SciQuest's CEO Discusses Q4 2013 Results - Earnings Call Transcript

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 |  About: SciQuest, Inc. (SQI)
by: SA Transcripts

Operator

Greetings and welcome to the SciQuest's Fourth Quarter and Full Year 2013 Financial Results Conference Call. At this time, all participants are in a listen-only mode. All lines have been placed on mute to prevent background noise. After the company's prepared remarks, there will be a question-and-answer session. (Operator Instructions) As a reminder this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Jamie Andelman, SciQuest's Head of Investor Relations. Thank you, Mr. Andelman, you may begin.

Jamie Andelman

Thank you, Manny, and good afternoon, everyone. Thank you for joining us to review SciQuest's fourth quarter and full year 2013 results.

Hosting today's call are Stephen Wiehe, SciQuest's Chief Executive Officer; and Rudy Howard, our Chief Financial Officer. On today's call Steve and Rudy will deliver prepared remarks, after which we will hold a question-and-answer session.

During this call we may make comments related to our business that are considered forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as, but not limited to, accelerates, anticipates, believes, could, seeks, estimates, expects, intends, may, plans, potential, predicts, projects, should, will, would or similar expressions and the negatives of those terms will identify forward-looking statements.

These statements reflect our views only as of today and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. Certain of these risks, uncertainties and other important factors that could affect our actual results are described in the Risk Factors section of our most recent annual report on Form 10-K and other reports filed with the SEC. These filings are available free of charge on the EDGAR system at sec.gov and in the Investor Relations section of our website, sciquest.com.

SciQuest expressly disclaims any obligations or undertakings to publicly release any updates or revisions to any forward-looking statements made herein except as required by law. Therefore, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

Additionally we will be discussing non-GAAP financial measures during this conference call. When possible, SciQuest provides all information required in accordance with GAAP, but believes evaluating its ongoing operating results may not be as useful if an investor is limited to reviewing only GAAP financial measures.

Please see today's press release, which has been included in a filing on Form 8-K and is available on our website and on the EDGAR system, for reconciliations of the non-GAAP financial measures for which we will be able to provide the most directly comparable GAAP financial measures.

Lastly, please note that a streaming replay of today's call will be available in the Investor Relations section of our website shortly after we conclude.

And now, I'd like to turn the call over to Steve.

Stephen J. Wiehe

Thanks Jamie. And welcome to everyone joining us on today's call. 2013 was a great year during which we achieved a number of successes including generating strong financial results, achieving all of our 2013 strategic priorities, which were adding new customers, accelerating cross sales, enhancing and expanding our solution and increasing our margins and our fourth quarter was our best bookings quarter ever, which was a direct result of the investment we made in our sales team during the year.

In 2013 we expanded the sales team by more than 40%, laid the foundation for improved efficiencies and effectiveness and bolstered our sales leadership. To help frame our success in 2013, we need to compare our company today with how our company looked not so long ago.

In 2013 -- in 2010, excuse me, when we held our initial public offering, we were a company generating approximately $10 million of quarterly revenue. We had a narrow solution set in an addressable market of approximately $1 million. Over the intervening three years we have made tremendous progress. We more than doubled revenue, dramatically expanded the breadth and depth of our software suite and we have quadrupled our addressable market.

This momentum and success continues to support our plans for achieving our long-term targets of 20% top line growth concurrent with 20% profitability. Since arriving in late May, Doug Keister, our new head of sales has done a great job transforming the team and the results are evident in our fourth quarter record breaking performance.

He oversaw the acceleration of sales hiring and the team is beginning to implement the process changes that Doug has brought from other large successful companies that will enable us to operate the large organization more effectively. He's also changed the structure of the Group giving greater focus to critical areas such as channel partnerships and sales leadership.

Non-GAAP revenue in the fourth quarter was $26.7 million as we crossed the $100 million annual revenue rate marker for the first time. Excluding the additional revenue generated by a settlement fees from our former customer that Rudy will discuss, non-GAAP revenue was $26.2 million, a growth of 26% compared to the fourth quarter of 2012. This was above the high end of our guidance range of $25.3 million to $25.6 million.

We're particularly encouraged by the strong performance within the commercial market, which complemented the growth that we achieved in other market segments. It's important to note that in the fourth quarter, commercial accounts accounted for 41% of non-GAAP revenue. This I believe clearly demonstrates the level of success we're seeing in the commercial market. Full year non-GAAP revenue was $93.6 million. Excluding the additional revenue generated by the settlement fee non-GAAP revenue was $93.1 million, up 37% from 2012 and above the high end of our guidance.

We're pleased to exit 2013 with renewed strength that provides the foundation for confidence in our high expectations for 2014. Looking at the fourth quarter in more detail our strong performance was based on a combination of factors. We added 18 new customers including Excellus Health Plan, which used to be known as Blue Cross and Blue Shield of New York, Welcome Materials and three schools in Canada that joined us via a previously announced consortium agreement, University of Toronto, Wilfrid Laurier University and Carlson University.

This brings our full year new customer count to 46, which excludes customers we gained from the acquisition of CombineNet we closed on August 30th. We ended the year with 534 customers, which compares to 428 at the end of 2012. Our track record of strong cross-selling continued in the fourth quarter. Sales to existing customers was 41% in 2013. This compares to rates in the low 20s that we experienced prior to the expansion of our solution suite through development and acquisitions. We're confident that we'll be able to continue to generate robust cross-selling in the quarters ahead.

Another one of our goals in 2013 was increasing our margins through operational and financial efficiencies. Thanks to the operational changes we implemented and continued growth we've began to benefit from improving profitability through two entities we purchased in 2012, Upside Software, now known as SciQuest Canada and Spend Radar. We also substantially completed operational integrations of CombineNet.

The fourth priority was to enhance and expand our solution suite. We made several substantial improvements to our suite this year including new more advanced user interface, greater mobile capabilities and hence reporting and analytics and the introduction of the global supplier portal. The CombineNet acquisition also added our tenth solution, the Advanced Sourcing Optimizer. All aspects of the acquisition are on track and in line with our expectations.

In conclusion, 2013 was another successful year positioning us well for 2014 and beyond. Based on our solid pipeline, improved and enlarged sales force, expanded solution suite and accelerating momentum of the commercial market, we expect another year of great growth. Our focus in 2014 will be to continue the strategy that drove the success in 2013. Executing against these priorities will move us closer to our long-term target of 2020, achieving 20% topline growth concurrent with 20% profitability.

We feel the optimal long-term model for running our business is to generate an attractive blend of growth and profits. We expect to augment the robust growth generated by existing business with acquisitions in order to further capture our large opportunity and to capitalize on the relatively low penetration rates in our addressable market.

On the profitability side we're rapidly building scale at the acquired entities while continuing to generate high margins within our legacy business. We will provide more details regarding the business, our 2014 operational plans and our financial outlook at our Analyst Day on Monday, February 24 beginning at 2 PM Eastern Time and we encourage you to join us in person or via our webcast.

I'll now turn the call over to Rudy. Rudy?

Rudy C. Howard

Thanks. As Steve described 2013 was another great year for SciQuest. Our strong second half sales performance enabled us to move past the interruption in bookings momentum in Q2 due to changes in our sales organization. In addition during 2013, two state customers notified us that they intended to stop making payments on their existing contracts. We've made progress with both of these customers. We collected a settlement fee that generated approximately $0.5 million of additional revenue from one state and we received a payment for the other state's current annual license. As a result we will continue to recognize revenue from that state.

Non-GAAP revenue in the fourth quarter was $26.7 million. Excluding the additional revenue generated by the settlement fee non-GAAP revenue was $26.2 million, up 26% from $20.8 million a year ago. This was $600,000 above the high end of the guidance range. Approximately $0.5 million of that overachievement was due to a combination of the revenue impact from deals closing earlier in the quarter than expected and higher than anticipated service revenue. GAAP revenue was $25.8 million also above the range due to the same factors in addition to the settlement fee.

Inclusive of the settlement fee, non-GAAP gross margin was 74.5% in the fourth quarter significantly higher than a year ago. Non-GAAP operating expenses were $15.5 million or 57.9% of revenue roughly on par with the year ago. At 16.6%, non-GAAP operating margins were 3.6 percentage points on a year-over-year basis, partially due to improving operational efficiencies and timing factors.

Non-GAAP net income was $2.7 million or $0.11 per share, $0.02 above the top end of the guidance range, primarily due to the higher-than-expected revenue. Excluding the after tax impact of the additional revenue generated by the settlement fee, non-GAAP net income per share would have been $0.10. GAAP net loss per share was $0.05 per share.

Operating cash flow for the quarter was $8.7 million in the fourth quarter. Capitalized software cost and property and equipment purchases in the fourth quarter were $712,000 and $1 million respectively, adding back a $0.5 million for acquisition-related cost, results in adjusted free cash flow of $7.5 million. Excluding the additional cash generated by the settlement fee the adjusted free cash flow would have been $7 million.

Looking at full year 2013 results. Non-GAAP revenue was $93.6 million. Excluding the additional revenue generated by the settlement fee, non-GAAP revenue was $93.1 million. GAAP revenue was $90.2 million, inclusive of the settlement fee, both were ahead of guidance. Non-GAAP net income per share was $0.38, $0.03 above the high end of the range. Excluding the after-tax impact of the additional revenue generated by the settlement fee, non-GAAP net income per share would have been $0.37, GAAP basic loss per share was $0.21.

Full year adjusted free cash flow was $14.5 million. Excluding the additional cash generated by the settlement fee adjusted free cash flow would have been $14 million. This was $3 million higher than our guidance range in part due to collecting cash in the fourth quarter of 2013 that we had anticipated we would be receiving in Q1 of 2014.

In terms of the balance sheet cash, cash equivalents and short-term investments were $34 million as of December 31. Our $30 million credit facility remains undrawn. You may have noticed that we filed a Form S-3 registration statement with the SEC. This shelf registration provides additional flexibility should we decide to sell common stock in the future. Proceeds of any transactions will be used for general corporate purposes, including potential acquisitions and to strengthen our balance sheet.

Given our accelerating momentum, large market opportunity and current cash balance, we wanted to ensure that we have the ability to quickly access the market should the right time and situation arise.

Moving on to first quarter and full year 2014 guidance, we continue to have well above average visibility since revenue is predominantly comprised of multi-year non-cancelable contracts; though it is worth pointing out that average contract length has been reduced to approximately 3.5 years. Nevertheless we still have above average revenue predictability with approximately 85% of revenue generated in a 12-month period coming from existing contracts or contracts up for renewal.

Year-over-year revenue growth in the first half of 2014 will be dampened by the disruption caused by the sales leadership transition that occurred in the second quarter of 2013. Growth will also be negatively impacted for the first three quarters by the termination of the state contract that we have previously discussed.

We currently expect to exit the year with a non-GAAP revenue growth rate in the high teens and similar non-GAAP operating margins. First quarter and full year cash flow will be negatively impacted by the collections that normally would have taken place in January that we received in December, as I mentioned previously.

With that background we expect to achieve the following ranges for full year 2014: non-GAAP revenue between $108 million and $113 million; GAAP revenue between $106.5 million and $111.5 million; non-GAAP net income per share between $0.40 and $0.44, based on 24.6 million weighted average diluted shares outstanding; GAAP net income per diluted share between $0.05 and $0.10 per share; operating cash flow between $22.4 million and $26.4 million; purchase of property and equipment of $5.5 million; capitalization of software development cost of approximately $4.8 million; acquisition related cost of $3.6 million; and headquarter relocation cost of approximately $0.3 million; and adjusted free cash flow in the range of $16 million to $20 million.

In the first quarter of 2014 we expect non-GAAP revenue between $26.1 million and $26.4 million; GAAP revenue between $25.5 million and $25.8 million; non-GAAP net income per share between $0.08 and $0.09 based on 24.5 million weighted average diluted shares outstanding, GAAP net loss per share between $0.01 and breakeven on 24.0 million weighted average basic shares outstanding.

In conclusion, we delivered strong financial results in 2013, inclusive of the fourth quarter. In 2014 we expect to substantial progress towards our long term target as we are saying 20% growth with 20% operating margins as we overcome headwinds and build momentum in the back half of the year.

Operator, can you provide instructions for the Q&A session please?

Question-and-Answer Session

Operator

(Operator Instructions) Our first question is from Terrell Tillman of Raymond James. Please go ahead.

Stephen J. Wiehe

Terrell, you on mute?

A.J. Shrestha - Raymond James & Associates, Inc.

Yes, hello. My first question is regarding getting an update on productivity being seen in the significant expanding commercial sales force?

Stephen J. Wiehe

I am sorry. We missed the first part of the question. Apparently it was on mute or something. Who are we speaking with?

A.J. Shrestha - Raymond James & Associates, Inc.

Sorry. This is A.J. Shrestha filling in for Terry Tillman.

Stephen J. Wiehe

Okay, AJ.

A.J. Shrestha - Raymond James & Associates, Inc.

And my first question is I just want to get an update on the productivity that’s been seen in the significant expanding commercial sales force?

Stephen J. Wiehe

Well I think the enhanced productivity is a result of -- is visible in terms of the new bookings. Q4 bookings were the highest ever and we had great results from all aspects of our sales organization. So we’re pleased with the investment that we made in terms of adding new heads and we’re finding them to be productive for us.

A.J. Shrestha - Raymond James & Associates, Inc.

Okay. Great. And then my second question is in terms of the various initiatives meant to enhance the sales growth, maybe you could provide an update on the inside selling mid-market sales, site partner initiatives and etcetera?

Stephen J. Wiehe

So we haven't talked a huge amount about it. We have built an inside sales force that is beginning to do work directly through -- over the telephone instead of having to use a more expensive field sales force, all-in we think, we had opened a number of reps late in the year. All of them have been filled and today we've been pleased with the productivity we've been seeing out of that organization. So they contributed as part of our results for Q4 and so we were pleased with what they had done.

Rudy C. Howard

I would add to that as well. We developed some product -- some product sales as well as services that are more tailored towards the new market as well.

A.J. Shrestha - Raymond James & Associates, Inc.

Got you. Okay. Well I appreciate you guys answer my question. Thanks a lot.

Operator

Thank you. The next question is from Bhavan Suri of William Blair. Please go ahead.

Bhavan Suri - William Blair & Co.

Hey guys, thanks for taking my question. Just to follow up on the sales process, you added a good number of new people and given sort of the bookings and the results there, does it feel like they are ramping faster than they have historically is this because you've got guys that are high caliber or you are picking up from the [re-biz], some color on that would be helpful?

Stephen J. Wiehe

So I think it's unfortunately it's a little mixture of everything. A number of the people that were brought in late third quarter did come from competitors and I think that's been very helpful to us. We've also had quite a bit of activity in terms of pipeline building and I think that's been helpful to us and I think the products are resonating with the market.

What your comment implied that we were -- the average sales person to become productive is kind of a six to nine month timeframe. We still believe that that is an accurate prediction. So we're expecting to see an increase in productivity, but that will be in the second half of the year.

Having said that, though we've been really pleased with what we saw in the fourth quarter and what we've seen so far in the first quarter. So I would encourage you Bhavan to -- I don't want to get over [our fees], but it's a whole lot better than seeing very low productivity and then waiting to see the results in the second half. So it's, as I said it's a little mixture of both, but we are happy with where we are.

Bhavan Suri - William Blair & Co.

Great. And then you also had a -- it's been a while now, you had sort of just great sort of cross sell and in the commercial typically it's still a sort of initial point sale solution. So what I was wondering is what are the modules, is there any pattern to what people are picking up in that space that's driving the cross-sell, is there anything specific that sort of tying on to what they are buying initially to drive that upside there?

Stephen J. Wiehe

No, I think it's been across the Board. We've been pleased with the market pick-up, the contract director product, which is the contract offering technology. We've been pleased with the pickup of the spend analytics. CombineNet is their product, which we are now calling the Advanced Sourcing Optimizer seems to be resonating very, very well with our customers. So I can't put the results at one particular product. I think we've been pleased with the portfolios performing well and we are hopeful that it will continue and possibly improve through '14.

Rudy C. Howard

And I'll also add to that Bhavan some of the things that we talked about, some of the deals for instance we talked about PricewaterhouseCoopers, them doing a very large…

Bhavan Suri - William Blair & Co.

The broad based sure…

Stephen J. Wiehe

Yeah, they had recently started off with just one of the product. So we are getting some of those and that's helping to drive that higher cross-sell.

Bhavan Suri - William Blair & Co.

So Rudy did you see any other customers do that, it just sort of what they did a couple of calls ago, or just go totally broad-based in the period?

Rudy C. Howard

I don't think that happened in the last quarter but we did have a number of up-sales in the quarter of customers who just had one product, who bought additional products.

Bhavan Suri - William Blair & Co.

Great, great. And then Steve you touched on sort of CombineNet, just little more color in just sort of what's the cross sell been like and then sort of have you managed sort of higher ASPs on average in some of the cross selling situation?

Stephen J. Wiehe

So the cross sell has been very good for the Advanced Sourcing Optimizer. I think it's too early to have a strong opinion in terms of our ability to inflect price. Since we closed the transaction in August and the average selling cycle is kind of six months, I think a lot of things we saw in the fourth quarter were things that were still in the pipeline at the time of the acquisition. Our early returns are we believe we will see price inflection with the product. So that was one of our thesis' that we talked about and I still believe it's true.

But until I can show it on repeatable multiple situations I really don’t want do declare a victory. So we're happy but we're not declaring win if that makes sense.

Bhavan Suri - William Blair & Co.

No, that's helpful. That's it for me guys I'll mump back in the queue but I'll see you in a couple of weeks, thanks.

Stephen J. Wiehe

Well, thank you for the questions.

Operator

Thank you. The next question is from Pat Walravens of JMP Group. Please go head.

Patrick Walravens - JMP Group

Great, thank you and congratulations on the bookings quarter, looks great. Can you get to the 20% organic growth and 20% operating margins by 2015, how should we think about that?

Rudy C. Howard

Yeah I think that's what we've always talked about Pat. We talked about by the end of next year obviously Q4 is really the first kind of apples-to-apples quarter because in the earlier quarters we had the effect of the Q2 sales interruption, we had the effect of acquisitions, we have the effect of the state things.

So we really in Q4 the first apples-to-apples comparison we talked about being in the hard teens as we are in the year in 2014 and I think in both sales growth as well as operating margin and we do feel comfortable that we will be able to hit those numbers sometime during 2015.

Patrick Walravens - JMP Group

Okay. And Steve what sort of key points would make for investors about the recent changes in the competitive environment, particularly the change this had SAP/Ariba

Stephen J. Wiehe

We so from what we are seeing -- the anecdotal data we're seeing is Ariba has -- the Ariba technology is now part of the standard SAP sales organization. And so while they do have specialists that are kind of overlay, the day-to-day selling of the product has really fallen into the bag of the general SAP rep, that also selling Success Factors and other products.

So we're seeing a slight less focus in terms of day-to-day focus on selling procurement. So we see that as an upside for us. We've also started to see there are number of customers that have expressed some concern about which technology will survive, whether its SAPs that's their end product or its the Ariba technology.

I don't think SAP has said anything about or if they have we haven't seen it. But I think it's just created some uncertainties and so I would suggest at this point I think we see the Ariba acquisition as being probably more helpful to us rather than less.

Patrick Walravens - JMP Group

Okay, great. Thanks very much.

Stephen J. Wiehe

By the way thank you for the questions.

Operator

Thank you. The next question is from Matthew Kempler of Sidoti & Company. Please go head.

Matthew J. Kempler - Sidoti & Company, LLC

Thank you. Actually I just wanted to ask on the 2014 guidance because we had a strong third quarter, a record fourth quarter for bookings and also like you mentioned you retained one of the states that we had previously called out of expectations. But the 2014 guidance seemed a little bit below the consensus forecast. So I am curious is there anything confirming your outlook for 2014?

Stephen J. Wiehe

No, I don’t think Matt. Obviously we've given a range in terms of the full year data. So I think we tend to be a little on the conservative side and will remain that way. Obviously we've given the number for Q1 that has a little less play in it so to speak and I think it's nothing but that and I think it’s a matter of us wanting to just be accurate but yet be conservative.

Matthew J. Kempler - Sidoti & Company, LLC

Okay. And when you look at your target of 20-20 as you move through 2015 where do you see the biggest risk basically if you had to classify P&L to accelerate and especially to get 20% growth or driving leverage to the models to get toward those 20% margins?

Stephen J. Wiehe

There is I think as with any business there is both of those things carry some risk. We certainly need to continue our momentum in the sales arena to be able to drive towards that growth. Doug's got to be successful, his team had to be successful in order for us to hit those numbers.

And I think I am probably very confident about the leverage opportunities but we've got to be smart in terms of how we manage our employees, how we manage internal development and how we leverage off of the staff that we have but I think that one obviously we feel really comfortable there because we have been at that operating margin in the past and based upon what we think we need to do from a product perspective I am fairly comfortable that we hit that and then particularly if we hit the sales numbers.

Matthew J. Kempler - Sidoti & Company, LLC

Okay and then I don't know if you mentioned it but so your sales headcount grew about 30% in 2013. Do you have similar plans for ’14?

Stephen J. Wiehe

No, I think the sales headcount is going to -- we’ll continue to grow it as needed but you bring up a great point and actually it may even be more than 30% but it has grown dramatically and lot of that growth is actually an accelerated growth off even our 2014 sales headcount. So we have added people early in order to try to pick up that momentum and I think the next step for us Matt, is to see how projected they are, to see what kind of traction all these additional sales heads get, that we hired over the last several months and if we see certain productivity we’ll continue to add sales heads and that will be based up on where those guys come in.

Obviously yes, our plans going forward will be to grow that sales headcount over time at least to have the same momentum as the top line sales growth, I mean the top line revenue growth is.

Matthew J. Kempler - Sidoti & Company, LLC

Okay, thank you very much.

Operator

The next question is from Richard Davis of Canaccord. Please go ahead.

Unidentified Analyst

Hey guys this is [Adam] on for Richard. Is there any update you can share with us on the contracts that were breached few months back and what’s happening in that process? Is there any resumption of implementation activity or is it still up in the air?

Stephen J. Wiehe

We talked about it on the call.

Rudy C. Howard

You are talking about the state contracts?

Unidentified Analyst

Yes.

Stephen J. Wiehe

Yeah so we talked about it on the call. One was settled for additional revenue of about approximately $0.5 million which I think we repeated multiple times in our remarks. The other piece was a State that continues to use it and we have recognized revenue for it for the upcoming 12 months.

Unidentified Analyst

Okay, great. Thanks.

Operator

Thank you. Our next question is from Tom Roderick of Stifel. Please go ahead.

Tom Roderick – Stifel Nicolaus & Co.

Hey guys, good afternoon. Few times in the past you have provided a bit of an update with respect to loosely what the individual segment is sort of contributing and you guys are great to breakout the enterprise space here as 41% of the overall revenue stream. Can you give us a general sense as to what sort of higher-end state local healthcare respectively are contributing and how you think about the growth rates within those segments?

Rudy C. Howard

Sure, Tom. You know you are right we had given that in the past. Most of that increase is associated with commercial is just chipping away primarily higher ed has been the predominant part of our business and I think last quarter commercial was around 38% and higher ed was around 50% and the two or three extra points that commercial gained this quarter primary has come from that.

Again it’s not a mark on higher ed, higher ed continues to grow and do well for us, but it's just that the commercial grows at an accelerated rate. So right now higher ed is approximately 48%, commercial at 41% and healthcare and state local government make up the rest about evenly.

Tom Roderick – Stifel Nicolaus & Co.

Great, that’s helpful. When you look at some of the other growth segments beyond commercial state local is one that that had been particularly promising for a period of time. What are you seeing there? I mean the demand certainly seems to be there and the budgets maybe a little bit of a different story. Are things freeing up a little bit or is that cycle still staying kind of similar to where it's been over the course of last year?

Stephen J. Wiehe

This is Steve. It appears things are freeing up but government is a strange beast in that it is difficult to forecast. So I think we feel like we have got some wind at our backs in the state and local government space but until we have ink on paper I don't think we want to declare a victory. We did or Dough replaced his Vice-President of Government Sales at the end of the year, we've brought on a new individual who has been on board just a very short amount of time. And we do believe that we think sales leadership will also improve our trajectory within the market.

Tom Roderick – Stifel Nicolaus & Co.

Got it. Last one from me, I apologize if I missed it on the call. Are you at liberty to share with us what the dollar renewal rates look like on a general basis for 2013 here?

Rudy C. Howard

Yeah. They still look very good, Tom. And as a matter of fact we will go into greater detail on Analyst Day. But we have changed a little bit, we are going to start giving a metric which is basically a same-store sales metric. And the primary reason for that is as we look at other SaaS companies that's what all of them are doing. And that remains at a 100% for us but just as a little bit of a point of reference our dollar value Euro rate which roughly did in the past is well into the 90s. So things do look very well for us on that perspective.

Tom Roderick – Stifel Nicolaus & Co.

Very good. Okay, guys, thank you.

Operator

Thank you. (Operator Instructions). The next question is from Brendan Barnicle of Pacific Crest. Please go ahead.

Brendan Barnicle - Pacific Crest Securities, Inc.

Thanks so much guys. I want to hold a little bit on Tom's question on strength in the commercial sector. You mentioned the growth rate there, can you give us any sense on what that's been growing at obviously faster probably than the overall business. So can you give us a range?

Stephen J. Wiehe

Yeah. And of course it also has some of the acquisition stuff in it as well. But that grew at 80% Brendan for the last period for us. So it continues to be a very healthy growth area for us. Now obviously that's not going to maintain as it gets larger and becomes a bigger proportion of our total revenue that growth rate will slow down and then again the CombineNet acquisition is included in that as well.

Brendan Barnicle - Pacific Crest Securities, Inc.

Great. And similar question on the best bookings quarter ever. Can you give us any more color on what that means in terms of size or growth rate?

Rudy C. Howard

We generally don't give bookings. Again I think suffice to say it was, was well ahead of the excellent quarter we've had.

Brendan Barnicle - Pacific Crest Securities, Inc.

Great. And then obviously you guys mentioned some commentary about maybe some acquisitions, and you filed the Shelf today. Can you give us any more color on where you may look I know you have to be careful about that, you don't want to tip you holding hand, but could we assume it to be more on the commercial side given that increase, raw momentum within the business or are there particular areas that would make sense?

Stephen J. Wiehe

This is Steve. We see the opportunity in a couple of different areas. We continue to want to broaden the kind of the width of our product portfolio and part of our criteria is we are looking for technology that we can sell into our multiple markets. So we probably be slightly less than -- something that would suggest commercial alone. As we mentioned on the call our cross rates, our cross sell rates have been very good and we want to continue to work in that area.

Another area which is of interest to us is there are maybe going into more specialized verticals, there are some feature function requirements in other markets. It's not high on our priority list but again it's something that we are looking at. So we see quite a bit of opportunity out there especially in terms of the past question. Now that Ariba is out of the market we are the largest provider of this genre of software. And so any company that is looking for an exit event or it is just looking to find a home for itself we typically get first look at it and so that give us a great opportunity to continue to evaluate things that will build our product portfolio.

Brendan Barnicle - Pacific Crest Securities, Inc.

And then lastly from me. In the commercial sector we had through last year you were able to share some great customer wins in some new and unexpected verticals. Did you see anything like that in the fourth quarter?

Stephen J. Wiehe

I think it was across. As I mentioned in our prepared remarks, we saw some activity in healthcare. We saw some activity in the commercial market. So we were pleased with the productivity that we saw across all markets. I would say we are probably especially pleased with what we saw in commercial but nothing that's unfortunately with the commercial market many of them don't want us talk about them. So we're not in a position where we can talk about some of the more interesting wins unfortunately.

Brendan Barnicle - Pacific Crest Securities, Inc.

Great. Thanks a lot guys.

Operator

Thank you. And our final question comes from Jeff Houston of Barrington Research. Please go ahead.

Jeffrey L. Houston - Barrington Research Associates, Inc.

Hi guys thanks for taking my question. To start with is it was great to hear about the state customers that you settled with one and then the other one came back. Could you provide little bit more color about the discussions that went on with the two clients and how you were able to reengage that one state whereas you chose to go with the settlement and one that reengaged was at the same level that they are at before?

Stephen J. Wiehe

One a couple of things, number one I am somewhat, not somewhat I am really kind of limited in what I can say particularly the one with the settlement but as you could imagine there was a lot of back and forth we ultimately change to a place where parties agree and agree to separate from each other. In terms of the one we kept that was obviously a plus to us. We had a lot of discussions with them and we continue to but right now we are comfortable with where that relation is and obviously we will continue to work with them going forward. So there is really not a whole lot more to say to it than that.

Jeffrey L. Houston - Barrington Research Associates, Inc.

Got it. And moving on to growth, could you talk a bit about what the organic growth was in the quarter and then also what the organic growth rate is that's implied in your 2014 revenue guidance?

Rudy C. Howard

Yeah again, I think I appreciate the question. I think we've talked about a number of quarters that we really don't compute the organic growth separately and the reason for that primarily is because once we acquire technology through M&A transactions we start to sell as a part of a package deal it's virtually impossible for us to break it out.

I think our organic growth has remained pretty steady, if I could break it out I think it would be pretty steady with what it has been and obviously we talked about it as it looks toward the end of 2014 and 2015 we believe that organic growth will approach the high teens and ultimately 20%.

Jeffrey L. Houston - Barrington Research Associates, Inc.

Great. And then last question from me is could you provide us maybe a sneak peek into the upcoming user conference in Analyst Day, what type of you executives are you going to have present and what sort of clients are going to be in attendance that we could talk to, and just trying to figure out a way to other incentivize other investors to attend this as well besides the great weather in Orlando, especially compared with here in Chicago, some of the sneak peek into what you guys are going to be doing there?

Stephen J. Wiehe

So this would be our 13th year for our user conference. Right now we expect the attendance rate to be somewhere around 700 people, most of them are current customers. We do get a few prospective customers that attend. It comes from all levels. I know we've got a couple of panels of some Chief Purchasing Officers that are talking about how they are utilizing our technology and kind of some best practice discussions.

The conference runs starts on Sunday night. Monday is a full session with some -- I would describe some high level discussions of what kind of where we see the industry trends going. We have short keynote from Mike Eruzione who was the Captain of the U.S. Hockey Team from Olympics in the late 80s and then we'll start the Analyst Day for investors Monday afternoon. Tuesday and Wednesday are broken into tracks. I think there is seven different tracks and they are labeled by products and also kind of by day.

So if you are a new user of the functionality, of the technology or if you are established user and most all of the presentations are by customers. Our whole concept behind our user group is having talking about how people are using our technology to implement, to solve problems and to generate savings and so quite a bit of the presentations are case studies from either one of our multiple groups of customers.

As part of the user -- as part of the conference we'll be showing a lot of our new technology that we will be releasing as part of our 41 one release. So we do quite a bit of focus groups with our customers giving us a chance to see the new products and give us feedback. So if you want to learn a lot about our products or hear directly from our customers it's a great way to see them in a very short time frame although we do expect there are quite a number of commercial accounts that will be joining us at the meeting. And so it's a mixture of effectively -- it's a cross section of all our client base.

Rudy C. Howard

And I am sorry let me add Jeff that in terms of the Analyst Day presentation itself obviously Steve and I will be there. Doug will be there and we will give a pretty in-depth discussion of his sales organization and what he sees for 2014 and we will also have Mark Digman who is our Vice President of Product Marketing. And so Mark is going to talk a lot about where we see our products headed in 2014 and beyond and so you'll get a good idea as to what we're thinking in terms of product roadmap.

So I think that will be interesting. We're also going to show some snippets of these products in the Analyst Day session itself and so there is going to be -- you guys, the analysts as well as shareholders will get a little bit of an idea of what our products are and how they work.

And then we are actually going to have a couple of customers speak in terms of analyst day. So I think it will be informative for those of you visiting.

Jeffrey L. Houston - Barrington Research Associates, Inc.

That sounds good looking, I am forward to it. Thanks guys.

Operator

Thank you. This concludes the question-and-answer session. I would now like to turn the floor back over to Mr. Andelman for closing comments.

Jamie Andelman

Thank you for joining us today. 2013 was another successful year for SciQuest during which we accomplished our goals while we posted strong financial results. We have demonstrated significant progress since our IPO three years ago. We look forward to more rapid growth as we proceed on our transformational journey in 2014 and beyond.

We just talked about Analyst Day and that’s on February 24th at 2:00 PM Eastern in Orlando. We hope you can attend and have the opportunity to interact with our customers and prospects. For those who are interested in attending Analyst Day and have not already registered please contact me. My information can be found in the press release we distributed earlier today in the investor relations portion of our website investor.sciquest.com.

For those who cannot attend there will also be a live webcast available in the event section of our IR website. Thank you and have a great night.

Operator

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time and thank you for your participation.

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