# SmartSpace Software continued successful transition into a pure play fast-growth SaaS business

- Link: https://www.directorstalkinterviews.com/smartspace-software-continued-successful-transition-into-a-pure-play-fast-growth-saas-business/412987744
- Published: 2021-05-10T08:33:41+01:00
- Author: Giles

**SmartSpace Software plc** ([LON:SMRT](https://www.directorstalkinterviews.com/company/smartspace-software-plc/smrt.l)),
the leading provider of ‘Integrated Space Management Software’ for smart buildings
and commercial spaces – ‘visitor reception, desks and meeting rooms’, has announced
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 31^(st) 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 Software 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 1^(st) 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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