Celebrus Technologies plc

Good afternoon and welcome to this Libra Technologies PLC half-year results investor presentation. Throughout this recorded meeting, investors will be in listen-only mode. Questions can be submitted at any time by the Q&A tab situated on the right-hand corner of your screen to simply type in your question and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. And now I'd like to hand you over to Bill Bruno, CEO. Good afternoon, sir.

Good afternoon. Thank you, sir, and thank you, everyone, for attending today. We're excited to walk through this with you, share some customer stories, walk through the financials, and kind of give you a glimpse into some of the things that we've been doing in the product with regards to artificial intelligence and some other areas of importance. From a Company perspective, this is, for those of you that have been on this journey in previous calls, our last one having been in July, that was the first time where we sort of presented the new sort of revenue segments that we've now brought live in these first half results for this year. as well as some adjusted versions of the prior year results to give you a proper comparison along the lines of those new categories. Ash will go through all of those in detail and help further explain that. But as a reminder, we now have sort of four revenue segments in the reporting, the first of which is ultimately CELBRIS software. Now, that's candidly the line item to pay special attention to going forward. That is the key focus of our business is in driving our software revenue. And that Celibra software line item ultimately contributes directly to the Celibra software ARR, an actual walk through the ARR growth from the first half and what that's looked like compared to the previous year. The second revenue segment that you'll see mentioned is non-Celibris ARR. These are our customers where we have longstanding relationships and deliver people-based services that are built around managing large analytic environments that don't contain Celibris software as a line item. So we've partitioned that out so that all of you going forward will be able to track the growth of our own software IP and the sales of that software and IP. The third category is professional services. Those professional services are project-based work, so things that don't repeat. In our Celibris software deals, we do build in services that recur. So, for example, X number of days a month or per year as part of our managed service in our Celibris Cloud single-tenant private cloud environments that we stand up for customers. And in that case, it would show up in Celibris software. Project work would be additional configuration or the client needs support with connecting our data into a different system where these are sort of one-off engagements and we treat them as such in that revenue segmental. And then the final is hardware revenues, and that's pretty straightforward for those of you that have followed the business for many years. We sell hardware occasionally to customers. It's not something that we offer to new customers, but it is something that we continue to support with customers that have been with us for quite some time. And anything that we do in that regard will show up in that bucket. Obviously, we'll continue sort of on this journey, and Ash will explain and reiterate sort of the revenue recognition policies and all the things that changed heading into this year. I know we had a lot of moving pieces as we sort of finished sort of the transformation of the business that we discussed about in July, but now we have tangible numbers and results that you'll be able to see and hopefully better understand from a transparency perspective everything that's going on in the inner workings of the business and where our focus lies. From an operational standpoint, we did have a couple of very key wins in this first half, the first of which was a fintech platform in the States and the other was a financial services firm here in the UK. Both of those organizations are exploring some significant upsell opportunities with our customer success team that we stood up a little over a year ago as well. which has us quite excited. This has been a trend that we've built as we've brought new logos into the business. In this cloud-first mentality, it's allowed us, one, to be better connected to customers, two, to deliver more value more quickly, but three, to also be able to engage customers differently and help them understand some of the things that our platform could do for their business above and beyond what it's doing today and allow us to turn those features on or enable those use cases in a very streamlined manner now that we're not focused on delivering on-premise environments. We also had a significant number of upsells and this is Again, a core part of our business, a core part of our pipeline. Ash will speak to the pipeline and some of the numbers that we're providing for the first time, as we've promised you for some time now that we would be bringing pipeline metrics into some of the things that we discuss to help give you better comfort about what we're doing as a business and where we're adding value and what that pipeline and opportunity structure looks like for our sales teams, our new business teams, as well as our partner opportunities. The Cellvers platform as a whole, we continue to innovate significantly. We do two releases a year. That's been our cadence for quite some time. I don't see that changing. It's just enough for us to manage from a development perspective, but it's also just enough for customers to have new features, new functionality at a pace at which our competitors are not delivering upon. And much of this innovation has been focused really in what to do with the data. We've spent many, many years, Cellvers, perfecting how we capture digital data and how we contextualize that through the data models that we provide for customers. Where a lot of our effort, a lot of our innovation has been focused is on taking that data and doing something with it. So namely things like our customer identity capabilities, the ability to sort of impact paid media investments, the ability to enhance from an analytics perspective and a reporting perspective to sort of bring that forth. From a marketing perspective, hopefully those of you that interact with the brand, follow us on LinkedIn if you haven't. We're quite loud out there with new content, new capabilities, et cetera. I'd urge you to do so above and beyond just browsing the investor website of the company. But it's been largely focused on creating content. and awareness to support our prospecting efforts and to also better enable our partners to speak about the platform in a much more simplified manner, focused on the way that we're selling it and where we're seeing that success. And finally, before I throw things over to Ash to work through some of the financials, the security side of business is something we take very serious. Compliance, security, privacy, all of these things are very important to our business. We have several certifications through independent third parties, things like ISO 27001 as an example. And to continue to grow in that journey and to continue to provide more certainty and more comfort to our customers, we also just recently added a SOC 2 certification as well. It's much more applicable in the States than it is throughout Europe as we tend to lean on ISO 27001 throughout Europe. But nevertheless, it is a great certification to have and speaks to not only the capabilities of our platform, but also our security processes, how we go about building products and how we go about securing customer data in these single-tenant private cloud environments. So with that, I will turn it over to Ash to walk through some of the financials. Great.

Thanks, Bill. Hello, everyone. So we're going to go through the financial highlights first, and I will just touch on these briefly because I'll probably go into each of these items in a bit more detail on the subsequent slides. But the key points are the celebrant ARR increased through the period to 15.6 million. That's an increase of just under 15%. compared to the ARR at the end of H1F by 25. The total revenue was 10.4 million. That's a fall on last year. And obviously that's related for the large part to the move to straight line revenue recognition. And I'll go on and describe that in a bit more detail. Likewise, for the celebrant software revenue, Fourth bullet point, very significant. If you remember back to July, we talked about how we account for our costs and the fact that we reallocate them up into the cost of sales line. We no longer do that as we announced in July. And so our software gross profit margin is what you'd expect to see if a software company up in 93.1% in the period compared to 95.4% this time last year. The impact on revenues obviously has an impact on the loss before tax. The cash position at the year end, at the half year, was healthy at 27.3 million. And that cash balance is likely to grow ahead of the end of the financial year in March 26. And we continue to pay a dividend. So we increased the dividend by 3.2% up to 0.98 pence for the first half. So let's get into a bit of detail. So if you remember back in July, we talked about a number of changes that we were making to our accounting reporting. One of those was that we were changing the revenue segments. And as Bill described, some of the confusion about the old revenue segments was that we aggregated celebrants and non-celebrants into a single license line and also into a single support maintenance line. So there's a driver for these changes to the segmentation that you see at the top of the income statement. It's for it to be very clear in terms of what's celebrant software, what's non-celebrant managed services. And then also there are two lines there which are less significant in many ways. The professional services, which is an aggregation of some celebrants related work and some non-celebrants related work. And then, of course, the hardware, which we talked about in the past and which will taper off in due course. So if we focus on the celebrant software line. we'll see that's down year on year and that's driven by the changes to our contracts so this is not an accounting change it's a practical contractual change in that we've tweaked the terms of our contracts such that the revenue recognition for our licenses whereas previously we recognized the whole of the first year for example in a lump sum in the month of signing we now recognize that license revenue month by month The impact of that is that let's take, for example, we signed something in late December. We will now recognise three months of revenue in this financial year, whereas previously we would have recognised four months of revenue. And that's applied already to the deals that Bill talked about that we've signed in the first half. So that's a reduction year on year because of the straight line revenue recognition. Because this isn't an accounting change, we do not restate the prior year numbers. So that's why the H125 is higher and why now we're recognising month by month to get a lower revenue number. That period, as I described in July, will flush through over the next three years. So we have contracts renewing this year, around now, in fact, in November, December. We have some more quite significantly renewing this time next year, but then we have slightly fewer renewing the year after that. So the impact of that year on year, this year we're expecting an impact of around $6 million to our revenue line in total as a result of that revenue recognition change. About half of that is new wins and about half of that is renewals. What we'll find in FY27 is an impact on the revenue line of somewhere around just under £3 million. And then in FY28, we will see an impact on our revenue line of just over a million, i.e. under the old basis, we would have had six million and three million and one million or so more in years FY26, 27 and 28. So this will be this will, as I said, flush through. So once we've renewed all of the contracts which currently exist, everything will be on a straight line basis and you'll get better sort of like for like comparability in terms of software revenues. Another change we made in the period we announced back in July was the cost of sales and I talked about that just a few seconds ago and in the past what we would do is that we would allocate some of our OPEX costs into the cost of sales line and this was something which we've been doing historically when the business was very different and it principally related to the managed service teams and the professional service teams in terms of those people being engaged in delivery services to our customers. With the business changing, as it has done, moving towards being a software business, we no longer do that. And that has two benefits. Firstly, you can see a true software GP percentage margin. And that's very important as you're trying to extrapolate forward in terms of what this business could look like in three, four, five years' time. You need to know the gross profit percentage for that. And then the other benefit is that you can very clearly see the opex line um without the kind of confusion of how much we've recharged into cost of sales whether it's four or five or six million dollars so you can see the opex line more clearly um and that's beneficial as you kind of track our opex and how we're controlling it and in this period what you see very clearly is that our opex has gone down So earlier in the year, we took out just over 10 headcounts. These were non-customer facing generally. These were back office and some of them were in our managed services and professional services teams. And we were able to do that as a result of automation systematization that we continued to do to see efficiencies. And there'll be more of that coming up in the next sort of six to 12 months or so. So all makes well controlled as we're going through this transition period. The adjusted PVT a loss of 1.5 million roughly and that is obviously related to the lower revenues driven by the straight line revenue recognition. And that brings us down to an adjusted diluted EPS, which is 3.51 cents per share. I should point out, and I'll explain this perhaps also in the subsequent slides, is that whilst we calculate an adjusted diluted EPS, the dilution comes from share options. However, we have enough shares that we bought back in Treasury to effectively negate that dilution. So whilst we calculate this, and this is a key metric that we have used for some years, In practice, it's unlikely that there would be this dilution for investors. Digital dividend I talked about, so let's go on to the annual recurring revenue. I talked about the percentage increases over the period, and those are probably reasonably significant. Let me talk now, as Bill implied, about the pipeline that's driving future ARR growth. So this is a metric we will start sharing in our announcements from the final results, but for the time being, I can tell you the size of our pipeline currently is 26 million dollars and let me just describe how that number comes about so in our pipeline we have around 60 opportunities and the aggregate of all of those values on those opportunities amounts to 26 million pounds so within that dollars dollars still adjusted to dollars yeah 26 million dollars so that's a great then obviously drive our ARR growth. A key point behind that is, let me just talk through the stages we have in the pipeline. so we have stages one to five and the one is when it's first recognized and accepted by the sales team as being an opportunity and then five is a verbal agreement to just move into signing um within that we have a stage three which is proposals so when i look at sort of the value of 26 million dollars um that is accounted for by 44 opportunities out of those 60. the early stage opportunities tend not to have a value so still scoping them still in early stage meetings so The value generally arises at stage three, which is proposal stage. We've sent out a proposal. We know the value. There may be some opportunities in stage two where they're far enough advanced. We've done the scoping sufficiently that we can attribute a value to them. So the key point there is that these are not probabilised. These are total values of probabilisation. proposals and other opportunities in the system. And the key point right now is that of the 60 we have roughly now, and we had a similar number this time last year, This year, 44 of those 60 have a value attributed to them, whereas last year, 33 of those 60 had a value attributed to them. And the significance of that is that whilst the pipeline is 13% larger than this time last year, it is actually mature as well, i.e. opportunities are further advanced in the pipeline and nearer to closure than they were this time last year. And that's obviously very positive as we look to making our numbers for this year and building out the pipeline for FY27. Moving on to the balance sheet. The balance sheet is a lot cleaner. It gets cleaner every year. Obviously, you'll remember we sold off our freehold property at the end of March. So that's no longer in the balance sheet. In terms of the other items, probably not a whole lot to say. You'll be able to see that in the property plans and equipment, we've got the IFRS 16 leases, and those are winding down over the period of the lease, typically around five years or so. Our trade debtors tend to fluctuate. At the half year, they're generally quite low. And then they're higher around November, December. We have a lot of billing and that billing converts to cash around February, March. So you should see a healthy cash balance at the end of March. And that debtor figure will be probably there or thereabouts. The other interesting item in the balance sheet, and I know a lot of investors track this, is the deferred income. So that is where we have invoiced a customer and they've paid typically, but we haven't recognised the revenue. So basically what that represents is what have we billed that hasn't been recognised, but will be recognised as revenue. So in the past, if you look at the previous periods, we've had some pretty large numbers and those invariably were related to some of the hardware deals that we had done for one of our customers. Now that's largely flushed through. So that deferred revenue figure will fluctuate period to period. But the general long term trend should be upward because, of course, as we sign on more customers, as we grow the business, there will be more billings going out and there'll be more sort of cash payment up front. uh coming into us so that will increase um over a period of time and of course as i said you know with high buildings in november and december um that will be very high at that point and then sort of come down a little bit by the end of march The upshot of all of that is that we've got net assets of 38.4 million, of which cash comprises 27.3 million. We have no debt. We continue to have no debt. And another point to make is that the majority of our cash is held in US dollars. We hold only enough GDP to be able to pay for our GDP cost base, which is our employees and our property in the UK. Then finally onto the cash flow. Again, a relatively clean cash flow. If you look at the movements of working capital, historically, there have been large movements. And these, again, are connected to the hardware deals that we had done in those periods. As that's flushing through now, we see a positive working capital movement with 1.1 million coming in from working capital movements. As you know, we have very little capex. We did have significant capex in the last couple of periods, partly related to the property moves and the capex we had to invest into furniture and fittings, et cetera, and leasehold improvements. But the figure you see now in H1 is a typical kind of, you know, internal laptops and IT equipment and those sorts of things. We continue to capitalise development costs and those have increased now. And the reason for that is that we have a much more rigorous methodology for calculating the capitalization of development costs. In summary, previously we used to do it on a percentage of FTE basis, so knowing what people's role was and how much they contributed to development costs. We now do it in a much more granular fashion, and that's by using a chronical tempo, where people enter their time related to particular tasks. And that's very important. Firstly, it gives us a higher number and we were getting pressure from the auditors to recognise a higher amount because, you know, that was a sense of where we were. Now we have the data to prove that. And that's important also because we're in terms of their R&D tax credits. So we now have in great granularity all of the data that supports our R&D tax credit claim. And that's also important in our patent box claims as well. If you remember, that was a very significant reason for our loan tax charge last year. So moving down into the financing activities, we pay a dividend, of course. That was 1.2 million. That was the final dividend that we paid in the first half of this year. We did have a share buyback scheme that is now completed. We purchased 500,000 shares over the last few months for a total of just under a million dollars. Those are the shares I referred to earlier, the treasury shares which are held on our balance sheet. The purpose of those is not to enhance earnings, it is solely around negating the dilutive impact of share options. So we're never in from the shares we already hold in Treasury without issuing more shares and creating dilution for existing investors. And that I think is pretty much the balance sheet. I will just repeat again the impact of the change to USD reporting. about a year ago is very significant because it reduces our FX exposure. It also reduces the amount of time and effort we spend creating FX hedging contracts. So previously we would hedge a contract for every new deal that we won. We would hedge it for year one and year two and year three. That's a lot of time and effort and a lot of risk. Now what we do at the start of the year is we merely hedge the GBP cost base on a month-by-month basis. we know when it's going to happen we know roughly how much it is and that's why or part of the reason why when you look at the balance sheet um sorry as a cash flow rather and the effect of the fx is really minimal it's because most of our revenues most of our cash coming in is in usd and of course our reporting also is in usd that's the financials film thanks ash