ENGAGE XR Holdings Plc (AIM: EXR), a leading spatial computing and metaverse technology company, is pleased to announce its audited results for the 12 months ended 31 December 2023.

Financial Highlights:

• Total revenue for the Group was €3.7 million (2022: €3.9 million)
• ENGAGE platform revenue remained constant at €3.3 million (2022: €3.3 million)
• ENGAGE continued to take market share within the growing North American market with 60% of total ENGAGE revenue being generated in North America (2022: 35%)
• Gross profit increased by 5% to €3.3 million (2022: €3.2 million) from an improved gross profit margin of 90% (2022: 82%)
• EBITDA loss was reduced to €4.0 million (2022: loss of €5.8 million)
• The Group’s cash position on 31 December 2023 was €7.9 million (2022: €2.2 million) with no debt
• Successful fundraise of €10.5 million (€9.9 million net of expenses) in February 2023

Operational Highlights:

• ENGAGE revenue from Education customers has grown in the period to €1.1 million from €0.8 million, including a 5,400 user K-12 education license deal signed with a US state and the year also saw a growth in revenues from two other existing educational clients, Optima Domi Academy and Victory XR.
• ENGAGE total licensed Education and Enterprise users grew to approximately 15,000 users at the period end (2022: 10,000 users)

Post period end Highlights:

• In the last nine months, ENGAGE has seen four of its largest contracts close, all within the education and training arena, from a mixture of new and existing customers
• This included the signing of the Group’s first ever seven-figure deal early in 2024 with a large Middle East-based company in the education, training, and development sector
• Record revenue quarter in Q1 2024 of just over €2m contracted revenue booked in. Over 70% of this revenue is professional education
• Announced the launch of "School of AI" which an immersive learning environment, in which students can speak to notable figures of history, powered by conversational and generative AI. Full rollout planned in Q2, creating new revenue opportunities

David Whelan, CEO of ENGAGE XR, said: “2023 was a year in which the Company successfully strengthened its balance sheet but was also a year that saw many ups and downs. We are now focused on the aspects of the business that have a long-term future, namely the education and training sectors within both the education and enterprise markets. 

2023 saw a number of enterprise customers deciding not to renew contracts or renewing at lower levels and revenue for remote events and collaboration also decreased, as many tech companies mandated employees to return to the office. In contrast, 2023 also saw good growth in our education, training, and development client base. In the last nine months, we signed four of the largest contracts, within the Company’s history, including the signature of the Group’s first seven-figure deal in early 2024 with a large Middle East based company, all in the education, training, and development sector. We recently announced our School of AI initiative which is a new product offering for schools and universities to be released in Q2.

2024 has started strongly, with Q1 being our biggest ever revenue quarter and we are therefore looking forward to continuing this momentum in the current financial year. We continue to strengthen our relationships with our partners and are very focused on our work with strong platform partners such as Meta and Lenovo on growing the market away from single pay entertainment purchases. Both of these partners are highly focused on recurring revenue generators with education, training and development sectors, which is key to our strategy.

Led by our Chairman, Richard Cooper, we are well advanced in making additional appointments to our non-executive board members with a specific focus on both technology and the US west coast knowledge and networks.

Having taken steps to reduce our cost base, and strengthen our balance sheet through a successful fundraise, we believe ENGAGE is in prime position to become the largest provider of such spatial computing services globally, combined with a growing client base.”

Investor Communications

CEO David Whelan and CFO Séamus Larrissey will provide a live presentation relating to the results via Investor Meet Company on 15 April 2024, 09:00 BST.

The presentation is open to all existing and potential shareholders. Questions can be at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet ENGAGE XR HOLDINGS PLC via:

https://www.investormeetcompany.com/engage-xr-holdings-plc/register-investor

This announcement contains inside information for the purposes of the UK Market Abuse Regulation and the Directors of the Company are responsible for the release of this announcement.

For further information, please contact:

About ENGAGE XR

ENGAGE XR Holdings plc (AIM: EXR) is an extended reality (XR) technology company focused on becoming a leading global provider of virtual communications solutions through its new fully featured corporate metaverse, ENGAGE Link. A demonstration of ENGAGE Link is https://youtu.be/2OHtimtFY3M?si=Ng0-mwgUpTgU4wtl

The Company also has a proprietary software platform, ENGAGE. ENGAGE provides users with a platform for creating, sharing, and delivering VR content for education, training, and online events through its three solutions: Virtual Campus, Virtual Office, and Virtual Events.

For further information, please visit: www.engagexrholdings.com (LinkedIn: @Engage XR Holdings plc Twitter: @engage_xr)

CHAIRMAN’S STATEMENT

Our aim is to become a leading global provider of virtual communications solutions through our proprietary software platform, ENGAGE. However, it has been a challenging year with an uncertain macro-economic backdrop which manifested itself most acutely in the legacy of the “tech crash” in Autumn 2022 and continued to impact us throughout 2023.

Revenue decreased by 5% to €3.7 million (2022: €3.9 million). A longer sales decision-making cycle in our customer base, due to economic uncertainties, together with some enterprise customers not renewing their contracts or renewing at lower levels meant we were disappointed not to deliver the revenue growth we were targeting. Gross profit however increased by 5% as the Company improved gross profit margin to 90% (2022: 82%).  Staff and contractor costs fell to €6.2 million, down from €7.0 million in 2022, a 11% reduction, which was the result of an aggressive cost-cutting program.

The Company has seen increased interest from the education and training sectors. The Board continue to see meaningful opportunities to increase metaverse use within these sectors. The Board believes that the specific areas the Company is targeting, such as remote education, and the way in which organisations interact with staff, suppliers and customers will be transformed by the Metaverse. As a result, the Board remains focused on selling to and servicing universities and other education establishments whilst continuing its sales push to global enterprise customers.   

We were delighted with the response to the ground-breaking concert hosted in ENGAGE early in 2023 by the renowned international musician, Norman Cook, aka Fatboy Slim. The concert demonstrated the versatility and capabilities of VR and how it enables corporations to creatives to build their own worlds within ENGAGE that can be used for entertainment, business engagements and so much more.

In February 2023, we successfully completed a €10.5m equity raise (before expenses) to bolster the Group’s balance sheet and to help us deliver on our ambitious growth plans. At 31 December 2023, we had funds of €7.9 million and earned €0.2m of interest during the year.

I would like to thank Praveen Gupta for his service as a director from 6 July 2020 to 8 December 2023 when he retired from HTC, a leading shareholder and customer. Following his departure, we are looking to strengthen the Board and have been searching for candidates who can bring additional contacts, networks and technology experience to the Group. This process is well advanced, and we will be making an announcement soon.

We have seen a strong start to 2024 and therefore the management team and the Board are looking forward to the future with optimism. I would like to thank everyone at ENGAGE XR in delivering great progress in what has been a challenging environment. Furthermore, I want to thank our shareholders for their continued support.

Richard Cooper
Non-Executive Chairman
15 April 2024

CHIEF EXECUTIVE’S REVIEW

Overview

2023 has been a year of clarity for the ENGAGE team in understanding our value proposition and revenue opportunities in a post lockdown world. Although ENGAGE revenue was impacted by delays in contracts being signed towards the year end, enterprise customers either not renewing contracts or renewing at lower levels and a decrease in revenues for one off remote events and collaboration, we have grown our education, training, and development client base to partially replace these revenue streams.

In the last nine months, we have signed four of the largest contracts, within the Company’s history, including the signature of the Group’s first seven-figure deal in early 2024 with a large Middle East based company, all in the education, training, and development sector.

Reorganisation

In early Q1 2023, management took the difficult decision to ensure the Company’s cost base was reduced and as a result the executive and management teams undertook a companywide reshuffle. This reshuffle ensured growing areas of the business were staffed appropriately and spending was controlled in less active areas of the Group. This reshuffle resulted in significant savings with the reduction of contractor fees and a focus on greater operating efficiencies being delivered across the Company.  

Capital Raise

In Q1 2023, the Company also successfully raised a total of €10.5 million in additional funding to capitalise on growing 2022 subscription figures and our newly formed partnership with Lenovo. This additional funding should see the ENGAGE group reach profitability in late 2025.

Reduction in Enterprise revenues

Two major themes throughout 2023 were the mandates for workers to return to the office and layoffs within the global tech sector. Many tech workers hired during lockdowns lived far from the office and used services such as ENGAGE daily for group meetings and collaboration. Many of these employees left their jobs as they could not work in the office, and coupled with extensive redundancies, saw ENGAGE Enterprise revenue, incorporating events and collaboration, fall by almost 34%. Whilst this was very disappointing, we are confident that the worst is over, and that we expect to see lower levels of churn and higher net revenue retention levels from our Enterprise client base.

Growth in Education and training

ENGAGE version 1.0 was officially launched on 18 December 2018, with an initial focus on education and training. In the period since its launch, whilst winning clients in the education and training space such as Stanford University, Commonwealth of Kentucky and Pearsons, the Company saw greater engagement from Enterprise customers who were seeking alternatives to video-based communication options and also in one off events. A strong example of these one off events was the popular Fatboy Slim immersive concert held in March 2023. The concert was designed to showcase what the ENGAGE platform has to offer in the events arena and received high praise and coverage globally.

However, during 2023, the ENGAGE platform started to grow significantly in areas it was originally designed for within the education, training and development sectors. This saw a revenue increase of 41% in this sector partially helping to mitigate the enterprise losses from non-renewals experienced throughout 2023. The result being that, although headline ENGAGE revenue was marginally down year on year, the customer profile within the Company changed from enterprise-led to education and training-led revenue with a smaller but faster revenue-generating client base. This has provided management with greater clarity on the ENGAGE platforms value proposition which is on employee onboarding services, professional training and development, university education and K12 education services¹. Many of our smaller education clients grew their license numbers with us throughout 2023 and we also saw American-based banking and insurance companies use our platform to train employees using immersive technologies.

One of the bigger deals seen during 2023 was the largest ever single deployment of immersive technologies within education with 5,000 headsets purchased by the State of Kentucky education board along with ENGAGE licenses to use on those devices. This was a collaboration between Meta and the ENGAGE team and something we intend to replicate.

Positive Direction

Even with the turmoil and challenges that have been faced throughout 2023 the revenue metrics are clear. We continue to focus on growing renewing clients and sectors that have quantifiable ROI, be that with better test results for students within education or cost savings achieved within the training and development sectors for enterprise clients using the ENGAGE platform.

We are seeing this education and training base grow and mature quickly, and this is resulting in the Company successfully starting to win larger deals in this space. What is most encouraging is that many of the deals we are closing in the later part of 2023 are from existing clients growing their presence on the platform. This trend is continuing in 2024.

Confidence on Medium Term Prospects

2024 has started strongly with just over €2m contracted revenue booked in Q1. Over 70% of this revenue is professional education and the Board is hopeful that we should see a further expansion of revenues from these clients over the next 12 to 18 months.

We are still working closely with Lenovo on our partnership and are exploring opportunities with potential customers together. However we do not expect revenue to be generated from this relationship until near the end of 2024 or into 2025.

In March 2024, we announced our School of AI initiative which is a new product offering for schools and universities to be released in Q2. With the growth of our education sector clients, it is obvious to us that this should be a key focus point for the team going forward. Remote collaboration and events are still available, however, AI aided immersive education is where we are making strides.

Our development plan is to release AI features for the K12 market as a test bed before deploying them within the enterprise sector in H2 of 2024. Almost half of queries coming into our website are interested in our AI-aided education and experiences, and we are taking onboard these requests before publishing our findings and tools.

We are currently working with a small selection of enterprise clients on AI-enhanced training for bank and hospitality workers in the USA and the Middle East. We will be providing a broader rollout to the rest of our enterprise clients in the second half of 2024.

Summary

2023 has been a transformative year with many ups and downs. The year has brought a sharp focus to the team and allowed us to focus on the important aspects of the business that have a long-term future.  We expect many of our competitors who only provided collaboration services in the past to fail this year making us a much bigger player in a small but fast-growing space.

New hardware players are investing heavily in this space with Apple having recently released its Vision Pro device, and Samsung, Google and Sony all expected to join the immersive technology sector later this year.

We are looking forward to the second half of the year as we work with strong platform partners such as Meta and Lenovo on growing the market away from single pay entertainment purchases. Both partners are highly focused on recurring revenue generators with education, training and development is key this strategy.

We believe ENGAGE is in prime position to become the largest provider of such services globally, given our past performance and current growing client base.

David Whelan
Chief Executive Officer
15 April 2024

¹ K–12 refers to publicly supported primary and secondary education in the United States running from kindergarten to 12^th grade

CHIEF FINANCIAL OFFICER’S REVIEW

Revenue was down 5% from €3.9 million in 2022 to €3.7 million, driven by a delay in closing some significant contracts in the final quarter of the year which subsequently closed in early 2024. ENGAGE platform revenue remained constant year on year at €3.3 million.

ENGAGE revenue from education customers has grown in the period to €1.1 million from €0.8 million. This was bolstered by a 5,400 user K-12 education license deal signed with a US state and the year also saw the growth of two other educational clients, Optima Domi Academy and Victory XR.

ENGAGE revenue from Professional Services also grew in the period to €1.1 million from €1.0 million driven by increased custom development work performed by the ENGAGE Studio team for both Enterprise and Education customers but offset by a reduction in one off VR events supported by the ENGAGE Event team whilst ENGAGE Revenue from Enterprise customers declined from €1.5 million to €1.0 million.

ENGAGE revenue continued to grow within the North American market with 60% of total ENGAGE revenue being generated in North America (2022: 35%). This is in line with our focus within the group to grow the sales team within North America.

ENGAGE total licensed Education and Enterprise users grew to approximately 15,000 users at the period end (2022: 10,000 users)

EBITDA loss was €4.0 million compared to a loss of €5.8 million in the prior year and loss before tax was €4.1 million compared to a loss in the prior year of €6.0 million. This reduced EBITDA loss is primarily driven by reduced headcount in the year, and strong cost control across the Group.

Operating cashflows were a net outflow of €4.5 million for the period.  The current run-rate of staff costs and other ongoing costs is approximately €0.3 million per month.

At the balance sheet date, trade and other receivables were €1.2 million, ahead of trade and other payables at €0.6 million. Trade receivables represented an average of 59 debtor days (2022: 52 days).

The Group’s cash position on 31 December 2023 was €7.9 million (2022: €2.2 million) with no debt. The cash balance was significantly improved during 2023 by a successful €10.5 million (€9.9 million net of expenses) fundraise.  

Séamus Larrissey
Chief Financial Officer
15 April 2024

CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

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COMPANY STATEMENT OF FINANCIAL POSITION

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

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COMPANY STATEMENT OF CHANGES IN EQUITY

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CONSOLIDATED STATEMENT OF CASH FLOWS

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COMPANY STATEMENT OF CASH FLOWS

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