Final Results and Publication of Annual Report

29 October 2024

Rosslyn Data Technologies plc

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

Final Results

and Publication of Annual Report

Rosslyn (AIM: RDT), the provider of a leading cloud-based enterprise spend intelligence platform, announces its final results and gives notice of the publication of its annual report for the year ended 30 April 2024.

Financial summary*

·      Revenue of £2.9m (2023: £3.0m)

·      Gross margin was 38.8% (2023: 34.7%)

·      Operating expenses were £4.7m (2023: £3.8m)  

·      Adj. EBITDA** of £2.5m loss (2023: £2.0m loss)

·      Net cash used in operating activities was £2.2m (2023: £2.7m)            

·      Cash burn rate was £218k per month (2023: £205k)

·      Cash and cash equivalents of £646k as at 30 April 2024 (30 April 2023: £767k); post year end, Rosslyn raised £3.1m through the issue of new ordinary shares and convertible loans and the Group's Chairman confirmed his intent to subscribe for an additional £264k following the release of the Group's full year results

* The 2023 comparatives are for continued operations only (see note 5)

** A reconciliation of adjusted EBITDA loss can be found in the Financial Review

Operational summary

·      Performance against operational key performance indicators ("KPIs"):

o  Annual recurring revenue ("ARR") of £2.3m (2023: £2.4m), representing ARR reduction of -4% (2023: 8% growth)

o  Total pipeline as at 30 April 2024 was £3.3m (30 April 2023: £3.6m) and weighted pipeline was £1.3m (30 April 2023: £1.1m)

·      Launched new AI-powered classification solution - now live with four customers

·      New contracts won with a blue-chip European med-tech company and international transport consultancy

·      Implemented key operational enhancements to drive margin improvement  

·      Secured, post year end, a major new client that is a leading global technology company and household name

Paul Watts, CEO of Rosslyn, said:

"Following a period of significant transition as we transformed our business - having reset our strategy, had that strategy validated and established the foundations to execute - we believe that we are now at an inflection point. We are particularly pleased with the progress that we have made with our AI-powered solution, AiCE - and the contribution our AI development made to securing our major new client win, which is of substantial significance and a further validation of our strategy.

"Looking ahead, we are now ramping up our sales & marketing activities following our recent fundraise, particularly to support the commercial launch of AiCE, which marks our transition to delivering 'spend intelligence' and going beyond spend analytics or data visualisation. By unlocking the value of data that sits across the supply chain, we can provide the strategic insights that are required by procurement teams today. Accordingly, and with our recent fundraise and the improvements made to our operational model during the year, we remain greatly excited about Rosslyn's prospects."

This announcement contains inside information as stipulated under the Market Abuse Regulations (UK MAR).

Enquiries

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. Investors wishing to contact the Company should email [email protected].

Operational Review

During the year, Rosslyn's focus was on the modernisation of its technology, particularly with the development and launch of its artificial intelligence ("AI") solution, and securing some very large enterprise partnerships. In particular, the Group's AI development work made an important contribution to securing, post year end, a major new client win. The Group also implemented changes to its operating model to better position Rosslyn for sustainable growth going forward. This was undertaken against a backdrop of needing to maintain tight cost control and, accordingly, allocating resources to prioritise investment in what the Board believes to be transformational opportunities for Rosslyn.

Customer wins

Rosslyn secured two new contracts during the year worth £422k in aggregate over a multi-year period and equating to an additional £120k in annual recurring revenue. The contracts are with a blue-chip European med-tech company, which sells its products via its 9,000+ shops and outlets in over 20 countries, and an international consultancy that provides services and solutions to the transport industry and is utilising the Rosslyn platform on behalf of a UK train operating company.

During the year, the Group made a substantial resource investment towards securing its major new client win, with the contract signed post year end. The customer, headquartered in the US, is one of the world's largest technology companies, a global household name and one of the top-10 Fortune 100 companies. As noted above, a key consideration in Rosslyn's appointment, which followed an extensive nine-month competitive tender process, was the development work being undertaken to automate the data classification process and to establish an enterprise-grade procurement data lake. To be appointed by an organisation of this magnitude is, the Board believes, a significant endorsement of Rosslyn's offering. The initial three-year contract, which is of significant commercial value, also brings further possible growth opportunities through expansion into the customer's other divisions and operations beyond the central procurement department.

Partnerships

The Group continued to make progress on its renewed go-to-market approach centred on a partner model. With Chain IQ, a business process outsourcing partner, Rosslyn completed an extensive process of aligning ChainIQ's business model with the Group's technology value add to the point that the Rosslyn solution is now strategically embedded in all of ChainIQ's offerings. The Group is already beginning to see transaction volumes significantly increase as a result of this.

Rosslyn significantly enhanced its relationship with a global consulting partner. The Group is in advanced negotiations, after a lengthy and competitive tender process, to replace the internal spend intelligence tool of this partner, which is one of the world's five largest consulting firms. The partner has also already introduced Rosslyn to a number of new business opportunities, and the Group expects to sign the first customer in the near term. As with Rosslyn's aforementioned major new client win, the sales and implementation cycles with partners such as these are complex and prolonged - commensurate with their size and growth potential. 

Rosslyn is also in the process of establishing a new type of partnership that will allow it to offer strategic procurement consulting services, focusing on matters such as tail spend management, maverick spend management and vendor consolidation. This would be a value-add service for Rosslyn customers that the Group would deliver via partnership with best-of-breed boutique consulting practices. This also forms part of Rosslyn's evolution from providing spend visibility to spend intelligence and facilitating impact realisation.

Platform

An important part of Rosslyn's activities during the year, and which was completed subsequently, was the work undertaken to modernise the platform architecture and to make it as AI-ready as possible. This has included, for example, transitioning to running on more scalable serverless platforms rather than traditional virtual machines. Through this exercise, Rosslyn has increased platform efficiency, which will reduce operating costs while enhancing reliability and robustness. It is also what enabled the Group to launch and bring to market its first generation of AI solutions. 

AI innovation

The most significant development during the year was the launch of Rosslyn's AI solution, its Artificial Intelligence Classification Engine ("AiCE"). After a successful proof-of-concept, AiCE became operational with a first customer in April 2024, which, since year end, was expanded to four customers. Thanks to the calibre of Rosslyn's client base, the solution has been stress tested and proven by substantial enterprises - attesting to its strength. It has now been made commercially available as an additional classification-as-a-service module, and Rosslyn expects to receive its first revenue by the end of the current financial year.

With AiCE, Rosslyn is aiming to unlock the asset value of the data that sits across a customer's supply chain by using technology to make it procurement-relevant. The data often sits across multiple systems and has not been classified - essentially, indexed - in a format that can be interrogated and leveraged by procurement teams. AiCE automatically generates the categorisations and classifications of extracted procurement data. Automating this process significantly increases accuracy, expands the volume and complexity of data that can be incorporated and therefore shortens the time to insight. It also reduces the need for time-consuming ongoing manual maintenance of classification rules and frameworks. The Group's aim is to build the most automated, dynamic technology, and establish Rosslyn as the leading provider, for data classification and enterprise customer taxonomy management.

Looking further ahead, the Group's plan is to innovate on top of this architecture with next-generation AI technology that can generate intelligent - or predictive - insights. By building an enterprise-grade procurement data lake and integrating with third-party sources, Rosslyn will be able to provide a far more interactive, data-led means of driving procurement strategy and unlock insights extending beyond pure savings - looking at sustainability, diversity and, ultimately, supply chain transformation.

Customer Success

Rosslyn continued to invest in its Customer Success function - building on the significant work undertaken in the previous year. This is helping the Group to transform the customer journey, which is enabling the generation of larger commercial returns from each customer - through the up-sell or cross-sell of new product modules and providing more value realisation. The Group has also introduced the Customer Success function as an additional chargeable service, which creates value for customers by enabling them to maximise their use of the Rosslyn platform and more effectively identify risk in the supply chain.

Financial Review

While still at the relatively early stages of implementing its renewed strategy, the actions that the Group has taken during the year to improve its financial position are beginning to bear fruit. In particular, gross margin was significantly increased through adjusting its professional services fees. Alongside this, an in-depth internal project was conducted to increase platform efficiency, which will result in reduced costs going forward. As the business expands, the Group will 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. The Group also took a strategic decision to prioritise quality of revenues. As a result, and alongside the recent fundraising, the Board believes the Group is positioned for sustainable growth.

Revenue

Revenue for the year was £2.9m (2023: £3.0m), of which £2.3m was annually recurring revenue ("ARR") compared with £2.4m in 2023. The reduction reflects the Group's strategic decision to exit unprofitable business lines and the protracted timelines associated with contract negotiations for the sizable new opportunities that have been secured. 

The Group's revenue comprises the annual licence fee - software revenue - that customers are charged for having access to the Rosslyn platform and professional services fees for work undertaken to tailor the Group's solution to align with customers' infrastructure or meet specific additional solution requirements. Software revenue continued to be the main contributor to revenue, generating £2.3m (2023: £2.4m) and accounting for 79% of total revenue (2023: 80%). Professional services revenue remained stable at £0.6m (2023: £0.6m), and accounted for 21% of total revenue (2023: 20%).

Gross profit

Gross margin improved to 38.8% (2023: 34.7%), primarily reflecting the introduction during the year of increased pricing for the Group's professional services work to appropriate market levels, which applies to new and renewed customer contracts. As a result of the improved gross margin, gross profit increased to £1.1m (2023: £1.0m).

Operating expenses

Operating costs were £4.7m (2023: £3.8m). This primarily reflects administrative expenses being higher at £4.1m (2023: £3.4m) as Rosslyn began to rebuild the business. Depreciation and amortisation expenses were £0.4m (2023: £0.4m), relating to the amortisation of development costs relating to the continued upgrading of the platform.

Profitability measures

Adjusted EBITDA* loss was £2.5m (2023: £2.0m loss) as set out in the table below:

*Adjusted EBITDA is defined as earnings before interest, taxation, depreciation, amortisation, exceptional items and share-based payments. The change in the value of share-based payments is adjusted when calculating the Group's adjusted EBITDA as it has no direct cash impact on financial performance. Adjusted EBITDA is considered a key metric to the users of the financial statements as it represents a useful milestone that is reflective of the performance of the business resulting from movements in revenue, gross margin and the costs of the business removing exceptional items (£195k relating to old contractual issues, £30k relating to management consultancy costs, employment restructuring costs of £190k and £84k relating to the surrender of a lease), which are believed to be not representative of the ongoing business.

Operating loss was £3.5m (2023: £2.8m loss). The increase in operating loss and adjusted EBITDA loss reflects the higher operating expenses.

Loss before tax for the year was £3.6m (2023: £2.8m loss). The Group had receivable tax credits of £235k (2023: £664k). As a result, net loss for the year was £3.4m (2023: £2.1m loss).

In addition, in the previous year the Group generated profit of £2.5m from discontinued operations (2024: £nil). Accordingly, total comprehensive loss for 2024 was £3.4m compared with total comprehensive income of £0.4m for 2023.

Cash flow and liquidity

Net cash used in operating activities was reduced to £2.2m (2023: £2.7m), which reflects the receipt of £0.6m in R&D tax credits (2023: £0.03m expense). Cash used in operations was £2.8m (2023: £2.7m).

Net cash used in investing activities was £0.7m compared with £1.0m of cash being generated from investing activities for the previous year. The change primarily reflects £1.5m of cash being generated from the disposal of operations in the previous year (2024: £nil). Cash used in investing activities primarily comprised investment in software of £0.6m (2023: £0.5m).

Net cash generated from financing activities was £2.8m (2023: £0.03m). This primarily reflects the fundraising undertaken during the year.

Accordingly, there was a decrease in cash and cash equivalents of £0.1m before the effects of foreign currency translation compared with a £1.7m decrease in 2023.

Cash and cash equivalents at 30 April 2024 were £646k (2023: £767k). The Group's cash position was significantly strengthened post year end with the raising of £3.1m via the issue of new ordinary shares and convertible loan notes. In addition, and as previously announced, James Appleby, Non-Executive Chairman, has confirmed his intention to subscribe for £264k following the release of the Company's full year 2024 results, resulting in total funds raised being approximately £3.4m.

Balance sheet

As at 30 April 2024, the Group had net assets and total equity of £1.3m compared with £1.9m at 30 April 2023. The main movements in the balance sheet during the year were:

·    a decrease in current assets to £2.0m (30 April 2023: £2.6m) reflecting lower trade and other receivables and corporation tax receivable;

·    an increase in intangible assets to £1.6m (30 April 2023: £1.4m); and

·    non-current liabilities increasing to £0.3m (30 April 2023: £0.1m), comprising non-current financial liabilities (borrowings) of £0.3m as at 30 April 2024 (30 April 2023: £nil) and £nil non-current trade and other payables (30 April 2023: £0.1m).

Material uncertainty to going concern

As discussed in note 2 below, the Board considers the Group to be a going concern. However, if the Group is unable to generate its proposed revenue projections, particularly around the levels and timing of new business forecast that have not been secured yet included in the projections, there is limited headroom in the current forecasts and as such there is considered to be a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern. Should the Group not meet those new revenue predictions, management plans to cut costs or look to raise capital from a number of different funding options. The independent auditors' report is not modified in respect of this matter. The financial statements do not include any adjustments that would result if the Group were unable to continue as a going concern. For further details, refer to the Going Concern section in note 2 to the financial statements.

Outlook

Following a period of significant transition Rosslyn's business has been transformed. Having reset the strategy, had that strategy validated and established the foundations to execute - the Board believes the Group is now at an inflection point. The initial results of these efforts are beginning to be recognised, most notably with the major new client win. This customer offers significant growth potential for Rosslyn, and management expect to expand the relationship before completing the initial contract. The Group is also experiencing strong momentum with ChainIQ, which is expected to be an important contributor to growth in the near-term, and it is in advanced negotiations with a significant prospective partner that is one of the world's largest consulting firms.

Rosslyn is also now ramping up its sales & marketing activities, which had been reduced during the year as the Group prioritised investment in technology and focused on securing the substantial tenders noted above. Following the recent fundraise, the Group is now investing to significantly increase this activity - particularly to support the commercial launch of its AI solution.

Accordingly, the Board is greatly excited about Rosslyn's prospects. In the near term, the Group expects to achieve positive adj. EBITDA and cash generation on a monthly basis by the end of the current financial year - which will enable accelerated revenue growth in the medium term as the Group leverages the investment that has been made to substantially strengthen Rosslyn's offer. The Board looks forward to reporting on Rosslyn's progress.

Publication of Annual Report

The Company announces that its annual report and accounts for the year ended 30 April 2024 has, today, been published on its website on the Reports and Corporate Documents page of the Investors section at https://www.rosslyn.ai/investors/reports-corporate-documents, and is being posted to shareholders today.