Enterprise software provider SoftBrands, Inc. logged improved revenue in its third quarter, ended June 30, citing significant year-over-year improvements in its hospitality segment due primarily to an acquisition at the end of fiscal 2006. The top-line growth, however, couldn't pull the company out of the red.
Revenue for the quarter climbed 47% to $23.6 million from $16.1 million a year earlier and 10% from $21.4 million in the second quarter. Software license, maintenance, and professional services revenues all showed double-digit improvements in the quarter.
The company reported an operating loss of $1.4 million, including a $1.6 million charge related to a restructuring of its manufacturing business, announced in June. A year earlier, the company reported an operating loss of $1.9 million. SoftBrands finished out the quarter with $12.2 million in cash and cash equivalents on hand.
The manufacturing business contributed $12.9 million in revenue, flat with the 2006 third quarter, and operating income of $462,000, slightly lower than $471,000 a year earlier, as a result of the restructuring charge. Without the charge, company executives noted on a conference call with analysts late yesterday, operating income for the manufacturing segment would have been $2.1 million in the quarter.
In June, SoftBrands announced a plan to restructure its manufacturing-related business to emphasize its partnership with SAP over its traditional FourthShift business and to eliminate roughly 55 staff positions. The company had predicted the move would necessitate a $1.5 million restructuring charge in the third quarter.
SoftBrands President and CEO Randy Tofteland told analysts yesterday that the restructuring "better aligns our resources" and positions the company for growth. "We believe the restructuring of our manufacturing business will help us deliver organic growth and achieve our mission to dominate the SAP SME [small and medium enterprise] space while improving our profitability," he said.
To that end, the company has been shoring up its value-added reseller channel partnerships, and ended the third quarter with 90 partners worldwide. "Our focus [going forward] will be on partner-enablement," Tofteland said. The company also sells direct to the SAP large enterprise subsidiary market, capitalizing on its small and medium-size business experience and offering plant-level platforms. Calling the SAP focus "the future of our manufacturing business," Tofteland noted that SoftBrands is one of a small group of partners that SAP has selected to participate in discussions concerning its A1S product targeted at small and mid-sized businesses.
The company pointed to implementations during the quarter at two SAP large enterprise customers in the food and beverage industry, which it hopes to turn to further advantage. "We believe there is a significant opportunity to further penetrate these global manufacturers as we prove our capabilities over time," Tofteland said in a prepared statement. "In addition, we believe our increasing customer referenceability will lower the barriers to adoption among other large SAP users that face the same challenges in their distributed geographic regions."
SoftBrands' hospitality business improved markedly in the quarter, largely due to its acquisition of Hotel Information Systems (HIS) in the fourth quarter of 2006. SoftBrands attributed its year-over-year gains largely to that acquisition and its sequential quarterly gains to improvements in both business units.
Geographically, 53% of total revenue came from the Americas in the quarter, 26% from EMEA, and 21% from the Asia Pacific region.
Tofteland was optimistic about the company's prospects for growth. "The progress that we are making against our strategic initiatives, combined with the recent restructuring of our businesses, should put SoftBrands in its strongest financial and fundamental position since it re-emerged as a stand-alone company six years ago," Tofteland told analysts. He reiterated the company's guidance of full-year revenue in the range of $95 million and GAAP operating profit growth in the range of 1% to 3%, excluding restructuring charges, but including roughly $5.5 million in non-cash items, such as stock options.