Chief executive Jose Luis Vazquez joined Proactive Investors for an exclusive interview on the deal.
Charlotte: Can you tell us a bit more about this contract? What is it for?
Jose: It’s a major contract; it’s very, very important for us. We are providing the new user experience and user interface for a very large established telecom operator in Latin America. This operator has millions of subscribers, and the idea is to update the user experience of them during a period of three to five years, so we are really pleased about that.
Charlotte: Can you tell us how much this contract is worth? How significant is it for the company?
Jose: I cannot disclose the actual figures yet. I can say that only for the trial, they accepted the consideration of about $1.4 million. Usually a project itself for a customer, and the setup fees, is no larger than half a million to a million, so this is very, very big. This is only the setup fees.
On the licence fees that are obviously much more profitable, with amortising the product investment that we have done, the revenues over three to five years are much, much larger than our yearly turnover, so I cannot give you a figure. Turnover last year was just below £5 million, very similar to this year, and it will be far bigger than that.
Charlotte: Is this a one-off or will there be more contracts like this in the future?
Jose: This opens the door for more contracts like this one. Obviously, there are big and small contracts in the world; we have been usefully working with tier-2, tier-3 customers worldwide, but especially upon entering Latin America, we have several customers talking to us at this moment, and this is a game-changer for us, really.
Charlotte: Separately, you also issued a trading-up day today. You said second-half revenues fell slightly below expectations. Can you tell us what happened?
Jose: We have been investing a lot on securing this deal. This means that we have been selecting, due to the lack of resources, mainly the most profitable projects; the most profitable investments that we needed to do in the second half. Even if the revenues are actually smaller than in the first half – not much smaller – but the margins were higher, so we are improving our EBITDA and we are improving our net results for this year.
Charlotte: Will the new contract announced today help you though to a profit this year?
Jose: The year we are in; this contract will start rolling out licence fees in the second half of the year, so obviously it will improve a lot our net result. Yes, I’m expecting this to be positive.
Charlotte: In the run-up to the World Cup in Brazil, can you tell us how much the event has benefited the business?
Jose: Well, it’s highly related to these big events; the Olympics, the World Cup, and especially in the countries we are working for, mostly at the moment 75% of our revenues are coming from Latin America now, and football is big there as you can imagine. We have seen a nice improvement on the subscribers’ fees coming from new customers for our customers in Latin America mainly.