Sopheon PLC – SPE – Trading Update

Sopheon PLC – SPE – Trading Update

Sopheon, the international provider of software and services for Enterprise Innovation Management solutions, is pleased to provide the following trading update for the year ended 31 December 2021.

On 20 December 2021 we reported our acquisition of the ROI Blueprints ("ROIB") business, along with a statement that financial performance would be comfortably in line with market expectations. We are now delighted to report that we expect that revenue for the year ended 31 December 2021 will exceed $34m (2020: $30m). Annual Recurring Revenue ("ARR") at the end of 2021 is expected to exceed $20.5m (2020: $18m), a performance we are pleased with.  This, coupled with contracted consulting services, means that revenue visibility1 for 2022 has grown to approximately $23.4m (2020: $22.0m).

Adjusted EBITDA is expected to exceed $6m (2020: $5.9m). Net cash on 31 December 2021 was $24.1m (2020: $21.6m) after funding the initial payment on the ROI Blueprints acquisition, demonstrating the cash generative nature and resilient cash performance of the business and underlining our robust balance sheet.  In addition to the revenue out-performance, the profit result was assisted by the deferral of some of our anticipated investment plans, in particular in the staffing of product development. Like many other software businesses, we face ongoing challenges in recruiting technical staff. However, as noted in previous announcements, along with the appointment of Greg Coticchia as CEO in April, we have added new leadership in sales, marketing and product areas and expanded resources in 2021. We have increased the pace of Accolade product releases, and also expanded a number of marketing initiatives to build the Sopheon profile, and grow the pipeline.  This includes programs to introduce the ROIB solution to our customer base later this month. Several cross-sell opportunities have been identified, and the ROIB team is already fully integrated at Sopheon. Our growth initiatives will continue and accelerate in 2022.

The improvement in ARR underlines continued traction in our migration to a Software as a Service ("SaaS") recurring revenue model, giving both enhanced revenue visibility to future periods and improved quality of earnings. Approximately 50% of more than 70 license transactions signed during 2021 were for SaaS contracts. Moreover, the value of SaaS bookings was more than double that of perpetual contracts. This includes another six existing customers converting from the perpetual model to a SaaS model. Gross retention of ARR returned to our normal strong levels, at 95% compared to 91.5% during the challenging conditions of 2020.

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 2021 on 24 March 2022.

Sopheon's Chairman, Andy Michuda said: "As I noted in our December announcement, it was great to end the year with our first acquisition for some time, coupled with strong execution in the core business. We continue to explore and evaluate further M&A opportunities. In parallel, we are also advancing nicely on our stated transition towards a SaaS business, both operationally as well as financially, intended to enhance predictability, quality of earnings and overall shareholder return.   I am encouraged with the foundational progress Greg and the team have made in 2021 and look forward to further positive developments as the new year progresses."

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