Engage XR warns of contract delays

Virtual reality (VR) and metaverse technology company Engage XR warned of some contract delays in a trading update on Tuesday.

The AIM-traded firm said that it had been actively expanding its recurring revenue proposition throughout the year with significant achievements.

Notably, its Engage Link platform had gained traction, attracting more than 15,000 licensed enterprise and education customers.

The group also secured a substantial K-12 education licence deal with a US state as a pilot programme, encompassing 5,400 users.

Additionally, Engage XR's portfolio saw growth through substantial deals with the educational clients Optima Domi Academy and Victory XR, all contributing significantly to its 2023 revenue.

Moreover, Engage XR inked a six-figure contract with one of the world's largest banks, using the Engage platform for an employee onboarding event.

The board said the company's sales pipeline showed consistent growth in the second half, with solid demand for its technology, particularly within the education, training, and development sectors.

However, Engage XR anticipated that some contracts it had expected to finalise in the current financial year would likely be recognised in 2024.

The shift was attributed to the launch of Lenovo's new ThinkReality VRX all-in-one virtual reality headset in June.

As a result, the expected benefits of Engage XR's partnership with Lenovo hardware were now anticipated to materialise in the first quarter of 2024 rather than the fourth quarter of 2023, with a relaunch featuring Engage AI features scheduled for the CES technology trade show on 19 January.

The board expected total group revenue for the year ending 31 December to range between €3.6m and €3.8m.

Engage revenues were set to account for over 90% of group revenue, with recurring revenues from Engage projected to make up about 65% of group revenues.

At the same time, non-Engage-related revenue streams, including Apollo 11, Titanic VR and Shuttle Commander, were expected to decrease from €0.54m to €0.35m, in line with expectations.

The company said it was managing costs to align with revenue growth and, as a result, expected to report an EBITDA loss of €4.6m.

Engage XR said it expected to maintain a net cash position of €7.3m by year-end, providing sufficient funding to break even in the short to medium term.

"2023 has been a very valuable year for gathering data on the true value proposition of Engage to our customer base," said chief executive officer David Whelan.

"We are seeing a move away from our historic offering of one-off remote events with a focus on driving our recurring revenue model with encouraging progress being made in the education, training and development verticals.

"In a marked change in 2023 education, training and development revenue now comprise a bigger percentage of overall Group revenue compared to enterprise revenue whereas in 2022 enterprise revenue was almost double that of education, training and development."

Whelan said big contract wins in the US showed that education-based customers were willing to invest heavily in Engage and saw their return on investment as less time to train employees and better educational outcomes overall.

"Up to now, Engage has been the build-anything-you-wish platform in a similar way to WordPress for website development.

"We have had a broad and varied user base over the past three years, which has enabled us to see what works and, more importantly, what doesn't."

Whelan said the firm now had a "clear and visible" customer base, which is where its focus would be in 2024 and beyond.

"2023 has indeed been challenging but extremely informative and now it is time to capitalise on the opportunity before us to generate meaningful revenues and expand our customer base."

At 1420 GMT, shares in Engage XR Holdings were down 14.29% at 2.4p.

Reporting by Josh White for Sharecast.com.