Essensys (LSE:ESYS) — Half Year Results

0:02 Good morning, ladies and gentlemen, 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 via the Q and A tab which is situated on the right hand corner of your screen. Please simply type in your questions at any time 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 of the questions submitted today and publish responses where it's appropriate to do so. Will be available via your investor me company dashboard, and we will notify you by email when these are ready for your review. Before

0:33 we begin, I would like to submit the following poll. And if you'd give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand you over to CEO, Mark Furness, and CFO, Alan Pepper. Good morning. Good morning. Thanks, Jake. Good morning, everyone, and welcome to ESSENSYS half year results presentation. Thanks all for taking the time to join us today. For those of you who don't know us, since 2006, we've been developing and delivering software and technology for the commercial real estate estate sector, mostly

1:07 the flex workspace industry, but certainly more recently, the wider real estate industry at large.

1:14 What does our products do? What do they deliver for our customers? Well, our platforms help our customers to, automate out complexity of their, operations. It allows in building experiences to be delivered on demand. It might allows our customers to manage and scale their operations, more effectively and more cost efficiently, provides and solves for cyber and digital security challenges. It reduces the complexity of running data networks in buildings and in spaces, and it allows our customers to surface hugely valuable and deep data and insights on their businesses. Talking specifically to the highlights of h one, where we've really demonstrated the resilience of our business and our model, We continue to grow across our organization, and we've really focused on the execution of our strategy.

2:11 And that's resulted in really strong US performance again. Our biggest primary market opportunity and the world's largest single real estate market, we've performed exceptionally well there. In APAC, since we launched our, our business, there less than twelve months ago, we've really delivered great progress. And across our product and our platforms, the accelerated investments has led to significant development of that capability and of the value it delivers to our customers. The market continues to evolve, so real estate is undergoing major structural changes, and we're at the very heart of those major shifts, be they digitalization, be they flex, or be they decarbonization. And finally, for us, we've really focused on, heads down, delivering on the strategy, which is about long term that long term strategic market opportunity that we see opening up in front of us. And I'm delighted with the quality of the team we've been able to recruit. So our full senior executive now in place across all regions, with a really talented and deep, supporting cast of domain experts.

3:22 We'll be remiss not to mention the impact of COVID nineteen. That was a little unforeseen, around the turn of the year as we saw Delta and Omicron variants hit. That led to some delayed capital deployment on our part as we were unable to put some of those funds that we'd raised to work in the time scale we expected. In terms of customers, we saw them extend the sales cycles. So not move away from us, but certainly, think about the deployment of their capital, in that period was certainly extended. And we had one, single customer loss in The UK, one of our long standing customers, who at that point had at that point had a number of sites in The UK, was unable, to renegotiate with their landlord. So in terms of, performance, that's 3% up on overall revenue, a 4% up on recurring revenue, with 91% of all revenues now recurring, and 30,500,000 of net cash on the balance sheet, at the turn of the half year.

4:24 Our strategy is really simple. The model is all about benefits of compounding over time and growing into the opportunity. So we think about landing new customers, expanding into their portfolios, and growing our capability to support their and solve their problems. In terms of how we we performed in terms of landing customers, so nine high value new strategic logos added in the period. We've seen really strong pipeline growth particularly since the turn of the year across all regions, and we've got that domain expertise across the whole senior team and downstream in the whole organization now as we've deployed some of that capital, to expand our teams.

5:08 The existing customer expansion opportunity, so the ability to grow with our existing customers, is beginning to unlock again. Again, we talked about expanding the team around the talent and the quality of of our colleagues. And finally, in that that section, it's about our global reach. So this is undoubtedly a global shift in real estate. ESSENSYS is positioned to make the most of that global opportunity. And so from a an operational so from an operational footprint point of view and from the reach of our platforms point of view, we've continued to expand globally. And that platform evolution has led to the development and delivery of new capabilities that we'll talk about a little later today. And also, is it about the development of our people. So if we grow our people, you know, they can help us fulfill our ambition. I'm just handing over now to Alan who will take us through the financial highlights.

6:05 Thanks, Mark. Morning, everyone. Thanks for joining. If you've joined us before, this is a similar format to what we've done before and and on the historic decks that are available on the website. So in terms of overall highlights, so total revenue up 3% to just under 11,000,000 for the half year. That's an actual currency. You'll be aware that, you know, we obviously got some US dollar currency translation, and so we talk to actual and constant currency as well. Recurring revenue and actual currency up 3%, and the standout, obviously, comparator is our US recurring revenue at local currency. And so in US dollar terms, up 20% year on year or period on period over the last period, and that's a combination, obviously, of the full period effect of those sites that went live in the first half of f y twenty one together with the impact of those that have gone live since then.

7:05 Overall, nonrecurring revenue, flat period on period, that inconsistent with the things we talked about about sales cycles and new sites. US nonrecurring, down slightly, not really material in the period and catching up, and and we'll talk to that in a moment. And then in in terms of the underlying products, we will recall Connect, obviously, the largest portion of revenue. That's up 4% in line with overall revenue. Our operate business, smaller part of the business down about a $100 in the period compared to the last period. I'll touch on that, and that was mostly impacted by that large UK customer insolvency that we referred to historically, and and we'll touch on that in a moment. The consequence of that is our our our recurring revenue run rate, if you like, measure of growth going forward up 2% period on period, notwithstanding the challenges over the last twelve or so months.

8:00 And then in terms of development statistics, EBITDA and EBITDA loss, we have been forecasting a loss as we invest in the business and the growth in business over the next two or three years. And that's also the 2,900,000 loss in the period, Slightly better than we'd originally forecast due to, you know, just the time time taken to recruit additional staff to support the growth of Mark. We'll talk about in a minute. We're expecting that to catch up in the second half of the year. Recurring revenue in line with the previous period, and we would expect that to come down as an overall proportion of the business in time, reflecting a greater proportion of nonrecurring revenue as the business starts to grow more rapidly again. Net retention slightly ahead of last period, so future that we'll touch on at the moment. And then margins down slightly in the period, primarily driven by accounting adjustments to do with IFRS 16 and the way we treat right of use assets as a short term transfer from depreciation interest back into cost of sales, which will come back yet or has already come back out in the second half of the year.

9:10 And then in terms of personnel, so up 20% in terms of personnel numbers from the full year end. And then we're up at about a 172 at the end of March, so that that personal number continuing to grow. US business, now more than half. For those of you who followed us, previously, that's becoming a greater proportion of the overall business, so more than half now. And, as the other other regions start to grow and generate direct revenue, we will report those separately going forward. Margins, I've I've touched on a moment ago. Talking about sort of moving forward to products. So the connect and our platform element is is the vast proportion of vast majority of revenue, up slightly compared to the previous period. So 92% over and 790. So revenue up there, 4%. So we continue to see customer and site growth compared to the previous period. Net retention still maintained, still very high, nearly a 100% net retention, and and some slight margin movement there, but that's driven by mix of business with an increasing proportion of US business.

10:25 On the operate side, just to cover up a smaller part of the business, that's the area where we've had a we had and we inherited some years ago a a large number of smaller customers. These are not core customers to the business going forward, and those are the ones that are most affected over COVID.

10:46 The the relative customer value is is modest, and we've sort of a number of those come out. Most of the site loss relates to that single UK customer, and we have actually seen revenue per site go up as a consequence of that as as we're focused on our more of our core customers who have got engagement in Connect as well. On and then look moving forward in terms of the standard sort of reporting statements, I've covered off most of the income statement elements. The other area to cover off is is overheads where that movement of overhead, obviously, there's significant driver in EBITDA. That's the growth primarily in our sort of go to market and third party marketing spend.

11:32 So get the so this period, full full period effect of growth during h one twenty one plus h one h two twenty one and then the first half of this year. That's what's clearly driving that that growth as we as we expand the business and and for future growth driving that number. That's really all on the p and l front. And then on on cash flow, a bit of working capital movement, that's timing, where we've we have a number of large customers and where a number of large customers in The US paid us a few days later into February rather than January. There's a little bit of inventory build, which we'll we'll we'll touch on shortly further.

12:22 We're continuing to invest in capital in our in our software development. Mark will touch on that in a moment. Not quite to the extent that we would have expected in the first half of the year, and and that's to do with people. Again, Mark will touch on timing of bringing those people on. We'd expect that to catch up in the second half and beyond target for 3.5 to 4,000,000 of capitalized development for the full year. And clearly, an overall cash position, the fundraise that completed just before the end of the financial last financial year is is the big driver there, driving us having 13,500,013 and 500,000 cash in tax period end. Finally, just on this point, to highlight, subsequent to the period end, we made a decision to buy certain to make a strategic inventory investment in North America to ensure that we, a, locked in current pricing and also ensured that if there was any potential for supply shortages over the next twelve months that we we had secured supply to ensure we could deliver our growth, that was 2,300,000 sterling. That will obviously be reflected in the second half year numbers, but that will that will unwind through f y twenty three and also ensures that we can deliver growth to customers primarily in the North America.

13:45 On the balance sheet, the balance sheet is there really for record only. And and then finally, just to sort of talk through some of the KPIs that, again, that you will have seen before. Key key key one, obviously, to note at 53 new contracted sites for delivery after the turn of the half year. A number of those are into are into FY twenty three, which is starting to underpin FY twenty three growth projections, which is good. And then in terms of customer concentration, that continues to broaden. We now only have one customer that is more than 10 of revenue, of, say, our largest customer in North America, and we're seeing a broader cohort in the the balance, if you like, of the top 10 as that area broadens out, which is positive.

14:32 LTV to CAC, down slightly as we as we forecast. Still market leading in terms of being just around three to one. That will nevertheless continue to drift down over in the second half of the year as as we continue to invest in sales and marketing and probably in the first half of twenty three before I would expect we'd start to see it recover or climb back up again in the second half of twenty three as as we see the new sales and marketing personnel start to deliver over the next six to nine months. And finally, from me, clearly, we're we're continuing to sell both products. That becomes increasingly less relevant to incoming new customers as the relevant operate functionality is incorporated in the new platform.

15:21 And so, therefore, you know, operate in due course will become a stand alone product of itself without necessarily any application across both products. And that's it from me, Mark. Thanks, Alan. So I wanna talk specifically to the market opportunity right now. And so the real estate industry is really, at the front end of three major structural drivers converging, and those structural drivers are also driving the conversation towards ESSENSYS and our technology. Now the first is well understood for ESSENSYS. For sixteen years, we've been delivering the software and technology that helps flex workspace operators. So we know that trend, and we understand it well. But over the last few years, we've seen the rise of two other structural changes in real estate. The first being digitalization that's using digital first technologies to transform the journey in building and the in building experience.

16:23 So whether it's touchless control, touchless access, whether it's automated and autonomous operations, and digitalization is the thing that will make, real estate more relevant, more efficient, and more commercially viable as we look out for the next five, ten, fifteen, twenty years. And the third theme that is converging towards us is decarbonization. So which technologies, whether they be cloud, SaaS, whether they be digital, can help in the decarbonization of real estate portfolios. And so those three trends and those three major challenges for the industry are the challenges we are helping to solve with our technology.

17:10 Forgive me. Just more moving through, to how that looks in terms of, an overall market picture. So what used to be the case in buildings and and big real estate organizations was really was all about the traditional tenant spaces that they sold. Think of it as like a, selling you a big empty box on a long term lease, and the responsible for all of the services in that box was for the tenant. Now that's evolved rapidly in the last few years, and we have now in these buildings all types of spaces. So a building can have traditional tenants. It can have coworking, flex spaces. It can have amenity spaces and communal areas, and it can even have conferencing and meeting spaces.

17:56 And those multimode buildings are likely to be the most commercially successful, assets in the future of real estate. And so the flex workspace report and the trend report from Colliers of 2022 said that says that actually in real estate, the world of flex and the world of traditional tenants is actually blaring. So what used to be two never the twain shall shall meet type space, formats are now combining, to create the workspaces of today and tomorrow. So buildings now will have all forms of these types of spaces and solutions, and that will really play to technology platforms like ours that enable them to operate efficiently. And the second thing here is a Deloitte report that we've heard earlier this year, which is the commercial real estate outlook, which is really to survey, the wider commercial real estate industry and understand how well equipped they are to meet the needs of their tenants and their occupiers and to support these technologies that are ever more important.

19:01 And eight out of 10 organizations suggest that they don't have a modernized core system. So if you like the intelligent digital infrastructure needed to incorporate these emerging, and critical technologies going forward. And that really plays to the white space opportunity, that exists for ESSENSYS. Now let's just talk specifically then to, the problems we solve for the real estate industry at large. On the right hand side, you can see the flex workspace operator. So as they scale, their operations become more complex. Our automation technology, our private platform, our private secure global network, and the ability to deliver on demand services are really the challenges we solve with technology for that part of the industry.

19:51 But increasingly, the asset owners, so the real estate owners, the real estate brands, and the property managers are the biggest global players are looking to us to help them solve for that intelligent digital infrastructure. Can we can they support in their buildings those new innovations that are needed

20:10 by them and their clients and their customers and tenants? So today, it's about solving that, digital complexity with our automation technology, and tomorrow, it's about the operational complexity as they evolve to deliver those flexible flexible workspaces, in and around their own portfolios. So we're seeing the real estate markets evolve rapidly. We know digital maturity is variable across the industry, across people's portfolios, and even at an asset level. But the final point here is critical. Digitally enabled spaces and buildings are critical to the commercial success of these real estate portfolios. Just specifically in the regions that we operate, our biggest regional market, North America.

20:56 So CBRE report that, the industry faces a challenge to deliver the technology privacy. So if you like cybersecurity and digital security that is needed for enterprises to take spaces in these buildings. It also, faces the the the slow adoption of the critical technology that's needed to support their growth or a better user experience in the building. We all want a premium experience as we walk through these workspaces in these buildings, and it's technology that unlocks that. Our biggest customer, Industrious, actually reported their biggest ever increase in enterprise sales in the third quarter of twenty twenty one, and that was over a 150% increase. And that was really around them being able

21:41 to deliver the digital security and the digital experience that enterprise customers demand in these spaces all powered by a SENSYS technology. In The UK and Europe, we know that companies will pay a premium for being in these type of spaces, and we also know that technology that allows landlords and flex workspace operators to reduce time to value, so to do things in real time,

22:05 via automation and the the digital infrastructure is critical to developing a better commercial models and increasing return on investment rapidly. And in Asia Pacific, which is our second largest market opportunity, landlords there are looking to high impact technologies such as smart building systems, big data and analytics, and digital property management, which we cover all three of those major trends, to to really drive the biggest impact for their portfolios in the next five years. So the market backdrop is one which is really driving the conversation towards the census, and we think we have a very strong strategy to capture that market opportunity. And so a little over a year ago, sorry, a little under a year ago, we announced a fundraise to really equip ourselves and resource the business, to face into and make the most of that emerging market opportunity, that structural growth story.

23:05 And the fundraise was really to do three things. One is to expand the geographic reach of our platforms and our organization. Two, to accelerate our go to market activities to really build brand equity and to have the feet on the street that can sell the ESSENSYS product and platforms into those target customers. And finally, it was to accelerate the value of the product so that actually we become even more embedded, into our customers, deliver even more value, and really help them to solve these major challenges via our technology. So specifically, how do we how have we performed in terms of driving product value? We expect as part of this fundraise, to increase our headcount at the first half of the year. We increased the headcount.

23:52 We were a 116% of plan. And by the end of the full year, which is July this year, we expect that to be pretty much a bang on plan in terms of the headcount. So really pleased that we've been able to hire and retain and recruit and onboard the technology talent that we need to deliver the product development. And we've restructured our organization in terms of r and d around full stack development, around Internet of Things and hardware, and around really, innovative new initiatives and ideation around ESSENSYS Labs. And that's all delivered accelerated product output. So flex services platform, which we'll now talk about as the ESSENSYS platform, really developing new capabilities within that new core platform for us. And smart access in Hub and Halo, which is really about creating unique in building journeys that our technology can enable.

24:47 In terms of that expansion, we talked about underpinning everything we do is our global private network. We plug directly into these buildings from our data centers with a big fiber connection that delivers all of our capability and gives security

25:05 and experience protection for us and our customers. This investment phase will see us deliver 25 data centers across these key markets. It's all about unlocking the opportunity in those major regional markets where there is high density of office and buildings. And and this investment will allow us to support over 3,700 locations, which is equating to over 300,000,000 of ARR as we get there. So the platform today, as we talk about the global private network plugging into buildings, we connect directly to the ESSENSYS platform, to these buildings, through our data center network. And and then we use intelligent automation around the networks or the data networks, automated provision of services, around space management and occupancy management. We allow that control to happen, through our intelligent automation engine via a single pane of glass for our customers.

26:06 And finally, that allows us to create these amazing, seamless in building and cross portfolio experiences that are unique to ESSENSYS and our customers, and we allow to surface, and we are able to surface really deep insights about those journeys and about how customers are using and, accessing the spaces. One of the initiatives that ESSENSYS Labs has, delivered, so we ideated this, a little under a year ago, is ESSENSYS more access in the Hub and Halo product. This is about using our mobile device, to unlock an in building journey, so to make it easy to touch, tap, and open, to tap, book, and pay even through these buildings and spaces. And those tech those technology solutions around access control, around, booking their availability, and around sensors are historically siloed solutions and proprietary.

27:01 We figured that if we can could vet can converge these in one single unique capability, which is commercially compelling and disruptive as well as technology technologically disruptive and compelling, that this would be really powerful for our customers. Hub and Halo, has been deployed in its first beta test, phase, with some UK customers, and that really will unlock the power of using your mobile device, and we're all familiar with tapping our mobile device, to pay or to get through the tube. But to do that and be able to navigate through a building to unlock a door as well as to book a space as well as to pay for it, we think is a really powerful use case, for ESSENSYS Smart Access Hub and Halo. As well as new product innovation, we talk about accelerating go to market. And this is nothing this is really not about just scale.

27:54 It's about hyper efficient growth. We talked about that LTV to CAC number being near three to one. So it really shows the efficient growth that ESSENSYS is well known for, and that comes from the type of customers that we target and being able to expand with them, over time. So when we grow headcount, as we've done through the year and we continue to do, to the end of the year, it's all about industrialization of the process, driving sales efficiency. So you've you've seen us move to a digital first approach to demand generation as we build new markets and brand equity in those markets. And it's all about making sure we get the right headcount. And COVID limited our, ability to get the right people onboarded so you can identify and find the people in terms of sales and marketing, but it's all about the onboarding quality. So we will have recovered that position by the end of the year, we'll be back on plan as we talk about the outturn of the full year.

28:51 In terms of the regions, North America, our largest market, as I've said, which is you know, a 1,700,000,000 total addressable market, and our target customers right now represent over 377,000,000 of ARR. We've, again, impacted by COVID. So at the half year, we were a little behind the plan in terms of deploying that capital and getting the headcount, but we recovered, and we expect to recover to 80% of the plan, by full year. And we've done really well in actually engaging with some significant new logos at the bottom of the funnel too. And so we have some, some really strong opportunities, that we're looking to close in the near term. So that's a Californian mixed use landlord, with a number of locations, a pan US REIT, Texas mixed use, developer, and a West Coast landlord that not only have 37 buildings across that area, but also have an APAC business too. So they're really it's about really focusing on the type of customers that as we land them, will deliver long term expansion opportunity for our business.

29:54 But I wanna really talk specifically to APAC. It is undoubtedly a huge market opportunity. And just in the early stages, when we think about Hong Kong, Singapore, and Australia are early entry points. That is a service addressable market of over £225,000,000 a year of ARR. And since we launched our business there little under a year ago, we've made great progress. Alan and I, were fortunate enough to visit the team in Singapore, last week, and we were super impressed by the quality of our team and the progress they've made. To give you an example of that, since the turn of the year when we've managed to onboard our new sales team, we've seen pipeline grow 11% week on week since we onboarded the team.

30:40 And we've actually managed to engage with over 40% of our target customers in the market already with really high conversion rates already being shown through the funnel and through the pipeline. That's resulted in some strong new logo prospects. So a regional landlord with a flex established flex brand, a large Australian landlord with an established flex brand and a multi, family portfolio, a Singapore and regional flex operator with over 40 locations, and a Singapore brand that actually has a global portfolio that has 11 over 11 flex locations in the region. So we're actually really excited about the APAC opportunity and what it could mean to the business. And finally, The UK and Europe. Our heartland is The UK, and we've done really well in the sixteen years we've been established here. But, obviously, only when you add the European opportunity to that to that UK market does it become super significant for us. So, as we think about that as our third market opportunity, with a TAM of, nearly 1,000,000,000, but with a a a service addressable market of 250,000,000, We've appointed James Lowry as our CEO for the region recently. He comes from British Land where where he was the lead at the head of their flex division.

31:58 And and now we've got real expansion opportunity across content or market. So, we have 36, operate only customers. So sorry. 36 operate only sites with that single French customer that we're talking to about taking the whole platform. We've got a UK building operator with over 50 locations, a Swedish private landlord as well as a Swedish customer we've recently won, and a German meet with over 500 buildings across the region. So, again, we've, done really well on recruitment and managing to to get our headcount up to the numbers we expected, and that will result in a full year out there in terms of The UK and Europe of being pretty much bang on plan in terms of the numbers of people. And so the people, our progress with our strategy has resulted in the pipeline, progress that we see in front of us.

32:48 Delta and Omicron undoubtedly, saw that that pipeline stall and all of the the funnel progression really slowed down, as uncertainty returned. But since the end of January, we've seen those pipeline moves unlock. So in terms of top of funnel, we've seen that increase 23% since the middle of January. But more importantly, in terms of the medium term pipeline, we've seen that increase 40% since the middle of January. And to give you some context around our existing customers too, so as well as our new logos, we took a snapshot little a over a couple of weeks ago of a small subsection of our existing customers to really get a sense of their levels of confidence through the near term through next year and what the long term opportunity represents with those logos.

33:38 And so as you can see here, I think we've got 17 customers, 13 actually customers that we went to. And near term pipeline, you can see that across North America, our existing established customers who've been with us over a year, now there's 33, and that pipeline near term pipeline is really till the end of our financial year. New sites they see, and 12, from brand new customers. But more importantly for in support of our land, expand, grow strategy, it's what those customers are expecting to deliver in terms of new sites in f y twenty three. And perhaps even more importantly, what those, whole portfolios represent in terms of overall expansion opportunity for ESSENSYS, which is in excess of 1,700 locations, just those logos you see in front of you, and that would equate to over a 150,000,000 of ARR.

34:36 So when we come to the outlook and the summary for our for our half year, it it it's really a story of building foundations and getting our business in shape for the opportunity in front of it. We've made great progress with delivering the quality of people, the talent in the business that can support our ambitions, domain experts, the senior executive team, and all the way through our development teams and and our operational teams. And that really supports our product because our product really is is everything for the future of the business. We have to support our customers, deliver great product, and that is super sticky, and you've seen that in the net retention numbers of near a 100%, with Connect and the Flex Services platform.

35:25 And and the more value we can create for our customers, the the quicker we can get the accretive revenue, accretive margin, per building, the better for our customers and us. The progress we've made across the, for delivering our strategy, I'm really pleased with across all fronts, in the two and a lit two and a bit quarters since we raised the £33,000,000 to accelerate our growth. And the market backdrop, those converging structural drivers of flex, of sustainability, and of digitalization are really playing to the conversation and technology like a census. And and finally, we have the global capability, the reach of our platform, and the reach now of our operations, to deliver and unlock those major market opportunities in front of us.

36:17 So thank you for your time. That concludes my part. I think, Jake, while I hand Mark. Yep. That's perfect. Alan, Mark, thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab situated on the right hand corner of your screen. But just while Alan and Mark take a few moments to review those questions submitted already, I would 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 via your investor dashboard. Mark, Alan, as you can see, we did receive a number of pre submitted questions ahead of today's event as well as a number of questions that have come through throughout today's presentation. Firstly, can I thank all investors for submitting their questions? And, Alan and Mark, if I could please hand back to you just to run through that q and a tab. Where it's appropriate to do so, if could just read out the question and give your response, and then I'll pick up from you at the end. Thank you. Thanks, Jake. We'll get through as many of these, sorry, as we can. Actually, questions from a different Jake we'll start with.

37:14 Question is on the March 1, the market cap reduced significantly when the company update never seemed to justify this. Do you think this market cap reduction was justified, and do you think believe the share price should be back to pre March first levels based on the recent half year results just released? And I wouldn't I wouldn't try and and understand how markets work. My job is to understand how ESSENSYS and our customers work, and that's what I focus on. And and my belief is and I'm told the markets are efficient, therefore, eventually, we will be valued accordingly. So I I would just add that I'm the biggest single holder of this business, the founder since we started the organization back in 2006.

38:03 And so I guess the question is, am I confident in the future? And the answer has to be absolutely. Jake asked another question. Your stack of flex services platform sites contracted for delivery grew from 02/28/2022 to '53. Were any sites delivered in that period? In other words, were the growth additions the same as the net '25? Yes. There were, that's the reported number at the period end. There have been some of those sites delivered, to date, and and we'll see some of those sites delivered. But, obviously, as we continue to accelerate pipeline, that will, hopefully result in the addition of new sites added to that number as we look out. So hopefully that answers that for you. I've got another one here from Jake, which is it may well be in your presentation, but if not, what's your up to date LTV CAC? I think we've answered that.

38:52 LTV CAC is is one of those, three letter acronyms that the industry has has tagged on to, which is really all about efficiency. And we've always been super focused on, return on investment when it comes to sales and marketing and acquisition of customers, and very low churn across our organization. High long term lifetime value and high margin really drives that ratio. And we've always been very efficient in sales, and we expect to be so in the future. Roughly, how much of your admin expenses reflect steady state maintaining service in existing products and customers rather than expansion? Alan, do you wanna come briefly on that? Yeah.

39:37 So if you look back to last year before we sort of started the growth, you know, that probably give you an indication of where our admin expenses would normally be if we weren't growing the business. Clearly, we are growing the business, and there's a continued operational requirements to support those customers. It's obviously it's not linear. Clearly, we bring in our bigger customers, they they are not one for one. We'd expect that sort of, if you like, that operational gearing to flow through. I hope that answers that. Thanks, Alan. Talking about longer you talk about longer sales lead times with some significant potential new customers and large European property companies and managers. Do you expect this to be an enduring feature of the market?

40:24 Absolutely. It is the real estate industry is primarily about risk management. And one of the reasons we took the business public was to give the confidence and to deal with that part of the risk matrix for real estate companies to go actually public company confidence so that they could deal with the census with confidence. And but, actually, it's all about that efficiency. Larger customers with larger portfolios and scale, we deliver increasing ROI the Fed we're penetrated in the those organizations. So, actually, the more complexity we automate out, the better the ROI profile and on on the investment for our customers.

41:12 And so they're absolutely our target customers. As well as that, they provide that talk about that sales efficiency. They they really provide that long term growth and expansion opportunity. So the sales pipeline might be longer. It might be more professional, the the sales process itself, because of a procurement process being much more much tighter. But, the outsized returns for a census are really important. And and finally on that, operationally, those bigger organizations as we embed and we become part of their standard operating procedures, actually, they become less of an overhead. So on a unit basis, they are less costly to service than small customers. And so absolutely targeting global, large, high value strategic accounts, whether they be our existing customers like JLL, Cushman and Wakefield, Industrials, and Pines in The US to some of the new prospects we've been talking about today.

42:14 And we have one about can you talk a little more about the losses arising from The UK customer insolvency? How much of the £324,000 expected credit loss provision is due to this customer? How much of the continued committed costs associated with the lost customer in The UK that affected your gross margin? And have you been through this having been through this experience, are you doing anything differently now to mitigate the insolvency risk? So I can deal with that straight up. I think this was a long standing customer, been with us for a thick end of a decade, and was actually fully up to date. So we didn't experience any significant loss in terms of cash terms from unpaid bills.

43:00 That organization was unable to renegotiate renegotiate their leases with their landlords, And so, unfortunately, was not able to survive. In terms of continued commit committed costs and the impact to margins, limited because we're able to obviously repurpose the benefits of cloud and SaaS is to repurpose a lot of those costs elsewhere. So not really an impact on gross margin. And having been through this experience, are you doing anything different now to mitigate the solvency risk? We're we're pretty robust. And as you can imagine, we are mission critical to our customers. And so without us, they are unable to operate their businesses. So we have quite a big stick with which to to sort of to waive to manage credit risk. So I think I think we continue to be very active on that, but we're not seeing any additional risks from our customers.

43:56 And we talk about you talk about building inventories, and I can see the increase in the balance sheet. What stuff is the inventory? I think Alan talked about that. It's really about supply chain, managing to making sure that we control our supply chain in in the face of inflationary, likely cost pressures and cost increases, and also in case there's any possible supply chain disruption through the year. And I think that proved a a really good approach to us. So type of stuff is some of network equipment and the stuff that is located on the site that we deliver our services over. And from James, good morning. An article out today states you need to double revenue to get to breakeven. Is this true? And if not, when do you forecast breakeven? We're absolutely in growth mode right now.

44:45 The size of the opportunity, it is a larger single asset class, worldly untouched by technology like ESSENSYS. It So is really all net new and white space opportunity to grow into. And and so we need to grow into that opportunity rapidly. Then we get the defensive moat, the economic moat, and we become embedded across the industry. So it's really important we do that aggressively in in the the years to come. And that will mean that we will run harder and and and revenues and margins will catch up, and we'll we'll lag slightly that investment. So we said about a breakeven. We talk about 2024 in terms of when we expect that to be. One thing to note in terms of our breakeven capability is a lot of that investment that we're making is all about growth, but we have a huge range of existing customer growth and expansion opportunity, that we see today.

45:42 So we are able to leverage that. And if we feel that at any point, we are not confident about the growth opportunity, then obviously, we're able to pretty quickly wind off a lot of the costs in the business that are supporting our future growth ambitions. From Lloyd, do you consider the company is in the strongest position ever? And if so, do you still believe the share price is justified to be this low? I think I talked about the share price and dealt with that earlier. But as the founder, and I've been here, I think, end of sixteen years now, absolutely do I see this as the strongest time for ESSENSYS. You know, the quality of our teams, the reach of our organization, proven product market fit, the quality of our customers, that have been with us now for a while as well as our new customers, the expansion opportunities with them and how we can help.

46:37 I am very, actually hugely delighted with where we are today. But, again, it's all about execution. There's really one thing that will kill this organization and kill the opportunity for us, and that's complacency. And we've worked too hard to get to here, bootstrapping the the business all the way through to IPO. And now we have to make the most of the opportunity, but not be complacent as we get there. From Lloyd again, our director's in a closed period currently. And if so, when does this end? So I think we just come out of the closed period. I think we are 30 it's thirty days before the results. Lloyd again asks, we're currently sitting on just over 30,000,000 of cash.

47:24 How is this cash best utilized to maximum potential whilst waiting to invest in the business? I think the market's pretty volatile, so I'll I'm not gonna answer on behalf of how treasury works. And I'm sure Alan has got that in hand. But the but, yeah, it is you know, we're putting it to work. The best thing to to is in in investing power. Anything to add on that? No. Not particularly. You know, you you saw what we said in terms of investing in inventory to ensure, you know, you you were obviously well well positioned for cash. So I guess a sens sensible use of those cash resources to ensure that we we derisk any or we remove or mitigate any risk for growth next year by buying that that stock. So I think those are the sorts of things that where where relevant, we'll make those investment decisions.

48:10 I think the plan is the right answer. We we wanna make sure that actually the business is funded through to breakeven time that Mark talked about, and that's what it's there for. Thanks, Al. Christoph Al sorry. Christoph Al, is the cash been necessary and sustainable? A self funding will be attractive to the market, and this will float to the share price. I think it's about all about size of opportunity. And this is a multibillion, pounds, ARR opportunity, which is broadly untouched and untapped, and and that is beginning to open up in front of us. So, absolutely, we should be in growth mode in investment. But to my point earlier, self we self funded this whole organization through to IPO and investment capital. So start up capital was less than £7,000 that I put into this business. And so I understand the value of self funding. And where where we can, we will absolutely do that. We self funded all the way through to our expansion into The US. And but right now, we have a window of opportunity to, if you like, own a big part of the market, that is really important that we execute against that.

49:21 Lloyd, apart from a slightly underwhelming March 1 trading update, what do you believe caused a significant drop in share price? Was it mainly an institution selling out, and is there active interest from other institutions to buy in? What caused it? We we obviously notified that we'd been impacted by Delta and Omicron just storing some of our progress. Whether or not that drop was commensurate with that, that's for other people to decide. Definitely sellers that we saw, and I'm sure you guys are connected to that and can see that. And and and hopefully, yeah, hopefully, our story is one with a structural growth story, a successful business, and real execution discipline, that will keep the interest peaked, for the organizations and institutions institutions to buy in. And, Lloyd, again, with the strength in the American markets, has there been any discussions regarding possible mergers and or an American stock listing?

50:24 If no, is this something that may be considered in the future? I'm not sure I can actually answer that and but but all sorts of conversations are always ongoing in our business about all sorts of things as you would imagine. But you're right. It is a huge market opportunity, The US. When will new product details be released and launched? You saw some of that in this presentation, Lloyd. And, again, you know, keep up to date with our website, connect with us on LinkedIn and some of the social channels. The key thing is our customers are really driving that innovation and and really putting it in their hands. So it's about constant delivery, constantly innovating, adding value, and that will allow us to increase significantly revenue per site and margin per site, because of the cost to serve are very low, once we are in a building.

51:15 And how long is a typical customer contract from Christophe? How embedded is your tech in a customer's building business? Typical contract is three years. How embedded are we? Well, up until the lockdown and COVID, we were always over a 100% net retention. Chain, low single digits. So if you look at our connect flex services platform, you know, there's two elements to chain, gross and net. We've always been unbelievably high in terms of our performance in terms of churn, at those levels. So very embedded, very sticky in terms of our customers because we solve big problems for them, and we're mission critical. Lloyd, what is your vision for the company in two years' time, market cap, and total share of markets? So this is a very ambitious team, a very ambitious organization with a significant opportunity in front of of us, and our ambition reflects that opportunity.

52:10 We expect in the years ahead to maintain and accelerate our position as market leader in a in a in a huge market that's growing rapidly in terms of opportunity. And so I think we talked to this previously about the first real, I guess, milestone for us is when we break a 100,000,000 of ARR, and that's part of the that's that investment that we've made, that £33,000,000 fundraise to support our growth to that number. And, Lloyd, do you envisage any risks, negatives in the coming few years? Contrary, what do you see as the largest opportunity for you and your share shareholders? I think I've talked to the opportunity quite clearly. It's delivering for our existing customers and those target customers, because the ability, and the opportunity to expand into their whole portfolios, could be absolutely transformational for our business.

53:09 So we need to keep executing and delivering for our customers. And any risks and negatives, undoubtedly, will be many risks. Our job is to see them as early as possible and navigate, but we can only control those things we can control. And the you know, our hope is that some of the macro things, such as the global pandemics and, you know, wars in in regions, we we can hope we can navigate through those as successfully as possible. And with the balance sheet that we have, you know, great customers, you know, we've got no debt and a big opportunity and strong team, it's all about execution, and that will keep us safe. Christophe, again, what is your win rate in a competitive tender for new customers? What are your key USPs versus competitors?

53:57 So our key USPs are all around the automation engine that we built. So that intelligence automation that allows things to happen immediately on demand and without any people interaction, that is unique today to ESSENSYS. And the way the platform is configured and connected to the buildings means that we can deliver these unique and building experiences that are highly automated, limited if not zero touch, and really unique to how we do things. So I think we've got to tell more people and be better at explaining that to our customers, And I think that will, that will certainly, deliver outsized results for our business. And the win win rate in a competitive tender process, we're all always, very successful, in those processes, as you can see by the logos that we have and those customers that we have today.

54:50 You know, those procurement processes are very, very disciplined, very detailed, and, you know, our win rates are very high in in those without going into specific numbers for each. Sorry. Just checking through these. We're conscious of time. Yours as well. Please split your visible revenue growth in 2023 between existing customer expansion rollout, new customers already contracting new customers. Well, the the it's in the deck actually, Christophe. We talked to that in the pipeline, but you can see existing customers and that have been with us over twelve months and and new customers have been with us less than twelve months. But in that pipeline slide, there is no addition of, if you like, new customers to that as well. So you can see that confidence that comes through from our existing customers in terms of 2023.

55:49 Imran Kay, what did placing shares investors at two 85, see in the business? Is it still true today? Who is this the big biggest investor of placings? They didn't sell since then, did they? So, no, they've they've actually added the biggest investor that came in there. What did they see? A lot of our existing investors held their position or or added to? So think about the structural opportunity in front of a census. So it's a structural shift in real estate, which is untapped and untouched. And so the white space opportunity is huge.

56:38 So this is all about looking out two, three, four, five, ten, twenty years on what that can look like for for an organization like ESSENSYS. And it's also about our execution history. Now for the first thirteen years of this business, we'd, bootstrapped our way to success in North America and to the expansion of our portfolio and to working with some of the biggest real estate brands and names. And so, really, it's about turbocharging that the the DNA of our business, the experience, and allowing us to get more customers more quickly, build more product and more quickly, and develop and deliver great people in our business more quickly and attract and retain them.

57:25 And so that absolutely still holds true today. And as I sit here, I I am more excited and more optimistic about our business in the future than I've ever been. And just a a comment. Thanks for your answers, Mark, from Christophe. You're more than welcome. I think that brings us to the very end of of the questions and super efficient eleven fifty eight. Jake, anything else? Absolutely, Mark. Adam, thank you very much indeed for addressing all of the questions that came through from investors. And, of course, ladies and gentlemen, if there are any further questions submitted today, we'll, provide those back to the company immediately after the presentation has ended, and we'll publish all those responses where it's appropriate to do so on the investment company platform, and you'll be notified by email when these are ready for your review. Mark, Alan, perhaps we're redirecting investors to provide you with their feedback, which I know is particularly important to yourselves and the company.

58:17 If I could please just ask you for a few closing comments wrap up with that, that'd be great. Yeah. Absolutely. Thanks, Jake, and thanks everyone for joining us today. Really appreciate you taking the time to learn more about our business. I think the summary summary is right in front of you. It's all about, have we got the foundations for future success? And do I look across the business, to the quality of our people, to the quality of our product and our innovation going forward, to the progress we've made to date, and we will continue to make in the weeks and months and years ahead? And And does that tie to a market opportunity which is significant, and does that mean that the global potential for ESSENSYS is huge? And the answer to all of those things is yes. So thanks for your investment. Thanks for your time. I look forward to catching up again soon.

59:10 That's great. Mark, Adam, thank you very much indeed for taking the time to update investors today. Could I please ask investors not to close this session? It should 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 will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of ESSENSYS PLC, we'd like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.