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(Sharecast News) - Essensys posted a return to EBITDA profitability for the year ended 31 July on Tuesday, despite a sharp fall in revenue, while the firm warned of a current year performance materially below expectations.
The AIM-listed flexible workspace software provider reported revenue of 19.2m, down 21% from 24.1m a year earlier, with recurring revenue falling 17% to 16.9m.
Run-rate annual recurring revenue declined to 15.0m from 20.3m, or 15.6m on a constant-currency basis.
Adjusted EBITDA swung to a 1.3m profit from a 0.9m loss in 2024, reflecting cost reductions and a more focused operating model, while the statutory loss before tax widened slightly to 5.7m from 5.5m.
Net cash at year-end stood at 1.8m, down from 3.1m, with the group remaining debt free.
The company said the revenue decline largely reflected the anticipated reduction in activity from one large customer, alongside a deliberate shift away from lower-quality cloud revenues towards its core Essensys Platform.
Excluding the large customer and adjusting for currency, annual recurring revenue from strategic customers fell by 2%, driven by portfolio rationalisation.
Gross margins improved to 59% from 57%, supported by a higher proportion of recurring software revenue.
Operationally, Essensys highlighted the launch of its new Elumo product across all core markets and the completion of a data centre decommissioning project, delivering 1.5m of annualised cost savings.
A post year-end restructuring refocused the business around its two core products, with dedicated teams for elumo customer acquisition and for deepening relationships and retention on the Essensys Platform.
"FY25 marked a year of significant operational progress for Essensys, underpinned by the successful launch of Elumo, the execution of substantial cost-saving initiatives and the restructuring of the business as announced in November to support our two core products with a sharpened focus on strategic customers," said chief executive James Lowery.
"This progress aided essensys in its return to EBITDA profitability, despite ongoing macroeconomic challenges, delivering 1.3m in adjusted EBITDA for the year."
Lowery said the decline in revenue also reflected a strategic repositioning of the customer base.
"While revenue reduced year on year, due to the downsizing of a customer, it also reflects a deliberate evolution of our customer portfolio and revenue mix, with a greater emphasis on scalable, higher-quality software revenues," he said, noting that the shift had improved margins and strengthened the long-term sustainability of the business.
Looking ahead, Essensys said first-quarter revenue was broadly in line with expectations but warned that full-year performance was now expected to be materially below management expectations, citing elongated sales cycles and slower-than-anticipated adoption of Elumo amid volatile economic conditions.
Management said it remained focused on customer engagement, operational efficiency and a targeted go-to-market approach.
The update came as the company continued to assess a possible all-cash offer.
As announced in November, founder and non-executive director Mark Furness submitted a preliminary, non-binding proposal to acquire the entire issued and to be issued share capital at 20p per share.
Reporting by Josh White for Sharecast.com.