Cirata PLC Trading Update and Outlook (4330Q)

TIDMCRTA

RNS Number : 4330Q

Cirata PLC

18 October 2023

18 October 2023

Cirata plc

("Cirata" or the "Company")

Trading Update and Outlook

Trading in line with management expectations

Outlook reaffirmed for H2 bookings performance.

Cirata plc (LSE: CRTA), announces a trading update for the quarter period ended September 30, 2023.

Summary

   --   Trading in line with management expectations 

-- Bookings for the period of $1.7m, representing the first quarter of normalised trading following the disruption in H1

-- Outlook reaffirmed for H2 bookings ($4.3M - $6.0M) and cash balance for the year end ($16.0m - $16.5m)

   --   Progress on Turnaround Plan workstreams 
   --   Further updates to operational KPI's 

Trading update

Bookings [1] in Q3 2023 were $1.7m (Q3 2022: $1.9m), with the business mix driven by Application Lifecycle Management (ALM) software, comprising 67% of bookings [2] and Data Migration (DM) software comprising 33% of bookings. There were three new contracts in the quarter, including two previously announced (DM) contracts with General Motors, and FordDirect.

A table of key performance indicators can be found in the Business Review section.

As previously reported, the disruption to the H1 2023 trading activity was significant, however, the transition of the Company towards growth and the execution of the Turnaround Plan led by the new Board and Executive Leadership Team is showing early progress. In Q3 we continued to focus on our go to market execution and we exit the quarter with new leadership in marketing.

The Company's shares were suspended for most of July and emerged from the summer quarter, resuming normal operations with customers and partners. The level of engagement with customers and partners during the Q3 trading period is in line with management expectations.

Outlook

The outlook for H2 bookings' performance remains unchanged.

   --    H2 2023 bookings are expected to be in the range of $4.3m to $6.0m. 
   --    Relative to prior periods this would represent: 

o Sequential progression on H1 2023, with 54% bookings growth at the low end and 114% at the high end

o 5% bookings growth relative to H2 2022 at the low end and 46% growth at the high end

o FY 2023 bookings performance in the range of $7.1m to $8.8m

   --    Forecast closing cash position as of 31 December 2023 of $16.0m to $16.5m 

The pipeline has been appropriately cleansed and qualified, and management is confident that what remains is robust and of high quality. The Q4 activity started well as evidenced by the already announced contract expansion with NatWest and a material renewal from US insurer HCSC, with a combined total of $1.3m in bookings. The Q3 bookings reported plus the early Q4 bookings activity announced result in H2 bookings total to date of $3.0m.

Overall, Cirata's pipeline continues to be in the early stages of a rebuild and we are entirely focused on building a strong basis for growth in 2024 in line with the Company's Turnaround Plan. W e continue to target cashflow break even as we exit 2024 and move into 2025.

Approach to Disclosure of New Contracts

During FY23, Cirata has communicated news of new contracts and renewals to investors which included smaller contracts to disclose the ongoing progress being made in re-engaging with current and prospective customers and the positioning of Cirata for growth and success.

Going forward intra-quarter, the Company will adopt a policy of only announcing material customer wins and renewals.

Summary data on all deals will be captured within quarterly trading updates.

Stephen Kelly, Chief Executive Officer, commented.

" Our turnaround plan is developing momentum, and our collective focus now is squarely on growth and tracking towards cash-flow breakeven. We are pleased with the level of engagement with both our partners and customers. It has been a period of "root and branch" positive changes with a new Board, new Management Team and new Company name and brand. These are early days in the Company's transition and although we can see the green shoots of progress as evidenced by recent contract announcements , we realize that our future success relies on a continued relentless focus on growth and execution."

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the company's obligations under Article 17 of MAR.

This announcement contains information that qualifies or may qualify as inside information. The person responsible for arranging the release of this announcement on behalf of Cirata plc is Larry Webster, Company Secretary.

For further information, please contact:

 
 Cirata plc                                       Via FTI Consulting 
 Stephen Kelly, Chief Executive Officer 
 Ijoma Maluza, Chief Financial Officer 
 Daniel Hayes, Investor Relations 
 
 FTI Consulting                                   [phone] 
 Matt Dixon / Kwaku Aning / Usama Ali 
 Stifel (Nomad and Joint Broker)                  [phone] 
 Fred Walsh / Richard Short / Tom Marsh 
 
   Liberum (Joint Broker)                           [phone] 
 Max Jones / Ben Cryer / Miquela Bezuidenhoudt 
 

About Cirata

Cirata accelerates data-driven revenue growth by automating data transfer and integration to modern cloud analytics and AI platforms without downtime or disruption. With Cirata, data leaders can leverage the power of AI and analytics across their entire enterprise data estate to freely choose analytics technologies, avoid vendor, platform, or cloud lock-in while making AI and analytics faster, cheaper, and more flexible. Cirata's portfolio of products and technology solutions make strategic adoption of modern data analytics efficient and automated. For more information about Cirata, visit www.cirata.com

Business Review

During the quarter, the business continued to drive customer and partner engagement in parallel with the execution of the Turnaround Plan. The completion of the Turnaround workstreams is expected to be 31 December 2023, when all new working practices and processes will be rolled into business as usual. Key Turnaround workstreams are highlighted below.

Turnaround highlights

Rebrand

The transition to the new company brand, Cirata, was completed October 4, 2023.

Application Lifecycle Management (ALM)

Within our ALM business we are focusing on 3 key areas; product, services, and Go-To-Market. The ALM product suite has gone through a prolonged period of underinvestment leading to effective "mothballing". From direct customer input, it is clear that there is a strong commitment to the ALM product line. Therefore, we are intelligently increasing resource investment to the development and maintenance of these solutions. This investment will bring our highest value ALM products to a current point of relevancy, which will increase retention of current customers by delivering functionality enhancements in their upgrades, whilst enabling us to target new customers that have been delayed or lost because of our product gaps. Within this market segment, we also see opportunities to increase both services and consulting revenue. Investment in the Go-To-Market strategy will also modestly increase. This will not only increase the traction of our ALM product offering but will leverage our existing large enterprise account base to cross-sell Data Integration solutions. This incremental investment will be within our previously announced cost alignment programme.

Cirata Colleagues

The Company's most valuable resource is its people. Short-term retention plans have been implemented for key colleagues, longer term top talent retention programmes are being rolled out. The Company is strengthening both its marketing and sales teams.

Training in business ethics, code of conduct, compliance and controls have also been developed and rolled out and will be part of a continuous program.

Go-To-Market

Many elements across the eight workstreams directly impact the Go-To-Market strategy. Completed elements as at Q3 include focused partner selection, account allocation, compensation plans, professional services charging setup, account reviews and customer-aligned roadmap.

Turnaround update

A summary of the progress on all 8 workstreams is presented in the Turnaround Plan scorecard.

Turnaround Plan Scorecard

 
 Workstreams             Completed                    In Progress                 In Planning 
 Company Positioning     Rebrand.                     Customer reference 
                          Account Updates.             accounts. 
                          Positioning statement.       Customer campaign 
                                                       planning 
                        ---------------------------  --------------------------  ------------------- 
 Recurring Revenues      Delegation of                Pricing model               Updated pricing 
                          Accountability               aligned with customer       tools. 
                          (DoA),                       value. 
                                                       Pricing structure 
                                                       Q4 and beyond. 
                        ---------------------------  --------------------------  ------------------- 
 Partner strategy        Compensation plans.          Recruitment of 
                          Account allocation.          key Sales talent. 
                          Partner selection            Revised partner 
                          for business development.    strategy. 
                                                       Sales enablement 
                        ---------------------------  --------------------------  ------------------- 
 Focused proposition     Agreed roadmap.              Clarity on proposition      Industry analyst 

                          Customer derived             & focus.                    coverage refresh. 
                          roadmap process. 
                        ---------------------------  --------------------------  ------------------- 
 Customer first          Top 10 Customer 
                          outreach. 
                          Services charging 
                          schedule set up. 
                          Professional services 
                          opportunity review. 
                        ---------------------------  --------------------------  ------------------- 
 Application Lifecycle                                Re-engagement 
  Management (ALM)                                     campaign & cross-selling 
  leverage                                             planning. 
                        ---------------------------  --------------------------  ------------------- 
 Retention program       Top Talent retention         Top Talent retention        Updated values 
                          plan short term.             plan long term.             & culture roll 
                          Ethics and Compliance        Hybrid working              out. 
                          training.                    Office upgrade. 
                        ---------------------------  --------------------------  ------------------- 
 Cost Realignment        Target run rate 
                          plan 
                        ---------------------------  --------------------------  ------------------- 
 

Key Performance Indicators

Management monitors the business against a series of Key Performance Indicators. Management is sharing a subset of the key indicators with investors so that they may more easily assess our progress against these key performance measures.

 
 KPI [3]                2022Q1   2022Q2   2022Q3   2022Q4   2023Q1   2023Q2   2023Q3 
 Bookings ($m)          2.5      4.8      1.9      2.2      2.1      0.7      1.7 
                       -------  -------  -------  -------  -------  -------  -------- 
 Total revenue ($m)     1.3      4.5      1.9      2.0      2.0      1.0      1.4 
                       -------  -------  -------  -------  -------  -------  -------- 
 -ALM Revenue ($m)      0.8      2.5      1.3      0.8      1.7      0.6      0.7 
                       -------  -------  -------  -------  -------  -------  -------- 
 -DM Revenue ($m)       0.5      2.0      0.6      1.2      0.3      0.4      0.7 
                       -------  -------  -------  -------  -------  -------  -------- 
 -Services Revenue      0.2      0.1      0        0        0.1      0.1      0 
                       -------  -------  -------  -------  -------  -------  -------- 
 #New DM contracts      4        1        2        2        2        1        2 
                       -------  -------  -------  -------  -------  -------  -------- 
 #New DM Logos          3        1        1        1        2        1        2 
                       -------  -------  -------  -------  -------  -------  -------- 
 #Contracts >$250K      3        4        3        1        2        0        3 
                       -------  -------  -------  -------  -------  -------  -------- 
 Cash Overheads ($m)    9.4      10.1     10       11.1     9.4      8.2      7.0 [4] 
                       -------  -------  -------  -------  -------  -------  -------- 
 Cash Balance ($m)      21.3     32.7     26.3     19.1     9.3      3.2      23.3 
                       -------  -------  -------  -------  -------  -------  -------- 
 

Table abbreviations: DM denotes Data Migrator and is a Data Integration solution: Use cases include Data Modernisation, Disaster recovery, and Hybrid and Multicloud. ALM denotes Application Lifecycle Management.

General updates

Further to the announced appointment of Xenia Walters and Chris Baker as Independent Non-Executive Directors to the Cirata Board of Directors, a process has been instigated to appoint a permanent Chair of the Board of Directors. Ken Lever remains as interim Chair and has expressed his desire to be included in the process for the permanent appointment.

[1] All reported data relating to the Q3 trading update are unaudited.

[2] ALM renewals above $200K in the quarter include Siemens Industry Software, Apple, and Allianz Life Assurance.

[3] Q3 KPI's unaudited.

[4] Preliminary estimate of cash overheads.

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October 18, 2023 02:00 ET (06:00 GMT)