Despite
facing macro challenges and lower growth in its KX division, FD Technologies (LSE: FDP) expects to deliver in-line EBITDA and slightly below consensus revenue for the
year to 29 February 2024, according to its trading update released today
(Thursday).
The provider
of software and consulting services expects to report revenue of not less than
£247 million, slightly below consensus, and adjusted EBITDA of not less than
£22.5 million, in line with consensus.
FD Technologies Reports
Lower Revenue and ARR Growth amid Macro Challenges
The company previously known as First Derivatives attributed the lower revenue performance to the macroeconomic conditions and
some short-term challenges in its KX division, which offers high-performance
analytics solutions. KX is expected to report an annual contract value (ACV)
added of approximately £14 million for the year, resulting in annual recurring
revenue (ARR) growth at constant currency of not less than 12%. This is lower
than expected and compared to FY23 due to a lower conversion ratio, longer sales cycles, especially
in the newer industry sectors, and delayed decision-making on some larger
contracts.
“While
the Group’s revenue and adjusted EBITDA performance is broadly in line with our
guidance, the KX ARR growth is disappointing,” commented Seamus Keating, the
CEO of FD Technologies Group. The weaker results align with those reported in October, when the company reported a net loss. However, the KX division stood out from the rest at that time.
#FDP expects revenue below consensus at £247m; adjusted EBITDA in line at £22.5m. Challenges in KX impacted growth, sales leadership strengthened. https://t.co/MoqA6sJ8kx
— Ticker (@TickerOfficial) March 1, 2024
The company
has upgraded its sales and marketing leadership to address these issues,
focused more direct sales resources on repeatable use cases in financial
services and aerospace and defense, and leveraged partner channels for other
industry markets. The company expects that KX cash EBITDA in FY25 will be
slightly improved compared to FY24.
These
results exclude the MRP division, which will no longer be consolidated in the
financial statements following its merger with CONTENTgine.
The
company’s First Derivative division, which provides consulting services, also
experienced customer spending caution due to the macro environment. The
division is expected to report revenue of approximately £170 million, which is
7% lower than FY23, although it maintained EBITDA margin by managing its costs.
The company noted some encouraging signs of improved customer sentiment, but it
was too early to forecast the timing of a return to revenue growth.
“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,” the CEO concluded.
The company
will announce its full-year results on 18 May 2024.
Transition from First
Derivatives to FD Technologies
Before
2021, the company operated under the name First Derivatives, serving primarily
investment banks and financial institutions with its technology solutions. The organization decided to undergo a rebranding in a strategic move outlined in its annual report. This decision aimed to represent its diversified services portfolio better, moving beyond the implication of a focus on derivatives
alone.
Under its
new identity as FD Technologies, the company unveiled a strategic expansion in
2022 by inaugurating a new branch in Łódź, Poland. This expansion was driven by
the “significant” demand for its services across the European region.
Despite
facing macro challenges and lower growth in its KX division, FD Technologies (LSE: FDP) expects to deliver in-line EBITDA and slightly below consensus revenue for the
year to 29 February 2024, according to its trading update released today
(Thursday).
The provider
of software and consulting services expects to report revenue of not less than
£247 million, slightly below consensus, and adjusted EBITDA of not less than
£22.5 million, in line with consensus.
FD Technologies Reports
Lower Revenue and ARR Growth amid Macro Challenges
The company previously known as First Derivatives attributed the lower revenue performance to the macroeconomic conditions and
some short-term challenges in its KX division, which offers high-performance
analytics solutions. KX is expected to report an annual contract value (ACV)
added of approximately £14 million for the year, resulting in annual recurring
revenue (ARR) growth at constant currency of not less than 12%. This is lower
than expected and compared to FY23 due to a lower conversion ratio, longer sales cycles, especially
in the newer industry sectors, and delayed decision-making on some larger
contracts.
“While
the Group’s revenue and adjusted EBITDA performance is broadly in line with our
guidance, the KX ARR growth is disappointing,” commented Seamus Keating, the
CEO of FD Technologies Group. The weaker results align with those reported in October, when the company reported a net loss. However, the KX division stood out from the rest at that time.
#FDP expects revenue below consensus at £247m; adjusted EBITDA in line at £22.5m. Challenges in KX impacted growth, sales leadership strengthened. https://t.co/MoqA6sJ8kx
— Ticker (@TickerOfficial) March 1, 2024
The company
has upgraded its sales and marketing leadership to address these issues,
focused more direct sales resources on repeatable use cases in financial
services and aerospace and defense, and leveraged partner channels for other
industry markets. The company expects that KX cash EBITDA in FY25 will be
slightly improved compared to FY24.
These
results exclude the MRP division, which will no longer be consolidated in the
financial statements following its merger with CONTENTgine.
The
company’s First Derivative division, which provides consulting services, also
experienced customer spending caution due to the macro environment. The
division is expected to report revenue of approximately £170 million, which is
7% lower than FY23, although it maintained EBITDA margin by managing its costs.
The company noted some encouraging signs of improved customer sentiment, but it
was too early to forecast the timing of a return to revenue growth.
“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,” the CEO concluded.
The company
will announce its full-year results on 18 May 2024.
Transition from First
Derivatives to FD Technologies
Before
2021, the company operated under the name First Derivatives, serving primarily
investment banks and financial institutions with its technology solutions. The organization decided to undergo a rebranding in a strategic move outlined in its annual report. This decision aimed to represent its diversified services portfolio better, moving beyond the implication of a focus on derivatives
alone.
Under its
new identity as FD Technologies, the company unveiled a strategic expansion in
2022 by inaugurating a new branch in Łódź, Poland. This expansion was driven by
the “significant” demand for its services across the European region.
