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More SaaS: SuccessFactors Steady, Concur Cautious

Posted on Tuesday, Feb 10th 2009

Yesterday we saw how the SaaS sector is doing well, with RightNow achieving profitability and Omniture going strong. Today, we’ll analyze the results of SuccessFactors and Concur.

Yesterday, SuccessFactors  (NASDAQ: SFSF), a leading SaaS company for performance and talent management solutions, reported strong Q4 and fiscal 2008 results that beat estimates and its own guidance.

Q4 revenue grew 72% y-o-y and 11% q-o-q to $33.0 million, beating its guidance last quarter of $31.0 to $31.5 million. Net loss per share was $0.11 and non-GAAP loss per share was $0.06. Analysts expected loss of $0.32 per share on sales of $31.37 million.

Fiscal 2008 revenue grew 77% to $111.9 million, exceeding the company’s guidance of $109.9 to $110.4 million. Net loss per share was $1.21 and non-GAAP loss per share was $1.05. Recurring revenue at the end of 2008 was $125 million with customer retention rates greater than 90%. SuccessFactors added 230 new customers in the quarter.

Non-GAAP gross margin improved to 71% from 67% last quarter and 53% last year. For the full year, cash flow was negative $12.0 million compared with negative $28.5 million in fiscal 2007. Total cash, cash equivalents and marketable securities at the end of the year were $102.4 million, up 13%. The company cut spending by 24% q-o-q to $36.3 million and reduced its headcount from 769 in Q3 to 596 at the start of Q4.

For the first time since going public last year, SuccessFactors reported positive cash flow of $0.7 million. In the earnings call, CEO Lars Dalgaard said, “We made a promise to you in November 2007 at the IPO that we would be cash profitable in two years. Today we can announce that SuccessFactors turns cash profitable in Q4 2008 in almost half the time we committed to.” For my interview with the CEO, click here.
It’s an entertaining and insightful discussion.

For Q1, SuccessFactors expects non-GAAP net loss per share of $0.10 to $0.12 versus analyst estimates of $0.30. For the fiscal year 2009, it expects revenue in the range of $145 to $146 million or about 30% growth. Non-GAAP net loss per share is expected between $0.23 and $0.27 versus analyst estimates of $1.07. The stock is currently trading around $7 with market cap of about $387 million. It hit a 52-week low of $4.61 on November 21. If you have the nerve to buy, buy the stock. I do need to point out that the doomsayers at Davos, including Black Swan Taleb have been forecasting Dow going down to 6,500. If that happens, I’m afraid, SuccessFactors being an excellent company simply doesn’t help.

Chart for SuccessFactors, Inc. (SFSF)

On February 5, Concur (NASDAQ: CNQR), the expense management software maker with annual revenue of $215.5 million, reported a strong first quarter that exceeded its guidance, but the company provided a disappointing outlook for the next quarter. My interview with CEO Steve Singh is available here. Also an excellent discussion on where that company is headed.

Q1 revenue grew 19% y-o-y and 2% q-o-q to $57.5 million, driven by 22% growth in subscription revenue that accounted for about 97% of total revenue. Net income was $5.8 million, or $0.11 per share. Non-GAAP EPS was $0.25 per share. Analysts estimated earnings of $0.13 per share on revenue of $58.4 million.

Cash flow from operations was $3.8 million, down 4% y-o-y. Concur bought back shares worth about $61 million in the first quarter. Gross margin was 69.5%, up 190 basis points from Q108, and operating margin was 20.9%, compared to 17.2% last year. Concur signed nearly 700 new customer contracts, up more than 50% y-o-y but down from 800 last quarter.

Concur has reported downward pressure on its near-term revenue growth rate. It therefore expects just 6% revenue growth, or revenue of $62.1 million, in Q209. EPS is expected to be $0.08 in Q1 and $0.48 in 2009. Due to the uncertain economic conditions, it hasn’t provided revenue guidance for 2009. The company expects cash flows from operations in fiscal year 2009 to be between $64 and $68 million, and capital expenditure of approximately $21 million. Analysts are expecting Q2 revenue of $64.3 million and EPS of $0.17. For the year, analysts expect EPS of $0.90. The stock is currently trading around $23 with market cap of about $1 billion. It hit a 52-week low of $19.52 on November 20.

Even with the uncertainty, the company has grown well. Its management has the experience of having weathered one recession, and will likely be able to steer well in this storm.

Chart for Concur Technologies, Inc. (CNQR)

This segment is a part in the series : More SaaS


. Concur, Taleo, RightNow
. SuccessFactors Steady, Concur Cautious

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