ReadyTech share price slips despite earnings increase

The software as a service provider has notched a solid year.

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Key points

  • The ReadyTech share price is trading lower on Wednesday despite the company posting sound FY22 earnings
  • The company reported strong top and bottom lines while a number of FY22 acquisitions contributed to its earnings
  • Optimistic guidance was given for FY23 with organic revenue growth expected in the mid-teens

The ReadyTech Holdings Ltd (ASX: RDY) share price is in the red in midday trade amid the company reporting a strong performance in its FY22 results.

Shares of the software as a service (SaaS) company are currently changing hands for $3.18 each, a fall of 1.24% on the day so far.

Let's go over the highlights of the report.

What did ReadyTech Holdings report?

The company reported healthier top and bottom lines combined with a strong net customer retention rate. Sales momentum also picked up, with the company significantly growing its opportunity pipeline.

ReadyTech reported a 27% compound annual growth rate (CAGR) for its revenue over the last four years.

This was helped through the company onboarding 48 marquee brands, each contributing $50,000 in subscription and implementation revenue. The combined total of these companies was said to be $8 million.

What else happened in FY22?

The company announced four acquisitions in various sectors to boost the brand's competitive standing. These included Open Windows, Avaxa, Itvision, and PhoenixHRIS. During the financial year, these companies contributed revenue of $4.3 million.

However, the company's operating expenses also grew 63.1% to $50.8 million, with most of the increase attributed to increased research and development (R&D) and sales and marketing costs.

A major contributor to the company's finances was the justice sector, contributing $23.9 million in revenue and $8.8 million in earnings. These figures grew 18.6% and 25.7% respectively on a YoY basis.

What did management say?

ReadyTech co-founder and CEO Marc Washbourne said:

FY22 was a highly successful year for ReadyTech driven by the disciplined execution of our vertical SaaS playbook strategy. Our investments in product-market fit, sales and marketing – with a particular focus on enterprise accounts – saw the Company deliver strong organic growth across all verticals.

What's next?

ReadyTech said it's expecting organic revenue growth to be in the mid-teens for FY23, with $2 million added to its income statement from its acquisitions.

The company said the justice sector continues to be a major tailwind. ReadyTech said its delivery of case management solutions represents a serviceable market of $250 million. This is spread across courts, legal services, tribunals, and public prosecutors.

The company also stated it has already partnered with the Ministry of Justice in the UK, providing a scheduling and listing module. It also has the potential to port its products to other Commonwealth countries.

ReadyTech share price snapshot

The ReadyTech share price has taken a beating over the last year, down 17% year to date

But it's still fared better than the S&P/ASX All Technology Index (ASX: XTX). It's lost more than 24% over the same period.

At its current share price, ReadyTech has a market capitalisation of around $350 million.

Motley Fool contributor Matthew Farley has no position 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 Scott Phillips.

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