TOST) The best of the bunch

As the first quarter earnings season comes to an end, it’s time to take stock of the best and worst of this quarter’s performance in the vertical software industry, including Toast (NYSE:TOST) and its competitors.

Software is devouring the world, and while a large number of solutions such as project management software or video conferencing software can be useful in many industries, some have very specific needs. As a result, vertical software that incorporates industry-specific workflows is growing and driven by pressure to improve productivity, whether it’s a life sciences, education or banking company.

14 software companies we monitor reported a slower first quarter; revenues were higher than analyst estimates by an average of 0.7%. while revenue guidance for the next quarter was 2.8% below consensus. Stocks – especially those trading at higher multiples – had a strong end to 2023, but 2024 saw periods of volatility. Mixed signals on inflation have led to uncertainty over interest rate cuts, and industry software stocks have remained more or less steady through it all, with share prices up an average of 3.1% from previous earnings results.

Best Q1: Toast (NYSE:TOST)

Founded by three MIT engineers in a local Cambridge bar, Toast (NYSE:TOST) provides integrated point-of-sale (POS) hardware, software and payment solutions.

Toast reported revenue of $1.08 billion, up 31.3% year-over-year, beating analyst expectations by 3.3%. It was a very good quarter for the company, with significant improvement in gross margin and solid growth in analyst estimates.

“Toast is off to a strong start in 2024. Our first quarter results demonstrate strong revenue growth and margin expansion, which we will build on throughout the year. We did well on our priorities: scaling restaurant locations; driving ARR by delivering products that customers love; further expanding our target market; and building operating leverage as we scale,” said Toast CEO and co-founder Aman Narang.

The story continues

Toast recorded the fastest revenue growth in the entire group. Since the results were released, the company’s shares are up 7.8% and are currently trading at $25.6.

Is now the time to buy toast? Access our full earnings performance analysis here, it’s free.

Holdings in the second quarter (NYSE:QTWO)

Founded in 2004 by Hank Seale, Q2 (NYSE:QTWO) offers software-as-a-service that enables small banks to provide online banking and consumer lending services to their customers.

Q2 Holdings reported revenue of $165.5 million, up 8.2% year-over-year, which beat analyst expectations by 1.3%. It was a very good quarter for the company, with an impressive increase in analyst estimates.

Since the earnings release, the company’s stock has increased by 20.5% and is currently trading at $62.34.

Is now the time to buy Q2 Holdings? Access our full earnings performance analysis here, it’s free.

Weakest Quarter 1: ANSYS (NASDAQ:ANSS)

Used to design the Mars Rover, Ansys (NASDAQ:ANSS) offers a software-as-a-service platform that enables simulation for engineering and design.

ANSYS reported revenue of $466.6 million, down 8.4% year-over-year, or 15.9% below analyst expectations. It was a weak quarter for the company, with analyst revenue estimates missing and gross margin declining.

ANSYS achieved the weakest result compared to analyst estimates in the group. Since the results were released, the company’s shares are up 3.2% and are currently trading at $331.50.

Read our full analysis of ANSYS results here.

Adobe (NASDAQ:ADBE)

Adobe (NASDAQ:ADBE), one of Silicon Valley’s most prominent software companies, is a leading software-as-a-service provider in the digital design and document management space.

Adobe reported revenue of $5.18 billion, up 11.3% year-over-year, in line with analyst expectations. It was a slower quarter for the company, and revenue forecasts for the next quarter were disappointing.

Since the results were released, the company’s shares have fallen 16.7% and are currently valued at $476.13.

Read our full hands-on report on Adobe here. It is free of charge.

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-a-service platform for project, financial and quality management for the construction industry.

Procore Technologies reported revenue of $269.4 million, up 26.2% year-over-year, beating analyst expectations by 2.5%. It was a mixed quarter for the company, with analysts missing billing estimates and slowing customer growth.

The company added 231 customers, reaching a total of 16,598 customers. Since the results were released, the company’s shares are up 0.7% and are currently trading at $68.75.

Read our full hands-on report on Procore Technologies here. It is free of charge.

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