Cybersecurity and customer service are among the two most valuable company assets right now. So it’s no surprise that companies like software solution company Prophecy International (ASX: PRO)—offering customer experience analytics and cybersecurity solutions—are in demand.
In H1 FY23, the Company reported $9 million in revenue, up 18.4% on H1 FY22. As of December 31, 2022, Prophecy’s annual recurring revenue base had grown to $20.6 million, a 33% year-on-year (YoY) growth.
During the half, the Company began transitioning from a perpetual license to a recurring subscription, i.e. instead of making a one-time payment, customers pay in installments for its software. Since the money got spread out, its invoicing was down 5%, but when adjusted, it is similar to H1 FY22.
It became more self-reliant in the first half, departing from outsourcing customer support. Early on, it established a wholly-owned subsidiary in the Philippines, Prophecy Software Solutions Philippines Inc, to deliver customer support, software development, cloud operations and end-customer training capability for Prophecy globally across all product sets. This allowed Prophecy to cut costs of approximately $400k per annum.
The Company is attempting to build a more sustainable and scalable model by becoming more independent and spreading payments over time.
As for its subsidiaries, the Company’s SaaS-based customer experience and call centre analytics platform, eMite, signed contracts covering more than 2,600 seats. Their aggregate first-year contract value is over $1.9 million and includes sales to Next Holdings, Hawaiian Electric and Amica Mutual Insurance. eMite’s sales growth in H1 FY23 is 46%, and this year, Prophecy expects eMite’s sales pipeline value to increase to $12.2 million.
Prophecy also raked in new cybersecurity contracts through its subsidiary Snare. Snare provides critical government-recommended or mandated security controls, such as cyber threat detection, security information and event management (SIEM) and centralised log management. In H1 FY23, the Company signed new contracts with over 80 government and enterprise clients, generating more than $2.2 million in sales. This includes Kelley Services Group, Allens and the Australian Department of Defense.
The Company has also been vying for—but struggling to achieve—US Government bids for Snare. Prophecy is currently engaged in seven bids of this type, hoping to score something. Plus, in H1 FY23, 77% of Snare sales were made on a subscription basis rather than under a perpetual license model. This brought about a YoY sales growth of over 200%, a decrease from H1 FY22. Besides the change in the subscription model, the lack of any significant US government bids being awarded led to its decline.
Prophecy did secure some significant clients for both eMite and Snare in the first half. For instance, in August 2022, just about a month before its cyberattack, Optus signed a Mutual Supply Agreement (MSA) with Prophecy. However, it doesn’t seem like the agreement has come into force yet.
In 2023, the Company has pegged Snare’s potential sales pipeline at $12.8 million.
Finally, its unaudited cash balance of $9.7 million sets the stage for some significant 2023 milestones, including global expansion, cementing Snare in the US, introducing new product innovations for eMite and Snare, and more acquisitions.
Will its prophecies be fulfilled?
Alinda is a Business Reporter for The Sentiment
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