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SaaS Companies Growing Nicely

Posted on Tuesday, Dec 18th 2007

I had earlier covered Omniture, Concur, Right Now, Taleo, and Citrix as part of the Enterprise 3.0 series. Let us now look at how they have fared since then.

On October 30, Omniture, Inc. (NASDAQ: OMTR) (previous coverage here) reported its financial results for Q3 2007. Revenue was $37.4 million, up 78% y-o-y and 12% sequentially. GAAP net loss was $1.1 million or $0.02 per diluted share, compared to a net loss of $1.3 million, or $0.03 per diluted share, in Q3 2006. Its total customers increased by 240 to nearly 2,700.

For Q4 FY 2007, Omniture expects revenue to be between $40.6 million and $41.6 million and GAAP net loss between $0.02 and $0.01 per diluted share. For the full fiscal year 2007, GAAP revenue is expected to be between $140 million and $141 million and GAAP net loss between $0.18 and $0.17 per diluted share

In October, Omniture acquired Visual Sciences, a leading provider of real-time analytics applications for $394 million. Earlier in September, it acquired Offermatica, a leading on-demand A/B testing and multivariate testing company for $65 million. Its stock is currently trading around $30 after hitting a 52-week high of $38.57 on October 26. Market cap is around $1.8 billion.

Omniture Inc. (OMTR)

On November 19, Concur (Nasdaq: CNQR), reported its financial results for Q4 2007. Earlier posts are available here, here, and my interview with CEO Steve Singh is here. Total revenue for Q4 was $35.7 million (up 30% y-o-y and 7% q-o-q), driven by 37% y-o-y increase in subscription revenue. Net income was $4.1 million, or $0.10 per share, compared to net income of $1.0 million, or $0.03 per share, in Q4 2006.

For fiscal 2007, total revenue was $129.1 million, up 33%. Net income was $8.2 million, or $0.20 per share, compared to $ 34.2 million, or $0.87 per share for fiscal 2006.
For 2008, Concur expects revenue to be $200 million and pro forma EPS to be $0.70 per share.

Concur launched its Concur Travel and Expense with Smart Expense in October. During the quarter, it won a global contract with Merrill Lynch for its Travel Expense and Vendor Payment services.

Concur completed its acquisition of H-G Holdings, Inc. and its subsidiaries, including Gelco Information Network, Inc., on October 1, 2007. To fund this acquisition, it offered 5,405,000 shares of common stock to the public at $28.50 per share. Its stock is currently trading around $35 after hitting a 52-week high of $38.5 on December 10. Market cap is around $1.5 billion.

Concur Technologies, Inc. (CNQR)

On October 24, RightNow Technologies, Inc. (NASDAQ:RNOW) (previous coverage here) announced financial results for Q3 2007. Revenue was $29.2 million, down 3% y-o-y, reflecting the impact of its business model shifting away from perpetual licenses in 2007. Recurring revenue grew 31% y-o-y. Net loss was $3.6 million or $0.11 per share, compared to a net loss of $0.5 million or $0.02 per share in Q3 2006.

For Q4 2007, RightNow expects revenue to be about $29.5 million and net loss per share is expected to be between $0.10 and $0.11.
For the full fiscal year, revenue is expected to be about $111 million and net loss per share between $0.56 and $0.57. Its stock is currently trading around $15 after hitting a 52-week high of $23.38 on October 26. Market cap is around $511 million.

Rightnow Technologies Inc. (RNOW)

On November 1, Taleo Corporation (NASDAQ: TLEO) (previous coverage here) reported its financial results for Q3 2007. Revenues was $33.7 million, up 36% y-o-y and 9% q-o-q, driven by a record 35% y-o-y increase in application revenue and a 37% y-o-y increase in services revenue. GAAP net income was $2.2 million, or $0.08 per diluted share, compared to GAAP net loss of $(0.8) million or $(0.04) per diluted share in Q3 2006. Its total customers increased to over 1,380 customers with more than one million application users.

In October, Taleo acquired WetFeet Inc.’s web-based recruiting product, WetFeet Recruiter, an applicant tracking system. It has recently announced a strategic alliance with Paychex (a company that I think ought to roll-up the category) for marketing its online recruiting and hiring management tool, Taleo Business EditionTM. Its stock is currently trading around $29 after hitting a 52-week high of $32.41 on November 2. Market cap is around $750 million.

Taleo Corp. (TLEO)

On October 18, Citrix (NASDAQ: CTXS) reported its financial results for Q3 2007. Earlier posts are available here and here. Revenue was $350 million, up 26% y-o-y. Net was $61 million, or 33 cents a share, up from $44 million, or 23 cents a share in Q3 2006. Adjusted EPS was $0.41, up 21% y-o-y.

Segment-wise, App Virtualization products Group revenue was $243 million grew 17% y-o-y to in revenue. Application Networking Business group grew 55% y-o-y to revenue of $46 million. Citrix online had revenue of more than $55 million, up 43% y-o-y, led by growth in GoToMeeting and GoToWebinar real time App collaboration solutions that had more than 90% y-o-y revenue growth.

For Q4, Citrix expects revenue between $374 million and $382 million, including $58 to $60 million from online services. Adjusted EPS is estimated to be between $0.42 and $0.43. For the full fiscal year 2007, total revenue is expected to between $1.36 billion and $1.37 billion and adjusted EPS between $1.52 and $1.53 per share. In 2008, Citrix is planning to expand outside North America.

In October, Citrix acquired XenSource, a leader in enterprise-grade virtual infrastructure solutions for $500 million in the midst of the VMW IPO frenzy.

In November, Citrix entered into a partnership with Dell to offer Citrix XenServer OEM Edition across Dell’s PowerEdge server line, bringing server virtualization technology to millions of Dell customers. Its stock is currently trading around $37 after hitting a 52-week high of $43.90 in early November. Market cap is around $7 billion.

Citrix Systems, Inc. (CTXS)

In summary, most of the category is trading below the 52-week highs right now, and market is somewhat soft at the moment. If you are looking for things to buy, SaaS is a great category to load up on. I am pretty sure that the growth in these companies will continue over the next 3-5 years. What’s more, we should see some very interesting M&A activity in 2008.

ps. I am somewhat surprised that Internet funds like Munder Internet Average (MNNAX) have not realized that instead of eBay, they should be stocking up on the SaaS companies. It goes to show how little imagination or insight some of the fund managers have!

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Great post, Sramana and thanks for the props on the good tech blogs.

I agree with you totally on this post. When consolidation occurs, do you assume it will come from without the SaaS industry? More traditional players?

Zack Miller Wednesday, December 19, 2007 at 7:29 AM PT

Well, as I have said before, the consolidators could be Paychex, Citrix, SAP, IBM, Salesforce.com. Oracle has so far said they don’t want to be in SaaS.

Sramana

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