Large global accounts are being credited for record-setting software revenue at Ottawa-based Magor Corporation, CEO Mike Pascoe said Tuesday.
Mr. Pascoe said contracts with the Canadian government and a Middle East government gave the visual collaboration solution provider its largest quarterly software revenue ever in the third quarter of fiscal 2015.
Magor (TSX-V: MCC) posted third-quarter software revenues of $630,697, 24 per cent higher than in the same quarter a year earlier. Recurring revenues for the three months ending Jan. 31 were up 210 per cent from the third quarter of 2014, coming in at $113,921.
Total third-quarter revenue, however, dropped from $1.1 million in 2014 to $810,862 this year.
Mr. Pascoe blamed the decline on lower hardware revenue, explaining that a major client in the Middle East purchased its hardware locally so it only needed Magor’s software products.
“If we had have had hardware associated with those orders, our revenues this quarter would have been well over $1 million, (and) would have been larger than the quarter a year ago by far,” he said.
Still, Mr. Pascoe said not selling hardware to the client was a “win-win” for both parties because that side of the business has relatively low margins anyway.
“We don’t have to buy the hardware, which means we don’t have the working capital demands. It’s also win-win that what we do sell them is software, so it’s essentially 100 per cent margin business,” he said. “We really like that. It does have the impact of making your overall revenue number actually look lower. But in actual fact, it’s a much more positive scenario.”
Mr. Pascoe said there’s not a lot of money to be made in selling hardware, noting any net revenue generated barely covers shipping and handling costs.
“Not selling hardware is a plus for us, and if I had my druthers, none of our customers would buy hardware from us. But still, an awful lot of them do, so we have to live with that,” he said, adding the company plans to transition away from hardware as soon as it can.
Third-quarter gross margin for the quarter was 84.6 per cent, up from 62.9 per cent in the same quarter last year.
Magor’s net loss for the quarter was just over $1 million, or two cents per share, compared with $1.4 million, or three cents per share, in the third quarter of 2014.
As of Jan. 31, the company’s order backlog was $559,781, down from $900,097 on Oct. 31, 2014.
Magor had $114,585 in cash on hand as of Jan. 31, down from $666,195 on April 30, 2014.