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RightNow Technologies Profile

Sources: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and Motley Fool CAPS.

This Week's Pitch :

RightNow Technologies, Inc

HQ: Bozeman, Montana
Website: http://www.rightnow.com
Sign of a Breaker: Sustainable advantage gained through business momentum
CAPS Rating: 2 stars (81 out of 105)
Market Cap: $506mln
Cash/Debt: $98.4mln/0
Revenue 07-08-09 $112mln/$140mln/152
Earnings 07-08-09 $(18.6)mln/(7.2mln)/$5.8mln
Recent price $15.55
52 week range: $11.55 -- $19.99

- RightNow describes its CX (Customer Experience) Software as CRM's Big Brother

The company believes its products/solutions deliver customer experiences that build loyalty, drive revenue, reduce costs and increase efficiency. RightNow describes CX as: a comprehensive customer experience solution for consumer-centric organizations to enable interactions across web, social, and contact center touch points

Why Buy?

- Rapidly growing revenue and income
- Stable and Diverse base of clients
- Companies that switch to CX software reduce costs and improve efficiency.

What they do:

RightNow Technologies is coming after Salesforce.com and other CRM providers with its Customer Experience (CX) SaaS. Delivering a different approach to great customer experiences that create loyalty, grow sales and increase efficiency. CX is not a new name for CRM. It is built from the ground up for consumer organizations and puts customers at the center of the experience. CX marks the shift from solutions that focus internally on operational efficiencies to solutions that focus externally and deliver superior customer experiences that drive revenue. The company focuses on Web, Social, and Contact Centers.

The company states that: "CRM was created to help organizations manage the internal business processes related to customers, specifically sales automation processes for field sales organizations. CRM helped companies create operational efficiencies by coordinating sales and customer data. However, the internal focus of CRM often left the consumer out in the cold. "

Furthermore: "The reasons why CRM has left the consumer unfulfilled are clear. First, consumers don't want to be managed, they want to be engaged in an experience that works for them. They want to find you, buy from you, use your products and services and get support. Second, CRM amplified the complexity of internal systems, processes and procedures, crippling an organizations ability to rapidly adapt to the dynamic needs of consumers."

Scanning the company website reveals a list of well known clients, including: Overstock, iRobot, British Airways, Electronic Arts, Opentable, MySpace, Travelocity, numerous Financial companies, government branches, and universities.

Notes:

Company had its IPO in August of 2004, in which it raised some $40 million after expenses.

CEO and Co-Founder Greg Gianforte and his wife control approximately 25% of the stock.

All insiders control 31% of the voting power.

The company counts 1,900 customers, from all types of industries: technology companies, telecommunications, government entities, retail, entertainment, travel and financial companies.

No single customer accounts for more than 10% of revenue (diversity!)

Roughly 1/3 of all revenue comes from outside the United States

Recently they have signed or renewed some well known companies recently: Yahoo Japan, Toyota, Live Nation, New Balance, and a few others

The company has made some acquisitions over the years since its IPO. RNOW has spent $15.6 million for 3 acquisitions in May of 2005 and 2006, and September 2009

Competitors:

As you might expect, the company shows a virtual laundry list of competitors: Microsoft, Oracle, SAP, BMC Software, Liveperson, salesforce.com, eGain Communications, nGenera, Parature, ATG

Financials:

The company recently reported Q2 Earnings:

Revenues increased 20% year-over-year to $43.5 million. Recurring revenue increased 27% to $34.7 million. EPS was .09 for the quarter, nudging ahead of the .08 street consensus.

Cash Flow from Operations was $4.014 million in the 2nd quarter, and $7,525 Million for 6 months ended June 30th.

The balance sheet is solid as well with approximately $100mln in Cash & Equivalents. Not bad for a company with a $500 million market cap.

Revenues have climbed from $67.944 million in 2005 to $115.395mln in 2009.

RightNow has done a good job of lowering its operating expenses over the last 3 years.

As a percentage of revenue operating expenses were:

2007: 83.6% of revenue
2008: 70.8%
2009: 66%
2010: 65% (through the first 6 months)

And no coincidently, the company was profitable last year.

Guidance for 2010 calls for:

$175-180 million in revenues, and .40-.45 in Eps. That would be 52% revenue growth in 2010 over 2009.

That .45 of Eps gives us about 34.5x P/E on 2010 Earnings. Street estimates call for .66 in 2011, giving us a 23.5x forward multiple. Quite reasonable if they do grow earnings 46% from 2010-2011.

3rd Quarter guidance:

Revenue is expected to be approximately $45.0 million. Third quarter net income per share is expected to be approximately $0.12.

Rule Breaker Risk Rating:

I tally 8 "No's" placing it at the Moderately Low Risk Ranking. (Your mileage may vary)

Things to watch:

Increased competition

Further expansion into overseas markets

Customer retention and satisfaction

Capital expenditures – RNOW will need still need to spend plenty of money on R&D, sales, and marketing

Recurring revenues should lead to improve margins and greater cash flow

As the company continues to excel, it will probably become an attractive takeover candidate for one of its deep pocketed competitors.

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