Trading Update
Sopheon plc, the international provider of software and services for complete Enterprise Innovation Management solutions, issues the following trading update for the six months to 30 June 2019.
The Board expects first half revenues to be approx. $13.7m compared to $15.9m in 2018. As we have always stated, our licensing model has been predominantly perpetual and consequently the precise timing of deal closure plays a significant role in periodic revenue recognition. Our sales pipeline includes a large number of opportunities where we are strongly positioned and that we remain confident have a high probability of closing in the balance of the year.
Since January, we have increased our sales pipeline value by 48 percent, and the number of opportunities above $500,000 in deal value by 29 percent. We believe this is a result of executing on the strategic growth initiatives communicated in our past two annual reports, to drive higher growth and profit over time. The delay to some of these licences has been reflected in profitability for the first half. EBITDA for the first half is expected to be approximately $2m (2018: $4.1m).
Outlook
Current revenue visibility for the full year stands above $24m. With an unprecedented volume of opportunities in the sales funnel, we anticipate rising deal flow and traction through the balance of the year. An increasing proportion of these opportunities are opting for a multi-year, Software-as-a-Service (SaaS) model rather than perpetual. This change in procurement preference to a rental rather than purchase model is coming sooner than we expected, but is in line with the Group's long term strategy. A greater number of customers in the pipeline opting for SaaS licenses will, in the near term, have the impact of reducing revenue in exchange for increasing recurring revenue in future periods, and consequently a greater lifetime revenue from each customer.
Accordingly, the Board believes that revenue for the full year will be at similar levels to last year. To reiterate, the Board believes this shift reflects a change to procurement behavior and the associated revenue recognition, rather than a change in expected commercial momentum. Our strategic shift to a SaaS model will drive recurring revenue and shareholder value, and the Board remains confident that Sopheon is well positioned to deliver on the long term opportunity.
With net cash of $18.7m at 30 June 2019 compared to $16.7m at 31 December, the balance sheet remains strong and highlights the Company’s ability to turn profits into cash.
Further details of the results for the six months to 30 June 2019 will be provided in our interim financial report, scheduled for release on 22 August 2019. Expectations noted above are subject to completion of the period-end financial close and auditor review processes.