Seeking Alpha

Rally Software does the opposite on soft revenue guidance

  • Though Rally Software (RALY) beat FQ1 estimates and posted nearly in-line revenue, it expects FQ2 revenue of $20.2M-$20.8M (just 2%-5% Y/Y growth) and FY15 (ends Jan. '15) revenue of $87M-$90M (17%-21% growth), below consensus estimates of $22.5M and $92.3M.
  • EPS guidance is a little better: Rally expects FQ2 EPS of -$0.39 to -$0.42 and FY15 EPS of -$1.31 to -$1.36 vs. consensus estimates of -$0.42 and -$1.57.
  • The provider of cloud-based software development tools says it "struggled slightly in selling new seats to new customers," as large growth in quote-carrying headcount caused "some execution delay."
  • Canaccord's recent remarks about the growing pains often faced by enterprise software companies (in reference to Splunk) appear relevant.
  • GAAP opex +27% Y/Y to $22.6M. Paid seats +6% Q/Q and +23% Y/Y to ~226K.
  • RALY -18.2% AH. FQ1 results, PR, CFO commentary (.pdf)

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Comments (1)
  • estotz
    , contributor
    Comments (30) | Send Message
     
    Listening to the conference call. There is not the usual .. atta go cheerleading comments from the same usual analysts.

     

    Either way you slice it, RALY last quarter guided profits to double the loss, then this quarter beat that guidance. It means nothing ... they just decided to lower the bar drastically, so they could beat that actual low bar.

     

    Revenue growth is already going down sooner than expected.

     

    Sales reps were blamed again for the lowered revenue growth, because of all the new hires. My guess is that excuse will wear thin ...

     

    This is going to $5 sooner than later, and then maybe when it gets into the low digits, someone may take it out for a song - but not after more pain.

     

    Not to mention this stock will have higher multiple downside than the overall market if the market corrects in the next few quarters.
    5 Jun 2014, 05:50 PM Reply Like
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