Copperleaf Announces Fourth Quarter and Fiscal Year 2022 Results

• Annual Recurring Revenue increases 26% YoY to $46.4 million
• 2022 Subscription Revenue reaches $39.9 million, a 27% increase
• Backlog grows to $107.3 million

VANCOUVER, BC, March 23, 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 fourth quarter and fiscal year ended December 31, 2022. All amounts are expressed in Canadian dollars unless otherwise stated.

"Copperleaf's ability to deliver material and tangible return on investment for our clients, combined with our commitment to support our clients' environmental, social and governance initiatives, drove continuing demand for our solutions in 2022," commented Paul Sakrzewski, CEO of Copperleaf. "Our strategic investments in go-to-market activities led to expansion into new sectors, including Metro Transit and Pharmaceuticals, and new geographies, including France and Portugal. Throughout 2022, we made substantial progress enhancing our Alliance Ecosystem, with partners continuing to support the majority of our deals and contributing to a record global pipeline. In 2023, with dedicated Copperleaf Partner and Ecosystem managers now in place in each region, we will continue to focus on expanding our reach, and establishing the tools, community and structure needed to scale the business."  

"The fundamental tailwinds that drive demand for Copperleaf's solutions continue to strengthen; however, growth in the fourth quarter was slower than expected due to the continued shift of our clients toward SaaS driving lower perpetual license revenue, and temporary deal elongation resulting from the challenging macro-economic climate," continued Mr. Sakrzewski.  "Overall, we continue to see a healthy demand environment. In 2023, we expect our growth to be driven by recent investments in sales and marketing, which are demonstrating early positive results with increased lead generation and pipeline activity, and our investments in R&D, which have resulted in exciting new innovations that continue to advance our leadership position in the decision analytics market.  With a deep sales pipeline, a strong balance sheet, a growing customer base, and a market leading solution, we are poised to expand our leadership position in the decision analytics market and drive future growth."

 Fourth Quarter 2022 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 fiscal years ended December 31, 2022; Comparison period is the fourth quarter ended December 31, 2021, unless otherwise stated)

• Revenue of $19.2 million, a decrease of 12% over Q4 2021, driven by our clients continued shift to SaaS and a year over year decrease in the number of Perpetual License deals closed in Q4.
• Subscription revenue of $11.3 million, an increase of 32% over Q4 2021.
• Gross profit of $14.7 million representing a Gross Margin of 76%, a 15% decrease from $17.3 million and a Gross Margin of 79% in Q4 2021, driven by the decrease in Perpetual License revenue year over year.
• Adjusted EBITDA¹ loss of $2.0 million, compared to Adjusted EBITDA¹ gain of $2.3 million in Q4 2021.
• Net loss of $2.4 million, or a loss of $0.03 per diluted share, compared to a net gain of $0.1 million, or a gain of $0.00 per diluted share, in Q4 2021.
• As of December 31, 2022, Copperleaf's Revenue Backlog¹ grew 5% to $107.3 million compared to $101.9 million, as of December 31, 2021.
• Strong balance sheet with cash and cash equivalents of $149.5 million as at December 31, 2022, compared to $161.4 million at December 31, 2021.

Fiscal Year 2022 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 fiscal year ended December 31, 2022; Comparison period is the year ended December 31, 2021, unless otherwise stated)

• Record revenue of $73.4 million, an increase of 6% over the prior year, driven by the increase in new clients and the expansion of existing clients.
• Subscription revenue of $39.9 million, an increase of 27% over the prior year, offsetting a 60% decrease in Perpetual license revenue year over year as our clients continue to transition to SaaS.
• Annual Recurring Revenue¹ as at December 31, 2022 of $46.4 million, a 26% increase from $36.8 million as at December 31, 2021.
• As of December 31, 2022, the Company's Net Revenue Retention Rate¹ was 110%.
• Gross profit of $54.8 million representing a Gross Margin of 75%, compared to $54.9 million in the prior year, representing a Gross Margin of 79%
• Adjusted EBITDA¹ loss of $24.9 million, compared to an Adjusted EBITDA¹ gain of $2.1 million in the year ended December 31, 2021.
• Net loss of $28.2 million, or a loss of $0.41 per basic and diluted share, compared to net loss of $6.5 million, or a loss of $0.24 per basic and diluted share, in the prior year.

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

Key Developments

In 2022, Copperleaf successfully expanded its rapid-start strategy with several new sales of the Copperleaf H2O solution into the water market. The Company also introduced the Copperleaf CNAIM solution, developed to meet the needs of electrical utilities seeking to adopt the best-practice asset risk modeling methodology developed by British Distribution Network Operators.

As a result of the Company's recent go-to-market investments, Copperleaf successfully expanded into new sectors including Metro Transit and Pharmaceuticals, with pilot projects ongoing in Mining and Air Services. Copperleaf also expanded geographically with projects initiated in Switzerland, France, Italy, Portugal, and the Middle East.

Throughout 2022, the Alliance Ecosystem continued to gain traction as our partners invested in expanding their Copperleaf practice areas. As trusted advisors to shared clients and prospects, the Company's partners played an increasingly important role by supporting the majority of sales in 2022 and contributing to the growth of the global pipeline.

The Copperleaf Community is active and growing.  In 2022, in addition to the Company's virtual global community summit held in May, three in-person community summits were introduced in each of Copperleaf's sales regions with attendees from over 95% of client accounts worldwide. The Company held 11 client-led working group sessions in the natural gas, water, and electricity industries, and nearly half of the Company's clients participated in client-led innovation with Copperleaf Labs. The Company also delivered four product releases over the year and released numerous new innovative features to the client base, including:

Q1: A new application for creating candidate projects from predictive analytics to inform strategy in Copperleaf Portfolio; automation of investment capture and cost estimation; new security features; and the first edition of the Copperleaf dashboard library, creating more value for clients throughout the entire planning process.

Q2: Multi-native currency support; new workflow visualization; and process automation for reviews and approvals.

Q3: New options for native Geographic Information System support and strategic dashboards for executive reporting; advanced analytical software for system level modelling; and turbocharged scenario analysis support delivering a four-fold increase in performance.

Q4: Optimize Ready which is machine-learning backed functionality that helps clients improve their investment quality and portfolio values by automatically analyzing investments and portfolios to spot issues and inconsistencies and provides recommended solutions; Geographic Information System integrations allowing users directly interact with their investment portfolio on a map; and interactive asset intervention modeling which allows Asset Managers to quickly and easily explore the impacts of shifting their asset interventions in time, allowing quick what-if analysis without waiting for complete asset management strategies to be created.

In 2022, Copperleaf filed three patent applications and was issued two patents on scenario planning and asset intervention bundling.

Throughout 2022, the increasing focus on ESG initiatives and the energy transition across the Company's target market sectors helped generate increased interest in Copperleaf solutions. As a result, ESG influenced nearly a third of Copperleaf's sales in 2022 and has contributed to the expansion of the global pipeline.

In Q3, Copperleaf joined the UN Global Compact (UNGC) which requires companies to communicate their progress annually. Additionally, Copperleaf will be making climate-related financial disclosures aligned with TCFD recommendations in the Company's 2022 annual report.

Q4 and Fiscal Year  2022 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, March 23, 2023, at 5:00 PM ET.

Date: March 23, 2023
Time: 5:00pm ET
Dial-In Number:   416-764-8659 or 1-888-664-6392
Webcast: https://app.webinar.net/1KPVOx6b0Zp
Replay:   416-764-8677 or 1-888-390-0541 (Available until March 30, 2023)
Replay Entry Code: 809214#

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.

¹ Non-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, gain on lease modification, foreign exchange loss (gain), current income tax expense, and IPO transaction related 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 December 31,			For the year ended December 31,
	2022 $	2021 $	Change %	2022 $	2021 $	Change %
	(in thousands, except percentages)
Net loss	(2,368)	149	NM	(28,202)	(6,524)	(332 %)
Depreciation and amortization	516	430	20 %	2,159	2,115	2 %
Share-based payments expense	1,292	875	48 %	4,402	2,306	91 %
Finance costs	239	186	28 %	1,013	786	29 %
Finance and other income	(1,124)	(148)	NM	(2,687)	(157)	NM
Gain on lease modification	-	-	-	-	(181)	100 %
Foreign exchange (gain) loss	(533)	21	NM	(1,493)	723	(307 %)
Current income tax (recovery) expense	(21)	148	(114 %)	(82)	247	(133 %)
IPO transaction related costs^1	-	660	(100 %)	-	2,753	(100 %)
Adjusted EBITDA	(1,999)	2,321	(186 %)	(24,890)	2,068	NM
NM – Not meaningful ^1IPO transaction -related costs include costs related to our IPO and consist of external consulting and professional fees that are non-recurring, would otherwise not have been incurred, and are not reflective of our underlying business.

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 years ended December 31,
		2022	2021
		$	$
Revenue		73,385	69,283
Cost of revenue		18,545	14,370
Gross profit		54,840	54,913
Operating expenses
Sales and marketing		34,942	22,805
Research and development		27,231	18,957
General and administrative		24,118	18,257
		86,291	60,019
Loss from operations		(31,451)	(5,106)
Other expenses (income)
Finance costs		1,013	786
Finance and other income		(2,687)	(157)
Gain on lease modification		-	(181)
Foreign exchange (gain) loss		(1,493)	723
		(3,167)	1,171
Loss before income taxes		(28,284)	(6,277)
Income taxes
Current income tax (recovery) expense		(82)	247
Net loss and comprehensive loss for the year		(28,202)	(6,524)
Net loss per share
Basic and diluted		(0.41)	(0.24)
Weighted average number of common shares outstanding,    basic and diluted		69,602,130	27,693,445

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

		December 31, 2022	December 31, 2021
		$	$
ASSETS
Current assets
Cash and cash equivalents		149,458	161,432
Accounts receivable		21,232	32,252
Investment tax credits receivable		-	1,408
Contract costs		852	719
Contract assets		4,337	2,199
Prepaid expenses		3,050	2,250
		178,929	200,260
Non-current assets
Deposit and prepaid expenses		702	81
Contract costs		1,566	1,262
Contract assets		458	-
Property and equipment		1,901	2,009
Intangible assets		1,407	1,107
Right-of-use assets		730	1,324
		6,764	5,783
TOTAL ASSETS		185,693	206,043
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities		12,232	13,182
Contract liabilities		28,098	20,849
Lease liabilities		1,039	1,032
		41,369	35,063
Non-current liabilities
Contract liabilities		11,038	14,728
Lease liabilities		259	1,234
		11,297	15,962
TOTAL LIABILITIES		52,666	51,025
SHAREHOLDERS' EQUITY
Share capital		183,778	181,279
Share-based payments reserve		8,625	4,913
Deficit		(59,376)	(31,174)
TOTAL SHAREHOLDERS' EQUITY		133,027	155,018
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		185,693	206,043

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

	Three months ended December 31,				For the year ended December 31,
	2022 $	2021 $	Change %		2022 $	2021 $	Change %
Subscription	11,301	8,546	32 %		39,909	31,399	27 %
Professional services and    custom software contracts	7,584	6,443	18 %		28,342	25,171	13 %
Perpetual and term-based software    licenses	285	6,809	(96 %)		5,134	12,713	(60 %)
	19,170	21,798	(12 %)		73,385	69,283	6 %

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", "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 l 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]