Quarterly earnings results are a good time to check in on a company’s progress, especially compared to its peers in the same sector. Today we are looking at Bentley (NASDAQ:BSY) and the best and worst performers in the vertical software industry.
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 strong Q2. As a group, revenues beat analysts’ consensus estimates by 2.7% while next quarter’s revenue guidance was 7.5% above.
After much suspense, the Federal Reserve cut its policy rate by 50bps (half a percent) in September 2024. This marks the central bank’s first easing of monetary policy since 2020 and the end of its most pointed inflation-busting campaign since the 1980s. Inflation had begun to run hot in 2021 post-COVID due to a confluence of factors such as supply chain disruptions, labor shortages, and stimulus spending. While CPI (inflation) readings have been supportive lately, employment measures have prompted some concern. Going forward, the markets will debate whether this rate cut (and more potential ones in 2024 and 2025) is perfect timing to support the economy or a bit too late for a macro that has already cooled too much.
Thankfully, vertical software stocks have been resilient with share prices up 9.4% on average since the latest earnings results.
Slowest Q2: 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 $330.3 million, up 11.3% year on year. This print exceeded analysts’ expectations by 1.6%. Despite the top-line beat, it was still a mixed quarter for the company with a narrow beat of analysts’ billings estimates but a miss of analysts’ ARR (annual recurring revenue) estimates.
CEO Nicholas Cumins said, “Our performance in 24Q2 and the first half provides a solid foundation for the full year, with very positive end-market and operational momentum. Our year-over-year ARR growth of 11% on a constant currency basis (11.5% excluding China) is consistent with the previous quarter. Public Works / Utilities and North America remained the main growth drivers, and we continued to add new small- and medium-sized accounts at a rapid pace, reflecting healthy market conditions.
Bentley delivered the weakest performance against analyst estimates of the whole group. Interestingly, the stock is up 11.2% since reporting and currently trades at $49.80.
Is now the time to buy Bentley? Access our full analysis of the earnings results here, it’s free.
Best Q2: Guidewire (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 $291.5 million, up 8% year on year, outperforming analysts’ expectations by 2.7%. The business had an exceptional quarter with an impressive beat of analysts’ billings estimates and a significant improvement in its gross margin.
Guidewire pulled off the highest full-year guidance raise among its peers. The market seems happy with the results as the stock is up 21.4% since reporting. It currently trades at $174.65.
Is now the time to buy Guidewire? Access our full analysis of the earnings results here, it’s free.
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 $265.3 million, up 14.8% year on year, exceeding analysts’ expectations by 3.5%. It may have had the worst quarter among its peers, but its results were still good as it also locked in a significant improvement in its gross margin and full-year revenue guidance topping analysts’ expectations.
Interestingly, the stock is up 21.8% since the results and currently trades at $275.17.
Read our full analysis of Manhattan Associates’s results here.
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 $233.8 million, up 4.4% year on year. This number surpassed analysts’ expectations by 2.9%. Overall, it was a strong quarter as it also recorded a solid beat of analysts’ billings estimates and full-year revenue guidance topping analysts’ expectations.
Alarm.com had the slowest revenue growth and weakest full-year guidance update among its peers. The stock is down 16.9% since reporting and currently trades at $54.54.
Read our full, actionable report on Alarm.com here, it’s free.
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