Acquisition of IMeasureU Limited (“IMeasureU”)
Will further increase, over time, the Group’s recurring revenue base
27th June 2017 - Oxford Metrics plc (LSE: OMG) the international software company servicing government, life sciences, entertainment and engineering markets, is pleased to announce the acquisition of IMeasureU. Using wearable sensors and its own proprietary software, IMeasureU has developed a world-leading high-fidelity motion measurement system which enables researchers and elite athletes to gain data-driven insights into athletic performance. The Directors believe this acquisition will contribute to the Group’s five year strategic growth plan by expanding Vicon’s addressable market, accelerating its ability to develop new Vicon product, opening up opportunities to cross-sell, and by further increasing over time the Group’s recurring revenue base.
Rationale for the Acquisition
Last year the Group announced its five year growth plan, which aims to double profits and triple recurring revenues by 2021. The decision to acquire IMeasureU delivers on one of the commitments made under this plan for FY17: to invest in Vicon as a profitable market leader and improve its product offering. The Group believes that the principal benefits of the acquisition will be to:
- Create clear cross-selling opportunities with existing Vicon customers – IMeasureU sensors have been shipped to a number of customers who already use Vicon systems. The Inertial Measurement Unit sensor (IMU) technology is relevant to almost all of Vicon’s existing vertical markets, particularly Vicon’s 1200 sports sciences customers, where IMU technology is already well understood.
- Accelerate Vicon’s product roadmap – Vicon has been closely tracking IMU technology for a number of years and this acquisition will enable the company to bring forward product release plans in this growing space. IMUs are a natural extension of the Vicon product suite, and the data produced by IMU sensors can be analysed through Vicon’s existing end-user applications.
- Expand Vicon’s Total Addressable Market (TAM) – Vicon’s markets will expand in three ways: first, the lower price point of the IMU measurement system opens access to a broader marketplace. Second, IMU measurement can be used virtually anywhere, opening up a greater range of measurement applications for potential Vicon customers. Finally, the combined business will address new SaaS-based vertical markets, where IMeasureU already has a lead.
- Increase the quality and recurring nature of Vicon revenue – One of the great strengths of the Group’s Yotta business is the increasingly recurring nature of its revenue base. Vicon’s revenue base, by comparison, has considerable repeat business but a lower level of recurring revenue which the addition of IMeasureU will serve to increase.
IMeasureU Products and Markets
Founded in 2013 and based in Auckland, New Zealand, IMeasureU has developed a motion measurement system which fuses Inertial Measurement Unit sensors (IMUs) with proprietary software to provide high fidelity movement and workload data. These wearable sensors are lightweight and small - about the size of a £2 coin. The sensors can be attached to a subject enabling researchers to monitor and manage an athlete’s performance and assist in their recovery following injury.
While the sensors do not offer the same positional accuracy as a Vicon system, no additional camera equipment is required. This allows flexibility and a greater variety of applications. For example, data can be captured outdoors and researchers can monitor multiple subjects at the same time. With measurement solutions starting at a few thousand US Dollars, it provides a relatively low cost way to measure a subject’s biomechanics, giving Vicon access to a broader marketplace.
IMeasureU has two core business lines, IMU-Research and IMU-Step. Both business lines apply the same technology but target different markets. IMU-Research is well-established, selling systems to researchers in the Life Sciences, Entertainment and Engineering sectors where Vicon is already a market leader. IMeasureU and Vicon share a number of clients, including Harvard University and there are clear and immediate applications for the technology right across Vicon’s client base. Giving IMeasureU access to Vicon’s large direct and indirect sales channels will offer compelling cross-sell opportunities and help to accelerate growth.
IMU-Step sells to the elite sports market, assisting in the rehab of injured players in elite sports, including basketball and soccer. IMU sensors are attached to the injured player, helping sports scientists to track the strain an athlete is under throughout rehab, optimise the player’s training regime and minimise the time it takes to return from injury. The business line is still at an early stage but there are already successful pilot deployments with a number of professional teams in a variety of sports. The engagements are expected to result in sales on a SaaS-basis. This gives Vicon a platform to create a meaningful recurring revenue base.
Terms of the acquisition
The acquisition comprises an initial consideration of £1.99m (NZ$3.5m) paid in cash from existing resources. A deferred cash consideration of up to £2.89m (NZ$5.1m) is payable: 75% is contingent on IMeasureU achieving a series of stretching SaaS-based recurring revenue goals and 25% is contingent on growth of existing revenue streams measured over the course of a 27-month period following the completion of the acquisition.
For the full year ended 31st March 2017, IMeasureU reported revenues of NZ$0.3m, a loss before tax of NZ$0.3m and Net Assets of NZ$0.1m. Oxford Metrics expects the acquisition to be earnings neutral for the remainder of FY17 and FY18. Assuming the achievement of revenue goals during the earn-out period the acquisition is expected to make a meaningful contribution to Group profitability in FY19 and become increasingly earnings enhancing in subsequent financial years.
Commenting on the acquisition, Nick Bolton, CEO of Oxford Metrics said:
“When we announced our five year plan last year our strategy was to amplify our core. IMeasureU does exactly that, adding a new growth dimension to Vicon from its already strong and profitable market-leadership position. The technology will expand Vicon’s addressable market, maps neatly to sectors we already serve, and provides a lower price point at which a broader customer base can begin to engage with the product-set.
IMeasureU also provides a platform to inject a meaningful SaaS-based recurring revenue stream into our Vicon business, just as we have done with Yotta, and in line with our target to triple recurring revenues over the next five years. This is an exciting opportunity to secure and expand Vicon’s market leading status and drive long-term growth.”