ATQT.L Regulatory News (ATQT)

29 September 2022

Attraqt Group plc

("Attraqt", the "Group" or the "Company")

Half Year results

Attraqt Group plc (AIM:ATQT), the provider of SaaS solutions that power exceptional online shopping experiences, is pleased to announce its unaudited results for the six months ended 30 June 2022.

GROUP FINANCIAL HIGHLIGHTS

· Revenue increased 9% to £12.2m (11% at CER) (HY2021: £11.1m)

· Gross profit increased by 2% to £8.3m (6% at CER) (HY2021: £8.1m)

· Adjusted EBITDA1 was £0.2m (£0.3m at CER) (HY2021: £0.5m)

· Loss before tax was £2.2m (HY2021: £1.8m)

· Basic EPS loss 0.9p per share (HY2021: 0.7p loss per share)

· Operating cash inflow of £0.3m (HY2021 outflow of £1.3m)

· Cash at the period end was £2.5m (FY2021: £3.5m)

NON-FINANCIAL KPIs

· Exit annual recurring revenue (ARR) increased 10% to £24.2m (8% at CER) (FY2021: £21.9m)

· £1.9m of new logos signed (HY2021: £0.6m), including two large UK high street fashion retailers

· ARR Bookings of £2.6m (HY2021: £1.8m), increase by 39%

· 21 new logos signed in H1 (HY2021: 8)

· Net retention rate of 102% (HY2021: 103%)

· 12 multi-year renewals (HY2021: 14)

RECOMMENDED CASH OFFER FOR ATTRAQT

· Recommended cash offer for Attraqt at a price of 30p per share by Crownpeak Technology, Inc. For details, refer to Rule 2.7 firm offer announcement released this morning

Tom Crawford, Non-Executive Chairman of Attraqt, commented:

"Over the past six months we have continued to make strides forward as we see the benefits of our investments in our technology and product offering starting to come through. We have seen positive momentum in bookings, with strong new logo performance despite lengthening sales cycles, but a more challenging revenue and profit performance, given the time it takes to monetise new enterprise logo wins to full revenue, combined with a material increase in cost of sales due to new customer sale patterns driving higher hosting costs and more recently the unfavourable foreign exchange movements on cost of sales.

I would like to take this opportunity to thank every member of the Attraqt team for their hard work and commitment during the first half. Your drive to provide the best possible technology and service to our clients has shone through.

Throughout the first half we have focused our efforts on ARR bookings and building the future revenue base, and we will continue in this vein going forwards as we believe it is better to build sales momentum and then move focus to margin in anticipation of advances in EBITDA and cashflow in future years. As a result, I remain cautiously optimistic of the Group's continued growth, either on a standalone basis, or as part of Crownpeak."

1. Adjusted EBITDA refers to earnings before interest, tax, depreciation, amortisation, share based payments and exceptional items.

FOR FURTHER INFORMATION, PLEASE CONTACT:

ABOUT ATTRAQT GROUP

Attraqt enables online retailers and brand owners to maximise the performance and potential of their e-commerce investments by enabling best in class product discovery experiences. The Company delivers omnichannel search, merchandising, and product & content personalization for online retailers and brands. Our vision is to be the number one team and growth engine for our customers; powering the world's best product discovery experiences, wherever and whenever they happen.

For more information visit www.attraqt.com

CHIEF EXECUTIVE OFFICER'S STATEMENT

Throughout the first half the Company has continued to see good momentum in bookings with encouraging new client wins across both product sets. This is despite the challenging market backdrop and reflects our investment in AI and visual merchandising, the strength of our partnerships and a successful focus on the mid-market.

The AI backed differentiation of our offering is highlighted by the increase in our win rate in the half, with momentum in converting new business opportunities and extending our track-record of being selected as the preferred solution versus competing products.

REVIEW OF SALES AND OPERATIONS

Revenue for H1 2022 was up 9% to £12.2m (11% at CER) (HY2021: £11.1m) for the period, driven by monetising 2021 bookings. 

The Company has continued to see good momentum in bookings, with strong new logo performance. Annual Recurring Revenue (ARR) bookings in H1 increased by 39% to £2.6m (HY2021: £1.8m) and the closing ARR is up c.20% (annualised) to £24.2m (FY21: £21.9m) (16% at constant exchange rates). Enterprise performance was strong with two UK fashion brands and two international brands signing in the reporting period, all following competitive tenders. The win rate has increased due to sales momentum and AI becoming the centrepiece of the Company's offering, providing greater competitive differentiation.

Our innovation and embedding the technology from our acquisitions is also the driver of our sales wins in the Mid-Market. Our product discovery solutions for the Mid-Market are class leading, evidenced by the contract momentum and growing pipeline, as we increasingly bring Enterprise grade functionality to the Mid-Market powered by AI. We signed 12 Mid-Market logos in the first half compared to 7 in HY2021.

We are also pleased with the investment we have made in supporting our existing client base with 12 multi-year renewals (HY2021: 14). This was down year-on-year due to a product of timing, with fewer clients eligible for renewal during the period compared to HY2021 as many clients are already on multi-year agreements.

Recurring bookings increased by 39% to £2.6m and encouragingly this included some significant wins with opportunity to expand, for example with two UK high street retailers and US-based fashion brands.  

Gross churn continued to fall and was £0.9m (HY2021: £1.0m), due to the increasing strength of our relationship with our existing clients, lower contracts coming up for renewal and the process of sunsetting of the Freestyle Merchandising product nearing conclusion.

PERFORMANCE AGAINST GROWTH STRATEGY

Despite the continued uncertainty of the external environment seen in the first six months of the year and going forwards, we have continued to make progress against many our strategic priorities.

Our ongoing priorities are:

· Evolving our data-led approach

· Increasing the speed of our innovation

· Executing our partnership strategy

· Replicating our UK success in other geographies

· Improving the customer and developer experience

· Being recognised as a market leader

In the half we are particularly pleased with our achievement in replicating some of our UK success into overseas markets deals with notable enterprise wins in the US and Germany. Our initial focus in the mid-market has been optimising the solution for the UK market but we have made significant progress in France which now accounts for around a third of our Mid-Market pipeline.

Our investment in the products and roadmap was recognised in the recent Gartner Magic Quadrant for Personalisation Engines. We are positioned to continue to take market share in both the Enterprise and mid-market, reflected in our win rates, success outside of the UK in a backdrop that has challenged some of our competitors.

Our focus in the second half is to continue to grow our presence in the Mid-Market, accelerate investment in partnerships and integrations, and continue to build on our momentum outside the UK to further validate the Enterprise opportunity with global retailers.

OUTLOOK

The Group continues to progress its go to market strategy in existing geographies and has grown new logo bookings in the first half including making headway with the launch of product to the mid-market and some large UK headquartered enterprise sales.

The Group must now demonstrate that it can fully access the market opportunity open to it, and maintain its new logo win rate, including enterprise sales, as it converts the pipeline it has been building over recent periods, while monetising its new clients to full revenue over time.

The current global macroeconomic environment has been impacting the rate of progress through the strengthening dollar exchange rate, extended competitive sales cycles and the normalisation of ecommerce activity post lockdowns. However, the Board is encouraged by the new two product strategy and mid-market launch and anticipates longer term upside as its go to market strategy matures.

While the Group consumed cash in the first half of the year, actions taken mean that the cost base in the second half of the year will be materially lower than the first half on a constant currency basis, as the business approaches its goal of becoming cash neutral for 2023.

The Board is, however, cognisant of the difficult external factors that are introducing an additional layer of risk into sales processes and, whilst the current pipeline is healthy and supportive of the Group's short-term objectives, it is therefore prudently managing operating margin and discretionary investment in order to ensure the Group underpins its growth expectations, with advances in earnings and cashflow in future years.

Mark Adams

Chief Executive Officer

FINANCIAL REVIEW

Total revenue increased by 9% to £12.2m (HY2021: £11.1m). SaaS revenues increased by 11% to £11.3m driven by lower attrition and monetisation of 2021 bookings. Annual Recurring Revenue (ARR) increased by 10% in the six-month period at Actual exchange rates and by 8% at Constant exchange rates. Services revenue decreased by 3% to £0.9m.

Recurring bookings increased by 39% to £2.6m in the period (HY2021: £1.8m). Enterprise and mid-market new logo bookings were strong.

Total bookings in the period YTD were £3.4m.

Gross profit increased by 2% to £8.3m (6% at CER) (HY2021: £8.1m), with a gross margin of 68% (HY2021: 73%). 

The SaaS gross margin decreased by 5% points to 73% (74.5% at CER) due to increased hosting fees due to the business not reacting quickly enough to an increase in sales events by our major customers, which has now been addressed, and the impact of the strong dollar. The Services gross margin decreased by 8% points as services revenue were flat, but staff costs increased.

Operating expenses (defined as Total administrative expenses less exceptional items, amortisation and depreciation) increased by 6% to £8.1m (HY2021: £7.6m) due to the impact of the hiring of the mid-market sales team which drove the increase in bookings mentioned above. To the loss from operations before tax of £2.2m we add back exceptional costs of £0.3m and depreciation and amortisation costs of £2.3m, then deduct share-based credit of £0.2m to give the Adjusted EBITDA figure of £0.2m.

Adjusted EBITDA profit of £0.2m (£0.3m at CER) (HY2021: £0.5m profit) was in line with management's expectations.

The exceptional costs of £0.3m in the period relate to severance costs.

Depreciation and amortisation totalled £2.3m (HY2021: £1.9m) and increased in line with the scale of the business. There was a share-based credit of £0.2m (HY2021: charge of £0.1 m).

The loss before tax was £2.2m (HY2021: £1.8m loss) and the tax credit in the period of £0.3m (HY2021: £0.4m). Therefore, the loss for the half year was £1.9m (HY2021: £1.4m loss).

The loss per share increased to 0.9p (HY2021: 0.7p loss) partly due to exceptional charges.

There was a cash inflow of £0.3m from operations (HY2021: cash outflow of £1.3m), due to the absence of non-recurring items. Collections remain good and bad debts are low.

The cash balance at 30 June 2021 was £2.5m and the cash balance at 30 December 2021 was £3.5m. While the Group consumed cash in the first half of the year, actions taken mean that the cost base in the second half of the year will be materially lower than the first half on a constant currency basis, as the business approaches its goal of becoming cash neutral for 2023. To provide additional financial flexibility, the Company has had a working capital facility of £1.5m credit approved from Barclays.

The directors continue to believe that the preparation of these condensed consolidated interim financial statements should be on the basis of a going concern.

Eric Dodd

Chief Financial Officer

1 Adjusted EBITDA refers to earnings before interest, tax, depreciation, amortisation, other income, foreign exchange and also exceptional items (exceptional items set out in note 6)

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED INTERIM INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2022

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 JUNE 2022

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2022

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 JUNE 2022

NOTES TO THE CONSOLIDTAED INTERIM FINANCIAL STATEMENTS

1. GENERAL INFORMATION

Attraqt Group plc (the 'Company') and its subsidiaries' (collectively, the 'Group') principal activity is the development and provision of eCommerce site search, merchandising and recommendation technology.

The Company is a public limited company, which is listed on the London Stock Exchange, incorporated, registered and domiciled in England (registered number: 08904529). The address of its registered office is 7th Floor, 222-236 Grays Inn Road, London, WC1X 8HB.

The condensed consolidated interim financial statements for the six months ended 30 June 2022 was approved by the Board on 23 September 2022.

2. BASIS OF PREPERATION

BASIS OF PREPERATION OF INTERIM FINANCIAL STATEMENTS

The condensed consolidated interim financial information has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34 Interim Financial Reporting. They do not include all the information required for full annual financial statements and should be read in conjunction with information contained in the Group's Annual Report and Accounts for the year ended 31 December 2021.

The financial information for the year ended 31 December 2021 does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006 for that year, but it is derived from those accounts. Statutory accounts for the year ended 31 December 2021 were approved by the Board of Directors on 7 April 2022 and delivered to the Registrar of Companies. The report of the auditor on those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under section s498 (2) or (3) of the Companies Act 2006.

GOING CONCERN

As part of the Directors' consideration of the appropriateness of adopting the going concern basis in preparing the financial statements, given the uncertainty of COVID-19.

The Group has continued to monitor the impact of COVID-19 and situation in Ukraine by reviewing the monthly results versus the budget set for 2022. The Group has not seen a severe impact in the year with consolidated Revenue up year on year, Revenue for half year being just 1% behind budget, and consolidated EBITDA on budget. The consolidated cash balance available to the Group at 30 June 2022 is healthy at £2,470,000. The Group has continued to offer services and support to our clients uninterrupted by the national lockdowns in prior year and has not relied upon any furlough schemes available.

The Group has assessed the ongoing situation in Ukraine and there is limited impact to the business because the Group has no customers or assets in Ukraine, Belarus or Russia. We note that some of our multinational customers have paused business operations in Russia in response to the situation but due to the global reach of these customers, the Group has determined that there will be limited effect. The Group will continue to monitor the situation. The Group's Directors have revised the Groups forecast taking into account the resilience of future sales, customers and the impacts of future possible COVID-19 related national lockdowns and performed sensitivity analysis on monthly consolidated cash flows to August 2023. Those forecasts make assumptions in respect of future trading conditions, notably the economic environment and its impact on Group's revenues. The forecasts take into account foreseeable downside risks, based on the information that is available to the Directors at the time of approval of these financial statements, however it is not possible to quantify the ongoing impact with certainty.

Directors have identified that there is sensitivity to a reduction in revenue receipts, with sustained reduction of over 6.75% of annual recurring revenue bringing the Group outside existing cash facilities without any mitigating cost reductions, however they consider this to be unlikely given the impact seen within the business in the current financial year to date and the return to normal with the lifting of restrictions.

Should revenue cash flows deteriorate, management would take some mitigating actions, which include but are not limited to:

• Negotiating longer credit terms with suppliers;

• Changing invoicing terms with customers to upfront payment;

• Reduction in marketing spend in relation to events; and

• Delay in staff recruitment.

Based on the above, acknowledging the uncertainty in the economic environment as a result of the pandemic, the Board remains satisfied that the Group holds sufficient cash together with bank and other facilities and has further options available to meet its working capital requirements for at least 12 months from the date of approval of these financial statements and therefore supports the preparation of the financial statements on a going concern basis.

3. ACCOUNTING POLICIES

In preparing the condensed consolidated interim financial information, the same accounting policies, methods of computation and presentation have been applied as set out in the Group's Annual Report and Accounts for the year ended 31 December 2021. The accounting policies are consistent with those of the previous financial year and corresponding interim reporting period.

The annual financial statements of the Group are prepared in accordance with international accounting standards in conformity with the requirements of Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC No 1606/2002) as it applies to the European Union.

The Group has not early adopted any standard, interpretation or amendment that was issued but is not yet effective.

4. SIGNIFICANT JUDGEMENTS AND ESTIMATES

The preparation of the condensed interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets and liabilities, income and expense. Actual results may differ from these estimates.

The significant judgements and estimates used in the application of the Group's accounting policies are the same as those described in the Group's Annual Report and Accounts for the year ended 31 December 2021.

5. SEGMENTAL REPORTING

For the purpose of IFRS 8, the chief operating decision maker takes the form of the Board of Directors. The Directors' opinion is that the business of the group is to provide cloud-based e-commerce solutions. Based on this, there is one reportable segment. The internal and external reporting is on a consolidated basis with transactions between group companies eliminated on consolidation.

There is one customer which contributes 9%, which is £1.1m of the Group's revenues (H1 2021: 1 customer - contributing £1.0m).

The table below provides an analysis of the Group's revenue by geographical market where the customer is based.

6. EXCEPTIONAL ITEMS

The Group separately identifies those items which in management's judgement, need to be disclosed by virtue of their nature, size or incidence in order for the user to obtain a proper understanding of the underlying performance of the business. The exceptional costs of £257,000 (H1 2021: £264,000) relate to severance costs and corporate activity. The exceptional costs in 2021 related to redundancies and additional costs relating from the finalisation of the Early Birds acquisition.

7. TAXATION

The Group tax charge is based on the estimated annual effective rate and for the half year is calculated at 19.00%, (HY2021: 19.00%) and applied to the loss before tax for the period.

8. LOSS PER SHARE

Basic Earnings per share is calculated by dividing the loss attributable to the equity holders of the Company by the weighted average number of ordinary shares outstanding in the period.

The calculation of continued earnings per share is based on the following:

The outstanding share options calculation are antidilutive, due to loss made in the period. If they were to be included, the weighted average number of shares would be 211,485,899 (H1 2021: 205,607,381) and the loss per share would be 0.9 pence (H1 2021: 0.7 pence).

9. INTANGIBLE ASSETS

10. CASH AND CASH EQUIVALENTS

11. SHARE CAPITAL

The Company issued 5,131,374 1p Ordinary shares at 42.5p on 26 July 2021 which related to 95% of the unpaid deferred consideration to the sellers for the asset purchase of the Aleph software. The Company issued 270,072 1p Ordinary shares at 37.50p on 7 October 2021 which was the remaining 5% of the deferred consideration to the sellers for the purchase of the Aleph software. The Company has a total of 201,550,617 ordinary shares in issue, all of which have voting rights.

12. SHARE OPTIONS

During the six months ended 30 June 2022, the Group made further grants under its existing share-based payment schemes, as follows:

On 13 June 2022, the Company granted employees a total of 280,000 share options who had a year's service as at this date. The options will vest based upon three years' service. Upon vesting, the options will remain exercisable until 13 June 2032.

On 13 June 2022, the Company granted senior employees a total of 9,613,000 nil cost share options who had a year's service as at this date. The options will vest based upon three years' service. Upon vesting, the options will remain exercisable until 13 June 2032.

For the six months ended 30 June 2022, the total cost recognised in the income statement was £175,000 (H1

2021: £141,000).