Despite a record month in December, Unit4 has warned that Q4 2011 profits will be down on the year ago period. As far as we can see it is the SaaS/subscription side of the business that has been an issue.
Prelim results show that EBITDA for the quarter is expected to come in at cEuro 28m down from Euro 30.6m. Additional investments in the FinancialForce SaaS business unit, and lower profits on SaaS/subscription sales contributed to the drop, and there was also an impact from reorganization costs.
Although SaaS/subscription revenue grew c35% year on year, Unit4 (in common with every other supplier offering SaaS that we know of) appears to be wrestling with the SaaS commercial model, in that growth continues to cost and profits are strung out. This is the latest piece of data that calls the current SaaS commercial model into question.
Unit4 says the move to SaaS is putting short-term pressure on profits, which was particularly noticeable on sales made during the last months of the year. With organic revenue from licenced products described only as ‘modest’, Unit4 could be looking at a several more unsettling quarters as the business shifts towards the SaaS/subscription model.
However, revenue for the quarter was up by around 3% to cEuro 127. Customers are cautious however, and some deals slipped but overall the company said deal flow was 'quite good'. US, Asia, Sweden, Benelux and Norway performed well, but Spain was below par. The absence of a specific reference to the UK leads us to infer that performance was probably in line.
Revenue for the full year will be around Euro 455m, vs. Euro 421.8m in 2010, with EDITDA of Euro 85 – Euro 87, vs. Euro 86.1m for 2010. Full results for the quarter and the year are due on February 21.
Overall, Unit4’s second half was slower than H1 (see Unit4 hits Q3 slowdown and Unit4 bagging bigger contacts). Results were not boosted by acquisitions so growth is all organic and shows the fundamentals of the business. These are not too bad when compared with the recent performance of some of the other enterprise software suppliers.