Although it is still in transition mode from an onpremise/rental and one-off license business model to a hosted base, Patsystems is starting to experience momentum around its hosting operation and its H1 interims (to 30 June 2011) revealed that revenue from the hosted XConnect offering had risen by £1m compared to the year ago period, to £1.7m. Its ambition is to increase its recurring revenue.
Total revenue was down slightly (£9.7m compared to £10m in H1 2010) as was adjusted pre tax profit (£0.6 compared to £1.0m) but considering that 2011 is a year of transition this is an acceptable set of results, and they are broadly in line with expectations.
Chief executive David Webber told us that the company now has six hosting centres across the globe: Chicago, Hong King, Singapore, Sydney, Tokyo and London (plus another facility in New York courtesy of its Mixit acquisition – see Patsystems aims to boost critical mass with Mixit acquisition) and has pretty much completed on its data centre investment (roughly £1.5m cap ex per centre). London was the last to come on line, around six weeks ago, and 2 mainland European banks have already signed up and will start using the service in H2.
The outlook for the company is good. Its ambition is to use the hosted model to increase recurring revenue. Currently about 20% of its sales are one-off license sales which bring upfront income but do not contribute to ongoing revenue. These will decline over the next couple of years. The Mixit business is 100% hosted and 95% of its revenue is recurring so it will substantially boost Patsystems recurring stream (as well as taking it into the equities market which is a new area for Patsystems). Hosted revenue is expected to contribute upwards of 20% of total revenue by the end of fiscal 2011, excluding the Mixit contribution (Mixit ended FY 2011 with revenue of $9.2m).
In terms of geography, the standout was a 17% rise in recurring revenues in Asia. The company derives around 20% of its total revenues from the UK and has seen an improvement in the outlook over the past 6 to 9 months but overall there appears to have been little actual change.