NETCALL PLC
(“Netcall”, the “Company”, or the “Group”)
Interim results for the six months ended 31 December 2018
Approaching inflection point as Cloud services growth accelerates
Netcall plc (AIM: NET), the leading provider of Low-code and customer engagement software, today announces its unaudited interim results for the six months ended 31 December 2018.
Financial highlights
· Revenue up 6% to £11.4m (H1-FY18: £10.7m)
· Cloud services and product bookings(1) increased by 96% to £5.22m (H1-FY18: £2.67m)
· Total annual contract value(2) ('ACV') at 31 Dec 2018 up 10% to £15.1m (H1-FY18: £13.7m) – Low-code ACV up 40% year over year
· Adjusted EBITDA(3) £2.02m (H1-FY18: £2.69m) after approximately £0.75m spend of the growth investment programme
· Profit before tax increased 49% to £0.42m (H1-FY18: £0.28m)
· Cash generated from operations of £1.85m (H1-FY18: £0.30m)
Operational highlights
· Substantial growth in cloud business with a number of notable multi-year contracts
· Cloud service bookings exceeding product sales for the first time
· New Low-code customer wins and cross sales
· High levels of customer renewals
· Significant new Low-code and Liberty cloud product releases
Henrik Bang, CEO at Netcall, commented:
“We are now approaching a clear inflexion point in our transition from a traditional software business to a high growth digital cloud operation, with our Cloud service bookings exceeding product sales.
“The increase in our total ACV and Low-code ACV provides a clear demonstration of the growing forward visibility of our revenue streams.
“Trading is in line with our expectations for the year so far. We expect revenues for the year to be more weighted toward the second half given the move to a recurring revenue model and the timing of product sales. Our strong sales momentum has continued into the second half with order inflow significantly ahead compared with the same period last year.”
(1) Cloud services and product bookings is the total of all new orders received classified as cloud subscription and support, product and first year support contract revenues.
(2) ACV, as of a given date, is the total of the value of each cloud and support contract divided by the total number of years of the contract.
(3) Profit before interest, tax, depreciations and amortisation adjusted to exclude the effects of acquisition, impairment, contingent consideration and non-recurring transaction costs. The forecast is based on unaudited management accounts for the 6 months ended 31 December 2018.
Strategic overview
The Group is transitioning from a traditional software business to a high growth digital cloud operation, blending its Liberty platform with its recently acquired Low-code cloud operation. The aim is that the cloud business becomes the majority of the Group's revenue by 2021.
The Group is now well positioned to capitalise on the fast growing Low-code market and is accelerating its investment in the business. The cash generative Liberty business, which has a strong position in healthcare and public sector markets, is providing the resource to support substantial new growth opportunities.
The combination of Netcall's products provides organisations with a unique proposition for their customer engagement and digital process automation requirements. It enables significant customer experience improvements and delivery of operational excellence with efficiency savings.
Netcall has seen a notable rise in interest and new customer wins for its solutions, as a growing number of organisations evaluate and adopt these capabilities across their enterprises. The Group has also seen an increase in cross selling of Low-code solutions into existing customers as they digitise and modernise their operations.
The average annual contract value of these initial Low-code cross-sales is three times higher than the average of the Netcall customer base. This gives an early indication of the potential value of Low-code sales into the existing customer base.
Netcall is also developing its partner strategy and activity in this area is growing. Partners using the Group's Low-code platform can gain significant advantages including using the speed and flexibility of its software to disrupt their market place, being able to scale with customer demand and create profitable recurring revenue streams.
Netcall's software is highly operationally geared, scalable and easy to deploy and use for enterprises. The Low-code market is worth more than an estimated $6 billion and is expected to grow rapidly in the coming years1.
In addition to the Group's focussed organic growth strategy, the Board continues to look for selective acquisitions with complementary proprietary software and/or additional customers in its target markets.
1 Source: https://go.forrester.com/blogs/why-you-need-to-know-about-low-code-even-if-youre-not-responsible-for-software-delivery/
Current trading and outlook
Netcall is now approaching a clear inflexion point with Cloud service bookings exceeding product sales for the first time in a six-month reporting period and the Group's forward visibility of revenue continues to grow strongly.
The Group has traded in line with the Board's expectations for the year to date. As previously stated, Netcall expects revenues for the year to be more weighted toward the second half given the transition to a recurring revenue model and the timing of product sales. The Group experienced strong sales momentum in the first half which has continued into the second half with order inflow significantly ahead of the comparable period last year.