Cirata plc

I'm joined today by Stephen Kelly, the Chief Executive Officer of Serata. Stephen, it's great to have you with us.

It's great to be here.

Now, Stephen, there's been a lot of disclosures over the last several days. Q2 trading update, as well as the launch and successful completion of an equity placing. Let's start with the placing. Why now?

I think good question. And I think we thought very carefully about the right timing. But essentially what I'd like to do first of all is thank all the investors who back the management and back the company and are with us on the journey. What we did was raise just over $7 million to really make sure we have a robust balance sheet. And I think that's important for all sorts of stakeholders, obviously customers and colleagues. And as we set this path to break even as we exit the year, I think this really underpins a moment in time where it's another stage on the journey of progress. We inherited a company that was broken and much troubled. And in the last year, we've moved from firefighting to really building the company and building the company for growth and sustainability. So establishing where we are on the journey, I think it's the case with the cost base being significantly reduced from $45 million a year to $20 million. That gives us a platform for operational leverage going forwards.

So you've also released details of your Q2. Now it's clear there's still a problem with slippage. Why is deal slippage still a feature?

Yeah, first thing to say is in terms of we want to do quarterly updates and that's good for transparency and disclosure. But it only presents a snapshot of where we are on the journey. And I'm really delighted with the recent fund ways about long term investors coming with us for the whole journey. But if we get back to Q2, yeah, actually, you know, I'm not going to shortcode anything. I was disappointed with the headline numbers. there was a lot of green shoots and even you know the comparables it was like 143 percent up on the previous quarter and year-on-year performance was a similar level of growth but again you know I think the comparables were poor so ultimately we would have been much happier with a better headline number but within the actual structure We're making some significant changes. So on the go-to-market, we established a new organisation in January 1, so it's only been in place for seven months. And we're making a lot of progress around the sales methodology, the pipeline build, the discipline around predictability, qualification. engagement with prospective customers and customers right across the business and we are seeing the steady signs of progress throughout the business and I think in some of the smaller contracts in the second quarter we were much more predictable in terms of their closure and in total there were 16 contracts signed in the quarter. So ultimately I'm not satisfied with the overall headline but we are making progress and I think that's important. If I look at the context of where the company's come, we have made tremendous strides. So the company hit an existential crisis back in March, 2023, and we lost the trust of all our stakeholders. So we were on the watch list of customers and partners, and we've had to completely establish that trust from the get-go. And that's taken time. And now we've got the new brand, we've got the new marketing programmes, and we are seeing evidence of the progress. So for example, on the marketing programmes and working with partners, we saw 110 opportunities in the pipeline, which means it's more robust and stronger than it has been in any of my tenure. with the company and with that obviously you know what we've got to do is uh grow the pipeline and that will improve the predictability and there will be inevitably in any software businesses just like night follows day there's always going to be some slippage But if you've got a very robust and broad pipeline, then it actually allows you to have contingency within that pipeline to be a lot more predictable as a software company. So ultimately, not totally satisfied with the quarter. But in terms of the context of the journey, I do see some significant green shoots of progress that are highlighted in the quarterly disclosure. And that's very much our commitment as a management team.

So can we talk a little bit more about cost restructuring? You've taken the business from a run rate of $45 million to a run rate beginning FY25 of $20 million. Can you talk about the impact on the business?

So you're absolutely right. In terms of the cost base, it was too high. And over the last five, six years, the company hadn't demonstrated any sustainable growth. So we looked at the cost base, we looked at driving a performance culture and also building a culture, which was really important around the key hubs like Belfast and Sheffield. And from that, we've taken the cost base down, as you said, from 45 million 18 months ago to kind of exiting this year at 20 million. Now that also provides, because we're planning for strong bookings growth, significant operational leverage. I think the second point is it's tough, obviously, when you do restructuring on colleagues, particularly colleagues who have been here a while. We hope we've been compassionate and supportive for those. But for colleagues who are here, it has been a reset. We're on a rebuild of the company. and we're really pleased that many of our colleagues are leaning in and excited about the growth of venture but let's not underestimate it has been a turbulent time for them and a time of uncertainty that's unsettling and we want to make sure now we enter a period of stability where that platform of stability provides for much better execution particularly in the go-to-market and the sales and marketing areas of the business that will drive the growth and the success for the company.

Now in your Q2 and launch document you mentioned an internal review and validation of strategy. Can you talk a little bit more about what that entailed?

Yeah, I think it's fair to say obviously when we came in the company literally we were day to day just putting fires out and I've referenced in the annual report it felt like whack-a-mole. But when we sort of came up for AIR towards the fall, the autumn and into the new year, we thought it was really important to have a very strong data-driven approach to validating the strategy. So we initiated a piece of work talking directly to customers and partners and analysts to assure ourselves that the market established and was there and supported the growth ambitions for the company. I think the job is never done and effectively what we have now is set up the disciplines internally where we have feedback loops, where we've established the review of the strategy, we've validated the product market fear but we're constantly now obviously talking to customers, partners, OEM partners to validate and fine-tune the execution, the go-to-market, the messaging and that will be a continuous process and it's I think that's the essence of a listening company that really takes feedback particularly from its customers its partners to constantly improve and that's what we're striving to do.

So Stephen you've been in the role now just over a year tell us what has kept you up most at night?

So what keeps me up at night? Directly to the point, I think we've got to execute better and great companies execute flawlessly. Simple as that. We really are building the sales and marketing footprint from the ground up. We're making strides, we've done tons of work around sales kick-offs, sales boot camps, training, introducing new methodologies, much more greater discipline around pipeline management, qualification. but we've still got a way to go and i wouldn't pretend any anything else and that's the thing that definitely doesn't give me sleepless nights now but that's where all our focus is going to make sure that we become very predictable the pipeline is much broader and deeper and stronger and that will be the essence and foundations to build the high performance company that i'd be very honored to be the steward to lead so ultimately what are your key takeaways from the year um It's been a tumultuous year. Actually, when Ken and I started, you could probably describe it using a football analogy of a game of two halves. The first half was brutal. It was a slog, working every weekend, just literally putting fires out on the rescue of the company. We sort of came through that period at the end of last year and now we're clearly in the second half. We've established the foundations for growth, we've transformed the company, we've done the review of the strategy. We believe the journey is well set for growth ahead and providing significant operational leverage. for investors with literally less than half the cost base that we were carrying 18 months ago and a strong bookings growth trajectory and that's underpinned by a growing pipeline and literally every week now we are making improvements we feel in the sales and marketing side of the business which has been probably the weakness of the business historically. We're not there yet, probably never will be honestly. We'll always be looking to make continuous improvements because that's the culture that we want to build. So I think now in the second half, we've established the foundations, we put in the plans, we're improving the execution and the culture across the company, very focused on winning with customers and partners. And I think we are seeing clearly signs of positive momentum.