Why the Vection (ASX:VR1) share price lifted 9% on Friday

Cash flow was one highlight of the software company’s quarter.

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Shares in software company Vection Technologies Ltd (ASX: VR1) are lifting today after it released its quarterly activities and earnings report for Q1 FY22.

At the time of writing, the Vection share price is trading 7% higher at 10.5 cents each, slightly off its intraday high o 10.75 cents.

Here we cover all of the main data points from Vection’s performance for the quarter ending 30 September 2021.

Vection share price rises on strong cash receipts growth

The software giant outlined several investment highlights it had achieved last quarter, including:

  • 172% cash receipts growth from the previous quarter, to $2.8 million — aligned with
    FY22 growth objectives
  • Strong growth opportunity in FY22 underpinned by a FY22 total contract value (TCV) of around $5 million
  • Strengthened advisory board (following first appointment of former CIO R&D of Mercedes-Benz, Dr Siegmar Haasis)
  • Strategic agreements underway to position the company for further growth during FY22
  • Company fully funded to deliver on its growth strategy with $6.8 million of cash at bank.

What happened in Q1 for Vection?

It was a period of strong growth in cash flow for Vection, seeing as it grew cash receipts by 172% to almost $3 million from the previous quarter.

This was supported by a further $5 million in added in TCV, underscored by large contributions from its real estate and defence/law enforcement exposure. Each contributed 32% and 19% to TCV during the quarter, respectively.

Vection also progressed the integration of JMC Group within its wider operations. The company reckons this will be accretive to cost efficiencies and growth in its American & APAC divisions.

The company also established an advisory board this quarter, to “gain a technological advantage in specific verticals, gain wider market recognition market positioning” on a global scale.

It also left the quarter well capitalised to “provide a strong base to pursue the aggressive 2021 growth strategy” alongside acquisition initiatives.

This appears to include its ‘verticalisation strategy’ by diversifying its TCV contributions and “providing strong growth opportunities” in currently underserved segments expected to increase in the next quarters.

From its technology standpoint, the company also launched Mindesk for Autodesk Revit, thereby gaining exposure to its approximately 11 million AEC users.

Furthermore, Vection announced the launch of its Webex integrated FrameS solution early in the quarter. This, it states, is a “3D collaborative app enabling hybrid workforces and unique 3D workflows directly within the Webex experience”.

It is expected for the second half of FY22, according to the announcement.

What did management say?

Speaking on the announcement, Vection managing director Gianmarco Biagi said:

The integration of the newly established divisions within the broader Vection ecosystem, coupled with organic growth and cross selling, is generating continued quarter on quarter global growth.

A stronger and growing FY22 TCV metric enables management to focus on strategic initiatives to support the company’s global strategy during FY22 and in the years to come. Vection’s management remain fully aligned with the growth strategy and the interest of all stakeholders.

What’s next for Vection?

The company intends to expand its verticalisation strategy, which it says will include the reinforcement of existing global infrastructure to commercialise technologies while increasing global market penetration.

It also wants to boost its footprint across Europe, the Middle East and Africa; North, Central and South America; and Asia Pacific.

Finally, Vection is focusing on developing breakthrough technologies “to support the company’s global commercial activities, within the requirements of digital transformation (DX) to support its core technology stack”.

It’s been a difficult year for the Vection share price. The company posted a loss of 12.5% since January 1, extending its loss over the past year to 19%.

That’s well behind the benchmark S&P/ASX 200 index (ASX: XJO)’s return of around 25% in that same time.

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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