Punctuating an eventful year, SSA Global yesterday reported record fourth-quarter and fiscal 2005 revenues, driven in part by heady growth in extensions to its core enterprise resources (ERP) applications suite -- notably the company's supply chain, customer relationship and corporate performance management software modules.
The financial report, the first released by SSA since closing a challenging initial public offering last May and agreeing to buy former dot-com CRM darling Epiphany and boutique human capital management player Boniva Software, offers tangible evidence of a company whose four-year-long growth-by-acquisition and integration strategy is finally paying dividends.
For the fourth quarter ended July 31, revenue reached a record $186.9 million, a 7% increase from the like period last year. Revenue in fiscal 2005 exceeded $711 million, a 12% jump from last year.
Meanwhile, Q4 net income nearly tripled to $8.9 million on a GAAP (generally accepted accounting principles) basis. For the year, net income on a GAAP basis reached $32.5 million, a 40%-plus increase from fiscal 2004.
In a conference call with financial analysts, Mike Greenough, SSA Global's chairman and CEO, characterized fiscal 2005 as "a great year." In addition to going public, which added $114 million to SSA's balance sheet, and rekindling its acquisition strategy, Greenough pointed to the company's Java-enabled "product convergence strategy" as providing customers -- regardless of which SSA ERP package they use -- "a go forward roadmap for their systems."
Like Oracle's Fusion and Microsoft's Project Green, the strategy provides a common Web services architecture for enabling applications interoperability. It includes the recently
released ERP LX platform for users of its enterprise applications running on IBM iSeries hardware and its ERP LN platform for users of Unix- and NT-based systems, which arrived in North American early in the fiscal year.
Without disclosing specifics, Greenough told analysts the company already has many LX early converts and expects to see many more in the next six to nine months, "which is a normal cycle for this type of product."
ERP product "extensions" such as SCM, CRM and CPM, meanwhile, made up 25% of Q4 license revenue, which reached a record $58.8 million in the quarter, up 22% from the like period last year, Greenough noted. "Keep in mind these products were not even in our portfolio a couple of years ago," he emphasized.
While declining to break out revenue by product extension and claiming continued growth in its core ERP business, Greenough said supply chain was the most significant growth area, followed by corporate performance management. In fact, Greenough said supply chain constitutes "44% of the company's pipeline" moving forward.
"It's a very substantial piece of the business," he said.
License revenue for the year was $203.7 million, an increase of 29% from fiscal 2004, the company reported.
The company said in Q4 it signed 56 new customers -- companies or business units therein that Greenough said had never done business with SSA or any of its acquired brands -- which represented 7% of new license revenue in the period. Overall, 1,199 contracts were signed in the quarter with an average selling price of roughly $100,000, he added.
Cash generated from operations, meanwhile, totaled $23 million in Q4 and $86.4 million for the year. Chief Financial Officer Stephen P. Earhart attributed the company's good fortune to "consistent business performance" and strong receivable collections.
In fact, SSA reported $165.4 million in cash and equivalents at the close of fiscal 2005, which should allay concerns raised following the Epiphany acquisition that the company wouldn't have the financial means to complete the all-cash acquisition.
SSA's momentum is expected to carry forward into the current fiscal year as the company ptrojects revenue of between $780 million and $800 million and earnings per share in the $1.05 to $1.09 range in fiscal 2006, Greenough said. That includes 10 months worth of business from Epiphany, he explained. (Greenough said the acquisition is expected to close at month's end, pending Epiphany shareholder approval.)
More details on the integration of Epiphany into SSA -- both product- and personnel-related -- will be disclosed with the company's Q1 financial results in December, Greenough said. Boniva, he added, has been fully integrated into SSA from an "employee, customer and technology perspective."
Greenough declined to provide Q1 fiscal 2006 guidance, contending that doing so would reveal too much to the competition. He said, however, he is comfortable with the Q1 organic growth rate calculated by "The Street."
While at the forefront of rollup activity, Greenough said the company isn't feeling any additional pressure amid the rapid consolidation of the enterprise applications market. The latest incidence -- Oracle's acquisition of Siebel -- should have little impact on SSA, other than taking another competitor from the market, he noted. Oracle, he added, was already a CRM competitor.