Growth was not a feature during 2011 for product lifecycle management software provider Sopheon as it struggled to pull in new customers and new license revenue. As a result, revenue of £10.3m for the year (to December 31 2011) was a shade down on the £10.5m of the previous year.
For the second year, the company reported a bottom line profit after tax, delivering £104,000 (vs £152,000 in 2010). Cost control and the conversion of development costs into products helped the bottom line even though additional sales, services and development staff were added.
The underlying metrics are concerning. Licence transactions were down from 58 to 54 (7%) and licence revenue was just 29% of total income, compared to 37% in 2010. Licence revenue dropped 25%. The company points to sensitivity to individual sales events, plus a change in buying patterns whereby customers are opting for extended validation phases, pilot projects and phased license orders rather than placing substantial one-off orders. It is hard to see this situation changing in the short term so even though the company has adjusted aspects of its go to market strategy and believes they will start to pay off during the current year, it is probably in for a rough ride during 2012.
The product lifecycle management market Sopheon operates in has the potential to be a strong market because it plays a supporting role in improving the customer experience, which is something enterprises are concentrating on. ‘Supporting’ is the key word here and we believe this is the bottom line contributor to lower licence sales.