GetBusy plc (LON: GETB), a leading developer of document management and productivity software products, has announced its audited results for the year ended 31 December 2018.
Financial highlights
· Total revenue up 17% in reported currency and 19% at constant currency
· Recurring revenue up 19% in reported currency and 22% at constant currency
· Increase in proportion of recurring revenue to 87%, up from 86% in 2017
· Significant increase in UK recurring revenue growth to 17%, up from 5% for 2017
· Adjusted EBITDA improvement of 31% to £(834)k
· Statutory loss before tax reduced by 43% to £(1,205)k
Operational highlights
· GetBusy public beta and new website launched
· SmartVault launched in UK
· Material improvement in SmartVault LTV:CAC ratio to 6:1 (2017: 3:1)
· Paying users up 4,100 to 61,543
· Portal users exceeded 1.2 million
· SmartVault successfully migrated to AWS environment
· Started transition of UK business to a pure subscription model
Daniel Rabie, CEO of GetBusy plc, comments:
“2018 was a successful year of growth for GetBusy, with a 22% constant currency increase in recurring revenue. Our strategy of building a long term sustainable growth business based on high quality recurring subscription revenues is delivering results, with a strong performance in each territory from our two existing products. We also passed important milestones in the development of GetBusy, our communication and productivity app, with the launch of the public beta and new website.
“In 2019 we will continue to invest in customer acquisition for SmartVault and Virtual Cabinet to drive sustained growth from each product. As the volume of beta users for GetBusy increases we will continue to learn from the data we gather and iterate the product and marketing strategy accordingly. 2019 looks set to be an exciting year.”
* Adjusted EBITDA is EBITDA before IPO and demerger costs, share option costs, net capitalised development costs and non-underlying items.
+ Changes at constant currency are calculated by retranslating the comparative period at the current period’s prevailing rate of exchange.
Ahead of today’s presentations to investors, a copy of the presentation to investors is now available on the Company’s website, at www.getbusy.com/about/investors
GetBusy is an established, successful, award-winning Document Management software business, with operations in the UK, USA, Australia and New Zealand, providing over 61,500 customers with a highly secure form of digital document distribution with the flexibility to suit any business or industry. It has found particular success in the accountancy, legal and financial services verticals. Over 1 million users are registered to share information through GetBusy’s online client portals.
The Group has three core product offerings:
· Virtual Cabinet is Document Management software focused on the medium size to enterprise size markets. It is used by 27 of the 100 largest accounting firms in the UK and 25 of the top 100 accounting firms in Australia and New Zealand;
· SmartVault is an award-winning Document Management software targeting the professional small and medium enterprise market, long established in the USA and subsequently launched in the UK and Australia;
· GetBusy (in public beta) is a new client chat and productivity product which we anticipate will help customers create stronger relationships with less effort, help users become more organised and productive, and reduce their administrative burden.
The Group has an international reach, rapidly growing existing products, a proven business model, and strong momentum moving into the future.
Further information on the Group is available at www.getbusy.com.
Chairman’s Statement
It’s been a pleasure to chair GetBusy during its first full year on AIM.
In 2018, the Group has delivered an excellent set of results that has seen a 19% increase in the size of recurring monthly subscription revenues. We ended the year with a very strong cash position of £2.5m. There has been progress across all elements of our strategy. We’ve seen solid growth in each region and have been able to invest based on clear data to deliver sustained growth through 2019 and beyond. Our new product GetBusy has entered an exciting phase and, while it’s too early to forecast any revenues from the product, the process we have in place to gather feedback and iterate the product is cutting-edge.
As ever, I am grateful to all of our shareholders for their continued support this year.
Along with many AIM companies, we saw significant changes to disclosures concerning our governance framework during 2018 following the adoption of the Quoted Companies Alliance Corporate Governance Code. As a Board, we are fully supportive of the Code and are committed to maintaining the highest standards of governance.
Looking forward, the Board assesses that the fundamental challenges of document management, information chaos, privacy and the need for efficient, secure communication will remain prevalent across each of our markets. Legislative changes, including BREXIT, GDPR and similar mandates across the globe, are important catalysts for businesses to examine their operations and select best-in-class technology-led solutions to simultaneously address compliance obligations and improve efficiency. Our products provide that solution.
I would like to thank the whole team for their efforts in 2018. 2019 looks set to be another year of growth in our existing products and a year of rapid learning for GetBusy. We’re looking forward to it.
Hope to see you at the AGM.
CEO’s review
I’m incredibly proud of what our rockstar team accomplished during our first full year as an independent company in public markets. Whilst achieving strong total revenue growth of 17% (19% at constant currency), 2018 saw pleasing progress in key strategic initiatives, laying a platform for continued future growth. Our UK business has returned to healthy levels of growth having made substantial progress in transitioning its business model to pure subscription. We’ve brought SmartVault into the UK market, addressing the SME market and those seeking a pure cloud solution. And we have launched the new website and public beta of our new product, GetBusy.
During 2018, the Virtual Cabinet business celebrated its 20th anniversary and SmartVault turned 10. This wealth of knowledge and experience has helped us to create class-leading products that add significant value to our customers’ businesses and we are applying that expertise in the development of GetBusy.
UK
The UK had an outstanding year, with a return to strong growth. Recurring revenue was up 17% to £4.6m and total revenue increased 14% to £5.8m. Recurring revenue now represents 80% of the UK total (2017: 78%) and we expect to continue increasing that proportion as more opportunities are converted on a pure subscription basis.
Our marketing campaign preceding the GDPR deadline in May was very well-executed, leading to heightened awareness of document traceability and privacy. Our GDPR e-book even made GDPR fun. GDPR led to an increase in one-off consulting projects for existing customers, enabled us to upsell existing customers with additional functionality, for example our document retention packs, and generated substantial new business leads. Our order intake has continued to be strong even after the passing of the GDPR deadline, with businesses that initially focussed on compliance now looking to optimise their systems to be both compliant and efficient.
Generating high quality subscription revenue remains our priority. Subscription revenue is predictable, sustainable, scalable and provides a solid platform for us to make investments for growth. During 2018 we started to shift our UK business to a pure subscription model from a legacy upfront perpetual licence and support model. The cash investment that is required to transition to this model is more than compensated for by the increased customer lifetime value.
Our cloud-based SmartVault product was launched in the UK in June 2018. This complements our Virtual Cabinet offering, providing choice for customers with the two products solving similar problems in different ways. SmartVault is particularly well-suited to smaller customers who may not have the server infrastructure needed to support Virtual Cabinet or who mandate a cloud-first solution. We now have dedicated sales, support and delivery resource for SmartVault in the UK and we will be expanding the sales and marketing team in 2019. Whilst 2018 revenue from SmartVault in the UK was not material, we have begun to build a recognisable brand presence, we’ve formed alliances with national bookkeeping industry bodies and we’ve identified the key additional product integrations required to offer improved value to customers and accelerate growth.
UK Adjusted EBITDA before corporate and development costs increased 10% to £2.5m, despite significant investments in sales, marketing and operational infrastructure improvements.
US
2018 was a pivotal year for our US operations. We made a wholesale change to our entire sales team at the beginning of the year, completed our digital signature integration with DocuSign, strengthened our marketing effort with additional resource and automation capability and made significant headway with migrating the product to Amazon Web Services (“AWS”).
Recurring revenue increased 23% at constant currency to £3.2m. A strong year for new sales was augmented by a late 2017 price increase for some customers and lower customer attrition than in previous years. Our average Net MRR Churn in 2018 was 0.5% per month, compared to 0.7% in 2017. Total revenue increased 20% at constant currency to £3.3m.
During 2018, we saw a material improvement in the efficiency of our sales and marketing operation. Our LTV : CAC ratio doubled from 3:1 in 2017 to an average of 6:1 in 2018. A number of factors contributed to this, including better use of automation tools to nurture our funnel of leads, an increasing library of informative digital content to stimulate awareness of our product and outstanding collaboration between our award-winning marketing team and sales team. These improved metrics gave us the confidence to increase our investment in sales and marketing during H2 and we anticipate increasing investment further in 2019.
In May we announced the integration of DocuSign’s e-signature technology into our SmartVault product, having signed a global non-exclusive partnership and reseller agreement. DocuSign’s technology is now embedded into SmartVault’s Connected Desktop and Portal, allowing customers to e-sign and archive automatically any file stored in their SmartVault account. The integration was completed after the end of the 2018 US “tax season”, which is the peak time for digital signature requirements, and therefore revenue from the digital signatures in 2018 was not material. 2019 tax season will be the first real test of the success of that partnership.
Back in 2017, we migrated the Virtual Cabinet portal from self-managed servers to AWS, a global cloud provider. This has improved speed, reliability and security for customers, eliminated the need for us to make ongoing and significant capital investments to support the infrastructure and has ensured the product is scalable. In H2 2018 we started to migrate our SmartVault product to AWS. As well as bringing the user experience and cost benefits from which we benefited with Virtual Cabinet, this will provide a platform to more effectively develop and deploy product enhancements in the future. This migration was successfully completed during January 2019.
Following the increase in revenues and tight cost control, US Adjusted EBITDA before corporate and development costs was £0.3m, an improvement on the small loss in 2017.
Australia and New Zealand
Our Australia and New Zealand (“ANZ”) business has delivered revenue growth substantially higher than the group average in 2018, from a much lower base, despite a challenging year operationally. The combined business is now comfortably above cash breakeven.
Recurring revenue in 2018 was £1.6m, an increase of 35% at constant currency. There were some significant changes to the sales team in 2018 that impeded momentum during the year, resulting in the slowdown in growth compared to 2017. We have reduced the cost base in Australia accordingly and we maintain there remains attractive growth potential in the region.
Progress with existing customers has been good. Our “land and expand” model has proved successful, with pilots and trials of Virtual Cabinet in one office or service line of a customer very often leading to wins across other parts of the same firm.
During late H1 we started to test SmartVault in the ANZ market. Based on the market response, we anticipate a launch towards the end of 2019.
Pleasingly in 2018, the ANZ business reached cash breakeven, reporting Adjusted EBITDA of £0.1m, despite having a full year of establishment costs (such as premises and admin support) as standalone entities following the spin-out from Reckon Limited in August 2017.
Product development
Throughout 2018, we continued to make improvements to our existing SmartVault and Virtual Cabinet products, to deliver improved value to our customers and to maintain our competitive edge.
Virtual Cabinet introduced sophisticated document retention capabilities, allowing customers to implement GDPR-driven document retention policies with ease, saving significant administrative time and reducing compliance risks. We are also progressing well with the development of our VC mobile app, which will bring a feature-rich mobile experience for Virtual Cabinet users, overcoming the significant technical complexities of securely and seamlessly working with different customer VPNs. This allows users to work successfully on the move without logging into laptops and remote servers.
It has been a busy year for the SmartVault development team. A major improvement in security was introduced with the roll-out of multi-factor authentication. Our DocuSign integration provides a seamless customer experience, further enhancing the time efficiency benefits of using SmartVault as part of a suite of best-of-breed apps. Finally, in H2 we started the complex migration to AWS, which was completed in January 2019.
And throughout the year, we’ve been working on our new baby…
GetBusy
In 2018, we broke cover.
Our new website and public beta went live in December. This exciting development marks the start of our search for product-market fit for GetBusy and allows us to significantly increase the volume of beta users from whom we are obtaining feedback to iterate the product.
Our approach to developing GetBusy is to constantly obtain feedback from users. We examine the value propositions that resonate most strongly before a user signs up to the app. We monitor the way in which users travel through our onboarding process and the reasons why they might drop-off. We look at usage data – the number of new contacts created, messages sent, tasks requested, documents transferred, how often a user logs back into the app. We do this using industry-leading tools to obtain as much data as possible about what’s working and what’s not working. And we complement this with one-to-one video interviews with users.
And then we iterate the product. We want to make sure we’re building something that customers actually want and need, rather than what we think they want and need. Updates to the product are released at least every fortnight. Our development culture is one of failing fast, learning fast, and then improving.
Over the course of 2019 we aim to learn more about what users want out of the product, which features are offering the most value, which features need work, what makes users stick and what makes them leave. We will run marketing campaigns across a broad spectrum of messages, value propositions and target markets to acquire users. It’s an inevitable part of the development journey that many of these users will drop out of the product. We only see that as failure if we don’t learn something from each of those users. We’ve created the right technology stack to make sure every user, no matter how long or short their stay is with us, contributes to our knowledge and understanding of what customers want.
Team
We’ve strengthened our rockstar team across each business during 2018. Our focus has been on improving our customer acquisition team in the US, adding to our development capabilities across the group and bringing on board finance and analytical skillsets to help us optimise each business. Our team is committed, highly capable and customer-focussed. Our culture and values really means something to each of our people and the success in 2018 is a real credit to them. We’re proud of the fact that 85% of our people told us they would recommend working here to a friend.
Outlook
The UK and US are currently enduring significant political and macro-economic uncertainty. Whilst this may present risks to the customers of our customers, we believe that, on balance, uncertainty is an opportunity for many of our professional services clients to advise their clients on navigating that uncertainty. Other than with the foreign currency translation of our overseas earnings, we do not anticipate that uncertainty having a material effect on our business.
During 2019 we will continue our focus on growing our base of high quality recurring subscription revenue for SmartVault and Virtual Cabinet in the UK, US and ANZ. This will include increased investment in customer acquisition for SmartVault in the UK and US and the continuation of our transition to a pure subscription model for Virtual Cabinet in the UK. We will make investments in user acquisition for GetBusy and as the volume of beta users increases, we will continue to learn from the data we gather and iterate the product and marketing strategy accordingly.
2019 promises to be an exciting year.
Financial review
Revenue
Total revenue for the Group rose 17% to £10.9m, an increase of 19% at constant currency. Both the US Dollar and Australian Dollar were around 5% weaker on average in 2018 than 2017.
Recurring revenue, which comprises subscriptions and support contracts, increased by 19% to £9.5m, with a strong performance across each of our regions. Non-recurring revenue, which includes revenue from upfront perpetual licences, consulting and hardware, increased by 5%, reflecting our focus on increasing our proportion of high quality recurring subscription revenues.
Geographically, the UK saw its share of Group recurring revenue reduce from 51% to 49% (at constant currency), while ANZ increased from 15% to 17%. The US maintained its share at 34%.
We saw progress in our drive to increase recurring revenue as a proportion of our total revenue. The UK increased its share from 78% to 80% and the US increased from 96% to 98%. ANZ dropped back slightly from 92% to 91%. As a Group, recurring revenue now comprises 87% of the total, up from 86% in 2017.
We came into 2018 with Annualised MRR of £8.7m. The impact of new business on 2018’s recurring revenue was £0.9m and we benefitted by £0.1m from price increases to the existing customer base. Churn eroded our performance by around £0.2m, leading to reported recurring revenue of £9.5m for the year.
Our Annualised MRR at 31 December 2018 was up 19% at constant currency to £10.3m. If we stopped acquiring new customers, and our existing customers remained with us on the same terms for the next 12 months, this would be the recurring revenue recognised in 2019.
£4.0m of the total revenue recognised in 2018 arose from the unwind of deferred revenue in the balance sheet at 31 December 2017. As we enter 2019, approximately £4.4m of the £4.8m deferred revenue will unwind into revenue in the next 12 months.
Annual Revenue Per User (“ARPU”) for SmartVault increased by 14% to £193, with a number of factors contributing. ARPU for new accounts was 50% higher than ARPU for the accounts that churned, meaning that new customers tend to be worth more to us. We also saw the full-year impact of a price rise that was typically around the 10% range and was implemented for some customers towards the end of 2017.
Virtual Cabinet’s ARPU increased 9% to £156. The increase is chiefly the result of the shift to a pure subscription model for new customers.
Virtual Cabinet’s ARPU is lower than that of SmartVault because of the large base of installed users who are on legacy support contracts, having paid for an upfront perpetual licence. As we transition the business to a pure subscription model, we would expect ARPU to increase because the proportion of legacy customers will diminish.
Over time, as we shift the UK model to pure subscription, we would expect to see a decline in non-recurring revenue although ad-hoc consulting projects for existing customers, which might include data migrations and server moves, are likely to continue.
Gross margin
Gross margin increased slightly to 95% during 2018. Our cost of sales includes the costs of operating our product infrastructure, credit card payment fees and third party integration fees.
As we move SmartVault to AWS, we would expect a reduction in gross margin in the medium term. The first priority is to ensure the product is operating properly within the AWS environment and that there is no detrimental impact on the customer experience. Once it is operating to our satisfaction, we will start the process of cost optimisation. That process will likely take the duration of 2019.
Operating costs
Total operating costs have increased by £1.3m (13%) in 2018. £0.3m of the increase was due to a full year of corporate costs, including the costs of being a public company, given that 2017 only included 5 months of such costs. There was a £0.3m increase in non-corporate staff costs, due to a combination of changes to the make-up of our team and routine salary increases, a £0.4m increase in sales incentives, due to the very successful year for new business and a £0.1m increase in marketing costs across the business.
Development costs of £2.5m (2017: £2.6m) on the face of the income statement are stated before any adjustments for capitalisation under IAS38 Intangible assets. This is to provide a transparent view of the cash development spend before the application of judgement in applying IAS 38. £1.6m was spent on existing products (2017: £1.6m) while £0.9m was spent on GetBusy (2017: £1.0m). The reduction in the overall cash spend reflects team reorganisations that started in 2017 and have continued in 2018, to better align our skillsets with the needs of our development pipeline in order to continue investing heavily in our products. This included transferring some of the SmartVault development function from the US to the UK. 2017 also included c. £0.2m of spend with a leading outside design agency to assist with the user experience for GetBusy.
Adjusted EBITDA before development costs was £1.7m, an increase of 18% compared to 2017. Adjusted EBITDA was £(0.8)m, which was a 31% improvement on 2017.
Items reconciling Adjusted EBITDA to Operating Loss
On an IFRS basis, we have capitalised £0.4m of development spend in 2018. This relates solely to work carried out on our existing products. It includes the creation of document retention packs and a mobile app for Virtual Cabinet and for SmartVault it includes the introduction of multi-factor authentication capability, to improve security, the integration with DocuSign and the ongoing work to migrate to AWS. No costs related to the development of GetBusy have been capitalised as there is insufficient certainty over the commercial viability of that product at this stage.
The increase in depreciation and amortisation is due to the impact of continued capitalisation of development costs.
Share option costs have increased to £0.3m (2017: £0.1m). The long-term incentive plan has only been in place since IPO in August 2017, so that year contains only 5 months of costs. There has also been an additional grant of options in 2018.
The 2017 demerger, flotation and other non-underlying costs related solely to the demerger from Reckon and the related IPO. In 2018, costs of £0.2m include a £0.1m provision for an onerous contract for data centre costs in the US following the decision to migrate SmartVault from self-managed servers to AWS. £28k relates to the costs of relocation for the Group’s Chief Executive Officer from Australia to the UK and related advice, a move which was planned at the time of IPO.
Tax
The 2018 tax credit of £0.2m is largely the result of the reversal of a deferred tax charge in previous years arising on capitalised development costs. Overall the Group is currently loss-making and, in those Group companies in which profits arise, we have brought forward tax losses that offset them. We have taken no credit for UK research and development tax benefits in 2018 or 2017; we are in the process of assessing what claims might be available following the 2017 demerger.
Loss after tax
The loss after tax for the year was £1.0m, a reduction of £1.3m compared to 2017, which contained £0.9m of costs related to the demerger and IPO and a £0.4m higher tax charge. Basic and diluted loss per share was 56% lower at 2.09p.
Balance sheet and cashflow
Movements in non-current assets are mainly due to the net capitalised development costs in the period. Until we are sufficiently satisfied with the commercial viability of GetBusy, we would expect the level of capitalisation to continue broadly in line with 2018’s rate. Additions to tangible fixed assets over the period largely relate to IT equipment replacements and upgrades.
Within our current assets is £1.6m of trade and other receivables, which is marginally higher than at 31 December 2017 although no meaningful movements within the constituent parts. Overall trade debtor ageing has improved during 2018, with a reduction in unprovided debts more than 60 days overdue from 37% of the total to 7%. 85% of our trade debtors are in the UK business, reflecting the legacy upfront model with many customers invoiced annually.
The 11% increase in deferred revenue is due to a combination of the higher overall revenue number, offset by the impact of a higher proportion of new UK customers paying monthly subscriptions rather than annual.
In late 2019 and early 2020, our UK business will be moving into new premises. The business currently occupies three separate buildings on a business park. The improved collaboration opportunities afforded by everyone being under the same roof, together with a modern, fun working environment, should be significant benefit to that business. We will incur a degree of fit-out costs for the new building starting in late 2019 and will also have approximately 7 months of overlapping rent and associated costs, depending on the date of completion of the new office.
Cashflow performance during 2018 has been very strong given the operating loss. A large contributor to this has been the £0.4m increase in deferred revenue. This is a product of higher sales invoiced annually in advance and deposits received for significant projects completing in early 2019, for which no revenue has yet been recognised. Year-end accruals are also £0.4m higher than 2017 due to a combination of higher sales commissions that have not yet been paid, the £0.1m onerous contract provision for SmartVault’s self-managed server architecture and other timing differences.
