With earnings season underway, next week's calendar is packed with companies that ETR tracks in our surveys, and while no single input can paint an entire picture, our forward looking spending intentions have been proven to corelate to future revenues. As such, let's take a look at what the recent data said about a few of the companies reporting next week including CyberArk, Qualys. For spending intentions data, end-user insights, and industry-leading analysis on the 700 hundred enterprise tech vendors that ETR publishes research for, please visit our product platform HERE. Or get started with your own free trial HERE.
Let's kick off our (mostly) security-focused group with CyberArk, which is slated to report quarterly earnings before the market opens on Wednesday, August 10th. Year to date, the priviliged account management leader, has seen its share price drop a little more than 20% but remains ~2x higher than pandemic lows captured back in March 2020. Based on the most recent spending intention data from the JUL22 TSIS, the ETR Research team noted that CyberArk’s Net Score (ETR's proprietary metric measuring forward-looking spending intentions) is stable and improving from OCT21 levels, confirming the longer-term trend of 2H survey Net Score growth that our data has captured. Meanwhile, Pervasion (ETR's proprietary metric measuring citation growth within our survey sample) within the Information Security sector has held strong. Among all respondents in our survey, CyberArk's Expansion rate (Adoption % + Increase %) stands at 54% versus a Contraction rate (Decrease % + Replace %) of only 6%, which is among the highest across our entire survey universe.
Leveraging the ETR Insights library, we see that one ETR community member, the CISO of a Large Healthcare Enterprise, had this to say about the vendor's continued growth prospects: "I think the privileged access management – that market that CyberArk plays in – that’s one of the areas of control that fits into that basic security hygiene area. That is something that’s being pushed on by everyone, including the cyber liability providers. I don’t think there’s any getting away from that. Limiting who has access; assuring that there’s multifactor on all of those user accounts; and managing and controlling them.” In sum, CyberArk's spend intent remains stable y/y and at high absolute levels within an Information Security sector that is seeing broader Net Score declines. A growing expansion rate for 2H, along with Global 2000 Pervasion growth and low churn, leave us with a Positive outlook on the data set. The data visualization slide below illustrates CyberArk's strong relative positioning as compared to other Identity-related peers. To review the full data set and analysis, check out the report HERE.
Let's stick to the Information Security sector as we turn our attention to the vulnerability management player, Qualys, expected to report earnings on Monday, August 8th after the market close. Of the three, major vulnerability management comps, Qualys' stock has been the most resilient posting YTD declines of only 7% versus more than 40% for Rapid7 and 20% for Tenable. Our recent data sets supported that resiliency; however, after several quarters with a Positive outlook on the vendor, ETR dropped down to a Neutral outlook based on the JUL22 TSIS data. We based our outlook on some key data trends, noting that Qualys Net Score contracted slightly from levels seen a year ago but remains stable. however, Net Score is declining more sharply among Global 2000 (and even more so among F500) respondents and now sits at the lowest level within that key customer group since OCT19. The Net Score decline within the index is a result of a combination of higher levels of expected churn picked up in JUL22 and much lower indications of Increasing spend in the index. These trends, along with deteriorating positioning versus Vulnerability Management peers (Tenable and Rapid7), caused us to step down to a Neutral outlook on the data. Despite the Neutral viewpoint on the most recent data set, ETR’s proprietary Sales Forcesater model predicts that Qualys' reported sales for the quarter ending 6/30/22 will be $119M, representing 19% y/y growth, and slightly above the median analyst estimate for Qualys, which sits at $117M, representing 17.8% y/y growth. Read the full report on Qualys HERE.
Lastly, we wrap up with a vendor that straddles both Networking and Security, with the patriarch of the CDN group, Akamai, who is scheduled to report on Tuesday, August 9th after the market close. The mature vendor has fared better than many tech stocks this year with the share price down less than 20% YTD (as of press time), buoyed by relatively attractive valuation metrics like 16x earnings, 4x sales, and a ~7% FCF yield on a forward basis. While ETR does have a Positive rating on the vendor's closest CDN comp, Cloudflare, the recent data sets for Akamai have not warranted an outlook. In the JUL22 TSIS report, we did note improving trends that are worth monitoring. The report states, "Spending intentions dropped significantly throughout 2021 as much of the positive tailwinds from COVID-19 dissipated with the company’s Net Score ultimately troughing at 14.5% in OCT21, the lowest level ever captured for Akamai in ETR’s dataset. Expected 2H22 spend on Akamai has continued to show improvements from the data collected earlier in the year and from 2H21. The more significant improvements are seen within the Information Security sector, although Networking (CDN) is improving as well." While optimistically acknowledging the improving data for Akamai, we await further acceleration in future spending intent to confirm the rising trend line from recent all-time lows. In addition, as the data illustration shows below, we remain cognizant of the competitive dynamic where Cloudflare’s penetration of Akamai’s customer base continues to increase. Read the full report on Akamai HERE.
Honorable Mentions: Two other names that ETR tracks are also scheduled to report next week, Monday.com and Sailpoint. Monday.com has a low citation base in our most recent survey and the data set did not warrant an outlook; however, the research team noted that material growth in Pervasion and strong customer expansion rates were bright spots in the data set amidst a gloomier backdrop of declining Net Score and slowing adoptions for Monday.com.
Meanwhile, we can pour one out for Sailpoint, as another solid company ETR tracks is being taken private by Thoma Bravo, who along with announcing the acquisition of Ping earlier this week is building a formidable Identity Access and Governance suite of tools. The deal is even more insular when one realizes that Thoma Bravo's buyout essentially helps Ping's top investor (and fellow P/E giant), Vista Equity, liquidate its position. Vista had already bought out Ping back in 2016 only to spin it back out to the public markets in 2019. Maybe the PE powers that be simply want to combine the assets and tap back into public equity at a more opportune and advantageous time. Either way, due to the acquisition, the ETR research team did not author a JUL22 TSIS report for Sailpoint, but we did publish a report on Ping (with a Negative outlook and prior to the lucrative valuation announcement) which you can read HERE.
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Enterprise Technology Research (ETR) is a technology market research firm that leverages proprietary data from our targeted IT decision maker (ITDM) community to bring you actionable insights about spending intentions and industry trends. Since 2010, we have worked diligently at achieving one goal: eliminating the need for opinions in enterprise research, which are often formed from incomplete, biased, and statistically insignificant data. Our community of ITDMs represents $1+ trillion in annual IT spend and is positioned to provide best-in-class customer/evaluator perspectives. ETR’s proprietary data and insights from this community empower institutional investors, technology companies, and ITDMs to navigate the complex enterprise technology landscape amid an expanding marketplace. Discover what ETR can do for you at www.etr.ai