A couple weeks back, I wrote a post that offered up three things to expect from Ariba’s earnings announcement later in the month. Yesterday, Ariba announced earnings in a report that proved once and for all that the largest best-of-breed vendor in the procurement space can achieve profitability and continued SaaS revenue and customer growth. But from a Spend Matters perspective, I’m less interested in the EPS numbers and more curious about what their earnings report signals for the market and how Ariba’s solutions are fairing in the overall competitive marketplace.
In this initial post in this series looking at Ariba’s quarter — check back next week for additional commentary in the second and third installments — I’ll look at the accuracy of my earlier predictions for the quarter. But first, here are the highlights from the earnings announcement and call. To start, Ariba posted a healthy 16% year-over-year increase in their subscription software revenue (i.e., SaaS) business. Because of how revenue recognition for SaaS contracts works, this is the equivalent to at least a 30%+ growth in a traditional software environment (potentially as high as 40% or more). In addition, Non-GAAP revenue came in at $87.1 million for the quarter including, generating some $24 million of operating cash flow. Ariba also got some blood money during the quarter in the form of “$7 million from Emptoris” as part of a patent litigation settlement.
But below the numbers surface, how did Ariba really perform? The first prediction I previously suggested was to look for “significant customer momentum” in the January to March time period. Here, I noted that we should look for “a healthy number of new signed deals (in relation to other quarters from the same period for Ariba)” and that “the amount of new deal activity I’ve seen in general in the space has continued to pick up nicely, gaining significant steam in Q4 of last year, which I believe will carry into the first quarter of this year.”
How did Ariba’s actual performance stack up to this prediction? In the quarter, Ariba “added 35 new customers … and closed 13 transactions over $1 million, including 7 deals with a software component greater than $1 million. On-demand product deals totaled 194.” This compares with the previous quarter that saw Ariba close 248 unique customer deals, add 35 new “named accounts” — i.e., new customers — and sign 192 on demand transactions, not to mention six software deals over $1 million…