RNS Number : 0250C
13 June 2019
("Sopheon" or the "Company")
At today's Annual General Meeting of Sopheon, the international provider of software, expertise, and best practices for enterprise innovation management solutions, the Board will give shareholders the following update and review of the business.
In recent years, we have described how we have broadened our mission from one that helps R&D organizations to improve innovation, to one that helps major enterprises achieve their strategic goals. This extension of our vision into what some are beginning to call a third major pillar of the enterprise stack - alongside ERP and CRM - has dramatically expanded our horizons and potential. In an increasingly digital world, organizations are challenged to operate with more agility and velocity to survive and thrive; this is where Sopheon can add significant value to our customers. The potential addressable market for this opportunity is substantial. Sopheon continues to benefit from increased market recognition through industry business analysts such as Gartner and Forrester Research, having been named in 22 research reports in 2018.
While executing on our growth strategy, we continued to strengthen our financial performance. Once again, revenues, EBITDA and other profit measures in 2018 all exceeded market expectations, and resulted in two upward revisions. Revenues rose 19% to $33.9m from $28.5m in 2017. EBITDA reached $8.9m, up 11% from $8m. Substantial realignment of our debt position in 2017 fed through into an even larger increase in profit before tax, up 25% to $6.4m compared to $5.1m the year before. Our balance sheet ended the year very strong, with net assets rising to $25.6m from $18.6m the year before, and net cash rising to $16.7m from $9.5m; 100% of this growth was generated organically. All of this was accomplished while achieving a historically high recurring revenue retention rate of 97 per cent.
We continued to focus on and refine our three core growth strategies - to extend our footprint in existing customers by expanding our enterprise platform, to target new business acquisition with a clear vertical focus, and to develop a partnership ecosystem. These core strategies, along with our tremendous staff and unique culture, have been at the root of our consistent and solid financial performance. The number of larger opportunities in our sales pipeline continues to grow, validating our stated strategy. As always with a mostly perpetual license model, such deals can have a big revenue effect on the period in which they close. In parallel, customer preference for Software as a Service ("SaaS") rather than perpetual licensing in our market is beginning to come through. With our strong balance sheet, we are assessing how to accelerate this migration to an even higher recurring revenue model. We also remain open to M&A opportunities, provided they align with our strategic priorities.
When we published our annual report for 2018, we announced a proposal to increase our dividend from 2.5p to 3.25p per share, which we will put to shareholders at today's annual general meeting. We are delighted to be following through on the commitment made last year to maintain a progressive dividend policy, which the Board believes underlines our maturity as a business.
As noted above there are several larger opportunities in our pipeline where we are strongly positioned and that we are confident have a high probability of closing in the coming months. Accordingly, at the time of this AGM full year revenue visibility from contracted business and recurring revenue streams is at similar levels to this time last year, at $23m. We expect this to rise sharply through the summer. In previous years we have typically had a stronger second half and fourth quarter in particular, and we expect 2019 to follow this pattern.
It has been very exciting over recent weeks to announce wins in countries like Thailand and Pakistan, representative of the potential for Sopheon of the significant Asian market. We are also seeing traction with partners both in overseas territories and with major management consulting firms. This morning we are delighted to announce the release of Accolade 12.3, with new features specifically designed to help global corporations achieve their digital and business transformation objectives.
The Board remains confident of achieving our full year expectations, and in continuing to deliver against Sopheon's strategic goals and expanded vision. The Board looks forward to providing shareholders with a more detailed update at the time of its interim results for the 6 months to 30 June 2019, expected to be released in late August.