SmartSpace Software Plc, (LON:SMRT) the leading provider of ‘Integrated Space Management Software’ for smart buildings and commercial spaces ‘visitor reception, desks and meeting rooms’, announced today its unaudited Interim Results for the six months ended 31 July 2021. This follows on from a recent Trading Update, which was announced on 22 October 2021.
Financial Highlights:
· Total Group revenues up 8.8% to £2.52 million (FY21 H1 £2.32 million)
· Annual recurring revenue (“ARR”) up 53% year on year to £3.78m at 31 July 2021 (FY21 H1: £2.46m). This momentum has continued into H2 with ARR of £4.11m as at 30 September
· Recurring revenues up 52% to £1.59m (FY21 H1: £1.05m)
· Gross margin on continuing operations continued to improve to 71% (FY21 H1: 51%), reflecting an increased mix of higher margin SaaS revenues, in-line with stated strategy
· Group Adjusted LBITDA of £1.29 million (FY21 H1: £0.87 million)
· Loss per share 5.49p (FY21 H1: Loss per share 3.47p)
· Cash balance at the period end of £3.37 million (FY21 H1: £1.56 million) and a net cash position of £2.97 million (FY21 H1: £1.14 million)
· The Group had cash of £3.25 million at 20 October 2021
Operational Highlights including post review period
SwipedOn
· SwipedOn ARR increased by 43% year-on-year to £3.21m at 31 July (FY21 H1: £2.25m) with this growth continuing during August and September to £3.47m at 30 September
· Monthly average revenue per user (“ARPU”) increased by 32% year on year to £56 at 31 July (FY21 H1: £43) and has advanced further to £61 at 30 September
· SwipedOn locations increased to 7,003 at 31 July (FY 21: 6,741) with customer numbers at 4,747 (FY21: 4,735) as SwipedOn targets higher value, multi-location customers
· Customer churn at lower levels than expected and focussed on single site customers, often on lower value price plans. Customer churn in the six-month period averaged 14% whilst revenue churn was 9%
· SwipedOn Desks now available to entire customer base with positive feedback received to date
Space Connect
· ARR up 157% to £0.41m in the six-month period to 31 July and has progressed further to £0.49m at 30 September
· At 31 July, Space Connect had 41 customers, an increase of 28 new customers in the six month period. Subsequently increased by a further 18 customers to 59 in total at 30 September
· 43 reseller agreements now in place with 14 partners delivering revenue to date. Of the 29 partners who have yet to deliver revenue, 18 have deals in the pipeline. First partners signed in the USA.
· Sales of Evoko Naso below expectation; impacted by Covid-19 as offices in Evoko’s key markets not yet fully back to normal working capacity leading to delayed investment decision making
Anders & Kern (A+K)
· A+K revenue for the 6 months to 31 July 2021 down 27% to £0.96m (H1 FY21 £1.32m) mainly due to the impact of the UK lockdown during the period resulting in a hesitation in returning to the office
Board changes
As announced on 26 May 2021:
· Kris Shaw appointed as Chief Financial Officer
· Philip Wood appointed as Independent Non-Executive Director
Commenting on outlook, Frank Beechinor, CEO of SmartSpace Software, 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. While Evoko Naso sales continue to be slower than anticipated, we share Evoko’s confidence in the medium and long-term potential of Naso. Our business operations continue to focus on a highly attractive sector, evidenced by a number of major competitors consolidating at high ARR multiples. Our priorities remain focused in continuing to deliver strong growth in ARR and to maximise value for shareholders over the coming years.”
Chairman’s Statement
We have continued to execute our SaaS growth strategy, completing the development of SwipedOn Desks, advancing our indirect sales channel for Space Connect adding 27 new partners, and growing our customer base and revenue per user. The benefit of these successes will mostly come in future periods, however we continue to see excellent results in our key performance indicators (KPIs) with annual recurring revenues increasing by 43% year on year to £3.78m, and group average revenue per user (“ARPU”) increasing by 44% year on year to £63.
The investments we have made in developing software features in past periods have allowed us to reduce the price gap with our competitors, therefore increasing ARPU. The effects of this will take time to fully realise and will therefore contribute to continued growth in ARR and ARPU over coming periods. Our channel sales network has also shown success with growth in recurring revenues through our new partners. We will continue to add more partners and see revenue growth become more consistent and predictable.
As we emerge from the pandemic, the Group has experienced continued global uncertainty surrounding when and how businesses will require staff to return to the office on a more permanent basis. The various geographic markets in which we operate have all been affected at different points, leading to lower growth than in normal times. This was expected to be the case in the first quarter of the financial year and was therefore reflected in our plans. However, as recently announced in our trading update on 22 October, a return to a more normal business environment is taking longer than we anticipated and therefore resulting in continued uncertainty from customers in their investment decision making. As a result, revenue growth will be lower than the Board had originally expected for the full year.
Group Key performance indicators
| Metric | 30 September 2021 | 31 July 2021 | 31 January 2021 | 31 July 2020 |
| Annual recurring revenue (£m) | 4.11 | 3.78 | 2.93 | 2.46 |
| Monthly average revenue per user (£) | 69 | 63 | 49 | 44 |
| Customers | 4,806 | 4,788 | 4,748 | 4,379 |
Strategy update
We have made good progress towards our goal of expanding our SaaS revenues, with the following strategic initiatives facilitating growth:
· Over the last 18 months SwipedOn has been developing functionality which is offered primarily to our highest value customers on the Business or Enterprise plans. This additional functionality justifies an increase in subscription fees, bringing in line our pricing structure to that of our competitors and therefore increasing ARPU and ARR.
· We have completed the development work required to allow SwipedOn to offer a feature-rich desk booking product based on our Space Connect technology. This creates the opportunity to sell desk booking solutions to our existing SwipedOn customer base with the potential to rapidly accelerate ARPU. SwipedOn Desks is more sophisticated than the functionality offered by our visitor management competitors, giving us a strategic advantage in future sales opportunities.
· We have strengthened our channel partner network for Space Connect. Once onboarded, we focus on a targeted promotion campaign using marketing material provided by our partner management team.
· We are actively working on strategies to enter new geographic markets. This includes development work required to be able to offer SwipedOn to customers in languages other than English. We will consider acquisition opportunities in new geographies where a local presence may be beneficial to establishing a broader foothold faster in that market.
· Our software development team for Space Connect has been re-located to New Zealand bringing together the Group’s entire software development capability into one location under the management of a Group CTO. This will ensure we benefit from knowledge exchange and expertise sharing between teams.
Operational update
SwipedOn
Our ‘land and expand’ strategy of increasing ARPU from existing customers, by focusing on clients with potential to use more of our products and across multiple locations continues to positively impact SwipedOn and remains the key driver for growth over the coming years. Our sales team have been focussed on attracting high value, multisite customers who comprise an increasing proportion of our customer base. The development work which has taken place over the last 18 months has enhanced the functionality of SwipedOn justifying reducing the price differential with our competitors, whilst still remaining one of the most cost effective offerings in the market. From February 2021 all new customers have been enrolled on our new price plans, and gradually we have implemented the price increase to our existing customer base. The average ARPU of new customers has been £85 since the beginning of the financial year. The full effects of this price increase will be realised over coming periods.
In implementing the price increase we anticipated an increase in customer churn. This has been borne out but at lower levels than expected and also focussed on single site customers often on our starter plans. Customer churn in the six month period averaged at 14% whilst revenue churn was 9%.
The number of new SwipedOn customers has been lower than historical average rates. However, with a higher number of locations per customer and a higher revenue per user, the ARR from new customers in the six-month period is comparable to the average achieved by SwipedOn since its acquisition. We have seen an increase in the cost of online marketing during the period which, together with a lower number of new customers, has led to an increase in customer acquisition costs. Our expansion into new geographical markets, particularly in the Far East where competition is less and with lower marketing costs, is expected to rebalance the cost of acquisition to historical levels.
The development work to allow the launch of SwipedOn Desks was completed during the period and we have been promoting this new offering to our customer base.
SwipedOn KPIs
| Metric | 30 September 2021 | 31 July 2021 | 31 January 2021 | 31 July 2020 |
| Annual recurring revenue (£m) | 3.47 | 3.21 | 2.62 | 2.25 |
| Monthly average revenue per user (£) | 61 | 56 | 46 | 43 |
| Customers | 4,747 | 4,747 | 4,735 | 4,372 |
| Locations | 7,061 | 7,003 | 6,741 | 6,018 |
Space Connect
We have focussed on expanding our channel partner distribution network for Space Connect. We signed 14 new partners in Poland, Ireland, Belgium, Canada and the USA. Through these new partnerships and our existing relationships with the likes of Softcat we have increased our ARR by 157% in the six month period to £0.41m. The pipeline of new customer opportunities from new partners has grown quickly, reinforcing the momentum seen in the business and underpinning our confidence in the opportunity for Space Connect, its product capabilities and the potential market.
Our new Space Connect Mapping module which was developed inhouse and released in July, further streamlines the customer on-boarding process. The mapping tool enhances our self-provisioning proposition and has replaced a third-party service provider, therefore reducing cost of sales.
Sales of our strategic partner’s meeting room panel (the “Evoko Naso”) for which Space Connect receives both licence fees and SaaS revenues were below management expectations. This is a continued result of Covid-19, with offices in Evoko’s key markets not fully back to normal working capacity. As a result, many have delayed investment decisions for new hardware. The Board remains convinced by the medium-term growth opportunity for Naso and expects that, once businesses return to normal, sales will accelerate.
Space Connect key performance indicators
| Metric | 30 September 2021 | 31 July 2021 | 31 January 2021 | 31 July 2020 |
| Annual recurring revenue (£m) | 0.49 | 0.41 | 0.16 | 0.06 |
| Customers | 59 | 41 | 13 | 7 |
Anders and Kerr (A+K)
With the UK under lock down for a significant part of the trading period, a large number of A+K’s customers were not in the office. As a result, investment decisions have been delayed and revenues were lower than expected from April to June. Whilst since July there has been an uptick both in revenues and in near-term sales pipeline A+K remains below historical revenue levels. During the period A+K continued to furlough a small number of employees taking advantage of the UK Government’s job retention scheme. Whilst we remain confident that the business will return to pre-pandemic levels, we cannot predict with certainty when this will take place.
