MuM’s Q3 “happy” results look good for Autodesk
Germany’s Mensch und Maschine (MuM) reported results earlier this week and, as usual, we look at them to see what they might mean for Autodesk and for its broader VAR network. In case you’re unaware, MuM is probably Autodesk’s largest European reseller and has steadily built an Autodesk-independent business as well, to cushion it somewhat from the whole perpetuals-to-subs thing.
In Q3, 2018, MuM said it saw strong revenue growth in both halves of its business, with “dynamic growth” from its OPEN MIND CAM offering and from the VAR segment, “where in Q2 and Q3 many Autodesk maintenance contracts were converted to subscription”. Let’s tackle the VAR subs first: Autodesk has been running promotions intended to convert existing maintenance customers into maintenance-subscription customers, offering discounts and other goodies for those who switch and increasing prices for those who defer the decision. The difference? Prepayment, different terms and extra goodies to get companies inot the subs stream.
And the programs are working, as MuM reports that 9month revenue for the VAR business was €94 million, up 18% but the best part is that each quarter is accelerating: Q1 revenue was up 6% year/year, Q2 up 24% and Q3 up 28%. I believe that this puts MuM’s VAR business roughly back to where it was before the subs transition fully hit. And that’s good. What this means for other VARs is simple: yes, MuM is big and has many feet on the street, offering support that smaller VARs may be unable to — but these promotions apply across the board. All VARs should benefit to some extent and see their revenue stream stabilize. One investor I spoke with after the Q2 results told me that he thinks that the stresses caused by Autodesk’s to switch to subscription licensing are “substantially over”. I think he’s more or less right though one could argue that the maintenance promotions are still fiddling with the installed base’s buying habits — but the bottom line is that this is good for Autodesk and for the rest of the VAR channel.
MuM’s proprietary software (which includes more than OPEN MIND, but that’s the single biggest brand), reported 9-month revenue of €40 million, up 11% — and each quarter showing growth too: Q1 was up 9%, Q2 up 12% and Q3 up 13%. OPEN MIND amounts today to a bit less than a third of total sales, but accounts for well over half of the company’s profits — focusing on a non-Autodesk set of offerings was a smart strategy, even when WHAT?
Adding it all up. for the first 9 months of 2018, MuM reported total revenue of €134 million, up 16%. The proprietary softare business repored revenue of €40 million, up 11%), while the VAR business contributed €94 million, up 18% over a year ago.
I love MuM’s press releases. Verbatim, it says that “CEO Adi Drotleff happily states: ‘The ambitious EBITDA 2018 target range of EUR 22-23 mln (PY: 18.04 / +22% to +28%) is now very well underlined. The same is true for the net profit target range of EUR 11-12 mln (PY: 8.55 mln / +30% to +40%) and EPS 67-73 Cents (PY: 52.5), as well as the 62-68 Cents (PY: 50 / +24% to +36%) dividend plan.” I’m pretty sure that “happy” understates Mr. Drotleff’s view of MuM’s performance so far in 2018 — and that meeting all of those profit targets wouldn’t be possible without the strong performance of OPEN MIND and the VAR business.
Autodesk will announce its results in about a month, and we’ll be able to compare — and perhaps hear more about progress in the channel at large.