CARY – Revenues have been flat or declined for five consecutive years at software giant SAS, something that would make any public company executive cringe. But SAS is privately held by billionaires Jim Goodnight and John Sall. And the payoff – renewed growth – may be at hand as they have continued to invest in new and emerging technologies such as artificial intelligence and cloud computing.
Buoyed in part by a growing partnership with Microsoft, SAS reportedly improved revenues by more than 7% in the first quarter. The company also has remained profitable for 45 years, dating back to its founding in the days of Goodnight and Sall as educators at N.C. State. A recently launched marketing campaign also may add to the forward momentum.
Even the fact SAS noted it remained profitable in its new annual report with revenues of $3 billion came as a surprise to some, including Goodnight. In an interview a year ago as the COVID-19 pandemic ravaged the global economy, Goodnight – the CEO – told Bloomberg news SAS might lose money. But he also noted that SAS was debt free, had built up reserves over its many years of profitability, and was ready to weather COVID.
Asked about revenue growth, a SAS spokesperson noted: “As you know, we typically do not respond to rumors. I can confirm that we recorded revenue growth in Q1.”
Talk about the revenue surge broke Monday as SAS held an embargoed news briefing with reporters in advance of today’s SAS Global Forum, the largest SAS user event of the year, with attendees from around the world joining to hear about the latest products and developments.
Goodnight delivered the opening keynote of the conference, and noted that the world changed in 2020, including the acceleration of a trend which he believes the company is well-suited to address: the increased use of data and analytics to “turn insight into action.”
SAS responded to the spread of the global coronavirus pandemic, finding ways to “push the boundaries of what is possible,” said Goodnight, noting that the company moved to assist hospitals through the analysis of data, and that the company’s native cloud program Viya will “help us return to normal, return to the office, bring us back to entertainment and sports.”
An additional area of opportunity that Goodnight highlighted in the keynote address: how analytics can be used to aid insights into areas like mental health service delivery, including how to assess what is working or what isn’t, to evaluate policies and programs, and to analyze data from multiple sources that permit and support further innovation.
Another good sign for the company: SAS continues to hire both at its headquarters campus where several thousand people already work and around the world, the spokesperson points out.
After reviewing annual reports and other sources for information, WRAL TechWire asked SAS about revenues. Here are company figures dating back to 2016 with some comments from the spokesperson:
- 2016, $3.2 billion
- 2017, $3.24 billion
- 2018, $3.27 billion
- 2019, $3.1 billion (context: SAS revenue in 2019 was relatively flat, growing 0.5% in constant currency. In USD, SAS revenue was $3.1 billion, reflecting accounting and pricing changes, and the impact of exchange rate changes.)
- 2020, $3 billion
NCSU economist Dr. Mike Walden doesn’t envy Goodnight and Sall – confirmed by SAS as the company’s only shareholders with Goodnight owning two-thirds – for the challenges they face, even if the firm isn’t subject to shareholder pressure. In real money terms, Walden points out, inflation means SAS revenues are actually down.
“While inflation has been modest, the compound inflation rate from 2016 to 2020 was 7%, not a trivial number,” Walden tells WRAL TechWire. “So, just to keep up with inflation, 2020 revenues would needed to have been $3.4 billion. The fact that revenues were, instead, $3 billion, would be considered a disappointment.”
Companies with stagnant revenue growth can remain competitive by managing personnel costs through normal attrition and by increasing operational efficiency, said Greg Brown, Kenan Institute Professor of Finance. “2020 was an unusual year so it is hard to know how to interpret their performance,” noted Brown. “As a private company they are not required to disclose the detailed financial one would typically use to understand how the business is doing.”
SAS has emerged over the years as a highly praised, very successful global leader in data analytics. And it is investing some $1 billion over several years in AI plus the cloud. Its partnership with Microsoft a year ago demonstrates SAS is hardly standing still in research and development. And earlier this year SAS acquired Boemska, a company at the forefront of low-code or no-code development.
Yet Walden points out SAS is hardly alone at pushing the frontiers of data.
“There are now several rivals to SAS’s data management and data analysis programs,” Walden says. “With data storage and data analysis a more important element of business management, SAS no longer has the field to itself. My guess – repeat – guess – is there are discussions within SAS to improve its competitive position. If SAS was a public company, I would expect its share price would have been under pressure.”
SAS responded to COVID with a number of moves to remain in the black, the spokesperson notes.
“Even though 2020 was full of surprises, we adjusted quickly to keep our employees safe – and focus on helping our customers through a difficult time. We found ways to use data to fight the virus and create new strategies to keep society moving forward,” she explains.
“I’m proud to report that SAS maintained its uninterrupted streak of profitability in 2020. We recorded revenue of $3 billion, influenced by our innovation in analytics, artificial intelligence, cloud and IoT. We saw industries like financial services, fraud and risk thriving. We are in a great position in the market. We have 45 years of uninterrupted profitability, even during a global pandemic. And we have started 2021 strong, recording revenue growth in Q1.”
SAS also is moving on from the departure of Oliver Schabenberger, its chief operation officer and viewed as a likely successor to Goodnight, in December. No new COO has been named, but SAS has a succession strategy still in place with a “strong bench” of talent, the spokesperson says.
R&D investment remains strong
When times are tough and budgets are tight, executives are tempted to cut research-and-development spending. But Goodnight believes strongly in R&D and has touted SAS investments. Those have continued at high levels – nearly double those of rivals in software, according to Statista.
“We still reinvested 27% of revenue back into R&D, which is higher than the percent of revenue that our competitors reinvest,” the spokesperson said.
SAS benefits in some ways, as it is not required to answer to outside investors, said Brown. “This can be a bad thing if it makes the company complacent, but it also allows for potentially taking a longer-term approach to strategy and investments.”
SAS also has made some adjustments in its operational spending, including an estimated 100 layoffs it said were made to accelerate digitalization of the company. SAS also outsourced its on-campus daycare, a high-profile benefit for employees.
However, the company remains among the most highly rated as a place to work and has avoided mass layoffs or cuts. So how has the firm remained profitable?
“SAS remains debt-free, for starters,” the spokesperson explained.”Additionally, we are very efficient with costs. For example, in 2020 we significantly reduced costs associated with travel and live events.
“We are in a great position in the market. We have 45 years of uninterrupted profitability, even during a global pandemic. We have already seen a very strong Q1.
“And, while we are in a cloud transition era, we are committed to our on-prem customers. In fact, 97% of our customers are still on premises right now, and we won’t just leave them behind. So, while this may impact our growth short-term, our customers will succeed. We have a turn-key platform to help them in their cloud transition, and we are meeting them where they are.
“We are confident that SAS is in a great position to take advantage of the current and future landscape to compete with the top players and to ultimately thrive.”
SAS also remains highly rated by analysts covering the data analytics industry, she added.