Agile Software Corp. closed the books on fiscal 2006 with a return to profitability in the fourth quarter and signs of growth across each of the major revenue components of its product lifecycle management (PLM) software business.
For the quarter ended April 30, Agile's net income on a GAAP (Generally Accepted Accounting Principles) basis was $3.7 million (or six cents a share), compared to a $4.4 million loss posted in the like period last year. Agile's $34 million in fourth-quarter revenue represented a 6% increase over the corresponding period in fiscal 2005.
"We were pleased with our strong fourth-quarter results, including a four-year high license revenue and record profit," said Jay Fulcher, Agile's CEO and president, during a conference call with financial analysts. Fulcher assumed the operational reins of the San Jose, CA, company from former CEO Bryan Stolle on May 1. Stolle remains as chairman.
For the year, Agile's revenue hit $132.7 million -- a 13% increase from fiscal 2005 -- putting the company's growth at the high end of analyst projections for the PLM sector. Profitability for the year remained elusive, however. Agile lost $7.8 million on a GAAP basis, compared with a slightly smaller loss of $7.2 million for the 2005 fiscal year.
All in all, Fulcher said, fiscal 2006 was a growth year for Agile, with progress made across most fronts, including licenses, service, maintenance, and total sales. Demand was also strong across all product modules, although Fulcher singled out Product Collaboration and Portfolio Management as two standouts in its PLM lineup, as well as the Cimmetry visualization tool suite, which Agile acquired in February 2005. Agile added 500 new Cimmetry customers in fiscal 2006.
"Cimmetry had an outstanding first year post-acquisition, exceeding all targets," Fulcher said. "We see continued growth in fiscal 2007 and great opportunity for this business over time."
Despite a continually difficult sales climate, Fulcher was bullish that customers are finally recognizing PLM as a key business imperative and are earmarking precious IT dollars to those investments. "We had 13% year-over-year growth and we expect to grow substantially faster than that in fiscal 2007," Fulcher said in an interview with Managing Automation. "That's represented in our pipeline and in the amount of activity we see going on in the market. We're having a lot more at bats than we used to."
Analysts also are positive on Agile's momentum, but recognize that the company has some key challenges going forward. The fact that Agile has no CAD offering is somewhat of a disadvantage over PLM behemoths UGS (Plano, TX) and Dassault Systemes (Suresnes, France) which are having success transitioning existing CAD customers to their PLM products.
"Agile's primary challenge is that many buyers are expanding into PLM from their existing CAD investment, requiring Agile to fight hard to displace any incumbent," noted Mike Burkett, director of PLM for AMR Research Inc. (Boston).
Consequently, Agile needs to continue to pursue non-traditional markets outside of discrete manufacturing, where CAD tools play a big role. The small to mid-size market is a sweet spot for Agile, and the company needs to continue the progress it has made in markets beyond its core high-tech and electronics markets, including consumer packaged goods, said Ken Amann, director of research at CIMdata Inc. (Ann Arbor, MI).
Agile has already made significant progress in that vein, Fulcher said. While 50% of Agile's market still constitutes high-tech and electronics companies, CPG and life sciences account for the rest of its installed base. Moreover, one quarter of Agile's revenues in the fiscal fourth quarter came from new customers, he said.
In guidance for the first fiscal quarter of 2007, Agile Chief Financial Officer Carolyn Aver said typical seasonal fluctuations will keep revenue down slightly, to between $32.5 and $33.5 million for the quarter. The company expects to earn one cent per share in the period, in line with analyst projections, she added. Agile did not provide guidance for the full fiscal year.
Management will continue to look for ways to scale the company, including potential acquisitions, Fulcher said. Organic growth will also be key: "We have enough product and channel competitive advantages in the market that we think we can be successful growing our business substantially over time," Fulcher said.