SciQuest shares dropped 12 percent Friday after the Cary software company failed to close a number of large contracts in the third quarter, an issue that also plagued it in the first quarter of this year.
While SciQuest increased the number of sales transactions it closed by 40 percent compared with the third quarter of last year, CEO Stephen Wiehe acknowledged in a conference call with analysts that earnings in the quarter were primarily driven by smaller deals.
“Similar to what we experienced in the first quarter ... a number of large suite deals were delayed in the third quarter, causing bookings to fall below expectations,” Wiehe said.
SciQuest has been seeking to achieve a better mix of big and small deals to mitigate the fluctuation in its earnings. Investors have expressed frustration with company executives about the volatility of its quarterly earnings, and are looking for proof that it is correcting the problem.
The company had revenue of $25.9 million in the third quarter, up 10 percent with the same period last year. Net income was $2 million, or 7 cents per share. While those results were in line with Wall Street expectations, SciQuest provided weak guidance for its fourth quarter.
SciQuest’s procurement technology allows customers to more efficiently buy goods and services online. Its customers include casinos, universities, drug makers and governments.
The company has hired a new sales team within the past 12 months to help improve its ability to land new business.
“We don’t see this as a competitive problem; we see it more as an execution problem, which we’re taking some fairly aggressive steps to correct,” Wiehe told analysts. “So, if I was an investor, my question would be well, is this a problem that’s going to continue longer-term? I don’t believe it is.”
Wiehe was also asked whether SciQuest, which has $124 million in cash, would hold off on doing any acquisitions while it focuses on improving its sales efforts. Wiehe said the company has explored several deals but hasn’t felt “comfortable with the state of the company so we’ve passed on those.”
Wiehe has been CEO and president of SciQuest since 2001. During that period, the company was taken private in a 2004 management buyout, and then returned to the public markets in September 2010.
The company’s shares closed Friday at $14.91, down $2.02. The stock is down 47 percent this year.