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Player Avatar cottagetrees (< 20) Submitted: 3/10/2007 12:18:37 PM : Outperform Start Price: $16.18 RNOW Score: +116.08

RNOW has emerged as one of the leading customer service automation companies. The company has shown revenue growth in 35 of the last 36 quarters as of this writing in March 2006.RNOW's products are used primarily by mid to large-sized companies to help streamline customer support. RNOW's core web-self-service software allows its clients' customers to find answers to their own questions faster than it would take for them to pick up the phone and make a phone call. The product improves customer support while reducing support expenses.Contrary to what one other poster here claimed, RNOW has extremely high customer renewal rates. Based on conference call disclosures, the renew over 90% of their 2-yr subscription contracts and they renew, on average, at greater than 100% of the previous price (this means as RNOW's product line options have expanded, they finding great success cross selling their other modules to customers.RNOW was one of the first software companies to deliver their software as a hosted solution, what many now call software-as-a-service, or SaaS. They were doing this even before Salesforce.com was launched. By hosting their customer's software implementations, and making the software available over common web browsers, RNOW's clients reduce their cost of ownership because they don't need to shell out their sheckles on expensive hardware and database administrators.In January, 2006, the company changed how it recognized revenue and expenses so that their accounting structure and sales process is aligned around the idea of selling subscriptions only. While this move is going to make Q1, Q2 and Q3 year over year comps look ugly on first glance, don't be deterred. The ugly looking GAAP results mask true underlying 40%+ revenue growth and 50% free cash flow growth.Many shorts are attracted to RNOW because the business model change makes otherwise strong financial results look ugly. Investors with the savvy to see the real picture will be rewarded with a company who has amassed a proven track record of consistent 30-40% revenue growth over the last 8 years, even in times of recession.The company is somewhat more recession proof than other companies because clients are locked into 2 year contracts, and because companies can ALWAYS justify an information technology expense if it's proven to reduce costs and increase revenues, which RNOW is proven to do across thousands of successful customer implementations.

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