Cloud services at 20% of revenue run rate
While StatPro’s (LONDON:SOG) Q1 trading is in line with expectations, 20% of annualised contracted revenue now relates to cloud services – essentially StatPro Revolution – up from 18% at the end of December. Meanwhile, the recurring revenue run rate for the legacy StatPro Seven traditional software is unchanged. StatPro is now in the advanced stages on its shift to being a pure-cloud play and we believe there is significant upside, given the lofty multiples of StatPro’s financial software US peers and SaaS firms.
Leading-edge software technology
In 2008, StatPro took the decision to develop a cloud-based software solution (delivered over the internet) with a view to targeting new market segments (front offices, hedge funds and private wealth). The solution, StatPro Revolution, launched in 2011, is multi-tenant, meaning all customers use the same instance of the software, in a similar way to using Google (NASDAQ:GOOGL) or Facebook (NASDAQ:FB). Hence, there is only one version of the software and the product is much more scalable and easier to maintain, support and upgrade. StatPro Revolution was so successful that management decided to replace its entire software suite (StatPro Seven) with similar cloud services technology. This new product – StatPro Revolution performance module – will be launched later this year.
We believe customers will gain a significant reduction in the total cost of ownership from the performance module for several reasons: 1) as a cloud product there are no hardware or IT support costs; 2) the new technology is more efficient and faster at processing data, hence requiring a lower headcount; and 3) the product should enable customers to streamline their processes and systems. We expect these benefits to feed through to StatPro, as was illustrated by a contract win in January with a major European asset management company, where the contract value was boosted by 55% to €4m, due to the benefits of a lower total cost of ownership for the customer.
We note the new technology has been winning awards, with StatPro Revolution recently awarded the 2015 Financial Technologies Forum Award for the ‘Best Performance Measurement & Attribution System’, while StatPro won the award for the ‘Best Buy-Side Risk Management Initiative Over the Last 12 Months’ at the Buy-Side Technology Awards in late 2014.
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