- $400 million Sentry acquisition doubled revenues for software company
- Craneware tools deeply embedded in how US hospitals run
- Cloud upselling opportunity as Trisus platform modules offered
If analysts are right, Craneware (CRW:AIM) is on the cusp on a new organic growth drive that could return the share price to the £30 level before the pandemic.
Edinburgh head-quartered Craneware operates provides software solutions that help hospitals and other healthcare providers discover, convert and optimise assets to improve clinical outcomes and financial performance.
Craneware’s resilient operating margins (31.3% last year to 30 June 2022) are evidence of its captive customer base, which is unlikely to churn even if there is a competing product at a cheaper price. ‘This is because its software is crucial for hospitals, which operate on thin margins, to receive their reimbursements and subsidies on time,’ said Berenberg analysts.
Revenues increased 119% to $166 million, while ARR (annual recurring revenues) were up 164% to $170 million in a year heavily influenced by the $400 million transformational acquisition of Sentry Data Systems in July 2021. That deal took Craneware into the pharmacy procurement software space, essentially doubling Craneware’s revenue base.
Craneware shares rallied nearly 7% to £19.50, their highest since the very start of 2022.
CLOUD PLATFORM OPPORTUNITY
Aside from Sentry, Craneware has been pulling its customers over to its cloud software platform, and this is an area where analysts see a great organic growth opportunity. On a recent site visit, Berenberg’s analysts were left in no doubt about how Craneware’s large data collection and processing is deeply embedded into the workflows of hospitals and pharmacies alike, making it hard to replace.
‘We agree with the group’s thinking that if it can first transition all customers onto the cloud, including for the Chargemaster product, the upsell of additional Trisus modules will be easier,’ Berenberg says.
Chargermaster is a revenue optimisation and risk control module of the company’s wider Trisus toolkit.
‘Currently, 80% of the ARR is on the cloud, and this gives us confidence that the upsell of additional modules is around the corner,’ said Berenberg.
The investment bank estimates Craneware EBITDA (earnings before interest, tax, depreciation and amortisation) of $57 million on $188 million revenue this year to June 2023, implying 30% margins.
