AIM-listed asset management portfolio analysis provider, StatPro hit the full year 2012 numbers as expected (see Statpro on track with cloud move), although hardly a blistering performance. Top line revenue grew 1% to £32m, and pre-tax profits were down 2% to £3.78m (margin 11.8% vs. 12.2% last time). The net cash position looks in better shape at £3.7m (vs. -£3.4m last time) after raising £6m last November (see here).
As Hot Views readers will know, Statpro is in the midst of a major shift in its business model wholly to the cloud. However this isn’t going to happen overnight since its legacy licence product StatPro Seven won’t be ready for complete replacement until a full cloud version StatPro Revolution R+ is ready – development has begun on R+ but its staged launch will be over the next three to five years. Consequently, the strategy between now and then is to add-on sales of StatPro Revolution to existing clients in order to maximise the uptake.
And so far so good. Sales of Revolution more than trebled to £1.51m as did the number of customers, which reached 156 at the year end. Among these are 21 fund administrator partners, more than double the number last year, including 6 of the major operators, showing good progress in a key target market. Statpro sees these acting as channel partners for Revolution since the platform can be shared between colleagues, businesses and customers, it hopes to create a 'network effect', with each new customer potentially driving uptake by others.
Another interesting development is Statpro’s focus on partnering for Revolution, with a ‘major data provider’ to offer their data through the platform, as well as a partnership with Russell Investments to sell their indexes via Revolution's online store, charging on a per portfolio basis. Further partnerships are planned in areas like compliance, and with other software suppliers.
As with other SaaS offerings however, it’s the bottom line which is suffering (see our comments on Salesforce.com here and work back). Revolution is losing money to the tune of £2.28m (EBITDA) in FY12. Although a 10% improvement on last year, there is no visibility on when Revolution will break even. Indeed spend on marketing and other costs for Revolution went up 11.4% to £3.70m.
Anthony Miller writes:
The decision to move entirely to hosted software delivery definitely falls into the ‘brave and courageous’ category. It’s not that StatPro shouldn’t develop a SaaS product line – pretty much every software firm needs to. But to ditch on-premise delivery entirely is to take big a bet, especially for high-end clients.
The financial risks are great, witness StatPro’s own numbers. To date, only 4 of StatPro’s 156 Revolution (SaaS) clients are spending more than £100k p.a. The vast majority (108 to be precise) are spending less than £2k. Average revenue per client is under £10k. Meanwhile, licence revenues from StatPro Seven (on-premise) reached almost £25m last year. Revolution would need some 2,500 clients at current run rate to match Seven.
And then let me repeat yet again the first of ‘Miller’s Maxims’: It costs more to deliver software as a service than it costs to deliver software.
Therein lies StatPro’s challenges.