Rally Software tanks on decelerating metrics, weak Q4 guidance

|About: Rally Software (RALY)|By:, SA News Editor

Shares of Rally Software (RALY -24.3%) plunge after a Q3 beat, decelerating fundamental metrics, and weaker-than-expected Q4 guidance.

Management's expectations for Q4 revenue of $19.2M-$19.4M (+24%-25% Y/Y) are far shy of analyst expectations of $20.4M. EPS is seen by management at -$0.26 to -$0.24, below a consensus of -$0.20.

Seat count grew 28% Y/Y to 155K and 3% Q/Q. Calculated Billings (revenue plus the change in deferred revenue), grew a much slower 8% Y/Y to $16.4M.

A downgrade from Piper Jaffray to Neutral from Overweight is also hampering shares. Analyst Mark Murphy noted concerns on the conference call: "I think people right or wrong they are going to be horn in on the sequential growth rates for paid seats and differed revenue." Deferred revenue growth decelerated to 13% Y/Y, with the balance at $33.7M at the end of the quarter.

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