Click Software (CKSW): Israeli tech

by Vivian Lewis, editor Global Investing

For our latest recommendation, we enter into the world of software again with an Israeli small cap: Click Software (NASDAQ: CKSW).

Its software lets companies and government entities manage their workforce and customer service by fully integrating call centers, customer relationship management (CRM), scheduling, location tracking, and mobile telephony links with workers in the field and their waiting customers.

There are millions of field technicians out there and cutting waste in their schedules, travel time, and overtime appeals to their employers. While so far CKSW has mostly sold to big big private companies I think others, such as police officers, fire fighters, ambulances, and even the military would like to buy the system.

I just met its CFO, Shmuel Arvatz, at the Oppenheimer conference on Israeli equities. Mr. Arvatz figures there are over 9 mn field engineers working for over 8000 companies. It could sell $2000 in licenses, services and support per field engineer to companies with over 500 service personnel. That comes to $18 bn.

Then you can add another $12 bn by selling systems to smaller companies with 100 to 500 service personnel. And the more they have wireless access to a full service management program like Click Soft, the more they will sign up.  

The system is for big companies in fields like telephony, energy and utes, computers, home service, capital equipment, and public service.

But thanks to resellers and integrators (like SAP, IBMAccenture aiming at the giant corporations), and Microsoft, revendor to the middle market, there are future sales coming even from smaller outfits.

Its newly available Service Tycoon 9 web-based service software is for small and midcap firms, acquired with the purchase of AST in NYC last year. Services now account for 70% of the world economy and even firms making goods find that service accounts for a quarter of revenues and as much as half of profits.

There is a huge market for integrated optimisation systems, and last year the CKSW customer crew sales rose 17%, full speed ahead despite the recession.

Despite acquisitions (of $5.7 mn) it generated $7.5 mn in cash in 2009. I can see the appeal for public services like my family cops in Britain and Spain, plus fire fighters, ambulances, even the army.

So far, Clickcsoft is picking the biggest fruit, with 150 top corporate customers and a staff of 300. Last year it did some mini-takeovers in India, Israel, and New York City.

Its CAGR over the last 3 years is 24%. Over the 11 years since it was bounded the CAGR has been 200%. Having earned $55 mn last year its guidance is $71.5-74.5 mn in 2010, up 17 to 22%.

As I have hinted already, the customer base is prettty concentrated: 36% utes, 32% telcos, with the rest companies in infrastructure of some sort. By region it is 46% in Europe with 54% divided between Asia, the USA, and the rest of the world (even including Israeli; I didn't realize Israel believed in customer relations.)

By line of business about 2/3 of reveneus came from services and the rest from licensing. The latter is likely to grow faster this year than in 2009 said Mr. Arvatz.  

CKSW had cash of just under $35 mn at the close of 2009 and zero debt. It has offices in Israel, North America, Europe, India, South Korea and Australia. Once again it wins the boffin prizes, rated No. 2 by Gartner for "the most complete line of products for technicial scheduling and optimization of any competitor, and the configuration and customization tools to customers are extensive."

It ranked No. in mobile field service by Aberdeen's Mobile Field Service AXIS "based on value and market readiness" thanks to its R&D and new modules.

It doesn't matter if these prizes are deserved. When a big company shops for a system it will look at the rankings. Yes there are plenty of competitors, one of whom may choose to buy it out including ones it works with like Oracle or SAP.

There are ever-higher barriers to entry as CHSW creates  more closely integrated systems. Yes it is expensive with EPS of 41 cents and a price of $7, a p/e ratio of 17. Yet today you can buy the ClickSoftware stock at $7 which is where it traded at its Q launch in 2000 and in 2007.

Learn more about this financial newsletter at Vivian Lewis' Global Investing.