09 May 2024
Eckoh plc
("Eckoh",
the "Group", or the "Company")
FY24 Trading Update &
Notice of Results
- Profit and cash in line
with market expectations
- Record new contracted
business in North America, up 44% year-on-year
- Record year of total
contracted business at £52.6m driven by high renewals and strong H2
new business
- Client transition to
cloud-based solutions continues at pace, driving ARR and margin
enhancement
Eckoh plc (AIM: ECK), the global
provider of Customer Engagement Data Security Solutions, today
announces a trading update for the year ended 31 March 2024 (the
"Year").
Trading Performance
The Board expects to report revenues
of approximately £37.2m for the Year (FY23 £38.8m) which, although
slightly behind market expectations1 is a result of
the ongoing transition of client deployments to the cloud,
the first contract renewals of several large on-premise US clients
(where there are no ongoing associated hardware revenues and set up
charges), and the elongated sales cycles that delayed the closing
of contracts in H1.
In contrast, Eckoh expects to report
adjusted operating profit of approximately £8.3m (FY23 £7.7m),
marginally ahead of market expectations1, which
represents a 17% increase on FY23 pre-forex2. The higher
proportion of cloud-based SaaS revenues and ongoing cost efficiency
meant the Group saw operating margin improvement as well as strong
cash generation, with an improved net cash position of £8.3m at the
end of the Year (FY23 £5.7m), also marginally ahead of market
expectations.
Record Contracted Business
In H1 Eckoh won a record level of
total contracted business3 (defined as the combination
of contract renewal value and new business value from either new
clients or existing clients) and this trend continued in H2. This
resulted in £52.6m of total contracted business in the Year, over
50% higher than FY23 and a record for the Company. As anticipated,
the level of new contracted business4 increased
substantially in H2, more than double that of H1, leading to £18.7m
of new contracted business won in the Year (FY23
£14.4m).
In North America, our single biggest
growth market, the Company won a record level of both renewals and
new contracted business in the Year, with $33.7m of total
contracted business and $16.3m of new contracted business (for
Security Solutions), 87% and 44% higher than FY23 respectively.
Progress in North America has been driven by successfully closing
deals delayed from H1, winning an unusually high number of large
multi-year renewals, successful cross-selling and up-selling our
new solutions and the ongoing transition to cloud-based deployments
by our clients.
As previously announced, the closing
of several sizable enterprise deals where Eckoh was the chosen
supplier slipped into H2 - most of which have now closed - the
remaining ones are still in progress and contribute to a record
North American sales pipeline. The Company continues to experience
elongated sales cycles with new enterprise clients, especially in
the final contracting phase, however the cross-selling strategy for
existing accounts should help moderate these delays as the sales
cycle for these opportunities is shorter.
Recurring Revenue Improvement
While our successful drive to
transition clients to cloud-based solutions is tempering revenue
growth in the short term, it is having a positive impact on the
visibility of revenues, which has increased. Recurring revenue in
North America grew by 11% year-on-year, and for the first time, all
new client contract wins in the Year were for cloud-based delivery
and we expect this trend to continue.
Eckoh expects to report good
progress in North America with Security Solutions exit
Annual Recurring Revenue5 ('ARR') up organically by
6% to $16.8m (FY23 $15.9m), which represents a CAGR of 29% since
FY21. The delay in signing new business in H1 has temporarily
slowed the ARR growth in this region, however when taking into
account the contracts signed in H2 that are expected to commence
billing in the first half of FY25, that growth rises a further 14%
and will lead to a meaningful positive impact on the revenue in the
second half of FY25. The Group's ARR now represents 83% of Group
revenue, a 5% increase on the prior year (FY23 78%).
Nik Philpot, Chief Executive
Officer, said: "At our interim results in
November we said that the first half had been all about excellent
contract renewals and that the second half would be all about new
business wins, so it's gratifying to see the record levels of new
business coming through. We have built a strong pipeline of
exciting new business opportunities and we are already seeing
tangible signs of the impact the new version of the PCI standard is
having, with an increased number of formal tender processes as
companies look to outsource this challenging requirement to a
specialist like Eckoh.
Our unusually high level of
multi-year renewals (including many that were not scheduled until
this year), alongside our newly won clients, gives us excellent
revenue visibility and improves our ability to further increase our
strong cross-sell and upsell pipeline. We expect total renewal
value to be lower this year because of the size and timing of those
clients whose contracts are due to expire, but we expect levels of
new business coming from our existing client base to grow
significantly and our operating margin to improve further as we
leverage our cloud platform and new product set.
The fact that all new client wins
this year were for cloud delivery illustrates the pace of cloud
transition, and whilst this reduces our headline revenue growth it
improves revenue visibility and margin. We are confident that Eckoh
is well placed to consolidate our market-leading position by
assisting enterprises with the significant challenges that they are
facing globally to keep their customers' data and engagements
secure."
Notification of Interim Results
announcement
Eckoh expects to announce its
results for the year ended 31 March 2024 on Tuesday 11 June
2024.
1. Eckoh believes
that consensus market expectations for the year ended 31 March 2024
are for revenue of £38.9m, adjusted operating profit of £8.2m and
net cash of £8.2m.
2. In FY23, the
Company's operating performance benefitted from a £0.5m currency
tailwind versus a £0.1m headwind in FY24.
3. Total contracted
business includes new business from new and existing clients, as
well as renewals with existing clients.
4. New contracted
business includes new business from new clients and new business
from existing clients.
5. ARR is the annual
recurring revenue of all contracts billing at the end of the
period.
- Ends-
For
more information, please contact:
Eckoh plc
|
Tel: 01442 458 300
|
Nik Philpot, Chief Executive
Officer
|
|
Chrissie Herbert, Chief Financial
Officer
|
|
www.eckoh.com
|
|
|
|
FTI
Consulting LLP
|
Tel: 020 3727 1017
|
Ed Bridges / Emma Hall / Valerija
Cymbal / Yasmin Prior
|
|
eckoh@fticonsulting.com
|
|
|
|
Singer Capital Markets (Nomad & Joint
Broker)
|
Tel: 020 7496 3000
|
Shaun Dobson / Tom Salvesen / Alex
Bond
|
|
www.singercm.com
|
|
|
|
Investec Bank plc (Joint Broker)
|
Tel: 020 7597 5970
|
Patrick Robb / Nick Prowting /
Shalin Bhamra
|
|
www.investec.com
|
|
About Eckoh plc
As a global provider of Customer
Engagement Data Security Solutions, Eckoh is all about making the
world of data more secure.
Our vision is that everyone should
be able to trust every brand and engage without risk to their
personal information. We're on a mission to set the standard for
secure interactions between consumers and the world's leading
brands, and our innovative products build trust and deliver value
though exceptional experiences.
We're trusted by many of the world's
leading brands to help them manage the personal data from customer
enquiries and transactions safely. Our solutions enable payment
transactions to be performed securely and help protect sensitive
personal data across any customer engagement channel and device the
customer chooses.
Protected by multiple patents, our
solutions remove sensitive personal and payment data from contact
centres and IT environments, as the best way to secure data is not
to collect it. This allows organisations to be not just compliant but
secure, increase efficiency, lower operational costs, and provide
an excellent customer experience. This is our
specialism.
Our solutions are delivered globally through multiple cloud platforms
or can be deployed on the client's site. They offer merchants a
simple and effective way to reduce the risk of fraud, secure
sensitive data and become compliant with the Payment Card Industry
Data Security Standards ("PCI DSS") and wider data security
regulations. Eckoh has been a PCI DSS Level One Accredited
Service Provider since 2010, and our extensive portfolio of
typically large enterprise clients spans a broad range of vertical
markets including government departments, telecoms providers,
retailers, utility providers and financial services
organisations.
For more information go to www.eckoh.com or email MediaResponseUK@eckoh.com.