Saturday, December 17, 2005

TMS (non) fiancials

I seem to have made the quite unwise statement that I would attempt to evaluate the financials of several TMS vendors. Realizing now that I should take that statement back (entirely possible with just a quick stroke of the keyboard) and deny the whole thing, I submit the following with a few disclaimers (on top of my normal disclaimers):
1. Any and all analysis performed for this post is almost pure conjecture.
2. While I reviewed a few sources of financial data, and have made some pretty reasonable calculations and guesses, many of these calculations were based on educated guesses.
3. I actually have crunched numbers and came up with a few comparisons of profitability, revenues, total clients, total employees. I will not post these numbers since I could be so far off it would be misleading.
4. I have decided to look only at Authoria, RecruitMax, and SuccessFactors. These are private companies and difficult to get data for. For WorkStream, please visit their website here to download the annual report. It’s simply not fair to evaluate WS against “educated guesses.”
5. I have not been involved in a TMS search in the last couple quarters, and don’t have any direct information other than what is on the public internet.

Key Points:
– SuccesFactors seems to be adding clients faster than anyone else.
– Authoria seems to have the strongest base in the Fortune 1000. SuccessFactors is a very close second.
– RecruitMax may not be profitable (I don't know for sure), but is also adding clients as a fast pace. Their average clients size seems to be smaller than Authoria or SuccessFactors.
– Authoria and RecruitMax have more users that SuccessFactors, but it is impossible to tell what product those users are on. For example, my numbers for Authoria may include non-TMS products. However, I have reasonable confidence that Authoria has the most TMS employee subscriptions. RecruitMax has a pure TAS base.
– As SuccessFactor’s client base is 100% subscription based on employee headcount, each employee added is much more significant to the bottom line than for Authoria or RecruitMax.

– Success Factors has been profitable since inception in 2001. I’m not sure if they have ever taken a loss if you exclude cash infusions of about $5M/year. However, this is chump change and I’d guess that they have been turning real profits. I really can’t figure out how they have been cash flow positive since inception.
– Authoria turned a profit in FY’04. They state that they are on course to turn a profit in FY’05 as well. Obviously I don’t know how the acquisition of will affect the books (or when). Strong revenues from pre-TMS products should help them.
– Regarding RecruitMax, my best guess is that they are not profitable. R&D and acquisitions may affect profitability for a few years, but that's true for anyone in this space.
– In my only comment on WorkStream, they are clearly not profitable. You can look at their financials yourself.