[Software] Axway Software: Accelerated Migration to Cloud Offerings

[FazzNoth]

 

"In the first half of 2022, I have been very impressed by the momentum generated by our General Manager model. Our focus on our products and customers’ needs continues to drive improvement in our NPS and the nature of the deals we sign. Over the first half, our core product-based strategy had a real impact. Thanks to our B2B offering, we were able to sign our largest deal of the period through a multi-million euros Axway Managed cloud contract with a new customer. Our MFT portfolio also continued to attract new customers and grow within its large installed base, while API Management pursued its development through the success of the Amplify Marketplace and Axway Open Finance offerings. We also strengthened our capabilities by acquiring a cloud integration start-up, DXChange.io, at the end of June. While we were anticipating a decline in H1 2022 compared to the good performance of the previous year, the number of Axway Managed subscription contracts signed during the period exceeded our expectations. This shift is disrupting our revenue even though we have achieved our sales forecasts, as evidenced by the satisfactory growth of our ARR. Should this trend continue, our 2022 organic growth target of between 1 and 3% may become difficult to achieve in favor of more stable and predictable revenues in the years to come. At this stage we are looking at a full-year landing in the low end of our guidance, but we will have a better picture of the situation at the end of Q3."

 

Comments on business activity in the first half of 2022

In the first half of 2022, Axway continued to adapt to its new market paradigms at a good pace. This resulted in Axway Managed subscription growth of almost 400%, which helped ARR growth of 8.6% and builds future revenue stability. Over the first six months of 2022, in an inflationary economic environment, Axway's margin and booking performance was in line with internal forecasts.

While the first half of 2021 represented a high comparison basis, Subscription revenue, which had been growing steadily between 2018 and 2021 with a compound annual growth rate (CAGR) of 41.5%, was slowed by several large new contract signatures for Axway Managed cloud offerings. These contracts, which, as evidenced by the continued increase in ARR over the period, generate more recurring revenue over time and do not result in any early revenue recognition.

On the operational side, the company continues to implement its strategy focusing on its significant product lines and markets. This approach involved several major developments:

 

- The company moved to an execution model with General Managers ("GM") for each core product: API, MFT, B2B and Digital Finance. Each GM oversees the strategy and budget for a product line and works closely with regional entities allowing teams to continue to get closer to the customer and their needs.

- The initiative to rationalize the product portfolio, which involves 5-7% of the company's 2021 total revenue, has been launched. As such, several specialized products have been put in the process to be sold or discontinued.

- In addition to its product portfolio rationalization, Axway is working to secure its market positions. As part of this plan, it was decided to serve Chinese market with partners and therefore, Axway's subsidiary in China will be closed.

- As mentioned at the beginning of the year, the acquisition strategy was re-engaged with a first transaction completed at the end of June 2022. Axway acquired the India-based start-up, DXChange.io, which offers a cloud integration platform that will be leveraged across the entire core portfolio. This strategic technological acquisition will enable Axway to respond effectively to the convergence of the API Management and IPaaS markets, which are rapidly evolving towards a common framework for integration and management of hybrid and multi-cloud environments.

 

Finally, over the first six months of the year, customer satisfaction has risen sharply breaking a new record, with a Net Promoter Score of 37 compared with 29 at the end of 2021. Axway’s customers continue to be excellent external advocates of the company’s offerings and value.

Comments on operational performance in the first half of 2022

In the first half of the year, Axway generated revenue of €136.4 m, down 5.8% organically and 1.4% in total. While there were no changes in the scope of consolidation during the first six months of the year, currency fluctuations had a positive impact on revenue of €6.5 m, mainly due to the appreciation of the US dollar against the euro. Profit on operating activities amounted to €6.7 m for the period, or 4.9% of revenue.

 

More Info: https://finance.yahoo.com/news/axway-software-accelerated-migration-cloud-154500382.html