SaaS: Omniture Grows, RightNow Profits

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 |  Includes: CTXS, OMTR, RNOW
by: Sramana Mitra

Despite the worsening recession, the SaaS sector is doing pretty well. Omniture reported growth of more than 100%, and RightNow achieved profitability. Let’s take a closer look at their results as well as those of Citrix (CTXS), not a pure play SaaS company, which explains its more shaky results. SaaS business models have immense predictability buried in them, so if they miss forecasts, it usually isn’t by that much.

On February 5, Omniture Inc. (NASDAQ: OMTR) reported Q4 and fiscal year 2008 results that missed estimates. Q4 revenue grew 93% to $83 million versus analyst estimates of $84.8 million. Net loss widened to $8.1 million or $0.11 per diluted share versus net loss of $1.8 million or $0.03 per diluted share in Q407. Non-GAAP net income was $9.2 million or $0.12 per diluted share versus analyst estimates of $0.13 per share.

For the full year, 2008 revenue grew 107% to $296 million, an amazing performance, especially in times of recession. Net loss was $44.8 million or $0.63 per diluted share, compared with a net loss of $9.4 million, or $0.18 per diluted share in 2007.

During the fourth quarter of 2008, Omniture added over 250 new customers, bringing its total to more than 5,100. The company has a large enterprise clientele of about 1,900 and averages $136,000 in revenue per customer, annually.

The deferred revenue balance has grown more than 150% to $112 million. Cash and investments at the end of the year were at $95.2 million, down from $134.7 million at the end of 2007. Operating cash flow in Q4 was $7.8 million and adjusted free cash flow after $3.5 million in capital expenditure was $4.3 million. In November, Omniture completed the acquisition of Mercado Libre’s (NASDAQ:MELI) search and merchandizing assets.

For Q1 FY09, Omniture expects revenue to be in the range of $85 to $87 million and net loss in the range of $0.11 to $0.10 per share. Non-GAAP net income is expected to be between $0.11 and $0.12 per diluted share. The Street consensus is $88.5 million and $0.13. At the time of writing, the stock was trading around $11 with a market cap around $800 million. It hit a 52-week low of $7.15 on November 21.

Chart for Omniture Inc. (<a href='http://seekingalpha.com/symbol/OMTR' title='OMNITURE, INC.'>OMTR</a>)

On February 4, RightNow Technologies (NASDAQ: RNOW) reported its results for Q4 and fiscal year 2008. Q4 revenue grew 18% to $36.1 million, and for the first time since switching to a subscription model, RightNow swung to a profit of $692,000 or $0.02 per share. In Q407, net loss was $3.3 million or $0.10 per share and last quarter, net loss was $1.4 million or $0.04 per share. Excluding charges, earnings were $2.0 million or $0.06 per share versus analyst estimate of $0.0 per share on revenue of $36.89 million.

For the full year 2008, revenue grew 25% to $140.4 million and net loss was $7.3 million or $0.22 per share. Gross margin was 67%, which is a 300-basis point improvement over Q3. Cash from operations was $3.8 million in Q4 and $14.7 million in the full year. The company ended the quarter with total cash and investments of approximately $90.8 million. It repurchased shares worth $13 million. Headcount at the end of the quarter was 737, which is up 7% y-o-y, but down 5% q-o-q. The company froze hiring in the last quarter but this will resume in the next one.

RightNow added 59 customers in the fourth quarter and more than 260 new customers for the year. Deferred revenue increased 6% q-o-q to $103.9 million compared with $97.9 million at the end of Q3. Recurring revenue was $26.5 million up from $25.9 million last quarter and $23.5 million in Q407.

For the first quarter of 2009, RightNow expects revenue in the range of $36 to $37 million versus analyst estimates of $37.9 million. Non-GAAP net income per share is expected to be in the range of $0.02 to $0.04 versus analyst estimates of $0.01 per share.

For full year 2009, RightNow expects revenue in the range of $150 to $155 million, with recurring revenue growth of approximately 10-15%. Non-GAAP EPS is expected in the range of $0.15 to $0.23. CEO Greg Gianforte put forth two primary objectives for the company: taking care of customers and growing profitability. You can read my interview with the dynamic CEO, here.

At the time of writing, RightNow was trading around $9 with a market cap around $286 million. It hit a 52-week low of $5.02 on October 24.

Chart for Rightnow Technologies Inc. (<a href='http://seekingalpha.com/symbol/RNOW' title='RightNow Technologies, Inc.'>RNOW</a>)

On January 28, Citrix Systems (NASDAQ: CTXS), the leading application delivery infrastructure company, reported mixed results for Q4 and fiscal year 2008. Q4 revenue grew 4% to $416 million, missing analyst estimates of $432.2 million. Net income was $60 million, or $0.33 per diluted share, compared with $63 million, or $0.33 per diluted share in Q407. Non-GAAP net income was $87 million, or $0.48 per diluted share beating analyst estimate of $0.47 per share.

For the full year, revenue grew 14% to $1.58 billion while net income was down to $178 million, or $0.96 per diluted share, compared with $214 million, or $1.14 per diluted share in 2007.

Deferred revenue grew 21% to $533 million. Cash flow from operations was $166 million, which is up from $113 million in Q407. Citrix repurchased shares worth about $57 million in the quarter and $346 million in 2008. It has over $850 million in cash and investments.

By region, Q4 revenue grew 3% in the Americas and 2% in EMEA, while it decreased 6% in the Pacific region. In 2008, revenue grew 9% in the Americas, 17% in EMEA and 10% in the Pacific.

In Q4, Product License revenue was down 9%, License Updates revenue grew 13%, Online Services revenue grew 18% and Technical Services revenue grew 13%. By product area, Application Virtualization declined 3% as customers delayed or reduced planned projects. Application Networking revenue grew 13% to $54 million. XenServer and XenDesktop revenue was up over 40% q-o-q to $9 million, though it missed its annual target of $25 million.

For the full year, Product License revenue grew 7%, License Updates revenue grew 15%, Online Services revenue grew 22% and Technical Services revenue grew 24%.

For the first quarter of 2009, Citrix expects total revenue to be down 5% y-o-y. Analysts are expecting a decline of 3% or revenue of $401.5 million. For the full year 2009, Citrix expects total revenue to be about $1.58 billion, flat with 2008 levels. Analysts expect $1.71 billion in revenue in 2009. Citrix also announced its plans to save about $50 million annually by reducing its headcount by 10%.

Its market cap has come down to about $4 billion, and as I have said earlier, it could be an acquisition target for bigger companies like Oracle (NYSE:ORCL), SAP (NYSE:SAP), IBM (NYSE:IBM) or even Microsoft (NASDAQ:MSFT), who is its strategic partner. At the time of writing, it was trading around $24 after hitting a 52-week low of $20.92 on October 3.

Chart for Citrix Systems, Inc. (<a href='http://seekingalpha.com/symbol/CTXS' title='Citrix Systems, Inc.'>CTXS</a>)

Disclosure: None