Copperleaf Announces Second Quarter 2023 Results

• Annual Recurring Revenue increases 26% YoY to $51.2 million
• Subscription Revenue grows 23% YoY to $11.7 million

VANCOUVER, BC, Aug. 3, 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 and six months ended June 30, 2023. All amounts are expressed in Canadian dollars unless otherwise stated.

"Copperleaf delivered a 26% YoY increase in Annual Recurring Revenue, and a 23% YoY increase in subscription revenue in the second quarter. This represents material year-over-year growth despite uncertain market conditions persisting in most of our geographies. Our ability to unlock value, through improved capital efficiency and increased alignment of resource allocation with our client's strategy is a huge benefit under constrained conditions. These results are a great indication that we are gaining traction in articulating that value to clients." said Paul Sakrzewski, CEO of Copperleaf.

"In the second quarter, Copperleaf welcomed Società Gasdotti Italia, Italy's second largest gas transmission operator, as its first client in Italy. Additionally, Copperleaf secured its first client in Ireland and its first Oil and Gas client in Europe, validating our strategic investments in these regions and our deliberate, programmatic approach to introducing Copperleaf's solutions to new industries," added Mr. Sakrzewski. "Momentum also continues to build across our Alliance Ecosystem, and following our announcement in Q1, we have now achieved Premium Certification and are live on the SAP store, marking the onset of joint go-to-market activities between Copperleaf and SAP."

"For the remainder of 2023, we will remain focused on executing our go-to-market strategy and further strengthening our global salesforce, while prudently managing our expenses. The maturation of our global go-to-market approach, supported by increasing partner traction, will drive ARR and pipeline growth in the second half of the year. With continued innovation in our market leading solutions, a strong balance sheet, and a growing client base, we are poised to extend our leadership position and drive future growth." Mr. Sakrzewski concluded.

Second 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 and six months ended June 30, 2023; Comparison periods in each case are the three months ended June 30, 2022, unless otherwise stated)

• Revenue of $18.5 million, a decrease of 10% compared to Q2 2022, driven primarily by a 97% decrease in perpetual and term-based software license revenue over Q2 2022.     
• Annual Recurring Revenue¹ as at June 30, 2023 of $51.2 million, a 26% increase from $40.6 million as at June 30, 2022.
• Subscription revenue of $11.7 million, an increase of 23% over Q2 2022.
• Gross profit of $12.8 million representing a Gross margin of 69%, a 19% decrease from $15.7 million and a Gross margin of 76% in Q2 2022. Gross margin decreased temporarily primarily due to a decrease in perpetual and term-based software license revenue, an increase in subcontractor costs for the quarter, plus increased headcount and product support related to our growing client base.
• Adjusted EBITDA¹ loss of $10.6 million, compared to Adjusted EBITDA¹ loss of $5.8 million in Q2 2022.
• Net loss of $12.6 million, or a loss of $0.18 per basic and diluted share, compared to a net loss of $7.4 million, or a loss of $0.11 per basic and diluted share, in Q2 2022.
• As of June 30, 2023, the Company's Net Revenue Retention Rate¹ was 111% compared to 107% as of June 30, 2022
• As of June 30, 2023, Copperleaf's Revenue Backlog¹ grew 16% to $107.7 million compared to $93.0 million, as of June 30, 2022. 
• Strong balance sheet with cash and cash equivalents of $62 million, short-term investments of $55 million, and long-term investments of $20 million as at June 30, 2023.

Key Developments

• In Q2, Copperleaf made further progress on geographic and industry sector expansion, closing its first clients in Ireland, Italy, and its first Oil and Gas client in Europe.
• Further to the public announcement in Q1 of Copperleaf and SAP entering into an Endorsed Apps agreement, the Company has now achieved Premium Certification and is live on the SAP store. This milestone means that Copperleaf has passed stringent security and interoperability requirements enabling organizations to add Copperleaf to their SAP ecosystem with confidence. Achievement of Premium Certification and inclusion on the store is the trigger for the commencement of joint go-to-market activities between Copperleaf and SAP.
• During the quarter, the Company released its inaugural Environmental, Social and Governance (ESG) Report for the year ended December 31, 2022. The ESG Report includes responses to the recommendations outlined in the Task Force on Climate Related Disclosures (TCFD) framework and shares the Company's progress and plans to address important ESG issues, in addition to showcasing Copperleaf's internal and external ESG impact.
• The Company convened the first in-person Global Copperleaf Summit since 2019 in Vancouver, exceeding client attendance goals and record attendance from partners.
• In Q2, Copperleaf saw growing engagement in Copperleaf Community working groups, with the introduction of the H2O water working group and held five working group meetings in the quarter.
• During Q2, Copperleaf released version 23.2 of its product suite which included numerous new features comprising:
• 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.
• 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.

_______________________________

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

Q2 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, August 3, 2023, at 5:00 PM ET.

Date: August 3, 2023
Time: 5:00pm ET
Dial-In Number: 416-764-8659 or 1-888-664-6392
Webcast: https://app.webinar.net/XnPBaNd830V
Replay: 416-764-8677 or 1-888-390-0541 (Available until August 10, 2023)
Replay Entry Code: 264037#

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. 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 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 June 30,			Six months ended June 30,
	(in thousands, except percentages)
	2023 $	2022 $	Change %	2023 $	2022 $	Change %
Net loss	(12,606)	(7,426)	(70 %)	(24,396)	(18,331)	(33 %)
Depreciation and amortization	475	717	(34 %)	950	1,153	(18 %)
Share-based payments expense ^1	1,326	1,176	13 %	2,959	1,915	55 %
Finance costs	298	262	14 %	587	535	10 %
Finance and other income	(1,515)	(432)	(251 %)	(2,872)	(702)	(309 %)
Foreign exchange (gain) loss	1,428	(263)	(643 %)	1,383	474	192 %
Current income tax expense	43	123	(65 %)	98	134	(27 %)
CEO transition expenses ^1	-	-	-	695	-	100 %
Adjusted EBITDA	(10,551)	(5,843)	(81 %)	(20,596)	(14,822)	(39 %)

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)

		Three months ended June 30,		Six months ended June 30,
		2023	2022	2023	2022
		$	$	$	$
Revenue		18,504	20,584	38,470	36,153
Cost of revenue		5,733	4,846	12,041	9,238
Gross profit		12,771	15,738	26,429	26,915
Operating expenses
Sales and marketing		9,921	9,461	20,320	18,026
Research and development		9,076	7,376	18,739	14,025
General and administrative		6,126	6,637	12,570	12,754
		25,123	23,474	51,629	44,805
Loss from operations		(12,352)	(7,736)	(25,200)	(17,890)
Other expense (income)
Finance costs		298	262	587	535
Finance and other income		(1,515)	(432)	(2,872)	(702)
Foreign exchange loss (gain)		1,428	(263)	1,383	474
		211	(433)	(902)	307
Loss before income taxes		(12,563)	(7,303)	(24,298)	(18,197)
Income taxes
Current income tax expense		43	123	98	134
Net loss and comprehensive loss for the period		(12,606)	(7,426)	(24,396)	(18,331)
Net loss per share basic and diluted		(0.18)	(0.11)	(0.34)	(0.27)
Weighted average number of common shares    outstanding,    Basic and diluted		71,998,377	69,368,649	71,453,274	68,909,651

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

		June 30, 2023	December 31, 2022
		$	$
ASSETS
Current assets
Cash and cash equivalents		61,983	149,458
Short-term investments		54,942	-
Accounts receivable		12,558	21,232
Contract costs		983	852
Contract assets		2,449	4,337
Prepaid expenses		3,484	3,050
		136,399	178,929
Non-current assets
Long-term investments		20,000	-
Deposit and prepaid expenses		463	702
Contract costs		1,464	1,566
Contract assets		-	458
Property and equipment		1,466	1,901
Intangible assets		1,271	1,407
Right-of-use assets		2,258	730
		26,922	6,764
TOTAL ASSETS		163,321	185,693
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities		12,392	12,232
Contract liabilities		25,812	28,098
Lease liabilities		661	1,039
		38,865	41,369
Non-current liabilities
Contract liabilities		9,488	11,038
Lease liabilities		1,997	259
		11,485	11,297
TOTAL LIABILITIES		50,350	52,666
SHAREHOLDERS' EQUITY
Share capital		186,738	183,778
Share-based payments reserve		10,005	8,625
Deficit		(83,772)	(59,376)
TOTAL SHAREHOLDERS' EQUITY		112,971	133,027
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		163,321	185,693

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

	Three months ended June 30,			Six months ended June 30,
	2023 $	2022 $	Change %	2023 $	2022 $	Change %
	(in thousands, except percentages)
Subscription^1	11,688	9,510	23 %	22,964	18,592	24 %
Professional services and custom     software contracts ^2	6,717	7,121	(6 %)	13,650	13,119	4 %
Perpetual and term-based     software licenses ^3	99	3,953	(97 %)	1,856	4,442	(58 %)
	18,504	20,584	(10 %)	38,470	36,153	6 %

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 (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/

For further information:
James Bowen, CFA
416-519-9442
[email protected] 

Source: Copperleaf Technologies Inc. CPLF-IR

SOURCE CopperLeaf Technologies Inc.