Cerillion Plc (CER) Earnings Call Transcript & Summary

Welcome to the Cerillion Interim Results Webinar ended at the end of the presentation, there will be the opportunity to any stage, please type your question using the Q&A button. This webinar is being recorded. I now hand over to Louis Hall, Co-Founder and CEO; and Andrew Dickson, CFO. Louis, over to you.

Many thanks, Tamsen, and welcome, everybody, to the webinar, and thank you for taking the time to listen to us this afternoon. I appreciate some of you will already know the story. But for the benefit of those, who don't, I will go through the introduction of the company and what we do, who we are and so on. So I'm Louis Hall, CEO and Founder of Cerillion. We founded Cerillion back in 1999 as an MBO from a company that was then Logica, which was quite a large U.K. software house at the time. We went out to the market, raised [indiscernible] Funding invested in building the business over the next 15 years or so and then ex the [indiscernible] the IPO in 2016. Andrew, would you like to introduce yourself quickly?

Yes, sure. So I started back in February 2022. So coming on for 18 months ago. Before that, I worked for Vitec for about 7 years -- and I started my career at Deloitte, where I did my accountancy qualifications.

Thank you, Andrew. So what does Cerillion do so we provide the enterprise software layer that sits between telecoms businesses customers and their networks. And so what does that mean? So let's have a look at that in a bit more detail. So this is a diagram of the different product modules that we provide. And essentially, I won't go into this in a lot of detail, but we provide all of the software that enables telecom businesses to create the products they sell to their customers. And bearing in mind that most telcos these days, the telecoms companies are selling what we call quad-play. So that's a combination of mobile broadband, fixed wire and TV services in quite complex bundles, and that requires some quite complex software. We also provide all the software that enables telecom businesses to onboard their customers, whether that's through CRM in call centers or retail outlets or through self-service for customers onboard and sales or through our mobile apps. We also provide software that then connects those services to the networks that monitors users of those services, puts charges for those services onto bills, collect payments, manages collections and so on. And again, and other peripheral modules that sit around this area. So this is absolutely at the core of everything that telcos do. it's not nice to have. It's mission-critical. I guess our USP in the market is that we provide this already pre-integrated together. So some vendors provide part of this product set, individual modules or one or two of these modules and then they have to be integrated together with other vendors modules. That's a complicated, expensive, relatively risky process. We provide all this on day 1, out of the box as a service, as much software as a service model. So you don't need to have your own hardware or your own IT department. We provide this as a service working out the box on day 1. In terms of the business model and revenue model, if you like, we sell customers a subscription service that subscription fee covers licensing for the use of the products. It covers the support and maintenance of those products. It also covers what we call managed service, which is us operating the solution, as I said before, on the customer's behalf. And also as hosting that solution, either in public or private cloud. And in addition to that, we will also, for a new customer, provide implementation services to put that solution into production. And because these are large solutions and they're essentially digital transformation projects across the whole breadth of the business, those projects can consume somewhere between 3,000 and 6,000 man-days of effort. They typically take 9 to 12 to maybe 15 or in some cases, even 18 months to complete. Having said that, that's quick in our industry. It might not sound like a long time, but that's a very short project for this kind of engagement mainly because we're starting with all customers having the same products. There is no change to the product when we deliver it to a new customer or at least there's not very much changed very rarely we're writing new codes. And all the work we're doing is around understanding requirements and then doing configuration and data migration. So in terms of the revenue model, addition to the subscription fee and the -- so addition to a quarterly SaaS subscription fee, we're charging an implementation services fee to put this offer into use. So that is recognized over the term of the project, the project last 12 months we recognize revenue for that over that 12-month period against project milestones. For the subscription fee, and then the customer sees one fee internally, we break that out into a license fee, a support and maintenance fee, managed services fee and a hosting fee and the license fee we recognized per the IFRS 15 accounting rules once the software is installed. So right at the front of the engagement typically, these are 5-year term contracts. So customers paying subscription over 5 years, will recognize the license element of that as soon as the software is installed. The rest of those price elements, their support, managed service and hosting, we recognize over the duration of the -- on a set loans base, the duration of the contract term. Moving on, Great. Okay. So we are headquartered in London. We have about 320 people. We have about 100 in London, 200 in India in three different offices that we have in India. And we've recently opened a delivery center in Bulgaria in Sofia where we have about 20 people today, but we're growing that office quite rapidly. We opened this office just to give us a bit more diversity in terms of addressing some of the overheating in our U.K., India locations. Having said that, that's obviously came down quite a lot since last year, but it's always sort of have alternative sources of resources. We found a good team of -- rich team of resource to mine in Bulgaria. So that's working out well. Also, it gives us more people who have EU passports. A lot of our business comes from Europe, and that's useful in terms of having easy travel -- ease of those people working in the rest of Europe. Today, we have around 80 customers in 44 countries. That's everywhere from Australia through to North America. We also have sales presences in Sydney and in Singapore. And in Brussels, and we're in the process of putting on the ground sales resource in North America. In terms of the high-level numbers, the split between software and services is usually -- these are H1, half one, first half numbers, but usually a bit more than half of our revenue comes from software and a bit less than half comes from services. This is fairly consistent equally, a bit more than half of our revenue comes from Europe normally. Europe is, in our view, by far the most dynamic telecoms market. and the other half is usually split roughly -- split between Asia Pacific and the Americas. This particular half, we had a fair amount of revenue in Middle East mainly deriving from a big project we're doing for Orange to provide software for the new telecom's infrastructure in the new Egyptian Capital City. We do have very sticky customers. Once our customers are on board, they tend to stay with us for a long time. This chart is showing that 81% of our customers have been us for more than 5 years, but we have customers in our portfolio who have been with us for more than 20 years. It's a big process to move these to different platforms, move customers different platforms. So they tend to stay once they are onboard. just trying to pass the slides here. Okay. I think without going to massive amounts of detail, the market drivers behind what -- why the telecom businesses spend all this money and go towards effort to have these solutions or to change these solutions. And I think there are three main drivers. One is revenue growth. So there's a huge amount of investment going into -- at the moment, going to 5G rollout and fiber rollout. And in order to recoup those investments and better monetize those investments, telcos need sophisticated software to help them build better product bundles to get closer to the customer and so on. So revenue growth is a key factor. And what we're seeing at the moment is two of the big drivers in this market are digital customer experience. So how do you -- not just how do you save cost by getting customers to serve themselves, but how do you make it more attractive for customers to join your service to come onboard as one of your customers while then the next telco's customers, the [ best ] customers and I think that that's all about making it easy to use those self-service tools, all those mobile apps that enable new customers to do that. And the other thing that we're seeing, which I've already mentioned, I guess, is that this need to be able to build more sophisticated product bundles to be able to add loyalty schemes on top of that and then the discounting schemes on top of that, both in business and consumer is a key to, again, generating more revenue to recoup investments made in this heat infrastructure investments that telcos are making. Of course, all the other factors still apply, obviously, operational efficiency, if you can consolidate a number of legacy platforms onto a modern conversion platform that can cover all the different services and brands as our platform can that's a driver. And of course, technology is always a driver in telecoms. If anything, technology is the driver in telecoms and telecoms businesses will always have to offer the latest and greater services if they're going to stay in business. So that's a factor too and then of course, not all legacy enterprise software can cope with all the new infrastructure technology. So that in itself can drive change and customers to move to new platforms. I just wanted to draw your attention to a recent Gartner report for some external validation. So Gartner, one of the big business analysts, they cover telecoms very widely. This is a report that came out last month in April, and it was a vendor survey, which we included in, but it also surveyed the telecoms businesses and asked telecoms companies what are your priorities in choosing enterprise software, the software that we provide. Prize #1 for the market was digitalization of sales and support channel. So that's all about this improved customer experience. Prize #2 was support for new product types and business models, which is the second thing I was speaking about, i.e., it is all about creating more sophisticated product bundles to earn more revenue at the same basic services. So it's interesting to get some external validation from Gartner on what we're seeing at the [ call ] base. In terms of the markets that we're in, so the thing to know about telecom is not all telcos are like BT or Vodafone there are all kinds of different telcos and we have customers who are typical telco names you might recognize on three in the U.K. KDDI is like BT in Japan, Proximus is the BT of Belgium and so on. But we also have customers who are not really telcos at all, like say, in the U.K. Neos is the telecoms business of SSE, the power generator. -- in Denmark, Norlys is another big electricity company, second largest power generator in Denmark, but they're also the largest supplier of TV and broadband services to telecoms -- telecoms market -- and they've recently, just a few weeks ago, announced that they're buying Telia, one of the big Danish mobile operators and are going to integrate that into their business as well. So that's not a telco, you might think it was a telco. And then, of course, there are all the MVNOs, the brand-based telco businesses. So think about things like Tesco Mobile, for example, we call those mobile virtual network operators, and then we have emergency service networks around the world. They all have their own telco operations that need all of these software modules. So again, without getting to fast-lane detail, there are all kinds of different types of telco. Just going back to the previous slide, the market -- you can say we in the market most different ways. You can also look at it in terms of just scale, so Tier 1, Tier 2, Tier 3 and so on. And I think for the largest telcos, we are able to break into those through niches. So either by providing One or two of our modules are not the whole product suite or by providing the whole product suite to one or two of that telcos brands. So that's the way we break into the big ones. -- and then the sort of more midsize, smaller ones, we can provide the whole suite to all the brands. So different connect points and different places that we can operate in that market, which gives us a lot of diversity. In terms of channels, we also work through the channels. Channels are a lot less important than when I started out in this industry. I think part of that is driven by the SaaS revolution, so because software van is providing software as a service mainly now the concept of going through a third party to have access to the service is not quite as obvious. So telecoms businesses, we see want to direct a lot more to the software provider However, Nokia is an important channel for us in that, Nokia can access some of the markets that it's harder for us to get to on our own, particularly in the Middle East, and hence, the deal we won with Nokia the Egyptian capital, which we're currently working on, and that's a very interesting project. It would have been hard for us to win with Orange without Nokia being involved. And also, we do work with the big systems integrators, so people like Infosys, Capgemini, CGI,, [ Encounter ] and so on, on a sort of a fairly opportunistic basis, but they do give us access to leads that we wouldn't necessarily always see and they are also potential pools of resource to help us with projects on some of these larger deals. We've spoken a bit about customers just point being we have a very broad and diverse customer base. And we can certainly handle questions on that later on that people want to know more details. In terms of the competitive landscape, well, there is competition, unfortunately, keep us all honest. The competition splits into three main grids, the large independent software vendors. So people like Oracle, for example, who have product suites in this area. And we tend to win against these much larger beasts because we are very focused on, as I was saying before, our product solution. Every customer has the same software. If a customer wants features we don't have, we won't give them a customized version. We will either introduce that feature through our own R&D program or in some cases, customers will fund R&D to have that feature produced so it's not something we think that we want to invest in or something that we would do at a later date, but not right now. So a fair amount of R&D is customer-funded. And that's a useful source of product development. But that customer then does not have any IP rights in the software or any royalties, and that feature is a product feature that all other customers will benefit from and that's an absolutely fundamental principle in our business model. Whereas the -- most of these large independent software vendors are providing quite heavily tailored solutions. So they'll start from some product framework or a solution for a different site or different customer but they will then get into quite heavily tailoring that solution, which obviously takes a lot more time. It's high risk, it's more expensive. Then the middle group of competitors are the what we call the network equipment vendor. So that's Ericsson Nokia, ZTE and Huawei, the main ones in the world. The Chinese vendors are not in our current main markets, Europe and North America. They're still strong in the emerging markets, but we tend not to do very much in emerging markets. And Nokia is a partner, so they're not really a competitor. Ericsson are a competitor, but somewhat lost focus on their software business. So we're not seeing as much of Ericsson as we would normally do. And then there are some smaller independent software vendors of the same sort of order of magnitude size of ourselves, but they tend to be more kind of regionally focused or focused on particular types of telcos -- so we don't generally compete much against the smaller ones. Okay. So a little bit of -- just a quick couple of points about the about the 6-month period we're reporting on and then I'll hand over to Andrew to go through that in some detail. We've had very strong trading, I think, in the first 6 months of the year. And we have hit record highs on all the key KPIs. And Andrew will go into the detail. But as you can see, revenue, EBITDA just PBT, net cash all up. Well, I'll just spend a couple of minutes on is the orders and the sales side of things. So we achieved GBP 15.3 million or a 40% increase in new orders compared to the same period last year. This is still lower than the high we had in '21. And the reason for that is that new orders in 2021 were heavily skewed towards the first half. So total new orders for '21 was something like GBP 30 million. say, whilst 15.3% is lower than 23%, we're pretty confident that we'll exceed the total for '21 in '23. And a couple of points about that new order tickets, So, all of those new orders came from existing customers. The interesting thing is that we signed two quite substantial deals with existing customers of a scale that a few years ago would have been considered to be big new customer wins. So one of those, we announced at GBP 10 million -- the other one we announced at GBP 6 million. And just to explain before I go on, how GBP 10 million plus GBP 6 million doesn't equal GBP 15.3 million. In our new orders numbers, we don't include any support and maintenance sales and that's because when we take new orders into back order, we only include a year of support and maintenance contracts in our back order. That's just so that we don't distort our back order otherwise look back orders full of contracts that we're getting -- sorry, revenue that will get recognized for 5 years or so. So that's why there's a slight discrepancy. Of course, we we've done other existing customer sales and those two big ones. And obviously, that's a different number. But just to give you some color around that, the interesting thing about those two quite substantial existing customer sales is that they weren't to particularly large customers, and they certainly weren't to our largest customers. And one of those customers have been a customer for more than 20 years. So that's really interesting and gives us a lot of confidence that we can achieve -- keep this growth rate growing and keep momentum moving when this customer base has this potential to deliver these kind of deals. So what was in those sales, there was -- a mixture of things. Some of it was licensed capacity expansion where our customers are growing their bases. So as customers take on more customers themselves, more mobile users or TV customers or broadband customer whatever, they pay higher fees, our subscription fees are directly linked to a number of end customers. And so some of that was just growth, but also customers establishing new brands, new bases. And some of that was one customer -- one of those customers that bought additional module [ service ] . They hadn't bought all of the modules upfront and went back now and bought the rest, the rest of them. And that not only generates additional license fees, but it also generates additional services revenue, seat services, sales to put those modules into production. In addition to that, we had we had some evergreen sale of Evergreen. So Evergreen is our subscription program where customers pay a quarterly fee and that gives them automatic access to upgrades on a regular basis rather than those becoming a once every 2- or 3-year exercise and that becomes quite disruptive. And we are finding a lot of traction in that with existing base, not to mention, of course, new customers who tend to take that automatically. In addition to that, there was some extension of the term agreements that also generated more order value. So sort of [indiscernible] point to this is that what's interesting as well is that we're seeing the opportunity to convert older customers into more of the SaaS model through selling them not just evergreen, but managed services, for example, so that we take over running the software from all the customers' IT departments. And I think we'll see more of that going forward. Okay. I think -- sorry, one final point before I hand over to Andrew. In terms of new customer sales, and I'm hoping these slides are going to advance fast enough, No, it's going to take too long. I'll just speak about that for a minute. It's not on this slide. And we do have a slide on the sales pipeline further along but our new customer pipeline as a new logo customer pipeline is up by 23%, a record GBP 212 million. And I think that we will convert some of that, here we go. Yes. Thank you. So as you can see from this chart, this is our unweighted new customer pipeline, we will convert some -- we're pretty confident we'll convert some of this in H2. So we'll also have new customer sales coming through as well. So again, that should help this older value to be at quite a high level, I think, for '23 as a full year. That is not a forward-looking statement. Can we go back to the KPI slide, please, Tamsen? One more. Great. Okay. So we're very positive about the sales outlook. So I'll hand over to Andrew now to go into some more detail -- give some more color on the numbers. Andrew?

Thank you very much, Louis. So as you can see from the graph in the top left-hand corner, revenue growth was very strong in the first half, increasing by 27% that follows a 26% increase in the first half of last year. So really continuing the very strong trend that we've been seeing in recent years. Moving over to the right-hand side, it's interesting to see that adjusted PBT grew even faster than that. So this grew by 46% in the first half so clearly, we're benefiting from favorable operating leverage as we gain those incremental revenue as the incremental revenue comes through. Part of the reason for that very strong operating leverage in the first half of this year was a lot of the extra revenue came from license sales. So as most of you will know, any incremental license sales will drop all the way through to profit at 100% because there's very little additional cost associated with them. Moving to the right-hand side, you can see that net cash performance remains very strong. Net cash was GBP 23.6 million at the end of the half. And as a detailed slide, we'll come on to in a minute, which looks at cash performance in a bit more detail. In terms of new orders, Louis already talked through the key points on the new orders. So there's nothing else I wanted to add to that. But if you look to the graph in the very middle in terms of the back order -- you can see the back order remains very strong at GBP 43 million. Now this is made up of two components: first of all, GBP 34.7 million of orders that have been contracted but not yet recognized. So essentially, this is orders that we've got in the hopper that are ready to be turned into revenue and gives us very good visibility into revenue over the next few months. And on top of that, we've got GBP 8.3 million of annualized support and maintenance revenue. So again, that GBP 43 million is very well covered, gives us very good coverage for revenue for the rest of the year and also going into FY '24. Graph to the right of that shows the recurring revenue run rate so this has increased by 34%, up to GBP 13.1 million. Again, the increase in recurring revenue run rate has been faster than the increase in revenue of 27% and -- and this is showing that over time, Cerillion is becoming an increasingly higher quality business. Part of the reason for the increase in the recurring revenue run rate was the increase in managed service run rate which you can see on the graph on the bottom left-hand corner, this increased by 80% over the period from GBP 2.5 million up to GBP 4.5 million and we expect this growth will continue at these sort of rates into future periods. In terms of adjusted EPS, this really mirrors the adjusted PBT graph, as you would expect. And just demonstrates again the very strong operating leverage that we have got in the business. And the final graph on this slide shows dividend per share increased up by 27% to 3.3p per share and demonstrates our continued progressive dividend policy. So in terms of the financial highlights, as I said before, revenue increased by 27% in the first half. The table here shows the breakdown of that revenue between software services and other revenue and as you can see, the increase in the period was fully driven by an increase in software revenue, and that was mainly due to an increase in license revenue being recognized in line with IFRS 15. Another way of looking at that, the recurring revenue in the period was GBP 6.5 million, so that makes up 32% of the total revenue balance which again was 2 percentage points higher than in the first half of last year. Again, reflecting back on the previous slide, over time, Cerillion is becoming a higher-quality business. In terms of margins, gross margin increased by 3 percentage points up to 81.5%, and the adjusted EBITDA margin increased by 4 percentage points to 48.9%. And Again, the majority of this increase was driven by the higher proportion of license revenue that was recognized during the period. At the same time, there has been some increase in operating expenses, which we'll see on the next slide, and this reflects mainly increased investment in headcount we're continuing to grow our headcount in order to ensure that we can continue to grow the business at these high levels into the future. As you would expect, that there also has been some element from higher inflation falling through as well as other elements, including higher sales commission. Finally, you can see our very strong cash performance there, again, net cash increasing by 43% up to GBP 23.6 million. So the next slide looks at the cash performance in a bit more detail. The table at the top shows a reconciliation of adjusted EBITDA down to free cash flow. What you can see there is that there has been some element of an increase in working capital in the first half. This is linked to the high proportion of license revenue that we recognized, and this is something that we did flag as part of our FY '22 results. So as we are recognizing more license revenue, in line with IFRS 15, we have to recognize that revenue upfront. But on a typical 5-year contract, the customer will pay in equal installments so as we recognize the revenue upfront, we have to recognize more accrued income on the balance sheet, but that will then unwind over the contract term. In terms of CapEx and net interest and tax paid, these balances were broadly in line with the prior period. So this is the key story for getting to free cash flow of GBP 5.8 million. The graph at the bottom shows a reconciliation of opening net cash through to closing net cash. I think the key point here is that the free cash flow that we've generated is a lot higher than the amount that we spent on dividends on lease payments and also from unfavorable FX. So consistent with prior periods, we have generated net cash. In terms of the consolidated income statement here, I've already talked through the increase in revenue and also the drivers for the increase in margin so really just four additional points I wanted to mention here. First of all is that we continue to invest in research and development. So over the full year, we expect to invest around 12,000 days into R&D. From an accounting perspective, in the first half, we capitalized GBP 0.5 million worth of development costs. This was broadly the same as the amount of the amortization charge that went through the P&L so net-net, there's been no overall benefit from capitalizing these development costs. Secondly, as you can see, there was an increase in operating expenses of 18% and this was much lower, only 13% after stripping out the impact of foreign exchange with the fact that this was well below the increase in revenue of 27% shows that we continue to control our cost base very closely. Thirdly, in terms of the depreciation and amortization balance you can see there, the GBP 1.6 million includes GBP 0.5 million relating to amortization of acquired intangibles. Now this balance stems from the IPO, and it's now fully amortized. So therefore, going into the second half of the year and in future periods, this balance will be closer to GBP 1.1 million, so around about GBP 500,000 lower than we've seen in the first half. Finally, on this slide, as we had anticipated, there was an increase in the effective tax rate. This increased from 14.2% up to 19.4% and the 19.4% reflects our best estimate for the full year tax rate. And the main reason for the increase is the increase in the U.K. corporation tax rate from 19% up to 25%. In terms of the consolidated balance sheet, I think the key point here is that the balance sheet remains incredibly strong. You can see net cash of GBP 23.6 million. There's no debt on the balance sheet as this was repaid in full 2 years ago. And overall, there was an increase in net assets of 38% from the prior period. In terms of the consolidated cash flow statement, this is mainly shown here for reference. You can see a reconciliation of adjusted EBITDA at the top of GBP 10 million through to our closing cash balance of GBP 23.6 million. I think the key point here is that cash generation remains incredibly strong. You can see that cash has increased by 43% from the prior period. But I think most of the key points have been covered on the previous cash slide. So I wasn't planning on saying anything in addition to that here.

Thanks, Andrew. That's great. Thank you. So I won't say much more, just sort of summarize the strong order book and strong pipeline particularly the new customer business gives us a lot of comfort about the future. And I think in terms of outlook, we're pretty well positioned. So that's really it from us. And I guess back to you Tamsen, and floor open to questions.

[Operator Instructions] We've only got Louis till 2:00 Andrew, might be able to stay around for a bit longer. So we'll kick straight off. What do you intend to do with the huge cash pile or share buybacks a possibility?

So I think we buy limited amounts of shares to fund the -- our Save As You Earn share option scheme and the LTIP for the senior management team, but they're relatively small amounts. We're more likely to -- we're more likely to use that cash for acquisitions. And in acquisitions, we're looking for bolt-ons or tuck-ins, adding product that fits around the edges of our suite where we can bring in a product that we can upsell to existing customers equally bring in new telco customers who can cross our existing product set too -- so that's more where the focus is. Also, it's worth saying that as we win larger customers with larger deals, there's more focus on our balance sheet and we do need to demonstrate that we have a strong balance sheet. So we shouldn't be all of that cash is available to be disposed of so to speak.

And you talked about three classifications of competitors. It sounds as if the competitors most similar to Cerillion or the smaller software vendors how good is their service versus your own? And how likely is it that one or more of these will do a Cerillion and become real competitors by taking a high-quality offering to a wider audience.

That's a good question. I think we do punch above our weight. So we don't compete much with the smaller vendors. We compete really with the bigger ones. It's a hard one. I think the part of it is that if you go back to our DNA, we were founded out of what was a large software business. So we -- from day 1, we have a lot of process and procedure and a sort of quality ethos that in a lot of smaller start-ups, you just wouldn't find that because of our MBO background, I think also it takes a long time to get established in this market. It's taken us a long time to have this breadth of references and trust that we have. And you just have to have done a lot of successful projects to achieve that. So it's not impossible and other smaller vendors might spring up, but there's a big entry barrier that's got a hurdle to get -- to catch that point.

And are you currently working on a new module to add to your package, so to increase sales to existing customers?

Well, we're constantly refreshing the modules, and we're not working on a completely new module at the moment, but we are -- we've recently updated and upgraded our campaign management what we call CPQ, Configure Price Quote, which is a key part of the business to business sales process. such that customers can now use Cerillion without -- to replace sales force with. So we have customers who would have bought sales force, but they've looked at our campaign management CPQ and said, well, we just what's sales force. We'll just use, the campaign management. So that's an interesting development. Then look recently on the loyalty schemes, improving that functionality in our products and of course, at the moment, we're looking at AI and the new features that, that can provide to give us differentiation in the market not just on the productivity side, it's obviously a key part of AI, but what new features can we bring in that make use of the AI capabilities that's now available.

So how will AI be part of your business going forward?

I think AI will be a key part of production. So what we're seeing now is tools that can write software modules and then test software modules. Of course, AI makes mistakes. So it's important that AI can not just write software, but test it. And the analogy I use is, you've got to think about software systems is almost like LEGO models. So that's they were building the Eiffel tower out of LEGO. AI will not be able to necessarily put all the bricks in the right places to build the Eiffel tower, if you just said build the Eiffel town. Of course, probably not a great example because AI could look at a picture of the Eiffel tower in 3D diagrams could probably do that, but software being a more complex thing to design, but what AI can do is it can make the bricks. And if you think about maybe that model is 1,000 bricks, and each of these bricks being a piece of code, it takes maybe five days to write and five days to test that AI can do that work. And that's a lot of the kind of the coding that the sort of -- we try to think of a plight way of putting it, but the detailed production work, not manual, but it's sort of lower skilled work than the design part. And that not having to spend all that effort on just the basic code-cutting. And testing will save us a lot of effort and increase productivity significantly. So it will have a big impact.

Tremendous. The current business focus is in the telco area. And as previously stated on the last presentation, you see plenty of opportunity for growth in this industry sector, which is a positive position to be in. That said, do you see a benefit of pursuing additional market sectors with similar needs where your existing solution could be tweaked to fit. So this would be a potential future growth strategy? Or would it need internal resource? And would that be a challenge to pursue?

It's a good question. I think when you look at the share of the market we currently have in telco, I would be surprised if it was much more than 1% of the market. there's such a vast space for us to grow into. But right now, our focus is on that and achieving greater momentum in this market. I think you can certainly adapt our software to other utilities, electricity, water gas and so on. And in fact, some of our modules are used in other industries. But really for the big transformation projects, you need a lot of domain expertise. So we're experts in telco. We can go and do a digital transformation project in the telecoms business and turn everything over we don't have that domain knowledge or experience in electricity, water, power, gas and so on. So whilst the software could probably do most of the functions, we don't have the people who have the knowledge to make that happen more something we would look at through acquisition, I think.

Great. I'm aware but perhaps one more question before you go, Louis, before Andrew takes over. Do you encounter customer reluctance arising from fear of conflict in acting for potential competitors to existing customers?

I'm not sure I got that. Sorry, do we come across customer...

Do you encounter customer reluctance arising from a fear of conflict acting for potential competitors to existing customers.

Yes. Yes. Sorry, I get it now. Not really because it's -- we're talking about software is hugely configurable. And even though every customer of ours has the same product, they will have vastly different configurations of that product so everything from the products that are defined, the workflow prices are defined the sales processes, the front end that customers see, that's all configurable but also what the CRM screens look like. So it can all be configured differently and it generally is to suit individual customers' needs, but all within the same code base.

And you probably need to go now should I carry on with Andrew?

I can do another 5 minutes.

So it's a question Tremendous. What's the size of the addressable market?