So how resilient are the SaaS companies going to be? How much, if any of a revenue slow down can we expect? We’ve had more earnings reports yesterday and today: COUP, MDB, and SMAR. I listened only to the MDB call and here are my thoughts on the subject:
Guidance is for 25.7% for FY2021. This is with a $25m reduction built in for coronavirus. Without this reduction guidance would have been for 31.6% growth. Let’s remember that guidance for SaaS companies typically starts low after Q4 and then gets beaten and raises in each of the next 3 quarters. MDB actually slowed growth. On the call management didn’t seem to think that coronavirus would affect them that much and they said that they are modeling for the second half to return pretty much to normal. They also said that so far their business has not really been affected by the outbreak even in countries that were really affected (they didn’t specify which countries though). So MDB slowed as many of us expected but I would have expected management’s view of the coronavirus impact to be worse. So are SaaS stocks really not affected that much by this outbreak or does MDB have coronaplacency?
Now COUP and SMAR have pretty good guidance. Management has seen a few weeks of what’s happening and so far it seems that none of them (and OKTA too which reported 2 weeks ago) are seeing much negative impact yet.
CRWD is on Friday so we’ll get another datapoint and another view from another management team.
Chris
Also: COUP and MDB are both in the SF Bay Area and did they even mention the Shelter in Place order…I didn’t hear it on the MDB call.
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MDB are both in the SF Bay Area and did they even mention the Shelter in Place order…I didn’t hear it on the MDB call.
Chris
I’m pretty sure MDB is a New York company, not based in the Bay Area. MDB and DDOG are both NY, I believe.
Granted, it may only be a matter of time before NY also has shelter in place. Regardless, many NY companies offices, like mine, have already closed their offices since mid last week with all employees working remotely.
-mekong
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most companies are in pure survival mode right now: ensure you have enough cash to pay the bills you have to pay, cut everything you don’t need for survival. And they will stay in that mode until the fog clears.
I can’t imagine how SaaS companies on the whole could be immune from this impact, so at the very least sales growth should take a very sizable dip - which obviously has disastrous consequences for a valuation that is based on the assumption that there is extreme growth for the foreseeable future. Now valuation is one thing and always subject to change. More serious is the question, how long companies in a cash-burn situation can last in this environment.
And of course there’s one more undesirable and at the same time more likely negative outcome than insolvency (for those who think it’s just a matter of time until they recover): if the share prices drop sufficiently, they may become a takeover target, and we’ll never get to see share prices recover to former highs, because they end up being part of IBM or whoever (in other words, something very large which is NOT going to go up explosively later on).
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