Eagle Eye Regulatory News (EYE)

16 July 2020

Eagle Eye Solutions Group plc

("Eagle Eye", the "Group", or the "Company")

Full Year Trading Update

Strong trading performance, successful international expansion and continued

innovation combined with business resilience

Eagle Eye, a leading SaaS technology company that creates digital connections enabling personalised, real-time marketing through coupons, loyalty, apps, subscriptions and gift services, today provides an update on trading for the year ended 30 June 2020 (the "year").

Highlights

· Win and rapid deployment for flagship client, Southeastern Grocers in North America

· Successful launch of The Warehouse Group in New Zealand

· Contract extensions with Sainsbury's and ASDA in the UK

· Board confident in the long-term growth opportunity for Eagle Eye

Trading Update

Despite the challenges of operating in a global pandemic, the Group has shown its resilience, agility, and innovation to adapt to the new operational environment. The Group has continued to deliver for its major clients, win new business both domestically and internationally, and innovate the product as the need for digital engagement accelerates for retailers. The strong performance by the Group is demonstrated by its 21% revenue growth, significant improvement in adjusted EBITDA1 to £3.3m (2019: £0.7m) and significantly improved cash performance.

Revenue increased to £20.4m (2019: £16.9m) despite the impact of the COVID-19 pandemic on our non-grocery clients and delays to new business decision-making. Recurring revenues increased to 73% (2019: 71%). This growth in revenue has been driven by several significant customer contracts secured in the prior year moving to the transactional phase, and increased transactional revenues from existing customers, demonstrating their growing use of the AIR platform. Redemption and interaction volumes increased by 135% to 2.1bn (2019: 847m).

Growth in revenues combined with a continued focus on managing the cost base and releasing investment into the business in line with revenue growth, has resulted in a significant improvement at the adjusted EBITDA level. The Group generated adjusted EBITDA1 of £3.3m, an increase of 359% on the prior year (2019: £0.7m), ahead of revised market expectations. We continued to invest in the expansion of the AIR platform's capabilities and applicability to other retail sectors, increasing R&D in the year to £2.4m (2019: £2.2m).

The Group delivered a significantly improved cash performance in the year, driven by both the increase in adjusted EBITDA1 and cash management measures implemented in response to COVID-19. The Group closed the year with a net cash position of £1.5m (30 June 2019: net debt position of £(1.2)m). The Group benefited from approximately £2.2m of COVID-19 related cash management measures and prudent working capital management, which will partly unwind in FY21, resulting in a cash inflow of £2.8m (2019: outflow £1.6m) for the year.

The Group continues to have sufficient headroom within its £5m banking facility to support its existing growth plans and is in advanced discussions with the Group's lender, Barclays, with regards to extending the facility, due to expire in May 2021.

Operational update

We are pleased to report on a positive close to the year, with major customer engagements progressing well and to plan.

In May 2020, we signed significant new extensions with existing customers, Sainsbury's and ASDA, demonstrating the value of AIR to large retailers, sitting at the heart of their customer engagement programmes. The Loblaw PC Optimum programme continues to perform well, with ongoing enhancements including the extension of the Digital Wallet to enable the gifting of points to charities.

International customers go-live

Since the signing of a 5 year contract with Southeastern Grocers, Inc., a top 20 grocer in the US, in December 2019, we have made rapid progress to deploy the AIR platform and begin a multi-phased implementation. Nine media channels will be enabled, with the first channel, coupon on receipt, going live in June 2020 within six months of contract signing. Revenues from this contract will continue to grow in future years, as the number of live channels and transactions flowing through the AIR platform increase, with the potential for the engagement to become one of the Group's largest customers.

The Warehouse Group, one of the largest retailing groups in New Zealand and our first client in Australasia, has moved to the pilot phase of its digital customer engagement and community give back programme following a team member trial. The pilot programme launched in its largest brand, The Warehouse in June 2020, commencing the generation of transaction revenues at that time.

Supporting brands and outlets through the COVID-19 lock-down

The Group has cemented its relevance and innovation by launching initiatives to support our clients in the face of COVID-19. We launched a Text and Trace service within hours of the government announcing the need for hospitality operators to collect guest contact details, which is now live in over 3,000 locations. In addition, we donated the AIR platform to power the UK's Grand Outdoor Summer Café campaign, a fundraising initiative to thank Key Workers for their huge contribution during these unprecedented times.

Outlook

With high levels of recurring revenue, a growing customer base, a well-managed cost base and increased adjusted EBITDA1, the Board is confident in the ongoing resilience of Eagle Eye.

The COVID-19 pandemic continues to impact mainly non-grocery clients, which currently represent approximately 10% of Group revenues on a monthly basis, although we are now starting to see a recovery in F&B issuances as UK lockdown lifts. While new business decision making is likely to continue to be delayed during this period of uncertainty, our sales pipeline continues to grow, and we are engaged in positive discussions across multiple geographies.

In the year ahead, we will invest in product development, sales and marketing, and in new geographies to capitalise on the momentum being achieved in the US and Australasia, while continuing to manage the business carefully during the COVID-19 period.

The Board, therefore, continues to be confident in the long-term growth opportunity for Eagle Eye.

Tim Mason, Chief Executive of Eagle Eye, said: "It has been a busy and successful year for Eagle Eye, as we continued to grow while simultaneously managing the impact of COVID-19. As our business has become more international, we have worked hard on our culture, connectedness and collaboration which has served us well and we will exit the pandemic as a stronger business. 

"The pandemic has highlighted the need for retailers to digitally engage with their customers in a new world where social distancing is the norm and we believe will cause an acceleration of the digital transformation of loyalty, promotion, and gift markets over the longer-term. With flagship US and Australasian clients now gone live, an expanding partner network providing us with an enhanced offering and an increasingly powerful platform, we believe we are well positioned to support the digital transformation of retail marketing."

Notes:

All financials based on unaudited figures.

1Adjusted EBITDA excludes share-based payment charges along with depreciation, amortisation, interest and tax from the measure of profit.

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About Eagle Eye

Eagle Eye is a leading SaaS technology company transforming marketing by creating digital connections that enable personalised performance marketing in real time through coupons, loyalty, apps, subscriptions and gift services.

Eagle Eye AIR enables the secure issuance and redemption of digital offers and rewards at scale, across multiple channels, enabling a single customer view. We create a network between merchants, brands and audiences to enable customer acquisition, interaction and retention at lower cost whilst driving marketing innovation.

The Company's current customer base comprises leading names in UK Grocery, Retail and Food & Beverage sectors, including Asda, Sainsbury's, Tesco, Waitrose and John Lewis & Partners, JD Sports, Greggs, Mitchells & Butlers, Pizza Express and in North America, Loblaws, Shoppers Drug Mart, Esso and Southeastern Grocers.

For more information, please visit www.eagleeye.com