Let’s dig into the relative performance of Agilysys (NASDAQ:AGYS) and its peers as we unravel the now-completed Q2 vertical software earnings season.
Software is eating the world, and while a large number of solutions such as project management or video conferencing software can be useful to a wide array of industries, some have very specific needs. As a result, vertical software, which addresses industry-specific workflows, is growing and fueled by the pressures to improve productivity, whether it be for a life sciences, education, or banking company.
The 15 vertical software stocks we track reported a mixed Q2. As a group, revenues beat analysts’ consensus estimates by 1.9% while next quarter’s revenue guidance was 1.1% above.
Big picture, the Federal Reserve has a dual mandate of inflation and employment. The former had been running hot throughout 2021 and 2022 but cooled towards the central bank's 2% target as of late. This prompted the Fed to cut its policy rate by 50bps (half a percent) in September 2024. Given recent employment data that suggests the US economy could be wobbling, the markets will be assessing whether this rate and future cuts (the Fed signaled more to come in 2024 and 2025) are the right moves at the right time or whether they're too little, too late for a macro that has already cooled.
Luckily, vertical software stocks have performed well with share prices up 11% on average since the latest earnings results.
Agilysys (NASDAQ:AGYS)
Originally a subsidiary of Pioneer-Standard Electronics that distributed electronic components, Agilysys (NASDAQ:AGYS) offers a software-as-service platform that helps hotels, resorts, restaurants, and other hospitality businesses manage their operations and workflows.
Agilysys reported revenues of $63.51 million, up 13.3% year on year. This print fell short of analysts’ expectations by 1.4%. Overall, it was a slower quarter for the company with some shareholders anticipating a better outcome.
Ramesh Srinivasan, President and CEO of Agilysys, commented, “We are pleased to report our tenth consecutive record revenue quarter at $63.5 million, a 13.3% increase over the comparable prior year quarter, which included strong year-over-year growth of 32.0% for subscription revenue and 39.8% for services revenue. Adjusted EBITDA at $12.1 million, 19% of revenue, was slightly above our original expectations for the current quarter.
Agilysys Total Revenue
Unsurprisingly, the stock is down 5.7% since reporting and currently trades at $105.47.
Founded by Noah Glass, who wanted to get a cup of coffee faster on his way to work, Olo (NYSE:OLO) provides restaurants and food retailers with software to manage food orders and delivery.
Olo reported revenues of $70.5 million, up 27.6% year on year, outperforming analysts’ expectations by 4.1%. The business had a very strong quarter with an impressive beat of analysts’ GMV (gross merchandise value) estimates and a solid beat of analysts’ billings estimates.
Olo Total Revenue
Olo scored the fastest revenue growth and highest full-year guidance raise among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 3.1% since reporting. It currently trades at $4.64.
Used to design the Airbus A380 and Boeing 787 Dreamliner commercial airplanes, PTC’s (NASDAQ:PTC) software-as-service platform helps engineers and designers create and test products before manufacturing.
PTC reported revenues of $518.6 million, down 4.4% year on year, falling short of analysts’ expectations by 2.8%. It was a softer quarter as it posted a miss of analysts’ billings estimates and a decline in its gross margin.
PTC delivered the weakest performance against analyst estimates and weakest full-year guidance update in the group. The stock is flat since the results and currently trades at $176.35.
Founded in 2011 in North Carolina, nCino (NASDAQ:NCNO) makes cloud-based operating systems for banks and provides that software-as-a-service.
nCino reported revenues of $132.4 million, up 12.9% year on year. This number beat analysts’ expectations by 1%. More broadly, it was a softer quarter as it produced a miss of analysts’ billings estimates and a decline in its gross margin.
The stock is down 13.5% since reporting and currently trades at $29.85.
Founded in 2010 and named for a combination of “docs” and “proximity”, Doximity (NYSE: DOCS) is the leading social network for U.S. medical professionals.
Doximity reported revenues of $126.7 million, up 16.8% year on year. This print surpassed analysts’ expectations by 5.7%. Zooming out, it was a mixed quarter as it also recorded optimistic revenue guidance for the next quarter but a miss of analysts’ billings estimates.
The stock is up 69.5% since reporting and currently trades at $43.50.
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