GETB Getbusy Plc

3 September 2024

GetBusy plc

2024 Half-year Results

A clear strategy to create and realise value

GetBusy plc ("GetBusy", the "Company" or the "Group") (AIM: GETB), a leading provider of productivity software for professional and financial services, announces its unaudited results for the six months ended 30 June 2024 (the "Period", "H1" or "H1 2024").

Financial highlights

·      Recurring revenue growth of 4% at constant currency to £10.4m (H1 2023: £10.1m)

·      ARR growth of 5% at constant currency to £21.0m (H1 2023: £20.1m) and up 3% at constant currency since the start of the year

·      Gross margin remains strong at 89.3% (H1 2023: 89.9%) with greater volume of cloud revenue

·      Increase in Adjusted EBITDA to £0.4m (H1 2023 £0.2m)

·      Narrowing of Adjusted Loss to £0.3m (H1 2024: £0.6m), a 45% improvement on H1 2023

·      Gross cash of £0.9m (H1 2023: £1.7m) and drawn debt of £0.7m (H1 2023: £nil), meaning total available funds of £2.2m

·      Net Cash of £0.2m (H1 2023: £1.7m) reflecting a later receipt of UK R&D tax credit than in H1 2023 (expected to be £0.6m) and the acquisition of SmartPath (£0.2m)

Operational highlights

·      Net revenue retention of 99.7% (H1 2023: 100.5%)

·      Group ARPU^**** up 9% at constant currency to £316 (H1 2023: £291)

·      4% reduction in paying users^**** to 66,424 (H1 23: 69,208), reflecting strategy to focus on higher value customers and churn within legacy Virtual Cabinet business

·      Completed acquisition of SmartPath, the revenue optimisation and pricing intelligence platform, enhancing the Group's product offering in the highly attractive and strategically valuable US market

·      SmartVault platform transacted a record 106 million documents during peak US tax season with 100% availability

·      Substantial order traction for Workiro in ERP market, representing 75% of new sales in the combined Virtual Cabinet / Workiro business

·      Workiro ARR up 150% since start of year, demonstrating encouraging potential in significantly enlarged target market

Outlook

·      The Group reconfirms group revenue expectations⁺ for the year, whilst flagging increasing exchange rate pressure from the weaker USD

·      Prospects for the Group, including cash returns in the medium term from SmartVault and the long-term potential from Workiro, remain excellent

Daniel Rabie, CEO of GetBusy, comments:

"We have made encouraging strategic progress in H1 2024 to keep the business on track to achieve our value creation and realisation objectives in the medium- and long-term.

"We're excited to have added SmartPath's pricing technology into SmartVault's suite, providing an excellent platform on which we can build a more extensive offering to help accountants transition to become advisory-led firms.  Within Workiro, encouraging order intake through our strategic channel partners provides validation of the value of our solution within the ERP market, and the size and reliability of our pipeline provides confidence for the future.

"Whilst ARR growth over H1 has been more modest than in previous periods, we are confident we have the foundations in place for a return to stronger growth and significant value creation over the next few years."

⁺ Expectations for the year-ending 31 December 2024 are considered to comprise Revenue of £22.9m and Adjusted EBITDA of £1.2m.

*Adjusted EBITDA is Adjusted Loss before Tax with capitalised development costs added back.  A full list of our alternative performance measures, together with a glossary of certain terms, can be found in note 2.

** Adjusted Loss before Tax is Loss before tax, depreciation and amortisation on owned assets, long-term incentive costs, net capitalised development costs, finance costs that are not related to leases, and non-underlying items. 

*** Changes at constant currency are calculated by retranslating the comparative period at the current period's prevailing rate of exchange.

**** Following a review of the way the volume of paying users is captured in the Group's reporting systems, it has been identified that in some circumstances deactivated users or other non-paying users were being included incorrectly in the Group's paying user count.  The Group is therefore restating previously reported paid user count information, and the related Group ARPU figures, as shown in the table below.  There is no impact on the Group's revenue in any period and no customers have been billed for deactivated or otherwise non-paying users as a result of this error.

GetBusy plc

investors@getbusy.com

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION (EU) NO 596/2014 AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN. THE PERSON RESPONSIBLE FOR MAKING THIS ANNOUNCEMENT ON BEHALF OF THE COMPANY IS PAUL HAWORTH.

About GetBusy

GetBusy's specialist productivity software solutions enable growing businesses to work securely and efficiently with their customers, suppliers and teams anytime, anywhere.  Our solutions can be delivered flexibly across cloud, mobile, hosted and on-premise platforms, whilst integrating seamlessly with a wide variety of other class-leading core business systems.

With nearly 70,000 paying users and over 3 million collaborators across multiple market sectors and jurisdictions, GetBusy is an established and fast-growing SaaS business delivering sustained double-digit growth in high-quality recurring subscription revenue over the long term.

Further information on the Group is available at www.getbusyplc.com

A clear strategy for value creation and cash returns

We are building a strategically valuable business in the US accounting market, through SmartVault, that we believe will enable substantial value realisation in the medium term.  Additionally, we are capitalising on our excellent reputation within professional services to establish and scale Workiro in the ERP market, building long-term shareholder value.

The Group is committed to sustained investment, from its current funds and further self-generated cash resources, in the pursuit of both medium- and long-term growth.  The underlying Virtual Cabinet and Workiro business is profitable and cash generative, and our SmartVault business is on the point of generating significant and scaling cash profits over the next couple of years.

We believe there is a substantial long-term growth opportunity for software that supports the productivity of knowledge workers, enhances their working day by improving workflows, and contributes to the profitability of the organisations that employ them.  AI capabilities will be transformational in these markets.  This opportunity is supported by enduring structural drivers such as stricter regulatory requirements, a more hostile cybersecurity landscape, tightening labour markets and increasing workforce flexibility demands.

By remaining focused on specific, valuable markets, in particular the accounting market, we can build a high quality, sticky customer base for whom our products have infrastructural characteristics.  We believe our base of customers can become strategically very attractive as a result of the access we have to a very well-defined set of customers with similar software requirements. 

Whilst medium-term growth is expected to be driven largely by the accounting market, in which we are experienced and proven, growth over the longer-term is expected to be significantly enhanced by the opening of larger enterprise markets and the provision of enterprise content management solutions via Workiro.  As in accounting, we expect success to come through the depth of our integrations with other mission-critical software platforms, such as ERP applications.  The scale of the Workiro opportunity warrants the sustained investments we are making with the expectation that the solution will open substantially larger markets over the longer term.

H1 overview

Marked strategic progress was made across the business in H1, setting the business up well for stronger growth in the future and to achieve our value creation and realisation objectives in the medium- and long-term.  In SmartVault, we extended our product capabilities with the acquisition of SmartPath, providing a platform on which we can build a more extensive offering to help accountants transition to become advisory-led firms.  Within Workiro, we saw significant first fruits from our strategic channel partnerships in the ERP market, with notable success within certain clearly-defined and sizeable industries.  We anticipate further strategic progress in these areas over H2.

ARR increased 5% year-on-year to £21.0m at 30 June 2024 (30 June 2023: £20.1m), a more modest growth rate than in previous periods mostly reflecting slower than anticipated return on the customer acquisition investments we have made within SmartVault in the US.  Strong and responsive cost control led to a reduction in the adjusted loss to £0.3m.  H1 seasonal net cash outflow increased by £0.5m as the UK research and development tax credit (usually paid in H1) has not yet been received, together with the acquisition of SmartPath.  Available cash funds at 30 June 2024 were £2.2m and the Board considers the Group to be well capitalised to execute its strategy.

SmartVault

SmartVault is the leading cloud document management and client portal software serving US accountants.  Through deep integrations and a commercial partnership, SmartVault has built an enviable position as the cloud document management software of choice for the c. 100,000 users of Intuit's Lacerte and ProSeries tax products.  In 2023, SmartVault completed its integration into Thomson Reuters' Ultratax, which roughly doubles the medium-term market opportunity, providing a reusable blueprint for further integrations into other tax software platforms as well as other specialist tools within the tax ecosystem, such as Liscio's client portal, creating a route to even broader adoption in the future.

The acquisition of SmartPath, the pricing intelligence and revenue optimisation platform, provides an important tool to enable accounting firms to expand from tax compliance services, which are becoming increasingly commoditised, into value-added advisory services.  The importance of advisory to the future of US tax accountants cannot be overstated; a recent survey by Accounting Today found that 80% of firms were seeing substantially higher demand for advisory services.  Starting with SmartPath, we plan to selectively add to the capabilities of SmartVault, including the ability for our customers to surface actionable insights from their clients' data and documents, to create a valuable toolset that facilitates the advisory transition for our customers, increasing ARPU and the embeddedness of the SmartVault platform into our customers' workflows.

SmartVault ARR grew 8.4% to $14.3m (30 June 2023: $13.2m). 

New customer acquisition during H1 was roughly in line with H1 2023, with strengthening contributions from our reseller channels and encouraging traction from SmartPath.  However, our investments in direct customer acquisition have not yet led to the acceleration we were seeking and so we have scaled those back to be commensurate with the demand we are seeing.  We continue to see improvements in average selling price for our direct customers, a product of a greater proportion of larger customers and improving adoption of our premium "Unlimited" plan, which packages an unrivalled feature set including e-signature and the form-fill and quoting technology acquired in 2021.

Churn and net revenue retention were both in line with H1 2023.  Following the successful introduction of the Unlimited plan in Q4 last year, we anticipate continued strong adoption of Unlimited by existing customers over the rest of the year during the key pre-tax season buying period, which can improve customer ARPU by up to 40% and drive improvements to net revenue retention.  Additionally, after the completion of our first round of product improvements we expect to make the SmartPath pricing tool available to the existing customer base during Q4, ahead of integrating the product into the core SmartVault application.

Workiro

Collectively, Virtual Cabinet and Workiro serve enterprise customers in the professional and financial services sector together with a broad range of industries through Workiro's deep integration into ERP systems, with an initial focus on Oracle's NetSuite application.  NetSuite's installed base of over 38,000 enterprise customers provides a considerable market opportunity for Workiro, with the broader cloud ERP market being significantly larger.  Product development continues apace, ensuring we are meeting the capability and security requirements of larger enterprise customers, deepening our integration with NetSuite and putting in place the building blocks for further additional integrations in ERP and CRM.

Our go-to-market activities are now dominated by Workiro.  Our presence at Accountex, the world's largest accounting and finance technology exhibition, was entirely under the Workiro brand, showcasing the Group's most advanced and scalable content workflow technology to our core market and customer base.  Migration of customers from Virtual Cabinet to Workiro, typically generating an additional 20% of revenue per user (and in many cases considerably more), has gained a reasonable momentum and we are exploring ways to automate substantial parts of the process, providing customers with as seamless a migration experience as possible and reducing the overhead burden. 

Within the combined Workiro and Virtual Cabinet business, Workiro accounted for over 75% of the annual contract value of new orders in H1, with average selling price about 50% higher than for new business within Virtual Cabinet.  Partners, and particularly those on our platinum tier, contributed a little more than 50% of new business.  Partnerships enable us to leverage domain expertise from those partners in a wider variety of industries, enabling us to identify high-value vertical markets served by NetSuite that have complex content workflow requirements that Workiro can solve.  We are seeing particular strength in the mid-tier US accounting firm market through our integration with PracticeERP, which provides a customised NetSuite instance for CPA firms; Workiro's origins from within Virtual Cabinet, which pioneered document management software for accountants, lends significant credibility to the offering.  

ARR of £9.7m, was up 1% on 30 June 2023, a result of new business being offset by higher than usual churn, principally a result of mid-market accounting firm consolidation and the mandating of specific cloud technology stacks, the decisions for which were made before Workiro was a credible alternative.  Of that, Workiro ARR was £0.4m at 30 June, up over 150% since the start of the year.

Financial review

Recurring revenue was up 4% at constant currency (3% at reported currency) to £10.4m (H1 2023: £10.1m), with growth in the US, through SmartVault, tempered by flat performance in the UK and ANZ (which comprises Virtual Cabinet and Workiro).

ARR, which is our recurring revenue runrate, grew by 5% at constant currency to £21.0m (30 June 2023: £20.1m), and is up 3% at constant currency since the start of the year.  ARR growth over H1 was largely from higher ARPU as a result of expansion revenue (driven by the Accounting Unlimited plan in SmartVault and the migration of customers from Virtual Cabinet to Workiro).  ARPU was up 6% at constant currency since 1 January 2024 to £316.  As described more fully in note 1, we have restated historic user count and ARPU numbers following a review of the method used to collect that data.

Net revenue retention of 99.7% per month was an improvement on H2 2023 (99.5%), with the reduction compared to H1 2023 (100.5%) due the comparative period containing the impact of the final set of UK customers moving to the Virtual Cabinet Unlimited pricing plan.

Non-recurring revenue of £0.4m was in line with H1 2023, taking total revenue to £10.7m (H1 2023: £10.5m), up 2% (4% at constant currency).

Gross margin of 89.3% (H1 2023: 89.9%) reflects the greater proportion of revenue from our cloud products, principally SmartVault and Workiro, as opposed to on-premise products for which there is very little ongoing cost of sale.

SG&A costs of £7.6m were tightly controlled (H1 2023: £7.7m).  Investments in customer acquisition in SmartVault have been tempered to reflect new business performance, although we retain the ability to flex this spend to the circumstances should we see a significant increase in demand.   Total development expenditure was down a little at £2.3m (H1 2023: £2.4m), although headcount remains consistent and the reduction simply reflects currency differences.

Adjusted EBITDA was £0.4m (H1 2023: £0.2m), whilst Adjusted Loss, which is stated before development capitalisation, was £(0.3)m (H1 2023: £(0.6)m).

Depreciation and amortisation increased to £0.6m (H1 2023: £0.4m) as a result of an additional year of capitalised costs relating to Workiro, which only started to be capitalised in 2022.

The credit for long-term incentive costs of £0.3m (H1 2023: charge of £0.3m), reflects modifications made to the SmartVault Leadership Incentive Plan to make reward under the plan entirely contingent on an acquisition by a third party.

Cashflow and working capital

H1 is typically a cash absorptive period for the Group as a result of the seasonality of cash receipts for annual customer renewals, which are heavily weighted towards Q4.  H1 2024 had some additional pressures on cash compared to the comparative period:

·      Historically we have received our research and development tax credit in H1.  Due primarily to changes in HMRC's documentation requirements, and a lengthier process to submit our claim, our 2023 claim for approximately £0.6m had not been received by 30 June 2024; and

·      The acquisition of SmartPath included £0.2m of upfront cash investment.

These pressures were mitigated to an extent by a smaller reduction in deferred revenue compared to H1 2023.

Net cash at 30 June 2024 was £0.2m (30 June 2023: £1.7m), comprising £0.9m of cash and £0.7m of drawn loan facilities.

The £2m revolving credit facility is committed until February 2027.

Consolidated income statement

For the six months ended 30 June 2024

Consolidated statement of comprehensive income

For the six months ended 30 June 2024