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Rhipe’s Office 365 subscriptions continue to climb as profit slides

Rhipe’s Office 365 subscriptions continue to climb as profit slides

Paid seats increased by 40 per cent, or over 630,000

Credit: Dreamstime

Rhipe has seen another uptake in Office 365 subscriptions with a rise of 50 per cent in sales over FY20.

The Australian distributor’s partners consumed over 1.5 million monthly Office 365 subscriptions over the last 12 months to 30 June 2020, an increase of over 630,000 paid seats, or 40 per cent. This is up from FY19’s over 450,000 paid seats and over 600,000 seats total.

In addition to the Office 365 increase, Azure sales were also up by over 120 per cent which, combined, meant sales of Microsoft Cloud Solutions Provider (CSP) public cloud products accounted for 37 per cent of total licensing sales, delivering nearly two-thirds of licensing sales growth for the financial year.

Overall, net profit after tax (NPAT) declined by 19 per cent year-on-year, to A$5 million, according to its financial results for FY20. sliding downward from its FY19 results of A$6.2 million.

However both revenue and pre-tax earnings (EBITDA) were up 15 per cent, to A$55.8 million, and 16 per cent, to A$11.6 million, respectively. 

The performance of revenue growth was held back by a reduction in the margin earned in its licensing sales, which was down 2.3 per cent due to lower vendor incentives, product mix, geographical mix and competition.

Rhipe’s capital raise of A$32.5 million, announced in April 2020, paid off for the company, resulting in a year end cash position of A$60.9 million, an increase of a rounded up 139 per cent from last financial year of A$25.5 million.

Excluding the raise, however, the company had A$2.9 million left over, even with A$2.8 million paid out in dividends and a A$2 million cash payment for the acquisition of Melbourne-based software company Network2Share and its SmartEncrypt product in August 2019.

Non-executive chairman Gary Cox said in a message to shareholders that coming off the back of strong H1 results for the financial year, he thought at the time  that COVID-19 would “simply go away”.

As the year progressed however, this was not the case.

“COVID-19 has taken over our lives and I suspect transformed many things forever. The implications for businesses, our families and friends, our customers, our employees, and our shareholders are profound and will continue to be felt for several years to come,” he said.

“Although the impact has been dramatic across many geographies and businesses, I do hope we will begin to see a steady recovery of the economies towards the end of 2020 together with a more positive business sentiment in the months thereafter.”

Moving past its Microsoft public cloud offerings, Rhipe's Microsoft private cloud licensing market grew 8 per cent to 37 per cent of total group sales, yet is down from 44 per cent in FY19 and 52 per cent in FY18.

As for its non-Microsoft products, which include those from VMware, Citrix, Veeam, Trend Micro and Red Hat, were up a combined 20 per cent.

Rhipe Solutions, its service business, recorded revenue growth of 37 per cent, to A$13.5 million, but declined in operating profit by roughly 32 per cent, to A$2.6 million, due to an expansion in support services and the distributor’s A$2.3 million investment in its Microsoft Dynamics business.

To support the Solutions business during FY20 , it increased the division’s headcount of its customer support operations in the Philippines by 15 per cent, to 156 full time employees. This in part caused the distributor to incur a higher than normal capital expenditure of A$1.4 million, up 50 per cent from FY19’s A$700,000, as it moved to a new office in the Philippines to accommodate the increase in headcount.

The distributor’s outlook for the financial year ahead is relatively positive, expecting its public cloud business to continue leading the way for growth and revenue growth to continue. It also expects to invest significantly in its activities in the Japanese market off the back of its entry into the country from August 2019.

Further investment in licensing sales and solutions is also anticipated, but may be held back by cost management measures implemented to mitigate future impacts of the coronavirus.

In particular its Platform for Recurring Subscription Management (PRISM) is expected to see further investment in the months to come, following A$2.1 million going towards it during this financial year – slightly down from FY19’s A$2.2 million.

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