Checkit H1 FY26: cost cuts, resilient renewals and a pipeline near record highs
Checkit has posted a tidy set of half-year numbers for the six months to 31 July 2025. The headline is a 65% improvement in adjusted LBITDA, with the loss reduced to £0.5m from £1.4m a year ago. Gross margin stepped up to 71% and recurring revenue grew 6% to £6.6m, helping total revenue edge up 3% to £6.9m.
The company is still loss-making and cash reduced to £2.7m, but management says the heavy lifting on costs is done and profitability is in sight during calendar year 2026. The sales pipeline is “close to an all-time high” and two large US customers renewed for three years with a combined total contract value of £5m.
What drove the improvement in H1
The main lever was the cost reduction programme completed in June, delivering approximately £3m of annualised savings. That pushed adjusted LBITDA close to breakeven on a monthly run-rate in Q2. Non-recurring costs of £0.8m did weigh on statutory results, split between £0.5m of restructuring and £0.3m linked to the aborted Crimson Tide plc acquisition.
Revenue growth came largely from existing customers. Annual Recurring Revenue (ARR – the annualised value of contracted subscriptions) rose 3% on a constant currency basis to £14.0m. There was a headwind from one large US customer removing unused services, a £0.4m ARR reduction, but after adjusting for that, underlying ARR growth was 5% at constant currency.
Retention and quality of revenue
Checkit’s 12-month rolling adjusted net revenue retention (NRR – how much revenue you keep and expand from existing customers) came in at 104%. Gross revenue retention (GRR – revenue kept before upsell) was 93%. That is a touch softer than last year’s 109% and 95%, but management flags forward indicators that suggest GRR above 95% in H2 FY26 and H1 FY27.
The two US renewals on fresh three-year terms back up the stickiness of the platform. They also help underpin the outlook, especially given the focus on expansion within healthcare, biopharma, retail, facilities management and franchised operations across the UK, continental Europe, Australasia and the US.
Cash, balance sheet and investment
Cash at period end was £2.7m, down from £5.1m at 31 January 2025, with an undrawn £1m overdraft available. Operating cash outflow was £1.2m, investing outflow £1.0m (including £1.0m on product development), and financing outflow £0.2m. The company expects the cash benefits of the cost cuts to show through in H2.
Deferred revenue – future revenue already invoiced for services not yet delivered – stood at £5.3m. Net assets were £9.1m.
AI-enabled product delivery
Checkit is leaning into AI internally, especially in product development. Management says AI has improved productivity, shortened time-to-market and reduced costs. Customer adoption of AI remains early stage, but Checkit’s role in generating and analysing operational datasets should provide fertile ground for AI-led features over time.
Guidance and outlook from the board
The board expects full-year results to be in line with market expectations. It remains focused on growth with operational discipline and still targets adjusted EBITDA profitability and cash flow breakeven during calendar year 2026. With the pipeline close to a record and a leaner cost base, management guides to a stronger second half.
Key numbers investors should know
| Metric | H1 FY26 | H1 FY25 | Comment |
|---|---|---|---|
| Total revenue | £6.9m | £6.7m | Up 3% |
| Recurring revenue | £6.6m | £6.3m | Up 6% |
| ARR (constant currency) | £14.0m | £13.6m | Up 3% cc, +5% underlying excl. £0.4m US reduction |
| Gross margin | 71% | 68% | Improved mix and efficiency |
| Adjusted LBITDA | £0.5m loss | £1.4m loss | 65% improvement |
| Operating loss | £2.1m | £2.7m | Helped by cost actions |
| NRR / GRR | 104% / 93% | 109% / 95% | Softer, expected to improve |
| Cash | £2.7m | £7.0m | £1m undrawn overdraft available |
| US renewals | £5m total contract value | New three-year terms | |
My take: solid execution, but keep an eye on cash and retention
On the positives, Checkit has done what it said it would do. Costs are down materially, gross margin is up to 71%, and the adjusted LBITDA loss narrowed sharply. Underlying ARR growth of 5% (after stripping out the £0.4m reduction from unused services) is respectable in the current climate. The three-year renewals with large US customers are meaningful signals of value and add welcome visibility.
On the flip side, cash reduced to £2.7m over the half and non-recurring charges of £0.8m are not trivial. Retention dipped, with GRR at 93%. Management’s guide that retention should move back above 95% is encouraging, but it needs to show up in the H2 numbers. The aborted transaction costs are behind the business now, yet they still dampened H1.
Why this matters for shareholders
- Path to profitability – the £3m cost programme has moved the dial, with monthly adjusted LBITDA near breakeven in Q2 and EBITDA profitability targeted in 2026.
- Stickier revenue base – ARR grew to £14.0m and two US renewals worth £5m provide multi-year visibility.
- Operational leverage – higher gross margins suggest the model can scale as revenue grows.
- Cash discipline – with £2.7m on hand and a £1m facility, delivery of H2 cash improvements is important.
What to watch in H2 FY26
- Conversion of the near record pipeline into signed ARR, particularly in healthcare, biopharma and retail.
- Gross revenue retention moving back above 95% as indicated.
- Further monthly improvements towards adjusted EBITDA breakeven.
- Cash burn moderating as cost benefits flow through and deferred revenue unwinds.
- Evidence of AI-led features accelerating product adoption or supporting upsell.
Bottom line
This is a cleaner, leaner Checkit. Revenue is edging up, margins are firmer and customer relationships have been reinforced by multi-year renewals. The main swing factor now is execution against the bulging pipeline while keeping a tight grip on cash. If management delivers on retention and sales discipline, the stated goal of EBITDA profitability and cash flow breakeven in 2026 looks achievable.
