Solid start to the year
January–March 2015 (first quarter)
- License revenue amounted to SKr 115 million (Q1 '14: SKr 107 million), a decrease of 4 percent currency adjusted.
- Maintenance revenue was SKr 291 million (Q1 '14: SKr 249 million), an improvement of 5 percent currency adjusted.
- Consulting revenue amounted to SKr 374 million (Q1 '14: SKr 335 million), an increase of 3 percent currency adjusted.
- Net revenue totaled SKr 782 million (Q1 '14: SKr 694 million), an improvement of 3 percent currency adjusted.
- Adjusted EBITDA was SKr 63 million (Q1 '14: SKr 50 million). EBIT amounted to SKr 51 million (Q1 '14: SKr 25 million).
- Cash flow after investments was SKr 72 million (Q1 '14: SKr 133 million).
- Earnings per share after full dilution amounted to SKr 1.47 (Q1 '14: SKr 0.60).
OutlookFor 2015, IFS expects good growth in both license revenue and EBIT.
Solid start to the yearLicense revenue for the first quarter was consistent with our expectations, with the outcome more or less in line with the very strong first quarter last year. There was to some extent a positive impact from deals originally expected in the previous quarter. However, this was offset by the soft development in the oil and gas service sector. The continued weakness in this market has required us to take action and rebalance the pipeline with opportunities in more promising areas in the short to medium term. As a result, the pipeline has grown strongly over last year, and stood at a record level at the end of March, currency adjusted. The market for our products and services remains strong across most of our target sectors. Furthermore, our reputation and market profile is steadily improving as a result of strong customer references and the high quality of our partners. This development is gaining us access to larger deals that, even though harder to predict from a timing perspective, increasingly will add to our growth. Consequently, we feel confident and expect to see good license growth for the full year.
Maintenance and support revenue grew by 5 percent, currency adjusted, where the same quarter last year benefitted from a one-off recognition in previously unrecognized revenue. The ‘churn’ in our customer base remains very low and it is expected this will be further improved by the launch of the latest release of our software — IFS Applications 9. This version, which will be launched in May at our upcoming World Conference in Boston, USA, includes impressive new features, even greater user friendliness and a new architecture that will make it easier for our partners to work with our product.
Consulting revenue grew by 3 percent, currency adjusted; the margin increased to 20 percent (Q1 '14: 17 percent). We continue to invest in building our partner ecosystem with the appointing, training, and certification of third-party consultants. During the quarter, IFS and Accenture announced a strategic cooperation for sales and delivery of IFS Applications. This will involve joint sales and the establishing of a large team of resources within the Accenture organization.
Our partnering is also continuing in our promotion of IFS Applications offered on cloud, where we are providing a number of off-premise cloud-hosted solutions, including our go-to-market partnership with Microsoft Azure.
For 2015, industry analyst firms such as Gartner are optimistic yet cautious and expect the market’s development to be in line with the past year’s, with a growth in software revenue in the 5 percent range.
Gartner have recently rated IFS as being in the leaders’ quadrant for both Single-Instance ERP for Product-Centric Midmarket Companies, historically IFS’s largest market, and Field Service Management, the market that we have most recently targeted. This recognition is resulting in an increased interest in IFS.
'We continue to tightly manage our costs with other operating expenses, net, growing just 3 percent over last year, currency adjusted, mainly as the result of an increase in sales & marketing and R&D. Our strong cash flow and strong finances are enabling us to actively seek acquisitions that will complement our market position and increase the value of our business.
We expect to see good growth in both license revenue and EBIT in 2015.
President & CEO
IFS published its interim report January–March 2015 on Wednesday, April 22. In conjunction with this, Alastair Sorbie, president and CEO, and Paul Smith, CFO, held a telephone conference during which they presented and commented on the report.