Riding the resurgence in software as an application service, Click Commerce Inc, a provider of e-commerce solutions to manufacturing and other sectors, yesterday disclosed second quarter net income of $3.2 million on a GAAP basis, an increase of 173% from the like period last year.
Revenues for the period ended June 30 hit $13.3 million, a jump of 115% from the second quarter of 2004. The company counted 215 new customers, upgrades and renewals in the second quarter.
Click CEO Michael Ferro said during a Webcast with financial analysts that the Chicago-based company's outlook is good for the rest of the year. "The numbers speak for themselves," Click CFO Mike Nelson told Managing Automation, in a follow-up interview, intimating that the company's 2005 pipeline remains solid.
The company's strong results suggest that its collaborative commerce technology, which automates interactions among suppliers and their partners, is beginning to gain traction both in manufacturing (Click's traditional sector) and elsewhere.
Click started in 1996 in the business of providing extranets for manufacturing companies. Click's customers now purchase a variety of solutions from the company, from channel management to supply chain to warehouse management and spare parts optimization, noted Steve Cole, Click's senior vice president of product management.
Product diversity has been spawned by a growth-by-acquisition strategy, which has "clicked" with Wall Street. The company began a six-company buying spree in March 2003 with the acquisition of Allegis, a partner relationship management (PRM) company. Click then snapped up Webridge and bTrade to round out its portal and PRM functionality.
This year, Click acquired ChannelWave (its channel management and service automation business), Optum (for warehouse management) and, in May, Xelus (for service parts management). The Xelus acquisition was a good move, according to AMR Research analyst Mark Hillman. The SPM market is growing at 20% annually, according to AMR forecasts. Warehouse management is not as hot, on the other hand, though it does fill in the end-to-end supply chain functions manufacturers need, he added.
Although Click does offer licenses for its software, most of its recent growth has come insubscription services. Click is pushing the software as a service (SaaS) idea hard, encouraging even customers that opt to buy traditional software licenses to let Click host their software. "We impress upon our customers the advantages and ROI they can gain from having us host the software for them. We will manage the box so they just have to be the users," Cole noted.
In fact, the portion of Click's revenue attributed to hosting subscriptions is now 43% and climbing. "We're seeing greater acceptance of using hosted software over the Internet," Cole said. The fact that users don't have to buy and manage the hardware on which the application runs makes it almost irresistible, he added.
Software licenses currently make up only 28% of Click's revenue, with services accounting for 29%.
That fits with the rise of the on-demand model for software delivery, Hillman explained. "Customers want to be able to buy software that way." Many software companies are focusing on a hosting model to drive sustainable, profitable growth. Click fits that trend, as well, he said.
Click's second quarter results were undeniably strong, though Hillman questions how much of the increases are due to the acquisitions vs. organic growth. "You want to show that both the existing product line and the newly acquired products are growing. That part is too soon to tell," Hillman concluded. The jury is still out as to how Click is faring at merging not just the different technology platforms but the different cultures and sales forces, he added.
"The good news is Click should be profitable for the next several quarters. But it's always harder to tell whether the products will mesh into a coherent suite that customers will want to buy," Hillman said. Indeed, investors were overtaken by uncertainty in the wake of Monday's financial announcement, with Click's per-share stock price taking a steep dive Monday afternoon and this morning.
Nelson declined to offer an explanation for the market reaction, saying only that it "seemed strange."
Nevertheless, Click continues to invest heavily in its products, Cole noted. Case in point: The latest release of Click's warehouse management package, called Move, will incorporate state-of-the-art RFID capabilities.