Essensys (LSE:ESYS) — Half Year Results

0:00 Good morning, and welcome to the ESSENSYS PLC Half Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time. Just by using the Q and A tab, which is situated in the top right corner of your screen, just simply type in your questions and press send. The company may not be in a position to answer every question received to the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. And I'd now like to hand you over to CEO, Mark Furness. Good morning, sir.

0:33 Thanks, Alessandro. Good morning, everyone, and welcome to ESSENSYS' half year results presentation for the period ended 01/31/2023. Alongside me, I have Sarah Harvey, our chief financial officer. Okay. Let's dive into highlights of h one twenty three. So revenue up 18% year over year. That's combined of 10,600,000 of recurring revenue. That's up 8% with nonrecurring revenue, which is new site activations and a leading indicator of future ARR, up a 112% in the period. We closed with 12,600,000 of cash on hand, a 21,000,000 ARR rate, that's increase of 3%, and 459 live customer sites.

1:24 Standout story is our performance in North America, where that is now approaching two thirds of all of our revenues, with UK and Europe as a little over a third, and our recent introduction into the APAC market is starting to see some revenue pull through. So good revenue growth, a very strong North America story, and we've also optimized our strategy in the last six months to accelerate our path to profitability and cash flow generation. For those of you who don't know our business, we were founded in 2006, and our software and technology is designed to help commercial real estate providers, so landlords, asset managers, flex workspace providers and operates operators, accelerate their journey to flexible workspace.

2:19 The real estate industry is undergoing a period of significant change, And, actually, that's driving the supply of these flexible workspace products as our customers and the industry at large faces into that new demand paradigm. Today, we have offices across UK and Europe, North America, Asia Pacific. We listed in 2019, and our simple vision is to use our software and technology to power the world's largest community of flexible tech driven spaces. We have a high quality customer base and work with the world's some of the world's largest real estate companies across the globe. So what's driving the long term structural opportunity for ESSENSYS?

3:07 Well, there are a number of key things that have happened in recent years that have moved most companies to a more flexible working style. So COVID nineteen is embedded flexible and hybrid working. There is a flight to quality as companies of all sizes try and evolve their real estate footprint to offices and spaces that are more productive, more flexible, and help them retain and attract talent. That flight to quality has resulted in, premium office assets remaining sought after and performing well. And as part of that demand, shift, actually, we're we're seeing landlords increasingly respond to that by accelerating their investments in flex and flexible workspace products, and also looking to deliver the flex, products themselves as opposed to partnering with organizations such as WeWork and IWG, which has historically been a a route to market.

4:08 So we're in the very stage early stages of industry adoption for Flex. That means the market opportunity is still hugely in front of a census. Today, less than 2% of all office globally is, consumed or, sold on a flexible basis, and that's expected to be 30% by 2030. Now, the whole point of, real estate historically has been to manage and own the asset. Now, actually, increasingly, the real estate industry is operating those assets too. So it's about amenity spaces in buildings, shared workspaces, and and delivering the types of products that companies of all sizes are now demanding. That really underpins that accelerated growth of what is, quite frankly, a secular growth opportunity.

5:00 Now our customers' journey to flex, is one that actually starts as they start to, these big multitenant office buildings. They start to deliver more amenity value into their existing tenant tenant base, whether that be, using, shared areas, shared meeting rooms, flexible spaces, perhaps in the reception area, some hot desk in areas to allow the rest of their tenant base to access those shared services. That journey will continue to deliver more dedicated flex spaces in buildings, whether that be coworking or plug and play spaces to and it will be eventually realized that all buildings will have an element of flexibility baked into them. It's not just lease length. It's about the products and services within them, and our customers are looking to expand those flexible building offerings across their whole portfolios.

5:59 To do this at scale, you need automation, you need technology and software,

6:04 that makes these, space operations increasingly more efficient and commercially viable. How does that play out, with our customers today? This is one of our customers. This is Willis Tower in Chicago, formerly Sears Tower. Many you many of you will recognize that name. That is a blueprint for a premium office now. That is a building which has the traditional demised tenant spaces for major US and global corporations. They augment those tenant spaces with flexible product, whether they be shared meeting rooms, shared food and beverages areas, wider amenity spaces, so all the way from the Ground Floor to outdoor communal spaces.

6:50 This is the blueprint for the future that ESSENSYS owned by EQ office. They are part of the Blackstone Group of Companies. So how do we help this transition? How are we helping the industry and our customers? Well, firstly, which is our core product, is designed to automate space operations. It it's about that digitalized journey in a building. You know, we're all used to mobile phones and our smartphones. It's how we activate the journey in a building, whether we get through a door, book a space, get connected to network and Wi Fi services. It's how do we automate that onboarding and offboarding journey for occupiers and tenants.

7:37 It allows our customers to remove significant operational complexity, which drives efficiency and profitability. It allows them to deliver a digital first customer journey, which is increasingly important. And finally, the data our platform creates allows them to understand occupancy and utilization, not just in a space, but across the building and across portfolios of buildings. So increasingly more valuable, a mission critical platform, that we expect to become increasingly, critical to our customers, over the years ahead. And so we're just closing, from my first part of this presentation on in the first half. You know, the market is still evolving, so the market opportunity is long term. It's structural, and flex is now embedded. This is unfolding in front of us, and we're at the very start of that market opportunity now. Our performance has been in line with market expectations and management expectations, and that's really underpinned by the strong US growth we've seen in our primary markets.

8:45 Our strategy has been optimized for capital efficiency, for cash conservation, and for an accelerated return to profitability. And but everything we do is underpinned by the quality of our product, how valuable our product is to our customers, how sticky that product is. And so we continue to evolve and innovate. We've developed some new, Internet of Things hardware to support our customers, and some of the problems they're facing. And finally, you know, that's translated all of that activity has translated into a significant improvement in our So we work at the very top of the industry with some of the world's leading global real estate brands, landlords, and operators, and that continues to translate into some of the performance metrics Sarah will talk about shortly.

9:30 And on that note, I'll hand over to Sarah. Morning, everyone. So I'll talk you through the financial and operating review before handing back to Mark for product. When we look at our financial highlights, Mark highlighted these already, but strong revenue growth year on year, 18%, of which North America was, a really, really good result for us. So 36% growth in North America, as Mark said, that is the most significant part of our revenue, and and it's the growing part of our business. Recurring revenue of 8% and nonrecurring, as Mark said, of a 112%. That's a really important metric because what we've seen during the period is an improvement in both the volume of the sites we're taking live and the average value of those sites. And so thinking about what Mark said about our customers, effectively, where we're seeing our customers work with new sites, we're talking big strategic sites for them, which bring us a higher level of nonrecurring revenue.

10:26 The slight decline in The UK and Europe was an expected one because of the dynamics we're seeing there, and we'll touch more on that in in a moment. We closed the period with 12,600,000 of cash, ARR of 21,000,000, and new contracted ARR from sites not yet live at January of £1,500,000 So if we look through the income statement, I'll talk you through the main changes year on year here. We've talked about the revenue element of which North America was a significant proportion and a positive story there. Gross profit also up year on year. Gross margin showed a decline in the period, and there are three specific reasons for that. One is the mix of recurring versus nonrecurring revenue. Our recurring revenue is higher margin, so anytime we have a higher mix of nonrecurring, that will always impact the margin.

11:11 The other is that our US business is is lower margin than our UK business, partly because the of the type of services sold into those markets. The UK is an older, more established market. And and also when you look at our fixed cost element of our cost of sales, that's the operational run rate cost of our data centers, of which The US has more than The UK. And APAC in particular is a region. The setup of that region involves fixed operational run costs of those data centers, which impacts that gross margin until that region reaches scale. So that was an expected hit to gross margin in the period. You can see that overheads have increased year on year. That's the impact of the year on year investment made following the fundraise in July 21. So through half one of twenty two, the ramp up of investment was happening both in the product and development side of things and go to market and establishing the APAC region.

12:06 This half year, we see the fully loaded impact of that investment, which brought us to adjusted EBITDA of 4,200,000 loss in the period. You can see there some exceptional costs and an impairment charge that relates to the reorganization that we announced in February this year, and that's connected with our GBP 7,500,000 initiative. Moving on to the cash flow statement, again, pulling out the year on year changes there. EBITDA, we've talked about. Working capital, I'll touch on on the next slide because that was a very specific impact in the first half of this year. Intangible asset development costs relates to the capitalization of our people who are building out the ESSENSYS platform, and that's increased year on year based on the investment that was put into that team to continue developing the product.

12:55 The purchase of property, plant and equipment in the period related to payments for the APAC Data center equipment, which was put into place last year, paid for this year. Lease liability payments increased and that was the impact of the APAC data center leaseholds and also the end of a rent free period that we benefited from last year in The UK. Okay. So we've talked about the £12,600,000 we had left at the end of that period, and that is part of our plan to return to positive cash generation by the end of FY twenty four. We've bridged here the opening to closing cash position through the half year. And you can see here that the EBIT the adjusted EBITDA metric coming in there, a 4,200,000 loss in the period. That loss will reduce slightly as we see the impact of the cost saving initiative come through. We have said that we plan to enter FY '24 on an adjusted EBITDA positive run rate basis.

13:53 The strategic inventory point was a specific thing that impacted us in half one of twenty three. So during FY twenty two, we decided for both supply chain and pricing reasons to make a bulk purchase of inventory, and that inventory is kit to take sites live effectively. What happened was the delivery of the inventory happened mainly in q four of f y twenty two, and the payment of that, an element of that happened during the first half of this year. We also had the final bulk delivery of that and the payment for that element too. What that means is that half one twenty three had a 1,700,000 cash outflow associated with that strategic inventory purchase that won't happen during the second half. And what will happen during the second half is we will start to see the benefit of that inventory unwinding as we take further sites live, so we won't need to go and buy the inventory for that.

14:43 Other working capital was impacted during the first half by some specific brand, go to market, and legal and compliance costs happening across the group in q four of FY twenty two. That was though though that credit put to position unwound during the early part of half one twenty three. And currently, at the moment, there are no one off specific projects happening. We're at a much more normal run rate as a business, so we don't expect to see that level of credit to unwind either. In terms of capitalization capitalized development cost, that run rate will continue through the second half of this year. Capital expenditure we've touched on, that 500,000 payment for data center equipment won't recur in the second half. Lease payments will continue at that level.

15:29 So when you look at that the expected reduction in the EBITDA loss and the impact of the specific one offs in half one, that should explain why our half two cash flow burn rate won't be the same as it was during the first half of the period. Moving into the operational review, we closed January with 459 sites and a 104 customers. That's a return to net addition of sites after two periods of reporting contraction in site numbers. But what both the customer number and the site number does is disguise an important movement in in what has made up that movement. So I'll come on to that on the next slide. We closed the we closed the period with a 177 people in the business. That is now slightly lower because of the reorganization that we announced in February.

16:15 We had 97% net revenue retention as a business and 1.8 to one LTV to CAC ratio. If I move on to the next page sorry. Thank you. The we'll start at the bottom left there. In terms of that 1.8 to one LTV to CAC ratio, what that translated to is a very strong pipeline for us. We've always been very clear that our strategy is to land, expand, and grow. So we land important customers, we expand into their portfolio, and we grow with them. What what we're seeing through our go to market activity at the moment is that our pipeline is made up of 34% existing customers, which is still a very strong opportunity with them, but 66% from new logos reflecting the importance of the new customers we're also going after.

17:02 And that brings us on to the improving customer mix. Strategic customers are more and more replacing the smaller operators in our base. And what we've seen is that although the customer base increased by four, that included losing nine customers. Now all of those customers were small one or two site operators at the lower value end of our base. And they've been replaced by 13 new customers, four of whom were innovations at the end of contracts so that we maintained that revenue stream, but nine new customers, of which six were strategic. And as a reminder, we define a strategic customer as one with the potential to

17:38 bring us a million dollars of ARR, which equates to around 20 sites in their portfolio that we can capture. When you look at the site movement year on year oh, sorry, period during the period, again, we had a a higher number of sites opened and closed, but the sites that were closed were were the lower value sites. So part of that was the nine lost customers in the period with one to two sites each. What we do see though is our strategic customers closing an element of their sites and opening more higher value sites. That's contract flexibility. We allow some of our important customers through the term of their contract, and it's generally good business for us. What we have seen is a 17% improvement on of MRR from new sites opening versus those closing.

18:28 Focusing in on strategic customers here, this is our most important cohort. As I said, these are these are customers who are the foundation for our success, the customers who bring us the most growth potential as a business. And all of our focus on is on winning this type of customer, which will drive our future growth. I mentioned the nine customers lost in the period. We haven't lost any strategic customers, so our strategic customer churn is zero. I also mentioned that we had 97% net revenue retention across the full customer base. It's a 109% for our strategic customers, which is showing the the quality and value that they bring. Strategic customers represent a vast majority and a growing proportion of our total revenue and ARR. We also are now fully recontracted with our top five customers, which which gives us future revenue certainty with those strategic customers.

19:19 And the vast majority of new sites that are opened are with strategic customers. What you can see on the right there is the proportion of total strategic revenue by region, which is just bringing home again the importance of North America to our business. North America strategic customers as a proportion of our total group is almost half now. So again, our focus will continue there, but we have strategic customers in all regions. ESG continues to be an important focus for us. We can we consider how we use our office, how our policies evolve, whether it's travel, the way we use our office. And there are focus groups across the business focusing on everything from environmental to social sustainability and the way we work with each other and with our partners and customers.

20:07 I'm gonna hand back now to Mark for the product update. Thanks, Sarah. Okay. So touching a a little more on, the architecture of a ESSENSYS platform, and the key components, and how it helps clients. So the core of SENSYS platform is designed to to to automate space management and client onboarding and offboarding to simplify that journey. And it's really designed around the dynamic nature of flexible workspace. Because the platform automates things in real time, it allows for instant results. So it allows for our customers to deliver digital services to onboard their occupiers, their tenants, simply and at the touch of a button.

20:57 Underneath all of that is a very powerful automation and orchestration engine, which is we started developing back in 2008, and that really underpins, everything that we do and the ESSENSYS platform does. Creates a huge amount of data, as I talked earlier about, you know, the data that our platform creates for our customers, is both high fidelity, I e, highly accurate, and high resolution. That means a very full picture of what is going on in these spaces, whether that be how spaces are booked, who actually uses, areas of the building and when. And that helps our customers to make better decisions more quickly. Now our customers are the world's biggest providers of real estate, and so our platform has been built to support those. It's a global capability across, Amazon architecture, and it's built with an a API first approach.

21:54 What does that mean? It simply means that, a census platform can sit alongside existing architecture or an an existing tech stack of customers, perhaps where they have embedded finance systems or maybe embedded CRM systems. Our platform, it has a machine to machine relationship with those platforms. So, again, it's about a zero touch journey through the whole life cycle of a customer. And and we're excited by some of the innovation. But the innovation that we develop and we bring to market is really there to drive value for our customers and drive adoption by our customers. Think of our platform really simply. We have three editions of the ESSENSYS platform.

22:40 We it is a base simple SaaS model. It is on a building basis today. It price is aligned completely to value. Everything we do about our packaging is designed around customer adoption. We've also in the newer ESSENSYS platform, which we started to develop post IPO in 2019, one of the founding principles of the architecture is something called product led growth. Put simply, that means that the software itself becomes its own distribution capability for new functionality. And so the modules you can see there, which are added value and therefore can be monetized, such as smart access and our booking engine and our enterprise experience solutions,

23:30 they are all able to be switched on by our customers in the platform. So very low, cost to deliver and sell those additional, expansion modules. Now one of the things we've worked really hard on over the last few years, and for those of you who know our business, we'll we'll understand that historically, and Sarah mentioned it, there is a requirement for our our customers to plug their buildings directly into our network. What does that mean? It means we wholesale a fiber connection from, the incumbents or the regional telco, and that fiber connection goes from the building directly to our data centers. That is a significant, drag on gross margins.

24:16 It is a barrier to entry, and it keeps sales cycles long because, as you can imagine, today, most large buildings will have significant connectivity already in place. So our customers asked us if we were able to decouple our network, And we're pleased that this year, we've been able to do that. It means that we expect shorter sales cycles, improvements in gross margin because, the big part of our cost of goods sold, number is attributed to that telco element. And and, actually, this this is a a piece of work that has been ongoing for many months and years now. And so we're, we're pleased with where we are today with that, and we're also excited about what that brings to the future of our customers and our business.

25:03 One of the things that we've also been developing, in line with our customers, is the ESSENSYS Smart Access module. Now today, that software component, is in pilot phase in a number of buildings, And we've also recently brought out an IoT and instead of things hardware product. What does this do? What was the the reason for developing this solution? Well, the reason was actually our customers wanted to converge booking, access control, smartphone access, and charging. So they wanted a simple book, tap pay open solution for their spaces, and there was nothing available for the market.

25:50 So for the past two years, we worked with the ubiquitous mobile phone and smartphones that we all know today to unlock those wallets in to use those as the way the access medium as opposed to our traditional plastic cards. We developed a hardware device, which you can see in front of you, which is undergoing final stages of certification. And that, as I say, is currently in pilot phase, in a major premium at New York building, in Hudson Yards and also in a premium development in London. And and we're excited about how smart access can really accelerate both adoption from our customers of our products, but also really unlock the potential of these spaces for our clients.

26:37 So, to close, this year, you you've seen us optimize our strategy. It's important to note we haven't changed our strategy. Land expanding grows the foundation, of our business. But in f y nineteen, when we, IPO ed the business all the way through to our fundraising July 21, you could see that we were well ahead of the market opportunity as it was developing. So we chose, to expand rapidly geographically, to invest aggressively in our product, and to increase headcount to support that opportunity. Now like many businesses, that meant an increased period of cash burn. It meant an increase in, I guess, our operational overhead and complexity. And finally, it meant an approach which is regionally focused, I e, North America, UK, Europe, and APAC.

27:27 Whilst we got many benefits in terms of building new customer pipe pipeline, we also realized that today, we need to drive efficiency. We need to conserve cash, manage our capital, and drive to profitability with more certainty and sooner. And so as we've adapted and optimized that strategy, it's really all about as we go forward focusing on those prime near term demand drivers from our customers. So where are those near term opportunities? Working alongside our strategic customers to expand and grow with them. It's about it's about making sure that we align our cost base today with today's revenues, but also our investment decisions with very near term demand and opportunity.

28:13 We've unified our global go to market activities, and we've also reduced our executive headcount by 40%. This delivers, an expected 7,500,000 annualized cost saving. So really accelerating, that, journey to profitability, and cash generation. So finally, in summary, the opportunity is structural in the real estate industry. This is a secular growth story, and it is all in front of us. We are well placed, with the strategic customers that we've acquired, and we are expanding with, for continued long term, very efficient growth as we, increase our penetration into those customers. Our execution is around product and those customers aligning our innovation, road map with those customer requirements and their problems.

29:07 And we will we'll continue to focus on efficiency, on cash generation, on near term investment decisions, with a focus on managing profitability and growth effectively. And finally, everything is underpinned by those strategic customers, our strong US growth, and the continued progress both operationally, and from a product point of view across our business. And that concludes, the formal part of the presentation. I think we will, I think we now move to, q and a. Yes. Mark, Sarah, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab, is situated on the top right hand corner of your screen.

29:55 But just while the company take a few moments to review those questions submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed by your investor dashboard. Mark, so as you can see, we received a number of questions both pre submitted and throughout today's presentation. And if I could just ask you to read out those questions and give responses where it's appropriate to do so, I'll pick up from you both at the end. Great. Thank you. Okay. So diving into some of the earlier submitted questions. The first question is is a question around the growth of the market that the flex industry will grow from 2% today to 30%. Now I think, that stat is, one which is often recounted in the real estate industry, and it is well understood.

30:41 And that's really about how much of a of a real estate company or if you like an asset should be on a more delivered on a more flexible basis to be accretive to value and net operating income. And so there is a a a range there, but the expectation is that 30% of all commercial real estate product and office will be delivered flexibly by 2030. And primarily primarily the driver is demand. We all are in a world of flex and hybrid working, and businesses are evolving their real estate approach to face into that. The second thing is, the second question is, we are running uphill at the moment with strategic customers, somewhat offset by losses of long tail customers.

31:29 When do you see the long tail attrition stabilizing? I think we I think Sarah mentioned that in our strategic customer slides earlier, but as we say today, less than 8% now of our group revenues are attached to that long tail of UK small nonstrategic customers, and we expect that to continue, to dilute over time. Next question is, how strong, competitive constraint is IWG's capital light franchise offering? Well, interestingly, I think for landlords and asset owners and operators in the middle of the market. I think for them, the idea of partnering or taking a franchise approach, this is well understood in the world of hotels and hospitality, is a very sensible one. I think, you know, alongside Industrious, which is one of our, you know, major customers, who offer this capital light management, if you will, partnership franchise offering to clients, I think those will have, continue to have a big place in the industry. I think for us, we see, our clients, the the majority of those big landlords looking to develop their own in house solutions.

32:51 They own and operate the assets, and and they wanna continue to own and operate the customer. And I think so there are there is plenty of market opportunity for all of these options. Moving on to some recently submitted questions. One from Chris. Will the reorganization of your global operations have an impact on potential to win new customers and service existing customers? Well, we're very, very focused on aligning with those strategic customers. And one thing we do not, intend to do is put any of those relationships or our ability to serve them at risk with what we're doing. We are simply optimizing around the market opportunity, where our customers' demand sits, and how we support them. So, actually, we think the net positive with this will be a much more focused aligned organization to those customers, particularly as the long tail slowly diminishes.

33:52 Our strategic customer is simply a customer that has, the potential to be more than $1,000,000 of ARR. What does that really mean? Is that they mean they have at least 20 buildings we can grow into. Most of our customers have hundreds of, if not thousands of buildings, so you can see the scale of the downstream opportunity those customers brings. Sorry, Sarah. I feel like I'm they're all sort of go to market, so I'm still looking at these. Any questions for Sarah would be welcome too. So what are the key reasons? This is from James. What are the key reasons behind the success in North America? Do you see this continuing, and what visibility do you have in this regard? Well, James, I'm absolutely delighted the success we've seen in North America. We entered the market in 2016, and we really started to see traction there about late twenty eighteen and 2019.

34:44 You know, we started with an unknown brand, and and not really fully understood by, the market. That is very different today. We have significant brand equity. We are seen significant as enabler for this journey to flex by our customers. And why is it, why is it so exciting and why we've been successful? Well, it's such a huge market. It is the single largest, real estate market, full stop. The majority of major global real estate owners and operators, be they JLL, CVRE, Tisch and Spire, are based and operate out of The US. So a huge opportunity, and we've only just begun to scratch the service, but our logo base continues to increase and strengthen in The US.

35:33 Finally, before I pass to some other questions, from Sam, will your investments in platform development continue, and what does the the rollout on new products look like? Well, Sam, in case any of our competitors are dialing in, I'm not gonna give you all of the road map. But we we we've shared a a small amount of the road map, particularly with Smart Access, on the call today. I think platform innovation and development has to continue. It is our product will be the bedrock of what we do. But it's not the only thing that customers buy from us. Customers buy not just our products, but they buy a census, they buy our our scale, our public market status, our referenceability, our ESG credentials, our compliance, our governance, our security.

36:22 The biggest real estate brands have the lowest tolerance to risk. And so, actually, we will continue to invest in all parts of the business that aligns with our strategic customers. But it starts with our product, with delivering more and more value to those customers every month, every new release, every cycle. Okay. So, some earlier questions that we had. Network and Wi Fi is a a strong part of the ESSENSYS value proposition. What role will five g play in the future? Well, interestingly, sorry to get technical for everyone and try not to bore people.

37:08 Five g, the the the frequency, like, the spectrum it operates on, is not conducive to getting into buildings. It's really good and really strong outside of buildings. But, actually, there is a distribution challenge of getting network, particularly five g in buildings. It doesn't like going through walls or windows. And and I think that is a big thing. So, externally, five g is strong. In building, we'll see more and more proliferation of, network provided services. So, basically, the building being connected to the wired network fiber and and then distribution in a building via Wi Fi. So, actually, five g will raise the expectation levels of every consumer of what what we should be getting, and we have to deliver that in buildings, and and our customers need to deliver that that in buildings too.

37:59 So second in question, there is, we mentioned that most of the connect customers will be migrated to the ESSENSYS platform. Migration is always a chance for upselling and and a risk for churn. How is this progressing? Well, the ESSENSYS platform, which is, if you like, an evolution of, ESSENSYS Connect and ESSENSYS Operate, has been built, designed, developed in conjunction with those very strategic customers and those strategic customers that we are looking to work with long term. And so, actually, we become more aligned. And so less risk, more aligned. Always execution risk in migration, We work very closely, and our teams very closely with managing that risk in terms of the migration gen. Can you help better understand and appreciate the complexity of managing, multi tenant spaces and multiple buildings.

38:55 Well, absolutely. So these are dynamic in nature. So the more flexible, the more people, the more dynamic spaces. So historically, landlords would simply sell a big empty box on a long term lease and pass you the keys. But now in this world of flex, landlords are responsible for managing access to lots of different spaces. But not just access. Charging, you know, how do we apportion spaces to the tenants? How do we secure the access to as in, do you have you paid your bills? How do we make sure you're in the right network and the private network that you should be on for your company? So the complexity increases exponentially the more space, the more buildings you put on. And then if you start to think about activating networks of spaces where perhaps I want to work today in London and tomorrow in Liverpool and a week on Thursday in New York, To create that journey and and make that journey seamless and frictionless and digitally enabled is hugely complex, and that's why automation technologies like ours are so powerful.

40:01 I think, yep, I think we are, yep, all covered. Mark Mark, Sarah, thank you very much. I think you actually did manage to address every question there from investors. And, of course, the company will review all those questions submitted today, and we'll publish those responses on the Investor Me company platform. But just before redirecting investors to provide you with their feedback, which I know is particularly important to you both, Mark, could I just ask you for a few closing comments? Yeah. Of course. Well, listen. Thank you so much everybody for taking the time to join us today and learning more about ESSENSYS and the opportunity in front of us. We think we are unbelievably well placed at the start of what will be a significant journey for real estate.

40:46 Our products are helping that journey and supporting it, and we continue to be excited by our future. Our ambition is on dimmed, and we look forward to updating you on our progress in six months' time. Thanks, everyone. Thank you. Mark, Sarah, thanks once again for updating investors today. Could I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure greatly valued by the company. On behalf of management team of ESSENSYS PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.