Cerillion: Powering Growth with Recurring Revenue Streams

Cerillion provides essential software that helps telecom operators manage customers, bill for services, and earn money from their networks. While the company is not widely known, it has built a strong business with recurring revenue, high returns on invested capital, and solid free cash flow. Led by its founder, who is also the largest shareholder, Cerillion has taken a long-term and disciplined approach to growth. With a global customer base, a large market opportunity, and improving order momentum, the company appears well positioned for continued growth. The question remains: does Cerillion deserve a place in a long-term investment portfolio?

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me. 

For full disclosure, I should mention that I do not own any shares in Cerillion at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of Cerillion, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

The Business

Cerillion is a UK-based enterprise software company that supplies BSS and OSS solutions to telecom operators around the world. BSS, or Business Support Systems, and OSS, or Operations Support Systems, are the core software layers that sit between a telecom operator’s network infrastructure and its customers. In simple terms, they are the systems that allow telecom companies to sell services, manage customers, track usage, and turn network activity into revenue. Cerillion’s software enables telecom operators to define and launch products such as mobile plans, broadband packages, TV services, or enterprise solutions. It supports customer onboarding through call centers, websites, apps, and self-service portals, connects those customers to the underlying network services they have purchased, tracks how those services are used in real time, calculates charges, produces bills, and manages payments, receivables, and collections. These systems are mission-critical. Without them, a telecom operator cannot reliably operate or monetize its network. The company delivers this functionality through a single, pre-integrated BSS and OSS software platform made up of multiple modules. Customers can deploy individual components or the full end-to-end suite, but all customers run on the same core product regardless of whether they focus on mobile, broadband, TV, satellite, or enterprise services. Cerillion typically sells its software on an as-a-service basis under long-term contracts, most commonly five-year agreements. Before going live, each customer goes through a substantial implementation project to configure the system to their business. Even though Cerillion is faster than most competitors, deployments still usually take between 12 and 18 months due to the complexity involved. Once live, customers pay recurring subscription fees for software licenses, support, and often managed services, resulting in a high proportion of recurring revenue. Cerillion serves around 70 customers across roughly 40 to 45 countries, primarily in the telecom sector, with selective expansion into other industries such as utilities and finance where complex billing and subscription management are also required. Cerillion’s competitive moat is rooted in how its software is built and how deeply it is embedded in customer operations. Unlike many competitors that deliver highly customized, services-heavy systems, Cerillion offers a standardized product that works largely out of the box and is configured rather than rewritten for each customer. This leads to faster implementations, lower risk, and a lower total cost of ownership over time. Because all customers use the same core software, upgrades are simpler and more predictable, allowing customers to benefit from continuous improvements without costly and disruptive re-implementation projects. Switching away from Cerillion is difficult and risky. BSS and OSS platforms handle real-time charging, customer data, and billing, which sit at the heart of a telecom operator’s business. Replacing them involves long vendor selection processes, multi-year implementations, and significant operational risk. Even Cerillion’s own deployments take over a year, while larger competitors can take several years. As a result, once a system is live and functioning well, customers are unlikely to change providers. This creates strong customer retention and a growing base of recurring revenue. Many customers have been with Cerillion for more than five years, and recurring revenue has grown faster than reported revenue over time. Overall, Cerillion’s moat comes from its mission-critical role, standardized but flexible product design, high switching costs, and long-term customer relationships.

Management

Louis Hall is the CEO and founder of Cerillion, a position he has held since leading the management buyout of the business from Logica in 1999. With more than three decades of experience in enterprise software, he has been the central architect of Cerillion’s strategy, culture, and long-term positioning in the global telecom software market. Prior to founding Cerillion, Louis Hall spent several years at Logica, where he held a range of product, sales, and management roles. During this time, he developed deep expertise in large-scale billing systems and telecom software, working closely with tier-one operators and complex enterprise customers. This hands-on background shaped his conviction that the industry needed a true product-based BSS and OSS platform rather than the bespoke, services-heavy systems that dominated the market at the time. Since the management buyout, Louis Hall has led Cerillion with a strong focus on building a standardized, pre-integrated software product that could be deployed globally across different telecom use cases. Under his leadership, the company deliberately avoided growth through acquisitions, instead choosing to develop its platform organically around a single technology core. This long-term product discipline has been a defining feature of Cerillion’s strategy and is central to its competitive positioning today, enabling faster implementations, easier upgrades, and lower total cost of ownership for customers. Louis Hall is the largest individual shareholder in Cerillion, holding a substantial stake of around one fifth of the company following a partial sale of shares. This level of ownership creates strong alignment between management and shareholders and supports a long-term perspective on capital allocation, customer relationships, and product development. Cerillion’s focus on recurring revenue, long contract durations, and disciplined execution reflects this continued owner-led mindset. As a leader, Louis Hall is known for his deep technical understanding of the business, close involvement in product direction, and a pragmatic, execution-focused management style. He has overseen Cerillion’s expansion to around 70 customers across more than 40 countries, while maintaining strong customer retention and a reputation for reliable delivery in mission-critical environments. Many of the company’s customer relationships span well over five years, underscoring the durability of the platform and the trust built under his leadership. I believe Louis Hall’s combination of founder-led vision, deep domain expertise, and substantial personal ownership makes him particularly well suited to continue leading Cerillion. His long-term approach, consistent strategy, and alignment with shareholders support sustainable growth and value creation, especially in a niche software market where stability, reliability, and trust are critical.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. Cerillion has managed to achieve a high ROIC, especially since fiscal year 2021, largely because of a shift in its business mix and the economics of its software model. We only have ROIC data from fiscal year 2017 onwards because Cerillion became a publicly traded company in March 2016. As the company’s financial year ends in September, fiscal 2017 is the first full year for which public financial data is available. The step change in ROIC from 2021 onwards reflects Cerillion’s transition from being partly implementation-led to increasingly subscription-led. By that point, a larger share of revenue was coming from recurring software subscriptions, support, and managed services rather than one-off implementation work. Subscription revenue carries very high margins and requires limited incremental capital once the platform is built. As revenue scaled, invested capital grew much more slowly than operating profit, driving ROIC sharply higher. At the same time, Cerillion benefits from a business model that does not require large upfront investments to grow. The core software has been developed over many years and is reused across all customers, meaning the same product can be sold repeatedly without rebuilding it each time. Most development work is treated as an ongoing cost rather than something that sits on the balance sheet, which keeps the amount of money tied up in the business relatively low. Even though implementation projects are complex, they mainly require people and expertise rather than factories, equipment, or large inventories. Once the business reaches a certain size, this setup allows profits to grow much faster than the resources needed to run the company, which naturally leads to very high returns on capital. The slight decline in ROIC in the most recent years does not indicate a deterioration in business quality. Instead, it mainly reflects continued investment ahead of revenue. Cerillion has been expanding headcount, investing in product development including AI-driven functionality, and preparing capacity for new customers that are expected to come on board in future periods. These investments increase the capital base and operating costs before the full revenue contribution is realized, which can temporarily dilute ROIC even though the underlying economics remain strong. Importantly, ROIC has remained well above 25% even while Cerillion has been investing for future growth. This suggests that the company is still able to turn new investments into strong profits, rather than relying only on work done in the past. In other words, as Cerillion puts more resources into the business, those investments continue to pay off well, which supports the view that the underlying business remains very strong. Looking ahead, ROIC is likely to remain high. Cerillion benefits from long-term customer contracts, strong customer retention, and a growing base of recurring subscription revenue. As new customers complete the initial implementation phase and move into regular, ongoing use of the software, profits should increase without the company needing to invest much more to support them. ROIC may move up or down from year to year depending on when new customers are signed or when investments are made, but the overall structure of the business supports consistently high returns and the potential for further improvement as the company grows.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. Cerillion has managed to increase equity in most years since its IPO mainly because the business consistently earns more money than it needs to run and grow, allowing value to build up inside the company over time. Looking at the available data since Cerillion became a public company, equity has increased in most years. The primary reason equity has increased over time is that Cerillion consistently generates profits and retains a meaningful portion of them within the business. Its software model produces strong cash generation once customers are live, and running the business does not require heavy reinvestment in factories, equipment, or inventory. As a result, profits are not quickly consumed by large ongoing spending needs and instead add to the company’s equity over time. Another important factor is the long-term nature of Cerillion’s customer relationships. Contracts typically run for five years, and customers tend to stay much longer. This creates a stable and predictable revenue base, which supports consistent profitability across economic cycles. Because the business is built around recurring subscription revenue rather than one-off sales, earnings tend to be resilient, allowing equity to grow steadily rather than in short bursts. Cerillion has also grown in a disciplined way. The company has avoided large, debt-funded acquisitions and instead focused on organic growth by selling the same core software platform to more customers globally. Looking ahead, equity growth is likely to continue as long as Cerillion maintains profitability and its current business model. The combination of recurring revenue, high customer retention, and a capital-light structure means that future growth does not require a proportional increase in resources. While equity growth may vary from year to year depending on contract timing and investment levels, the underlying economics of the business support continued accumulation of equity over time.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins provide a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. Cerillion has delivered strong and steadily growing free cash flow over time, with fiscal year 2025 marking the highest free cash flow level in the company’s history. This outcome is closely tied to the underlying economics of its software business and the mix of revenue generated during the year. The main reason free cash flow reached a new high in fiscal year 2025 was strong profitability combined with disciplined cost control and limited capital needs. A higher contribution from software license revenue played an important role. License revenue is particularly attractive because once the software is built, additional licenses generate profit with very little additional cost. This boosts cash generation even if overall revenue growth is more moderate. At the same time, Cerillion continued to collect cash reliably from customers, reinforcing its ability to convert profits into cash over time. Free cash flow margins have been a bit lower than the very high levels seen in some earlier years, but they are still strong. This is mainly due to timing and not because the business has weakened. Cerillion records some revenue when a contract starts, while customers usually pay gradually over the length of the contract. When the company signs more new contracts and grows faster, profits can increase before the cash actually arrives. This can make cash flow margins look lower for a period, even though the money is expected to come in later. Importantly, Cerillion has a long history of being paid by its customers, and management has made it clear that this is a timing issue rather than a sign of payment problems. Another factor affecting margins is revenue mix. Years with a higher share of license revenue tend to show stronger margins, while years where services and implementation work grow faster can show slightly lower margins. Services are still profitable, but they are more people-intensive and therefore carry lower margins than software licenses. This explains why margins can move up and down from year to year while remaining high. Cerillion uses its free cash flow in a disciplined and conservative manner. A portion is reinvested into the business through ongoing product development and hiring, helping ensure the software platform remains competitive and able to scale as the customer base grows. At the same time, surplus cash is returned to shareholders through dividends, reflecting management’s confidence in the long-term outlook. The company also retains a strong net cash position, which adds financial flexibility and reduces overall risk. Looking ahead, free cash flow is expected to grow over time, broadly in line with the expansion of the customer base and recurring revenue. Margins may fluctuate from year to year depending on contract timing, growth rates, and revenue mix, but the underlying model supports strong and sustainable cash generation. As more customers move from implementation into the steady subscription phase, cash receipts should increasingly catch up with reported profits, reinforcing Cerillion’s ability to generate free cash flow over the long term. While the free cash flow yield is higher than in the previous two years, it still suggests that the shares are trading at a premium. We will revisit valuation later in the analysis.

Debt

Another important aspect to consider is debt. It is crucial to evaluate whether a business has a manageable debt level that can be repaid within three years, which is typically assessed by dividing total long-term debt by earnings. Looking at Cerillion’s financials, debt is not a concern. The company has been entirely debt-free since 2019 and ended the latest year with £34,4 million in cash, giving it a strong and flexible financial position.

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Risks

Changes in the demands of the telecom industry is a risk for Cerillion because the company remains heavily dependent on telecom operators for the majority of its revenue. While Cerillion’s software is mission-critical, the willingness and ability of customers to invest in new systems, upgrades, and services ultimately depends on the underlying health of the telecom industry. The telecom sector is under long-term pressure from falling prices for mobile, broadband, and other connectivity services. Regulation, intense competition, and customer churn have made it difficult for many operators to grow revenues, even as network investment requirements remain high. When telecom operators face weaker profitability, they tend to be more cautious with spending on large software projects, which can delay new contract wins, slow expansions, or reduce the scope of implementations for suppliers like Cerillion. This risk becomes more pronounced during economic downturns. In periods of weaker consumer demand, telecom operators often prioritize cost control over transformation projects, postponing investments in billing, CRM, and operational systems even if they are strategically important. A prolonged slowdown in telecom spending would directly affect Cerillion’s growth, as new customer wins and upsell opportunities could be pushed out in time. The telecom industry is also undergoing structural changes in how services are used and monetized. Traditional revenue streams such as voice calls and SMS continue to decline as consumers increasingly rely on internet-based messaging apps and VoIP services. While Cerillion’s software supports modern digital services, these shifts can still pressure the overall revenue base of telecom operators, especially in fixed-line and legacy mobile segments. If customer revenues shrink or stagnate, their capacity to invest in large-scale software platforms may weaken.

Rapid technological changes in the telecom industry is a risk for Cerillion because the sector is constantly evolving in terms of technology, standards, and system requirements, and this places ongoing pressure on software providers to keep pace. Telecom operators are currently navigating major technological shifts, including the rollout of 5G, the move toward cloud-based networks, virtualization, and more complex digital services. These changes increase the technical demands placed on BSS and OSS systems, which must handle real-time charging, multiple service types, new pricing models, and increasingly complex customer relationships. While this complexity can create opportunities for flexible software providers, it also introduces uncertainty around how and when operators invest, and which technical approaches they choose. For Cerillion, the risk is that operators may delay modernization projects, change priorities mid-cycle, or adopt alternative solutions. Some operators may decide to build more functionality in-house, rely on open-source components, or favor much larger vendors that can bundle network technology with software. Others may adopt newer architectural standards or platforms that require faster adaptation than anticipated. If Cerillion’s software does not evolve in line with these technological shifts, it could become less attractive compared to newer or more integrated solutions. Staying competitive in this environment requires continuous investment in product development. Cerillion must regularly update its platform to support new technologies, industry standards, and customer use cases, while ensuring reliability for existing customers running mission-critical systems. This is inherently challenging. Development timelines can slip, costs can rise, and new features may not always be adopted as expected. There is also the risk that customer needs evolve in a different direction than anticipated, reducing the commercial impact of new development efforts. If Cerillion were to fall behind technologically, the consequences could be meaningful. Existing customers might choose not to expand their use of the platform, and prospective customers could opt for competitors perceived as more advanced or better aligned with future network architectures. Over time, this could weaken Cerillion’s competitive position, slow growth, and put pressure on margins.

Customer concentration is a risk for Cerillion because a relatively small number of customers account for a large share of revenue, which makes the business more sensitive to the actions and financial health of individual clients. Even though Cerillion operates globally and serves dozens of customers, revenue is unevenly distributed, and the loss, delay, or scaling back of one major customer could have a noticeable impact on results in a given year. This risk is heightened by the way revenue is recognized, as a large portion of revenue from a customer is recorded at the start of a contract even though the relationship typically lasts many years. When a new customer goes live, that customer can represent a very large share of total revenue in that specific year, making results more dependent on a small number of customers at any given time. If one of these large customers were to delay a project, reduce its scope, or experience financial difficulties, the impact on Cerillion’s revenue in that year could be significant. Even if the long-term contract remains in place, the timing of revenue means that issues with just one or two customers can have an outsized effect on reported results in the short term. Customer concentration also affects cash flow timing, as payments are spread over the contract term, meaning that delays in payments or disputes over milestones from a small number of large customers could temporarily weigh on cash generation even when revenue has already been recognized. While Cerillion has a strong track record of being paid and sells mission-critical software, reliance on a few key customers still increases exposure to individual credit, execution, and negotiation risks. Large telecom customers often have meaningful bargaining power and may push for pricing concessions, longer payment terms, or expanded service commitments over time. Management has acknowledged that customer concentration is partly a structural feature of the business, driven by long contract cycles and upfront license recognition, and while concentration tends to even out over longer periods as contracts mature and new customers are added, reliance on a small number of large customers can still lead to more volatile revenue, cash flow, and reported growth in the short to medium term.

Reasons to invest

A large addressable market is a reason to invest in Cerillion because the company operates in a global and structurally large software market where even modest market share gains can support many years of growth. According to industry estimates, the market for telecom BSS and OSS software is expected to grow steadily and reach around $60 billion annually by 2029. While this is not a high-growth market in percentage terms, its sheer size means that Cerillion can continue to grow significantly without needing to become a dominant player. Even a small share of this market would support revenue levels well above the company’s current scale. An important feature of this market is that telecom operators operate in broadly the same way all over the world. Whether a customer is in Europe, North America, Asia, or emerging regions, the underlying requirements around billing, customer management, and network monetization are largely similar. This allows Cerillion to sell the same core software platform globally, with limited adaptation, making the addressable market truly international rather than region-specific. A customer win in one country can also serve as a reference point for expansion into neighboring markets with similar structures. Geographically, Cerillion still has significant room to expand. While Europe has recently accounted for an unusually large share of revenue, this reflects timing rather than a natural ceiling. Europe itself remains an attractive market due to its fragmented telecom landscape, regulatory-driven competition, and large number of small and mid-sized operators. At the same time, management sees meaningful opportunities to expand further in regions such as Asia, North America, and the Middle East, where Cerillion’s presence is still relatively limited. The company is actively investing in additional sales resources on the ground in these regions to build a deeper local footprint. Smaller and emerging markets also contribute to the opportunity. Regions such as the Caucasus and parts of Central Asia include fast-growing economies with sizeable telecom operators that can generate large software contracts, even if they are not globally recognized brands. Early wins in these regions can open the door to larger opportunities over time as Cerillion builds local credibility and references. In large markets such as the United States, the opportunity looks different but is still attractive. The largest telecom operators usually work with very large software vendors, but they rarely use just one system for everything. Many of these companies run multiple brands, sub-brands, wholesale businesses, and virtual network operators, each of which often needs its own billing and customer management setup. This gives Cerillion opportunities to win parts of the business without having to replace the main provider. In addition, the U.S. also has many smaller regional telecom operators, which may be small by U.S. standards but can still be significant customers compared with operators in Europe.

New orders are a reason to invest in Cerillion because they provide a clear forward-looking signal about future revenue, customer strength, and the long-term growth potential of the business. The strong increase in new orders shows that demand for Cerillion’s software remains healthy. Orders grew by around 25% to roughly £48 million in fiscal year 2025, which is significantly faster than reported revenue growth for the year. This difference is important. Cerillion typically recognizes revenue over time, especially for long-term contracts that include implementation, licenses, and subscriptions. As a result, orders tend to lead revenue by one to several years. When orders grow strongly, it increases confidence that revenue growth will follow in future periods. The composition of these new orders is particularly encouraging. Only a small portion came from entirely new customers, while the vast majority was generated by existing customers expanding their use of Cerillion’s platform. This highlights the strength of the installed customer base and shows that once Cerillion becomes embedded in a customer’s operations, there is a strong tendency for that relationship to deepen over time. A clear example is the company’s largest contract ever, a £25 million deal with an existing European customer that expanded its use of Cerillion’s software following an acquisition. This type of upsell demonstrates how Cerillion can grow meaningfully without relying solely on new customer wins. New orders also feed directly into the backlog, which reached a record level and grew by more than 20% year on year. The backlog represents contracted revenue that has not yet been recognized and provides strong visibility into future earnings. Importantly, not all of this backlog is expected to convert into revenue immediately. Only around one-third is expected to be recognized in the next fiscal year, with the remainder flowing into later years. This supports a longer runway of growth and reduces reliance on constantly signing new deals just to maintain momentum. Another positive signal is the improving quality and size of opportunities in the sales pipeline. Management has highlighted that the average deal size has increased and that the largest potential opportunities are now bigger than any contract Cerillion has signed in the past. This reflects a gradual shift toward winning larger telecom customers, which tend to generate more follow-on business over time through additional modules, higher volumes, and expanded service scopes. This dynamic creates a reinforcing growth cycle where larger customers lead to larger expansions.

A more favorable competitive environment is a reason to invest in Cerillion because recent consolidation among its competitors is reducing the number of credible alternatives available to telecom operators, while at the same time creating uncertainty and dissatisfaction among existing customers of those competitors. One of the most important developments is the acquisition of CSG by Netcracker, which is owned by NEC. This transaction effectively removes one of the top three independent competitors from the market. In practical terms, this means that in many large tenders where Cerillion previously competed against two or three major rivals, there may now be fewer strong alternatives. With fewer credible bidders, competitive pressure can ease, improving Cerillion’s chances of winning contracts and potentially supporting better commercial terms. The deal also creates disruption among CSG’s existing customers. When a software provider is absorbed into a larger organization, customers often worry about the future of the product they are using, including whether it will continue to be developed, supported, or eventually phased out. In this case, customers may be reluctant to migrate onto Netcracker’s platform, which is widely seen as complex and expensive to own and operate. As a result, some CSG customers are likely to reassess their long-term software strategy and look for alternative providers, opening up a pool of potential opportunities for Cerillion. A similar dynamic is playing out among smaller competitors. Optiva has also announced a takeover, which further reduces the number of independent vendors in the market. While Optiva is smaller, its customer base now faces uncertainty about product direction, support, and investment priorities. Historically, periods of consolidation often lead to increased customer dissatisfaction, as product roadmaps change and service quality can suffer. These situations tend to create switching opportunities for stable, product-focused vendors like Cerillion. More broadly, Cerillion benefits from being one of the few remaining independent, product-led BSS and OSS vendors with a proven global track record. As competitors consolidate, become more services-heavy, or are deprioritized within larger groups, Cerillion’s clear product strategy, faster deployments, and lower total cost of ownership stand out more clearly. This differentiation becomes increasingly valuable in a market where customers are seeking certainty, longevity, and flexibility from their software providers.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first metric is the Margin of Safety price, calculated using earnings per share (EPS), estimated future EPS growth, and an estimated future price-to-earnings (P/E) ratio. The minimum acceptable rate of return for this calculation is 15%. I have used an EPS of 0,56, based on Cerillion's fiscal year 2025 results. For the projected future EPS growth rate, I selected 15%. While Cerillion has achieved an impressive average EPS growth of 51% per year over the past five years, I chose 15% as it is the highest growth rate I use. Additionally, I have selected a projected future P/E ratio of 30, which is twice the growth rate. This decision is based on the Cerillion's historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be £16,80. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy Cerillion at a price of £8,40 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 13,2, and capital expenditures were 0,4. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 0,3 in our calculations. The tax provision was 5,0. We have 29,5 outstanding shares. Hence, the calculation will be as follows: (13,2 – 0,3 + 5,0) / 29,5 x 10 = £6,07 in Ten Cap price.

The final calculation is called the Payback Time price. It is a calculation based on the free cash flow per share. With Cerillion's Free Cash Flow Per Share at £0,43 and a growth rate of 15%, if you want to recoup your investment in 8 years, the Payback Time price is £6,79.

Conclusion

I believe that Cerillion is an intriguing company led by strong management, with a CEO who is both the founder and the largest shareholder, creating clear alignment with long term shareholders. The company has built a solid moat through the way its software is designed and how deeply it is embedded in customer operations, which has supported consistently high ROIC since 2019, a trend that is expected to continue. Cerillion also delivered its highest free cash flow ever in fiscal year 2025, and free cash flow is expected to grow further over time, supported by a scalable business model and strong customer relationships. In addition, the company has had no debt since 2019, which reduces financial risk and adds flexibility. There are risks to consider. Changes in the demands of the telecom industry could affect Cerillion because its customers face long term pricing pressure, intense competition, and changing consumer behavior, which may lead them to delay or reduce spending on software during periods of weaker profitability or economic slowdown. Rapid technological change is another risk, as telecom operators continuously adopt new technologies and standards, requiring Cerillion to keep its platform up to date to remain competitive and relevant. Customer concentration also represents a risk, as a small number of large customers account for a meaningful share of revenue, making results more sensitive to project timing, customer decisions, and financial health, especially since a large portion of revenue is recognized early in long term contracts. On the positive side, Cerillion operates in a large and global telecom software market that is widely standardized, meaning even small gains in market share can support many years of growth without the company needing to dominate the industry. New orders are another key positive, as they act as a strong leading indicator of future revenue, and the recent increase in orders has lifted the backlog to a record level, providing good visibility into multi year growth even if reported revenue lags in the short term. Finally, the competitive environment has become more favorable as consolidation among competitors has reduced the number of credible alternatives and created uncertainty for their customers, which improves Cerillion’s position as a stable, independent, product focused provider. Overall, I believe Cerillion is a high quality company, and buying shares at £11, which implies more than a 30% discount to intrinsic value based on the margin of safety price, offers an attractive long term investment opportunity.

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