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Instem on track to meet full-year expectations as SaaS transition gains momentum

"The board expects that full-year performance will be in line with expectations."

Robotic intelligence
The company's augmented intelligence Informatics services saw revenue growth in excess of 20%

Instem PLC (LON:INS) said all three areas of its business performed well in the first half of 2019.

The software group, which is focused on the life sciences sector, said group revenue in the period rose by around 10% year-on-year.

READ Instem upbeat after solid year

Revenues from software-as-a-Service (SaaS) grew by more than expected during the period as more new customers chose SaaS subscriptions over perpetual licensing and a growing number of existing clients moved from on-premise deployments to SaaS, as planned.

It is a known feature of a transition to a SaaS model from a model where licence fees are paid in a single lump upfront that revenues will initially take a dip and such is the case with Instem.

The plus-side of the SaaS model is that it tends to give greater visibility in terms of future revenue streams and Instem expects the second half revenue visibility to improve.

There was a related short-term impact on earnings but operating cash flow has been particularly strong, Instem said, with net cash at the end of June standing at £6.0mln, up from £3.7mln at the beginning of the period.

The company revealed it continues to build a “healthy pipeline of new business”, with the number of individual transactions increasing significantly year-on-year across all sectors of the life sciences industry. Importantly, further diversification of revenue by both type and geography is expected to continue to benefit performance through the remainder of the year, the company said.

"The business has performed well during the period with above-average growth in new data collection clients and technology-enabled outsourced services growing strongly,” said Phil Reason, the chief executive officer of Instem.

"Furthermore, it was particularly pleasing to see a faster rate of transition than anticipated from perpetual software licensing to SaaS subscriptions. We believe our SaaS value proposition offers both Instem and our customers enduring benefits and increases shareholder value as the visibility of our revenue continues to improve," Reason added.

Quick facts: Instem PLC

Price: 465 GBX

Market: AIM
Market Cap: £77.53 m

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