Weak EMEA Market Hurts Kofax

Kofax announced its fiscal 2012 Q1 results early this morning, and they were not particularly strong, with weakness in EMEA being blamed as the main culprit. For the three months ended Sept. 30, Kofax total revenues were $58.5 million, which represented 7% growth over 2011 Q1 revenue of $54.4 million. However, in terms of "organic constant currency" - which we assume means accounting for currency fluctuations and acquisitions, Kofax reported only 1% growth.

The growth was driven primarily by increased revenue from maintenance contracts, which was up 18%, while software license sales were down 4% - including a 7% drop in applications software licenses, which was offset slightly by a 7% increase in revenue from OEM/POS software license sales (which includes VRS and Kofax Express.)

"The first quarter of fiscal year 2012 yielded mixed results," said Kofax CEO Reynolds Bish in a press release. "Software license revenues in the Americas and Asia Pacific regions as well as our OEM / POS business, and maintenance and professional services revenues grew in line with our September 2011 expectations. The EMEA region conversely experienced a decline in software license revenues."


The current financial turmoil in Europe is no secret, and Kofax is taking steps to account for continued potential weakness in this geography.  “We are concerned about the continuing uncertainty and deteriorating economic environment throughout much of EMEA and the potential effect this may have on other markets, and we expect these challenges to continue or worsen until more confidence and stability return on a global basis," Bish said. "While our pipeline of opportunities continues to grow and management and the Board remain confident in our business, we are nonetheless lowering our expectations for fiscal year 2012 to low single-digit total revenue growth in U.S. dollars on a constant currency basis. However, in order to maintain the absolute EBITA reported in fiscal year 2011 during fiscal year 2012, we are restructuring our EMEA sales organization and also reducing operating expenses in other functions to a lower level while preserving our new product development initiatives and a strong balance sheet.”


Sounds like a plan.

Kofax competitor ReadSoft recently reported its third-quarter results  (same time period) as well. For the quarter, ReadSoft reported a 24% growth in software license sales in terms of local currencies and 15% growth in overall revenue. This was led by exceptionally strong numbers in its "U.S. and rest of the world" revenue (includes Australia, Brazil, and Malaysia), which showed 31% growth. Nordic markets and Benelux were also reported as strong for ReadSoft, which indicates, ReadSoft must have seen some weakness in the Germanic and other EMEA markets as well.

While Readsoft reported Nordic region growth of 10-15%, its sales "other European markets" was essentially flat.