Cloud-based data analytics platform operator Rosslyn Data (LON:RDT) is acquiring clients at a faster rate and at a lower cost.
The technology firm said in its trading update covering the six months to the end of October that other key metrics are also moving in the right direction, such as the average lifetime of a contract, which is increasing.
Meanwhile, the churn rate – the proportion of existing clients that fail to renew – remains below 5%.
The management's focus on achieving cash flow break-even is progressing and remains on track, which the board believes is encouraging evidence of an emerging, sustainable and valuable business model.
Rosslyn said the trading environment remains positive, and as evidence of this pointed to the recent acquisition of a further two FTSE 100 clients plus a couple of FTSE 250 clients.
“Our direct sales team continues to make encouraging progress in our target verticals and we are pleased to report that a previous client has recently returned and signed a contract worth more than three times its original annual value,” the company told investors.
“We expect solid progress to be made across all fronts in the second half of the year and look to the future with confidence,” the company's statement concluded.
House broker Cenkos Securities said it expects Rosslyn to be cash flow positive in the first half (H1) of the next fiscal year (2017E), and maintains that the share price is not recognising the progress management is making in exercising its business plan.
“We believe H1 revenues will be close to our forecast of £2.27mln and that H1E will show revenue growth in excess of 50% yoy. [year-on-year]. Tight cost control and some up-front payments should mean net cash as at 31 October was in line with our forecast of £2.9mln,” Cenkos said.
The partner business is ramping up and clients are coming on board “at pace”, Cenkos said, and the benefits of this should be seen in the second half of the current fiscal year.
Rosslyn is beginning to white label its platform in some cases, Cenkos revealed.
“We believe it is likely that organisations such as Microsoft will invest in both the technology and sales & marketing activities of the company,” the broker said.
Based on Cenkos's sales forecast for the year to 30 April 2017, the enterprise value (EV) – broadly speaking the market value of the company adjusted for its debt – of the company is equivalent to its projected sales. Ordinarily, companies growing as fast as Rosslyn would have an EV of at least three times sales, Cenkos said, as it reiterated its 'buy' recommendation.
Shares in Rosslyn were unchanged in lunchtime trading.