KRM22 plc share price, company news, analysis and interviews

KRM22 plc (LON:KRM) Executive Chairman Keith Todd caught up with DirectorsTalk for an exclusive interview to discuss their latest trading update, strengthening the quality of customers, expanding the global risk platform and what we can expect from the company in the next 6-12 months.

Q1: As mentioned, KRM22’s trading update published, what are the key points that we should take?

A1: Yes, it’s been a period of progress, progress frankly on many, many fronts but it’s also fair to say probably a period of some frustrations.

On the progress front, new customer revenues of £300,000 improved the quality of the annual recurring revenue base of our customer base, and also expanded the global risk platform offerings with new partnerships and new functionality.

The frustrations are really twofold, one the amount of time it has taken to close some contracts and as we’ve said in the trading update, we have £600,000 per annum of annual recurring revenue contracts which will be multi-year contracts that we’re waiting for signature, everything agreed. Unfortunately, it’s timing is such that they don’t always fall on the right side of the half year period reporting but it does mean we’ve got a strong order book coming.

The second frustration that we had a couple of terminations, companies that had run into in one case problems financially and the other case, a change in a business approach but overall, good progress on many fronts.

Q2: What did you mean by strengthening the quality of customers?

A2: It’s a good question because it does deserve some explanation, it’s a number of aspects of it.

Our core businesses is Software as a Service so we prefer, and want in fact, customers to take the global risk platform and that platform then is a mechanism for being able to expand further offerings into that customer base. Tied with the technology is what’s called Master Service Agreement (MSA), a contract with customer whereby a particular functionality, maybe at trade market risk management might be under one order form, but the next time you negotiate with the customer, you’ve got the basic contract in place, they can take the next part of the revenue automatically.

So the second thing is about the MSA and it’s key that also we’ve, as we reported, started focusing on bigger customers, tier ones and for very practical reasons. The practical reasons are that they’ve got to many more functions they could take from us and therefore greater revenue for the company. We love all the customers, I don’t want that to be misinterpreted that we only like big customers, we love all the customers but it’s just a statement of fact that a tier one bank, over the years, will be able to get us a lot more revenue stream.

So, when we’re talking about improving the quality of the customer base within our annual recurring, it’s not only that it’s better, more secure contracts, but it’s also more expandable contracts to give us good revenue growth in the future.

Q3: Now, you mentioned earlier that your global risk platform has been expanded, can you tell us a bit more about that?

A3: Yes, so really important, as I said a few months ago, the global risk platform is the central delivery mechanism and the one gets access to what one may think of as applications that they’re authorized to get.

We’ve added additional partnerships with Waymark, a company to bring some of the compliance digital reporting to the platform, and that’s expanded the partnership portfolio that is available for us.

Also, we’ve extended right across the suite from our market risk offering, as well as our compliance and including our surveillance offering and as well as our risk cockpit, the features, and functionalities in each of those products. That then provides us more sustainability stickiness of customers, but also opportunities to grow the revenue stream with those customers.

Q4: What else can we expect in the next 6-12 months from KRM22?

A4: Well, there’s going to be a continuation obviously of the closing of those contracts which are just about across the line but most importantly, it’s the global risk platform, again, as a springboard for further growth.

We’ve got some very exciting initiatives that are coming forth, you’ll be hearing more on in the future discussions about addressing holistic surveillance. This has been a topic we’ve been around for a year or two, but we’re bringing together, I think, what is quite a unique partnership of our own products and partner products to really address fully the holistic surveillance market.

We’ve got an initiative in the AI area and I’m hopeful within the next few weeks to be able to announced that, not only from the point of view of applying AI machine learning to our own products, but also to be able to address some of the wider requirements in the marketplace.

It’d be remiss not to mention the risk cockpit, the central integration tool, really being an interesting recent period of demonstration of how we’re bringing together both management information, management tools, together with risk management, all in the integrated risk cockpit.

So, yes, a lot of growth going forward and we are looking very positively at the outlook.

KRM22 plc (LON:KRM) Executive Chairman Keith Todd caught up with DirectorsTalk for an exclusive interview to discuss their audited results, the strengthened balance sheet, how the Global Risk Platform will be a springboard for growth, other 2020 highlights and what’s next for the company in 2021.

Q1: KRM22 has announced audited results for the year ended 31st of December 2020. Keith, firstly, can you just talk our listeners through the highlights?

A1: I think there’s got to be recognition that 2020 context was the pandemic but there are three things I’d probably focus on.

One is just how remarkable it was, how the team responded to being able to operate remotely from home, from many parts of the world. Secondly, financial performance, to deliver 11% revenue growth and to reduce the adjusted EBITDA loss by approximately £3 million to £0.2 million, were very significant steps in the year.

During this period, during 2020, with all this going on, we continued to invest in the GRP and it really now is a platform for growth.

Q2: Can you just expand a little on the financial performance?

A2: The revenue growth is obviously important, 11%, but we now have a £4.1 million of ARR – Annual Recurring Revenues – which is very important that we signed £800,000 of new business last year and that’s included a number of the tier one banks, which will help to give us a good growth opportunity for the future.

It is appropriate to acknowledge that we did see a fair amount more churn than normal, most of this was really just caused because of the effects of the pandemic and certainly nothing to do with the product we were delivering.

The significant change in the adjusted EBITDA number to £0.2 loss by £3 million reduction, the loss from the previous year, was the revenue growth but also importantly, the actions we took on the cost base. We took it very early recognising that back in March/April, that the year was going to be challenging, we did a number of changes to the cost base and we also put some salary sacrifice in place.

So, the combination of this made the dramatic impact on the adjusted EBITDA.

Q3: Now, you said that you’d strengthened the balance sheet. How did you do this?

A3: Well, there are a number of things. It was quite clear that when one is moving into challenging market conditions, strengthening the balance sheet is an appropriate step.

So, in April we raised £1.3 million new capital, in September we put a place in new convertible debt facility with Kestrel Partners to replace the existing debt facility at the time.

We also were able to acquire the remaining shares of a company called Irisium, which is our market surveillance offering and as part of that transaction for shares, we were able to eliminate debts that was associated with the Irisium subsidiary.

We also reset on the balance sheet the goodwill as a result of the fact that some of the earn-outs which were in the acquisitions were not achieved and therefore wouldn’t be paid. That, together with some adjustments related to just the economic conditions, meant we wrote down some of the goodwill associated with those acquisitions.

So, we come out of the year with a stronger balance sheet, with approximately £2 million of cash in the bank and that sets us up very well for 2021.

Q4: Just looking at the future, how will the Global Risk Platform be a springboard for growth?

A4: None of the fundamentals from when we first founded the company have changed, the pandemic didn’t affect any of those.

We’re building a platform business that really is looking to leverage the data that our customers provide, and it provides a springboard for our growth because we ingest into the GLP and then can populate various applications for the customer, depending on what they have taken from us. This dramatically reduces the cost and the complexity for the customer, it means that they have to deal with less technology providers and that very, very important.

From our perspective, the springboard growth comes from this, it’s like an app store, you can see the applications as a user of the system that you’re using but you can also see what might be possible for you to use, should you need it for your business to help enhance your own business. So, it reduces the integration time for customers.

Now, we’ve seen during the last few months, further partnerships being announced to be able to be added to the GRP and it’s worth reminding the listeners that our platform not only has our own products on it, but we bring other partner products on it really to help fulfill the whole requirements for the customer.

Very definitely, the GRP is the springboard for growth.

Q5: Are there any other 2020 highlights that you’d like to cover?

A5: Always in the background of companies, there are things that are going on, it’s worth acknowledging Kim Suter, the CFO, and his Finance team in achieving fully audited results at this time of the year.

One of the other things we did on the operational side was went for a certification, which is known as a SOC 2 Type 1 certification, which is a global standard, independently audited on the delivery of the service and the secure way you handle customer’s data.

Now this doesn’t get a lot of publicity, but it’s crucial for a SAAS-based business and we’re unusual being such a new company, such a young company to be a SOC 2 Type 1 approved already and that is very, very powerful.

What it means in practical terms, apart from we confirmed that we’re running the business professionally, is that’ll help reduce some of the sales cycles, as we bring new customers on board. They’ll have the confidence to know that we’ve been independently audited, not just on the financial numbers but the way we operate the business securely.

Q6: What’s next for KRM22 in 2021?

A6: It’s that springboard for growth from the GRP, we’ll continue to add further features and functions to the GRP, we’ve made an investment in a number of new features over the last year.

In 2021, you’ll see further enhancements, in particular refreshing some of the user experience which helps to make the users of the system operate more efficiently and effectively.

So, a broader offering and definitely more growth coming from those cross-sale opportunities with those higher quality customer, bigger customers that we’ve now been able to sign up.

KRM22 plc (LON:KRM) Executive Chairman Keith Todd caught up with DirectorsTalk to discuss their new partnership with Kintail Consulting, launching the People & Culture Risk Management solution, customers they are specifically targeting and why they chose Kintail Consulting to partner with.

Q1: You’ve announced a partnership with Kintail Consulting, can you explain to us what it is KRM22 are launching?

A1: We’ve made a launch of an initiative to focus on people and culture risk. People have always been an important of all businesses but in particular in a capital markets context, the whole challenge of managing risks associated with people and culture have become greater over the period.

We’ve launched what we know as our People and Culture Risk proposition to help HR Directors manage that portfolio of risks.

Q2: So, why are you launching it now?

A2: Well, we need to do a couple of things, first of all it was important that we found a partner we could work with because whilst we have lots of opinions within the company about people and cultural risk, we certainly aren’t naturally experts in this topic. Working with Chris Cherrington and Kintail Consulting, we found a really good partner that we can work with.

When we look at what happened last year with the pandemic, it really demonstrated to us as we were talking to customers, talking to people in the marketplace, that the challenges that were there around people management, leadership, building culture were even greater as a result of what happened through the pandemic.

Therefore early ’21 it seemed the right time to launch this initiative.

Q3: Why is it important though?

A3: It is important, I said earlier on it’s always been important, people are a critical part of business but one of the things which our company is all about is integration of components of risk. If one looks at the challenges that firms have in the capital markets around people, they fit very well aligned with class business objectives, priorities, giving people clearer accountabilities, that also is a direct link to the whole, for example FCA Senior Management Regime where regulators are now requiring great clarity around people’s specific accountability for aspects of running the business.

The tools to bring together all of these, I would say, component pieces that are involved around managing people, bringing them together have not been optimal is what I would suggest. By applying our Risk Cockpit in the use case of people and culture risk, we can really help HR Directors in particular, but firms more generally, bring together those portfolio of activity, initiatives, processes around people and culture risk in one place to have an oversight of them and understand what is working, what isn’t working, what might need some attention for the firm to undertake.

Q4: So, what customers are you targeting specifically?

A4: It’s very applicable for all customers but probably the practical reality is we’re more focussed on what I might call the tier 2/tier 3, the tier 1 players have very very large organisations and resources and have found different ways of addressing it. So, probably consistent with our original tier 2/tier 3 players.

This is applicable to all organisations, frankly not just capital markets, our focus remains in capital markets but the toolkit which our Risk Cockpit focus on HR and culture will do is applicable to other markets. Our sales though very much definitely in the capital markets context.

If I may just take a moment, and I’ve talked before about joining up the dots within organisations and I may run reference in a moment to Compliance and HR but we’re also talking about really getting the organisation engaged in this challenge. So, we’ve got an opportunity to educate and help HR Directors, we have with our Compliance offering in the company good contact with the Compliance Managers, we can bring the HR Director and the Compliance Manager together for a common view about the issues that overlap, they have shared accountabilities on. Likewise, with operational resilience and other areas where the Risk Cockpit has seen great practical use, it’s a way of helping firms join the dots.

So, when one part of an organisation adopts the Risk Cockpit, it’s just then an optionality for other parts of the organisation to use it for other use cases which it is very applicable to.

Q5: Finally, why did KRM22 choose to Kintail Consulting?

A5: I’ve known Chris Cherrington for quite a number of years and I’m aware of the work importantly that he’s been doing with leading capital market organisations around leadership and management and motivation. He is and his firm is very in tune with this challenge of really how do you optimise performance, our principal risk is alpha, risk isn’t always a negative, risk can be used and the proactive management of risk tools can help firms deliver greater and better busines performance than normal market performance.

So, I known Chris for a number of years and he’s very in tune with that thinking that actually people management, leadership, people risk management, cultural risk management isn’t a defensive mood, it’s very much something can be offensive.

Good talent with great subject matter expertise which is why we’ve done a partnership with Chris Cherrington and Kintail Consulting.

KRM22 plc (LON:KRM) Executive Chairman Keith Todd caught up with DirectorsTalk for an exclusive interview to discuss their latest trading update, deals in the pipeline, the effect of signing two tier one banks, bringing cost down and the outlook going forward.

Q1: KRM22 issued a trading update earlier for the 12 month period to the 31st of December 2020. Can you just talk us through the financial highlights?

A1: Without doubt, 2020 will be memorable for the pandemic but importantly for the company, we were able to see a very substantial reduction in our adjusted EBITDA loss from £3 million in 2019 to approximately about £100,000 in 2020. That’s on revenues of £4.6 million, which was up from 4.1 million in 2019.

We also, during the year, took some steps to strengthen the balance sheet, we ended the year with £2 million of cash, the result of a convertible loan facility that we put in place and announced previously.

We’ve made very good progress in the marketplace, improving the quality of the customer base, in particular with signing some tier one banks.

Q2: Now, just in terms of deals, what can you tell us about the pipeline?

A2: Well, I think the place to start is probably with the tier one banks I just talked about. Just to maybe help the listeners and viewers to understand that the reason often firms like we talk about tier one banks as being important is it’s not just what we’ve immediately sold to those banks. That is important in its own right but it’s the opportunity to grow maybe an array of different offerings and sell different offerings over the coming year and actually years ahead. So, the process of getting into these banks takes a lot of time to pass their vendor onboarding processes.

So, the starting point on the pipeline is that we’ve signed some contracts, we’ve got some more contracts just on the verge of signing, approximately £500,000 worth of contracts which are in the final stages of negotiations. We can never tell exactly which week or which day there’ll all be completed, but certainly reasonably eminently.

Beyond that, there’s a very strong pipeline and this has been built up through 2019 through the work we’ve done in explaining to the market the company’s proposition, where we deliver our services on the global risk platform. This is a platform, you might think of it as an app store for your risk apps and it makes it easy to get access to them but importantly, the global risk platform helps to share data across a number of different applications.

Why is that relevant to the pipeline growth? Well, it’s very visual that customers see not just what they’re using today but what they might use in the future so we sit here today with a very strong pipeline, but importantly, a very good quality customer base that are current customers of the company.

Q3: Now, as you say, you’ve signed two tier one banks in H2 last year, what effect then has this had on the company?

A3: Well, I touched on it a moment ago, the process to be accepted by tier one bank is significant. Now all customers want to ensure firms are fit for purpose with delivering services and to remind the listeners that we are a technologies as a service company so we’ve been able to go through those processes and to be validated and accepted by these important tier one banks.

The second piece of this is that each of the banks last year, we signed three, were for different products and actually all three of those banks are capable of taking all of our products suite. I’m not saying they will do, but certainly are capable of taking all of those suites.

So, the opportunity to grow and expand off what we’ve already been able to sign up with these institutions is very important to our business going forward.

Q4: You also managed to bring cost down, can you just remind us the steps that you took and the effect that this has had?

A4: We entered 2020 with barely a mention of any pandemic, what became clear in late March, in the initial lockdowns, was that we may be faced with quite a significant period of challenge to all the growth.

We decided to take decisive action and put in place a number of cost reduction measures, on third party costs, travel was by nature stopped but we also did some reshaping of our resources. I’m very actually pleased to say that the team that remained here took voluntary salary sacrifices to help reduce that cost base.

So, the decisive prudent cost actions meant that we were able to deliver a result at the adjusted EBITDA line, which is very closely related to the market expectations, which were about £40,000 loss in a year. So, decisive action that was taken to control cost but importantly, though, it’s the revenue line going forward, which is the priority.

Q5: Just looking forward, how do you view the outlook? Is there anything investors should be looking out for over the coming months in terms of news flow from KRM22?

A5: It might be surprising for people to hear me say this, but we’re actually excited about the outlook going forward. Clearly not excited about the continuous strain of the pandemic, which is a factor but we’ve been operating globally, effectively from when it first kicked in.

As we go forward in 2021, we see that we’ve got this strong customer base, high quality customer base that I talked about earlier, we’ve also got the GRP, which is a platform for growth, it enables and encourages customers and prospects to take our other applications.

So, we’re very positive about it and we certainly entered 2021 much stronger than we entered to 2020 as a company, we’re still only 2.5 years old and we’ve come a long way, but a company with some very promising prospects.