For the fourth quarter ending December 31 2004, the hosted CRM provider posted revenue of $17.7m and delivered a profit of $1.3m compared to a loss in the year ago quarter of $1.4m.
For the full year, revenue was up 72% to $61.8m, delivering a profit of $3.4m rather than a loss of $4.1m last year.
Founder and CEO Greg Gianforte attributed the improvement to the ongoing acceptance of the on-demand model and disenchantment among organizations with software vendors over-promising and under-delivering, plus the continuing opening up of the SME market sector.
We enable customers to try before they buy. They can see the business value prior to making a significant investment and this is accelerating the adoption of the product, he said. The on-demand model eliminates over 80% of the ownership costs so we can address companies who previously have been unable to afford CRM.
One effect of the increased acceptance of on demand is an increasing adoption within larger companies. 40% of RightNow’s customer base has annual revenues of over $1m. Larger companies have watched the smaller companies prove the concept and are now coming on board.
Like all hosted vendors, including Saleforce.com, SalesNet and NetSuite, RightNow is undergoing huge growth, way above the CRM industry norm. Salesforce.com delivered 82% revenue growth year on year when it reported its Q3 financials.
However, they are also starting from a low base, which makes it easier to achieve high growth rates and also raises the question of whether it is sustainable. Used to high levels of growth the market was unimpressed with RightNow and the share price dropped by around 9% during the day following the results announcement.
Gianforte is convinced that there is plenty of scope for growth: Last year the overall CRM market was worth $7m to $8m worldwide and we did $62m. There is a changing of the guard from on premise to hosted delivery and we are at the beginning. There is a lot of runway left, he said.
Nevertheless the forecast for Q1 2005 is $18m to $18.3m, and $80m to $84m for the full year, which is a significantly lower growth rate than was delivered throughout 2003. Financial analysts are estimating growth of 66.7% next year.
