Eckoh revenue falls even as total contract value expands

Customer engagement data security specialist Eckoh said in an update on Wednesday that it achieved a total contract value (TCV) of £24.6m in its first half, marking a substantial 40% increase compared to the prior year’s first-half figure of £17.6m.

The AIM-traded firm put the growth down to strong multi-year renewals and successful cross-selling and up-selling of new products.

It said its enhanced Secure Engagement Suite, coupled with the ongoing shift to cloud-based services and a new commercial strategy, played pivotal roles in driving those initiatives.

Key product additions, such as secure call recording and an updated secure digital payments platform, had been well-received, with several clients expected to go live with those and other additional products from the suite in the second half.

Despite a reported revenue decrease from £19.6m to £18.8m year-on-year, Eckoh said that was due to the loss of a large UK client and the ongoing transition to cloud-based delivery of its solutions.

It said the transition was expected to enhance the visibility and quality of earnings while reducing the proportion of one-off revenues from hardware and implementation.

The shift to cloud services, although tempering short-term revenue growth, had positively impacted recurring revenue, which rose to 83% from 79% a year earlier, as operating margins remained strong at 21%.

Adjusted operating profit excluding foreign exchange was anticipated to reach £4.1m, compared to £3.5m in the first half of the 2023 financial year.

Eckoh said it had positioned itself for growth in the North American market with a record pipeline of new business opportunities.

The strategic decision to consolidate its global commercial team and focus on that market was proving to be compelling, the board said, although it was experiencing extended sales cycles with new clients, leading to longer contract completion times.

Despite those challenges, data security solutions’ annual recurring revenue for the North American market saw a robust year-on-year increase of 22% to $16.8m.

Regarding its financial position, Eckoh said it maintained a robust balance sheet with solid cash generation.

At the end of the period, it had net cash of £7.3m, rising £1.6m from the year-end figure of £5.7m and from £4.4m a year earlier, while it had no debt.

“The board is very encouraged by the record level of business contracted in the period, the successful implementation of the new commercial strategy and the sales pipeline - most notably the large deals which are in a progressed position,” Eckoh’s directors said.

“The sales pipeline gives us confidence that the strong positive trend of growth in total contract value will continue in the second half.

“Whilst the longer-than-expected sales cycles will marginally impact revenue, the board is confident that the company is on track to meet profit expectations for the full year.”

Eckoh said it would provide further detail at the time of its results for the six months ended 30 September, on 21 November.

At 1230 GMT, shares in Eckoh were down 4.47% at 40.6p.

Reporting by Josh White for Sharecast.com.