Published on: July 24, 2019

The mixed blessings of SaaS

Sopheon’s H1 2019E update states that revenues and EBITDA will be lower than H1 2018, at around $13.7m and $2.0m respectively. This is as a result of a delay in closing some licence contracts (and H1 2018 was a tough comparator). Further, although the group is enjoying a very strong pipeline (up 48% in value since January), “an increasing proportion” of this pipeline is likely to be SaaS, so H2 revenue is unlikely to be sufficient to reach consensus full year estimates. The result of a greater number of SaaS licenses should be an increase in revenue visibility over the longer term and a fillip to recurring revenue in FY 2020 and beyond; however, it impacts revenue recognition in the near term. Full year revenue is now expected to be similar to FY 2018, and we are reducing our estimate for FY 2019E by 8% with EBITDA decreasing by 22% to the figures below. We also reduce our estimates for FY 2020E by 5% and 14% respectively – hopefully this will prove conservative. We hope to see a good increase in annualised recurring revenue during H2, which will underpin estimates for 2020 and beyond.