AGM Notice and Update - Sopheon

Sopheon, the international provider of software, expertise, and best practices for enterprise innovation management solutions, has published its Annual General Meeting (“AGM”) notice which is now available on the Company’s website, and will be posted to registered Shareholders today. The AGM will be held at 11 am on 11 June 2020, at the Company’s registered office. Given the Coronavirus situation, Shareholders are not expected to attend the meeting in person, and are encouraged to submit a proxy vote in accordance with the instructions in the notice. Arrangements have been made to ensure a quorum at the meeting. The Board takes this opportunity to give shareholders the following update and review of the business.

2019 in review

2019 benefited from the strong operational discipline in our business that enabled us to deliver a profitable and cash generative year, and despite a pause in revenue growth, we reported closing net asset and cash positions at historic highs.  Consistent with our expectations, after a slow first half, momentum rebounded sharply in the final quarter of last year, which was one of the strongest on record for deal flow.  Furthermore, we ended 2019 with a substantially larger sales pipeline, up 50% year on year.  While we saw some signs of customer hesitation due to economic factors, we did not attribute this as a key issue prior to the incidence of the recent pandemic.  Indeed, behind the headline financials, we signed the same number of new customers (18) in 2019 as in the year before. Today, our pipeline remains at a similar level to the year end, and the proportion of software as a service (“SaaS”) opportunities in the pipeline also remains high, especially from potential new customers. We first referred to this shift to SaaS in our 2018 annual report, and since then transformation to a cloud business has become a key internal driver of change.  We have revised our standard pricing models, service delivery models and commission plans, and a longer-term migration of the software platform is underway.  Experience tells us that the full conversion to SaaS will take several years.

COVID-19

The COVID-19 pandemic means that every organization is facing new and immediate challenges and opportunities that require urgent, strategic and effective responses. In terms of our own operations, we took early action to ensure the health and safety of staff, introducing an immediate work from home policy supported by well-defined virtual working practices, and we also assured continuity of business operations and cloud services through our co-location and Azure based infrastructure.  This has all gone smoothly. For many of our customers, our Accolade solution offers visibility and speed to decisions in such times of crisis. Further to this point, during April we developed and launched an Accolade software configuration, the Disruption Response Toolkit, to enable our customers to rapidly develop their COVID-19 responses through quick assessment, analysis and reprioritization of strategic initiatives, and to implement changes to their supply chain or revisit their product portfolio strategy.  In addition, a Microsoft® Teams Connector was announced which allows Accolade users to initiate a Teams call, chat or group discussion, all from within the Accolade platform. These offerings are being made available to existing customers at limited charge. They are designed to add value to their Accolade investment in a time of crisis, and to raise the profile of our solution to extended use cases to drive user growth.

Outlook

Clearly the market environment is tough, and though we are busy with several deals and we are signing business, sales cycles are extending. Projecting the impact that COVID-19 will have on customer conversion makes forecasting the future challenging, and we are therefore being prudent by withdrawing our market guidance for FY 2020 and beyond. However, several vertical markets where Sopheon operates – food, beverage and consumables; chemicals; defense – are showing resilience to the crisis at present. In addition, so far this year retention levels for ARR have remained good, and as noted we are seeing orders restart from our existing customers, as their own operations settle down. Visibility for the full year 2020 now stands at $23.2m, which is above last year at this time, underpinned by ARR at $15.9m. Net cash at the end of April was $21.8m. A moderate rise in cash is normal at this time of year, given our billing seasonality, but this clearly demonstrates the robustness of the Company’s balance sheet. We are nevertheless taking some measures to limit expenditure, including putting a temporary hold on the majority of our hiring plans for the second quarter. All these factors give us the confidence to proceed with our strategy under a range of disruption scenarios, which we have stress tested in detail. In this respect we have also concluded that we have sufficient strength and optimism to proceed with our declared dividend of 3.25p per share, and this is proposed to shareholders in the notice issued today, in line with the timetable set out in the final results.

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The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

About Sopheon
Sopheon (LSE: SPE) partners with customers to provide complete Enterprise Innovation Management solutions including software, expertise, and best practices, that enable them to achieve exceptional long-term revenue growth and profitability. Sopheon’s Accolade solution provides unique, fully-integrated coverage for the entire innovation management and new product development lifecycle, including strategic innovation planning, roadmapping, idea and concept development, process and project management, portfolio management and resource planning. Sopheon’s solutions have been implemented by over 250 customers with over 60,000 users in over 50 countries. Sopheon is listed on AIM, operated by the London Stock Exchange.