REG - Eagle Eye Solutions - Half Year Results
19/03/2024 07:00
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RNS Number : 3248H Eagle Eye Solutions Group PLC 19 March 2024
19 March 2024
Eagle Eye Solutions Group plc
("Eagle Eye", the "Group", or the "Company")
Half Year Results for the six months ended 31 December 2023
Continuing momentum as retailers move towards personalised marketing
Eagle Eye, a leading SaaS technology company that creates digital connections
enabling personalised, real-time marketing through coupons, loyalty, apps,
subscriptions and gift services, is pleased to announce its unaudited interim
results for the six months ended 31 December 2023 (the "Period" or "H1 2024").
Financial Highlights
H1 2024 H1 2023 Change
Group revenue £24.1m £20.0m +20%
Recurring subscription and transaction revenue £18.8m £15.7m +23%
Recurring revenue % of Group revenue 78% 78% -
Period end Annual Recurring Revenue(1) £35.4m £28.1m +26%
Net Revenue Retention(2) 120% 127% -7ppt
Gross profit £23.1m £18.8m +23%
Adjusted EBITDA(3) £5.9m £4.7m +25%
Adjusted EBITDA margin 24.4% 23.5% +0.9ppt
Adjusted profit before tax(4) £2.6m £1.7m +49%
Adjusted net cash(5) at 31 December £7.8m £5.7m +36%
(1) Period end Annual Recurring Revenue ("ARR") is defined as Period exit rate
for recurring subscription and transaction revenue (exc SMS) plus any
professional services contracted for more than 12 months hence and secured new
wins, excluding any seasonal variations and lost contracts.
(2) Net Revenue Retention ("NRR") rate is defined as the improvement in
recurring revenue excluding SMS and new wins in the last 12 months.
(3) EBITDA has been adjusted for the exclusion of share-based payment charges
along with depreciation, amortisation, interest and tax from the measure of
profit, along with costs of the acquisition of Untie Nots in FY23
(4) Profit before tax has been adjusted for the exclusion of amortisation on
intangible assets recognised under IFRS 3 on the acquisition of Untie Nots and
share-based payments
(5) Adjusted net cash is defined as cash and cash equivalents less financial
liabilities and in H1 23 excludes the placing proceeds associated with the
acquisition of Untie Nots which were paid out following completion on 3
January 2023.
Positive customer momentum and strong international growth continues
· Revenue growth and EBITDA margins in line with our "Rule of 40+ Objective",
with revenue up 20% and an adjusted EBITDA margin of 24.4% (up 0.9ppt).
· Particularly strong international performance, with revenue from North America
increasing 21% and APAC increasing 39%, enhancing our presence in two of the
fastest growing loyalty markets.
· Group ARR increased by 26% to £35.4m, providing a strong basis for continued
expansion, driven by:
o The winning of two five-year contracts in North America, including the first
win for EagleAI, a three-year contract with an Australian retailer and a
three-year contract with The Ivy Collection in the UK;
o Ongoing deepening across our customer base, delivering strong levels of NRR at
120%, including expansion with Woolworths in Australia and Asda in the UK, the
further roll-out of the large US grocer won in partnership with Neptune Retail
Solutions, Untie Nots expansion with existing French customers, including
E.Leclerc and first successful cross sale to existing Eagle Eye customer,
Morrisons.
Innovation to capitalise on expanding market opportunity
· 'EagleAI - Personalised Promotions', the Group's new AI solution, launched at
the world's largest retail trade show, NRF in January 2024, with first two
customers secured and a growing pipeline of opportunities across existing and
new customers.
· Untie Nots' AI-Powered Challenges solution re-branded as 'EagleAI -
Personalised Challenges', bringing both AI-powered solutions under the EagleAI
brand
· Launched new Social and Behavioural Actions capability within AIR, enabling
retailers to award customers points for non-transactional behaviours and
deployed the ability to auto-exchange points into cash vouchers.
· New partnership agreement with commercetools to enable commercetools customers
to access the AIR platform on their eCommerce websites through a single,
ready-to-use connection.
Investment in our Purple People
· Roll out of the Group's Purple Playbook and bespoke training programmes to
deliver on the ambition to be the best company to work for.
· Moved up the rankings to 7th place in the UK's Best Companies to Work for and
named the 7th most innovative marketing technology company in the world in the
recent TMW 100 awards, where Eagle Eye also received the prestigious Judges
Pick accolade.
Confident in continued success
· Exited the Period with a sales pipeline 2.5x higher than a year ago, with the
two EagleAI solutions accounting for 30% of the pipeline.
· Trading since the Period end has continued well providing confidence in
delivering another year of profitable growth in line with the Board's
expectations.
Tim Mason, Chief Executive of Eagle Eye, said: "We have laid out our ambitions
and strategy to be a much bigger business, and these results demonstrate we
are progressing on that journey, thanks to our Purple People, powerful
platform, product innovation and growing roster of customer success stories
around the world.
"Our ability to deliver highly personalised messages to consumers at
unparalleled speed and scale, positions us at the centre of the innovations
taking place across the world of retail marketing. With a considerable and
growing pipeline, we remain confident in our ability to deliver on our
ambitions."
Enquiries:
Eagle Eye Solutions Group plc Tel: 0844 824 3686
Tim Mason, Chief Executive Officer
Lucy Sharman-Munday, Chief Financial Officer
Investec Bank plc (Nominated Adviser & Joint Broker) Tel: +44 20 7597 5970
David Anderson, Nick Prowting, St John Hunter
Shore Capital (Joint Broker) Tel: +44 20 7408 4090
Corporate Advisory: Daniel Bush, David Coaten, Lucy Bowden
Corporate Broking: Henry Willcocks
Alma Strategic Communications Tel: +44 20 3405 0205
Caroline Forde, Hannah Campbell, Kinvara Verdon
About Eagle Eye
Eagle Eye is a leading SaaS technology company enabling retail, travel and
hospitality brands to earn the loyalty of their end customers by powering
their real-time, omnichannel and personalised consumer marketing activities.
Eagle Eye AIR is a cloud-based platform, which provides the most flexible and
scalable loyalty and promotions capability in the world. More than 750 million
personalised offers are executed via the platform every week, and it currently
hosts over 200 million individual loyalty members for businesses all over the
world. We are trusted to deliver a secure service at hundreds of thousands of
physical POS destinations worldwide, enabling the real-time issuance and
redemption of promotional coupons, loyalty offers, gift cards, subscription
benefits and more.
The Eagle Eye AIR platform is currently powering loyalty and customer
engagement solutions for enterprise businesses all over the world, including
Asda, Tesco, Morrisons, Waitrose and John Lewis & Partners, JD Sports,
Pret a Manger, Loblaws, Southeastern Grocers, Giant Eagle, and the Woolworths
Group. In January 2024, Eagle Eye launched EagleAI, a next-generation data
science solution for personalisation, already being used by leading retailers
worldwide including Carrefour, Auchan and Pattison Food Group. Web
- www.eagleeye.com (http://www.eagleeye.com/)
Strategic Report
At our Capital Markets Event in February 2024, we announced our medium-term
ambition to achieve the next milestone of a £100m revenue and 25% EBITDA
margin business, built upon the strong foundations of the business and our
growth strategy to take advantage of the increasing demand for personalised
marketing at scale.
I am pleased to be reporting results today that demonstrate the continued
successful execution of that strategy, delivering revenue growth and EBITDA
margins that align with our "Rule of 40+ Objective", with revenue up 20% and
adjusted EBITDA margin up 0.9ppt to 24.4%. ARR grew 26% to £35.4m as we
continued to secure new customers in the UK and internationally, including two
five-year contracts in North America, and the first win for EagleAI, and
deepened our existing relationships, across all key geographies, supporting
the Group's continued strong level of NRR.
We now have a presence in all key loyalty market geographies, with North
America now accounting for approximately half of Group revenue. International
regions delivered the highest growth rates in the Period, with North America
up 21% and APAC up 39%, alongside 15% growth in our more established European
market. With strong and growing pipelines, these regions represent
considerable expansion opportunities for the Group.
The launch of EagleAI in January 2024 at NRF, the world's leading annual
retail event, held in New York, marked a significant step forward on our
journey to power the personalised marketing revolution, and is already driving
a considerable increase in our sales pipeline.
The strength of our offering, growing global customer base, exciting market
backdrop, outstanding team and high-quality business model provides the Board
with confidence in our ability to achieve our ambitions.
Growing market opportunity
In the fast-evolving landscape of global retail, establishing meaningful
digital connections with consumers has never been more crucial. Retailers
worldwide are evaluating the optimal ways to offer highly targeted,
personalised promotions and loyalty programmes to their customer base, in
response to changing consumer shopping behaviour, the inflationary crisis and
the advances in cloud-native technologies, data science and AI.
The loyalty market is currently estimated to be worth $10.2 billion worldwide
and is projected to reach $22.8 billion by 2028 1 , growing at a CAGR between
2023 and 2028 of 17.5%. The market is global and sector agnostic, providing a
considerable runway of growth for Eagle Eye.
Personalised loyalty in its broadest form is regarded as a highly effective
means for retailers to drive sales growth, with Boston Consulting Group
estimating that redirecting 25% of US mass promotional spending to
personalised offers would increase ROI by 200%. We estimate, however, that
even those retailers with the most advanced loyalty offerings are not even at
10% of their spend.
Added to this is the desire by retailers to take advantage of the advances in
AI. AI, however, needs data, and one of the most efficient methods for
retailers to gather customer data is through the implementation of loyalty
programmes, which themselves cannot run without the connection to consumers in
order to execute on the data. Eagle Eye's AIR platform powers loyalty, creates
connections and executes data - placing us right at the centre of this key
driver in the loyalty market. AI needs AIR.
Delivering against our growth strategy
Our next milestone is to become a £100m revenue business with a 25% EBITDA
margin and we believe that the five measures in our strategic framework,
alongside an expanding market and a great team, will enable us to achieve our
ambitions.
I am pleased to report good progress across all of the five aspects of our
growth strategy during the first half of the financial year:
1. "Win, Transact and Deepen"
- 'Win': bring more customers on to the Eagle Eye AIR platform;
- 'Transact': drive higher redemption and interaction volumes through the
platform; and
- 'Deepen': encourage our customers to adopt more of our product portfolio as
they become more adept at digital marketing.
Win
A key focus for Eagle Eye is to continue to 'Win' to drive growth and during
the Period we secured a good number of new 'wins', growing our presence in the
UK, Europe, Asia and North America. We now have eight customers in North
America reflecting the growing recognition within the region of the
importance of personalised digital loyalty programmes. During the Period, we
secured a five-year loyalty contract with a large pet supply company in the
region, to support their re-imagined loyalty programme and a five-year
contract with Pattison Food Group (PFG), Western Canada's largest grocery
retailer, for the use of Eagle Eye's AIR platform to enhance its loyalty
programme, More Rewards. This also includes the first win for EagleAI, which
will see PFG use Eagle Eye's new AI tools to generate and autonomously target
personalised offers for its 3.5 million More Rewards members.
A second win for the EagleAI solution was secured post Period end in France,
where Untie Nots extended their relationship with Carrefour through the
addition of EagleAI via Médiaperformances, the leader in shopper marketing in
France. Médiaperformances will use the AI based promotion picking
capability to offer relevant personalised offers that they have sourced to
Carrefour's customers.
Further wins include a three-year contract with an Australian retailer and a
three-year contract with The Ivy Collection in the UK, a popular group of
brasseries and cafes, to power its colleague discount scheme.
In the Period, we also signed a partnership agreement with commercetools, a
global leader in composable commerce headquartered in Germany, and together we
have now launched an integration-led partnership to enable commercetools
customers to access the power of the Eagle Eye AIR platform and its associated
Loyalty and Promotional capabilities on their eCommerce websites through a
single, ready-to-use connection.
Our high level of customer retention means that each new customer win
significantly adds to our growth prospects, through expanding the use of the
platform and the addition of new services.
Transact
Chargeable AIR redemption and interaction volumes, a key measure of usage of
Eagle Eye AIR, increased by 65% to 2.6bn (H1 2023: 1.6bn).
A significant contribution to this growth was generated by Asda following the
full launch of its loyalty programme in 2022, which in 2023 saw over 400m
redemptions throughout the year. We also benefitted from a full period impact
from Woolworths Group "Real-Time Loyalty" programme in Australia following its
go live in August 2022. Volumes also grew due to the further roll-out of the
large U.S. grocer won in partnership with Neptune Retail Solutions, which went
live in May 2022 and other general increases in the use of the platform by our
customers.
Deepen
The Group's continued strong performance has been supported by the deepening
of existing relationships, including expansion with Woolworths in Australia
and Asda in the UK.
We have also seen good levels of deepening for Untie Nots since joining the
Group in January 2023. Untie Nots has expanded with existing customers,
including E.Leclerc, who have signed a 12-month renewal for the Challenges
product, which is to be delivered through the Google Cloud Marketplace, and
secured entry into the UK market through a win with existing Eagle Eye
customer, Morrisons, benefitting from Eagle Eye's larger marketing reach and
relationships.
The success of this is reflected in the continued strong NRR of 120% (H1 FY23:
127%). Pleasingly, our long-term contract customer churn rate by value remains
very low at 1.2% (H1 2023: 0.0%), with good levels of renewals taking place.
2. Innovation
Innovation continues to lie at the heart of our proposition, investing in the
capabilities of Eagle Eye AIR to ensure that our technology continues to
enrich the lives of our customers, and their consumers. In addition to
EagleAI, we have continued to invest in innovation, to capitalise on the
expanding market opportunity.
EagleAI: newly launched Personalised Promotions solution
Our newly launched Personalised Promotions solution, powered by EagleAI, was
built on the capabilities brought into the Group with the acquisition of Untie
Nots. This offering uniquely automates the process of connecting and
structuring customer data across touchpoints, and then applies machine
learning and AI to create uniquely personalised offers for customers rather
than curating the 'best fit' set of offers based on a finite number available.
This approach sets a new global standard for retail personalisation, and
significantly expands our market opportunity as we can now deliver a more
packaged end-to-end personalisation use case for enterprise retailers
globally.
Following a successful 12-month integration period, the acquired AI-based
Personalised Challenges solution will also now be marketed under the EagleAI
brand, alongside Personalised Promotions, while still being sold as individual
products. Together, these two AI-based offerings accounted for 30% of the
Group's considerably increased sales pipeline at the end of the Period,
demonstrating the strong interest globally from retailers for AI.
Extending our functionality
A significant area of focus has been on launching our new Social and
Behavioural Actions capability which enables retailers to award customers
points for non-transactional behaviours including writing product reviews,
referring friends, downloading an app and much more. In addition to this, we
have deployed the ability to auto-exchange points into cash vouchers, have
enabled "pending points" which aims to reduce fraud on larger ticket items as
well as supporting multi-stage fulfilment of points which ensures that points
are only credited to customers as the items from their order are shipped to
the customer.
Speed and Scale
Investing in the overarching strength of the platform continues to remain a
priority, and this is governed by our customer promise and its pillars of
Security, Speed, Scale, Stability and Support. Transaction volumes going
through the platform continue to grow, with 23% growth in the year to December
2023 compared to 2022, therefore, our teams are continually focused on
delivering improvements to our API response times as these volumes grow.
In the Period, we also added additional sophistication to our Cloud-Based
Adjudication service, incorporating a number of new campaign qualification
rules, but reduced our POS Connect response times simultaneously.
3. International Growth
The benefits of our investment into international expansion are becoming
increasingly evident, with the new wins in North America, and the deepening of
our customer relationships in Europe during the Period.
We see opportunities for international expansion across all four regions:
- Within our established European markets, we are focused on the cross sale of
AIR into Untie Nots' customer base and Untie Nots' Challenges into the Eagle
Eye customer base.
- In the DACH region, where we are just at the start of our journey, we have
invested in a German speaking salesperson on the ground to build our pipeline.
- We are seeing strong momentum in North America, the largest promotions and
loyalty market in the world, and have a direct sales team of 9 as well as a
partnership with Neptune Retail Solutions to address the significant CPG
promotions market.
- In APAC, the fastest growing loyalty market in the world, we now have a good
presence in Australia, New Zealand, and Singapore.
In order to capitalise on this increased presence and opportunity, we
increased investment in marketing activities in the Period, attending more
trade shows than before, as it is becoming increasingly evident that they are
an effective way to meet new prospects as well as advance existing
discussions. For the first time we exhibited at Groceryshop in Las Vegas and
Tech for Retail in Paris, introducing Eagle Eye to Untie Nots' clients in
France as well as meeting potential French prospects. Post Period end, we
attended a number of high-profile retail events including FMI in January 2024,
increasing our profile in front of top North American retailers, and EuroCIS
in February 2024, meeting with leading German and European prospects. We
exhibited at NRF in January 2024, the world's largest retail trade show, where
we doubled the number of prospects from the previous year and launched
EagleAI. The Group is also planning to attend NRF Singapore for the first time
later this year.
Our increased international presence, expanded offering, growing international
direct sales and marketing activities, and continued support from our Google
partnership has contributed to an increase in the number of opportunities
entering our sales pipeline, the value of which is 2.5x larger than a year
ago.
4. "Better, Simpler, Cheaper"
While investing in innovation and growing the business, we simultaneously look
for inherent productivity and efficiencies coming from the scale of what we
do. We have developed a proven business model to grow our EBITDA margin whilst
also investing, as we 'Win', in sales & marketing and enhancements to the
product to generate new opportunities for growth. The success of this approach
can be seen in our growing EBITDA margin, which reached 24.4% in the Period.
Our people costs, net of capitalisation, represent 61% of the operating costs
of the business in the Year (H1 FY23: 55%) and we recognise they are our
biggest asset. We will see further cost base expansion in the second half,
largely as a result of salary increases, which is supported by our model.
We continue to follow our stated model of investing c.30p back into the growth
of the business for every £1 of new win (c.50p representing the cost of
running the business). In the Period, we invested 16% of revenue into product
development (H1 FY23: 15%) and 10% into sales and marketing activity (H1 FY23:
8%), delivering an overall Group EBITDA margin of 24.4%.
5. M&A
It has now been a year since the successful acquisition of Untie Nots, a
high-growth SaaS company that enables retailers to develop highly
personalised, profitable, and gamified promotions at scale, strengthening the
opportunity for both businesses by providing an additional channel for growth
and increased cross-sale opportunities, as well as bringing valuable AI
capabilities into the business.
The successful acquisition of Untie Nots demonstrates the benefits Eagle Eye
can bring to other businesses looking to scale and the Group continues to
assess the market for earnings enhancing acquisition opportunities as part of
its growth strategy. We have a proven, strong organic growth strategy that is
enabling us to deliver in line with our Rule of 40+ objective and any future
M&A can be considered as a lever for accelerating us towards our vision to
be a £100m revenue business plus 25% EBITDA margin.
Our People
Creating value for our customers sits at the heart of Eagle Eye, which we
believe is the foundation of our successful business. This value is created by
the efforts of our Purple People who are guided by the Golden Rule: to treat
people the way they want to be treated which is the guiding principle of
behind the Group's world-class culture and what we believe is the very heart
of personalisation. The strength of our Purple People and world class culture
was recognised during the Period, as we moved up the rankings to 7(th) place
in the UK's Best Companies to Work for and were named the 7(th) most
innovative marketing technology company in the world in the recent TMW 100
awards, where we also received the prestigious Judges Pick accolade. These
awards mark the continued successful embodiment of the Golden Rule as well as
our market-leading products which enable retailers to treat their customers as
they'd like to be treated through the power of personalisation. We continued
to invest in the development of our employees with the roll out of our Purple
Leaders bespoke training series globally during the Period and additional
training at individual team member level, aligned with our Purple Pathways
career development initiative. The Group's eNPS score, a metric assessing
employees' job satisfaction, remains high indicating strong employee
engagement as we focus on developing our people for the Group's next phase of
growth.
Our ambition is to be the best company to work for and we will continue to
focus on moving up the rankings as at Eagle Eye we strongly believe the best
company to work for is the best company to work with. During H2 we will focus
on rolling out our Purple Playbook training series which is designed to embed
our values further into the organisation to deliver on our ambition to be the
best company to work for.
As previously announced, Malcolm Wall, Chair of Eagle Eye, retired from his
position following the Group's AGM in November 2023. Malcolm has provided
significant guidance to the business since Eagle Eye joined AIM in 2014, and I
would like to thank him for his service and wish him all the very best for the
future. Non-Executive Director, Anne de Kerckhove, has since assumed the Chair
role, bringing a wealth of experience in the technology, media, and
entertainment industries and in leading and advising high growth,
international businesses. We are excited to have Anne on board, who has
already contributed positively since joining.
Financial Review
Key performance indicators H1 2024 H1 2023
Financial £m £m
Revenue 24.1 20.0
Recurring revenue
AIR licence revenue £7.1m 30% £7.4m 37%
AIR transaction revenue £8.4m 35% £7.0m 34%
Untie Nots licence & transaction revenue £2.1m 9% - -%
SMS transaction revenue £1.2m 4% £1.3m 7%
Total recurring revenue £18.8m 78% £15.7m 78%
Adjusted EBITDA(1) 5.9 4.7
Adjusted EBITDA(1) margin 24.4% 23.5%
Adjusted profit before tax(2) 2.6 1.7
Reported (loss)/profit before tax (0.4) 0.9
Adjusted net cash(3) 7.8 5.7
Cash and cash equivalents excluding FY23 net placing proceeds 9.0 7.7
Short term borrowings (1.2) (2.0)
Net placing proceeds - 6.7
Non-financial
Chargeable AIR redemption and interaction volumes 2.6bn 1.6bn
Long term contract customer churn by value 1.2% 0.0%
(1) Adjusted EBITDA excludes share-based payment charges along with
depreciation, amortisation, interest and tax from the measure of profit, along
with costs of the acquisition of Untie Nots SAS in FY23
(2) Profit before tax has been adjusted for the exclusion of amortisation on
intangible assets recognised under IFRS 3 on the acquisition of Untie Nots and
share-based payments
(3) Adjusted net cash is cash and cash equivalents less borrowings and in H1
23 excludes Placing proceeds associated with the acquisition of Untie Nots
which were paid out following completion on 3 January 2023
Revenue and gross profit
During the Period, the Group delivered continued revenue growth of 20% to
£24.1m (H1 2023: £20.0m), particularly driven by growth in international
revenues, including the impact of the acquisition of Untie Nots in 2023.
Revenue generated from recurring subscription fees and transactions over the
network represented 78% (H1 2023: 78%) of total revenue for the Period. This
recurring revenue increased by 20% to £18.8m (H1 2023: £15.7m) driven by
higher transactional volumes across all regions. In the North American
business, we saw growth with the major grocer won in association with Neptune.
In the APAC region, growth was primarily driven by the full Period effect of
transaction volume expansion of the Woolworths service. In EMEA, the continued
expansion of loyalty by Asda as well as new client wins such as Morrisons and
the acquisition of Untie Nots has had a positive effect on revenue for the
half year Period. Growth in EMEA was dampened due to a UK grocery customer
contract reaching the end of its lifecycle, which contributed to churn moving
from 0.0% to 1.2% in the Period, a figure which remains incredibly low.
Overall, AIR redemption and interaction volumes, a key measure of usage of the
AIR platform, increased 65% from 1.6bn to 2.6bn.
Professional services revenue increased by 21% to £5.2m (H1 2023: £4.3m),
driven by implementation support for the new customers secured in North
America and Woolworths in APAC as they further expand their offering.
In the commoditised SMS market, revenue fell to £1.2m (H1 2023: £1.3m) due
to continued inflationary cost headwinds in the SMS market and we anticipate
this decline in revenue will accelerate in H2.
Under IFRS 15, a SaaS business will typically recognise revenue (including
implementation revenue from professional services) over time. In some cases,
this means implementation revenue is now recognised over the period the
service is live. Therefore, during the period of implementation for a new
client, no revenue will be recognised, although directly attributable
associated costs are also deferred and spread over the same period, matching
revenue and costs on a client-by-client basis. Revenue from professional
services that has been deferred into future periods, but delivered and billed,
was £6.0m at 31 December 2023 (31 December 2022: £4.3m).
The Group's Annual Recurring Revenue ("ARR"), which is our period exit rate
for recurring subscription and transaction revenue (excluding SMS) plus any
professional services contracted for more than 12 months hence and secured new
wins, excluding any seasonal variations and lost contracts, increased by 26%
to £35.4m (H1 2023: £28.1m). The growth rate is ahead of the recurring
revenue growth rate of 23% due to the timing of growth in transactional
revenue volumes through the Period, in particular with Asda, Leclerc and the
US grocer won in association with Neptune.
The Group's Net Revenue Retention ("NRR") rate, which is the improvement in
recurring revenue excluding new wins in the last 12 months and SMS remains
strong at 120% (H1 2023: 127%) with the slight reduction reflecting the timing
of new wins. Long-term contract customer churn by value remains low at 1.2%
(H1 2023: 0.0%). This reflects the scale and breadth of our offering in
meeting our customers' needs.
Gross profit grew 23% to £23.1m (H1 2023: £18.8m) with gross margin
increasing to 96% (H1 2023: 94%). The change in gross margin reflects the
reduction of the lower margin SMS business to 5% of Group revenue (H1 2023:
7%). Cost of sales includes the cost of sending SMS messages, revenue share
agreements and outsourced bespoke development work. All internal resource
costs are recognised within operating costs, net of capitalised development
and contract costs.
Adjusted EBITDA and operating expenses
Adjusted EBITDA grew by 25% to £5.9m (H1 2023: £4.7m), due to revenue growth
and continued control over net operating expenses, which increased in line
with the increase in gross profit at 23%. To provide a better guide to the
underlying business performance, adjusted EBITDA excludes share-based payment
charges along with depreciation, amortisation, interest and tax from the
measure of profit. In H1 2023 it also excludes costs incurred in relation to
the acquisition of Untie Nots, completed on 3 January 2023.
The GAAP measure of operating loss before interest and tax was £(0.3)m (H1
2023: profit of £0.9m), the decrease reflecting amortisation of intangible
assets recognised under IFRS 3 on the acquisition of Untie Nots of £1.1m and
higher share-based payment charges of £1.8m (H1 2023: £0.9m) primarily due
to a higher payout following FY23 performance.
Adjusted operating expenses increased to £17.3m (H1 2023: £14.1m) as the
business has invested in line with our planned growth investment model.
Headcount has risen from an average of 222 in FY 2023 to 258 at 31 December
2023, resulting in an increase in net staff costs, which represent 61% of
adjusted operating costs (H1 2023: 55%) to £10.6m (H1 2023: £7.8m). The
increase also reflects the impact of annual pay awards and performance related
bonuses. IT infrastructure costs increased behind the 20% rate of recurring
revenue growth, up 10% to £4.6m (H1 2023: £4.1m) as we benefitted from
previous investment in the platform to enhance its speed, stability, and
security. Work continues to optimise our infrastructure spend. Other operating
costs (excluding those in H1 2023 related to the acquisition of Untie Nots),
which are either discretionary or are not correlated to changes in revenue,
were unchanged at £2.2m (H1 2023: £2.2m).
We have continued to invest in the Group's products where total spend in the
Period was £3.8m (H1 2023: £3.1m). Capitalised product development costs
were £1.1m (H1 2023: £1.1m) whilst amortisation of capitalised development
costs was £1.2m (H1 2023: £1.0m). Contract costs (including costs to obtain
contracts and contract fulfilment costs), recognised as assets under IFRS 15,
were £2.1m (H1 2023: £1.3m) and amortisation of contract costs was £1.7m
(H1 2023: £0.7m). This profile reflects the phasing of recognition of costs
as we approach contract renewals for some of our major customers.
The Group continues to manage the business with the aim of at least achieving
the Rule of 40+ (Revenue growth + Adjusted EBITDA margin = 40+), with an
expectation that the Adjusted EBITDA margin achieved for the Group will be at
least 20% on an annualised basis. In the Period our result versus this metric
was 45.
Earnings per share
Net finance expenses were £0.07m (H1 2023: £0.03m) reflecting the partial
utilisation of the Group's revolving credit facility, following the
acquisition of Untie Nots in H2 2023 and the cost of the debt acquired with
Untie Nots.
The tax charge of £0.1m (H1 2023: credit of £0.2m) reflects the improved
profitability of operations internationally, offset by an R&D tax credit
receivable in France. The Group reported a statutory loss after taxation of
£0.4m (H1 2023: profit of £1.0m). Adjusted basic earnings per share improved
to 8.63p (H1 2023: 7.17p) primarily reflecting the improvement in EBITDA.
Adjusted basic earnings per share excludes the cost of amortisation of
intangible assets recognised under IFRS 3 on the acquisition of Untie Nots and
share-based payment charges from the reported measure of earnings per share.
This measure provides a better guide to the underlying operating performance
of the business.
Statement of financial position
The Group had net assets of £25.1m at the end of the Period (June 2023:
£24.0m), with the increase driven by the operating performance of the
business, offset by the impact of payments for annual bonuses and commission
in H1 2024.
Cash and net debt
The Group ended the Period with adjusted net cash of £7.8m (H1 2023: £5.7m
excluding funds raised for the acquisition of Untie Nots). The business moved
to a cash outflow for the period of £0.9m excluding deferred consideration
paid on the acquisition of Untie Nots (H1 2023: inflow of £2.1m excluding
funds raised for the acquisition of Untie Nots), reflecting expected H1
working capital outflows (in particular in relation to performance related
bonuses and commission for FY 2023) and a move to a net tax payment as our
improved profitability in the UK means that a research and development tax
credit is no longer received in cash. We expect the business to be cash
generative in the second half of the year.
The Company has a £5.0m revolving credit facility with HSBC Innovation,
against which it had drawn down £1.0m at 31 December 2023. Subsequent to the
Period end this has been repaid in full and the Board does not expect any
further requirement to use the facility for normal operations.
In the light of the economic environment and our increasing global customer
base, we hedge elements of our foreign currency net receipts to ensure that
the Group is protected from significant and sudden adverse movements in
foreign currency exchange rates. There were no open hedges at 31 December 2023
(30 June 2023: none).
Outlook
We have entered the second half of the financial year with good momentum. Our
sales pipeline has increased considerably versus this time last year, with
EagleAI now accounting for 30% of the pipeline, demonstrating the strong
interest in the product. As the wins previously announced go live, we will see
continued growth in all areas of Win, Transact and Deepen revenue. Trading
since the Period end has continued well, providing confidence in the delivery
of another year of profitable growth, in line with the Board's expectations.
With a growing roster of customer success stories around the world, a
fantastic team and powerful offering, we are confident in our ability to
capture a growing share of the global loyalty market and deliver on our
ambitions.
Consolidated unaudited interim statement of total comprehensive income for the
six months ended 31 December 2023
Unaudited Unaudited Audited
6 months to 6 months to Year to
31 December 31 December 30 June
2023 2022 2023
Note £000 £000 £000
Continuing operations
Revenue 3 24,068 20,015 43,074
Cost of sales (974) (1,172) (2,091)
Gross profit 23,094 18,843 40,983
Operating expenses (23,491) (17,963) (41,725)
Other income 111 - 122
5 5,861 4,703 8,789
Adjusted EBITDA ((1) )
Acquisition costs - (1,068) (1,298)
Share-based payment charge (1,838) (888) (2,426)
Depreciation and amortisation (4,309) (1,867) (5,685)
Operating profit/(loss) (286) 880 (620)
Finance income 19 - 30
Finance expense (88) (25) (170)
(Loss)/profit before taxation (355) 855 (760)
Taxation (61) 165 1,948
(Loss)/profit after taxation for the financial period (416) 1,020 1,188
Foreign exchange adjustments (344) (237) (410)
(760) 783 778
Total comprehensive (loss)/profit attributable to the owners of the parent for
the financial period
Earnings per share
From continuing operations
Basic 4 (1.42)p 3.84p 4.25p
Diluted 4 (1.42)p 3.38p 3.79p
Adjusted basic ((2) ) 4 8.63p 7.17p 17.75p
Adjusted diluted ((2) ) 4 7.71p 6.33p 15.80p
((1)) Adjusted EBITDA excludes share-based payment charge, depreciation,
amortisation and the costs of the acquisition of Untie Nots from the measure
of profit
((2)) Adjusted earnings per share excludes amortisation of intangible assets
recognised under IFRS 3 on the acquisition of Untie Nots and share-based
payment charge from the measure of earnings per share
Consolidated unaudited interim statement of financial position as at 31
December 2023
Unaudited Unaudited Audited
31 December 31 December 30 June
2023 2022 2023
£000 £000 £000
Non-current assets
Intangible assets 18,816 6,753 19,458
Contract fulfilment costs 2,646 2,126 2,562
Property, plant and equipment 1,339 774 1,444
Deferred taxation 1,666 127 1,626
24,467 9,780 25,090
Current assets
Trade and other receivables 10,044 12,902 11,085
Current tax receivable 816 444 762
Cash and cash equivalents 9,003 14,409 10,615
19,863 27,755 22,462
Total assets 44,330 37,535 47,552
Current liabilities
Trade and other payables (9,934) (13,827) (14,252)
IFRS 15 deferred income (3,734) (2,228) (3,086)
Current tax payable (40) - (74)
Financial liabilities (1,125) (2,000) (1,102)
(18,055) (18,514)
(14,833)
Non-current liabilities
IFRS 15 deferred income (2,256) (2,032) (2,670)
Other payables (1,999) (436) (2,131)
Financial liabilities (114) - (197)
(4,369) (2,468) (4,998)
(19,202) (20,523) (23,512)
Total liabilities
Net assets 25,128 17,012 24,040
Equity attributable to owners of the parent
Share capital 294 278 293
Share premium 29,934 24,445 29,925
Merger reserve 3,278 3,278 3,278
Share option reserve 8,697 6,264 7,291
Retained losses (17,075) (17,253) (16,747)
Total equity 25,128 17,012 24,040
Consolidated unaudited interim statement of changes in equity for the six
months ended 31 December 2023
Share capital Share premium Merger reserve Share option reserve Retained Total
losses
£000 £000 £000 £000 £000 £000
264 17,685 3,278 5,549 (18,209) 8,567
Balance at 1 July 2022
Profit for the period - - - - 1,020 1,020
- - - - (237) (237)
Other comprehensive income
Foreign exchange adjustments
- - - - 783 783
Transactions with owners
Issue of share capital 13 6,702 - - - 6,715
Exercise of share options 1 58 - - - 59
Fair value of share options exercised in the period - - - (173) 173 -
Share-based payment charge - - - 888 - 888
6,760 - 173 7,662
14 715
Balance at 31 December 2022 278 24,445 3,278 6,264 (17,253) 17,012
- - - - 168 168
Profit for the period
- - - - (173) (173)
Other comprehensive income
Foreign exchange adjustments
- - - - (5) (5)
Transactions with owners
Issue of share capital 9 5,446 - - - 5,455
Issue costs - (285) - - - (285)
Exercise of share options 6 319 - - - 325
Fair value of share options exercised - - - (511) 511 -
Share-based payment charge - - - 1,538 - 1,538
15 5,480 - 1,027 7,033
511
293 29,925 3,278 7,291 (16,747) 24,040
Balance at 30 June 2023
Loss for the period - - - - (416) (416)
- - - - (344) (344)
Other comprehensive income
Foreign exchange adjustments
- - - - (760) (760)
Transactions with owners
Exercise of share options 1 9 - - - 10
Fair value of share options exercised in the period - - - (432) 432 -
Share-based payment charge - - - 1,838 - 1,838
9 - 432 1,848
1 1,406
Balance at 31 December 2023 294 29,934 3,278 8,697 (17,075) 25,128
Included in "retained losses" is a cumulative foreign exchange loss of
£68,000 (June 2023: £103,000).
Consolidated unaudited interim statement of cash flow for the six months ended
31 December 2023
Unaudited Unaudited Audited
6 months to 6 months to Year to
31 December 31 December 30 June
2023 2022 2023
£000 £000 £000
Cash flows from operating activities
(Loss)/profit before taxation (355) 855 (760)
Adjustments for:
Depreciation 336 187 487
Amortisation 3,974 1,680 5,198
Share-based payment charge 1,838 888 2,426
Finance income (19) - (30)
Finance expense 88 25 170
Decrease/(increase) in trade and other receivables 814 (3,049) (3)
(Decrease)/increase in trade and other payables (3,173) 4,144 3,850
Income tax paid (189) (56) (56)
Income tax received - 426 960
Net cash flows from operating activities 3,314 5,100 12,242
Cash flows from investing activities
Payments to acquire property, plant and equipment (128) (277) (171)
Payments to acquire intangible assets (3,467) (2,462) (5,444)
Acquisition of Untie Nots, net of cash and cash equivalents acquired (654) - (6,347)
(4,249) (2,739) (11,962)
Net cash flows used in investing activities
Cash flows from financing activities
Net proceeds from issue of equity 10 6,774 7,097
Proceeds from borrowings - 2,000 2,000
Repayment of borrowings (60) - (1,627)
Capital payments in respect of leases (262) (96) (217)
Interest paid in respect of leases (44) (11) (31)
Interest received 19 - 4
Interest paid (44) (14) (113)
(381) 8,653 7,113
Net cash flows from financing activities
(1,316) 11,014 7,393
Net (decrease)/increase in cash and cash equivalents in the period
Foreign exchange adjustments (296) (237) (410)
Cash and cash equivalents at beginning of period 10,615 3,632 3,632
9,003 14,409 10,615
Cash and cash equivalents at end of period
Notes to the consolidated unaudited interim financial statements
1. Basis of preparation
The Group's half-yearly financial information, which is unaudited,
consolidates the results of Eagle Eye Solutions Group plc and its subsidiary
undertakings up to 31 December 2023. The Group's accounting reference date is
30 June. Eagle Eye Solutions Group plc's shares are listed on AIM, the
market of that name operated by the London Stock Exchange.
The Company is a public limited liability company incorporated and domiciled
in England & Wales. The presentational and functional currency of the
Group is Sterling. Results in this consolidated financial information have
been prepared to the nearest £1,000.
Eagle Eye Solutions Group plc and its subsidiary undertakings have not applied
IAS 34, Interim Financial Reporting, which is not mandatory for UK AIM listed
groups, in the preparation of this half-yearly financial report.
The accounting policies used in the preparation of the financial information
for the six months ended 31 December 2023 are in accordance with the
recognition and measurement criteria of International Financial Reporting
Standards ('IFRS') as adopted by the European Union and are consistent with
those which will be adopted in the annual financial statements for the year
ending 30 June 2024.
The profit before interest, tax, depreciation, amortisation and share-based
payment charge is presented in the statement of total comprehensive income as
the Directors consider this performance measure provides a more accurate
indication of the underlying performance of the Group and is commonly used by
City analysts and investors.
While the financial information included has been prepared in accordance with
the recognition and measurement criteria of IFRS, as adopted by the European
Union, these interim financial statements do not contain sufficient
information to comply with IFRS.
The comparative financial information for the year ended 30 June 2023 has been
extracted from the annual financial statements of Eagle Eye Solutions Group
plc. These interim results for the period ended 31 December 2023, which are
not audited, do not comprise statutory accounts within the meaning of section
434 of the Companies Act 2006. The financial information does not therefore
include all of the information and disclosures required in the annual
financial statements.
Full audited accounts of the Group in respect of the year ended 30 June 2023,
which received an unqualified audit opinion and did not contain a statement
under section 498(2) or (3) of the Companies Act 2006, have been delivered to
the Registrar of Companies.
2. Going concern basis
As part of their going concern review the Directors have followed the
guidelines published by the Financial Reporting Council entitled "Guidance on
Risk Management and Internal Control and Related Financial and Business
Reporting''. The Directors have prepared detailed financial forecasts and cash
flows looking beyond 12 months from the date of this half-yearly financial
information. In developing these forecasts, the Directors have made
assumptions based upon their view of the current and future economic
conditions that will prevail over the forecast period.
On the basis of the above projections, the Directors are confident that the
Group has sufficient working capital to honour all of its obligations to
creditors as and when they fall due. In reaching this conclusion, the
Directors have considered the forecast cash headroom, the resources available
to the Group and the potential impact of changes in forecast growth and other
assumptions, including the potential to avoid or defer certain costs and to
reduce discretionary spend as mitigating actions in the event of such changes.
Accordingly, the Directors continue to adopt the going concern basis in
preparing this half-yearly financial information.
3. Segmental analysis
The Group is organised into one principal operating division for management
purposes. Revenue is analysed as follows:
Unaudited Unaudited Unaudited
6 months to 6 months to Year to
31 December 31 December 30 June
2023 2022 2023
£000 £000 £000
Development and set up fees 5,240 4,321 8,563
Subscription and transaction fees 18,828 15,694 34,511
24,068 20,015 43,074
Unaudited Unaudited Unaudited
6 months to 6 months to Year to
31 December 31 December 30 June
2023 2022 2023
£000 £000 £000
AIR revenue 20,803 18,697 38,440
Untie Nots revenue 2,109 - 2,212
Messaging revenue 1,156 1,318 2,422
24,068 20,015 43,074
The majority of the Group's revenue comes from services which are transferred
over time.
4. Earnings per share
The calculation of basic earnings per share is based on the result
attributable to ordinary shareholders divided by the weighted average number
of ordinary shares in issue during the period. The calculation of diluted
earnings per share is based on the result attributable to ordinary
shareholders divided by the weighted average number of ordinary shares in
issue during the period, diluted for the effect of options being converted to
ordinary shares. The adjusted measures exclude the cost of amortisation of
intangible assets recognised under IFRS 3 on the acquisition of Untie Nots and
share-based payment charges from the reported basic and diluted measures of
earnings per share. Basic and diluted earnings per share from continuing
operations are calculated as follows:
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
H1 2024 H1 2024 H1 2024 H1 2023 H1 2023 H1 2023
Earnings (Loss)/ Profit Weighted average number of ordinary shares Earnings Profit Weighted average number of ordinary shares
per share £000 per share £000
pence pence
Basic (loss)/ earnings per share (1.42) (416) 29,281,665 3.84 1,020 26,595,355
Diluted (loss)/ earnings per share (1.42) (416) 32,792,651 3.38 1,020 30,146,994
Adjusted basic earnings per share 8.63 2,528 29,281,665 7.17 1,908 26,595,355
Adjusted diluted earnings per share 7.71 2,528 32,792,651 6.33 1,908 30,146,994
5. Alternative performance
measure
Adjusted EBITDA is a key performance measure for the Group and is derived as
follows:
Unaudited Unaudited Unaudited Year to
6 months to 6 months to 31 December 30 June
31 December 2022 2023
2023
£000 £000 £000
(Loss)/profit before taxation (355) 855 (760)
Add back:
Costs associated with acquisition of Untie Nots - 1,068 1,298
Finance income and expense 69 25 140
Share-based payments 1,838 888 2,426
Depreciation 336 187 487
Amortisation of intangible assets recognised under IFRS 3 on the acquisition 1,106 - 1,344
of Untie Nots
Other amortisation 2,867 1,680 3,854
Adjusted EBITDA
5,861 4,703 8,789
EBITDA has been adjusted to exclude share-based payment charges along with
depreciation, amortisation, interest and tax from the measure of profit, along
with costs of the acquisition of Untie Nots in FY23.
6. Adjusted net cash
30 June 2023 Cash flow Foreign exchange adjustments 31 December 2023
£000 £000 £000 £000
Cash and cash equivalents 10,615 (1,316) (296) 9,003
Financial liabilities (1,299) 60 - (1,239)
(1,256) (296)
Adjusted net cash 9,316 7,764
7. Availability of this Interim Announcement
Copies of this announcement are available on the Company's website,
www.eagleeye.com (http://www.eagleeye.com) .
1 Markets and Markets, Loyalty management market - Global forecast to 2028
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