The SaaS sector has seen quite a few acquisitions this year, the major ones coming from Adobe, Intuit, and ADP. The recent economic downturn has spurred this acquisition activity in the sector, which has turned out to be relatively less vulnerable to the effects of the economic downturn.
Adobe’s acquisition of Omniture and Intuit’s acquisition of Paycycle were the major acquisitions in the SaaS sector this year. Though the Adobe move was rather unexpected, I had suggested that Intuit should go for Paycycle, and it recently also bought personal finance and budget software provider Mint.com. ADP on made its first SaaS acquisition with HRInterax. Apart from these major acquisitions, among the smaller companies, Concur acquired the European firm Etap-On-Line to expand its European presence. NetSuite acquired QuickArrow for $20 million to increase its market share, and athenahealth recently completed its $30 million acquisition of Anodyne Health Partners.
In terms of financials, on November 17, employee expense management software maker Concur (NASDAQ:CNQR), reported a strong fourth quarter that topped estimates. Q4 revenue was up 13% to $64.8 million driven by 13% growth in subscription revenue. Net income was $5.9 million or $0.11 per share compared to $5.6 million, or $0.11 per share last year. Q3 analysis is available here.
For the fiscal 2009, annual revenue was up 15% to $247.6 million and net income was $25.7 million or $0.50 per share versus $17.2 million, or $0.35 per share in 2008. Gross margin was up 120 basis points to nearly 70%. Cash and investments net of customer funding liabilities were more than $200 million.
The recession caused travel spending to decline substantially and unemployment to reach as high as 10.2% in October, and even higher in states such as Michigan. Both of these factors have affected Concur’s business, but it has made up the loss through new business growth. Unemployment rates are expected to stabilize by the middle of 2010, and as we saw in my recent travel stocks post, travel spend has already started improving. This should set the stage for a better 2010 for Concur.
However, the company gave a modest outlook. For the fiscal year 2010, Concur expects EPS to be $0.52 since it expects to increase investments, taking advantage of the rebound in the market. First quarter EPS is expected to be $0.11. The stock is currently trading around $38 with market cap of about $1.8 billion. It hit a 52-week high of $41.09 on November 16.
On November 4, NetSuite (NYSE:N) a SaaS vendor of business management software with annual revenue of $152.5 million, reported its third quarter results. Q3 revenue grew 3% to $41.7 million. Net loss widened to $8.0 million, or $0.13 per share compared to loss of $6.2 million, or $0.10 per share last year. Non-GAAP net income was $348,000, or $0.01 per share. Q2 analysis is available here.
For 2009, NetSuite updated its revenue outlook last quarter to a range of $164 million to $168 million and reiterated that expects non-GAAP EPS to be $0.04 to $0.06. The stock is trading around $15 with market cap of about $950 million compared to its IPO price of about $26 two years ago. It hit a 52-week high of $17.49 on October 21. Analysts are expecting NetSuite to earn $0.06 in 2009 and $0.14 in 2010.
On October 21, Citrix Systems, Inc. (NASDAQ:CTXS), the leading application delivery infrastructure provider with annual revenue of $1.58 billion, reported its third quarter results. Q3 revenue was $401 million, compared to $399 million last year. Net income was $53 million, or $0.29 per share, compared to $49 million, or $0.26 per share last year. Non-GAAP net income was $80 million, or $0.43 per share. Q2 analysis is available here.
Deferred revenue was $556 million, compared to $481 million last year. The company repurchased 2.1 million shares for about $75 million. Cash flow from operations was $124 million and cash in investments are nearly $1 billion.
Revenue was down 15% from the EMEA region and 5% the Pacific region and up 5% in the Americas region. While product license revenue decreased 18%, revenue from license updates increased 7% and technical services revenue increased 20%. Citrix’s online services revenue also grew, by 21% to $78 million.
Citrix expects revenue to increase slightly from 2008 levels for fiscal 2009. For fiscal 2010, the company expects revenue to increase between 8%and 10% over 2009. The stock is currently trading around $38 with market cap of about $7 billion after its 52-week high of $42 on October 9. According to a recent report from Bloomberg, Citrix tops the acquisition list for IBM, Cisco, or HP, and it is attractive because of its virtualization software. Oracle, SAP, and Microsoft are also possible suitors.
Another possible acquisition target for IBM that would give a boost to both its healthcare and SaaS portfolios would be athenahealth. The healthcare technology sector is poised for tremendous growth as the U.S. healthcare system is soon to be digitized with the help of about $45 billion in federal healthcare stimulus funding. athenahealth is sure to benefit. The government would pay incentives of up to $44,000 through Medicare bonus payments to all physicians who use electronic health record services, and physicians who use athenaClinicals would qualify for the incentive.
On October 29, athenahealth (NASDAQ:ATHN) which has an annual revenue of $139.5 million, reported its Q3 results. Q3 revenue grew 37% to $48.7 million. Adjusted net income was $5 million or $0.14 per share compared to $4.8 million or $0.14 last year. Q2 analysis is available here.
Gross margin improved to 61% near to its 2011 target range. The company ended the quarter with $104.6 million in cash, excluding the $30 million related to the Anodyne acquisition. Debt increased to $12.1 million. The company recently received its first patent, called practice, management and billing automation system for the athenanet rules engine. The stock is currently trading around $45 with market cap of about $1.5 billion. It hit a 52-week high of $47.75 on December 4.
According to a recent Gartner report, the SaaS market is forecast to grow 17.7% to $7.5 billion in 2009. Worldwide SaaS revenue is expected to reach $14 billion for the enterprise application markets by 2013. More and more companies are turning to cloud computing to cut expenses, and I expect further consolidation in the industry, especially from Salesforce.com and Oracle:my list of Top 8 SaaS stocks is a good place to start.