Shares of Prophecy International Holdings Limited (ASX: PRO) have been hammered this afternoon after the software business issued an earnings downgrade.

Prophecy’s share price fell as much as 30.8% to $1.01 shortly after the announcement was made, reflecting a total decline of 60% since the shares peaked at $2.53 in November last year.

The company said that the trading performance for financial year 2016 would be below original guidance of $20 million in sales and $8.9 million in earnings (before interest, tax, depreciation and amortisation, or EBITDA) due to deferred sales in the third quarter.

Instead, it expects revenue to be between $15 million and $17.5 million, with EBITDA to be in the range of $5 million and $7 million.

Pleasingly, the company did note that fourth-quarter sales have already delivered an improvement compared to the third-quarter, which is important considering that the fourth quarter has traditionally been the group’s strongest.

It said: “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.”

What’s more, the new revised group figures would still represent strong growth compared to the 2015 financial year. However, a downgrade of this calibre will still come as a concern for investors considering the group’s early stage of growth, which would go a way towards explaining today’s harsh response from the market.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia owns shares of Prophecy International Holdings Ltd.. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.