UNIT4 reports continued growth in revenue and profit in 2012
- Operating profit growing
- Shift towards subscription model continues
- Increasing success against “tier 1” ERP vendors
Victoria, B.C. and Manchester, N.H. (February 21st, 2013) – UNIT4 N.V., the global cloud-focused business software group listed on the Amsterdam Stock Exchange, has announced its financial results for the year ended December 31st, 2012.
Despite the difficult economic situation UNIT4, which specializes in software for businesses living in change, won a record number of deals against tier 1 vendors and is increasingly replacing such systems in clients seeking more adaptable, cost-effective solutions.
Highlights for Full Year 2012:
- Total revenue increased by 5.4% to USD $624.0 million (€469.8 million) (2011: USD $592.0 million) (€445.7 million))
- Run rate of cloud revenues at FinancialForce.com up by 90% to $17million
- EBITDA, including FinancialForce.com and exceptionals, rose by 3.2% to USD $114.5 million (€86.2 million) (2011: USD $110.9 million (€83.5 million))
- EBITDA, excluding FinancialForce.com and exceptionals, increased by 7.4% to USD $134.9 million (€101.6 million) (2011: USD $125.6 million (€94.6 million))
- EPS before goodwill related items grew by 22.9% from USD $2.03 to $2.50 (€1.53 to €1.88)
- Dividend proposal 2012: USD $0.60 (€0.45) (2011: USD $0.53 (€0.40))
- UNIT4 is actively shifting towards SaaS and subscription model
- Irregularities in Poland identified and resolved
In 2012 total revenue grew by 5.4 % to USD $624.0 million (€469.8 million) (2011: USD $592.0 (€445.7 million)), highlighting UNIT4 competitive strength and, even more importantly, its high client retention rate. Contract revenue grew by 8% to USD $260.7 million (€196.3 million). Total recurring revenues now represent 52% of total revenues (2011: 49%).
While SaaS and subscription revenues continued to show a strong upward trend, product revenue also returned growth for the full year. In the last quarter of 2012, UNIT4 intensified its focus on the sale of cloud solutions, resulting in a decline in products but a growth in the annual run rate of SaaS and subscriptions from USD $58.0 (€43.5 million) at year-end 2011 to USD $75.7 million (€57.0 million) at year-end 2012, an increase of USD $17.9 million (€13.5 million) or approximately 31%.
The trend towards SaaS and subscription is now clearly evident and UNIT4 is actively shifting towards this model. Although the majority of its ERP installations and extensions are still demanded and installed as ‘”on-premises” solutions, increasing numbers of potential customers are considering moving to the cloud, including for full ERP suites. This shift has a larger impact on the revenues in the fourth quarter and in particular in December.
Service revenues stabilized at USD $198.1 million (€149.1 million), in spite of the increase in the number of customers, due to increased focus on efficient implementation, including templating and outsourcing of lower value services. This delivers better value to customers and increases UNIT4 competitiveness in the market.
Performance in North America was positively influenced by the growth in Financialforce.com, as well as the merger of the Agresso and Coda operations which positioned UNIT4 Business Software as a strong player in the North American market.
Shelley Zapp, CEO of UNIT4 Business Software in North America commented: “We are thrilled to see the revenue growth generated in 2012 thanks to a significant increase of high profile customers in the not-for-profit and commercial sectors including IPAS, Conservation International, the City of Penticton, Nature Conservancy, Map International and Jordan’s Furniture. In addition, we have witnessed a real momentum building around our cloud offering and new business opportunities within existing customers. With our new structure and offices located on the west and east coasts, we are in a great shape to serve our customers and thrive in today’s market by delivering software solutions that allow businesses living in change to operate efficiently with a low on-going cost of ownership.”
The UK performed strongly, despite seeing some deals slip into 2013 or being sold as SaaS solutions. Public sector funding restrictions are leading to strong demand for UNIT4’s solutions, driven by Agresso’s flexibility, our sector-specific platform approach, cost-effective commercial model and track record of success in shared services.
With major systems integrators and outsourcers bidding Agresso in preference to traditional high end solutions, deal size is growing. Key new wins included Coventry City Council, Avon & Wiltshire Mental Health Partnership NHS Trust, and two deals with partner Agilisys at Tower Hamlets Council and Bristol City Council. The company also grew strongly in the commercial sector, with notable successes including a leading hotel chain, retail establishments, charities, a market leading organization in the travel and leisure industry, energy providers and world renowned financial services organizations.
In the Netherlands KPMG signed a deal to use AccountAnalyser, meaning that all of the “big four” accountancy firms are now using one or more products from UNIT4 Accountancy. PWC signed a contract for three additional products in 2012 - UNIT4 Auditor, UNIT4 DocumentManager and UNIT4 Actueel. This brings the total number of UNIT4 products used by the accounting firm to seven, all of which will be hosted by UNIT4 IT Solutions.
The economic climate in Spain remains challenging, and UNIT4 reorganized the business during 2012. Revenue in this region declined by 11%, in line with the reduction in headcount.
The German team secured some notable successes with public sector entities. Among them a large 6-year contract was signed with the State of Berlin and an important deal was closed with the Federal State of Saxony. This contract sees the State of Saxony move all 17 of its state organizations (Eigenbetriebe) from existing SAP, MACH or other competitive solutions to Agresso.
In Poland revenue declined by 19%, as a result of comparison reasons (in 2011 we signed a major local government low margin hardware contract worth approximately PLN 11 million) and business interruption, caused by legal proceedings to solve partner and management issues in the second half of the year. These issues were resolved on December 21, 2012. All of the external partners involved will repay all disputed collections.
FinancialForce.com, our US-based cloud applications company formed with minority investment from salesforce.com, again grew strongly in 2012. Investment in FinancialForce.com was increased to support the growing momentum and opportunities in the fast-growing cloud applications market.
The annual run rate in December 2012 (including services) grew to USD $17 million, compared to USD $9 million in December 2011 (+90%) and USD $12 million in June 2012. This illustrates how strongly growth accelerated in the last few months, where only limited revenues could be recognized.
The number of new customer deals was up more than 50% over 2011, with growth achieved across the small business, mid-market and enterprise sectors. Notably, FinancialForce.com’s penetration of the enterprise market increased, particularly with its Billing and PSA applications.
The number of customers using both core applications - Accounting and Professional Services Automation (PSA) - more than doubled and deal size (annual contract value) also grew.
FinancialForce.com applications and users of our applications continue to gain industry recognition and awards. FinancialForce.com Accounting won the British Accountancy Software Product of the Year Award and was named a CRM Watchlist Broad Brush Winner in 2012.
Investment in FinancialForce.com was increased to support ongoing momentum and growing opportunities while staff numbers grew by 60% in 2012 to 150 FTEs across the US, UK and Spain, and is on track to continue this growth rate in 2013. UNIT4 management has considered FinancialForce.com’s growth prospects and has committed to accelerate investment in the company during 2013 based on its confidence in the potential for and valuation of FinancialForce.com. Staff numbers are planned to grow to a total of 250 FTEs by the end of 2013 in order to drive substantial revenue growth.
In 2012 UNIT4 made three small add-on acquisitions in the UK, Norway and the Netherlands:
- Mentec was the authorized distributor in Ireland for the Agresso Business World suite of business software products and its MentecPlus operation, which has had a long-established relationship with UNIT4. MentecPlus, with 167 customers, is a leading provider of business software solutions to both SMEs and Public Sectors in the Republic and Northern Ireland. It was acquired by the UK division in January to extend its operations in those regions.
- Sendregning is an e-invoicing specialist that provides a solution to meet new electronic invoicing standards in Norway. Since July 1st, 2012, all invoicing across the Norwegian government has had to be done electronically following the EHF (Elektronisk Handels Format) standard. This is a trend that is growing rapidly in other countries. Since Sendregning’s technology solution also adheres to the relevant European standard, (PEPPOL – Pan-European Public Procurement OnLine), it is well positioned to exploit this growth market for electronic message exchange internationally. The company was acquired in November.
- In the Netherlands, UNIT4 acquired Primaccount Software, a developer of tax software. This acquisition strengthens UNIT4 position in the Netherlands as the preferred supplier for accountancy and audit software and also supports our position within the tax segment.
To be able to manage the operating margins and operating leverage during the transition phase towards subscription models, UNIT4 management is aware that the organization should be as streamlined as possible. In 2012 reorganizations took place in several areas focusing on optimizing the consultancy operations where necessary.
UNIT4’s mid-to-long term strategic plan focuses on increasing recurring revenues through SaaS and subscription models, but with a strong focus on increasing margins and operating leverage. This margin increase will be realized through organic revenue growth and by reducing duplication of costs.
The following aims have been defined for the end of 2015 (run rate):
- EBITDA margin, including FinancialForce.com, increasing by at least 250 bps
- Increasing the efficiency of R&D
- Strong continued growth of SaaS and subscription revenues, while maintaining license business
- Recurring proportion of revenues around 60%
- Single digit organic annual revenue growth and including acquisitions >10%
- FinancialForce.com at least a $70 million revenue company
For the full 2012 results statement please click here.
About UNIT4 Business Software
UNIT4 Business Software is the North American subsidiary of UNIT4, a $624 million global business software and services company that creates, provides and supports software for Businesses Living IN Change – delivered via the cloud or on-premise. It offers solutions that help these fast-changing public, private, non-profit and higher education ‘BLINC’ organizations embrace business change - simply, quickly and cost-effectively. UNIT4 Agresso, the company’s flagship Enterprise Resource Planning (ERP) suite and UNIT4 Coda Financials, its best-of-class financial management software, are used by 6000+ organizations in more than 100 countries. For more information visit our website or follow the company on Twitter, LinkedIn and Innovating4Change, the company blog.
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