Aconex FY16 Annual Report
The Company's flexible and fully integrated Software-as-a-Service (SaaS) platform provides customers with a centralised approach to managing documents and data, communicating with project participants and streamlining business processes.
Aconex enables clients to improve project efficiency, productivity and accountability, while lowering cost and risk in delivering projects of all sizes. Building Information Modelling (BIM) and mobile collaboration solutions available with the existing Aconex platform have extended the Company's offering, providing project teams with complementary tools to manage increasingly complex projects.
Aconex Limited currently has more than 60,000 user organisations working on projects valued at more than $1 trillion. The Company has 47 offices in 23 countries around the world, with headquarters in Melbourne, Australia.
The Company's ordinary shares are traded on the Australian Securities Exchange (ASX) under the ticker code (ACX) and are included in the S&P / ASX 200 Index.
Operating and Financial Review
A summary of financial results from core operations for the year ended 30 June 2016 is set out below. For the purposes of this report, core operations are defined as the reported results per the audited financial statements adjusted for listing expenses associated with the Company's Initial Public Offering in December 2014, business acquisition and integration costs associated with three acquisitions in 2016, and foreign currency gains and losses.
For the year ended 30 June 2016, the Company reported revenue of $123.4m, an increase of 50% on the previous year's revenue of $82.4m. Revenues in ANZ grew 35% and international revenues increased 61%. The 50% increase in Group revenue was driven by strong sales momentum, new enterprise agreements and enhanced product offerings. The acquisitions of the CIMIC Group's INCITE Keystone collaboration platform and Conject contributed $14.6 million to revenue growth. New enterprise agreements were signed with the CIMIC Group, Burns & McDonnell, ExxonMobil and Fluor, and existing enterprise agreements were renewed with several customers.
Total operating expenses from core operations, excluding depreciation and amortisation expenses, increased 29% to $78.9m when compared with the previous year. The increase reflected investments in:
- Engineering and product development (including capitalised development costs), which increased from 14% to 18% as a percentage of revenue.
- Sales and marketing, which led to an increase in commissions paid as a result of increased sales.
- All employees and operations of Conject following the close of the acquisition.
The Company recorded positive EBITDA from core operations of $13.6m for the year ended 30 June 2016, a $10.6m improvement on the prior year's EBITDA from core operations of $3.0m. The improvement in EBITDA reflected the benefits of global scale and the operating leverage gained from the Company's business model which is focused on the following key objectives:
- Leverage industry and collaboration network effects to drive new business from both new and existing customers.
- Replicate the highly profitable Australian business model across international regions to increase global market leadership and drive scale.
- Continuously expand the breadth of the Aconex platform to drive increasing value for customers and users as well as competitive advantage.
- Balance revenue growth and profitability by investing in product and sales to drive new opportunities for market penetration.
Net operating cash flows from core operations were $9.4m for the year ended 30 June 2016, a $3.4m increase from the prior year, reflecting improved EBITDA, offset by working capital movements.
Business Acquisitions During The Year
Aconex made three acquisitions during the year. The Company expanded its technology and product capabilities through the acquisitions of Worksite and the CIMIC Group's INCITE Keystone platform, and further consolidated its global leadership position with the acquisition of Conject.
Acquisition of Worksite
On 24 July 2015, Aconex Limited acquired Worksite, provider of a SaaS-based project cost management solution, from ARES Project Management LLC. Under the terms of the acquisition agreement, Aconex purchased the intellectual property and assets of Worksite for a total price of $6.4m, with $3.2m paid up front and a further $3.2m paid on 24 July 2016.
The Worksite software solution complements the Aconex collaboration platform through the build-out of collaborative cost management on the Aconex platform.
Strategic Partnership with the CIMIC Group
On 4 August 2015, Aconex Limited entered into a multi-year strategic partnership with CIMIC Group Limited (ASX:CIM) and certain of its related entities. CIMIC, formerly Leighton Holdings Limited, is the parent company of one of the world's largest international contractors.
The strategic partnership is expected to build long-term commercial value for both companies. Aconex anticipates that the partnership will generate a minimum of $16.5m of committed revenue for the management of existing and new projects over four years from the date of the partnership agreement.
Acquisition of Conject
On 31 March 2016, Aconex Limited acquired Conject, a leading cloud and mobile collaboration service provider in Europe and other regions, for a total cash consideration of $99.5m.
The acquisition of Conject is expected to significantly expand Aconex's market penetration and user network throughout Europe and further consolidate Aconex's market position as the global market leader in cloud-based construction collaboration solutions.
To finance the Conject transaction and provide additional working capital, Aconex raised $120 million through a fully underwritten institutional placement of more than 23 million shares at an issue price of $5.20. Following the capital raising, the Company offered a share purchase plan (SPP) for eligible existing shareholders to purchase additional Aconex shares.
The SPP raised another $12.0 million also at an issue price of $5.20.
Product Development Overview
Aconex research and development in financial year 2016 focused on critical processes that help customers deliver successful projects, on time and on budget, while increasing the Company's competitive advantage. Key new capabilities added to the Aconex platform included project controls for cost and schedule management, as a result of the Worksite acquisition. FY16 product development priorities included the following:
- Insights and enhanced reporting to help detect and resolve project issues early.
- Field processes and increased mobility to improve efficiency and productivity on site.
- Management of building information modeling (BIM) data and processes across project teams.
- Connecting the Aconex platform with a broader range of internal systems for data exchange.
- Continued layering of security measures to meet emerging market and customer requirements.
- Deeper design processes, including mail routing, packages, linking, configuration management and construction lots.
Aconex accelerated the pace of product development over the last twelve months, increasing its total research and development spend by 85% from $11.9m in financial year 2015 to $22.0m in FY16. The increased spend is largely a result of:
- The acquisition of Worksite and the integration and continued development of its SaaS-based project cost management solution (Aconex Connected Cost). Aconex Connected Cost helps owners and contractors manage budgets, contracts, month-end processes, and payments in a collaborative environment. The new module on the Aconex platform has been rolled out to selected customers in preparation for full commercial availability in FY17.
- The acquisition of the INCITE Keystone collaboration platform from the CIMIC Group, as well as its integration with the Aconex platform and the development of further product enhancements.
- The acquisition of Conject, its products and its product development teams, which are being integrated with Aconex.
Significant Changes in the State of Affairs
In March and April 2016, respectively, Aconex completed a fully underwritten institutional placement and a share purchase plan, through which the Company raised $132m in cash to finance the purchase of Conject and provide additional working capital. The capital raising, coupled with positive cash flows from operating activities, strengthened the Group's cash balance, including restricted cash, from $29.1m to $52.5m at 30 June 2016.
In the Directors' opinion, there have been no other significant changes in the state of affairs of the Group during the year.
Significant Events After Reporting Period
On 24 July 2016, in accordance with the terms of the Worksite acquisition, a payment of $3.2m (US$2.4m) was made to ARES Management LLC.
In the Directors' opinion, there have been no other significant events since the end of financial year 2016.
Business Strategies and Future Developments
Aconex is focused on a set of key initiatives to increase shareholder value which include:
- Driving sales and marketing into underpenetrated industry segments and regions such as Asia, the Americas and Europe, the Middle East and Africa (EMEA).
- Leveraging existing customer relationships and communities via the "network effect" to further entrench the existing user base and attract new users.
- Continued improvement and enlargement of the Aconex product offering through innovative research and development.
- Opportunistic assessment of strategic acquisition targets that may accelerate growth.
- Balancing investments in growth with increasing profitability.
Aconex is a leader in the construction collaboration market in Australia and New Zealand (ANZ) and has built a profitable business. Over a number of years, Aconex has been investing and replicating its ANZ success globally as it penetrates international markets, all of which are significantly larger than the ANZ market.
While revenue in the ANZ region grew 35% from FY15 to FY16, the revenue growth rate for the international business was 61%. The international revenue growth trajectory is underpinned by Aconex's historical investment in its scalable SaaS platform, an established global sales, marketing and customer support network.
The Company believes that Aconex stands to benefit from the increasing adoption of cloud collaboration in the construction industry worldwide. Future revenue growth is expected to benefit from:
- The rising complexity, cost and risk of construction projects.
- The increasing digitisation of project documents and workflows.
- The adoption of increasingly advanced processes such as BIM; which provides a digital, multidimensional representation of the physical and functional characteristics of an asset.
- The growing Aconex user community, which provides positive "network effects" in spreading the adoption of the Aconex platform through project collaboration worldwide.
Aconex's future growth plans include continuing to invest in growth markets both domestically and internationally, as evidenced by continued revenue and earnings growth in each key market. In the course of executing the Group's growth plans, the Group is subject to market and operational risks outlined below.
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About Aconex Ltd
Aconex Limited (ASX:ACX) project collaboration solution digitally connects owners, builders and other teams, providing complete visibility and management of data, documents and costs across all stages of a construction project lifecycle. The Aconex cloud-based solution has been used to manage over $1 trillion in projects across 70,000 user organisations in over 70 countries. The company’s ordinary shares are traded on the Australian Securities Exchange (ASX) under the ticker code ACX and are included in the S&P/ASX 200 Index.
For more information on Aconex, please visit:
- Website: http://www.aconex.com
- Twitter: http://www.twitter.com/aconex
- LinkedIn: http://www.linkedin.com/company/aconex
- Facebook: https://www.facebook.com/Aconex
Cimic Group Ltd