Checkit : Half-Year Report and Accounts 2023-24

Digital empowerment of the deskless workforce

Half-Year Report 2023

STRATEGIC REPORT

Checkit is the augmented workflow solution for frontline workers, enabling large multinational and complex organisations to operate more safely, efficiently and sustainably - driving them towards achieving intelligent operations.

At Checkit, we have hundreds of customers across the globe, including Global Fortune 500 and public health organisations. Our customers are digitising their manual processes through our highly customisable workflow software and our top-of-the-line Internet of Things (IoT) sensors. More than 14 billion sensor readings and 42 million completed workflows per year are sent through our platform, enabling our customers to become more efficient, ensure safety and deliver complete operational visibility.

Software + Sensors + Services = Intelligent Operations

Checkit is transforming how forward thinking and digital-first organisations execute frontline work, blending software, hardware and event-driven actions to deliver value across every frontline business process.

We enable organisations to progress in their digital maturity journey towards achieving intelligent operations by connecting people, assets and processes to create rich performance data which directly informs efficient operational strategy, execution and compliance.

Our proven reliable single-source digital solution drives fast and scalable efficiencies across the entire frontline workforce. Checkit has helped customers uncover operational insights that have led to transformational reductions in cost and risk and improved employee and patient experiences.

Intelligent operations make it simple for frontline workers to record their daily activities, share tasks, track progress and continually improve. Business and department leaders can quickly assess performance, visualise the entire operation and respond to changes by deploying enterprise-wide process improvements effortlessly.

STRATEGIC REPORT

HIGHLIGHTS

• Annual recurring revenue ("ARR"1) increased year on year by +24% to £12.6m at period end (H1 FY23: £10.2m), including US ARR, which grew 41% to £3.2m (H1 FY23: £2.3m)
• H1 recurring revenue increased by +22% to £5.4m
  (H1 FY23: £4.4m)
• Total Group revenue from continuing operations increased +19% to £5.7m (H1 FY23: £4.8m2)
• Gross profit increased by +30% to £3.9m (H1 FY23: £3.0m) Improved cost of sales efficiency resulted in improved gross margins of 69% (H1 FY23: 63%2)
• Operating efficiencies resulted in adjusted LBITDA3 from continuing operations reducing by 47% to £1.9m (H1 FY23: £3.5m2)
• Cash at 31 July 2023 was £12.8m (31 January 2023: £15.6m)
• The Board is confident of delivering an operating performance ahead of expectations in the current financial year3

1. Annual Recurring Revenue ("ARR") is defined as the annualised value of contracted recurring revenue from subscription services as at the period end, including committed annual recurring revenue from new wins.
2. Continuing operations only.
3. Adjusted LBITDA is the loss on operating activities before depreciation and amortisation, share based payment charges and non-recurring or special items. Analysts' Adjusted LBITDA expectations for FY24 range from £3.7m to £3.8m.

www.checkit.net

Linkedin: checkit-ltd

Twitter: _checkit

1

Contents

1. Highlights
2. Chief Executive Officer's Review

1. Consolidated statement of comprehensive income
2. Consolidated balance sheet
3. Consolidated statement of changes in equity
4. Consolidated statement of cash flows
5. Notes to the unaudited interim results

1. Web property and advisers

Checkit plc|  Half-Year Report 2023

STRATEGIC REPORT	2

CHIEF EXECUTIVE OFFICER'S REVIEW

with Kit Kyte

Sustainable growth balanced by a priority for profitability

Kit Kyte

Chief Executive Officer

14 September 2023

Overview

Amidst a continuing difficult economic environment, Checkit has performed in line with our expectations in the first half of FY24, generating an overall increase in ARR of 24% to £12.6m (FY22: £10.2m). Checkit has continued to deliver against its land and expand strategy with an exclusive focus on higher quality and higher value recurring revenue growth.

"Checkit is on an accelerated track to profitability. We're scaling growth through our land and expand model, while prioritising operational efficiency and cost reduction. Despite the challenges in the wider economy, our diverse customer base and a product suite that is built to deliver operational efficiency uniquely positions us for market capture."

Sales bookings have benefitted from a number of small wins with potential for future upsell, supported by a master service agreement signed with Compass Contract Services (U.K) Limited ("Compass") for the provision of CAM and CWM to their end users, primarily in the food services sector. Since signing the MSA with Compass, Checkit has entered into 3 new contracts with Compass and is in discussion over further opportunities.

We have also secured our largest contract renewal, with John Lewis plc, at £6m total contract value over three years. Although the sales cycle has lengthened as a result of customer caution in the current environment, our pipeline remains strong. We continue to develop new customer relationships globally with a focus on large multinational enterprise accounts and look for complementary partnerships to accelerate our expansion.

The inflationary pressures have been successfully navigated to date through the application of price increases and extending the length of customer terms. Checkit will continue to execute against its growth strategy and develop its

cutting-edge technology, whilst also applying increased focus on reducing operating costs, preserving cash and accelerating its path to profitability.

The Augmented Worker

• a platform to transform enterprise productivity
  Checkit works with hundreds of organisations across the globe, ranging from the Global Fortune 500 to single site public health providers. We automate tasks to free up their frontline workers. We help them to do the right thing in the right place at the right time, quickly and accurately. We give their managers insights that pinpoint problems and drive improvements. The result: higher productivity and quality and increased regulatory compliance.

We are on a mission to deliver technology that gets the most out of people, augmenting their capacity to do what people are good at - problem solving, customer service, decision making. We do this by:

• Integrating: connecting users to the real world using IoT sensors. We process 14 billion readings a

year, monitoring critical items like blood and millions of pounds worth of food stocks.

• Assisting: prompting users with intuitive workflows and the information they need to do their job, allowing them to collaborate in real-time. Mobile apps prompt when an action is due or when an event detected by a sensor needs action. They provide a library of guidance to be used as needed.
• Managing: providing intelligence to help track compliance and identify high and lowlights of performance across many locations. Advanced data technology provides dashboards and uses artificial intelligence to help optimise the performance
  of people, assets and processes.

Our proven, reliable, single-source digital solution drives fast and scalable efficiencies across the entire frontline workforce. Checkit has helped customers uncover operational insights that have led to transformational reductions in cost and risk and improved employee, customer and patient experience.

Checkit plc|  Half-Year Report 2023

STRATEGIC REPORT	3

CHIEF EXECUTIVE OFFICER'S REVIEW

Growth strategy and ambitions

We are meeting market demand with an unrivalled end-to-end solution with powerful AI and predictive analytics capabilities that provides meaningful insights and enables our customers to make data driven decisions. We are on track to deliver our longer-term objective: to become the market leader in augmented work management for the deskless industry. We have successfully converted Checkit into a pure-subscription business - with recurring revenues now representing 95% of total revenue. This transition provides

us with visibility over future revenue, enabling us to deepen customer relationships and opportunities to enhance contract values. We are improving our customer value proposition through continued investment in our data platform, which has the ability to integrate third party technology, to create a market leading AI solution. This is reflected in our loyal customer base, with a gross retention rate at 98%. Our sales and marketing strategy is focused around developing a higher quality sales pipeline across our target sectors as well as further expansion into the US. In the meantime, we remain focused on optimising our operating costs to accelerate profitability and deliver value to our investors. Going forward, we will consider compelling partner opportunities as an additional

importance will be our ability to execute and scale the growth opportunity ahead of us whilst targeting breakeven in FY26.

New business pipeline

The Group's focus is to continue building a high quality pipeline across food retail, healthcare, facilities management, care homes and biopharma verticals. Meanwhile, our "land and expand" sales strategy is focused on the quality of our pipeline with increased traction into mid and large-enterprise accounts. The split of the sales pipeline by target organisation size at the end of the half year between tier one (large enterprise), tier two (enterprise) and tier three (mid-size) targets was 64%, 22% and 15% respectively. Checkit's new customer pipeline in the US - a key growth market - now includes a number of multi-site organisations across the healthcare, food retail and hospitality sectors. The US is expected to become the largest contributor to Group revenues.

Revenue growth

ARR has continued to grow in line with market expectations during H1 FY24, despite the uncertain economic environment, driven by consistent execution of our "land and expand" strategy, as well as high net retention rates.

Checkit's ability to grow with its customers is seen in a net retention rate of 113%* and a gross retention rate of 98%*. Over 50% of H1 FY24 ARR growth resulted from upsell and cross sell within our current customer base, as customers continue to see the productivity and efficiency benefits which the Checkit platform enables, with the balance coming from new customer wins and pricing.

The Group has also continued its strong performance in the US, with 41% growth in ARR to £3.2m (H1 FY23: £2.3m).

ARR growth of 24% resulted in a consequent 22% growth in reported recurring revenue of £5.4m (FY23: £4.4 m). Recurring revenue growth reflects bookings achieved in FY23. A breakdown of H1 FY24 revenue from continued operations is shown below.

scale opportunity. Of paramount

 Tier 1  Tier 2  Tier 3

		Six months ended
	31 July 2023	31 July 2022
	Actual	Actual	Change
£m reported	£m	£m	%
ARR	12.6	10.2	+24%
Revenue
Recurring	5.4	4.4	+22%
Non-recurring	0.3	0.4	(21)%
Total Group	5.7	4.8	+19%

• Net retention revenue ("NRR") is defined as the amount of recurring revenue from existing customers retained over the period, excluding new wins in the period. Gross retention revenue ("GRR") is defined as the amount of recurring revenue from existing customers retained over the period, excluding new wins or upsell / expansion in the period.

Checkit plc|  Half-Year Report 2023