Public cloud subscription play boosts rhipe's financials

Public cloud subscription play boosts rhipe's financials

Reports operating profit of $5 million for the year ending June

Dominic O'Hanlon - CEO, rhipe

Dominic O'Hanlon - CEO, rhipe

Rhipe has started to generate profitable returns from its investment in building a public cloud subscription business across Asia Pacific.

In revealing financials for the year ending June 30, the software distributor delivered an operating profit of $5 million, in addition to earnings before interest, tax, depreciation and amortisation (EBITDA) of $4 million - a “material improvement” from the prior year.

The company did not bring in an operating profit last year and reported EBITDA of $1.5 million that year.

In addition, rhipe reported a year-end cash position of $19.8 million for the 2017 financial year, compared to the $13.8 million it raked in the same time last year – an increase by 43 per cent.

Meanwhile, its revenue itself was $157 million, up from $137.1 million last financial year.

According to rhipe, revenue growth was driven by “strong momentum” in public cloud via its Microsoft Cloud Solutions Provider (CSP) program, with its partners said to be consuming more than 130,000 Office 365 seats per month.

“These seats are billed on a monthly subscription basis with an annual run rate revenue now exceeding $22 million compared to $6.7 million at the end of FY16,” a company statement read.

Also a factor to revenue growth was its software license revenue of $152 million, up 16 per cent year-on-year with a gross margin of $23.8 million as well as a 70 per cent growth in local Asian sales and the restructure of its Solutions Business, which has allegedly led to the elimination of losses that affected the prior year’s results.

The company's operating expenses for the 2017 financial year also fell by $2.6 million, almost 10 per cent year-on-year with the reduction also driven by the restructure in its Solutions Business.

“The licensing business’ operating expense base grew by only two per cent, versus revenue growth of 16 per cent and it was this operating leverage trend that drove the improvement of financial performance of the business,” a company statement read.

Looking ahead, rhipe revealed plans to continue investing in its core billing and operational systems to ensure that the company remains competitive.

Specifically, the business is targeting to deliver operating profit in access of $7 million, and within this includes the intended new investment costs incurred with entering into a new market in South Korea.

“In the 12 months to 30 June, the group invested $1.2 million in its partner subscription platform, which is a key part of the company’s intellectual property," a company statement read.

"We will continue to invest in this platform in order to enhance the system’s capability, improve operating efficiencies and maintain competitiveness."

For the next financial year, rhipe expects its public cloud business to grow faster than its traditional private cloud business, grow new programs, and have vendors like Microsoft increase incentives and support for its public cloud CSP program and place less focus on older licensing programs.

Rhipe managing director and CEO, Dominic O’Hanalon, said the marketplace in which the company operates will continue to change and adapt to new technologies and programs and the company will continue to be agile and capitalise on such shifts by investing ahead of the curve.

“I therefore believe that FY18 will be another good year in which rhipe continues to grow its revenue and earnings while at the same time, investing in new growth opportunities,” he said.

At the time of writing, rhipe's shares were trading at $0.67.

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