Sopheon has reported full year results in line with its January trading update and a little ahead of our estimates which we upgraded at that time. Sopheon saw a strong finish to 2018 with a number of transactions further underlining the adaptability and flexibility of the Accolade platform. Overall, Sopheon won 18 new customers compared to 13 in 2017. Chairman Barry Mence says that Sopheon has ‘a unique opportunity’ to build on its category leader status by accelerating investment. Revenue visibility is already at $20.6 million for FY 2019E and the announcement highlights a sales pipeline which includes a number of ‘large opportunities’. Management continues to look at acquisition opportunities to augment organic growth. After an excellent FY 2018 which has enabled Sopheon to increase its dividend by 30%, we note the Board’s intention to speed up investment during the year and we make changes to our FY 2019E estimates which leave Adj EBITDA a touch lower than our previous estimate. We introduce FY 2020E estimates which reflect a resumption of good growth in Adj EBITDA on the expectation of moderated investment spend.
Sopheon reported a 19% increase in revenue to $33.9m while reported EBITDA of $8.9m was an increase even on the strong prior year comparator of $8m. Profit after tax rose to $6.9m (FY 2017: $5.4m) with fully diluted EPS increasing by 16% to 65.0 cents from 55.9 cents in FY 2017. The dividend increased by 30% to 3.25p. The Group ended the year with net cash of $16.7m, up from $9.5m at the end of FY 2017.
With a tailwind from 2018 and ‘a few early-reported sales in 2019’, current year revenue visibility is now an encouraging $20.6m compared to $19.3m at this time last year.
While Sopheon’s European business was particularly strong in FY 2017, both the Americas and Europe grew revenues further in FY 2018 with the emphasis moving back to North America.
The outlook statement re-emphasises the opportunity that a strong business performance has brought to accelerate investment – in particular to hire more of the right people in FY 2019E. The Group also remains ‘open to M&A opportunities’ which align with its strategic priorities.
Overall, we view Sopheon’s upcoming acceleration in investment in organic initiatives as well-timed, with the group seeking to exploit a burgeoning market opportunity, the scale of which is only just beginning to show through in financial results.