1Spatial’s H1 2026: Recurring Revenue Steps Up, Margins Hold, Cash Improving
1Spatial has posted a solid first half for the six months to 31 July 2025, with revenue up 9% to £17.65 million and a clear tilt toward stickier, higher-quality sales. Recurring revenue rose 20% to £10.70 million, now 61% of the mix, and Annualised Recurring Revenue (ARR) climbed 11% to £19.87 million. Adjusted EBITDA edged up 5% to £2.10 million with an 11.9% margin.
Under the bonnet, a slightly softer gross margin and a modest statutory loss reflect a heavier skew to third‑party licences and the usual H1 seasonality. Net borrowings increased to £2.52 million as the company continues to invest in product. Post period, two chunky contracts – the US$1.7 million Caltrans enterprise agreement and a £1 million 1Streetworks contract with UK Power Networks – help set up H2.
Revenue Mix Pivoting to Subscriptions and ARR
Recurring revenue means contracted income that repeats each year (term licences and support & maintenance). ARR is the annualised value of those contracts at period end. Both moved in the right direction: recurring revenue up 20%, ARR up 11%. That’s the engine investors want to see compounding.
| Key metric | H1 2026 | H1 2025 | Change |
|---|---|---|---|
| Group revenue | £17.65m | £16.24m | +9% |
| Recurring revenue | £10.70m | £8.91m | +20% |
| ARR | £19.87m | £17.92m | +11% |
| SaaS + Term licences revenue | £6.45m | £4.29m | +50% |
| Gross margin | 49.7% | 52.2% | -2.5pp |
| Adjusted EBITDA | £2.10m | £2.01m | +5% |
| Adjusted EBITDA margin | 11.9% | 12.3% | -0.4pp |
| Operating profit | £0.0m | £0.1m | n/a |
| Loss before tax | £0.31m | £0.16m | – |
| Basic EPS | -0.3p | -0.2p | – |
| Net borrowings | £2.52m | £0.86m | – |
SaaS and Term Licences Accelerate – 1Streetworks Takes Off
SaaS (software-as-a-service) and term licences jumped 50% year-on-year to £6.45 million, with term licences at £5.69 million and SaaS solutions at £0.76 million. Within that, 1Streetworks continues to prove itself commercially – revenue quadrupled to £0.8 million.
Post period, UK Power Networks awarded a £1 million 1Streetworks contract (with an optional one-year extension), embedding the tool into core operations and potentially supporting 30% of UKPN’s works over the next 15 months. The market opportunity is pegged at £400 million, and the sales pipeline value has risen 60% since January. The paid-trial-to-rollout model is bedding in, which should help shorten sales cycles as references build.
Margin Dip Driven by Third-Party Mix
Gross margin slipped to 49.7% (from 52.2%) due to a higher proportion of lower-margin third‑party term licences with key government customers. That mix effect is the trade-off for large strategic renewals and maintaining footprint in accounts such as Defra and Network Rail. The strategy remains to increase the share of higher-margin proprietary licences and SaaS over time.
Services were broadly flat at £6.81 million, while perpetual licences fell to £0.14 million – consistent with the shift away from one-off licence sales to recurring term licences.
Regional Picture and Stand-out Contracts
Revenue grew across most regions: UK/Ireland up 23% to £7.25 million, Europe up 2% to £5.80 million, US up 4% to £2.61 million, with Australia down 9% to £1.99 million. ARR by region also moved higher: UK/Ireland +11%, Europe +7%, US +5%, Australia +31%. The renewal rate stayed robust at around 94%.
- United States – Signed a four-year US$1.1 million expanded renewal with the State of Montana for NG9‑1‑1, with additional renewals in Georgia, Arkansas and Los Angeles County. Post period, a US$1.7 million annually renewing enterprise agreement with the California Department of Transportation (Caltrans) increases licence revenue by 50% and simplifies future procurement.
- United Kingdom – Continued momentum with strategic government and infrastructure clients. A renewal with Defra (third‑party FME technology) and Network Rail (VertiGIS) maintains presence, while proprietary tech deployments expanded at the Rural Payments Agency, Environment Agency, Yorkshire Water and HS2. A new engagement with Heathrow supports data migration and positions 1Spatial well for further airport work.
- Europe – The flagship €9 million Belgian DSO digitisation programme continues to roll out. Some government projects saw decision delays, but the pipeline remains healthy.
- Australia – ARR up 31% on licence sales and renewals, though total revenue was lower due to fewer large consultancy engagements. The Board is considering strategic options for the Australian business.
One to watch in the UK defence/aerospace niche: the QinetiQ and major UK Government agency project is now expected to fully deploy in Q2 FY27 and is anticipated to contribute £1 million of ARR on completion, while helping reduce costs as contractors roll off and R&D is redirected.
Cash, Debt and Investment: Sensible Use of the Balance Sheet
Operating cash flow improved to £1.5 million thanks to timing of receipts and payments. Free cash flow was an outflow of £1.46 million, better than the £2.01 million outflow last year. Net borrowings rose to £2.52 million, reflecting continued product development investment, partly offset by improved cash performance in the half.
1Spatial has a £5.4 million revolving credit facility, with £4.5 million drawn at period end, and also drew €1.5 million of French government-backed loans to support development for a French government contract expected to be awarded in the coming months. Intangible assets increased to £22.5 million as development progresses, with the net intangible balance expected to decrease from next financial year.
Outlook: H2 Weighting, Healthy Pipeline, US and SaaS Focus
Management guides to H2 weighting as usual for term licence renewals and services delivery, with a robust order book and several European programmes underpinning visibility. The post-period Caltrans and UK Power Networks wins are strategically important and provide revenue underpin for H2 FY26 and into FY27.
The strategy is clear: accelerate SaaS adoption (anchored by 1Streetworks), deepen US penetration, and keep expanding ARR with existing customers. Risks remain around decision delays, a lower-margin third‑party mix in certain renewals, and higher borrowings while investment continues. But the renewal rate, ARR growth, and the calibre of recent deals give the Board confidence in meeting management expectations for FY26.
My take: what matters for investors
- Positive – Quality of revenue improving: recurring revenue up 20% to 61% of total, ARR up 11% to £19.87 million.
- Positive – 1Streetworks is catching on: revenue quadrupled to £0.8 million and a £1 million UKPN contract post period validates ROI claims and opens up broader rollout.
- Positive – US traction: US$1.7 million annually renewing Caltrans enterprise agreement simplifies scaling; NG9‑1‑1 base is sticky and widening.
- Mixed – Margins and loss: gross margin down 2.5pp to 49.7% and a small statutory loss before tax (£0.31 million). This is the price of strategic third‑party renewals in H1, with H2 typically stronger.
- Mixed – Net borrowings up to £2.52 million, though free cash outflow improved and H2 renewals should support cash inflows.
- Catalysts – H2 renewals, 1Streetworks deployments, US pipeline conversions, completion of defence/aeronautical products by Spring 2026, and potential progress on the French government contract.
Bottom Line: Steady Execution, Building Optionality
This is a steady set of interims that strengthens the recurring base, validates the SaaS thesis with real customer expansion, and lands meaningful enterprise agreements. The trade-off is a softer gross margin and a small loss while the mix shifts and investment continues.
If 1Spatial keeps converting its pipeline – especially in the US and across 1Streetworks – and maintains renewal discipline, the medium-term case of “more ARR, better margins, stronger cash” remains intact. For now, H2 execution is key.
