Ideagen trading 'comfortably' in line with forecasts

Regulatory and compliance software company Ideagen updated the market on its trading for the six months ended 31 October on Thursday, reporting that trading was ahead of the same period last year, and “comfortably in line” with its expectations.

The AIM-traded firm said the results underpinned its confidence in the group's prospects for the second half, and were based upon the continuing execution of a strategy to grow revenue both organically and through acquisitions, maintaining high EBITDA margins through disciplined cost control, generating strong cash flow, and increasing annual recurring revenue as a percentage of total revenue.

Its board said it considered annual recurring revenue as its primary growth metric, and the driver for long term value.

Annual recurring revenue recognised during the first half was expected to be £24.4m, rising from £20.3m year-on-year, and representing 83% of total revenues, rising from 74% in the comparative prior period.

The annual recurring revenue book, being contracted revenue to be recognised over the coming 12 months, had increased by 13% during the first six months to around £54.8m, arising from both strong organic growth of approximately 7%, or 14% on an annualised basis, and 6% of acquired annualised recurring revenue from the acquisition of Qualsys in August.

Ideagen said it expected to report total revenue up 7% at about £29.2m, and adjusted EBITDA to have increased by 25% to approximately £10m.

Organic growth was driven by both customer expansion, and new customer logo wins across verticals including healthcare, life sciences and financial services.

The group said it won 270 new customers in the period including KPMG, Reata Pharmaceuticals, Bank of Greece, NATO and the Lighthouse Laboratory, and successfully expanded existing customers such as GlaxoSmithKline, Lelam and Discover Financial Services.

Cash generated by operations during the first six months was expected to be more than 90% of adjusted EBITDA, resulting in a gross cash balance as at 31 October of £12.1m and gross bank borrowings of £40m.

Net bank debt at the period end of £27.9m left the group “comfortably” within banking covenants, the directors confirmed, and on a “robust” financial footing.

“We continue to execute our strategy, delivering growth both organically and through acquisition, and have invested in the group without stretching our disciplined approach to costs,” said chief executive officer Ben Dorks.

“Our business model has remained resilient throughout the pandemic with growth being driven from across a number of market verticals.”

Dorks said cash generation had been “strong” which, coupled with further growth in new software-as-a-service recurring revenues and an increase in repeat business from the firm’s growing customer base, provided a “strong platform” for the second half.

“Given the size and longevity of the regulatory and compliance market, and the group's position as a leader in the space, the board is optimistic about the group's continued growth prospects.”

At 1221 GMT, shares in Ideagen were down 2.58% at 227p.