REG - FD Technologies PLC - FY24 Trading Update

FD TechnologiesAnnouncement

01/03/2024 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240301:nRSA0688Fa&default-theme=true

RNS Number : 0688F  FD Technologies PLC  01 March 2024

1 March 2024

 

FD Technologies plc

("FD Technologies", the "Company" or the "Group")

 

FY24 Trading Update - KX and First Derivative Performance

 

FD Technologies (AIM: FDP.L, Euronext Growth: FDP.I) announces an update on
trading for the year to 29 February 2024.

 

A separate RNS has also been released providing an update on the conclusion of
the structure review and a merger of MRP with CONTENTgine.

 

We anticipate that Group revenue will be slightly below consensus at not less
than £247m, and adjusted EBITDA will be in line with consensus at not less
than £22.5m*. These anticipated results exclude MRP, which will no longer be
consolidated in our financial statements following the announcement of its
merger with CONTENTgine referred to above.

 

The revenue performance for the Group was impacted by the prevailing
macro-economic conditions and some short-term challenges in KX, which we are
proactively addressing as detailed in the overview below.

 

KX performance

 

KX is expected to report annual contract value (ACV) added of approximately
£7m in the second half of the financial year, making total ACV for the year
of approximately £14m. This is expected to result in ARR growth at constant
currency for the year of not less than 12%.

 

The lower than expected FY24 ARR growth at KX is due to the following factors:

 

·    Despite early wins in H1, we have seen a lower conversion ratio and
longer sales cycles, particularly in the joint Cloud Service Provider (CSP)
pipeline for our newer industry sectors which we attribute to having fewer
repeatable use cases and lower brand recognition

·    Delayed decision making on a small number of larger contracts
expected to be signed during H2 which have slipped into FY25 as customers
require more time to complete their purchasing process, in addition to sales
cycles generally lengthening due to macro headwinds.

 

To address these issues, we have implemented the following measures:

 

·   Upgraded our sales leadership through the appointment of Clint Maddox as
Chief Revenue Officer in February 2024 and Peter Finter as Chief Marketing
Officer in September 2023. Clint Maddox has a strong track record of sales
leadership success in enterprise technology and channel distribution at
companies including Broadcom and CA. He brings the experience needed to scale
our sales processes and increase efficiency. Peter Finter has experience
building marketing strategies at hyper-growth technology companies and is
focused on driving down customer acquisition costs, expanding brand awareness
beyond capital markets, and positioning KX as the engine for AI workflows

·    Focused more direct sales resources on repeatable use cases in
financial services and aerospace and defence which combined accounted for more
than 80% of our FY24 ACV

·    Other industry markets will be served through partner channels with
strong brand recognition including CSPs, Systems Integrators and OEMs. Despite
the short-term challenges in H2, the CSP channel remains strategic, and we
expect stronger conversion rates as we refine our joint sales processes and
add more customer references and use cases.

 

The lower level of ARR has not materially affected KX FY24 reported revenue or
adjusted EBITDA. We are optimising our cost base for FY25 and focusing our
investment on the areas of highest return and following these actions we will
be better placed to give detailed guidance with our FY24 results** as well as
update on our H1 FY25 progress. Given the high level of predictability of our
reported revenue and our current cost plans, we expect that KX cash EBITDA in
FY25 will be slightly improved compared to FY24.

 

Despite the ARR performance for the year, the unique capabilities and
differentiation of the KX technology continue to be consistently confirmed by
our customers and partners. The action we have taken on sales and marketing
leadership and processes will enable us to deliver stronger and more
sustainable returns in the future.

 

The key drivers of sustainable growth in FY25 and beyond are:

 

·  Established, repeatable use cases with improved time to value in capital
markets using standard configurations and cloud infrastructure, supporting
quantitative research and trading strategies across many hundreds of financial
institutions of all sizes

·   Building on initial wins, aerospace and defence has solidified as a
major sector for our technology responsible for approximately 25% of FY24 new
business and will be important for FY25 and beyond, supporting engineering and
warfare scenario simulation

·    We delivered a major release of kdb+ (release 4.1), the foundational
analytical database engine for all of our product range, with 15 of our most
advanced customers already benefiting from the new, improved performance and
functionality

·    We are able to attract new audiences and provide value through our
native Python integration 'PyKX'.  With over 150,000 downloads and 25
customers, Python is central to our go-forward pipeline and ability to win new
logos, add new workloads and bring high performance analytics to our
customers and partners

·    We continue to work with the CSPs on joint market propositions in
capital markets but also in generative AI and as an OEM component within
sector-specific solutions

·    Following our increased investment, we are seeing accelerating
activity in generative AI. Our investment in KDB.AI has allowed us to explore
and validate highly differentiated use cases with key clients. This success
builds confidence in establishing repeatable use cases within this burgeoning
market, which will in turn drive revenue growth in FY25 and beyond.

 

First Derivative performance

 

At First Derivative customer spending caution continued to be evident through
the second half of the financial year. FY24 revenue is expected to be
approximately £170m, which is 7% lower than FY23, although we were able to
maintain EBITDA margin by managing our costs. Looking ahead, there are
encouraging signs of improved customer sentiment although it remains too early
to forecast the timing of a return to revenue growth.

 

Seamus Keating, Group CEO, said: "While the Group's revenue and adjusted
EBITDA performance is broadly in line with our guidance, the KX ARR growth is
disappointing. The slower growth reflects the weaker macro environment and
some areas where we need to improve. We have moved quickly to strengthen our
sales leadership and to ensure that the greatest focus is on repeatable use
cases in financial services and aerospace and defence where we have a clear
competitive advantage. With these operational improvements in place, we
believe that our technology and market opportunity are compelling and that KX
will deliver stronger, more sustainable growth and value for shareholders."

 

Analyst call

A presentation for institutional analysts will be held at 8.30am today via
Zoom. Please contact FDtechnologies@fticonsulting.com for joining details.

 

*Company-compiled analyst consensus excluding MRP is for revenue of £254m,
adjusted EBITDA of £22.5m and KX ARR of £83m

** FY24 full year results will be released on 21 May 2024

 

 

For further information, please contact:

 

 FD Technologies plc                            +44(0)28 3025 2242

 Seamus Keating, Chief Executive Officer        www.fdtechnologies.com (http://www.firstderivatives.com)

 Ryan Preston, Chief Financial Officer

 Ian Mitchell, Head of Investor Relations

 Investec Bank plc                              +44 (0)20 7597 5970

 (Nominated Adviser and Broker)

 Carlton Nelson

 Virginia Bull

 Goodbody (Euronext Growth Adviser and Broker)  +353 1 667 0420

 Tom Nicholson

 Don Harrington

 Jason Molins

 J.P. Morgan Cazenove (Broker)                  +44 (0)20 3493 8000

 James A. Kelly

 Mose Adigun

 FTI Consulting                                 +44 (0)20 3727 1000

 Matt Dixon

 Dwight Burden

 Victoria Caton

 

About FD Technologies

FD Technologies is a group of data-driven businesses that unlock the value of
insight, hindsight and foresight to drive organisations forward. The Group
comprises KX, which provides software to accelerate AI-driven innovation and
First Derivative, providing consulting services which drive digital
transformation in financial services and capital markets. FD Technologies
operates from 13 locations across Europe, North America and Asia Pacific, and
employs more than 2,400 people worldwide.

 

For further information, please visit www.fdtechnologies.com
(http://www.fdtechnologies.com) and www.kx.com (http://www.kx.com)

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  TSTPPUAUPUPCPWB