ClickSoftware Earnings Highlights: On-Track Performance

ClickSoftware (NASDAQ:CKSW) reported earnings for Q 9/10 this morning. Noteworthy is the following information:

  • Revenues for Q 9/10 were $17.48 million, representing an increase of 5% y-o-y. This is well below the 4-year annual rate of 22%. As the company explains, the below-expectation Q 9/10 revenue result was due to delays in signing certain contracts. Gross profit was strong at 62% of revenues (vs. 65% in Q 9/09 and 62% in Q 6/10).
  • FYE 12/10 19% revenue growth target remains unchanged. Revenues for Q12/10 are guided at over $20.00 million, an all time record, representing 16% y-o-y growth.
  • YTD 9/10 Net Cash from Operations was $13.65 million vs. $6.96 in YTD 9/09. The ratio of Net Cash from Operations to Revenues (annualized) was 24% for YTD 9/10 vs. 13% for YTD 9/09.
  • Free Cash Flow (FCF); $5.16 million in the quarter vs. $3.28 million in Q 9/09 and $3.45 million in Q 6/10.
  • FCF= Net Cash from Operations minus (replacement) Depreciation and Amortization.

Emphasizing the continued efficiency in the use of capital to support Net Operating Working Capital (NOWC) is the significant growth in deferred revenues, a source of NOWC financing. Deferred revenues amounted to $12.74 million, at the end of Q 9/10 vs. $9.65 million at the end of Q 9/09.

  • Trailing 12-Month FCF; $12.26 million vs. $13.27 million at Q9/09 and $10.28 million at the end of Q 6/10. The y-o-y decline is explained by a very week FCF in Q12/09 ($0.14 million).

Just as a point of reference; the figures above are consistent with the $10.00 million in FCF estimated for FYE 12/10, an important input in the estimation of $10.27/share, as the fundamental value of the stock in the most recent article.

  • Return on Invested Capital (ROIC) continues to run at a rate in excess of 80%. This estimate involves annualizing and normalizing performance.

o NOPAT = Net Operating Profits after Taxes = EBIT x (1-Tax Rate)
o NOWC = Net Operating Working Capital
o OLTA = Operating Long Term Assets.

  • Cash (and equivalents) were $48.28 million vs. $36.48 at Q 9/09 and $42.50 million at Q 6/10. Y-o-y $11.8 million increase is consistent with the Trailing 12-Month FCF.


All in all, ClickSoftware’s Q 9/10 financial performance is very good.

Net Cash Flow from Operations and FCF are particularly strong.

Revenues for FYE 12/10 are on track to reach $72.55 million, or 19% y-o-y, in-line with the secular growth story.

Overall Q 9/10 results are consistent with the investment thesis discussed in the most recent article and with the fundamental value of the stock, estimated at $10.27/share.

Cash flow generation supports the $10.00 million in FCF estimated for FYE12/10, a key determinant in the fundamental value of the stock.

Disclosure: Long CKSW