The pandemic has accelerated many trends and changes and arguably the most fundamental is the rise of hybrid working.
Typically, working from home was confined to a Friday, but now the idea of working from home is likely to be extended to an increasing number of days as workers proved their productivity remotely.
However, the office will also continue to serve an important base for businesses.
This trend inevitably means that businesses need to adapt to new ways of working and in particular how to manage the ‘new normal’. Handled correctly, that should generate significant cost savings for firms.
Step in, SmartSpace Software (AIM: SMART) that helps businesses to adapt to this new way of working life and aspires to become a market leader in space management technology.
Led by Frank Beechinor, SmartSpace Software is in very reputable and capable hands. Beechinor was previously chairman of online marketing specialist dotdigital – overseeing a surge in the value of the firm from £15m to over than £300m with its shares now standing at £2.60 each.
And he’s hoping to do something similar at SmartSpace. As part of the ShareBuyers’ Going for Growth series, we speak to Frank Beechinor to understand more about growth plans for SmartSpace and why he’s confident of taking the share price up from £1.55 to £5 within three years.
Firstly, please can you tell us about SmartSpace and its core value proposition?
SmartSpace Software (AIM: SMRT) is a fast-growing provider of flexible workspace software including desk, meeting room and visitor management solutions for the SME and mid-market. The three operating companies in the Group comprise:
- Space Connect – SaaS meeting room and desk booking
- SwipedOn – SaaS visitor management, desk booking
- Anders & Kern – distribution and technical support
The visitor management subsidiary, SwipedOn, is the most established, with almost 5,000 customers around the world, in 7000 locations, from small, single office firms to multinational companies, such as DHL.
With the transition to a Software as a Service “SaaS” model now successfully complete, following the successful sale of the legacy Enterprise business in 2020, the Group’s value-for-money platforms offer short sales cycles and are quickly deployed. The roadmap out of lockdown has been a key driver of growth as companies seek to ensure workspaces offer flexible, productive, and COVID-secure environments while offering the opportunity to reduce footprint.
So, what drives demand? SmartSpace’s solutions supports the shift to hybrid working which is something both employers and staff are embracing as part of the current and future work culture. With businesses reducing office / floorspace but without reducing headcount the challenge for a business is to manage where their staff sit when they arrive in the office – “How do I know I will have somewhere to sit when I arrive at the office”.
SmartSpace’s platforms provide better employee/visitor experience – smooth check-in, notifications, pre-screening and badge printing. Similarly, businesses can better optimise real estate, generally the second highest fixed costs in most businesses. In London, for example, every desk costs an average of more than £25,000 a year in terms of rent and associated facilities, so cutting back on office space can deliver serious cost-savings. Further cost savings can also be illustrated with the visitor management tool, which reduces reception head count and the need for additional spaces. From a regulatory perspective, there is also better record keeping, helping customers create Covid-safe working environments, manage social distancing in the workplace, room/desk hygiene etc. So, in essence, it’s a ‘must have’ proposition.
As a result, software solutions such as SmartSpace, which optimise building capacity and ROI while ensuring employee safety and engagement will be primary drivers of corporate spend. Market commentators agree, by saying that SmartSpace is at the start of a multi-year growth phase driven by core organic growth, an enviable direct sales channel, strong distribution partnership agreements and considerable scope for international expansion. As such, it creates an exciting growth proposition at this time in its development where most of the risk has gone and the upside has huge opportunities.
Last year was admittedly tough for many businesses – how did this impact you?
In essence 2020 was a game of two halves for SmartSpace. In the first half we announced challenges to the business, specifically within Enterprise, our legacy work optimisation business, but also the impact of Covid-19 which translated into lockdowns across the globe. Within our April trading update we confirmed that we were withdrawing our previous guidance for the year ending 31 January 2021. This was reflected in the share price pressure experienced between January to June 2020 where our share price languished around the 20-30p mark.
Moving into the second half of the year we kick started our recovery at the end of July 2020 by announcing a positive trading update whilst also announcing that we were incorporating Covid-19 functionality into the Group’s products. Our ‘go to market’ strategy for Space Connect is via an indirect model through dedicated channel consisting of partners, distributors and resellers around the globe. We were therefore delighted to add Softcat as a partner. This agreement was significant for SmartSpace as it was the largest distribution deal we had concluded to date for Space Connect and it was also our first agreement with a major system integrator outside of the AV market. Softcat’s extensive customer base and reputation in the UK and Ireland is second to none. In the runup to this agreement we worked closely with the Softcat sales team and both organisations quickly established a good working relationship. The strength of this relationship was underlined by the fact we had already secured a number of customers for Space Connect through Softcat. SwipedOn proved to be particularly resilient during the pandemic, with a simple and effective SaaS software product offering. The number of customers across multiple geographies, combined with not being overly dependent on any one client or vertical market, helped us successfully navigate what could have been a very difficult time.
To achieve what was a record month in June 2020, both in terms of numbers of locations and monthly recurring revenue “MRR” growth, underlines the strength of the SwipedOn business. Our aim was to maximise our indirect routes to market and I am pleased that we made good progress on this strategy. We used Lockdown as an opportunity to engage and sign new partners. It was also good to see a significant increase in inbound enquiries for our products in all markets, as organisations planned their return to their offices. Whilst Lockdown and dealing with the pandemic was and still is difficult for many businesses, it has created opportunities for SmartSpace as customers need our technology to implement their Covid-19 policies in the workplace. Later in August 2020, the Board confirmed the sale of our legacy Enterprise business for a consideration of circa. £5million. This transaction gave us the opportunity to exit the enterprise software market and the proceeds from the sale strengthened our balance sheet ensuring that we had the firepower to fully exploit the significant opportunity that exists for our products in the small to mid-market. A base of over 7,000 locations across multiple geographies means we are not overly dependent on any one customer or group of customers and gives a great platform to build a global SaaS business in the workplace technology market. The market was quick to understand the positive sentiment to this transition and over the next period our share price recovered strongly (currently Circa. 155p)
Moving forward, economies look set to sustainably kick-start once more – how will this help your business?
Fundamentally, as markets open up, businesses return to much more normal trading patterns and confidence returns to the economy, this can only be continued good news for SmartSpace.
Within our businesses, both SwipedOn and Space Connect have successfully achieved strong growth and demonstrated robust business models through these challenging and unpredictable times. In particular, SwipedOn Desks, along with enhanced features and a focus on larger multi-location contracts, continue to be major catalysts for achieving our growth objectives for SwipedOn as positive sentiment and business confidence within our customer base continues. Within Space Connect, the continued successful relationships with our existing partners will continue to develop, as the economy once again opens up, whilst more recently-signed resellers are already growing their sales pipelines. We will also continue to expand the reseller base in new international geographies.
Whilst sales at our white label offering with Evoko Naso have been slower than originally anticipated, we understand the reasons why, as we have experienced similar delays in investment decisions from A+K customers, due to Covid restrictions. However, we are optimistic that through the second half of the year and beyond, again as economies and business open up, Naso will contribute significant revenues to the business. This confidence is underpinned by both the reopening of resellers in important overseas markets for Evoko and the signing of the first strategic contract for Naso.
As we move forward and economies kick start, we will continue to capitalise on the enormous opportunities internationally by globalising the businesses and enhancing our product offerings, with the continued focus of becoming a leading workplace optimisation SaaS business. Whilst we will continue to successfully grow the business organically, we will also consider acquiring businesses which offer accretive growth opportunities and expansion into non-English speaking ‘virgin’ territories like Japan or Korea, which to be successful, require much more localised offerings. Again, these strategic activities could provide significant longer term revenue growth.
Growth catalysts are vital for any business to appreciate in value. What are the key ones to drive SmartSpace forward?
As a SaaS business, we have very transparent KPI’s (key performance indicators) which keep us focused on trading patterns throughout the year and where growth is coming from within the key parts of the business. As we have indicated in recent financial trading updates, we continue to build on the foundations we have set over the past year. A focussed Group with emphasis on high margin SaaS Revenue and building Annual Recurring Revenue “ARR” and Annual Revenue Per User “ARPU”, throughout our business.
We will continue to offer solutions to help businesses return to the office and to better understand their real estate and help implement hybrid working, whilst being agile in meeting customers’ new demands. It is important to recognise that SmartSpace operates in a new market ‘virgin territory’ with no dominant player, so in most cases our products do not displace existing systems. Equally, the demand we sell against impacts businesses globally. Our current estimates are that it will take between 4-5 years for full penetration of workplace optimisation tools such as SmartSpace, so there are lots of opportunities to go for. Taking a deeper dive into our businesses, our visitor management division, SwipedOn, is growing well with many opportunities to accelerate growth in mid-market through a ‘Land and Expand’ strategy, which will progressively reduce CAC (cost of acquisition) and improve other metrics.
As Covid and lockdowns ease across the globe and businesses gradually return to the office, many will adopt hybrid working, implementing systems for more efficient space utilisation, thus creating a better employee experience. In this environment, demand for Space Connect will continue to grow. The agility of Space Connect to rapidly deploy to customers with a high degree of user control means that we are, particularly from a competitive perspective, ideally placed to assist these customers with their requirements. Space Connect is also gaining traction through partner channels, with our white label meeting room panel offering, ‘Naso’ revenues now flowing. There are also opportunities to significantly grow our partner network overseas. Our hardware division, A+K, which has been repositioned as a provider of smart workplace technology, will now well placed to generate more recurring revenue.
Importantly, SmartSpace has sufficient cash to execute on organic growth plans. Two of our businesses, SwipedOn and A+K are now at cash break-even and the 3rd business, Space Connect is forecast to follow in the near future. In summary, we are in a competitive position, in the right place, at the right time, in a significant market
Imagine you find yourself in a lift with Warren. What would be your ‘elevator pitch’ to summarize why he should invest?
We are SaaS savvy entrepreneurs, with excellent track records of successfully building high growth, profitable software businesses. Within SmartSpace we are confident we are in the right place, at the right time, with the right proposition and management team to build this business to be worth 3x or (500p) within three years.
This discussion with Frank Beechinor, CEO of SmartSpace forms part of the ShareBuyers’ going for growth series – helping companies with high growth potential to share their growth story.