Mid-market ERP provider Exact Holding N.V. reported that revenue climbed 16% in the first half of this year, contributing to an earnings spike of 31% compared with the like period of 2005.
For the first six months of 2006, the Netherlands-based company logged revenue of €118.3 million compared to €101.6 million in the same period of 2005. All of Exact's revenue lines moved up year over year, but the standout was service revenue, which surged 50% from €16 million in the first half of 2005 to €24 million in the first half of 2006. License revenue climbed 15%, from €28.1 million in 2005's first half to €32.4 million in the same period this year.
While it is still the smallest of Exact's three geographic markets -- which also include the Netherlands and international markets -- North America gave the company its biggest percentage increase in revenue in the period, logging €30.1 million in the first half, up 23% from its €24.5 million contribution in the first six months of 2005.
Exact's first-half revenue of €118.3 million means that even if second-half revenue comes in €1 million off the year-over-year pace, the company will make the low end of its 2006 growth expectations, which run between 7% and 9%.
The more ambitious projection, at least on paper, involves Exact's 2007 guidance. Even if the company grows its 2006 revenue by the more optimistic 9% projection, its sales team will be left with the task of growing revenue by more than 22% in 2007. That team might be bigger, said CEO Rajesh Patel during a conference call with analysts to discuss the results, noting that getting to €300 million will "obviously" involve acquisitions as well.
According to Patel, Exact's E-Synergy on-demand business management product also should factor prominently in this drive. The sales plan going forward, Patel said, involves a push to get existing ERP customers to adopt the E-Synergy product.
Although Exact's operating expenses grew year over year by more than €11 million, from €85.2 million to €96.9 million -- due primarily to additional personnel costs from acquisitions -- Exact still managed to improve its earnings in the first half of 2006 over those reported in the like period last year. EBITDA (earnings before taxes, depreciation, and amortization) for the 2006 period -- when Exact made no acquisitions -- came in at €24.9 million, compared to €18.9 million in 2005's first half, a gain of 31%.
On the conference call with analysts, Patel attributed some of the company's success to the refocusing of sales efforts on its core customers -- what he referred to as the "volume business" at the low end of the mid-market. Exact supplemented this focus with a selective push toward the higher end of the mid-market, or which Patel called Exact's "value business."
Patel also reported on two of Exact's acquisitions from the second half of 2005. In October of 2005, Exact purchased Vanguard Solutions Group, a provider of business intelligence software. Exact is now adding this BI capability into the Exact E-Synergy product, and, according to Patel, will launch the integrated version by the end of 2006.
Another 2005 acquisition was Inspired, an Atlanta-based IT consulting firm. "We think those acquisitions have been very successful," Patel said, noting that both were slated to add back-office functionality to the company's North American products.
Exact's acquisitive nature has helped it serve its many regional markets, and propels the company's effort to build out a complete suite of enterprise and e-business applications. According to the company, its coffers are more than able to support this kind of activity -- at the end of the first half of this year, Exact held a net cash position of €113.6 million.
Exact's current North American product lineup includes, among other products, e-Synergy; JobBOSS, management software for small contract and custom manufacturers; Max, an ERP tool mainly for discrete manufacturers; and the Macola Enterprise Suite, which includes business process management capabilities.