REG - Rosslyn Data Tech. - Trading Update

Rosslyn Data TechnologiesAnnouncement

21/08/2024 07:00

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RNS Number : 2344B  Rosslyn Data Technologies PLC  21 August 2024

21 August 2024

 

Rosslyn Data Technologies plc

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

 

Trading Update

Better-than-expected EBITDA loss for FY 2024

New AI-powered solution now live with four customers

Significant increase on contract renewal with one of Rosslyn's largest
customers

New contract worth a minimum of £2m with leading global technology company

 

Rosslyn (AIM: RDT), the provider of a leading cloud-based enterprise spend
intelligence platform, provides the following update on trading for the year
ended 30 April 2024 ("FY 2024") and updates on progression with the Company's
artificial intelligence ("AI") solution.

 

Update on trading for FY 2024

 

The Board of Rosslyn is pleased to confirm that it expects to report revenue
for FY 2024 in line with management's expectations, as set out in the
Company's trading update announced on 4 March 2024.

 

The Company expects to report revenue of £2.9m (FY 2023: £3.0m) and annual
recurring revenue ("ARR") of £2.3m (FY 2023: £2.4m), with the reduction
reflecting the protracted timelines associated with contract negotiations for
sizable new opportunities. The Company has continued to make progress
negotiating with these large counterparties and is delighted to have also
announced today that it has been awarded a three-year contract, worth a
minimum of £2m, by one of the world's largest technology companies and which
also offers further opportunities for expansion (the "Contract"). In addition,
since the year-end, the Company is pleased to have signed a two-year contract
renewal with one of its largest customers, with the contract value increasing
by over 20%. This increase partly reflects Rosslyn introducing its
strengthened customer success function as an additional chargeable service,
which generates additional value for customers by enabling them to maximise
their use of the Rosslyn platform and more effectively identify risk in the
supply chain.

 

The Company expects to report adjusted* EBITDA loss for FY 2024 of £2.5m (FY
2023: £2.0m loss) and EBITDA loss of £3.3m (FY 2023: £2.4m loss), which is
ahead of management expectations. The better-than-expected adjusted EBITDA
performance reflects the Board's strategic decision to prioritise sustainable
growth and focus on the quality of revenues as discussed further below. The
increase in EBITDA loss (on a reported and adjusted basis) for FY 2024
compared with the prior year is due to the lower revenue and greater costs as
the Company increased its level of activity as it began to rebuild its
business following a period of significant restructuring. In addition, the
Company generated profit in FY 2023 from the sale of discontinued operations.

 

The Board is focused on achieving positive adjusted EBITDA and cash generation
on a monthly basis by the end of the current financial year and on an annual
basis from FY 2026, which will drive accelerated revenue growth in the medium
term. As previously stated, during the year the Company increased its pricing
for its professional services work to appropriate market levels, which applies
to new and renewed customer contracts, such that all new business is being
sold at a higher margin. In addition, the Company's R&D team, under the
leadership of the newly appointed fractional Chief Technology Officer, has
conducted an in-depth internal project to increase platform efficiency, which
will result in reduced costs going forward. As the Company expands its
business it will also benefit from a number of economies of scale, such as
being able to increase its Azure platform usage by up to 50% without incurring
additional cost. As noted above, the Company has also commenced selling its
customer success package as an additional service.

 

The Company expects to report gross margin for FY 2024 of approximately 39%
(FY 2023: 34.7%), with the improvement being driven by the aforementioned
actions. The Board expects this momentum to continue as the new higher-margin
contracts are signed and the benefits of the platform enhancements are fully
recognised.

 

As at 30 April 2024, the Company's total contract pipeline was £3.3m (30
April 2023: £3.6m) and the weighted pipeline was £1.3m (30 April 2023:
£1.1m). On an underlying basis, there was an increase in both the total and
weighted pipeline as management has adopted more stringent criteria for what
qualifies as pipeline compared with the prior year. Following the securement
of the Contract noted above, the Company's near-term pipeline remains strong
with the Company in the advanced stages of concluding a number of further new
contracts.

 

As at 30 April 2024, the Company had cash and cash equivalents of £807k (30
April 2023: £767k). Cash burn was £218k per month (30 April 2023: £205k),
reflecting the rebuilding of the business. Since the period end, the Company
has focussed on reducing the cash burn and, as at 31 July 2024, the Company
had cash and cash equivalents of c. £703k, reflecting the seasonality of
contract renewals as well as the Company's tight focus on cash management.
Importantly, the Company expects cash burn to reduce as the aforementioned
significant new contracts are signed and the Group begins to benefit from the
increased platform efficiency. The Contract win also strengthens Rosslyn's
position in pursuing a number of funding options to extend the cash runway to
when the Company becomes cash generative.

 

The Company will provide further detail on FY 2024 trading in its full year
results announcement.

 

Rosslyn's Artificial Intelligence Classification Engine ("AiCE")

 

As previously announced, a successful proof-of-concept of the Company's AI
solution - which utilises AI to automate procurement data categorisation and
classification - was conducted with four key customers during FY 2024.
Following further development and refinement, the new AiCE solution became
operational with the first customer in April 2024, as planned, and is
currently live with four customers. Rosslyn expects to make AiCE, which is the
culmination of several years of investment and development, commercially
available by the end of the first half of the current financial year, when it
will be sold as an additional classification-as-a-service module.

 

The foundation for all spend intelligence is the quality of the underlying
procurement data. By harnessing the power of AI, Rosslyn can automatically
generate the categorisations and classifications of extracted procurement
data, which is a process that must be undertaken before the data can be
analysed. Automating this process significantly increases accuracy, expands
the volume and complexity of data that can be incorporated and therefore
shortens the time to insight - which is particularly important for meeting the
increasing demand for real-time procurement insight. It also reduces the need
for time-consuming ongoing manual maintenance of classification rules and
frameworks.

 

Looking further ahead, the Company is in the process of developing a
procurement data lake which, through machine learning, can enable predictive
intelligence. Optimal performance requires continuous refining and enriching
of the data within the procurement data lake, which is most effectively
achieved through automation, particularly for organisations with large and
complex data sets. Accordingly, the Board believes AiCE represents a
transformational opportunity for Rosslyn and its customers and looks forward
to updating the market on its progress.

 

* Adjusted to exclude exceptional items, share-based payments and convertible
loan interest.

 

This announcement contains inside information.

 

 

Enquiries

 

 Rosslyn
 Paul Watts, Chief Executive Officer                                                     +44 (0)20 3285 8008

 James Appleby, Chairman

 Cavendish Capital Markets Limited (Nominated adviser and Broker)
 Stephen Keys/Camilla Hume/George Lawson                                                 +44 (0)20 7220 0500

 Gracechurch Group (Financial PR)
 Claire Norbury/Anysia Virdi                                                             +44 (0)20 4582 3500

 

About Rosslyn

 

Rosslyn (AIM: RDT) provides an award-winning spend intelligence 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 (http://www.rosslyn.ai) . Investors
wishing to contact the Company should email investors@rosslyn.ai.

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