RPMGlobal Holdings Limited: Leading Mining Software Solutions for a Sustainable Future

About RPMGlobal Holdings Limited

RPMGlobal Holdings Limited (RPM Global, the Group, ASX; RUL) is a world-leading mining software vendor that provides software licensing, consulting, implementation, support, and technical advisory services to miners in Australia, the Americas, Asia, Europe, and Africa.

RPM Global shares listed on the ASX on 27 May 2008 when its $1 shares closed at $1.18 per share.

Significant demand growth ahead for Mining Software

A confluence of factors is driving demand for minerals globally, especially critical minerals. The transition to net zero carbon emissions requires massive investments in renewable energy sources and transmission technologies, including batteries and new grid infrastructure. This is driving demand for metals and minerals essential for producing and operating these technologies.

It is this demand for such metals and minerals, especially critical minerals, that is boosting demand for RPMGlobal’s software solutions and advisory services from mining companies. The ambitious climate goals set by governments all over the world will require an estimated six-fold increase in the production of critical minerals alone.

RPMGlobal’s products are dispersed across the full suite of commodities, including copper, precious metals, iron ore, metallurgical coal, and aluminium, as well as critical minerals.

Software and Advisory services

The Group reported total revenue of $113 million in FY24, an increase of 15 percent on the previous financial year. Advisory revenue increased by 20 percent to $37.5 million and software revenue increased by 14 percent to $75.2 million.

Software revenue comprises subscription licenses and contracted maintenance revenue, and at 1 July 2024 the total value of Annually Recurring Revenue was $62 million, of which $50.7 million is subscriptions and $11.3 million is contracted maintenance revenue.

RPMGlobal’s software is becoming more mission-critical, and mining companies are seeking longer subscription terms to ensure certainty of supply. In the second half of the 2024 financial year, RPM sold $18.4 million in software subscriptions with a committed term of eight years and $6.4 million with a committed term of ten years.

Importantly, of $75.4 million in software subscriptions sold in FY24, only $6.6 million (9 percent) was recognised in the FY24 financial accounts, with the remaining $68.8 million to be reported as revenue in future financial years. At 30 June 2024, the Group had $161.0 million in pre-contracted, non-cancellable, recurring software revenue, which will be recognised in future years. This amount is $28.8 million (22 percent) more than the same time last financial year.

This increasing amount of Annually Recurring Revenue underscores the earnings resilience of RPMGlobal.

Share buy-backs likely to continue

RPMGlobal is unlikely to pay a dividend in the near-term, despite having $34.2 million of cash in the bank at 30 June 2024 and no debt. The Company currently has less than $300,000 in franking credits. The Board rightly consider that paying an unfranked dividend is not the most appropriate form of capital management. An unfranked dividend leaves most shareholders with a tax liability.

The Board consider that buying back shares is the most appropriate capital management solution at present. Once the franking account balance builds to a sufficient amount, then franked dividends will be declared.

The current on-market share buy-back program has been in place since May 2022 and the maximum number of shares proposed to be bought back is 34,050,000 shares. The total number of shares bought back under the current buy-back program is 15,667,250, leaving 18,382,750 to be bought on-market in the period ahead.

The Future

Assuming no material change in mining industry fundamentals, the robust demand for Advisory services and Software sales in future years is set to continue.

The operating leverage provided by the $161 million in pre-contracted non-cancellable software revenue will support revenue growth and cash inflows in FY25 and beyond.

Given the Group’s debt-free balance sheet, respected advisory business, competitive software offerings, and robust pipelines, shareholders can expect consistent earnings growth at least in the medium-term.