SQI

SciQuest, Inc. (SQI)

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SciQuest (SQI)

Q1 2013 Earnings Call

April 30, 2013 4:30 pm ET

Executives

Jamie Andelman - Investor Relations Director

Stephen J. Wiehe - Chief Executive Officer, President and Executive Director

Rudy C. Howard - Chief Financial Officer, Principal Accounting Officer and Secretary

Analysts

David E. Hynes - Canaccord Genuity, Research Division

Terrell Frederick Tillman - Raymond James & Associates, Inc., Research Division

Matthew J. Kempler - Sidoti & Company, LLC

Peter Lowry - JMP Securities LLC, Research Division

Jeffrey Van Rhee - Craig-Hallum Capital Group LLC, Research Division

Chris Koh - Stifel, Nicolaus & Co., Inc., Research Division

Brendan Barnicle - Pacific Crest Securities, Inc., Research Division

Matthew Pfau

Jeffrey L. Houston - Barrington Research Associates, Inc., Research Division

Patrick D. Walravens - JMP Securities LLC, Research Division

Presentation

Operator

Good afternoon. My name is Kirk, and I'll be your conference operator today. At this time, I'd like to welcome everyone to SciQuest's First Quarter Results Conference Call. [Operator Instructions] Thank you. I would now like to turn the call over to Jamie Andelman, Director of Investor Relations. Jamie, you may now begin.

Jamie Andelman

Thanks, Kirk, and good afternoon, everyone. Thank you for joining us to review SciQuest's first quarter 2013 results. Hosting today's call are Stephen Wiehe, SciQuest's Chief Executive Officer; and Rudy Howard, our Chief Financial Officer.

On today's call, Steve and Rudy will make prepared remarks, after which, we will hold a question-and-answer session.

During this call, we may make comments related to our business that are considered forward-looking statements under federal securities laws. Words such as, but not limited to, plan, expects, anticipates, believes, goal, estimate, potential, may, will, might, could and similar words will identify forward-looking statements. These statements reflect our views only as of today and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC's EDGAR system and our website. SciQuest expressly disclaims any obligations or undertakings to publicly release any updates or revisions to any forward-looking statements made herein, except as required by law.

Additionally, we will be discussing non-GAAP financial measures during this conference call. When possible, SciQuest provides all information required in accordance with GAAP, but believes evaluating its ongoing operating results may not be as useful if an investor is limited to reviewing only GAAP financial measures. Please see today's press release for a reconciliation of the non-GAAP financial measures for which we are able to provide the most directly comparable GAAP financial measures. The press release is available in the Investor Relations section of our website at www.sciquest.com. Lastly, please note that a streaming replay of today's call will be posted later tonight.

And now, I'd like to turn the call over to Steve.

Stephen J. Wiehe

Thanks, Jamie, and hello to everyone joining us today. We had a great Q1 across multiple fronts and entered the second quarter with solid momentum. During the first quarter, we made progress against each of our 2013 goals. Specifically, we added 10 new customers. We made further operational progress that will help drive and improve our non-GAAP operating margins in the future, executed against our cross-selling goals and continued to enhance our software suite. In the first quarter, non-GAAP revenue was $21.3 million, up 48% from the first quarter of 2012 and $200,000 above the high end of the guidance range. Results benefited from solid operational and sales execution, which we achieved amid market conditions that have remained fairly consistent over the past year.

Revenue growth was also positively impacted by the 2 acquisitions we made in the second half of 2013 (sic)

. During the quarter, we added 10 customers including the State of Ohio, Princeton University, Baxter BioScience and Shore Memorial Hospital, which represent a great balance across our market segments. We also generated strong cross-selling activity and sold a healthy mix of suite and point solutions.

Last year, the Ontario University Procurement Management Association (sic) [Ontario University Purchasing Management Association], which is known by its acronym of OUPMA, made SciQuest the preferred provider of spend management solutions to its more than 20 universities and college members. To win the deal, we went through a competitive process and dislodged the large incumbent provider. The agreement makes it easier for OUPMA members to purchase our software because there are predefined terms and pricing as well as documented due diligence that can be leveraged.

During the quarter, we attracted the first 2 OUPMA customers under the agreement, the University of Ottawa and the University of Western Ontario. We believe that over time, this relationship could eventually mirror the expansion that we've seen in some U.S. school systems, such as the University of North Carolina and the University of California systems.

On the integration front, we now operate as one cohesive organization that includes Spend Radar and SciQuest Canada, formerly known as Upside Software. For example, we've migrated the development team in Canada to our agile process in the first quarter, and we're currently doing the same at Spend Radar. We have also implemented unified reporting structures in the development services and client support teams across locations. As a result, all customers have a single point into the company to get assistance for any solution.

In addition, we are staffing development teams across geographies, which enable us to better leverage our existing technical employees. It also allows us to expand the area from which we can hire new developers.

Read the rest of this transcript for free on seekingalpha.com