Okta, UiPath, and SentinelOne are not part of the core coverage network. Still, with software sentiment so volatile and the future of this sector so polarizing right now, I think it's important to collect as much earnings data as we can. Salesforce is part of the core coverage network, and I will get a detailed review for that report published soon. For now, here are brief snapshots of that report and the other three.
Other detailed earnings reviews to read from this season include:
a. Salesforce (CRM)
Results:
Beat revenue estimates by 0.7% & beat guidance by 0.6%.
12% constant currency (CC) growth beat 10.5% CC growth guidance. 8.9% organic revenue growth beat 8.5% organic growth guidance.
Beat subscription & support revenue estimates by 0.7%.
Slightly missed current remaining performance obligation (cRPO) estimates. Met 13% constant currency (CC) cRPO growth guidance.
Missed RPO estimates by 1.5%.
Balance Sheet:
$11.8B cash & equivalents.
$39.3B debt vs. $10.4B Y/Y.
Diluted share count shrank by 10% Y/Y. With the help of debt issuance, they bought back $27B in stock in a single quarter. For context, the market cap is currently $144B. Massive.
Guidance & Valuation:
Slightly raised annual revenue guidance, which slightly missed estimates.
Reiterated annual 10.5% CC growth guidance.
Raised annual 7.5% organic growth guidance to 8.0%.
Slightly raised annual EBIT guidance, which slightly missed estimates. EBIT margin guidance was reiterated, with the small boost to EBIT dollar guidance coming from the revenue beat.
Lowered 9.5% FCF growth guidance to 4.5% FCF growth.
Raised annual $7.89 GAAP EPS guidance by $0.06.
Raised annual $13.15 EPS guidance by $0.94, which beat by $0.87.
For Q2, revenue guidance was a tad light, CC cRPO growth guidance was in-line and EPS guidance was slightly ahead.
Salesforce trades for 10x forward FCF and 13x forward EPS. FCF is expected to grow by 4% this year and by 10% next year. EPS is expected to grow by 13% this year and by 9% next year.
b. Okta (OKTA)
Results:
Okta beat revenue estimates by 1.7% & beat guidance by 1.9%.
Current Remaining Performance Obligations (cRPO) beat guidance by $54M or 2.2%.
Met 81.6% GPM estimate.
Beat EBIT estimates by 6.4% & beat guidance by 7.3%.
Beat $0.85 EPS estimates & identical guidance by $0.06 each.
Beat FCF estimates & identical guidance by 6.3% each.
Balance Sheet:
$2.6B in cash & equivalents.
$350M in convertible senior notes.
No traditional debt.
Diluted share count rose by 0.5%.
Guidance & Valuation:
Raised annual revenue guidance by 0.5%, which slightly beat estimates.
Raised annual EBIT guidance by 1.4%, which beat estimates by 1%.
Raised annual $3.78 EPS guidance by $0.05, which beat estimates by $0.04.
Raised annual FCF estimate by 0.6%, which slightly missed estimates.
Next quarter guidance was slightly ahead for revenue and EBIT. It was 2.6% ahead for FCF and in line for EPS.
Okta trades for 25x forward EPS and 18x forward FCF. EPS is expected to grow by 8.5% this year and by 11.8% next year. FCF is expected to grow by 1.2% this year and by 14.1% next year.
c. SentinelOne
Results:
Met ARR estimates.
Slightly missed revenue estimate & slightly missed guidance.
Beat $5.3M EBIT estimate by $5.2M & beat guidance by $5.5M.
Beat $0.02 EPS estimate by $0.02 & beat guidance by $0.025.
Balance Sheet:
$650M in cash & equivalents.
$155M long-term investments.
No debt.
0.8% Y/Y diluted share count growth.
Guidance & Valuation:
Reiterated annual revenue guidance, which slightly missed estimates.
Raised annual EBIT guidance by 4.3%, which beat estimates by 4.1%.
Raised $0.34 EPS guidance by a penny, which met estimates.
Q2 revenue guidance missed estimates by 0.7% and Q2 profit guidance met expectations.
SentinelOne trades for 53x forward FCF & EPS. FCF is expected to grow by 122% this year and by 66% next year. EPS is expected to grow by 69% this year and by 41% next year. It’s very cheap. But that’s because of ongoing growth deceleration concerns that merely grew larger from this report.
d. UiPath
Results:
Revenue beat estimate by 5.3% & beat guidance by 5.3%.
Beat $43.5M net new ARR estimate by $5.5M.
Beat EBIT estimate by 15.7% & beat guidance by 15.7%.
Beat $0.03 GAAP EPS estimate by $0.01.
Balance Sheet:
$1.3B cash & equivalents.
$108M non-current marketable securities.
No debt.
Share count shrank by 3.8% Y/Y.
Guidance & Valuation:
Slightly raised annual revenue guidance, which slightly beat estimates.
Raised annual net new ARR guidance by $70M. Slightly raised annual ARR guidance, which slightly beat estimates.
Raised annual EBIT guidance by 3.6%, which beat estimates by 3.5%.
Q2 revenue and EBIT guidance were both slightly ahead of estimates.
PATH trades for 14x forward EPS and FCF. EPS is expected to grow by 11% this year and by 12% next year. FCF is expected to grow by 21% this year and by 14% next year.
e. Quick Thoughts
The general theme of consumption-based software models (especially in data) thriving and seat-based business models performing about as expected continues. MongoDB results (review already sent) looked great on the consumption side, while all of these reports look roughly as expected. I will say SentinelOne continues to disappoint and I think that has more to do with leadership and go-to-market than anything else. Their products are good enough to be doing a lot better than they are. Salesforce had a decent quarter. The buyback is arguably the most exciting thing about the investment, but if they can deliver a bottoming in overall growth rates at their dirt cheap multiple, there could be a lot to like. I'd like to see more evidence of this growth engine outside of M&A not being in permanent decline. I think this earnings season has made it clear to me that I want almost all of my software exposure to come from the data infrastructure side of the sector.
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