Checkit upbeat on transition to subscription model

Workforce technology specialist Checkit reported a 28% rise in annual recurring revenue in a full-year trading update on Thursday, to £11.5m, surpassing consensus market expectations for £10.8m.

The AIM-traded firm said its net cash at year-end on 31 January totalled £15.6m, which was also higher than consensus expectations for £15.2m.

It said that despite a challenging economic and political environment, its recurring revenue growth was better than expected in the second half, driven by consistent sales momentum and contracts signed, offering further expansion opportunities.

The company's US market expansion achieved 91% year-on-year annual recurring revenue growth to £2.8m, thanks to several contract wins, including continued growth in its footprint with biopharma customers and a new contract with a large resort and casino operator.

Checkit renewed one of its largest existing enterprise contracts with an integrated energy company in the period, to provide real-time operations management capability to more than 300 sites.

The company reported that recurring revenue growth had topped 30% for the third year in a row, and now accounted for 93% of total revenue, demonstrating a successful transition to a subscription-based model.

Non-recurring revenue declined compared to the 2022 financial year as planned, due to the ongoing conversion of US customers from maintenance contracts to subscription income.

Following the decision to close the Building Energy Management Systems (BEMS) business unit, revenue from discontinued operations in the year totalled £0.6m.

The group said it was now entirely focussed on delivering recurring revenue from its technology solutions.

Checkit's net cash as at 31 January was £15.6m, and the company said its balance sheet remained strong.

The firm said it would further update shareholders as part of its preliminary results, set to be issued by the end of April.

“We are pleased to have delivered strong growth in annual recurring revenue and a robust cash position, both of which are ahead of market expectations,” said chief executive officer Kit Kyte.

“We expect the positive sales momentum to continue and as we enter the 2024 financial year, we will look to continue to expand our US presence and build on the successes of the past year.”

At 1017 GMT, shares in Checkit were up 2.59% at 30.78p.

Reporting by Josh White for Sharecast.com.