SMRT.L Regulatory News (SMRT)

11 October 2022

SmartSpace Software Plc

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

Interim Results for the Six Months Ended 31 July 2022

SmartSpace Software Plc, (AIM:SMRT) the leading provider of 'Integrated Space Management Software' for smart buildings and commercial spaces 'visitor reception, desks and meeting rooms',  announces its unaudited Interim Results for the six months ended 31 July 2022. This follows on from a recent Trading Update, which was announced on 16 August 2022.

Financial Highlights:

· Total Group revenues up 45% to £3.67 million (31 July 2021: £2.52 million)

· Strong growth in Annual Recurring Revenue* ("ARR") to £5.17m at 31 July 2022 up 32% year-on-year on a constant currency basis (31 July 2021: £3.90m)

· Recurring revenues up 49% to £2.37m (31 July 2021: £1.59m)

· Improved Adjusted LBITDA** of £0.50 million (31 July 2021: £1.29 million) generated from growth in high margin recurring revenue as overheads remains constant

· Loss per share from continuing operations of 3.87p (31 July 2021: Loss per share 5.49p) and total loss per share of 3.77p (31 July 2021: Loss per share 5.49p)

· Reduction in cash consumption in the period with cash used in continuing operations amounting to £0.22m (31 July 2021: £1.33m) as trading losses reduce and a net positive movement in working capital occurs

· Cash balance at 31 July 2022 of £2.32 million (31 July 2021: £3.37 million) and a net cash position of £1.97 million (31 July 2021: £2.97 million)

· Cash balance at 30 September 2022 of £1.92m

· Group ARR* £5.65m at 30 September 2022

Operational Highlights including post review period

SwipedOn

· SwipedOn ARR* increased by 35% year-on-year to £4.50m at 31 July 2022 (31 July 2021: £3.33m) with this growth continuing during August and September to £4.96m at 30 September

· Monthly Average Revenue Per User* ("ARPU") increased by 44% year on year to £84 at 31 July 2022 (31 July 2021: £59) and has advanced further to £91 at 30 September

· SwipedOn locations increased to 7,506 at 31 July 2022 (31 July 2021: 7,003) and further to 8,129 at 30 September with the inclusion of 550 Thermo Fisher Scientific locations

· Since our February 2022 contact win announcement, Thermo Fisher Scientific have now engaged SwipedOn until Q3 2023 with a contract extension to assist with their Covid-19 testing program for schools

· SwipedOn's largest Desk customer is now managing over 2,300 desks from 16 locations in APAC region and is intending to deploy into their US offices

Space Connect

· ARR* up 35% year on year to £0.55m at 31 July 2022 (31 July 2021: £0.41m) increasing to £0.58m at 30 September

· At 31 July 2022, Space Connect had 73 customers (31 July 2021: 41)

· Sales of Evoko Naso continue to show growth with billings ahead of management expectations for the six month period and in subsequent months.

Anders & Kern (A&K)

· A&K revenue for the 6 months to 31 July 2022 increased by 36% to £1.30m (31 July 2021: £0.96m) as Covid-19 restrictions are no longer impacting sales

Outlook

· Trading is in line with expectations for FY23

· Continuing to deliver growth in ARR to transition business to cashflow breakeven towards the end of FY23

* For customers invoiced in currencies other than pounds sterling ARR and ARPU is calculated by translating charges at the applicable 31 July 2022 exchange rate (with the exception of the 30 September 2022 ARR and ARPU which is set at exchange rates on that date). Comparative period ARR is provided on a constant currency basis by retranslating foreign currency amounts at the 31 July 2022 exchange rate.

** LBITDA is the loss for the period from continuing operations before net finance costs, tax, depreciation, amortisation, reorganisation and transactional items, impairment charges and share based payment charge

Commenting on outlook, Frank Beechinor, CEO of SmartSpace, said:

"As indicated in our recent Trading Update, our primary objective is to build a high growth SaaS business with strong recurring revenues. The results outlined above for SwipedOn and Space Connect illustrate that these key objectives are being achieved. We continue to see good momentum in SwipedOn and it is great to see the momentum return in Space Connect after a slow start to the year. It is encouraging to see a significant uplift in Evoko Naso sales which have continued to grow in recent months. Our priorities remain focused in continuing to deliver strong growth in ARR, growing our new international geographies and becoming cashflow breakeven towards the end of FY23, to maximise value for shareholders over the coming years."

A copy of these interim results together with a results presentation with further information on the Company will be posted on the Company's website at: www.smartspaceplc.com.

Investor Meet Company Presentation

Frank Beechinor, CEO, Kris Shaw, CFO and Hadleigh Ford, MD of SwipedOn, will provide a live presentation on the interim results via the 'Investor Meet Company' ("IMC") platform at 12.00 midday (BST) today.

Investors can sign up for free via: https://www.investormeetcompany.com/smartspace-software-plc/register-investor

Questions can be submitted at any time during the live presentation. 

Those who have already registered and requested to meet SmartSpace will be automatically invited.

Enquiries:

Introduction

As a Group we remain committed to growing SaaS revenues to develop a profitable and cash generative business. We have made progress on this core strategy with 45% growth in revenue and a significant reduction in LBITDA and cash consumption. Group ARR grew by 32% year on year on a constant currency basis, to £5.17m. Our focus remains on growing revenue from existing customers through account expansion and upselling, as well as finding valuable multi-location new customers both in our existing core markets, and by targeting new international geographies.

Software development during the period has been geared towards creating revenue generating opportunities. Since the beginning of the year, we have completed development of a freemium version of SwipedOn, which we are trialling in the UK, with the aim of allowing us to establish a new base of prospective customers. The recent launch of the Android version and introduction of the full multi-region/language capability of SwipedOn means we can now accelerate our sales activities, selling into new geographic regions and markets. One of our other software development priorities which we have made good progress with is the transition to a single platform. It is anticipated that the new integrated platform will be released in 2023. 

We have developed a new partnership with Yealink, a major international manufacturer of meeting room and video conferencing hardware. A joint marketing campaign with special bundle pricing has been launched with Yealink in the UK, targeting their major partners.

Group Key performance indicators

Operational update

SwipedOn

SwipedOn has continued to see good growth in revenue and other key performance metrics, allowing us to report our first EBITDA profit for SwipedOn of £0.36m for the six month period. Our software is now well suited to multi-location customers needing an enterprise level solution, that is simple to implement, on a self-serve basis, and represents good value for money. This has allowed us to expand our higher value accounts, as demonstrated by Thermo Fisher, who have further extended their contract to a full school year running until October 2023.

SwipedOn's largest Desk customer was signed during the period with the order coming from an Australian- headquartered consulting business with 200 offices and 10,000 employees worldwide. They are now using our software to manage over 2,300 desks from 16 locations in the APAC region and are intending to deploy into their US offices.

During the period we launched a fully localised Korean version of SwipedOn. There was much to learn about entry into non-English speaking markets, where the dominant search engine is not Google and with non-Roman characters. Whilst challenging, important lessons have been learnt, and we have been able to successfully complete this phase whilst minimising costs. We intend to apply these learnings to other new geographies, in particular in the Far East.

SwipedOn has recently achieved two important information security accreditations, ISO 27001 and SOC 2. These certifications demonstrate our commitment to keeping data secure and operating in accordance with internationally accepted standards.

Space Connect

Space Connect began the year slower than expected with a limited number of new customers joining. This was a reflection of the switch in customer needs from Covid-19 risk control to work space optimisation, resulting in longer decision-making cycles. Despite the slow start to H1 2023, we have seen increased sales momentum, resulting in stronger sales performance in May, June and July, which has continued into August and September. We have also seen some customers who joined us during the pandemic where Covid-19 mitigation was the priority, changing their requirements and therefore resulting in some expansion, contraction, and churn. This meant that the ARR for Space Connect did not grow as materially during the period as previously announced. However, the focus has very much shifted to space optimisation and, whilst the sales cycles are more protracted, it tends to result in 'sticky' customers with a long-term commitment to using our technology. We continue to see good interest from our key UK partners, including Softcat, where we have become an 'Elite' vendor, making Space Connect the only workplace software solution provider offered to the Softcat sales team.

During the half year our room panel partner, Evoko, launched a new pricing model and showcased Naso at key trade shows. With these key marketing initiatives successfully implemented, we have seen an acceleration of sales momentum of Naso, which has resulted in increased cash generation in Space Connect since May 2022 and helps underpin anticipated revenues recognised from this division going forwards. Management expects this momentum to continue over the coming months.

Anders and Kern (A&K)

With Covid-19 no longer materially impacting our customers, A&K has been able to close a number of larger sales which had stalled in the pipeline during the pandemic. This has allowed A&K to return to pre Covid-19 revenue levels and we anticipate this will continue into the second half of the year.

Financial review

Group LBITDA has reduced to £0.50m (31 July 2021: LBITDA £1.29m) through 49% growth in high margin recurring revenue, 39% growth in lower margin hardware sales, and a 1% reduction in administrative costs. In line with reduced losses, cash consumed by continuing activities reduced to £0.22m (31 July 2021: £1.33m consumed).

The breakdown of revenue by type is:

SwipedOn revenue has increased due to higher monthly Average Revenue Per User ("ARPU"). This has come from increased proportion of customers on our Business and Enterprise level plans which contribute more locations per user, together with higher subscription fees as a result of the price increase we started to implement last year. The significant customer wins announced including Thermo Fisher Scientific and Gategroup, together with the new SwipedOn Desk offering, are further strengthening revenue growth.

Space Connect revenue has increased against the comparative period due to higher customer numbers. The effect of increased sales of Naso have yet to make a significant impact on revenue, as this occurred towards the end of the reporting period and is largely recognised over time.

A&K made good progress in returning to pre-pandemic revenue levels by closing a number of larger sales. Revenue for the period was 36% above the comparative period in 2021.

Group administrative expenses fell by 1% to £3.59m (31 July 2021: £3.63m) due to a reduction in overall staff costs. Whilst inflation has increased individual staff costs, this has been offset by a small number of staff vacancies, which were only filled towards the end of the period. With a full compliment of staff going into the second half of the year, administrative costs are expected to rise reflecting the impact of inflation, albeit to be offset by anticipated revenue growth.

A profit of £29,000 relating to recently settled outstanding contingent obligations from the disposals of Smartspace Global in FY21, and Comunica Holdings in FY19, was recognised during the period.

Loss per share from continuing operations improved to 3.87p (31 July 2022: Loss per share 5.49p).

Cash flow

Cash used in continuing operations amounted to £0.22m (31 July 2022: £1.33m). The reduction in cash consumption occurred through reduced trading losses together with a net positive movement in working capital primarily generated by increased deferred revenue. 

Cash outflows from financing activities of £78K (31 July 2022: £34K) relate to the repayment of lease liabilities, mortgage repayments, and a repayment interest free Covid-19 loan, provided by the New Zealand government.

The above cash flows resulted in a cash balance at the period end of £2.32 million (31 July 2021: £3.37 million) and a net cash position of £1.97 million (31 July 2021: £2.97 million). 

Outlook

With the pandemic mostly behind us, we are seeing a change in sentiment towards efficiency and work place optimisation. This shift is beginning to contribute to sales growth, with growing interest in both Space Connect and SwipedOn. Growth in Evoko Naso receipts offers further promise of revenue growth in the second half of the year and beyond. While there are still challenges and uncertainties in the current environment, not least from cost inflation, we remain confident of achieving our objectives of becoming a profitable high growth SaaS business. The Board have plans in place to transition SmartSpace through to cash generation and believes the Group has sufficient liquidity to complete this transition. SmartSpace is therefore well positioned to meet targets for this financial year and remains optimistic about growth prospects.

People

On behalf of the Board, I would like to thank all my colleagues for their hard work and efforts in delivering the successes achieved in the first half of the year. 

Frank Beechinor

Chief Executive

10 October 2022

Consolidated Income Statement

For the six months ended 31 July 2022

* Loss for the period from continuing operations before net finance costs, tax, depreciation, amortisation, reorganisation and transactional items, impairment charges and share based payment charge

Consolidated Balance Sheet

As at 31 July 2022

Consolidated Statement of Cash Flows

For the six months ended 31 July 2022

Consolidated Statement of Changes in Equity

For the six months ended 31 July 2022

Notes to the Interim Financial Statements

1. Basis of Preparation

The unaudited interim report for the six months to 31 July 2022 does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The comparative figures for the year ended 31 January 2022 are extracted from the statutory financial statements which have been reported on by the Company's auditor, RSM UK Audit LLP. The report of the auditor on those accounts was unqualified and did not contain statements under Section 498 to 502 of the Companies Act 2006.

The consolidated interim financial information has been prepared in accordance with International Financial Reporting Standards and on the historical cost basis and using generally recognised accounting principles consistent with those used in the annual report and accounts for the year ended 31 January 2022 and expected to be used for the year ending 31 January 2023.

This interim report for the six months to 31 July 2022, which complies with IAS 34 'Interim Financial Reporting', was approved by the Board on 10 October 2022.

Hard copies of the interim report are available from the Company at its registered office at Norderstedt House, James Carter Road, Mildenhall, Bury St. Edmunds, England, IP28 7RQ. This interim report will also be made available on the Company's website, www.smartspaceplc.com.

2. Significant Accounting Policies

The accounting policies and methods of computation applied in this interim report are consistent with those of the annual financial statements for the year ended 31 January 2022, as described in those annual financial statements.

3. Segmental Analysis

* Loss / profit for the period from continuing operations before net finance costs, tax, depreciation, amortisation, reorganisation and transactional items, impairment charges and share based payment charge

4. Revenue

5. Equity

6. Loss per share

7. Cash flow information