Intercede Group (LSE:IGP) — Investor Presentation

0:01 Good afternoon, ladies and gentlemen, and welcome to the INTERCEDE GROUP PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q and A tab It's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions, that are submitted today, we'll and publish responses where it's appropriate to do so, and these

0:31 will be available via your investor meet company dashboard. Before we begin, as usual, if I could submit the following poll. And I would now like to hand you over to CEO, Klas Van Der Leeste. Good afternoon, sir. Good afternoon, Jake. Good afternoon, everyone. My name is Klas Van Der Leeste. I'm the CEO for INTERCEDE. I'd like to welcome both existing investors as well as potentially new private investors to this session, which will cover the full year until the end of March. During this session, I'm joined on my right hand side by Nitol Patel. On my left hand side by Ellen Story. Ellen is our chief product officer. Nitol is our CFO. And we look forward to providing you with an update in the next forty five minutes. Whilst the presentation is us presenting to you, we very much look forward to your questions.

1:21 And please also leave your feedback after the session. We do take your feedback serious, and we use that to improve any sessions going forward. So without further ado, let's start with the main presentation. So agenda, quick progress report, results highlights. Nital will then take over to go through the financial review, followed by Ellen talking about strategy, product, and market overview. Ellen and I will share the approach to m and a, and we'll then close off with summary outlook. There There are a few appendices which will be available to you after the session, and, of course, we'll do q and a once we finish the session.

2:06 So progress results and highlights. Just to provide a bit bit of context, I started this journey with a company five years ago when the main aim was to get the business back to profitability, cash generation, try and create good strong balance sheet, heavily invest in the product, make sure that the company was actually ready for growth. We reached that phase beginning of last year. So phase two basically is is underway now. We've completed our first year, and the whole objective for phase two is continued business expansion through both organic and inorganic growth. So what did we say last year at this time? We basically said our objectives and strategies are clear. We have a clear plan. We felt we had a good pipeline that we could actively, you know, dive into.

2:57 You can actually see rest of world gathering a bit more momentum during COVID. Our rest of world, we've been very transparent about this, have been very, very quiet. Continental Europe basically was not transacting at all. That was in sharp contrast to our North American markets, which actually contracted like normal. We saw good business flow from that. So this time last year, we felt confident in our ability to drive double digit growth from a revenue perspective. So where did we end up the year? We start on the left hand side. Our revenues grew by 22%. It's record revenues for the year at 12,100,000. Pipeline conversion was good, was actually quite strong, not just in The US, but indeed rest of world, Continental Europe started picking up quite nicely.

3:50 We also saw interest from The UK market. Those who have followed us for a little while may have heard us talk about that we typically do less than 1% of revenues in The UK because UK, particularly UK government, shown relatively interest in in PKI, which is our traditional market we've we've played in and continue to play in. But after the invasion in Ukraine, we've actually seen the five eyes collaborating significantly more. And within the five eyes, US is dominating the security posture. Good news is we're very much recognized in US federal markets. The security posture they use to share information is PKI. Ultimately, credential management is what we do. So we actually closed a few deals with UK MOD here. Can't provide any further detail on that. A lot of these these interactions are either at secret or top secret level.

4:46 Good news is we have some colleagues who are cleared so they can actively participate in these these programs of work. So organically, we grew very, very nicely. Inorganically, we announced our first acquisition of Orthologix in October last year. We'll provide a bit more updates, but at a very high level, business integration, very much on track, but also product integration is on track.

5:11 Investment in the product, particularly MyID, has been very, very heavy. There's no surprises here that for the last couple of years, we've continued to invest around £3,000,000 in r and d. That's actually being recognized now by an independent consultant called It's a it's a leading German consultant. They're not as big as Gartner, but they're very focused on the identity and access management space. Their approach is over a year ago, made some inquiries about what we were doing for FIDO for the enterprise. Alan and I had the original conversations with them that led to quite an extensive interaction both in terms of questionnaires as well as spending time with their market analysts. And they published fairly recently their secrets management leadership compass, and INTERCEDE was recognized there as overall leader. Secrets management is in effect what we would call credential management.

6:04 That's actually a really good recognition by an independent third party. Alan was also invited to speak recently in Berlin at their main event around identity and access management, and he was specifically requested to speak about FIDO for the enterprise. So we've been preaching about FIDO for quite a while. It's really good to see that the market is now starting to pick this up and will help us to to drive revenue growth going forward. If we then move to the right hand side of the slide, talked about the revenue, 22% increase. Clearly, we've got some exposure to The US. But even when we take currency fluctuations into account, our growth was still 30% based on constant currency.

6:51 The momentum we did have in half one very much continued into the second half, and that also helped us to continue to drive the recurring support and maintenance revenue, which increased by 9% to 7.3%. Our support and maintenance is very, very sticky. Our tax rate is very, very high. As a result, our attrition in terms of the support maintenance is very, very low. Good news is that that support maintenance revenue at these kind of levels is starting to cover quite a lot of our operational cost. So as and when we sell licenses, a lot of that will flow through to the bottom line. Talking about licenses, we had good license recognition and sales in The US. Again, usual kind of suspects in US federal space, but we also saw new deployments as talked about UK government, more specifically MOD, but also through acquisition through Autologix, who got very strong presence in The Middle East through distribution and resellers. We've seen new customers in UAE, Saudi, Oman, and a number of other countries. Cash remains very important to us. Five years ago, we were close to running out of cash.

8:01 We've managed cash very, very tightly over the last four to five years. We ended the year at 8.3. That's net of Orthologix acquisition, which was roughly 2,500,000. So without acquisition, we would have been very sensibly above 10,000,000. As Nitol will explain to you in in his update, which will immediately follow this, our cash is actually higher at the moment. So I'll pass on to Nitol. Thank you, Klaus. So financial review for the year. So income statement. As Klas has said, it's a record year for the group, which is great. Top of 1,000,000. I'll come to explain how that revenue is broken down in the next few slides. The cost of sales is a slight uptick compared to last year. This is mainly to reflect the license sale class mentioned earlier.

8:48 I had a third party product embedded into our offering. Obviously, that's the cost that we have to incur for the selling of the product. Gross profit is circa 96, 96.8%. Going forward, we see that going back up again to about 97, 98%. Operating expenses, you can imagine, the most the biggest expense we have is payroll. We look to control that as best we can, but we'll come I'll show you later what what the movement has been incurred in the company regarding retention, making sure the churn rate is low, and, obviously, making sure that we invest the future regarding succession planning and our graduate training suite plans. However, that has resulted in a good profit. Operating profit is $57.01.

9:34 And although we we're one of the few companies that expenses most of our R and D into the income statement, we do a 100%, and that's gone straight as an operating expense. Some people capitalize. We don't. Now the consequence of the other part of this is that we've been able to utilize the HMRC tax rules for r and d expenditure in United Kingdom, and we'll see a tax credit coming in of 685,000. That's a big number for us for this year because of the regime that was in place. However, going forward in f y twenty four and twenty five, the changes that are made by the government will see that number reduce, not completely disappear, but it'll come down. We're forecasting it's like a $3.50 to 400,000 going forward.

10:20 It has meant the profit for the year is 1,300,000 to 700,000 last year, and that's a good result if you look at it from a revenue perspective going down. The key thing here is that with us supported maintenance and professional services covering a bulk of our operating expenses, any accretive sales that we do on licenses, it's it moves really down into the profit line profit line for us. So the focus for FY 2425 is continue to grow our SNM and our PS as as, you know, inflation rates and normal growth procedures of five to 10%. We're focused on the license income to get the double digit growth in the top line and to feed that at the bottom line. Due to the acquisition of Orthologix, we just decided to show you an adjusted EBITDA profit.

11:09 This is just to reflect, obviously, going forward, we'll have a larger amortization of intangibles due to the acquisition and, of course, any acquisition costs related to m and a activity going forward.

11:22 As mentioned, we just wanna focus, give you some idea of where the revenue breakdown is coming through. There's a regional revenue analysis and a revenue breakdown on the streams that we have. As you can imagine, United States is the biggest market in the world. Again, Alan will show you why this is having an impact with the rest of the world. And, obviously, they're well funded, and we're concentrating on on big bits and clients in that area. But ROW and EMEA has grown. And with addition of our Orthologix, the Middle East footprint has increased for us, which is good news. As mentioned previously, supported maintenance is a recurring revenue stream for us, and we now see PS becoming a recurring revenue stream for us. The reason for this is, obviously, as we mentioned previously, we're now bringing our quarter cape quarter releases, every year for our products. So we have version 12.6 latest, 12.7 coming out in June, end of this month.

12:18 And that enables us to go to our clients and say, look. After five years, we're our end of support. It's in your interest to upgrade. The clients we have, government, defense, aerospace, big corporates, they tend not to like to be outside of support, so there's a churn of increased PS that we see coming through. It's not the focus for us. It just helps us to cover that OpEx I was alluding to in the income statement. To give you an idea again how sticky our support and maintenance is, in this pie chart, if you look at US federal and you look at aerospace and defense, they represent 68%. It's nice to have. They pay us on time. It may be fifty five, sixty days late, but they do pay. And one of the things that obviously Klaus mentioned is that, you know, 80% of our revenues are coming to US dollar denomination.

13:08 You know, how are we going to look at that going forward on exchange movement? We now have facility with Barclays Bank on a forward exchange capability and facility. We were going to use it, to last month, but our clients, again, paid us on time and that we didn't need to use it. Going forward, when we do a license sale that's large into dollar denominated, we will now look at putting in place a foreign exchange contract. It's not to derisk, make money on exchange movements. It's mainly to derisk and give us certainty on on the conversion rate for the company. Again, we just wanted to show you the movement between last year's operating expenses to this year. Obviously, you can see the largest chunk in there is pay rises, bonuses, and national shareholders contributions.

13:59 Critical to us are our staff, and retaining our staff is essential. The experience, losing a staff member is is difficult, and therefore, the loss of knowledge is is not great. So we've helped what we've done is we've approached this in three ways. We've looked at it from a pay rise point of view, which range between five to 7%, and then a discretionary bonus depending on appraisals. And we also did acknowledging that our cost of inflation was increasing last year. We did a one off cost of allowance payment in November across the board for our staff in United Kingdom and United States. Going forward sorry. Sorry. Moving forward, obviously, sales commission and new recruits run rate. Sales commission, that was a bigger delta than last year purely because of increased activity. And then new recruits, again, coming back to investing in the future. Again, Klaus will mention this later in the slides as well. We're looking at how to enhance our product, how we can increase the bandwidth so we can focus on making sure that our product is best in class as Alan will show you later in the slides.

15:02 How we see this going forward, if you if any of you got access to the FinCap note, you'll note that we've got another investment strategy and plan. We continue to invest in our graduates. It's working well. We want to make sure that that enables the company to have successful planning going forward. But it also one of the aspect that we're looking at now that we've got time to do this and got the cash flow to do so is invest in our IT internal IT infrastructure. We're moving a bulk of our IT into the cloud, Microsoft Azure. This is a heavy lift from us. It's not just the back end of the service, but also our product and how we operate in in coding. That's gonna take a two year plan, and what we're doing is we're expensing this into the statement.

15:48 And we'll see the reasons why the think happened, made the notes that we're investing in our IT infrastructure. This gives us scale, resilience, and it gives us the capability of expanding our revenue streams in the future.

16:04 And then on the financial position, again, main movements this year in light of the acquisition of Orthogix and the IFRS three is you'll see now goodwill arising on acquisitions and other taxable assets. This is a consequence of the Orthologix acquisition. Goodwill is a grouping of more into one, CTU, which is good news in the sense that there's no differentiation between the orthologix product, the INTERCEDE product, my IUD product. And, again, Alan will come to you and show you what we're planning to do in the future about this. The other int intangible assets of the, long term contracts that we acquired on the acquisition. The other metrics that we focus on heavily is traded on the receivables, cash, and deferred revenue. Trade on other receivables are higher than last year, again, reflecting the activity increased activity in the group, and we've converted 3.5 to 3,600,000 of that into cash. So as of May 31, the group was sitting on 11,300,000 in cash and no debt.

17:02 The other focus, obviously, is deferred revenue. We like to have a large deferred revenue aspect because it gives you a good eye our force items for the next year and next twelve months. And as of '4 April 1, we had 7,000,000 into f y twenty four, and we had $5.50 into f y twenty five. We'll continue to focus on that that metric because it, as you know, said to you, gives us good stability and forecast into the financial years going forward.

17:27 The only other aspect to note is the contingent consideration. Again, that's part of the SBA on NorthLogix, and we have a different element to them, and we've recognized what we believe we're gonna be paying out according to the SBA over the next two to three years.

17:43 And the final slide for me is just, again, showing you the net cash position of the group. It shows you the debt position reducing, the cash increasing, and that's a good position to then use this as a facility, as a launchpad for doing an MNA strategy. We're fully aware at the moment of, you know, cash is really key, but it's important to use as best we can to deploy, you know, an m and a strategy. Debt is becoming more expensive in light of the interest increases on the Bank of England. We have a facility that we've not enacted with a bank. The term sheet is there to use if and when we require. We've got the right target. And then, obviously, the last option is to go to the shareholders for a larger deal, but that will be only on the share price increase of the deal. It's a it's it's a highly EPS accretive for us to go to the shareholders to ask for that. So it's cash first, making sure they have robust working capital to make sure we don't have to go back to shareholders for more money. It's then debt depending on the interest rates and the cost of doing that, and then obviously shareholders depending on the size of the acquisition.

18:50 I'll pass you over to Alan. Okay. Thanks, Nintel. So we're gonna take a look at product strategy and market fit and then move on to how that plays into acquisition strategy. So as a reminder, INTERCEDE customers today buy our product to help protect themselves against data breach. Hackers don't tend to break in. Hackers tend to log in, they so steal somebody's credential and then log in with that credential. We help customers protect themselves against that by replacing weak credentials with stronger credentials.

19:21 We do that at scale, so tens of thousands, hundreds of thousands employees. And importantly, we do that securely compliant with all the US government legislation. We use this, what we call the authentication pyramid to describe the strength of security. So weaker authentication at the bottom, moving up to stronger authentication at the top with PKI, but it also describes the addressable market. So INTERCEDE have historically played at the top of this pyramid only in the PKI space. So that's federal government, it's aerospace and defense, it's military intelligence agencies, etcetera, which is a good place to be because it's very sticky. Once you're in there, you tend to stay in there, and they also tend to be high value customers who pay well. However, there was a portion of the market that we weren't able to address.

20:09 So that's customers who want to become more secure to move away from passwords. Wanted stronger authentication, but would never move to a a such a solution as complex or as costly as PKI. So that acquisition of Orthologix back in October allowed us to do two things. Firstly, it allowed us to start addressing those customers that we wouldn't previously have got to because our solution was too complex for them. And we're seeing good traction with that in The Middle East, which is a reason which does want stronger authentication, but what we've got to PKI. The second thing it allowed us to do is to start looking and selling more into our existing customer base. So the legislation that drives a lot of our business in The US, FIPS two zero one, changed. It used to say that PKI is the only authentication we trust, the strongest form of authentication.

20:58 It then changed last year to become more risk based.

21:02 So it now states, depending on the risk of the material you're protecting, you can use different forms of authentication. So things like push notifications to phones, one time passwords, sent over SMS, for example, depending on data you're protecting are allowed. But importantly, they now fall under the remit of the legislation, whereas they didn't before. So we have some of our existing customers who will come to us for the high assurance solutions. They'll go to another vendor for the midterm solutions and another vendor for password security management. So with the Orthologix acquisition, we can now address all of that. We can go to a customer and say, come to us for all of your authentication needs all the way from passwords through to PKI. We are changing the branding and the positioning of this, so the Orthologix brand name will disappear.

21:54 That will be consumed within the MyID brand name. We're doing that in consultation with Gartner as to how we best position this in the product and in the market. And the feedback is MyID is a strong brand. Credibility we gain from the customer base we have, number of blue chip customers will help position the multi factor authentication, password security management solutions. So MyID

22:19 has moved on from being a single product. So we've moved on from being a single product company to a multiproduct company, and we now have multiple products within the MyID family. So you'll start to see this addressed on the website in the presentations we make going forward. So we have MyID password security management as a product. If you're still using passwords, try and make them as secure as they can be. And part of that is by making sure that if a password has been compromised, if it has been breached and leaked online, We now have the world's largest database of no compromise credentials, so our customers can validate their passwords against that and make sure they're not going to be compromised. For customers who want to step up to stronger authentication, but don't need to go all the way to the very high assurance authentication, the multifactor authentication solution supports that.

23:08 MyD credential management system is at the very highest level, so that's in that government aerospace military space.

23:15 And the fourth one in there, registration ID verification. Again, this is aimed at that very high assurance US market where some of the rules state that it's not enough just to have a strong credential. You must have enrolled the person securely, captured biometrics, verified their identity before we can issue them the credential. So all of those four are now products that can be sold standalone, but we are integrating into a single solution. This will be on the market in September, marketed in advance of that. So our customers can benefit from a a single pane of glass to manage all of their authentication credentials no matter how secure they want to be. You'll notice on the right hand side there, we have a box with three dots in it. So that's to depict the acquisition strategy where, as we'll talk about that over the next few slides, the strategy is very much to have additional products in the product family that can be sold standalone, but they're part of that MyID digital identity strength, and they will be integrated with the rest of the product family to provide a combined solution.

24:22 Looking at where we invest, so how do we invest in product, where do we partner, where do we acquire new organizations. The best place for us to start is what's driving our market. So what's going on in our customer base, What's driving them to make purchases?

24:38 I won't go through all of this in detail. I'll just pick out three key points. The first key point is that on the left hand side of the slide, the first three items there, they're all driven by The US. And and that's no surprise to us. The US is the best funded administration to set cybersecurity standards. What tends to happen is that Mist set standards,

25:01 and then the rest of the world follow and reply back to those standards. And that's what we see. So the the major changes in cybersecurity, most of the legislation still continues to come out of The US. If you look on the fourth column in there, we've got NIST two. This is a cybersecurity legislation that has been enacted in Europe. Yeah. What's now happening is that that's turning into regulation, I. Law within each EU member state, and that's by 2024. So Belgium will typically start. Germany will follow. That talks about systems and data protection, talks about the need for strong authentication, encryption, signing, etcetera. That refers back to the next legislation that's come out of The US. So it calls out to that as best practice, which puts us in a strong position because our product already meets and exceeds those standards.

25:52 On our own personal loan turf in The UK, we're starting to see changes to the legislation as well. So our security authority, NCSC, updated their guidance in April of this year to promote use of stronger authentication, phishing resistant multifactor authentication. Again, that calls back to NIST as to state what that technology is. A pattern we're seeing there is that organizations are now not receiving cybersecurity insurance unless they've reached at least that base

26:24 level of security. So three real things to point out here. One is that the legislation tends to start in The US and then spread out from The US. The second is the stronger authentication, multifactor authentication is being pushed everywhere, both within the organization and down supply chain. And the third is the biggest change in our industry is serial trust, and I'll explain what that is in a couple of slides time.

26:53 So how how do we make benefit from that? How do we look at what's happening in the industry and apply that to our product set and our acquisition journey? So the first is that that high assurance authentication is still critical. We're seeing growing need for that in The US from some good project wins there, after COVID to come back to life in in Europe, and we're seeing some interesting opportunities coming forward there. So continuing to invest in our corporate MyID credential management system at the high levels for sure is key. That market leadership we got from the Kuppinger coal analysis

27:27 is is generating revenues, generating business, We want to maintain that so that we'll continue to invest in that product set. Moving over to more of the mid market size, that's where the ID password security management and multifactor authentication solutions come in. They came in from the acquisition. So when we did the acquisition, we were confident from due diligence that there was a strong technology, strong competitive product there. What was really lacking was the scale of the organization to invest in sales and marketing around that.

27:57 So that's the initial activity looking at taking that product set to market, investing in the sales and marketing around it both into new customer base and our existing customer base by the channel. But we also see an opportunity to take the code we've written in our credential management product and the skills we've earned learned from that and take that into that mid market product. So FIDO for the enterprise, see is a very very interesting growth space, and we believe by adding that into that multi factor authentication product, we can make that product differentiated against some of the competition. So investing in the existing product, investing in the acquired products. As we move on to acquisition, that's where we believe Zero Trust is the space where we need to move. It's starting to drive our industry. So I'll describe what that is and where we think we would play in that space.

28:53 So if I can describe the world before zero trust, it was very much Sam needs to access the network. Let's make sure Sam is who he claims to be by onboarding him, doing some background checks, etcetera. And then we give him a very strong credential of FIDO or PKI phishing resistant that he can log on to the network with. And and that was the world before Zero Trust. Zero Trust really raises the security barrier quite significantly. It states never trust almost verify. So just because it was Sam who logged on to the network ten minutes ago, is it still Sam? Are they behaving in a different way? Is their machine safe? Does it have malware on? Now were they gonna plant ransomware in my environment? Is Sam suddenly in a different location that was impossible to travel to within that particular time window?

29:43 So it starts to look at multiple what are called our pillars of zero trust. So these are items you need to consider before you can implement zero trust. This is taken from the NIST specifications, which are core to us because that drives our existing customer base. The first pillar on the left is on is users. That's really identity, digital identity. That's very good for us because our pyramid all the way from passwords through to PKI really cover that first column. So it all starts with the identity. But it expands from that, looks at the device. Is it one of my devices? Is it in a good state? Has it got anti malware installed? Has it got antivirus installed? Is it up to date from a patch perspective? How do I protect my network? I don't want my network visible to the outside world.

30:29 I want those trust decisions to be made before people can even access it. Protecting the applications and the data. Just because Sam's logged on the network, does he have access to this particular application? Does it have access to this file store area, this area of shared platform, etcetera? Visibility and analytics, who's getting onto my network? What are they doing? Lots of artificial intelligence machine learning starting to come into this space to make decisions on security. Orchestration, key point about this diagram is really that one vendor is not going to be able to provide all of this. So an an Okta, Microsoft, a Ford Rock, a SailPoint, the giants in the industry are not gonna be able to provide all of these solutions.

31:14 This is all about vendors working together following standards, what Gartner call a identity fabric board, let's call a cybersecurity mesh. How do they share security and identity signals between them to make a much broader and deeper decision on security? And importantly, down at the bottom, this has to happen on an ongoing basis. We can't have SAM logging on and then nothing's checked for four hours Whenever it moves to a different area of the network, accesses a different application, something changes, we need to make sure it's still SAM. So that this is a fundamental change. I haven't seen a a change in the cybersecurity industry as large as this since 2006 when the FIPS legislation that significantly drove our business came out.

32:01 This is regulation. So the executive of the president pushed out a mandate saying federal agencies, and that spreads out to suppliers to federal agencies, intelligence communities, aerospace and defense. So our core customer base have to adopt this by 2027. So if you go to a conference in The US at the moment around cybersecurity, the zero trust room is where everybody sat looking at how they implement this. And that's right in our core customer base. So we believe we are very well positioned here and that we have a number of these core customers using our products for identity and are now starting to look at how do I spread that out to zero trust. We also expect that, like the other legislation, to start in The US and then spread out through the rest of our markets.

32:50 So before we talk about m and a, what Alan has just described is very much us trying to assess what's happening in the market, where are our customers going, where is the legislation going, and how do we respond to that, and then, basically, what do we need to do from a product perspective. And at any point in time, we have three choices to make. We either decide to build it, we're buying it, or we're partnering it. But from an m and a perspective, we appointed head of corporate development, very experienced in UK and indeed international markets. And he's basically guiding us, you know, as as a management team through this. And we're looking at three things here. We're looking at is the product fit, is the market where it's operating in suitable for us, is the company that we're looking at actually having the the right kind of attributes. So what what does this mean at a very high level? At any point in time, we probably have a a long list of 250 to 280 companies that we do basic test based research on.

33:50 So we're trying to assess from the outside what does this company do, what does it add to us, you know, can we afford it, They got revenue. Are they profitable or not? How many staff have they got? How do their products position? We then grind that down to a shortlist, typically twenty, twenty five companies on on a shortlist, and then we start approaching the targets on the shortlist. At any point in time, we're in dialogue with anywhere between zero and four to five different target companies. What are we assessing those on from a product perspective? Following up on on Alan's background in zero trust, can any of these form a core building block for Zero Trust? Do they have IP that will actually stand up? It's defensible.

34:36 Ideally, we want to look for a SaaS offering, but also the ability to deliver on prem functionality. A lot of our clients and existing client base, they do have air gap networks. They need to be capable of having on premise flexibility. So when you look at an opt out or a duo, they're very much cloud driven, cloud driven, and cloud driven. And, typically, we don't see them necessarily in the environments where we're trying to position. At the same time, we're looking for functionality and product that can add value to the large players. So when you look at the Foxtrot, when you look at the SailPoint, we we're keen to add value. A lot of that value is actually demanded by our client base. We have SailPoint across a large part our client base. We have Forschop across a large part of our client base, and it's the clients who actually demand that there is sensible integration between the players.

35:32 So rather than competing with them, we wanna play with them and basically be a niche provider around their offering. And it's got to be capable of either being sold standalone, but also integrated as Alan has explained, we're now integrating Orthologix into our next next release, which will be released in September this year. Looking at the markets, our core market is very much US federal government related. So, yeah, any target we look at needs to be capable of compliant with those markets. But at the same time, those markets are typically testbed. It moves from government into core enterprise in the same way as Alan described that zero trust is probably the hottest button in in The US cybersecurity market, less so in Continental Europe.

36:20 But interestingly enough, we are seeing and hearing noises that zero trust has also started to make into U UK Government. So, you know, we wanna follow that that trail. When it comes to the company, we're not looking for some academic kind of exercise. No. We're looking for company with a a proven track record. They've got recurring revenue out there. They're either profitable or close to being profitable, and the last two points are absolutely paramount. So culture fit and credible management is very, very key when we do our assessments. If I actually transpose orthologix across this, we get lots of green ticks and boxes. But culture fit from an orthotics perspective has worked really, really well. They're technically they're technically competent, and they're credible. So our sales teams or presales teams will not hesitate in getting to orthotics new members of staff in front of our clients. And our clients are typically one step up from orthotics used to sell to. So they're absolutely incredible.

37:16 So these guiding principles very much drive what we do. We have a very structured approach. We're not afraid to walk away, and we do lots of upfront work in order to assess whether we think some some some technology or company is right for us. So what does it mean in real terms? You fully appreciate that we can't disclose to you who we're talking to, but Allan will give you a sense of the kind of technologies we're currently assessing. Yeah. So we're very much focusing on that zero trust area. People can add value to our product set within that space. There are two types of organizations we're looking for here. On the left hand side, we have people we believe can form a key building block, key cornerstone of zero trust that we can then add components around. So for example, that could be network proxy providers, so people who sit in front of the network, make the network invisible until anybody's actually passed those security checks before they can come in. Orchestration.

38:09 So that's where I was talking about multiple systems talking together, sharing security signals before the a decision can be made. And that's where we tend to get lots of sort of artificial intelligence, machine learning capabilities of that space. And policy definition enforcement, very important as well. So what is the policy before somebody can actually access the system, not just about the identity and authentication, but about the device, the location, the level of risk, etcetera. So a number of organizations in that space we're talking to. We are also finding some interesting component providers who, whilst not providing an overall zero plus solution in their own right, can provide an interesting component part for that, can either be bolted on to the systems on the left or can add value to some of the the large identity and access management vendors we've spoken about.

39:00 Couple of examples of that, one of them is user behavioral biometrics. So this, for example, is how am I holding the phone? How am I typing? Is this still the typical way that I interact with my device? Therefore, is it still likely to be how I'm using that device? Some of this technology is being used in the finance world for a while, where we're looking at the risk of a transaction. And that tends to be a a very financial decision. If the risk of the transaction reaches a certain point, but the value of the transaction is quite low, then we're quite happy for that to go ahead. In our world, we tend to be protecting people accessing military helicopter plans, air traffic control systems, tracking nuclear material. So we need a much more absolute identity.

39:45 Those people don't want to know it's probably Sam. They want to know it definitely is Sam. But that technology starts to play in the world of zero trust because we can't ask Sam to strongly authenticate with their PIN and smart card every ten minutes. It's just gonna be useful. But the idea here is if we can have systems checking, well, we know Sam logged on with strong authentication ten minutes ago. And in that time, he's still using the device in the same way he typically uses the device. I'm comfortable it still sounds as a low risk. I'm not gonna ask them to re authenticate. If, however, something changes, somebody else might have taken over that device. They may have walked away from it. Somebody else may be using it, then I can force them to re authenticate. We're starting to see some interesting technologies that are being used outside of our strong authentication space coming into that space.

40:35 Device health and identity, spoke briefly about organizations being very concerned about ransomware and malware. So systems that can check the health of device certainly had a lot of value. And again, risk analysis is very important here. So that's where that AI machine learning comes in. What's the risk of this being abnormal behavior or something that doesn't typically happen? And then stepping up the level of security or analysis around this. So we're in dialogue with organizations on both sides of this slide. So I'm trying to wrap up with summary and outlook. If you look at it from a revenue perspective, we delivered good solid revenue growth also in terms of constant currency, adjusted EBITDA, and profit for the year were up. We continue to have strong margin focus, and our cash conversion remains very, very strong. Intel's definitely pushing robust working capital on there, and our balance sheet is very, very clean. It's unleveraged.

41:35 And the momentum we had in 2023, we're also looking to take forward in 2024, and we've actually had a good start to the year. If we look at April and May, clearly, we've got four months to run-in this in this first half, but we'll push really, really hard to make that happen. So growth is very much on the on the the agenda. So where does it leave from an outlook perspective? We had a good start to the year. We're gonna continue to push that out. But at the same time, in order to continue this growth and grow even faster, we need to invest. We need to invest in colleagues. We talked about we want to put more horsepower in the engine so we can deliver more of the product road map. But at the same time, we've got a bit of catch up to do on our own IT infrastructure. But on the back of that, we'll be far more resilient going forward. We'll continue to invest in the product development. We'll continue to invest in sales and marketing.

42:25 It was only yesterday when our last sales recruit actually started. But at the same time, we're very much aware of what's happening out there in the big wide world. There is lots of volatility going on. Sometimes it's just volatility here in The UK, but also clearly at global level, there's quite a lot going on. So we're maintaining our robust working capital model. At the same time, we wanna push continue to push the scalability of the business and accelerate the organic revenue growth. Last year, the 20 odd percent plus was nearly all organic revenue growth, so we wanna continue to push that. But at the same time, we've hopefully given you a view that our approach to m and a is focused, and we're very much looking for strategic acquisitions. So overall, you know, the focus continues to be on sustainable good quality growth, and we're confident we can execute on our plans to achieve that. At this point, I think, and I'm pretty sure I'm gonna hand over back to Jake. So, Jake, are you there? Glass, absolutely. And and Nitto and Alan as well, thank you very much indeed for your presentation this afternoon.

43:30 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. But just while the team take a few moments to review those questions that were submitted already, I would like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. Class, Alan, Nittel, as you can see there in the q and a tab, we have received a number of questions, throughout your presentation this afternoon. Thank you to all of those on the call for taking the time to submit their questions. But, Klas, if I may just hand back to you perhaps to chair the Q and A session with the team, and then I'll pick up from you at the end. Thank you. Okay. We'll try to answer as many questions as we can. I will read down the questions, and I will try and pick the the best possible person to answer. So Roger has got a question.

44:22 Since you seem to be doing well, we're expanding your sales to US government agencies and other government bodies with little news of commercial customers when surely organizations such as banks need the technology. Why is this? Well, actually, we are selling to commercial customers and corporate enterprises. And particularly with Orthologix, we actually see that their core market is very much core enterprise space, and we'll continue to to push this going forward. Also, in talking about FIDO for the enterprise, we've called it specifically FIDO for the enterprise because we see going forward that there's gonna be far more traction in the commercial side of our business. So, hopefully, that's answered that question. Next question from r d RW is with over 80% of revenues in The Americas, we are sensitive to the dollar note.

45:13 33 operating profit shows foreign exchange gain this year versus last last. Does our company do any foreign exchange hedging? Have you considered reporting the accounts of dollars? I think I've explained we are looking at foreign exchange hedging. We have the capability. We were we didn't have it last year. We were gonna do it this year on one of our big support and maintenance contract renewals, but we actually got paid on time. So there's no point doing it. We will look at it again at the next big license that we do in. Are we gonna report in dollars? No. We have no plans to report in dollars. Next question is from Alison. The maximum deferred consideration for automotive was 3,000,000. You're forecasting you will pay 500,000. This tells me that, one, the deal was well structured. You didn't pay for growth that was talked about and has not occurred.

46:00 But, two, the growth in revenues has been moderately positive but far from great. Is this a fair reading? It's all you wanna comment on that? Thank you for noting that. Yes. They gave us their forecast again. As you can imagine, they gave us a nice hockey stick. We said, fine. If you believe your hockey stick, put your money where your mouth is. We will give you valuation based on those deliverables. Obviously, we don't see that happening completely. We've got a moderate growth. Reason we've done that is because we're integrating the product. We're going to wait and see what happens. We will hope to beat those numbers that we've got out there. Next question is again from Alister. Why don't you and your house broker report and forecast adjusted EPS as steps for EPS adding back amortization of acquired intangibles acquisition costs and exceptional costs? Focusing on EBITDA is particularly unflattering presentation for INTERCEDE given there is no interest charge.

46:50 The tax is an inflow, and the market accepts amortization of acquired intangibles to be adjusted out. And two, something of a red flag to a casual reader who assumes that the numb that the number overstates true earnings, whereas in in this in INTERCEDE's case, it understates. Nitol, one for you. Point taken, Alastair. We will look at this going forward into FY 2024. Tom's got a question. Good to see strong group revenues. How big is your sales team, and how do you envisage further investment in your sales team to on your growth strategy? So we have 10 FTEs in the wider sales team evenly split between The US and UK market. We'll continue to invest in sales as I just alluded to. We only had a new channel sales manager starting yesterday.

47:40 Adding to this is, you know, also from a marketing perspective, we have significantly increased our marketing budget. Just to be absolutely clear, those who've been on presentations presentations before, our model is very much indirect. So we go through distribution. We go through channels. So we're not looking to double travel our Salesforce. We're looking to grow our channel capability and basically address the marketing that way. Question from Ian. Is My Elite approved and recommended by insurance companies? Alan, one for you. Yep. So the insurance companies don't recommend a product directly. They recommend you comply with the standard. So in The UK, for example, that is cybersecurity essentials plus. So our product will help you comply with the standard that the insurance companies recommend as opposed to a direct product.

48:28 But we are planning marketing campaigns around that to help let people know how we can help them achieve that standard and therefore get their insurance. Question from Jerry. Could you please elaborate on how you can compete with much larger players and what's your USP compared to those larger players with deep pockets in including growth equity backed players. Alan? So from a product perspective, it's looking at the areas around the market that we can specialize in that the large players don't do. Microsoft is a great example. We've worked with Microsoft back since the days of Windows eight. They tend to focus on a very large part of the market, but they'll leave space in the product around it. So credential management was a space that they didn't do. When they have virtual smart cards back in Windows eight, they approached us. We'll actually approach Boeing, one of our customers, and said, we're not planning to do this. We're planning to put APIs to allow those people to do it. Who do you work with? Spoke to us, and we work with them. We were the first to market with that. Windows Hello for Business, similar.

49:32 We have large customers who want to add more identities and credentials into the Windows Hello for Business container. Microsoft don't do that. They produce APIs that allowed us to do that. So that that's typically where we go with SailPoint, for example. They don't do credential management. They do identity governance and onboarding. We've integrated with that to allow that to automate into our product. So to find areas we can add value to those larger players is is absolutely been our history and background. We believe there are multiple possibilities to do that within the zero trust market because it's broader and it's more complex, and the very nature of it has multiple companies having to work together to provide an overall solution. Think the the other thing I'd like to add to that, it's not just about the product, but it's also about the people we can bring to the table. We have probably the largest group of PKI experts globally, colleagues, including the likes of Ellen, including the CTO, including our design authorities, including our developers, including our presales, including our professional services people, they know this space inside out.

50:39 When a customer wants to do something and we don't think it can be done, we will tell them. On the other hand, if we think we can do it, we'll find a way of doing it. So I think we're very, very credible. It's not just a product, but I think it's a combination of of product as well as knowledge we can bring around the table. But a question from Simon. Are all the major parties, bodies in the in The US back in zero trust, I e, could there be a change of policy under a new administration, or is it now baked in? So I've been going to some of our customers in The US for over twenty years. I've been into the the US senate multiple times and seen different photos of various US presidents on the wall that have walked into that building. So we've seen multiple regime and administration changes in that time. The zero trust started under the previous administration and was carried forward under the current administration.

51:33 So regardless of whether it's republican or democrat, the the drive towards stronger security because the geopolitical climate is is ongoing. They've pushed this to set the standard. They're setting the standards. It's only gonna go in one direction. Next question from Simon is, will investment growth in defense industry feed through to good news for IGP? I'd like to think so. We're definitely seeing that happening in the in The UK, MOD kind of world, and we're also expecting further growth in other regions going forward. So question from RW. Your outlook states the group needs to continue to invest in its colleagues, IT infrastructure, product development, sales and marketing. Obviously, there's a time line between investment and return. Do you see that affecting the half one, half two balance this year compared to the one compared to the one now reported where half one and half two were fairly equal?

52:31 Do you want to get this? Yep. Other than the no. We don't see that having effect. We faxed that in. But what we'll see is that for the first time, if you're getting if you got access to the think up note that we've introduced f y twenty five and f y twenty six forecast to give you an indication of although the investment strategy for especially the IT will and sales margin will continue for an element into FY '24 and '25, you'll start seeing the returns coming into FY '26. It is unusual for us to have two equal h ones and h twos in FY '23. I think noted that as well. We do see heavy weight normally in h two. We've kind of factored that into FY '24. Simon, next question. Your results statement sounded a bit downbeat. I was expecting upbeat considering the general geo environment, which is surely favorable.

53:26 Simon, it was definitely not not designed to be downbeat. I actually felt we were quite front footed. But if we've given the impression that we would downbeat, then clearly, we need to work on our messaging going forward. So, hopefully, we can address that in the in the next update. Next question from Simon. Rather than looking for acquisition possibilities, wrong zero trust make you more likely target for bigger prey. Who wants to take that one? We can't possibly comment on what other people are going to do. We will continue with our road map. We have a clear strategy of what we want to do with our anticipation of m and a and also how we're going to develop our product, integrate off logic. If another person wants to try and take.

54:12 So we've got rules, we've rules, we've got got we've got shareholder rights. So we will see how that plays out. And and and just to add to that, we focus on running our business. We can't focus on what the market may or may not do. We know what our business looks like. We know what we want to achieve, and the aim is to deliver on that. Final question, I think here is from Jonathan. Do you do you prioritize buying an installed customer base when assessing potential m and a? Jonathan, we look at all kinds of options. We're not excluding anything whatsoever. So, you know, with m and a, we can't provide any detail, but, hopefully, we've given you a view with our approach and, you know, the person leading our m and a program. We have a a good plan. We're executing against that plan. Orthologix was the first stepping stone on that.

55:02 It will undoubtedly not be the last one as Alan tends to refer to it. It's the it's a journey that's gonna evolve going forward. And as and when we have updates, we will continue to provide those. I think unless there are any more questions, I'm gonna hand back to Jake. Klas, absolutely. And Nitto and Alan as well, thank you very much indeed for being so generous of your time there in addressing all of those questions that came in from investors this afternoon. And, of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended just for you to review to then add any additional responses, of course, where it's appropriate to do so. And we'll publish all those responses out on the investor meet company platform. But, class, perhaps before really just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company, If I could please just ask you for a few closing comments to wrap up with, that'd be great.

55:56 Yeah. So now my challenge is to make this as upbeat as possible. So here's here's my go. So a couple of final words in closing. I think we delivered record results in the group with revenues of 22%, which is very much underpinned by strong organic growth. In addition, we've added our first acquisition in October, and the acquisition and, sorry, the integration of that business is well on the way. As we've discussed, we've got market drivers as well as dynamics, which put INTERCEDE's offering right at the heart of strong identity, and our aim is to deliver sustainable revenue growth and profitability for the the new fiscal year. Clearly, this is not possible without a strong committed team of colleagues who live in the best code in our part of the industry. We look forward to keeping you updated on progress, and I hope you found this session informative. Thank you again for attending, and please do provide us with your feedback.

56:45 It will be read. It will take you on board, and we will try and enhance and improve our our presentations going forward. So thank you for attending. That's great, Klas, Nitto, Alan. Thank you very much indeed for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations? This won't 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 INTERCEDE GROUP PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.