Last week, I reviewed the performance of some SaaS companies, namely SuccessFactors, RightNow, Omniture and Citrix in the context of the recession. As I have discussed before on this blog and in my Forbes column, I believe SaaS companies will be able to withstand a prolonged downturn. In this post, I look at how Taleo, Concur and NetSuite have fared recently.
On November 11, Concur (Nasdaq: CNQR), the expense management software maker, reported Q4 and fiscal year 2008 results that beat analyst estimates. My interview with CEO Steve Singh is here.
For fiscal 2008, revenue was $215.5 million, up 67% and net income was $17.2 million, or $0.35 per share, versus $8.2 million, or $0.20 per share in 2007. Non-GAAP operating margin was 19% for fiscal 2008, up from 17% in fiscal 2007.
Q4 revenue grew 61% y-o-y and 5% q-o-q to $57.5 million, driven by 72% growth in subscription revenue. Net income grew 36% to $5.6 million, or $0.11 per share. Non GAAP EPS was $0.24 per share beating analyst and company estimates.
Q4 cash flow from operations was $22.7 million, up 222% from Q4 2007. Subsequent to quarter end, Concur bought back shares for about $43 million. Deferred revenue was $1.113 million. Non-GAAP operating margin was 20%, up from 18% last year, and down from 21% last quarter. The company signed more than 800 new customer contracts in the quarter. It also increased its investments in the EU and Asia Pacific markets to support sales initiatives.
For the first quarter of fiscal 2009, Concur expects total revenue of $58 million. For fiscal 2009, it expects revenue to grow 25% to $269 million versus analyst estimates of $264.4 million. EPS is expected to be $0.08 in Q109 and $0.48 in 2009. Non-GAAP EPS is expected to be $0.20 in Q1 and $1.11 in 2009.
Most of the financial companies that have recently either filed for bankruptcy, been bought out or come under control of the US government, such as Merrill Lynch, Washington Mutual, Wachovia, Lehman Brothers, AIG and Bear Stearns, are Concur’s customers. As these companies lay off employees, Concur is bound to be affected, but it sees strong demand for its services in the tough economy from other companies.
Concur plans to increase its customer base from 8,000 to more than 50,000 by the next decade; the company’s American Express distribution partnership should help it reach this target. It also plans to introduce new services like Concur Travel, Concur Pay and Concur Analytics. It is currently trading around $25 with a market cap of about $1.2 billion. The stock hit a 52-week low of $19.81 on November 11.
On November 3, NetSuite Inc. (NYSE: N) reported third quarter results in-line with Street estimates. Its outlook, however, was disappointing.
Q3 revenue grew 44% y-o-y and 11% q-o-q to $40.4 million. Net loss was $6.2 million, or $0.10 per share, compared with a loss of $1.8 million, or $0.21 per share in Q307. Non-GAAP net loss was $1.7 million or $0.03 per share.
Overall gross margin was 69%, down from 70% in Q208 partly due to new recruits in the company’s professional services training organizations. Cash flow from operations was negative $3.4 million versus negative $1.8 million for Q208. NetSuite ended the quarter with $133 million in cash.
Short-term deferred revenue grew to $64.2 million versus $56.0 million last year. Total long-term deferred revenue decreased by about 9% to $8.5 million due to the shift from multi-year to one-year contracts. NetSuite expects its long-term deferred revenue balances to continue to decline. It added 330 new customers in the quarter. Revenue from the Americas was $33.2 million, while international revenue was $7.2 million, or 18% of total revenue.
The company’s $26 million OpenAir acquisition is doing well, with ASP for its products rising. NetSuite also launched its enterprise application, NetSuite SRP, which incorporates OpenAir’s products. It also announced a new standalone OpenAir product line for small to large project-based businesses.
On November 11, NetSuite and HP (HPQ) announced they were collaborating to offer SaaS business applications to SMBs via HP’s channel community of 15,000 value added resellers in the US. NetSuite is getting more competitive with offers like RenewForce, which targets SalesForce.com customers by giving them a 50% discount for switching to NetSuite CRM.
For Q4 2008, NetSuite expects revenue in the range of $41 million to $42 million and non-GAAP net loss in the range of $900,000 to $300,000 or $0.01 to $0.00 per share. Analysts had been expecting $45.3 million revenue and loss of $0.01 per share. The stock is currently trading around $8 with a market cap of about $500 million. NetSuite’s 2007 annual revenue was $108.5 million. It hit a 52-week low of $7.5 on October 24. Compare this with its opening price of $26 in December of last year to get a feel for the battering these stocks have gone through.
On November 3, Taleo (NASDAQ: TLEO), the talent management leader with 2007 annual revenue of $128 million, reported a strong third quarter that beat estimates. Though its shares gained on the earnings release, they plunged yesterday after its 10-Q report was delayed due to re-evaluation of timing of revenue recognition. My interview with CEO Michael Gregoire is available here.
Revenue grew 39% to $46.8 million. Application revenue grew 36% y-o-y and 21% q-o-q to $37.4 million. Net loss was $8.2 million or $0.28 per share versus net income of $2.2 million or $0.08 per share last year, mainly due to restructuring charges and amortization expense related to the Vurv acquisition, which was completed on July 1. Non-GAAP net income was $5.6 million or $0.17 per share and non-GAAP revenue was $50.6 million versus Street earnings estimates of $0.15 on revenue of $49.6 million.
Taleo signed more than 230 new customers in the quarter, including 22 new Enterprise Edition customers and 210 new Business Edition customers. Including the customers from Vurv, its customer base is now over 3,800 with more than 2.6 million users.
Taleo achieved its 2008 target of the number of Taleo Performance customers a full quarter ahead of plan. It believes its solutions will be more relevant than ever in the tough economy when most companies are looking to reorganize or optimize their businesses. The stock is currently trading around $8 with a market cap of about $248 million. It hit a 52-week low of $6.05 on November 11 after the delay in the 10-Q report.
To summarize, I’d say I like Concur the most among these because of its particular competitive dynamics. The expense management space is somewhat less competitive than the ERP or the talent management space. Netsuite faces competition from Intacct, Everest, Oracle, etc. and Taleo faces competition from SuccessFactors, Kenexa and other private companies. Also, the extreme pressure that corporate America will be feeling in 2009 and 2010 to keep costs under control gives Concur the perfect message to sell with.