Sopheon, the international provider of software and services for Innovation Management, is pleased to provide the following trading update for the year ended 31 December 2022.
We are pleased to report that we expect revenues for the year ended 31 December 2022 to be in line with market expectations at approximately $36.5m (FY2021: $34.3m). On a constant currency basis, revenues would comfortably exceed market expectations.
The Board considers Annual Recurring Revenue (“ARR1”) as the driver for long term growth and therefore its primary growth metric and focus. ARR at the end of 2022 is expected to reach approximately $24.3m (FY2021: $20.7m) representing solid growth of 17.5% over 2021, in a challenging market environment. Adding ARR to contracted consulting services means revenue visibility2 for 2023 is already $28m, compared to $23.4m at this time last year.
Adjusted EBITDA is expected to approach $7m (2021: $6m) comfortably exceeding market expectations, after absorbing the write down of $1.6m in costs previously capitalized in connection with the Group’s original next-generation cloud platform, in light of the two recent acquisitions. The stronger than expected profitability was driven by several factors including careful cost management.
Net cash on 31 December 2022 was $21m (2021: $24m). A large part of this reduction reflects a fall in the Dollar value of Euro and Sterling cash deposits due to currency movements, the extended payment terms for the US Navy contract announced in July, as well as the impact of acquisition payments.
These impressive financial results were achieved in conjunction with major strategic accomplishments. We integrated two acquisitions and have launched three software-as-a-service (SaaS) products under the Acclaim™ banner: Acclaim Ideas (formerly Solverboard), Acclaim Projects (formerly ROI Blueprints), and Acclaim Products. The launch of these new solutions expands Sopheon’s addressable market by an estimated $2bn and reinforces the Company’s competitive advantage.
As evidenced by the impressive ARR growth achieved in the year, we have embedded our transition to a SaaS recurring revenue model, in line with our strategy. All but one of our 16 new customers in 2022 contracted on a SaaS basis, and we converted an additional 13 existing customers from perpetual to SaaS. With these advances under our belts, we have now determined that our strategic, operational, and financial goals are best served by completing this transition to SaaS as soon as practically possible. This means that we intend to sell all new customers as SaaS, and any existing customer extensions will be used as an opportunity to convert to SaaS. Accordingly, we expect perpetual license sales to fall in 2023 and 2024, offset by growth in ARR. Due to revenue recognition timing differences between SaaS and perpetual license sales, this will slow revenue and profit development in 2023, but should accelerate ARR growth - delivering traction and more predictable growth in subsequent years, with a higher quality of revenue.
Financial expectations noted above are preliminary, and subject to year-end financial close and audit review processes. In line with our normal reporting schedule, Sopheon plans to issue its results for the year ended 31 December 2022 on 24 March 2022.
Sopheon’s Chairman, Andy Michuda commented: “I am very proud that the company has delivered such strong commercial and financial performance – while also absorbing two acquisitions, transitioning our core business model and launching a set of new products. We have now expanded our end-to-end capability to operationalize innovation, offering immediate value to both corporate executives as well as their supporting cross-functional teams, expanding our addressable market. We have made big strides in our transition to a SaaS model, and the benefits are becoming clear in our ARR and visibility development. As I said in our half year report, this is one of the most exciting periods in my time at Sopheon, and I am delighted to now share such strong evidence of that sentiment.
For further information contact:
|Andy Michuda, (Executive Chairman)
Arif Karimjee, (CFO)
|+ 44 (0) 1276 919 560
|Carl Holmes / Abigail Kelly / George Dollemore (Corporate Finance)
Alice Lane / Sunila de Silva (ECM)
|+ 44 (0) 20 7220 0500
About SopheonSopheon (LSE: SPE) provides complete Innovation Management software and expertise to help customers achieve exceptional long-term revenue growth and profitability. Sopheon’s Accolade and Acclaim offerings deliver unique, fully integrated coverage for the entire innovation management and product development life cycle. Sopheon’s leadership in innovation management was highlighted in the comprehensive MarketsandMarkets™ report on the Innovation Management Market where Sopheon was listed in the “Stars” category, the highest recognition. Sopheon’s solutions have been implemented by over 200 customers with over 125,000 users in over 50 countries. Sopheon is listed on AIM, operated by the London Stock Exchange.
1 ARR is the annual value of all ongoing contracts for SaaS, hosting and maintenance in force at the measurement date including pending renewals but excluding confirmed terminations
2 Revenue visibility is defined on page 7 of Sopheon’s 2021 annual report which is available from the investor section of www.sopheon.com.
Sopheon®, Accolade® and Acclaim™ are trademarks of Sopheon plc. All other trademarks are the property of their respective owners.
The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014 as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018 (as amended) ("UK MAR").