Managing Director and Senior Equity Research Analyst at BMO Capital Markets
Keith Bachman is a Managing Director and Senior Equity Research Analyst at BMO Capital Markets, specializing in technology coverage, primarily focusing on major firms such as Apple, MongoDB, Dynatrace, and N-able. He has documented over 1,700 price targets on 49 technology and basic materials stocks, maintaining a notable 67.77% success rate and generating an average return of 17.63% per recommendation. Bachman's career spans several prominent roles, including leadership positions at OppenheimerFunds, Stone Tower Fund Management, DWS Investment Management Americas, and abrdn, before joining BMO, and he holds an undergraduate degree from the University of Maryland and an MBA from Columbia Business School, alongside industry-standard securities licenses. Bachman regularly receives recognition for his performance, ranking among the top 150 analysts on major research platforms such as TipRanks and StockAnalysis.
Keith Bachman asked about the application segment's potential contribution to net new ARR and customer growth expectations.
CFO Brian Carolan stated SailPoint Accelerated Application Management will contribute to NRR over time and emphasized the quality and size of customer lands.
Keith Bachman from BMO Capital Markets asked for a 2-3 year outlook on the Marketing Hub's evolution with agentic AI, questioning how the product and payment models (seats vs. consumption) might change.
CTO Dharmesh Shah described an emerging 'AI operating system' where HubSpot connects to frontier models like ChatGPT, allowing users to query HubSpot data within those apps and take action back in the HubSpot platform. CEO Yamini Rangan added that content is more critical than ever and Marketing Hub will help customers create and distribute it across diverse channels beyond search. She reiterated that the pricing model will be a balance of seats for productivity and credits for work done by agents.
Keith Bachman from BMO Capital Markets asked how agentic technology will change the Marketing Hub in the coming years and how the mix of what customers pay for (seats vs. consumption) will evolve.
CTO Dharmesh Shah described an emerging 'AI operating system' where users interact with frontier models like ChatGPT, and HubSpot provides value via connectors, allowing actions to be taken within the HubSpot platform. CEO Yamini Rangan added that content matters more than ever, and Marketing Hub will help customers diversify content across social, podcasts, and LLM answers. She reiterated that the pricing model will be a balance: seats will grow by providing productivity value, while credits will grow by having agents perform work, opening up significant future opportunity.
Keith Bachman asked for HubSpot's long-term philosophical view on how consumption-based pricing will contribute to its revenue growth algorithm over the next few years.
CFO Kathryn Bueker reiterated that the new credit-based AI pricing will not have a material impact on 2025 revenue. However, she expressed excitement about the medium to long-term opportunity for consumption models to drive top-line growth. She emphasized that the future of AI monetization will be a mix of traditional seats and consumption-based credits, but noted it is still too early to quantify how that balance will play out over time.
Keith Bachman asked about seat growth versus customer growth and how to model Average Subscription Revenue Per Customer (ASRPC), specifically whether its negative growth will continue or if it will begin to grow after anniversarying the pricing model changes.
CFO Kathryn Bueker explained that the seat-based pricing model was designed to lower the entry barrier and have customers grow over time. She highlighted that early cohorts on the new model are showing higher upgrade rates and higher net revenue retention, meaning seat growth is faster than overall growth for those cohorts. While a specific data point wasn't shared, this trend supports the model's core assumption.
Keith Bachman asked about the competitive landscape, particularly regarding market consolidation versus open-source solutions, and sought clarity on the unchanged full-year free cash flow guidance despite a strong Q1.
CEO Rick McConnell stated there has been no substantial change in the competitive environment and little to no observed leakage to open source. CFO Jim Benson explained that the free cash flow guidance was maintained because while Q1 is seasonally strong, foreign exchange rates create a headwind on the company's euro-heavy expense base.
Keith Bachman asked about the expected DPS uptake rate for the next fiscal year and how Dynatrace thinks about portfolio expansion to drive adoption, especially relative to competitors with broader offerings.
CFO James Benson provided a long-term goal of 75-85% of customers on DPS. CEO Rick McConnell addressed portfolio expansion by stating the company is focused on driving both depth in existing products and breadth into new areas, citing the recent acquisition of Medis for database observability as an example of expanding the platform.
Keith Bachman questioned the implied Q4 net new ARR guidance, which appeared to be down year-over-year, and sought clarification on whether the fiscal 2026 cash tax changes would be a net positive or negative.
CFO Jim Benson attributed the prudent Q4 ARR guidance to a sales funnel heavily weighted toward large, strategic deals, which increases variability in close timing. He framed this trend as a long-term positive. Regarding taxes, Benson confirmed the recent IP transfer to a Swiss subsidiary will be a tailwind, resulting in lower cash taxes for the company in fiscal 2026.
Keith Bachman from BMO Capital Markets asked about the full-year bookings outlook, the book-to-bill ratio needed to achieve flat revenue growth in fiscal 2027, and potential changes in backlog duration.
CFO Rob Del Bene, while not providing guidance, noted healthy full-year pipelines and estimated a sustained trailing twelve-month book-to-bill of 1.05 to 1.1 is needed for growth. President & CEO Raul Fernandez added that new proactive solutioning will supplement the pipeline. Del Bene also explained that backlog duration depends on the mix of short-term projects versus longer strategic deals.
Keith Bachman asked about the necessary conditions for DXC to return to revenue growth and the potential timing. He also questioned if DXC is losing market share and sought details on the Carnival Cruise Line win, specifically the role of pricing.
CEO Raul Fernandez stated that returning to growth depends on scaling the execution of a higher-quality sales pipeline, noting the foundational rebuild is now in place. He asserted that DXC has ample market opportunity and is not constrained by market contraction. Regarding the Carnival deal, he emphasized it was won against 12 competitors based on superior capability and being a proven partner, not on price, and the key is to replicate that winning motion.
Keith Bachman asked about the potential for further asset dispositions and the stability of the senior leadership team, also seeking clarity on the margin benefit from an equity-related gain.
CFO Rob Del Bene confirmed that DXC is actively pursuing more dispositions beyond the $150 million generated year-to-date and clarified the margin gain was from reversing equity accruals for departed executives. CEO Raul Fernandez expressed high satisfaction with the new, experienced leadership team he has brought in, stating they are having a terrific impact.
Keith Bachman of BMO Capital Markets questioned the ongoing impact of discounting on subscription growth, noting the line item's performance was disappointing and that investors view it as a key indicator of future health.
CFO Roei Golan acknowledged that discounting headwinds from bundled refresh deals will likely continue for the next four quarters. However, he expects this to be offset by tailwinds from faster-growing services like Email and SASE, which should lead to a slight acceleration in the overall subscription growth rate.
Keith Bachman requested a comprehensive update on the company's SASE solution, including product enhancements, go-to-market activities, and potential success metrics for the end of the year.
CEO Nadav Zafrir outlined the product focus on achieving feature parity and scaling for large enterprises. The go-to-market strategy centers on showcasing successful deployments. He noted that success will be measured by customer feedback on user experience and SASE's contribution to broader Infinity Platform sales, confirming it is a high-investment priority.
Keith Bachman of BMO Capital Markets asked about the outlook for headcount trends through the year, given the flat growth in Q1. He also questioned if the delivery model might shift towards more success-based or fixed-price contracts due to AI capabilities.
CFO Jayesh Sanghrajka stated that future volume growth would require additional headcount as utilization is already high. He believes that while new pricing models like outcome-based contracts are emerging with AI, a fundamental shift in the overall delivery model is unlikely in the short term and would be a gradual change over a longer period.
Keith Bachman from BMO Capital Markets probed how AI is changing pricing discussions and contract structures, particularly how significant efficiency gains of 20-40% are shared with customers, and which service lines are most impacted by AI in delivery.
CEO Salil Parekh explained that discussions around AI-driven efficiency gains are at the forefront with clients, especially in areas like customer service. He noted these gains are typically shared as part of broader transformation and consolidation deals, rather than as a simple revenue reduction on existing contracts. He emphasized that AI also creates new revenue opportunities, leading to a positive composite effect on the business.
Keith Bachman asked for the expected inorganic contribution embedded in the full-year guidance and sought perspective on the durability of the recent increase in the pipeline for smaller deals.
CFO Jayesh Sanghrajka clarified that the impact of acquisitions was fully baked into the previous guidance and the current revision contains no incremental change from M&A. He noted the Q2 benefit was 80 basis points. CEO Salil Parekh commented that while the increase in the sub-$50 million deal pipeline is a relevant data point to share, it is too early to determine if this trend is durable.
Keith Bachman from BMO Capital Markets asked for commentary on the sustainability of the subscription net retention rate (NRR), particularly how it might evolve given the expansion of the product portfolio with offerings like identity.
Chief Financial Officer Kiran Choudary stated the company was pleased with its NRR remaining above 120%. She noted that while the platform model lends itself to a high NRR, the rate is expected to moderate over time. This is partly because the benefit from the maintenance-to-subscription model transition has normalized and because new customers may land with larger, multi-product deals, which can be a headwind to the NRR calculation. However, she affirmed that the NRR is expected to remain strong.
Keith Bachman asked for context on why the fiscal 2026 guidance for net new subscription ARR is lower than the amount achieved in fiscal 2025, despite strong business momentum.
CFO Kiran Choudary provided two key reasons. First, he noted that fiscal 2025 ARR growth benefited by approximately two percentage points from the maintenance-to-subscription transition, which had an outsized impact on net new ARR. Second, he stated that as this is the company's first annual guidance as a public entity, they are being thoughtful and setting a target they feel confident in achieving.
Keith Bachman asked for clarification on how the anniversary of the prior year's CCP program would impact the ARR opportunity in the second half of the current fiscal year.
CFO Burt Podbere explained that as customers consume their credits from initial Flex deals, many of which originated from the CCP program, they are expected to "reflex" and make new purchases. This repurchase activity directly contributes to net new ARR, underpinning the company's confidence in back-half acceleration. He also highlighted a ~95% module retention rate as a key indicator of customer commitment.
Keith Bachman from BMO Capital Markets questioned why Okta is positioned to win in the non-human identity (NHI) market against established security players like CyberArk and SailPoint, especially as governance appears to be a critical component.
CEO Todd McKinnon argued that Okta currently has the most complete solution, with a breadth of products spanning detection, vaulting, and governance for NHIs. While acknowledging this is just the 'entry to the race,' he emphasized that Okta's trusted brand gives it the right to play and define the market, but continued execution and innovation will be key to winning long-term.
Keith Bachman asked about the directional trend for the 107% net retention rate through fiscal '26, considering potential upside from governance upsells and anniversarying headwinds.
CFO Brett Tighe stated that for the balance of FY'26, their model suggests the net retention rate will remain roughly in the current range, potentially moving plus or minus a point depending on the mix of new business versus upsell deals.
Keith Bachman posed a broader question about the strategy to simultaneously execute on client diversification and revenue acceleration while also improving margins, given current market pressures.
Executive Jason Macdonnell positioned the current year as an 'investment year,' where targeted investments in growth areas are funded by disciplined reductions in indirect costs. Executive Tobias Dengel added that margin defense comes from offering differentiated services through partnerships and new offerings like AI-first development. CFO Gopi Chande highlighted creating 'win-win' scenarios with clients through geographic optimization and outcome-based pricing, using TELUS as a test case to improve efficiency and margins.
Keith Bachman asked about the company's evolving M&A strategy and the specific metric that triggered a performance payment adjustment for the Willow Tree acquisition.
President and CEO Jeffrey Puritt confirmed they have 'tapped the brakes' on large M&A to focus on organic growth, with future activity likely limited to opportunistic tuck-ins. CFO Gopi Chande clarified that there was no payment, but rather a downward true-up of the earnout provision. This adjustment was driven by a lower performance forecast and a renegotiation of the earnout agreement, which is now based on the combined success of Willow Tree and TELUS Digital.
Keith Bachman asked for the specific impact of foreign exchange on the revenue guidance, clarification on whether deal scrutiny was impacting the sales pipeline, and a review of long-term EBITDA margin expectations, particularly for 2026.
EVP and CFO Tim O'Brien confirmed the revenue guide increase was primarily due to FX, as the constant currency outlook was maintained. He stated that for 2026, he expects EBITDA margins to return to the low 30s. President and CEO John Pagliuca added that while there are anecdotes of deal scrutiny, N-able's own bookings and pipeline remain strong and are not showing material changes.
Keith Bachman questioned the underlying organic growth rate for 2025, suggesting it appears to be in the low-to-mid single digits after adjusting for M&A and accounting factors, and asked for commentary on gross and net retention rate trends.
President and CEO John Pagliuca attributed the moderated growth outlook to headwinds from the long-term contract initiative in the first half of the year and a prudent approach to forecasting the recently acquired Adlumin business. EVP and CFO Tim O'Brien clarified that the pro forma ARR growth exiting 2024 was 7%, and the 2025 guide of 7-9% implies acceleration. He also projected that both gross and net retention would bottom in Q1 2025 and improve thereafter.
Keith Bachman asked about spending sensitivities, questioning if deal elongation is affecting subscriptions differently than hardware and if there's a risk of hardware refreshes crowding out spending on SASE or SecOps.
Founder, Chairman, and CEO Ken Xie acknowledged that infrastructure spending can slow in uncertain economies but views it as an opportunity to gain market share due to Fortinet's strong competitive position. COO John Whittle highlighted the company's history of growing through downturns, and CAO Christiane Ohlgart noted the hybrid customer environment is a key opportunity for their unified OS.
Keith Bachman asked about the SASE customer mix, specifically what it would look like for large enterprises if SD-WAN was excluded. He also inquired about the business outlook for Europe.
CFO Keith Jensen clarified that without SD-WAN, the SASE customer mix would be even more tilted towards larger enterprises by dollar value. Regarding Europe, he noted that EMEA was the top-performing geography in the quarter. While acknowledging economic pressures, he stated they are not expecting an outsized performance from Europe in Q4 but will monitor its progress.
Keith Bachman asked if the Q4 guidance was adjusted to be more conservative due to macro factors. He also questioned how investors should model the impact of the new 'Teamwork Collection' bundle, given its significant discount compared to individual product pricing.
CFO Joe Binz responded that the Q4 guidance approach is unchanged, consistently accounting for macro uncertainty and execution risk. He clarified that the Teamwork Collection is a long-term strategic play to drive attach and upsell, with limited impact on FY'26. CEO Mike Cannon-Brookes added that the collection simplifies purchasing, which historically drives long-term growth and stickiness.
Keith Bachman asked about Atlassian's strategy to increase revenue from large enterprise accounts, questioning the growth trajectory of the sales team and which product areas, like JSM or Jira, offer the most significant expansion opportunities.
CEO Mike Cannon-Brookes explained that growth is broad-based across the platform, not concentrated in a single product. He highlighted Jira's expansion into business teams and the large number of untapped seats within existing enterprise customers. Cannon-Brookes emphasized that the go-to-market motion is successfully converting initial team landings into larger, strategic relationships, evidenced by a record number of deals exceeding $1 million in Q2.
Keith Bachman asked for an update on Jira Service Management (JSM), focusing on competitive dynamics, win rates, and how AI is changing the landscape, particularly in relation to competitors like ServiceNow.
CEO Mike Cannon-Brookes reported that JSM continues to grow strongly, driven by a superior price-to-value ratio compared to legacy vendors. He highlighted expansion in both DevOps and broader employee service management (HR, finance). He asserted that Atlassian's AI capabilities, including virtual service agents and alert processing, are industry-leading and provide a significant competitive advantage, a position he said is recognized by industry analysts like Forrester.
Keith Bachman of Bank of Montreal sought clarification on the 30% public sector growth metric and how the outlook for this sector is reflected in the full-year guidance, given the potential for deal elongations.
President and CFO Gina Mastantuono clarified the 30% growth was in net new ACV for the quarter and stated that while the team exceeded expectations, the full-year guidance incorporates conservatism for potential short-term headwinds in the federal space. Chairman and CEO Bill McDermott emphasized the massive long-term opportunity to consolidate legacy government systems onto the ServiceNow platform.
Keith Bachman of BMO Capital Markets asked about the potential revenue uplift from Business Data Cloud, the risk of it cannibalizing other SAP spend, and its margin profile given the Databricks partnership.
CEO Christian Klein asserted that Business Data Cloud is additive and will not replace other assets. He explained that while the underlying Databricks partnership has an acceptable margin, the premium margin will be driven by SAP's proprietary semantic data products. He declined to give a specific uplift percentage but confirmed the pipeline and deal multiples look healthy.
Keith Bachman asked if GenAI is altering the economic relationship with customers and inquired about the durable growth outlook for Accenture Song, given AI-driven efficiencies in creative work.
CEO Julie T. Sweet explained that the economic model for GenAI is consistent with past technology shifts, where managed services contracts already assume efficiency gains. For Accenture Song, which grew double-digits, she stated its durability comes from helping clients build the foundational data and reinvent processes required to leverage AI, positioning it at the core of their growth agenda.
Keith Bachman asked about pricing dynamics in the current competitive market, particularly for legacy services like application management and BPO. He also inquired if management has observed any recent softening in the European market and how that affects their demand outlook for the region.
CEO Julie T. Sweet acknowledged that it is a very competitive market and that they have seen lower pricing, which is consistent with a constrained spending environment. However, she emphasized that Accenture's Application Managed Services (AMS) is not 'legacy' but a modern offering that helps clients modernize and rotate to new technologies. Regarding Europe, Sweet stated that while the region is in a more challenging environment, their view of European demand is fully baked into the raised full-year guidance, and they feel good about their position there.
Keith Bachman sought clarification on M&A, questioning why the inorganic revenue contribution for fiscal 2025 is projected at just over 3% despite significant spending in fiscal 2024. He also asked about the outlook for the book-to-bill ratio and if M&A contributed to Q4 bookings.
Incoming CFO Angie Park and CEO Julie T. Sweet explained that the inorganic contribution is a function of deal timing, as many fiscal 2024 acquisitions closed late in the year. Park reiterated the long-term book-to-bill targets of 1.0+ for consulting and 1.2+ for managed services. Sweet confirmed there was no material M&A impact on Q4 bookings.
Keith Bachman asked for a high-level view on how AI alters Zscaler's competitive position and how the company plans to capture the AI opportunity, whether through new products or by enhancing existing ones.
CEO Jay Chaudhry stated that Zscaler's competitive advantage in AI stems from its massive proprietary dataset of over 400 billion daily transactions. This data powers new AI-driven products built on the Avalor data fabric and enhances existing solutions like ZDX. Furthermore, Zscaler is creating new security solutions specifically for AI, such as an LLM proxy to prevent data leakage, turning the AI trend into a multi-faceted growth opportunity.
Keith Bachman asked about the durability of Document Cloud's strong 23% ARR growth and its key drivers. He also followed up on whether consumption-based models would be a meaningful contributor to ARR growth in FY25.
David Wadhwani, President of Digital Media, attributed Document Cloud's durable growth to PDF's ubiquity, strong MAU growth, and the significant value-add from the new AI Assistant. Shantanu Narayen, Chair and CEO, added that consumption will contribute to ARR in FY25 through a new video offering, enterprise Firefly Services, and premium-priced tiers that include higher usage limits, rather than a pure pay-per-use model for most customers.
Keith Bachman inquired if consumption-based AI monetization could contribute to ARR growth in FY25, given competitive pressures. He also followed up on the Q4 net new ARR guidance being down year-over-year.
CEO Shantanu Narayen and President of Digital Media David Wadhwani answered. Narayen emphasized Adobe's unique differentiation through the combination of apps and models, the strong start for Firefly Services (a consumption model), and the importance of commercial safety. Regarding the Q4 guide, Narayen noted they are on track for record net new ARR in FY24 and pointed out that Cyber Monday falls in Q1 this fiscal year, which impacts the Q4 comparison.
Keith Bachman questioned the contributing factors for the dollar-based net retention rate declining to a guided 116-117% despite a stabilizing macro and improving product portfolio. He also asked for more specific details on the ratio of free-to-paid users in the installed base.
Pete Godbole explained the NRR decline is primarily due to continued pressure on net expansions, particularly in the transactional business, which has not recovered. Mark Mader stated that the majority of platform users are free collaborators, representing a huge conversion opportunity. He explained that the strategy is to now offer significant value reserved for paid users, but the financial impact of this shift is an FY '25 opportunity.
Asked for clarification on what 'transformative' means for the next fiscal year and how shareholders will see it, and posed a philosophical question about the pros and cons of selling the company at this time.
A 'transformative' year refers to the convergence of maturity in their business model, go-to-market motion, and product offerings, which will manifest in improved growth, profitability, cash flow, and customer satisfaction. The company declined to comment on the philosophical question about selling the company, stating it was too similar to the earlier question about acquisition rumors.