2014 will be the year when the commercials of cloud services come under increasing scrutiny (see our Predictions piece) and StatPro will be tested as it shifts its business entirely to Cloud. The company started from a strong position and has made good progress but there are still hard miles to travel before its strategy is realised.
Today’s trading update continues the confident tone of Q3, see here, re the growth of StatPro Revolution, its cloud-based portfolio and asset pricing software. Annualised revenue for this product rose by 114% to £3.2m and “Revolution-related revenue” (from clients with Revolution in their subscription) more than doubling to £9.2m, or around 36% of total group software revenue. The number of fund administrator partners who act as sales intermediaries has risen to 34, up 50%. Client numbers remain impressive, up 62% and average contract value up 31% with broader capability and greater penetration of client accounts.
All well and good, but the balancing act has become more difficult with the end of marketing of new implementations of the largest product by revenue, StatPro Seven. Annualised revenue from these products fell by 5% and this decline may well accelerate. The replacement cloud-based product, StatPro R+ is expected late this year. The further investment in development, sales and marketing and lack of up-front licence fees will impact cash flow and EBITDA throughout 2014.
Group EBITDA for the H1 was £3.2m, with the cloud-based initiative costing £1.4m. Further EBITDA hits due to cloud cannot be ruled out. The shares have fallen 10% over the year and although it is hard to find fault with StatPro’s strategy and execution thus far, there is still some way to go.