A handful of Software-as-a-Service (SaaS) companies that I have a vested interest in released their quarterly results in the past few weeks.
Here’s a quick round-up on their performance and some insights from management.
Zoom Video Communications (NASDAQ: ZM)
The video conferencing leader continued to report healthy growth. In the three months ended 31 July 2021, it saw 54% year-on-year revenue growth on top of the 355% growth it enjoyed in the corresponding quarter a year ago. On a sequential basis, Zoom reported 6.8% revenue growth.
Zoom’s free cash flow margin for the latest quarter was an excellent 44% and the company is now sitting on more than US$5 billion in net cash. Although management expects some churn in its SMB (small, medium businesses) online segment, Zoom still seems to be in a high growth phase as its net dollar expansion rate continues to be above 130%.
Zoom is also spending on innovation as it accelerates the app ecosystem on its Zoom App platform. Eric Yuan, Zoom’s founder-CEO, shared the following comment in the company’s latest earnings conference call:
“Our internal innovation engine is very strong and bolstered by our growing Zoom Apps developer ecosystem and acquisitions such as Kites that will strengthen our position in AI transcription and translation. As organizations and people reimagine work, communications, and collaborations, we are faced with a once-in-a-lifetime opportunity to drive this evolution on multiple fronts.”
In terms of outlook, Zoom expects revenue of between US$1.015 billion to US$1.02 billion in the upcoming quarter, which is roughly flat quarter-on-quarter as the company is facing some churn from its SME clients. But from my vantage point, Zoom is still well-positioned for the long-term.
Veeva Systems Inc (NYSE: VEEV)
For the quarter ended 31 July 2021, the healthcare software company reported a 29% increase in revenue from a year ago, and 7.3% sequential growth in subscription revenue. Veeva is now sitting on US$2.2 billion in cash and equivalents and continues to generate a growing stream of free cash flow.
During Veeva’s latest earnings conference call, its founder-CEO Peter Gassner said:
“Looking at the bigger picture in clinical, we are advancing our vision to move the industry to digital trials that are patient-centric and paperless. On the product side, we are growing our product team significantly to support further innovations. On the customer side, early adopters are progressing with Veeva eConsent and Veeva Site Connect, and momentum with Veeva SiteVault Free continues. We are learning a lot as we bring sponsors, clinical research sites, and patients together in the Veeva Clinical Network. It’s an exciting area, and digital trials have the potential to change the course of drug development worldwide.”
Okta Inc (NASDAQ: OKTA)
Identity management software provider Okta reported healthy topline growth even as it lapped tough comparisons from a year ago. During the reporting quarter (the three months ended 31 July 2021), Okta’s revenue grew 59% year-on-year due in part to the inclusion of Auth0, which was acquired in May. Excluding Auth0, Okta’s organic revenue growth was still a healthy 39% year-over-year and 10.7% sequentially.
The company’s overall trailing 12 month net retention rate stood at 124% – which is great – and Okta’s standalone current remaining performance obligation was up 43% year-over-year.
Okta is guiding for US$325 million to US$327 million in total revenue for the next quarter, which would represent growth of 50% year-on-year and 3.2% sequentially.
During Okta’s latest earnings conference call, co-founder and CEO Todd McKinnon shared his confidence on the company’s future growth:
“As the world continues to work through the ongoing pandemic, organizations have had to maintain fluid plans for returning to offices. Regardless of the time line, it’s clear that most organizations are adopting plans that include more remote access. Organizations also realize that their interactions with customers will continue to shift more online and need to accelerate their digital transformation business plans. These factors, combined with the ever-evolving security threat landscape, mean that the demand for Okta’s modern identity solutions has never been greater.”
MongoDB Inc (NASDAQ: MDB)
The leading noSQL database provider saw its share price rise sharply last week after posting another set of excellent results.
Revenue for the reporting quarter (the three months ended 31 July 2021) was up 44% year-on-year and 9.4% sequentially. Impressively, MongoDB’s Atlas product, which is a database hosted on the cloud, grew by 83% from a year ago as companies are starting to embrace the fully-managed MongoDB database-as-a-service offering.
Management is forecasting the next quarter to have sequential growth of between 0.5% and 2.7%.
MongoDB’s CEO, Dev Ittycheria, ended the company’s latest earnings conference call by saying:
“I just want to leave you with a few comments. First, I think what we really want to reinforce is that we believe customers realize that if they want to move fast, MongoDB is the best way to do so; second, Atlas’ growth of 83% reinforces the point that customers want a multi-cloud platform that enables them to innovate quickly and outsource the undifferentiated heavy lifting of managing their data infrastructure; third, we continue investing and evolving our go-to-market strategy across field sales, inside sales and the self-serve channels to capture this large market opportunity; and last but not least, we continue to roll out significant innovation to improve our platform through both ease of use and expansion of capabilities to encourage more and more customers to use MongoDB.”
DocuSign Inc (NASDAQ: DOCU)
The e-signature specialist continued its excellent run. For the three months ended 31 July 2021, DocuSign reported a 52% increase in revenue year-on-year, building on the 47% growth experienced in the same period last year. DocuSign’s revenue also rose 9.2% on a sequential basis, and its net retention rate continued to be high at 124%.
The company is also enjoying improving operating leverage and saw a free cash flow margin of 32% in the reporting quarter. DocuSign’s management is guiding for between US$526 million and US$532 million in revenue for the upcoming quarter, good for a 3.3% sequential growth rate at the midpoint.
In his opening remarks during DocuSign’s latest earnings conference call, CEO Dan Springer highlighted how the company is becoming an integral part of the tech stack in many companies’ adoption of digital workflows. He mentioned some examples in his opening remarks to analysts:
“Many have also seen a better way of doing business from anywhere. And we believe that will become their new normal. One of our customers, Stacy Johansen, who is the President of Downeast Insurance, told us that when COVID hit and they had to close their physical doors, DocuSign saved them. In her words, and I quote, If it weren’t for the ability to get an electronic signature, we wouldn’t have written half of the new business we did last year.
Having succeeded beyond expectations by fully embracing digital tools, Downeast resolved to do business this way from here on. Another example is one of Canada’s largest automotive dealers. In response to COVID, the company adopted DocuSign eSignature and DocuSign payments to support remote sales and service. The program was so successful, it spawned a larger initiative to offer digital transactions across their entire dealer network.
As one company executive put it, “DocuSign has become part of facilitating a full breadth of remote experiences.” These are just a few examples of what we’re seeing again and again, being able to do business and operate from anywhere is what people now expect, plus it saves time, money and trees.”
Note: An earlier version of this article was published at The Good Investors, a personal blog run by our friends.
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Disclosure: Jeremy Chia owns shares of Zoom, MongoDB, Veeva, Docusign and Okta.