Intercede Group (LSE:IGP) — Preliminary Results

0:01 Good afternoon, ladies and gentlemen, and welcome to the INTERCEDE GROUP PLC Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the Q and A tab that's 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 of the questions submitted today and publish responses where it's appropriate to do so. These will be available via your investor meet company dashboard,

0:32 and we will notify you by email when these are ready for your review. 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. Now I'd like to hand you over to CEO, Klas Van Der Leeste. Good afternoon, sir. Good afternoon, Jake, and indeed 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 potential new private investors to the session, which will cover our results presentation for the period leading up to the end of March twenty twenty two. During this session, I'm joined by our new CFO, Nitol Patel, as well as our chief product officer, Ellen Story. As you may have heard in the recent RNS updates, our existing CFO, Andy Walker, announced his retirement. So I'm in a lucky position where I have two CFOs at the moment whilst we're doing a full handover from Andy onto Nitol.

1:29 Whilst this presentation is clearly us presenting to you, we do look forward to your questions, but also to your feedback after the session. So without further ado, let us start with the presentation, and we'll provide you an update on the year that's been, but more importantly, where we're heading going forward. So in short, we give you quick updates on progress report and results highlights. I then hand over to Nitil who will talk about financial review. I then do a very short introduction to the strategy before Alan takes over on product and market overview, which subsequently leads quite nicely into our approach and strategy for m and a, and then we'll wrap up with some, you know, outlook. We will not go into the appendices unless there are specific questions coming out during the the q and a.

2:18 Let's start with slide number one, progress report. Clearly, joined four years ago as part of a turnaround play. That's been completed. We're profitable. We've strengthened the management team. We're significantly invested into the product. We've built our go to market model on on channel and and a reseller model. And we're now very much geared up for phase two where the objective is to achieve increased revenue growth. Revenue growth in terms of organic, we've extended the product portfolio to take on a much bigger slice of the market that we have traditionally moved into, and Alan will talk about that. And the second track of our growth plan is m and a. We appointed head of corporate development in late summer last year.

3:06 In the process, we've identified over 200 targets. We've profiled those. We had active dialogue with nine during the the the period in under consideration, but we didn't conclude on anything for different reasons. You know, we fully appreciate this is our first foray as a company into into m and a, Whilst Nittel and I have extent extensive experience from an m and a perspective, we do wanna make sure that whatever we do on this track is is is is right and first time right. So we then move on. We didn't get to the revenue where we wanted to be. We had a a miss on revenue, 4% on constant currency, and and there are two, three main underlying reasons for that. There's nothing materially wrong with the business. The product is fine. The organization is fine. Market is is picking up again. But those who've been supporting us for a while and following us for a while know that, you know, we do pursue large opportunities, in US federal space, and we've seen some delays on some of the larger opportunities.

4:11 We haven't seen these opportunities moving away. We haven't lost any opportunities. It's simply that these opportunities are being delayed in time. These are large opportunities, and, you know, we can't control those opportunities with regards to timelines. We have to follow the the the process that the agencies are setting, and we actually have seen in recent months a real uptick in activity. Alan is is one of the executive team members who frequently gets involved and earlier this week was involved in in late presentations towards an an opportunity that that we're pursuing. Again, tonight, we're again presenting for other opportunities. So, you know, we are actively involved. So that's one one main contributor. The second contributor we've been very loud and and clear on during the COVID period that Continental Europe for us has been very, very quiet. Simply, the majority of the European continental European countries, were earlier in lockdown than we were here in The UK, and that basically stymied any any progress we could make in the region.

5:17 Good news is in the last three to six months, continental European, but also Asian activities have picked up again. We're seeing existing opportunities that we already had in the pipeline, again, maturing. We're seeing net new opportunities appearing. More importantly, we see order flow coming into the business. And then finally, contributor. Again, those who are following us for a while know on the larger opportunities, we tend to see one or two patterns when clients, prospects acquiring licenses. They either acquire the entire license volume upfront and therefore take advantage of the lowest possible cost, or they buy in smaller quantities, and then they ramp up the quantities as they move into production.

6:03 Both large opportunities that we announced in q four have chosen to buy smaller quantities. Good news is they're both competitive displays. So what does that mean? It proves that our product is is definitely market leading because we're taking competitors out of the market, and it also means that these clients will migrate from competitive platform onto MyID over the period, and we definitely expect to see progress during this this this fiscal year. What else can I add to that? Our recurring support and revenue stream, our maintenance stream, our annual recurring revenue increased by 10% to just north of 6,700,000, and we expect that to grow also in the the current current fiscal year. Our business is very, very sticky. We see very little attrition, 98% renewal rate on support and maintenance is very, very strong. It also means we're not losing large opportunities.

6:59 Clients who come on platform tend to be very, very sticky. They're with us with us for five, ten, fifteen years periods periods of time. We have one client here in The UK who's renewed for the twenty first year, and we clearly like that type of business. Other interesting point to note is record number of new client wins. Whilst we didn't get a large one, which discussed above, we have seen a record number of new clients coming on platform using MyID across a number of of different regions with a good spread. We also won our first client in Latin America through a new partner, so that's encouraging. We all already have seen other opportunities through that same partner appearing, and that also leads quite nicely into the next point that, you know, we continue to establish new partnerships. Again, those who have listened to us before, we launched our indirect go to market model four years ago. Our connect partner program has got two pillars.

7:59 One pillar is the technology partnership. So it's those technologies and applications we need to integrate with or to in order to drive an end to end solution. It's very much driven from Allan's side as chief product product officer, and then the other side of the program is the reseller. So those companies will actively take MyID as a as a software solution to market, integrate it with third parties, and then offer an end to end solution out to clients and prospects. Andy Dali, who is affiliated with FinCap, clearly writes the the notes that are coming out. And one of his notes is or his last notes is very, very clear that we also see now second and third opportunities appearing through existing resellers. So it's all nice and well to sign up a reseller and try and consume the first deal, but it's far more interesting for us to consume the second and the third deal, and that's what's now coming through.

8:53 Already talked about the the the two deals that came through later on in in q four. Both of those are initial entries into two net new federal agencies for us. What does that mean? It means that we have immediate upsell opportunity as they migrate away from competitive platform onto MyID. We fully expect incremental license orders. But there's also a second part to that, which is very much the land and expand. And, typically, those agencies don't just have a single instance of software like MyID, but they have multiple instances of that software. So, clearly, the the strategy that we will be following is to expand into that client base and try and secure more net new business going forward. Final point on the slide is cash. Cash still remains strong. Nitol will also clarify that as of today, cash is actually significantly higher than the 7.8 we've reported as part of the the period on the review.

9:58 So where where do we position as as a software play? You know, we're part of the wider identity and access management market. And within that market, we're very much focused on the authentication segment. And when we talk about authentication, we refer to our pyramid as you see on the screen. Bottom of the pyramid, passwords, not secure. Top of the pyramid, PKI, that's the area where we played. Now clearly, lot of companies are still using passwords, and passwords are frequently the reason why one sees data breaches. Colonial Pipeline is is a great example in the last six to eight months where the CEO for Colonial Pipeline was holding front of the the senate in The US and was asked to explain what happened. And the response was, well, yeah, it was a it was a password, but it was a complicated password. Well, the challenge there is it was still a password. Password's are Ease easily breached. So we play on the top end on the PKI side. We build up our credibility there over the last twenty years. We've probably got one of the largest PKI knowledge and experience pools globally, and we build up a phenomenal client base.

11:06 When you look at the client base, we have you think, hang on. This is a small company in a lot of work, but with a a very impressive client base who use anything from thousands to tens of thousands to hundreds of thousands to millions of licenses. So what does that mean? We have credibility in that in that space. However, what's also become apparent in the last couple of years is that a PKI is a niche market, and this this pyramid is is a really good reflection of relative market size. So what have we done over the last two years? We said, hey. We wanna use our credibility in the space, our knowledge in the space, our technical prowess in that space to try and come down the pyramid and actually eat into that midsection of the the pyramid. So April March actually, March, April last year, we launched

11:54 our latest release that included PKI as well as Fido. Alan will talk a little bit later about the impact of Fido and why that now has become very important for us. And then later on, as I talk about m and a, we'll highlight why we are interested in coming down that pyramid further and take a larger position. So overall, we're in in a really interesting market. Clearly, in the current geopolitical climate, cybersecurity is pretty, high up on the agenda. We see a good level of interest. We see really good pipeline. So on that note, I'll pass on to Nitil who will do his finance review. Thank you, Klas. Okay. So just reiterating what Klas has said. You know, we're moving up from phase one into phase two. Phase one was all about building good strong foundations, and we'll talk about how that's been reflected in the income statement and the financial position.

12:49 But phase two is all about growth, revenue growth, growth, revenue growth, and how do we go about doing that. And focus is obviously organic and inorganic. And organic is the continuing development of our product, making sure it's best in class, and we truly believe it is best in class. And then enhancing our sales and method sales and marketing methodologies and then going to market with our movement down the pyramid into FIDO, which, again, Alan will describe further in detail in the deck. So coming back to, the income statement for the 03/31/2022, As Klaus said, disappointing on the revenue. But what it does show is that, one, we have a very simple, income statement. We don't have adjusted EBITDA, adjusted EBIT, or exceptionals.

13:36 We take the expense on our development into the income statement. We reflect everything accurately onto the statements, and we don't do, as I said, any exceptionals. The one thing to note is that we have a high operating OpEx, and that's mainly reflecting the fact that most of our costs are people costs. And, and expectation of that is how does inflation affect it is it impacting us going forward? You know, it is impacting us, and it would be remiss of us not to acknowledge that. But what we've done is we've addressed it in two ways as best we can within the limitations of cash flows and profitability. And that is that we've, given an element of pay rises to our staff this year for f y going into f y twenty three of circa three to 4%, And then we've given a discretionary bonus to address the other elements of inflation ex incurrence in United Kingdom and United States of about three to 4%. So we can't address all of the inflation that people are suffering, but we've addressed as best we can. And that's reflected in the churn as well. The churn is low in this in this company, and that's a good sign. We engage with our employees quite heavily.

14:48 When I joined on the April 19, two weeks later, we did a very impressive three day, company kickoff where we had all our American friends flown over. So we had three days of good session and good attendance, especially in two years after COVID. So what does that mean? That means that effectively, the company is controlling costs as best it can. It's passing elements of inflationary pressure that is in it's incurring onto our clients. Again, we'll explain later in the deck of how we're doing that. And the other thing I'd like to note is that taxation. We've got a credit in here, and that reflects the favorable r and d tax credit scheme in United Kingdom. All our developers are in United Kingdom. Therefore, we are we can if we're innovating, which is what we're doing, on our product, then we can claim, tax credits either added additionally into our losses going forward or as a cash repayment, and we've elected to do a cash repayment.

15:44 On the moving on. So what we wanted to show you on this revenue analysis, as we've mentioned, we do have a dip in this year, but a lot of our revenues come out of The United States, of The Americas, and that will we believe will continue. But the other thing that we wanna focus on is recurring revenues and repeat repeatable revenues. We call support and maintenance recurring revenues and professional services as repeatable, and that's growing. And the reason we're focusing on that, and we will also focus on license income, is that it gives us the stability to say that recurring repeatable revenue now represents a certain percentage of our revenues for for 60% this year. We're looking to increase that. So it covers a huge element of our operating OpEx, and we're looking to cover 95% of that going into f y twenty two, f y twenty three, and f y twenty four. That's quite an important metric for us because it gives us that stability to then focus heavily on on license growth, whether it be perpetual and if where we can, annual recurring long term contracts or SaaS models because that is highly accretive to us. And as it feeds into the income statement, it moves straight down to the bottom line.

16:57 So, again, we wanted to show you where our revenue comes from on support and maintenance and why we believe it's so sticky. As Cluster said, it's 98% repeatable and recurring, and therefore, this churn is very low. And the reason why is that if you look at it from a from a sector point, US federal, aerospace and defense, UK government, European government, and national IT schemes make a large chunk of us as support and maintenance. And that continues to be sticky, and we can pass on elements of inflation increases between 4% to our clients who won't, batten eyelid against that. And that helps us mitigate the inflationary pressures we're facing on payroll costs. This is important for us because in this meth method methodology and application, we're using the ability to, use the stickiness of our revenues to help us increase our revenue streams in this area.

17:57 And then the reflection on the financial position. Class has done a really good job with the team in the last four years of, make of in cleaning up the balance sheet, removing the debt, and the prudence that Andy has been operating for the last twenty one years reflects in this balance sheet. You know, we don't capitalize our r and d. Therefore, you don't have a huge intangible. Our noncurrent assets are mainly to do with IFRS 16, which is leasing. And if that's a low number, that shows you that we've got low lease commitments going forward, and we will look to reduce that further. Our trade in, the receivables were it's 4,600,000 as at March 31. As of May 31, we received $3,400,000 from one of our bigger clients across the pond. And therefore, we've got in excess of £10,000,000 in cash.

18:45 And as Clar said, we removed our debt last year. We don't have any debt on the balance sheet, and we have a very strong deferred income going into f y twenty three. So what does this all mean? It may help us for our third prong strategy, which is inorganic growth. We have a very good cash balance. And it means that we don't have a, we have a strong unleveraged balance sheet. So we understand that our current share price is low. So our strategy at the moment is to look at the right acquisition, and class will come to that. We'll use our cash flows, but we will be prudent about how we use our cash and how we work make sure that we got sufficient working capital to maintain our trading capability for the next six to seven months. And then we will look at a debt facility.

19:30 We have a draft terms term sheet with clients bank for 6,000,000 revolver, and we will enact that as and when we need to into it going into the acquisition mode. So what we want to say is that, you know, as Clas has mentioned, it's phase two. It's all about growth. It's how we execute online growth both internally through product innovation, through sales and and enhanced sales and and marketing methodologies, and also on that m and a strategy. And I'll pass you over to Klas again. Sorry. It was a bit bit too quick. So in this section, I'll do a quick update on strategy before I hand over to Alan to talk about product market and how we're positioning and responding to market movements that we think are critical for us going forward.

20:20 So phase one for us has been very much about, you know, the turnaround, the repositioning, the re restructuring, which we've completed, EMT referring to the executive management team, coming on board is is, again, key member, and he's bringing valuable m and a experience. At the same time, we've also developed over the last two years, the OMT. OMT is the operational management team. So it's in effect, it's the layer sitting below us. Why is that important? Because I know from experience when you start doing m and a, it can become very disruptive for your day to day business, particularly in smaller companies like we are. So we've developed the ONT team. They're really running pretty much independently. They have clear authority levels. They operate within the bands that they can operate in. They appoint their own their own chair. And as and when they need decisions, they float up to EMT.

21:14 They ask for approval. We either approve or reject or we enter into discussion, and then they move on. But from a day to day perspective, OMT is very much capable of running the day to day business. This has been particularly useful over the last six, seven months where we've had a number of m and a dialogues where, you know, we may be out for days on end, and our business is just carrying on. So that's really good. Talk about the balance sheet clean. We moved 400 k of interest for the the loan the loan notes. We're increasing that addressable market, which Alan will will talk about, and we continue to invest in our go to market model by using the technology partners as well as the channels across US, Asia, EMEA, and now also Latin America. So phase two, as as Nitol has really highlighted and you said in the introduction, it's all about growth now. It's about business expansions, two legs, the organic side, the inorganic side.

22:14 And finally, you know, what we have proven over the last last couple of years, we've been very focused on the execution side. You know, when I joined this business, you know, we were pretty close to running out of cash. We've managed through a difficult period and then been reestablishing the business. I do believe that we've got the strong product at the moment. It's very well recognized in in in the market, not just by customers, but also by the channel community we're dealing with, and we're in a really good space. So let me pass on to Alan who will take it a bit further with regards to what do we do as a product and how we position. Alan? Okay. Thanks, Claus. So reminder of what MyID does today. So people buy our product to protect themselves against data breach. They do that by moving away from passwords at the bottom of that security pyramid all the way up to the top with the highest assurance credentials. So today, that's PKI and that's FIDO.

23:12 If you're a small organization, you can probably deploy those credentials with some manual processes and a spreadsheet. If you're a larger organization or you need to prove that you're complying with a particular security policy, you can't do that. You need a product to help you do that. That consists of registering the people. So that might be just taking data from an existing system For the very high assurance schemes, it could be capturing fingerprints, facial biometrics, proof of ID document, etcetera. It's then issuing and managing the life cycle of those credentials. So there's lots of key management. There's lots of integration with systems. It's working with a range of smart cards, USB tokens, mobile devices, etcetera. And depending on the actual credential you're using, if it's a FIDO credential, you also need to be involved at the point of use as an authentication server. Is this credential valid while you use it? And that's really what MyID does. It helps you deploy those high assurance credentials and use them in organizations that need to do that at scale, tens, hundreds of thousands of users, and who need to comply with specific policies and prove they're compliant with those policies.

24:22 Looking at how we take the product to market, so we have a platform, MyID, which we wrap up into three different product variants focused on different markets. So the darkest one on there, MyIDPIV, that's very much focused on US federal government and associated industries, I. People who do business with US government, so aerospace and defense contractors, for example. Big driver in INTERCEDE's revenues was back in 2006 when FIPS two zero one came out. So this was a US regulation published by NIST that says every federal government employee needs to have an identity. It needs to be high assurance. It needs to be PKI on a smart card, and it needs to be issued to a certain business process.

25:07 That regulation fits to a one, also has some subregulations which cover management of information outside of government systems. So that's s p eight hundred one seven one. That's all about data that's government data, but exists in contractor systems. So people like Lockheed Martin, Boeing, Booz Allen, Hamilton, people who do business with government, And that really covers that 72% of our customer base. So that was very much being driven by the regulation states. You must have high assurance credentials, and you must have you must management. So that is what I'd call a specific regulation. It calls out the technology you must use to provide that strong authentication. So that MyIDPIV product, and PIV stands for personal identity verification.

25:53 It's just a subtitle of the FIPS two zero one standard to make it more understandable. So that particular regulation applies to those customers. That's all about compliance. Comply with the standards when I get audited, prove I'm complying with those standards. So that's the sell there. The second product variant is MyID Enterprise. That covers what I call more generic legislation. So things such as HIPAA in health care, critical national infrastructure, GDPR, I'm sure we're all familiar with protection of PII identifiable information. That those regulations talk about the fact that you must look at your risks, you must mitigate against those risks, and you must follow best practice, but they don't call out a specific technology.

26:39 So those customers won't be compliant if they're choosing passwords because that's clearly not best practice. But they could choose one time password devices, and they could choose FIDO. They could choose PKI. So that product is is much more open, much more flexible, very generic. You can configure it and customize it in many ways to meet customers' needs. It's not as prescriptive as the PIV product, which is has baked in compliance policies within it. So that's our our open platform that we sell to a number of customers. The MyID professional product is aimed at smaller customers, so around the 50 I'm sorry, 500 to 2,000 volume. Those smaller customers typically don't have large IT departments, and they don't have the time to look at what's the best way of integrating a solution. They also tend to have simpler environments, fewer systems to integrate.

27:32 So a product like MyD enterprise, although it's highly flexible, can be challenging to those organizations because they've got lots of decisions to make about how to use it and how to configure it. MyD professional takes that problem away by having a simplified, cut down one way of working out the box. This is the way you issue credentials. This is the way you update them. If that meets your needs, then that's a very simple and quick product to deploy. You can literally within a day be up and issuing credentials. If you want the configurability and the flexibility to drive it via APIs, absolutely, we can do that, but that's the enterprise product. We also sell that professional solution on a subscription basis because that tends to meet that market's needs better. So that's that's how we take MyD to market today.

28:19 A little bit more information on the features and functions provided by MyID, and then I'll take on the next slide into where we're taking the product for the futures. So the heart of the system is the piece in the middle. That's the issuance and management of those credentials. So that could be a smart card. It could be a USB token, something like a YubiKey. It could be on a mobile phone. It could be a virtual smart card. It could be to a mobile device, something like Microsoft Intune managed or VMware AirWatch managed. So at the top of the slide, we have all the systems we integrate with. So multiple PKI, certificate authority providers, people like PrimeKey, people like Microsoft, INTERCEDE, Digicert, for example. The MDM providers, people like Microsoft and VMware AirWatch, physical access systems. So there's a lot of integration MyID provides into joining all those systems together, which makes it a real barrier to entry for new people trying to get into this space.

29:18 The bottom of the slide, we have the people using the system. So we have operators. These issue credentials to people. They provide help desk facilities if they'll lose them or forget them. And there's a huge amount of self-service in the system. So how can I manage my own credentials, collect updates to them, report them stolen, collect them, either at a kiosk interface, my own desktop, or a mobile? So that's been the heart of myD for a long time managing, deploying those credentials. Over on the left hand side, for some of the higher assurance government programs we work on, we can't just issue a credential to somebody who claims they are somebody. We need to prove that. So for those environments, we can enroll fingerprints, facial ID, proof of identification, for example, driving licenses, passports, etcetera, information into the system.

30:07 We can then match that against background checking systems. So one too many fingerprint checks, has this person enrolled fraudulently as somebody else previously, and background checking systems such as the FBI, which do does this person have a footprint on society? You claim to have this address. Does somebody with that name live at that address? Are you on a no fly list? Are you on a terrorist watch list? So that's for the very high assurance programs we can provide those capabilities. Over on the right, this is where we're starting to be involved as an authentication server. So if we issue a PKI credential to a USB token, you can just log on to Windows with that. It understands it out the box. If we're moving towards more modern authentication mechanisms such as FIDO, there's an extra component there which is an authentication server. So its job

30:55 is to decide is this authentication valid at the point of use. And MyID provides that capability. So if somebody's logging on to a cloud resource such as Office three six five, for example, then that can talk to MyID to say, is this authentication valid? We can validate that with a person's FIDO token and hand the result back to that system.

31:16 That starts to change the nature of where MyID can play. So some of the systems that do that piece today, the likes of Ping, ForgeRock, Opta, for example, tend to do that with lower or medium assurance credentials, but don't tend to do that with a higher assurance credentials such as PKI or Fido bound to a person's identity. So we can provide that. We can add that value to those systems.

31:43 K. So moving on to drivers for change. I'm not quite sure how much you can see of my wall behind me, but if you can see any of it, those are cycling pictures from the Tour de France, which I love watching. Some of my friends think cycling is very boring because nothing happens for a very long time. And then a key event happens and the race kicks off. Everything suddenly goes.

32:05 That's very much like INTERCEDE's business in credential management. Back in 2006, FIPS two zero one came out that said every federal government employee and contractors federal government need to have a digital identity managed to these technology standards and business process. And that had a huge impact on our business. We've been very successful in that market. That's why 72% of our revenue today.

32:29 But that's changing. FIPS two zero one dash three was actually published and ratified end of January this year. Customers have twelve months to start complying with that. That had a very major change in that. It started for the first time to talk about you don't have to just use PKI. It didn't specify only PKI. It called out FIDO as what was called a phishing resistant credential, so a high assurance credential.

32:56 And the whole model behind FIPS two zero one dash three is not just you have to use the absolute highest assurance credential you can for everything. It says you need to understand the level of risk and use an appropriate level of security for that level of risk. But unlike some of the more generic legislation, it does call out the characteristics of those authenticators, those security credentials for the different types of risks. And it calls out PKI, and it calls out FIDO at the highest standard.

33:26 That's very big for our market because our customers don't choose a technology unless it's compliant with the standards. They won't go near it. It could be the absolute best technology in the world. And unless it ticks the compliance box, they won't touch it. So that now is starting to see PKI and FIDO is compliant. The second big change in this area is the OMB, Office of Management and Budget publication. So NIST who published FIPS two zero one set the regulations.

33:53 Office of managing budget, these are the people who are part of the executive office of the president. They actually push the policies out to say what you must do. So when you see the photo of Biden sat at the desk signing an executive order, if it's a cybersecurity order, these are the people who push it out. And the most recent one here was on zero trust, and that plays with the change to the regulation. So what's zero trust? Today, if you log on to the system,

34:21 that's generally enough. I log on to the network, and because I'm securely logged on to the network, I can access applications. What they're starting to say is that, no. We can't trust that anymore. Just because somebody's logged on to the network doesn't mean they should have access to the applications. We need to revalidate them at the point of that application access.

34:41 It's the equivalent in the physical world of just because you've walked in the building doesn't mean you should be able to get into every room in the building. This is bringing that into the cyber world. And that zero trust is very hard to do with PKI only. PKI works really well for some use cases. Windows log on, sign in emails is very good for that. It doesn't work so well in the SaaS world where people are providing the software services, things like Salesforce, Office three six five, because they tend to use more modern protocols. They're provided by the service provider, and you

35:12 can't PKI enable them. But FIDO does work in those environments because Fido is kind of baked into the browsers, and it tends to understand that technology. So those we see as the perfect storm of driving demand here. We've got the regulation changing saying you can use PKI and you still must use PKI, But for the remainder of your population or moving down the supply chain, you can use Spyder. As long as it's issued and managed in a secure way, it's as secure as PKI. And then we've got the OMB publication saying you must move to a zero trust architecture.

35:46 So those two, I think, are the the time where in cycling metaphor, the race kicks off as it did in 2006. That's happening again now. Evidence for that, Klaus mentioned I've been working on some supporting our partners in some very large US federal government bids at the moment. Don't worry, Klaus. I won't name them because you're starting to get nervous. I know I'm not allowed. I'd love to. There's probably three very large request for proposal I'm supporting partners on at the moment. Every one of those calls out PKI and FIDO. So it starts to ask about your capabilities around FIPS two zero one dash three and FIDO and in the demonstrations we were doing Tuesday and Thursday of this week to some of those bids. They want to see this in action. So I think we're in a very, very strong position in that case.

36:36 I'll mention this too, actually. I saw a question pop up in the chat on it because this is quite interesting. So this this is a cybersecurity legislation in the EU. This came out a few years ago, and I asked one in effect. That was very much focused on critical national infrastructure. At the time, it was quite narrow. So it defined critical national infrastructures as what you'd expect in terms of energy companies, and it also wasn't very prescriptive. It was very much you need to understand your risks and mitigate against them, but didn't stay particular technology types. NIST two, which is now being ratified and passed into law as legislation and over the next six to twelve months will start to appear in country regulations, so things people need to comply with. It's got a couple of key changes in there.

37:25 Three key changes, in fact. The first one is that it broadens the scope. So if you're a food supplier, you are now counted as critical national infrastructure. So from a very small range of companies, it now starts to address probably 50%

37:39 of the organizations in the EU. The second one is that it pushes security down the supply chain. So, again, broadens the scope of it. And the third and important one is it specifically calls out strong authentication. So like The US regulation, FIPS two zero one, that said you have to use strong authentication, NIST two specifically calls out strong authentication. So is that going to be as big a driver for our business as fits to what was in The US? Time will tell. It depends on the on the specific rules as it get passed into country like regulation. But what we've lacked in Europe to drive our business is regulation stating you must use strong authentication. That's coming, and that's coming with NIST two. So the product with PKI and with FIDO, we talked about that moving down the pyramid strategy, addressing a wider market.

38:31 The product we've built there, we can sell into our existing types of customer with very strong evidence that they are now asking for that in the RFPs and the tenders that we're working on. We're also starting to see a second drive, which is people much lower down the pyramid in terms of organization size and level of security. I'm starting to see more and more press. They they all understand now that passwords aren't good enough. The CEO of Colonial Pipeline certainly understands that now, but many other organizations do too. There's a lot of press that one time passwords via SMS. So you get a message on your phone with a one time code and you type that in. Or also what's known as subject to phishing. So they can be stolen. They can be reused. So there's pressure for people to move up that pyramid as well. Some of those organizations won't move all the way to PKI because it is complex to deploy, but they might move to FIDO because it's easy to deploy.

39:25 So we believe what we're building into the product, yes, we can address our existing customer base with and types of customers and sell more to them. But we also believe there's an opportunity to start moving into an entirely new type of customer for INTERCEDE. Okay? And that hopefully should neatly lead on to where we're heading with the company. So if if we take Alan's Alan's picture of, you know, us coming down the pyramid, but organizations having to move up because they have to move away from from passwords, then, again, we end up in that middle part of the pyramid that say, hey. INTERCEDE, how are you gonna address that? Well, in fact, there's only three opportunities we we can get there. We build it, we partner it, or we buy it. And based on the assessments we've done, we said we're gonna build FIDO because it's very close to our heart.

40:14 It's still cryptographic. We understand that space very, very well. But then if we wanna move down that pyramid further, we strongly believe that m and a is the better approach for us. Hence, we appointed head of corporate development. So if we look at what we're trying to achieve and and how do we justify this, you know, today, we have one product, MyID with its three versions as as Alan explained. What is our objective here? We wanna create a portfolio of software products that fit around alongside MyID, but can also be fully integrated in in the same way that we're currently offering the single pane of glass, the single interface for clients to manage PKI as well as FIDO credentials.

41:00 Whatever we're gonna bolt on from a technology perspective, our core objective is that we need to be capable of of slotting that in. So that very much fits on the left hand side. So target number one is we wanna move down that pyramid. We've identified 200 plus companies as as I said in my introduction. We are talking to a number of those, in in various regions. And our key objective is is to calm down that pyramid by getting hold of incremental IP. We've had quite a few questions in in the last couple of days about, you know so, you know, what's the size? What's the shape? Clearly, we can't disclose too much out in the market, but what we can say is we're looking for companies that have got interesting IP, I e, interesting technology, have got existing revenue, have got existing clients, so we know it's proven out now.

41:53 So once we've come down that pyramid, we also said, okay. We need to start looking at, you know, other adjacent pyramids that we can start taking advantage of. And then you get into the zero trust kind of environment, you know, Alan's example of moving down the corridor. I'm allowed access in Office 1, but not in Meeting Room 3, but I can again get access to the canteen. In the same way, that's the analogy into the various applications. So this this continuous authorization and and authentication, and that's in the tomorrow section here. Access management, continuous authorizations, continuous authentication, single sign on. It's an interesting space. Taking more of a medium term view on it and say, hey. INTERCEDE, today, we're very much playing on the the enterprise infrastructure side. You know, what can you do on the application layer? And there are there are interesting areas out there. We're just calling out PKI signing solutions as an example, but, indeed, there are other other application areas we may well be looking into.

42:52 So we're very clear and stringent on what we're looking at. We're very clear and stringent up into where our priorities are and indeed how we're gonna take those forward when we find the right opportunity. So that leads me quite nicely onto the last two slides here, summary and outlook. Some of this has already been addressed, so I won't spend too much time on it. But, yeah, clearly, we missed some of the revenue. We were 4% down on constant currency. But we've entered the current fiscal year with really good momentum, and we're pursuing some good opportunities. We have a very good pipeline at the moment. The pipeline's developing not just from the opportunities we already have in the pipeline, but also through adding net new opportunities.

43:42 All through the period, we've been profitable. Actually, we've been profitable for the last four years and debt free and with cash. Cash currently sitting just above 10,000,000. We had really strong client growth. We wanna keep that going. Turnaround, we talked about. KPI wise, you know, we're very, very firm on KPIs, and, you know, we've now have a four year period of of KPIs we we can look back at. And whether that's, you know, the value of the pipeline, the weighted value of the pipeline, the number of values in the pipeline versus attrition versus churn versus DSO days, each business function in INTERCEDE has got its own KPIs. We review those on a month by month basis. And if something is off track, then we'll make sure we'll get it back on track.

44:32 Final point here is, you know, the recurring revenue growth that's been really, really strong, 10% year on year. Again, into the current year, we fully expect that to grow even further. And, you know, we take our recurring revenue and our repeatable revenue. We cover pretty much cover our OpEx as Nitol has really outlined. I talked about previous slide about organic and inorganic. We wanna do both, and we really wanna come down that pyramid. And then once we've done that, look at adjacent pyramids going forward. So where does it leave us from an output perspective? You know, for us, second phase, phase two, we're very clear on what we want to achieve. Our objectives are very, very clear, and we know how we want to get there. So each objective for each objective, we have a clear strategy or a number of strategies. So we are clear on how we're gonna deliver those.

45:25 Reference to pipeline. Good news is rest of world, which is our business outside of North America, is finally picking up momentum again, which is good, not just momentum on the existing opportunities we already have in the pipeline, but we're also seeing actively net new opportunities being added. Net new opportunities, interesting enough, traditionally, we've seen very little uptake for our solution in The UK. But, actually, in the last three to six months, we've seen more opportunities than we've seen in the last six years, and that's that's interesting in itself. We are seeing different primes, different system integrators approaching us who specifically want to bid MyID in a number of opportunities that are present currently in The UK. They're all government related, but, again, it's a market we we see we understand well. We have the credibility, and it's probably one of the key reasons why they're coming towards us. North America talked about much lower impact from COVID, some delay on the larger programs because, again, there's been a lot of homeworking. But as a country and as a business for us, North America has contracted pretty, pretty normal.

46:34 Innovation, r and d, we talked about, you know, we're pretty close to investing £3,000,000 year on year into the product. And if we look at the product today versus the product three, four years ago, I strongly believe we have the best product in town. It's also, I think, a good indicator as to, you know, what's happening in the market. Three, four years ago, we actively had to pursue the larger opportunities in as far as trying to get the foot in the door. Today, because we've had a number of significant wins over the last last couple of years, we professionalized as an organization. We've heavily invested in the product. The The product product looks good. The product is slick. It's highly performing. It's highly scalable. It's highly secure as I outlined. We now see the primes coming towards us.

47:19 So when we're bidding for the large tenders, we typically have multiple primes bidding MyID, which clearly from a client perspective is a really good sign when they see the same product being positioned by different system integrators of different primes. So whilst we've been trying to build momentum within INTERCEDE, which is clearly key, more importantly, as Ellen client, we now also see momentum into the market. Momentum into the market because the standards and the directives are there and then basically drives the uptake of our product going forward in our existing client base, but also in net new opportunities. And the fact that tenders since January are now being issued to mandate PKI, FIDO, etcetera, you know, for us, it's a real good position because we're the leading product in that space. Yes. We were early last year in March because we were ahead of the standard being released. On the other hand, it's given us a year of experience where we demoed, we demonstrated, we've had proof of concepts already. So when somebody wants to see our capability in this space, we're ready. We're ready today.

48:25 Leaving to the final point, you know, we remain confident in our ability to deliver double digit growth, double digit in terms of organic growth, but also in terms of inorganic growth. And as and when we have more information that we can release to the market, then we definitely won't shy in won't be shy in coming forward. And that concludes the presentation. There's a few appendices here, but unless there are specific questions, we won't we won't dive into that. Now I think Jake Yes. That's yeah. That's great. And Nitto and Alan as well, 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. But just while the team take a few moments to review those questions 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.

49:19 Class, Alan, as you can see, we have received a number of questions throughout today's presentation, and thank you to all the investors for submitting their questions. If I could please just hand back to you to run through that q and a tab and where it's appropriate to do so, if you could please just read out the questions and give your response, that'd be great. Thank you. Okay. Well, let me take the lead on this, then at least I know where the questions are going. And then I'm hopeful that both Nital and Alan have got the right kind of answers. So there's a question from Alastair. Question directed at Nital. First, congratulations. How does your accounting work for deals sold through partners? Do you book the whole fee as revenue and then account for the commission under admin expense or something else? Yes. I can answer that. Can you hear me? So thank you very much.

50:05 I'm glad to be on board. We abide by IFRS 15, recognition of revenue. So it depends on what the revenue stream is. If it's a perpetual license, it's on the day we pass the license obligations and responsibilities to the client. And the it doesn't matter if it's a partner or the client. It has to meet the IFRS IFRS 15 obligation. And then if it's a supported maintenance, it's if it's a twelve month contract, we'll recognize it on a monthly, revenue stream if it's even though it's paid on an annual basis. Regarding commission, that is on a invoice based system where recognition where we invoice, to the client or the partner. And as the invoice is raised, then the commission is paid via payroll in a month in arrears.

50:58 K. Thank you for that. Until we have another question from Alister. How big do you think is the NIST two opportunity? Do you need to do anything different to exploit it? Most obviously, do you need an office in the EU? Alan Yep. Thoughts about this one? Yep. So currently, NIST two is legislation. EU has passed it, the cybersecurity legislation. And then within twelve months, it will start to appear in specific countries as regulation. That's when we'll get more knowledge about the size of it and the scope of it and where we can fit. In terms of do we need an office in the EU to exploit it? I don't think we do. We've got a strong partnership network in Europe already. They speak the right languages. They're in the right territories. They've got local presence. What we are doing is looking at generating some marketing around this and some thought leadership around this so we can start to look at this too. So I can't answer the how big question, but I can say it's significant because there hasn't been legislation like FIX two zero one in Europe, and this is the closest I've seen in twenty years working in the space. So I I expect it to be significant.

52:05 We'll know more when it turns into regulation, and it's absolutely something I think we can explore through our growing partner network. Thank you, Arthur. We have the next question from Simon. How should we look at the operational gearing of the business going forward with costs covered by recurring revenue? Nitol, one for you. Thanks. Hi, Simon. How do you how do you look at operational gearing? Well, it's good news that we've got an element. It's not all of it is gonna be covered in f y twenty three by S and M and PS. We're gonna get about 95%. But the way you should look at it is that any license deals we do going forward should be highly, highly accretive to the bottom line. K. Thank you. Another question from Alacer. How are sales from IDP Professional progressing? How many customers?

52:52 Some raw feel for revenues. Well, let let me take this one. We don't split out revenue for the individual product lines. You know, we have one product group. What I can say, Alastair, is we see good uptake on Mighty Professional. It's between 510% of our installed base. Revenue wise, it's less because these deals are smaller. You know, you're into, at the very low end, probably 8 to $10,000, and then depending on how many licenses on a subscription basis they're buying. But let me be clear. It is subscription based revenue. So we've just installed one here in The UK with a UK based software company. Within three days, it's installed. It's up and running. They're issuing certificates. We have other instances in The US where clients have actually installed it themselves. So we we know this product fits in the market.

53:40 There's actually been a secondary benefit by introducing MyID Professional into the market. This was typically a market we wouldn't even be engaged in. We wouldn't be involved in any of those opportunities floating around in the the 500 to 2,000 licenses. But because we are positioning in that market, we are being engaged. We are then in a position to qualify the opportunity. If the client then comes out with, hey. Yeah. But I don't want a Microsoft CA. I want a DG CERT CA. We say, yep. Absolutely. We can do that. But in that case, you know, you need to move on to Mighty Enterprise. So, actually, it's it's added the additional benefit of giving us access to net new opportunities, which in in value terms has actually been more valuable than the absolute revenue we'll see from the product coming through. So, hopefully, that's giving you an answer, Alastair.

54:37 We have a question from SAT. Can MayaD be used for addressing, I think what you're trying to say, can can MyID be used for addressing the open banking market, Alan? Yep. So this is something we looked at. So it's looking at strong customer authentication. And initially, you look at anything, well, my Adidas authentication isn't a perfect fit. The reality is it's a very different market, different technologies, different players, different go to market, different models of consuming it. And we view that we're better off focusing on our strengths. We think there's some significant regulatory drivers that means the pickup for our technology and our existing types of customers is there. Fundamentally, we're employee ID.

55:23 SCA of the open banking is very much b to b to c model. So it's quite different. So we decided it's not something we want to focus on at this moment. We don't wanna get distracted. We wanna focus on where we see the best chance of growth is in revenue. Having said that, some of the m and a activity may well change that position, but I can't really talk any further than that. So the answer is not yet. Great. Thank you. Another question from Alastair. You've set out quite a bullish outlook, but I find that hard to reconcile with the FinCap downgrades, which we base future years to f y twenty two. What should investors reconcile the apparent tension? Nitin, you're gonna Thanks, Alex. Hi, Klaus.

56:08 I think if you look at the FinCap, their target price is $12.05, and we're currently at 49. So they're quite bullish in the way we're or or what their expectations are. I think what they are saying, they looked at the the dip in the revenues to 9.9 and then moving obviously to eight 10.9 and then 12 into f y twenty three and f y twenty four. What they are looking at is there's there's an element of investment that we have to do, and we're expensing that into the income statement. And you can see that from their numbers. What we're saying here is that we see an uptick in our marketplace, and we see growth in our market. Now as Klaus said, our clients are not are not adapting the old methodology of taking all the licenses in one go. They're doing it in an incremental in an incremental way because I think they're just moving their existing supplier out while we come in as a new supplier. We see that continuing, hence why we're being slightly cautious in what we're telling FinCap on how we see revenue recognition compared to winning a contract. I hope that answers your question.

57:20 Thank you. Got a question from Douglas. What sort of size do you think your acquisitions may be, and how would they be financed if not just cash? I'm afraid, Douglas, we're not gonna announce in the public domain what the size of of the acquisitions we're looking at. But what I can tell you is we got a rigorous process of what we're looking into, and and there are a number of of of of financial metrics there. But more importantly, it needs to be technology that we think has got legs going forward, must be proven in the market, and something that we can integrate to. Financing, I think, Nintel already talked a little bit about this. We do have cash on the balance sheet. We do have access to a revolve revolving facility with clients' old bank.

58:13 And if we have to raise more capital in the market, then clearly that's always an option. The current share price isn't isn't great for that, but, you know, we're confident over time share price will recover, and that will probably give us more options going forward. I just need to scroll down. Simon, usually, others follow what the US government does, especially in the defense sector. Why has this not been the case with MyID? Well, Alan. I think it is the case with MyID. So there's there's two points here. One is that there are some defense customers in countries that we absolutely cannot name, but they are there, and they are following those US government standards. The other piece is that those defense customers tend to move incredibly slowly. They they move really, really slowly. But where we are seeing tenders for systems and replacement systems and renewals of systems coming up, We are winning some of those, and they are looking at following those NIST and Fitch two zero one standards.

59:15 K. Thank you. Got a question from Eddie. With a strong recurring revenue base, why shouldn't organic growth be significantly higher than 10%? Question number one. It feels like stabilizing the sales function should be the priority ahead of acquisitions. Ittle, you wanna take the first part? Yes. Why is our organic growth not stronger than 10%? I think I've already mentioned this that we are we although we believe we're going to win some hopefully, win some good contracts going forward into f y twenty three and f y twenty four, we're recognizing the way that our clients are operating. And therefore, we're just being slightly cautious on when they're going to enact the full value of that contract, whether it's going to be in in buckets of one, two, three, four, five rather than the full allocation.

1:00:02 Hence why we don't believe at the moment that anything above 10% to 15% is going to be probably deliverable just reflecting what our clients are doing. K. Thank you. So the second part of the question is feels like stabilizing the sales function should be the priority ahead of acquisitions. I'm not quite sure what the background to the question is because it kind of implied there's a problem with the sales function, and I don't think there is a problem with the sales function. If anything, I think we got a really good sales function at the moment. You know, as as indicated, our sales are very much driven through the channel. It's a good way for us to broaden our footprint into the market without having to invest in expensive sales or sales because for a small company with 10 people, you cannot run a global sales approach. But as we've proven with our partners, we can get reach into the market. And from ThinkApp in his company note has also clearly indicated that, you know, as a business, we're capable of running multiple deals through the same partner. Our pipeline also supports that. So the investment, I don't think should be in in the direct sales function. The investment has got to be in creating our reach into the market and indeed extending our our go to market through technology and and a few technology partners. Simon had pretty much the same question, so, hopefully, that's dealt with that. Simon suggesting wouldn't we

1:01:32 be better off hiring a a few super salesman? The challenge with hiring the super salesman is, a, they're very expensive, and, b, one salesperson can only run this many deals, whereas what we're doing through the channel is we're seeing multiple opportunities coming through the same channels. So it's a far more efficient way of getting more reach. Another question from Simon. Why haven't you made small investments funding grants into university cyber departments in order to access what might become available, etcetera. Alan? So we have tried that in the past. In the past, we have been involved with some universities and cyber departments and looked at what they do. The reality was we weren't really getting return on investment, and it was very long cycle.

1:02:19 As as we expand what we do potentially down the m and a, that might become more relevant. So we have tried it in the past. We stopped it because it wasn't returning income in a short enough time frame, but we might review that again. And what we are finding, if you can, on the other flip side, is that we are accessing universities for recruitment, for, young developers for succession planning into the group, and that's been quite successful for the last year. I know we're slightly over time, but there's a few questions left. So let's take the last few questions, and then we'll wrap up. A question from Peter. Who are your main competitors in different market segments? Alan, one for you. Yeah. It very much depends on the country and the end customer. So in The US, at the government scale, we have HID.

1:03:08 We have XTech as probably the primary competitors. If you move lower down the scale to where my ID professional competes, then it tends to be, am I going to use PKI, or am I gonna use a one time password solution? So it's more of a competition on technology than vendor. In Europe, it tends to be people like Nexus and VersaSec, but it really depends on the the market space and the and the combination of the market space and the geography. It's not a simple answer. K. Final question from Simon. Is geopolitical volatility a positive for you? I actually think it is. You know, there is a lot of focus on cyber at the moment. Cyber budgets are not discretionary anymore.

1:03:56 Cybersecurity typically now hits the boardroom, which is good for us. And, you know, what we're seeing in The US, what we're seeing in Continental Europe, what we're seeing in The UK is increased increased interest in cybersecurity solutions. And and, clearly, that's the the market we play in. And and I don't think there is a coincidence that the increase in opportunities we're seeing in The UK is is is not directly related what's what's going on in in in the wider wider environment. So, yes, I do think, Simon, it is a positive for us. So I think that concludes the q and a. Jake, thank you. Nitto, Alan, thank you very much indeed for being so generous of your time there and addressing all of the questions that came in from investors this afternoon. And, of course, if there are any further questions submitted today, we'll make these available to you immediately after the presentation has ended for your review. And ladies and gentlemen, we'll publish those responses where it's appropriate to do so on the investment company platform, and you'll be notified by email when they're ready for your review.

1:04:59 Class, perhaps we're redirecting those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could just ask you for a few closing comments to wrap up with, that'd be great. Thank you, Jake. Yeah. So we're really looking forward to continuing our progress into the the current fiscal year. You know, our offering remains very relevant as witnessed by our current sales, but also by our ongoing pipeline development. Alan has explained how we're now positioning MyID and how we aim to take advantage of of a much enlarged target account market by adding authentication as well as FIDO. Clearly, I have to add that, you know, we have a highly committed and loyal team of colleagues who day after day delivered what I believe is the best code in our part of our our industry. We aim to deliver continued revenue growth. Thank Thank you again for attending.

1:05:46 We look forward to updating you again in October. And please do not forget to provide your feedback. Your feedback is really important because we want to continue to improve on what we present on a half yearly basis to you. So please use your feedback. As long as it's constructive, we happily take it on board. So thank you for attending, and we look forward to seeing you again. Class, that's great. Nitto and Alan as well, thank you very much indeed for taking the time to update investors today. Thank you. Could I 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. This will only take a few moments to complete, but I'm sure will 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. Thank you. Good afternoon.