Knosys (KNO) - nanocap software

Knosys (KNO) generates $9.5M of annualised recurring revenue, from 3 small sub-scale software product businesses.

• Libero is library focused software with 100 customers generating circa $2.4M revenue.
• KnowledgeIQ is Call Centre knowledge management software with 40K users, $3.6M revenue from ANZ, Singtel which are due to renew by 2025.
• GreenOrbit is corporate intranet software with 160 customers with current revenue albeit declines generating revenues of $4.0M

Knosys is currently allocating a greater share of its 2024-2026 solution development budget into expanding its Library Management Solutions solution Libero.

The company has 216.2m share on issue, and at 4c trades at $8.65M market cap, with $4.2 million cash giving an Enterprise value of $4.5M.   This enterprise value for 100% of KNO is not much more than an expensive house in Sydney.

The company trades at 0.47X enterprise value/ARR and 0.55X enterprise value / gross profit.  

<1X sales is historically an attractive revenue multiple for buying any software company.  KNO is an itsy bitsy subscale software nanocap.  No growth for 3 years and 2024 tax loss selling largely explains the lowly value being ascribed by the market.

The short term potential opportunity is a re-rate to 1.0X Sales = 6.3 c = +57% sp gain

The medium term potential opportunity is a re-rate to 1.5X Sales = 8.5 c = +112% sp gain