Instructure (INST) and Everbridge (EVBG)
Instructure Soars on Q4 Beat
Instructure reported early this week and results were modestly ahead of expectations, with revenue up 39% to $43.8 million (beating by $2.4 million) and EPS of $-0.27 beating by a penny. Shares jumped by well over 10% yesterday. And clearly it wasn’t the relatively small beat that drove the action.
The bigger news is that management’s 2018 initial guidance was well above expectations. Management now sees revenue growth of roughly 30% over the coming year. And with margins expanding and cash flow on the rise, the adjusted loss should be around $-1.00.
Notable positives from the quarter include a customer count of over 500 (a major milestone) with the new corporate product Bridge, including new deals with Scripps Networks Interactive and Vivint Smart Home. The company also secured a partnership with human capital management company Paychex to offer Bridge to its customers. This expands the potential pie as most of these potential clients are smaller than Instructure’s target customer base, and by offering a white label product through Paychex it can grab incremental revenue without having to manage a lot of relatively small accounts. Paychex is a quality company, so this deal has potential.
There was also continued success in International markets including a Moodle displacement in Europe that includes 18,000 students, France’s INSEAD business school, and Sweden’s University Computer Network (SUNET).
Instructure has been hiring, but the pace of sales team expansion should now slow, meaning the company will move into “harvest” mode in the U.S., with some incremental hiring overseas. Platform investments in Bridge will cost money, but these also expand the market opportunity and give salespeople more to sell, which should begin to drive larger deals.
All in all, it was a good quarter and helps to validate Instructure’s growth strategy. The stock is inexpensive relative to other high-growth SaaS peers (including Shopify, AppFolio and Q2 Holdings), and given what looks like a long runway of growth ahead, I expect demand for shares to remain high and the stock to continue to outperform. Don’t go crazy, but if you want to add a few more shares I think it’ll work out. Keeping at Buy. BUY.
Everbridge Goes Shopping in Europe
In December I speculated that Everbridge (EVBG) would use some of the cash from its convertible debt offering to expand overseas. I wrote that I saw Enera and F24 AG on the potential list, since both have exposure in Europe. I was right on the idea, wrong on the target!
Today Everbridge announced a voluntary cash offer to acquire all shares of Unified Messaging Systems (UMS), a Norwegian company with 1,200 customers reaching over 500 people through national and municipal alert systems, mainly in northern Europe, Greece, India, Cambodia and Colombia. UMS was founded in 1998 and has a platform that’s widely used on mobile devices. The offer price is $33.6 million, and is expected to close in Q1 2018 given that the major shareholders and Board of Directors for UMS has approved the deal. That said, it’s not over ‘til it’s over!
We’ll get more details on the deal next week when Everbridge reports. But from what I know now, and given it’s not a huge surprise, the acquisition seems to make sense.