Significant Investments Made in Product & UK Market Launch

NZX and Media Release

22 August 2022

GEO MAKES SIGNIFICANT INVESTMENTS IN PRODUCT IMPROVEMENTS AND UK MARKET LAUNCH

GEO (NZX.GEO, the Company) today announces its unaudited financial results for the year ended 30 June 2022, with details of the accelerated investment programme undertaken following its capital raise in October 2021.

Summary
● Financial Result to 30 June 2022: Reflecting the Company’s accelerated investment in product and technology capability and the launch of its UK office, its net loss from operations increased by 77.7% to $(3.2)m(1), its EBITDA(2) loss increased by 160.2% to $(2.0)m and operating and investing cash outflow (excluding impact of $1.3m funds invested into term deposits) increased by 113.8% to $(2.7)m.
● Revenues: Subscription revenues were up 1.2% to $3.1m, while the annualised recurring subscription revenue run rate (ARR) at year end increased by 5.9%. Group revenues decreased by 11.2% (due to prior year impact of discontinued operations and now-discontinued COVID-19 subsidies).
● Customer Wins: FY22 saw a continuation of the strong positive trendlines in customer acquisition:
- new customer wins up sharply with 85% growth over PCP, new licence sales up 72% on PCP, and new customer ARR up 80% on PCP;
- new customer growth of 55% on starting customer numbers; and
- new customer ARR growth (i.e. before churn) of 23.6% for FY22, with the year-end run rate up to 30.4% (v 18.6% at end of FY21(3)).
● Licence numbers per customer: New customers onboarded averaged 3.5 licences versus the existing customer base average of 9.0 licences. Geo customers typically sign up at lower licence levels and then gradually increase licences over time as their businesses grow or broaden usage of the product across entire teams.
● Retention: Average ARR retention decreased from 90.5% in FY21 to 83.8% due to a mix of large new customer numbers and churn from the Company’s legacy platform. Significant product upgrades from September 2022 and improved onboarding approaches are expected to improve retention rates from Q2FY23.
● Cost base: Operating costs increased by 18.1% due primarily to increase in customer acquisition marketing costs and the partial year impact of the doubling of the Company’s Product & Development teams. R&D costs increased by 4.2%, while general overheads were reduced by 7.9%.
● UK: All major UK launch expenses were incurred in FY22, with initial conversion rate improvements observed due to the establishment of a local presence.
● Sales and Marketing: staffing and spend increased by 84% as customer acquisition activities grew in ANZ and launched in the UK, delivering an 85% increase in new customer sales over FY21. Increasing spend in alignment with product releases is expected to drive sustained growth.
● Cash Flows and Capital Position: Investing and operating cash outflows (excluding cash invested on term deposit) increased by $1.5m to $2.7m, reflecting increased marketing ($0.4m), staffing (including capitalised R&D) ($0.2m) and one-off COVID grants and sale proceeds from discontinued operations received in PCP ($0.4m). Monthly operating and investing cash burn averaged ~$0.4m in Q4 reflecting the full run rate of new staffing costs. As at 30 June 2022, GEO had $4.1m in cash at hand and on term deposit.
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1. All figures are for the twelve months ended 30 June 2022 unless otherwise stated.
2. Earnings before Interest, Tax, Depreciation and Amortisation, excluding discontinued operations
3. Based on Q4 rate annualised
4. All comparisons are versus FY21 unless otherwise stated 

Financial Year Summary [See table in attached PDF]
 
Commentary

CEO Commentary FY22

Tim Molloy said:
“We are delighted to have delivered four consecutive record quarters in new customer growth during FY22. Our go-to-market and sales operations are well established in Australia and New Zealand, and we have progressively increased our investment in them on the back of strong results.
“In the UK we now have dedicated resources on the ground addressing this large and attractive market. Our UK results continue to improve as we learn and respond to the subtle differences of that market. Our investment there provides a compelling medium-term growth opportunity for GEO.
“Our strong new customer revenue growth was offset by lower customer retention than expected. Q1 retention was affected by COVID, with Q2 bouncing back to target levels. In Q3 and Q4 retention dropped due to a combination of lingering COVID and product issues, which we are rapidly resolving. With the first of a number of major product upgrades scheduled from September 2022, we are confident that retention will trend back to targeted levels.
“We have accelerated our investment in product and engineering in order to innovate at speed and deliver the product features our customers want. Major new functionality releases will improve customer retention and enable the business to scale through customer acquisition.
“While the combined investment in product, technology and the UK have driven an increased cash burn, we are confident these investments will underpin customer retention, new customer acquisition and improved financial metrics moving forward. We note that at Q4 rate of customer acquisition, a reversion to targeted retention rates would result in net ARR growth of ~21%.
“I would like to thank the GEO team for their dedication, hard work and focus as we continue to advance our company.”

Chair Commentary FY22

GEO Chair Rod Snodgrass said:
“With a solid shareholder base encouraging GEO to innovate and grow faster, we have doubled the size of our product and engineering teams, laid the groundwork for faster innovation and have opened our first international office, in the UK. We are confident these measures will deliver strong metrics.”

For more information:
Tim Molloy
Chief Executive Officer
Tel: +61 411 592 180
Email: [email protected]


ABOUT GEO
Geo is a leading SaaS business that provides smart software platforms for tradies, field and home service businesses. The market for Geo’s products is growing quickly as the global mobile workforce expands. Geo’s simple yet powerful software platform helps business owners reduce the complexity of running their business whilst saving time and improving cashflow. For more information: www.geoworkforcesolutions.com

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Announcement PDF