Integrated Research Limited (ASX: IRI) shares have fallen after the company gave a trading update at its AGM.
AGM update
Integrated Research reminded investors about its performance during FY20. Revenue grew 10% to $110.9 million, net profit after tax (NPAT) grew 10% to $24.1 million and operating cashflow rose 14% to $24.2 million.
The FY20 net profit margin was the same and the dividends per share were maintained at 7.25 cents per share.
Asia Pacific revenue rose 17%, Europe revenue declined 1% and the Americas revenue increased slightly.
Trading update
Integrated Research commented that there’s a lot of economic uncertainty, COVID-19 is still affecting the northern hemisphere and there’s exchange rate volatility.
Its financial year to date revenue is lower than the prior corresponding period. The sales cycle has lengthened due to the current environment and there’s also a foreign currency exchange headwind.
However, the company said that a significant proportion of license sales occur in the last few weeks of the reporting period and there’s continuing currency volatility. The sales deferrals and currency swings may mean that first half revenue and net profit is less in the first half than the corresponding period.
Longer term opportunity
Integrated Research pointed out three market dynamics that will help its long term growth.
With ‘collaboration’ there is a shift to remote working. Around 500 million global workers are estimated to be remote in the 2021 calendar year – this represents 40% of knowledge workers. In 2020 there is 48% year on year growth of conferencing users.
In ‘transactions’ there is an accelerated shift to digital payments. Visa reported that their annual US transaction volumes are up 30% for online transactions excluding travel, whilst in-store is down 5%.
Finally, in ‘cloud’ the public cloud spending to accelerate to a compound annual growth rate of 18.8% over 2021 to 2024, after 6.1% growth in 2020.
Summary thoughts
Short term weaknesses can be an opportunity to buy businesses with long term growth potential. I think that Integrated Research is worth being a long term holding in a portfolio.
However, I don’t have as much conviction in it as much as other ASX growth shares like Pushpay Holdings Ltd (ASX: PPH).
