Corero Network Security (LSE:CNS) — Interim Results

0:01 Good afternoon, ladies and gentlemen, and welcome to the CORERO NETWORK SECURITY PLC interim results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the q and a tab. That's just situated on the right hand corner of your screen. Please just simply type in your questions at any time and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, all questions submitted today will be reviewed with responses published on the investor meet company platform where it is appropriate to do so. Before we begin, I would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I'd like to hand you over to CEO, Leonel Smilevsky and Interim CFO, Andrew Miller. Good afternoon. Good afternoon, everybody. Thank you for taking the time to attend the presentation today.

0:52 I'm here in London with Andrew Miller, our interim CFO, and I'm the CEO of the company. We'll make a presentation around the H1 twenty twenty two results. We'll give you an update on the strategy, and we'll give you a few words about the outlook for the rest of the year. So that's basically the agenda for today. Feel free, as Jack mentioned, to ask questions the end of the session for the end of the session. So I know that some of you have attended the previous one we've done about a year ago, a little bit than a year ago, sorry, in April. We're gonna do this one around the topics that you can see here. So an exact summary of what we are announcing. We're gonna give you a few words about the company and what we believe the unique proposition is.

1:40 We'll go through the financials. We'll go very briefly through the solution and the products. We'll say a few words about competition and how we differentiate versus the competition and update, as I said, on strategy and growth, and then we'll wrap up and give few words about the outlook. So what we are announcing today or presenting today for the announcement that we made on Tuesday this week are the results of the first half. So we are continuing our growth trajectory. We are delivering financial records and new financial records.

2:25 So all the KPIs are moving in the right direction. You'll see, and we'll talk about some of the initiatives, but we continue to invest in the business to assure sustainability and future growth. And we've put a high focus in sales and marketing, and we'd share some numbers around that. We are launching a number of new sales and marketing initiatives in order to grow the top line, to increase the market coverage and to increase the awareness around the company. And we have continued to invest in product and solution in order to maintain our technology and innovation leadership. And what we've done successfully, I believe, in the first half of the year is to have hired a pretty significant number of new talent in the environment, as you all know, that is quite challenging in terms of being able to hire.

3:21 So on the financial side, you're seeing here, I mean, the different KPIs, order intake, some people call it bookings, revenue, EBITDA, and ARR. And Andrew, obviously, will go in more details. But as you can see, all the KPIs are moving in the right direction. We had the the first half record in order intake with a growth of about 22%, reaching almost 11,000,000 versus 8,900,000 last year, same period. Record H1 group revenue, 6% up at $8,800,000 LRR is growing $13,600,000 plus 21%. We continue to have very solid gross margins at 88% for the first half.

4:11 EBITDA, 900,000 versus the 100,000 we had first half last year. Recall we have a record in adjusted EBITDA, 300,000, and net cash, 5,800,000. So you see we're all moving in the right direction. In terms of business highlights, we continue to see lots of momentum on the market. The market itself, the DDoS market itself, I mean, is growing. There are many more attacks every day, and we are growing in that market and probably faster than the market CAGR. We had 21 new customers in the first half, and we had eight of them through our strategic alliance, Juniper.

4:59 We're now very international. We are doing business in about 50 countries. Obviously, we are very strong in some of the region or some of the countries like The U. S. And EMEA. And the thing that is important to mention is that we got 18 new countries over the last two years. So as I explained about two years ago when we launched the enhanced strategy, becoming more international, more global was a very important pillar for us. As I said, we have invested significantly in sales and marketing. We grew in terms of number of head counts, we grew by 32%. So moving from 20 sorry, from 19 people in sales and marketing to 25.

5:48 We had some very important hires. We hired a a new chief revenue officer, solid profile, obviously, good experience in cybersecurity and good experience in technology. We hired the VP of international sales, what I would call rest of the word international sales. So EMEA and APAC. We hired many more people like VP sales ops and many more people in the regions. We're trying to balance now resources between US and rest of the world. So we hired people in APAC, in Australia, in Singapore, hired people in some other geographies in EMEA. We have added as well some additional resellers, which is a channel to the market for us.

6:36 And we also won a number of new references, new customers in some interesting verticals like fiber broadband operators. That's very, very important. We have put a very high focus in growing the top line, and the way to grow the top line is to get more leads, more opportunities. So there's been a number of initiatives that we've constructed and launched in three domains in order to to basically address the three route to the market that we have. One is for direct approach with the strategic account. Number two is alliances. As you know, we have a strategic partnership with Juniper and GTT, So we're putting more resources around that. And the third route to the market is around channels. So that's basically distributors and resellers.

7:26 They are generally local. We strengthen because you heard me saying that many times. We strengthen the number of of people or the resources around strategic alliances and channels. So we hired the VP of strategic alliance. We are working on new campaigns with Juniper and GTT, and we are doing further initiatives with them, attending roadshow, attending roadshows and things like that in order to increase the awareness and grow the business. Market trends, and I think that that's an important one. As I said previously, the number of daily attacks has increased significantly.

8:12 It's doubled over the last two years. The attacks are becoming more complex, more difficult to tackle, and hence, impactful for those who are not protected. On our side, and we're measuring that, obviously, on the, I would say, daily basis almost, We did mitigate about three hundred and thirty nine thousand attacks in the first half of the year, and that's about 20% higher than what we had in the first half of last year. Also, I mean, because of deployment of five g networks and things like that, I mean, the the bandwidth, the capacity that is being vehicle through the networks had increased significantly. So 100 gigabit per second is now becoming important, and that's a huge opportunity for us, obviously, to upgrade our existing customers and provide to new customers with protection for networks that have that type of bandwidth and capacity.

9:08 In terms of competition, there's more and more competition on the cloud based, you know, DDoS protection providers, which is not what we're doing as our main activity. But the landscape on on prem DDoS solution provider, which is our main activity, the the the competition there is not has not changed. So, basically, we're still seeing the same competitors in the market. In terms of solution offering, we are investing, as I said a lot, in r and d in order to be ahead of the attackers when they deploy new techniques for attacking targets. So we've invested and launched a solution that address the carpet bombing attacks.

9:58 And, also, we've put lots of resources in what we call our service portal to give better visibility, to give better reporting tools and analytics tool to our customers, especially our enterprise customers. The thing which is very important, and I think that's one of the differentiators that I'll explain later on, we are detecting and mitigating most of our attacks automatically. About 98% of the attacks are automatically mitigated, and our competitors cannot say the same. So for those who don't know the company, a quick snapshot on who we are and what we do. So first, we are the specialist in on prem DDoS mitigation.

10:48 We have very high performance with dealing with the attacks automatically for all the cases or most of the case, and we do that real time. We it takes us very, very short time to detect and mitigate attack. So that's the technology differentiators. We are a public company. We're trading on the end market on the London Stock Exchange, headquartered in London, but we have offices and people in Boston and in Edinburgh. Edinburgh is mostly r and d. Boston, have operations, CTO, marketing, and some other function. In terms of the the the segments that we are addressing, I mean, our sweet spot is around service providers, telecom service providers and ISPs, hosting providers, SaaS enterprise, data centers and colocation.

11:39 We also deal with edge providers and enterprises. Enterprises, we're mostly tackling that segment through partnership, with GTP or Juniper. We are protecting either directly or indirectly thousands of organizations. And as I said, we are very international as we are deployed in more than 50 countries. We are investing a lot in sales and marketing, as I explained, but we're also investing a lot in R and D. So roughly 16% of our top line goes into R and D investment. We are, generally speaking, between 15% to 20%. And something which is important because they are new for growth, we have strategic alliances with Juniper and with GTT.

12:30 Juniper, we're basically adding a DDoS protection stack on their routers. And GTT, basically, we're helping them to monetize DDoS mitigation when they're selling connectivity to their enterprise customers. We also have some technology partnership with Newstar for hybrid customers, customers who want cloud, and that's the part that is providing by NewStar and people who want on prem, which is what we are providing. And then we have a partnership with Splunk, a technology partnership with them for the analytics and the reporting tools.

13:10 So what's the value proposition and the unique investment opportunity? So first, we are operating in a large market. The market is about $1,500,000,000. It's growing at about 15%. If you're looking at the very sweet spot market for us, it's probably half of that, but still a a very big market. And then, you know, what's going on in terms of network deployment, network architecture moves in into the right direction for us. So with five g, for instance, people have higher capacities. They have a higher density of network and lower latency. Hence, the importance to be protected in such an environment because if you're not, the impact could be very, very big.

13:56 We believe we and this is not me saying that. This is our customers saying that. We believe we have the best ratio performance over TCO in the industry, especially when you're talking about on prem. We're quick. We are automatic, and we're very precise. All the expertise is an in house expertise. We develop, design, everything in house. We've been investing for eight years in DDoS protection. By the way, that's the only thing that we do. We are 100% focused and specialized in DDoS protection, and we've invested roughly 35,000,000 over those eight years in r and d. We have for a company of size, we have an amazing list of customers in all the domains that I explained, small customers, but a huge number of large customers that are the leaders in the different domains.

14:52 And we have customers in 50 countries. 60% of our revenue is recurring. We have an ARR, as I explained, of 13,600,000. And, basically, we we are helping our customers on two fronts. One is on protecting their own network. So we deploy our DDoS solution to protect their own network against DDoS attacks. And two is to help them to generate incremental revenue by selling DDoS protection on top of the connected services that they're selling to their customers. We have a worldwide, very high grade first class support. You know, we have customers as far as Australia, and we're supporting them 24 by seven by three sixty five. We have a huge expertise in terms of SOC and in terms of operations. We are global.

15:45 It's very quick to deploy our solution because our products are very good. And, also, because it's mostly software, we we can deploy very, very quickly. So in terms of, you know, installing, you know, deploying, and then on the pure financial side, recognizing revenue could be very, very quick. We could scale pretty quickly both in terms of direct approach, but also using the leverage that we have with our strategic alliances like Juniper, GTP, but also with the channels. And then we don't have any in house supply constraints. We have a a subcontractor with whom we're working very well, and we could deliver even when there's a component which is a hardware. We could deliver very quickly.

16:35 So all what you're hearing about, you know, the long lead times, you know, quarters or years, I mean, we're not impacted by that because we manage that very, very tightly. In terms of financial performance, as I explained, we've been growing significantly over the last two years. We almost doubled the size of the business. We are now profitable. We have solid gross margin, a high level of repeating and recurring business, and we're spending smart. And last but not least, because I believe it's extremely important, we have an amazing team both in terms of operational and management, who have decades of experience in technology or in cyber. The market dynamics, I've explained that. So a large market, the the SAM is about 700,000,000, 30,000 daily DDoS attacks, so doubled in twenty four month.

17:35 And what we help our customers with, I've explained that already in the previous slide. In terms of how we get to the market, so clearly, we have three types of solutions, and I will explain later on. But, basically, a solution that we sell direct to our customers. This is our threat defense system, a solution that we deploy through Juniper. This is a threat defense director, so that's software only, and a hybrid solution that we deploy in conjunction with new staff for customers who want cloud and on prem. And then, obviously, we have a full portfolio of services going from, you know, consulting services to installation, deployment services, support and maintenance, and managed services.

18:24 Our go to markets, as I explained, strategic alliances, indirect through channels and direct sales. In terms of customer segments, I went through that already. Type of revenue, so we get term license revenue, revenue share type of revenue, DDoS as a service, and then we have CapEx type of revenue. A quick snapshot of our customers. So the segments I already explained, the ones that we're putting most of the resources and focus, service providers, hosting providers, SaaS enterprise, and colocation, and some that we're addressing through our partners. You see some of the logos here.

19:11 We have many more. We're not putting all of them. We added two more since we last spoke. One called who is a a service provider focused on gaming industry. This one is in Australia and a fiber broadband company in The US. The thing which is important is that we're very global on all the continents in 50 countries, thousands of organizations, 18 new countries over the last two years. And the thing that is extremely important is that our customers are very loyal. They start with us. They grow with us either when they expand geographically or when then they densify their network. And that's very important because that's generating recurring revenue. And, you know, you could start pretty small with orders or POs that are, like, 100 k, and then you can reach with the 10 customers over time million of dollars.

20:06 We're not losing customers, by the way. So we we don't have any churn in terms of number of customers. So let's go now into more details regarding the financials, and I will pass that to you, Andrew. Thank thank you, Lionel. Lionel highlighted some of the the key financial highlights, which I'll repeat on this on this page, the things that we track as as as a management team. Obviously, order intake is very important and reflective of of of our growing business. Revenue in terms of how we recognize that order intake is up. ARR is a very important statistic, and that's growing strongly. ARR represents over 60% annual recurring revenue. So that's the recurring elements of our business is over 60% of our total revenue. So a key indicator for us.

20:56 EBITDA, the business moving to profitability in 2021 and continues that trend, and our and our cash remains strong. We have net cash of 5,800,000 at the end of at the end of

21:07 June. Moving on to a little bit more detail in terms of of the income statement. You can see, obviously, that the the the revenue line, It's worthwhile pointing out on the gross profit line that our margins remain strong. Our margins for the first half of twenty twenty two were 88%, up slightly from the comparable period. And that's largely driven by product mix. So our different lines of business have different margins. Obviously, software is very high margin. Our services are high margin. And depending on where the where the mix is for that particular quarter will determine margins. And our margins the key message is our margins are very, very strong.

21:53 And the key focus is without the line will will I mentioned that we'll we'll elaborate on further is growing the top line. As we grow the top line with 80% plus margins, the majority flows through to the bottom line. On the operating expenses, on the face of of the income statement, you can see our operating expenses were 7,700,000 for the half year ended June 2022, down from 8,400,000 for the comparative period. That is despite the fact that we've invested. So you'll see in the the highlight, we've invested in growing the scale of the business, and that's planned investment that we we planned from the start of the year. An increase of 1,100,000. The majority of that is sales and marketing. That has been masked by by foreign exchange differences of of of 1,600,000.

22:42 The majority of that 900,000 relates to an unrealized gain on an intercompany loan between the the the The UK company and The US company. That that dates back to the to when when The US company was acquired in in in in 2010. So it's a non traded item as a result of the movement in the in the in the pound against the dollar. Dollar strengthening pound weakness at the end of last end of December two thousand twenty one. The dollar was at

23:14 $1.38 versus the pound down to $1.21, $1.22 at the end of June. It's obviously continued to fall since then. So the the overriding message on the operating expenses is we're investing. That's been masked in this period by the the foreign exchange differences. You can also see on the on the in the in the half year ended June 21, we had a a positive impact from the forgiveness of a of a a of a PPP loan, PDP loan in The US. At at the time of the COVID crisis, the US government provided support to companies. Obviously, our companies has a has a presence in The US in the form of a loan to support the continued employment of employees. And if you met certain criteria, that loan was forgiven, and that was forgiven in the period to June 21. So we had a positive inflow from that in that in the prior period, but obviously not in the current in the current period.

24:11 And our EBITDA is, mentioned, 9,900,000 versus

24:16 100,000 in the comparative period. So it's a strong a strong performance on on the income statement side. Move to the next slide, So on the cash flow, we've had a decrease in our gross cash, and that's largely reflective of financing activities. We had an increase enough in our bank loan facility in the comparative period last year. And in this period, we haven't drawn any further on bank loan facility, but we've continued to repay that facility to the tune of around $900,000. So the net the net outflow, we've had we've had an inflow in terms of operating activities, a little bit of investment in working capital, and then a note outflow in relation to our financing activities. But our cash net cash remained strong and up on the comparative period in the prior year.

25:08 On the balance sheet, a couple of things to highlight. We continue to invest in our r and d, capitalized r and d. But you'll see that's fallen from the comparative period. So we we are amortization charge is greater than our development. And that's reflective of the fact that we are our development is really focused on improving and adding functionality, excuse me, on additional protection as new attacks emerge as opposed to developing net new products. So our product is development is really all about enhancing as opposed to developing new products. Our debt at the end of June was 1,700,000 versus 3,800,000 at the at the prior period. So we continue to repay our debt on on in terms of an agreed schedule, and we will have repaid our debt in full by early two thousand and twenty four, so eighteen months from now.

26:04 And as I said, cash net cash remained strong at at 5,800,000. And that that was the summary on the financial slides. Obviously, happy to take questions on on any any any further detail regarding the numbers. Thanks, Andrew. So quick one on the solution offering. As I mentioned, we offer three flavors of our smart wall platform. One is we call it appliances, but by the way, it's mostly software. So one is our TDS solution, which is a piece of hardware and software. This is what we're selling to our customers direct through the channels as well. The one that we're selling through our strategic alliance with Juniper is what we call TDD.

26:54 So, basically, we're adding a a software stack on their routers, and the big advantage for them is that they're able to propose routing connectivity with DDoS protection to their customers. So for us, it's a great way to leverage on, you know, the important sales force they have on on the ground and also the impressive list of customers that they have. And then we have a hybrid solution when our customers want on prem and on the cloud. But that's a very, very small portion of our business. I think the biggest portion of our business is on those two. If I'm looking at the portfolio, once again, I don't want to spend too much time here, but this slide shows that we have the broadest on prem product portfolio going from very, very high level of protection.

27:50 So, basically, you're putting device, a a DDoS protection device before the router so that you can monitor and detect and and and mitigate all the traffic that is coming inbound to solutions that are more like, you know, you protect what you decide to protect, solution that you do putting the the the software I was explaining on Juniper to protect their routers customers, and then the solution that does detect and redirect to a scrubbing center. That to say that we're very flexible depending on the type of protection that our customers want. And then we have a full range, as I was explaining, of services, presales and post sale services.

28:39 In terms of differentiators, couple of things I'd like to mention. So technology differentiators is basically the time it takes for us to detect and mitigate an attack, few seconds. The fact that it's fully automatic, 98%, and the fact that we have a very sophisticated deep packet inspection technology. We're inspecting not only the the packet headers, but also the payload, which makes, I mean, the the the detection and mitigation extremely accurate for larger attacks, which normally are easy to detect and mitigate, but also for very small ones. And then there are differentiators that are linked to the profile of the company in terms of being the expert, the specialist in DDoS mitigation.

29:26 And and we we are probably the only company that is 100% specialized on on prem DDoS protection. The the fact that we're very, very flexible, that we have an amazing level of support, and for a company of size, I mean, the impressive list of customers that we have. So that's very interesting. Those are the market trends that we're seeing on the DDoS market, and I will explain how that is relevant to what we do and why it plays in our favor. So first, the attacks are becoming more and more complex using multivectors to attack a target. And the fact that we are the specialists in DDoS protection that we have a very sophisticated deep packet inspection as I was explaining, Inspecting everything makes our detection and mitigation system very, very accurate for all type of attacks.

30:24 The fact that we are extremely fast in detecting and mitigating allows us to solve the 80% of the attacks that are below ten minutes. So if you're taking fifteen minutes to detect and mitigate an attack, you will not see 86% of the attacks, which could be a big problem. 98% of the attacks are small attacks. So same thing, if you don't have a very precise, accurate way of detecting and mitigating, you will miss the big picture. And then sixty eight percent chances of repeat attack within a week means that if you're not automatic in detecting, mitigating the attacks, you will need an army of people to handle the ODDO's problems, which will mean for our customers an increased level level, sorry, of OpEx.

31:17 So because we're the specialist and because we have an answer to all those trends, I believe it puts us in a very good and competitive situation. So let's go back to the strategy and how we are progressing over time. For some some of you with whom I've spoken, we we did the following. So the company has been eight years in developing and marketing DDoS solution. So for the first six, seven, eight years, I mean, the company has worked extremely hard first to develop a great solution.

32:03 We're still using the basis of the same platform that obviously we've met evolve, but still, I mean, the same base or smart whole portfolio. We increase in terms of features, in terms of throughput, but still the very good platform that we have. So we've developed a very, very solid product and solution. Two, I mean, we built some impressive teams in terms of, you know, r and d, support and maintenance, operation, sales and marketing, so very strong teams. And then for a company of size, as I said, an impressive list of customers and references. The leaders, you saw some of the logos, the leaders in their domain. Two years ago, we launched what I call an enhanced customer centric strategy, very much focused, as Andrew was saying, very much focused in growing the top line.

32:57 Because we have we have all the bases to be successful, a good product, good people, great references. It was all about growing the top line. So this is where we put the focus. So as Andrew explained, we are investing a lot in sales and marketing. And, basically, this is what we've been doing, you know, over the six pillars that some of you saw, which are here, but I will explain in in a minute what what we we've done. So, obviously, the market environment is a very favorable environment, and we're leveraging on that. We are growing faster than the market CAGR. As you have noticed, the market CAGR is around 15%. We've been growing anywhere between 25 to 74% over the last almost three years.

33:47 We are investing a lot on sales and marketing, and we are doing lots of initiatives in terms of sales and marketing, lead generation initiatives, strategic alliance initiative, initiatives with our channels. And we are measuring that with very sophisticated tools. And we have tools also that allows us to be smarter in how we are exploiting our database. So targeting the customers that have the highest potential of buying from us. We've been able, as I said, to attract new talent in a very challenging environment. So that you saw is becoming more global, I mean, leveraging on our partnership, both strategic alliances and channels, getting more large accounts in the segments where we're strong and, obviously, doing more services because services is a way to capture and have more loyal customers.

34:54 That's the the first front. So that's the market, sales and marketing, top line. And, obviously, we continue to invest significantly in order to maintain in r and d, sorry, in order to maintain our technology and innovation leadership. So just to summarize, so as you saw, as some of you with whom we we started to spoke already two years ago, I mean, we've been very, very consistent in what we deployed, where we put the focus. And thus, for the last thirty months, we showed in the diagrams, we got some very good performance, improved performance, and became profitable.

35:41 If I'm looking now at this year and the future, as I explained, the DDoS market is strong. It's probably going to become stronger with all the environment changes and political instability. We are very strong on that strong market. We probably, as I said, have the best performance over a TCO ratio in the industry. We expect the the the cybersecurity dynamics despite some of the, I would say, headwinds, economic economic difficult economic conditions. We expect that, you know, that's going to play no favor. When I'm looking at H2, we talked about H1. But when I'm looking at H2, as I explained, we invested a lot in sales and marketing.

36:33 We put together lots of initiatives, sales and marketing initiatives to grow the top line direct and with our channels and partners. We have a solid pipeline, a much better qualified pipeline. We have a very good win rate where people try our products, normally, they buy our products. So based on all of that, plus the good H1 performance, we expect trading for the second half of the year to be in line with market expectations. And because we are building for not only the short term, but also medium and long term future, we feel confident about the future.

37:19 So this is what I wanted to say in a nutshell. We are now open to take questions. So there were already some questions that were raised before the beginning of this session. I will go through some of them. We have lots of questions. So Leonel sorry. Andrew, if I may just jump back in there. Thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the right hand corner of your screen. Just while the team take a few moments to review those questions that were submitted already, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard.

38:06 Leonel, as you rightly said, we did receive a number of presubmitted questions ahead of today's event as well as as you can see in the q and a tab, a number that have been submitted throughout today's presentation. So firstly, thank you to all of those on the call for taking the time to submit their questions. And, Leonel, Andrew, if I could just hand back to you to run through that q and a tab to respond to those where it's appropriate to do so, and then I'll pick up from you at the end. Thank you. Thank you very much. So there is a few questions that have been raised. The first one is around cash and how are we what's gonna be the usage of the cash that we have. So I will take this one. So basically, you know, what what we're doing is we're trying to find a happy medium between providing good financial performance, but also investing in the business for the future.

38:53 And I think we we've done a good job in in that. So we will continue to invest in sales and marketing. We'll continue to invest in r and d in order to continue to grow the top line with very competitive product. So it's it's a happy medium between investing in the business for mid long term and providing good financial performance. So that's that's the first question. And Drew, do you want to take the second question? Yes. Thanks, Lina. The second question is, can you provide details on the P and L impact of the continued weakness of sterling and the opposite of, obviously, dollar strength? The company looks cheap in dollar terms. So in so in terms of currency, the CORERO's functional currency is US dollars.

39:46 All all our selling is in US dollars. Our prices is in US dollars. So that so so our functional currency is obviously US dollars. We have some of our operating costs are in are in sterling. The majority are in in in US dollars. And in terms of our trading, the the majority of the foreign exchange impact you see on the balance sheet relates to some intercompany balances that that exists. And also our borrowing facility, which is in in in is a sterling denominated borrowing facility. So as as as as sterling comes under pressure, as it has done in in in the last in the last while, we show an exchange gain in relation to the the conversion of that sterling liability into US dollars.

40:32 So the majority of it is non trading relative financing and intercompany. The the moving the dollar doesn't doesn't affect our our selling and our and our and our payments from our customers. Thanks, Andrew. The next question is around our global footprint. So the question is, having not deployed your solution in 50 countries, what other countries are you currently looking at to expand your global customer reach, and where do you see your current cash being best utilized? So we take the the beginning of of this one. So, you know, we're not necessarily trying to go in every countries. We're to replicate what we've been doing successfully with some customers in a specific country and do that with more customers in the same country. So clearly, I mean, US is a big part of our business. We're doing between two third to 70% of our business in The US.

41:33 We want to balance that more with the other regions. And in terms of regions, clearly, EMEA is is one of them. So we're we're quite strong in in The UK. We're strong in some other countries in the in EMEA. One of the region that is interesting for us because when you're looking at the size of the DDoS market, I mean, it's an important one, is APAC. So as I explained already, we're putting more resources in APAC, hiring local people, also getting some local partners, and we're starting to get some interesting references. So we'll be extremely focused in APAC, but APAC is one of the region where we want to we want to grow. We already have some solid references in Australia, some good references in Japan as well. So we'll add few more countries, and we'll we'll do more in Australia and in Japan. So growing with the existing list of customers and references that we have there. And I guess, Leonardo, there's there's increase in territories. A lot of that expansion and that that going into new territories is alongside our large partners. Exactly. Exactly.

42:46 Yeah. It has the footprint and has the has the feet on the street as it were in those in those geographies. Exactly. Using that their network and their selling capability to expand. Exactly. So the other question, and I believe I partially answered that, is around the churn rate on your installed customers. We don't have any churn, quite frankly. We don't lose customers. I mean, our customers, as I explained, are very loyal. They grow with us. I mean, the the percentage of people renewing their their support and maintenance contract is close to 100%. So, I mean, churn is not an issue for us. I don't know, Andrew, if you wanna say anything more on that.

43:34 So there is a question that that the broker note shows 28,000,000 revenue for for the the current financial year. To hit that expectation, you generate 20,000,000 in h two. Is that is that the correct market expectation? Obviously, the market expectation is the market expectation. It's it's not a company forecast. But in terms of our our our our confidence in in in growth in the second half, and we haven't adjusted that market expectation. We have a strong pipeline, and the investment that's been made in the first half in terms of growing sales and sales and marketing is a ramp up required in terms of getting those resources productive. And we we're confident they will be and and contribute strongly to the second half. It's also fair to say that our our business along with a lot of other technology companies Very small. We have a we have a very strong it's second half biased in in terms of the contribution.

44:31 So we've seen traditionally a very very much stronger second half than first half. That's just the way the industry and the way customers transact. So we will see that continuing this year as well as the benefit of our increasing pipeline and increased investment in sales and marketing. Do you wanna do you wanna comment on that, Nick? No. Maybe maybe a few words. As I was explaining, I mean, we've invested a lot in sales and marketing in the first half, so building the teams. Now the teams are more or less complete. People are now fully operational and starting to deliver both in terms of, you know, results, but also in terms of providing initiatives, campaigns that will generate results in the second half of the year. So I mean, that is in place. That is operational, and that's going to deliver results.

45:20 The next question is around gross margins. So the gross margin performance looks exceptionally strong in h one. Is this sustainable? Our margins generally driven by the mix of business we do. So our margin in the first half of this year was 8888%, up a little bit from the the comparative period. So it it really depends on on on the mix. So we had a larger mix of recurring revenue and support, which is high margin, which drives that that that gross margin up in terms of the blended margin. We don't see pressure on our margins, and we think our margins will continue to be in that mid to high 80%, and that's very sustainable. We're extensively a software product. We we are very efficient in the way we deliver our services and our margins. We expect our margins to remain strong.

46:07 And then the other thing I want to add on this one is we're not seeing an increased level of competition on the on prem. So basically, the landscape has not changed, which means that, you know, all strong competitive position still remains. And, you know, that allows us to be pretty strong on what we we're proposing to our customers. And I think that's the last question. Yes. This is. So thank you, everybody, for joining today. Thanks for the the questions. Thanks for making the time, and looking forward to our next to to our next, sorry, update and discussion. Leonel, that's great. And Andrew, well, thank you very much indeed for taking the time to address all of those questions that came in from investors this afternoon. And of course, if there are any further questions that are submitted today, we'll make these available to you immediately after the presentation has ended for you to review and then add any additional responses where it's appropriate to do so. Leonel, I was just going to ask you for some closing comments, but I think you just well delivered those. So what I'll do now, if it's okay, is redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. So if I could please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations.

47:23 This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of CORERO NETWORK SECURITY PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all. Thank you, everybody, and good afternoon.