The transformation to a SaaS financial model for our customers also reduced the total revenue brought into the business as Vault commits itself to building a sustainable Annualised Recurring Revenue (ARR). ARR represents the annual value of all active software subscriptions. The traditional billing method used by Vault resulted in customers being initially invoiced 70% of the 3 year contract price upfront and the remaining 30% spread across years 2 and 3.
Moving to the SaaS model customers are now billed in equal amounts across the 3 year period and ongoing thereafter. This transformation naturally resulted in less total revenue being received in early lump sum amounts and has contributed to the loss sustained during the year. The base ARR is now increasing and the strategy is that the existing ARR will reach levels where it will equal or exceed expenses for the year meaning that all new sales for the year will add to the profit. Although causing some short term revenue downside the Group believes the longer term benefits far outweigh the effect on FY17 results.
