Insig Ai Plc Regulatory News (INSG)

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. It forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

3 November 2022 

Insig AI plc

("Insig AI", the "Company" or the "Group")

Trading update

Trading update and revised guidance with profitability now expected from Q2 2023

Insig AI plc (AIM:INSG), the data science and machine learning company, today announces a trading update and revised guidance resulting in expected profitability being generated earlier than previously forecast by management.

In the Company's final results published on 9 September 2022, the Company stated that a number of contract wins were anticipated to close before the end of October. On 30 September, the Company announced that it had won a contract with a value of £200,000.

Two weeks after the publication of the Company's final results, the "mini-budget" took place. As widely reported, this resulted in a sharp rise in borrowing costs, an unprecedented sell-off in UK index-linked government bonds, significant uncertainty and liquidity concerns in the pensions industry. Given Insig AI's focus on the asset management industry, this resulted in a number of our prospects understandably prioritising dealing with the impact on their businesses of sudden market turmoil. As a result of this recent unexpected wave of uncertainty, a number of contracts within our pipeline did not close by 31 October, however, many of these remaining prospects remain active.

Over the last 12 months, the Company has invested heavily to build a repository of machine learning ESG company disclosures on more than 2,500 global businesses. Our database now includes constituents of the S&P 500, the STOXX 600 and the FTSE 100/250/350 together with hundreds of non-listed corporates. The Company is confident that this repository can be utilised to deliver a long term revenue stream. Having secured this capability, the Company is now able to flex more of its costs based on orders received. Accordingly, the Board has taken the decision to substantially reduce ongoing costs in relation to the building of the repository of disclosures and the integration of the data filings capabilities.

The Board recognises the nascent nature of the ESG space and whilst improved disclosures and an end to greenwashing will be both welcome and inevitable, timings remain uncertain. Having now achieved critical mass within the 'stocks universe' with our repository and the resultant reduction in headcount and other costs noted above, the Board is able to prioritise and accelerate the timeline to expected profitability of the Group. As announced in September 2022, our focus is firmly set on: fintech data science solutions, new fund launches with associated sharing of management fees and selling our ESG proprietary scoring and comparison capabilities to the corporate market.

In March 2022, the Company provided revenue targets, which included asset managers as direct buyers of the ESG scoring tool and of data filings. Given the specialised nature of these data filings and our preference to partner with asset managers on new fund launches and fintech data science to generate improved alpha, that to achieve those revenue targets, significant further investment and cost would be required. The Board is therefore reducing these targets and, in turn, any associated costs of investment are now expected to result in an improved return on equity as well as higher operating margins.

As previously announced, with the receipt of the R&D tax credit, together with the convertible loan note facilities provided, it was expected that there would be sufficient working capital through to Q2 2023. The Board now believes that no further working capital will be required to support the operations of the business in the short and medium term, as the business is expected to become cash flow positive from Q2 2023 as a result of the cost cutting actions taken. Moreover, the Board also notes as per the announcement on 4 May 2022, the terms of the initial convertible loan note provided by Richard Bernstein stated that the loan was repayable on or before 31 December 2022. Whilst no formal agreement has been made, the Board is in positive discussions with Mr Bernstein to extend this repayment date, however, should the loan become repayable on or before 31 December 2022, the Company would need to raise additional capital.

Colm McVeigh, Insig AI's Chief Executive commented: "With recent uncertainty in the asset management and funding markets having increased significantly, we must adapt and accelerate the timing of profitability. Whilst it would have been ideal to have continued to expand our coverage into more smaller companies, the return on this investment would extend beyond our appetite. We prefer to focus on becoming cash positive sooner, which we hope to achieve in Q2 2023."

For further information, please visit www.insg.ai or contact: