Cerillion Plc (CER) Earnings Call Transcript & Summary

Good afternoon, everybody. Thank you for joining. First of all, I appreciate -- I recognized quite a few of the names on the list and recognize that -- I appreciate that you -- some of you will have heard the background before. But for the benefit of those who haven't, I'm going to explain a little bit about what we do before I launch into the results themselves. So by way of introduction, so I'm Louis Hall, CEO and Founder of the company, way back in 1999. And Cerillion was formed as an MBO from a -- at the time it was a large U.K. software house called Logica. Andrew, a quick introduction?

Yes, sure. So, thank you, Lou. I joined the company just over 3 years ago as CFO. I previously spent 7 years working at a company called Videndum. Before that I was at Smiths Group, the FTSE 100 Company, and I started my career out at Deloitte.

Great. Thanks, Andrew. So before we get into the detail of the half year results, I'm going to give you a little bit of background. So, as I said, Cerillion was formed as an MBO out of a U.K. software house called Logica. Essentially, we MBO the telecoms products part of Logica. It's a very small part at the time, but a unit that was -- we could see has tremendous opportunity. And in terms of what we do, we provide telecoms companies with CRM charging and billing software. This is a software that enables them to monetize their network assets and connect with their customers. So -- the next slide. If you look at where we sit in the chain, so our software is called in the industry BSS and OSS software. And it's essentially the bulk of the enterprise software that fulfils that function of connecting telecoms business network infrastructure assets with their customers. So we're talking about everything from defining the products they sell to their customers across all different service types, whether it's mobile, fixed, broadband, TV, et cetera. The software that supports the sales channels, so whether that's retail outlets or call centers or online, self-service mobile apps, et cetera, so the software that enables Telcos to onboard their customers. And then once those customers are onboarded, the software that talks to the network side of things and connects those services, makes them live on the network. Once those services are live, the software monitors in real-time customers' use of those services, manages their balances and so on. Has this customer got enough credit to start this Internet session, for example, or to download the streamers' TV program or to make this call, that's all happening real time. And then at the end of the billing period, the software that sends up bills, that then manages receivables, collects payments, et cetera, et cetera. So a very broad range of software. And we sell this as a set of modules, different modules addressing different areas of that functionality within the backdrop of an industry standard framework that is a global standard. So wherever you are in the world as a telco, you will be working to these same standards. So truly a global business and makes it relatively easy for us to sell internationally, which is where most of our business is. And dropping back to high level, so we have around -- sorry, I'm jumping around the slides getting on here. We have around 75 customers across 45 countries. We initially had private equity backing. We then IPO-ed in 2016 and a market cap of only about GBP 22.5 million. And we've since grown the business, grown the market cap over 20 times to a market cap of around GBP 0.5 billion. So that's a very quick overview as to what Cerillion does and where it came from. So I'll now talk a bit about the highlights. And obviously, if people have more questions at the end on what we do and how we do it, obviously, happy to talk in more detail if people have specific points they want us to answer. So just -- so now moving to the highlights for the 6 months to 31st of March. So first of all, revenue and earnings were a little lower than the same period last year in H1 '24. Really, this is a timing issue to do with where software subscription agreement extensions and renewals land. So last year, the majority of these extensions and renewals occurred in H1, whereas, we anticipate this year that most of these will land in H2. But in terms of the overall shape of the year, we're confident that we'll meet market expectations for consensus forecast and grow by around 12% and meet the earnings forecast. And I just want to put a couple of reasons why we're confident about this to sort of underpin that confidence. First of all, the major new contract we signed with a new customer for $11 million in January. This was the -- one of the national Telcos in Armenia. So because that was signed in January, not a lot of that revenue will have had time to be recognized in the first half, which ended at the end of March. So we'd expect a lot of the -- a reasonable portion of the services revenue to fall into our second half of this financial year. Now the project is actually underway and we're doing the services work. Also the license revenue for this customer for this project we would expect to land in the second half as well. So that will make a significant contribution. I just pull out as well that we recently signed in April, just after the end of the half, a new implementation service agreement with one of our large European customers to support the migration of a new mobile base that they've acquired in their home market. And that GBP 8 million deal will also contribute services revenue in the second half. And of course, having signed that a few weeks after the end of the half, that increased our back order by 23% year-on-year as opposed to the 7% increase we actually reported at the end of March. So just the timing when that deal landed made quite a big difference to our back order increase. But the other interesting thing about this deal is that the -- what it doesn't include is the additional subscription -- sorry, the extension of the existing subscription agreement with that customer to extend the right to use the software to the much larger base that they'll now be supporting. So this migration of the new acquisition in the home market will more than double their customer base. So that will lead to significant expansion of their subscription agreement. And we would expect the license element of that which will be quite a substantial amount of that to land in the second half too. In addition to that, our new customer pipeline remains steady, remains strong. It's up a little bit 3% year-on-year. And we're confident we'll see some traction on that pipeline in the second half, too. So whilst new logo customer wins that we closed now in the second half won't make a major difference to the major contribution to the second half, because obviously, by the time we start projects and recognize license, we're going to be more into the first half of next year. They are really important for powering next year. So that's still important. But I think the flip side of that is we're not dependent on any major new logo, new customer wins to achieve our targets for the '25 financial year. And of course, all of that has given us the confidence to increase dividend -- interim dividend by 20% for that -- for this period. So I'm now going to hand over to Andrew, who will talk about the KPIs in some more detail and the rest of the financials.

Great. Thank you very much, Louis. So as Louis has said, revenue in the first half was down slightly on the prior period. And this was due to the timing of license revenue against what was a relatively strong comparator. But as Louis has flagged, we are currently expecting this to be a year of 2 halves with higher revenue in the second half of the year driven by higher license revenue, which overall should lead to year-on-year growth. I think we just lost the slides, but I'll carry on talking and hopefully there. The slides should come back shortly. So at the same time, the decline in profit was actually slightly lower than the decline in revenue. So we did achieve favorable operating leverage. This was driven by a number of factors. But the biggest factor was actually the fact that we achieved higher day rates on some key implementation projects. And I'll talk about this and the other key factors in a bit more detail on the next slide. So what this effectively meant was that the adjusted EBITDA margin remained very strong at 47.7%. And maybe if we just sort of go back to that slide, so adjusted EBITDA margin remained very strong at 47.7%, despite the lower level of higher margin license revenue that we recognized in the first half of the year. In terms of recurring revenue, you can see we do have a track record of recurring revenue increasing over time. And in fact, recurring revenue overall has been growing faster than total revenue. So over time, we have been becoming a higher-quality business. The growth that we saw in the current period of 8% mainly reflects higher levels of support and maintenance revenue recognized in the period. And as we have flagged in previous presentations, this would be higher if we included the impact of term license renewals. In terms of the back order book, the graph in the very middle, this increased by 7% up to GBP 50.2 million at the end of March. But after taking into account the GBP 8 million services contract that Louis referred to later -- earlier on, this actually increased by 23% to GBP 56.5 million as at the end of April. So this number is made up of 2 main components, so firstly, GBP 46 million of orders that have been contracted. And we're flagging that we estimate around 45% of this balance will be recognized as revenue within 12 months as at -- from the end of April. And on top of this, we've got GBP 9.6 million of annualized support and maintenance revenue. New orders in the period came in at GBP 19.6 million. This includes the impact of the new major contract with a new customer for $11.4 million, which we announced in January. Most contracts continue to be with existing customers. And I think it's interesting that these continue to offer significant upsell potential. In terms of net cash, you can see we do have, again, a very strong record of cash growth. Cash continued to build in the period, so it was up to GBP 31.2 million as at the end of the period. And as Louis said before, this has enabled us to increase the dividend per share by 20% up to 4.8p per share. So now turning to the financial highlights. We've already talked about the impact of total revenue. But if we look at the impact on a segmental basis, you can see that we did recognize 24% more services revenue in the first half. But this was more than offset by lower software revenue due to the timing of license revenue recognized. Again, you can see the very high margins that we reported in the period. So the gross margin was actually slightly higher at 80.6% versus 80.4% in the prior period and the adjusted EBITDA margin, again, holding up very strongly at 47.7%. I said before that the main factor behind this was the higher day rates that we achieved on some key implementation projects. So the story behind this is effectively, we have been operating more efficiently as an organization than we did in the prior period, where we did experience a couple of overruns and some major projects. These were not repeated in the current period. And we also experienced a favorable mix in terms of services as well with a higher proportion of time and materials work where we typically get a better day rate as well. So that was one factor. We also capitalized more development costs. So this reflects the fact that we invested around 30% more effort into R&D in H1 '25. And this meant that we were able to put more of those costs on the balance sheet as opposed to going through the P&L. We also experienced continued favorable head count mix. So whilst we did increase head count across the group. And as you would expect, everybody got pay increases where they were eligible to do so. If you look at the payroll cost period-on-period, they were actually flat because we recruited more people, in particular, in India, where the costs are significantly lower than in the U.K. And we also continued to recruit strongly in terms of the entry-level roles at the graduate level. So overall, this favorable head count mix was very beneficial from a margin perspective as well. And the final factor I'd like to pull out is the impact of FX. We did see some element of favorable FX in the period, too. Okay. So now I'd just like to look at cash in a bit more detail. So as usual, the table at the top shows a reconciliation of adjusted EBITDA down to free cash flow. You can see that despite the lower level of license revenue, we did see a small increase in working capital. And this was mainly driven by a build in accrued income due to the timing of revenue recognized versus cash received on some key implementation projects. But as you would expect, because we recognized significantly less -- sorry, less license revenue than we did in the first half of '24, there was a lower build in accrued income and therefore, working capital. The second point to pull out here is that, as I said before, we did capitalize more development costs, so roughly GBP 900,000 versus GBP 600,000 in the prior period. And this reflects the higher level of investments made. 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 generated of GBP 5.9 million was higher than the amounts that we spent on dividends, the amount that we spent to purchase employee incentive shares and a relatively small amount for lease payments as well. Okay. In terms of the detailed income statement, I think the key point here is that we do continue to invest in R&D, as I said before. So the total investment was up over 30% on the prior period. So it was up to just over 8,000 days that we worked in the first half. And operating expenses remained broadly flat. So the main reasons for that were increases from higher head count, inflation and higher depreciation and amortization were offset by higher capitalization of development costs, continued favorable head count mix and favorable FX. And finally, the next slide shows the consolidated balance sheet. Again, the key point here is that the balance sheet remains very strong. You can see net cash of GBP 31.2 million. We don't have any debt on the balance sheet. And you can see there has been some increase in the period due to new leases that we've signed, in particular, in our India office and in our Bulgaria office. And this explains why the right-of-use assets and the lease liabilities have increased slightly from the prior period. Back to you, Lou.

Thanks, Andrew. So, I think, really just to reiterate the general point at the beginning. We've spoken about the weighting of H1 to H2 and the fact that post the period end, back order is up significantly and other reason why we have confidence in that H2 outturn. Also equally important is new logo wins looking ahead to next year. So we think we're in a good position there. I think in general, our model in the market remains pretty unique. So we are providing a Software-as-a-Service solution based on a pure product strategy, so all customers have the same software. It's an off-the-shelf product. It works from day one. In a market that has traditionally been dominated by big vendors that are looking to provide a much more services heavy solution. So where they're solving some kind of product framework, but delivering a quite heavily tailored bespoke solution to each of their customers. And of course, the big advantage we have in that market is that our approach, because it's based on standard product, is much more cookie cutter. It's much more cost effective. It has a much lower total cost of ownership, a much faster time-to-market and it's much more flexible. So I think that does put us in a strong position in a market that is estimated to be at around $70 billion a year at the moment by one of the main analysts out there. So a huge market for us to expand into based on our current revenues, a well-differentiated competitive position. And I think all of that positions us well to not just achieve the current year market expectations, but to go on growing significantly next year and beyond. So I'll hand back to Gareth. I appreciate there's lots of other detail that we're going to go on the company. But if you do have questions on any of that, direct me to the area you'd like to know more about and we'll do our best to respond. Thank you very much.

That's great. Thank you very much, Louis. Thank you, Andrew. We will now move to Q&A. [Operator Instructions] We've got a number of questions already been submitted. First of all, a couple around acquisitions. Could you comment on what kind of potential acquisitions you would be interested in? And in the case of an acquisition, do you have a minimum hurdle rate that you would look to achieve?

It's a good question. So -- sorry, I'm trying to step through the slides. But essentially, if you think about the diagram we show with our different modules that fit the industry standards, BSS/OSS map, the sort of acquisitions we're looking at are bolt-on or tuck-ins. That would be focused around businesses that can offer additional modules that we could bolt on around the edges of our offering -- our current offering. And obviously, the benefit of that is that, that will bring with it Telco customers we don't have today and [indiscernible] for us is to bring on board some bigger names, some bigger logos and so on. So adding boxes around the edge of this diagram to not just to bring additional products into our products that we can upsell, cross-sell to our existing customers, but to bring in new logos we haven't already got. That would create some opportunity for us to upsell the rest of our main product suite into those logos. And -- yes. I mean one thing we didn't spend any time actually in the presentation was customers. And we do have a very broad range of customers, as you can see from the logo -- the logo wall. Some Tier 1 names you have heard of, but a lot of other Telcos in the world that you won't have heard of. And we've got everything from network -- main network operators like Virgin Media, for example, and Orange and so on and -- to MVNOs, MVNEs, messaging businesses, power companies that have become Telcos in their own right, et cetera, so very broad range. And then more we can diversify that range for acquisitions and create more opportunity, then the better that is. So hopefully, that answers that question in -- perhaps a little bit too [ extensive ].

That's very helpful. Another question here, you've -- this is one maybe for Andrew. You've increased the interim dividend by 20%. If you meet market expectations for profitability and cash flow for the whole year, would you expect to increase the final dividend by a similar amount?

Yes. I mean I don't think at this point we can commit to exactly what's going to happen at year-end. I mean we do have a progressive dividend policy in place. And therefore, we do plan to continue increasing the dividend. But I don't think we can commit at this point to definitely increasing the final dividend by 20%.

It'd be fair to say it would be a reasonable expectation.

Hopefully, yes, but it depends on final performance and Board approval.

Okay. We've had a couple of questions around competition. Could you maybe touch a little bit on the competitive landscape? And what's the difference between your vertical solutions and some of the others offered by the competitors? In particular, a couple of questions have been asked about Amdocs. So any sort of compare and contrast there would be very useful.

Yes, that's a good question. So, let's jump to that. Apologies, it does take a while for the slides to change. And -- apologies. So, I mean I was trying to get to a slide which actually breaks out the different types of competitors. Essentially, we've got 4 main groups of competitors. So the large independent software vendors, these people on the right-hand side, [ column ] on the right-hand side. So that includes Amdocs, who are the biggest vendor by -- in terms of revenue in this market, about $5.5 billion of turnover, I think. And they're not the biggest company in the market. Obviously, others like Ericsson and Oracle and [indiscernible] and all the bigger companies, but they have the biggest amount of business in this market. And the differential there is that, what I was saying earlier on, we are a product one-size-fits-all solution off-the-shelf as opposed to vendors like Amdocs that offer a much more tailored bespoke solution. And this strategy is to maximize services revenue, whereas we want to be a software business, a product company. And our strategy is to minimize service revenue to a large extent and focus on the recurring software revenues. And of course, as I was saying before, that gives us a much faster time to market, lower long-term cost of ownership and a more flexible solution that is flexible on day 1, but can be upgraded seamlessly going forward, which is much harder with a bespoke tailored solution. You then got the network equipment vendors. So that's essentially Ericsson, Nokia and then Huawei and ZTE in -- from China. And Ericsson do have a competing product suite. They have a product suite in this space. It is -- It's been around for a long time and was put together through acquisitions. And I think it's not really a focus for them. Software is not really a focus for Ericsson right now. The focus is more on the network side. But they have got a big customer base and they have lot of salespeople around the world. So they are a competitor. And Nokia are a partner. So Nokia don't have all of the boxes on that diagram we looked at. So they sell some of our boxes as part of their suite. So for example, a big project we have with Orange in Egypt to -- for the new Egyptian capital city or the telecom infrastructure, the smart city infrastructure, if you know what smart city is all about. That was a contract through -- went through Nokia. And then with ZTE in Huawei, we -- well, we don't really see them in Europe, obviously, or North America. They do compete with us in Asia Pacific, for example. But they're not as -- I mean they used to win on price. They're now not as cheap as they used to be. In fact, they're not cheaper anymore. So we do stand our ground against them. And again, they're offering -- they're not really offering a product approach. So again, we tend to win on that gambit and that's our differentiator. And then there are some small independent software vendors, I'd say small more our size, or at least in the same order of magnitude. They tend to be more regionally focused. And there's some in India, particularly, that are price focused. So their USP has just been the cheapest. And they're typically playing more in emerging markets. But we're not really -- we're not trying to compete in emerging markets for all sorts of normal reasons. It's hard to get paid. It's hard to get the work done, et cetera. So we don't play in those markets. And then there's another kind of a newer set of competitors that are really kind of multiple vendors getting together to offer a-- So this is multiple SaaS vendors, Software-as-a-Service vendors, offering Software-as-a-Service approach like we do, but with different components for different functions. So we're talking about the old-fashioned best-of-breed approach on a SaaS basis. And of course, it covers all of the baggage and problems of the old fashion best-of-breed approach where you're talking about vendors whose modules aren't designed to work together necessarily. You need to have an integrator come in and put all that together. You need to keep it in step over time as different vendors evolve their road maps at different rates and different directions. And that is a much more complex, more expensive, higher risk, longer time to market, less flexible solution in the end. So there are lots of differentiation there. So that's really a quick summary of the competitive landscape. I think also it's probably -- I mean, just someone asked about Amdocs. If you look at the Amdocs margins, the lower margins and the higher service revenue content do kind of highlight the difference between our model and their model.

That's great. And yes, there were a couple of other questions which kind of related to some of the things you mentioned as you've gone through that competitive landscape. One of them in particular was about Egypt. You mentioned the Egypt project. The question was, how is the Smart City project in Egypt progressing? And have you received positive feedback?

Yes. I mean it's -- absolutely. It's -- I mean, the smart city itself -- it's called ACFUD, Administrative Capital for Urban Development. It's sort of -- they haven't set a lot of -- a good name yet, but there's a lot of -- the core of cities is in the [indiscernible], a lot of buildings have gone up, government buildings, accommodation, malls, community centers and so on. So it's a real project. And there are real people living there who are being built through the Cerillion Nokia infrastructure. And what's interesting is it's a smart city. It's not just about telecoms billing. We're also doing billing for all the utilities. So power, water, gas, smart meters, anything else that's sold as a municipal service, like, for example, car parking, cinema tickets, public transport. All those things that have to do with the municipality are being managed and built through Cerillion. So it's mostly complete in terms of a project and really it's now a case of waiting for more people to move in. One of the challenges the Egyptian government has is getting people to move from Cairo which may be noisy, crowded, et cetera, congested. But people somewhat reluctant to move out into this completely new place, which I guess is sort of inevitable. But our work is mostly complete. And the feedback so far has been very positive.

That's great. You also talked about the services proportion of your business relative to some of the competitors. We have a couple of questions about the services revenue. First of all, is there any aim to reduce the proportion of services revenue over time? And secondly, for the services revenue, how much would you say is recurring and how much is related to new implementations?

I think I'll just say very quickly that our goal is to become more of a software -- more of a higher software content business to increase the proportion of software revenue over time. And I think as we add more customers and more subscription agreements, then the concentration of services revenue, which is -- a lot of which is derived from implementing new customers, will become a smaller proportion as the customer base expands and grows. But I'll let Andrew handle the detailed part of that question.

Yes. So in terms of the split, I mean, we do disclose that the services revenue in the half was GBP 10.3 million. And at the same time, we disclosed the recurring revenue element was GBP 8.2 million. So the recurring revenue is made up of support and maintenance, managed service and third-party hardware and hosting revenue. So I mean -- so those 2 splits are relatively equally spread. I think as I said before, what we don't include in our recurring revenue is the impact of the term license renewal. So we have a sticky customer base. A typical contract for us is a 5-year term contract. And at the end of the 5-year contract, we would fully expect the customer to renew at the period at which the customer renews. We can then recognize that license revenue upfront all over again. And that's not currently included in the recurring revenue. So effectively, the metric that we're showing as recurring revenue is very prudent. And I think one could argue that the true recurring revenue is higher than the GBP 8.2 million.

Okay. That's great. Slightly different angle question. Could you please elaborate on what kind of operational improvements you were referring to when you say they help to improve day rates for implementation projects? And are you able to give any specific examples?

Yes. I mean -- so let me start on that. I mean I think the key point here is that most of our new implementations are based on a fixed price. So we have a fixed price. And then we have to perform the work until that is done. Now clearly, when we're pricing a project, we have to put an estimate in place as to how long the project is going to take. Now sometimes the project takes slightly longer than we're estimating. Sometimes it takes slightly shorter. But I think the key thing that we're saying here, the reason the day rates have improved period-on-period, that in the prior period we did see a couple of projects which overran, whereas the opposite was true in the current period. So actually, there was one project in particular that took -- that has been under-running. And therefore, we're able to recognize slightly more revenue against it. So the way we recognize the revenue in each period is on a percent completion basis. So therefore, if the project takes a shorter time than we're initially expecting, that leads to a greater degree of revenue being recognized and therefore, the day rate goes up. So I think that's probably the best specific example I can give on that.

Okay. That's great. And we had a sort of -- in some ways, a related question. How strong is your pricing power on recurring revenues, i.e., do they outpace inflation around the world?

Yes. So in terms of pricing power, I mean, I think the key point here is that we do have indexation built into most of our contracts. So what that means is a typical contract over 5 years. In each of the 5 years throughout the contract, we are able to increase our prices in line with inflation. Now when it comes to renewing the contract as at the end of the period, and you could argue we do have a decent amount of pricing power because we have a very sticky customer base. And it can be difficult for customers to move against -- move away from us. At the same time, it's really important for us to build long-lasting relationships with customers. So I think we do treat customers fairly. And we typically put prices up in line with inflation in order to make sure that customers do stay with us for the long-term. And I think there's a lot of examples of that. If I look at our customer base, there are some customers that have been with us for over 20 years. So we do have a good track record of looking after our customers. And I think that has worked in our favor in the past.

That's great. We've got a couple of questions about evolving technologies. Maybe it might be worth answering them sort of in sequence. First of all, how are you integrating cybersecurity into your software solution? And then separately, what would you say are the risks around potential AI developments from some of your competitors?

Well, I mean cybersecurity is something which is integral really to everything we develop. And we're compliant with ISO-27001, for example, on security. There are a lot of fundamental principles that we have to have our developers adhere to. And of course, that's just an ongoing huge focus in -- I think, to be honest, in most software businesses. So the way we write software is governed by that, but also the way it's deployed. So when we're hosting the solution, obviously, the firewalls that we have in place and all of the deployment protections are also key. And we do have regular testing with external specialist third-parties who do penetration testing to see if they can break our firewalls and find weaknesses in the software itself that may lead to cyberattacks. So that's very much baked into everything we do. AI -- I think AI is really important in 2 ways. First of all, it does offer a big opportunity to increase productivity. So we're using AI tools in software development, but not just in the writing software, but also generating the -- test the software we write and then running those tests. And the next step along that journey is to have AI actually correct the errors it finds in the software it tests, that to some extent is written itself. So there's massive opportunity for big productivity improvement in software development. I think we're already at the point where really nobody writes a new line of code instead anymore. It sits -- we -- you can't say to AI at the moment to [ attend ] to these tools, write a new charging platform. But you can tell it to write modules within that charging platform. And it's quite fascinating, the power that's there to saying, I guess, to get productivity improvements. And of course, the other side of AI is AI features in our product that we offer to customers. And we've been really heavily focused on that. And in Barcelona at the Big Mobile World Congress trade show we're demonstrating some of these new features that are already in the product. So for example, the ability for a telco customer to query either verbally or in a sort of natural language request to a chatbot. Why is my bill higher this month? It's $50 more, what's going on. And the intelligent assistant we've developed will then go through the calling history, the calling patterns, the charges and so on and come back with an intelligent answer. Like, for example, you were roaming in Barbados because you were there on holiday last week. Of course, fair enough. So that sort of thing is -- it may sound simple. But it's actually a more powerful -- a better answer than most call center representatives will be able to give because they just don't have the ability to scan the whole data fast enough. And of course, it's an answer that doesn't need a person to provide. So that you get a productivity gain, you get a customer service gain. So these things are really important to Telcos. And I think we're at least as far ahead as anybody else is in this -- any of our competitors and a lot of our R&D does get spent on AI on the product side.

Okay. Another question about customers and in particular, new implementations. Generally speaking, how long do new implementations -- sorry, do implementations on new customers take?

It depends a lot -- to be honest, the biggest limitation here is the speed the customer wants to move at because we're starting with a product that works at the box on day 1. It's much quicker than most of the competition. But I mean there's a lot of work to do. So we still have to configure all the products the telco is selling. And most of the time we're not dealing with Greenfield and we're dealing with existing customer bases and migrating those. So we've got to map all the products the customer -- our telco customer currently sells. Also products they're no longer selling, but they have existing customers using still. We have to model all the workflows around the business, how to get customers onboarded, et cetera to all the customer service issues that might arise. We have to then do data migration. So we've got to typically extract data from multiple different systems to consolidate on to our central platform, multiple legacy systems converting into one new system. And we have to do all of the kind of network integration -- network integration testing and so on. So that is normally at least 9 months. It can often be 12 months, 15 months, sometimes 18 months. And of course, sometimes Telcos will want to do this in multiple phases. So they want to do maybe the fixed wire base first, then have the mobile customers or do it by brands or whatever. So it does vary, but typically, it's about 12 to 15 months.

Okay. Another question. How do you select and incentivize local managers in new countries? And most importantly, how do you make sure they then act with integrity?

So we have 3 main operating bases: London; Pune in India; and [ certainly ] in Bulgaria. So we haven't got lots of different operating units to worry about. We have salespeople distributed more widely. But obviously, they're all reporting into a central oversight function. And I think in India we have -- Head of India has been with us for 22 years or so. And -- but fundamentally, all of the kind of financial -- if the concern is about how do we control the financial integrity. The financial control is all centralized in London in terms of payments over certain thresholds and all the rest of it. And the same is in Bulgaria, which is our newest office where we've only been active for about 3 years, but it's a relatively small team so far. And again, all the kind of financial transactions are effectively managed out of London. I think does that answer the question? I'm not sure I quite have [ on ] the right...

No, I think it does. And there's actually another one which the answer may also be related to people certainly to operations. What's the major cost inflation that you're currently noticing across the business?

Yes. So in terms of cost inflation, I guess, more widely if you look at our cost base, the biggest cost that we have across the business is head count costs. Now if I break that down, as Louis said, the main regions where we operate are in the U.K., in India and Bulgaria. I think it's fair to say that within those operating areas, the largest push for inflation has been in India over the past few years. I think -- at the same time, I think it's fair to say that the inflation that we have seen in India has been lower this year than in previous years. And I think that's partly due to the sort of redundancy levels that we have seen in some of the large tech companies. When I joined about 3 years ago, I was surprised that if you made 5 offers, maybe on the first day you might have sort of one or 2 people actually turning up to work in India. That has definitely changed. And so I think that the people have less bargaining power in general. And therefore, we are seeing a reduction in inflation in that region.

That's great. We've got a last couple of questions already been submitted. [Operator Instructions] The last couple that we've got, one relates to Starlink. Do you see Starlink as a major disruptor of the telco market? And could it have an impact on Cerillion?

Good question. I think it could be disruptive to the telco market and that it may take business away from -- mobile business away from some of the major providers. But it probably doesn't really affect us because at the end of the day, it's just another transport mechanism. And whether the network is satellite or terrestrial or whatever, we work with every kind of network, mobile, fixed, TV, broadband, satellite. So for us, it's just more of the same. I mean, will low satellite networks significantly disrupt Telcos in general? I'd say the jury is still out, to be honest. And at the end of the day, there's always going to be a latency constraint and a bandwidth constraint, although more satellites closer to the earth makes that less of an issue. It's still hard to see that being as effective as terrestrial networks based around fiber backhaul. But we'll see. I think the jury is out.

And then the last question we have is, do you still have the ambition to double revenue or size within the next 5 years? And how confident are you in achieving that target?

Yes, absolutely. I mean that's what our -- certainly our target is to do that within the next 3 to 5 years. And I think we do have to execute. We have to close deals. We have to keep expanding. But I think we have a well-differentiated position and that's certainly our goal.

That's great. Thank you very much. This is the end of the webinar. We won't be taking any further questions. But Louis, if you've got any final closing remarks, please, give those to the audience and then we'll finish the webinar.

Great. Well, just thank you, all, very much for joining. Appreciate your time. If anybody has any follow-up questions, feel free to submit those. If you already know us, obviously, direct or through your broker or through Gareth and Progressive and we'd be happy to follow up with you separately, if that would be helpful.

That's great. Thank you very much, Louis. Thank you, Andrew. And for the audience, please do submit the feedback forms that you'll receive from us. It's very useful for management to get that feedback. So please do take the time to fill in that feedback form. Thank you very much for attending. And this is the end of the webinar.