In this Research Note, we examine the flexible workspace technology business of essensys, based on their full-year results, announced on 2nd November 2023 and Annual Report, year ending 31st July 2023. This article highlights their latest financial performance, restructuring of global operations and strategy, updating our 2022 Examined report.

Listed on the AIM market of the London Stock Exchange since 2019, essensys provides software and technology which are the foundation from which large landlords and flexible workspace providers can deliver connected, in-building and cross-portfolio digital experiences.

essensys software delivers a suite of capabilities for real estate operators to run flexible workspaces ranging from the provision of digital infrastructure, through space management and space operations to occupier experience. An access control hardware and software solution designed for hybrid and flexible real‑estate is soon to be launched.

essensys Financials

• Total group revenues increased 9% to £25.3 million, driven by new site activity, 94% of new sites with strategic customers
• Adjusted EBITDA loss improved by 10% year on year and 7% ahead of market expectations
• Recurring revenues account for 83% of total revenue (FY22 86%)
• ARR - £20.0m, down -9%, reflecting churn of non‑strategic customers, lower occupancy-based marketplace revenues and foreign exchange movement
• Group remains debt-free with cash balance of £7.9m. Additional £2m unsecured loan facility provided by Mark Furness, the Group CEO and largest shareholder.

Regional Performance

North America:  essensys continues to see strong performance in North America, where total revenue increased by 20% and recurring revenue by 15%. The US continues to be their primary growth market, providing a significant long-term opportunity and accounted for 62% of Group revenues in the year.

UK & Europe: The strong US performance offset a continued decline in the UK, which was largely driven by expected churn from smaller, legacy customers, with 12 customers positioned at the low-value end of the customer base leaving during the period. UK and Europe revenues declined by 11%, with growth in Europe offset by the UK performance. This forms part of their planned and long-term focus on large landlords and real estate operators.

APAC: essensys onboarded 9 new sites with new and existing strategic customers in Australia and Singapore in FY23, with additional sites due to go live shortly.

Restructuring of Global Operations

The reorganization of global operations announced in February 2023 to align the cost base with current revenues and near-term growth opportunities is largely complete.  The company is on track to return to profit and cash generation.

Headcount in 2023 has been reduced to 122 (previously 180) and £8m annualised operational cost reduction has been achieved. Following this reorganisation their go-to-market team is now a single function, they have centralised global operations and simplified their management structure.

Strategy

essensys has evolved its client base to focus on larger strategic customers, who now account for 77% of group revenue (FY22:72%). Their strategy to target only large landlords and flexible workspace providers is continuing to drive improvements in customer mix, product adoption and revenue quality.

essensys enters FY24 as a leaner, more efficient business and their momentum with strategic customers and new product developments supports their confidence of further progress in the year ahead.

This article was written by Daphne Tomlinson, Senior Research Associate at Memoori.