FD Technologies warns of revenue slightly below consensus

FD Technologies said in a full-year trading update on Friday that group revenue was expected to be slightly below consensus, at no less than £247m, while adjusted EBITDA was anticipated to be in line with consensus, coming in at £22.5m at least.

The AIM-traded firm said its revenue performance for the 12 months ended 29 February was impacted by prevailing macroeconomic conditions and short-term challenges in KX, which it said were actively being addressed.

KX, expected to report £7m in annual contract value (ACV) added in the second half of the year, resulting in a total ACV for the year of £14m, experienced lower-than-expected annual recurring revenue (ARR) growth for the 2024 financial year.

Contributing factors included a lower conversion ratio and longer sales cycles, particularly in the joint cloud service provider (CSP) pipeline for newer industry sectors, and delayed decision-making on a small number of larger contracts.

To tackle those challenges, measures were implemented including leadership upgrades, focusing direct sales resources on repeatable use cases in financial services and aerospace and defence, and serving other industry markets through partner channels.

Despite the lower ARR, 2024 revenue and adjusted EBITDA for KX had not been materially affected.

The company said it was optimising its cost base for the 2025 period, and focusing investments on areas of highest return.

Key drivers for sustainable growth in 2025 and beyond included established, repeatable use cases in capital markets and aerospace and defence sectors, major releases of foundational analytical database engine kdb+, and the integration of native Python, among others.

At First Derivative, 2024 revenue was expected to be about £170m, making for a 7% decrease from 2023, though the EBITDA margin was maintained.

While there were signs of improved customer sentiment, the timing of a return to revenue growth remained uncertain, the board said.

“While the group's revenue and adjusted EBITDA performance is broadly in line with our guidance, the KX ARR growth is disappointing,” said group chief executive officer Seamus Keating.

“The slower growth reflects the weaker macro environment and some areas where we need to improve.”

Keating said the firm had moved quickly to strengthen its sales leadership, and to ensure its greatest focus was on repeatable use cases in financial services and aerospace and defence where it had 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.”

At 1419 GMT, shares in FD Technologies were down 21.45% at 1,040p.

Reporting by Josh White for Sharecast.com.