RPMGlobal Holdings Ltd (ASX: RUL) shares are currently up around 6% after releasing its FY20 result.
RPMGlobal’s FY20 report
The mining software company announced a pleasing set of growth numbers.
Whilst total revenue only rose by 2% to $80.7 million, software subscription revenue increased by 317% to $10 million. Maintenance revenue fell 6% to $20.6 million and advisory & consulting revenue dropped 5% to $37.1 million.
Its operating profit fell 1% to $8.4 million. However, its bottom line improved by 88% to a net loss after tax of $0.7 million.
The total contracted value (TVC) of software subscriptions sold during FY20 increased by $24.2 million to $34.5 million. However, most of this revenue will be recognised in future years. The increased subscription TCV saw a $1.3 million increase in commission and incentive costs.
Operating cashflow more than doubled during the year to $15.8 million. At the end of FY20 the company had $40 million of cash and no debt.
Outlook
The company continues to aim to be able to offer a complete enterprise planning framework for the mining industry, which is compelling for customers if it covers the full mining value chain.
RPMGlobal finished FY20 with annual recurring revenue (ARR) of $12.7 million and ARR from perpetual maintenance revenue of $20.5 million.
COVID-19 continues to cause uncertainty, which may cause difficulties for the advisory and software consulting divisions.
Management said that the software sales pipeline is good, but there are delays due to COVID-19 as customers are careful with their capital and operating spending. RPMGlobal thinks the deals will be completed in time.
The current investing into products should help grow market share in the coming years. The company is also on the lookout for acquisitions when appropriate.
Summary
RPMGlobal looks like a very promising business. The RPMGlobal share price has been a strong performer over the past six months, so whilst I’m confident about the long term, there may be volatility in the short term – which could prove to be a buying opportunity if it occurs.
Software businesses have very attractive models when they can generate recurring annual revenue at high profit margins. Sticky customers are good for cashflow generation. My own take is that if you’re interested, then a small purchase today could be wise, with more buying on price weakness. There are other software ASX growth shares out there which could also prove to be good long term investments like Pushpay Holdings Ltd (ASX: PPH).
