Sopheon (SPE:AIM) saw its stock rally in Monday trading after reporting a strong end to 2020. Shares in the innovation management software designer jumped more than 5% to 909p after the company unveiled a 23% rise in total contract value (TCV) of all sales and a stunning 274% increase on subscription-based software-as-a-service (SaaS) income.

The shift from perpetual licences to multi-year SaaS will mean that most of this revenue will be recognised over time, leaving revenues for the year flat at $30 million year-on-year. That compared with pre-pandemic expectations of $36 million.

ANALYSTS IMPRESSED

Yet analysts were enthusiastic. ‘It is impressive that a business with recurring revenues only making up 52% of the total in 2019 has managed to keep the revenue line stable in an unsettled year while transitioning to a SaaS model’, said Megabuyte’s Lee Prout.

This illustrates ‘strong underlying growth dynamics’ for the business. The subscription model allows Sopheon’s platform to become more deeply embedded in clients’ own operating processes, strengthening the commercial partnership making future income more reliable and predictable.

Revenue visibility for 2021 already stands at $22 million against a comparable prior year number of $18.9 million.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to be down 13% to $5.6 million, versus pre-Covid forecasts of $6 million. Net cash at the year-end was $21.6 million, up from $19.4 million.

STABILITY DURING SAAS SHIFT

‘Most importantly, as the business transitions from licences to a licence / subscription mix, total orders were are at record levels… while visibility of full-year revenue for 2021 was also at a record’, said FinnCap analyst Andrew Darley, as he reiterated a £12 target for the stock.

The analyst plans to reinstate forecasts when Sopheon reports 2020 detailed results on 24 March 2021.

Find out how to deal online from £1.50 in a SIPP, ISA or Dealing account.

Issue Date: 25 Jan 2021