News Column

Callidus Software: A Cloud Computing Play for Tech Investors?

June 28, 2014

Equities Staff

Cloud computing is one the fastest growing areas within the technology space. According to research firm Gartner, cloud computing will become the bulk of new IT spending by 2016. Software-as-a-Service (SaaS) is one of the fastest growing segments within cloud computing. In fact, it is the largest overall cloud market segment. Not surprisingly then, shares of Callidus Software Inc. (CALD) , a provider of a suite of SaaS solutions, have gained more than 80% in the past one year. Indeed, the small cap star is an excellent option for investors looking to capitalize on the burgeoning cloud computing market.

Cloud Computing is Still a Fast-Growing Market

The cloud computing market has grown significantly in the last three years. In fact the growth in cloud computing market has been so robust in the last few years that Gartner expects cloud computing to account for bulk of new IT spending by 2016.

Chris Howard, Research Vice President at Gartner, said last year that overall, there are very real trends toward cloud platforms, and also toward massively scalable processing. Howard further said that virtualization, service orientation and the Internet have converged to sponsor a phenomenon that allows individuals and businesses to choose how they will acquire or deliver IT services, with reduced emphasis on the constraints of traditional software and hardware licensing models.

Gartner expects the SaaS market to grow 19.5% from $13.5 billion in 2011 to $32.8 billion in 2016. However, the estimate could be conservative.

Callidus Software's SaaS Market Share

The SaaS market is expected to register significant growth in the next few years, which augurs well for Callidus Software, a provider of SaaS solutions.

Based in Pleasanton, California, Callidus Software is a provider of sales and marketing effectiveness and management software. The company's solutions are organized into four main product suites; Marketing Cloud, Hiring Cloud, Learning Cloud, and Selling Cloud.

Callidus also provides a full range of services to its customers, which include professional services, business process outsourcing services, maintenance and technical support services, and education services.

At the end of 2013, Callidus had more than 2,200 customers. For the last three years, none of the company's customers, which belong to a wide variety of industries, have accounted for more than 10% of its revenue.

Callidus has also entered into several alliances and partnerships with leading consulting organizations, independent software vendors and technology providers. Some of the big names the company has partnered with include Accenture (ACN) , Cognizant (CTSH) , Deloitte and TCS.      

Callidus Software's Momentum

Callidus Software has been expanding its global footprint. Recently, the company announced the opening of a regional office in Japan and Japanese product localization. The company also appointed Steven Noll as the country manager for Japan.

Commenting on the development, Leslie Stretch, President and CEO of Callidus Software, said that the company's growth in the Asia-Pacific region has been very promising. Stretch noted that the demand for sales and marketing effectiveness software is expanding rapidly.

With Callidus expanding globally, the company needs the expertise of software industry veterans. Recently, one such industry veteran joined the company's Board of Directors. Murray Rode, executive Vice President and Chief Operating Office of TIBCO Software (TIBX) , joined Callidus Software's Board of Directors in June. Rode has served TIBCO in a variety of roles for nearly two decades. Charles M. Boesenberg, Chairman of Callidus Software Board, said that Rode's knowledge and experience as COO of TIBCO will be invaluable as Callidus continues on its mission to be a top five cloud company.

Record Revenues for Callidus

In its most recently reported quarter (Q1, ended March 31, 2014), Callidus Software had registered record quarterly revenue. CEO Stretch said that the first quarter was a great start to 2014. Indeed, the first quarter saw the company record not only a record all time revenue, but also margin expansion. In addition, the company saw consecutive quarters of non-GAAP net income.

For the quarter ended March 31, 2014, Callidus Software registered revenue of $31 million, representing an increase of 21%. The company's total recurring revenue stood at $22.3 million, which included SaaS revenue of $18.2 million. On a non-GAAP basis, the company's net income for the quarter was $1.3 million, or $0.03 per share, compared to a net loss of $0.8 million, or $0.02 per share reported for the same period in the previous year.

Looking ahead, Callidus expects second-quarter revenue to be between $30.4 million and $31.4 million. For the full year 2014, the company expects its revenue to be between $127.5 million and $132.5 million.



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