Making good on his prediction that MRO Software Inc. would enjoy strong second-half financial results despite a slower-than-expected second quarter, CEO Chip Drapeau today reported that the maker of enterprise asset management software saw a 14.9% revenue increase and a 32.2% earnings increase in the third quarter which ended June 30.
Drapeau said the improved third-quarter results were due to strong customer acceptance of the company's new enterprise and service management software suite, Maximo Enterprise Suite, and to several large deals which closed in the quarter.
MRO sold 12 new Maximo ES software licenses and, said Drapeau, closed four transactions valued at $1 million or more during the quarter. One of those, said Drapeau, was at a Fortune 500 company where MRO came out on top in a competition that included the Remedy suite from BMC Software Inc. (Houston, TX) and Peregrine Systems Inc. (San Diego.) Drapeau declined to identify the customer.
Following MRO's disappointing second quarter, Drapeau predicted the Bedford, MA company would recover to record a 10% to 20% revenue increase for the year and an earnings increase in the range of 15% to 25%. Drapeau had blamed the poor second quarter -- in which MRO saw a 3% revenue dip and a 57% drop in net earnings -- on the transition to the new Maximo ES product and resulting longer sales cycles.
For the third quarter, MRO reported $53.2 million in revenues. It was the largest quarterly revenue figure in the company's history. MRO reported net earnings of $4.1 million, up from $3.1 million reported in the third quarter of 2004. The bulk of the revenue jump was attributable to increased software license sales. For the quarter, MRO reported $19.2 million in license revenues, up 47.7% compared to the $13 million in license revenues reported in the third quarter of last year.
"We were very pleased with our performance" during the quarter, Drapeau said in a conference call with analysts. "We continue to differentiate ourselves with robust vertical functionality and lower TCO against niche and ERP competitors."
The new Maximo ES product, said Drapeau, is allowing MRO to expand beyond its traditional enterprise asset management market and industrial vertical industry set. In addition to EAM functionality, Maximo ES includes support for managing information technology and service industry assets.
As a result, said Drapeau, MRO is beginning to attract customers in service-related industries. Of the 12 Maximo ES licenses sold during the quarter, Drapeau said, eight were sold into IT and service desk asset management applications.
Drapeau, however, stopped short of predicting that MRO's strong third quarter growth trajectory will continue through the rest of its fiscal 2005. Company officials predicted that, in the fourth quarter, MRO would report revenues of between $52 million and $54 million and net earnings of between 18 cents and 21 cents per share.
The revenue projection was essentially flat compared to the third quarter result and up only slightly from the 16 cents per share in net earnings reported for the third quarter.
MRO CFO Peter Rice said the relatively flat fourth quarter projections do not reflect any expected weakness in MRO's traditional markets. Rather, said Rice, MRO is taking a conservative approach given the relative newness of the Maximo ES product.
"This is still a very early set of results for a new product," said Rice. "The first at-bat was pretty darn good, but we've got a lot of games to go."