Restructuring costs, CQ5 investments, changes in the management team, high R&D spending and several other factors affected Day’s balance sheet. We see bright spots here. Let's take a closer look.
Day Software 2008 Financial Highlights
- Total FY08 revenue of CHF 27.8M, an increase of 11% from total FY07 revenue of CHF 25.0M
- License revenue grew 8% to CHF 11.3M in FY08 from CHF 10.5M in FY07
- Total cost of revenue for FY08 was at CHF 8.7M resulting in CHF 19M gross profit
- Operating expenses increased in 2008 in R&D (about 27% increase over 2007), Sales and marketing and other departments, resulting in a CHF 2.3M loss
- Total net loss of CHF 12M vs. CHF 7M net income over same period last year
- Year-end cash flow was up 12% to CHF 12.8M
- Non-cash accounting loss related to Q4 2008 restructuring, including CHF 4.6M related to the sale of its U.K. subsidiary
- Loss of CHF 5.4M related to cancellation of software capitalization, etc.
- Net income of CHF 106K on a non-GAAP basis in Q4 2008
Unlike our friends at CMS Watch, we don’t think these results are gloomy and “not-so-sunny” (Good line there, Kas). It's possible to see it both ways, but our interpretation is a bit brighter. If you put the numbers into context, most of them actually make sense.
Where Did Day’s 2008 Money Go?
Some of the negativity in Day’s financials are the losses/expenses we’ve witnessed and, hence, we don’t find them surprising or alarming.
Over the last year, we’ve covered most of the events that led to Day’s 2008 balance sheet looking the way it looks today.
Remember that new guy, Kevin Cochrane (of Interwoven, then Alfresco), who Day hired last year as their new CMO? He’s an expense in the Sales & Marketing slot on the balance sheet.
Day also added Richard Francis as the new CFO in 2008, along with Trevor Salmon as VP of the UK and Northern Europe. Ching, ching.
How about that new version of Communiqué that saw light in November 2008 -- the magical Day CQ5.1? Another huge expense. R&D and Sales & Marketing investment increasing (think red ink here) -- check. But CQ5 also brought over 17% revenue growth over the first half of 2008, according to Day, just as we predicted.
Restructuring efforts and accounting adjustments that include shedding its UK subsidiary MarketingNet took a hit on Day’s balance sheet resulting in the seemingly scary net loss of CHF 12.0M on 27.8M in income.
Day says with these efforts the company has finished a six-month operational restructuring intended to refocus business operations around CQ5.
2008 Financials for the Content Management Industry
Day Software’s report of slight revenue growth sheds an optimistic light on the web content management systems market for 2009.
With Interwoven now a part of Autonomy, we’re still not clear about this vendor’s future on the CMS playground.
Vignette has been reporting steady losses in the recent past in addition to layoffs late last year.
With these results in mind, 2009 should be an interesting year for the content management industry. Especially with SaaS and open source players gaining more popularity.
As long as Day's investment into innovation and technology pays off this year, the shareholders should be happy with this transparent balance sheet and future financial results. We certainly think it's a good time to gather the wagons and strengthen products.