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’, has announced its unaudited Preliminary Results for the twelve months ended 31st January 2022.
Financial Highlights:
· Total Group revenues up 11% to £5.14m* (FY21: £4.63m)
· Annual recurring revenue (“ARR”) up 64% year on year to £4.94m (FY21: £3.02m) 1
· Recurring revenues up 43% to £3.42m (FY21: £2.39m)
· Gross margin on continuing operations strong at 71% (FY21: 72%)
· Group Adjusted LBITDA of £2.49m (FY21: £2.12m)
· Loss per share 8.91p (FY21: 7.54p)
· Cash balance at the period end of £2.76m (FY21: £4.52m) and a net cash position of £2.38m (FY21: £4.10m)
Operational Highlights
SwipedOn
· SwipedOn ARR increased by 57% year-on-year to £4.23m (NZ$8.67m) at 31 January 2022 (FY21: £2.70m)1
· Monthly average revenue per user (“ARPU”) increased by 58% year on year to £75 (NZ$ 154) at 31 January 2022 (FY21: £48)1
· SwipedOn locations increased to 7,076 at end 31 January 2022 (FY21: 6,741)
· Net revenue retention increased to 130% (2021: 105%) as price increase implemented
· Revenue churn at expected levels of 10.9% (FY21: 6.8%) mainly from single site customers with lower value price plans and limited scope for upsell
· SwipedOn Desks now available to entire customer base with positive feedback received to date
Space Connect
· Space Connect ARR increased by 291% year-on-year to £0.61m at 31 January 2022 (FY21: £0.16m)
· At 31 January 2022, Space Connect had 69 customers, an increase of 56 new customers in the twelve month period
· New partners signed during the year in key geographies including Poland, The Philippines, India, Ireland, Belgium, Canada and the USA
· Sales of Evoko Naso below management expectations; primarily impacted by Covid-19 due to offices in Evoko’s key markets and territories not yet fully back to normal working capacity, leading to delayed investment decision making – we remain convinced of medium-term growth opportunity
Anders & Kern (A+K)
· A+K revenue for the twelve months to 31 January 2022 down 24% to £1.73m (FY21: £2.27m) due to the continued impact of the UK lockdown during the period, resulting in a hesitation in returning to the office
· New complementary workspace technology product lines added to the portfolio
Post period end highlights
· The Group had cash of £2.28m at 30 April 2022
· Group ARR £5.50m at 30 April 2022 up 59% year-on-year, restated to the prevailing exchange rate at 30 April 2022
· Group ARPU £93 at 30 April 2022 up 62% year-on-year
· SwipedOn ARR £4.79m (NZ$9.33m) at 30 April 2022 up 56% year on year, restated to the prevailing exchange rate at 30 April 2022
· SwipedOn ARPU £85 (NZ$165) at 30 April 2022 up 58% year-on-year
· Space Connect ARR £0.61m at 30 April 2022 up 156% year on year
· SwipedOn locations 7,471 at 30 April 2022
· Recent launch of Korean language variant of SwipedOn visitor management platform
· SwipedOn agreement with Thermo Fisher Scientific to support its US school Covid testing program in 570 locations 2
1 on a constant currency basis, restated to the prevailing exchange rate at 31 January 2022
2 revenue and locations from 5 month Thermo Fisher Scientific agreement are not included in ARR of £4.79m or locations of 7,471
Commenting on outlook, Frank Beechinor, CEO of SmartSpace Software, said:
“We have planned for a year of further strong growth in FY23 whilst ensuring our costs are tightly controlled. Expansion into non-English speaking markets has already begun, as per our recent Korean launch for SwipedOn and will be a key area of focus throughout the coming year. We see opportunity for growth from SwipedOn Desks which was launched in Autumn 2021 and has already attracted 30+ customers. Multi-location deals such as the one recently announced with ThermoFisher also provides further opportunity for growth.
As we aim to return A&K to its pre Covid-19 revenue levels, we see good opportunities in the pipeline for the new workspace technology lines.
Space Connect is ideally placed to capitalise on the opportunity presented by hybrid working fast becoming the expected norm in many parts of the world. We will continue to develop unique features that allow us to increase our market share.
With such a large addressable market and well placed product set, we are confident in our strategy to grow our high margin recurring revenues and maximise value for shareholders.”
A copy of these Preliminary results together with a results presentation with further information on the Company will be posted on the Company’s website at: www.smartspaceplc.com.
Chairman’s statement
Overview
I am pleased to report a period of strong organic revenue growth, especially when taking into account another year of challenging trading conditions for many businesses. Despite the considerable disruption caused by Covid-19, Group recurring revenue grew by 43% year on year, to £3.42m and contributed towards a total Group revenue of £5.14m, up 11% from the prior year. Growing recurring revenue is one of our key objectives and now accounts for 66% of Group revenue (2021: 52%). Our LBITDA has increased by 18% to £2.49m as a result of higher staff costs as we establish the team needed for our growth plans.
Growth in Average Revenue Per User (“ARPU”) has contributed significantly towards an overall growth in Annual Recurring Revenue (“ARR”) of 64% to £4.94m at 31 January 2022. With lockdowns and ‘work from home’ (“WFH”) mandates in place our focus has been concentrated on expanding revenue from existing clients. By growing the value of each customer, with more customers on higher tier plans, more locations, and more ‘add-on’ software sales, we were able to achieve many of our key financial objectives for the year.
The overall growth in Group revenue was achieved despite Anders & Kern (“A&K”) being severely impacted by ongoing Covid-19 restrictions in its UK customer base. This led to a fall in hardware revenues for A&K which was mitigated to the extent possible by utilising the UK Government Job Retention Scheme. Sales of our strategic partner’s meeting room panel (the “Evoko Naso”) were impacted by Covid-19 as businesses across multiple markets in the US and Europe delayed hardware investment decisions, leading to significantly lower than expected revenues for this product.
People
The continued strength of the Group is due to the hard work and resilience of all the people who work for SmartSpace. I would like to thank the team for their contribution, especially for the commitment and focus they have shown throughout this year. We have continued to invest in employees who are being supported through professional training relevant to their functional areas, as well as other relevant role-specific training. We recognise the importance of the right people to our business and therefore are pro-actively monitoring salary levels to ensure staff retention is managed.
Our priority during the Covid-19 pandemic has been the health and safety of our employees. We minimised the risk of infection in our offices and worked from home when necessary. Our staff showed great flexibility and patience in dealing with these challenges.
Last year we decided to re-locate all our software development to New Zealand, centralising development for the Group under the management of Matt Cooney, Group Chief Technology Officer (“CTO”). This task was completed by Autumn 2021. Whilst we do not expect to see financial synergies from this change the operational benefit will be significant.
Board changes
In May 2021 Bruce Morrison and Diana Dyer Bartlett stepped down as directors of the Company to be replaced by Kris Shaw as Chief Financial Officer (“CFO”) and Philip Wood as non-executive director (“NED”). Kris had been with SmartSpace for over two years before his appointment as CFO having worked closely with Bruce on both the acquisition of Space Connect and disposal of SmartSpace Global. The experience of working with both Bruce and Diana has provided Kris with the core foundations to be an excellent CFO.
With our increased focus on software offerings, there was a requirement that the role of the NED has direct experience of building fast growing international software businesses. We therefore appointed Philip Wood as an independent NED and Chair of the Audit Committee. Philip is the Deputy Chief Executive Officer and Chief Financial Officer of Aptitude Software Group plc, a specialist provider of powerful financial management software to large global businesses. The experience Philip brings in growing software businesses and mentoring finance teams is being hugely helpful to SmartSpace, as we move through our next phase of development as a global SaaS business.
Annual General Meeting
The Board will shortly be sending out a notice of the Annual General Meeting which once again will be fully open to all shareholders to attend. For those unable to attend I would urge shareholders to email any questions they may have to [email protected] and to send in proxies so their votes on the resolutions contained in the notice of meeting will be counted.
Future developments and outlook
Our intention is to become a profitable business and we have plans in place to transition SmartSpace through to cash generation. The board believes the Company has sufficient liquidity to complete this transition to cash generation towards the end of FY23.
The global economy has entered a period of higher inflation with raised living costs and consequently higher wage expectations for both existing staff members and new hires. The majority of our customers are on contracts of one year or less allowing us to factor inflation into our price plans upon renewal.
Recent investment activity within our sector values our SaaS peers on higher multiples than that commanded by SmartSpace. We intend to close this gap and build shareholder value by growing recurring revenues and delivering high quality cash generative earnings. With such a large addressable market for our products globally we are confident in our ability to capitalise on the opportunities open to us.
As we target strong revenue growth in all three divisions we intend to:
· Focus on entering new geographies, with a view to building our customer base in non-English speaking markets. Our recent launch into South Korea is a first step in this process.
· We will continue to prioritise revenue expansion opportunities from existing customers by growing customer accounts to include more locations. A key focus for growth will be to continue to build ARPU by selling SwipedOn Desks and other add-ons to new and existing customers.
· Build on the momentum achieved so far with the now well established Space Connect indirect partner network.
· Seek new technology offerings in the area of workplace optimisation for A&K to sell to its established channel partner customers.
These actions combined with the already strong growth in recurring revenues are key to achieving our financial plans, allowing us to transition SmartSpace through to cash generation.
Whilst Covid-19 has hampered sales of Evoko Naso to date, we remain optimistic about the prospects of this product, especially as customers return to the office and WFH mandates are lifted. The feedback on Naso from the Evoko partner network around the globe is very positive.
Our ambition and confidence for the year ahead remains high following a good start to the year. Our revenue, profitability and cash generation targets remain unchanged. As we continue to grow our high margin recurring revenues, we add financial strength to the business, and with such a large addressable market and well placed product set, we believe this can continue for the foreseeable future.
Guy van Zwanenberg
Chairman
16 May 2022
