Bish Puts Positive Spin on Kofax Results

Kofax's Q1 fiscal 2013 results were announced today. Certainly not great numbers by any means. Total revenue of $60.1 million, which represented slight (2.8%) net growth, but a .8% decline when measured in organic constant currency. Software license sales and professional services numbers were down with only increasing maintenance revenue preventing a more serious dip in revenue. And, historically, relying on increasing maintenance to drive revenue growth has not been a good sign for an ISV.

Here's an article from a U.K.-based tech Web site that does a nice job summing up Kofax's performance. Although the company is now headquartered in Irvine, CA, it still trades publicly on the London Stock Exchange.

It is worth noting that Kofax's adjusted EBITDA for the quarter was pretty much the same as last year and the company still generated $11 million in cash, ending the quarter with $90 million in the bank.

Here was CEO Reynolds Bish's spin on the numbers, "Our first quarter produced seasonally weak software license and professional service revenues and continuing growth in maintenance service revenues due to increasing renewal rates with total revenues being consistent with historical trends. This was accomplished during a quarter in which we changed our head of global sales and services in order to strengthen leadership in those areas and began implementing initiatives to gradually improve sales execution and productivity. We’re therefore pleased to report essentially the same EBITDA as that realized in the prior year period and strong cash generated from operations."

Bish also reaffirmed his guidance for the whole fiscal 2013, "which is for mid to high single digit total revenue growth on a constant currency basis and an adjusted EBITDA margin of at least that reported in fiscal year 2012."

It's my opinion that capture market conditions are changing and although Kofax is pushing forward with more cutting edge products like Mobile Capture and Web Capture, which are both highlighted in the press release on the financials, Koafx still has a large legacy traditional client/server-based business to support. Not that the market for client/server capture is dead by any means. But, trying to support this quarterly $50-million-plus  legacy business, while ramping up in new areas that might be influenced by subscription-based pricing - well, it's a bit of a conundrum. We kind of agree with Bish that the profitability number is impressive, especially (and he doesn't mention this, at least in the press release [haven't listened to the conference call  yet])  when you consider the investments Kofax is making in its new products lines and potentially new business models.