SaaS Software Cloud Update – September 2018

Navidar | October 11, 2018

Public Markets and M&A Activity

The Navidar SaaS Software Cloud Index remained flat in Sep and has advanced 29.2% so far in 2018, compared with the NASDAQ’s -0.8% and +16.6%, the Russell 2000’s -2.7% and +10.5%, and the S&P 500’s +0.4% and +9.0%, respectively. The following is a summary of the company-specific news related to selected stocks in our coverage universe whose performance meaningfully differed from projections.

Facebook (NASDAQ: FB –6.4%) – the social network giant’s stock declined on the news of hackers gaining access to personal data of ~50 million users. The unsolicited access to the users’ personal data results from vulnerability in FB code that exposes access tokens. The Company’s COO Sheryl Sandberg testified before the Senate Intelligence Committee to address election-related abuse of the Company’s platform ahead of the 2018 elections.

Twitter (NYSE: TWTR –19.1%) – the social media platform provider’s stock declined as senior executives from the Company testified before Congress. TWTR CEO Jack Dorsey appeared before the Senate Intelligence Committee to answer questions about the platform’s alleged role in the 2016 U.S. presidential election and Russian interference in the democratic process via social networks. Lawmakers have accused the Company of “shadow banning,” or de-emphasizing certain accounts on its network.

Shopify (NYSE: SHOP +12.9%)the e-Commerce platform provider’s stock surged on the expectation of rising digital sales from Canadian cannabis companies, where the country’s lawmakers recently approved legislation to fully legalize cannabis. Analysts estimate SHOP revenues to reach $1.03B and $1.43B by 2018 and 2019, with an expected growth rate of 53% and 39%, respectively. The Company announced the use of augmented reality (AR) to make buying products online more interesting for users – SHOP added support for one of Apple’s (AAPL) ARKit2 features, AR Quick Look, allowing iOS users to place 3D objects using AR.

Snap (NYSE: SNAP –22.2%) – the social media provider’s stock declined on the back of a ratings downgrade by BTIG, lackluster engagement growth, and the ongoing scrutiny of social media platforms by lawmakers. Investors and analysts cited slower steps towards monetization and innovation from CEO Evan Spiegel as the major reasons for the lackluster growth. Major brokerages project tepid revenue growth for fiscal 2019 due to growing uncertainty around user interest.

Okta (NASDAQ: OKTA +13.8%) – the identity management SaaS provider reported strong 2Q19 results, with revenues growing YOY by 57% to $94.6M, exceeding analyst estimates and management guidance. OKTA net loss per share was $0.15 during the quarter, the same as reported in 2Q18. OKTA management guided 3Q19 and fiscal 2019 revenues to the range of $96-97M and $372-375M, growing YOY at 43-45% and 45-46%, respectively. Net loss per share for 3Q19 and fiscal 2019 is expected to be in the range of $0.12-0.11 and $0.48-0.46, respectively.

Athenahealth (NASDAQ: ATHN –13.2%) – Hedge fund, Elliott Management, reportedly backed out from its $160 a share bid to take the cloud-based healthcare applications provider private. According to market rumors, ATHN management is actively in talks with two PE firms and one strategic buyer, nThrive, for a possible acquisition.

Coupa Software (NASDAQ: COUP +10.3%) – the cloud-based spend management platform provider reported strong 2Q19 results, beating top-line and bottom-line expectations. COUP revenues increased by 38% to $61.7M in 2Q19, compared to the same quarter last year. Subscription revenue grew by 39% YOY to $55.4M. Operating income was reported at $4.0M during the quarter, compared to an operating loss of $5.7M in 2Q18. Earnings per share was $0.05, compared to a loss of $0.10 per share in 2Q18. The Company expanded its customer base by adding blue chip and high growth customers and believes to be well positioned to deliver on its business and financial objectives for the year. COUP raised its 3Q19 and fiscal year 2019 revenue guidance to $62-63M and $243-245M, respectively. Net loss per share for 3Q19 and fiscal year 2019 is expected to be in the range of $0.01-0.04 and $0.06-0.11, respectively.