Revenue growth accelerated above expectations at constant scope in Q2 18 (+6.9% following +4.9% in Q1 18). Growth was driven by the international markets which benefited from the signature of a large number of contracts based on the Microsoft Dynamics 365 online platform.

The development of the SaaS model, a source of recurring revenue, continued at high double-digit growth. In H1 18, SaaS revenue represented 17.4% of the total (+3.1pts).

Q2 18 revenue

Prodware posted strong revenue above expectations in Q2 18. Revenue reached €44.9m, +2.2% and +6.9% at constant scope (vs our estimates of €44.7m, +1.8% and +4.5% at constant scope). There was a change in perimeter related to the disposal of non-core Sage businesses in France in Q4 17 and the integration of Nerea in Q2 17.

SaaS revenue increased by 19.9% to €10m and represented 22.3% of the total (+3.4pts yoy). There is no figure for the trend in the Business Consulting activity in the quarter. Finally, software editing performed very well, +5.8% to €15.6m, corresponding to 35% of the total. 

International revenue continued to be a solid growth driver, +39% to €24.8m in Q2 18 vs +22.3% to €24.9m in Q1 18, thanks to the large number of contracts based on the Microsoft Dynamics 365 online platform signed since the beginning of the year 2018.

H1 18 revenue

Revenue reached €90m,+3.2% and +4.1% at constant perimeter (vs +3.1% and +2.3% at constant perimeter in H1 17). 

SaaS revenue reached €15.7m (+25.7%) and represented 17.4% of the total (+3.1pt). The Business Consulting activity benefited from strong growth (undisclosed figure) despite a challenging hiring situation in the market. Software editing revenue reached €30.9m, +3.2%, and was stable at 34.4% of the total.

Revenue growth acceleration at constant scope

Excluding the change in the perimeter, revenue growth accelerated significantly, above expectations, between Q1 18 (+4.9%) and Q2 18 (+6.9%) contrary to last year (+2.2% in Q1 17 and +2.5% in Q2 17). This acceleration was mainly attributable to international markets and probably to a positive impact from the postponement of some projects from Q4 17 to H1 18.

Fast-growing in international markets

The strong International revenue growth (+39% in Q2 18 vs +22.3% in Q1 18) was attributable to the large number of contracts based on the Microsoft Dynamics 365 online platform signed since the beginning of the year 2018. In H1 18, the breakdown of revenue by geography was the opposite of those in H1 17. Revenue in French-speaking countries reached €40.3m (-18%), 45% of revenue (vs 56% of revenue in H1 17) while International revenue was €49.7m (+30%), 55% of revenue (vs 44% of revenue in H1 17).

Strong and seamless development of SaaS revenue

As a reminder, Prodware is involved in a business transformation which consists of replacing traditional software licence fees by three-year subscription fees in the SaaS mode. The development of SaaS is expected to continue to be a growth driver in the medium term. The advantage of SaaS is higher recurring and predictable revenue for Prodware in the medium term.

In H1 18, SaaS grew at a high pace, or +25.7% (vs +26% in H1 17), and represented 17.4% of the total.

The positive set of figures in Q2 18 show the group’s ability to move to a SaaS model without disruption at the top-line.

We will update our estimates after the release of H1 18 earnings due on 16 October 18.

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