In it to win it

While slower growth (linked to industry headwinds and smaller customer churn) and balance sheet strength are valid concerns, both are temporary challenges, that have disproportionally impacted valuation in our view. By comparison, ESYS has been given far less credit for winning an increasing number of ‘strategic customers’ (now ~77%/revs). This is an oversight. As while newer relationships have not all scaled materially (and hence their contribution isn’t yet turbocharging growth) perhaps it’s o

Back to basics, back to profitability

EBITDA and cash are both expected to be in line, while sales have grown +9% y/y to £25.3m (vs. £27.3m). Even more important, ESYS also reference it has materially completed its targeted restructure and so reduced the cost base by c.£7.5m on a pro-forma basis. We don’t believe the market has fully grasped how this should accelerate the company’s path to breakeven and in turn address concerns over capital adequacy, which in share price terms, has resulted in ESYS trading in at over a 60% discount

Inflection approaching

essensys interims confirm the material step up in non-recurring revenue (NRR) announced in the recent update, indicative of an acceleration in gross site additions. Revenues grew +18% y/y to £12.9m, with NRR up +110% y/y to £2.3m and recurring +8% y/y to £10.6m. Total sites returned to sequential growth (+1 h/h) as a function of a >30% y/y increase in gross site additions which offset headwinds from strategic customer portfolio rebalancing and non-strategic site churn. What is most encouraging i

In-line update; cost efficiency plan accelerated

essensys delivers an H1 update in-line with our projections at the half year. Revenues grew +18% y/y to £12.9m, with recurring revenues up +8% y/y to £10.6m. The key takeaways however are the sharp rise in NRR (+110% y/y to £2.3m), a highly encouraging leading indicator, as well as higher ARR/site (new sites generate +17% higher ARR than closed sites). Total sites returned to sequential growth (+1 h/h) as strategic site adds offset previously flagged headwinds from customers upscaling/ rebalanci

Q1: Positive start in pivotal year

essensys has provided a positive Q1 trading update ahead of its AGM later today. Q1 revenue growth of +22% y/y represents a strong start in a pivotal year (SCMe H1: +19%), and implies an encouraging acceleration in deployment of new sites. Contracted pipeline for deployment also continues to be refreshed, with notable near-term pipeline activity including a new multi-site US flex customer and a “substantial opportunity” with an existing customer in France. As we previously opined, key to a posit

Pipeline builds, but headwinds remain

ESYS finals confirm delivery of in-line revenue growth of +6% FY’22 to £23.3m (SCM: £23.4m), ARR growth of +11% y/y to £21.9m (SCMe: £22.3m) and an adj EBITDA loss of £7.0m (SCMe: £6.6m; FCF in-line) in a challenging year. FY(Jul)’22 saw an abnormally high rate of site churn as a function of tough trading conditions for smaller ESYS customers (including one customer insolvency) which, coupled with some ongoing site optimisation at larger customers, led to total site numbers down 3% to 458. Yet w

FY'22 in-line, cash ahead

A positive FY’22e pre-close update from ESYS, highlighting in-line revenues (SCMe forecast revs: £23.5m (+6% y/y)), and cash ahead at year-end (£24m; SCMe: £22.1m). The Group has successfully renewed with it largest customers in the US and UK whose expansion plans, alongside new logos wins in the year, have led to contracted pipeline worth an estimated £1.6m ARR at year-end. Investment plans remain on track, with new operational footprints established and sites going live in Europe and APAC. We

Pipeline builds strongly

ESYS results were in-line with the March update, yet a newly reported strong contracted pipeline performance is the key takeaway from interims. H1 performance: revenues were resilient in a challenging macro environment, growing 3% y/y to £10.9m (+4% constant currency (‘cc’)). US revenues were up strongly (+20% y/y in $ terms), although as previously highlighted, this was offset by a lost customer in the UK due to CV19 occupancy headwinds. Challenges regarding sales team expansion and sales cycle

H1 TU: Decision-making cycles elongated

ESYS’s delivered revenue growth of +3% y/y to £10.9m in H1, even as CV19 headwinds continued to impact operations. US performance remains on track, delivering strong +20% y/y growth in recurring revenues to £5.3m (+13% h/h); yet unexpected site churn in UK ops (c20 sites we estimate) saw total sites fall to 470 (FY’21: 474), offsetting US site gains. UK site losses, coupled with the continued elongation of landlord decision-making cycles (driven by CV19 uncertainty) means Group performance is be

FY'21: Strong operational performance

essensys has successfully navigated a lockdown impacted FY’21, delivering broadly flat sales in line with market expectations (-2% y/y to £22.0m, +2% excluding FX) as continued strong site additions (+13% y/y to 474) offset decline in occupancy exposed revenues (yield per site: -14% y/y) driven by CV19 travel restrictions. Yet flat growth masks the strong underlying operational momentum seen through FY’21 as ESYS added a number of high value strategic accounts and extended into new regions. Post

FY'21 update: The stage is set

essensys has delivered resilient performance in a challenging year for flex working, with FY’21 covering the entirety of the lockdown period. Whilst occupancy rates were low and deployment cycles extended due to pandemic-driven lockdown, essensys was still able to deliver organic revenue growth on a constant currency (‘cc’) basis of +2% y/y (reported: -2% to £22.0m) and exit ARR growth of +4% y/y. Notably, deployment of new sites accelerated in H2 (H2: 43; H1: 12) rising back towards pre-pandemi

Carpe Diem

essensys recently completed an oversubscribed c.£40m equity raise (inc £6.3m secondary). The raise enables the acceleration of sales and marketing investment as essensys seeks to execute on its significant pipeline opportunity in both existing and new geographies. We reiterate our view that initial CV19 headwinds for flex such as deployment cycle elongation will be significantly outweighed by the longer-term seismic acceleration of flex demand from landlords. This view is playing out in a struct

Small Cap Feast: 09/07/21

What’s cooking in the IPO kitchen? Bridgepoint Group to float on the Premium Segment of the Main Market. Bridgepoint is the leader in middle market investing, with a global reach that leverages its strong pan-European footprint and Bridgepoint's ability to deploy meaningful amounts of client capital across several well established strategies. Raising £300m. Timing TBA. HydrogenOne Capital Growth to IPO on the Premium Segment of the Main Market. HGEN is targeting a raise of £250m. First London

Journeo - The Merry Journey Continues

Journeo has released a positive trading update following strong business activity in October and November. The company references strong trading in its core Fleet and Passenger Systems divisions, as well as the newly acquired Infotec and MultiQ divisions. We expect that the investment made in the Infotec factory to facilitate higher production speed has contributed to clearing the prior backlog and the ability to win new orders. We believe the positive trading momentum will continue into FY24E a

Ingenta - Firm interims –forecast upgrades

Ingenta, the provider of software technology and supporting services to content providers and publishers around the world, has released interim results for the period to 30 June 2023. Revenues were up 9% £5.7m (H1/22: £5.3m), 80% of revenues recurring in nature. Adjusted EBITDA of £1.6m was up 26% versus H1/22 (£1.3m). New contracts worth c£2m were won during H1/23, with further new business secured post period end and we have modestly upgraded revenue and adjusted EBITDA forecasts for FY23E and

Morning Note – 28 November 2023

LSE AIM Market Screener - 22 June 2023

 The market capitalization of 806 AIM stocks was £89.3bn as of 20 June 2023. FTSE AIM All Share Index was down 5.55% YTD to 785.2 as of 21 June 2023. There were 32 companies delisted from AIM over the period December 2022-June 2023. Among the top YTD winners, there were Celadon Pharmaceuticals (up 209%, MktCap £95m), Vast Resources (+211% YTD, Mkt Cap of £15m), B90 Holdings (+200%, MktCap £22mn), Verditek (154%, MktCap £6mn), Star Phoenix Group (+162%, MktCap $1.6mn), Inspecs Group (+162%, Mk

Hybridan Small Cap Feast - 01/12/23

1st December 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment obje

Hybridan Research: 01/12/2023: DXS International Plc: Innovate UK grant to advance precision medicine AI solution

DXS International yesterday announced its success in securing £409,000 of grant funding jointly with Health Innovation East from Innovate UK – the UK’s national innovation agency - for further Research and Development (R&D) of its Artificial Intelligence (AI) medicines optimisation prescribing solution, ExpertCare. The Innovate UK grant will enable DXS to accelerate its efforts in advancing ExpertCare, a product promising to revolutionise medicine optimisation. The funds channelled into intensi

New balance

Morning Note – 1 November 2023

Celebrus Technologies - Encouraging interims, and name change

Celebrus (formerly D4t4) 1H24 interims to September are in line with the October trading update and unchanged forecasts. The typical 1H/2H revenue split eased a touch to 40/60 from 38/62, taking 1H EBITDA to breakeven (after £-1.2m in 1H23) and en route to £5.7m for the full year (FY23: £3.7m, including £4.9m in 2H23). The delivery of the larger of the two lower margin orders, together worth c£6m and postponed from 2H23, has boosted 1H24, with cash to follow in 2H24. Net cash (no debt) of £14.7m

Concurrent Technologies - FY23 trading update – revenue growth accelerating

Concurrent Technologies has released a FY23 trading update stating revenues in the current year are expected to be ahead of market expectations. Strong order intake has continued throughout the year and the significant investment in product development undertaken to target design-in wins has brought new customers (especially large Defence sector prime contractors), larger average single order sizes, and an increasing diversification of end markets. So far this year, Concurrent Technologies has w

Crimson Tide - FY23 update: FY23E adj EBITDA +136%, FY24E reiterated

Crimson Tide has reported an encouraging FY23 trading update highlighting operating efficiencies in FY23, and a strong pipeline of new business with increasing visibility to support profitable recurring revenue growth. As a result of more efficient operations, the company delivered reduced spend in FY23, reinvesting part of the savings in growth marketing activities, including partner acquisition in the US and UK. We upgrade our FY23E adj EBITDA to £0.4m (was £0.2m) to include the savings, upgra

Positive tailwinds

Growth on the dot plot

Sondrel Holdings - H1/23A Interim Results

Sondrel has released a solid set of interim results, in-line with its prior trading update. The first half showed good development on expanding the full turnkey ASIC service and progressing several projects to tape out. As previously highlighted, the environment has become more challenging in the second half of the year as customers delay decisions on next generation projects in light of weaker consumer confidence. We have prudently revised our FY24E forecasts lower, but they still show c100% gr

dotDigital - Delivering organic and acquired growth expectations

Finals to June 2023 detail performance in line with expectations, but outperforming by +6% for adj PBT and adj dil. EPS: revenue of £69.2m (£69.1mE); adj EBITDA of £22.0m (£22.3mE); adj EBIT £14.3mE (£14.3m); adj. PBT of £15.4m; (vs £14.5mE with the benefit of interest); and adj dil EPS also +6%. £52.7m cash at 30th June enabled the £25m September acquisition (incl £18.9m cash consideration) of personalisation functionality provider Fresh Relevance, in line with the acquisition strategy and acce