The last two years have seen a surge in demand for digitalisation and cloud adoption.
More companies are now realising the importance of cloud computing and the benefits it brings.
Employees are also increasingly embracing hybrid work practices that allow them to achieve a work-life balance.
These shifts have resulted in many software-as-a-service (SaaS) companies doing well and growing their businesses at a rapid clip.
If you’re a growth investor and are looking for promising SaaS companies, here are four you can consider adding to your investment watchlist.
Zoom Video (NASDAQ: ZM)
Zoom Video is a video conferencing software company that operates a cloud service providing clients with a host of communication needs.
The company saw increased adoption of its solutions in the last two years and reported a stellar set of earnings for its fiscal 2022 (FY2022) ended 31 January 2022.
Revenue surged by 55% year on year to US$5.1 billion while net profit more than doubled from US$671.5 million to US$1.38 billion.
The momentum has carried over into the first quarter of FY2023 (1Q2023), with revenue rising by 12% year on year to US$1.07 billion.
Net profit, however, nearly halved year on year to US$113.6 million due to higher expenses and a one-off loss on investments.
Zoom enjoyed a 24% year on year jump in enterprise customers to 198,900, with the net dollar expansion rate for this cohort hitting 123%.
The company recently acquired Solvvy to boost its contact centre offering and accelerate its expansion into conversational artificial intelligence.
It also announced a collaboration with Genesys, a cloud leader for customer experience, to integrate both companies’ software to better solve customer needs.
Okta (NASDAQ: OKTA)
Okta is a leader in identity management software and offers a cloud service to help its clients manage access privileges and rights.
The company reported an impressive set of numbers for FY2022 as more clients adopted its identity management services.
Revenue surged by 55.6% year on year to US$1.3 billion while gross profit climbed 46.3% year on year to US$903.8 million.
For 1Q2023, revenue growth was even more impressive at 65% year on year to US$415 million.
Subscription revenue made up the bulk of total revenue and increased at 66% year on year.
Okta’s subscription backlog was 43% higher year on year at US$2.7 billion, and the company enjoyed a consistently high net retention rate of around 123%.
Okta estimates its total addressable market to be US$80 billion, giving the company significant headroom for further growth.
Salesforce.com (NYSE: CRM)
Salesforce is a cloud-based provider of customer relationship management (CRM) software that covers sales, customer service, analytics, and marketing automation.
Revenue for FY2022 increased by 24.7% year on year to US$26.5 billion while operating profit rose 20.4% year on year to US$548 million.
Like Okta and Zoom, Salesforce also saw its 1Q2023 revenue climb, up by 24% year on year to US$7.4 billion.
The company’s remaining performance obligations (RPO) stood at US$21.5 billion, up 21% year on year.
Salesforce also generated US$3.5 billion of free cash flow for the quarter.
For FY2023, the company expects revenue to grow around 20% year on year to around US$31.75 billion.
It estimates that the CRM total addressable market should grow by 13% per annum to hit US$284 billion by 2026.
Blackline (NASDAQ: BL)
Blackline is a cloud software company that offers a cloud-based service to help clients automate and control the financial close process.
The company’s revenue rose 21% year on year for its fiscal 2021 (FY2021) ended 31 December 2021.
It also generated free cash flow of US$56.3 million for that year.
The good news continues to flow in 1Q2022 with revenue rising 22% year on year to US$120.2 million.
Blackline added 72 net new customers to end the quarter with 3,897 customers.
The company achieved a net dollar retention rate of 110% for the quarter and expanded its user base to almost 338,000 users.
Blackline is recognised as an industry leader and has won awards in the accounting, financial close, and accounts receivable categories from TrustRadius, a software peer review platform.
Frost and Sullivan, an independent research company, has identified a US$17 billion total addressable market that Blackline can tap on, comprising more than 165,000 potential worldwide customers.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
