ClickSoftware (CKSW) – Part 1 - Introduction

ClickSoftware is primarily a Workforce and Service Optimization software solutions provider based out of Israel. Before the disappointing 2007 Q3 results the stock traded at a 52-week high of $6.84. The shortfall in revenue translated into a significant pullback and the stock now trades at about 30% below that peak. Even after the pullback, the stock returned 60% in the last year and over the last 5 years the stock price soared 20 times. This performance however is overshadowed as the stock trades about 35% below the price per share at the time of its IPO in June of 2000. Here is a look at the company’s financials over the years:

Year	2007(Projected)	2006	2005	2004	2003	2002
Revenues	$41M	$32.43M	$24.08M	$22.71M	$22.41M	$15.75M
Software license	42%	37%	34%	47%	47%	45%
Services	58%	63%	66%	53%	53%	55%
R&D Expenses	14%	13%	13%	12%	9%	18%
Net Income (loss)	$0.12	$0.08	$(0.07)	$0.03	$0.06	$(0.40)

Revenue has more than doubled in the last 5 years giving it a compounded annual growth rate (CAGR) on a revenue basis of about 15%. 2006 saw a revenue growth rate of about 35% and 2007 growth is expected to be slightly below that level. ClickSoftware has managed to be only marginally profitable over the years. It is projected to have a net income of $0.12 per share this year and close to $0.20 per share next year. That level of profitability will result in a forward PE of 24 at the current price. They are expected to grow at a 30-35% revenue and earnings growth going forward.

Software license as a percentage of total revenue has consistently clocked in below 50%. It dropped as low as 34% in 2004 before rebounding to the current run rate of 42% for fiscal 2007. To see margin improvement, it is imperative that management focus on driving that number up to the 75% range to be allied with highly profitable software enterprises.

ClickSoftware (CKSW) Analysis:

1. ClickSoftware (CKSW) - Part 1 - Introduction.
2. ClickSoftware (CKSW) - Part 2 - Business Issues.
3. ClickSoftware (CKSW) - Part 3 - Outlook.