Kinatico Ltd (KYP.ASX) : 1 Pager
Kinatico Ltd (KYP.ASX) : 1 Pager
The modernisation of an old player: should Kinatico's transition to SaaS interest us?
In this week's one-pager, we turn the spotlight on an established company that is rejuvenating both its products and business model by embracing Software as a Service (SaaS).
Founded in 2004, CV Check is on the verge of celebrating its 20th anniversary. The company initially emerged with a vision of streamlining and securing employee information verification.
Presently, with a new name and other noteworthy changes, CV Check's evolution may merit attention.
Let’s dive in.
Business Summary
Undergoing significant transformation since its modest inception, Kinatico Ltd (ASX:KYP) has emerged as a prominent 'Know Your People' regtech enterprise software. Operating through its four products, the company's primary focus revolves around workforce compliance monitoring and management.
Here’s a quick breakdown:
CV Check: The company’s foundational product, CV Check, carries out more than 300,000 secure checks every year for organisations, employers and individuals. These include:
Employment reference checks
Police checks
Traffic and licence checks
Employment and qualification checks
Credit and financial history checks
On Cite. This user-friendly app empowers workers to store their compliance documents, receive alerts about upcoming expiries, and ensures they uphold compliance.
Enable. Acquired through the integration of Bright People Technologies, this solution mirrors their existing offerings. The key distinction lies in tailoring compliance and rostering solutions for asset heavy industries: mining and resources.
This is a pertinent feature given the stringent compliance requirements within these industries.
Cited. Also obtained through the Bright People Technologies acquisition, Cited piques our interest as an all-in-one platform providing employees with a sophisticated compliance management hub. This enables proactive management of credentials by centralising document storage, ultimately saving teams valuable time and mitigating headaches.
Cited incurs a monthly fee per worker, granting organisations comprehensive peace of mind in managing their compliance needs
Compelling Events
Two recent compelling developments underscore why Kinatico may warrant closer observation.
A recent turn to profitability. The first significant milestone occurred at the close of the financial year—Kinatico reported a profit for the year.
The ASX release on July 13th heralded a "Total Comprehensive Profit exceeding $200,000, marking the company's first profitable full year since its listing."
While this achievement is noteworthy, it prompts questions about the 20-year timeframe leading to this profitability.
Regardless, this accomplishment signifies a positive shift. Newly appointed CEO, Michael Ivanchenko, appears to have steered the company in a promising direction since taking the helm.
A change to a SaaS business model. The acquisition of Bright People Technologies, announced in February 2021, is now bearing fruit. As the Bright products inherently operate as SaaS offerings, Kinatico has concentrated its efforts over the past two years on generating SaaS revenue.
Cited, their real-time workforce compliance monitoring and management platform, has spearheaded this transition.
SaaS revenue accounted for 18% of FY23 revenue, with Q4 showcasing a commendable 28% contribution from SaaS.
The problems & What needs to happen
Challenge #1 - Accelerating Top-line Growth. Although management's focus on profitability and SaaS revenue growth is commendable, it's apparent that a small team cannot undertake all endeavors simultaneously.
Consequently, the top-line growth for the year settled at a modest ~5%.
To sustain momentum and capture investor attention, achieving top-line growth in the range of 15-25% in forthcoming years is imperative.
The rapid adoption, predominantly by existing customers, of the SaaS product is anticipated to propel this growth. Vigorous expansion within this segment remains crucial.
Challenge #2 - New logos and international success.
While initiating the transition to SaaS by catering to existing customers is prudent, sustained growth is contingent on extending this momentum beyond the existing customer base.
Although 60% of sales stem from current customers, the remaining 40% from new logos demonstrates potential.
Diversifying into new regions would offer a robust evaluation of this potential and success. While the company has not extensively elaborated on this, management has mentioned that this would become a focus, and the forthcoming years will reveal its progress in these facets.
Conclusion
In an era where companies face heightened scrutiny over compliance, and where the intricacies of compliance administration compound annually, Kinatico is positioned advantageously.
Concurrently, the realm of regtech is growing more competitive, as founders recognise the mounting challenges employers confront in this domain, and see opportunities to grow promising startups.
The upcoming year will serve as a litmus test for Kinatico's journey. Should they show progress towards the milestones I mention above, I will revert back with a full deep-dive in 1 year.
Previous 1 Pagers
Felix Group (ASX:FLX) : 1 Pager - June 2023 - Link here
Beamtree (BMT.ASX) : 1 Pager - July 2023 - Link here
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