Half year results

13 March 2025

essensys plc

("essensys", the "Company" or the "Group")

Half year results

Return to profit in H1 25 and on track for run rate cash generation in FY25

Launch of new product elumo underpins drive for growth over the next five years

Planned succession of Chief Executive role

essensys plc (AIM:ESYS), the leading global provider of software and technology to the flexible workspace industry, announces its unaudited results for the six months ended 31 January 2025 ("H1 25"). All information relates to this period, unless otherwise specified.

Return to positive adjusted EBITDA in H1 25

· Return to positive adjusted EBITDA1, reflecting essensys' simplified operational structure and aligned cost base

· As previously guided, ARR was lower due to the downsizing of a large strategic customer. Excluding this customer, Strategic customer ARR2 grew by 5%

· Adjusted Strategic customer Net Revenue Retention of 110% (H1 24: 103%)3

· essensys remains debt free with net cash of £2.2m at 31 January 2025

New product launch to drive sustainable growth and progress with strategic customers

· Launch of elumo, a dynamic bookings and access platform to give landlords and operators a new way to manage and monetise shared meeting rooms and flexible space, expected to drive growth for the next five years

· Momentum with strategic customers

o  Land: new customer win for an intelligence-led portfolio deployment for 11 new sites in key US market

o  Expand: Three-year renewal of existing strategic customer expected to generate £2.7m of TCV

o  Grow: launch of new product, elumo, as a significant evolution of essensys Platform

Chief Executive Officer succession

· As announced separately today and as part of a planned succession, Mark Furness has decided to retire as Chief Executive Officer, after founding essensys in 2006 and leading the business since launch 

· Mark will remain on the Board of the Company and will move to a new role as a non-executive director of essensys with effect from 1 May 2025

· James Lowery, Chief Operating Officer, will take over as Chief Executive Officer on 1 May 2025

Current trading and outlook

· The Group remains confident of further progress in the second half of the year, supported by our progress with strategic customers, our pure-play SaaS product, essensys Platform, and launch of elumo

· essensys Platform expected to improve gross margins from decommissioning data centres and revenue mix

· On track for revenue expectations and exit run-rate cash generation in FY25, as previously guided. Expected FY25 EBITDA reduces due to an extension for the data centre decommissioning programme in order to maximise commercial returns, but remains on track to deliver a positive outcome for the year, with H2 25 EBITDA expected to be similar to H1 25

· The Group expects an improvement in revenue mix following a continuing strategic shift away from network services, which will reduce overall revenues in FY26, leading to cash generation and an improvement in margins

Mark Furness, Chief Executive Officer of essensys, said:

"essensys returned to profit in the first half of our financial year and expects to deliver run-rate cash generation in the full year, in line with management expectations. We exist to help solve the complex operational challenges faced by office landlords and flexible workspace operators. Our new product, elumo, responds to a pressing customer need to better monetise their prime asset - shared meeting rooms. I am very excited by the opportunities elumo creates for essensys and we are confident that this will be a key driver of growth for our business. In a challenging macroeconomic environment, which resulted in a large strategic customer downsizing as previously disclosed, we are making good progress with our strategy to return to long-term, sustainable profitability and cash generation and look forward to further progress in the second half of the year."

Financial summary:

Notes

1. Adjusted EBITDA is earnings before tax, depreciation, amortisation, exceptional items and other non-trading items, such as share option charges

2. Strategic customers are those customers who have potential for at least $1m ARR

3. Excluding the expected downsizing of a large strategic customer

4. See CFO review below for description and breakdown

5. Current period revenue and/or costs translated into GBP using the average exchange rate for the comparative prior period

For further information, please contact:

About essensys plc 

Founded in 2006 and listed on the London Stock Exchange AIM Market, essensys is a leading global provider of software and technology to the commercial real estate industry.

Partnering with many of the world's leading landlords and flexible workspace operators, essensys delivers innovative digital experience (DX) solutions that drive occupancy, maximise yield and reduce operating costs. Its flagship products, essensys Platform and elumo, solve the complex challenges of managing physical and digital access in dynamic multi-tenant environments, while delivering deep space utilisation insights and transformative digital experiences.

With a focus on Access, Intelligence & Experience, essensys' products enable real estate leaders to unlock the full potential of their portfolios in today's flexible, hybrid world while ensuring they stay ahead in an era of dynamic workplace evolution.

Chief executive's report

essensys returned to positive adjusted EBITDA in the first six months of the year, reflecting the improvement in our revenue mix, the simplification of our operational structure with a lower cost base and our focus on strategic customers. essensys remains on track to be profitable and cash generative on a run-rate basis by FY25, in line with management expectations.

While ARR reduced following the downsizing of a single strategic customer, as previously announced, we were able to return to profitability and remain on track for cash generation - in a challenging macro backdrop - through a laser-focus on our three strategic priorities. First, landing, expanding and growing with new and existing strategic customers. Secondly, product development with the launch of elumo, which is expected to drive growth with new and existing customers for the next five years. And thirdly, maintaining a disciplined approach to cost management. Because of our progress with essensys Platform, we were able to decommission four of our thirteen data centres in H1 25. 

Strategic customers: Land, Expand and Grow

The steps we have taken to enhance the quality of our customer base continue to bear fruit and will continue to support an improvement in our customer mix, gross margin, product adoption and revenue quality over time.

High value, strategic customers with the potential to deliver at least $1m ARR remain the focus of our business. While the challenging macro backdrop continues to weigh on sales cycles and capex, we successfully signed a three-year renewal of our contract with a leading UK based flexible workspace operator and one of our largest customers globally. This cements our partnership for a further 3 years and supports our strategic transition to a pureplay SaaS business, growing our software revenue whilst reducing network costs, with a total contract value of £2.7m.

This also builds on other recent multi-site software partnerships; an additional 18 locations with one of the UK's largest commercial property specialists, and a new win with a North American flexible workspace specialist for an intelligence-led portfolio deployment for 11 locations. 

Strategic customer Net Revenue Retention was 84% (H1 24: 95%), improving to 110% when adjusted for the impact of the downsizing of a large single customer.

Product innovation

Over the last four years, we have been committed to investing in product development, listening to our customers and evolving our product offering to ensure we continue to solve the key operational challenges faced by the commercial real estate industry.

We have continued to make significant progress on this important pillar of our strategy and through essensys Platform, Intelligence Engine and now elumo, we have built a suite of products which can deliver Access, Intelligence and Experience solutions - either together as a converged platform, or as standalone capabilities - that overcome these challenges.

Launch of elumo

In March 2025, essensys launched elumo (formerly referred to as Smart Access), a new dynamic bookings and access platform designed to provide landlords and operators of flexible, multi-tenanted office space with a powerful new way to manage and monetise shared meeting rooms and flexible space. 

The launch was a strategic priority for the business and elumo is expected to drive growth with new and existing customers for the next five years.

elumo brings together bookings, access control and intelligence into a single solution for the first time.

Shared meeting rooms represent some of the most valuable, in-demand spaces in the inventory stack for owners and operators of multi-tenanted offices. This has been driven by the rise of flexible workspaces and hybrid working, smaller demised spaces, as well as a greater reliance on shared amenities. However, the current ways used to manage these spaces are outdated.

This creates a number of challenges for our customers: lost revenue from 'room squatting', where meeting rooms are occupied without being booked; a poor user experience caused by operational pain points, for example when rooms are booked but sit empty; and a lack of real-time visibility into the use of these spaces.

elumo provides a unique solution and is designed to transform how bookable spaces are used and accessed, enabling our customers to unlock and maximise revenue by turning vacant spaces into income-generating assets, whilst also significantly improving the user experience and providing real-time intelligence on utilisation and bookings.

Designed and developed from the ground up elumo is an integrated hardware and software solution that converges bookings and access control, enabling rooms to be booked, charged and accessed with a single tap. Users download a digital pass using Apple and Google wallets, enabling meeting rooms to be booked instantly, charged automatically to the associated account and access automatically granted in less than half a second..

· Benefits to our customers: Instant, rule-based access for users ensuring the correct permissions are given and only trusted users can access a customer's digital environment; shared meeting rooms transformed into revenue-generating assets; provides real time intelligence on utilisation and bookings so every square foot of space is optimised. The resulting charges may then be passed automatically into the customer's invoicing platform of choice for onward billing to tenants.  

· Benefits to the user: Enables users to seamlessly move between connected spaces safely & securely; real-time availability instantly showing which rooms are free and when rooms are available using elumo's simple availability display at every door, providing the flexibility to support both ad-hoc and in-advance bookings, whilst leveraging the power, security and convenience of Apple and Google wallets.

elumo's intelligent IoT gateway is also designed to enable the collection of real-time sensor data, providing the potential to evolve, adapt and unlock further opportunities in the future, enhancing users' experience in customer spaces.

Intelligence Engine

Since launching our insight solution, Intelligence Engine, last year, we have seen excellent engagement from customers.

Using high-resolution, high-fidelity data into space utilisation and digital experience (DX), Intelligence Engine is a solution that provides customers with data-driven insights that can enables them to understand how their spaces are used and experienced. These insights can be used to drive real business outcomes, identifying opportunities and risks across their customer base, and increasing occupancy, yield and efficiency.

Ongoing cost management

Adjusted EBITDA returned to profit in the period, amounting to £0.8m, compared to a loss of £0.5m in H1 24. This reflects our continuing focus on cost management. The evolution of essensys Platform into a pureplay SaaS offer is expected to support a significant improvement to gross margin in H2 25. As a result, essensys was able to decommission four of our thirteen data centres in H1 25, with a further six planned to close in H2. 

We remain debt-free and had a net cash position of £2.2m as at 31 January 2025. 

Current trading and outlook

The Group remains confident of further progress in the second half of the year, driven by our progress with strategic customers, our pure-play SaaS product (essensys Platform) and the launch of elumo.

essensys remains on track to deliver positive EBITDA and run-rate cash generation in FY25. 

We expect to see an improvement in gross margins in H2 25 as a result of the decommissioning of our data centres. Four data centres were decommissioned in H1 25 and we expect the decommissioning of a further six in H2 25 (out of 13 in total) to further reduce costs, improve gross margin and revenue mix. This cost saving is a direct result of the adoption of essensys Platform by our customers.

While the Group expects the strategic move away from network services will lead to a reduction in overall revenues in FY26, the resulting evolution of our revenue mix will deliver cash generation and improved margins.

The long-term, structural drivers for flexible office space remain intact and support ongoing demand from strategic customers for our software to meet tenant needs. This is supported by our investment in product. The launch of elumo in March 2025 is a significant milestone after five years of development and is expected to drive growth for new and existing customers in the next five years.

Chief Financial Officer's Report

The unaudited financial results included in this announcement cover the Group's consolidated activities for the six months ended 31 January 2025. The comparatives for the previous six months were for the Group's consolidated activities for the six months ended 31 January 2024.

Financial Key Performance Indicators

Revenue

Group total revenue decreased by 11% to £10.4m in H1 25 (H1 24: £11.7m), primarily due to the downsizing of a single large strategic customer, as previously guided. Excluding this customer, Group total revenue decreased by 5% and recurring revenue decreased by 1%, with recurring revenue from strategic customers growing by 6%.

Recurring revenue comprises income invoiced for services that are repeatable and are consumed and delivered on a monthly basis over the term of a customer contract. Run Rate Annual Recurring Revenue (Run Rate ARR) is an annualisation of the recurring revenue for the month identified (January 2025); this is used by management as an indication of the annual value of the recurring revenue for that month and to monitor long term revenue growth of the business.

Run Rate ARR decreased by 16% year on year, again driven by the downsizing of the customer above. Excluding this customer, Run Rate ARR decreased by 1%, with ARR from strategic customers increasing by 5%. ARR from strategic customers continues to account for 80% (H1 24: 81%). The Group introduced 2 new strategic customers in the period and 5 new customers in total, which resulted in increased ARR of £0.2m.

A further £0.4m was added in new sites (net of lost sites), offset by the expected continuing decline in variable Marketplace revenues (£0.3m).

Non-recurring revenue comprises set up and installation costs and is recognised when a site is live. Non-recurring revenue reduced by 22% compared to H1 24, reflecting challenging market conditions, with customers continuing to show hesitancy in capital investment. With initiatives to simplify installation, as well as the launch of elumo, we expect a reduced requirement for upfront investment, reducing barriers to entry and supporting future recurring revenue growth.

Gross margins

Gross profit decreased by 13% in the period but overall gross margins increased from 57% in the year to July 2024 to 59% as a result of a higher proportion of recurring revenue, up from 84% in the year to July 2024 to 88% of total revenue, and the early benefit from the programme to decommission our data centres, where 4 of 13 data centres were closed in the first half, with a further six expected to close in H2.

Operating expenses

Operating expenses represent all administrative expenses, excluding restructuring costs and non-cash items of depreciation, amortisation, impairment and share option charges.

Operating expenses decreased to £5.3m, a reduction of £2.2m (29%) compared to the prior year. This reduction was driven by the Group reorganisation, which began at the end of H1 23 and completed in H1 24 and reflects the strong emphasis on cost management and operational simplification in the business.

Adjusted EBITDA

As previously reported, adjusted results are presented to provide a more comparable indication of the Group's core business performance by removing the impact of share-based payment expenses, exceptional costs (where material and non-recurring), and other, non-trading, items that are reported separately.

Adjusted EBITDA amounted to £0.8m in the period, a return to profit compared to the loss of £0.5m reported in H1 24, reflecting our simplified operational structure, with a cost base aligned to our customers and products, and a continued focus on profitability and cash.

The Group continues to invest in product development in the UK. Where such work is expected to result in future revenue, costs incurred that meet the definition of software development in accordance with IAS38, Intangible Assets, are capitalised in the statement of financial position. During the half year, the Group capitalised £1.1m in respect of software development (H1 24: £1.1m), as it continued to invest in its products.

Cash and Going Concern

Cash at the half year end was £2.2m (H1 24: £3.5m). Cash outflows in H1 25 amounted to £0.9m, compared to £4.4m in H1 24. This was supported by tax credits in respect of R&D activities received in H1 25 of £0.9m. Management expect cash burn to reduce further in H2 25, as we optimise our Cloud costs. The Group continues to maintain sufficient cash reserves to fund its working capital requirements and its return to cash generating operations. Excluding leases, the Group has no debt and has an existing undrawn £2m loan facility committed until 31 July 2025.

Greg Price

Chief Financial Officer

13 March 2025

UNAUDITED INTERIM FINANCIAL INFORMATION OF ESSENSYS PLC GROUP

Consolidated statement of comprehensive income

Loss per share

UNAUDITED INTERIM FINANCIAL INFORMATION OF ESSENSYS PLC GROUP

Consolidated statement of financial position

UNAUDITED INTERIM FINANCIAL INFORMATION OF ESSENSYS PLC GROUP

Consolidated statement of changes in equity

UNAUDITED INTERIM FINANCIAL INFORMATION OF ESSENSYS PLC GROUP

Consolidated cash flow statements

UNAUDITED INTERIM FINANCIAL INFORMATION OF ESSENSYS PLC GROUP

Notes to the unaudited interim financial information

1. Basis of preparation

The unaudited condensed interim financial information presents the consolidated financial results of essensys plc and its wholly owned subsidiaries (together, "essensys plc Group" or "the Group") for the six-month period to 31 January 2025 and does not constitute statutory accounts within the meaning of Section 434 (3) of the Companies Act 2006..

The annual financial statements of the Group are prepared in accordance with the UK adopted international accounting standards and as applied in accordance with the provisions of the Companies Act 2006. This financial information does not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the Annual Report for the year ended 31 July 2024.

The comparative financial information presented herein for the year ended 31 July 2024 does not constitute full statutory accounts for that period. The statutory Annual Report and Financial Statements for the year ended 31 July 2024 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statements for the year ended 31 July 2024 was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

essensys plc is the Group's ultimate parent company. It is a public listed company and is domiciled in the United Kingdom. The address of its registered office and principal place of business is Unit 2H, 1 Finsbury Avenue, London EC2M 2PF. essensys plc's shares are listed on the Alternative Investment Market (AIM) of the London Stock Exchange.

Going Concern

The consolidated financial information has been prepared on a going concern basis. In reaching their assessment, the directors have considered a period extending at least twelve months from the date of approval of this half yearly financial report.

In light of the continued impacts of global macroeconomic uncertainty, the Board has reviewed trading and liquidity forecasts for the Group and continues to model its base case and downside scenarios, including mitigations, consistently with the basis used for the annual financial statements for the year ended 31 July 2024. Under the scenarios assessed, the Group would remain within the headroom provided by its cash and committed facility for at least the next 12 months.

The Group has made significant progress in reducing its operational cost base and has continued to take action to reduce cost further, particularly through the programme to decommission data centres, which will bring additional future benefit.

Based on the analysis described above, the directors have reasonable expectation that the Group has the financial resources to enable it to continue operations beyond 31 March 2026. Accordingly, the directors conclude it to be appropriate that the interim condensed consolidated financial statements be prepared on a going concern basis.

Notes to the unaudited interim financial information

2. Segmental reporting

The Group operates in three main geographic areas, North America; the United Kingdom & Europe; and Asia Pacific region. The Group's revenue per geographical area is as follows:

The Group has two main revenue streams, essensys Platform and Operate. The Group's revenue per revenue stream is as follows:

Group revenue disaggregated between revenue recognised 'at a point in time' and 'over time' is as follows:

3. Loss per share

The loss per share has been calculated using the loss for the period and the weighted average number of ordinary shares outstanding during the period, as follows:

As the Group is loss making in both periods presented, the share options over ordinary shares have an anti-dilutive effect and therefore no dilutive loss per share is disclosed.

Notes to the unaudited interim financial information

4. Called up share capital 

5. Post balance sheet events

No post balance sheet events to report.