EPOS Now – robust growth driven by shift to subscription model and global expansion

UK-based provider of small business software and payment services, EPOS Now, has reported robust growth for the year to May 2022. Global turnover surged by 46% to £48m, as the number of customer locations increased by 24% to 55,844.

Founded in Norwich in 2012 by Jaycn Heavens, EPOS Now offers a comprehensive ePOS system for small businesses, specialising in retail and hospitality, providing stock control, employee scheduling and CRM. The company includes integrated payments in its package, taking a commission from merchant acquirers and ISO’s for recommending merchants.

EPOS Now successfully shifted its business model from upfront product sales to a multi-year recurring model, boosting annual revenue per location from £730 to £860. Service revenue, which includes the company’s new payments platform launched in 2022 and powered by Adyen, increased by 70% to £32.8m, accounting for 68% of revenues. Commission payments, likely comprising receipts from payment partners, increased from £4.9m to £7.8m.

All major markets saw sales growth, with Europe up 49% to £29.3m, the US up 32% to £14.1m, and the small Australian business up 79% to £4.65m.

Cost of sales fell 10% to £15.3m, resulting in gross profit more than doubling to £32.7m, with gross margins expanding from 48% to 68%. Administrative expenses rose 31% to £29.9m. Total payroll costs rose just 3% to £14.1m while staff numbers fell from 380 to 357.

However, trade debtors are a concern, with impairment charges, likely linked to customer defaults during the pandemic, increasing from £2.7m to £4m. R&D spending held steady at £0.7m, just 1% of revenues, which appears low for a technology business.

EPOS Now’s operating profit swung from a Covid-related loss of £6.6m to a profit of £3.0m in 2021/2, with an operating margin of 6%. Management expressed optimism, stating that “future trading is expected to be very positive.”