving operational efficiency.

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