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Pelatro lands another recurring revenue contract

Published: 08:11 09 Nov 2020 GMT

Pelatro PLC -

Pelatro PLC (LON:PTRO), said its mViva platform has been chosen by an Asian telecommunications company (telco) for campaign management operations.

The telco is part of a large global group that is an existing customer of Pelatro.

The contract is recurring in nature and includes a variety of services as well as the product itself. Over the term of the contract lasting three years, revenue is expected to be between US$1mln and US$1.8mln, depending on the customer's take-up of additional services that are currently under discussion.

The contract is another example of Pelatro switching to recurring revenue contracts and away from licence-based, one-off contract wins.

Pelatro, which specialises in helping telecommunications companies engage with their customers, said that from an annual recurring revenue (ARR) run rate in January 2019 – when the transition to a recurring revenue model began in earnest – of US$1.5mln, the ARR run rate was running at US$5.2mln last month.

The ARR run rate is expected to continue to grow and record a material increase by the end of 2020, Pelatro said.

As is well-recognised, the loss of upfront revenues from licence fees during the switch to a software-as-a-service model leads to an initial hit to revenues but ultimately to greater long-term revenue visibility.

The company is in the process of trying to land more customers but notes that any contract wins will be ARR contracts and therefore unlikely to make much of an impact on this year’s numbers.

The company said that the coronavirus (COVID-19) had affected its business somewhat, which has led to slower than scheduled implementation of some projects, as a result of which some revenues that were expected to be recognised this year will be recognised instead in the first-half of 2021.

“Pelatro is excited with the progress achieved with respect to ARR and the appetite we are seeing from our customers to work with us in this way. As stated on several occasions, we expect the group to be on very strong footing in the future owing to the quality, transparency and visibility of its revenue model. It has been a key objective of ours to reach a stage where, at the start of a financial year, the recurring revenue to be recognised in that year is at least equal to the cash costs expected for that year,” the company said in a trading update.

“With the progress in ARR, we expect to reach that stage in the very near future. Additionally, and in line with the strategy stated at the time of our placing this year, the group has commenced investing in marketing activities and has also signed up with a new sales person on a contract basis. We expect these activities to bear fruit towards the end of 2021 or early 2022,” it added.

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