ONTF, CRNC and EVBG Report
On24 (ONTF) reported a perfectly good Q2 (revenue up 43% to $52.1 million, beating expectations) but guidance is weak, and the stock is getting clobbered today. The primary issue here is customer churn is much higher than expected, especially among the small-business clients that came in during the pandemic, who collectively represent around 60% of the Q2 renewal base. These clients needed digital solutions when the pandemic began but are apparently pulling back at a higher-than-expected rate, meaning total customer growth in Q2 was a meager 18% (16 net new customers over Q1). Factoring this in, full-year guidance drops roughly $6 million to $203.2 million (at the midpoint). Analysts expected $210 million. As we’ve seen with other growth stocks that report a slowing of the trends there’s not much patience in the shareholder base. The stock drop is immediate, and fierce. ONTF opened down and has stayed that way for the day. There is little doubt the stock is beat up more than it deserves to be right now, but the investor base isn’t currently thinking about how the trends should improve in the first half of 2022 once the noise from this big pandemic cohort dims. We are now considering next steps and therefore moving ONTF to hold today. HOLD
Cerence (CRNC) reported Q3 fiscal 2021 results that beat on the top and bottom lines. Revenue grew 29.4% to $96.8 million (beating by $840,000) while adjusted EPS of $0.62 beat by $0.08. Management increased its revenue target for 2024 by 17% ($100 million) to $700 million. Adjusted gross margin was up a lot, to 79.1% from 68.9%, continuing a nice profit growth trend. The stock popped on the result and bumped up against overhead resistance near 128. With the business and stock looking good we’ll keep at buy. BUY
Everbridge (EVBG) reported Q2 results that surpassed expectations. Revenue was up 32.4% to $86.6 million (beating by $2.7 million) while adjusted EPS of $0.03 beat by $0.26. Importantly, a record number of CEM deals closed (19 to be exact) which drove a record selling price in the quarter ($107,000). CEM customer base is now 158, up 61% over a year ago.
Full-year revenue guidance of $362.8 million implies 34% growth while adjusted EPS guidance of $0.01 suggests Everbridge will be profitable for the first year since going public. As I mentioned in a previous update the Estonia country win could lead to more country-wide wins in the region, driving the network effect that could really lift the stock. Gross margin dipped 1.1% to 73.6%, not great but reflective of acquisitions and hiring, both of which are good investments.
Big picture the trends we need to see to get the stock moving again are showing up. Now it’s up to investors to clue in and start buying again. BUY