Checkit (LSE:CKT) — Half Year Results

0:01 Afternoon, ladies and gentlemen. Welcome to the CHECKIT PLC Interim Results Investor Presentation. Of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so, and these will be available via your meet company dashboard.

0:33 Before we begin, I would like to submit the following poll, and I would now like to hand you over to CEO, Kit Kite. Good afternoon, sir. Hey. Good afternoon, and good afternoon, everybody, and thank you for making the time to tune in to our half year results webinar. We have a little bit of ground to cover today, so I'll start off with some highlights and financial highlights. And then for those that are new or those that are already existing shareholders and they know us well, we'll recover the why CHECKIT story and what makes us such an attractive market, particularly in light of current technology trends. Then we'll cover off some of the pillars of our strategy before doing a bit more of a deep dive into h one and some of our customer stories. Then I'll hand over to Greg for more focus on the financials before we open the floor to questions.

1:24 So, yeah, we're very happy with the results delivered so far. So ARR coming in at 12,600,000 at the half, up 24% year on year. And and The US ARR of 3,200,000, up 41% year on year, evidencing continued traction in that market. Recurring revenue of 5,400,000, 22%, and total revenue of 5,700,000, 19% follow on accordingly. Worth noting that recurring revenue is, represents 95% of all revenues in this business. And the net retention rate at a 113%, continues to reinforce the land and expand strategy through really consistent upsell, cross sell with existing customers as we bring on new customers and then scale. So we're very happy with these.

2:11 So okay. So why CHECKIT? And what's what's the attractive opportunity here? So frontline workers, deskless workers, are in large blue chip multinational enterprises are our target audience here. Okay? So to remind anyone who's new here, frontline workers, desk deskless workers, they still represent 80% of the global workforce. And yet their frontline work is under increasing pressure. So these large blue chip enterprises for whom the majority of their employees are deskless workers, they suffer quite often attrition rates of greater than 70%. So this results in knowledge walking out the door, knowledge loss, significant amount of staff turnover, a reliance on contingent labor, the gig economy, where you're bringing in staff here who are untrained. They don't know what they're supposed to be doing.

3:03 These these frontline workers are operating in an environment with increasing complexity, often having to interact with systems which are digitally complex, and yet they themselves have no digital tooling with which to access. And from a leadership and a management and operational control perspective, given the vast number of workers and the vast number of sites in which they work, they are driven towards remote management. The CHECKIT platform and IoT ecosystem solves this by driving automation and digital into that environment. We help these organizations do more or less, strictly adhere to their compliance requirements, drive increased quality in the way that they run their operation, and deliver on service expectations, not just through increased customer retention, but also from employee satisfaction as well.

3:54 When we think about some of the big macro trends that have been building up over the last twelve to eighteen months, particularly the rise of AI and large language models and the disruptive effect that's going to have, particularly for the knowledge worker industry. We look at our industry, the deskless industry, the frontline industry, the frontline worker, and we realize actually that work is always gonna need these workers. They're not going anywhere anytime soon. Automation isn't going to do everything here. And yet, they do need to be equipped with the digital tooling and the and the automation capability to help enhance the way they interact with the rest of the digital world. And so this is what CHECKIT does. Our mission here is to help businesses make the most of these work. So starting at the top, thinking about management, operational leadership, our platform, at its essence, is gathering vast amounts of data from both workers and the assets that they work within the physical environment. That'd be they fridges, freezers, hot holds, etcetera.

4:54 All that data gets translated into sophisticated insights, analytics, dashboarding capabilities that allow operational leaders and managers to make real time decisions and drive operational effectiveness. In the hands of a worker, the desk desk worker, the frontline worker, that looks like an iPhone or an Android device or an iPad device with an intelligent workflow automation tool in the hands guiding them, prompting them, and helping them prioritize which task to do and when. Okay. We help them move from the routine to the rare and from simple to complex tasks. And alongside this and surrounding all of this in the physical environment they work in, we have a sophisticated IT ecosystem that has sensors and integrations that helps create an extended nervous system inside the organization, prompting issues and alerts and driving real time resolution of actions in a continuous feedback loop.

5:53 So we cover off on our strategy, and there's three pillars of the strategy, really. The first pillar is to convert CHECKIT into pure subscription business. As I I alluded to earlier, you know, recurring revenue is now 95% of all revenue, so we consider this pillar now to be complete. We've done a lot of work over the last eighteen months to transition CHECKIT into this place. Second pillar is how we think about building scale and global growth. So scale in terms of the product suite and the product mix that we bring to bear and indeed in which industries we do it, and then global growth in terms of where we look to serve customers and businesses. So as a reminder, this company's grown up in The UK and Western Europe. But as I mentioned before, The US and North America is a really priority growth market for us, and we also have presence now in Asia Pacific, particularly in in Australia and New Zealand. So we've started to expand our reach.

6:46 And the third pillar, which is absolutely vital whilst we're doing the first two, is to continue to transform the operating model of this business. And Greg will give you some more detail on that as we we think about driving operational efficiency inside, oftentimes using our own tools to help us do so. All of which still needs to be done whilst building a culture that can focus on outsized growth for the organization. So these growth ambitions, I just wanna cover them off with you all. First one, continue to accelerate US market growth. We've evidenced good, consistent scale so far. It's a priority market for us, and we would like to do more whilst also consistently scaling the rest of the world, particularly around Western Europe. Second pillar here. As you'll see, we've driven some quite significant operating efficiencies.

7:34 We need to continue that in order to accelerate our path to profitability, and we're confident of doing so. And the third one is how we see the future and evolution of the CHECKIT platform and ecosystem for for large multisite enterprises, and we we seek to become the intelligent copilot for the frontline industry, augmenting the work that people do. We do this with our software, our sensors, and increasing our ML and AI contribution across our target sectors. So let's cover off h one in review. Just focusing on the ARR bridge. As I mentioned earlier, we've been very successful with land and expand strategy. So the continuing ability to bring a new customer in at whatever size is necessary, but oftentimes an initial entry point deal, and then cross sell and upsell that existing customer. There's a number of stories we'll talk about in a bit. But as you can see, the majority of our errors comes from that cross sell upsell activity whilst bringing in net new customers at the top of that pipeline.

8:35 Subscription revenues. It's been consistent growth over the last three years And backing up this point around recurring revenue mix, 95% of all revenues helps us to get a vast amount of predictability in future revenue streams for the business. With a focus on The US then, so over the last eighteen months, we've actually driven a CAGR of 66% in US growth to the point where it's now 3,200,000 of ARR and about 25% of the total ARR of the business. So consider The US to still be very much on track to become the largest revenue contributor of the group.

9:14 So thinking about our pipeline, so in terms of how we're going about driving that scale and global growth I mentioned earlier, that the pipeline here, 64% of that pipeline references is is targeted towards large blue chip, multi enterprise, multinational companies. So customers such as BP who we already have or John Lewis or the NHS or or Grifols in The US or Optopharma represent the core target market for us. Now these sales cycles can often take up to twelve months if you're looking to land at scale, and so we also focus on the enterprise and the midsize customer for the remainder in order to continue to produce run rate business. Some of the logos you see on this slide represent customers in our pipeline and also customers that we've recently won and landed and expanded with. So for example, Just Eat, we brought on in the first instance about ten months ago, and subsequent to that, we sold we sold in again into Canada with them. Compass Group, which we'll talk about earlier, has been a great success story for us. Even Atria, which is the third largest senior living care homes provider in The US, we have got recently got our initial footprint and location under the belt.

10:29 So we're very excited about the future prospects of this pipeline. We announced in our trading update, again, reminded them with release this morning that we recently secured the John Lewis Waitrose contract, largest ever contract renewal for the company, just over £6,000,000,000 of total contract value, which we're very pleased with, and it's just a really good example of a sticky and sustainable relationship. We're very well integrated. 22,000 endpoints are being monitored across the John Lewis and Waitrose estate. We're able to monitor and control and provide insights on everything from their fire door lift usage, HVAC systems, a vast number of assets, including fridges and freezers, and the energy output, the data outputs that they're providing, then get visualized through our dashboard that I mentioned earlier.

11:18 So it's a great relationship. We're driving about 3,600,000 in food waste to savings a year, so that's a cost and sustainability play. 24,000,000 of repurposed staff time and about 600,000 of optimized energy usage. So it's a really good example of a sticky customer relation we're very pleased to have renewed for another three years.

11:39 Separate customer example would be something like Compass Group here. So on the one hand, we've we've had Compass as a customer for a number of years, and yet with the recent signing of the MSA with Compass Group back at the end of May, we've really unlocked the the capability to drive scale in in this this customer. For those that don't know, Compass Group's one of the world's largest catering providers, facilities management players, highly, highly decentralized organization. So thousands and thousands of location around the world with with power and autonomy decentralized. So the ability to land and expand there is quite contingent on getting a commercial framework of the one we've put in place to unlock that capability. Ironically, the one centralized thing within Compass Group is their procurement organization called Foodbuy. So we secured that.

12:28 And as you'll see, the the the the typical challenges with Compass Group relate to the the way they run

12:34 their food operations, which is the core of their business. So very time intensive manual checks required, quality and efficiency challenges, in what is a highly competitive market with relatively low margins and a complete lack of visibility from the management team. We've eliminated that manual and paper based check requirement. We've reduced by 14% minimum the manual checks and recording requirements. We've helped mitigate stock loss, 33% reduction in management time. And since we signed that MSA, we've just we've onboarded three new contracts with Compass Group, and the pipeline has more than 15 opportunities with Compass Group just in The UK alone. So it's exciting, and we look forward to the next half and into next year with with optimism. So I want to touch now on really the product and how we see the product evolving over time. So, again, just to to make it clear, we have a workflow tool I mentioned that helps digitize the work and augment the power of the frontline workers, it does it in three areas, really. It's an integrate, assist, and manage cycle. So we're integrating data and information they're receiving from the environment, either through the checks and the tasks they're doing or through the alerts and the recordings that are coming in through sensors.

13:49 We're We're then then helping them to prioritize and assist the way they do their work to help them get their job done. And all of that data is then being fed up to a single pane of glass view that helps managers and operational leaders to better visualize and optimize the way that people are working. Right? Concurrent activity. What do you do when workers don't turn up? What do you do? How do you onboard a vast amount of workers quickly? You can do it through a system like this. Alongside this, our sensor networks, our IoT sensor networks, are providing end to end managed monitoring of the assets and the physical environment in which these frontline workers are operating. So it's a define, collect, inform cycle. Define, we're helping to model the assets and the rules that are required for monitoring.

14:34 We're collecting a vast amount of data in in near near simultaneous real time and storing that data on the cloud inside our own data lake, and then we're using that to then inform and alert management and frontline workers around deviations or asset breaks or anything like this to then be able to prompt a real time resolution, again, driving operational effectiveness. And when you put that together in an end to end platform, you get a single intelligent platform. And, really, the intelligence is the area we're gonna start to cap capitalize on in the future because it's a vast quantity of data that's being gathered all the time across hundreds and thousands of locations and tens of thousands of people and assets. So that points towards what we're gonna be doing with the product in the future.

15:20 And, really, there's three areas. So first of all, I mentioned this vast amount of data. What we're gonna be looking to do is find ways to harness the power of that data and commercialize it with our target customers' organizations. So selling those data insights. For example, as we're monitoring assets continuously, can we help them with predictive maintenance challenges? Clearly, if assets go down in an unforeseen manner, then you can result in things like stock loss, stock wastage, energy loss, and, of course, an inability to serve customers. So anything that you can help customers to predict is valuable. Can we help them predict or manage energy optimization in a more effective way? Again, we have a number of customers in beta already where we're looking to trial this and roll it out.

16:06 Secondly, how do we how do we better use humans, and how do we complement the human worker in a more proactive and predictive way? Okay? So, again, how do we bring how do we think about bringing in generative AI and and such things to help them become more effective in doing the work they're doing and alleviate them out of the the mundane towards more effective, higher value adding work. And then we take the entire platform, and we think about how do we position that towards high value processes in those industries and those subsectors of industries which are higher margins. So think, for example, manufacturing or chemical manufacturing plants where the cost of pretty highly skilled, highly paid frontline workers and the cost of expensive stock becomes prohibitive if it's run inefficiently or there are losses and there are wastage. So how can we position the CHECKIT platform to better serve those industries? And that really points towards the evolution of the product.

17:04 Okay. So I'll hand over now to Greg, the CFO, who'll take you through more detail in in the finance numbers. Thanks, Kit. Thanks, Kit. At our year end, we talked about the themes of growth and efficiency. Today, as we announce our FY twenty four interim results, I'll update you on our progress in both these areas.

17:28 First, some highlights. I'm pleased to report that our top line continues to show strong growth with annual recurring revenues of GBP 12,600,000, up 24% year on year. On top of this, we've also seen progress in our profitability with gross profit of £3,900,000 up 30% year on year and EBITDA, a loss of £1,900,000 and an improvement of 47% year on year. I'll talk in more detail on our profitability shortly, but first, some more on revenue. As I said, ARR grew by 24% year on year, and this is reflected in recurring revenue of £5,400,000, up 22%.

18:22 As we mentioned at year end, ARR provides strong visibility of future revenues. So ARR now of £12,600,000 supports the analyst forecast of £12,000,000 of revenue for the full year. As Kit has explained, recurring revenue growth is a result of our land and expand strategy as well as strong performance in The US. And in a challenging sales environment, this represents positive headway. Nonrecurring revenue is now a very small part of our business, so total revenue of £5,700,000, up 19%, mirrors our recurring revenue performance. On top of our top line, we've also delivered improving gross margins in the half.

19:10 Gross margins have grown from 54% in January 2022 to 63% in January 2023, up nine points and now up a further six points to 69% in July 2023. There are two drivers for this improvement, efficiency and sales mix. And efficiency has come from three key areas. First, our hardware cost second, procurement savings in our platform costs and finally, efficiency in our cost of delivery, which is the cost of sending engineers to customer sites to install our sensors. As As we have grown revenue, we've been able to deliver for customers with our existing teams. And as Kit mentioned before, we're now using CHECKIT tools to guide food retail installations, and that's a good example of how we're able to be more efficient.

20:06 However, our cost efficiencies aren't only seen in our cost of sales. The efficiency we've been able to deliver in our operating cost meant that our cost base reduced by £700,000 in the period. This includes savings from bringing all product development in house, ceasing the use of outsourced software teams, and this resulted in increased productivity. The combination of top line growth and cost efficiencies has resulted in strong progress on the path to profitability. As you can see here, EBITDA as a loss of £1,900,000 compared to the previous year, which was £3,500,000 is an improvement of 47%.

20:58 And as we look at our cash position, we can see plenty of runway to reach profitability. Cash at July 29 2023 was £12,800,000, and this represents an outflow of £2,800,000 from January 23, and that outflow is 40% lower than the previous year, even as we increased inventory by 1,000,000 pounds ensure that our supply chain remained resilient in the face of competition for components. We manage our cash very carefully so we can maintain the balance between achieving further ARR growth and working towards profitability. And this comes together in the analyst forecast for EBITDA breakeven during f y twenty six.

21:48 And now I'll hand back to Kit for some closing messages. Thanks, Greg. Yeah. Look. I mean, we're we're pleased with the AR growth, and, course, we'd always like it to be more. But as Greg, you know, as Greg mentioned, we've we've got a strong cash position here to see us through the profitability. And the board is confident of delivering an operating performance ahead of market expectations for this year. And with that, I'll hand over to the team here for questions. K. Greg, that's great. And thank you very much indeed for your presentation this afternoon. If I may, will just bring back up your cameras now. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab that's situated on the top right hand corner of your screen. But just while the team take a few moments to review those questions that were submitted already, I would like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard.

22:41 Greg, Kitt, as you can see in the q and a tab, we have received a number of questions throughout your presentation this afternoon. And thank you to all of those on the call for taking the time to submit their questions. But, Alex, if I could please just hand back to you to chair the q and a session with the team, and then I'll pick up from you at the end. Thank you. Yeah. Thank you very much. So, yeah, let's start this q and a session with the first question on on AI. What impact is AI having on the business? How are you applying it, and what planned investment is required here? Yes. Very topical question. Thank you, Alex. From a competitive perspective, we we're quite excited about AI. We actually have we already had AI at work inside the business. I can elaborate on that in a bit, but we we very much see the the disruptive component of AI is is affecting knowledge worker businesses far more than it will ours. Ours we see this as a complement to our business because, of course, the frontline worker, the type of work they're gonna the frontline workers do is not something that's gonna be automated by AI anytime soon. So, actually, the real question for us and something that the team's already working very, hard against is how to incorporate the best, lowest hanging use case of generative AI into our platform and systems to better enhance the value proposition we have with our customers.

24:12 And so we see this actually as a as a point of difference for us given the vast amounts of data that we're actually gathering, And this is data that was analog data in the first instance that we make digital in the first place. We have in our data lake. We have in the cloud, and we can then bring the latest advances of AI onto that data to drive really meaningful additional impact for customers. And the other point I'd say is it's also a great opportunity internally. So we we have a we have a CHECKIT project underway now. We have teams across the company looking at how we can best utilize the latest AI tools in a way that can help us become more efficient as a business, and also more engage with customers. And, again, this is contingent on having the right data in place, but we do. And we think, again, that'll be a point of difference as an organization.

25:01 Thank you. And the the next question is sort of linked to that, actually. It says, what does the road map look like for future products and also new geographies? Yeah. And and and, again, I I alluded to it a bit during the presentation. I think there's roughly three areas for the future road map of the product. One, based upon all the data that we're gathering, how do we better utilize that data and apply machine learning and AI capabilities to that dataset to drive additional value for customers? And so, for example, we have five customers currently in beta right now where we're running out rolling out some of these ML AI programs for them. And we're helping customers, for example, those that have thousands of assets, let's say, fridges and freezers with lots of stock inside of them. We're helping them predict or better optimize the energy usage of those assets. So, for example, what we've discovered is, you know, for every one one degree centigrade that an asset is too hot or too cold, it's costing a business, you know, up to £500 a month in wasted wasted energy, wasted cost.

26:11 And so those just kind of insights, you put them at scale, become really powerful. I think the other thing is around how we're helping them predict which assets are going to fail and when, and this is literally done on the basis of continuous temperature monitoring. You can actually see which assets are about to burn and blow. And this is very powerful if you can get ahead of that curve versus just reacting and having stock loss and and abilities of customers. So this predictive insights as a service to customers is an area that we're gonna be looking to focus as a business. Absolutely. The second area is how we better equip humans. So the frontline workers, people that make up the vast majority of people, workers inside these large businesses, how do we complement even further the work they're doing in a digital way that makes them more effective and allows them to do higher value adding work.

27:00 Because, ultimately, a a lot of these work is the only point of contact with customers on the ground. So it's better that they should be spending more time with customers on the ground than doing a bunch of routine tasks and checks that could be automated or could be enhanced using better AI capability. And then the third area for the product that we're looking to really build focus in is how we can then apply and develop and evolve our current product set towards new industry sectors, which we consider to be of higher margin. And I'm I used the example perhaps of, say, chemical manufacturing or food manufacturing, where the the deskless worker and the frontline worker is actually quite highly skilled and quite quite costly as is the product that they're working with.

27:49 And it but they still suffer from these inefficiencies, and they still suffer from an abundance of pen and paper and spreadsheets. And how do we bring our product set in there to to target those customers and help them drive much better operational efficiency? Okay. Thank you. You referenced your ambitions to accelerate US market growth. Can you comment on your sales and marketing strategy in The U. S? And what are your expectations for The U. S. In the near to medium term? Okay. So the expectations for The U. S. In the near to medium term is quite clear that we expect them to become the largest revenue contributor to the business. Market size is four to five times that of The UK, Western Europe. They have a common business language, and the buying propensity once you get established is quicker. So sales cycles, we expect to maybe start to become shorter. So that is the expectation for The US.

28:47 We are investing behind bringing sales, marketing, customer success capability further into The US. We have a footprint. We we we have about 18 people there at the moment, of which five four or five are sales marketing folks. The remainder are delivery folks. We'll be looking to augment that through the second half of the year and into next year to really seize this opportunity. I think the other aspect that's gonna really help boost not just The US, but particularly The US as well as UK, most of is how we start to harness our partner and channel strategy. So we have a few partners that we do work with, and I would say we haven't got close to optimizing how we can go to market with them.

29:33 As we look to harness that second half of this year and into next year, I think we can see a really meaningful uptick in pipeline and revenue growth, and that's particularly true for The US. Okay. Thank you. Question here is, who are your competitors? Yeah. Okay. So there's a number of competitors. Not all are, what I would say, pure play competitors to CHECKIT. So just the statement I would start with is, you know, we're the only organization that we know of that has a true end to end capability here. So, you know, the the workflow platform being the core of what we have, the IT sensor ecosystem fully integrated into that, driving data back and forwards in a continuous loop and this kind of insight dashboarding management there. So that that that is our kind of point of difference here. But in The US, we'd see the likes of, I guess, a Zenput or Jolt or a GhostBotCheck as a competitor.

30:32 And and over here in The UK, we might see a sort of a a reflexes perhaps on the task management side of things, although they won't they don't have the IT ecosystem. So it's a relatively fragmented base. And then there's some quite niche players that might play in the food safety space that we come up against from time to time or the medical monitoring space, but, again, none that will do the breadth that CHECKIT does. So that's that's how we see the space at the moment. Brilliant. Thanks, Keith. Next question. How open are you to growing the business through bolt on acquisitions? I mean, the short answer would be open. I'm not sure what I mean by bolt on, but, yeah, ultimately, we're we're open to this. I think, you know, the lens through which we'd make assessments would be is there a product complementarity component to it?

31:23 Is it something that helps us enhance our overall value proposition to customers? Is it customer or ARR acquisitive? And if, know, has it got that Goldilocks mix? If it does, then we're very much open to this. Thank you. Next question, looking at the customer base. How diverse is the customer base, and does any one customer represent more than 10% of your revenues? Yeah. So it's a diverse customer base in the sense that we have more than 400 customers, and they are split just to give you an indication of the ARR that we have. It's roughly a third in food retail, food services, a third in health care, like NHS, basically, and then a and a and a third non NHS, but other health care, you know, blood plasma and or facilities management. So it's spread across a number of different industry sectors at the moment.

32:20 Of that 400 customers, though, you know, the top 10 represents about 45% of the ARR profile. The next twenty, twenty five will take up 25, 30% of ARR, and then you have a long tail of customers from where CHECKIT grew up, which would be relatively small footprint. And I think there was a question around, does any one customer represent more than 10% of your revenue? Yes. I suppose there's a couple, actually. There's, you know, John Lewis Waitrose at about £2,000,000 of ARR is, you know, north of 10% of our revenue. BP is probably north of 10% of our ARR as well. So, yeah, there's there's there's two or three that fit in that bucket and then remainder that fill out the rest.

33:10 Great. Thank you. I think this is a question for you, Greg, here. Could you comment on what drove the receivables reduction and whether you expect that to reverse, be maintained, or further improve? Yeah. Sure. Thanks, Alex. So our receivables work on there there's a seasonality to it that the balance is reduced from the year end because of the size and the timing of the annual renewal profile that we have with our customers. But what I would focus on is the comparison of our balance now against our balance a year ago, and that has certainly reduced. And we expect that reduction to be maintained. And that's about how we manage to drive quicker collection from our customers, and we're very happy with the efficiency we've gained there.

33:58 Thanks, Greg. Commenting here about sales and marketing. Could you approximately estimate how much you spend on sales and marketing for potential new customers rather than on the upsell for existing customers? Yeah. Shall I answer that one as well, Kits? Yeah. If you can start, Craig. Yeah. So I would start by saying that we spend about £3,000,000 a year on sales and marketing. The majority of that will be focused more on new customers than existing customers. But, I guess, in general, we we do focus on how we can make sure that we are giving the best results, best performance for both. It's also fair to say, just to comment on that, that that new customer acquisition is always more more expensive than existing customer acquisition.

34:49 For us, it it could be up to about 25% more than it would be for the cross sell upsell. Hence, you know, the land and expand strategy, which I think there's a question on, and that that that drives clean revenue once you've got in that first footprint, and then you can expand. So the question is oftentimes, what size do you really want to enter a new customer app? Because maybe smaller is better because you get in, you've proven, then you can upsell from there at less of a cost. Thank you. You're right. There is a question on, land and expand. So regarding the land and expand strategy, could you estimate how much potential there is to expand with existing customers and give an example where you have managed to expand and also give an example where it's proved more challenging.

35:41 Yeah. Okay. So so the following our strategy, I mentioned the pipeline, and, you know, 64% of that pipeline represents these large blue chip enterprise customers. So for each of those customers, the enterprise value of that customer, so the total value we might expect to get to is typically quite significant. If you imagine, we've got some customers that are already worth, you know, 2,000,000 of ARR or 1,800,000 of ARR or 1,200,000 of ARR, and they're not even close to being full potential. So that's the enterprise value of these customers. And we will we will only ever reach that enterprise value through land and expand. We never can land all of it in one go. So you could use BP as a good example of a land and expand strategy. We're in The UK now. We're in The Netherlands, Luxembourg, and Australia, New Zealand, and there are more markets to come as we work through that enterprise customer. It's a very big beast of an organization, so these things don't move in a predictable fashion, but it's a good example of that. Compass Group, as I mentioned earlier, where we already had a couple of locations under our belt prior to an MSA, and we've got three more locations under our belt in the last couple of months with more in the pipeline. So it's another good example of that. Or the NHS, where we're in over 400 hospitals, 86 different trusts. That's effectively been just one big land and expand story given how decentralized it is.

37:04 But, you know, I would so that's a good example of where land and expand works well. You know, where is it challenging? I think it can be challenging for it's almost always challenging because any large enterprise customer with big sophisticated procurement organizations and different stakeholder groups requires a continual consultative sale and account management and farming approach in order to really reap the benefits of getting to scale with them. And you know what? The more you take on with a customer, typically, you know, the more responsibility you've got to deliver value continuously across different markets. And so, you know, if if you have a teething issue somewhere, that can actually slow down the expansion opportunity until it's fixed because customers demand more once they're paying more. It's how it goes.

37:52 So we see this actually with all customers, but I think the discipline here is really strong, focused, good customer engagement and customer success programs allied to a pretty focused sales and new business and land and expand strategy. Thank you, Kate. We've got the last question here. Why is there such a big difference between subscription revenue and annual recurring revenue? I mean, I can let Greg answer this. I I I don't think there is such a big difference between subscription revenue ARR. But, Greg, perhaps you can explain. I think maybe one of the slides may have been a bit misleading.

38:38 Sorry. No. So there there is a there is a difference there. So the annual recurring revenue, that will represent the full value full annual value of our contracts that we sign. The subscription revenue will be based on the revenue that we can recognize in the year. So if I give an example, if we signed a customer up in July 2023, then we'll start recognizing revenue for that customer, but it will take it'll be six months in the year, whereas ARR will show the full year annual value. The other factor to consider is that for some of our customers, we'll sign them up, but then it will take a bit of time to get them live, to install their sensors, and that can sometimes lead to a slight lag in when we can recognize the revenue.

39:24 But the ARR is the best indicator of the full annual value of all of our contracts. KIT, Greg. Alex, if I may just jump back in there. And thank you very much indeed for being so generous of your time then addressing all of those questions that came in from investors this afternoon. And, of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended just for you to review to then add any additional responses, of course, where it's appropriate to do so, and we'll publish all those responses out on the investor meet company platform. But, Kit, perhaps before really just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments to wrap up with, that would be great. Yes. Thanks. I mean, it's been an absolute pleasure to speak with everyone. We actually really appreciate the detail and the thinking behind the questions, and it helps us to better unpack the story of CHECKIT. And as I mentioned, you know, earlier, we're we're the board is confident here delivering operating forms ahead of market expectations for this year. So we we do look forward to the future with confidence. So thank you very much.

40:31 K. That's great. And thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. This may take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of CHECKIT PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.