Revenue — possible unit mismatch: actual is 9.97e-07x the estimate
Verdict
Non-GAAP diluted EPS of $0.11 beat the $0.104 estimate by $0.006, but it is down from $0.13 a year ago -- a beat on a number that is shrinking.
Total revenue of $213.7m grew 1% against $212.0m, with subscription up 3% to $194.8m and professional services down to $18.9m from $23.6m.
Profitability went backwards on flat revenue: non-GAAP operating income fell to $31.3m from $38.2m and non-GAAP operating margin to 15% from 18%; GAAP operating income was $10.0m against $16.3m.
Guidance points to more of the same -- Q3 total revenue of $215.0m to $216.0m, full-year total revenue of $866.5m to $868.5m, and full-year non-GAAP EPS of approximately $0.47.
The one thing that matters: the transformation is showing up in the share count, not the P&L -- non-GAAP net income fell 25% to $25.2m while EPS fell only two cents, because buybacks took 25m shares out of the diluted count.
Key metrics
Metric
Reported
Prior year
Change
Total revenue
$213.7m
$212.0m
+1%
Subscription revenue
$194.8m
$188.5m
+3%
Non-GAAP operating income
$31.3m
$38.2m
-18%
Non-GAAP operating margin
15%
18%
-3pp
Free cash flow
$13.1m
$29.8m
-56%
RPO
$1.03bn
—
+11%
Guidance changes
Item
New guidance
Prior guidance
Q3 FY2027 total revenue
$215.0m to $216.0m
—
Q3 FY2027 non-GAAP net income per share
approximately $0.11 on 239m diluted weighted-average shares
—
FY2027 total revenue (updated)
$866.5m to $868.5m
—
FY2027 non-GAAP operating income (updated)
$139.0m to $141.0m
—
FY2027 non-GAAP net income per share (updated)
approximately $0.47 on 240m diluted weighted-average shares
—
Quality of earnings
The per-share line is flattered by the buyback. Non-GAAP net income fell to $25.2m from $33.8m, down 25%, yet non-GAAP diluted EPS fell only to $0.11 from $0.13 -- diluted weighted-average shares dropped to 237.8m from 263.2m after $125.8m of Class A repurchases in the first half.
Growth has narrowed to one line and it is getting more expensive to serve. Subscription revenue rose 3% to $194.8m while professional services fell to $18.9m from $23.6m, and subscription cost of revenue rose to $50.9m from $43.2m, taking gross margin to 65% from 68% and non-GAAP gross margin to 66% from 69%.
Gotchas & watch items
Cash generation roughly halved: operating cash flow of $18.2m against $34.8m and free cash flow of $13.1m against $29.8m, with capitalized internal-use software steady at $4.7m.
The contracted-demand claim is long-dated. Total RPO is up 11% to $1.03bn, but cRPO -- the part due inside twelve months -- is up only 3%, the same rate as reported subscription revenue, so near-term growth is not accelerating.
Full-year total revenue guidance of $866.5m to $868.5m against $433.2m booked in the first half leaves the second half essentially flat with the first, with no sequential build assumed.