Full year numbers show that Unit4 had a good 2011 with numbers up on multiple - but not all - fronts and new initiatives such as its planned PAYG analytics primed to open up new revenue opportunities during 2012.
Headline numbers include an 8% revenue uplift to 454.5m Euros. Although not spectacular that is more than creditable, especially considering that SaaS and subscription sales are accelerating - by 45% to 38.6m Euros no less - with all that means in terms of upfront vs recurring revenue. Net profit increased by 10% to 26.5m Euros but the EBITDA margin dropped from 20.4% to 19.3%. This was caused by two factors - a large order in Poland that included a third party hardware element with lower margins, and the trend towards the SaaS/ subscription billing model.
The rise in SaaS/subscriptions had already caused the company to warn of lower profits in Q4 (see here). In common with other suppliers making the change, the transition from licence to recurring revenue is causing short term pain, hopefully for long term gain. At the Unit4 user conference earlier this month we were impressed by how transparent Unit4 was being regarding the impact. “We are actively growing our subscription business at double digits but it is only having a small impact on revenues at the moment” said group COO Ab van Marion, “We know that’s where the market is going over the long term but I don’t think anyone can say with certainty how long that transition will take.”
Although sales exceeded expectations in Singapore, Norway, North America, Sweden and Benelux, in both public and private sectors, UK revenue was down by 2%. A lot of the damage occurred in Q3 due to the economy. The move to SaaS/shared services in the public sector also put pressure on revenue growth, although this is expected to be a growing market over the next few years. Unit4 is hopeful that it will make an impact here, but plenty other vendors have also earmarked this area.
Success for Unit4 would be a testament to its ‘Business Living in Change’ strategy, which is based on customer-enabled easy and low cost post-implementation change. There is ongoing evidence that it appeals as the number of 1m+ Euro deals is growing e.g. Addis Ababa Water and Sewerage Authority in Ethiopia (via Sweden); the City of Oslo in Norway; and Magnox in the UK. Two 3m+ Euro subscription deals were also signed, in the Netherlands with Achmea Vitale; and in Germany in the local government sector.
Going into 2012 Unit4 does not seem to have much to worry about operationally but it is working against the general economic outlook so is being conservative with its outlook, anticipating growth in the single digit range in both revenues and EBITDA in 2012.