Friday, April 22, 2011

Autonomy Q1 Results - Revenue Ahead of Consensus, Earnings Light

Autonomy (LON:AU.), a leading vendor in the high-growth markets of Enterprise Search, eDiscovery and Content Management., has announced a strong quarter with good growth in revenue, profits and other key metrics today.  Revenues were $220 million ahead of consensus $216 million,  PBT (adj.) $95 million ahead of consensus $90 million, operating margin (adj.) 
43% vs consensus 42%.

The franchise enjoyed strong year-on-year growth in core IDOL business, including OEM growth (organic) of 28%,  Cloud growth in recognized revenue (organic) of 17%, and product growth (organic) of 17% while gross margins up to 88% in Q1 2011 from 86% in Q4 201.

Dr Mike Lynch, Group CEO of Autonomy said “Q1 was a strong quarter for Autonomy in which we continued to execute well with good growth in revenue, profits and other key metrics. We are excited by the fact that the transition to the cloud has continued apace, seen in the combination of growth in recognized cloud revenues of 17% and growth in new signings evident in the rising commit number”

Revenues came in ahead of consensus, but earnings were a little light. DSO, at 102 days, is a concern to us given the faster pace of growth in receivables relative to revenue growth. While top-line growth was impressive, we continue to be worried about the quality of earnings. 2010 was a disappointment in our view.  Operating costs rose faster than we and the market expected, and revenues/gross profit expectations were lowered during the year. This compared to many of the industry peers delivering better than expected results. Underlying metrics, such as cash conversion, working capital outflows and growth in trade receivables remain poor relative to our expectations. We will continue to demand better execution and cash management.

The company’s strong IDOL technology, coupled with an extensive catalogue of data repository connectors, provides high barriers to entry, which we believe should allow the company to sustain its profitable growth for the foreseeable future. In addition, management has a strong track record of value creation through the continued signing of OEM relationships and strategic acquisitions.

Lastly, Autonomy is one of the largest independent ECM vendors in the world and is provided with many attractive acquisition candidates to grow even faster organically. However, Microsoft (NASDAQ:MSFT) SharePoint remains as a major threat to the company.

No comments: