The RPMGlobal Holdings Ltd (ASX: RUL) share price has jumped 10% after the ASX tech share revealed a strong FY23 update.
RPMGlobal is a software business that provides services to mining companies, as well as advisory services and professional development. The software can be used to “extract more value at every stage of the mining cycle.”
Strong FY23 update
The ASX tech share revealed that the FY23 total contracted valued (TCV) made from software sales increased by 25.4% (or $14.3 million) year on year to $70.5 million. That’s a good tailwind for the RPMGlobal share price.
RPMGlobal said that TCV from subscription sales ended the year at $65.8 million, perpetual sales were $2.9 million and new maintenance revenue from perpetual sales amounted to $1.8 million.
The advisory part of the business is expected to contribute $6.2 million to total revenue, an increase of 54% year on year. However, the ‘over performance’ of both the advisory and software divisions resulted in once-off management incentives of $3 million being earned.
Future revenue looks promising
The software company sales that it now has $126 million of pre-contracted, recurring, non-cancellation software revenue (which will be accounted for in future years) was up 32% ($31 million).
Its $65.8 million of TCV software subscription sales is reportedly going to deliver annual recurring revenue (ARR) of $11 million. Management said that the total value of ARR as of 11 July 2023 is $55 million, which breaks down to $42 million of subscription and $13 million from maintenance.
In other words, the company has seen good growth of revenue that’s expected to be repeated in the following financial year.
Profitability and balance sheet
While EBITDA (EBITDA explained) isn’t the final measure of profit, it’s a decent measure of day-to-day profit, and it’s what the company told investors about.
Operating EBITDA, before once-off management incentives, is now expected to finish the year at $15 million. This compares to guidance of $13.8 million given in February. This is good news for the RPMGlobal share price.
Including management incentives, operating EBITDA is expected to finish the year at $12 million, an increase of 243%, or $8.5 million.
It had no debt at the end of FY23 and a cash balance of $34.7 million, after spending $7.6 million on a share buyback and $0.9 million on acquisitions.
Final thoughts on the RPMGlobal share price
It’s still down over 30% from the 2021 peak, yet the revenue has grown a lot more and profitability is soaring.
I think this is a good time to invest in this business considering the rapid progress it’s making, its expanding client base and the rising profit margins that it will be able to achieve as revenue grows.
