Sweden-based ERP software provider IFS today reported growth in revenue and earnings, continuing a string of profitable quarters that dates back to 2005.
For the quarter ended Sept. 30, net revenue was SKr 528 million, compared with SKr 485 million in the same period last year. License revenue was up 14%, at SKr 106 million, compared with SKr 93 million last year. Maintenance and support revenue also grew to SKr 161 million from SKr 146 in the third quarter of 2006. Consulting revenue rose to SKr 253 million, versus SKr 238 million last year.
IFS also improved the bottom line, with earnings before interest and tax (EBIT) reaching SKr 20 million in the quarter, compared with SKr 13 million last year.
"We are focusing on license growth as a way to increase our overall business," IFS Chief Executive Alastair Sorbie said on a conference call with analysts today. He noted that IFS' license sales are growing faster than the overall business applications market, which, he said, is an indication that IFS is gaining market share.
Sorbie also said that strong license sales naturally have a trickle-down effect on maintenance and consulting revenues, the latter an area in which IFS has struggled mightily in past quarters.
The company's 14% year-over-year increase in license revenue owed mainly to the EMEA region (Europe, the Middle East, and Africa), where license revenue was SKr 78 million in the quarter, up from SKr 60 million. In the Americas, revenue from new licenses was SKr 15 million, compared with SKr 14 million in Q3 2006. In the rest of the world, which includes Eastern Europe and the Asia-Pacific region, revenue from license sales decreased SKr 5 million year-over-year, totaling SKr 13 million.
Consulting revenue, which has been a weak spot for IFS of late, increased in all regions except the Americas, where revenue totaled SKr 38 million, compared with SKr 47 million last year. On the call, Sorbie attributed the lower regional figure to the "non-availability of project work in North America."
IFS North America President and CEO Cindy Jaudon told Managing Automation today that the drop in consulting revenue in the Americas reflected the fact that much of the business' consulting revenue went to partners — such as systems integrators — which many customers in the defense market tend to utilize.
Jaudon said that while IFS' revenue from direct consulting in the Americas was down, so, too, were costs. The company is focusing instead on continuing to simultaneously grow license revenue and EBIT, she said.
On the conference call, Sorbie discussed IFS' continued support for its partnership strategy, noting various marketing, maintenance, and consulting partnerships, as well as collaborative product partnerships. During 2007, for example, the company began working with Savi Technology in the logistics area, ClickBase and ProfitBase Inc. for business intelligence, and Pagero for electronic payment functionality. Sorbie also mentioned a new contract with partner Lockheed Martin Simulation Training & Support, which uses IFS software for its pilot training program.
In addition to the deal with Lockheed, Jaudon said, the Americas unit signed a new, unnamed customer in the high-tech aerospace and defense manufacturing space, as well as "several other" industrial manufacturers.
At its annual user conference earlier this week IFS announced availability of version 7.5 of IFS Applications, as well as a new .NET-based user front end, called Aurora, which is scheduled for delivery during the second half of 2008.
Sorbie said the "iPod-like" Aurora is expected to attract new business and encourage customers to re-up maintenance contracts.
Sorbie said IFS has not adjusted its financial outlook for 2007, which is a projected EBIT that is "significantly better" than the SKr 120 million reported for 2006, as well as continued improvement in cash flow. The company did not divulge revenue guidance.