Enterprise software presently contains some of the hottest stocks across the equity universe. Indeed many such as Adobe, Coupa Software, Autodesk, ServiceNow & Slack trade at >10x EV/sales, reflecting their secular double-digit growth, pricing power, bumper EBITDA drop through rates, wide economic moats and recurring revenues. The trick of course for investors is to spot the next SaaS ‘category killers’, before valuations reach nose bleed levels. Accepting however that things don’t always go up in straight lines, particularly for early-stage businesses that aim to disrupt large $100m+ verticals.
One such company that we believe fits the bill, is nascent ‘RiskTech’ SaaS expert KRM22. It is 100% focused on the Capital Markets, and is in the process of creating a ‘1st - of-its-kind’ Global Risk Platform for brokers, fund managers, institutions, quants, traders et al (see below). Not only addressing all their regulatory, market, technology & operational risk requirements, but also materially reducing their costs & complexity.
Ok, but how are things progressing? Well encouragingly this morning, KRM22 said that it now served 37 institutional customers (vs 26 Dec’18) and delivered H1’19 turnover of £1.8m (vs £1.3m FY18) - exiting June with Annualised Recurring Revenues of £4.1m (vs £1.0m LY & £3.3m Dec’18). Nonetheless the timings of some contracts that were anticipated to be secured over the summer, instead shifted to the right (deferred, not lost) due primarily to the less certain macro environment (eg Brexit, trade tariffs, Hong Kong protests & slowing global GDP).