Sparks

Celebrus reported FY25 results (y/e 31 March 2025) that were in line with revised guidance from its April trading update, when the company noted that sales cycles had lengthened in the second half.  Revenue declined 5.4% to $38.7m while adjusted PBT was 14.5% higher at $8.7m. Revenue split out as $30.3m from software (+9.4% y-o-y) and $8.4m from third-party hardware (-36.4% y-o-y). Year-end cash of $31.5m was down 18% y-o-y due to the unwind of working capital related to third party hardware partially offset by the sale of the company’s freehold property for $4m.

In April, the company announced that it had reviewed the terms of contracts and its revenue recognition policies, and had implemented new contract terms from 1 April. A standard contract is for three years, with an annual license payment. While older contracts typically resulted in the recognition of software licenses on the anniversary date, new contracts will recognise software license revenue on a monthly basis over the life of the contract (this was already the policy for managed services and support). While the overall value of contracts signed and the related cash flows are unchanged, the new revenue recognition policy will change the profile of reported revenue in the short-term and will reduce seasonality.  The company has also changed its definition of annual recurring revenue (ARR) to exclude third-party resold software. On this new basis, year-end ARR of $18.8m was 13.9% higher than the restated ARR of $16.5m for FY24.

For FY26, the focus will be on the sales and service of proprietary Celebrus products, and already in Q126, the company has signed up two new customers with contracts worth a combined $4m over three years and ARR of $1.1m for the first year. The company noted that it had restructured a long-standing agreement with a large, partner-led on premise customer and will no longer be reselling non-Celebrus software to this customer. While the overall value of the contract will be lower, it will consist of higher quality Celebrus  software revenue.  Consensus forecasts are not available for FY26/27, but we would expect the increased focus on Celebrus products and services to result in a rebasing of revenue at a lower level but higher profitability and lower working capital requirements going forward.