Sopheon, the international provider of software and services for Enterprise Innovation Management solutions, provides the following trading update for the year ended 31 December 2020.
As in prior years, the final quarter was the strongest of the year for the Group, and in fact stronger than 2019, despite the resurgence of Covid concerns globally. We are pleased to report ongoing commercial traction and material progress in two strategic areas of focus: migration to a Software as a Service ("SaaS") recurring revenue model - giving both enhanced revenue visibility to future periods and improved quality of earnings - and landing large enterprise class contracts with major companies.
Total contract value ("TCV") of signed SaaS business grew 274% year on year, due to rapid adoption by our sales teams of the SaaS model for new customers, as well as converting some existing perpetual customers. Annual Recurring Revenue ("ARR") gross retention for the year remained respectable, at 91.5% (2019: 94.2%) but this represented greater than normal attrition, which is unsurprising given the challenging market conditions for some customers last year. Overall, the TCV of all sales bookings increased by 23% year on year, but the shift of emphasis from perpetual to multi-year SaaS means that most of this revenue will be recognized over time, rather than in the year of sale. New wins included global brands such as DuPont and LG, alongside previously announced Mondelēz and Orion. Six of our new customers had initial deal value at $1m or more, compared to just one in 2019, underlining material traction with enterprise sales even in these difficult times.
We expect that revenue for the year ended 31 December 2020 will be approximately $30m, in line with our 2019 performance. ARR is expected to rise to $18m (2019: $15.9m). This, coupled with a substantial order book of services, means that revenue visibility1 for 2021 is already at $22m (2019: $18.9m) giving cause for optimism regarding the year ahead.
Adjusted EBITDA is expected to be in the region of $5.6m (2019: $6.4m). Net cash on 31 December 2020 was $21.6m (2019: $19.4m), demonstrating the cash generative nature of the business as well as the robust balance sheet. As noted previously, billing seasonality means that this number should rise in the early part of 2021. In addition, costs reflect initial investments in a native cloud platform to enable new SaaS products, that will take us into new market segments. This was in parallel with further investments in our enterprise Accolade platform. These initiatives will continue in 2021.
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 2020 on 24 March 2021.
Sopheon's Chairman, Barry Mence said: "I'm very proud that Sopheon has been able to match prior year revenue and grow total sales bookings in such a difficult global climate. We've done this while simultaneously embarking on a migration of our business from up-front perpetual license sales to a SaaS subscription model - leading to a solid increase in recurring revenues, and providing greater visibility to future years. We believe we have a substantial opportunity ahead of us, and our strong balance sheet gives us the confidence to maintain ambitious investment plans through the pandemic and beyond."