Day Software returns to profitability

Earlier this week Swiss CMS vendor Day Software released financial results for the last 6 months (1H 2009) which showed a return to profitability, revenue growth and actual cash growth.

Revenue was up 33 % and license revenue accounted for 42 % of revenue, maintenance and support (M&S) revenue for 32 % and services for the remaining 26 %. A few months ago, Michael Marth, a friendly Day engineer, shared an interesting insight into Day’s customer retention success when he documented the lifetime of a CMS installation to be more than 6 years for Day customers. This certainly helps in relation to the M&S revenue.

While Day has been known to continuously invest in research & development (R&D), a closer look at the operating expenses reveal that R&D costs are down roughly 5 %. Sales and marketing costs are up more than 10 % and general and administrative costs are up more than 20 %. Perhaps Day is hoping that the increased spend on sales and marketing will translate technical leadership into market leadership?

After Day released what analyst Kas Thomas at CMS Watch characterized as not-so-sunny financial results in February, quite a few of our community of practice members have asked us to keep a watchful eye on the Swiss CMS vendor. Interestingly, CMS Wire had a more positive take in a story titled Bright and Sunny 2008 Financial Results. Irrespective of your interpretation of the numbers, Day deserves recognition for being transparent and more open about numbers than most competing vendors.

With software sales at €4,7 million for the 6 months, Day has quite a global footprint with dual headquarters (in Switzerland and the US), 4 regional offices in Europe and 1 in Singapore. Based on software revenue, Day is a slightly smaller than Sitecore, which has experienced rapid growth and Day is significantly smaller than FatWire, which recently reported a profitable year and revenue increase. If you look at the recent and (too) influential Forrester Wave for WCM vendors, Day was indeed the smallest dot on the chart.

Many potential buyers, particularly in Scandinavia, have so far been reluctant to consider Day, mostly due to the lack of local experienced partners. According to Kevin Cochrane, Chief Marketing Officer at Day, who I recently interviewed, a revamped partner program will soon be introduced in order to win new system integrators and agencies in regions where Day has historically been weak.

Cochrane also reflected briefly on the management changes that Day experienced in 2008 with a new CEO and a new CFO. He saw this as a very positive change for the company and he mentioned that there had been no change in R&D, even with the cost reduction. According to Cochrane, the number of engineers actually went up as Day had some quite extraordinary costs related to the CQ5 launch in late 2008.

As always, great financial results from a vendor is not necessarily an indicator that the company’s products fit the specific requirements of your organisation. When evaluating vendors, ensure you compare features as well as intangibles, e.g. roadmap, community, partners and finances. If you are very close to a decision, consider doing reference calls to some of the 27 new customers to check in on their progress.

Disclaimer: I’m no financial analyst, but the financial standing of a vendor is important when evaluating. So remember to look beyond the product features.