KRM22 Q&A: Global Risk Platform will be a springboard for growth (LON:KRM)


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.

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