Updated from 4:41 p.m. EDT
Strong growth in revenue and bookings in the first quarter are overshadowing
After taking a sharp hit when the earnings press release hit the wires after the close Monday, shares moved into positive territory as investors apparently considered the bookings and improvements in bookings margins.
In recent after-hours trading on Instinet, the stock was up 12 cents to $15.15, after a gain of 80 cents, or nearly 6%, during the regular session.
The business software vendor posted a loss of $440,000, or a penny a share, on sales of $24.6 million (a gain of 34%), compared with net income of $801,000, or 2 cents a share, on sales of $18.3 million in the first quarter of 2005.
Excluding the cost of employee stock options, the company would have earned a profit of a penny a share -- but Wall Street was looking for a 3-cent profit, according to Thomson First Call.
But bookings, which the company maintains is a better leading indicator of business than EPS, were up 71% to a record $37.6 million. And the company said it remains "comfortable" with its expectations of bookings growth of 40% to 50% for the year.
JMP Securities analyst Patrick Walravens expected a better EPS performance than the company delivered, but pronounced himself pleased with the growth in bookings. "If they grow bookings by 71% I'm fine with it," he said in an interview.
Walravens, whose firm has no banking relationship with RightNow, attributed the quick selloff to "traders who pulled the trigger as soon as they looked at the EPS," and added that the projected growth in bookings indicates that RightNow is "ahead of plan."
The bookings margin was 33% during the quarter, compared with "the low 20s" through most of last year, said CEO Greg Gianforte. He attributed the increase to continued expansion of the sales organization.
Average deal size (excluding four that were more than $1 million each) increased to $140,000 from $123,000 in the previous quarter.
Bookings costs, particularly sales commissions, are recognized upfront, but revenue from bookings moves to the income statement over a period of two years, which is why EPS does not give a good picture of profitability, says Gianforte.
As the company matures and revenue is recognized, earnings should improve -- if the company's model works. Investors appear to accept that argument and were even willing to forgive the company's weak earnings guidance.
Looking to the second quarter, the company expects to post a non-GAAP profit of 1 cent to 3 cents a share, on sales ranging from $25.5 million to $26.5 million. Analysts were forecasting a 6-cent profit on sales of $28 million.
For the full year, the company expects a non-GAAP profit of 16 cents to 23 cents a share on sales of $115 million to $120 million. First Call's consensus calls for a 24-cent profit on sales of $117 million.
RightNow sells on-demand customer relationship management software. Although it superficially resembles the larger and more successful
, RightNow tends to be more enterprise-oriented than Salesforce.
According to Gianforte, revenue generated by RightNow applications taking advantage of speech recognition grew revenue by 100% during the quarter.
Gianforte declined to state an exact figure, but indicated that speech recognition is a relatively small top-line contributor.