Cirata plc

Stephen, great to see you again. Now, how are you feeling about the business?

Yeah, I think today I'd just like to give some context for investors, almost like an unplugged conversation. Given the crisis that Serata had experienced in 2023, we totally get it that investors could see the company as a risky investment. Now, can we guarantee success? No, of course, that would be unrealistic. But what we can guarantee is that Ken, our chairman, Ken Lever, and me and the management team are absolutely working our socks off to deliver for investors. Now in these videos, we'll show you where we are under the covers, where we've been, where we are, and importantly, what lies ahead of us.

So what are your thoughts on the Q3 numbers? What should investors take away from it?

Yeah, in Q3, I think there were no great surprises from a bookings perspective. As we flagged, the year was going to be very back-end loaded when we reiterated the guidance. We did, however, land almost a million-dollar renewal from a big US insurer, which is a big vote of confidence around the data integration product and the use case was disaster recovery. You'll remember a year ago when customers and partners were looking at alternatives from Serata, given the crisis of what happened back in the spring. And there's some other significant developments that are worth sharing with investors. Firstly, we've got the anchor of the partner prepays off our backs. Our prepays are great in theory, if there's a credible plan to burn them down. The new management team arrived in March with overhangs from the prepaids from partners. And this combined with the breakdown of trust for both direct customers and partners at that time, almost 18 months ago, meant we had a lot of work to rebuild that trust and rebuild those bridges with both customers and partners where relationships had been damaged. Most important that we had to start driving those new engagements on that platform of trust and then see that engagement translate into top line growth. So bottom line, we started again and it wasn't a clean sheet of paper, but now I'm happy to say the slate is clean. I'm immensely proud of the work that the team's been doing to fix, firstly, the prepaid issue. And the announcement we made with the IBM renewal of the OEM relationship, the prepaid retirement and the burndown of some other smaller prepaids is a hugely important checkpoint for the Serata recovery. It had kind of been like running a race, but starting 10 miles back from the start line. Now, I'd also like to note for investors that the number of data integration contracts in the quarter are admittedly small in quantum, apart from the renewal that we mentioned. But it was eight new DI contracts versus four at the same time last year. So in absolute numbers, doubling in the year. I think the activity levels also are worth noting that have improved significantly. We understand we've got to land the larger deals, but we need a much stronger and broader level of cadence in our go-to-market that we've historically had. Now, typically, a busy go-to-market business is ultimately a more efficient and higher growth business. And I totally get that software companies either grow fast or die slowly. The reality for the old company was that for four years from 2020 to 2023, the company broadly flatlined with an average of eight to nine million bookings per annum. That's no growth, and we plan to change that.

Now, your CFO, Ijeoma, resigned last week. What do you think that says about your business?

I think it actually says nothing about the business. I think all the C-suite, the board, the leadership team own the strategy for the company and it's very much business as usual. Ijeoma's a really nice guy and it's been a pleasure to have worked with him. We're lucky to have his commitment and hard work during the rescue phase, which together we've delivered against. And it's no surprise to me that he's been offered very attractive roles elsewhere. And we wish him all the best. Now, Ricardo, our new interim CFO, has bags and bags of growth experience, particularly software growth experience. And he's got tons of energy. he's going to hit the ground running and in fact he and Ijeoma have already begun working tightly on a smooth transition and he spent the last couple of days with the management team really plotting out the plans for Q4 and importantly into FY25.

So Stephen just looking at your board now, there have been some recent announcements. Why the board additions? What do you think they'll bring to the team?

Yeah, really good question. And Ken runs the board. He and I have an excellent relationship. Ken and I are very much committed to each other to see this through. Ken, honestly, is head and shoulders the best chairman that I've worked for in my three UK public company journeys. He's been very active over the summer upgrading the board and I know this is a topic close to shareholders' hearts. First thing to say is that we're absolutely delighted to have Amanda Jobbins and Eric Collins join us on the board. They're both winners in their chosen field with absolutely tons of growth experience. Now, Ken, our chair, is bringing together a very strong board, underlining our early commitment to governance and getting the best brains we can do to work on the challenge of building a great company. I speak with personal knowledge as a chief executive of a NASDAQ company and a FTSE 50 board, and Ken is building a board that is punching big for a company of this size.

So shifting back to the business then, the pipeline obviously garners a lot of attention, particularly given the back-end weighted nature of the year. Is there more information that you could be sharing?

Yeah, I think it's a really interesting perspective and we set the highest standards for disclosures and transparency. Now, investors has asked us for more transparency, but I think we're conflating transparency with deal flow. I can promise you that we work in night and day to drive the pipeline and the deal flow. But again, we're very candid about the cards we were dealt when we started the recovery and talk to the slippage that we've experienced since. Now, we are very transparent. Firstly, we guide based on our pipeline and we guide based on what we see in the latter stages of the pipeline, what we call stages four and five in our sales process methodology. We review our guidance with the committee of the CFO, investor relations and myself every quarter. And we try to be incredibly disciplined about our assessment and very objective of what's in and what's out. We do need to be careful, however, and not to hold a running commentary with the public markets about prospective deals. And as the business momentum improves, guiding and forecasting obviously becomes easier because it's about probability and about maths.

So Stephen, why do you think the recovery is taking longer than you'd hoped?

Yeah, when we arrived, it wasn't a standing start. On reflection, Ken and I have chatted about the trauma left behind by the scandal of spring 2023. And it's a miracle that we rescued a company against all odds. For example, we found a demoralised and shell-shocked set of colleagues where we needed three phases of restructuring. Trust was blown with partners and customers. And naturally we had very angry investors who felt massively let down. The to-do list was long and it has been hard yards. This was well chronicled in all aspects of the business that had to be rebuilt from scratch. I always want us to move faster. And I think there's a danger of going over the old ground here. But building a growth business from the ground up, where trust has been lost, was always going to be hard. I used what any leader would use to try and galvanize the team, which was a burning platform. Honestly, the team probably took a bit longer, a bit more time to smell the coffee, having come from a very fragmented culture where there had been unlimited time off, a mandate for working from home, and a four day week where meetings were not rostered on a Friday. Now, I do get flexible working totally, and I fully support a lifestyle balance. But the company at the time was on its knees. And we really needed all hands to the pumps. Activity levels now accelerating and it's much busier now and we're running faster and that's a good thing. And anecdotally talking to the go-to-market teams, they said they've never been so busy in their Serata tenure, working on good stuff with customers and prospective customers. So it's been a big change for many people at Serata, but I'm really proud of the response from so many of our colleagues who have leaned in and embraced the new culture. Now, despite the expectations to the contrary, this company can be better described almost like a venture startup, despite the vast amount of money invested in the past. It's a matter of public record that the company has burned through almost probably around $250 million of investors' money with little or no growth on the top line and had a bloated cost structure pushing $45 million annualized when we arrived. You know, we'll exit this financial year at $20 million cost run rate. And our plan, when it comes through, will be showing the best operating leverage in the company's history. Obviously, the top line does have to come through. And I'm proud of my team's commitment thus far to building a sustainable model. We'll have more bang for every buck that hits the till.

So tell us, what are the KPIs that investors should be focusing on?

So the KPI, the key performance indicator we all care about is bookings. Obviously doing larger deals is nice and what we want, and we will do larger deals, but that's probably not the ultimate test of whether we fix the business. How do we become more relevant to a bigger, bigger cohort of customers and prospective customers? How do we simplify and accelerate the discovery process for prospective customers? What is this flywheel of sales around? Is it pricing and fixing the revenue model, fixing the technology, fixing the product market fit? Now, all these aspects of the business did need new focus. All these things together drive this deal generation and activity drives activity through the pipeline to closure. So in terms of KPIs, yes, it is the number of contracts as well as the quantum. It's the type of contract. It's growth versus renewal. It's new logos. It's product releases. It's partner initiatives and commitments and so on. And let's look at the data where data integration as a percentage and number of new customer deals is growing, which I'm really encouraged about. Let me give you an example of how small details drive the bigger picture. Some folks criticised us last year for posting an R&S related to a certain automotive company for a contract worth just a few thousand dollars. Now, we did this to demonstrate that we could transact with a counterparty after, you know, the scandal of March 2023. And most importantly, we could still land on a new counterparty. Now this quarter, we've sold a deal to that same customer almost 10 times the value. We landed initially and now have expanded in the worst of times. Another example in financial services, we did the first deal probably over a year ago and now have done a fourth expansion purchase order in this October quarter. Now clearly, we must do hundreds of those deals to drive growth, but it's kind of the boring stuff that builds a great business. You've got to turn up every day and do the boring stuff. We will do absolutely seven-figure deals, no doubt about it, but we need to stick to the focus and the strategy. For example, the land and expand is starting to show results.

So what about your policy on transparency? How are you communicating what's going on under the hood with investors?

Yeah, on transparency, it's a massive commitment. And let's share some data that sort of speaks for itself. And we'll come back to this with the data and I'll share with you in a minute. Interestingly, of all AIM companies on the London Stock Exchange, only 8% report to investors on a quarterly basis. You know, even in the main exchange, FTSE primary and secondary companies, less than half of those report quarterly. So when we joined together, Ken and I, we absolutely committed to the high standards, the gold standard of transparency, and it's incredibly important to us. The company is now being run with a high degree of integrity, honesty, transparency, and I think it's something shareholders have an absolute right to expect. So since Ken and I joined in March 23, just to give you some data points, Serata has published over 90 RNSs. We've released five video webcasts. We've released numerous investor presentations, provided quarterly trading updates, an investor roadshow, both online and face-to-face in the UK and the US. We also understand that there are retail investors and day traders in the stock. So our commitment to disclosure for all our shareholders is paramount. Now, I don't know any company management who'd want to share kind of the warts and all in terms of conversations like this. Ken and I, we don't want to sugarcoat stuff. We'll continue to set the gold standard for transparency and frequency of communications.

So tell us, how are management aligned with your shareholders?

We are completely aligned with shareholders and are absolutely committed to creating value and driving a growth company that drives equity value. I was a shareholder coming into the project and I've been buying shares in the open market since. Ken also has bought shares and so have other members of the management team. Now, I waived my FY23 cash bonus because the company has to use every dollar wisely. I can absolutely say there's no fat cats here. I expect everybody to respect our money, where it comes from, and ultimately we use phrases like treat the company's money as if it's your own because that's fundamental to the values of the company. Now our lack of sales mean that our salaries and expenses have come almost directly from our investors historically. So I get it totally. And as an example, you know, I'm jumping on a plane, my new favorite airline JetBlue, back to the States on Monday, flying coach at the back of the plane to New York City, and then jumping in an Uber on arrival, and then a full day of customer meetings with Chris. And around London, I jump around on public transport with my over 60s Oyster card. So there are some advantages to being old.

So Stephen, is there anything that worries you? What about the stock price?

I absolutely obsess about running the business. Obviously, I have to think about the stock price if it has any impact on the trust and the confidence of our customers and partners. However, I do think the intrinsic value of the company has increased materially since the company relisted at 50 pence in July 2023. Every aspect of the company is stronger. I can assure everybody that Ken, the team and I are leaving nothing on the pitch. We are all in. Now I'm not perfect, I make mistakes, but I'm seeking to build a sustainable, a growth machine that excels for customers and delivers value for shareholders. I don't look at the stock daily, as ultimately it should look after itself based on the fundamentals. Good product market fit, dealing with high quality brand name Fortune 500 customers, high quality revenues, quality of the management team, and the fundamentals of a strong growth business.

So Stephen, ultimately, do you think you'll be successful in turning around Serata?

We're working hard and we've got lots of reasons for optimism. As we flagged in Q2 and our interims, our internal review of the strategy, taking a complete drains up approach, talking to customers and partners, validated what we're doing with those customers and those partners and what we're driving in terms of the plans internally. We believe we've got a good product market fit, both near term opportunities for growth and also medium term and thinking about the world of data orchestration and hybrid cloud. We must execute, however, on what's in front of us. And we're working 24 by 7 to make sure that our shots on goal do go to the back of the net. I'm working as hard as I have done at any time in my career. And those who know me well know that I'm a grafter and I put in a shift. Ken's assembled a crack board and we're building a strong team. None of us like losing and we're not quitters. Investors can rest assured that we are giving it our all. We are all in.