Earnings results often give us a good indication what direction will the company take in the months ahead. With Q1 now behind us, let’s have a look at 2U (NASDAQ:TWOU) 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, there are industries that have very specific needs. Whether it is life-sciences, education or banking, the demand for so called vertical software, addressing industry specific workflows, is growing, fueled by the pressures on improving productivity and quality of offerings.
The 17 vertical software stocks we track reported a mixed Q1; on average, revenues beat analyst consensus estimates by 2.61%, while on average next quarter revenue guidance was 0.07% under consensus. Tech stocks have been hit the hardest as investors start to value profits over growth, but vertical software stocks held their ground better than others, with the share prices up 24.5% since the previous earnings results, on average.
2U (NASDAQ:TWOU)
Originally named 2tor after the founder's dog Tor, 2U (NASDAQ:TWOU) provides software for universities and colleges to deliver online degree programs and courses.
2U reported revenues of $238.5 million, down 5.85% year on year, missing analyst expectations by 0.02%. It was a slower quarter for the company, with a decline in gross margin.
"We're thrilled to report that we achieved positive adjusted free cash flow for the first time in our history, delivering a 146% increase in adjusted EBITDA. We generated three million new learner prospects and our enterprise channel grew 57%," said Christopher "Chip" Paucek, Co-Founder and CEO of 2U.
2U delivered the weakest performance against analyst estimates of the whole group. The stock is down 24.7% since the results and currently trades at $3.84.
Read our full report on 2U here, it's free.
Best Q1: Toast (NYSE:TOST)
Founded by three MIT engineers at a local Cambridge bar, Toast (NYSE:TOST) provides integrated point of sale (POS) hardware, software, and payments solutions for restaurants.
Toast reported revenues of $819 million, up 53.1% year on year, beating analyst expectations by 7.22%. It was a very strong quarter for the company, with a solid beat of analyst estimates and very optimistic guidance for the next quarter.
Toast delivered the highest full year guidance raise among its peers. The stock is up 21% since the results and currently trades at $23.55.
Is now the time to buy Toast? Access our full analysis of the earnings results here, it's free.
Weakest Q1: nCino (NASDAQ:NCNO)
Founded in 2011 in North Carolina, nCino (NASDAQ:NCNO) makes cloud-based operating systems for banks and provides that software as a service.
nCino reported revenues of $113.7 million, up 20.7% year on year, in line with analyst expectations. It was a weak quarter for the company, with revenue guidance for the next quarter and full year missing analysts' expectations.
The stock is up 14.7% since the results and currently trades at $31.49.
Read our full analysis of nCino's results here.
Procore Technologies (NYSE:PCOR)
Used to manage the multi-year expansion of the Panama Canal that began in 2007, Procore Technologies (NYSE:PCOR) offers a software-as-service project, finance and quality management platform for the construction industry.
Procore Technologies reported revenues of $213.5 million, up 33.9% year on year, beating analyst expectations by 5.07%. It was a strong quarter for the company, with accelerating customer growth.
The company added 601 customers to a total of 15,089. The stock is up 29.8% since the results and currently trades at $68.99.
Read our full, actionable report on Procore Technologies here, it's free.
Q2 Holdings (NYSE:QTWO)
Founded in 2004 by Hank Seale, Q2 (NYSE:QTWO) offers software as a service that enables small banks provide online banking and consumer lending services to their clients.
Q2 Holdings reported revenues of $153 million, up 14.1% year on year, beating analyst expectations by 1.95%. It was a weak quarter for the company, with revenue guidance for the next quarter and the full year missing analysts' expectations.
Q2 Holdings had the weakest full year guidance update among the peers. The stock is up 39.1% since the results and currently trades at $31.99.
Read our full, actionable report on Q2 Holdings here, it's free.
The author has no position in any of the stocks mentioned