Aconex continues 31% growth trend

Aconex continues to grow revenues, effectively doubling in two years. Two-thirds of its business now comes from outside Australasia.

Aconex logo 2014Melbourne, Australia-based Software-as-a-Service construction collaboration software vendor Aconex has announced its financial results for the year to 30 June 2017, reporting 31% revenue growth for the second year running (results were affected by exchange rates: at a constant currency, growth was 36%). Helped by a better second half-year performance, total revenues were Au$161.2 million (c. £99.3m, US$127.6m, or €108.3m), compared to the previous year‘s Au$123.4m.

EBITDA from core operations was up 10% to Au$15.0 million (c. £9.2m, US$11.9m, or €10.1m). After tax, however, the company recorded a Au$10m statutory loss, mainly due to integration expenses relating to the Conject deal and “amortisation of acquired intangibles”; from core operations, the business posted a net profit of Au$5m.

In the company’s investor presentation, Aconex highlighted that revenues had effectively doubled in two years. It says its platform has managed projects valued at over one trillion dollars in project value across 70 countries, and has 5.3 million project users managing 2.4 billion documents.

CEO Leigh Jasper said that the solid FY17 result reflected a stronger second half performance, a full year contribution from Conject and further penetration of the Company’s international markets which together have significantly strengthened its leading global position.

Leigh Jasper“Revenue increased in the second half of the year as market conditions improved and we continued to transition project customers to enterprise agreements, especially in ANZ. With Conject fully integrated into the business we also saw stronger revenue growth in Europe. We are truly a global business with two-thirds of our revenues now generated outside Australia and New Zealand.

“To drive greater returns and take advantage of the rapid growth in technology adoption across the industry, we have ramped up our investment in sales & marketing and our operational infrastructure. We have also significantly increased investment in our product, with 22% of revenue committed to research and development. We enhanced our offering and developed several new modules, including Connected Cost [launched in April 2017], and extended our ecosystem. Connected Cost alone has considerably increased our total addressable market and improved our overall win rates in all our regions.

“Meanwhile, our certification for the Federal Risk and Authorization Management Program (FedRAMP) is in process, which will enable us to service government projects with the highest compliance requirements in the world. This is a major competitive advantage.

“In the coming year, we will continue to extend our leadership position through further investment in our international markets and ongoing product development. We expect to grow revenue by 15 to 19% while increasing EBITDA and generating positive cash.”

The company says the revenue uplift was driven by the 2016 Conject acquisition, strong growth in its international markets and an improved second half performance in ANZ (despite competitive pressures in its home market). The company’s EBITDA margin reduced slightly from 11.0% in 2016 to 9.3% in 2017, due to the acquisition of the Conject business (Aconex says it incurred Au$7.9m in related acquisition, restructure and integration costs) and ongoing investment in product, sales, marketing and client service.

Sales and marketing expenses grew 28% to Au$59.2m as Aconex bolstered its international sales teams to drive further market penetration. The company also increased investment in engineering and product development – partly due to addition of the Worksite and Conject engineering teams.

Regional performance

International revenues were up 45% year-on-year, while revenues in the ANZ region increased 9% from Au$48.8m in FY16 to Au$53.3m in FY17 due to new business growth and the ongoing conversion of customers to enterprise agreements (with 36 new deals signed), which now represent more than 65% of the region’s revenue. Elsewhere:

  • Revenues in Europe and Africa increased 143% from Au$17.5m to $42.6m, principally driven by the full-year contribution of Conject (though revenue was impacted by adverse foreign currency movements, particularly the depreciation of the pound and Euro against the Australian Dollar). The business is now securing larger contracts in mainland Europe, and the UK pipeline was said to be “growing in a challenging market” (in January 2017, the company talked of Brexit uncertainty and revised its October 2016 forecasts causing its shares to slump).
  • Middle East revenues increased 11% from Au$22.4m to Au$24.9m.
  • Americas revenues increased 16% from Au$21.3m to Au$24.6m.
  • Asia revenues increased 19% from Au$13.3m to Au$15.8m.

The Americas and Asia businesses are operating at negative margins as they invest in sales and marketing for future growth, looking to eventually replicate Aconex’s strong performance in the Australasian market.

In the medium term, Aconex says it expects revenue growth of more than 20% with increasing EBITDA.

Market reaction

After the January 2017 slump – to a low of Au$2.92 – Aconex’s shares gradually recovered to hover around Au$4 for most of the past six months. Prior to the results announcement, they were trading on the Australian Securities Exchange at around Au$4.60, but the share closed at Au$4.14, down 10% (and less than half the Au$8.38 high reached just over a year ago), as investors digested the results and reflected on the statutory loss and on Aconex’s sub-20% forecast for FY18 growth (read the AFR‘s Yolanda Redrup and what The Australian said).

Aconex share price 22Aug2017

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