This is big news and illustrates the quality of their platform. Recurring revenue was up 50% yoy with the acquisitions contributing and also 12 of 15 new customers added to the SaaS model, with ACRR revenue up 100% yoy. Mgmt are on track to increase recurring revenues and this is the way forward.
The project work being delayed is still an issue however as this makes up 35% of total revenue and being in the UK with brexit ect adds strain and no doubt investors have priced this to continue. The share price has fallen 36% from highs at the current price yet the downgrade is likely to be temporary in nature even if we have a 'hard brexit'. This latest contract shows businesses actually see value in using the platform to gain efficiencies which gives me confidence that the UK economy won't ruin GTK, but certainly the lack of contract revenues is a drag. Over time they are hoping to increase RR as a portion of total revenues to lessen this impact.
Mgmt have highlighted this with the acq of Evolve and the opportunity to cross sell into their own client base given the synergies between the businesses. Plenty of headroom with bank facilities gives GTK a war chest to buy more businesses that offer SaaS revenue streams to be less reliant on contract revenues moving forward. Yes they give up the license fee at the start, but as they pointed out it does increase the margins and life time value of a customer.
Big opportunity in Asia with deregulation expected to continue following their recent successes in Singapore. When looking at these markets the opportunity becomes much larger and given the dominant market share GTK have managed to achieve in first world markets like AU, NZ and the UK this should bode well for Asian markets as a proven solution.
At current prices this seems like a decent entry point IMO, and if there is a hard brexit I imagine there will be another dump on this stock but I can't see it going much lower than 4.304.50
But can I ask, when they say 'regulatory uncertainty' are they saying there is a chance the utility sector in the UK will be renationalised? Or is it just that businesses aren't committing to big capital expenditure until they know the impact of brexit on their business?
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