SofTech: sequential increase

Ahh, earning season. Get ready, ‘cause here we go. By all accounts, 2011 wasn’t bad — global economies were tense, foreign exchange rates were unpredictable, wars continued and natural disasters too, but consumers kept buying because … that’s what they do. Over the next 6 weeks or so we get to hear how the leaders in software and hardware technology fared in 2011 and what they see for 2012.  Most companies with year-ends on December 31 are still doing the math, but we’re starting to see results announcements from those whose quarters ended on November 30. As promised last week, SofTech has put itself back on a regular reporting schedule and announced results for its second fiscal quarter. For the three months ended November 30, 2011, total revenue was $1.7 million, down 6% from the same period a year ago but up 9% sequentially. Product revenue was $333,000 in FQ2, down 3% from a year earlier; service revenue was down 7% to $1,372,000. According to SofTech, the decline revenue decline on a year/year basis was “due almost exclusively to one customer that migrated to a competitor’s solution in February 2011.” CEO Joe Mullaney said in a prepared statement, “While I am pleased with the progress made to date [to regularize the business], the sequential revenue growth and improved profitability, I believe there are significant new opportunities for us to grow profitably. We have great technology, a fantastic customer base and a deeply experienced and long tenured employee group that form a rock-solid foundation from which to build shareholder value.” I don’t think we can read too much into this one announcement. Yes, the results weren’t great — but they are very specific to SofTech and don’t say anything at all about the state of the engineering software market. SofTech’s year/year decline is due to a customer decision that was made before the current management team was in place; who knows what they would decide today? A better indicator is the sequential increase, which shows that customers are liking what’s happened since last Spring, when Mullaney and his team took over.