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1Spatial
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== Transitioning to a SaaS model == 1Spatial was historically known as a geospatial software and services company. Part of its strategy includes transitioning into a SaaS company focused on growing its recurring, higher-margin licence revenue. Historically, most sales were from long-term contracts, which were lower margin and led to more volatile revenue. Transitioning to a SaaS-based delivery company is intended to lead to higher margins and produce more repeatable and predictable revenue. For instance, to support this transition, 1Spatial is building its SaaS multi-tenant and scalable cloud platform, which increases SPA’s addressable market (by addressing customers seeking cloud-based solutions), meets growing customer demand for web-based solutions and is scalable based on the size of the client’s dataset. The plan is to launch this platform by the end of FY22, which will provide more ‘pay as you go’ pricing schemes and lower the entry price point for new customers. Evidence of this transition to a SaaS model can be seen in recent results and contract wins. In early December 2021, SPA was awarded a £0.6m contract with the Rural Payments Agency (RPA, an executive agency of the UK’s Department for Environment, Food and Rural Affairs), £0.4m of which is software licences. RPA, a current customer, will use the 1Edit mobile application to enable the collection of accurate and correctly formatted location data by inspectors via mobile devices. As a result, this adds to SPA’s growing amounts of recurring, high-margin software revenue. Furthermore, in H122, 1Spatial grew its annualised recurring revenue (ARR) by 12% to £11.6m, with term licence ARR (the ARR of term licences) increasing by 63%. Moreover, its new £8m contract announced in September 2021 with a department of the UK government (which we believe is also the largest win in company history) is heavily weighted towards recurring software licence fees (75%). Altogether, this transition to a SaaS model has the potential to significantly enhance shareholder value, in our view, driving increases in higher-margin recurring revenue.
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