Needham analyst Scott Berg shared 2Q earnings for its Enterprise Software universe kick-off this week with seven companies reporting, namely, 2U, Inc TWOU (Buy; Price Target: $19), Coursera, Inc COUR (Buy; PT: $32), Five9, Inc FIVN (Buy; PT: $160), PROS Holdings, Inc PRO (Buy; PT: $51), SPS Commerce, Inc SPSC (Buy; PT: $150), Teladoc Health, Inc TDOC (Buy; PT: $48), and Tyler Technologies, Inc TYL (Buy; PT: $575).
Investor sentiment on Berg's universe has improved dramatically over the past month as investor appetite shifted from cyclical consumer names to growth-ier themes like his universe.
Berg believed the 2Q tone would show that bookings were generally solid overall, but expect careful 2H guidance as companies bake the looming macro slowdown into guidance.
After speaking with nearly 35 private companies over the last seven weeks, he believes 2Q sales across its space were generally positive and in line with solid 1Q billings activity.
He believes those vendors most exposed to North America will show 2Q bookings outperformance, while those with a more significant European presence were exposed to some lengthening of sales cycles.
He fielded numerous calls from investors asking if the Qualtrics International Inc XM sales commentary will indicate broader 2Q expectations, but his 2Q checks suggest a more favorable sales tone.
For FIVN, recent Contact Center works suggest demand for automation and Cloud delivery drove healthy demand.
For SPSC, he thinks the broader supply chain macro pressure drove net new customer additions above historical levels.
For TYL, he expects that the ARPA tailwinds and strong bookings over the last several quarters led to organic growth again above 10%, versus the guidance of 9.5%.
Within Ed Tech, 2Q earnings kick off with COUR and TWOU. Both companies gained share according to web traffic over the past quarter, which boded well for lead generation and adoption of shorter form credentials.
However, investor concerns remain regarding the 2H22 outlook for each company's degree business as labor market strength has not yet slowed, despite growing layoffs in tech.
In digital health, TDOC looked to bounce back after a problematic 1Q. Web trends suggest strong demand for mental health services, like BetterHelp. He saw TDOC's need to address concerns around elevated competition in multiple segments of their business, particularly within primary care, as Amazon.com Inc AMZN shared plans to acquire One Medical.
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