Kofax Posts Weak Q3

Document capture and BPM ISV Kofax continues to struggle. Kofax followed a weak fiscal Q2, with an even weaker Q3 (ended March 31). The Irvine, CA-based company reported revenue of $58.7 million, which represented a decline of almost 6% in terms of constant currencies. However, CEO Reynolds Bish remained optimistic and predicted a strong fourth quarter and projected low single-digit revenue growth in U.S. dollars for Kofax's total fiscal year 2012.

Said Bish in a prepared statement, "We experienced an unusual number of delayed orders in our core capture business. We have not seen material changes in the competitive landscape or macroeconomic environment and, as a result, believe these delayed orders are attributable to less than adequate execution in our core capture business. We’re taking actions to minimize the risk of this reoccurring in future quarters and should begin realizing the related benefits during the current and next several quarters.

"After a thorough review and based on our fiscal year to date results and outlook for the current quarter, for fiscal year 2012, we continue to expect high single digit total revenue growth on an as reported basis – including acquisitions to date and assuming current exchange rates, low single digit total revenue growth in U.S. dollars on a constant currency basis and an Adjusted EBITA of at least the $40.2 million reported in fiscal year 2011. This clearly implies a seasonally strong fourth quarter, which is very consistent with historical patterns.”

Especially alarming is Kofax's continued decline in its core applications software business, which as Bish clearly confirmed to DIR at Kofax's Transform event earlier this year, is the key to the future success of the company. Applications software licenses saw almost a 30% drop in sales in constant currencies. Bish said "During the third quarter our Singularity, Atalasoft, MarkView and OEM / POS revenues met or exceeded our expectations." He put the blame for software licensing shortfall squarely on the shoulders of the company's flagship document capture software business.