FinnCap Plc says the KRM22 PLC (AIM:KRM, OTC:KRMCF) story is “as powerful as ever” and suggested that enthusiasm for the share will come from proof of execution.
The stockbroker, reacting to the financial risk management software firm’s full year results, said the reported 2021 performance was ‘in line’ with forecasts updated in January and noted that whilst the technology company had suffered some setbacks but had stabilised in the second half.
“Opportunity remains in conversion of the still-strong pipeline–such as the major futures brokerage, deployed in the year.
“Gross annualised recurring revenue (ARR) growth of £0.7mln was delivered in the period, but was more than offset by churn derived principally from legacy customers unwilling to transition to SaaS, a process now coming to an end,” finnCap analyst Andrew Darley said in a note.
“Although some churn is always to be expected, much lower levels of churn allows gross growth to translate into net growth.”
Darley added: “Catalysts for acceleration of future ARR growth include the transition to master service agreements, SOC2 (security) accreditation and, particularly, the agreement with Trading Technologies (TT).
“The deal resulted not only in a robust balance sheet but a distribution agreement; the reality of execution is evidenced in the recent announcement of the first two products for TT to sell to its 1000+ strong global client base – with much reduced potential sales cycles to existing TT clients where MSAs already exist.”
In Wednesday’s results statement, meanwhile, the company highlighted that it had started 2022 well, with the new partnership with Trading Technologies International (TT) "progressing very well".
Final results for 2021 showed £5.4mln of gross cash at the end of the year after the direct strategic investment by futures industry-focused TT, which took a 25% stake in December.
Although most of the key headline numbers had been reported in a trading statement in January, the results revealed that 69% of customers are now contacted under a master services agreement on software-as-a-service (SaaS) contracts of two to five years with increased annual recurring revenue over the term of the contract.
The company has £3.8m of annual recurring revenue and 28 institutional customers on multi-year contracts.
Executive chairman Keith Todd said 2021 had been a challenging year for KRM22 but “the financial performance masks the significant progress the company has made strategically, with significant expansion of offerings on the Global Risk Platform and the continued migration of many customers to new multi-year contracts as well as new revenue contract wins”.
“We have started 2022 with a strong balance sheet and, most importantly, I'm pleased that the TT partnership is progressing very well with positive reaction from prospects and customers at the recent FIA global conference at Boca Raton clearly visible," Todd added.