I-nexus Global. Regulatory News (INX)

28 April 2023

i-nexus Global plc

("i-nexus", the "Company" or the "Group")

Interim Results

i-nexus Global plc (AIM: INX), a leading provider of cloud-based Strategy software solutions designed for the Global 5000, today provides its unaudited results for the 6 months ended 31 March 2023.

Financial Highlights

· Monthly Recurring Revenue ('MRR') increased 25% year-on-year to £281k and 12% since the start of the period (30 September 2022: £250k, 31 March 2022: £225k) driven by a further five new business wins and the expansion of several existing customer relationships; equivalent Underlying MRR1 was £275k (30 September 2022: £250k, 31 March 2022: £230k)

· Total revenue, 93% of which is recurring, increased by 9% to £1,673k (H1 2022: £1,540k) through the new business and expansion successes since the start of FY22

· Net retention2 in the period improved to 103% (H1 2022: 95%), highlighting both the increasing strength of our client relationships and quality of our product

· A select number of strategic investments during the second half of 2022, considered fundamental to the Group realising the market opportunity, has led to Adjusted EBITDA3 loss increasing to £358k (H1 2022: £138k)

· Loss after tax for the period of £491k (H1 2022: £283k) as a result of the aforementioned strategic investments

· Cash and cash equivalents at the period end improved to £147k (30 September 2022: £99k), with the Group continuing with its plan of deferring the placement of additional investment beyond 2022 levels until such time that revenue growth delivers a position of at least Adjusted EBITDA breakeven

· Trade receivables (net) have increased to £1,127k due to the timing of receipt of annual licence fee invoices issued (31 March 2022: £702k)

· The growth in the Group's MRR resulted in deferred revenue increasing to £1,927k at 31 March 2023 (31 March 2022: £1,655k). The Group's cash collection disciplines remain strong with DSO (debtor days) at 31 March 2023 of 60 (31 March 2022: 70)

Operational Highlights and Outlook

· Three material account expansions, two of which were logos signed in 2022, highlighting the speed of value being derived from the product alongside the increased market need for digitalised strategy solutions

· The delivery of fourteen new logos in the last 18 months has highlighted clear, common areas where we can continue to make improvements and where we are focusing our development activities. These improvements will benefit all existing customers, whilst supporting increased conversion in new business

· On track to deliver improved double-digit net MRR growth in FY23, capitalising on the increased opportunities within our base and strong prospect pipeline

Simon Crowther, Chief Executive, of i-nexus Global plc, commented:

"The market for i-nexus software continues to expand, with an increasingly remote or hybrid workforce across multiple industries driving the need for scalable, robust, digital strategy execution tools. We continue to steadily add to our customer base and have considerably improved the retention and expansion rates of our customers. 

The Board is confident i-nexus is well positioned, with a differentiated offering, to play a leadership role in this maturing market and the management team are focused on delivering a year of growth, alongside the continued management of our cash resources."

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About i-nexus Global plc

i-nexus Global plc ("i-nexus") helps organisations achieve their goals. Whether executing a strategy, driving operational excellence and continuous performance improvement, or coordinating portfolios and programs to transform results, i-nexus strategy software underpins success.

Today, we support organisations in managing over 200,000 strategic programmes around the world.

i-nexus transforms how organisations plan, execute, and track goals. We inspire the confidence to leave behind the spreadsheets, presentations and reports those organisations rely on, replacing it with a cloud-based, collaborative solution.

Throughout this announcement:

1 Underlying MRR excludes MRR movements related to IFRS adjustments and Foreign Exchange variances, these items are included within the Reported MRR value.

2 Net Retention is measured by the total of on-going MRR at the period-end from clients in place at the start of the period as a percentage of the opening MRR from those clients.

3 Adjusted EBITDA excludes the impact of any impairment, loss on disposal of assets, share based payment expenses and non-underlying items

Overview

i-nexus is pleased to report on a period of encouraging progress for the business, with the continued delivery of new business wins being well supported by the expansion opportunities secured within our client base.

These sales successes, combined with the continued improvement in net revenue retention levels, resulted in the Group delivering double-digit MRR growth in the period whilst continuing to operate a strong sales pipeline, with multiple businesses in active dialogue or trials.

This success is underpinned by the decision at the start of 2022 to revise our Go-to-Market strategy, shifting our marketing focus to a content-led strategy and deliberately securing smaller initial deals, servicing limited business areas or teams within the customer where demonstration of value would lead to significant expansion opportunities.

In order to ensure the business is best placed to realise the growing market opportunity, during the first half of the year the Group launched several strategic initiatives which focused on streamlining the onboarding process, ensuring we continue to drive our value proposition and best practice into our sales discussions and simplification of our product demonstrations, particularly around our key differentiator: our ability to deliver Hoshin Kanri methodology.

Our marketing engine is performing well, with the strength of the pipeline corresponding well to the level of investment. During the second quarter, the business took the strategic decision to reduce marketing expenditure, choosing instead to increase investment in other areas of the team, to ensure we have the ability to continue to deliver for our growing customer base.

Positive progress with partners has been achieved in the period, with the Group securing approximately three new consulting partner leads per month. The business has now started to focus on re-engaging in its partner program, believing they have considerable potential to increase our sales pipeline. The Board is actively considering ways to capitalise on this interest.

Trading

Since the start of the current financial year, the Company has secured five new logos (H1 2022: 5), each with expansion potential, building on the record nine new logos signed in the prior year. These successes include a large tier 1 automotive manufacturer, secured via our UK reseller, who successfully demonstrated the value of a rigorous and systematic approach to strategy.

A key highlight for the business during the first half of the year is that a number of these logos are already showing the potential for either stepped growth or are considering business wide rollouts, in addition to the three material expansions being secured in H1. This is a testament to the value the deployment team are demonstrating.

The Group renewed well over 90% of its customers, a considerable improvement on the prior year period, reflecting the rigour and routine that has been brought to the review of accounts with our customer stakeholders, and the release of enterprise software budgets following the freeze experienced during Covid times.

These new logo wins and account expansions, alongside the continued improvement in net revenue retention levels, delivered year-on-year growth in MRR of 25% to £281k MRR and 12% since the start of the period (30 September 2022: £250k, 31 March 2022: £225k).

Market Opportunity

All businesses set goals, plan how to deliver them and track performance. The challenge is whether they can do this at pace, with insight and high levels of visibility across their complex ecosystems where i-nexus' software delivers considerable value. Our software category - Strategy Execution Management ('SEM') - continues to evolve and gain momentum as companies accelerate digitalising mission-critical processes in this post-pandemic world. The Group is beginning to see increased demand from customers looking to digitalise strategy execution. Post-Covid traditional analogue methods have proven ineffective for remote working. These customers acknowledge market disruption and seek tools that enable responsiveness to changing conditions.

The business is seeing two clear customer priorities around improving the strategic planning process (and in particular, the adoption of Hoshin Kanri) and connecting the planning process with the delivery engine: a traditional project management office or a new strategy realisation office driving organisation alignment.

Accompanying this is an increased level of sophistication in our market, with prospects frequently now coming to us with very well thought through capability requirements, having pre-evaluated i-nexus against the competition on a matrix of criteria. We continue to see that i-nexus has two clear advantages in strategy execution against Strategy Portfolio Management ('SPM') vendors: powerful strategic planning and performance management capabilities that complement portfolio management features, plus, i-nexus' customers benefit from insight gained from over fifteen years of market experience in strategy execution.

People

The Board wishes to thank its employees for the excellent support and commitment they are providing to the business and to our clients, highlighted by the successes achieved. The results are even more impressive when taking into account the size of the team. Each person has gone above and beyond to grow sales momentum, develop our products and deepen customer relationships.

Strategic focus for H2

1. To accelerate the landing of new logos - The business has managed to reduce friction in buying i-nexus through a more streamlined contracting process whilst enhancing the trial experience as planned. The Group is seeing increased evidence of trials advancing to where we feel confident in marketing them more widely and we are also witnessing early signs of shorter buying cycles.

2. Prove our ability to expand within accounts - A key highlight during the first half of the year was the delivery of three material expansions, two of which were logos secured in 2022. With a further five new logos signed in the period, proving the land and expand strategy is repeatable across both these and the other clients secured in 2022 is a key focus for the Group. In order to fully realise this opportunity, the business launched an updated set of value measures and increased its levels of customer interaction through marketing initiatives and forums.

3. Improve the customer experience within our Workbench product - The Group continues to focus on the challenges customers face in the process of strategy execution rather than outputs for insight. The delivery of the fourteen new logos secured in the last 18 months has highlighted clear, common areas where we can continue to make improvements and where we are focusing our development activities. These improvements will benefit all existing customers, whilst supporting increased conversion in new business. A process of defining best practice Strategy process and mapping it to the product is also underway.

We believe that through continued focus on these programs, we will drive the success of the business.

Outlook

Following the growth in MRR achieved in H1 and our careful management of the impacts of cost inflation on the business, we continue to have clear visibility of our cash runway. The growing interest in strategy software, the relaxation of enterprise software budgets, the enhancements we have made to our products and our increased sales and marketing skills, all combine to provide us with confidence in our outlook.

The market for i-nexus software continues to expand, with an increasingly remote or hybrid workforce across multiple industries driving the need for scalable, robust, digital strategy execution tools. We continue to add steadily to our customer base and have considerably improved the retention and expansion rate of our customers. 

The Board is confident i-nexus is well positioned, with a differentiated offering, to play a leadership role in this maturing market and the management team are focused on delivering a year of growth. Alongside the continued management of our cash resources, the Board continues to consider the available options at its disposal in order to strengthen the Group's cash position.

Financial Performance

Revenue

Licence revenues

i-nexus' Monthly Recurring Revenue ('MRR') at 31 March 2023 totalled £281k (30 September 2022: £250k, 31 March 2022: £225k) representing overall year-on-year growth of 25% and growth of 12% since the start of the period as the business secured five new logos (H1 2022: five), building on the record nine secured in FY22, alongside material expansions in three accounts (H1 2022: two).

Highlighting both the increasing strength of our client relationships and quality of our product, net retention (measured by the total value of on-going MRR at the period-end from clients in place at the start of the period as a percentage of the opening MRR from those clients) in the period grew to 103% (H1 2022: 95%).

As predicted, licence revenues recognised in H1 2023 increased by 10% to £1,555k (H1 2022: £1,416k), with the new business and account expansion successes since the start of 2022 expected to drive further increases during the second half of the year. These revenues now represent 93% of overall revenue (H1 2022: 92%).

Services revenues

Revenue from associated professional services was in line with prior period levels at £118k (H1 2022: £124k).

Gross Margin

Gross Margin in the period remained stable at 77% (H1 2022: 77%) with the increase in revenue driving the uplift from £1,188k to £1,293k.

Reported Gross Margin is the combined gross margin over both recurring software subscriptions and professional services.

Adjusted EBITDA

Adjusted EBITDA (EBITDA excluding the impact of impairment, loss on disposal of assets, share-based payments and non-underlying items) totalled a loss of £358k for the period (H2 2022: loss of £414k, H1 2022: loss of £138k), with the increase in overhead costs of £350k against H1 2022 levels reflecting the Board's decision during the second half of 2022 to accelerate a select number of investments both in its existing employee base to preserve retention and in additional resource needed for operational delivery. The strengthening of the team was considered fundamental to the Group realising the market opportunity and delivering on the next stage of its growth strategy, a strategy which has started to play out during H1.

As mentioned in the FY22 Annual Report, there remains no plans to make further investments until such time as revenue growth is delivering a positive Adjusted EBITDA. 

Depreciation, amortisation and impairment

Total costs in respect of depreciation, amortisation, and impairment were £106k (H1 2022: £89k). With the business having low capital expenditure requirements, the value is principally made up of amortisation on intangible assets, being capitalised development costs (£99k, H1 2022: £59k).

These costs are reective of the continual evolution of the market in which the Group operates, the needs of its customers, both present and prospective, and the Group's agile approach to continually developing and improving its oering.

Non-underlying items

Non-underlying items totalling £11k in H1 2023 comprise redundancy costs. No such costs were incurred in the year ended 30 September 2022.

Statutory results

The Group reported a loss before taxation for the six month period of £596k (H2 2022: £762k, H1 2022: £343k).

Cash and cash equivalents

Cash and cash equivalents at 31 March 2023 improved to £147k (30 September 2022: £99k, 31 March 2022: £694k).

Careful cash management will continue to be a priority focus for the Board. As previously outlined, there are currently no plans to increase the existing cost base in the second half of 2023 until such time as revenue growth delivers a position of at least Adjusted EBITDA breakeven.

The Group prepares budgets, cashow forecasts and undertakes scenario planning to ensure that the Group can meet its liabilities as they fall due. The Board's assessment in relation to going concern is included in note 2 of this report.

Balance sheet

Trade receivables (net) have increased to £1,127k at 31 March 2023 due to the timing of receipt of annual licence fee invoices issued (31 March 2022: £702k). This amount is expected to be received in line with the Group's DSO.

The growth in the Group's MRR resulted in deferred revenue increasing to £1,927k at 31 March 2023 (31 March 2022: £1,655k). The Group's cash collection disciplines remain strong with DSO (debtor days) at 31 March 2023 of 60 (31 March 2022: 70).

Principal risks and uncertainties

The Group's principal risks and uncertainties are set out in note 7 of this report. 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 31 March 2023

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

As at 31 March 2023

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

For the six months ended 31 March 2023

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the six months ended 31 March 2023

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the six months ended 31 March 2022

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. General information

i-nexus Global plc (the "Company") and its subsidiaries (together, the Group) is a specialist provider of cloud based strategy software and associated professional services. 

The Company is a public limited company domiciled in the UK and incorporated in England and Wales (registered number 11321642) and its registered office is 27-28 Eastcastle Street, London, W1W 8DH.

The interim condensed consolidated financial statements were approved for issue on 27 April 2023.

These condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 September 2022 were approved by the Board of Directors on 6 January 2023 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statements under section 498 of the Companies Act 2006.

2. Basis of preparation

These condensed consolidated interim financial information for the six months ended 31 March 2023 have not been audited or reviewed by the auditors. The interims have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'interim financial reporting'. These condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 30 September 2022, which have been prepared in accordance with UK adopted international accounting standards and company law. The interim condensed consolidated financial information has been prepared on a going concern basis and is presented in Sterling to the nearest £1.

After reviewing the Group's forecasts and projections, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, being a period of at least twelve months from the date of approval of these interim financial statements.

A scenario testing exercise, in which the Directors prepared detailed cash flow forecasts for the period covered by the going concern forecast, was performed. The forecasts take into account the Directors' views of current and future economic conditions that are expected to prevail over the period including assumptions regarding the sales pipeline, future revenues and costs with various scenarios which reflect growth plans, opportunities and risks.

Alongside management's base case forecast, the Group prepared an extreme downside scenario. Under this extreme scenario, the Group has given consideration to the potential actions available to management to mitigate the impact of these sensitivities, in particular the discretionary nature of costs incurred by the Group, in order to ensure the continued availability of funds. Across both this scenario and those scenarios detailed above, the business had sufficient working capital headroom to continue to operate.

Financial performance in the next 12 months is not expected to be materially impacted from current period levels due to the long-range revenue visibility achieved through the recurring revenue business model. These recurring revenues, representing 90% of total revenue, are considered resilient given the majority are on multiyear terms. In each scenario, the Board also assumed that the Group did not have access to any further external funding.

3. Accounting policies

The accounting policies adopted are consistent with those of the previous financial statements, except in respect of taxes on income which, in the interim periods, are accrued using the tax rate that would be applicable to expected total annual performance. New and amended standards and interpretations need to be adopted in the first interim financial statements issued after their effective date. There are no new IFRSs or IFRICs that are effective for the first time for this interim period that would be expected to have a material impact on the financial statements.

4. Estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 30 September 2022, with the exception of changes in estimates that are required in determining the provision for income taxes.

5. Segmental reporting

The Group has one single business segment and therefore all revenue is derived from the rendering of services as stated in the principal activity. The Group operates in six geographical segments, as set out below. This is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance, has been identified as the management team comprising the executive directors who make strategic decisions.

6. Earnings per share

The calculation of basic and diluted loss per share for the six months to 31 March 2023 was based upon the loss attributable to ordinary shareholders of £491,175 (six months to 31 March 2022: £282,703, year ended 30 September 2022: £870,884) and a weighted average number of ordinary shares in issue of 29,571,605 (six months to 31 March 2022: 29,571,605, year ended 30 September 2022: 29,571,605), calculated as follows:

Weighted average number of ordinary shares

Earnings per share (0.02) (0.01) (0.03)

7. Principal risks and uncertainties

Pursuant to the requirements of the Disclosure and Transparency Rules the Group provides the following information on its principal risks and uncertainties. The Group considers strategic, operational and financial risks and identifies actions to mitigate those risks. These risk profiles are updated at least annually. The principal risks and uncertainties detailed within the Group's 2022 Annual Report remain applicable for the first six months of the financial year. The Group's 2022 Annual Report is available from the i-nexus website: www.i-nexus.com/company/investor-center/

8. Forward-looking statements

This announcement may include certain forward-looking statements, beliefs or opinions, including statements with respect to the Group's business, financial condition and results of operations. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "anticipates", "targets", "aims", "continues", "expects", "intends", "hopes", "may", "will", "would", "could" or "should" or, in each case, their negative or other various or comparable terminology. These statements are made by the Directors in good faith based on the information available to them at the date of this announcement and reflect the Directors beliefs and expectations. By their nature these statements involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, developments in the global economy, changes in government policies, spending and procurement methodologies, and failure in health, safety or environmental policies.

No representation or warranty is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. Forward-looking statements speak only as at the date of this announcement and the Group and its advisers expressly disclaim any obligations or undertaking to release any update of, or revisions to, any forward-looking statements in this announcement. No statement in the announcement is intended to be, or intended to be construed as, a profit forecast or to be interpreted to mean that earnings per share for the current or future financial years will necessarily match or exceed the historical earnings. As a result, you are cautioned not to place any undue reliance on such forward-looking statements.

9. Statement of Directors' Responsibilities

The Directors confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

- an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and 

- material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The Directors of i-nexus Global plc are listed in the i-nexus Group plc Annual Report for 30 September 2022. A list of current directors is maintained on the i-nexus Global plc website: www.i-nexus.com/company/team/.  Copies of this statement are available on the investor relations page of our website (www.i-nexus.com/company/investor-center/)