Riding strong growth in its consulting and maintenance businesses, the traditionally mid-market ERP software provider Epicor Software Corp. on Tuesday announced an 8% year-over-year improvement in revenue that masked a poor performance in license sales.

For the quarter ended Sept. 30, Epicor reported revenue of $103.1 million, up from $95.7 million in the third quarter a year ago. Net income also showed strong growth, totaling $8.1 million, a 49% improvement on $5.4 million in the year-ago quarter. That yielded a commensurate jump in earnings per share, to $0.14 from $0.10.

The top-line growth was led by Epicor's consulting business, which grew 26% year over year to $32 million. Maintenance revenue topped $40 million, up 6% from the year-ago total of $38 million, with a retention rate of 94%.

Yet, Epicor managed to eke out just a 1% improvement in software license revenue, which brought in $24.1 million in the quarter.

The quarter's highlights "were somewhat offset by lower-than-expected software sales," Epicor's CEO George Klaus said on a conference call to announce the results. Earlier this year, emboldened by what it saw as a robust sales pipeline, Epicor had forecast third-quarter software license growth of 10% to 13%.

On Tuesday's call, Klaus said the company did not believe the shortfall stemmed from reduced demand, lack of market momentum, or increased competition. Instead, he blamed the sluggish license sales growth on a lengthening sales cycle, saying customers were taking longer to sign licensing agreements. Klaus attributed that phenomenon to Epicor's expansion into the higher end of the customer market, where "larger and more complex sales transactions in bigger companies" are the norm.

The third quarter was the second consecutive period in which license revenue has lagged expectations. President and COO Mark Duffell noted on the conference call that Epicor's sales force failed to close some of the more traditional mid-market license deals because it was prematurely focused on the potential larger deals.

The plan to move up-market has begun to bear fruit, according to Duffell, who revealed that in the quarter, the average license revenue of Epicor's 10 largest deals was $380,000, a metric that has trended upward over the past three years, he said.

"Our goal here is not to shift our business, but to expand our business," Duffell said, emphasizing that Epicor plans to remain a strong player in the mid-market ERP space.

The growing pains of recent quarters have not dented the company's strategy. "We are confident that continuing to move up-market is very positive from a business standpoint," Klaus said, "and we believe we will continue to be more and more successful engaging in progressively larger accounts and transactions as the .NET platform becomes even more scalable ..."