Median TTM revenue in 3Q12 grew 20% or more in three of our SEG Software Index product categories.
This excerpt is from our complimentary Q3 2012 Software Industry Financial Report which can be downloaded here: https://softwareequity.com/research_reports.aspx
Median TTM revenue in 3Q12 grew 20% or more in three of our SEG Software Index product categories (Figure 10). Vertically focused software providers (other than healthcare) posted a median 24.6% TTM revenue growth rate, led by Sapiens International (72.4%), Guidewire (34.5%), and EPIQ Systems (32.2%). Healthcare software providers finished close behind, closing 3Q12 with a 21.8% TTM revenue growth rate. Benefiting from substantial shifts in healthcare IT spending were Greenway Medical Technologies (38.0% TTM revenue growth), Simulations Plus (28.4%) and MedAssets (27.6%).
And security software companies grew revenue a median 20.1% in the third quarter, cashing in on concerns accompanying the shift to cloud computing. Revenue growth in the Security category was led by Palo Alto Networks (115.1%), Sourcefire (38.2%), Imperva (35.3%), Fortinet (29.0%) and VASCO Data (22.8%).
On the flip side, seven software product categories posted disappointing TTM revenue growth rates below 10%: Billing & Service Management (9.8%), Enterprise Resource Planning (8.8%), Financial & Accounting (7.3%), Storage, Data Management & Integration (6.0%), Gaming (5.9%), Development Platforms (5.4%) and IT Conglomerates (1.5%).
As for the most profitable software product categories, the highest median EBITDA margins in the third quarter were reported by public software companies in the IT Conglomerate and Vertical – Finance categories, 36.1% and 34.8%, respectively. Among the software industry’s largest public companies, most profitable were Oracle (43.5% EBITDA margin), Microsoft (41.7%) and SAP (36.1%). The Vertical – Finance category, consisting of software providers vertically focused on the finance industry, demonstrated strength from top to bottom, with three out of four generating EBITDA margins above 31%. This category was led by MSCI (45.0% EBITDA margins) and SS&C Corporation (37.4%).
The Gaming solutions product category had the lowest median EBITDA margin in 3Q12, at 6.7%. EBITDA margins varied drastically from one provider to the next, as the industry undergoes significant disruption brought upon by consumers rapidly shifting gaming consumption to mobile and Internet channels and away from boxed retail. Activision Blizzard finished 3Q12 with an EBITDA margin of 24.6%, while TakeTwo Interactive closed 3Q12 with an EBITDA margin of -23.2%.