Stibo Systems A/S

Management's review

Sales & MarketingThe Fiscal Year 2022/23 has proved a challenging market for Sales due mainly to the global economic conditions. Order Intake (Sales) ended lower than the previous year despite market share increasing.A recent (May 2023) market analyst report by Gartner, established that the MDM Software market grew by 1.41% in the past 12 months to $1.475 billion. Their analysis established that Stibo Systems grew share from 6.32% to 7.41%.Sales to existing customers, representing around 55% of actual revenue, proved more resilient than sales to new customers where projects were delayed and reduced in size due to the perception of market risk. Sales continue to be boosted by the migration of existing on-premise customers to the Stibo Systems Software as a Service (SaaS) platform.Currently, more than 50 % of customers are on the SaaS platform. This number continues to increase as existing customers migrate whilst all new customers move directly to the SaaS platform. It is planned that over 70 existing customers will migrate in the coming FY, a run rate expected to continue through the next two years.The graph shows the Order Intake over the last two FYs by region. It shows how the North American market is growing more rapidly than other regions. This rate of growth is expected to continue supported by ongoing investment.The focus for Sales and Marketing continues to be on four core verticals: Retail, Consumer Packaged Goods (CPG), Manufacturing and Distribution with over 70% of Order Intake resulting from those sectors as shown in the diagram.The Marketing function has gone through a major rebuild in the last year and has renewed focus on demand generation whilst content is heavily focused on the business impact of our technology on customers. Whilst Marketing has been strengthening lead generation activities, the company strategy of Partner First has been paying off. There is typically conflict between software companies and Systems Integrators (SIs) over who takes the majority of Professional Services (PS) fees. Stibo Systems long term strategy prioritises SIs, and more specifically Global SIs (GSIs) over our internal PS team. Whilst this has inevitably caused a reduction in PS revenues for the year, the quantity and quality of leads generated and closed in partnership with Alliances has been high. Over 25% of new customer Order Intake has been generated by Partners. This excludes the additional volume of deals influenced by partners.Stibo Systems MDM platform enjoys unique competitive advantage when focused on data relating to products – food, apparel, electronics, etc. The same technology is also used to ‘master’ data across other Domains such as Customers, Staff, Suppliers, Locations etc. This brings substantial benefits to both the customer and Stibo Systems. For the customer, the re-use of the same technology increases their Return on Investment (ROI) whilst also enabling more sophisticated analytics across the ‘Zones of Insight’ - being the Domains of data being mastered. For Stibo Systems, greater penetration of the technology across the customer enterprise, increases the stickiness and hence contributes to a lower rate of customer churn.RevenueThe transformation into a SaaS business is a substantial boost to the predictability of revenues as they are less influenced by large, one-off, Perpetual deals.Revenue increased with 15 % compared to previous FY. This is an acceptable growth in revenue given the market situation and is founded by a solid fund of recurring revenue, however below the expectations for the year which was 20%.he Monthly Recurring Revenue (MRR) have increased with 23 % since FY 21/22.The Revenue split is shown below shows the trend from Perpetual to SaaS as well as an overall increase in the revenue..EBITDAGrowth in revenue combined with tight fiscal control created an increase in profitability (EBITDA) for the year totalling DKK 125.3 million. Whilst the growth in EBITDA is below budget and previously announced expectations of EBITDA in the range DKK 140-150 million , it is the highest ever achievement for Stibo Systems representing an EBITDA-margin of 11.9%.Pipeline analysis early in the FY highlighted the market uncertainty due to recessionary pressures. The company immediately implemented fiscal controls to protect profitability. Having surfaced from the COVID Pandemic, the Company’s travel and Expense budget came under pressure as teams started to reconnect physically around the world. Anecdotally, many companies have suffered from under budgeting for this resurgence of travel however we viewed it as vital to refresh the teamwork and culture of the company.Stibo Systems focused on controlling the two largest cost factors: Salaries and Cloud Costs. During the past year, inflation globally has risen dramatically, in many operational locations it has exceeded 10%. The knock-on effect in an already competitive labour market has led to salary inflation for new joiners. This has been counter balanced by driving attrition down and reducing and prioritising new hires. We averaged 728 employees through the year compared with 735 in the previous FY.The second largest area of cost is the 3rd party cloud platform used to provide SaaS to customers. During the FY, Stibo Systems entered into a strategic agreement with the cloud services provider giving access to beneficial pricing, expertise, and partnership in winning new business.Product and Technology updateStibo Systems is a leading multi-domain master data management software solution. This is achieved through continuous innovation in our product portfolio and technology. Priorities are based on established engagement programs with our customer base that includes some of the world’s largest enterprises and well-known brands.Multidomain focus – As part of 2022/23 fiscal year’s product goal we have doubled down on innovation and scale around core capabilities of MDM including AI-enabled automation. From product-market fit and demand perspective, we have observed an increase in customers moving from single to multiple domains We are also seeing an increase in importance and business criticality of our solution within our customer base. The primary focus is on Product, Customer, Supplier and Location domains in Manufacturing, CPG, Distribution and Retail industries.Cloud focus – The Stibo Systems SaaS offering has seen significant growth to over 50% of the customer base– this has been possible through modernization of architecture as well as optimization of processes around SaaS offering. While not leaving any customers behind.PDX is an enabler for brands to connect with their consumers through different channels at scale. In 2022/23 Stibo Systems has expanded on its PDX offering and invested in scale to meet demands from our growing customer base. PDX has proven to be a good fit for global brands to effectively deliver quality product information for unified commerce.Innovation Incremental innovation has geared Stibo Systems to serve its existing customers as well as new customers. Topics such as augmented MDM with a focus on improving business users’ efficiency, as well as exploration of Sustainability data management are two examples of many topics.Category leadership- MDM, PIM as well as Product Syndication are the categories that Stibo Systems remained as a leader in 2023.Market fit and relevance – Stibo Systems continued to collaborate with the leading analyst firms (Gartner and Forrester) as well as industry analysts. Combined with close partnership with customers and partners continued to refine roadmap for the most optimal results for enterprise customers – this resulted in winning some of the largest brands as part of 2022/23.