Why Xactly Corp. Stock Fell Today

Image source: Xactly Corp.

What happened

Shares of Xactly Corp. (NYSE: XTLY) were down 18.5% as of 11:30 a.m. EST Friday after the enterprise cloud-based incentive compensation solutions company released solid fiscal third-quarter 2017 results but followed with weaker-than-expected forward guidance.

So what

Quarterly revenue grew 25% year over year, to $23.9 million, including 22% growth in subscription revenue, to $18.5 million, and 39.3% growth in professional services revenue, to $5.5 million.On the bottom line, that translated to an adjusted net loss of $2.0 million, or $0.06 per share, narrowed from an adjusted net loss of $5.1 million, or $0.18 per share in last year's fiscal Q3.

By comparison, analysts' consensus estimates called for slightly lower revenue of $23.8 million and a wider adjusted loss of $0.13 per share.

Xactly also touted "key enterprise wins" across multiple verticals including manufacturing, telecom, consumer goods, healthcare, software, and construction. And the company grew its total subscribers 22% year over year, to 287,000.

"Companies choose our solutions because we enable them to drive employee behavior, " stated Xactly founder and CEO Chritopher Cabrera. "In particular, Xactly Insights gives customers the actionable data they need to drive higher business performance."

Now what

"The third quarter marked another quarter of solid revenue growth and significant improvement on the bottom line," elaborated Xactly CFO Joseph Consul. "The operating leverage we are demonstrating gives us confidence to achieve our target of positive cash flow from operations in the fourth quarter of this fiscal year."

For the current quarter, however, Xactly anticipates revenue of $23.6 million $24.4 million, which should translate to an adjusted net loss of $4.0 million to $3.2 million, or a loss per share in the range of $0.13 to $0.10. Analysts, on average, were looking for a loss at the lower end of Xactly's guidance but on higher revenue of $25.9 million.

Finally, for the full year, Xactly now expects revenue of $94.8 million to $95.6 million and an adjusted net loss of $11.1 million to $10.3 million, or $0.36 to $0.33 on a per-share basis. Here again, Wall Street was looking for higher full-year revenue of $96.9 million and a wider adjusted net loss of $0.43 per share.

Of course, the market's reaction might seem overblown when you consider Xactly's bottom-line guidance was technically ahead of expectations. But in these early stages of its long-term story, Xactly's primary focus should be growing revenue and taking market share as it consciously eschews profitability. So when unprofitable, fast-growing businesses like Xactly fall short to that end, it should be no surprise to see shares endure a sharp pullback as a result.

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