FD Technologies : Results for the six months ended 31 August 2022

18 October 2022

FD Technologies plc

("FD Technologies" or the "Group")

Results for the six months ended 31 August 2022

FD Technologies (AIM: FDP.L, Euronext Growth: FDP.I) today announces its interim results for the six months ended 31 August 2022.

Business highlights

Momentum continues, strong growth in KPIs

• Growing momentum in KX reflected in H1 annual recurring revenue (ARR) growth of 41% and annual contract value signed of £11.4m, surpassing FY22 (£9.8m)
• Customer expansion strategy delivering results, with net revenue retention (NRR) increasing to 119% (H1 FY22: 102%), reflecting the value our customers achieve through increasing their use of KX
• ARR growth in Industry of 120%, led by new customer wins and expansion in healthcare, manufacturing and energy, while Financial Services delivered ARR growth of 35% through new customer wins and upsells of existing customers to KX Insights
• Growth driven by 51 subscription deals signed (H1 FY22: 41), of which 21 were for KX Insights (H1 FY22: 6), our cloud-first integrated data management and real-time analytics platform
• Strategic agreement with Microsoft progressing as planned, with joint marketing initiatives helping to build customer interest and pipeline ahead of general availability of KX Insights on Azure in H1 2023
• Appointment of Ashok Reddy as KX CEO to deliver product and commercial strategies that will accelerate growth
• Continued strong growth in First Derivative, ahead of our expectations and built on our capability to assist clients with their strategic objectives
• Weaker demand environment at MRP, with measures taken to restore adjusted EBITDA margin in H2 and building pipeline for Prelytix 3.0
• Increasing FY23 Group revenue guidance to at least £300m, while maintaining adjusted EBITDA guidance to reflect strong KX and First Derivative performance

Seamus Keating, CEO of FD Technologies, commented: 'The Group has enjoyed a strong H1, growing revenue and profitability and laying the foundations for accelerated growth from here. In KX the momentum we have built since the launch of KX Insights is delivering results, as evidenced by the 41% growth in annual recurring revenue. The recent appointment of Ashok Reddy is already benefiting KX through his significant experience in scaling product-led enterprise technology businesses. Likewise, First Derivative maintained its strong growth, while we have taken action to enable MRP to improve its performance in H2 despite the market conditions experienced there.

These results demonstrate that our strategy of investing to accelerate growth is working. We have added significant value to the Group during H1 as our investments in product, systems and people are delivering. We are very well placed to continue to create value, with major growth opportunities ahead.'

Financial summary

Six months to end August	2022	2021		Change
Revenue	£147.4m	£128.0m		15%
Gross profit	£60.2m	£51.7m		16%
Profit / (loss) before tax	£1.1m	(£1.6m)		N/A
Reported diluted EPS	2.9p	(7.5p)		N/A
Net debt*	£7.4m	£11.7m		37%
Adjusted performance measures
Adjusted EBITDA**	£16.0m	£14.9m		7%
Adjusted diluted EPS	14.2p	11.7p		21%
Performance against Key Performance Indicators	FY23 target	H1 performance
KX annual recurring revenue (ARR) growth	35-40%		41%
KX net revenue retention (NRR)	110%		119%
First Derivative revenue growth	15%		22%
MRP revenue growth	10%		(8%)

• Excluding lease obligations
• Adjusted for share-based payments and restructure and non-operational costs

Financial highlights

• Revenue up 15% to £147.4m (9% at constant currency), led by performance at KX and First Derivative both above our full year guidance, balanced by a reduction in revenue at MRP
• KX returned to growth, with revenue up 19% to £37.8m, with ARR up 41% and now representing 71% of total KX revenue (H1 FY22: 59%) as we continue to focus on growing our subscription revenue
• First Derivative revenue £86.2m, up 22%, driven by our investment to deliver services that map to our customers' strategic goals and our strategy to achieve greater value from our deep domain expertise
• MRP revenue down 8% to £23.4m, resulting from lower demand for lead generation activities in the current market conditions
• Adjusted EBITDA £16.0m, up 7%, with stronger growth at KX and First Derivative tempered by a decline at MRP
• Net debt £7.4m (H1 FY22: £11.7m) after significant investment in implementation of an Oracle ERP system

Current trading and outlook

The Group is delivering growth in both revenue and profitability. In KX, the acceleration in ARR in H1 leaves us well placed to deliver growth in this key metric at the top end of our range of 35-40%. In First Derivative, while H1 was particularly strong, we continue to believe that a growth rate of 15% is the appropriate medium term target, while in MRP we expect revenue to decline by approximately 8% for the full year.

For the Group's FY23 performance we increase our revenue guidance and now expect revenue to be at least £300m, while maintaining our adjusted EBITDA guidance in the range of £36.5m to £38.5m.

For further information, please contact:
FD Technologies plc	[phone]
Seamus Keating, Chief Executive Officer	www.fdtechnologies.com
Ryan Preston, Chief Financial Officer
Ian Mitchell, Head of Investor Relations
Investec Bank plc	[phone]
(Nominated Adviser and Broker)
Andrew Pinder
Carlton Nelson
Virginia Bull
Goodbody (Euronext Growth Adviser and Broker)	[phone]
David Kearney
Don Harrington
Finbarr Griffin
FTI Consulting	[phone]
Matt Dixon
Dwight Burden
Elena Kalinskaya

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, the leading technology for real-time continuous intelligence; First Derivative, which provides technology-led services in capital markets; and MRP, the only enterprise-class, predictive Accounts Based Marketing solution. FD Technologies operates from 14 locations across Europe, North America and Asia Pacific, and employs more than 3,100 people worldwide.

For further information, please visit www.fdtechnologies.comand www.kx.com

Results presentation

FD Technologies will publish a pre-recorded presentation today at 07.05 BST on its website at https://fdtechnologies.com/investor-relations/presentations/. The Group will also host a live results Q&A session for analysts at 09.30 BST today.

Business Review

FD Technologies comprises KX, which operates at the frontier of real-time data analytics; First Derivative, which provides business and software engineering solutions for capital markets; and MRP, which uses KX to deliver predictive analytics for enterprise demand generation.

KX - at the frontier of real-time data analytics

As industries increasingly adopt real-time decision making, KX is benefitting from its leading performance in time series data management and analytics, as well as the work we have done to make our technology easier to adopt and use. These capabilities, allied to the investment in our go-to-market strategy, are cementing KX's place as a core component of a modern data architecture, resulting in deeper and broader conversations with existing and potential customers. It is also attracting partners, such as Microsoft, who see competitive advantage in the ability to deliver real-time and historical analytics solutions based on KX.

Despite the rapid growth in data generated from machines and sensors, McKinsey's report 'The Data-driven Enterprise of 2025' asserts that currently only a fraction of data from connected devices is ingested, processed, queried and analysed in real-time due to the limits of legacy technology structures and the high computational demands of real-time processing. Organisations are increasingly aware of the benefits of real-time analytics, as evidenced by Forrester and others, and McKinsey forecasts that by 2025 the challenges will be overcome to enable the creation of vast networks of real-time data and insights.

KX has the potential to play a central role in the delivery of time series analytics at scale, particularly as a result of the investments we made in the past two years to develop and launch KX Insights, our cloud-firstreal-time analytics and data management platform. Our technology is currently a mission critical component in the most demanding use cases, including the real-time ingestion and analysis of more than seven billion messages per day at an Exchange customer, and delivering complex queries on disparate data sets at a fraction of the cost and more than 25x faster than the next best option for a healthcare customer. These performance advantages are typical of the benefits our technology delivers and with the added benefits of scalability from our cloud partnerships and the ease of use and rapid time-to-value delivered by KX Insights we see enormous potential for growth in recurring revenue in the years ahead.

Appointment of KX CEO

During the period Ashok Reddy was appointed CEO of KX. He brings a track record of success driving product revenue growth and commercial strategies at enterprise technology companies (including IBM, CA Technologies, Broadcom and Digital.Ai) and his priorities are to use his expertise in driving growth, particularly through partners, to help KX scale faster.

Microsoft strategic partnership agreement

We are making good progress with our strategic partnership with Microsoft, signed earlier this year, which positions KX Insights as the premier real-time analytics technology on Azure. This progress covers both our go-to-market activities and technical development as we move towards general availability of KX Insights as a tightly integrated component within Azure, expected in H1 2023. Ahead of this, general availability of KX on the Azure platform as either a customer managed deployment or as a service managed by KX is expected in Q4 2022.

The Microsoft and KX sales teams have already started working together to build pipeline, with Microsoft salespeople fully incentivised to sell KX. A programme to support the sales effort through joint product marketing and technical support has commenced and engagement to date has been positive. We already have a number of customers in private preview of KX Insights on Azure, across industries including financial services, automotive, healthcare and industrial IoT. Initial feedback from these clients is extremely positive, with the rapid time to value and performance they are achieving increasing our confidence in the potential of KX Insights on Azure.

The progress and engagement with both Microsoft and potential customers is encouraging and reinforces the significant potential of the partnership to deliver KX Insights to a broad user base. We also continue our joint development work with

Microsoft ahead of a planned launch next year of applications and services for the financial services sector that are built on KX.

More generally we are seeing strong interest from cloud platforms in working with us, recognising the unique capabilities of our technology. Our customers who are moving their KX workloads to the cloud are driving us to work with their preferred cloud vendors and this is leading to stronger collaboration with the leading vendors.

Operational and commercial progress

We continue to make good progress in areas such as product development and go-to-market as we seek to deliver on the opportunity for KX. As a result, we saw momentum that enabled us to deliver more annual contract value in H1 than we did in the whole of last year, while continuing to increase our pipeline and investing in our opportunities with partners.

Our focus on rapid time-to-value for our customers is delivering success and is leading to growth in new opportunities and shorter sales cycles. While more rapid deployment results in lower implementation services revenue per customer, it reduces complexity and cost for customers and increases their return on investment. Our product and go-to-market priorities are to continue to make KX easier to adopt and use, in order to drive further growth in recurring software revenue.

Research and development

The launch last year of KX Insights was a major milestone and puts KX at the heart of the modern data management landscape for time series data. KX Insights leverages the benefits of cloud architecture to deliver rapid, scalable insights without the burden of managing infrastructure and is built on open standards such as Docker and Kubernetes, using a microservices-based architecture. The ability for SQL and Python developers to use their preferred programming language rather than learn our proprietary q language is a particularly attractive feature of KX Insights, opening up opportunities for existing customers to broaden their use of KX and encouraging adoption by new customers.

In H1 we continued to focus on prioritising ease of adoption and use, interoperability with other technologies and integration with partners, particularly hyperscale cloud providers. In particular, we focused on the deployment of KX Insights on Azure, working with Microsoft and private preview customers to ensure the optimal performance of our technology. We also worked to develop accelerators for our key target markets that will enable customers to speed up time-to-value by providing common integrations and business requirements for our customers in those industries.

Go-to-market

We signed 56 new deals during the period, of which 51 (H1 FY22: 41) were subscription deals including 10 new customers, with the remainder being upsells to existing customers. Churn remained at low single digits in percentage terms, and together with expansion from existing customers attracted by the value they derive from KX, drove NRR of 119%.

Of our new customers, 40% came from Industry, highlighting the progress we are making in entering new markets. We also saw significant expansion within our Industry user base, for example with a healthcare manufacturer expanding its use of KX to more of its facilities in recognition of the return on investment it has achieved from KX to date.