What a difference a week makes.
This time last week, in the wake of earnings from tech’s five largest American companies and early results from other software companies, it appeared that tech shares were in danger of losing their mojo.
But then, this week’s rally launched, and more earnings results came in. Generally speaking, the Q3 numbers from SaaS and cloud companies have been medium-good, or at least good enough to protect historically stretched valuations when comparing present-day revenue multiples to historical norms.
This is great news for yet-private startups that have had to deal with a recession, an uneven and at-times uncertain funding market, an election cycle and other unknowns this year. Wrapping 2020 with a market rally and strong earnings from public comps should give private software companies a halo heading into the new year, assisting them with both fundraising and valuation defense.
Of course, there’s still a lot more data to come in, markets are fickle and many SaaS companies will report next month, having a fiscal calendar offset by a month from how you and I track the year. But after spending time on the phone this week with JFrog’s CEO, BigCommerce’s CEO and Ping Identity’s CFO, I think things are turning out just fine.
Let’s get into what we’ve learned.
Kicking off, Redpoint’s Jamin Ball, a venture capitalist who unconsciously moonlights as the research desk for the The Exchange during earnings season, has a roundup of earnings results from this week’s set of SaaS and cloud stocks that reported. As you will recall, last week we were slightly unimpressed by its cohort of results.
Here’s this week’s tally:
As we can see, there was a single miss amongst the group in Q3. Unsurprisingly, that company, SurveyMonkey, was also one of three SaaS companies to project Q4 revenue under street expectations. My read of that chart is seeing a little less than 80% of the group that did project Q4 guidance that bests expectations is bullish, as were the Q3 results, which included a good number of companies that topped targets by at least 10%.
Inside of the data are two narratives that I want to explore. The first is about COVID-related friction, and the second is about COVID-related acceleration. Every company in the world is experiencing at least some of the former. For example, even companies that are seeing a boom in demand for their products during the pandemic must still deal with a sales market in which they cannot operate as they would like to.
For software companies, reportedly in the midst of a hastening digital transformation, the question becomes whether or not the COVID’s minuses are outweighing its pluses. We’ll explore the matter through the lens of three companies that The Exchange spoke with this week after they reported their Q3 results.
Of our three companies this week, Ping Identity had the hardest go of it; its stock fell sharply after it dropped its Q3 numbers, despite beating earnings expectations for the period.
The company’s revenue fell 3%, while its annual recurring revenue (ARR) rose by 17%. Why did its stock fall if it came in ahead of expectations? You could read its Q4 guidance as slightly soft. In the above chart it’s marked as a slight beat, but its low-end came in under analyst expectations, creating the possibility of a projected miss.
Investors, betting on Ping’s move to SaaS being accretive both now and in the long-term, were not stoked by its Q4 forecast.
A new report released today by App Annie digs into how Gen Z consumers engage with their smartphones and mobile apps. According to data collected in Q3 2020, Gen Z users spend an average of 4.1+ hours per month in non-gaming apps, or 10% longer than older demographics. They also engage with apps more often, with 20% more sessions per user in non-gaming apps, at 120 sessions per month per app, compared with older groups.
This app engagement data is only a view into Gen Z trends, but is an incomplete analysis, as it only focuses on select markets, including the U.S., U.K., Brazil, France, Germany, Indonesia, Japan, Mexico, South Korea and Turkey. It also included only data collected from Android devices, which doesn’t provide as full a picture.
App Annie found that Gen Z is more likely to use games than older users, but they don’t access them as often or use them as long. Those ages 25 and older actually spent nearly 20% longer in their most-used games and accessed them 10% more frequently. Both demographics spent more total time gaming than using non-game apps, on a monthly basis.
Image Credits: App Annie
One breakout in the games category for Gen Z users, however, was the casual arcade game Among Us!, which just became the third-most played game worldwide, thanks to its team-based multiplayer features and the surge of Twitch streams. When Rep. Alexandria Ocasio-Cortez played the game on Twitch last night, it became one of the biggest-ever Twitch streams, peaking at 435,000 concurrent viewers.
Other popular Gen Z games include Match-3 games like Candy Crush Saga and Toon Blast, action games like PUBG Mobile and Free Fire, and casual simulation games like Minecraft Pocket Edition and Roblox.
Image Credits: App Annie
The report also examined what apps Gen Z users prefer across a range of non-game categories across both iOS and Android.
TikTok and Snapchat, in particular, stood out as the top over-indexed social and communication apps among Gen Z in nine out of the 10 markets analyzed for this report. This comes on the heels of Snap’s blowout earnings yesterday, where the social app topped analyst expectations and saw daily user growth climb 4% to 238 million.
Discord is also seeing strong growth, particularly in France, as mobile and remote gaming has become an epicenter of social interactions during the pandemic.
Image Credits: App Annie
Among entertainment apps, Twitch was the top over-indexed app in six out of the 10 markets for Gen Z users, though live streaming niconico was popular in Japan.
App Annie found that finance and shopping apps haven’t yet reached a broad Gen Z audience, but are demonstrating promising growth.
Image Credits: App Annie
Few finance apps over-index with Gen Z, though the demographic tends to interact with non-bank fintech apps like Venmo, Monzo and DANA. In South Korea, a top app was peer-to-peer payments app Toss, which also offers loans, insurance and credit.
Top Gen Z fashion apps, meanwhile, included Shein, ASOS, Shopee and Mercari.
Overall, active Gen Z users are rising faster across the markets analyzed, compared with older groups, with emerging markets like Indonesia and Brazil seeing the most growth.
Image Credits: App Annie
App Annie noted that Gen Z is becoming one of the most powerful consumer segments on mobile, as 98% own a smartphone and have a combined estimated spending power of $143 billion annually.
“Gen Z has never known a world without their smartphone. They see the world through this mobile first lens,” said Ted Krantz, CEO, App Annie, in a statement about the report’s findings.
Snap shares were up nearly 20% in after-hours trading after the company showcased a massive earnings beat, besting analyst expectations on both revenue and earnings per share for Q3. The company was already hovering above an all-time-high, with Tuesday’s beat poised to send the share price from just above $28 to just short of $34 per share.
The company posted a $0.01 revenue bet, best expectations of a $0.04 loss, but the real headline was that they delivered $679 million in reported revenue, smashing past Wall Street expectations that pinned their performance for the quarter around $555 million.
User growth was up 4% to 249 million daily active users from the 238 million they reported at the end of last quarter. The company still posted a net loss of $200 million, but that’s a 12% improvement from last years numbers.
The web of collaboration apps invading remote work toolkits have led to plenty of messy workflows for teams that communicate in a language of desktop screenshots and DMs. Tracing a suggestion or flagging a bug in a company’s website forces engineers or designers to make sense of the mess themselves. While task management software has given teams a funnel for the clutter, the folks at Jam question why this functionality isn’t just built straight into the product.
Jam co-founders Dani Grant and Mohd Irtefa tell TechCrunch they’ve closed on $3.5 million in seed funding and are ready to launch a public beta of their collaboration platform which builds chat, comments and task management directly onto a website, allowing developers and designers to track issues and make suggestions quickly and simply
The seed round was led by Union Square Ventures, where co-founder Dani Grant previously worked as an analyst. Version One Ventures, BoxGroup and Village Global also participated alongside some noteworthy angels including GitHub CTO Jason Warner, Cloudflare CEO Matthew Prince, Gumroad CEO Sahil Lavingia, and former Robinhood VP Josh Elman.
Like most modern productivity suites, Jam is heavy on integrations so users aren’t forced to upend their toolkits just to add one more product into the mix. The platform supports Slack, Jira, GitHub, Asana, Loom and Figma, with a few more in the immediate pipeline. Data syncs from one platform to the other bidirectionally so information is always fresh, Grant says. It’s all built into a tidy sidebar.
Grant and Irtefa met as product managers at Cloudflare, where they started brainstorming better ways to communicate feedback in a way that felt like “leaving digital sticky notes all over a product,” Grant says. That thinking ultimately pushed the duo to leave their jobs this past May and start building Jam.
The startup, like so many conceived during this period, has a remote founding story. Grant and Irtefa have only spent four days together in-person since the company was started, they raised their seed round remotely and most of the employees have never met each other in-person.
The remote team hopes their software can help other remote teams declutter their workflows and focus on what they’re building.
“On a product team, the product is the first tab everyone opens and closes,” Grant says. “So we’re on top of your product instead of on some other platform”