By all accounts, Kofax (NASDAQ: KFX; LSE: KFX) has had a banner year in fiscal 2014. The company on September 2 announced its full-year earnings, notching non-IFRS revenues of $80.6 million in the fourth quarter, a 3.0% year-over-year gain, and $297.4 million for the full year, an 11.5% year-over-year gain. These aren’t the only bright stars in the Kofax constellation either.
Also on September 2, Kofax announced its acquisition of Softpro GmbH, a Germany-based provider of eSignature verification and fraud prevention for $34.7 million in cash (a detailed analysis of the deal is forthcoming). The acquisition nicely complements Kofax’s core capture business by expanding its product offering in the payables space, as Softpro’s solutions are used extensively by banks to verify signatures on paper checks.
Kofax’s software license sales have increased 10.2% in FY2014, up to $123.9 million for the year; maintenance agreements grew by a similar 10% year-over-year in FY2014. Professional services notched the largest gain, increasing by 22% year-over-year to wrap up fiscal 2014 at $39.4 million.
Speaking of its core capture business, Kofax CEO Reynolds Bish noted in the investor conference call that the capture business notched a 5.4% decline for fiscal year 2014, which is due primarily to three seven-figure deals slipping into future quarters.
The company increased by 35% its quota-bearing sales staff—growing from 100 full-time salespeople to 135—and plans to keep expanding the sales team by an additional 15% in fiscal 2015. Already this increase in sales staff has borne fruit. Kofax closed 41% more six-figure deals in 2014 than in 2013, and added 2,894 new customers in the same period—a year-over-year increase of 9.8%.
Kofax also announced that Chief Financial Officer Jamie Arnold plans to resign on September 1, 2015 for personal reasons, among which include tensions caused by his commute from Phoenix, Ariz., to Irvine, Calif., where Kofax is based. Arnold plans to work the intervening year to help the company find and train his replacement in the CFO role.
In the earnings call for investors, Bish outlined Kofax’s goals to return its core capture business to higher levels of profitability. This is key to the company’s continued health, as capture still represents about 76% of Kofax’s total revenues. Bish is also looking to garner some keystone accounts in Kofax’s mortgage agility product so the company can use those accounts as marketing references, as well as aiming for growth of 30% or more in newer product areas.
The acquisition and subsequent integration of Softpro appears a key part of that strategy, and so far Kofax’s 2013 acquisitions of Kapow and Altosoft have helped achieve at least part of Kofax’s overall goals. At the end of the day, the drop in capture revenues looks more and more like an anomaly instead of a trend.
The future looks bright for Kofax. Between their significant investment in sales and the acquisitions to drive growth and expand client relationships, Kofax is positioning itself well for future growth. The year-over-year growth across business lines—software licenses, maintenance, and professional services—shows that AP automation solutions can provide strong results over the long term. Kofax certainly appears to be on its way up; now we only need to see what happens next.
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