RPM provided an update on TCV and ARR just after the FY close, subject now to audit. Full financials will be posted within 4 to 6 weeks.
The consolidated count of new Software Subscriptions contract wins (TCV of $34.5m spread over 3+ years) plus Perpetual Licenses sold ($7.5m) equates to Total Contract signings of $42m for FY2020.
Useful to consider that in 2018, this consolidation of new contracts wins yielded $15.3 m. In 2019, the number was $22.4 m. This progress and trajectory build is impressive. Unfortunately, this progress is not that apparent when looking at past HY and/or FY results.
We can add a further $1.5 m of new Maintenance Revenue for the year.
Looking at the cost side of the equation, the Company embarked on an aggressive R&D campaign 6 years ago, with annual spend peaking at $14m during FY 18 and H1 FY19. At the end of FY 19, the Company signalled that the investment in R&D would decline to better align with industry norms. We saw the first confirmation of this with the HY2020 report, where the spend came in below $6 m ( or annualised , say $11.5 m)
Believe that the annual spend on R&D for FY2021 will decline to about $9 m. Would mean that $4-5 m would drop straight to the bottom line.
IMO, there is a lot to be liked about RPM and believe the Company is generally misunderstood by the market.
Lifting my 12 month forward valuation to $ 1.61 but will review again once we have the FY2020 results in hand.
Remains a high Conviction Buy.
Rob W
