Beeks Financial Cloud Group (LSE:BKS) — Interim Results

0:00 Good afternoon, and welcome to the BEEKS FINANCIAL CLOUD GROUP PLC interim results investor presentation. Throughout this quarter presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated in the right corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives in the meeting itself. However, the company can review all the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to make the following poll. I'd now like to hand you over to Gordon McArthur, CEO. Good afternoon to you, sir.

0:33 Thanks, Alessandro. Good afternoon, folks. I'm gonna Gordon, Carter, CEO and founder. I'm gonna run through the first five or six slides, and then I'll hand over to Fraser on the on the financials and then back to myself on, as as Alessandro said, we'll do q and a at the end. So, yeah, first few slides are, you know, introduction to the business. So BKS are a cloud computing provider specializing in capital markets. We don't do any other platforms other than a low latency trading infrastructure for various asset classes through the financial markets subsets. So I guess everyone kinda knows what cloud computing is and and does.

1:21 We deploy our infrastructure in financial data centers. They're very specialist data centers. We connect directly within the data centers to venues in the same location via fiber over the internal data center roof. So we have low latency guaranteed performance throughput between our cloud infrastructure and, the venues. So, we have around 30 data centers globally, you know, for historical public and private cloud infrastructure. You know, that will not grow a huge amount. We're we're fairly well good coverage now globally. So it's America's really the only region that, we don't have presence in, and, we're we're currently looking at that.

2:12 So next slide, you know, what what what makes up our solutions. So the 90% of our revenue comes from trading infrastructure, you know, low latency network and compute of various flavors, you know, virtual machines, high performance dedicated servers. But we also have other value add services that we provide for our client base. So, you know, we have a a wide area network that connects all of our data centers globally. So if a a client wants to move market data between New York and London or London and Singapore, then they can do that over a private network that we, we don't obviously put the cables in the ground. We, take the kind of best of breed, in terms of latency, from various carriers around the world, sticks that all together and and allow clients to have, you know, a global wide footprint that underpins that core trading infrastructure.

3:15 We also have a a growing analytics business. So, we acquired an analytics company four years ago now, a company called Velocimetrics. It's been rebranded to BEEKS Analytics and has had some significant investment over the last few years to to improve that product offering. So that gives clients real time latency monitoring and alerting so, you know, they can find out if messages are slowing down or trades are slowing down. Also provides what's called gap analysis. So market data is has a stamp. Every piece of market data has a a unique stamp on it, and we can monitor the sequence flow of all the data and alert clients again if they are seeing gaps in that market data sequence.

4:04 And there's a bunch of other stuff that, you know, it's kinda low level stuff that sits around there. So analytics can be bought in various different flavors. It can be bought as a standalone appliance that a client puts into their own environment. And we've got a SaaS offering for it in London and New York. And more recently, it's an embedded part of the proximity and exchange cloud offering that I'll cover in a little a lot more detail as we go. Small part of business is professional services, so design, project management, deployment, management of of infrastructure. But, you know, as I say, it's a small smallest part of what we do. So we quite often get asked about, you know, how you know, the the the product lines that we've got and and and kinda break them down into three and try and give a a view of what it means commercially for each of the the product offerings. So the legacy business or the, you know, the the historical business has all been public and private cloud provision, and that's where we will deploy.

5:12 We will rent space in a data center from an exchange or from an Equinix or whoever it may be. We will deploy our infrastructure, prebuild cabinets, get it all ready, and then clients come in and rent that on a month to month basis or more in the private cloud space, they will, you know, say in between twelve and and sixty month contracts. And and that was, you know, previous to IPO and since IPO, that was the main driver for the business. Still about 85% of our of our revenue, that will that will go down as as as we grow. And and the size of these deals can be anything between one to 20 a month. It can be even bigger than that, but, you know, that that's a kinda common size of of a client spend. You know, we've got maybe three, four hundred clients that are using our kind of public so private cloud offerings.

6:06 Smaller clients, ISVs, brokers, hedge funds, prop shops, These are the the type of clients that use it. Then we move into a product that we launched about two and a half years ago, maybe a little a little bit longer. So Proximity Cloud, which really productized the private cloud offering. Right? We have written a lot of our own proprietary software that surrounds the core infrastructure offering. So Proximity Cloud is a is a prebuilt cabinet or multiple cabinets that we deliver to any data center globally. It doesn't have to be in a big space. It can be in a bank's own space. It can be in an exchange space. It's a single use platform, so it's meant for a bank, a broker, a venue, anyone anyone who, you know, wants to use it for their own internal use.

7:01 TCV, about 1 to 5,000,000. So these are long term contracts, typically between forty eight to sixty months. And, you know, you know, the TCV is is tends to be 1 to 5,000,000. Can be bigger than that, you know, not much smaller. The entry level is about a million TCV for a single rack. And they are targeted at larger institutions, the kind of tier one institutions, banks, large banks, brokers, you know, larger prop trading firms, and some of the larger brokers around the world. And and most recently, and and, know, a lot of news around this, you know, over the last kinda year and a half, we took that core proximity cloud offering, you know, in in discussion with some big exchanges who actually, you know, when we're talking to them about proximity cloud for their own use, you know, come up with an idea of, you know, in conjunction with us of Exchange Cloud, which still uses the same underlying technology as Proximity Cloud. But Exchange Cloud is a multi homed platform.

8:11 You know, in layman's terms, that simply means multiple clients can share a physical cabinet, securely. So it's impossible for them to see each other's data, which is obviously very important in our world. And it allows exchanges to white label our service. So, classically, exchanges offer collocation facilities within their own data centers. So all of the all of the larger equity exchanges barring one, you know, one or two anomalies, offer you know, have their own their their matching engine in a in a data center. It can be part of the building or or or their own physical data center. And the matching engine, just that's the core of the our our stock exchange. That's a physical infrastructure that matches buyers and sellers.

9:02 And exchanges over ten years ago started selling colocation space in the same data center as the matching engine. You know you know, with HFT, they needed to be as close to the exchange as possible and they and they rent space in the in the data center and connect directly to them over a piece of fiber. And then everyone started doing it. You know, once the once the exchanges offered it, it was, you know, taken up in the beginning by HFT, but banks, brokers, ISVs all now take collocation offerings directly from exchanges. And because of that, there's no cloud offering there. Right? You know, the the only option really is to use a managed service provider or to build it out yourselves. Right? You can't AWS are not in the Exchange. Google are not in the Exchange.

9:57 So Exchange Cloud are struggling with Exchange Cloud as we enable Exchange to become the cloud. So we physically deploy infrastructure, our customers, the exchange. We physically deploy infrastructure in the exchange collocation facility, and they white label that as their service

10:17 to their members. So they are selling it on our behalf. So we have one commercial relationship as between us and exchange, and then they will sell that CLOUD capability on. So white labeled as the exchange, on a multi home basis. And these deals can be potentially, you know, are are are very large compared to our historic public private cloud offerings. So anywhere between three and twenty million of TCV. And, again, similar to Proximity Cloud, long term committed contracts where they we we charge per cabinet depending on the level of infrastructure we put in that cabinet, and then they sell that, you know, at server and virtual machine and analytics level to to their clients. So, you know, some of these exchanges have, you know, five, six, seven, eight hundred cabinets of customer equipment in their exchange colo. So, you know, there's a very big and untapped market. So, you know, we we're fairly unique in the offering.

11:22 You know, there isn't anyone else really that we're we're seeing in the space that we're kinda competing with for this multihomes, exchange cloud offering. So, you know, we we we see that as the real driver for revenue growth as we go forward. And pleasingly, we we announced, subject to regulatory approval, our our third exchange cloud client and the and the update about a month or so ago. So yeah. So we target customers again very obviously, you know, the large equity exchanges, commodity exchanges. It's not for crypto. Crypto kinda lives in the cloud, unregulated venues, don't really have the same rules and regulations as the the larger commodities and equity exchanges. So so, yeah, we, you know, we're in various discussions with, you know, if you can imagine, most of the the larger exchanges globally on, you know, how they can utilize the service and and and add you know, incorporate as a value add for their clients.

12:21 So that's a kinda off, you know, very brief tour around our our our three different streams of product. Fraser, do you wanna take the the number slide?

12:36 We we don't have we don't have oops. Sorry. I'm on. Yeah. I'm on. Yep. Sorry. I thought I was muted. Yeah. Hello, everyone. Good afternoon. Fraser McDonald, chief financial officer of of BEEKS. So in terms of half year, results, we don't have a half year forecast, in the market. It's it's full year forecast, but we are, you know, we're on track for for half year in terms of where we we're expected to be.

13:05 Since IPO, we've consistently delivered about between 2030% revenue growth every every period. So the current period's been no no different to that. So we've grown turnover by 25%, and that's recognized revenue. ACMMR, so that stands for annualized committed monthly recurring revenue. That's also grown by by 25% to to just under 27,000,000. And, again, that will be further increased following the proximity cloud extension that we we made just, a few days ago. So it it gives us very good visibility into our our full year, market forecast consensus, which is just under 30,000,000. In terms of how that's translated, down to profits, so it it's grown our our EBITDA by 28% to to just to to 4,600,000.

13:57 And even more, significantly, it's it's it's doubled our profit. So our underlying profit before tax is is just under 1,400,000, which is which is double this time last year. Statutory profit, not here, but, again, positive. So we we went from a statutory loss, last period of 760,000 to a statutory profit of 158,000, which again is is obviously significant. The main difference between our statutory and our underlying profit is our share based payment charge. Operating margins, again, healthy. So they've they've moved by 400 basis points, which, again, you know, significant in the period, largely the result of keeping a a flat overhead base. So, you know, whilst we've grown the revenue by 25%, we've actually slightly reduced our our overhead base.

14:47 So so that's delivered better operating margins. Key key driver behind that really is is is is headcount. So, you know, we we talked, I think, last time we did our we did this that, you know, we've we've kinda committed to know, you we've we've we've been through quite a aggressive hiring period over the last couple of years, but we've now largely built out that that team that will support, you know, not only the current business, but, you know, quite quite a quite a substantial increase in terms of, you know, revenue increase. So we will we will add incrementally to heads, but not to the same extent we have been doing. So, you know, there's there's absolutely more operational, leverage that that we can get as as we as we move forward. Again, you know, as well as how that's translated into profits has also translated and and dropped into cash. So we'd actually had a, you know, period on period. We've we've improved our net cash position by by over 1,000,000. So we've gone from from 4.4 to to 5,400,000.

15:48 We we took the, you know, decision to pay down, you know, quite a bit of debt over the period. So we we borrowed we borrowed some money to buy our head office a couple years ago. And, during the period, we decided to to repay that debt. So we repaid down debt of of 1,700,000 during the period. So, you know, our our borrowing now is is is relatively low, which given, you know, current interest rates is is good. So it's been that positive net net cash position as a business is obviously pleasing. So borrowing's about point two times annualized EBITDA, so so low. So balance sheet's in a very strong position, to to to finance future growth. Or generate cash, and and, you know, there's there's potentially more headwind in in terms of those operating margins. Happy to take further specific questions on the financials at at the end.

16:39 Okay. Thanks, Fraser. So, yeah, next slide is a a kind of detailed slide on a or one of the Johannesburg Stock Exchange, and and we we've talked a lot about a land and expand strategy. Right? You know? We are not AWS. We are BEEKS. So clients tend especially new you know, when new clients sign up with us, given the nature of what we are doing, you know, mission critical infrastructure that literally transacts billions of dollars a day. No one throws everything at us in day one. Right? So, you know, as well as winning new logos, we have a very, you know, well established land and expand strategy, right, where the first one is always, you know, relatively modest amount of infrastructure.

17:37 But whoever it is, especially in the the kinda tier one space has, you know, masses of infrastructure globally. So so that that slide's quite a a nice slide showing that the GSE timeline. Right? You know, some of the exchange cloud conversations and some of the bank conversations for Proximity Cloud are literally three to four year sales cycles. Right? That that's just the nature of the world we're in. But in JSC, so kinda going back to first meeting, you know, we we we met with them and discussed first discussion was August 2022. And, you know, they had some challenges around data center space or run out of capacity, and, you know, they had a an investment to make of multiple millions of dollars to extend that data center or do something differently. And and, you know, we we started talking to some of the Exchange Cloud, and and, thankfully, they went down that route.

18:30 So, you know, that was signed in June of last year after, you know, a year sales cycle, which, you know, in that space is not, you know, it's kinda relatively fast. So the the contract was signed in June. We deployed the equipment in Johannesburg in September, various levels of internal testing and, you know, making sure everything was good. The product was launched in November. And towards the end of November, you know, current current timeline, you know, they've onboarded seven clients, you know, which maybe doesn't sound a lot, but, you know, some of the biggest banks in the in Africa have taken the the first part of first slug of infrastructure.

19:18 And they will sell out of that that capacity, hopefully, a little bit before August. So we we you know, hopefully, we'll we'll extend that contract into our phase two. So, you know, GSE was was a was a quicker sales cycle than than some of the other ones that we've been talking to. But they're a happy client. Customer feedback has been exceptional. I was in South Africa and Cape Town a few weeks ago presenting at their their big global annual conference, met with c suite. You know, they've they've onboarded clients that they they wouldn't have onboarded without Exchange Cloud and our call two point o as they call it. So they're they're happy. You know, they they are, you know, it's a it's a profit engine, a profit center for them now. But the benefits that we've always talked about, you know, you know, ease of access to international clients, getting people turned up quickly, attracting people to the exchange has all come to fruition. Right? And and, you know, they've they've seen some, international clients. So not only do they make money on Exchange Cloud and and and offering COLOUP two point o as a service, but increasing liquidity to the Exchange

20:31 brings a full life cycle of commercial benefits. You know, they get settlement money, they get clearing revenue, they get execution revenue. So, you know, given that easier access to the exchange has a whole commercial raft of benefits around it. And, you know, we we now have a a very referenceable, very vocal, very happy client, and very happy end clients that are more than willing to talk to other exchanges. The the exchange landscape is is is quite a strange one in that very few of them compete head to head. So, you know, Johannesburg will talk to Australia. They'll talk to Hong Kong. They'll talk to Singapore. You know, the ones that's, you know, that sit, you know, in the same country, obviously, don't really have that closer relationship. But there's a lot of mindshare that goes on between these exchanges. So, you know, the more exchanges that we land and we get happy, the easier it becomes.

21:26 And we're starting to see that process and having the referenceability that we've we've got in the early stages granted makes the sales cycle, hopefully, shortens it because

21:36 it can be very, very painful in terms of amount of time. Fraser? It's okay. I I covered it in the previous. There's there's a lot of repetitions, so that's fine. Okay. So, you know, investment opportunities. So, you know, I think we mentioned this a few times in our investor meetings this week, you know, and and and of late. You know, we've six years since IPO, we've always been in the 20 to 30% revenue growth bracket. And every period, we've, you know, we've issued results. So, you know, some some periods were better than others, but I think we've been fairly consistent in terms of our top line growth Yeah. Achievements.

22:20 And we we expect fully expect that to continue. You know, the the business is moving into your profitable cash generative status. And it's the same as the big hyperscalers that you know, again, you know, if you look at the the the the major hyperscalers in in in our space, for ten years, they are you know,

22:43 they they you know, you have to invest lots of cash because it's physical infrastructure you need to build out, and then they get to the tipping point, and that make they then become very cash generative. And, you know, AWS, it's it's you know, generates more cash than the rest of the Amazon business combined. So we are at that tipping point of, you know, moving into cash generation. So, you know, we quite often get asked, are we gonna are we looking at our further equity raises? The answer to that is no. We don't we don't see at the moment any need going forward for further equity raises.

23:16 You we are, you know, you we are now a very well known entity in the space, and that means a lot. Right? You know, even if someone came along, you know, you know, copied our technical road map or decided to try and get into the space, you need years of delivering. Right? You need a proven track record in our world because of the nature of the systems that we are delivering,

23:39 and you need referenceability. You know, no one is moving trading applications, the absolute core of our capital markets organization to an unknown in unknown entity. So, you know, we often get asked about moats around the business in terms of technology. It's not just a technological thing. It's it's having the track record of delivering and having the trust and having that referenceability. You know? And when we IPO ed six years ago, we always said we were, you know, we were looking at the tier one domain, which we hadn't serviced previously, and we now have between tier one direct relationships and and more through partners. And that, you know, that gives a level of referenceability that is is worth its weight gold. We're at the right end of the market. You know, electronic trading, algorithmic trading is still growing.

24:27 Cloud computing is is still growing. You know, not you know, cloud computing and and execution based front office services of of exchanges is still fair is still in its infancy. Right? So we're in the we're in a good growing sector and the right side of the technology footprint in that sector, which positions us well for, you know, moving forward.

24:54 So the coming, you know, the coming year, the coming twelve months, so, you know, what's the priorities? So conversion. Right? We are having multiple conversations with, you know, many of the the the world's largest equity exchanges. So it's about converting that pipeline. You know, we've been talking to a number of banks and brokers and fund, you know, larger entities, big proximity cloud for for a period now. So, you know, we've had a very good six months of sales execution, hence the, you know, our our brokers raising forecast as we go forward. So we can we need to continue to convert that. The pipeline's bigger than ever, and we need to find ways to try and shorten sales cycles and and bring clients in sooner than we historically have. So that's one of the big focuses.

25:44 Product development, we you know, we we get asked by, you know, lots of institutions, you know, do we have an m and a strategy? And, really, that's not that's not the DNA of the business. You know, we have, for the last five four, five years, focused on building a product that's relevant to our niche, and we will continue to do that. That's not to say we would never do any, you know, buy anything, but, you know, we don't actively look. It's not something that we spend a huge amount of time on. The the organic opportunity in front of us is is large. And there's there's further product developments that myself and the team have in mind that will continue to open up, you know, a larger addressable market for us.

26:29 So so yeah. You know, core focus, you know, we've got a big software dev team, big product team now, and we, you know, we're full of ideas of how we continue to enhance our offering. As Fraser said to, you know you know, look at operational leverage, you know you know, we have invested in the business from an infrastructure and headcount point of view, an automation point of view to get to a point now where we're at that inflection of, you know, cash generation. And we continue to try and add revenue without adding the same amount of cost to ensure that, you know, as we go forward, you know, the operational metrics get better.

27:12 And then last one and before we kinda move on to q and a, outlook. So, you know, we're in a we're in a good sectors. I've just said, you know, that we're in a growing segment of cloud computing within, you know, a growing segment of capital markets. Pipeline is bigger than ever. You know, I look at the names of the people that you know, the the the brands of who we are dealing with compared to seven or eight years ago, and and it's night and day. That's not to say we don't still deal with lots of, you know, kinda smaller and medium sized organizations, but, you know, we are talking to the biggest of the big organizations who unfortunately don't move as quick as we all would like, but, you know, you know, it it means that that pipeline is is fairly substantial.

28:00 And, you know, the outlook going forward, profitable, cash generative. The balance sheet is supports, you know, further growth, and acceleration of that growth. As Fraser says, you know, we don't we're not in the in the market for, you know, additional cash reserves. We will build that up as we generate cash going forward. And we need to, you know, close out a couple of deals left in the the second half of the year. And and already, as you've seen from some of the announcements we made earlier in the week with the the trading update, we're already starting to close deals that will, you know, have a material impact on next year's figures. So, you know, you know, we've we stated we're in line for this year, and and then next year, we we will kinda outperform.

28:51 So, yeah, we need to get this half year over the line and then, you know, convert on some of the bigger opportunities to go in the second half.

29:00 Yeah. As I said, you know, we we we announced a a £5,000,000 proximity cloud win with a a large bank on Monday. That was a four year four year sales cycle competitive RFP, which we thankfully won. And we hope once that platform is delivered, then there will be further projects as well. Proximity Cloud deal with a large investment manager. Signed the first tranche in November, delivered it very quickly. Customer was, you know, happy. They signed an extension in February. So their total spend at the moment is 3,600,000. There are further opportunities with that particular organization, and they will become a very, you know, a large user approximately going forward.

29:52 So, you know, as we said, we're confident of being, you know, trading in line for the the 2024 expectations and 2025, as we previously announced, you know, was ahead of of the previous forecast and expectations. I mean, as I say, the the positive thing is we're already signing deals that will make a material impact to that 2025 number. So, yeah, the business is in a good position going forwards. Alright. Yeah. So I think we're gonna go to q and a. Perfect. Gordon, Fraser, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab, which is situated on the top right hand corner of your screen. But just while the company take a few moments to view those questions that have been submitted today, I'd like to remind you the recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard.

30:47 As you can see we have received a number of questions throughout today's presentation. If I could just hand back to you both just to read out those questions and give responses where it is appropriate to do so, I'll pick up from you at the end. Yeah. I'll I'll take the business ones, and then anything financial, pass on to Fraser. So first one is, will BEEKS announce the names of stock exchanges that company won contracts with? Yes. We will. So I think we've we've we've stated this previously. Some of this is commercially sensitive. Right? So on exchange, Cloud, we will name the exchange because, you know, there's joint marketing that goes on. Right? So that will be in the public domain. What we will not discuss is commercials around that contract. So you're gonna get one half, unfortunately. Right? You're gonna find out the who the exchange is, but we will not go into public facing details of the sizes of the contracts and how they're structured for just commercially sensitive reasons.

31:41 Next one is, will BEEKS be offering generative AI products for their customers? Yes. It's a massive opportunity. So we we we made a we made a a bit of a statement in in the results. We are looking at some AI initiatives more around our analytics offering, which captures large amounts of market data and fine grained market data and trade execution data on behalf of our clients. So we are looking at AI layers on top of the data warehouse that sits sits in there. But, you know, it's in its infancy, and it's probably in conjunction with, you know, a number of a number of banks who we are kinda in discussions with. But, you know, we're not we're not we're not about to start seeing with an AI company. There is a there is some AI initiative that, you know, can open up another addressable market for us that we have identified, and we'll put some investment into over the next twelve months or so.

32:45 Fraser, do you wanna take this one about cash flow implications? Yeah. Okay. I think the question is, I'm not sure that I understand the cash flow implications of the latest order, which you announced today. Does it have a big upfront cash outflow, please? So I think that's relating to the the Proximity Cloud contract that we announced. So, again so some some of this, again, is commercially sensitive, but, you know, broadly speaking, we would budget about 20 to 30% of CapEx, of the overall TCV for our proximity and exchange cloud contract. You know, they're not all the same size. It depends on customer requirements and things, but, you know, round about that, you know, we we'd be reasonably prudent to to to do that. And so that that you know, for those types of deals, if it's a monthly recurring contract, it'll be about a year to to pay that back.

33:33 How do we define a tier one customer? It's not there's no hard and fast rules. I mean, everyone knows who tier one banks are. They're they're they're they're globally well known brands. It's more about, you know, potential spend. You know, anyone that can spend, you know, 5 to 10,000,000 with us, we would class as a tier one. Whether that's right or wrong, it's a different story. But, you know, and and exchanges are known. Right? You know, you've got your major exchanges, and you've got some regional exchanges.

34:04 But, you know, banks, again, a a little bit easier and and the and the ISV and, you know, specialist trading infrastructure peep space then maybe a little bit greer. But, yeah, there's no hard and fast, really. It's more around, you know, is that global brand that can spend 5 to 20,000,000 with us. And I think next one, how do you see share based payments expense trending in the next few years? So, yeah, again, that one so just now, you know, share based payments for us, it's is a way that we differentiate ourselves. It's, you know, it's difficult for us to compete with with, you know, the banks in terms of salaries for staff. So, you know, it's it's it's it's kind of baked into our remuneration package that we we we give that to to all our staff, not just our board.

34:51 So just now, it's, you know, it's it's significant. It's about 7% of our our turnover in terms of that charge going to our p and l. We we committed so every every year, no more than 2% of the of the amount of of shares in existence, that goes into that pot every year. So it can be tricky to protect because it depends on the share price, the issue share price at the time, which obviously fluctuates. But, you know, what I would say is that that percentage compared to turnover, you know, will not go any higher. So similar to, you know, the way we control headcount relative to turnover, the the share based payment charge will will be kept, you know, at at that percentage, and it won't it won't grow any higher. Just I just have to add a point on that. You know, the shared options that we distribute are distributed throughout the organization.

35:39 Right? You know, anyone who has been here for more than a year will get a level of shared options. I I've never taken any. I'll never take any of a similar shareholder. It would it would it would it would be wrong of me to do so. But, you know, they they are there to attract and retain some of the talent that we have that could quite easily walk out and double their salary at a big investment bank. Right? And that's that's this you know, we are competing with, you know, people with much larger wallets than us for, you know, a finite amount of resource. So, you know, the share based payment shouldn't be looked at as, you know, some executive, you know, exclusively executive only award. It really is through the organization and, you know, and it drives behavior. Right? You we not only does it retain staff, it's if people are compensated on, you know, where the share price goes, it it it drives behavior. You know? We we are a quality service business, and we have to ensure that everyone has partial ownership.

36:39 So, yeah, you you know, it's not as Fraser says, we're we're capped at 2% per annum, but it it will be a continuing feature of the business. Next one, Fraser, could you please say a bit more about free cash flow during the period and forwards? How are you going to increase free cash flow conversion as you continue to grow? So yeah. And, I mean, in the period, the the net cash position changed by 1,100,000 to the to the benefit. It was actually one point, four overall because of some working capital movements in our favor. So, you know, in terms of how we how we increase that, I mean, it's really, you know, what I was saying earlier on. We we are now starting to get that operational leverage whereby, you know, our our our cost base is growing at a much lower, rate than our revenue base. So, you know, there's a relatively fixed cost in some of the things that we do, so cost of infrastructure, cost of data centers.

37:32 But in terms of where our gross profit margins are just now and our and our operating profit margins, there's there's, you know, there's there's absolutely scope for for improving those. And then ultimately, that's gonna result in additional free cash flow, and there'll be timing with cash. But, you know, those profit increases are going to translate to cash. So really controlling our cost base and growing the revenue the way we're growing it and the cash will start flowing. Think similar next question from from David. What are the margins likely to be for BEEKS as a mature infrastructure as a service, IES business? So your current forecast just now, you have operating profit margins around 14%, 15%. And as I say, we like to be relatively cautious and prudent when we guide the market in those margins, but we should, as a business, be looking and internally, are looking to deliver higher than those.

38:33 If competition does arise, where do you see coming from? So when we keep our eye on the hyperscalers. Right? You know, we're in a we're in a niche world, you know, for various reasons. You know, we are in, you know, a bit of a different space in terms of the proximity cloud and exchange cloud offerings. We've got kinda older school managed service provide competitors that I I don't really like naming in these public forums, but, you know, you can figure them out if you want. But, you know, they are they they position the business is very definitely to ours, and they're they're more managed services rather than we are a cloud computing company. Right? So so, yeah, I I keep an eye on everything, you know, competitors, hyperscalers.

39:19 But at the moment, you know, in the proxy some in proxy and exchange cloud space, we are we're not seeing anything meaningful as of yet. What clients do you have for exchange, Clyde? So Johannesburg Stock Exchange, ICE Global Networks, part of the ICE Group that own New York Stock Exchange, and the third one is the yet to be named large exchange group that as soon as regulators approved, we will publicly announce that press releases are all ready to go. But until that, taking the box from regulators there, then they shall remain anonymous for the moment. And tier one clients the problem with tier one clients is they don't like to be in the public domain, which is frustrating because we've got some very big names, but some of them will take reference calls in certain situations.

40:10 But a lot of them, because of the money involved in the, you know, the platforms, don't like to be in the public domain at all. So if we're allowed to name them, we name them, and we've got we've got some of that stuff on our on our website. But, frustratingly, for for me and for the business, lot don't like to be named. The AI offerings. What are the AI offerings BKS gonna offer the customer? So I I I touched on it there, you know, potential predictive AI stuff around venue performance and, you know, analytics output from our analytics and using using AI models and data models on top of that. So I'm not gonna go into any more detail on that. It's still very early days.

40:57 What is a typical implementation time for Proximity Cloud, and when does billing commence? So depends where it is. So the GSE is a great example. We had never deployed in South Africa. We got from signed order to the handed over to the exchange for testing. It's about twelve week process. So we could be faster than that. We could be a little bit slower than that, but that's that's probably a good guide. The billing commences when, you know so we will agree when we deliver what's what what's the success criteria, and it's usually transit market data between the exchange and receiving it and all the infrastructure. We start billing when that success criteria has been met. How much of 2,025 broker expectations are in the bag?

41:47 I mean so our targets have put you know, on on the smaller deal sizes, our target's about 30 k a month net increase in the ACMRR. So, you know, if you do some of the maths of what we announced and however many months we've got left, you can see where where we'll roughly we should roughly end up in the, you know, the committed run rate at the end of the year. And then, you know, the deals that were announced the other day, because it's proximity, we need to recognize half of that in advance. And then we've got, you know, we've got other stuff that that will will all come in before the year ends. So, you know, I think we started off this year with about 80% coverage of the of the of the future forecast, and I I hope we'll be there or thereabouts again.

42:36 As profitability goes, would you consider share buybacks? We have discussed this. The problem is I own more than 30% of the business. So if equity is diluted, and and that's a frustration of mine. There seems there's some rules for the sake of rules. So I'm not allowed to buy any shares, or I need to make a formal takeover bid for the company, or I need to do a whitewash, which is a process that, you know, we just don't have time to be getting involved in. So it's the same thing with share buybacks. If if the share base is diluted, I have to make a formal takeover bid for the company, which seems insane. So we have talked about how we will ultimately return cash to shareholders. We either do a whitewash to do a share buyback or we pay dividend or we do a bit of both. Still unknown at the moment, but, yeah, it's just rules for the sake of rules.

43:25 Next one, how do you measure ROIC in the business? So, you know, returning capital employed, it's not really a measure that we use. You've got complications at times whereby the different products sometimes sit in our balance sheet, sometimes don't. So so that kind of measure we tend not to to use. You know, we we look at more operating margin as opposed to a a kind of rocky measure to to measure profitability. Okay. So I think the how does cash work for exchanges as they sell on? Does this extend debtor days as exchange sells to trading companies, and are you paid in arrears? Also, exchange are doing more analytics. What is your growth? So it's maybe a combination of both.

44:11 You know, in terms of the cash flow exchanges, so it depends how we you know, not all contracts are the same, but, you know, a typical deal would be, you know, a contract length would be four years, and it'd be monthly recurring business monthly recurring revenue that we'd, you know, be billed monthly, sort of thirty day debtor period. So and that's, you know, ultimately, that's our contract with Exchange. We contract with Exchange. What they bill to their customers doesn't doesn't influence how we how we are paid. Again, different deals were structured differently. We were we've we've maybe billed annually in advance to to, you know, to help our cash flow. And in terms of analytics, Gordon. I'll take the analytics. So, yeah, I mean, we've got a we've got a a a very big pipeline for our analytics software. We we, you know, we bought a product that needed a a a of investment, and we've done that over a number of years.

45:00 You know, it's now a very good stable product that we are that we're very happy with. So we've got a very we've got a growing analytics pipeline. And, you know, as it's as it's bundled with products and Exchange Cloud, you know, exchanges just get it at default, but when they license Exchange Cloud, and they can actually offer it to the customers. So so, yeah, you know, analytics are very interesting area, and we expect the revenue portion to grow. Gordon has stated in the past, you have a target price to sell the business. Do you have an identified time scale to achieve this? Yes. I'm not telling you. You know, the business has become cash generative, it can't reduce share based payments instead use cash.

45:48 Nearby mini minimizing dilution staff can then buy the shares of the market just like the rest of it. A good point, but I go back to my the it's not about it's it's people being involved. It's people belonging to the organization and having ownership. You know, if you pay people, well, they go and you know? We we seen that after IPO. The the the level of change in people's behavior when they become materially commercially attached to the share price it's it's so much more valuable than the small amount of share dilution that we see over. I mean, it's 2% per annum. If you did do share buybacks, you know, that would reduce, but I I can't emphasize how much the behavioral change in in every member of staff. Right? You know?

46:38 Everyone is, you know, has a different view of the business because they are a partial order. And to see for the dilution, you know, it's it's well worth it for me. So I I don't see that changing. Are you seeing an outflow of talent as a result of the Scottish government tax regime? I get asked this with some of the local press the other day. Not seeing an outflow of talent. It's I mean, I I was thinking in political statements, we'd get them into trouble. You know? The the Scottish government are not exactly business friendly. You know, higher rate of tax and, you know, both individually and corporate than than any other part of The UK. We're not seeing an outflow, but, again, you know, my point to the the the Scottish press was, you know, I'm a graduate, and, you know, you get choice of you know, the the the the very best graduates have good choices of in the labor market. Right?

47:25 Do you go to London and take a job, or do you stay in Glasgow, or do you stay in Edinburgh, whatever you know? Does it drive behavior? It doesn't help, you know, to retain talent in Glasgow, which is where, you know, the majority of our staff lives. So I just find that a very strange outlook, but it's it's not, you know, it's not it's not driving an outflow of talent. Can you give a high level overview of product servers pricing philosophy? That's a hard one to answer. You know? We have some internal metrics, and, you know, we want in the public domain where, you know, that drives our pricing. So, unfortunately, Mitchell, I am gonna not answer your question directly, I'm afraid.

48:13 David, which product line do you see as the main driver of revenue growth in the next couple of years? Prox and exchange exchange exchange materially, and prox as well. So we we will still grow that, you know, public private cloud practice, if you wanna call it that, you know, 3 to 4 to 5,000,000 a year. And then you layer on the bigger proximity and exchange cloud contracts, and that's where you see, you know, a step change in our growth. So, you know, the investment dollars have gone into props and exchange and then, you know, some of the new new analytics things. Last one. You've said in the past you sell the business at the right price. Where will the buyer come from as a private equity? When mature in terms of cash flow or managed service competitor? I mean, it could come from anywhere. Right? You know, we get private and I've said this before, I think.

49:04 I've said this in a podcast a few weeks ago. We get like any, you know, growing business in The UK, the valuations in certainly the market have been, know you know, relatively low of late. So it provides a happy hunting ground for US private equity acquirers and, you know, fair play to them. You know, they they they will pay the the metrics that are in the public domain, and, know, we've had conversations with a number of them. But so I would I I if I'm betting, I would say private equity, but I wouldn't really trade, although there's not that many trade players. Don't I don't think that many of them would be able to afford us. So if I'm a betting man, I would say private equity, but that's that's a guess.

49:50 Oh, sorry. One more. How do you see the business going, and do you expect the share price to be two or five times or 10 times in the next five years? I'm not gonna answer that because something they'll just throw back at me in a year's time. You know, we've got our own internal view of of where we will end up, but I'm not putting that out in the public domain, I'm afraid. Do you think the business can grow at 20 continue to grow at 25 per annum or faster or slower? Yeah. Yeah. I mean, it becomes harder than as the numbers get bigger. But as our contract size increases, as our product offering increases, as our referenceability increases, then, yes, you know, I've been I have ambitions to get beyond the 25%, but, you know, that's just that's just me as as a reality, and we'll see.

50:42 But, yeah, I think it's certainly for the for the next few years. So that's what we are all pushing and aiming for. And that's it, I think. Yeah. Perfect. Gordon Fraser, thank you very much. I think you actually managed to answer all those questions from investors. And, of course, the company can review all the questions submitted today, and we'll publish those responses out on the investor meet company platform. But just before redirecting investors to provide you with their feedback, which is particularly important to the company, Gordon, could I just ask you for a few closing comments? Yeah. Of course. So, yeah, listen. I think we've had a a a good period. The business is in a strong position. You know, getting into cash generations has been, you know, big aim for us, and we will continue to focus on that. But the business in a in a good position and, you know, it's head down, it's sales execution and focus on customer satisfaction.

51:35 Our business is a quality service business, and if we get that right, then good things will come. So it's exciting times. And, yeah, thanks for your time, folks. Hope we hope it was it was worth it. Perfect. And thanks once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will then take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of BEEKS FINANCIAL CLOUD GROUP PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.