麥格理美股軟件行業(yè)軟件行業(yè)手冊2019年q2非周期預(yù)覽

1、Please refer to page 47 for important disclosures and analyst certification, or on our website esearch/disclosures.16 August 2019United StatesEQUITIESSoftware Earnings HandbookQ219 Off-Cycle EPS Preview: Macro MercyValuations Pulled Back 10% from On-Cycle / July Peaks, Macro WoesOur software tracker

2、 aggregates data from 165 co.s and shows that cons. 12 mo. after NTM EV/Sales ratios have pulled back from a 10-year peak of 7.3x in late July to 6.6x today. Even still, current values are 16% higher than the 1-year average of 5.7x, and 47% higher than the historical 5-year average of 4.5x, but cert

3、ainly have pulled back due to macro factors like global GDP growth slowing, and trade wars. While we continue to caution that multiples are expensive, they feel a bit better today and the spending environment continues to favour software.Spending on Digital Projects Persists, But Signs of Softness i

4、n EMEAOur channel work with dozens of software resellers and integrators focused on any inflections or signs of slowness given recent Fed dovishness, slowing GDP in areas of Europe and China, and looming trade wars. However, partners and resellers once again pointed to organizations continuing to sp

5、end on digital transformation initiatives as a critical part of business optimization, but did note that there was some softness in EMEA on spending for large software projects in July and into August, which stemmed primarily from the UK but bled into other regions. Our channel work showed Workday a

6、s the most impacted due to a slew of recent sales losses in the region.Anaplan was still able to beat expectations in the region. We look for conservative outlooks as companies balance the uncertain macro.Channel Work Points to Solid Quarters at CRWD, PLAN, SPLK and In- line at CRM, WDAY and PANW, M

7、ore BelowOur channel checks on CrowdStrike were very solid with almost all partners above plan, helped by disruption at Symantec during the quarter, a move to Win10 as an opening for agent consolidation, and market leadership in EDR. We noted solid new and expansion business in period. Our checks on

8、 PLAN were also notable, with the co. continuing its land and expand efforts. In particular, the co. had solid traction in new markets in Asia Pac and upside in North America due to strong spending on planning tools in general. This strong planning environment was also noted at Workdays Adaptive Ins

9、ights, but Workday saw a bit of softness in the core HR market in EMEA and therefore we expect results largely inline to potentially soft as large deals were hard to find (large logo wins were scarce, whereas SMB customer wins like the ASPCA and Colby College were noted, though the co. did land Tyso

10、n). Salesforce, the most often discussed name under coverage with 3 large deals YTD, is suffering through a heavy investment year causing fears of slowness. With most partners inline, and a few leading partners ahead, we suspect the emphasis to be on 20%+ organic growth, and M&A strategy/margins

11、 with upside from the early close of Tableau (2 months early vs. guidance for $375mn). Palo Alto checks were solid, but showed a strong shift to Prisma Cloud products. Along with an unexpected Analyst Day the evening of EPS, we are expecting upside to Q4, but a potential need to address investors on

12、 the sub. mshift which may muddy DR, FCF and revenues. We are sitting on the sidelines awaiting the report. More inside.InsideQ219 Off-Cycle EPS Preview:Macro Mercy2Salesforce FQ220 Preview4Splunk FQ220 Preview14Palo Alto Networks FQ419 Preview21Workday FQ220 Preview29Anaplan FQ220 Preview34CrowdStr

13、ike FQ220 Preview41AnalystsMacquarie Capital (USA) Inc.Sarah Hindliansarah.hindlianKey pointsê Our off-cycle channel checks in software remained solid, though EMEA showed pockets of weakness.ê Valuations have pulled back off peaks which we expect to continue in August.ê Bullish checks

14、 on CRWD, PLAN and SPLK (term+). CRM checks largely inline (DATA early close) while WDAY softer in EMEA. More below.獲取報(bào)告1、2、3、每周群內(nèi)7+報(bào)告；當(dāng)日華爾街日報(bào)、4、行研報(bào)告均為公開利歸原作者所有，起點(diǎn)財(cái)經(jīng)僅分發(fā)做內(nèi)部學(xué)習(xí)。掃一掃 關(guān)注公號(hào)回復(fù)：加入“起點(diǎn)財(cái)經(jīng)”群。Macquarie ResearchSoftware Earnings HandbookQ219 Off-Cycle EPS Preview: Macro MercyBroad Software Tracker

15、Our software tracker aggregates data from 165 companies and shows that cons. 12 mo. after NTM EV/Sales ratios have pulled back from a peak 7.3x in late-July to 6.6x in mid-August. Even still, current values are 16% higher than the 1-year average of 5.7x, and 47% higher than the historical 5-year ave

16、rage of 4.5x, but certainly being impacted by ongoing macro factors like interest rates, global GDP growth slowing, and trade wars. While we continue to caution that multiples are expensive, we also dont expect a return to prior levels anytime soon due to the central role software companies play in

17、the digital transformation of other industries. Software revenues are also increasingly more recurring and deployments are often sticky, increasing the quality of these earnings vs other sectors. (Fig 1 below).We look to see how our off-cycle companies report the year with an emphasis on global macr

18、o, as our channel checks remained solid, though there were some signs of softness for software vendors in EMEA, especially the UK and Italy. While we are at the mercy of the macro, our off-cycle companies largely saw good quarters, with CrowdStrike and Anaplan partners showing the most “ahead of pla

19、n” results, a relief for Anaplan given the high multiple and exposure to EMEA. More details in this report.Fig 1Macquaries Broad Software Multiples Tracker (n=165)Source: FactSet, Macquarie Capital (USA), August 2019Growth Software TrackerGrowth software multiples have reached higher-highs lately,iz

20、ing at 9.3x 12mo. after NTM cons.EV/Sales during the first half of July. The market has pulled back since then due to a variety of factors, and we are now at 8.7x vs. the 1-year average of 7.5x, 3-year average of 6.1x, and the 5-year average of 5.7x. In our view, the multiples are partially due to l

21、imited growth opportunities for investors combined with what we believe is a digital transformation occurring across all sectors as processes are automated and augmented, and as larger sets of data are wielded for algorithm design (AI/ML). Higher multiples may be the new normal going forward as we a

22、re still in the early parts of the adoption S-curveand plenty of opporturemains, while supply / demand imbalances in limited new issuance floatsalso creates outsized revenue multiples.16 August 2019212 mo. after NTM EV/SalesGroup Average10-Year Average+1 STD-1 STD8xCurrent Group Average: 6.6x7x6x5x

23、4x3x 2x 1x 0xMacquarie ResearchSoftware Earnings HandbookFig 2Macquaries Growth Software EV/Sales Tracker (n=45)Source: FactSet, Macquarie Capital (USA), August 2019New Issuances are Showing Strong ValuationsNew issuances have shown significantly higher multiples than the broad software or growth so

24、ftware average. Our sample of nine newly public application and cybersecurity companies, detailed in Figure 3, demonstrates an average FY2 revenue growth rate of 33% with an implied EV/FY2 Sales of 19.8x. One contributing factor for many of these companies the limited float and high insider ownershi

25、p, which we believe affects the supply/demand dynamics and could cause price expansions.Fig 3Sample of New Issuance Valuations Across Software Shows a 19.8x FY2 EV/Sales RatioSource: FactSet, Macquarie Capital (USA), August 201916 August 2019312 mo. after NTM EV/SalesSelect New Issuance Valuation Ta

26、ble52 WeekFY2 Cons.FY2 Cons.YTDStockShort Interest Revenue GrowthEnterpriseFY2 Cons.FY2 Cons.FY2 Cons.Op. Margin Performance Performance as a % of the(%)Value ($mn)EV/SalesEV/FCFP/E(%)(%)(%)FloatZM38.2%$24,49532.5x481.5x1369.6x2.6%33.3%CRWD42.4%$19,65731.8x-141.0x-209.0x-15.4%12.6%ZS33.1%$9,88924.8x

27、184.0x423.6x5.2%107.9%117.2%10.4%WORK38.8%$16,13019.3x-653.4x-142.6x-17.1%8.1%COUP27.3%$7,93418.0x124.0x337.1x7.5%108.7%93.9%11.9%PLAN29.4%$6,81716.0x-157.6x-114.6x-15.5%108.4%3.4%AVLR24.7%$5,92513.0x279.3x-161075.3x-0.2%170.7%134.1%2.9%PD28.5%$2,38211.4x-424.8x-178.8x-9.1%15.7%ESTC34.3%$6,11011.4x-

28、205.4x-62.2x-19.7%19.0%9.2%Average33.0%$11,03719.8x-57.0x-17739.1x-6.8%102.9%115.1%11.9%Average5-Year Average+1 STD-1 STD10xCurrent Group Average: 8.7x9x8x 7x6x 5x4x 3x 2x 1x 0xMacquarie ResearchSoftware Earnings HandbookSalesforce FQ220 PreviewWe expect Salesforce to report a largely in-line to sli

29、ghtly better Q2 (especially in light of sentiment) on the back of a flurry of operational changes keeping shares lagging, including: 1) several large M&A deals, one of which was largely planned (Tableau); 2) customer contract renewal price uplift structure removal which led many to fear slowness

30、 and customer pushback; 3) managements removal of DR guidance in favour of Current RPO which we favor; and, 4) Concern that the co. is not committed to its margin growth framework, with M&A as an excuse.In addition to these changes, macroeconomic conditions within the EU have been taking a turn

31、for the worse with heightened risks around a no-deal Brexit and the set deadline for striking a deal on October 31st which coincides with Salesforces Q3 period end. As a reminder, Salesforce generates 20% of its business from the EU with the GBP acting as its functional currency in the region which

32、inherently creates foreign currency translation risks for its USD reporting structure. In the near term we expect incremental FX headwinds to be helped by the co.s short duration hedging programs but may nonetheless become a drag as estimates roll into next year. This headwind may keep the co. from

33、raising its organic guidance, but we still expect them to keep the current plan organically, and increase Tableau given an early close.For the quarter, our channel checks suggest that most partners met plan though as we note above, EMEA was a bit more challenging to whale hunt this quarter. However,

34、 retail, financial services, and even telco verticals appear to have performed well and Salesforce is making a lot of inroads into the UK with new hires as well as Australia. We were interested to learn of early trial work around Customer360 which helps to integrate the CRM stack for a unified custo

35、mer data m focused on the co.s views of what it will be able to do with Tableau.and we are particularlyWe believe the bar is set relatively low on the top line with much of the street having yet to incorporate acquired revenues from the Tableau deal for FY20 onwards (more on this below) and valuatio

36、nfavourable with the stock currently trading at just 5.3x FY21e EV/Sales (ex. Tableau).we noteda similar set-up into last quarter that led to an outsized positive move after reporting a solid print.From our discussions with clients, we observed a highly polarized investment commuwithincreasing angst

37、 surrounding Salesforces ability tiver foreseeable organic growth compoundingabove the 20% threshold many growth software investors desire, in addition to facing another disappointing fiscal year guide down on profitability margins. Year to date the stock is now up just 2.74% (as of 08/12/2019) and

38、is underperforming the S&P 500 by 12.25% points and the S&P Software & Services index by 26.19% points; suggesting sentiment is hovering near multi-year lows. However, we do think 20% organic growth is quite likely for several years, but we would prefer a more robust margin profile.On th

39、e Tableau acquisition, due to an increasing amount of incoming investor interest that we have been fielding as of late we provide a detailed pro-forma analysis in Figure 4.We utilize the co.s amended press release published on June 10, 2019 that provided an updated initial financial guide for its FY

40、20e and the S-4 filed with the SEC on July 3, 2019 detailing CRMs internal estimates for Tableau.From the filings, Salesforce estimates Tableau will generate revenue of $1.12bn for the 9 month period ending 12/31/2019. However, given the slight difference between Salesforces fiscal year end and the

41、expected CY19 contribution, we estimate Tableaus standalone revenue at closer to $1.43bn for the 12-month period ending January 31, 2020 while after accounting for an implied 20% PPA haircut and some 2H seasonality, based on our math, we expect $445mn in contribution to CRMs FY20e top line vs. co.s

42、guide of $375mn. We highlight that we believe our higher estimate is still likely conservative given at the time of the press release, Salesforce outlined that its financial guide was based on an October 1, 2019 close date. However, the deal closed materially sooner 2 months in fact suggesting 6 mon

43、ths of contribution vs. 4 at the time of guide. If linearly extrapolated, the extra two months of contribution could add up to $187.5mn in additional revenue for a total FY20 contribution of $562.5mn. Likewise, we would also expect greater share dilution to be expected for FY20. As such, we will be

44、looking for updated guide for both the top and bottom line on the print.For FY21e & FY22e, we estimate PPA impact to be minimal given Tableaus immaterial long-term DR balances and pro-forma total revs. to be approx. $21.1bn and $25.0bn, respectively. However, given the dilution impacts of the 10

45、0% stock based merger, we estimate per share metrics are likely to see16 August 20194Macquarie ResearchSoftware Earnings Handbookdilution right through our forecast period of FY22e, as outlined in Figure 5, in spite of expected margin accretion. Lastly, with regard to valuation, without consideratio

46、n of potential deal synergies that have yet to be discussed by mgmt., we estimate Salesforce is currently (08/12/2019) trading at 6.0x FY2e EV/Sales pro-forma on a fully diluted basis with modest room for multiple expansion should investors gain confidence that the stock is likely to remain a >20

47、%+ top line organic growth story.Key Topics for the Call:1)Updated financial guide to FY20 given Tableau close and ClickSoftware announcement and updates on early integration efforts and go-to market strategies for Tableau;How the co. sees future margin growth trajectory given Tableau, ClickSoftware

48、 and S all closing this year;CRM is no longer guiding to DR due to ASC 606 adoption and the co. is instead providing guidance on Current RPO or Remaining Performance Obligations. How can we start to see this metric trend and what are the seasonality impacts?;Given EMEA has been growing

49、>30% Y/Y, we also look for updates from management around the UK economy and the EU. No-deal Brexit risks are elevated and the GBP has seen material deterioration against the USD increasing potential FX headwinds;Broad update on M&A: With 3 deals >$1bn just this year, we are seeking update

50、d commentary on M&A outlook from Benioff, Block & Co. M&A has been a key inhibitor of op. margin expansion, and we are focused on how the co. is thinking about large deals at this time;2)3)4)5)16 August 20195Macquarie ResearchSoftware Earnings HandbookFig 4Salesforce Tableau Pro Forma An

51、alysisSource: Salesforce S4 filing, Macquarie Capital (USA), August 201916 August 20196Salesforce/Tableau MergerFiscal YearFY 2020EFY 2021EFY 2022EPeriod End Date1/31/20201/31/20211/31/2022StandaloneRevenueAcquirer - revenue16,17519,36122,773Target - revenue1,4261,7732,180Adj. Operating ProfitAcquir

52、er - Adj. EBIT2,2563,4224,328Acquirer - Adj. EBIT Margin13.9%17.7%19.0%Target - Adj. EBIT195315459Target - Adj. EBIT Margin13.6%17.8%21.1%Net IncomeAcquirer - Adj. Net Income2,3302,9613,663Target - Adj. Net Income156252367EPSAcquirer - Adj. EPS$2.89$3.54$4.23Target - Adj. EPS$1.72$2.70$3.83Shares Ou

53、tstandingAcquirer - FDSO807836865Target - FDSO90.693.295.9Pro Forma P&LRevenue (pre. PPA)16,88821,13424,953Revenue (post PPA)16,62021,13424,953Adj. Operating Income2,3223,6874,762Adj. EBIT Margin13.97%17.45%19.08%Earnings before Tax2,9174,1875,262Adj. Net Income2,2603,2454,078Adj. EPS$2.64$3.46$

54、4.20Pro Forma Weighted FDSO857939971Pro Forma Revenue per Share19.3922.5125.70Acquirer standalone Revenue per Share20.0423.1626.33Accretion/Dilution per share(0.65)(0.65)(0.62)Accretion/Dilution %-3.24%-2.80%-2.37%Macquarie ResearchSoftware Earnings HandbookFig 5Salesforce Pro Forma Valuation Ranges

55、;Source: Salesforce S4 filing, Macquarie Capital (USA), August 2019 range based on 08/12/2019 closeWe outline our expectations for the quarter and outlook below.Fig 6Macquaries FQ220 Salesforce Estimates vs. Consensus and GuidanceSource: FactSet, Macquarie Capital (USA), August 201916 August 20197FQ

56、2'20 Preview Estimates ($US/mn)Macquarie's ConsensusMidpt. of Company'sEstimatesEstimatesGuidanceTotal Revenue$3,956 $3,951$3.94-$3.95bnSubscription and support$3,701 $3,692Professional services and other$254 $256Non-GAAP Gross Margin63.5%77.0%Non-GAAP Operating Margin5.1%13.4%Non-GAAP EPS$0.46 $0.47$0.46-$0.47Cash Flow from Operations$768 $288Free Cash Flow$600 $136Billings$3,575 $3,526Unearned Revenue$7,205 $7,158CRM Pro Forma Valuation - FY