REG - Engage XR Holdings - Interim Results
11/09/2023 07:00
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RNS Number : 9162L Engage XR Holdings PLC 11 September 2023
11 September 2023
ENGAGE XR Holdings Plc
("ENGAGE XR", the "Company", or the "Group")
Unaudited Interim Results
ENGAGE XR Holdings Plc, a leading Metaverse / Spatial Computing technology
company, is pleased to announce its unaudited interim results for the six
months ended 30 June 2023.
Financial Highlights:
· Group revenue has continued to grow with H1 2023 revenue of c.€2.1
million, an increase of 18% (H1 2022: €1.8 million)
· ENGAGE revenue is the main driver of the increase with revenue in the
period of c€1.9 million, up 30% (H1 2022: €1.5m)
· ENGAGE revenue comprises 91% of H1 2023 total revenue (H1 2022: 83%)
· Gross margin in H1 2023 was 93%, up 12% (H1 2022: 81%)
· EBITDA loss was €2.1m (H1 2022: loss of €2.8m), with Group
administrative expenses being largely salary and associated costs
· Loss before tax was €2.2m, in line with expectations, compared to a
loss in H1 2022 of €2.8m
· Cash balance at 30 June 2023 of €9.4m (30 June 2022: €4.9m). The
Group's cash position was significantly strengthened in the period following
an oversubscribed €10.5 million (€9.9 million net of expenses) fundraise
in February 2023
Operational Highlights:
· The Group continues to gain traction in the US. 54% of Group revenue
in H1 2023 has been derived from North America compared to 34% in H1 FY22 and
30% for FY22, following the deployment of the US sales team during 2022
· There has been a steady increase in the client base with more than
220 active Enterprise and Education customers as at 30 June 2023 (31 December
2022: 190)
· Ground-breaking concert hosted in ENGAGE in March 2023 by the
renowned musician, Norman Cook, aka Fatboy Slim (Highlights Video
(https://youtu.be/27Ska8oQebY) )
· Following the launch of Lenovo™'s new ThinkReality™ VRX
all-in-one virtual reality (VR) headset in June 2023, the Group expects the
benefits of its Lenovo hardware partnership to start being seen in early Q4
2023
Post-period end Highlights:
· Continued momentum being seen - June was our strongest ever month for
revenue generation, with July and August generating a combined €1m in
revenue.
· 5,400 user K-12 education license deal signed with a US state for a
pilot programme. valued in excess of €300k
· Successful employee onboarding event run with one of the world's
largest banks
David Whelan, CEO of ENGAGE XR, said: "ENGAGE's client list, user numbers and
revenue continue to grow. Given the sharp global decline in tech spend, this
performance is an excellent endorsement of the value that clients think that
ENGAGE brings to their businesses.
"Although there has been much said in the press about the push for people to
get back into the office, we are not seeing this trend reflected in our
figures. Remote hybrid work is here to stay even if its two or three days a
week for most. Quality talent want flexibility in terms of their work/life
balance. We don't see this changing in the future but foresee a push against
constant video calls. This is where a platform like ENGAGE steps in,
especially for daily meetings such as standups and remote classes.
"The release and planned release of new VR headsets from Meta, Lenovo, HTC and
Apple will ensure a steady stream of new leads coming into our inbox as more
companies look at immersive communications, spatial computing and metaverse
services for the first time."
Investor Meet Company Presentation
CEO David Whelan and CFO Séamus Larrissey will provide a live presentation
relating to the Group's interim results via the Investor Meet Company platform
on 11 September 2023 at 09:00am (BST).
The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event via your Investor Meet Company dashboard up until
9:00am the day before the meeting or at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and add to meet ENGAGE
XR Holdings Plc via:
https://www.investormeetcompany.com/engage-xr-holdings-plc/register-investor
(https://www.investormeetcompany.com/engage-xr-holdings-plc/register-investor)
This announcement contains inside information for the purposes of the UK
Market Abuse Regulation and the Directors of the Company are responsible for
the release of this announcement.
- Ends -
For further information, please contact:
ENGAGE XR Holdings Plc Tel: +353 87 665 6708
David Whelan, CEO info@engagexr.co
Séamus Larrissey, CFO
Sandra Whelan, COO
finnCap Ltd (Nominated Adviser & Joint Broker) Tel: +44 (0) 20 7220 0500
Marc Milmo / Seamus Fricker / (Corporate finance)
Sunila de Silva / Harriet Ward (ECM)
Shard Capital Partners LLP (Joint Broker) Tel: +44 (0) 20 7186 9952
Damon Heath / Erik Woolgar
SEC Newgate (Financial Communications) Tel: +44 (0)7540 106 366
Robin Tozer / Tom Carnegie / Naz Zandi engage@secnewgate.co.uk
About ENGAGE XR
ENGAGE XR Holdings plc (AIM: EXR) is a leading Metaverse / Spatial Computing
technology company focused on becoming a leading global provider of virtual
communications solutions through its new fully featured corporate metaverse,
ENGAGE Link. A demonstration can be viewed here: ENGAGE The Spatial Computing
Platform for Enterprise (https://youtu.be/2OHtimtFY3M?si=qe-lcxvau1sPjbk8)
The Company also has a proprietary software platform, ENGAGE. ENGAGE provides
users with a platform for creating, sharing, and delivering VR content for
education, training, and online events through its three solutions: Virtual
Campus, Virtual Office, and Virtual Events.
For further information, please visit: www.engagexrholdings.com (LinkedIn:
@Engage XR Holdings plc Twitter: @engage_xr)
Chief Executive's Review
HY Review
The first half has been in line with our expectations with the number of
clients and revenue increasing steadily. The period finished strongly with
June being our strongest ever month for revenue generation with multiple new
clients onboarded onto the platform. We have continued to see good growth in
new clients using ENGAGE and this growth has helped to increase ENGAGE revenue
by just over 30% versus the same period last year. Platform sales now make up
91% of total Group revenue.
We have secured new funding, created new partnerships, and have more ENGAGE
product lines, such as Athena A.I, coming out later this year. We have
increased our customer facing sales and support teams in the US while reducing
spending in most areas of the business helping us towards our goal of reaching
profitability in a shorter time frame than previously envisaged.
Post-period Developments
Since the period-end, we have seen growth in both the education and enterprise
sectors, with a large US state purchasing over 5,000 educational licenses from
ENGAGE to run a pilot programme. Furthermore, one of the world's largest banks
has been using the platform extensively for onboarding new employees.
Lenovo
In September 2022, ENGAGE and Lenovo signed an agreement for ENGAGE to be part
of the new Lenovo VRX headsets, and for the Group and Lenovo to collaborate
for ENGAGE to be pitched to Lenovo's largest clients for use. The Lenovo VRX
was officially launched in June 2023, and we expect to see some early revenue
from this partnership during Q4 as the Lenovo headsets starts to be sold into
Lenovo's enterprise customers. Lenovo has an extensive sales network with
which the ENGAGE team will be working with over the coming months. Through
this partnership, we look forward to building relationships with some of the
world's largest brands and educational institutions.
Collaboration with Meta
The team at Meta have also been extremely active, collaborating with the
ENGAGE team over the last few months with a focus on growing "Meta for
Business" opportunities. Meta is set to release a new VR/AR device called the
Quest 3. This device is the successor to the popular Quest 2 headset, which
has sold over 20 million units. The release date of Quest 3 has not been
announced. However, we have been working with Meta to ensure ENGAGE will work
on this new device so that ENGAGE users will be able to utilise its new
features.
This new device is more focused on Augmented Reality (AR). AR is the ability
to see the real world and overlay it with digital objects. An example of AR
passthrough can be seen via an updated trailer for ENGAGE: ENGAGE The
Spatial Computing Platform for Enterprise
(https://youtu.be/2OHtimtFY3M?si=qe-lcxvau1sPjbk8)
The Meta for Business team and ENGAGE have already successfully worked
together on a couple of larger deals this year, using their older Quest 2
devices. We expect this working partnership to grow with the release of the
Meta Quest 3 in the coming months.
Apple Vision Pro
The Apple Vision Pro (https://www.apple.com/apple-vision-pro/) was announced
on the 5 June 2023, and will be Apple's first new product line in many years.
The device has impressive specifications and we expect ENGAGE to be able to
fully support the device when it arrives next year. Similar to the Quest 3,
this device is focused on passthrough AR which we believe is the direction
most leading headset manufacturers will be taking. The Company is already
undertaking development work to ensure that ENGAGE can utilise this new device
to its maximum potential when it is officially released.
We expect the Vision Pro to sell out when it hits stores, however it is not
priced for consumers, its aimed at developers like the ENGAGE team, enterprise
users and prosumers who can build applications and be ready for a more
consumer friendly device in the future. This is the template for Apple
hardware releases, and we expect it to mark a significant shift in global
adoption of immersive technologies.
ENGAGE Link
ENGAGE Link, which is our Metaverse / Virtual Worlds service, was released
late last year. It has already attracted major corporations to build their own
personal worlds inside, such as HSBC and 3M. As these are vast worlds,
ENGAGE Link is typically busy when virtual events such as the KIA car launch
or the Fatboy Slim VR concert
(https://www.forbes.com/sites/charliefink/2023/04/03/fatboy-slims-eat-sleep-vr-repeat-a-jaw-dropping-musical-journey/)
we hosted are on. What is perhaps surprising is the high demand for private
virtual worlds for internal use and demos by companies which are not
accessible to the public. This side of our metaverse offering is growing
rapidly although many clients are still creating public spaces including HTC,
Pfizer, KPMG, Lenovo, MTN, Adtalem, Pearson, St James' Place, BSI, Optima
Domi, Lobaki, Victory XR, University of Miami, and Stanford University.
Athena A.I
In January 2023, we announced the launch of Athena A.I., our artificial
intelligence assistant that integrates into ENGAGE. Using Open AI programs,
Athena A.I. can not only interact with users verbally she can also interact
with core ENGAGE systems, as well as generate from simple voice commands,
images and skyboxes, which is imagery from a photo, texture, or rendered
artwork. The skybox is an essential component in virtual reality design - a
panoramic wrapper that projects an entire background scene onto the client's
interface.
Our development team continues to enhance Athena A.I's capabilities but this
program has enhanced our product offering and Athena A.I is already extremely
smart, rapidly creating training scenarios from simple verbal prompts. You can
view this raw captured video from inside a Meta Quest Pro interacting directly
with Athena here (https://youtu.be/kY5r6jB9vDI?si=DySlTCMxLc7A9Tzy)
None of this video was scripted and the topic was chosen at random. Athena
A.I has been designed as a solution for our enterprise clients to be used for
employee onboarding, sales calls, education, training and much more. We will
be updating Athena A.I extensively over the coming months.
Outlook
We are optimistic about the second half where traditionally Q4 has been our
busiest growth period when most contract renewals take place. We are
encouraged by the pipeline with H2 potentially delivering some interesting
additional revenue opportunities for ENGAGE from the work we are doing with
Meta and Lenovo.
The immersive tech industry is starting to mature. The step away from
immersive technology being geared solely towards gaming applications is
evident with Apple, Lenovo and Meta all looking to expand the application of
their respective headsets to include enterprise and collaboration, which in
turn will generate opportunities for ENGAGE.
We look to the next six months with optimism and remain hungry to deliver
returns to our investors by delivering long term sustained growth.
David Whelan
Chief Executive Officer
11 September 2023
Financial Review
Revenue for the half year is up 18% on the prior half year to €2,075k (H1
2022: €1,757k), driven by a continued acceleration in revenue from the
ENGAGE platform.
ENGAGE revenue as a percentage of total revenue grew significantly in the
period and comprised 91% of total revenue in the period (H1 2022: 83%).
EBITDA loss was €2.1m (H1 2022: loss of €2.8m). The primary cost driver
for the EBITDA loss is salary and associated costs, currently approximately
€0.5m per month.
Loss before tax was €2.2m, in line with management expectations, compared to
a loss in the prior year of €2.8m.
The combination of operating cashflows and capital expenditure in H1 2023 were
€2.8m compared to €2.9m in H1 2022. The cash balance at 30 June 2023 was
€9.4m (30 June 2022: €4.9m). The Group's cash position was significantly
strengthened in the period following an oversubscribed €10.5 million (€9.9
million net of expenses) fundraise in February 2023. The management team are
fully focused on managing the cash position of the Group and remain very cost
conscious as the Group moves towards cash flow profitability in the future.
Séamus Larrissey
Chief Financial Officer
11 September 2023
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2023
Unaudited Unaudited
Six months Six months
ended ended
Note 30 June 2023 30 June 2022
€ €
Continuing Operations
Revenue 2,075,015 1,757,438
Cost of Sales (139,080) (337,244)
Gross Profit 1,935,935 1,420,194
Administrative Expenses (4,122,701) (4,200,985)
Operating Loss (2,186,766) (2,780,791)
Finance Costs (876) (17,524)
Loss before Income Tax (2,187,642) (2,798,315)
Income Tax Credit - -
Loss for the Year from continuing operations (2,187,642) (2,798,315)
Loss per share
Basic from continuing operations 4 (0.005) (0.010)
Consolidated Statement of Financial Position
As at 30 June 2023
Unaudited Unaudited Audited
as at as at as at
30 June 2023 30 June 2022 31 Dec 2022
Note € € €
Non-Current Assets
Property, Plant & Equipment 103,976 105,228 96,085
Intangible Assets 2 12,298 206,841 39,492
116,274 312,069 135,577
Current Assets
Trade and other receivables 1,444,904 1,087,352 1,365,982
Cash and short-term deposit 9,446,893 4,900,780 2,209,169
10,891,797 5,988,132 3,575,151
Total Assets 11,008,071 6,300,201 3,710,728
Equity and Liabilities
Equity Attributable to Shareholders
Issued share capital 5 524,826 290,451 290,451
Share premium 5 43,910,062 33,503,300 33,503,300
Other reserves (12,346,163) (11,764,028) (11,752,741)
Retained earnings (21,748,294) (16,354,082) (19,560,652)
Total Equity 10,340,431 5,675,641 2,480,358
Non-Current Liabilities
Operating lease liabilities 19,076 3,582 -
Current Liabilities
Trade and other payables 634,080 612,378 1,222,488
Operating lease liabilities 14,484 8,600 7,882
648,564 620,978 1,230,370
Total Liabilities 667,640 624,560 1,230,370
Total Equity and Liabilities 11,008,071 6,300,201 3,710,728
Consolidated Statement of Changes in Equity
At 30 June 2023
Attributable to Equity Shareholders
Share Share Other Retained
Capital Premium Reserves Earnings Total
€ € € € €
Balance at 1 January 2022 290,451 33,503,300 (11,775,474) (13,555,767) 8,462,510
Loss for the period - - - (2,798,315) (2,798,315)
Share option expense - - 11,446 - 11,446
Balance at 30 June 2022 290,451 33,503,300 (11,764,028) (16,354,082) 5,675,641
Attributable to Equity Shareholders
Share Share Other Retained
Capital Premium Reserves Earnings Total
€ € € € €
Balance at 1 January 2023 290,451 33,503,300 (11,752,741) (19,560,652) 2,480,358
Loss for the period - - - (2,187,642) (2,187,642)
Issue of ordinary shares 234,375 10,406,762 - - 10,641,137
Issue costs - - (601,361) - (601,361)
Share option expense - - 7,939 - 7,939
Balance at 30 June 2023 524,826 43,910,062 (12,346,163) (21,748,294) 10,340,431
Consolidated Statement of Cash Flows
For six month period ended 30 June 2023
Unaudited Unaudited
Six months Six months
ended ended
30 June 30 June
2023 2022
Note € €
Cash Flows from Operating Activities
Loss before income tax (2,187,642) (2,798,315)
Adjustments to reconcile loss before tax to net cash flows:
Depreciation 40,246 34,730
Amortisation 27,194 219,613
Finance Costs 876 17,524
Share Option Expense 7,939 11,446
Movement in Trade & Other Receivables (78,922) (441,462)
Movement in Trade & Other Payables (588,408) 130,802
(2,778,717) (2,825,662)
Bank interest & other charges paid (876) (17,524)
Net cash used in operating activities (2,779,593) (2,843,186)
Cash Flows from Investing Activities
Purchases of property, plant & equipment (15,435) (37,883)
Net cash used in investing activities (15,435) (37,883)
Cash Flows from Financing Activities
Proceeds from issuance of ordinary shares 5 10,039,778 -
Payment of operating lease liabilities (7,026) (8,211)
Net cash generated/(used) from financing activities 10,032,752 (8,211)
Net increase/(decrease) in cash and cash equivalents 7,237,724 (2,889,280)
Cash and cash equivalents at beginning of period 2,209,169 7,790,060
Cash and cash equivalents at the end of period 9,446,893 4,900,780
Notes to the Interim Report
1. Basis of Preparation
The consolidated interim financial statements have been prepared in accordance
with the recognition and measurement principles of International Financial
Reporting Standards as endorsed by the European Union ("IFRS") and expected to
be effective at the year-end of 31 December 2023.
The accounting policies are unchanged from the financial statements for the
year ended 31 December 2022. The interim financial statements are unaudited
and do not constitute statutory accounts within the meaning of Section 434 of
the Companies Act 2006. Statutory accounts for the year ended 31 December
2022, prepared in accordance with IFRS, have been filed with the Companies
Registration Office. The Auditors' Report on these accounts was unqualified.
The consolidated interim financial statements are for the 6 months to 30 June
2023.
The interim consolidated financial information does not include all the
information and disclosures required in the annual financial statements and
should be read in conjunction with the Group's annual financial statements for
the year ended 31 December 2022, which were prepared in accordance with IFRS's
as adopted by the European Union.
2. Summary of Significant Accounting Policies
New standards, interpretations and amendments adopted by the Company
No new standards or amendments have been adopted for the first time in these
financial statements:
Intangible Assets
Research costs are expensed as they are incurred. Development costs that are
directly attributable to the design and testing of identifiable and unique
commercial software controlled by the Company are recognised as intangible
assets when the following criteria are met:
- it is technically feasible to complete the software
product so that it will be available for use and sale;
- management intends to complete the software product and
use or sell it;
- there is an ability to use or sell the software product;
- it can be demonstrated how the software product will
generate future economic benefits;
- adequate technical, financial, and other resources to
complete the development and use or
- sell the software product are available; and
- the expenditure attributable to the software product
during its development can be reliably
- measured.
Directly attributable costs that are capitalised as part of the software
product include the software development employee costs and subcontracted
development costs.
Other development expenditure that does not meet these criteria is recognised
as an expense as incurred.
Development costs previously recognised as an expense are not recognised as an
asset in a subsequent period.
Computer software development costs recognised as assets are amortised over
their estimated useful lives, which do not exceed 3 years and commences after
the development is complete and the asset is available for use. Intangible
assets are amortised over their estimated useful lives based on the pattern of
consumption of the underlying economic benefits. Amortisation is included in
'Administrative Expenses'.
2. Intangible Assets
Software
in development
Costs Total
€ €
Cost or Valuation
At 1 January 2023 2,136,231 2,136,231
Additions - -
At 30 June 2023 - -
Amortisation
At 1 January 2023 2,096,739 2,096,739
Charge 27,194 27,194
At 30 June 2023 2,123,933 2,123,933
At 30 June 2023 12,298 12,298
At 31 December 2022 39,492 39,492
Software
in development Total
Costs €
€
Cost or Valuation
At 1 January 2022 2,136,231 2,136,231
Additions - -
At 30 June 2022 2,136,231 2,136,231
Amortisation
At 1 January 2022 1,709,777 1,709,777
Charge 219,613 219,613
At 30 June 2022 1,929,390 1,929,390
At 30 June 2022 206,841 206,841
At 31 December 2021 426,454 426,454
The software being developed relates to the creation of three virtual reality
experiences and an online virtual learning and corporate training platform.
ENGAGE is an online virtual learning and corporate training platform currently
in development by the Company. A desktop version was released in December 2018
and the mobile version was released in December 2019. Amortisation commenced
when the mobile version launched.
Amortisation expense of € 27,194 (H1 2022: €219,613) has been charged in
'Administrative Expenses'. An impairment review was carried out at the
balance sheet date. No impairment arose.
3. Share Based Payments
Share-based payment schemes with employees
There were no employee options granted during 2023 (2022: 285,714). Options
granted in 2022 were at an exercise price of €0.175 per share and these vest
subject to continued service by the employee over a period of 3 years. Options
expire at the end of a period of 7 years from the Grant Date or on the date on
which the option holder ceases to be an employee.
Share-based payment expense with Director
There were no share options granted during 2023 (2022: Nil) to Directors.
The movement in employee share options and weighted average exercise prices
are as follows for the reporting periods presented:
2018 Scheme
Half-Year Half-Year 2022
2023
At 1 January 4,404,127 4,118,143
Granted during period - 285,714
Forfeited during period (248,148) -
At 30 June 4,155,979 4,404,127
Options outstanding at 30 June
Number of shares 4,155,979 4,404,127
Weighted average remaining contractual life 1.10 1.71
Weighted average exercise price per share €0.041 €0.047
Range of exercise price €0.0001 - €0.20 €0.0001 - €0.20
Exercisable at 30 June
Number of shares 2,670,265 2,718,413
Weighted average exercise price per share €0.029 €0.031
The expense recognised in respect of employee share based payment expense and
credited to the share based payment reserve in equity was €7,939 (2022:
€11,446)
4. Loss per share
Unaudited Unaudited
Six months Six months
ended ended
30 June 30 June
2023 2022
Loss attributable to equity holders of the Group: € €
Continuing Operations (2,187,642) (2,798,315)
Weighted average number of shares for Basic EPS 446,584,479 290,101,146
Basic loss per share from continuing operations (0.005) (0.010)
5. Share Capital
Number of shares Ordinary Share Total
shares premium
€ € €
At 1 January 2023 290,451,146 290,451 33,503,300 33,793,751
Ordinary Shares Issued 234,375,000 234,375 10,406,762 10,641,137
At 30 June 2023 524,826,146 524,826 43,910,062 44,434,888
Forward-Looking Statements
Certain statements made in this announcement are forward-looking statements.
These forward-looking statements are not historical facts but rather are based
on the Company's current expectations, estimates, and projections about its
industry; its beliefs; and assumptions. Words such as 'anticipates,'
'expects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' and similar
expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to known
and unknown risks, uncertainties, and other factors, some of which are beyond
the Company's control, are difficult to predict, and could cause actual
results to differ materially from those expressed or forecasted in the
forward-looking statements.
The Company cautions security holders and prospective security holders not to
place undue reliance on these forward-looking statements, which reflect the
view of the Company only as of the date of this announcement. The
forward-looking statements made in this announcement relate only to events as
of the date on which the statements are made. The Company will not undertake
any obligation to release publicly any revisions or updates to these
forward-looking statements to reflect events, circumstances, or unanticipated
events occurring after the date of this announcement except as required by law
or by any appropriate regulatory authority.
- ENDS -
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