ORKT

Business Context and Reporting Period

Company: Orangekloud Technology Inc. (Nasdaq: ORKT)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2024
Business Overview: A Cayman Islands holding company operating primarily in Singapore and Malaysia. The company provides digital transformation solutions to SMEs, including the sale and implementation of Microsoft Dynamics ERP software and its proprietary No-Code Rapid Mobile Application Development (RMAD) platform, eMOBIQ®. The company completed its Initial Public Offering (IPO) in July 2024.

Key Financial Metrics (Year Ended Dec 31, 2024)

Material Changes vs. Prior Period

• Revenue Decline: Total revenue decreased by 33.6% to S$4.0 million (from S$6.1 million in 2023). This was attributed to geopolitical uncertainties, uneven economic growth in Singapore, and cautious investment by SMEs in technology.
• Margin Compression: Gross margin dropped significantly from 47.2% to 26.1%. While revenue fell sharply, cost of revenue only decreased by 7.1% due to supply-side inflation and relatively stable payroll costs for consultants.
• Increased Operating Expenses: General and administrative (G&A) expenses surged by 219.5% to S$8.4 million, primarily driven by IPO-related professional fees and compliance costs. Selling and marketing expenses increased by 38.0%.
• Liquidity Improvement: Cash and cash equivalents increased from S$1.1 million to S$8.2 million, largely due to IPO proceeds of approximately S$20 million (gross) raised in July and August 2024.
• Segment Performance:
  • Packaged Software Solutions: Revenue decreased 23.3% to S$3.3 million.
  • No-Code Platform: Revenue decreased 57.6% to S$0.77 million due to fewer projects with high customization elements.

Guidance, Outlook, and Risks

Management Commentary & Outlook:

• Strategic Pivot: The company is pivoting towards investments in Artificial Intelligence (AI) capabilities for its eMOBIQ® platform, targeting a commercial launch in 2025.
• Use of Proceeds: While the IPO prospectus allocated 50% of proceeds to acquisitions, actual deployment by year-end was only 5.5% due to a lack of suitable targets. The remainder is being used for working capital, R&D, and professional fees.
• Expansion: Plans include expanding market presence globally (APAC, Europe, US) through direct sales and channel partners, and growing revenue from key verticals like Food Manufacturing and Construction.

Risks and Contingencies:

• Supplier Concentration: High dependency on Microsoft Regional Sales Pte Ltd (40% of total purchases in 2024) and Ingram Micro Asia Marketplace Pte Ltd (37% of total purchases).
• Profitability: The company has a history of losses and may not achieve or sustain profitability in the future. Significant costs are expected to continue as a public company.
• Market Risks: Exposure to the Singapore market, which accounts for substantially all revenue. Economic recessions or changes in government grant rules (e.g., Enterprise Development Grant) could materially impact business.
• Corporate Governance: Dual-class share structure gives founders (Goh Kian Hwa and Lung Lay Hua) approximately 95% of voting power, limiting the influence of public shareholders.

Key Facts for Investor Verification

• Revenue Sustainability: Verify the trend of declining revenue in the core No-Code platform segment (-57.6%) and the ability to reverse this trend with the upcoming AI features.
• Cost Structure: Assess the sustainability of the high G&A expenses (S$8.4M) post-IPO and whether these will normalize in 2025.
• Supplier Dependency: Confirm the stability of relationships with Microsoft and Ingram Micro, given they account for 77% of total purchases.
• Use of IPO Capital: Monitor the deployment of the S$20M IPO proceeds, specifically the shift from planned acquisitions to AI R&D and working capital.
• Accounting Change: Note the change in auditors from Simon & Edward LLP to Enrome LLP effective December 30, 2024, and review the transition details.