SaaS Software Cloud Update – September 2017

Navidar | October 18, 2017


Public Markets and M&A Activity

The Navidar SaaS Software Cloud Index advanced 1.7% in September and 18.2% in 2017 through the end of the month, compared with the NASDAQ’s +1.0% and +20.7%, respectively. Following is a summary of the companyspecific issues  related to selected stocks in our coverage universe that meaningfully out- or under-performed as well as relevant M&A activity.

HubSpot (NYSE: HUBS +14.6% in September) – the SaaS marketing provider’s stock strength was driven in part by management’s comments at analyst day that 3Q17 results are ahead of plan. The company also unveiled plans to launch a customer service product in 2018 to create a unified front office system for SMBs.

On 9/20, HUBS acquired Motion AI, a chatbot platform for websites and messaging platforms, such as Facebook Messenger and Slack. Chatbots reduce the strain on an organization’s resources in meeting customers and prospects’ demands for “always-on” support. Some 80,000 bots have been built and 40M messages facilitated since May 2016 on Motion AI’s platform.

Cornerstone OnDemand, Inc (NASDAQ: CSOD +16.1%) – on 9/14, it was reported that the SaaS human capital management provider hired financial advisors to engage with potential suitors, driving the stock up about 12%. Also, activist investor Praesidium owns about 5% of the outstanding shares. This news is not a surprise because competition has increased, CSOD is struggling to expand outside of its flagship learning performance solution, and growth has slowed to less than 15% (from 40% a few years ago). We view the most likely buyers to be private equity and possibly Microsoft or ADP.

Cloudera (NYSE: CLDR –14.3%) – the data management and analytics platform company executed a $175M secondary stock offering on 9/15, pressuring the stock and offsetting strong 2017 results (reported 9/7). Revenue of $90M advanced 39% while loss per share of $0.17 exceeded the Street mean of $0.25. 2018 subscription revenue guidance was increased to $290-295M, about 45% growth, up from the prior 42%. The company added 45 net new Global 8000 customers due in part to Microsoft Azure collaborative wins.

On 9/18, CLDR acquired machine learning, training, and consulting company Fast Forward Labs, which teaches enterprises how to utilize AI trends to stimulate growth. We expect that Fast Forward will gel well CLDR’s expertise of managing big data and machine learning projects.

Everbridge (NASDAQ: EVBG +14.0%) – the SaaS critical events response platform is among the few companies that benefited from the recent natural disasters (e.g., Hurricanes Irma and Harvey). These headlines highlight that many enterprises are not appropriately equipped to handle such events. EVGB also announced a 7-year, $10.9M total contract value deal to provide a mass notification system to the 20M citizens in the state of New York. We like that EVBG now has eight SaaS applications, up from just two in 2012, presenting a cross-selling opportunity to its 3,000 customers.

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