- Annual recurring revenue (ARR) up 28 per cent to £11.5mn, ahead of expectations
- ARR in the US up 91 per cent to £2.8mn
- Gross margin up from 54 to 63 per cent year on year
- Recurring revenue equates to 93 per cent of total revenue
- Cash loss slashed by £1mn in second half
Global supply chain challenges, the rising cost of labour and increased compliance requirements mean that the premium on simplifying deskless operations has never been more relevant.
This is good news for Cambridge-based Checkit (CKT:29p), a technology group that provides customers with a workflow management software platform that delivers data-driven remote monitoring and automated systems surveillance to manage their teams of deskless workers. Digitising the scheduling and reporting of workflows can enhance staff efficiency and retention rates, operational insight and compliance.
By targeting five key verticals (retail, healthcare, facilities management, franchise and biopharma), large organisations (two-thirds of sales pipeline), and expansion in the US (24 per cent of annual recurring revenue ARR), the group has doubled ARR to £11.5mn over the past two years. Gross margin is improving, too, rising from 61 per cent in the first half to 64.8 per cent in the second half of the latest financial year to help drive down the cash loss from £3.7mn to £2.7mn, respectively.
Cash burn also fell 17 per cent in the second half, adding weight to the belief that net cash of £15.6mn (14.4p) should see Checkit through to cash profitability. The directors are currently predicting that the business will turn cash profitable in the financial year to 31 January 2026, but it could happen sooner if the group outperforms. For the new financial year, expect the cash loss to be slashed from £6.4mn to £3.7mn based on 21 per cent higher revenue of £12.5mn.
Key drivers of move to profitability
Key to maintaining the progress will be converting the new customer sales pipeline in the US, a key growth market that is five times larger than the UK, and expanding services to existing customers through the group’s ‘land and expand’ customer strategy.
A good example is Checkit’s contract with BP (BP.). The oil giant uses a Checkit-developed artificial intelligence (AI) algorithm in its Food to Go outlets to reduce food wastage by accurately predicting the number of cooked items sold during the day and providing data insights to improve decision-making. Checkit doubled its footprint with BP by rolling out its platform across 441 BP forecourts in Australia and New Zealand. The plan is to scale up the contract to 4,900 locations within three years, representing a quarter of BP’s global network of service stations.
A positive outlook statement and a drive to accelerate the path to profitability are highly supportive of the investment case for one of my 2023 Bargain Shares. Buy.
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