Intercede Group plc (IGP) Earnings Call Transcript

Good afternoon, ladies and gentlemen, and welcome to the Intercede Group plc investor presentation. [Operator Instructions] Before we begin, as usual, we would like to submit the following poll. And if you give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand you over to the executive management team from Intercede Group plc. Klaas, good afternoon, sir.

Good afternoon, Jake, and indeed good afternoon, everyone. My name is Klaas van der Leest. I'm the CEO for Intercede. At this session, I'm joined by Nitil Patel, who is our CFO; and Allen Storey, who is our Chief Product Officer. I'd like to welcome both existing investors potentially new private investors as well as analysts to this session, which will cover our half 1 results covering the period April through to September. We look forward to providing you an update in the coming 45 minutes. And whilst this presentation is us presenting to you, we very much look forward to your questions, but also your feedback after the session. So without further ado, let's start with the presentation. So if we start with company introduction, we then move on to progress report, financial review. Allen will then give an update on the product road map. We'll do a quick summary, and then we'll open up the floor to Q&A. So for those who are new to us, what does Intercede do? Well, we protect companies against data breach. So how do we do that? We replace weak credentials such as passwords with much stronger authentication. And we do that simply, securely and at scale. What do I mean with simply? We have standard off-the-shelf software, which is easy to implement. We do that securely. Our customer base is very recognizable. They tend to be very high-end government, U.S. federal agencies, defense and aerospace players. And before they put this type of software into production, it will be rigorously tested. So we know our software is extremely secure. And the final point is we can do it at scale. Scale is quite important, particularly for these large agencies and large corporates. So we tackle anything from thousands of licenses to millions of licenses at the very high end. So platform, simple to install, extremely secure, and it will scale. So at the very -- again, at 30,000 feet, how do we see our software and how is our software being perceived? It's very much seen as business-critical software. What do I mean with that? That this is not discretionary kind of spend. Even in financial downturns, economic downturns, this software will not be switched off because in effect, it's protecting the clients' crown jewels. And the second point of the headline banner is we're in an interesting space. The cybersecurity market is very, very active. We hear and read about data breaches and company shutdowns very, very frequently. We can reference JLR, we can reference Marks & Spencer, but they're not the only ones. This is happening on a daily basis. So if we then look at our business, we're a software company. It's scalable. We've proven that out over the last couple of years. Our operating model is very much proven. We've got 3 streams of revenue. We've got a very sticky recurring revenue base, very much based on our support and maintenance, but also now a growing amount of annual recurring revenue based on subs. We have our repeatable revenue, which is our professional services. And finally, we have our license income. We have a very recognizable client base. I always say B2C is a small company based in Lutterworth with a client base to die for. And whilst we can publish some of our client logos on our website, many of the logos we work with, we can't or we're not allowed to publish. What is very, very common in that client base, they are extremely loyal. They tend to be quite happy. Every year, we run our client satisfaction survey. We just completed our survey and our Net Promoter Score this year, I'm pleased to report is 58. Over the last couple of years, that's significantly increased. It's not that long ago. Our NPS Net Promoter Score was hovering in the mid- to low 20s. We've more than doubled it over the last 3 to 4 years and 58 for a B2B software company is regarded as pretty, pretty good. If you're not familiar with Net Promoter Score, it's an absolutely brutal score. You only need to get a few detractors in your client base, and you're very quickly back to 0. So 58 for a B2B software company is pretty, pretty good. Our management team is very established. Young kid on the block is Mr. Patel, who's been 3.5 years with the company. Allen has done just over 25. The rest of the team is pretty established, and I came in, in 2018. Our growth pillars are very clearly defined. We're an organic growth play who will, from time to time, look at inorganic, i.e., M&A, but we're not a buy and build. So very, very clear. We take time when we look at our acquisitions. We've done one acquisition over the last 7 years since I've joined. We're always in the market for more acquisitions, but we will only do so when we feel there is shareholder value to be created. So if we then look at the market, extremely important to us. We're very much recognized as a market leader in the space we're operating in. We believe we have a strong competitive advantage, not just based on our client base, but also on the technology we have, the client base we have and indeed, the people we have behind the organization who are regarded as specialists in the field. For those who followed us for a little while, you would have noticed that we've expanded from a single product company into a multiproduct company. So 4 years ago, we're very much a single product play, playing at the top end of what we referenced is the authentication pyramid. And both through our own development and through M&A, we're now covering the entire side of the authentication pyramid. Allen will talk about the pyramid in a bit more detail. What that has enabled us to do is basically grow our target account market, our TAM, not just from a product perspective, but also we're extending it from a geography perspective. We're opening up new countries through our resellers and distributions, and that's very much driven by our go-to-market model. And again, for those who are new to us, we love regulation. In the U.S., there's an awful lot of regulation. So we play there very, very well. We see now increased regulation coming up within the EU. We see other countries who may not have necessarily the regulation as we know it in the U.S., but they want to follow the regulation or the standards in the U.S. and particularly in AsiaPac, a lot of the governments out there, they look at U.S. regulation. So again, that will give us a few tailwinds. Financially, Nitil will talk very much about the first 6 months. But from a medium- to longer-term perspective, we've shown really good growth in all KPIs. We have a good amount of cash in the bank. We're debt-free. Our balance sheet is incredibly clean. We're extremely profitable. Our attrition remains incredibly low. Our attrition in terms of revenue is significantly below 2%. So I always describe it as the funnel. We want as many clients in the top of the funnel, but we also want to squeeze the bottom of that funnel. So we're not leaking. And we're in a position where we're currently transitioning from perpetual to subscription. We need to do that very, very carefully. In the public markets, there's very little room to switch on a hard pivot. So we're trying to manage that in the coming years to move to a subscription basis, and we're making good progress on that. So if we then look at our strategic growth plans, I've already highlighted that objective #1 is organic growth. We want to drive double-digit organic growth over a prolonged period of time. If you look at our CAGR over the last 4 years, we're very sensibly driving 20% plus growth. How do we do that? We clearly invest in our people. We invest in our products, but we also invest in our partners, and that's very much driven on the pipeline. Our approach to the second leg of our growth strategy, the inorganic side is cautious. We have very strict assessment criteria. I know there are questions in the chat already about M&A. We'll provide a bit more color on that. But we're actively managing a long list. We have a short list. We're talking to potential targets on a weekly basis. Capital structure, again, through our finance team and Nitil, we have a very low-risk attitude. We're managing our working capital very, very carefully. We're generating good cash. We're extremely profitable, and we'll continue to do that going forward. And then final point is, as I already alluded to, our focus is on recurring revenue. We try and get operational efficiencies where we can. We're starting to use AI a little bit in order to get a little bit more efficiency, but that's not to replace our staff. It's very much to enhance the work they do. So our growth strategy and plan is very, very clear, and it's all about execution as we have been focusing on that for the last 7 years. Just a quick update on the markets we operate in, particularly after Trump announced his tariffs. We thought in June, it would be good to provide a quick update on this. Still pleased to report there are no impacts on tariffs for us. We've seen little or no impact on DOGE. There are some conflicting news feeds out there at the moment. I think on Monday, there was a news feed out that DOGE has been disbanded but that the principles were still very much alive. I saw a note last night that allegedly, it's still alive. Conclusion from our side is we see little or no impact from DOGE. So whether it's there or it's not there, I don't think makes any real difference. Yes, we've seen some federal delays, which is why the arrow is pointing downwards. Interesting to note, and this is already one of the questions that I can kind of preanswer now. It wasn't actually the shutdown that caused the delays. During the shutdown, we as Intercede and our partners were all fully funded. So there was no real impact. The impact we did see was the change to the new administration and particularly in the period, July, August, so the summer period, there were recognizable delays and one of the larger programs we actually worked on was faced with no further funding, which is an interesting point when you're talking about one of the largest agencies in the U.S. But it is what it is. That process has fully normalized. You would have seen we issued a second RNS earlier this week showing new deal flow also in the U.S. And we fully expect that we see fewer delays, if not no delays going forward, but that's based on the information we have today. The move from GOTS to COTS, government off-the-shelf to commercially off-the-shelf software, we see as a positive. Again, lots of public domain information on this. The new administration is really focusing on defense and border security. Good news for us is these are very much the areas we operate well in. and we have recognized client base. The purchasing review, potential move more to direct relationship with vendors. What we've seen so far is it's been very much focused on Microsoft and Oracle and Salesforce, whether or not Intercede will be included in this group. We don't know, but I can reassure you we're very much prepared for this. We're visible in all the procurement frameworks in the U.S. So as and when they decide to have a direct relationship, we can and we're ready for it. The last one is an interesting one. There's definitely a lot more focus on the state of the cybersecurity in state and local. I think it's in the press here as of last night that there are certain councils in Central London that have been affected by a cyber attack. There is more spending at state and local. Allen was in the U.S. last week during our client advisory board, but was also recording marketing literature on video with one of our partners, Guide House, who now want to branch out of pure federal, but into state and local and into commercial or enterprise. So market update from the U.S., still very, very strong. Still a lot of our revenue is driven by the U.S. Yes, we've seen some delays, but we believe that's very much normalizing. Then finally, what we call Rest of World, Europe, increased regulation NIS2, DORA. We see that as positive drivers for our business, but we also see some more focus on data sovereignty Data sovereignty has already been an issue in the Middle East, where they don't necessarily want to be on U.S. cloud. We also see that very much coming through within the EU. Why is that of interest to us? Because the software we use or the software we manufacture is typically used on-prem or in hybrid cloud. So it gives the entity or the end client the opportunity to choose where that data is being hosted. Finally, Asia Pac. Asia Pac has been growing very, very nicely for us. Again, in the second RNS we issued this week, we're highlighting a deal in Asia Pac, particularly in Singapore, where we now very much have a growing footprint. Singapore is interesting. Whilst they don't necessarily have their own regulation, they very much follow FIPS 201 from North America, and they want to be compliant and following that standard very, very clearly. So their security requirements are extremely, extremely high, and we fit well into that category. What's happened over the last couple of years is we've been building out partnerships, reseller relationships in that region. And a lot of the partnerships we have, they actually branch out of Singapore. So we're now starting to have initial dialogue around countries like the Philippines, Indonesia, Malaysia and others will follow. And as and when we have more information, we'll provide a broader update on that one. And I think that's the update on this side. So I'm going to go on mute and pass over to Nitil.

Thanks, Klaas. And just to reiterate what Klaas has been saying, the company's clear strategy is to innovate. We'll show you that what we're doing with that, also to diversify with the geodiversified pipeline and to execute on our plans. We have highlighted, assuming that everyone has read the RNS that the revenue was slightly down on a comparative basis at 3.9% in normal terms and then obviously 4.2% against currency -- constant currency. And again, I'll come to later on what the impact the strong pound has had on the dollar as a lot of our revenues, significant amounts of our revenues come out are denominated in U.S. dollar. We continue to invest in our product. It's critical for us. And again, Allen will explain later on the product vision we've got for the next 3 to 5 years. We are expensing most of it. In fact, all of it at this juncture of GBP 2.1 million into the income statement. And we'll continue to do that unless, of course, we've got a separable identifiable product like we had last year for SecureVault, which will then capitalize according to the standards. And then you'll see the correlation of adjusted EBITDA to PBT and why they're quite similar to each other. As we've mentioned, there's a focus on subscription revenue. There's a pivot to it as best we can with a gradual process on how we're doing that. The good news for us is that new products such as SecureVault are only available in subscription pricing. And we're incentivizing our sales team to do more 3-year, 5-year deals, again, to give the group more predictability and more future revenue stability. As we mentioned before, I think everyone knows that when you see the graphs in a minute that professional services were down, and I'll explain why that has occurred. So graphically, just to show you the numbers, if you look at the top left, GBP 8.2 million, how is that split? The good news is that S&M continues to go in the right direction for us. It's a key KPI for us. Why is that? Because it's recurring. It's a very sticky revenue for us. And if it can in the year cover over 90% to 95% of our operating expenses, then anything else that we add on the top line will be very, very accretive to the bottom line. PS has been off, and it's a comparative GBP 2.7 million to GBP 1.4 million, 2 main reasons for that. One, as Klaas has said, there were some delays in June -- in July, August, which had an impact on us for PS revenue for recognition. But also last year, we successfully deployed a big deployment from that large order we had in December '24. And that successful deployment meant a lot of our staff were used to make sure that we were helping the client to get up and running. The good news is they are, but obviously, that doesn't repeat itself, and hence, why you're seeing that the numbers are slightly off. There's a question in the chat about is that a normal run rate. We expect our run rate to pick up in H2 now that the delays are not occurring, and we'll look to get to normalized run rate between GBP 3.5 million, GBP 4 million in the year. Revenue-wise Klaas has said, the United States still represents a large percentage revenues, 80%, but we're seeing movement in the rest of the world. As Klaas has alluded, there's movement in APAC, there's movement in Europe, and we'll continue to focus on developing that geo diversified pipeline for us. As I mentioned, why we're showing adjusted EBITDA to profit before tax is a strong correlation between the 2 because we have limited exceptionals. Our normal exceptionals are amortization, depreciation, right-of-use assets and share-based payments. And then, of course, net cash and equity all going in the right direction. We generated cash from operating activities. We outflowed an element of share award. I'll explain that later. But as Klaas has mentioned, we got good cash generation in the year, and we're forecasting that for the year-end. Income statement, again, a very clean income statement. We'll continue to use this. I think most companies are going to have to adopt this anyway for IFRS 18 when it comes into play. Two things of note for us. Obviously, margins are down. That's a reflection of, a, the product mix at the moment that I just mentioned, but also that if we miss revenue at the top line, the fixed element of our operating expenses does mean that the flex is limited, payroll being the biggest expense in our operating expenses. So it does have a larger impact on profit, which we will expect to pick it up as we're holding our numbers into H2. The one thing of note is that tax expense at the moment is nil and will be nil to forecast to be nil for FY '26. But as you noted in the last bullet point, our losses are going to be utilized. And as of FY '27, we're now forecasting to pay tax going forward. And again, just an illustration of what our exceptionals look like, mainly to do with amortization and depreciation. Just wanted to show you the movements in operating expenses, why they haven't moved so far. Obviously, the 2 reds, the targeted investments, as we've mentioned, the innovation is really critical for us. This is built into the budget. The run rate will replicate itself into H2. I did mention about the FX. We had a net adverse impact with pound strengthening. We don't hedge. We've taken the view that that's too risky for us, especially the size of the finance team. We have the capability of doing forward rates. We will look at that in the future. But at the moment, we tend to convert quickly into sterling because payroll is the biggest expense, which is in sterling, and we tend to keep 3 to 4 months of dollar cash just to meet our U.S. obligations. The greens just to flex on revenue, if there's less revenue, there's less commission, there's less bonus accruals. And I mentioned the contractor PS that we didn't pick up in July, August had an impact, obviously, a positive impact on the other side. Balance sheet, again, a very clean balance sheet. We don't anticipate anything major moving in this in the future. We will probably bring deferred tax assets and deferred tax liabilities into FY '26. Now knowing that we know that the tax losses have been utilized and we can forecast our R&D movements and capital allowance movements. The big movement on the top end is the right-of-use assets. We renewed leases on most of our properties in the United Kingdom and the United States. And the 3 metrics that we focus on other key working capital metrics, which is trade and other receivables, cash and deferred revenue. These we focus on purely because these are good metrics to hold the company to generate cash to be able to do what it wants to do with a clear strategy of investing, not just in its people and products but also doing an M&A play as and when we get the right acquisition into play. Just showing the cash flow. Again, we generated cash compared to last year. So the main movement of note is the cash in financing activities. That's mainly to do with the VCP. I'll explain that in a minute. But as you can see, good cash flow, good generation and no debt in the group. Just showing you the illustration of where the cash moved. Obviously, you have to take the comparative from the 1st of April rather than 30th September '24. So as we mentioned, GBP.165 billion for cash generation, the VCP cash award. So this was the VCP that we announced in October 2022 and had a trigger price of GBP 121 and a full realization price of GBP 133. That did occur when the share option was exercised. And when the Board met, the decision was made at that point in time to then look at the way we could protect dilution and EPS going forward and looking at the cash flows and the cash generation we were going to forecast in the last next 2 to 3 years. And the view was taken that it would be better to award a cash element to that award rather than a share element. A, although we did issue 700,000 shares to the awardee, it was better to give a cash element because we could protect EPS and dilution going forward. At that point, I'm going to pass you over to Allen, who's going to drive the product and vision for you.

Thank you, Nitil. So let's take a look as to where we've come from as a company, where we are today and where we're heading over the next 3 to 5 years. So we started off as a single product company. Those of you who have seen our authentication pyramid. We have very high security at the top, lower security at the bottom. We started off playing in that very high security space, governments, intelligence agencies, aerospace, defense, for example, just working on PKI public key infrastructure. We added FIDO passkeys in there, a standard that comes in from the consumer space, but it's still very high assurance. We then added in via acquisition, a multifactor authentication and password security management solutions. Those have now been completely integrated into the organization. So we take those to market as MyID product family. And that, in effect, covers the first part of the pyramid, the first phase of the pyramid from the top to the bottom. That allows us to move down into the mid-market. It also importantly allows us to provide solutions for customers who are on the journey towards better security and help them on that journey. So important to note, we believe there is still growth in that space. Personal identity is still a good place to be, but we're ambitious. We're looking ahead to the next 3 to 5 years, where can we take the product to drive that growth and increase revenue. We believe the best place is broadening out our credential management capabilities to support not just people, but people and nonhuman entities, including devices and agentic AI, and I'll explain what we mean by that. So our intention is to become a leading software provider of enterprise credential management. Sometimes Gartner called this secrets management, but it's basically looking after the secrets, the keys, the credentials within an organization that allow people and things to identify themselves and access your environment. Again, integrated software product family here as we've done with the existing acquisition, brought that into the company, focusing on employee ID, machine ID and agentic AI. What I mean by machines is fairly straightforward, printers, routers, servers. These tend to have identities. They need to identify themselves before they can connect into your environment. What we're seeing now is the appearance of agentic AI. So that's when AI is acting in an autonomous way on behalf of a person or a thing making decisions. For example, moving money between one account and another based on a set of rules. And if that's happening, you need to know that, that agentic AI is what it claims to be and not somebody trying to break into your system. This solution, we believe, builds on what we already have. So we're not completely starting from greenfield. We have the credential management system that works for people identities today. We can extend that to machine identities. We also, about a year ago, introduced the SecureVault product. This protects keys and secrets within an organization. So for example, if you have a private key on your phone to read an e-mail, you lose that phone, you replace it or you need to read the same e-mails on your iPad, you need to securely get that key and put it onto your new device. So this is one of the major features of credentials management in a broader context within the organization. So we already have some of the building blocks there. What we're looking at, at the moment is identifying what capabilities we need to add into our existing product set to cover that whole solution across enterprise credential management, some of which we'll build, some of which we'll acquire, and I'll talk about those in the next few slides. So why do we think this is the right space for us? The first one is demand. We've had customers -- existing customers approach us saying, Intercede, you're very good at managing personal identity. We have machines that need identity in our environment as well. If a server certificate expires, nobody can log on. We need to manage and track that. There are solutions that do this. We've looked at some of those solutions, but they're expensive, they're complex. They don't give us the control we need. Could you add that into your product? So we've seen existing customer demand on this. We've seen similar feedback from partners as well. And also working with analysts such as Gartner and Kuppinger Cole, we're seeing a growing need for a single pane of glass to manage multiple credentials within the enterprise. Today, people tend to deploy point solutions, something to do personal ID, such as us, something to do machine ID. They're starting to look at how do we manage agentic AI. That's relatively new. There are a few standards in that space at the area. But it's identified as a growing area that can help businesses via a converged management solution. So -- there was one question in the chat, so I'll address this now on identity and access management vendors and the Microsofts, the Optivs of this world. We've been successful where we work with them. We work alongside them as opposed to try and compete with them. So for example, with Microsoft, we were one of the early adopters working with their FIDO Passkey APIs, so we could issue and manage passkeys that work with Entra ID. We're now seeing customers starting to adopt that. So that's been a very good place to us to add value around those major identity and access management vendors. And this plays very much into that space. For example, Microsoft Entra ID predominant in a lot of our customers, controls once you've connected as a person or a device, what can you do within the environment, but they don't issue and manage those credentials in the first place. So we believe this is an area that carries on our work with strategy. As I mentioned, it builds on what we've already got. We have the credential management capability. We have connections into the environment. We have policy control, and we have the SecureVault. Moving down to the bottom section here. Anybody who's going to buy a solution in this space absolutely needs to work with a credible vendor. How you get that credibility is by delivering high security solutions to customers such as we have and also the scalability and process control. So a lot of our solutions work with existing networks, identity and access management systems, certificate authorities to automate processes, what's called identity orchestration. And we've done that at scale. We've done that with millions of people, millions of credentials. So we believe we have the credibility to move into this space. Looking at how modern enterprises are today. This is focused on the space we play in today. So this is the person identity management. So the 2 MyID logos there represent our product family. The top one is the integrated suite that has password management, onetime password management, FIDO passkey management and PKI credential management. We connect into infrastructure, certificate authorities, identity access management systems, sources of user data, et cetera. And the MyID logo below that is the secure vault that can protect some of those secrets and securely recover them when they're needed to. We can also onboard people, so we can capture fingerprints, photos, scan passports, do background checks. So we do this at the highest levels of assurance. And we issue those credentials onto a wide range of form factors, USB tokens, smart cards, virtual cards, mobile. So that's very much where we play today. As we build the slide, we start to see more entities within the enterprise exist that need a credential. The first one is machines. So printers, routers, firewalls, servers, these connect into the network. And typically, they would need a certificate to do that to identify themselves. That's good for us because certificate space is where we play very strongly. But as I mentioned, there are vendors that do that today. There are vendors who provide machine identity. There are vendors who provide personal identity such as ourselves, but there's nobody doing it across both areas and nobody doing it well. The next level up is where we have systems talking to each other. So this is really an extension of machine identity. Most applications we access today are not a single monolithic application where we just log on and use an interface. What's happening in the background is there are multiple cloud services, micro services, where data packets have been sent between API endpoints, how systems communicate with each other. Those endpoints, if you're going to talk to that endpoint to send it some data or request a process, you need an identity to do that. So you need a credential to authenticate. And the data that's sent between those endpoints needs to be protected. So again, this is an extension of machine identity. What we're starting to see now is a greater use of agentic AI within organizations, still relatively new, but that's an autonomous AI agent acting on behalf of a person or a thing that's performing operations based on a set of rules. And again, the standards in that area are quite new. People like the FIDO Alliance are trying to be a standard in that area, certificates potentially a standard in that area. Good news, again, for us, we work with both of those standards bodies very closely already. But there's basically a broader set of objects within an enterprise that need credential management. And it's very difficult for enterprises to get a view across the entire enterprise. So where we play today is down the bottom left, where we're moving is to provide this across the entire enterprise. So converged credential management, regardless of that credential we're managing is for a person, a machine or an agentic AI object. We'll build this via a combination of buy and acquisition where appropriate. So we've identified in effect the LEGO blocks we need to click together to build this overall solution. Some of those we already have, some of those we can build where appropriate, if we find the right vendor that can accelerate us in this in direction, we will make an acquisition. And we're actively managing that process at the moment. Looking at what we've been doing in the product to put us in a good position to move into this area. We've enhanced what the product can do in terms of the types of credentials it can manage. So we've managed smart cards, PKI tokens, FIDO passkeys, identity wallets and mobile. We brought the Secure Vault in. So again, we've built a number of these building blocks already. In terms of the way we deploy and integrate the product, we put investment into APIs and SDKs, toolkit around the product, we're cloud capable. So we can run this product at scale and integrate it into the environment. It will need to be as it's managing machine identities. There are more machines and people out there. So we need to have those scalable automated processes, which we have. And finally, within the organization, Klaas touched on some of this earlier about our use of AI. So we have moved to a much more modern development process. We have DevOps. The product builds every night automatically in the cloud and auto test runs, which means we can have our human testers focused on user experience as opposed to the use of the APIs. So basically, we built efficient and modern processes there. We don't get AI to code for us. We don't find it's quite at that level yet, but we do find it can help our developers write test plans, help with automated testing, for example. So basically, we're using AI to make our existing team more efficient, but we're not using it to replace people. And summarizing on this, we believe there is a need for this. So we're seeing a demand for converged enterprise credential management from our customer base, from the analysts believe there is a space for this, and we believe we can play very strongly in that space. There are a wider range of credential types out there that need managing. We manage some of those already. Some of the technologies involved fit very well into our product stack. So again, we're looking to evolve our product capabilities in this area to manage nonhuman identities, Agentic AI and people in a single credential product. Important point here is like our existing business, this is mission-critical for people. So as Klaas was mentioning, our product doesn't tend to get switched off. People keep the power on, people keep their security up and running. Just like they need the security for people, they need the same level of security for machines. So we believe this is an excellent business space for us to move into. And with that, I'm going to hand back to Klaas.

Thank you, Allen. Yes. So in summary, market-wise, yes, we've seen some delays in half 1, particularly relating to the new administration in the U.S. But as you would have seen from the second RNS that we've issued this week, there is some good momentum now from both net new business as well as renewals. So we fully expect that, that's going to normalize throughout the second half of the year. We've talked about our move from perpetual to subscription and annual recurring revenue. Yes, it's tricky in the public markets, but we're trying to manage that, really encouraging with the uptake on our subscription revenues at the moment. But at the same time, we need to balance that against market expectations and market forecasts that are out there. Pipeline-wise, we've been signposting this for a little while now that we're not just a single trip pony for the U.S. We're very much developing new regions. Asia Pac is a good example. We're seeing good traction within Continental Europe, EU at the moment. We're also continuing to see interest within the U.K. Nitil talked about revenue margin profitability focus. We're trending very, very nicely. And although we're 4% off in terms of revenue against a high comparable from last year, we believe we're making up some good ground. Then the final 2, very much on balance sheet. We are pretty, pretty clean. We have no debt. We have significant amount of cash in the bank. We're generating every quarter -- well, every quarter, every half, every year, good cash. There is no bad debt in the business. We're pretty well supported. So if we then try and wrap up, we believe we can meet the full year forecast. I know there are, again, also some questions in the chat out there. At the end of the day, there are many things that we can't control, but the things that we can control is how we run this business and how we convert that pipeline. into orders and from orders into revenue in period or if it's not in period into deferred revenue for periods to come. So if we then move on to final slide, if we then look outlook-wise, I talked about the move from perpetual to subscription, which will be a longer-term program and project. I referenced already the pipeline, but the pipeline is developing very, very nicely, both in the U.S. and what we call our rest of world. We're continuing to invest strategically into our product for medium and longer term. R&D-wise, we're north of GBP 4 million at the moment. So those who have been following us for a while know that the number has been growing. That's also reflecting in the headcount. Our headcount at the moment is 115, 100-plus in the U.K. and the rest in North America. We talked about our approach to M&A. Again, reiterating, we're not a buy and build, but we very much continue to evaluate the opportunities ahead of us. Allen has given some good hinters as to where our interest lies at the moment, and we have active dialogue as we speak. Client-wise, referenced earlier on, again, we see very little attrition, and we have an extremely loyal client base. Once our clients are on platform, they tend to be on platform for longer periods. Longer serving clients is now 22 or 23 years. So that's a pretty good driver for lifetime value of the clients. We believe we're well positioned for growth in revenue, growth in margin, growth in profits and driven by a wider expansion model, both from U.S. and non-U.S. perspective. And as Allen has indicated, we very much see a play for us to become a leading provider of enterprise or unified credential management where we take on more than just person entity or person identity, we see a real opportunity moving into machine and potentially Agentic AI. That concludes our presentation for today. There are quite a few questions in the chat. Now I quite enjoy this part because if I read the questions, I can pretty much hand them out. So first -- well, it's not the first question because there were a few pre-submitted questions, but it's the first question in the chat at the moment on our side. So it's a question from Ted. Can you give us a bit more color how you will drive market uptake? What's your marketing strategy basically? Allen, do you want to take that one?

The marketing report up to me, so I was expecting that one to come in my direction. There's probably 2 main themes here. One is thought leadership. So on areas where we believe we are ahead of the competition, we want to be in our customers' faces that we're leading the charge in this area. So a couple of examples. We -- I did a presentation at the FIDO Authenticate Conference on use of FIDO passkeys in high assurance environments. That was with a partner, Ubico. Recently did a presentation with Microsoft on how you could issue and manage passkeys that work with Entra ID because we were an early adopter for that. So again, there's elements of thought leadership. And the second one really carries through from that. So our marketing is very much working with partners. We have 115 people. Some of our partners are much larger than that, both technology and reseller partners. So as another example, last week, I was in the U.S. with our customers, do customer advisory board, one of our partners, Guide House there, around 18,000 people globally currently take us into federal government. I was recording some marketing with them where they're positioning it into regulated industries outside of federal government, so energy, health care on a global basis. So the marketing is very much focused on thought leadership where we believe the most appropriate to differentiate and also primarily supporting our partners to help go and drive those leads.

Thank you, Allen. Next question, I think it was from Ian. Re M&A, have you looked at Device Authority as a potential acquisition? Tern plc hold approximately 25% of Device Authority and their entire market cap is around GBP 30 million. This includes other investments that could be sold off. as they are not a strategic fit for Intercede. Ian, it's a company policy and market policy that we cannot comment on any specific targets. So I'm afraid I'm going to answer this question more in the round. And kind of picking up on earlier comments on M&A. We're very much in the market. We have a long list north of 300 companies of potential targets at any point in time. We have a short list of 15 to 25. And within that short list, we're typically in dialogue with multiple parties at any point in time. So no comments on specific targets here. But if we broaden that question a little bit to, are you still looking in the market for potential acquisitions? Absolutely, yes. And I think we've given a good indication as to what we're potentially looking at. There's another question, again, pre-submitted. I think it was from Max. Did the U.S. shutdown affect the timing of the flow of orders? I think we've answered that question during the process that it wasn't actually the shutdown. During the shutdown, all our programs were fully funded. Next question is from William. Thank you for the more comprehensive revenue breakdown in the interims. We are always listening, William. It's very helpful. Professional services at GBP 1.4 million were below your previously stated normalized full year run rate of GBP 3 million to GBP 4 million. Is this likely to improve in half 2? Nitil, you kind of touched upon it, but maybe you want to repeat earlier on.

Yes. Thanks, Klaas. Yes, William, just to reaffirm that. As we mentioned, there was a slight delay for us in July, August. We're forecasting to pick that up to the normalized run rate into H2. So yes.

Next question is again from William. In the finals, you mentioned potential upside from increased DoD spending. Is this still the case? Or has it been delayed by U.S. government shutdown? As per earlier remark, we have seen no real impact from government shutdown. We do see defense spending as an interesting point. Again, lots of public domain information on this. But if we look at the comments that, again, Trump has made around defense spending within the EU defense spending from NATO, we actually see some opportunity popping up in Continental Europe. And as and when we have updates, we will provide more color on that. Question from Andrew, regarding your plans of converged Enterprise credential Management, can you say a bit more about competition, including large entity and access management players, if relevant, is positioning of the IDM players important when Intercede is evaluating its best opportunities? I think, Allen, you again touched upon this. So I'm just going to bring this one back to you.

Yes. So as mentioned, we very much follow a work with strategy. We don't want to fight with the Microsofts and the Optivs of this world. They don't do this. There are other vendors out there who focus on either machine identity management or sometimes they call certificate lifetime management, but they don't tend to be the huge identity and access management players, which is important for us. We very much want to follow that work with strategy.

Next question from Mike P. 3 years in, how would you rate the success of Authlogics acquisition against your original expectations and why? I think, Mike, there are different angles to this. We've acquired some very, very strong IP. We've acquired a very strong client base and distribution network. We actually got a new CTO out of Authlogics. So that's all very, very positive. Revenue-wise, no, not there yet. expecting more from it. I fully expect it will come. But against the original case, we're behind on revenue, but there is no reason that we can't make that up. Next question, William, is the large project you mentioned still defunded? No, William. The lack of funding was only during July and August. That project has now been fully funded. I can also declare because the client isn't in the public domain anyway. But the $1.5 million in RNS 2 was actually from the same project, which gives you a good indication that there is definitely funding on this program. Next question, Andrew, I noted that support and maintenance revenue in the period was a decent amount higher than a year ago, but the deferred revenue at period end is roughly the same as a year ago. I would have expected that to be higher. Are you able to comment on this, please? Mr. Patel.

Yes. Thanks, Klaas. Andrew, yes, we are slightly disappointed in the deferred revenue. As we've mentioned, some of the FFPs that we had last year as a comparative had long-term capabilities and deliverables. They've all unwound because we've delivered them, hence, why the numbers are not growing as we thought it will. We expect that to change in H2. And as we focus more on 3-, 5-year deals, we're targeting that number to go up, especially long term. So slightly disappointing, agreed, but we expect to unwind that and increase it at the year-end.