Hope your seat belt is buckled, because we’re off to a fast start with earnings for the quarter that ended September 30. Today we heard from Mensch und Maschine; later in the week SAP, Dassault Systemes, 3D Systems, Cybernet Systems and Hexagon tell us what they’ve been up to. I’ll be at the PLM Innovation Americas conference but will try to keep up via Twitter (@monica_schnitge) and here on the blog as time permits.
Mensch und Maschine Software (MuM) said that a strong third quarter helped to accelerate profitability for the year to date. Total revenue comparisons to last year are relatively meaningless, since MuM sold its distribution business to TechData, but we can learn a lot from its continuing operations. For the year to date,
MuM Software had revenue of €24 million, up 14%
The VAR business had revenue of €64 million, up 32%. MuM attributes this growth to demand for Autodesk subscription renewals ahead of a price increase.
The VAR segment drove profitability, as its EBITDA (profit before interest, taxes, depreciation and amortization) grew 160% to €3.6 million. By comparison, the Software segment was similarly profitable in absolute terms, €3.6 million, but grew EBITDA by 28%.
Due to the change in business model, MuM is currently operating at a negative cash flow. MuM says this is a “non-recurring adaptive reaction to the changed business model. Due to the material reduction of the trading business the accounts payable decreased significantly relative to the accounts receivable.” Translated: “Selling the distribution business affected cash flow, with payment out bigger than cash coming in. It’s temporary.” MuM has cash reserves of €7 million, down from €18 million on December 31, 2011 but has total assets (current and long-term) of €88 million.
The shift in business from distribution to value-added reseller has been good for MuM from many perspectives, one of which was to grow its recurring business to 40% of total, up from 33% a year ago — those recurring customers are important to profitability since it costs less to sell to an existing customer than to acquire a new one.
MuM used plus signs to describe its overall business environment this year, to draw comparisons for investors. Q1 got three plus signs (+++), Q2 got one (+) and Q3 got two (++). This ties into the company’s outlook, which still calls for total revenue of around €140 million.
CEO Adi Drotleff said in a press release: “The strong course of business in the first nine months 2012 represents a good base to achieve the ambitious profit targets for the full fiscal year. As a supporting measure, we focus on cost management, in order to be prepared for an eventual short or mid-term slowdown of market demand. For the full 2012, we still target EBITDA at approximately €11.5 million and net profit around €5 million …. If we achieve these targets, 30 Cents per share dividend payment (+50%) is planned.”
These are ambitious targets: that full-year EBITDA target is nearly double what the continuing businesses reported for 2011. It will be interesting to see if MuM gives Q4 a +++.
