The Rhipe Ltd (ASX: RHP) share price was down by as much as 13% today following the release of the cloud software wholesaler's first-half results.
Rhipe shares are currently trading at $2.20 per share, 9.09% lower from $2.40 at the close of market yesterday.
What does Rhipe do?
Rhipe wholesales cloud software offerings such as Microsoft 365 to resellers and earns recurring revenue for licensing fees and value-added services.
The company provides a platform for recurring subscription management used by IT-resellers to buy, provision and bill end-user clients for monthly cloud software subscriptions.
Rhipe also provides value-added services for resellers including marketing, consulting, and 24/7 support as a service.
Rhipe's 1H20 results
Rhipe reported gross sales of $152.7 million in 1H FY20, up 33% from $114.7 million in 1H FY19. The majority of sales ($145.4 million) came from the Licensing division, with the majority of growth in this division driven by continued strong growth in public cloud and Microsoft CSP. Cloud Solutions contributed $7.9 million to gross sales, up from $4.3 million in 1H FY19.
Revenue grew 24% to $26.6 million in 1H FY20. Cloud grew 66% year-on-year to $7 million in revenue from $4.3 million in 1H FY19, driven by the expansion of the support as a service offering. Licensing revenue grew 18% on the prior corresponding period (pcp), lower than sales growth due to changes to product and geographical mix.
Operational expenses (OPEX) grew 24% to $18.4 million including the costs of the Japan joint venture, or 20% if these costs are excluded. Licensing OPEX increased 7% to $14.5 million predominantly driven by additional headcount in the front office. Cloud Solutions OPEX grew 180% to $3.9 million due to additional headcount aimed at growing support as a service, Rhipe's Dynamics practice and SmartEncrypt.
Reported earnings before interest, tax, depreciation and amortisation (EBITDA) grew 53% to $7 million from $4.6 million in 1H FY19. Operating profit rose 26% to $7.1 million from $5.6 million in the pcp. Licensing contributed $5.7 million to profits while Cloud Solutions contributed $1.4 million.
Additionally, a fully franked interim dividend of 1.20 cents per share was declared.
Outlook
Rhipe has forecast $16 million in operating profit in FY20 excluding Japan and additional investments. The cost of the Japan joint venture in FY20 is estimated to be $1.5 million.
Additional investments in support as a service, SmartEncrypt and Dynamics are estimated to cost $0.5 million.
Operating profit once Japan and the additional investments are factored in is expected to be $14 million.
