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

Alphawave Semi: FY23 trading update, amended forward guidance

Alphawave Semi has reduced guidance for FY23 and prospectively citing lower revenues from China, changes in expected revenue recognition from long-term contracts, and continuing investment in R&D. The share price has reacted negatively, giving up most of the gains since the trading statement at the end of January. Current consensus, which is a good match for pre-existing guidance, should be reduced, most likely following release of the FY23 results and full 1Q24 trading update due on 23 April. H

Audioboom Group - Q1 24 revenue growth of +11%, FY24E forecasts reiterated

Audioboom’s FY23 results and Q1 trading update show Q1 24 revenue growth of +11% yoy, $6.7m of March 2024 revenue marking the platform’s highest revenue month since May 2022, and a confident outlook that leads us to reiterate our FY24E forecasts. Following the focus on new initiatives through FY23, the platform is now in its strongest ever operational position, with a record 1.1bn monthly ad impressions created in March 2024, record global audience reach of 38.6m unique global listeners in Janua

Crimson Tide - FY23 reports +15% revenue; investment phase complete

Crimson Tide has reported FY23 results to December in line with expectations, with additional operating leverage benefitting updated FY24 and maiden FY25 and FY26 forecasts. FY23 delivered +15% revenue growth to £6.2m at 86% GM, of which over 90% is recurring, and maintained £5.8m ARR even after unexpected customer churn in the year as we previously noted. Crucially, the Group achieved milestone adj EBITDA profitability of £0.4m at 7% EBITDA margin, and edges closer to adj PBT profitability expe

Morning Note – 16 April 2024

Devolver Digital (DEVO LN) - Rebuild year

Devolver Digital encouragingly delivered 2023 results slightly ahead of expectations and provided a steady medium-term outlook that leads us to reiterate our 2024 Adjusted EBITDA estimates. Longer term, the company is now planning to further develop its two major planned titles, Human Fall Flat 2 and System Era's next major new release. We now expect those major titles to be released in 2026 rather than 2025, meaning we lower our 2025 Adjusted EBITDA forecast to $10.6m from $17.6m but introduce

Morning Note – 15 April 2024

Intelligent Ultrasound Group - GE Healthcare launches new Voluson Signature with

GE Healthcare has announced the launch of the Voluson Signature 20 and 18 ultrasound systems, with the related press release noting these systems ‘comprehensively integrate artificial intelligence’ to improve the ultrasound procedure for clinicians and the women being scanned. These ultrasound systems include SonoLyst, the AI which incorporates Intelligent Ultrasound’s ScanNav Assist and ScanNav AutoCapture AI software. The launch of additional Voluson systems including the SonoLyst suite of AI

Checkit - New product launch and contract wins

Checkit has won contracts with two customers worth at least £417k over the three-year lives of the contracts, confirming its ability to upsell to its existing customer base and supporting our forecasts. Having trialled the new technology with multiple customers, Checkit has launched its Asset Intelligence module, which uses advanced analytics and machine learning to enhance customer sustainability, reduce costs and increase revenue.

Soft growth patch

Auction Technology Group - H1/24 Trading update

ATG’s H1/24 trading statement indicates revenue for the six-month period to 31 March 2024 was $86m, a 6% increase on H1/23 (1% organic growth), helped by the addition of the EstateSales.Net (ESN) marketplace last year, which performed well in the period. Total marketplace revenue increased 2% (organic), driven by growth in value-added services (VAS) and event fees, offsetting a decline in commission revenue (mainly through lower asset prices).

Morning Note – 17 April 2024

Touchstar - Full year results: Recurring revenue strategy delivers further profit growth

Touchstar is a supplier of mobile data computing solutions and managed services to a variety of industrial sectors. This morning's full year results reflect the outcome of a multi-year strategy coming to fruition for the group, with recurring revenue growth of 8.7% delivering overall revenue growth of 7.1% and in turn a 60% increase in PBT to £0.7m. Over the past few years, Touchstar has focused on enhancing the returns from their product offering through a shift towards recurring software licen

It’s not what you sell, it’s the way that you sell it

This report is intended to help UK small- and mid-cap investors gain a better understanding of software companies’ routes to market, and to highlight how one of the most important facets of the way in which they grow and deliver value is routinely ignored.  We examine sales processes for six UK-listed companies and one that has recently been taken over, and consider why they have followed their respective paths.

LIBERUM: Cirata plc: Cirata from the flames

Engage XR Holdings - Expanding from FY23, FY24E forecasts reiterated

ENGAGE XR’s FY23 results show revenue and net cash in line with the February trading update, EBITDA ahead at -€4.0m vs -€4.5m due to the split of cash outflow between opex and working capital, and a confident outlook that leads us to reiterate our FY24E forecasts. FY23 revenue for the core ENGAGE platform was unchanged vs FY22 at €3.3m, as H2 23 revenue was impacted by the record seven-figure contract announced in February shifting to 2024, and several enterprise customers scaling back renewals