Essensys shifts from ‘aggressive’ growth to pursue profits
The flex office software provider has tempered its revenue targets as it looks to return to profitability.
Group revenue for the year to July 2022 was up 6% to £23.3m, in line with expectations and driven largely by growth in the US market. However, losses rose from £2.9m to £11.1m in that period.
essensys said that the expansion of its go-to-market activities was delayed in the first half of its financial year, and that Covid restrictions slowed sales cycles, team expansion and the return to the office.
But the company sees the shift towards hybrid working as an opportunity, adding that momentum is building around the world. essensys signed up 18 new customers this year, including “large landlords” in Sweden and the US.
In North America, where the number of sites using essensys software rose 5% and recurring revenue rose 23%, the company believes there is a £1.7bn addressable market.
In a statement, Mark Furness, CEO of essensys, said: “Whilst our long-term ambition is unchanged, we have moderated our growth targets and adapted our strategy and investment approach to focus on our return to profitability.”
essensys will focus on “high-value strategic customers” that can deliver at least 20 sites or $1m of annual recurring revenue.
This has meant some short-term pain, particularly in the UK, where revenue is down 8% partly due to the churn of “low-value” legacy customers and the unexpected insolvency of a long-standing customer – which essensys had previously reported.
Overall, the number of sites in the UK and Europe fell 17%.
“Going into FY23 we expect less volatility and reduced churn as the improvement in our customer mix continues,” the results said.
Building for stable growth
Over the last 18 months, essensys has set itself up to expand as a global business. The company raised £30m in 2021, launched in APAC and Europe and hired CFO Sarah Harvey as Alan Pepper moved to a standalone COO role.
Furness told PlaceTech that about half of its customers now are landlords. This allows the company to shift from what Furness called an “aggressive acquisition phase” to a phase of expansion in which it will scale with its customers and their portfolios over time.
essensys has a contracted pipeline of 52 sites, totalling £2.3m annual recurring revenue. Already, the majority of these are with its top 20 strategic customers.
Furness said: “As you know, the current market backdrop means we have to be very focused on our business in terms of efficiency.”
In the short- to medium-term, this will mean lower revenues than essensys is used to, but a return to profitability by 2024 or 2025.