Knosys (ASX:KNO) - Overview of LIBERO acquisition, July 2021


by Lauren Evans

Knosys Limited (ASX:KNO) Managing Director John Thompson provides an overview of the recent acquisition of LIBERO, a leading library management software business.

Lauren Evans: Hello. This is Lauren Evans for the Finance News Network. And joining me from Knosys (ASX:KNO) is Managing Director John Thompson. John, welcome to FNN.

John Thompson: Thanks, Lauren. Nice to be here.

Lauren Evans: It's great to have you. So, congratulations, John, on the announcement last week of the acquisition of LIBERO. Firstly, can you tell us a bit more about LIBERO?

John Thompson: Yes. Thanks very much, Lauren. LIBERO is a leading library management software business. It has about 116 clients located across eight countries. LIBERO itself is headquartered in Brisbane, with about 17 employees. And the business currently generates about $2.2 million in ARR and has an EBITDA of around $600,000. LIBERO itself delivers a new digital experience in managing library assets and collections, employees, and the interactions with the library from their customers and their members. So, basically, the software solution allows multiple sites to share collection items, allows employees and customers to better search for items, analyses usage patterns, and really automates the process of streamlining the whole engagement with in-house and digital users.

Lauren Evans: Thanks, John. So, how does this acquisition align with Knosys's growth strategy?

John Thompson: Knosys's growth strategy is to deliver multiple SaaS offerings under a shared service model. So basically, at the moment, we have KnowledgeIQ as our KMS solution. We have GreenOrbit as our intelligent internet solution. And these form the first two pillars of this diversified product offering. The LIBERO library management software will form the third pillar. So, fundamentally, what we were looking at when we looked at this opportunity was the ability to scale our global operations to acquire new development capabilities, and expand sales whilst maintaining hopefully a very good cost-effective shared service model. So, LIBERO itself, why we looked at it. It's predominantly a SaaS product offering, which fits really well. We get to leverage our existing global footprint to drive sales in the US, Canada, but also leverage their footprint in Europe. We get to increase our annual recurring revenue as a consolidated entity. And the acquisition also accelerates Knosys towards profitability.

Lauren Evans: Can you give our viewers a little bit more detail on the key metrics of the transaction?

John Thompson: Yeah, certainly. The LIBERO transaction was valued at approximately $5 million. And this was based on a 2.3x multiple of their annual recurring revenue of $2.2 million. So, as you can see, it was a very attractive acquisition multiple, and we spent a lot of time negotiating the opportunity. Knosys will pay the vendors $4 million in cash and 1 million in Knosys shares. And probably the big aspect of the transaction is the cash component will be funded out of our cash resources. And, therefore, there's been no dilution to the existing shareholders. The LIBERO business is already profitable, generating over $600,000 in EBITDA. And we see additional opportunities to invest in the business to develop it and expand its revenue growth over the coming years.

Lauren Evans: For the last question from me, John, what is the outlook from here?

John Thompson: Look, we've already given guidance for Knosys for FY21 that will be in the vicinity of $5 to $5.3 million in income, which will include three months' contribution from our GreenOrbit acquisition. With the acquisition of LIBERO, we're now tracking at an annualised revenue run rate of around $8 million. And we expect that this will continue to increase over time through FY22 as we acquire new customers and invest in sales and marketing to drive the ultimate sale of all of our solutions around the globe. We're operating in really good sectors. At the moment, the combined sectors for the three solutions is valued at over $25 billion. So, we've got plenty of room to grow.

Lauren Evans: Well, John Thompson, thanks for the update. We'll speak to you again at full year results, if not before.

John Thompson: Thanks very much, Lauren.


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