As the Q1 earnings season comes to a close, it’s time to take stock of this quarter's best and worst performers in the vertical software industry, including Bentley (NASDAQ:BSY) and its peers.
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 4 vertical software stocks we track reported a mixed Q1; on average, revenues beat analyst consensus estimates by 2.4%. while next quarter's revenue guidance was 0.8% below consensus. Valuation multiples for many growth stocks have not yet reverted to their early 2021 highs, but the market was optimistic at the end of 2023 due to cooling inflation. The start of 2024 has been a different story as mixed signals have led to market volatility, but vertical software stocks have shown resilience, with share prices up 5.1% on average since the previous earnings results.
Weakest Q1: Bentley (NASDAQ:BSY) Founded by brothers Keith and Barry Bentley, Bentley Systems (NASDAQ:BSY) offers a software-as-a-service platform that addresses the lifecycle of infrastructure projects such as road networks, tunnel systems, and wastewater facilities.
Bentley reported revenues of $337.8 million, up 7.4% year on year, in line with analysts' expectations. Overall, it was a weak quarter for the company with a miss of analysts' billings estimates.
CEO Greg Bentley said, “We are pleased with our 24Q1 performance, as year-over-year ARR growth of 11% (excluding China, 11.5%) is consistent with our recent financial outlook range for 2024. Profitability and operating cash flow started the year ahead of our expected pace, with subscription revenues (91% of total) fully on pace, although our digital integrator Cohesive’s professional services business unrelated to Bentley Systems software has declined significantly from 2023.
Bentley delivered the weakest performance against analyst estimates of the whole group. The stock is down 7% since reporting and currently trades at $49.76.
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Best Q1: Manhattan Associates (NASDAQ:MANH) Boasting major consumer staples and pharmaceutical companies as clients, Manhattan Associates (NASDAQ:MANH) offers a software-as-service platform that helps customers manage their supply chains.
Manhattan Associates reported revenues of $254.6 million, up 15.2% year on year, outperforming analysts' expectations by 4.6%. It was a decent quarter for the company with full-year revenue guidance topping analysts' expectations but a decline in its gross margin.
Manhattan Associates delivered the biggest analyst estimates beat and highest full-year guidance raise among its peers. Although it had a great quarter compared its peers, the market seems unhappy with the results as the stock is down 3.1% since reporting. It currently trades at $223.38.
Guidewire (NYSE:NYSE:GWRE) Founded by two individuals involved in the development of leading procurement software Ariba, Guidewire (NYSE:GWRE) offers insurance companies a software-as-a-service platform to help sell their products and manage their workflows.
Guidewire reported revenues of $240.7 million, up 16% year on year, exceeding analysts' expectations by 4%. It was an ok quarter for the company with a decent beat of analysts' billings estimates but a decline in its gross margin.
Interestingly, the stock is up 29.9% since the results and currently trades at $140.34.
Alarm.com (NASDAQ:ALRM) Founded in 2000 as a business unit within MicroStrategy, Alarm.com (NASDAQ:ALRM) is a software-as-a-service platform that enables users to control their security systems and smart home appliances from a single app.
Alarm.com reported revenues of $223.3 million, up 6.5% year on year, surpassing analysts' expectations by 1.6%. Zooming out, it was a good quarter for the company with a decent beat of analysts' billings estimates but full-year revenue guidance missing analysts' expectations.
Alarm.com had the slowest revenue growth and weakest full-year guidance update among its peers. The stock is flat since reporting and currently trades at $69.03.
This content was originally published on Stock Story
