SaaS Software Cloud Update – May 2018

Public Markets and M&A Activity 

The Navidar SaaS Software Cloud Index advanced +9.3% in April and +26.5% so far in 2018, compared with the NASDAQ’s +5.3% and +7.8%, the Russell 2000’s +6.1% and +6.6%, and the S&P 500’s +2.2% and +1.2%, 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.

Everbridge (NASDAQ: EVBG +23.3%) – the SaaS critical event response provider reported better than expected 1Q18 earnings and exceeded guidance. EVBG revenues increased by 34% Q-o-Q to $30.5M in 1Q18. Adjusted EBITDA was reported as loss of ($1.8M), compared to loss of ($2.3M) in 1Q17. Free cash flow was $5.3M compared to an outflow of ($0.3M) in 1Q17. EVBG strong performance was driven by the continued global adoption of Everbridge Mass Notification product, the growing number and size of multi-product deals.

Snap (NYSE: SNAP –20.5%) – the social media providers stock declined over disappointing 1Q18 results and uncertainty over future growth. SNAP revenues grew 54% Y-o-Y to $230M in 1Q18, but missed street expectations of $245M. Total active daily user additions also fell short of street expectations, with the company adding 4M users compared to 7M expected. Average revenue per user was down 21% Q-o-Q, although it increased 34% Y-o-Y. SNAP attributed the weak performance to recent product redesign, poor performance on Androids and advertiser concerns. The company expects its next quarter Y-o-Y revenue growth to “decelerate substantially,” partially due to advertisement prices.

Athenahealth (NASDAQ: ATHN +22.9%) – Hedge Fund Elliott Management announced plans to take the cloud-based healthcare applications provider private. Elliott Management, which holds 8.9% stake in ATHN, offered to acquire the remaining stake for ~$6.5B in an all cash deal, representing a 27.0% prior-close premium. Elliott Management believes that ATHN is mismanaging an opportunity to expand and is not providing adequate returns to shareholders. It also believes that the company cannot make the changes needed while it remains a public company.

Zscaler (NASDAQ: ZS –12.1%) – the security software providers stock declined over the resignation of its chief operating officer, Bill Welch. Bill is expected to pursue a more senior executive role at a leading technology company. ZS said the company has strong sales leaders running its Americas and international markets, who will continue to drive its business. ZS went public in mid-March 2018.

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