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Kofax looks in a much stronger position to continue building on recent improved performance, after bouncing back in the second half of 2013 from a terrible first half (see Kofax FY in line).
In Q4 ended 30 June, the document capture and automation player achieved record software license and total revenues - at $38.7m (up 3.1% in constant currency) and $78.2m (up 4.3% ccy) respectively. Operating profits were up 16.6% to $17.7m, giving Kofax a margin of 23% vs. 20% last time. It is unclear what the underlying organic growth picture was in Q4 however following Kofax’s recent acquisition of Altosoft in March (see Kofax buys into analytics with Altosoft). Nonetheless, in the full year, Kofax saw a 1.8% drop in organic revenues.
The second half of 2013 really has shown an improving picture for Kofax. The company delivered software license revenue growth of 9.6% (ccy) in H2 after a shocking 16.6% fall in H1. Meanwhile total revenues were up 6.8% (ccy) in H2 vs. a 1.6% decline in H1. The challenge will now be continuing this momentum into H114 and beyond.
Since the year end, Kofax has made another significant acquisition. It paid $47.5m in cash for data integration and process automation provider Kapow Technologies (see here). Kofax paid almost 3x revenue of $15.9m for the California-based company, which also made an adjusted EBITDA loss of $2.2m in its year to 30 June. Kofax will therefore be expecting big things from Kapow in FY14 to justify this valuation.
Kapow provides near real-time application integration and process automation via a ‘point and click, no coding’ approach. This is along the lines of robotic process automation, which we see as a really hot space right now and is disrupting traditional BPO models of engagement (see Business process automation – a BPO industry game changer?). Kapow also has some big names on its books including Astra Zeneca, Audi, Commerzbank, Deutsche Telekom, Fiserv, Thomson Reuters and Zurich Insurance.
Kofax sees the real opportunity being in improving the integration around multichannel data capture, and certainly automation has a part to play here. Kofax is right to be making a move into a potentially lucrative space, although payback on the investment is unlikely to occur in the near term.
