Class Ltd.’s Stock Crashes Post Release of a Sluggish Quarterly Update

Class Limited (ASX: CL1) designs and develops application software; and the group offers cloud-based software solutions for accounting, administration, and reporting of investment portfolios. The Class group serves accountants, administrators, and advisors.

The company has briefed its detailed business update for the quarter ended 31 December 2018. The company has stated that it has registered a growth in the total accounts by 1760 to reach at 174212 accounts. Also, the total class customers rose by 57 in number to reach the level of 1470 customers. [optin-monster-shortcode id=”swikrbu1d9j9aq0o4cko”]

Class Super grew by 1,529 accounts (net of ~1,000 AMP suspensions) to 167,631. This lower than expected growth in accounts reflects regulatory uncertainty, increased competition and a lower number of average accounts per new customer. Despite it being the second ever highest quarter for new customer additions, the average number of accounts per new customer (~40) was much lower than the usual.

Class is totally committed in strengthening its product leadership over its competitors and restoring the account growth to historical benchmarks. A lot of significant new features will be introduced & released in the first quarter of 2019 so as to drive increased levels of automation and further streamline SMSF administration for accountants. This is to be accompanied by a broad range of marketing and customer engagement initiatives. As of now, the Class Portfolio grew to 6,581 accounts, and about 32% of Class Super customers have been indicated to be using Class Portfolio.

Class is focused on broadening its product offerings into the financial advisers and advisory community, supporting their need to deliver up to date, high-quality information and drive down costs to the customer. Key integrations with XPLAN and Midwinter were only recently released, and the Class Adviser Dashboard will be released in the early 2019, so as to strengthen the Class platform’s value proposition further. Class has also released its Portfolio Engine, which provides back-office system software for investment portfolio administration and reporting. Class has recently signed pacts with the OpenInvest and InvestSMART, and these will act as Portfolio Engine partners, for the purpose to drive their managed account offerings.

Meanwhile, annualized recurring revenue (ARR) from license fees was $37.1m as at 31 December 2018, an increase of 10.1% from 31 December 2017. This has reflected the growth in accounts and the high customer retention rate of 99.2%, which is excluding AMP. Revenue from Class’ Alliances Program (including Portfolio Engine) is also growing at a decent pace, and further initiatives are currently under review to strengthen the Class Platform offering. The Board is in the last stages of recruitment for the CEO role and expects to announce the release of the half-year results on 14 February 2019.

In the meantime, the stock price of the company has receded by 33.64 percent in the past six months as on 9 January 2019. Company’s share last traded at $1.29, down by 11.644% and with a market capitalization of circa $171.79 Mn as on 10 January 2019.


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