TXT E-Solutions: Profits Maintained Despite Licensing Weakness
Edison | May 18, 2016 09:15AM ET
TXT (MI:TXTS) reported a small year-on-year revenue decline for Q1, 16. While TXT Next showed continued growth, TXT Perform saw delays in the signing of new licences, resulting in a decline in revenues. This was offset by reduced operating expenses. Management sees a more positive outlook in Q2 and maintains expectations for FY16. We leave our forecasts substantially unchanged.
Weaker Q1 revenues offset by cost control
In Q116, TXT reported revenues of €14.4m, a small decline of 1.9% from a year ago. The company noted that customers in the fashion and luxury goods markets delayed or rescheduled new licence agreements, leading to TXT Perform revenues declining 8.3% y-o-y. Licensing and maintenance revenues were down 16.6% y-o-y and we estimate TXT Perform services revenues were down 2% y-o-y. Conversely, TXT Next grew 7.4% y-o-y in Q116, following on from growth of 14% in FY15. The company noted TXT Next won new international customers in Q1. The higher proportion of services revenues reduced the gross margin to 49.3% from 51.6% a year ago. Well controlled operating expenses resulted in EBITDA of €1.4m, marginally down from €1.5m reported a year ago. The high level of trade receivables outstanding at end FY15 reduced as customers paid invoices in Q1, resulting in net cash moving up to €13.7m from €8.3m at year-end.
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TXT E-Solutions - Profits Maintained Despite Licensing Weakness
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