KRM22 plc (LON:KRM), the technology and software company focused on risk management in capital markets, has announced its audited results for the year ended 31st December 2021.
· Gross cash as at 31 December 2021 of £5.4m (2020: £2.0m)
· Annualised Recurring Revenue (ARR) as at 31 December 2021 of £3.8m (2020: £4.1m)
o New contracted ARR in the year ended 31 December 2021 of £0.7m
· Total revenue recognised of £4.1m (2020: £4.6m)
· Adjusted EBITDA loss of £0.7m (2020: £0.2m)
· An improved loss before tax of £3.4m (2020: loss of £5.7m)
· Further funding received in December 2021 of £4.7m (gross) through a direct strategic investment by Trading Technologies International, Inc.
· Distribution agreement signed with Trading Technologies International, Inc. in December 2021 following its strategic investment which will help provide a platform for future growth
· Deployment of a major futures brokerage customer adopting multiple KRM22 risk management products using a single data set
· 69% of customers now contacted under a Master Services Agreement on multi-year contracts with increased ARR on an annual basis over the term of the contract with contract commitments of between two and five years
· Soc 2 accreditation approved in March 2021 demonstrating KRM22 has internal controls in place to safeguard customer data which will assist in new customer procurement processes
Keith Todd CBE, Executive Chairman of KRM22, commented:
“The 2021 financial performance masks the significant progress the Company has made strategically, with significant expansion of offerings on the Global Risk Platform and the continued migration of many customers to new multi-year contracts as well as new revenue contract wins. We have started 2022 with a strong balance sheet and, most importantly, I’m pleased that the TT partnership is progressing very well with positive reaction from prospects and customers at the recent FIA global conference at Boca Raton clearly visible.”
2021 was a challenging year for KRM22 however we have entered 2022 well positioned for the next phase of the Company’s growth. In the almost four years since we floated on AIM, we have created a capital markets SaaS based risk business with £3.8m of Annual Recurring Revenue and 28 institutional customers with multi-year contracts.
We have endured two years of the COVID-19 pandemic which has placed restrictions on the traditional sales methods and tackled the transitioning of acquired deployed software to SaaS platform delivered services.
We exit 2021 with a strong shareholder base and balance sheet as well as an extensive array of risk services on our Global Risk Platform as well as many new and renewed multi-year contracts.
Trading Technologies International Inc. (“TT”) acquired a 25% strategic stake in KRM22 in December 2021 through a subscription for new shares and we have entered into a distribution agreement with TT to take KRM22’s products progressively into the TT customer base with significant opportunities for growth and cross selling.
In 2021 we secured £0.7m of new business however this organic growth was offset by an unprecedented level of existing customer churn in the year. The churn was from legacy customers on old deployed software that did not want to migrate to SaaS delivered services. This has been a common theme over the last two years of the COVID-19 pandemic. Whilst some churn is expected and budgeted for in 2022, we now believe to be at the end of that excessive churn process and expect to see positive growth in ARR going forward.
I am pleased that Stephen Casner is taking the Company forward as CEO. Stephen’s plans to strengthen sales and marketing resource as well as continue investment in the Global Risk Platform and KRM22 risk products, will help accelerate KRM22 for a sustained period of growth backed up by a strong balance sheet.
Keith Todd CBE
KRM22 is poised for a significant and rewarding year in 2022. We ended 2021 with a significant influx of capital from a new investor, a new distribution channel with one of our industry’s premier technology providers and a renewed commitment to redeploy our sales and marketing resources, all of which is expected to provide accelerated growth over the next two years.
2021 brought significant change to our target market. We saw companies change the way they use, deploy and consolidate risk technology. This change was predicted by KRM22 and underpinned the rationale for the acquisition of legacy software products like Ancoa, ProOpticus and Object+ which have subsequently been enhanced and rebranded as Market Surveillance, Post-Trade, At-Trade and Pre-Trade products and the development of our Global Risk Platform. Those acquisitions brought KRM22 key risk management talent and technology solutions that could be modeled into services for our Global Risk Platform, as well as a portfolio of customers who trusted these systems on a daily basis to manage risk on their assets.
We knew the products we acquired, and their competitors, were created in isolation of each other and significant benefit would come from standardisation on to a seamless platform. Disruption would come to these legacy platforms and our investments in creating a next generation, SaaS based Global Risk Platform would prove to be a natural constituent for the market to progress into.
2021 saw KRM22 make good progress on delivering the Global Risk Platform. A new showcase customer was deployed, creating the first instance of an “end to end” risk platform customer. This platform enabled our customer to use one risk system, the KRM22 Global Risk Platform, with a common set of data elements to manage market, compliance and enterprise risk. I am proud to announce that this key engagement continues to be a success and new services are being deployed weekly to further grow and mature this next generation system.
A key deliverable last year was our ability to completely rebuild one of the legacy systems we acquired into fresh technology and successfully deploy it for a tier one bank as a new customer of KRM22. This Pre-Trade Risk Limit Management application is now a key focal point of our Global Risk Platform and is being deployed for the “showcase customer” right now. We believe by the end of 2022 that our “showcase” will be complete and that the full power of the Global Risk Platform will be easy to identify and its value proposition obvious. This will have a significant impact on our core market and will act as an accelerant to KRM22’s success in becoming the capital markets premier provider of risk technologies.
In Blackrock’s CEO Larry Fink’s 2022 Letter to their CEO’s, he stated that the pandemic “has turbocharged an evolution in the operating environment for virtually every company.”. This is true for KRM22 as well.
He went on to say “It’s changing how people work and how consumers buy. It’s creating new businesses and destroying others. Most notably, it’s dramatically accelerating how technology is reshaping life and business. Innovative companies looking to adapt to this environment have easier access to capital to realize their visions than ever before. And the relationship between a company, its employees, and society is being redefined.”.
The pandemic’s “turbo-charging” had significant consequences for KRM22. Customer use of the legacy applications we acquired diminished, as five major organisations “swapped” our legacy products for newer products. While new customer acquisition was still strong, the sting of customer losses made it appear that KRM22 was basically “treading water”, but nothing could be further from the truth.
Our products continued to grow into a formidable platform, our new customers are some of the most exciting and dynamic firms in our industry and our staff of talented risk “knowledge merchants” found a successful way to work remotely while building great new products and providing exceptional global support services.
One “turbo-charged” effect of the pandemic was the change in the “buying process” our target market uses to evaluate and adopt new technology. The traditional industry events that could highlight and showcase new products were either cancelled, reformulated into webinars or so lightly attended that they were no longer effective marketing and selling events. Customers no longer tolerated the amount of “friction” in adopting modern technology. They increasingly demand “on the go” applications that they can use without long implementation planning and use of internal resources to manage large scale projects.
In response to that dynamic, KRM22 announced in September 2021 that it was looking for a strategic partner to help battle back these headwinds, accelerate the adoption of our new products, stem the tide of customer losses and provide capital to accelerate new features and products on the Global Risk Platform while we build one of the best sales organisations in our industry.
To that end we took in a strategic investment and signed a major distribution agreement with Trading Technologies International Inc. (“TT”), one of the futures industry’s most iconic technology firms. We now begin 2022 with a strong balance sheet and one of the biggest growth opportunities for the Global Risk Platform since we launched the platform in 2019.
We will use our balance sheet strength to continue adding to the Global Risk Platform, to invest in new sales and marketing resources and efforts that recognise the “new post-pandemic normal”, whilst also adhering to any financial covenants associated with the Kestrel loan facility. We are currently working hand in hand with our new distribution partner and will deliver exciting and proven risk technology to their customers before mid-year in a “frictionless” method, matching exactly how these customers want to buy. We will allow TT users to adopt KRM22 technology without having to wait for long term implementations, risk will be available to them at the “touch of a button”. This ability quickly validates the value proposition our technology brings and creates a “stickiness” for our applications that will pave the way for these new customers to explore and use more and more of our Global Risk Platform.
While we expect 2022 to be a year of transformation for KRM22, it is coming from a sound basis of great technology, expert resources and enriching partnerships.
 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 loss for the year, adjusted for recurring non-monetary costs including depreciation, amortisation gain on extinguishment of debt, unrealised foreign exchange loss, deferred salary bonus accrual write back and share-based payment charges and non-recurring costs including profit/(loss) on tangible/intangible assets, impairment charges, reorganisation costs and acquisition and funding costs.