Rand’s CQ4 suffers from a tough comparable in 2013

Rand Worldwide’s fiscal Q2, ending on December 31, 2014 revenue was down as reported year/year (y/y) to $22.4 million — but, excluding one really big sale a year ago, total revenue was up nearly 8%. You may remember that Rand has been reinventing itself, buying back the shares that were controlled by its venture capital owners. Larry Rychlak, CEO, seems glad to get this behind him: “We are intensely focused on strengthening our business through numerous initiatives to further enhance our customers’ experience, [including] new methods of providing training and product knowledge to our customers, the alignment of our Facilities Management team under the IMAGINiT umbrella to better serve our clients in the AEC space and additional investments in sales and technical resources to further our growth initiatives.” Rand no longer holds an earnings call, so we have minimal information — but here it is:

• Product sales revenue was $11.6 million, down 12% y/y. Excluding that big order in 2013, product sales would have increased by 16% y/y
• Services revenue was $5.1 million, down 3%. Rand wrote in its SEC filing that “[s]ervices productivity decreased slightly over the equivalent period of the prior fiscal year. The Company is addressing [this] by developing innovative new service offerings, including training delivery methods that it expects will better serve the customer base and improve services productivity levels.”
• Commission revenue was up 3% to $5.7 million

Rand resells AutoCAD and other Autodesk products, ARCHIBUS, Leica laser scanning equipment as well as its own ASCENT engineering software. These are typically included in Product sales. Like all Autodesk resellers, Rand also sees income from Autodesk’s subscription programs and accounts for this as Commission revenue. Expect to see more of this shift from product to commission for Rand and other resellers as the subscription model increasingly takes hold. (Services is what you’d expect: implementation, training, consulting, custom software development and customization, and so on.) It’s hard to say what these results mean for Autodesk, which reports next week. On the one hand, it seems that large deals are harder to close — but that may be math, a function of the subscription model, which smoothes the revenue out over a longer period. Perhaps a better perspective comes from looking at Rand’s last six months, when product sales and services revenue were up 1%, and commissions were up 9%. Hmm ….