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Allegro seems to have the wind at their back in the CTRM marketplace

We’ve recently begun preparation of our 2015 CTRM Global Market Size report and are in the process of collecting data from both private and public sources to ensure as accurate a picture of the market as possible. One of the many sources we use is the first-of-year press releases from the larger vendors in which they discuss their companies’ prior year results…that is if it has been a good year, otherwise they might, not surprisingly, just skip it.

Allegro has been pretty reliable in issuing such press releases, which is a good indicator of the success they’ve had in the market over the last few years. This year’s version notes they are “reporting 23 percent revenue and more than 30 percent EBITDA year-over-year increase compared to 2013.”

And while the 23% increase in revenues is impressive, perhaps even more impressive is the statement that notes “(t)he growth was fueled by the addition of 22 new logo accounts spanning global commodity markets, including major players transacting business in the commodities of power, gas, crude and natural gas liquids.” Though we at ComTech don’t have absolute visibility into all deals done in the global marketplace, we probably have the best proprietary database reflecting the total number of deals done and which vendors picked up what share of those. Allegro’s 22 new customers appears to put them at (or as close as possible to) the top in terms of new customer signings for the year. This is particularly impressive given that Allegro hasn’t been pursuing the non-energy deals (which are a not insignificant piece of the global CTRM software market) as their product line is, at least for now, almost exclusively energy centric. I say “for now” as they have been covering some non-energies with a few of their energy customers, and their management team has made no secret of their plans and early efforts to expand their core functional capabilities into other commodities.

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That being said, their current focus on energy can be a bit of a double-edged sword…energy markets were strong throughout most of 2014 and they obviously won more than their fair share of those deals. However, with the collapse of oil prices late in the year, a weak gas market in North America and a persistent recession in Europe stifling growth, a bearish outlook for sales of new ETRM products in 2015 could prove challenging for Allegro.

Nonetheless, they have been able to diversify their geographic reach. Their press release noted new sales in almost all regions in 2014, including APAC (China and Australia), Eastern Canada, and South America; in addition to significant growth in EMEA, a region that most vendors have found very challenging in the last couple of years. Given these successes, even if we continue to see the stacking of drilling rigs in the US through the year (one of the top leading indicators of budget cutbacks across virtually all categories of spending in upstream and midstream oil and gas…core markets for Allegro), their momentum in other markets and regions may be enough to sustain their growth trajectory through the end of the year. And based upon their performance in 2014, should they begin to move into the non-energy markets, there is little reason to believe they won’t find some successes there too.