Imperva Management Says Longer Sales Cycles To Blame For Poor Q2 Results

Imperial Capital’s Michael Kim believes investors are likely to remain cautious on Imperva Inc IMPV in the near term, until management offers greater visibility into the organizational changes and delivers more consistent results.

Kim maintains an Outperform rating on the company, with a price target of $55.

2Q Preliminary Results

“IMPV continued to experience sales execution challenges in 2Q16, though we believe IMPV’s technology and products remain highly relevant, given escalating threats against data and applications,” the analyst mentioned.

The company announced its preliminary 2Q16 results below the estimates and consensus. Preliminary 2Q16 revenue came in at $57.5-$58.0 million, with adjusted net loss per share of ($0.20)–($0.22), both metric missing expectations.

Related Link: Is Imperva A Likely Takeover Target Following Q2 Negative Pre-Announcement?

Management’s Explanation

According to the Imperial Capital report, “Management indicated that the quarter was adversely impacted by longer sales cycles across most geographic regions and vertical markets, especially for larger transactions.”

Management also stated that win rates were consistent through the quarter, without any competitive changes.

However, Kim believes secular growth rates were more stable than the preliminary results imply.

“Management also highlighted changes in procurement, reverting to pre-2015 patterns, with phased deployments instead of larger up-front purchases,” the analyst added.

The FY16 and FY17 estimates have been lowered to reflect expectations of grater weakness in product and license sales.

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