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StatPro has received a recommended all-cash offer at 230p per share (a 54.9% premium to the closing price) from Confluence Technologies, a private equity-backed (TA Associates) US-based provider of solutions to the global asset management industry. The offer is recommended by the board and supported by shareholders representing 65.2% of the shares. At the interims, management confirmed its focus on driving sales, having established the building blocks for growth (consolidation of the Revolution platform, new divisional structure) over the last few years.
Statpro Group
For the purposes of the Takeover Code, Edison Investment Research is deemed to be connected with SCISYS plc. Under Rule 20.1 Edison must not include any profit forecast, quantified financial benefits statement, asset valuation or estimate of other figures key to the offer, except to the extent that such forecasts, statements, valuations or estimates have been published prior to the offer period (as defined in the Takeover Code) by an offeror or the offeree company (as appropriate) in accordance with the requirements of the Code. Consequently we have removed our estimates until the Offer Period ends.
StatPro produced a solid set of interim results, with organic annualised recurring revenue (ARR) growth accelerating to 3.2% from 1.1% at end-2018. The EBITDA margin continued to expand and the group has a widening range of growth drivers in place. After many years of development on the group’s Revolution cloud platform and new divisions in place, which also creates opportunities in the data space, the focus is increasingly shifting onto driving sales. Given the group’s c £57.3m recurring revenue book, the rating (c 16x FY20e) looks attractive, especially in light of the active M&A backdrop in the financial software sector.
StatPro’s interim results reflect growth in Annualised Recurring Revenue (ARR) and EBITDA which result from increasing margins, improved growth in new contract numbers and fewer cancellations. Although there is some influence on the shape of the reported numbers from restatements and some exceptional items, it is clear that progress has continued in the first half. The new divisional structure has given the businesses renewed impetus and it was clear from a number of announcements during the first half that the Group is benefitting from contract wins and extensions which include conversions from Seven to Revolution. The Group also announced an important strategic partnership with J.P. Morgan. We note the increasing momentum behind ARR and profitability growth. The new contracts, partnerships and the integration of acquisitions are underpinning our full year estimates. We update numbers mainly to reflect adjusting items and IFRS 16 as detailed below. We expect StatPro to continue to reflect progress in its strategic delivery and profitability as it adds new contracts and converts more of its existing clients to using the Revolution platform. We also note the £2.5 million of mooted cost savings from that latter process in the coming years.
StatPro has announced that it has secured a conversion from its legacy StatPro Seven software to its cloud-based StatPro Revolution service with a large insurance company. This resulting three-year contract has a minimum value of £1.5 million representing a 77% increase in annual subscription. This large contract with an existing key client brings a good uplift in annual revenue and represents another conversion from Seven that remains within the Group while further endorsing the cloud-focused strategy. As StatPro moves towards the end of its programme of converting legacy Seven contracts into Revolution contracts, the announcement says that there are approximately £5 million of legacy StatPro Seven annual software subscriptions remaining to be converted. The Group remains on course to complete the full conversion of most of those remaining clients over the next two years. As previously flagged, as the process draws to a close, StatPro will be in a position to realise savings in IT costs as well as gaining improved revenues. We make no changes to estimates at present but note this further underpinning of our numbers for this year and next.
Positive newsflow continues, with StatPro announcing a significant £1.5m conversion from its legacy Seven suite to its modern Revolution cloud platform. This follows the recent news of a partnership with JP Morgan’s Data and Analytics business and the acquisition of an ESG research and index business. The deal is significant since it is a large contract with a key client, has an attractive 77% conversion premium and signals that the group is moving towards the end stages of conversions of its legacy Seven contracts. In our view, the shares continue to look undervalued, given the group’s c £56m recurring revenue book and the attractive rating (c 14x FY20e), especially in light of the active M&A backdrop in the financial software sector.
StatPro has announced a partnership with JP Morgan which it believes will be a significant contributor to growth in the future. We see the announcement as both another endorsement of StatPro’s cloud-based Revolution platform and an important new distribution channel for the Group. Initially for five years, the partnership will develop Risk and Performance Attribution capabilities for portfolio managers through J.P. Morgan's data and analytics platform. When launched, the service will be immediately available to J.P. Morgan’s European and Asian multi-asset clients and there will be an early adopter programme for its clients in North America. JP Morgan’s clients will have access to StatPro’s Revolution platform in tandem with JP Morgan’s Fixed Income Benchmark Indices. While we make no immediate changes to estimates given that this partnership has only just been announced, we expect it to support our current estimates as it gets under way.
StatPro has this morning announced the acquisition of a business active in the provision of ESG (Environmental, Social and Governance) ratings and indices. The deal offers a good fit with the group’s existing client base and product range, and is expected to be modestly earnings-enhancing in the first full year of ownership. We note a similar recent purchase by the London Stock Exchange. We upgrade our 2020E earnings estimates slightly to reflect the deal.
StatPro has acquired ECPI, a small private Italian environmental, social and governance (ESG) research and index business, from its management for a total consideration of c €2.9m (c £2.6m). While the deal is small, we believe there is significant potential to add value by cross-selling the products to StatPro’s large global client base. In our view, the shares continue to look undervalued, given the group’s c £56m recurring revenue book and the attractive rating (c 14x FY20e), especially in light of the active M&A backdrop in the financial software sector.
Following a solid performance in 2018, StatPro’s AGM statement confirms that the Group has traded in line with expectations during the first part of the current financial year. This is consistent with the outlook comment in the March FY 2018 results announcement which said that the Group had good visibility into H1 2019 with a solid business pipeline. We also note recent positive announcements on contracts – the latest of which was made earlier this week when the Group announced a three year extension for £2.44 million with a Top 20 Fund Administrator. Management had previously said that StatPro was seeing further growth from its fund administration clients in the first quarter of 2019. In his statement, Chairman Rory Curran reiterates two particular areas of focus: improving EBITDA margins – aided by the move to the new divisional structure – and ensuring that the Delta integration is a success. We leave estimates unchanged while noting the supportive contract announcements.
Trading remains in line and we have maintained our forecasts, which imply 2.7% FY19 organic revenue growth. Management’s two key priorities for FY19 are 1) improving EBITDA margins in all areas of the business and 2) ensuring the Delta integration is a success. In the longer run, margins stand to benefit from the group’s increasing scale and costs dropping out as the group’s three software platforms are consolidated over the next few years. In our view, the shares continue to look attractive, given the group’s c £56m recurring revenue book and the declining rating (c 15x FY20e), especially in light of the active M&A backdrop in the financial software sector. We note that Axioma, a StatPro competitor in the risk space, was recently acquired by Deutsche Börse for $850m or c 8.5x sales.
StatPro has announced a useful extension to a contract with an existing customer – a total of €1.2m over three years from a Revolution Delta client. The news does not cause us to revisit our estimates, but provides a useful boost to forecast security, and demonstrates both client satisfaction and the positive tailwind of ongoing regulatory change. We look forward to hearing more around the time of the AGM later in May.
StatPro has announced a setback in its long-running legal battle against the former part-owners of SiSoft. The dispute is in relation to the amount payable for a minority shareholding, and yesterday evening’s RNS describes a win for the former shareholders in the French Court of Appeal. The total award is for c.€1m plus backdated interest – but StatPro is considering lodging an appeal. The matter has no bearing on clients, products or profitability – it relates solely to interpretation of a share sale & purchase agreement. We adjust our cash forecasts to reflect c.£1m now payable, with details on the interest cost to follow.
StatPro continues to evolve and the new group structure creates opportunities to drive growth. Margins are now on a clear uptrend as the business scales, and there will be additional margin benefits as c £4m of costs drop out as the group’s software platforms are streamlined over the next few years. FY18 numbers were in line with the January trading update and we have maintained our forecasts, albeit with some minor tweaks. In our view, the shares continue to look attractive, given the group’s c £56m recurring revenue book and the declining rating (c 10x FY21e), especially in light of the active M&A backdrop in the financial software sector.
StatPro’s FY 2018 results are in line with the numbers mooted in January’s trading update including revenue of £54.8 million and Adjusted EBITDA of £9.0 million with the latter reflecting the anticipated margin improvement. Group Annualised Recurring Revenue ("ARR") increased again while StatPro Revolution ARR increased organically by 17%. The ARR renewal rate was 92% in 2018 versus 89% in 2017. The Group ended 2018 strongly – having previously highlighted robust Q4 sales - and this suggests to us that StatPro remains strategically well placed for growth. The outlook comment notes good visibility into H1 2019 with a solid business pipeline. StatPro has previously outlined the rationale behind, and prospects for, its new divisional structure and CEO Justin Wheatley says that it is already ‘releasing considerable entrepreneurial drive across the business’. With some numbers previously announced, we make only small changes to our estimates for FY 2019E and introduce first-time FY 2020E numbers.
StatPro’s FY18 EBITDA was slightly ahead of our expectations, while revenues came in lower than expected. The resulting margin gain reflects management’s determination to improve profitability levels. As we have pointed out previously, margins stand to benefit from the group’s increasing scale and costs dropping out as the group’s software platforms are streamlined over the next few years. In our view, the shares continue to look attractive, given the group’s c £56m recurring revenue book and the declining rating (c 15x FY19e), especially in light of the active M&A backdrop in the financial software sector.
StatPro’s trading update for FY 2018E follows a number of contract announcements from the Group during late December and January. Revenue and costs for FY 2018E ended around 4% and 5% below our expectations respectively with resulting EBITDA of £9 million still pleasingly in line with our estimate. This reflects a significant margin increase to 16% from 13.9% in 2017. CEO Justin Wheatley notes robust Q4 sales and reiterates that the Group is strategically well placed for growth. Revolution ARR (Annualised Recurring Revenue) increased organically by 17% in 2018. The contact announcements, as well as underpinning forward EBITDA estimates, highlighted the success that the Group is having in gaining new clients for Revolution and in transitioning existing clients from Seven to Revolution, usually on extended and more valuable contracts. They also reflect the strategy of supplying Revolution services to fund administrators and asset management service providers. There was a good-sized contract extension for Revolution Delta as well. We adjust revenue and expense estimates for both our forecast years but leave Adj. EBITDA estimates unchanged given the focus on margin.
StatPro took a decade to develop its cloud platform and all the key components, including a new divisional structure, are now in place for growth. The group’s broadened managed service offering is well placed to benefit from outsourcing trends in the asset management industry and we believe this offering will be a key component to growth. In addition, margins stand to benefit from the group’s increasing scale and costs dropping out as the group’s software platforms are streamlined. In our view, the shares look increasingly attractive, given the group’s £55m recurring revenue book and the much reduced rating (c 15x FY19e), especially in light of the active M&A backdrop in financial software.
StatPro has previously explained that the Group is to be structured into three divisions in 2019. Revolution will be the Analytics division, comprising Revolution, Seven, Delta and Alpha. Source: StatPro will be the data division while Infovest will be the integration and data management division, comprising Infovest and StatPro Portfolio Management (SPM). StatPro’s Capital Markets Day gave a very useful rundown on the development of the Group and the prospects for growth under its new divisional structure. The presentations from the divisional CEOs identified the potential that lies within the individual businesses but also the benefits of selling combinations of Group products to its clients. Currently, 47 of StatPro’s 500 clients use services from more than one of the new divisions so the opportunity to increase the Group’s share of its clients’ spend is clear. In this document, we summarise the main points from the CMD and highlight what to expect from the divisions.
StatPro’s trading update for Q3 2018 reflects the integration of acquisitions and a steady performance in line with expectations. There was a small increase in Group ARR (Annualised Recurring Revenue) from a pro forma £53.74 million in July to £54.8 million as at the end of September. We also note the recent encouraging contract win for the Group’s Infovest service. We leave estimates unchanged at present. The announcement says that the transition of ODDO BHF’s regulatory risk services bureau to the Revolution platform is on target for completion by the end of 2018 which will lead to the anticipated removal of duplicate costs. The migration of Delta is also progressing well with its addition to Revolution targeted to greatly expand the functionality for both Delta and Revolution clients. Given the Group’s view of the market trend towards outsourcing, StatPro continues to focus on fund administrators and notes ‘a steady increase quarter on quarter of new revenue’ from its current partners. In all, another solid quarterly performance from StatPro as it remains on track with the integration of its acquisitions and the evolution of its Revolution platform.
In an in-line Q3 trading update, StatPro says that its annualised recurring revenue (ARR) rose by 3% at constant currencies over the past 12 months to £54.8m. Additionally, earlier this week StatPro announced a c £1.0m five-year Infovest contract, which highlights the quality of the group’s Infovest data management solution. The main focus for growth remains the fund administrator channel and, in January, the group will operate a new structure with three divisions (Revolution for analytics, StatPro: Source for data, and Infovest for integration and data management) to drive the business. Following the recent de-rating, we believe the shares look increasing attractive on 15x our maintained FY19 earnings, especially in light of the active M&A backdrop in financial software and the scope for revenue acceleration and margin expansion.
Brady (BRY LN) Solid H1, FY18 in line | StatPro Group (SOG LN) Revenue and TP reduced, but valuation-based buying opportunity
Statpro Group Brady Corporation Class A
The group’s annualised recurring revenue (ARR) was flat due to higher than normal churn. However, we believe this slowdown is temporary as StatPro is looking increasingly well positioned to benefit from the outsourcing shift in the global asset management industry. StatPro is the only SaaS provider of performance, attribution and risk solutions and it also offers APIs along with full managed services. We have increased our interest forecasts while also reducing tax, which results in EPS forecasts remaining unchanged. Given the ongoing active M&A backdrop in financial software and the scope for revenue acceleration and margin expansion, we continue to see strong upside potential in the shares.
StatPro has reported good growth in H1 2018 revenues and Adjusted EBITDA, with Group Annualised Recurring Revenue (ARR) of £52.25 million at the period-end flat at constant currency. Revenue growth was driven by organic growth in StatPro Revolution and the Delta acquisition, tempered slightly by the anticipated reduction in StatPro Seven revenues and a 2% currency headwind. Adjusted EPS grew by 26% while the interim dividend was maintained at 0.85p. Subsequent to the period end, Revolution’s Fixed Income Attribution module was launched in July - the first step towards achieving functionality parity with Delta, the integration of which is ‘progressing well’. StatPro continues to focus on building partnerships with Asset Service Providers in anticipation of strong growth in outsourcing. It also expects significant opportunities in specialised managed services – particularly after the recent risk services bureau acquisition. Trading for the year as a whole is ‘in line with expectations’ and management notes continued demand for its cloud services. We are leaving our estimates mostly unchanged although we tweak expenses, interest charges and our tax rate assumptions. The net result is 2-3% lower EPS estimates with Adj EBITDA little changed.
StatPro has acquired the regulatory risk services bureau from ODDO BHF for an undisclosed sum. The acquisition significantly broadens the group’s managed-services capabilities in risk and creates cross-selling opportunities. Our EPS rises by 3% in FY18 and FY19; we believe the deal demonstrates how StatPro can add value for shareholders through bolt-on acquisitions. Given the busy M&A backdrop in financial software and the significant valuation disparity between StatPro and its US-listed financial software peers, we continue to see strong upside potential in the shares.
StatPro Group has announced the acquisition of ODDO BHF’s regulatory risk services bureau for an undisclosed cash payment. Assuming that the Group has paid a similar EBITDA multiple to that when acquiring Delta, we expect this deal to enhance earnings by around 3% in its first full year of ownership (FY 2019E). We adjust estimates accordingly. The acquisition will add to StatPro’s existing managed services for valuations and performance measurement with risk reporting. Currently offered in Germany and Luxembourg, StatPro will look to market the service throughout the EU. We also note the recent appointment of a new CEO to its Source: StatPro division. We see today’s acquisition as a useful positive step, and there appears to be a building momentum across the business.
StatPro’s AGM statement builds on the positive start to 2018 that was noted with the 2017 results announcement. It says that trading for the current year is in line with Board expectations and that sales of StatPro Revolution have progressed well. It reiterates the positive news announced earlier in May of a multi-year cloud conversion and extension contract with one of its fund administrator clients. The integration of Delta and associated investment continues. We note that the launch of Revolution’s fixed income module remains on track as StatPro continues its drive to enhance its cloud-based portfolio analytics service. With little currency effect so far in H1 2018E and supportive commentary on trading, we leave estimates unchanged and look forward to the Group’s half year trading update in July 2018.
In a short trading update, StatPro has said that trading is in line with expectations. The group recently signed a major cloud conversion contract with a top 10 global fund administrator. Such deals require significant commitment from the client and, once live, have the potential to be scaled up if the client takes additional licences to extend to its own client base. Given the ongoing busy M&A backdrop in financial software and the significant valuation disparity between StatPro and its US-listed financial software peers, we continue to see strong upside potential in the shares.
After nearly a decade developing its cloud services platform for the asset management industry, the investment at StatPro is starting to pay off. Fund administrators have begun to extend their use of Revolution and StatPro has beefed up its sales team to drive direct sales. The acquisition of Delta in May 2017 has added depth to StatPro’s front office capabilities, complementing its traditional middle office focus. Organic revenue growth was 2% in FY17 and management is optimistic that growth will accelerate over the next few years. Given the busy M&A backdrop, and the significant valuation disparity between StatPro and its US-listed financial software peers, we continue to see strong upside potential in the shares.
Full year results last month highlighted healthy organic growth (+13%) in StatPro Revolution ARR and a reassuring contribution from Delta. While the level of revenue cancellations/reductions (notably Alpha) was disappointing, key product releases, sales investment and stabilisation of Alpha’s revenue base should help deliver improved organic growth in 2018. Accelerating sales activity in Q4 last year and increasing usage of Revolution by fund administration clients has underpinned a solid start to the year; hence we have left our headline revenue and EBITDA estimates broadly unchanged. We introduce a new set of estimates for FY 2019 that imply 6% organic revenue growth and margin gains, but evidence of this is probably required before we see further significant re-rating. We maintain our Buy and 205p target price.
StatPro Group (SOG LN) Product releases key to accelerating growth | Trifast (TRI LN) Acquisition of Precision Technology Supplies | Walker Greenbank (WGB LN) Incremental downgrades of c6-7% due to tough trading backdrop
SOG TRI SDG
StatPro has reported FY 2017 revenues and Adjusted EBITDA in line with expectations reflecting solid growth from Revolution and a positive EBITDA contribution from Delta. Reported revenue increased by 26% at constant currency rates (CCR), adjusted EBITDA was up 24% while adjusted EPS grew by 74%. The dividend is maintained at 2.9p. Group Annualised Recurring Revenue (ARR) increased by 35% to £53.04 million. The acquisition of UBS Delta in April 2017 was a key feature of the year and its integration into Revolution continues. The announcement flags a restructuring of the business in 2019 into three divisions to allow management focus on the specific growth opportunities in the business lines. CEO Justin Wheatley says that StatPro ended 2017 strongly and that the Group expects to see further organic revenue and profit growth in 2018. StatPro has started the current financial year in line with management expectations. We make minor adjustments to our FY 2018E estimates and introduce FY 2019E numbers.
StatPro Group Flash : Acquisition of remaining shareholding in Infovest Consulting
StatPro Group : Acquisition of remaining shareholding in Infovest Consulting (23-Feb-2018)
StatPro Group Flash : Momentum
StatPro’s trading update for FY 2017E says that it expects to report revenue around 1% ahead of our estimate and Adjusted EBITDA of approximately £6.9 million - in line with our expectation. Net debt at the year end was a little higher than our estimate. Momentum in the business continued to grow with Q4 2017 proving to be the best quarter for new sales of StatPro Revolution. Group Annualised Recurring Revenue (ARR) increased by 39% during the year to £53 million from £38.1 million at constant currency rates. The in-line numbers suggest that the Delta acquisition has continued to contribute according to plan and the announcement notes increased sales. Ongoing migration to the group’s cloud-based offering, Revolution, continued with 13% organic growth in Revolution’s ARR during 2017. Meanwhile, StatPro Seven continued to show helpful resilience. We tweak our FY 2017E estimates to reflect the revenue and net debt guidance and await further detail of the full year numbers in the results announcement expected in March 2018. CEO, Justin Wheatley, comments that StatPro is ‘very confident’ of further good progress in growing revenue and profits in 2018.
StatPro has released an update indicating that FY 2017 results will be in line with market expectations, with revenue up 30% to c£49.0m and adjusted EBITDA up 35% to c£6.9m. Significantly, StatPro Revolution ARR increased organically by 13%. This should allay concerns that Revolution growth in slowing following the 9% growth reported in H1. We remain confident that a combination of product development initiatives and ramped up sales investment will drive accelerating growth in ARR going forward, and ultimately highlight the potential for significant further re-rating. Hence why StatPro is an N+1 Singer Key Pick for 2018. We make no changes to our headline forecasts, recommendation or target price pending the release of full year results in March.
StatPro has released an in-line trading update for FY17. Annualised recurring revenue (ARR) for StatPro Revolution grew by 13% organically. Statutory revenues, EBITDA and cash were broadly in line with our forecasts and we are maintaining our FY18 forecasts. Given the busy M&A backdrop, which saw competitor BISAM sold for 7.3x sales earlier in the year, and the significant valuation disparity between StatPro and its US-listed financial software peers, we continue to see strong upside potential in the shares.
The management has today confirmed that the company is on track to deliver full year expectations on revenues and profits. We note the progress in percentage of group Annualised Recurring Revenue (ARR) that are SaaS and cloud-based services, from 75% at constant currency in September 2016 to 83% in September 2017. Our valuation model, which employs a 15% discount to the average revenue multiple of the UK Fintech sector, continues to values the shares at 233p (206p). While the stock has outperformed the UK Fintech sector by 43% since the announcement of UBS Delta on April 7, 2017, it still sits at a 28% sector discount on an EV/2018 Sales basis.
StatPro’s Q3 trading update states that trading is in line with expectations for the nine months; we make no changes to estimates. The group appears to be well on track, with the Delta acquisition proceeding to plan, and ongoing migration to the group’s cloudbased offering, Revolution. We also include in this note a number of details from the group’s recent analyst and investor teach-in.
The Capital Market Day last week reaffirmed the cloud-based strategy that is fully aligned with the digital disruption that will transform the asset management industry just as it is changing every other part of the economy. The prize is the multi-billion dollars of costly hosted sales that should be replaced by cloud. Specifically, the sales and marketing initiatives discussed at the event have given us greater confidence that our 2018 forecasts can now be used to value the stock. Our valuation model, which employs a 15% discount to the average revenue multiple of the UK Fintech sector, now values the shares at 233p (206p). While the stock has outperformed the UK Fintech sector by 56% since the announcement of UBS Delta on April 7, 2017, it still sits at a 25% sector discount on an EV/2018 Sales basis.
StatPro hosted a Capital Markets Day yesterday for investors and analysts. We were encouraged by the updates we received on product development and sales initiatives, and by indications that the sales pipeline is building as a result. It is clear that StatPro’s technology offers multiple competitive advantages in terms of system elasticity, flexibility and integration, and that these qualities are being increasingly recognised by both existing and new customers. We make no changes to our forecasts, recommendation and target price.
StatPro has secured a £1.5m two-year contract extension with a large European asset manager for its Delta service. This deal alleviates any concern over potential client churn post StatPro’s acquisition of Delta, highlights the value of the Delta service to its users, and confirms StatPro’s ability to strengthen relationships with existing clients. We make no changes to our forecasts, recommendation or target price.
StatPro has announced that a Singapore-based asset manager (and existing client) has signed a $1m, two and a half year contract extension and consulting agreement to migrate from StatPro Seven to the Revolution platform. This is further evidence of the expansion of contracts which can take place as clients migrate to Revolution, and follows a number of such contract extensions and expansions announced during 2017. The deal further underpins the outlook for the Group’s annualised recurring revenue (ARR) which was also boosted by the recent acquisition of Delta; over four-fifths of StatPro’s software ARR now comes from cloud services. While Revolution is growing, StatPro Seven continues to show resilience - we recall a contract extension announced earlier this year and the improved demand for StatPro Seven’s Composites module highlighted in the recent interim results. While leaving estimates unchanged at present, we note the additional positive news.
We can see no storm approaching. Indeed, with each set of results such as today’s interims we are gathering evidence that the cloud transition strategy is going by the playbook, and the latest set of KPIs clearly indicates further progress. The momentum should be maintained as StatPro expands its product and geographical roadmap. The stock has appreciated by 51% since 7 April 2017 when the company announced the transformational acquisition of UBS Delta. This is equivalent to 32% outperformance against the average for the UK Fintech sector. Interim numbers are in line with our expectations and our full year target. Therefore, we make no changes to our forecasts, and maintain our Buy recommendation and 206p Target Price.
StatPro’s FY 2017E interim results reflect solid growth and the expected currency tailwind. Reported revenue increased by 23%, adjusted EBITDA was up 35% while adjusted EPS grew by 64%. The interim dividend is maintained at 0.85p. The period saw the acquisition of UBS Delta in April; a front office focused risk and performance analytics service noted for its fixed income risk and attribution capabilities. Integration is progressing to plan. As flagged in the recent trading update, annualised recurring revenue (ARR) had improved further by the end of the half year – boosted by the acquisition of Delta. Over four-fifths of StatPro’s software ARR now comes from its cloud services and CEO Justin Wheatley expects margins to improve as the Group benefits from its greater scale and operational gearing. The outlook statement strikes a positive tone for the second half. With several contract extensions and expansions announced in H1, and a full half year contribution from Delta to come in H2, we leave estimates unchanged.
StatPro has reported interim results which highlight healthy underlying growth (+16% organic, constant currency) in StatPro Revolution revenue and the increased scale and functionality that recent acquisitions have delivered. While a re-rating is clearly underway, we see scope for further significant upside given the size (£53m) and quality (82% of software ARR is SaaS) of the recurring revenue base. We will review our forecasts and target price following the analysts' meeting but expect no significant changes to our headline revenue and earnings estimates.
StatPro reported healthy interims with revenue up 23%, including 2% organic growth. Annualised recurring revenue (ARR) rose by 47% to £53.2m as at 30 June, boosted by the acquisition of UBS Delta in April. Adjusted EBITDA jumped by 35% to £2.8m as the margin expanded by 120bp to 12.9%, reflecting the increased scale of the business. We are reviewing our forecasts. Management says that the integration of Delta is on track, and we continue to see strong upside potential, given the significant valuation disparity between StatPro and its US-listed financial software peers.
The company has today reported that trading in H1/17 was in line with expectations. Group Annualised Recurring Revenue (ARR) increased by 47% year-on-year to c£53.2m (H1/16: £36.2m), with SaaS and cloud-based services accounting for 82% (H1/16: 74%) of software ARR. The update also confirms that the integration of UBS Delta is progressing well.
The stock has appreciated by 27% since April 7th when the company announced the transformational acquisition of UBS Delta. This is equivalent to 17% outperformance against the average for the UK Fintech sector. However, we believe there is considerable further upside as the benefits of StatPro’s cloud strategy and recent acquisition remains under-appreciated. The UK Fintech sector has also been re-rated since April 7 th, by 9% on EV/Sales multiple basis. As a result, StatPro is now trading at 47% discount to the sector compared with 54% on April 7th . Our valuation model for StatPro, which uses a 15% discount to average revenue multiple of UK Fintech sector, values the shares at 206p (190p).
In an in-line AGM trading update, StatPro says that sales have progressed well and that the pipeline remains solid. We have maintained all of our forecasts, but see scope for upgrades as the year progresses, unless sterling continues its recovery. In April, StatPro said that it was acquiring UBS Delta, a portfolio analysis and risk management system, at a valuation of less than 0.8x revenues. The valuation compared with the c 7.3x sales that FactSet recently paid for BISAM, a key competitor of StatPro. We continue to see strong upside potential in the shares, if StatPro can successfully integrate UBS Delta, given the significant valuation disparity between StatPro and its US-listed financial software peers.
StatPro is acquiring UBS Delta, a portfolio analysis and risk management system, from UBS for €13.05m. The acquisition significantly scales up StatPro’s business, boosting FY18 revenues by c 33% and EBITDA by c 40%. While the deal looks very cheap at less than 0.8x revenues, compared with 7.3x sales that FactSet recently paid for BISAM, a key competitor of StatPro, UBS Delta’s technology needs to be refreshed and to achieve this, its functionality, along with the customer base, will be transitioned to StatPro Revolution. If StatPro can successfully integrate UBS Delta, we believe there is strong upside potential in the shares, given the significant valuation disparity with its US-listed financial software peers.
StatPro has announced the acquisition of UBS Delta, the investment bank’s portfolio analysis and risk management cloud-based system that enables clients to measure risk and performance across fixed income, commodities, equities and FX. It is front office focused and noted for its fixed income risk and attribution capabilities. StatPro is paying €13 million in cash over three years, funded by additional committed facilities from Wells Fargo; the price equates to around 4.5x to 5.5x estimated EBITDA. UBS will continue to operate and support the UBS Delta service for its clients until StatPro has enhanced its StatPro Revolution platform such that it ‘reaches functional parity with the UBS Delta service’. We view this as a material deal which adds impetus to the Group and represents a very good strategic and tactical fit. StatPro expects the deal to be earnings enhancing in the current financial year. We increase estimates to reflect the deal with Adjusted EBITDA rising by 29% and 53% in FY 2017E and FY 2018E respectively.
We believe the acquisition (announced today) of UBS Delta, the risk and performance analytics service of UBS, is not only a boost to earnings but creates a broader platform for StatPro to accelerate its cloud strategy. UBS Delta brings complementary capability (cloud-based & front office) and scale (100 new clients). More importantly, the multiple of c0.8x sales and c5x EBITDA, a substantial discount to sector multiples, minimises acquisition risk but potentially creates considerable upside risks to our forecasts. We have increased our EPS forecasts for the 2017-19 period by 30%-81%, leaving the stock trading at just 10x 2019 EPS. Our valuation model is based on average revenue multiple of UK Fintech sector, currently 3.5x. At 1.6x revised 2017 sales forecast, StatPro is currently trading at a 54% discount. Using a 15% discount boosts our TP to 190p.
With its focus on migrating clients from StatPro Seven to the StatPro Revolution platform, most recent contract announcements from the Group have tended to reflect that process. They also provided evidence that existing clients were willing to retain and extend their relationships with StatPro. That said, only certain clients of StatPro Seven are set to convert to the cloud product over the next two to three years. Today’s announcement is for a contract extension with a large Canadian wealth business for the SaaS version of StatPro Seven which includes an uplift in the contract value. The underlying resilience of StatPro Seven has been evident in recent results although the migration to Revolution has, as expected, reduced Seven’s overall revenues. Nonetheless, that resilience remains important to the Group and today’s announcement underlines that support from StatPro Seven as this large existing client renews. We leave estimates unchanged following recent upgrades at the time of the FY 2016 results but note the value uplift in this contract.
The focus of investment may be entirely on the cloud-based StatPro Revolution platform but StatPro Seven is not ready to surrender its share of the group easily. Today’s announcement of a three year C$6m contract extension with a large Canadian Wealth business for the SaaS version of StatPro Seven represents a 25% uplift in contract value over the three year period, reflecting the superiority of the product over competing offerings and the quality of the service provided by StatPro.
The acquisition of BISAM Technologies, a specialist competitor in performance measurement, by FactSet, the mainframe-based competitor, for 7.3x sales puts the spotlight back on StatPro’s valuation of 1.8x sales. Strategically, the deal is also positive for StatPro in that it removes a direct competitor. The risk is that a much respected competitor (FactSet) will now have access to data management expertise that will allow it to offer transaction-based solutions in competition with StatPro. However, BISAM’s offering is single tenant and installed as opposed to StatPro’s multi-tenant cloud-based architecture and we believe it will take time and resources before FactSet can integrate BISAM functionality into its mainframe platform.
Full year results last week showed profits in line with our expectations (adjusted EBITDA £5.1m vs NS1e £5.0m), with revenue of £37.5m comfortably ahead thanks to a strong currency tailwind. Underlying growth in StatPro Revolution revenue was 48%. The outlook for the business looks positive given healthy growth in the recurring revenue base (+6% organic, cc to £39.3m), improvement in other core KPIs and a growing prospect pipeline. We have increased our FY 2017 revenue estimate by 7% and our corresponding adjusted EBITDA estimate by 4%, and introduce new estimates for FY 2018 that imply 8%/9% growth in revenue/EBITDA. We increase our target price from 163p to 169p, reflecting our view that the cloud transition strategy will deliver accelerating revenue growth, enhanced margin and further re-rating.
StatPro reported FY16 revenues and underlying EPS of £37.5m and 3.4p, respectively, beating our forecasts for both. The diversified SaaS business model continues to deliver growing recurring revenue, sticky customers and industryleading LTV/CAC ratio. We continue to believe that the combination of growth and operational leverage should deliver EPS growth of 13% in 2017. Recent underperformance presents a great investment opportunity. At 1.6x EV/2017 Sales, the shares trade at a substantial discount to average rating of 2.9x for UK Fintech stocks.
StatPro’s FY 2016 revenues and costs were ahead of our expectations by 9% and 6% respectively reflecting more of a currency impact than we had allowed for. Net, though, Adjusted EBITDA was 2% ahead of our estimate. In a set of results which contain a number of adjustments, the underlying momentum has been maintained. The year saw the successful launch of Revolution’s Performance module, two acquisitions and a number of large contract wins and extensions. As presaged by January’s trading update, the Group ended 2016 with solid metrics on annualised recurring revenue (ARR) and the forward order book. The results contained a number of adjustments which included the flagged non-cash impairment charge of £9.72 million against goodwill. There was continued resilience from StatPro Seven in conjunction with Revolution’s increasing ARR. Net debt was £10.1 million at the end of the year. We increase FY 2017 revenue by 4% and Adjusted EBITDA by 3%. We also introduce FY 2018E estimates.
StatPro has announced a €3m six-year agreement with an existing European asset manager client that is converting from Seven to the full Revolution offering. This deal will deliver an uplift in revenue and lengthier contract terms, and therefore highlights the additional value deliverable from existing customer migration. More news like this will help convince the market of the success of the cloud strategy. We make no changes to our forecasts, recommendation or target price.
Today’s announcement of a six-year contract with an existing European client for a minimum value of c.€3m continues to vindicate the cloud strategy. This is another example of an existing customer of StatPro Seven committing to a longer term and more valuable contract as it migrates to StatPro Revolution, which, in this case, will also include the game-changing StatPro Revolution Performance launched in September 2016. Such contract wins continue to underpin our forecast for revenue and profit growth in 2017 and 2018.
StatPro has announced that it has paid ZAR19.1m (£1.2m) for an additional 21.7% stake in Infovest Consulting, the South African software provider, specialising in data warehouse, ETL and reporting software for the asset management industry. This is a timely and attractively priced acquisition. Infovest has been performing strongly since StatPro made its initial investment for 51% stake, effective 1st March 2016. Based on the unaudited results for the 10 month period to December 2016, the annualised revenue and adjusted profit before tax for Infovest (which includes contracts transferred from StatPro) increased by around 77% and 130% per annum, respectively. The multiple paid is just under 8x EBITDA, a 33% discount to StatPro’s 11.9x 2017 EBITDA valuation.
StatPro has announced that it has increased its shareholding in Infovest Consulting from 51.0% to 72.7% at a cost of £1.2 million. It took its original stake in February 2016. StatPro expects the increase in its holding to be earnings enhancing in the current year and notes good growth in Infovest’s revenue and adjusted profit in its ten months of ownership during 2016. Since StatPro’s original investment in February 2016, Infovest has secured its largest ever deal with a contract with an existing large North American client of StatPro reflecting success in delivering on cross selling opportunities. Infovest continues to support the StatPro Portfolio Control (SPC) compliance system and previous announcements have noted growth in the sales of SPC. We see this as a sensible move to benefit further from Infovest’s improving revenue and profit streams. We make no changes to our estimates at present but we shall revisit them following the FY 2016 results announcement on 15 March 2017.
Following today’s trading update, we are increasing our 2017 and 2018 revenue forecasts by 7% and 4%, respectively, to £39m and £41m. This reflects stronger than expected growth in Group ARR (Annualised Recurring Revenue) in 2016 of 18% to £39.3m, due to a combination of underlying growth of 19% and a benefit from currency movements of 16%. Notwithstanding a sharp reversal in value of dollar against the sterling in 2017, our revenue forecasts remain conservative. This is especially as the full impact of the launch of the gamechanging Revolution Performance, which was only launched in September 2016, has yet to feed through. Our EBITDA growth forecast remains unchanged as we expect the company to continue to increase investment in R&D and sales, and some costs will be adversely impacted by currency movements.
StatPro’s FY 2016 year-end trading update notes solid metrics on annualised recurring revenue (ARR), the forward order book and the resilience of StatPro Seven in conjunction with Revolution’s increasing ARR. The announcement notes revenue and profitability in line with management expectations with the two acquisitions made during 2016 performing well. Net debt was £10.1 million at the end of the year. As expected, the numbers reflect fluctuations of sterling during the year. In addition, there is a £10 million non-cash impairment charge relating to a Canadian acquisition made over ten years ago. We are reflecting the impairment charge in our estimates for FY 2016 although there is no impact on adjusted numbers. We also increase FY 2017 revenue to be more in line with the Group’s end-2016 ARR. Our profit numbers remain unchanged ahead of the results announcement in March.
In an in-line trading update, StatPro says that its annualised recurring revenue (ARR) increased by 18% to £39.3m over the 12 months, which includes the two acquisitions made early last year. The ARR for StatPro Revolution, the cloud-based portfolio analysis service, increased by 68% to £15.0m, to represent 38% of the total, up from 27% a year earlier. We have maintained our FY16 P&L forecasts, which are likely to be slightly conservative due the weakness of the British pound, and have edged up our FY17 revenues, while broadly maintaining profits. With StatPro’s US-based financial software peers and SaaS companies trading on lofty multiples, we continue to believe there is significant upside in the shares.
StatPro has announced a five year contract with a global South African asset manager (an existing client) for a minimum value of around £1.5 million. This contract includes migration from StatPro Seven to the StatPro Revolution platform (which provides cloud-based analysis of portfolio performance, attribution, risk and compliance) in 2018. That will follow a proof of concept phase with the StatPro Revolution Performance module during 2017. This contract provides further evidence of existing clients’ willingness to retain and extend their relationships with StatPro as they migrate from their existing StatPro Seven solution to the Revolution platform. The announcement also suggests that the contract size is expanding from its previous level. This contract adds further support to our estimates for 2017 although we leave our numbers unchanged ahead of StatPro’s usual full year trading update which we expect to see towards the end of January.
Today’s announcement of a five-year contract with an existing South African client for a minimum value of c.£1.5m is a significant development for three reasons. First, it further vindicates the cloud strategy with an existing customer of StatPro Seven committing to a longer-term contract. Second, we believe it highlights StatPro’s ability to negotiate pricing commensurate with the value added by the game-changing StatPro Revolution Performance. Finally, it cements our forecast for revenue and profit growth in 2017 and 2018.
An eight-year journey to reposition this business as the provider of a next generation, cloud-based performance measurement and risk analytics platform is nearing its conclusion as far as the investment phase is concerned. Investors have been frustrated by revenue stagnation and margin suppression over this period but we strongly believe a growth inflection point is approaching, and that this will ultimately deliver significantly enhanced earnings. We expect further rating gains to be driven by increasing investor appreciation of the highly attractive combination of strongly growing cloud revenues (from new sales, upsells and migration of existing non-cloud revenues), improving KPIs and healthy growth in orders. Our 158p target price is based on what could prove to be highly conservative growth assumptions. Buy.
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The migration to cloud is moving swiftly with StatPro Revolution as a percentage of Group ARR very near the 40% mark by end-September 2016. With the game-changing StatPro Revolution Performance only released on 28 September, we would expect an acceleration in this trend as the company begins to unlock existing Seven customer base and attracts new customers. An attractive EV/Sales valuation of 1.7x, a dividend payer with an attractive yield and a shift in gear around performance says StatPro is going somewhere.
Following September’s successful launch of the StatPro Revolution Performance module, the Group has issued a brief trading update for Q3 2016; revenue and profits continue to be in line with the Board’s expectations and Annualised Recurring Revenue (ARR) for StatPro Revolution improved again. One of the beta clients, National Australia Bank, has gone live with eight end-clients – progress which was flagged at the investor presentation for the Performance module launch. Although not commented on in today’s announcement, we note that there have been notable currency movements during the quarter given the weakness of sterling. While the acquisition of Investor Analytics increased revenue and profit exposure to the US Dollar, StatPro has some natural and derivative hedging which will mitigate the impact on profits. With continued progress in line with expectations, we leave our estimates unchanged at present.
In a brief trading update, StatPro says that its annualised recurring revenue (ARR) for StatPro Revolution, the cloud-based portfolio analysis service, grew by 81% on a constant currency basis to £14.7m over 12 months. This includes Investor Analytics, which was acquired in January 2016. StatPro launched its Revolution Performance module in September and one of its beta clients, National Australia Bank, has already gone live with eight of its clients on the platform. We are maintaining our forecasts, but given the recent contract momentum and weak sterling, we continue to see upside risk to our forecasts. With StatPro’s US-based financial software peers and SaaS companies trading on lofty multiples, we continue to believe there is significant upside in the shares.
While the company has regularly added new capabilities to the cloud-based StatPro Revolution platform since its launch in 2011, we regard today’s launch of Revolution Performance service as a game changer for the asset management industry and StatPro’s growth profile and market position. Built from scratch, the Revolution Performance is a transaction-based performance measurement and data management service that provides exponential productivity gains to asset managers by allowing them to choose all the computing power they need when they want it and at a fraction of previous IT costs. With clear technology and cost leadership over competing performance systems, this new service represents a great opportunity for client upselling and attracting new customers, and underpins our growth forecast for StatPro over the 2016-2018 period. Further re-rating of the UK Fintech sector increases our TP to 159p, offering 43% upside.
Today’s well-advertised launch of the StatPro Revolution Performance module is a significant milestone for the Revolution platform. Additionally, we think it represents a watershed in the Group’s strategy of transitioning to a purely cloud-based provider of analytics services. Not only does it bring a major expansion of the platform but it also completes the content to an extent which will allow StatPro to accelerate the migration of customers from StatPro Seven to the cloud-based Revolution platform. We also expect that development costs as a percentage of revenues will begin to reduce over time now that the Performance module has been launched. For StatPro’s clients, it holds the promise of significant productivity gains. StatPro is making presentations to both investors and clients today. We make no changes to estimates but we note the on-time delivery of a core element of the product offering.
StatPro has seen a revival of sales in its traditional software in recent weeks. In early September it announced a £1.5m+ 3.5 year StatPro Seven contract win with a US-based top 10 global asset manager. Today, the group’s Infovest unit has announced a £1.0m seven-year contract with a large North American asset manager. Meanwhile, StatPro is launching its Revolution Performance module later this month. We are maintaining our forecasts, but with the healthy contract momentum and weak sterling, we see an increasing upside risk for forecasts as the year progresses. With StatPro’s US-based fintech peers and SaaS companies trading on lofty multiples, we continue to believe there is significant upside in the shares.
StatPro has announced another useful contract win – in this case by its 51% owned subsidiary, Infovest. The contract with an existing large North American client of StatPro reflects a revenue commitment of £1.0 million. The seven year deal will see Infovest supply its Data Warehouse and Reporting solutions, and the announcement notes that it will significantly increase Infovest’s annualised recurring revenues and committed contractual revenue. This is the largest contract which Infovest has secured and its fourth since the acquisition of the controlling interest by StatPro. Although we leave numbers unchanged for the moment, this announcement follows a series of such positive contract wins for the Group and clearly adds further support to our existing estimates.
StatPro has announced another contract win. While this one is not large in group terms, it demonstrates the rationale for StatPro’s acquisition of 51% of Infovest (February 2016). A large North American asset manager has extended its business with Infovest, using their Data Warehouse and Reporting solutions to manage data from all of their systems, including StatPro Revolution. This is a seven year contract, worth a minimum of £1m. It represents Infovest’s largestever win, and its fourth win since linking with StatPro in February.
StatPro has announced another good-sized contract win – this time for its StatPro Seven GIPS (Global Investment Performance Standards) Composites service. The minimum value of the contract with a US-based top 10 global asset manager is £1.5 million over three-and-a-half years. This StatPro Composites contract follows good momentum in the business as a whole in the first half of the current financial year - including two flagship deals for StatPro Revolution that were announced in that period. At the half year, StatPro noted that the Composites module continued to be actively marketed and that it was not among the three StatPro Seven modules whose clients are initially targeted for migration to the Revolution platform. In addition, the Composites module continues to be developed in line with market regulations and requirements. This contract win obviously adds further support to our estimates but, for the moment, we leave them unchanged.
StatPro Composites has won a significant new contract, worth a minimum of 1.4% of FY15 group revenues, for a top 10 global asset manager based in the US. We make no changes to forecasts at this stage, and the win comes in an area outside of the current migration to cloud-based StatPro Revolution products. Nevertheless, it validates the strength of the Composites product, and underpins overall confidence in our existing forecasts which were raised recently with the interims on August 3rd .
Following eight years of development, StatPro is beginning to see the benefits of its cloud strategy, as it reported a 19% growth in H1 adjusted EBITDA (13% at constant currencies). This included initial contributions from Investor Analytics and InfoVest Consulting, which were acquired early in the period. StatPro has its strongest ever pipeline of new business and the final piece in the cloud strategy – Revolution Performance – is scheduled for commercial launch next month. Hence, with StatPro’s US-based financial software peers and SaaS companies trading on lofty multiples, we continue to believe there is significant upside in the shares.
StatPro’s interim results for the six months to the end of June 2016 are in line with the recent trading update and continue to show success in securing ongoing growth of cloud-based recurring revenue. A combination of good underlying growth, currency and the impact of acquisitions have produced positive H1 numbers. Recent contracts have provided vindication of the strategy as the product suite gains material traction. The benefits of introducing a minimum relationship fee for new Revolution clients can be seen in the strong growth of the number of clients in the higher annualised revenue bands. The interim dividend is maintained at 0.85p. For the moment, we leave estimates unchanged despite the strong first half performance as we await more clarity on the ramifications of the Brexit vote and the sustainability of currency movements.
Interim results have a lightning rod of growth in revenue, ARR, order book, Cloud, profit, customers – a sea change from 12 months back when interims were flat-to-shrinking. To paraphrase Messrs Bachman, Turner and Overdrive “Baby you ain’t seen nothing yet”, given a current pipeline which is described as being “larger than at any time”. This is not a slippery one-off: StatPro sports a strengthened diversified business model; recurring revenue is 93% of total, 83% of sales to existing clients and an industry beating LTV/CAC ratio shows smart sales and customer engagement. Our favourite headlines; (i) the whopping +112%, 61% YOY, growth in StatPro Revolution, +47% YOY organically, (ii) contracted order book, £44.13m, +19% YOY and, (iii) the 82% increase in average revenue/StatPro Revolution client to £43.6k. Currency helped revenue but not profit where StatPro is long Euro and USDollar and had currency hedging in place as GB£ currency changed post EU referendum result. We make small forecast upgrades given the H1 outturn – notably FY2016E EPS to 3.4p from 3.2p. We caution that it is too early to predict what the end of an eight year product journey, with the debut of Revolution Performance (28 September) will do to later year forecasts. Yes, shares have nudged upwards but they enjoy strong valuation support, PEG 0.6x and EV/Sales 2.1x. Forecast changes, coupled with the visible re-rating, prompts an increased target price to 148p (132p). As Messrs Bachman, Turner and Overdrive might conclude, this is “Something that you never gonna forget”.
As Capital Markets people we have been urging all software companies to move to the cloud – a blasé call which can only come from someone with limited knowledge of what the transition actually entails (analyst disclosure: in my industry days I sat through the transition from a subscription-based to one-off revenue stream – epic fail). We are fortunate that one listed company, StatPro, was very early to spot the trend and is now nearing the end of this transition. StatPro CEO Justin Wheatley has posted blogs which inform his stakeholders (customers, potential customers, employees, potential employees, supply chain and channel partners, and of course investors) about its migration to the cloud. These make for fascinating reading, the ‘learnings’ deserve a wider audience and should be required reading. Remember this transition will be made by every software company. Here we outline some of Mr Wheatley’s vignettes:
Annualised recurring revenue (ARR) jumped by 26% in the year to 30 June, or 13% on a constant currency basis, to £36.2m. This incorporates Investor Analytics, which was acquired in January. Recurring revenue from cloud services now represents 38% of the total, up from 34% (on a proforma basis) in December. With the group’s transaction-based performance solution, Revolution Performance, due to be commercially launched in two months, StatPro is moving into its final stage of cloud transition, after eight years of planning and development. Hence, with StatPro’s US-based financial software peers and SaaS companies trading on lofty multiples, we continue to believe there is significant upside in the shares.
StatPro has this morning published its update for the six months to 30 June 2016, with Annualised Recurring Revenues up 26% to £36.2m, with good sales of the flagship Revolution platform and with a strong increase in the contracted forward order book. The ongoing transition to cloud-based recurring revenue continues apace, with material new wins in the period. The group is a beneficiary of recent Sterling weakness, although we believe it too early to increase estimates at this stage. More importantly, the product suite continues to gain material traction and the strategy continues to be vindicated.
For anyone fretting about ‘tech’ post the Brexit referendum, this morning’s H1 trading update from StatPro is an absolute tonic – The news features: (i) Strong trading: StatPro’s Annualised Recurring Revenue, ARR, +26% to £36.2m YOY as its cloud services ARR is up a whopping +112% YOY. (ii) Gains on currency: That 26% ARR gain is +13% constant currency as StatPro nets a “significant” positive impact due to GB£:US$. (iii) Improving business model & better visibility: Revolution related recurring revenue is now 67% of Group software revenue, 52% YOY. (iv) Estimate upgrades in the wings: We are well positioned to upgrade FY estimates, and await publication of H1 results (3 August) for details on the divisional outturn. (v) Supports our investment view: The update supports our view that 2016 is a pivotal year for StatPro. The forthcoming debut of Revolution Performance marks a key waypoint on a journey which started some seven years ago. Yes shares are nudging upwards but they still enjoy strong valuation support reminding us that StatPro shares are too cheap trading on PEG 0.8x, and EV/Sales 2.0x. We retain our Buy; our target price is 132p.
StatPro’s half-year trading update for the six months ended 30 June 2015 shows continued progress in the transition to a purely cloudbased provider of analytics services. The announcement confirms good progress in the first half of 2015 while ‘revenue and profits remain in line with market expectations for the full year’. Currently, 23% of StatPro’s annualised contracted revenue is sourced from cloud services – up from 20% in May – suggesting that its flagship product continued to progress well in Q2 15. Group annualised recurring revenue is up 4% to £28.6 million at constant currency rates (CCR). However, underlying that CCR improvement, sterling has strengthened against a number of the currencies relevant to StatPro during Q2 of 2015 so we are making changes to our FY15E and FY16E numbers accordingly. The result is a reduction in our reported revenue estimates by 3% in each year with the quantum of the impact on EBITDA partly mitigated by lower cost assumptions.
Australia rocks it again for StatPro as NAB selects StatPro Revolution as its new performance and risk analytics reporting platform. StatPro has a technical lead in Australia and is clearly making share gains there. We have elected to leave our estimates unchanged as the new contract will follow a period of transitional work, as the client ‘unpicks’ the incumbent supplier – double bubble win! Our investment view is unchanged: 2016 is a pivotal year for StatPro. The forthcoming debut of Revolution Performance marks a key waypoint on a journey which started some seven years ago – land ahoy and we have more details of the launch event (see below). We highlight that (i) StatPro’s robust business model means that it gains slightly from Brexit’s UK£ weakness, and (ii) CEO Justin Wheatley’s latest blog has an optimistic hue of “making the best of it”. The shares have not been hit like others with deeper UK exposure – after all UK is c17% of StatPro revenue. The shares still enjoy strong valuation support (PEG 0.7x, EV/Sales 1.8x). Buy; our target price is 132p.
StatPro has won a significant new contract, worth at least £1.2m over five years, with a global American financial institution. This follows last week’s £2.3m three-year contract win with a major Australian financial institution. We estimate that the two contracts will boost the group’s annualised recurring revenue run rate by c 2.7%, with growth potential. The two new contracts highlight the increasing potential for positive newsflow, as the group moves to late-stage cloud transition. Hence, with StatPro’s US-based financial software peers and SaaS companies trading on lofty multiples, we continue to believe there is significant upside in the shares.
Hard on the heels of the announcement of its Australian contract, StatPro has announced a five-year contract with a global American financial institution for a minimum value over the period of US$1.75 million (c £1.2 million). Again, it is for the provision of its Revolution platform including the Performance module. The unnamed American client will use StatPro’s latest cloud technology to replace its legacy systems representing a further validation of Revolution and an additional show of confidence in the Performance module. Like the Australian contract, we expect this contract to start producing revenue in the current year. The launch of Revolution Performance is still scheduled for Q3 2016. As we noted previously, our numbers for both FY16E and FY17E already include some growth assumptions for anticipated contract wins. However, although this contract is spread over five years, it adds further backing to our estimates for those two financial years. Consequently, although we make no adjustments to estimates at present, we continue to note the supportive positive momentum in the business following the two contract announcements made during the last week and the acquisitions made so far this year.
StatPro inks a second deal for Revolution Performance – aka “The most powerful, flexible and efficient performance system anywhere” in as many weeks. The latest buyer is as an unnamed global American financial institution. Once again we have a very attractive customer LTV – the five-year contract is worth US$1.75m (£1.25m) minimum over the period. This comes in the wake of last week’s banner deal in Australia saw the client spend £2.3m over a three year term. Given that the product is not formally released until 28 September this is another major endorsement for a yet-to-be-released product. We leave our FY estimates unchanged. Our investment view: 2016 is a pivotal year for StatPro. Revolution Performance marks a key waypoint on a journey which started some seven years ago – land ahoy! Now a completing product narrative should lead to strengthening operational KPIs and a payday for shareholders. The shares enjoy strong valuation support (PEG 0.7x). Buy; our target price is 132p.
It dropped into my in-tray, harmless click bait I thought. But no, it is a ‘hold the date’ invite from StatPro. It informs that 28 September is for the Revolution Performance launch. This is a big date on UK Fintech’s H2 calendar. This follows news earlier this week that StatPro had inked a banner deal in Australia. The client, unnamed, was to spend £2.3m over a three year term and had committed to buying the new Revolution Performance module. Given that this does not see the light of day until Q3/2016 is a major endorsement for a yet-tobe-released product. Our take is unchanged: 2016 is a pivotal year for StatPro. Revolution Performance marks a key waypoint on a journey which started some seven years ago – land ahoy! Now a completing product narrative should lead to strengthening operational KPIs and a payday for shareholders. The shares enjoy strong valuation support (EV/EBITDA 12.5x). Buy; our target price is 132p.
StatPro has won a significant new contract, worth £2.3m over three years, with a major Australian financial institution. We estimate that the contract will boost the group’s annualised recurring revenue run rate by c 2%. We have previously mentioned the increasing potential for positive earnings surprises, as the group moves to late-stage cloud transition, and this new contract win highlights the potential. Hence, with StatPro’s US-based financial software peers and SaaS companies trading on lofty multiples, we continue to believe there is significant upside in the shares.
StatPro has announced a £2.3 million contract win with a large Australian financial institution for the provision of its Revolution platform including the Performance module. This is a significant win which will increase the Group’s presence in an important market where (as elsewhere in the world) growing regulatory requirements are driving demand for compliance solutions. StatPro was the first vendor to offer a turn-key solution for new risk measurement regulation there in 2015. We expect the contract to start producing revenue in the current year and note that the launch of Revolution Performance is still scheduled for Q3 2016. This contract underpins our estimates for the current financial year and FY17E - both of which already include some growth assumptions for anticipated contract wins. Consequently, we make no adjustments to estimates at present but note the continuing positive momentum in the business following an in-line Q1 2016 performance and the two acquisitions made so far this year.
Faron's lead product Traumakine, is an orphan drug in Phase III for treatment of ARDS (Acute Respiratory Distress Syndrome) which could be approved in Europe by the end of 2017. The Phase I/II trial showed a dramatic 80%+ reduction in mortality in the patient group, and we estimate peak sales for Traumakine at over USD 600m. The large market opportunity, short time to market and low risk development make this an attractive investment, in our view. We initiate coverage with a BUY recommendation and a 383p target price. Please see our full note published this morning for more detail.
StatPro says that Q1 trading was in line with expectations. New sales of StatPro Revolution, the cloud service, have progressed well and Revolution now represents c 36% of annualised contracted revenue. Management says the pipeline for the remainder of FY16 is “strong”, which is notably increasingly upbeat language. With StatPro continuing to advance to late-stage cloud transition, we highlight the increasing potential for positive earnings surprises. Hence, with StatPro’s US-based financial software peers and SaaS companies trading on lofty multiples, we continue to believe there is significant upside in the shares
StatPro’s AGM statement notes that trading in Q1 2016 was in line with management expectations and that the business continues to have a strong pipeline of business for the remainder of the year. The integration of Investor Analytics is on track and Infovest is ‘making good progress’ and the launch of StatPro Revolution’s Performance module remains on track for Q3 2016. StatPro has also announced the appointment of two new NEDs who bring significant experience in growing technology businesses. We make no changes to our estimates as a result of the update but make small adjustments to reflect the impact of the buyback in March 2016.
StatPro’s AGM is a feast for the bulls – trading is judged to be “in line”, there is strong cloud customer traction – now c36% of annualised contracted revenue and StatPro reiterates guidance for the debut of StatPro Revolution Performance. Also, there is a series of Directorate changes following the retirement of Stuart Clark – notably well-regarded Jane Tozer now occupies the role of Senior Independent Director. While operationally Q1 underpins our forecasts, nonetheless we make minor adjustments to reflect the impact of Q1 share buy-back. Our view is unchanged in the wake of the AGM: 2016 is a pivotal year for StatPro. Revolution Performance marks a key waypoint on a journey which started some seven years ago - land ahoy! Now a completing product narrative should lead to strengthening operational KPIs and a payday for shareholders. We are relaxed with our on-going Buy recommendation. The shares enjoy strong valuation support (EV/EBITDA 11.1x) both here and against our global Fintech comps (see table) and via the AGM has clear evidence of operational momentum. Forecast changes prompt a target price raise to 132p (124p).
So said Wayne Gretzky and this is one of the fundamental views steering StatPro. The company believes that only the right technology in partnership with industry knowledge and experience can deliver true customer value. This week delivery of its v67 showed that StatPro’s tech continues to deliver to that customer promise. To remind, 2016 is a watershed year for StatPro as it replaces StatPro Seven with StatPro Revolution Performance and be a true cloud multi-tenant solution – this then joins Revolution a true ‘built from the ground up’ SaaS which is a single instance of the code with a multi-tenant data structure. From here StatPro can accelerate sales as it begins to unlock that c200 Seven customer base. This has been a long journey, many investors are sceptical and but as a consequence the valuation is one of the cheapest Fintechs, trading on 1.4x FY1 EV/Sales, in our coverage universe – the segment is 3.3x. Buy when others are fearful etc. We retain our Buy at 124p price target.
StatPro stepped into the market and purchased 2.9m shares at a price of 72p/share taking advantage of a seller to make an “earnings enhancing deal”. This happened last in 2010 – then StatPro trousered a handsome 19% profit. We like the play. This is a good year to make money on StatPro shares because its Revolution Performance module is on track for release in summer 2016 and is currently in ‘beta’ testing. For us, this is the last piece of the technical jigsaw and from here StatPro can accelerate sales as it begins to unlock that c200 Seven customer base. We retain our Buy at 124p price target.
StatPro continues to make solid progress on its transition to the cloud. StatPro Revolution annualised recurring revenues jumped 46% over the year to £7.8m, while the acquisition of Investor Analytics in January boosts cloud revenues to 34% of the proforma total. The group’s multi-tenanted cloud solutions enjoy significant advantages over traditional software and we believe there is an increasing potential for positive earnings surprises, as StatPro moves to late-stage cloud transition. Hence with StatPro’s USbased financial software peers and SaaS companies trading on lofty multiples, we continue to believe there is significant upside in the shares.
Revenue and adjusted EBITDA were in line with our estimates while fully adjusted EPS was ahead of our numbers thanks to a lower tax rate than we anticipated. In all, despite the known currency headwinds, the FY2015 results highlighted the continued progress that StatPro has made in developing its cloud-based offering to the increasingly receptive asset management industry. StatPro Revolution’s final product module will be launched in mid-2016. The recent purchase of Investor Analytics in the US increased the Group’s cloud-based Annualised Recurring Revenue (ARR) to 34%, while the acquisition of a 51% shareholding in InfoVest added further efficient data management software to the Group. The outlook statement notes that the current financial year has ‘started well’. We make small positive adjustments to our FY2016 estimates and add first-time FY2017 estimates.
StatPro finals are ‘bang tidy’; all in line with forecasts. The results feature a wealth of sparkling KPIs: (i) 46% growth in the all-important StatPro Revolution ARR, (ii) StatPro Revolution order book +57%, (iii) cloud services 27% of Group ARR, 18% YOY, (iv) LVM/CAC at a hugely impressive 16.1x. However, we are looking forward rather than backwards this morning and note the very pleasing comment that the StatPro Revolution Performance module is on track for release in summer 2016 and is currently in ‘beta’. For us, this is the last piece of the technical jigsaw and from here StatPro can accelerate sales as it begins to unlock that c200 Seven customer base. Shares trade on a very attractive valuation (EV/EBITDA 11.1x, EV/Sales 1.6x, PEG 0.8x) both on a standalone basis and in the context of the wider fintech market. To reflect the new valuation ‘pivot’ year we increase our target price to 124p from 119p. This is a proverbial banker with a very solid ‘tech’ franchise and a widening TAM – Buy.
Learning that Investor Analytics was awarded ‘Best Risk Management Software’ shows us that StatPro bought smart. In what can look like a crowded fintech marketspace the award shows a stand-out player. In addition to getting something for the trophy cabinet with its recent Investor Analysts acquisition StatPro got for itself: (i) complementary Risk Factor and Monte Carlo models to add to its Historical Simulation risk model, (ii) a “significant” increase for its US footprint – StatPro had £11.2m revenue from North America at latest finals. (iii) a beefed up financial model – Investor Analysts brought with it an additional US$4.85m of ARR. StatPro already pre-announced a positive set of final results, 29 January. We think that the outlook commentary will be positive and so we are relaxed with our ongoing Buy recommendation at 119p target price.
StatPro is exchanging its existing StatPro Seven compliance module (SPC) licence contracts for a 51% stake in InfoVest Consulting. StatPro Seven is StatPro’s legacy traditional software platform. While most of StatPro Seven’s modules are migrating to the Revolution cloud platform, StatPro had no plans to upgrade SPC functionality to the cloud. Nevertheless, the SPC module has a distinct market niche, and given InfoVest's specialist skillset, it makes sense for StatPro to transfer the development, support and sale of the product to InfoVest. Further, InfoVest will have access to StatPro's global client base to help grow SPC's sales (we understand an ARR of c £500k). Additionally, InfoVest brings to StatPro standardised data solutions that will be particularly useful for the process of streamlining customer data in the implementation of cloud transition contracts.
Following its recent purchase of Investor Analytics in the US, StatPro has announced the acquisition of a 51% shareholding in InfoVest Consulting, a privately-owned South African software provider which services the data integration and warehousing needs of the investment management industry. InfoVest currently manages all client services and business development functions around the StatPro Portfolio Control (SPC) compliance system. The purchase is settled by the transfer of SPC licence contracts to InfoVest. The deal (expected to close 1 March 2016) underpins support for SPC, brings further efficient data management software to the Group and adds access to new clients with associated cross-selling opportunities. We make no changes to estimates ahead of the FY15E results (expected 9 March) but note that management expects the deal to be earnings enhancing in 2016.
StatPro acquires the majority shareholding (51%) of South African InfoVest Consulting. We like this because there is no cash outlay, StatPro gets decent software (data management, ETL and reporting) and consulting skills and also widens its sales footprint. While billed as a ‘Seven' deal any time the acronym ‘ETL' pops up – we perk up. At its heart ETL – ‘Extract, Transform and Load' – is about migrating customers from software ‘A' to ‘B' and with Seven moving to Revolution over time this could well prove to be a handy acquisition, both in the short and longer term. This is already a year of building momentum at StatPro. We remind that StatPro is one of the cheapest shares in our listed Fintech universe and this year as the restructuring kicker steps in, and profit and FCF soars, the share price should rise commensurately. We await finals (9 March) before tweaking estimates in the wake of this latest deal. Let's recap – we have an attractive valuation, EV/Sales 1.6x, a dividend payer with an attractive yield, clear operational momentum around Revolution and a product narrative which screams Ooo-wa-ooo-aaooaaooaa-ooo! Our target price is 119p Buy.
StatPro has reported that FY15 adjusted EBITDA is expected to be in line with our expectations, while revenues were c 4% lower than our forecasts, which we understand was mainly due to the continued weakness in the C$, ZAR and euro against sterling. We have tweaked our FY15 forecasts and eased FY16 due to the currency moves. We have also incorporated Investor Analytics (IA), the cloud-based risk analytics solutions provider that StatPro acquired earlier this month, into our forecasts. We continue to believe there is significant upside in the shares, given the lofty multiples of StatPro’s US-based financial software peers and SaaS companies.
A big leap for StatPro – as it hits demanding cloud targets in today's FY update. For us the standouts are; (i) ARR +46% to £7.8m and (ii) StatPro Revolution contracted revenue order book +52% to £14.2m – the two points prove that cloud migration is rapidly gathering pace. 2015 has clearly benefited by decent sales execution but for us the year has been punctuated by a delightful tech insertion rate as StatPro made its 65th code drop as the year concluded. StatPro tech updates have focused on ‘risk' in order to help clients meet complex regulations and increasingly tough client mandates. The company is one of the cheapest shares in our listed Fintech universe. As the restructuring kicker steps in, and profit and FCF soars, the share price should rise commensurately. Forecast changes work in the impact of the recent Investor Analysts acquisition. As we reflect the impact of the acquisition plus the 2015 outturn, we raise our target price to 119p from 112p. Buy.
Following last week’s announcement of the acquisition of Investor Analytics (IA), a US cloud-based risk analytics company, StatPro has released a trading update for its financial year to the end of December 2015. Adjusted EBITDA and revenues are expected to be very slightly below our estimates but show resilience in the face of sterling strength. We are updating estimates to reflect the expected FY15E numbers and the impact of the acquisition of IA on FY16E. The result of our conservative assumptions is a net 6% increase in FY16E revenues and adjusted EBITDA with a 1% increase in earnings. We have assumed that full integration is achieved during 2016.
StatPro has acquired Investor Analytics (IA), a US-based provider of cloud-based risk analytics solutions to hedge funds and asset managers, for up to $16m. IA’s Risk Factor and Monte Carlo models will enable StatPro to provide a broader set of risk models to its customers. The deal boosts the group’s cloud-based annualised recurring revenue run rate to 35% of the total revenue book, up from 27%, and strengthens the group presence in the important North American market (IA’s HQ is in New York). We continue to believe there is significant upside in the shares, given the lofty multiples of StatPro’s US-based financial software peers and SaaS companies.
StatPro has announced the acquisition of Investor Analytics (IA), a US cloud-based risk analytics company, for an initial cash consideration of U$10 million with a further potential Earn Out of up to U$6 million. IA adds complementary risk models to StatPro Revolution’s existing Advanced Risk Management module, producing a complete product offer to clients. Funded from increased debt facilities, StatPro expects the deal to be earnings enhancing on a pro forma basis in 2016 following integration, noting estimated cost synergies of around £0.7 million. The deal will enhance StatPro’s position in the US (IA has 53 client contracts), provide cross-sell opportunities and increase the level of the Group’s cloud-based recurring revenue. We shall update estimates to incorporate the acquisition following the release of next week’s trading update scheduled for 29 January.
StatPro makes a very neat earnings enhancing acquisition, buying Investor Analytics LLC. IA brings 53 new (mostly US) clients with it and US$4.85m of Annualised Recurring Revenue for an attractive price of 2x sales – US fintech average is closer to 6x (see table). Now StatPro's cloud-based Group ARR rockets up to 35% of total ARR, 27% previously. In our view, the new product looks a box perfect functional fit for StatPro as it strengths risk analytics (a key focus area), is similarly cloud-based, and soups up StatPro's US market penetration. Despite the updated guidance we have elected to leave our estimates unchanged ahead of the forthcoming (29 January) trading update. Remember – StatPro is the gift that keeps on giving, and with its SMAC transition nearing its end the company is one of the cheapest shares in our Fintech universe. As the restructuring kicker from the latest product initiatives steps in, profit and FCF should soar and the share price should rise commensurately. Our target price is 112p.
StatPro has just released the latest version of its Revolution product incorporating the last of the major elements of the Advanced Risk Management module to have been released this year. This real-time risk analysis module, incorporating a fast risk API, should encourage further conversion of StatPro’s risk clients, many of whom are still using StatPro Seven. The Group recently held an investor lunch at which it offered product demonstrations which showed the breadth, depth and speed of the portfolio analytics which Revolution now offers. Sterling appreciation against certain currencies relevant to StatPro during H2 of 2015 drives a small reduction in our reported revenue estimates by 2% in each year with the impact on EBITDA partly mitigated by lower cost assumptions.
Let the bells ring out. It is like Christmas everyday at StatPro. Today the company gifts users its 65th code drop. This year's StatPro tech updates have focused on ‘risk' in order to help clients meet complex regulations and increasingly tough client mandates. These new features complement the existing capabilities of this multi-asset class analytics platform, which already provides performance and advanced attribution analysis, award winning compliance and risk limits monitoring, unlimited reporting and unlimited users in a scalable cloud-based platform. A reminder – StatPro is the gift that keeps on giving and with its SMAC transition nearing its end the company is one of the cheapest shares in our Fintech universe. As the restructuring kicker steps in, and profit and FCF soars, the share price should rise commensurately. Our target price is 112p. Buy, for this is Wizard.
An excellent analyst presentation led by CEO Justin Wheatly raised the kimono on the product roadmap, but a product demo stole the show, reminding us of StatPro's work on UX (user experience) with a wide range of performance and risk analytics packaged in a nice uncluttered UI (user interface – ie the screen). We can't believe there's a better Black Friday deal for the fund manager in your life! To remind, StatPro's pivot to SMAC dates back to 2007. Then, StatPro began its Cloud transformation by redesigning its entire product suite, pivoting to the Cloud as it addressed user concerns for a lower cost of ownership, easier deployment, and creating a better customer experience to increase usage. The company is now a global provider of Cloud-based portfolio analytics software and supporting data services to a customer base of asset managers, fund administrators and custodians, pension funds, insurance providers, private and retail banks, and financial data vendors. The SMAC transition is nearing its end, with progress best seen via the growth in annualised recurring revenue for StatPro Revolution. Trading to the nine months suggests that the Q4 hurdle just got a little easier, with StatPro reporting a whopping 68% jump in Revolution annualised recurring revenue – this time a year ago it was 35%. StatPro is one of the cheapest shares in our Fintech universe on an EV/Sales of 1.7x. As the restructuring kicker steps in and profit and FCF soar, the share price should rise commensurately. Our target price is 112p. Buy.
StatPro has said that 9M15 trading was in line with expectations. StatPro Revolution’s annualised recurring revenue grew to £7.2m over the quarter, from c £6.5m at 30 June 2015, and £4.3m (at constant currencies) at 30 September 2014. The Q3 performance is an improvement on Q314 and takes the SaaS revenue book to 25% of the recurring revenue total, which we estimate grew modestly on a currency adjusted basis to £28.8m. We are maintaining our forecasts, and, while the earnings multiples look punchy at first glance, this is due to ongoing heavy investment in the new cloud products. After some eight years of cloud software development, we believe revenue and earnings will begin to accelerate following the launch of the cloud replacement for the group’s core StatPro Seven product suite, which is on schedule for Q2 next year.
StatPro has released its Q3 trading update, covering the nine months to 30 September. Metrics are positive, with good growth in cloud-based Revolution, and the nine months stated as being “in line with expectations for the year”. We make no changes to forecasts, but take comfort from the ongoing transition. We aim to catch up with the StatPro management team during Q4, and will revert following those meetings.
Trading to the nine months suggests that the Q4 hurdle just got a little easier as StatPro reports a whopping 68% growth in Revolution Annualised Recurring Revenue, ARR. This time a year ago it was 35%. The evidence suggests that operationally StatPro is trading well into Q4, (currency) translation is more of a risk given sterling strengthening. In order to reflect this we ‘course correct' our forecasts – taking FY Adj EBITDA from £4.5m to £4.23m. However, given the improving visibility, note Revolution is 25% of Group ARR, we have generated 2017 forecasts for a first time. At 1.7x EV/Sales, 12.3x EV/EBITDA StatPro is one of the cheapest shares in the Fintech universe (see below) – average is 3.6x. De-risking Q4 prompts an increased target price to 106p from 103p. Buy.
StatPro is a global provider of award winning portfolio analytics solutions for the investment community. To prove the case it has just added another trophy to the cabinet. The gong reminds us that for software companies, products are important, and building mindshare for product excellence is also critical. StatPro is nearing the end of its own multi-year transition, the KPIs are moving in the right direction, and the last piece of the product jigsaw – ‘Performance' for Revolution module – is being readied for debut. In fairly short order, here too shares could rise substantially. We retain our Buy.
We were reminded of StatPro as we read Barron's this weekend. Barron's was gushing about software company Autodesk, citing its transition from "perpetual license" to subscription software and due to the “substantial” long-term benefits the shares could rise 50% over the next 18 months. Ditto for StatPro, we think. StatPro is farther down the subscription evolution curve than Autodesk, is now coming to the end of its own multi-year transition, the KPIs are moving in the right direction, and the last piece of the product jigsaw ‘Performance' for Revolution module is being readied for debut. In fairly short order, here too shares could rise 50% as well. We retain our Buy.
State Street's latest asset manager survey reminds us of the market need for analytics, greater transparency and the competitive threat from new technology-based entrants. Their findings are a wake-up call for asset managers and remind all of the structural changes that are afoot as the SMAC/digital economy gathers pace. StatPro skates on top of this changing FinTech market offering a rich customer experience, drill down analytics, in a scalable cloud offer available to all market participants – it resonates with the zeitgeist. In our view, TAM looks to continue to grow – and none of the upside is reflected in the current share price. Buy.
StatPro has a pacey technology insertion rate. Last week saw the debut of StatPro Revolution Version 64. This is a key product milestone in StatPro's strategy to deliver performance, risk and compliance analytics in a single cloud platform. The latest release combines risk functionality and a compliance module in a single workflow. In our view this will help to spread risk analytics through user organisations (i.e. thereby increase user count and LTV) – and gives investors another waypoint to measure progress. The shares are undervalued; we retain our Buy.
Annualised recurring revenue lifted by 4% at constant currencies to £28.6m, while Revolution’s annualised recurring revenue jumped by 61% to £6.5m, representing 23% of the recurring revenue book, in line with the recent trading update. Adjusted EBITDA dipped, as expected, mainly due to the increased investment going into the business. The Revolution Performance module remains on track for launch in early 2016, and this is expected to accelerate the group’s transition to a pure cloud play. We continue to believe there is significant upside in the shares, given the lofty multiples of its US-based financial software peers and SaaS companies.
StatPro has announced it has won the 2015 Wealth & Money Management Award for 'Best Portfolio Analysis Platform – UK'. While this award provides no guarantees with regards to commercial execution, it is a reassuring reminder of the quality of the Revolution product and its world class credentials.
Interim numbers are in line with our expectations and our full year target. With each set of results we look for evidence that the cloud transition strategy is going by the playbook, and the latest set of KPIs clearly indicate considerable progress. We revisit the issue of valuation to highlight the valuation disparity between this and other cloud businesses and remain convinced that a re-rating is inevitable. We accept that this is only likely to occur once acceleration in customer migration and news sales restores top-line growth, but believe the upside potential from this is significant. We will regularly revisit valuation as cloud-based sales momentum gathers pace and we have better visibility of the timing, and quantum, of the financial impact the transition strategy could deliver. We make no changes to our forecasts, and maintain our Buy recommendation and 103p Target Price.
StatPro’s H1 15 results announcement follows July’s trading update which had confirmed further progress and provided some revenue numbers. As expected, continued investment during the first half meant that StatPro reports a reduced adjusted EBITDA number which is in line with our full year expectation. Adverse exchange rate movements have affected the results but, as previously reported, revenues were ahead on a constant currency basis. The Group continues to move forward with revenue sourced from cloud services rising again as the business continues its transition to a purely cloud-based provider of analytics services. The interim dividend is maintained, the forward order book is strong and the outlook commentary is, unsurprisingly, confident. There is some useful new disclosure on KPIs and margins. The Group has put in place a new £20 million five-year financing agreement and we make minor adjustments to estimates which mainly relate to that.
Interim numbers are in line with our expectations and our full year target. With each set of results we look for evidence that the cloud transition strategy is going by the playbook, and the latest set of KPIs clearly indicate considerable progress. We highlight the valuation disparity between this and other cloud businesses and remain convinced that a re-rating is inevitable. We accept that this is only likely to occur once acceleration in customer migration and news sales restores top-line growth, but believe the upside potential from this is significant. We will regularly revisit valuation as cloud-based sales momentum gathers pace and we have better visibility of the timing, and quantum, of the financial impact the transition strategy could deliver. We make no changes to our forecasts, and maintain our Buy recommendation and 103p Target Price.
Cloud services continued to grow apace in Q2, representing 23% of StatPro’s recurring revenue run rate as at the end of June, up from 20% (at actual FX rates) in March and 18% in December. Meanwhile, the legacy Seven software suite maintained resilient renewal levels. While trading is in line at constant currencies, we have conservatively eased our forecasts due to the continued strength of sterling against most currencies. Nevertheless, StatPro is at the advanced stages of transitioning to a pure-cloud play and we continue to believe there is significant upside, given the lofty multiples of StatPro’s US financial software peers and SaaS firms.
StatPro has issued a trading update for H1 2015 indicating that it has closed out the half year in line with expectations. Again, all the core KPIs point to excellent progress with the cloud-based transition strategy: StatPro Revolution annualised recurring contract revenue is up 61% and now represents 23% of recurring revenue; StatPro Revolution-related recurring revenue is up 34% and now represents 52% of software revenue. This time last year currency delivered a degree of earnings headwind and recent sterling strength has prompted us to make the same cautionary cut to numbers: we reduce our FY 2015 revenue forecast by 4%, our EBITDA estimate by 10% and consequently our Target Price from 108p to 103p. Regardless, underlying activity is highly encouraging and we continue to expect a significant re-rating once acceleration in customer migration restores top-line growth. Buy.
The outlook commentary with FY14 results in March stated that the current financial year had begun well. Today’s AGM statement confirms this trend, with Q1 trading in line with management expectations. StatPro’s last financial year saw StatPro Revolution annualised recurring revenues increase significantly; the AGM statement notes that this flagship product continued to progress well in Q1 15, with further business signed for both existing and new clients. Currently, 20% of StatPro’s annualised contracted revenue is sourced from cloud services, and the statement looks to the business to make ‘further headway in the rest of this year’ as the group continues its journey towards becoming a pure cloud-based analytics service provider. Meanwhile, the business continues to retain stable levels of recurring revenue from StatPro Seven clients, with net new sales offsetting cancellations. We leave estimates unchanged.
With a number of metrics already released in the January trading update, StatPro’s FY14 results reflect the continued progress in the Group’s strategy to transition to a purely cloud-based provider of analytics services. Revenues and costs (less so) are slightly higher than our estimates producing Adjusted EBITDA of £4.36 million - some 4% better than our estimate of £4.2 million. That includes a previously-flagged one-off charge of around £0.3 million relating to an office lease. The dividend increased by 4% to 2.9p. Crucially, the year saw StatPro Revolution increase its annualised recurring revenue significantly. January’s contract announcement had already emphasised the benefits of the cloud platform. The outlook commentary is understandably upbeat. We raise revenue estimates by 2% for FY15 but slightly higher cost assumptions leave Adjusted EBITDA unchanged. We introduce our FY16 numbers.
StatPro has provided another in-line update which is testament to the consistent strategic progress which it is making. It follows an announcement earlier this month of a new contract which was an early validation of the Group’s strategy to transition to a purely cloud-based provider of analytics services. StatPro has done a good job of retaining stable levels of recurring revenue from its StatPro Seven clients while preparing for the launch of its replacement, StaPro R+. Additional sales and renewals kept the net cancellation rate for StatPro Seven at around 4% during 2014. We are making changes to our FY14E estimates to reflect a slightly lower net cash figure than we estimated at c.£2.7 million and to include the one-off £0.3 million charge flagged in the update.
StatPro has announced that one of its customers, a large European asset manager, has signed a three year contract to upgrade its current StatPro Seven platform to the StatPro Revolution platform. This highly significant deal is an early validation of the Group’s strategy to transition to a purely cloud-based provider of analytics services. The customer is not only moving to StatPro Revolution (with SatPro R+ to be added on its release) but will also be paying 55% more for StatPro’s services. This latter point reflects, inter alia, the improved productivity and distribution of information which StatPro Revolution offers. This is clearly positive and underpins estimates. A trading update is expected later in January.
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