Company Announcement 5th May, 2016

Prophecy International Holdings Limited (PRO) is today releasing revised guidance for FY16.
The Company is disappointed to report that due to deferred sales in the third quarter the trading performance for FY16 will be below original expectations.
FY16 revenues are now expected be in the range of $15.0 – $17.5m, with corresponding EBITDA expected to be between $5.0 – $7.0m. This is lower than the original guidance of $20.0m revenue and $8.9m EBITDA.
The final quarter is traditionally our strongest and we are pleased to report that SNARE product sales have enjoyed a healthy start to the quarter. However, the Company’s final result is dependent on the timing of a number of larger eMite deals currently being actively worked by the sales team, with the target to complete by the year-end.
These revised revenue and profit expectations still show considerable growth over the FY15 full year results, when revenue was just under $10.0m generating EBITDA of $4.1m.
Breakdown of revised forecast
 eMite sales pipeline is still mainly made up of a smaller number of larger dollar value sales and delays are likely to push out some opportunities to the next quarter. It is estimated that sales worth in the order of $1.8m are likely to move into FY17.
 eMite’s FY16 Q3 revenue was lower than expected due partly to a $400k credit in that quarter against a subscription that was not continued as a result of budget constraints.
 eMite has moved more aggressively than originally planned to promote Subscription licenses, in preference to Perpetual deals. This has resulted in lower upfront revenue, but a higher long-term earnings stream. Subscription deals expected for the year equate to an extra $1.3m that would have been recognised as revenue and EBITDA if they were all charged upfront as Perpetual license deals.
 Both Legacy and SNARE revenues were marginally below expectations in the third quarter.

 In reviewing the slower completion of larger sales opportunities across both SNARE and eMite during the third-quarter, management has implemented a more comprehensive sales forecasting, monitoring and reporting environment.

eMite earn-out
The FY15 accounts specify a potential additional $2.0m payout for the eMite business purchase as at 1 April 2016. The actual combination of the PRO share price and eMite profit recorded at that time has resulted in no additional payment being due in relation to this earn-out target. A final potential earn-out is still to be assessed as at 1 August 2016 with a potential of 857,142 shares to be issued depending on a combination of eMite profits for the 2016 year and the share price.
Outlook
So far early FY16 Q4 sales have already bettered the Q3 start and the FY15 Q4 start, giving weight to a healthy sales position in our final quarter being achieved. Notwithstanding the slower than expected third quarter, year to date sales of SNARE are up 54% on last year’s equivalent position. New sales of SNARE via partners stand at 25% of all new sales and through focussed activities in the partner area we are working towards our target of 50% of all new sales coming via partners.
The pipeline for both SNARE and eMite looks strong moving into FY17.
The current focus for eMite is to expand the opportunities created by the RealTimeBI solution and the eMite Lite Analytics solution, building the proportion of smaller sales opportunities and smoothing the overall flow of sales to lessen the impact of larger sales .
Base revenue has increased to $7.5m going into FY17. Even after allowing for the $400k that was lost (as detailed above), this represents a 15% increase on FY16. We expect this will grow further as sales are completed in the final quarter.
eMite Lite Analytics
The sales activity around the first niche market created for eMite Lite Analytics has brought success with the first new deals now in place. In a very exciting expansion, eMite is now packaged with very specific management reporting over-the-top of a popular call centre management software system.
The addition of eMite’s analytics capability provides a much needed solution to customers’ requirement for better and more timely reporting of the operational efficiency of their call centres. The eMite solution is simple to implement, and provides key management reporting via dashboards for a crucial part of many business operations.
The call centre management software involved in the current trial has more than 5,000 installations worldwide, which would present a significant new vertical for the eMite Analytics solution. Once proven, this style of solution can be implemented over many popular business and technical systems to enhance management’s understanding of their key business indicators. These applications of eMite Lite Analytics have the potential to significantly expand the sales of eMite and generate a large number of smaller dollar value Subscription licence sales in multiple niche markets worldwide.
The Company has agreed commercial terms with a global partner, which it hopes to announce before year end. This will provide the platform to market the eMite Lite Analytics to a worldwide market and ramp up the number of eMite sites. In addition, two other partner opportunities are being progressed in the same manner to add to the FY17 pipeline.
The eMite Lite Analytics solution, together with specific management reporting, is also designed to sit over-the-top of the SNARE system, providing a new analytical and reporting option for SNARE customers. This SNARE Analytics solution is currently being trialled ahead of an upcoming official release. It is expected that this expansion into analytics using eMite will provide many additional sales opportunities for both SNARE and eMite products.

Prophecy is pleased to advise that it was added to the ASX All Ordinaries in March 2016. S&P Dow Jones Indices

The half year results were submitted to the ASX on February 24, 2016

Half Year 2015

The FY16 first half has been completed with new sales coming in at $6.15 million. This compares to $1.68 million in the FY15 first half and $5.54 million in the FY15 full year. The FY15 full year new sales number has been beaten as at the FY16 half year mark which is a great overall result for the period.

SNARE new sales for the half have come in at 120% growth compared to the same period last year which in turn showed a growth of 85% from the same period in FY14. The momentum in SNARE sales growth which began in late 2014 has continued to be very strong. In addition, the SNARE new sales pipeline for Q3 already looks very pleasing even though the quarter has only just opened. SNARE new sales to the end of FY16 Q2 are already ahead of the FY15 Q3 YTD sales achieved.

SNARE total invoicing, which includes base business renewals as well as new sales, came in at $4.18 million for the half, showing growth of 88% compared to the same period last year. The SNARE total invoicing growth for the same period a year ago was 41%, so a significant increase has been achieved over the last two years.

eMite new licence sales came in at 45% growth compared to the same period last year. This has been a great result, achieved in parallel with the significant work done to complete the acquisition and integrate the business processes during this period. Again, the eMite new sales pipeline for Q3 looks very strong at this early stage with good numbers expected for this full quarter.

eMite total invoicing, which includes base business renewals as well as new sales, came in at $3.23 million for the half, showing growth of 58% compared to the same period last year.

Total invoicing for the two key business components SNARE and Emite combined came in at $7.4 million which was a combined growth of 74% compared to the same period last year.

The current cash position is at a healthy $6.4 million.

Prophecy has two main sources of revenue to record and report annually.

A portion of revenues each year are referred to as “base recurring revenue” which consist of invoicing to existing customers for ongoing services previously contracted and extending over multiple years in most cases. In addition, Prophecy generates additional revenues each year from “new sales invoiced”, mainly to new customers and in some instances to provide extended services to existing customers during the year. The sum of the two revenue types above makes up the total revenue reported by Prophecy for the year.

Today’s announcement reported on the Q1 “new sales invoiced” number which came in at $3.4m. By comparison, the FY15 full year “new sales invoiced” number was $5.54m, so this represents a significant increase over last year. The increase is the result of increased SNARE sales compared to Q1 last year plus the addition of eMite new sales since the acquisition.

In addition to FY16  Q1 new sales, Prophecy has invoiced base recurring business as expected for FY16 so far. Only the new sales number is available at this time for reporting as per the announcement, but the full revenue for Q1 including the base recurring revenue will be available to report by mid October.

With the great sales start to the year, a record Q1 full revenue number is expected to be reported.