Copperleaf Announces Fourth Quarter and Fiscal Year 2023 Results

• Annual Recurring Revenue increases 30% YoY to $60.2 million
• Subscription Revenue grows 21% YoY to $13.6 million in the fourth quarter
• Record backlog of $139.5 million, an increase of 30% YoY

VANCOUVER, BC, March 12, 2024 /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, 2023. All amounts are expressed in Canadian dollars unless otherwise stated.

Paul Sakrzewski, CEO of Copperleaf commented, "Copperleaf's ability to generate substantial client value drove sustained demand for our solutions in 2023. This was highlighted by our strong financial performance during the fourth quarter where Copperleaf delivered a 30% YoY increase in Annual Recurring Revenue and a 21% YoY increase in subscription revenue.  Additionally, we ended the quarter with a record backlog. These results are a testament to our improved scalability, efficiency of our sales team, and the progress we have made to enhance our go-to-market initiatives, despite challenging market conditions."  

"Furthermore, during 2023 our Partner and Alliance Ecosystem continued to gain traction as Copperleaf received Premium Certification from SAP, deepened its global relationship with Accenture, and entered into a strategic alliance with Siemens.  These partnerships are resulting in material incremental pipeline for 2024 and beyond," continued Mr. Sakrzewski.

"As a result of our continuous commitment to product innovation, our refreshed go-to-market model and increasing partner traction, we expect continuing robust ARR and pipeline growth in 2024 with our traditional Q4 weighting. These factors, along with our accelerating revenue growth and disciplined approach to managing costs, position us to make material progress back towards profitability" Mr. Sakrzewski concluded.

Fourth 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 fiscal year ended December 31, 2023; Comparison period is to the fourth quarter ended December 31, 2022, unless otherwise stated)

• Revenue of $21.2 million, an increase of 11% compared to Q4 2022, primarily driven by an increase in subscription revenue.
• Annual Recurring Revenue¹ as at December 31, 2023 of $60.2 million, a 30% increase from $46.4 million as at December 31, 2022.
• Subscription revenue of $13.6 million, an increase of 21% over Q4 2022.
• Gross profit of $15.0 million representing a gross margin of 71%, a 2% increase from $14.7 million and a gross margin of 76% in Q4 2022. Gross margin decreased temporarily primarily due to an increase in subcontractor costs and increased headcount to support our growing client base.
• Adjusted EBITDA[1] loss of $5.0 million, compared to Adjusted EBITDA¹ loss of $2.0 million in Q4 2022.
• Net loss of $5.5 million, or a loss of $0.08 per basic and diluted share, compared to a net loss of $2.4 million, or a loss of $0.03 per basic and diluted share, in Q4 2022.
• As of December 31, 2023, Copperleaf's Revenue Backlog¹ grew 30% to $139.5 million compared to $107.3 million, as of December 31, 2022.
• Strong balance sheet with cash and cash equivalents of $34.1 million, short-term investments of $82.3 million, and long-term investments of $10.0 million as at December 31, 2023.

Fiscal Year 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 fiscal year ended December 31, 2023; Comparison period is the year ended December 31, 2022, unless otherwise stated)

• Record revenue of $79.6 million, an increase of 8% over the prior year, driven by an increase in subscription revenue that was partially offset by a decrease in perpetual and term-based licenses and professional services revenue.
• Subscription revenue of $49.6 million, an increase of 24% over the prior year, offsetting a 37% decrease in perpetual and term-based license revenue year over year as our business continues to transition to SaaS.
• Annual Recurring Revenue¹ as at December 31, 2023 of $60.2 million, a 30% increase from $46.4 million as at December 31, 2022.
• As of December 31, 2023, the Company's Net Revenue Retention Rate¹ was 111% compared to 110% as of December 31, 2022.
• Gross profit of $55.9 million representing a gross margin of 70%, compared to $54.8 million in the prior year, representing a gross margin of 75%. Gross margin decreased temporarily primarily due to an increase in subcontractor costs, increased headcount to support our growing client base, and a lower mix of perpetual and term-based software license revenue.
• Adjusted EBITDA¹ loss of $31.5 million, compared to an Adjusted EBITDA¹ loss of $24.9 million in the year ended December 31, 2022.
• Net loss of $35.2 million, or a loss of $0.49 per basic and diluted share, compared to net loss of $28.2 million, or a loss of $0.41 per basic and diluted share, in the prior year. Net loss increase is primarily due to more personnel supporting the Company's growth strategy, increased incentive compensation, and the continued transition to SaaS.

______________________________

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

Key Developments

• In 2023 we completed the successful transition of our CEO and 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 Industries, Partners, and Value Engineering to better support the global go-to-market teams. Copperleaf's strategic go-to-market investments have accelerated lead generation and adoption in new industries and geographies. During 2023, the Company expanded into the ports industry, airports, upstream Oil & Gas with its first Oil Sands client, its first Oil & Gas client in Europe, first water client in Australia with Sydney Water, and first transit agency in the USA.
• Copperleaf also closed its first clients in France, Ireland, Italy, and the Middle East, as well as the signing of one of Brazil's largest integrated power utilities, representing another important geographic expansion while establishing our beach-head in Brazil.
• The Partner and Alliance Ecosystem continued to gain traction during 2023 as the Company's partners invested in expanding their Copperleaf practice areas. Copperleaf signed an Endorsed Apps initiative agreement with SAP and also received Premium Certification which triggered the commencement of cooperative go-to-market activities resulting in material incremental pipeline for 2024 and beyond, across all regions.
• 2023 also saw the deepening of Copperleaf's global relationship with Accenture as they assigned a Global Partner Director to programmatically coordinate joint go-to-market activities across all regions.
• In Q4, Copperleaf announced a strategic alliance with Siemens Smart Infrastructure, a leading provider of grid planning, operations and maintenance software, and a domain expert in power systems. Under this agreement, Copperleaf and Siemens will integrate technical planning with value-based investment planning to help utilities, including transmission system operators (TSOs) and distribution system operators (DSOs), make investment decisions that deliver the highest business value.
• The Company convened the first in-person Global Copperleaf Summit since 2019 in Vancouver, exceeding client attendance goals and record attendance from partners.
• Technology analysts continue to recognise Copperleaf as best-of-breed in our sector. Verdantix published its inaugural "Green Quadrant" report on Asset Investment Planning software in 2023 with Copperleaf positioned as the clear leader.
• The Company delivered four product releases over the year and released numerous new innovative features to the client base, including:
  • Q1: 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.
  • Q2: Interactive GIS Experience, a new chargeable option where users can improve their decision making and storytelling on their asset management plans by directly visualizing their Copperleaf Asset results in ESRI's ArcGIS (Geographic Information System) system; a new enterprise-standard SCIM (System for Cross-domain Identity Management) API which enables automatic management of users and groups directly through user management systems such as Azure Active Directory or OKTA.
  • Q3: Two new methodologies added to the Copperleaf Value Model Library (CVML); visualization of Predictive Analytics asset strategies in our Interactive GIS Experience option; and significant enhancements to the popular Dashboard Library which empowers clients to communicate their value-based decision outcomes more effectively.
  • Q4: Added improved scenario organization for managing large numbers of scenarios; ability to create investments in Portfolio directly from Predictive Analytics; and added new ESG-related CVML models, covering GHG Scope 1, 2 and 3 emissions.
• In 2023, Copperleaf was granted a US patent for an advanced software optimizer which enhances the Company's comprehensive asset management capabilities to accommodate large numbers of assets, across all stages of an asset's lifecycle. This patent highlights Copperleaf's dedication to developing pioneering solutions that facilitate better investment decisions.
• During 2023, the Company released its inaugural Environmental, Social and Governance (ESG) Report for the year ended December 31, 2022. The ESG Report included responses to the recommendations outlined by the Task Force on Climate Related Disclosures (TCFD) and shared the Company's progress and plans to address important ESG issues, in addition to showcasing Copperleaf's internal and external ESG impact.
• Copperleaf also submitted its United Nations Global Compact (UNGC) Communication on Progress (CoP). As a voluntary participant of the UNGC the Company has committed to conducting business responsibly and continues to incorporate the UNGC's Ten Principles and the UN Sustainable Development Goals into its strategy and operations.

Q4 2023 Financial Results Conference Call Details

Paul Sakrzewski, Chief Executive Officer and Chris Allen, Chief Financial and Chief Operating Officer, will host a conference call followed by a question-and-answer session today, March 12, 2024, at 5:00 PM ET.

Date: March 12, 2024
Time: 5:00pm ET
Dial-In Number: 416-764-8659 or 1-888-664-6392
Webcast: https://app.webinar.net/gyGvJy0BRb3
Replay: 416-764-8677 or 1-888-390-0541 (Available until March 19, 2024)
Replay Entry Code: 528651#

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 ARR 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. ARR provides us with visibility for consistent and predictable growth to our cash flows. Our steady year over year revenue growth coupled with increasing ARR indicates the continued strength in the expansion of our business and will continue to be our target on a go-forward basis.

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 ARR attributable to this same group of clients at the end of the period by the ARR at the beginning of the period. By implication, this ratio excludes any ARR 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. Roughly 50% to 75% of our expected annual revenue is recognized from client contracts that are in place at the beginning of the year; however, this percentage will vary year over year and we expect this percentage to generally increase going forward as our new clients increasingly adopt 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 (recovery), 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 table reconciles Adjusted EBITDA to net loss for the periods indicated:

	Three months ended December 31,			For the year ended December 31,
	(in thousands, except percentages)
	2023 $	2022 $	Change %	2023 $	2022 $	Change %
Net loss	(5,518)	(2,368)	(133 %)	(35,151)	(28,202)	(25 %)
Depreciation and amortization	469	516	(9 %)	1,882	2,159	(13 %)
Share-based payments expense ^1	1,035	1,292	(20 %)	4,987	4,402	13 %
Finance costs	253	239	6 %	1,114	1,013	10 %
Finance and other income	(1,430)	(1,124)	(27 %)	(5,773)	(2,687)	(115 %)
Foreign exchange loss (gain)	141	(533)	(126 %)	575	(1,493)	(139 %)
Current income tax expense (recovery)	14	(21)	(167 %)	173	(82)	(311 %)
CEO transition expenses ^1	-	-	-	695	-	100 %
Adjusted EBITDA	(5,036)	(1,999)	(152 %)	(31,498)	(24,890)	(27 %)

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 years ended December 31,
		2023	2022
		$	$
Revenue		79,576	73,385
Cost of revenue		23,679	18,545
Gross profit		55,897	54,840
Operating expenses
Sales and marketing		38,114	34,942
Research and development		33,433	27,231
General and administrative		23,412	24,118
		94,959	86,291
Loss from operations		(39,062)	(31,451)
Other expenses (income)
Finance costs		1,114	1,013
Finance and other income		(5,773)	(2,687)
Foreign exchange loss (gain)		575	(1,493)
		(4,084)	(3,167)
Loss before income taxes		(34,978)	(28,284)
Income taxes
Current income tax expense (recovery)		173	(82)
Net loss and comprehensive loss for the year		(35,151)	(28,202)
Net loss per share
Basic and diluted		(0.49)	(0.41)
Weighted average number of common shares outstanding,    Basic and diluted		72,223,276	69,602,130

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

		December 31, 2023	December 31, 2022
		$	$
ASSETS
Current assets
Cash and cash equivalents		34,113	149,458
Short-term investments		82,258	-
Accounts receivable		27,344	21,232
Contract costs		1,336	852
Contract assets		4,179	4,337
Prepaid expenses		3,650	3,050
		152,880	178,929
Non-current assets
Long-term investments		10,000	-
Deposit and prepaid expenses		434	702
Contract costs		1,844	1,566
Contract assets		-	458
Property and equipment		1,111	1,901
Intangible assets		1,158	1,407
Right-of-use assets		2,012	730
Other receivables		306	-
		16,865	6,764
TOTAL ASSETS		169,745	185,693
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities		16,738	12,232
Contract liabilities		36,879	28,098
Lease liabilities		354	1,039
		53,971	41,369
Non-current liabilities
Contract liabilities		8,622	11,038
Lease liabilities		1,929	259
		10,551	11,297
TOTAL LIABILITIES		64,522	52,666
SHAREHOLDERS' EQUITY
Share capital		189,474	183,778
Share-based payments reserve		10,276	8,625
Deficit		(94,527)	(59,376)
TOTAL SHAREHOLDERS' EQUITY		105,223	133,027
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		169,745	185,693

Disaggregation of Revenue
(expressed in thousands of Canadian Dollars)

	Three months ended December 31,			For the year ended December 31,
	2023 $	2022 $	Change %	2023 $	2022 $	Change %
	(in thousands, except percentages)
Subscription^1	13,619	11,301	21 %	49,562	39,909	24 %
Professional services and custom    software contracts ^2	7,047	7,584	(7 %)	26,794	28,342	(5 %)
Perpetual and term-based    software licenses ^3	552	286	93 %	3,220	5,134	(37 %)
	21,218	19,171	11 %	79,576	73,385	8 %

¹ Subscriptions represent revenue from 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 controlled.

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 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 2023 Annual Information Form ("AIF") under "Risk Factors". A copy of the 2023 AIF can be accessed under our profile on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedarplus.ca. 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.

About Copperleaf:

Copperleaf (TSX:CPLF) 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 industry-leading products and our commitment to providing extraordinary experiences, shaped by people who care deeply and partnerships that stand the test of time. Copperleaf is actively involved in shaping and implementing global industry standards and sustainability principles through our participation in the United Nations Global Compact, the Institute of Asset Management, and other organizations. 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]