Although Sopheon is withdrawing guidance for forecasts (and we remove FY 2020E estimates), today’s update reflects a number of positive comments on current trading and the robust nature of the Group’s balance sheet. The pipeline remains at a similar level to the FY 2019 year end (when it was some 50% up year-on-year) and retention levels for Annual Recurring Revenue (ARR) have remained good so far this year. The Group confirms that a number of markets are showing resilience to the crisis and existing customers are re-commencing orders. Sopheon held net cash of $21.8m at the end of April 2020 and, despite prudent cost containment, is to proceed with the previously-declared dividend of 3.25p for FY 2019 – which we take as a clear and positive signal of overall management confidence.
One of the pillars behind the Group’s growth strategy is the push to extend Accolade as the digital platform of choice to digitalise customers’ corporate strategy and operational execution. Two offerings designed to raise the profile of Accolade, extend its use cases and drive user growth were launched in April - both should help Sopheon spread visibility of Accolade’s attributes more deeply through its clients’ organisations.
- COVID-19 Disruption Response Toolkit, enabling customers to rapidly develop responses and to implement operational changes.
- Microsoft Teams Connector, allowing users to initiate a Teams call, chat or group discussion from within the platform – this should help extend the reach and visibility of Accolade within client organisations
Sopheon has previously stated that it expects to focus more on ARR rather than revenue visibility as a metric of progress. Today’s announcement notes ARR of $15.9m (unchanged from March) which underpins revenue visibility for FY 2020E of $23.2m (up from $21.2m in March).
The new business pipeline continues to reflect a high proportion of software as a service (SaaS) opportunities as the Group transforms to a cloud business. With this conversion likely to take several years, Sopheon has already instituted a number of revisions to its standard pricing models, service delivery models and commission plans. A longer-term migration of the software platform is also underway.
Overall, a very reassuring update, with a sensibly prudent near-term decision to withdraw forecast guidance balanced against a number of clear and long-term positives and a respectable level of client activity.