ClickSoftware Offers Value Amid the Bust: Best in Class

BURLINGTON, Mass. ( TheStreet) -- ClickSoftware Technologies ( CKSW) appears to be in the right place at the right time, as companies are being forced to do more with less.

But for ClickSoftware, a provider of customer relationship management (CRM) software, it's more than just luck. It's only a coincidence that the company is helping businesses with reduced headcounts perform more efficiently in the aftermath of the worst recession the world has seen since World War II.

ClickSoftware's management team, lead by Chairman and CEO Dr. Moshe BenBassat, has walked a tightrope above the market mess, and a 150% surge in the company's share price over the last year is a testimonial to its performance. After all, it's not easy helping clients optimize and manage costs when you're selling a service that could also be on the chopping block.

"The crisis happened at almost the optimal time for us," BenBassat said in an interview with TheStreet.com. "Companies have to cut costs to satisfy shareholders by showing profitability, but they still have to offer the same amount of quality they've shown in the past. Demand may be shrinking for them, but in the recession, demand is shrinking for everyone, including their competitors. That's why service is such a critical component."

ClickSoftware's stable of customers includes some of the best known consumer-related names, such as Best Buy ( BBY), Caterpillar ( CAT), Hewlett-Packard ( HPQ), Xerox ( XRX), Vodafone ( VOD) and Deutsche Telekom ( DT), among many others.

"We have the largest number of clients using our software, and they're the who's who in the world economy," BenBassat said. "So by midyear last year, we emerged clearly as the worldwide leader in this space."

ClickSoftware's service chain optimization and field service software is versatile, helping a wide variety of companies in many different ways. The software has helped EnergySouth's technicians complete an additional 1.5 jobs per day while cutting customer scheduling windows from four to two hours. Diebold ( DBD) was able to reduce overall travel distances by more than 300,000 miles per year. The Ohio Department of Commerce was able to increase the number of daily inspections by 25% to 30% while reducing gas and mileage overhead, due to more efficient street level routing.

While helping others with managing their business is a full-time chore, ClickSoftware has done a remarkable job in its own house by carrying no debt while lining its coffers. As of the end of the third quarter, the company increased its cash and cash equivalents level to $18.81 million, more than doubling from year-ago levels.

"For the first nine months of 2009, the company has generated nearly $7 million in cash from operations, up nearly seven-fold over the same period of 2008," Matthew Weiss, analyst with Maxim Group, wrote in a research note.

This type of frugal, thoughtful management has lead ClickSoftware to make equally frugal, thoughtful acquisitions. It has expanded further into three separate areas with the purchases of the workforce management business of India's Manchitra in April, the U.S.'s AST in July, and Israel's AiPoint in October, all for a combined $5.85 million in cash. In return, the company has further diversified its revenue streams.

"We've been generating cash almost every quarter for the past few years, so there was no need to raise money," BenBassat said. "It's all about finding the right target and whether it's good for our shareholders."

Maxim Group's Weiss praises the acquisitions for enhancing the company's delivery capabilities and for targeting new markets. "AiPoint strengthens the company's shift planning; AST positions the company at the very low-end of the market with a software as a service offering; and Manchitra enables the company to capitalize on the opportunity in India and more effectively leverage its SAP ( SAP) relationship," Weiss wrote.

BenBassat also trumpets ClickSoftware's partnerships with other software makers. Accenture ( ACN) and IBM ( IBM) have been systems integration partners for ClickSoftware's ServiceOptimization Suite. Additionally, as Weiss alluded to, ClickSoftware has inked a global reseller agreement with SAP.

With product developments, strategic developments, partnerships and acquisitions, BenBassat offers the analogy that ClickSoftware has transformed from a one-engine aircraft prior to 2008 into a jet flying with four powerful business engines.

"We've added a mobility engine to address the needs of a mobile workforce," he said. "We've added a shift scheduling engine. We've expanded the client side to include not just large clients but small and medium ones as well. All of this has essentially given us an airplane with four growth engines. And with a four-engine airplane, we can fly higher."

In its third-quarter report, ClickSoftware also offered guidance for the first time in a year, saying it expects to achieve fourth-quarter revenue of $16 to $16.7 million, representing 13.5% to 14.1% growth over the year-ago quarter. That means ClickSoftware is expecting full-year revenue of $60 to $60.7 million, representing year-over-year growth of 14.7% to 16.1%.

"We're approaching the end of the year, and the picture was clearer with only one quarter left. We felt we could give some sort of a conservative estimate that we felt was very likely or for sure," BenBassat said.

For investors, the success of BenBassat and his management team has translated into strong performance in key metrics. TheStreet.com Ratings maintains a buy rating on the company's stock, lauding a low price-to-earnings (PE) ratio compared to other competitors, an equally low price-to-earnings/growth (PEG) ratio, elevated earnings and sales growth as well as ClickSoftware's ability to cover any short-term cash needs.

The stock has been trading well off of its 52-week high of $9.18, which it reached on July 23. However, at $5.74, ClickSoftware shares are up more than 205% in 2009, and they still could offer investors a value based on price-to-earnings ratios. The company's trailing P/E ratio of 12.61 and forward P/E ratio of 13.78 are both below the average P/E ratio of the S&P 500, which is estimated to be 19.81.

ClickSoftware's corporate culture is built for this type of success, and that can be attributed to BenBassat's background in academia. Previously, he was a professor at Tel-Aviv University, and has also held academic positions at the University of Southern California and the University of California in Los Angeles.

"As a scientist, it gave me the initial help to build the technology foundation of the company," BenBassat said. "But as an educator, it helped me to manage people in a soft manner, but while still being decisive and assertive in getting things done. It has helped build spirit and culture throughout the company in a cost-effective manner."

But BenBassat isn't content with simply doing the same going forward. During ClickSoftware's user event this year, he said the goal is to have the company become the " Google ( GOOG) of workforce management." William McNeill, an analyst with AMR Research, called the statement a "little bombastic," but said the point was well understood.

"No longer satisfied with just deals in field service, ClickSoftware will continue to knock down the bowling pins and apply its optimization specialties to other related scheduling problems," McNeill wrote in a research note. "We think the company will succeed."

-- Written by Robert Holmes in New York.

Follow Robert Holmes on Twitter and become a fan of TheStreet.com on Facebook.