D4t4 is better at innovation than sales

D4t4 (D4t4) sells a data management platform called Celebrus, which gathers data on customer journeys and then uses that to help businesses market more effectively on their websites. It has also just launched a Celebrus Fraud Data Platform, which analyses the same data to see if there is strange behaviour occurring on a customer’s account.

The good thing about the product is that it can sit behind traditional marketing platforms. The most useful function of Celebrus is its data gathering capability, so it can be used to feed data into an already established platform. Management said one banking client connected Celebrus to 15 platforms across its business. The challenge for new CEO Bill Bruno, who took over earlier this year, is to boost annual recurring revenues (ARR) and thus maximise the potential for recurring cash flows. In the last year, ARR dropped 2.9 per cent to £10.4m because of the loss of an airline client that had been hit hard by Covid-19. In spite of this, the board still expects ARR to be in-line with market expectations.

The new fraud product shows promise and the company has built up some impressive IP, but investing in marketing this on its own could be a costly exercise for D4T4. Housebroker finnCap expects 2022 adjusted EPS to fall to 4.2p (from 6.9p this year) before rising to 9.8p in 2023, giving an adjusted 2023 PE ratio of 33.This looks expensive given D4t4's flat revenue growth, but the strong IP holds some attraction for a potential acquire. Hold.

last IC View: Hold, 29 June 2021, 348p