Catalyst Emerges Strong in 2000

  • Written By:
  • Published:

Catalyst Emerges Strong in 2000
S. McVey - May 19, 2000

Event Summary

Warehouse management system vendor, Catalyst International, recently reported results for the first quarter of 2000. Revenue was $10.3 million, an increase of 9.4% over the fourth quarter 1999, but slightly less than revenues of $10.7 million for the first quarter 1999.

Catalyst also made progress toward its goal of a 1:2 ratio of licenses to services revenues with license revenues increasing 175% to $2.4 million in the first quarter. Services revenues, derived primarily from modifications implemented for clients and other customer services, declined slightly over last quarter to $6.2 million. Catalyst returned to profitability in the first quarter, earning $172,000 after taxes, putting an end to a two-quarter period of losses in 1999. Carrying these losses forward, net earnings for the first quarter were $264,000 or $0.03 per share.

Catalyst's favorable results fall in line with those of its peers in the WMS and SCM markets, many of whom have entered Y2K with a surge in revenues and earnings. In addition to winning new accounts in the fourth quarter and selling to existing customers, Catalyst has continued to work toward revising its organization in order to capitalize on the SAP alliance in effect since last September.

Figure 1

Market Impact

Catalyst's renewed revenue growth and profitability follows a shaky 1999 in which its revenues fluctuated and earnings dipped into negative territory. Though its customers should be encouraged by its first quarter report card, the results do not yet indicate substantial growth in its business, an effect Catalyst hopes to achieve through its partnership with SAP. While potential for this growth is good, Catalyst must balance carefully its partnership with SAP and its ability to execute as an individual company to avoid conflicts in strategy that could damage its business in the longer term.

Catalyst needs to maintain the ability to sell its products independently of SAP to be viable in the post partnership existence that will resume in a few years, provided that SAP does not acquire Catalyst. Though outright acquisitions are not SAP's tactic of choice, the ERP vendor approximates them by providing a strong indirect channel for a multitude of VARs, which then depend fully on SAP for their livelihood. In order to avoid this fate, Catalyst must continue to seek business that supports its non-SAP goals, while still paying due "tribute" in the form of implementation services to its new benefactor. These goals should include expanding its product offering to cover more of the supply chain execution space by adding transportation management or advanced order management products.

In spite of its deep expertise and functionality in WMS, Catalyst often loses deals to competitors that can offer broader functionality to clients who are anticipating future IT needs that extend beyond WMS. A recent example is Provia Software's win at Owens Corning. Owens signed on for warehouse and yard management, two systems offered by Catalyst, but chose Provia in part for its transportation management capabilities that might be needed in the future.

User Recommendations

For companies in retail, consumer packaged goods, or industrial technology, Catalyst WMS products offer a rich set of features and can be customized according to specific customer requirements. We encourage users to include Catalyst on a short list for Unix WMS selections. SAP users who are unsatisfied with's WMS capabilities will certainly wish to evaluate Catalyst, but should remember that a dedicated interface between the two applications will not be ready until 3Q 2000 or later. Currently, Catalyst uses third party software from Mercator to integrate WMS and SAP R/3. As times goes on and Catalyst refines its ability to execute alongside SAP, SAP users should find the alliance to be a low risk alternative to other SAP WMS combinations. In the short term where ease-of-interface is important, SAP users may want to consider Provia Software's WMS, which offers a standard interface to connect to R/3. While the recent quarter bodes well for Catalyst and falls in line with our expectations (see TEC article, "Catalyst International Bit by Y2K Bug"), users should wait until the company can achieve sustained quarterly revenues in excess of $15 million with at least $3 million directly attributable to the new alliance before concluding its SAP pact a success.

comments powered by Disqus