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essensys CEO hails year of ‘resilience’ as expansion ramps up

Driven by strong growth in its US business, essensys has reported full year results that CEO Mark Furness said demonstrates the “resilience” of its business model.

The AIM-listed flex office software provider’s revenue was down 2% to £22m in the year to 31 July 2021, largely due to a slowdown in the UK – where revenue fell 13% – and a weakening of the dollar.

Excluding currency fluctuations, revenue was up 2% largely due to essensys’ growing US business. The company’s performance was strongest in the US where turnover rose 10% to £11.3m, overtaking the UK. Recurring US revenue was up 20% on a constant currency basis.

Customer demand grew throughout the last 12 months, and essensys ended the year with 474 live sites through its Connect management product – up from 419. A further 33 sites have been contracted, including its first in Asia Pacific.

Furness told PlaceTech: “FY21 was all about the resilience of our business and our business model, the structural market growth drivers that we see really begin to accelerate.”

He said the outlook for the US market is “really exciting”, particularly given its size. While the company expects growth to return to its UK business as people return to the office, the US market opportunity is 17 times larger than the UK’s, he said.

Expansion into APAC – essensys recently appointed Eric Schaffer as CEO of the region – combined with a push into continental Europe and further growth in the US means a slowdown in the UK will be less of concern in the future.

“Predominantly for the next 24 months, the majority of our revenues will be driven from North America, with a building contribution from mainland Europe and APAC behind that,” Furness said.

“Amazingly interesting time”

Shrugging off a dip in overall revenues – which was in line with expectations because of the pandemic, according to the results – Furness pointed to the rise in turnover on a constant currency basis and its recent £33.2m fundraise as evidence of the growth opportunity.

He said that the past year and a half have been an “amazingly interesting time for real estate” as the move away from traditional, long-term leases accelerated.

As a result, essensys’ fundraise, which will fuel its product development and geographical expansion, was a strategic move to get a head start.

Furness said: “It was clear through the pandemic that this would accelerate the adoption of flex globally, and therefore, we needed – and we had the opportunity – to get ahead of the market growth.”

Future growth prospects

Following its fundraise, essensys is now targeting annual recurring revenue of £68m by 2025, or about an 8% market share.

Longer term, the company wants to hit a market share of 17% by 2030 – 18% in North America, 10% in APAC and 22% in the UK and Europe.

The potential scale of those markets is alluring: Furness estimated that with 1.7bn sq ft of office space in the major APAC markets, the region presents a $60m opportunity for annual revenue. That calculation assumes essensys reaches a 10% market share and that 30% of offices eventually become flexible spaces.

In the meantime, the next step for essensys is announcing its European CEO, who is expected to start in February 2022. Although Furness declined to reveal who it is, he said people will be “astonished” at the quality of talent the company has managed to attract to the business.

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