SaaS: SFSF, Citrix, Omniture, RightNow

There is one tech sector that I feel is relatively recession-proof: Software as a Service (SaaS). My list of top SaaS stocks is available here. SaaS companies help businesses cut costs, which is why they should thrive in this weak economy. Let us review the performance of some SaaS companies that have recently reported results, namely SuccessFactors, RightNow, Omniture and Citrix. As you will see, they continue to be strong, solid growth companies.

On November 3, SuccessFactors, Inc. (NASDAQ:SFSF), a leading SaaS company for performance and talent management solutions, reported a strong third quarter. Revenue grew 77% y-o-y and 16% q-o-q to $29.7 million. Net loss per share was 37 cents. Non-GAAP loss per share was 33 cents.

Non-GAAP gross margin improved to 67% and cash flow improved 63% to negative $2.3 million from negative $6.4 million last quarter. Total cash, cash equivalents and marketable securities on September 30 was $101.5 million.

SFSF added about 220 new customers and at the end of the quarter had a total of 2,360 customers, up 69% y-o-y and 10% q-o-q and up from 1,950 last quarter. Its retention rate continues to exceed 90%.

For Q408, SuccessFactors expects revenue in the range of $31 to $31.5 million, or 63% growth, and non-GAAP net loss per share in the range of 32 to 34 cents.

For the full year 2008, revenue is expected in the range of $109.9 to $110.4 million, up from prior guidance of $107 to $108 million. Non-GAAP net loss per share is expected to be in the range of $1.32 to $1.34, revised from $1.39 to $1.43.

SuccessFactors is on my list of long-term hold stocks: it is well positioned in the recession-proof SaaS sector and has a great CEO: Read my interview with CEO Lars Delgaard.

The stock is currently trading around $8 with a market cap of about $460 million, the earnings giving it a strong boost after a 52-week low of $5.54.

Another strong SaaS company is Omniture Inc (NASDAQ: OMTR). On October 28, it reported Q3 results in line with estimates. Revenue grew 108% to $77.8 million and net loss was $17.3 million or $0.24 per share versus $6.5 million or $0.09 per share. Non-GAAP net income was $8.2 million or $0.11 per share. During the quarter Omniture added 250 new customers, the same number as last quarter. 

Q3 is traditionally a soft quarter for Omniture but it had strong bookings this time. Deferred revenue grew 116% to more than $100 million. The company generated a record $29 million in operating cash flow. Free cash flow increased to $15 million through increased success in structuring annual prepaid contracts and improved collection of advanced billing.

For Q4 FY 2008, Omniture expects revenue in the range of $82.5 to $84.5 million and  net loss in the range of 10 to 9 cents per share. Non-GAAP net income is expected in the range of 12 and 13 cents per diluted share. Analysts expect loss per share of 13 cents on sales of $86.41 million.

For 2008, Omniture has revised its revenue guidance to a range of $295 to $297 million from guidance of $295 to $300 million last quarter. Net loss is expected in the range of 62 to 61 cents per diluted share. 

It recently announced plans to acquire Mercado’s search and merchandizing assets for $6.5 million. The deal is yet to be approved by the Israeli government.

It is currently trading around $12 with a market cap of about $885 million. The stock hit a 52-week low of $9.50 on October 24 after the earnings were announced.

On October 23, RightNow Technologies, Inc. (Nasdaq: RNOW) announced its Q3 results. Revenue grew 24% to $36.2 million. Net loss was $1.4 million or 4 cents per share, down from $3.1 million last quarter. The company achieved non-GAAP profitability in the quarter. It has over $100 million in cash and investments. Read my interview with CEO Greg Gianforte, another capable CEO.

For Q4, revenue is expected in the range of $36.5 to $37.5 million. Net loss per share is expected between 4 and 3 cents. Cash from operations for the full year 2008 is expected to be in the range of $12 to $15 million. Non-GAAP net income per share is expected to be in the range of zero to one cent. For the full year, RightNow expects revenue to be about $141 million, net loss per share about 28 cents and non-GAAP net loss per share about 10 cents. Analysts estimate a loss of 3 cents per share on revenue of $37.8 million.

RightNow might have a tough time ahead with Salesforce.com’s acquiring its competitor, Instranet, in August. RightNow is currently trading around $8 with a market cap of about $267 million. The stock hit a 52-week low of $5.02 on October 24 after the earnings announcement.

The last company for today is not a pureplay SaaS, although it has a SaaS portfolio. On October 23, Citrix Systems (NASDAQ: CTXS), the leading application delivery infrastructure company, reported a strong third quarter in the face of a weak economy. Revenue grew 14% to $399 million. Net income was $49 million or 26 cents per share, versus $61 million or 33 cents per share last year. Non-GAAP net income was $80 million or 43 cents per share. Analysts were expecting earnings of 37 cents per share on revenue of $391.5 million.

By region, revenue grew 21% in EMEA, 11% in the Pacific and 9% in the Americas. Revenue from product licenses grew 12%, license updates grew 14%, online services grew 17% and technical services revenue, which comprises consulting, education and technical support, grew 18%.

The app virtualization business grew 12% y-o-y to $273 million, driven by strong sales of XenApp Platinum addition, which contributed over 30% of the mix. App networking business revenue was $47 million, flat with Q307 mainly due to weakness in e-commerce sales and web traffic growth. However, there is increasing traction with enterprise customers. In the server and desktop virtualization business, XenServer and XenDesktop revenue grew by about 100% q-o-q to $7 million driven by its traditional channel.

Deferred revenue was $481 million, versus $396 million last year. Cash flow from operations was $115 million and year to date cash flow was $409 million. Citrix repurchased shares for about $70 million. It has also recorded a temporary impairment of about $20 million related to investments issued by AIG. Though these securities are still performing as expected, Citrix will keep a tab on them.

For the fourth quarter, Citrix expects net revenue in the range of $425 to $440 million and EPS in the range of 29 to 32 cents. Non-GAAP EPS is expected in the range of 46 to 48 cents. Analysts were predicting revenue of $434.5 million and EPS excluding items of 45 cents.

For fiscal 2008, Citrix expects net revenue in the range of $1.59 to $1.61 billion and EPS in the range of 91 to 94 cents. Non-GAAP EPS is expected to be in the range of $1.61 to $1.63. It is currently trading around $27 with a market cap of about $5 billion. The stock hit a 52-week low of $20.92 on October 3.

This segment is a part in the series : SaaS