FrontRange Limited, the JSE-listed developer of service management and customer contact solutions for the small, medium and distributed enterprise markets, continued to improve its financial performance in the four months to the end of October 2004
For FrontRange chief executive Michael McCloskey, the highlights of the period were a 24% increase in new licence sales to $9.4 million, 9% growth in maintenance revenue to $12.7 million and significant progress being made with the company`s new product offerings, underpinned by a significant 37% increase in research and development spending. Total revenue of $24.3 million for the period was 10% up on the same four months in 2003.
Stronger licence revenue is the most important measure of the health of a software company and reflects continued improvement in FrontRange`s current product base, before the effects of new product releases begin to kick in. "This is the first time in more than three years that FrontRange has grown its licence revenue compared with the same period in the previous year," stated chairman Dana Buys.
Headline earnings for the four-month period came in at $0.4 million, compared to a headline loss of $1.9 million in the comparable 2003 period. The company ended the period with a positive cash balance of $21 million, up from $14.9 million at the end of October 2003.
FrontRange turned a trading loss of $1 million in the comparable period in 2003 into a trading profit of $0.4 million despite the northern hemisphere summer when customer demand is at its weakest. The half-year figures are for four months as the period was the first since FrontRange changed its year-end from June to April.
"We`ve continued to develop our product suite and improve the efficiency of our processes, while our stronger focus on going to market through a channel of partners has bolstered our ability to maintain and improve licence sales," says CEO Michael McCloskey.
FrontRange was successful in generating its fourth consecutive quarter of growth in licences, total revenue and trading profit. For the quarter ended 31 October 2004, the group generated revenue of $20.2 million and a trading profit of $2.2 million, a net margin of 10.9%. Net margins have strengthened steadily over five quarters and McCloskey believes the company is on track to achieve ongoing net margins of 12% and more.
Growth in FrontRange`s customer base also had an impact on deferred revenue which grew to $16.6 million by end-October, compared to the June 2003 balance of $14.5 million. FrontRange`s deferred revenue is comprised primarily of annuity revenue received in advance.
The 37% increase in research and development spending took FrontRange`s investment in developing new products to $4.7 million for the four-month period. The company`s goal is for research and development to be between 15% and 20% of revenue. The ratio for the four-month period was 19%.
The increase in research and development spending, combined with the more than $2.3 million in headline earnings, demonstrates the improvement FrontRange has made in building a scaleable business model. "Our revenue growth, increased spending in R&D to accelerate new products to market, and increased profitability, demonstrate that our financial model is driving our strategic direction," says McCloskey.
According to Buys: "FrontRange has thus far made significant progress. We have grown revenue, licences and earnings in each of the previous four sequential quarters. Few companies in our segments have achieved what we have done. In addition, we have a significant number of new products scheduled for imminent release and we look forward to bringing these new products to market."
FrontRange continued to expand its customer base, and during the period signed up new customers that included: in North America - Electronics for Imaging, BRINKS, Connecticut On-Line, Standard Motor Products, ASCO Valve, New York Jets, MWX Technologies, Debevoise & Plumpton and NSI Software; in Europe, Middle East and Africa - Fiat/ Alfa, UCS Solutions, Central African Building Society, Nissan Diesel, Sappi Kraft, Agricultural Research Council, Daimler Chrysler Finance, Global Refund, ABN Ambro Poland, Peritrostok, Essex Police, LSM Group, STA Travel, Oxford County Council and Vediorbis; and in Asia Pacific - Shortcuts Software, Spirax Sarco, Level Up and PT Astra International.
McCloskey expects FrontRange`s drive to develop families of solutions specifically for unique segments in the small, medium and distributed enterprise markets will gather momentum over the next six months.
"We anticipate that the benefits of our product development will be realised in future reporting periods as the latest release of GoldMine and an upgrade to the IP Contact Center product were released only in November," he says.
Other releases scheduled for this quarter include IT Service Management, while additional Infrastructure Management modules, and further enhancements to the HEAT and GoldMine products will follow in the next few months.
McCloskey says FrontRange continues to view its outlook with confidence. "The company is entering a seasonally stronger period of its year and, with the new products rolling out, we believe FrontRange will be able to continue to build sequentially on the revenue momentum achieved over the past five quarters."
Share
Editorial contacts