Lawson Reports 28 Percent Surge in License Fees
April 12, 2010 Alex Woodie
Shares of Lawson Software lurched upward last week after the company reported a 28 percent increase in license fees for its third quarter, which ended February 28. The good news concerning license fees–a closely watched barometer of the future health of public software companies like Lawson–overshadowed the news of a sizable drop in profitability for the company, which it attributed in part to an acquisition.
Total revenues for Lawson’s third quarter of fiscal year 2010 were $186.2 million, a 7 percent increase over the $173.8 million reported for the third quarter of fiscal year 2009. License revenue for the quarter totaled $31.8 million, a sizable and surprising (for the company) jump from the $24.8 million in license fees it recorded a year ago. Revenue from maintenance fees totaled $89 million, a modest 4 percent increase, while revenue from consulting deals rose 3 percent to $65.2 million, reflecting Lawson’s continued emphasis away from consulting, which it has downsized recently.
Net income, on a GAAP basis, came in at $1.8 million, a 71 percent decrease from the $6.2 million profit Lawson reported for the same quarter a year ago. On a per share basis, earnings were $.01 per share. Lawson attributes about a quarter of the drop in net income (or $.01 per share) to its $160 million acquisition of Healthvision, which was completed in late January. Healthvision contributed almost $5 million in revenue, but decreased the company’s profitability by $1.5 million, the company says. The declining value of the U.S. dollar during the quarter also hurt Lawson’s profitability to the tune of $.01 per share, the company says.
In a conference call following the announcement, Lawson CEO Harry Debes said the company’s core business was very strong. “We’re not back to 2008 levels of business activity yet, but more customers are moving forward on software investments,” he said. “All in all, the results were very positive.”
Several aspects of Lawson’s software business were executing well. The M3 ERP suite, which has its largest installed base in Europe and represents the company’s strongest System i offering, accounted for 10 percent of the company’s contracting, Debes said. The company’s suite of human resources software, called Human Capital Management (HCM), posted record sales, he said. Business was also good in the healthcare industry–the prestigious Cleveland Clinic signed a deal for Lawson’s complete range of HR and talent management software–and among public agencies and schools, the company said.
Lawson also gave guidance on its expected fourth quarter results for fiscal year 2010. The company foresees revenue in the $194 million to $198 million range, with profits in the range of $.04 to $.06 per share. That would be about a 5 percent increase from the fourth quarter results for fiscal year 2009, which amounted to $186.2 million. Fourth quarter results for fiscal year 2008–before the onset of the global financial crisis that we’re just beginning to emerge from–were $233 million.
While analysts expected better fourth quarter projections from Lawson, Wall Street still rewarded the St. Paul, Minnesota, company for its third quarter numbers, which exceeded the company’s own projections.
The company’s stock, which is traded on the NASDAQ National Market, went from about $6.90 per share earlier in the week to about $7.70 after Lawson’s announcement, representing an 11 percent gain and a new 52-week high for the stock. The value of the company’s stock has more than doubled since a low of $2.99 per share in November 2008. The stock is still well off its all-time high of $16.61, which was reached immediately after its IPO in late 2001.
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