Checkit — FY24 revenue and ARR in line, EBITDA ahead

Checkit (AIM: CKT)

Last close As at 08/11/2024

GBP0.21

0.00 (0.00%)

Market capitalisation

GBP23m

More on this equity

Research: TMT

Checkit — FY24 revenue and ARR in line, EBITDA ahead

Checkit’s FY24 trading update confirmed that revenue and year-end annual recurring revenue (ARR) were in line with our forecasts, up 17% and 16% respectively. Better cost control resulted in a smaller EBITDA loss than expected, highlighting good progress towards reaching profitability. Product development is focused on expanding into new verticals and enhancing the platform with tools to turn data into actionable insights.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

Checkit

FY24 revenue and ARR in line, EBITDA ahead

FY24 trading update

Software and comp services

15 February 2024

Price

22.5p

Market cap

£24m

Net cash (£m) at end FY24

9.0

Shares in issue

108.0m

Free float

56%

Code

CKT

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(21.2)

(8.9)

(30.5)

Rel (local)

(20.7)

(12.1)

(27.6)

52-week high/low

34.0p

19.5p

Business description

Checkit optimises the performance of people, processes and physical assets with its intelligent operations software. It is headquartered in Cambridge, UK, and has operations centres in Fleet, UK, and Tampa, US.

Next event

FY24 results

25 April 2024

Analyst

Katherine Thompson

+44 (0)20 3077 5700

Checkit is a research client of Edison Investment Research Limited

Checkit’s FY24 trading update confirmed that revenue and year-end annual recurring revenue (ARR) were in line with our forecasts, up 17% and 16% respectively. Better cost control resulted in a smaller EBITDA loss than expected, highlighting good progress towards reaching profitability. Product development is focused on expanding into new verticals and enhancing the platform with tools to turn data into actionable insights.

Year
end

Revenue
(£m)

ARR
(£m)

PBT*
(p)

EPS*
(p)

DPS
(p)

EV/sales
(x)

01/22**

8.4

9.0

(6.1)

(9.0)

0.0

1.8

01/23**

10.3

11.5

(7.3)

(6.9)

0.0

1.5

01/24e

12.0

13.3

(4.7)

(4.3)

0.0

1.3

01/25e

14.2

15.9

(3.6)

(3.4)

0.0

1.1

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Continuing operations only.

Strong revenue and ARR growth in FY24

Checkit expects to report FY24 revenue of £12.0m (+17% y-o-y), in line with our forecast. Careful management of costs and operational efficiencies have nearly halved the adjusted EBITDA loss from £6.4m in FY23 to £3.4m in FY24, better than our £3.6m forecast. Year-end ARR of £13.3m was 16% higher y-o-y and 6% higher h-o-h, in line with our forecast. Net revenue retention of 111% is evidence of the company’s ability to cross-sell and upsell to existing customers. At year-end, the US made up 26% of ARR, up from 24% at end FY23. Net cash at year-end was £9.0m, below our £9.5m forecast, we believe due to higher inventory levels that should be worked down over the next 12–18 months. We maintain our forecasts pending FY24 results on 25 April.

Broadening the product offering

Checkit’s current focus is on developing its platform to enhance functionality and to expand into new verticals such as food manufacturing and biotech. Applying artificial intelligence and machine learning tools to data collected on its platform, Checkit has developed new functionality that can help identify opportunities for customers to reduce energy consumption and predict when assets might need maintenance or replacement. This is currently being trialled by one of the company’s largest customers.

Valuation: ARR growth the key driver

On an EV/sales multiple of 1.3x for FY24e and 1.1x for FY25e, Checkit trades at a material discount to the UK software sector (2.5x current year sales, 2.3x next year sales) and US SaaS peers (7.4x current year, 6.3x next year). If Checkit were to trade on the UK average for FY24e, it would be worth 37p per share and moving to trade in line with US SaaS peers would imply a valuation of 91p. Sustained ARR growth will be the key trigger for Checkit to attract a multiple more in line with SaaS peers, evidenced by customers signing up to use its software and existing customers expanding their usage. Faster movement towards break-even should also support the share price.

Exhibit 1: Financial summary

£m

2019

2020

2021

2022

2023

2024e

2025e

31-January

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

1.0

9.8

13.2

8.4

10.3

12.0

14.2

Cost of Sales

(1.0)

(7.2)

(6.7)

(3.8)

(3.8)

(3.6)

(4.3)

Gross Profit

0.0

2.6

6.5

4.6

6.5

8.4

10.0

EBITDA

 

 

(2.3)

(4.9)

(2.5)

(5.6)

(6.4)

(3.6)

(2.3)

Normalised operating profit

 

 

(4.4)

(6.5)

(3.1)

(6.1)

(7.4)

(5.1)

(3.8)

Amortisation of acquired intangibles

(0.1)

(1.0)

(1.3)

(1.4)

(0.5)

(0.1)

0.0

Exceptionals

0.0

(1.7)

(0.9)

(1.0)

(4.3)

0.0

0.0

Share-based payments

0.0

0.0

0.0

0.0

(0.2)

(0.4)

(0.4)

Reported operating profit

(4.5)

(9.2)

(5.3)

(8.5)

(12.4)

(5.6)

(4.2)

Net Interest

0.0

0.1

0.0

0.0

0.1

0.4

0.2

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

(4.4)

(6.4)

(3.1)

(6.1)

(7.3)

(4.7)

(3.6)

Profit Before Tax (reported)

 

 

(4.5)

(9.1)

(5.3)

(8.5)

(12.3)

(5.2)

(4.0)

Reported tax

0.0

0.1

0.3

0.3

0.3

0.1

0.0

Profit After Tax (norm)

(4.4)

(6.4)

(3.1)

(6.1)

(7.5)

(4.7)

(3.6)

Profit After Tax (reported)

(4.5)

(9.0)

(5.0)

(8.2)

(12.0)

(5.1)

(4.0)

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Discontinued operations

8.6

89.8

0.6

1.4

(0.3)

0.0

0.0

Net income (normalised)

(4.4)

(6.4)

(3.1)

(6.1)

(7.5)

(4.7)

(3.6)

Net income (reported)

4.1

80.8

(4.4)

(6.8)

(12.3)

(5.1)

(4.0)

Basic average number of shares outstanding (m)

178

161

62

68

108

108

108

EPS - basic normalised (p)

 

 

(2.5)

(4.0)

(5.2)

(9.0)

(6.9)

(4.3)

(3.4)

EPS - diluted normalised (p)

 

 

(2.5)

(4.0)

(5.2)

(9.0)

(6.9)

(4.3)

(3.4)

EPS - basic reported (p)

 

 

2.3

50.2

(7.2)

(10.0)

(11.4)

(4.7)

(3.7)

Dividend (p)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

N/A

880.0

34.7

(-36.4)

22.6

16.2

19.0

Gross Margin (%)

0.0

26.5

49.2

54.8

63.1

69.8

70.0

EBITDA Margin (%)

(230.0)

(50.0)

(18.9)

(66.7)

(62.1)

(30.0)

(16.4)

Normalised Operating Margin

(440.0)

(66.3)

(23.5)

(72.6)

(71.8)

(42.5)

(26.9)

BALANCE SHEET

Fixed Assets

 

 

5.0

8.5

6.8

8.3

4.9

5.9

7.0

Intangible Assets

2.9

7.3

6.0

7.3

4.0

4.9

5.9

Tangible Assets

1.7

1.2

0.8

1.0

0.9

1.0

1.1

Investments & other

0.4

0.0

0.0

0.0

0.0

0.0

0.0

Current Assets

 

 

19.5

19.8

17.5

29.0

22.5

16.6

12.4

Stocks

4.3

1.7

1.1

1.8

2.4

3.1

2.2

Debtors

5.1

3.4

4.4

2.9

4.5

4.0

4.1

Cash & cash equivalents

10.1

14.3

11.5

24.2

15.6

9.5*

6.2

Other

0.0

0.4

0.5

0.1

0.0

0.0

0.0

Current Liabilities

 

 

(7.9)

(5.6)

(5.9)

(5.7)

(7.8)

(7.6)

(8.2)

Creditors

(7.6)

(5.1)

(5.6)

(5.2)

(7.5)

(7.3)

(7.9)

Tax and social security

(0.3)

0.0

0.0

0.0

0.0

0.0

0.0

Short term borrowings

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

0.0

(0.5)

(0.3)

(0.5)

(0.3)

(0.3)

(0.3)

Long Term Liabilities

 

 

(0.3)

(1.3)

(0.8)

(0.6)

(0.7)

(0.7)

(0.7)

Long term borrowings

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other long term liabilities

(0.3)

(1.3)

(0.8)

(0.6)

(0.7)

(0.7)

(0.7)

Net Assets

 

 

16.3

21.4

17.6

31.0

18.9

14.2

10.6

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

16.3

21.4

17.6

31.0

18.9

14.2

10.6

CASH FLOW

Op Cash Flow before WC and tax

(2.3)

(4.9)

(2.5)

(5.6)

(6.4)

(3.6)

(2.3)

Working capital

(0.5)

(1.0)

0.3

0.2

0.1

(0.4)

1.4

Exceptional & other

9.1

5.3

(0.7)

0.4

(0.2)

0.0

0.0

Tax

(0.5)

(0.5)

0.0

0.1

0.1

0.1

0.0

Net operating cash flow

 

 

5.8

(1.1)

(2.9)

(4.9)

(6.4)

(3.9)

(0.9)

Capex

(2.2)

(0.3)

(0.3)

(2.3)

(2.2)

(2.3)

(2.3)

Acquisitions/disposals

1.3

84.2

0.3

0.0

0.2

0.0

0.0

Net interest

0.0

0.1

0.0

0.0

0.1

0.4

0.2

Equity financing

0.0

(77.9)

0.5

20.2

0.0

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

0.0

(0.8)

(0.4)

(0.3)

(0.3)

(0.3)

(0.3)

Net Cash Flow

4.9

4.2

(2.8)

12.7

(8.6)

(6.1)

(3.3)

Opening net debt/(cash)

 

 

(5.2)

(10.1)

(14.3)

(11.5)

(24.2)

(15.6)

(9.5)

FX

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other non-cash movements

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(10.1)

(14.3)

(11.5)

(24.2)

(15.6)

(9.5)*

(6.2)

Source: Checkit, Edison Investment Research. Note: *Cash figures to be updated after FY24 results are reported in April 2024.

General disclaimer and copyright

This report has been commissioned by Checkit and prepared and issued by Edison, in consideration of a fee payable by Checkit. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Checkit and prepared and issued by Edison, in consideration of a fee payable by Checkit. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

More on Checkit

View All

Latest from the TMT sector

View All TMT content

Research: Consumer

Revolution Beauty Group — Looking good

Revolution Beauty Group’s (REVB’s) capital markets day (CMD) provided an opportunity for the new management team to present its refocused strategy: to become a top five global beauty brand by 2030. Management aims to drive product innovation at affordable prices, tailored to the demands of its target Generation Z consumer. REVB will continue to develop its online and offline routes to market with new and existing direct-to-consumer (D2C) and business-to-business (B2B) partners, using data to grow its online presence and improve marketing campaigns. Efficiency initiatives in inventory, supply chain and operations, as well as strategic choices with distributors and vendors, should provide cost savings and subsequent reinvestment in marketing spend to drive growth.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free