“In today’s world a mobile phone is everything: calls, messages, purchases videos, movies, music…”
Subash Menon trails off.
The importance of these electronic devices cannot be overstated; they are now integral to what we do in this connected world.
A by-product of the increase in usage is the huge amount of data generated by their owners; gigabytes upon gigabytes.
And this is where Menon comes in.
He is the co-founder, chief executive and managing director of AIM-listed Pelatro PLC (LON:PTRO). And his business helps telecoms companies, or telcos for short, make sense of the information that flows across their networks.
Pelatro calls itself a customer engagement software house, which means it processes the information with the aim of turning phone users into loyal repeat customers.
Indeed, these loyal repeat customers might even be inclined to pay a little more for their latest mobile bundle if the telco gets the offer right.
“The object is to increase the revenue per subscriber and reduce the churn,” says Menon.
Churn measures subscriber cancellations. The lower the figure the better.
“Acquiring a new customer is five times more expensive than holding onto one,” the Pelatro chief explains. “So, you definitely don’t want to lose a customer.”
Integral to those efforts is the mViva suite of products that provide contextual marketing, loyalty, data monetisation and unified communications solutions to international names such as Telenor, Axiata and Singtel.
“Our largest customer, who is about to go live in a few months, has four hundred million subscribers,” says Menon.
“The largest customer live has one hundred million. You can imagine the complexity involved in getting to a fine focus on subscribers for the data to be relevant and contextual.
“We manage a huge amount of data, which could go to tens of billions of records a day.”
This is a trusted position. More so when one realises that anywhere from 25-50% of a telco’s revenues might run across Pelatro’s platform.
So, the technology becomes business-critical, which means if it is down for five minutes it is “disaster”. Reliability and availability are key, says Menon.
Proving the value proposition
Pelatro’s success in “proving the value proposition” means impressed customers are prepared to roll out the solution to new jurisdictions. It now has 19 customers in 17 different countries.
It also speaks volumes that it is going toe to toe with some of the big beasts of the tech world – giants such as IBM, SAS and Oracle – to win new business.
The company’s annual results reveal top-line growth of 9% to US$6.7mln, though the mix is more interesting.
Recurring revenues grew by 63% and are now 44%. By the end of 2020 they will be “north of 50%” says Menon, rising to 70-80% “in the next couple of years”.
Cenkos, the company’s broker, said: “A concerted move into managed services is improving the quality of revenues.
“Management is targeting the growth in recurring revenues to cover the cash cost base of the company by 2022.
“This event will mark a material de-risking of the investment case and is the pathway to the share price doubling or more over the next two to three years.”
Beating stiff competition
Going up against some of the big wheels of tech, the company has a unique way of working with customers that help it build trust; however, it has an impact on the timeframe in which it is paid.
It recognises 90% of the revenue once the contract is signed, but gets paid eight to ten months later when the system is live and proven.
While it might help build a rapport with new clients, it creates a significant gap between when the new business is won (and therefore must be recognised on the profit and loss account) and when it is actually billed and collected. The result is the anomalously high debtor days number.
“The reality is we deal with tier-one companies whose creditworthiness is high. We deliver, they pay,” says Menon, adding that “we don’t have a dollar of bad debt.”
As for the global coronavirus pandemic, the company is powering through.
Operationally, costs have fallen as implementation is now being done remotely. Existing contracts, meanwhile, have been unaffected, Menon says.
On new business, he adds: “Nothing has been shelved, but everything is taking slightly longer because there is an extra stage of review because of COVID.
“None of our customers have stopped talking to us or scrapped contracts.”
Citing a report by Gartner, Menon reckons that, long-term, the lockdown could be positive for telcos, increasing usage and by extension industry revenues.
The outlook appeared relatively benign for Pelatro in April when it updated on current trading alongside its full-year numbers.
Revenue visibility at this point was US$4.1mln, which is around 60% of last year’s turnover. The pipeline, meanwhile, stood at around US$18mln.
The release of mViva version 6 should further differentiate the group from its competition, while the company is “maintaining the momentum in moving towards a revenue sharing business model”.
Pelatro’s success, Menon says, is that its software has been designed and developed for marketeers.
That might sound like common sense. However, Menon points out many solutions almost seem to have been created by software engineers for use by other engineers.
Proof of just how intuitive the Pelatro system is can be found in an anecdote from a new blue-chip customer, whose team has started using the freshly installed mViva system with virtually zero training.
“That’s fantastic and is as it should be,” says Menon.
“This is why we have been able to dislodge some big incumbents. It is about convincing them there is a huge business case.
“The product strength and references we have received have helped.”