Cerillion plc (LON:CER) Chief Executive Officer Louis Hall caught up with DirectorsTalk for an exclusive interview to discuss a strong set of results, specifics underlying the results and whether their growth is sustainable.
Q1: Louis, Cerillion reported a strong set of results with new records across your KPI’s but are you seeing any slowdown in the telecoms market at the moment?
A1: We’re very pleased with these results, we saw revenue increase by 27% compared to prior periods, EBITDA up to 38% and net cash up 43%.
Of course, it’s a fair question that there has been some talk about a global slowdown across many sectors and telco has been mentioned in that context, to an extent.
I think what we’re seeing is continuing very strong long-term investment trends and fundamentally telcos are technology businesses, they need to constantly adapt and upgrade their networks or infrastructure and I think we’re continuing to see that.
As they invest in those infrastructure improvements, they also need to look at how to better monetise those investments. That is around being able to build more sophisticated products that bundle services in different more innovative ways to obtain more revenue from the same customer base to recover the investment that’s been made in improving the network services.
So, that’s still very much a factor and of course, ongoing investment in digital customer experience, not just to reduce costs by taking people out of the customer chain but also making it more attractive for customers to sign up to your product.
If you have a better digital experience, a better self-service mobile app environment for customers to use then they’re more likely to come to you than the next competitor. So, we’re also seeing that as very important.
I think the final point on that is we actually saw our new orders increased by 40% over the same period last year so in that context, in our micro world, we’re not seeing anything as a slowdown.
Q2: Is there anything specific underlying these results that you’d like to draw attention to?
A2: I think what is interesting is the strength of sales existing customer base and I think that’s a function of, partly, us building a bigger base all the time but of increasingly larger customers.
I would highlight in the first half, we did two quite substantial sales to existing customers, one we announced at £10 million back in March and the second one we announced in the results at £6 million.
They were a combination of licence expansions so customers expanding their bases or adding new bases that increase our licence fees/subscription fees for our services solution. Also, one customer had bought some of our modules, part of our product set a few years ago, and has now come back to buy most of the rest of those modules so that involves licence expansion but also additional services to put those new modules into production.
On top of that, we’re selling our Evergreen solution to enable customers to be continuously up to date so rather than waiting 2-3 years between upgrades cycles, we have an Evergreen programme that enables our customers to be always up to date. That was part of one of those deals and also extensions to term agreements, again adding more value.
So, the other interesting thing about those customers is that none of those is a particularly large telco, and none of those is even one of the largest customers so it just goes to show how important a growing customer base can be in terms of generating more momentum and enabling us to continue to grow. One of those customers has been with us for more than 20 years so again, it’s not just new customers that are important.
Q3: Do you believe that the growth Cerillion has achieved over the last 3 years is sustainable?
A3: Yes, I think so. I think we’re seeing a lot of indicators that that should be possible, both in terms of backlog new orders but also pipeline so our new logo as in prospective new sales pipeline actually grew by 23% so that’s a fairly substantial increase. Obviously, we would expect some of that to convert not just in H2 but we expect to go one converting that forward into 2024.
So, I think the fact that we are seeing new opportunities arise all the time gives us a lot of encouragement, coupled to the fact that as the base grows and recurring revenue base increases as well, which again makes growth more predictable and more stable.
