Vertical Software Stocks Q1 Teardown: Olo (NYSE:OLO) Vs The Rest
Earnings results often indicate what direction a company will take in the months ahead. With Q1 now behind us, let’s have a look at Olo (NYSE:OLO) 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, some have very specific needs. As a result, vertical software, which addresses industry-specific workflows, is growing and fueled by the pressures to improve productivity, whether it be for a life sciences, education, or banking company.
The 14 vertical software stocks we track reported a slower Q1; on average, revenues beat analyst consensus estimates by 0.7%. while next quarter's revenue guidance was 2.8% below consensus. Stocks, especially growth stocks where cash flows further in the future are more important to the story, had a good end of 2023. But the beginning of 2024 has seen more volatile stock performance due to mixed inflation data, and vertical software stocks have held roughly steady amidst all this, with share prices up 3.5% on average since the previous earnings results.
Olo (NYSE:OLO)
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 $66.51 million, up 27.3% year on year, topping analysts' expectations by 3.5%. It was a strong quarter for the company, with a solid beat of analysts' billings estimates.
“In Q1, we got off to a great start in delivering on our 2024 financial targets, including 27% year-over-year revenue growth and non-GAAP operating margin expansion to 8%,” said Noah Glass, Olo’s Founder and CEO.
Olo scored the highest full-year guidance raise of the whole group. The stock is down 0.6% since the results and currently trades at $4.67.
Is now the time to buy Olo? Access our full analysis of the earnings results 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 $1.08 billion, up 31.3% year on year, outperforming analysts' expectations by 3.3%. It was a very strong quarter for the company, with a significant improvement in its gross margin and a solid beat of analysts' billings estimates.
Toast achieved the fastest revenue growth among its peers. The stock is up 7.8% since the results and currently trades at $25.6.
Is now the time to buy Toast? Access our full analysis of the earnings results here, it's free.
Weakest Q1: ANSYS (NASDAQ:ANSS)
Used to help design the Mars Rover, Ansys (NASDAQ:ANSS) offers a software-as-a-service platform that enables simulation for engineering and design.
ANSYS reported revenues of $466.6 million, down 8.4% year on year, falling short of analysts' expectations by 15.9%. It was a weak quarter for the company, with a miss of analysts' revenue estimates and a decline in its gross margin.
ANSYS had the weakest performance against analyst estimates in the group. The stock is up 3.2% since the results and currently trades at $331.5.
Read our full analysis of ANSYS's results here.
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 $198.4 million, down 16.8% year on year, surpassing analysts' expectations by 1.3%. It was a weaker quarter for the company, with underwhelming revenue guidance for the next quarter and a decline in its gross margin.
2U had the slowest revenue growth among its peers. The stock is up 6.9% since the results and currently trades at $0.29.
Read our full, actionable report on 2U here, it's free.
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 $269.4 million, up 26.2% year on year, surpassing analysts' expectations by 2.5%. It was a weaker quarter for the company, with a miss of analysts' billings estimates and decelerating customer growth.
The company added 231 customers to reach a total of 16,598. The stock is up 0.7% since the results and currently trades at $68.75.
Read our full, actionable report on Procore Technologies here, it's free.
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