FY18 Half Year Results
Sydney, 5th February 2018
rhipe Limited today provided its FY18 half-year financial results and operational highlights for the period.
Review of operations
The results presented in these financial statements reflect the operations of rhipe Limited and all subsidiaries (together the “Group”) for the six months from 1 July 2017 to 31 December 2017. The results for the comparative period reflect the operations of rhipe Limited and all its subsidiaries.
For the half year ended 31 December 2017, rhipe Group delivered strong revenue growth of 22% which combined with modest operating expense growth of 7%, produced operating profit of $3.1m, up 117% and reported EBITDA of $2.8m, up over 300% compared to the previous corresponding period (‘pcp’). Net profit after tax increased to $1.1m from a broadly break-even position in the pcp.
Group revenue was $88.3m for the period, up 22% or $16m compared to the prior year comparative period. The significant majority of rhipe’s revenue growth during the half year ended 31 December 2017 is in the form of monthly subscription based licensing revenue generated from more than 2,500 technology service provider customers across Asia Pacific. rhipe’s Licensing revenue was $85m for the six months to 31 December 2017, up 21% year on year. Revenue from our services and support activities was $3.3m for the period, up 37% on the pcp driven by growth in our support activities.
Gross profit for the period was $15.7m up $2.5m or 19% for the period with Group gross margin being 17.8% compared to 18.3% in the pcp.
Operating profit, which represents reported EBITDA excluding non-cash share based payments, FX gains or losses, non-recurring due diligence costs and non-recurring one-off costs of $0.4m (pcp $0.8m), was up 117% to $3.1m compared to the prior year. Group reported EBITDA for the six months ended 31 December 2017 has increased by 304% to $3.1m from $0.7m pcp.
rhipe delivered a positive net profit after tax of $1.1m compared to a net profit after tax of $15k in the prior year comparative period.
The Company’s strong operating profit and net profit after tax improvement for the six months to 31 December 2017 follows a period of significant investment in a number of key strategic initiatives including an expansion in operations across South East Asia and Korea, investment in the Indirect Microsoft Cloud Solutions Provider (CSP) program for Office365, and an investment in its operations to support the expansion of Microsoft’s Public Cloud Infrastructure platform, Microsoft Azure. These investments have under pinned the strong growth in revenue and gross profit for the Company whilst modest growth in operating expenses has resulted in the delivery of improved operating profit. The Company continues to invest in these future growth areas to ensure we maintain our competitiveness in the rapidly expanding cloud industry.
Key operating highlights in the six months to 31 December 2017 included:
- Licensing revenue growth of 21% year on year driven by strong growth in Office365 and Azure revenue (see below) and in our South-East Asia operations of 85% compared to the pcp;
- Strong growth in CSP operations (Office365 and Azure) with revenue in excess of $13m in the 6 months to 31 December 2017 compared to $5m in the pcp, with a current annualised run-rate revenue of more than $31m. At 31 December 2017 rhipe had over 186,000 CSP O365 seats compared to 126,000 at 30 June 2017.
- Licensing gross profit grew 19% year on year to $13.2m for the period with gross margin remaining broadly stable at around 15.5%;
- rhipe Solutions, our services and support activities, increased its revenue by 37% to $3.3m and its gross profit by 14% to $2.6m following the restructure of the business in the prior financial year and expansion of its technical support offering;
- Group operating expenses increased by a modest 7% year on year due to careful cost management and allocation of spend to growth areas;
- Investment of $0.3m in the six months to 31 December 2017 in our new operations in South Korea following award of Microsoft SPLA and CSP licences for South Korea in early 2017, a market which is second only in size to Australia in Asia Pacific (excluding Japan) for SPLA. We signed our first customers in Korea in the second quarter of FY18.
- Continued investment in rhipe’s Platform for Reporting and Subscription Management (‘PRISM’) of $1.3m compared to $0.7m in pcp;
- Cash at 31 December 2017 was $17.3m up $5.9m or 52% compared to 31 December 2016 and after the share buyback of $2.3m (see below) and PRISM investment of $1.3m. For the six months to 31 December 2017 net operating cashflow was $0.6m compared to a net operating cash outflow of $2.1m in the pcp; and
- rhipe continues to evaluate new geographic markets and also new vendor licensing relationships with a number of smaller complementary software vendors to allow strategic bundled offers to our customer base. For example, we announced in November a new partnership with Symantec, a global leader in security software.
In August 2017, rhipe Group announced an on-market share buyback program and by the end of 2017 rhipe had acquired 3.4m or 2.5% of its own ordinary shares from the market. Total cash spent on the share buyback program up to 31 December 2017 was $2.3m at an average buy back price of 67 cents.
Earnings per share for the six months to 31 December 2017 was AUD 0.79 cents per share versus AUD 0.01 cents in pcp.
As a result of the continued improvement in operating results and a strong cash position the Board of rhipe is pleased to announce a maiden fully franked interim dividend of AUD 0.5 cents per share.
rhipe’s overall financial performance was strong in the six months to 31 December 2017 and is consistent with our FY18 operating profit guidance of +$7m which we reaffirm.
2017 Annual General Meeting
2 November 2017
Good morning and welcome to the rhipe Limited Annual General Meeting.
I am joined here by all directors and a number of executives including Dominic O’Hanlon, Chief Executive Officer and Mark McLellan, Chief Financial Officer.
The 2017 financial year marked a significant year where rhipe delivered profitable earnings with Reported EBITDA up 167% and Operating Profit up $5m on the prior comparative period (pcp).
Credit certainly goes to the entire staff led by a focused and dedicated executive team on delivering a very strong second half of FY17 and meeting stated financial objectives. The board thanks all the employees of rhipe for working tirelessly to deliver these results from a revenue base of more than $157m for the twelve months (up 15% pcp).
This strategy to grow profitable subscription based revenue streams in cloud licensing programs in all key Asia Pacific markets remains at the core of the value proposition. For example, South East Asia delivered strong revenue growth of 70% in FY17.
Pleasingly, I am happy to report that in the 2017 year, rhipe capitalized on its market leading position in public cloud programs with Microsoft. From launch in July 2015, this public cloud business has already grown rapidly in its second full year and is now delivering annual run rate revenue of more than $22m at 30 June 2017 ($7m pcp).
In line with expectations, the business delivered positive cash for the year, ending with a cash balance of $19.8m at 30 June 2017 (up from $13.8m at 30 June 2016). The strong cash position and the board’s confidence in rhipe’s future growth enabled the board to announce a share buy-back which commenced in Q1 of FY18. As at 1 November 2018, the Company had bought back ~3.3m shares for ~$2.2m.
On a foundation created 14 years ago and a solid finish to the 2017 financial year, rhipe entered the 2018 financial year in a strong trading position.
With a focus on both program and geographic growth, rhipe has leveraged its ongoing monthly subscription revenues to deliver a solid start to 2018 which is outlined by Dominic in the AGM shareholder presentation.
2018 Quarter 1 ending 30 September 2018 trading update is as follows:
- Group Revenue of +24% of $42m
- Group GM of +27% of $8m
- Group Operating Profit of $1.2m (+$1.6m pcp)
- Group Reported EBITDA of $1.1m (+$1.7m pcp)
The board is extremely pleased with the executive leadership group and entire staffing team and feels confident in their ability to continue to deliver positive licensing subscription growth and earnings from its leading market position in Asia Pacific.
We would like to thank our Vendor Partners for their continued support of rhipe and helping us to meet our mutual growth objectives. I also thank all our shareholders for their continued support.
I will now handover to Dominic O’Hanlon for the CEO Address then we will return to the formal part of the AGM’s various resolutions as set out in the Notice of Annual General Meeting.
rhipe Partners with Symantec to Secure the Cloud Generation
8 November, 2017
The Board of rhipe is pleased to announce a partnership with Symantec, the world’s leading cyber security company, to offer Symantec’s Endpoint Protection Cloud solution, an industry-leading Security As A Service (SAAS), to protect small and mid-sized businesses (SMBs) from targeted attacks and ransomware.
Under this partnership, rhipe will offer Symantec’s Endpoint Protection Cloud solution across its extensive network of 2,000+ partners in Australia, New Zealand and Asia.
With the adoption of cloud computing and mobile technology, SMBs are working harder to protect employees across a diverse set of devices, while at the same time securing against new cyber threats. Symantec Endpoint Protection Cloud provides a market leading single cloud-based console for endpoint protection, management, mobility and encryption, bringing users a solution that simplifies management and reduces total cost of operation, typical pain points for SMBs.
“Symantec is the global leader in security technology innovation, and is a leader in endpoint security,” says Dominic O’Hanlon, rhipe’s Chief Executive Officer. “We are pleased to bring Symantec into our vendor portfolio. This solution offers comprehensive capabilities in a streamlined security-as-a-service offering that is ideal for our channel partners across APAC.”
Security is complex and constantly evolving in the face of increasingly sophisticated attacks. According to Chris Sharp, Chief Strategy Officer at rhipe: “Symantec Endpoint Protection Cloud adds a vital layer of granular protection, particularly for those channel partners who are wanting to build their own Clouds – allowing them to build even more secure solutions for their customers. We’re also pleased to offer Symantec’s Security-as-a-Service hosted solution in all 18 markets across Asia Pacific, although our initial focus markets are the mature markets in ANZ and South-East Asia.”
Edwin Yeo, Vice President, Channels & Alliances, Asia Pacific, Symantec said, “rhipe is one of the prominent cloud channel companies in Asia Pacific and Symantec’s Integrated Cyber Defense Platform focuses on empowering the businesses to securely embrace the cloud. With this partnership, Symantec will expand its outreach significantly and provide a cloud-based solution with all the features necessary to keep our SMB customers’ information secure. Furthermore, the solution's seamless and easy management will be a welcome relief for overstretched IT department.”
rhipe crosses 150,000 user threshold in Microsoft Public Cloud
2 October, 2017
The Board of rhipe is pleased to announce that the Microsoft Cloud Solutions Provider (CSP) program continues to drive significant growth in rhipe’s public cloud subscription business. rhipe crossed the 150,000 user threshold earlier this month and as at September 30, 2017 rhipe’s CSP business has achieved an annualized run rate in excess of AUD $25M. Significantly, the Microsoft Azure component of this revenue stream has grown to over $300,000 per month which represents a growth of more than 160% since 1 January 2017.
It has been just over two years since rhipe launched its Indirect CSP program in Australia and since this time rhipe has cemented its position as the number one provider of Microsoft monthly subscription licenses across the Asia Pacific region.
"rhipe’s continued momentum in the CSP program is a testament to our ongoing innovation and investment in the Public Cloud opportunity,” says Dominic O’Hanlon, rhipe’s Chief Executive Officer. “rhipe continues to differentiate its business by focusing on monthly consumption-based billing and value-add services. Our operating model allows our resellers to treat software as an operating expense, paid for based on consumption at the end of each month. As businesses tire of paying upfront for software they may not use, our resellers are able to offer a much more flexible alternative. Therefore, we remain confident in the ongoing month-on-month growth of our CSP business across APAC.”