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5 US Software-as-a-Service Companies Delivering Consistent Growth

When it comes to growth stocks, one category stands out for the predictability of its revenues.

I am talking about the software-as-a-service (SaaS) sector where companies earn the bulk of their revenue from offering subscription services to their platforms.

SaaS companies sign long-term contracts with their customers and build up a backlog that will slowly be recognised over time.

With such a business model, investors can track their future revenue to determine if they are growing, or not.

Here are five US SaaS companies that have delivered consistent growth.

Salesforce.com (NYSE: CRM)

Salesforce is the number one player offering artificial intelligence (AI) infused customer relationship management (CRM) through its Einstein 1 unified platform.

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For its fiscal 2024 (FY2024) ending 31 January 2024, Salesforce reported an 11.2% year on year increase in revenue to US$34.9 billion.

The CRM specialist’s operating profit soared nearly five-fold year on year to US$5 billion while net profit came in at US$4.1 billion, up sharply from just US$208 million a year ago.

The company also generated a positive free cash flow of US$9.5 billion, 50% higher than the US$6.3 billion churned out a year ago.

In line with the strong results, the SaaS company has initiated a maiden quarterly dividend of US$0.40 per share.

It also announced an increase in its share repurchase program by US$10 billion.

Salesforce’s remaining performance obligations (RPO) were up 12% year on year to US$27.6 billion.

The company estimates that FY2025’s revenue will come in between US$37.7 billion to US$38 billion, representing a year-on-year increase of 8% to 9%.

Subscription revenue looks set to grow by 10% year on year with operating margin guided at 20.4%.

Adobe (NASDAQ: ADBE)

Adobe is a software company that came up with the ubiquitous portable document format (PDF) and runs a cloud platform for its Document Cloud, Creative Cloud and Experience Cloud.

The company is also infusing AI capabilities into its various products through Adobe Sensei.

For the first quarter of fiscal 2024 (1Q FY2024) ending 1 March 2024, Adobe reported an 11.3% year on year increase in revenue to US$5.2 billion.

Operating profit fell by 43% year on year to US$907 million but investors should note that this included a one-off termination fee of US$1 billion paid to Figma for Adobe’s aborted acquisition.

Excluding this payment, operating profit would have risen by 20% year on year while net profit would have increased by 30% year on year to US$1.6 billion.

Adobe also generated a positive free cash flow of US$1.1 billion for its latest quarter.

Crowdstrike (NASDAQ: CRWD)

Crowdstrike is a global cybersecurity company delivering protection of endpoints, identity, and data through its Falcon platform.

This platform has integrated cloud modules that span IT operations management, threat intelligence services, and identity protection.

For FY2024, Crowdstrike’s revenue climbed 36.3% year on year to US$3.1 billion.

The cybersecurity firm booked a small operating loss of US$2 million but recorded a net profit of US$89.2 million, a sharp reversal from the net loss of US$183.2 million in the prior year.

Crowdstrike churned out a positive free cash flow of US$929.1 million, up 37.7% from the previous year’s US$674.6 million.

The company is aiming for revenue of US$3.9 billion for FY2025 and estimates that its total addressable market (TAM) is US$100 billion for this calendar year.

This TAM will grow to US$225 billion for the AI-native security platform sector by 2028.

Monday.com (NASDAQ: MNDY)

Monday.com runs a low or no-code platform that allows organisations to build work management tools and software applications.

For the first quarter of 2024 (1Q 2024), revenue jumped 33.7% year on year to US$216.9 million but the business incurred an operating loss of US$5 million.

Net profit, however, came in at US$7.1 million, a reversal from the net loss of US$14.7 million a year ago.

Monday.com managed to more than double its free cash flow generation to US$89.9 million from US$38.7 million in the prior year.

The company saw its customer base increase to 225,000 at the end of 2023, with an annual increase of 26% since 2019.

The business is also seeing a greater number of enterprise customers.

Those with an annual recurring revenue of US$100,000 or more jumped 55% year on year from 588 to 911.

Snowflake (NYSE: SNOW)

Snowflake runs a data cloud platform that helps organisations to mobilise their data.

Data Cloud will unite siloed data and allow it to be discovered so that customers can use diverse AI or machine learning to run analytics on it.

FY2024 saw the cloud provider’s revenue jump nearly 36% year on year to US$2.8 billion.

Gross profit climbed 41.4% year on year to US$1.9 billion but the company incurred a net loss of US$836.1 million for the fiscal year.

Free cash flow, however, improved dramatically from US$495.8 million to US$750.1 million in FY2024.

Snowflake saw its RPO jump from US$3.7 billion at the end of FY2023 to US$5.2 billion in FY2024.

Total customers grew by 22% year on year to hit 9,437 with 691 of them being Forbes Global 2,000 customers.

Customers were also spending more, with the number of customers with more than US$1 million in product revenue growing by 39% year on year to 461.

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Disclosure: Royston Yang does not own shares in any of the companies mentioned.

The post 5 US Software-as-a-Service Companies Delivering Consistent Growth appeared first on The Smart Investor.