It is ‘music to my ears’ – especially when this company clearly states that:
“Annual Recurring Revenue, driven by selling our Celebrus software, is a core focus for the business to drive more value for our shareholders.
Our goal, given the nature of our business, is to have ARR comprise roughly 75% of our total revenues in a given year.”
I really like to see a build-up of ARR by any company, so that statement pleases me as I look at this company’s background.
The Business
Previously known as D4T4, the company which changed its name late last year, classes itself as a disruptive data technology platform, Celebrus Technologies (LON:CLBS) is focused on improving the relationships between brands and consumers via better data.
It redefines what ‘digital identity verification’ means to power both next-level marketing and fraud prevention use cases.
With a blue-chip international customer base, the group, which has offices in the UK, USA and in India, works across over 30 countries and markets itself throughout the financial services, healthcare, retail, travel, and telecommunications sectors.
Celebrus automatically captures, contextualises, and activates consumer behavioural data in live-time across all digital channels and empowers brands to detect and prevent fraud before it occurs through the addition of behavioural biometrics and AI.
By selling more software, the group continues to focus on driving ARR growth with higher gross margins, increasing shareholder value, and building upon its high customer retention rates across the business to drive organic growth.
Celebrus Cloud allows the company to gradually shift away from a reliance on third-party hardware and into a hosting model that drives ARR Managed Services Revenue.
The strong management team has a track record of success in growing software businesses.
While the company, which has a strong balance sheet with ample cash to fund investment into revenue growth, is profitable, cash generative, and dividend paying.
Management Comment
In the company’s 19th March Trading Update, CEO Bill Bruno stated that:
“We continue to emphasize our focus on the Celebrus software platform, with the primary deployment option being Celebrus Cloud.
As the upcoming financial year approaches, we are pleased with our ARR growth and revenue visibility; we will continue to invest accordingly to ensure we execute our strategy successfully.”
The Equity
There are some 40,047,009 shares in issue.
The larger holders include Canaccord Genuity Wealth (11.91%), Investec Wealth & Investment (10.28%), Ennismore Fund Management (4.81%), Chelverton Asset Management (6.34%), Close Asset Management (5.78%), Rathbones Investment Management (4.78%), Peter Kear (2.73%), Peter Simmonds (0.88%), Octopus Investments (0.38%) and Ash Mehta, CFO (0.20%).
Broker Views
The group believes market consensus for FY24 to be revenue of £32.1m, and adjusted profit before tax of £5.4m.
Analysts Andrew Darley and Kimberley Carstens at Cavendish Capital Markets have concluded that:
“With contracts, confidence, and visibility, here is a very interesting stock at the wrong price.”
They currently have a 450p a share Price Objective on the stock.
Their estimates for the results, that are due next Tuesday morning, are for £32.0m (£21.4m) revenues for the year to end March, with adjusted pre-tax profits having risen to £5.5m (£3.7m), lifting earnings to 10.4p (7.7p) and the dividend to 3.2p (3.0p) per share.
For the current year they look for £35.5m sales, £6.0m profits, 11.8p earnings and 3.4p dividend.
Over at Canaccord Genuity Capital Markets its analysts have a Buy rating on the shares, with 330p as their target.
They have fairly similar 2024 estimates but are more bullish for the 2025 year – £34m sales, £6.6m profits, 13.0p earnings and a 3.5p dividend.
My View
The high price-to earnings ratio is said to be more than acceptable within the Software and Services sector.
The £98m capitalised group’s shares are currently trading at around the 245p level, which is on the year’s High.
The broker’s price estimates hold out that there is more upside to go for – so will next Tuesday’s results underline their feelings?
