There were several positives to take from Autonomy’s Q2 results (period ending 30 June 2011), not least record revenue that was up 16% to $256m yoy and profits from operations of $83m (from $77m), but it was the growth of its cloud and OEM business areas that really stood out.
First off, both business areas provide Autonomy with recurring revenue. Cloud revenue was up 17% organically (this excludes the lift from the acquired IRM Digital assets), with future commitments up 27% organically to $437m. Cloud was also a growth area during Q1 – see Autonomy’s cloud revenues hit 24%. Interestingly attrition rates are sub 1%, a testament to Autonomy solutions and limited direct competition. Most vendors who use the subscription model keep their attrition rates to themselves, which makes us think that they are considerably higher than Autonomy’s.
Chief executive Mike Lynch did point to the negative immediate effect on revenue of customers opting for its cloud offerings: “whilst success in the cloud has the effect of depressing short term total revenue growth, with lower recognised revenue in the period, these incremental committed revenue streams amongst other factors lead us to positively revise our view of 2012.” But given the record revenue, it is not exactly hampering overall performance.
During Q2 revenue from IDOL product licenses totaled $68m. Organic growth was 10%, and it represented 27% of revenues. Recognised revenue from IDOL cloud totaled $64m, a 37% increase and 25% of revenues, up from 21%. The rate at which customers are moving to the SaaS model is notable. Although a rapid shift to SaaS is evident in some business application areas such as CRM, other areas are showing slower rates. The Autonomy experience is a proof point that rapid change can occur in the application infrastructure space.
In terms of its OEM business around the IDOL product, revenue from this stream was up 26%. OEM sales are important to Autonomy - they generated revenue of $47m and represent 18% of revenues during the quarter – but they are indicative of activity within the wider market. The signing of 14 new deals is significant and we see rosy prospects going forward because the amount of structured and unstructured data is only going to rise due to disruptive technologies such as social media, mobile platforms and the cloud in general, and this is where Autonomy’s ability to handle unstructured data is particularly valuable.