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Sopheon continues to haul itself back into shape with progress on new customer acquisitions producing a beneficial effect on profitability, but profit levels remain low and the flow of business is still fluctuating – historically Q4 has been the strongest licence quarter but this did not materialise in 2012.
Top priority during 2012 was to drive new customer acquisitions following a hiatus in 2011 (see Licence sales elude Sopheon) and it made good progress in this area - revenue from new customers generated 51% of 2012 revenue (vs. 21%). Across the business as a whole the total number of licence transactions was down from 54 to 49 which must remain an area of concern even though the average deal size was higher resulting in 20% growth in licence revenue. Services revenue was up 50% but added cost to the business. Overall revenue was up 23% to £12.7m for the year to December 31 2012. Profitability is improving with operating profit up from £462,000 to £607,000 and PBT rising from £104,000 to £281,000.
As a software and services provider in the product lifecycle management sector, Sopheon remains sensitive to customer product lifecycles and swings in the broader economy. As such it can be impacted on two fronts: lower customer spend and customers dropping their maintenance contracts (2012 maintenance was down yoy). The drive for new customers is paying off but it needs to improve extension sales to existing customers, and customer retention in terms of maintenance contracts, in order to improve overall stability and the bottom line.
