Copperleaf Announces First Quarter 2023 Results

• Annual Recurring Revenue increases 29% YoY to $49.1 million
• Total revenue grows 28% YoY to $20.0 million, subscription revenue of $11.3 million, a 24% YoY increase

VANCOUVER, BC, May 10, 2023 /CNW/ - Copperleaf Technologies Inc. (TSX: CPLF) ("Copperleaf" or the "Company"), a provider of enterprise decision analytics software solutions, today announced financial results for the three months ended March 31, 2023. All amounts are expressed in Canadian dollars unless otherwise stated.

"Copperleaf's first quarter demonstrated continued momentum with material year-over-year growth spread across our geographies and sectors. During the quarter, we welcomed Scottish Water as our ninth UK-based water client and signed our first Australian water client, underscoring the global applicability of our solution," said Paul Sakrzewski, CEO of Copperleaf. "Water utilities in particular are facing unprecedented challenges, making it increasingly challenging to meet service level targets and minimize disruptions. Copperleaf provides water companies with proven tools to address these complex challenges, providing a comprehensive understanding of asset risk." 

"Copperleaf's strategic go-to-market investments continue to pay dividends, resulting in new industry sales, pipeline growth, and accelerated lead generation," continued Mr. Sakrzewski. "During the first quarter we successfully expanded into the ports industry, as well as into upstream Oil & Gas. For the remainder of 2023, we will remain focused on executing our go-to-market strategy, maintaining a prudent approach to managing our expenses as we navigate through the current economic environment. We anticipate that our growth for the remainder of the year will be driven by the maturation of our newly expanded salesforce and increasing partner traction, which will drive bookings and ARR growth in the second half of 2023. With a deep sales pipeline, a strong balance sheet, a growing client base, and market leading solution, we are poised to extend our leadership position and drive future growth."

First Quarter 2023 Financial Highlights

(All Capitalized terms used but not defined in this press release have the meanings ascribed to them in Management's Discussion and Analysis for the three months ended March 31, 2023; Comparison period is the first quarter ended March 31, 2022, unless otherwise stated)

• Revenue of $20.0 million, an increase of 28% over Q1 2022, driven by the delivery of new clients and expansion within existing clients.
• Annual Recurring Revenue¹ as at March 31, 2023 of $49.1 million, a 29% increase from $38.0 million as at March 31, 2022.
• Subscription revenue of $11.3 million, an increase of 24% over Q1 2022.
• Gross profit of $13.7 million representing a Gross margin of 68%, a 22% increase from $11.2 million and a Gross margin of 72% in Q1 2022. Gross margin decreased temporarily primarily due to an increase in subcontractor costs for the quarter plus increased headcount, travel costs, and product support related to our growing client base.
• Adjusted EBITDA¹ loss of $10.0 million, compared to Adjusted EBITDA¹ loss of $9.0 million in Q1 2022.
• Net loss of $11.8 million, or a loss of $0.17 per basic and diluted share, compared to a net loss of $10.9 million, or a loss of $0.16 per basic and diluted share, in Q1 2022.
• As of March 31, 2023, the Company's Net Revenue Retention Rate¹ was 111%.
• As of March 31, 2023, Copperleaf's Revenue Backlog¹ grew 15% to $110.5 million compared to $96.0 million, as of March 31, 2022.
• Strong balance sheet with cash and cash equivalents of $145.9 million as at March 31, 2023, compared to $149.5 million at December 31, 2022.

¹ Please refer to "Non-IFRS Measures" section of this press release

Key Developments

• In Q1 we completed the successful transition of our CEO.
• We took significant steps to improve scalability, sales effectiveness, and efficiency by establishing a new Global Business Operations function and introducing the Global Growth Office, which brings together Product Management, Industries, Partners, and Value Engineering to better support the global Go-to-Market teams.
• Copperleaf's strategic go-to-market investments have driven further pipeline growth, accelerated lead generation, and adoption in new industries and geographies. During the first quarter, the Company expanded into the ports industry, and upstream Oil & Gas with its first oil sands client. We also closed our first clients in France and the Middle East.
• Water continues to be a key focus for Copperleaf. In Q1 Scottish Water selected Copperleaf H2O to become our ninth water company in the UK, and we expanded this success internationally being selected at Sydney Water, our first water client in Australia.
• The Alliance Ecosystem continued to gain traction as the Company's partners invested in expanding their Copperleaf practice areas. In Q1 Copperleaf signed an Endorsed Apps initiative agreement with SAP signaling SAP's recognition of Copperleaf's industry-leading technology and the value that the combined solutions can deliver to organizations globally.
• The Company had strong engagement with the Copperleaf Community through Copperleaf Labs where we collaborated with clients on initiatives spanning scenario organization, GIS, and data visualizations.
• During Q1, Copperleaf released version 23.1 of its product suite which included numerous new features including: a configurable performance management dashboard enabling nimble visualization and adaptation of plans; improved GIS integration allowing users to manage their portfolios and plans directly through the GIS mapping interface; and improved support for multi-part or dependent projects coupled with an intuitive graphical user interface which will drive better outcomes and improved optimization results.

Q1 2023 Financial Results Conference Call Details

Paul Sakrzewski, Chief Executive Officer and Chris Allen, Chief Financial Officer, will host a conference call followed by a question-and-answer session today, May 10, 2023, at 5:00 PM ET.

Date: May 10, 2023
Time: 5:00pm ET
Dial-In Number: 416-764-8659 or 1-888-664-6392
Webcast: https://app.webinar.net/9LZYzqVGRl8
Replay: 416-764-8677 or 1-888-390-0541 (Available until May 17, 2023)
Replay Entry Code: 376144#

Key Performance Indicators

The Company monitors a number of key performance indicators (KPIs) to evaluate performance. Some of the KPIs used by management are recognized under IFRS, whereas others are non-IFRS measures and are not recognized under IFRS. These non-IFRS measures are included as additional information to complement the IFRS measures, providing further understanding of our results of operations from management's perspective. We believe that non-IFRS financial measures are useful to investors and others in assessing our performance; however, these measures should not be considered as a substitute for reported IFRS measures nor should they be considered in isolation. As these measures are not recognized measures under IFRS, they do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies. For a reconciliation of non-IFRS measures to the most directly comparable measures calculated in accordance with IFRS, see section "Non-IFRS Measures" below.

¹Non-IFRS Measures

Annual Recurring Revenue ("ARR")

We define ARR as the annualized equivalent value of the subscription and term-based software license revenue of all existing contracts as at the date being measured, excluding non-recurring SaaS and hosting fees. Our clients generally enter into three-to-five-year contracts that are non-cancelable or cancelable with penalty. Our calculation of Annual Recurring Revenue assumes that clients will renew the contractual commitments on a periodic basis as those commitments come up for renewal. Subscription and term-based software license agreements are subject to price increases upon renewal reflecting both inflationary increases and the additional value provided by our solutions. In addition to the expected increase in subscription and term-based software license revenue from price increases over time, existing clients may subscribe for additional products or services during the term. We believe that this measure provides a fair real-time measure of performance in a subscription-based environment.

Net Revenue Retention Rate

We believe that our Net Revenue Retention Rate is a key measure to provide insight into the long-term value of our clients and our ability to retain and expand revenue from our client base over time. Our Net Revenue Retention Rate is calculated over a trailing twelve-month period by considering the group of clients on our platform as of the beginning of the period and dividing our Annual Recurring Revenue attributable to this same group of clients at the end of the period by the Annual Recurring Revenue at the beginning of the period. By implication, this ratio excludes any Annual Recurring Revenue from new clients acquired during the period but does include incremental sales added to the cohort base of clients during the period being measured. This measure provides insight into client expansions, downgrades, and churn, and illustrates the growth potential of our client base alone. Our success in delivering exceptional value and extraordinary experiences to our clients is fully realized when we can achieve a high Net Revenue Retention Rate. However, this percentage can vary from period to period due to the timing of large expansion contracts with our existing clients.  In addition, only the recurring component of expansions with our perpetual license clients, such as on-going support & maintenance, is recognized in this calculation.

Revenue Backlog

Revenue Backlog represents the total revenue expected to be recognized in the future, related to performance obligations that are unsatisfied or partially unsatisfied at period end. The recurring nature of our revenue provides high visibility into future performance, and upfront payments result in cash flow generation in advance of revenue recognition. Subscription contracts require annual upfront payments; however, some clients pay multiple years upfront. Typically, approximately 50% of our expected annual revenue is recognized from client contracts that are in place at the beginning of the year; however, we expect this percentage to increase going forward as our client base continues to transition toward SaaS and our Q4 seasonality persists. Agreements with new clients or agreements with existing clients purchasing incremental product and services in a quarter may not contribute significantly to revenue in the current quarter. For example, for SaaS contracts and professional services, a new client who enters into an agreement late in a quarter will typically have limited contribution to the revenue recognized in that quarter. Software licenses, by contrast, are often recognized as revenue upon delivery of the software which typically occurs immediately upon contracting, and thus rarely enters Revenue Backlog.

Adjusted EBITDA

Adjusted EBITDA is used by management as a supplemental measure to review and assess operating performance and to provide a more complete understanding of factors and trends affecting our business. Management believes that Adjusted EBITDA is a useful measure of operating performance and our ability to generate cash-based earnings, as it provides a more relevant picture of operating results by excluding the effects of financing and investing activities, including removing the effects of interest and other expenses such as non-cash items and non-recurring expenses that are not reflective of our underlying business. In addition to interest, the other non-cash or non-recurring items adjusted for include depreciation and amortization, share-based payments expense, foreign exchange loss (gain), current income tax expense, and CEO transition expenses. Our management also uses Adjusted EBITDA in order to facilitate operating performance comparisons and decision making from period to period and to prepare annual operating budgets and forecasts. In addition, it is used to provide securities analysts, investors, and other interested parties with supplemental measures of our operating performance and thus highlight trends in our business that may not otherwise be apparent when relying solely on IFRS measures.

The following tables reconciles Adjusted EBITDA to net loss for the periods indicated:

	Three months ended March 31,
	2023	2022	Change
Net loss	(11,790)	(10,906)	(8 %)
Depreciation and amortization	475	435	9 %
Share-based payments expense ^1	1,633	739	121 %
Finance costs	289	274	5 %
Finance and other income	(1,357)	(270)	(403 %)
Foreign exchange (gain) loss	(45)	737	(106 %)
Current income tax (recovery) expense	55	11	400 %
CEO transition expenses ^1	695	-	-
Adjusted EBITDA	(10,045)	(8,980)	(12 %)

 ¹ Expenses incurred in the transition to our new CEO in 2023, which are non-recurring. CEO transition costs include share-based payments expense of $169 due to the modification of certain stock options.

Selected Financial Information 

Consolidated Statements of Loss and Comprehensive Loss
(expressed in thousands of Canadian dollars, except for share and per share amounts)

		For the three months ended March 31,
		2023	2022
		$	$
Revenue		19,966	15,569
Cost of revenue		6,308	4,392
Gross profit		13,658	11,177
Operating expenses
Sales and marketing		10,399	8,565
Research and development		9,663	6,649
General and administrative		6,444	6,117
		26,506	21,331
Loss from operations		(12,848)	(10,154)
Other expenses (income)
Finance costs		289	274
Finance and other income		(1,357)	(270)
Foreign exchange (gain) loss		(45)	737
		(1,113)	741
Loss before income taxes		(11,735)	(10,895)
Income taxes
Current income tax expense		55	11
Net loss and comprehensive loss for the period		(11,790)	(10,906)
Net loss per share
Basic and diluted		(0.17)	(0.16)
Weighted average number of common shares outstanding,    basic and diluted		70,429,455	68,425,389

Consolidated Statements of Financial Position
(expressed in thousands of Canadian Dollars)

		March 31, 2023	December 31, 2022
		$	$
ASSETS
Current assets
Cash and cash equivalents		145,884	149,458
Accounts receivable		17,954	21,232
Contract costs		919	852
Contract assets		3,974	4,337
Prepaid expenses		3,851	3,050
		172,582	178,929
Non-current assets
Deposit and prepaid expenses		594	702
Contract costs		1,515	1,566
Contract assets		692	458
Property and equipment		1,684	1,901
Intangible assets		1,309	1,407
Right-of-use assets		581	730
		6,375	6,764
TOTAL ASSETS		178,957	185,693
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities		13,505	12,232
Contract liabilities		30,362	28,098
Lease liabilities		1,042	1,039
		44,909	41,369
Non-current liabilities
Contract liabilities		10,739	11,038
Lease liabilities		-	259
		10,739	11,297
TOTAL LIABILITIES		55,648	52,666
SHAREHOLDERS' EQUITY
Share capital		184,787	183,778
Share-based payments reserve		9,688	8,625
Deficit		(71,166)	(59,376)
TOTAL SHAREHOLDERS' EQUITY		123,309	133,027
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		178,957	185,693

Disaggregation of revenue
(expressed in thousands of Canadian Dollars, except percentages)

	Three months ended March 31,
	2023	2022	Change
Subscription^1	11,276	9,082	24 %
Professional services and custom software contracts^2	6,933	5,998	16 %
Perpetual and term-based software licenses^3	1,757	489	259 %
	19,966	15,569	28 %

¹ Subscriptions represent revenue from software as a service ("SaaS"), support and maintenance services, and hosting. 

² Professional services and custom software contracts represent revenue earned substantially from professional services.

³ Perpetual and term-based software licenses represent software licenses that are client hosted or with the option for the client to host.

Forward-Looking Statements

This news release contains "forward-looking information" and "forward-looking statements" (collectively, "forward-looking information") within the meaning of applicable securities laws in Canada.

Forward-looking information may relate to our future business, financial outlook, and anticipated events or results, and may include information regarding our financial position, business strategy, growth strategies, addressable markets, budgets, operations, financial results, taxes, dividend policy, plans and objectives. Particularly, information regarding our expectations of future results, performance, achievements, prospects, or opportunities, or the markets in which we operate, is forward-looking information. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expect" or "does not expect", "is expected", "is poised to", "an opportunity exists", "budget", "scheduled", "estimates", "outlook", "future", "financial outlook", "forecasts", "projection", "prospects", "strategy", "intends", "anticipates", "does not anticipate", "believes", or variations of such words and phrases, or statements that certain actions, events, or results "may", "could", "would", "might", "will" occur or be taken ,   or "will continue to" or "are poised to" be achieved.  In addition, any statements that refer to expectations, intentions, projections, or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding possible future events or circumstances.

Forward-looking information may include, among other things: (i) the Company's expectations regarding its financial performance, including among others, revenue, gross profit, expenses, Adjusted EBITDA; (ii) the Company's expectations regarding industry trends, addressable market growth, overall market growth rates, and growth rates and growth strategies; (iii) our business plans and strategies; (iv) the continued success of our commercial model; (v) our expectations regarding growth in our customer base, our ability to retain clients and increase margin per customer; (vi) acceleration in the growth and adoption of new technologies; (vii) relationships with our technology partners; (viii) our ability to continue to attract and retain talent; (ix) our competitive position in our industry; and (xi) and the long-term impact of COVID-19 on our business, financial position, results of operations and/or cash flows.

Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that we considered appropriate and reasonable as at the date such statements are made, and are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to the risk factors described in our 2022 Annual Information Form ("AIF") under "Risk Factors". A copy of the 2022 AIF can be accessed under our profile on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com. There can be no assurance that such forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information, which speaks only as at the date made.

In addition, forward-looking financial information with respect to potential outlook and future financial results contained in this press release are based on assumptions about future events including economic conditions, the assumptions noted above and proposed courses of action, based on management's reasonable assessment of the relevant information available as at the date of such forward-looking information. Readers are cautioned that any such forward-looking financial information should not be used for purposes other than for which it is disclosed.

About Copperleaf:

Copperleaf provides enterprise decision analytics software solutions to companies managing critical infrastructure. We leverage operational and financial data to empower our clients to make investment decisions that deliver the highest business value. What sets us apart is our commitment to providing extraordinary experiences, shaped by people who care deeply, products that deliver exceptional value, and partnerships that stand the test of time. Copperleaf is a patron of The Institute of Asset Management and actively participates in shaping the future of asset management standards, including ISO 55000. Headquartered in Vancouver, Canada, our solutions are distributed and supported by regional staff and partners worldwide. Together, we are transforming how the world sees value.

For more details, visit https://www.copperleaf.com/

Source: Copperleaf Technologies Inc. CPLF-IR

SOURCE CopperLeaf Technologies Inc.

James Bowen, CFA, 416-519-9442, [email protected]