Unaudited interim results for the six months ended 30 September 2024

Eckoh plc

(“Eckoh”, the “Group”, or the “Company”)

Unaudited interim results for the six months ended 30 September 2024

- Cloud transition driving higher margins and quality of earnings
- North America territory 51% of revenue share

Eckoh plc (AIM: ECK) the global provider of Customer Engagement Data Security Solutions, is pleased to announce its unaudited results for the six months to 30 September 2024.

Strategic highlights

• Our drive to transition clients to a cloud-based SaaS solution model continued successfully, 100% of all new client wins during the period were for cloud deployment and North American revenue is now 68% cloud
• Global commercial strategy is progressing well - North America now accounts for more than half of Group revenue validating our approach on focussing on this big geographic market opportunity
• Good progress with the cross-sell and expansion strategy of existing client accounts, with new business from our existing clients growing by 24%
• The pipeline for new products from our expanded cloud Secure Engagement Suite, has grown substantially
• Increasing interest in AI bots for contact centres, which provides a further opportunity for growth
• North America pipeline remains very strong, but the elongated sales and contracting cycles continue to delay contract completion and therefore revenue
• Increased regulation from the new PCI DSS v4.0 standard, effective from April 2024, has increased complexity and cost of compliance for merchants and we are seeing tangible signs of the impact the standard is having
• Optimally positioned as market leader for the increased outsourcing trend driven by regulatory change (PCI DSS v4.0), hybrid working and growing security challenges for companies
• The business continues to benefit from the transition to a SaaS business model and cloud deployment with further improvements expected for recurring revenue, operating margins and quality of earnings
• Post-period in October, we secured more than $3m of new client contract value in North America and with the strength of the pipeline we expect the second half to be stronger for new business wins, in common with the prior year

Financial highlights

• Total contracted business⁶ at £14.9m (H1 FY24 £24.6m), was as anticipated lower year-on-year due to the number of large multi-year North American renewals in the prior period
• New business contracted in North America for Security Solutions, up 67% to $5.3 million (H1 FY24 $3.2 million)
• Group ARR1 £30.2 million, level at constant currency and down 1% year-on-year
• North America performing strongly with Security Solutions ARR¹ up $1.7m or 10% to $18.5m (H1 FY24: $16.8m)
• Group revenue £16.8m, (H1 FY24: £18.8m), down £2 million year-on-year o The ongoing reduction of one-off revenue year-on-year from the transition to cloud delivery continues to temper revenue growth with the removal of hardware fees and reduction set up costs being recognised.
• Group recurring revenue² increased to 91% (H1 FY24: 83%), reflecting the continued shift to the cloud and strong renewals
• Improved Gross profit margin at 86% (H1 FY24: 83%), an increase of 350bps
• Adjusted operating profit⁴ £3.6m (H1 FY24: £4.0m), includes £0.1m FX loss in both years
• Adjusted operating profit margin improving marginally to 21.6% (H1 FY24: 21.4%)
• Strong cash generation with net cash of £10.4m at period end, up £2.1m from £8.3m at year end (H1 2024: £7.3m)
• Working capital cash outflow reduced as expected to £0.8 million (H1 FY24 £1.6 million), in line with the full year expectation of working capital cashflow being neutral
• Eckoh’s balance sheet remains robust, with no debt or drawdown on credit facilities

Nik Philpot, Chief Executive Officer, said: “Our global commercial strategy to focus on North America where we see the greatest opportunity for growth, is progressing well. North America now accounts for over half of Group revenue and the pipeline remains strong, but the backdrop remains challenging as larger enterprise opportunities continue to have more complex and longer sales cycles that are harder to predict from a timing perspective.

Good progress has been made with our other strategic objectives as we have strongly grown the value that we cross-sell into our existing clients from our expanded Secure Engagement Suite and continued our migration to a SaaS cloud business with 68% of our North American revenue now cloud delivered and 100% of all new client wins were for cloud deployment.

I would like to take the opportunity to thank our employees for their continued dedication to our business as we work towards our mission to make the world more secure and to set the standard for secure interactions between consumers and the world's leading brands."

Details of the recommended cash offer for Eckoh by Eagle UK Bidco Limited (“Bidco”), an indirect, wholly-owned subsidiary of certain funds managed by Bridgepoint Advisers II Limited

On 30 October 2024, the boards of Bidco and Eckoh announced that they had reached agreement on the terms and conditions of a recommended cash acquisition by Bidco of the entire issued and to be issued share capital of Eckoh (the “Acquisition”). The Acquisition is intended to be implemented by way of a Court-sanctioned scheme of arrangement under Part 26 of the Companies Act (the “Scheme”). On 4 December 2024, Eckoh announced that it had published a circular in relation to the Acquisition (the “Scheme Document”). Notices convening the Court Meeting and the General Meeting for 11.00 a.m. and 11.15 a.m. respectively on 6 January 2025 (or, in respect of the General Meeting, as soon thereafter as the Court Meeting is concluded or adjourned), each to be held at Telford House, Corner Hall, Hemel Hempstead, Hertfordshire HP3 9HN, are set out in the Scheme Document. The Acquisition remains subject to the satisfaction or (where capable of being waived) waiver of certain Conditions set out in the Scheme Document, including (but not limited to) (i) approval of the Scheme by Scheme Shareholders, (ii) the passing of the Resolutions necessary to implement the Scheme by the requisite majorities at the General Meeting, (iii) sanction of the Scheme by the Court at the Sanction Hearing, and (iv) delivery of a copy of the Court Order to the Registrar of Companies.

The Eckoh Independent Directors, who have been so advised by Stifel and Singer Capital Markets as to the financial terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable. In providing advice to the Eckoh Independent Directors, Stifel and Singer Capital Markets have taken into account the commercial assessments of the Eckoh Independent Directors. Stifel and Singer Capital Markets are providing independent financial advice to the Eckoh Independent Directors for the purposes of Rule 3 of the Code. Accordingly, the Eckoh Independent Directors recommend unanimously that Scheme Shareholders vote in favour of the Scheme at the Court Meeting and that Eckoh Shareholders vote in favour of the Special Resolution and Eckoh Independent Shareholders vote in favour of the Rule 16.2 Resolution, both at the General Meeting, as the Eckoh Independent Director who holds Eckoh Shares has irrevocably undertaken to do in respect of his own beneficial holdings of Eckoh Shares.

The expected timetable of principal events is set out on page 10 of the Scheme Document. Capitalised terms used in this section shall, unless otherwise defined, have the meanings set out in Part IX (Definitions) of the Scheme Document.