The RPMGlobal Holdings Ltd (ASX: RUL) share price is charging higher on Monday after the release of its full year results.
In fact, at one stage today the mining software company’s hit a multi-year high of $1.34.
At the time of writing they have given back some of these gains but are still up a solid 4% to $1.30.
How did RPMGlobal perform in FY 2020?
For the 12 months ended 30 June 2020, RPMGlobal delivered a $1.2 million or 1.5% increase in revenue to $80.7 million.
This was driven by a 317% increase in software subscription revenue during FY 2020, which offset declines in perpetual licence revenue, maintenance revenue, and advisory & consulting services revenue.
This strong demand for software subscriptions led to the company’s total contracted value (TCV) of software subscriptions sold increasing by $24.2 million or a massive 235% to $34.5 million during the year. Of this, only $6.1 million was recognised in this year’s financial accounts, with $28.4 million from this year plus $6.3 million from prior years ($34.7 million in total) to be recognised across the remaining duration of the committed term customer contracts. In most cases this is a period of 3 years.
RPMGlobal’s operating contribution (EBITDAR before Foreign Exchange and one-off COVID-19 costs/provisions) came in at $8.4 million. This was down slightly from $8.5 million in FY 2019.
And while the company made another loss this year, it was a big improvement year on year. RPMGlobal posted a loss after tax of $0.7 million for FY 2020, compared to a $5.2 million loss in FY 2019. Last year’s result included a sizeable tax expense.
Strong balance sheet.
Another positive was the company’s strong balance sheet. RPMGlobal had a cash balance of $40 million with no debt at the end of June.
This includes the final acquisition earnout payments of $2.6 million for the iSolutions and MinVu acquisitions during the year. Pleasingly, this means the company will no longer be required to share revenues from these products going forward.
Outlook.
The company is expecting challenges in FY 2021 because of the pandemic, but remains very positive on its longer term prospects.
Management notes that at the end of FY 2020 the annual recurring revenue (ARR) from software subscriptions reached $12.7 million and the ARR from perpetual maintenance revenue stood at $20.5 million. This means RPMGlobal starts the year with total ARR of $33.2 million.
It commented: “This $33.2m in TARR for FY2021 represents 68% of all software revenue reported by the company in FY2020 delivering revenue certainty and resilience for the company even during uncertain times.”
It added: “We continue to see solid growth in the software sales pipeline however currently we are experiencing delays in finalising deals as miners reprioritise both their capital and operating expenditure in response to COVID-19. While these delays are understandable, we believe these deals will be concluded in the fullness of time.”
Nevertheless, management remains confident in its future prospects and expects its investment in software development to help it win market share in the coming years.
It explained: “The continued heavy investment in our products now (when it may be hard for others to do the same) will we expect result in strong market share growth over the next three to four years.”
“With $33.2m already in TARR for FY2021, $40m in cash (and no debt) and $15.8m in operating cashflow in FY2020 the Board has very few concerns about the company’s financial viability and will continue investing in the company’s products while making value accretive acquisitions where strategic opportunities present themselves,” it concluded.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of RungePincockMinarco Limited. The Motley Fool Australia has recommended RungePincockMinarco Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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