As Q2 earnings season comes to a close, it’s time to take stock of this quarter's best and worst performers amongst the vertical software stocks, including Upstart (NASDAQ:UPST) 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 slower Q2; on average, revenues beat analyst consensus estimates by 1.45%, while on average next quarter revenue guidance was 2.63% under consensus. Tech multiples have reverted to the historical mean after reaching all time levels in early 2021 and vertical software stocks have not been spared, with share prices down 13.5% since the previous earnings results, on average.
Founded by the former head of Google's enterprise business Dave Girouard, Upstart (NASDAQ:UPST) is an AI-powered lending platform that helps banks better evaluate the risk of lending money to a person and provide loans to more customers.
Upstart reported revenues of $135.8 million, down 41.1% year on year, in line with analyst expectations. It was a weak quarter for the company, with underwhelming revenue guidance for the next quarter and a decline in its gross margin.
"As a result of our efforts over the past year to improve efficiency and operating leverage in our business, we achieved record-high contribution margin and positive cash flow in Q2," said Dave Girouard, co-founder and CEO of Upstart.
Upstart delivered the slowest revenue growth of the whole group. The stock is down 47.6% since the results and currently trades at $27.12.Is now the time to buy Upstart? Read our full report on Upstart here.
Best Q2: 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 $978 million, up 44.9% year on year, beating analyst expectations by 3.51%. It was a milestone beat-and-raise quarter for Toast as it won a deal with Marriott, exceeded $1 billion in ARR, and reached adjusted EBITDA profitability and positive free cash flow for the first time since the IPO. On top of that, the company raised its revenue and adjusted EBITDA guidance for the full year, topping analysts' expectations.
The stock is down 6.48% since the results and currently trades at $18.9.
Is now the time to buy Toast? Access our full analysis of the earnings results here, it's free.
Weakest Q2: Matterport (NASDAQ:MTTR)
Founded in 2011 before any mass market VR headset was released, Matterport (NASDAQ:MTTR) provides the hardware and software necessary to turn real world spaces into 3D visualization.
Matterport reported revenues of $39.6 million, up 38.9% year on year, in line with analyst expectations. It was a weak quarter for the company, with full-year revenue guidance missing analysts' expectations and underwhelming revenue guidance for the next quarter.
The stock is down 30.2% since the results and currently trades at $2.2.
Founded by Noah Glass, who wanted to get a cup of coffee faster on his way to work, Olo (NYSE:OLO) provides restaurants and food retailers with software to manage food orders and delivery.
Olo reported revenues of $55.3 million, up 21.2% year on year, beating analyst expectations by 3.93%. It was a strong quarter for the company, with optimistic revenue guidance for the next quarter.
Olo scored the highest full year guidance raise among the peers. The stock is down 25.5% since the results and currently trades at $5.96.
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 $117.2 million, up 17.7% year on year, beating analyst expectations by 1.96%. It was a mixed quarter for the company, with revenue and adjusted EPS surpassing Wall Street's expectations. On the other hand, revenue guidance for the next quarter missed expectations.
The stock is up 7.23% since the results and currently trades at $31.59.
The author has no position in any of the stocks mentioned