25 January 2024

Rosslyn Data Technologies plc

("Rosslyn", the "Group" or the "Company")

Interim Results

Rosslyn (AIM: RDT), the provider of a leading cloud-based enterprise data analytics platform, announces its interim results for the six months ended 31 October 2023.

Financial summary*

·      Revenue was £1.4m (H1 2023: £1.4m)

·      Gross margin was 35.5% (H1 2023: 29.3%)

·      Administrative expenses maintained at £2.2m (H1 2023: £2.2m)

·      Adj. EBITDA** loss was £1.7m (H1 2023: £1.6m loss)           

·      Adj. net loss*** reduced to £1.5m (H1 2023: £1.6m loss)

·      Cash burn rate was £276k per month (H1 2023: £217k per month)

·      Cash and cash equivalents of £2.2m as at 31 October 2023 (30 April 2023: £676k), following the Company raising gross proceeds of £3.3m through the issue of new ordinary shares and convertible loan notes

* The H1 2023 comparatives are for continued operations only (see note 7)

**Adjustments made for exceptional items and share-based payments

*** Adjustments made for depreciation & amortisation, share-based payments and exceptional items. H1 2023 result also includes adjustment for profit on sale of discontinued operation

Operational summary

·      Performance against operational key performance indicators ("KPIs"):

o  Annual recurring revenue ("ARR") growth of 1% (H1 2023: 11%), with ARR of £2.5m (H1 2023: £2.5m)

o  Net revenue retention ("NRR") rate was 96% (H1 2023: 97%)

o  Total pipeline as at 31 October 2023 was £3.9m (30 April 2023: £3.6m) and weighted pipeline was £807k (30 April 2023: £1.1m)

o  Customer acquisition cost ("CAC") payback was 80 months (H1 2023: 69 months)

·      New contracts won with blue-chip European med-tech company and international transport consultancy

·      Significant progress on development of next generation artificial intelligence ("AI") module

Outlook

Since completing the fundraising toward the ends of the first half, there has been a strong increase in customer and partner engagement as the Group seeks to build on the solid foundations now established. The Group is in discussions regarding a number of opportunities with significant new partners, which offer near-term conversion and revenue-generation potential. With the opportunities with these significant partners coming to fruition, together with the continued expansion the Group is experiencing with existing customers, the Board continues to expect to report results for full year 2024 in line with management expectations.

The increase in revenue is expected to be driven by professional services, which is non-recurring revenue, as the Group onboards new customers, which will translate to licence fee revenue thereafter. For full year 2024, the Group anticipates reporting ARR growth of approximately 15%.

Looking further ahead, with the continued expansion in the Group's total pipeline and the encouraging feedback that it is receiving from existing and potential customers, the Board remains confident of delivering significant ARR growth and looks forward to updating the market on Rosslyn's progress.

Paul Watts, CEO of Rosslyn, said: "Following a year of major transformation and restructuring, and having undergone a fundraising during the period, we have now established the foundations for us to accelerate growth. We are currently in discussions with substantial partners regarding some significant opportunities, which reflect the recognised strength of our offer and are testament to our renewed go-to-market approach. We are also very excited by the innovative work that we are doing with generative AI - which is being undertaken alongside our customers to ensure our product is designed to meet their exact requirements. As a result, we continue to look to the future with confidence and look forward to updating the market on our progress."      

Enquiries

Investor Webinar

Paul Watts, CEO, and Ed Riddell, CFO, will be holding a webinar for investors on Tuesday 20 February 2024 at 2.00pm GMT. To register to participate, and to submit any questions in advance, please use the following link: https://forms.gle/z3qZsJkUVzDf44469. Participants are requested to submit questions by 5.00pm GMT on 19 February 2024.

About Rosslyn

Rosslyn (AIM: RDT) provides an award-winning spend analytics and predictive analytics platform. The Rosslyn Platform helps organizations with diverse supply chains mitigate risk and make informed strategic decisions. It leverages automated workflows, artificial intelligence and machine learning to extract and consolidate procurement data providing visibility of complex supplier data, enabling supplier spend savings and delivering rapid ROI. For more information visit www.rosslyn.ai 

Operational Review

During the six months to 31 October 2023, the Company focused on embedding the operational changes that had been implemented and initiated in the prior year as it underwent a significant restructuring as well as seeking to rebuild its business following a period of customer churn. This included making strong progress in advancing its partner-led go-to-market approach. Alongside this, management carefully managed costs while undertaking a fundraising process, which was completed towards the end of the period, to provide the capital to execute its strategy.

The Company secured two new contracts during the first half of the year worth £422k in aggregate over a multi-year period and equating to an additional £120k in ARR. The contracts are with a blue-chip European med-tech company, which sells its products via its 9,000+ shops and outlets in over 20 countries, and an international consultancy that provides services and solutions to the transport industry and is utilising the Rosslyn platform on behalf of a UK train operating company.

In addition, and as described below, during the period and subsequently, the Company has made significant progress in the development of its next generation generative AI module.

Innovation opportunity

Rosslyn continued the development work that it commenced in the prior year to embed generative AI into the platform. Rosslyn is utilising AI to generate the categorisations and classifications of extracted data, which must be done before it can be analysed, thereby automating the process. This significantly increases accuracy, shortens the time to insight and expands the volume of data that can be incorporated. In particular, the shortening of time to insight is crucial in meeting the increasing demand from procurement teams for real-time insight.    

During the period, the Company completed a proof of concept of this technology with four of its largest customers from different industries and who procure internationally, with the results exceeding management's expectations. The Company commenced further development and refinement of the technology and expects the module to go live with the first customer within the current financial year. While this opportunity will likely endure longer sales cycles, Rosslyn is well placed to establish a leadership position in this new market thanks to the depth of its technology stack, which has been built on an automation-first basis; its vast experience from operating in the industry for over 15 years; and from being custodians of a large volume of complex supply chain data.

Partner-led go-to-market approach

The Company continued to make progress in its renewed go-to-market approach centred on a partner model. In particular, the Company secured an extension of its strategic partnership with Chain IQ, a business process outsourcing partner. The partnership has generated an increasing amount of revenue for Rosslyn since being established in 2021. The Company also significantly enhanced its relationship with a global consulting partner and expects to sign its first customer via this partner in the near term.

Financial Review

Revenue

Revenue for the period was £1.4m (H1 2023: £1.4m) and ARR was £2.5m, representing ARR growth of 1%. The NRR rate was 96% (H1 2023: 97%). These results are in line with management's expectations, reflecting the Company being in the early stages of rebuilding its business following a period of significant restructuring.

Revenue comprises the annual licence fee - software revenue - that customers are charged for having access to the Rosslyn platform and professional services fees for work undertaken to tailor the Company's solution to align with customers' infrastructure or meet specific additional solution requirements. Software revenue continued to be the main contributor to total revenue, accounting for 81% in H1 2024. However, this was lower than the in the first half of the previous year of 84%, reflecting a slight increase in professional services revenue to £0.3m (H1 2023: £0.2m) and software revenue remaining flat at £1.1m (H1 2023: £1.1m). The growth in professional services revenue reflects the Company increasing its pricing to appropriate market levels for such services as well as greater activity in this area. 

Gross profit

Gross margin improved significantly to 35.5% (H1 2023: 29.3%), reflecting a reduction in cost of sales as a result of increased efficiencies with a leaner professional services team. As a result of the improved gross margin and stable revenue, gross profit increased to £0.5m compared with £0.4m for H1 2023.

Operating expenses

Operating costs were £2.5m for the period (H1 2023: £2.2m). This primarily reflects the Company generating a £0.2m profit in the first half of the prior year from the sale of a discontinued operation, and which offset administrative expenses being maintained at £2.2m (H1 2023: £2.2m).

Profitability measures

As a result of the increased expenses, operating loss was £2.0m (H1 2023: £1.8m loss) and adjusted EBITDA loss was £1.7m (H1 2023: £1.6m loss).

The loss before tax for the period was £2.0m (H1 2023: £1.8m loss). The Company received £120k (H1 2023: £120k) in tax credits for the period. As a result, net loss for H1 2024 was £1.9m (H1 2023: £1.7m loss). On an adjusted basis, to exclude depreciation & amortisation, share-based payments, exceptional administrative expenses of £0.2m (H1 2023: £0.2m) and profit on the sale of a discontinued operation in the comparative period, net loss was reduced to £1.5m (H1 2023: £1.6m).

Cash flow and liquidity

Net cash used in operating activities was £1.2m (H1 2023: £1.6m), with the reduction primarily reflecting the receipt of £612k in R&D tax credits. The Group generated net cash from investing activities and financing activities of £2.6m, compared with using net cash of £49k in H1 2023. This primarily reflects the raising of gross proceeds of £3.3m via the issue of new ordinary shares (£2.7m) and convertible loan notes (£0.6m). As a result, there was a net increase in cash and cash equivalents of £1.4m compared with a net decrease of £1.7m for H1 2023.

Monthly cash burn in the period was £276k (H1 2023: £217k). This primarily reflects investment the Group has made to grow the business, namely strengthening the sales and technology teams. As a result of this investment, CAC was also higher at 80 months (H1 2023: 69 months) with the onboarding of the new sales team. Both cash burn and CAC are expected to reduce as the Group converts some of its pipeline in the coming months.

As at 31 October 2023, the Company had cash and cash equivalents of £2.2m (30 April 2023: £767k; 31 October 2022: £763k).

Balance sheet

As at 31 October 2023, the Company had net assets and total equity of £2.4m compared with £1.9m at 30 April 2023. The main movements in the balance sheet during the period were:

·      the increase in cash and cash equivalents, as described above;

·      a reduction in corporation tax receivable to £0.4m (30 April 2023: £0.9m) following the receipt of a £612k R&D tax credit;

·      current trade and other payables increasing to £2.2m (30 April 2023: £2.0m);

·      non-current liabilities increasing to £0.7m (30 April 2023: £0.1m) reflecting the convertible loan notes described above and non-current trade and other payables of £nil in the period; resulting in

·      an increase in total assets to £5.4m (30 April 2023: £4.1m) and total liabilities to £3.0m (30 April 2023: £2.2m).

Outlook

Since completing the fundraising toward the ends of the first half, there has been a strong increase in customer and partner engagement as the Group seeks to build on the solid foundations now established. The Group is in discussions regarding a number of opportunities with significant new partners, which offer near-term conversion and revenue-generation potential. With the opportunities with these significant partners coming to fruition, together with the continued expansion it is experiencing with existing customers, the Board continues to expect to report results for full year 2024 in line with management expectations, including strong year-on-year revenue growth.

The increase in revenue is expected to be driven by professional services, which is non-recurring revenue, as the Group onboards new customers, which will translate to licence fee revenue thereafter. For full year 2024, the Group anticipates reporting ARR growth of approximately 15%.

Looking further ahead, with the continued expansion in the Group's total pipeline and the encouraging feedback that it is receiving from existing and potential customers, the Board remains confident of delivering significant ARR growth and looks forward to updating the market on Rosslyn's progress.