Balance sheet and Corporate
Net assets at 30 June 2016 stood at $7.3m (2015: $3.8m), with cash resources at the end of the period rising to $8m (2015: $4.8m). Approximately $6.4m was held in US dollars, $1.5m in Euros and the balance of $0.1m in Sterling. Intangible assets at 30 June 2016 stood at $5.4m (2015: $5.9m). This includes (i) $4.4m being the net book value of capitalized research and development (2015: $4.9m) and (ii) $1.0m (2015: $1.0m) being the net book value of acquired intangible assets. The reduction in development reflects the effect of lower capitalization described above, offset by amortization charges that remain at historic levels.
In 2014 the Group established new bank facilities with the London branch of Silicon Valley Bank. These facilities comprised a term loan of $0.5m repayable in 36 equal monthly instalments, and a $3m revolving line of credit. These facilities were this year renewed by Silicon Valley Bank for a further three year period through to January 2019, including a reset and restart to the term loan repayment schedule. Both facilities bear interest at rates of 2.75 percent over Wall Street Prime, resulting in a current effective rate of 6.25 percent. The facilities are subject to covenants based on working capital ratios. The drawdown mechanics and interest rates are also subject to working capital ratios.
The group’s long standing £2m convertible unsecured loan stock is held by a group of investors including key members of the board and senior management team. In April this year these investors agreed to extend the maturity date through to January 2019. The conversion price of the loan stock remains unchanged at 76.5 pence per share.
Strategy and Product
Two and a half years ago we embarked on a strategic growth transition to migrate from delivering process automation tools to delivering enterprise class innovation management solutions. We made substantial progress in 2014, but not without some disruption to business momentum, which continued into the first half of 2015. In spite of these short-term financial consequences, we remained confident in our path during the transition and continued to lead the market in vision, experience and capability that today in our opinion remain unmatched by competitors. Our dual market segmentation focus on both the complex global enterprise and the simpler, “out-of-the-box” Express model for quick time to value, continues to gain traction. This view is validated by the naming of Sopheon in Gartner’s 2015 Market Guide for Enterprise PPM Software and in recent Enterprise Innovation Management research conducted by CIMdata.
We continue to maintain the pace of new product releases consistent with our Agile methodology, last year releasing Accolade® 9.3 in February, 10.0 in June and 10.1 in September. In 2016 we have so far released versions 10.2 in January and 10.3 in May. These new releases include a number of customer driven features as well as advances against our strategic roadmap. We have been taking action to enable world-class adoption of our solutions for some time and we are now seeing the benefits in our performance metrics in both of the market segments mentioned above. Moreover, in 2014 and 2015 delivering “customer centric value” has been a core theme of all of our product release efforts, and of the restructuring of our sales and services organizations. In addition to the recent Gartner and CIMdata reports mentioned above, third-party validation of this effort also includes recent recognition as customer satisfaction leader by the executive readership of Consumer Goods Technology Magazine; and for the sixth consecutive year, as one of their top ten solution providers in the new product development and introduction category.
We see a continuing convergence of the business, economic and market trends that play directly into Sopheon’s market position, solutions and investments. These are: business transformation to deal with digitization; the changing cadence of the operating planning cycle; and growth through sustainable innovation. We believe that Sopheon’s Enterprise Innovation Management platform remains uniquely positioned to leverage these three major industry trends. Accolade was designed to provide connectivity, manage complexity, and enable even the largest global corporations to operate rapidly and nimbly in response to market disrupters which are occurring with increasing velocity. Accolade connects the enterprise so that board-level strategy is driven, propagated, managed, tracked and realized through all areas and levels of the organization with speed. It enables visibility across the entire innovation life cycle, which supports the nimble decision making capabilities companies require to compete. None of this can be achieved without an Enterprise Innovation Management system in place.