More Software Earnings Coverage

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.