Contract Win and Trading Update

RNS Number : 5910E

Pelatro PLC

09 November 2020

 

9 November 2020

Pelatro Plc

("Pelatro" or the "Group")

Contract Win and Trading Update

Contract Win

Pelatro Plc (AIM: PTRO), the telecom Customer Engagement Hub software specialist, is pleased to announce a new contract and to provide a trading update. Our mViva platform has been chosen by an Asian telco, which is part of a large global group that is an existing customer of Pelatro, for campaign management operations. The contract is recurring in nature and includes a variety of services as well as the product itself. Over the term of the contract lasting three years, revenue is expected to be between $1m and $1.8m, depending on the customer's take up of additional services which are currently under discussion.

Annual Recurring Revenue

As stated previously, Pelatro has been focused on transitioning its revenue model from license-based, one-time, revenue to recurring revenue contracts. This has been an ongoing process since January 2019, but momentum has been gathering and this transition is expected to be substantially completed by the end of 2020. The success of the strategy to transition to Annual Recurring Revenue ("ARR") over the past two years can be seen as follows:

Date	Jan 18	Jan 19	Jan 20	Jun 20	Oct 20
ARR run rate in US$m	0.0	1.5	4.0	4.7	5.2

ARR run rate is expected to continue to grow and record a material increase by the end of 2020. The shift of revenue model has a short-term impact in the form of lower upfront revenue from licenses being replaced by more regular recurring revenue contracts recognised over several years. This short-term reduction in upfront revenue will yield a significant improvement in the quality and transparency of the Group's revenue, as well as typically a greater overall economic return in future years.

Trading Update and Covid-19 

The Company continues to negotiate further contracts and is pleased to report that it expects any contract wins before the end of this year to be for recurring revenue. Whilst the Company will, therefore, benefit from the smoother and higher quality earnings from this contract profile, it is unlikely that any further contracts won this year will result in significant additional revenue being recognised in 2020.

As previously announced, the coronavirus pandemic has had relatively limited impact on high-level decision making at our customers, other than them necessarily needing to focus more on their day-to-day operations. However, over the past two months, regrettably Covid-19 has affected some of the employees and immediate relatives of both Pelatro and our customers. This has led to slower than scheduled implementation of projects (principally change requests). As this revenue is recognised only on completion of the relevant project, as a result, certain revenue which was otherwise visible in 2020 will be deferred to the first half of 2021.

The impact of the change in revenue model and Covid-19 has been quantified in the table given below.

Particulars	2019	2020*
Pro forma revenue on old revenue model	$11.7m**	$7.6m**
Revenue on new ARR model ex Covid-19 impact	$6.7m	$5.0m
Revenue on new model with Covid-19 impact	$6.7m	$4.0m to $4.2m

*Based on contracts won to date in 2020.

**Estimate of revenue which would have been recognised if contracts signed had been on a license basis.

Outlook

Pelatro is excited with the progress achieved with respect to ARR and the appetite we are seeing from our customers to work with us in this way.  As stated on several occasions, we expect the Group to be on very strong footing in the future owing to the quality, transparency and visibility of its revenue model. It has been a key objective of ours to reach a stage where, at the start of a financial year, the recurring revenue to be recognised in that year is at least equal to the cash costs expected for that year. With the progress in ARR, we expect to reach that stage in the very near future. Additionally, and in line with the strategy stated at the time of our Placing this year, the Group has commenced investing in marketing activities and has also signed up with a new sales person on a contract basis. We expect these activities to bear fruit towards the end of 2021 or early 2022.

For further information contact:

Pelatro Plc
Subash Menon, Managing Director	c/o Cenkos
Nic Hellyer, Finance Director
Cenkos Securities plc (Nominated Adviser and Broker)	[phone]
Stephen Keys / Cameron MacRitchie (corporate finance)
Michael Johnson (sales)

This announcement is released by Pelatro Plc and, prior to publication, the information contained herein was deemed to constitute inside information under the Market Abuse Regulations (EU) No. 596/2014. Such information is disclosed in accordance with the Company's obligations under Article 17 of MAR. The person who arranged for the release of this announcement on behalf of Pelatro Plc was Nic Hellyer, Finance Director.

Notes to editors

The Pelatro Group was founded in March 2013 by Subash Menon and Sudeesh Yezhuvath with the objective of offering specialised, enterprise class software solutions for customer engagement principally to telcos who face a series of challenges including market maturity, saturation and customer churn.

Pelatro provides its "mViva" platform for use by customers in B2C and B2B applications, and is well positioned in the Customer Engagement space. Our technology orchestrates  the digital journey of the customers of the telcos through contextual, relevant and real time offers and loyalty programs across multiple channels including websites, social media, apps and others.

For more information about Pelatro, visit www.pelatro.com

 

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