Smartspace Software PLC – SMRT – Final Results

Smartspace Software PLC – SMRT – Final Results

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 audited final results for the year ended 31 January 2021.

Financial Highlights

·      Recurring revenues increased by 64% to £2.4m (FY20: £1.5m)

·      Full year revenues from continuing operations of £4.6m (FY20: £5.1m) - decrease as a result of Covid-19 lockdowns

·      Exit ARR as at 31January 2021 grew by 50% to £3.0m (FY20: £2.0m) - primarily driven by SwipedOn

·      SaaS revenue made up 49% of total revenue (FY20: 26%)

·      Total gross profit increased by 28% to £2.6m (FY20: £2.1m)

·      Gross margin improved from 41% to 57% driven by the increase in high margin SaaS revenues

·      Adjusted LBITDA* of £2.1m (FY20: £1.7m)

·      Loss per share from continuing operations was 7.54p (FY20: 8.05p) - total loss per share of 7.89p (FY20: 41.7p)

·      Cash and cash equivalents at 31 January 2021 of £4.5m (FY20: £2.6m)

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

Operational Highlights

·      In line with the Board's strategy of focusing the software business on a SaaS model the completion of the sale of SmartSpace Global Ltd and certain contracts of its US subsidiary (comprising the Enterprise software division) to Four Winds Interactive.

o  Initial cash consideration of £4.6m, plus a further deferred payment of £0.3m received in May 2021.

Significant progress made in developing the SaaS business

·      SwipedOn - visitor management software (acquired in October 2018)

o  New Covid-19 functionality released increasing demand for products.

o  ARR up by 43% during the year to NZ$5.2m (FY20: NZ$3.6m).

o  At 31 January 2021 SwipedOn had 4,735 customers up 21.5%. The number of locations using SwipedOn increased by 27.7% to 6,741 locations (FY20: 5,280 locations).

o  ARPU up by 18% to NZ$92 (FY20: NZ$78).

o  Focussed efforts on higher value mid-market customers generating positive results with a number of significant new multi-location deals including:

§ Court Service in an Australian state - 68 locations.

§ Housebuilding company in Australia - 45 locations.

§ Expansion revenue from existing major accounts including Access information Systems, DHL, XPO and Vestas.

o  SwipedOn awarded leader in mid-market 'Visitor Management Software' category by G2, the peer-to-peer software review site.

·      Space Connect (acquired in November 2019) offers a full range of cloud-based space management software sold through international distributor network.

o  Distribution agreements already signed with 22 partners in the UK, Australia, Far East, Canada and Central America.

o  Our most significant partner is Softcat, one of the UK's leading System Integrators who have already delivered significant ARR and ESCO, a major AV integrator in the Far East has already delivered their first order.

o  Space Connect's agreement with Evoko, a leading manufacturer of meeting room panels for its next generation meeting room panel 'Naso' - launched in December 2020 and now shipping with first revenues recognised.

o  Evoko's internal sales projections for Naso are supported by a prospect list which includes a number of significant deals with well-known international brand names.

·      Anders & Kern, our specialist distributor and integrator of workplace technology has recently signed distribution and resale agreements focusing on workplace optimisation solutions. A+K's established network of 500 resellers is strategic to the development of the market for Space Connect in the UK.

o  During the lockdowns in 2020/21 the Company took steps to reduce its operating costs through closing its office and utilising the Government's Coronavirus Job Retention Scheme to furlough the majority of employees.

Software development

·      Investment of £1.3 million during the year in further enhancing software solutions of continuing businesses.

o  New add-on modules including SwipedOn Desks alongside Covid-19-specific functionality such as contactless entry.

o  Space Connect, tools to help users enforce social distancing in offices, sanitisation, contact tracing etc.

o  We have started the process to centralise software development in New Zealand going into FY22 to drive enhanced functionality and converge the technologies of SwipedOn and Space Connect.

Post period end highlights

·      SwipedOn ARPU has increased 8.3% to $99.32 ($91.90) at 31st January).

·      SwipedOn ARR has increased 9.1% to $5.7m.

·      SwipedOn added 180 new customers and 318 locations in Q1 April 21.

·      Restaurant brand company in Canada - 49 locations deal.  

·      SpaceConnect sales pipeline has grown from £556k in February to £1.2m at end of April driven by Return to the Office (RTO). campaigns promoted by partners including Softcat and ProAV.

·      We continue to book Evoko Naso revenues every month.

·      Anders & Kern has traded well against management expectations for the first quarter.

·      Revenue churn, which crept up during lockdowns has stabilised at 0.66% per month.

·      The Group reinstated its market guidance for FY22 & FY23 in March.

·      The Group currently has £4.0m of cash**

** as at 5 May 2021

On outlook, Frank Beechinor, CEO of SmartSpace commented: 

"Whilst the ongoing pandemic continues to create uncertainty for the Group, the Board is optimistic for the Group's prospects for FY22 and beyond.  Covid-19 has changed working practices and many businesses have indicated plans to reduce their real estate. This will result in more people than available desks which, in turn, creates a significant opportunity for SmartSpace. As businesses reopen and staff return to the office, customers are turning their attention to preparation for returning to the office in a controlled and Covid-19 secure manner, which the Company's products are ideally poised to assist with. Indeed, we have already received increased Space Connect orders for projects that had been delayed during the most recent lockdown. Our markets in Australia and New Zealand remain strong and the US has also held up well.  In the UK we have seen a noticeable increase in activity since the Government published its route map out of lockdown. 

As noted in the Company's trading update of 11 March 2021, our focus for the current year is to maintain momentum in both ARR and ARPU growth. Reflecting the increased functionality of the product, we implemented a price increase for new customers at SwipedOn on 1st February 2021 and we expect this to have a significant beneficial impact on ARPU this year. We are focussing our sales efforts on higher value customers in the mid-market where there is potential for revenue expansion through cross-sell and multiple location sales. This strategy has already generated results and, in February 2021, we closed a 49-location deal with a new Canadian client. We have seen healthy expansion revenue for other significant SwipedOn customers. We are also engaged with our first customers for our recently launched SwipedOn Desks product and are encouraged by both the feedback and the potential ARPU value of these clients. SwipedOn's churn has stabilised and at the beginning of May had not risen above the levels reported above.

We also have an exciting pipeline of opportunities for Space Connect in the UK, the Far East and Australia. Space Connect continues to win expansion revenue from existing customers as they deploy across their estates. Getting back to the office and helping businesses create Covid-19 secure environments is now a priority for our partners. The recent announcement of the roadmap out of lockdown has been a major catalyst, and we expect this focus to drive sales in the coming months. There is increasing focus in the media in the UK on businesses returning to the office and the emerging importance of 'hybrid working' along with reductions in expensive corporate real estate footprint. This will help drive demand for our solutions. Our technical team are working closely with Evoko on a number of significant opportunities with major international brands. Now that there is a clear pathway to returning to the office, we expect the recent momentum to continue.  

We have now started to plan and, in some cases, deploy A+K projects that had been put on hold during the current lockdown. We have recognised this revenue in March and April 2021. There has been a considerable increase in interest from A+K partners, in particular for desk management solutions. A+K distributes Evoko products, and the sales team are undertaking an increasing number of demonstrations of Evoko Naso which has resulted in a rapidly building sales pipeline. .We have a huge opportunity ahead of us and are confident in our strategy and team.

Thanks to the hard work from our colleagues and partners we are now well positioned to utilise our momentum going forward to further build recurring revenues."

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