Risk Intelligence A/S changes revenue recognition to full periodisation to improve investor transparency and comparison with peers
17 February 2023 | Company announcement No 6-2023
Risk Intelligence A/S (“Risk Intelligence” or the “Company") announces today that the company from and including the financial year of 2022 has changed its financial reporting standards to full revenue periodisation to comply with market standards for SaaS companies.
The Board of Directors of Risk Intelligence has had an ongoing discussion about changing the revenue recognition from date of invoicing to full periodisation for subscription-based licenses, which constitute about 90% of total revenue. The Board of Directors has therefore decided to follow the requirement from Deloitte to change the revenue recognition to full periodisation.
As part of the Company’s internationalisation, Deloitte was elected as the new auditor for Risk Intelligence at the Annual General Meeting in 2022. Following the election of Deloitte and due to the decision of the Board of Directors, Risk Intelligence has implemented new accounting principles for recognising revenue. The change will have an effect for the financial year of 2022, including new numbers for 2021 for comparison.
Full periodisation will create more transparency and align the income model with SaaS market standards. It will provide a much-improved basis for comparison with market peers. Furthermore, the previous uneven distribution of revenue across quarters will, due to the ongoing deferred revenue, be replaced by a more even distribution leading to easier understanding of key Risk Intelligence figures and growth.
The change in revenue recognition will affect the 2025 Strategy target of achieving profit by 2023, as the company historically has been invoicing most of its revenue, around 66%, in the second half of the year. With full revenue distribution and timing of launch of a new platform at in Q4 2023, most of the growth will shift from 2023 to 2024. As a result, the strategy target has been revised to achieving positive EBITDA in 2023 and profit in 2024, rather than positive net profit in 2023.
Due to the Company’s unchanged business model where license periods are invoiced 12 months up front and the strong and increasing cash-flow from revenue and liquidity will not be impacted by the decision. At the same time, as this is a change in the Company’s internal accounting policies only, the change will not impact any Risk Intelligence clients and partners, and subsequently will have no commercial impact.
The change of financial reporting standard and its implications are described in this presentation (also downloadable below and via the Reports page). The upcoming Q4 2022 interim report and the annual accounts for 2022 will reflect this change both in 2022 and 2021 comparison numbers.
CEO of Risk Intelligence, Hans Tino Hansen, says:
“The decision to change to full periodisation has been under way for some time, but it will immediately improve how we present the company to investors and how investors are able to compare the company to peers in the market. It will have some short-term negative implications on results, as revenue and thereby growth will be moved from 2022 into 2023 and 2023 into 2024 etc, but as we are able to explain that the changes originate solely in changes to technical reporting requirements, and not in changes to business fundamentals, I believe it will be seen as positive. Importantly, our clients and partners will not be affected by the change, and there will be no commercial implications."
Download explainer below:
The presentation available via the button below outlines how Risk Intelligence’s change of accounting principles to full periodisation impacts financial figures.
For further information about Risk Intelligence, please contact:
Hans Tino Hansen, CEO
Jens Krøis, CFO
Telephone: +45 7026 6230
E-mail: investor@riskintelligence.eu
Social media:
Twitter: twitter.com/riskstaff
LinkedIn: linkedin.com/company/risk-intelligence
Facebook: facebook.com/riskstaff