REG - Cirata PLC - Trading Update and Outlook

CirataAnnouncement

18/10/2023 07:00

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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  (#_ftn1) 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  (#_ftn2) 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. We 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                                 +44 (0)20 3727 1137
 Matt Dixon / Kwaku Aning / Usama Ali

 Stifel (Nomad and Joint Broker)                +44 (0)20 7710 7600
 Fred Walsh / Richard Short / Tom Marsh


 Liberum (Joint Broker)                         +44 (0)20 3100 2000
 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 (http://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 accounts.

                                                  Account Updates.                              Customer campaign planning

                                                  Positioning statement.
 Recurring Revenues                               Delegation of Accountability (DoA),           Pricing model aligned with customer value.            Updated pricing tools.

                                                                                                Pricing structure Q4 and beyond.
 Partner strategy                                 Compensation plans.                           Recruitment of key Sales talent.

                                                  Account allocation.                           Revised partner strategy.

                                                  Partner selection for business development.   Sales enablement

 Focused proposition                              Agreed roadmap.                               Clarity on proposition & focus.                       Industry analyst coverage refresh.

                                                  Customer derived roadmap process.

 Customer first                                   Top 10 Customer outreach.

                                                  Services charging schedule set up.

                                                  Professional services opportunity review.
 Application Lifecycle Management (ALM) leverage                                                Re-engagement campaign & cross-selling planning.

 Retention program                                Top Talent retention plan short term.         Top Talent retention plan long term.                  Updated values & culture roll out.

                                                  Ethics and Compliance training.               Hybrid working

                                                                                                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  (#_ftn3)       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  (#_ftn4)
 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  (#_ftnref1) All reported data relating to the Q3 trading update are
unaudited.

 2  (#_ftnref2) ALM renewals above $200K in the quarter include Siemens
Industry Software, Apple, and Allianz Life Assurance.

 3  (#_ftnref3) Q3 KPI's unaudited.

 4  (#_ftnref4) Preliminary estimate of cash overheads.

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