FinancialForce revenue jumps 85 percent

Profile picture for user gonzodaddy By Den Howlett February 16, 2014
Summary:
As UNIT4 readies to go private it reveals more details of growth in revenue and the business in general.

FinancialForce.com logo 2013
UNIT4 has reported full year financial results for 2013.

For the first time, UNIT4 provided a good amount of color on FinancialForce performance. It reported a revenue jump of 85 percent with running revenue increasing 80 percent to $30.6 million pa. This last number compared to $17 million for 2012. This time last year I was under the impression the annual run rate was around $20 million.

 

From the blurbs:

The number of new customer deals was up more than 50% over 2012, with growth achieved across the small business, mid-market and enterprise sectors. Notably, FinancialForce.com’s penetration of the enterprise market increased, particularly with its Billing and PSA applications. The number of customers using both core applications - Accounting and Professional Services Automation (PSA) - more than doubled and deal size (annual run rate) also grew.

In other news, the company reported strong growth in what it terms SaaS and subscription revenue but a decline in the traditional licence revenue business:

SaaS and subscription revenues continued to show a strong upward trend, with growth of 42.3% compared with 2012. Traditional perpetual product revenue showed a small decline of 5.5% to an amount of €72.2 million. The strong growth in SaaS and subscription resulted in growth in the annual run rate of SaaS and subscriptions from €57.0 million at year-end 2012 to €79.4 million at year-end 2013, an increase of €22.4 million or approximately 40%.

Analysis

UNIT4 is one of the more visible ERP application vendors going through the transition to a service/subscription model. Part of that transition sees the company going private so that changes in the business model are not forced by stock market expectations. It also means the company can choose whether it goes public with any figures. What we can be certain of though is that there will be significant shifts in total revenue growth and/or profitability.

Pulling this off for a 'traditional' vendor is very difficult in the public gaze. In UNIT4's case, we can already see the impact when the company is talking eye popping growth in some segments, falls in another but modest overall growth.

None of that matters since the offer to acquire by Advent is all but over, subject to shareholder agreement at the end of the month.

Even so and given the wide open nature of the mid-market to this style of offering, I expect FinancialForce to continue providing guidance on progress as part of its general market positioning as a credible alternative to NetSuite and Microsoft Dynamics. This will become even more important as it beds down its acquired HR solutions and integrates the whole while operating on the Force.com platform.

Disclosure: at time of writing, FinancialForce is a diginomica partner and is also a personal product consulting client of the author.