KRM22 plc (LON:KRM) Executive Chairman Keith Todd caught up with DirectorsTalk for an exclusive interview to discuss their latest trading update, deals in the pipeline, the effect of signing two tier one banks, bringing cost down and the outlook going forward.
Q1: KRM22 issued a trading update earlier for the 12 month period to the 31st of December 2020. Can you just talk us through the financial highlights?
A1: Without doubt, 2020 will be memorable for the pandemic but importantly for the company, we were able to see a very substantial reduction in our adjusted EBITDA loss from £3 million in 2019 to approximately about £100,000 in 2020. That’s on revenues of £4.6 million, which was up from 4.1 million in 2019.
We also, during the year, took some steps to strengthen the balance sheet, we ended the year with £2 million of cash, the result of a convertible loan facility that we put in place and announced previously.
We’ve made very good progress in the marketplace, improving the quality of the customer base, in particular with signing some tier one banks.
Q2: Now, just in terms of deals, what can you tell us about the pipeline?
A2: Well, I think the place to start is probably with the tier one banks I just talked about. Just to maybe help the listeners and viewers to understand that the reason often firms like we talk about tier one banks as being important is it’s not just what we’ve immediately sold to those banks. That is important in its own right but it’s the opportunity to grow maybe an array of different offerings and sell different offerings over the coming year and actually years ahead. So, the process of getting into these banks takes a lot of time to pass their vendor onboarding processes.
So, the starting point on the pipeline is that we’ve signed some contracts, we’ve got some more contracts just on the verge of signing, approximately £500,000 worth of contracts which are in the final stages of negotiations. We can never tell exactly which week or which day there’ll all be completed, but certainly reasonably eminently.
Beyond that, there’s a very strong pipeline and this has been built up through 2019 through the work we’ve done in explaining to the market the company’s proposition, where we deliver our services on the global risk platform. This is a platform, you might think of it as an app store for your risk apps and it makes it easy to get access to them but importantly, the global risk platform helps to share data across a number of different applications.
Why is that relevant to the pipeline growth? Well, it’s very visual that customers see not just what they’re using today but what they might use in the future so we sit here today with a very strong pipeline, but importantly, a very good quality customer base that are current customers of the company.
Q3: Now, as you say, you’ve signed two tier one banks in H2 last year, what effect then has this had on the company?
A3: Well, I touched on it a moment ago, the process to be accepted by tier one bank is significant. Now all customers want to ensure firms are fit for purpose with delivering services and to remind the listeners that we are a technologies as a service company so we’ve been able to go through those processes and to be validated and accepted by these important tier one banks.
The second piece of this is that each of the banks last year, we signed three, were for different products and actually all three of those banks are capable of taking all of our products suite. I’m not saying they will do, but certainly are capable of taking all of those suites.
So, the opportunity to grow and expand off what we’ve already been able to sign up with these institutions is very important to our business going forward.
Q4: You also managed to bring cost down, can you just remind us the steps that you took and the effect that this has had?
A4: We entered 2020 with barely a mention of any pandemic, what became clear in late March, in the initial lockdowns, was that we may be faced with quite a significant period of challenge to all the growth.
We decided to take decisive action and put in place a number of cost reduction measures, on third party costs, travel was by nature stopped but we also did some reshaping of our resources. I’m very actually pleased to say that the team that remained here took voluntary salary sacrifices to help reduce that cost base.
So, the decisive prudent cost actions meant that we were able to deliver a result at the adjusted EBITDA line, which is very closely related to the market expectations, which were about £40,000 loss in a year. So, decisive action that was taken to control cost but importantly, though, it’s the revenue line going forward, which is the priority.
Q5: Just looking forward, how do you view the outlook? Is there anything investors should be looking out for over the coming months in terms of news flow from KRM22?
A5: It might be surprising for people to hear me say this, but we’re actually excited about the outlook going forward. Clearly not excited about the continuous strain of the pandemic, which is a factor but we’ve been operating globally, effectively from when it first kicked in.
As we go forward in 2021, we see that we’ve got this strong customer base, high quality customer base that I talked about earlier, we’ve also got the GRP, which is a platform for growth, it enables and encourages customers and prospects to take our other applications.
So, we’re very positive about it and we certainly entered 2021 much stronger than we entered to 2020 as a company, we’re still only 2.5 years old and we’ve come a long way, but a company with some very promising prospects.