Copperleaf Announces Third Quarter 2022 Results

• Annual Recurring Revenue grows 27% YoY to $42.3 million
• Q3 Subscription revenue increases 22% YoY to $10.0 million and total revenue increases 7.5% YoY to $18.1 million

VANCOUVER, BC, Nov. 10, 2022 /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 nine months ended September 30, 2022. All amounts are expressed in Canadian dollars unless otherwise stated.

"Continued growth in subscription revenue, combined with 100% client retention, drove a 27% increase in Annual Recurring Revenue in the third quarter of 2022, highlighting the sustained demand for Copperleaf's solutions and continued strength in the decision analytics market. Copperleaf H₂O, our rapid start solution for the UK water market, continues to gain traction, with the addition of Portsmouth Water to our growing list of clients. Building on the success of H₂O, Copperleaf introduced a new rapid start solution for electricity distribution companies, to improve implementation times and reduce sales cycles for smaller regional utilities," said Judi Hess, CEO of Copperleaf. 

"Q3 marked one of Copperleaf's busiest quarters for sales lead generation to fuel pipeline growth. This elevated activity has been driven by our investment in expanding our salesforce, more in-person travel and events, as well as improved traction with our partner ecosystem," commented Paul Sakrzewski, President of Copperleaf.  

"We're pleased to have made significant top-of-funnel progress despite a weaker economic backdrop; however, lack of client resources and a tight labour market have continued to delay some client deployments and prospect sales cycles. These factors, in combination with the on-going SaaS transition, are expected to impact near-term perpetual revenue. Moving forward, we remain focused on prudently managing our expenses, while accelerating our path to profitability. With a deep sales pipeline, market leading products, a strong balance sheet, and marquee reference clients, we continue to be well-positioned to expand our leadership in the emerging decision analytics market." added Mr. Sakrzewski.

Third Quarter 2022 Financial Highlights
(All Capitalized terms which are not defined in this press release have the meanings ascribed to them in Management's Discussion and Analysis for the three and nine months ended September 30, 2022; Comparison periods in each case are the three months ended September 30, 2021, unless otherwise stated)

• Revenue of $18.1 million, an increase of 7.5% over Q3 2021, driven by the increase in new clients and expansion of existing clients.
• Annual Recurring Revenue¹ as at September 30, 2022, of $42.3 million, a 27% increase from $33.2 million as at September 30, 2021.
• Subscription revenue of $10.0 million (55% of total revenue), an increase of 22% from the prior year driven by our clients' continued transition from perpetual licenses to SaaS. This transition, in combination with deal timing, has resulted in a decrease in Perpetual and term-based software license revenue over the comparative period.
• Gross profit of $13.3 million, compared to $12.9 million in Q3 2021, representing a Gross Margin of 73%.
• Adjusted EBITDA¹ loss of $8.1 million, compared to $1.4 million in Q3 2021.
• Net loss of $7.5 million, or $0.11 per share, compared to a net loss of $3.3 million, or $0.20 per share, in Q3 2021.
• As at September 30, 2022, our Net Revenue Retention Rate¹ was 109%.
• As at September 30, 2022, Revenue Backlog¹ was $93.1 million, an 18% increase from $79.1 million as at September 30, 2021.
• Cash and cash equivalents of $147.1 million as at September 30, 2022, compared to $161.4 million as at December 31, 2021.

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

 
Key Developments

• Copperleaf's rapid start solution for the UK water market, Copperleaf H₂O, continued to deliver successfully in Q3, with the addition of Portsmouth Water.
• In Q3, Copperleaf held two of three planned in-person regional client community summits in London and Vancouver. These were the first in-person summits held by Copperleaf since May 2019, providing an opportunity to interact with clients, partners and prospects and share the Company's new products and roadmap. These summits provide invaluable business development opportunities by enabling in-depth discussions with clients and prospects to accelerate new sales opportunities and deepen partner relationships.
• During Q3, Copperleaf commenced three new projects focused on creating solutions to drive new environmental, social, and governance (ESG) investments, to deliver greenhouse gas reduction targets and other ESG related objectives. Copperleaf's ability to help companies operationalize their ESG goals is resulting in increased demand for solutions both in the Company's installed base and in new industry segments.
• Copperleaf expanded to new geographies in Q3 with the signing of three new pilot projects in France, Italy, and the Middle East, as a result of the Company's recent go-to-market investments.
• Copperleaf's first rail client went into production in Q3 which provides a beachhead in this new industry sector. Further new sector expansion has been made this quarter with pilot projects in both pharmaceuticals and mining.
• The Company released Copperleaf Suite version 22.3 which includes, among many other features, new options for native Geographic Information System support and strategic dashboards for executive reporting. Copperleaf's advanced analytical software for system level modelling went into production for the first time, and we turbocharged our scenario analysis support delivering a four-fold increase in performance. These new options will deliver high value to clients and create incremental revenue streams.
• There was continued strong engagement with Copperleaf Labs during Q3 where the Company collaborated on 63 separate client engagements, supporting innovation within the Copperleaf Community.
• In Q3 Copperleaf joined the UN Global Compact (UNCG) 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.

Q3 2022 Financial Results Conference Call Details

Judi Hess, Chief Executive Officer, Chris Allen, Chief Financial Officer, and Paul Sakrzewski, President, will host a conference call followed by a question-and-answer session today, November 10, 2022, at 5:00 PM ET.

Date:                           November 10, 2022
Time:                           5:00 PM ET
Dial-In Number:         416-764-8659 or 1-888-664-6392
Webcast:                    https://app.webinar.net/nYyw205Mxr3
Replay:                        416-764-8677 or 1-888-390-0541 (Available until November 17, 2022
Replay Entry Code:    472685#

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, 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 table reconciles Adjusted EBITDA to net loss for the periods indicated:

	Three months ended September 30,			Nine months ended September 30,
	2022 $	2021 $	Change %	2022 $	2021 $	Change %
Net loss	(7,501,523)	(3,281,416)	(129 %)	(25,832,903)	(6,674,784)	(287 %)
Depreciation and amortization	490,313	547,734	(10 %)	1,643,056	1,685,183	(2 %)
Share-based payments expense	1,194,127	426,768	180 %	3,109,572	1,431,997	117 %
Finance costs	238,666	186,874	28 %	774,132	600,042	29 %
Finance and other income	(860,341)	(738)	NM	(1,562,560)	(8,748)	NM
Gain on lease modification	-	-	0 %	-	(181,372)	100 %
Foreign exchange (gain) loss	(1,434,152)	(349,639)	(310 %)	(959,858)	701,814	(237 %)
Current income tax (recovery) expense	(194,947)	(92,762)	(110 %)	(60,639)	98,782	(161 %)
IPO transaction related costs^1	-	1,143,600	(100 %)	-	2,092,582	(100 %)
Adjusted EBITDA	(8,067,857)	(1,419,579)	(468 %)	(22,889,200)	(254,504)	(8894 %)

NM – Not meaningful

¹ IPO 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 Canadian Dollars)

		For the three months ended September 30,		For the nine months ended September 30,
		2022	2021	2022	2021
		$	$	$	$
Revenue		18,061,389	16,802,972	54,214,516	47,485,285
Cost of revenue		4,786,536	3,934,755	14,024,717	9,861,210
Gross profit		13,274,853	12,868,217	40,189,799	37,624,075
Operating expenses
Sales and marketing		9,640,173	6,384,224	27,666,396	16,125,910
Research and development		6,797,429	5,268,994	20,822,027	14,534,271
General and administrative		6,589,548	4,752,680	19,343,204	12,428,160
		23,027,150	16,405,898	67,831,627	43,088,341
Loss from operations		(9,752,297)	(3,537,681)	(27,641,828)	(5,464,266)
Other expense (income)
Finance costs		238,666	186,874	774,132	600,042
Finance and other income		(860,341)	(738)	(1,562,560)	(8,748)
Gain on lease modification		-	-	-	(181,372)
Foreign exchange (gain) loss		(1,434,152)	(349,639)	(959,858)	701,814
		(2,055,827)	(163,503)	(1,748,286)	1,111,736
Loss before income taxes		(7,696,470)	(3,374,178)	(25,893,542)	(6,576,002)
Income taxes
Current income tax (recovery) expense		(194,947)	(92,762)	(60,639)	98,782
Net loss and comprehensive loss for the period		(7,501,523)	(3,281,416)	(25,832,903)	(6,674,784)
Net loss per share
Basic and diluted		(0.11)	(0.20)	(0.37)	(0.41)
Weighted average number of common shares outstanding, basic and diluted		69,456,304	16,781,900	69,316,506	16,428,684

Consolidated Statements of Financial Position
(expressed in Canadian Dollars)

		September 30, 2022	December 31, 2021
		$	$
ASSETS
Current assets
Cash and cash equivalents		147,139,916	161,432,039
Accounts receivable		15,515,721	32,251,577
Investment tax credits receivable		-	1,407,539
Contract costs		754,481	719,263
Contract assets		5,890,645	2,199,394
Prepaid expenses		2,527,781	2,250,216
		171,828,544	200,260,028
Non-current assets
Deposit		47,085	81,455
Prepaid expenses		725,308	-
Contract costs		1,339,651	1,261,877
Property and equipment		2,133,862	2,009,533
Intangible assets		1,408,811	1,105,736
Right-of-use assets		885,182	1,323,751
		6,539,899	5,782,352
TOTAL ASSETS		178,368,443	206,042,380
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities		14,952,087	13,182,045
Contract liabilities		16,642,500	20,849,117
Lease liabilities		1,064,870	1,031,531
		32,659,457	35,062,693
Non-current liabilities
Contract liabilities		11,551,218	14,727,655
Lease liabilities		492,118	1,234,024
		12,043,336	15,961,679
TOTAL LIABILITIES		44,702,793	51,024,372
SHAREHOLDERS' EQUITY
Share capital		183,190,109	181,279,367
Share-based payments reserve		7,482,321	4,912,518
Deficit		(57,006,780)	(31,173,877)
TOTAL SHAREHOLDERS' EQUITY		133,665,650	155,018,008
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		178,368,443	206,042,380

Disaggregation of revenue
	For the three months ended		For the nine months ended
	September 30,		September 30,
	2022	2021	2022	2021
	$	$	$	$
Subscription ^(1)	10,015,948	8,211,319	28,607,670	22,853,746
Professional services and custom     software contracts ^(2)	7,639,545	7,924,758	20,758,193	18,727,731
Perpetual and term-based software     licenses ^(3)	405,896	666,895	4,848,653	5,903,808
	18,061,389	16,802,972	54,214,516	47,485,285

(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", "expects" or "does not expect", "is expected", "an opportunity exists", "budget", "scheduled", "estimates", "outlook", "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", "will be taken", "occur" or "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 2021 Annual Information Form ("AIF") under "Risk Factors". A copy of the 2021 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]