NEWS FROM THE OPERATING FRONT MAY ‘09
These are interesting times for technology companies. The economy seems to have stopped its freefall, but there are signs of both improvements and weakening in various markets. We see similar disparities among technology companies who are operating at multiple stages of development and evolving their business models as they adapt to a down economy. Using our On-Demand Dashboards, we've focused this month on comparing Q1 '09 and Q1 '08 expense ratios for 3 industry segments: SaaS, Software and Internet. We have not compiled extensive sample groups and they do not exemplify perfect peers in each segment, but they do represent a variety of models and stages of maturity.
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SaaS Companies: We used our On-Demand Dashboard to uncover operating trends in a select group of SaaS companies. Among the model companies we selected, all reduced operating expense ratios as a percent of revenue in Q1 '09 compared to Q1 '08. In addition, the companies with the highest S&M expense ratios in Q1 '08 reduced S&M in Q1 '09. The companies with relatively low S&M expense in Q1 '08 actually increased S&M expense in '09 very slightly (for example, Concur went from 26% S&M in '08 to 28.7% in '09). See the Dashboard summary here and the complete Financial Dashboard for each of the SaaS companies here.
Software Companies: In this sample, we chose companies representing a wide variety of software companies (Advent Software, JDA Software, Pega Systems, and Parametric Technologies). Expense trends among these diverse companies did not follow a set directional trend. Some companies decreased their operating expenses from Q109 to Q109 whereas others invested more in S&M or R&D causing their operational expenses to increase. However, our Dashboards did illustrate that these software companies with a much broader range of revenues - $60 - $240 million - showed a tighter range of operational expenses than SaaS vendors, roughly 50-60% (average for the group was 55.7%) versus 50-82% (average was 70.1%) for the SaaS companies. See the Dashboard summary here and the complete Financial Dashboard for each of the Software companies here.
Internet Companies: Among a sample of Internet companies (Constant Contact, Rate, Salary.com and WebMethods), two companies reduced operating expense in Q1 '09 and two companies increased the operating expense ratio in '09. It is interesting to note that these sample companies did not significantly change S&M or G&A ratios, but we saw changes in R&D ratios. SLRY with Q1 '09 of $11.3M had the highest operating expenses at 142% of recognized revenue. Larger companies such as RATE with Q1 '09 revenues of $38.3M (a drop of almost 10% from Q1 '08) had significantly lower Q1 '09 operating expenses of slightly less than 40%. See the Dashboard summary here and the complete Financial Dashboard for each of the Internet companies here.
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Take the opportunity to look at our On-Demand Dashboards and get an instant view of what competitors, market leaders and your customers are achieving on a quarterly basis with revenues, expense ratios, profitability metrics and employee productivity. If you would like an on-line demo of the On-Demand Dashboards, contact us directly at: 781-891-4149 or contact me at lauren@opexengine.com
Hope you had a lovely Memorial Day.
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