# KRM22 plc made good progress through the year

- Link: https://www.directorstalkinterviews.com/krm22-plc-made-good-progress-through-the-year/4121020248
- Published: 2021-09-01T07:28:33+01:00
- Author: Giles

**KRM22 plc** ([LON:KRM](https://www.directorstalkinterviews.com/company/krm22-plc/krm.l)),
the technology and software investment company, with a particular focus on risk 
management in capital markets, announced its unaudited interim results for the six
months ended 30th June 2021.

**Highlights**

**Financial**

·      Annualised Recurring Revenue* (“ARR”) of £3.7m at 30 June 2020 (H1 2020: 
£4.0m)

·      Total revenue recognised of £2.2m (H1 2020: £2.3m)

·      Adjusted EBITDA loss** of £0.3m (H1 2020: loss of £0.3m)

·      Loss before tax of £1.7m (H1 2020: £1.2m)

·      Cash and cash equivalents at 30 June 2021 of £1.4m (FY 2020: £2.0m)

**Operational**

·      Two new Market Surveillance customers

·      An existing Pre-Trade Risk customer adding the Market Surveillance product
to their Global Risk Platform

·      A five-year renewal with a major European Bank for the Market Surveillance
product, with increased ARR on an annual basis over the term of the contract

·      Launch of People and Culture Risk offering in February 2021

·      New partnerships signed with Waymark, to provide compliance scanning of regulatory
changes, and Lexis Nexis, to provide Exchange Data News Service to the Global Risk
Platform

·      Soc 2 accreditation approved in March 2021

**Post-Period Events**

·     Signed a three-year contract extension with to an existing tier one customer,
with ARR of £0.4m per year, an increase in existing ARR of £0.15m per year

·      Growth in ARR to £3.9m

* Annualised Recurring Revenue (ARR) is the value of contracted Software-as-a-Service(
SaaS) revenue normalised to a one year period and excludes one time fees

** Adjusted EBITDA is the reported profit/(loss), adjusted for depreciation, amortisation,
share-based payment charges and unrealised foreign currency gains/losses and non-
recurring exceptional costs including impairment charges, reorganisation costs, 
gain on extinguishment of debt and acquisition and funding costs, gain/loss on disposal
of property, plant and equipment 

> **Commenting on the results, Executive Chairman and CEO of KRM22, Keith Todd CBE,
> said:**
> “We have made good progress in the year expanding our offering and improving the
> quality of our recurring revenue while maintaining a tight handle on costs.  Delays
> in signing some larger orders is frustrating but larger customers will lay the
> bedrock for further shareholder value creation in the future.”

**CHAIRMAN’S REPORT**

The Company has made progress in the first half of 2021, with new Annual Recurring
Revenue (“ARR”) derived from new customers, sales of new products to existing customers
and existing customer contract renewals with extended contract terms and increases
in ARR over the new contract term, all of which has further strengthened the quality
of the Company’s ARR.

**Annual recurring revenue**

As of the date of this report, the Company has total ARR of £3.9m.  In addition 
to the new ARR signed in the year to date of £0.4m, the pipeline of sales opportunities
remains strong with £0.5m of ARR with agreed contracts awaiting signature plus a
further £0.2m in final discussion ahead of contract negotiation.  We are also seeing
strong engagement with new high-quality prospects.  The delay in signing these contracts
is frustrating but unfortunately not uncommon when dealing with global banks. 

As previously announced in the update on 22 July 2021, the Company did see two customer
losses worth an aggregate of £0.5m ARR, one as it transitioned legacy business to
its current business model of delivering Software as a Service and a second due 
to the impact of a customer non-payment of invoices and therefore non-renewal.

Our new business since the start of the year includes two new Market Surveillance
customers, an existing Pre-Trade Risk customer adding the Market Surveillance product
to their Global Risk Platform, a five-year renewal with a major European Bank for
the Market Surveillance product with increased ARR on an annual basis over the contract
term and a three-year contract extension with a tier one customer for use of the
Enterprise Risk Cockpit, increasing ARR by £0.1m to £0.4m per year, with the contract
including an option to increase ARR further by up to £0.2m from March 2022.

Since KRM22 was set up in 2018, new business wins have increased from £0.2m in FY
2018, £0.7m in FY 2019, £0.8m in FY 2020 and £0.4m in the year to date in 2021. 
The Company also has further opportunities across its product suite and is anticipating
increased ARR contract signings in the second half of the year.

We are working on several initiatives to reduce the time to convert opportunities
to contracts including:

·     Transition of our historic ARR contracts to a Master Services Agreement (“
MSA”) under longer-term contracts which reduces significantly the time to contact
for additional sales.  These, together with new business wins that are also contracted
under an MSA, now represent 58% of total ARR;

·    Achieving SOC2 Type 1 accreditation in March 2021 and working towards SOC2 
Type 2 accreditation.  This globally recognised security certification should speed
up the Tier one Bank internal sign off process related to cyber security as the 
accreditation provides customers with confidence that their information is protected
and secure; and

·      Looking to expand our distribution partnerships in particular working with
top tier capital markets technology suppliers to add our product offering to their
own offering.  These firms are already approved suppliers to tier one banks and 
therefore it should reduce the on boarding time to close new deals.

**Our Market**

The market we serve is adapting to the new norm and we anticipate an increase in
new projects and opportunities particularly as we enter our customers and prospects
new budgets for 2022.  Most of the European and North American markets are replacements
opportunities that play well with our proposition to reduce the cost and complexity
of risk systems. The cryptocurrency market is an exception where there is increasing
focus on professionalising the marketplace as it moves more mainstream and is seeing
larger financial institutions investigating it.  The Asia market still has new opportunities
in addition to cryptocurrency as Chinese capital markets firms expand outside of
mainland China.

**Products**

We have continued to invest in our products with over thirty functional and operational
enhancements delivered in the year to date.  This includes functionality for the
first customer deployment of our new Pre Trade product that provides risk limit 
management integrated into the firm’s electronic execution platforms though predefined
authorisation workflow with full audit trail and will go live in the third quarter.
We also announced partnerships with Waymark, to provide compliance horizon scanning
of key regulatory changes from more than 2,500 global data sources, Kintail Consulting,
to develop a People and Culture Risk Cockpit, and Lexis Nexis, to add an Exchange
Data News Service to the Global Risk Platform.

Additional product features and launches for the remainder of 2021 include the release
of the enhanced Risk Cockpit which will provide enriched functionality and the ability
for a customer to ‘self-set-up’ thus allowing for “Low Touch” sales of the product.
We are working with a partner company to deliver AI as a service across our suite
of products, initially focusing on Market Surveillance and Operational Risk, and
we will shortly be announcing our first technology and cyber risk offering delivered
through the Risk Cockpit.

**Selling**

We have expanded the number of active prospects so that we can increase the ability
to convert the sales pipeline.  Actions include expanding our opportunities through
distributor networks and launching new sales campaigns that leverage our Global 
Risk Platform capability such as the redefining of Compliance Risk with a Holistic
Surveillance offering that includes four of our existing product offerings integrated
into one package.  In September, and in conjunction with our partner, Acuiti, the
first report on the KRM22 risk sentiment will be released which will provide an 
initial view of the critical risk factors as seen by the community we address.

**Vision and mission**

Our vision ‘A world in which organisations operate at their optimal threshold of
risk to drive increased returns’ and mission ‘To bring increased visibility and 
lower cost risk management to capital market organisations’ has not changed since
our inception.

Our ability to offer integrated functionality as a technology service significantly
reduces the cost and complexity of managing risk for our customers.  We are already
seeing existing customers adding new KRM22 products to their existing suite of risk
products and new customers buying a suite of KRM22 risk products through the Global
Risk Platform, thus eliminating the requirement for multiple distinct applications
that demand separate infrastructure and data sources  

**Strategy**

Our strategy has not changed.  The core of which is to drive organic growth from
our suite of products and our partners products delivered through the Global Risk
Platform.  We will also be looking again at acquisitions and investments to further
drive our growth and scale.  Our business is built on a highly scalable administrative
and operational platform which will ensure that our growth delivers high margins.

**Outlook**

We have a compelling set of product offerings and broad base of prospects within
our 2021 and 2022 sales pipeline which underpins our confidence in delivering the
market expectations. 

Keith Todd CBE

Executive Chairman and CEO

31 August 2021

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