Beeks Financial Cloud Group (LSE:BKS) — HY25 Results

0:01 Good afternoon, and welcome to the BEEKS FINANCIAL CLOUD GROUP PLC investor presentation. Throughout this quarter presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time just based on the Q and A tab situated at the right corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it received during the meeting itself. Have the company can review all the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. And I'd now like to hand you over to Gordon McArthur, CEO. Good afternoon to you,

0:31 sir. Hi. Thank you, and welcome, folks. I'm gonna as usual, if you've listened to do this before, I'm gonna do the first, few slides and overview, and then I'll hand over to Fraser who's gonna go into more of the financials, and then we've got q and a at the end. So who are BEEKS? It's always difficult on this because we don't know if who's who's attending and who's not. So BEEKS are BEEKS FINANCIAL CLOUD, our cloud computing company based up in Glasgow, that's solely cater for capital markets. Right? So we do cloud computing, and we focus on the data centers that trading activities take place in. They tend to be specific financial services data centers, whether that be owned by an exchange or owned by a third party.

1:24 And we deploy our infrastructure in there, and connect to various endpoints within the data center, and then we tie all that up. We tie all these data centers up together with a a backbone that runs, around the world.

1:42 So just kinda gonna cover some of the highlights from the first half of the year. So proximity and exchange, Cloud, is what we're gonna spend most of our time talking about today, The percentage of revenue and the two new offerings that we see as the kind of future of the the company has doubled from 10% to 20% of the first half revenue year on year. So kind of as expected, and we hope that will continue to grow. We've got a substantial proximity cloud and exchange cloud pipeline, and we're now starting to see material contributions from the two new product lines, which is good. As we announced on Monday, Monday, we have won our first exchange cloud contract with a partner in the crypto space. So previously, everything we've done is equities asset class specific, and we'll continue to focus there.

2:44 But, we've, signed a deal with Kraken, one of the larger crypto exchanges, one of most sophisticated institutional flow, type exchanges for them to license Exchange Cloud in the European data center. And we've done that under our new revenue model, which will take some time to explain today. We've been looking at this revenue model know, kind of revenue share type agreements for the last twelve months, and we have decided to move forward with it. Not to say that we're ditching or or halting the the old model where it was a long term contract at x amount per cabinet per month. It just means we have two commercial models that we will use in different situations depending what is what is fit for both the client and BEEKS going forward. So not walking away from the old model, but we were introducing this new revenue share model, which ultimately will be more profitable for the organization, and we'll continue to cover that as we go through.

3:48 But, you know, materially shortens the sales cycle, so we are not asking customers to budget millions and millions of dollars, which usually tends to go into the next budgeting cycle. The revenue share agreement means that we are going into it with a a pretty much zero commitment from the client, and and we are willing to take the commercial risk on that upfront in certain situations. Operating cash flow was up 21% year on year. So, you know, we've delivered more profit, more cash than than we have in previous years, which is obviously good. Soon as I say, Fraser will cover more in-depth financials as we go through.

4:32 So this slide hasn't really changed that much in the last few years. We've got a new for anyone who's been following us for a for a new for any period of time. You'll see there's a new edge intelligence section in here, which we'll cover. But, you know, 90% of our revenue is still trading infrastructure, compute network within the data center, virtual machines, and that will continue. Right? That that's been the heart of the business. We are an infrastructure service company, and that that's what we do. We also have, as I said at the top, low latency weighted network. We don't run cables ourselves, obviously, under the sea. We buy we buy Hotel? Routes from sorry. We're in a hotel.

5:27 We buy routes from various cable carriers around the world and patch that together depending on our requirements. And we've got a small professional services division where, you know, we make a couple percent of revenue. The new the new part of this is a new product we're building called Edge Intelligence. It's kinda related to our analytics offering where we capture as part of our analytics, and it doesn't have to run on BKS analytics. It can run on on other analytics packages out there. You know, banks and brokers and exchanges generate and capture huge, you know, volumes of data, and it's market data. Right? So it's very low level fixed messages, you know, you know, text files that are you know, NICE has got the biggest feed in the world. Opera can pump pump out a 100 gigabytes of data per second in this very low level fix messaging language.

6:26 And that's it's got a lot of value in it, but it's very difficult to do anything with it because of the size of it. And we capture that and various other analytics offerings that that capture that data. So what an edge intelligence is gonna do in in the first use case for it, we've been building it for about a year, is to look at anomaly detection. So it's this is it's more of a machine learning environment at the moment where we've trained some machine learning models to look at years and years' worth of of data to understand what is normal. Right? When you understand what is normal, you can very quickly identify what is abnormal, what's an anomaly. And anomalies might last for, you know, a millisecond.

7:13 They might last for a second, and they might have and they all have some data attached to them. But manually sifting through all that data to try and find them is impossible. Right? So our edge intelligent platform will in real time, I let a bank, a broker, HFT, an exchange that there is an anomaly somewhere in the system, and we're scoring that at the moment between zero and a 100. The higher you get towards a 100, the more serious than normally is. So what I will do is I'll let in real time that there's something strange going on in your environment. At the moment, we're not telling you what, but what we will do is attach a link to the packet capture and that specific piece of data that is suggesting there is something going wrong in the overall trading infrastructure.

8:07 So trade operations people can do a deep dive into. And then there's there's there's a lot more use cases as we go along. So we've been building that for a year. Still about six months from being ready, but, you know, we're working with a couple of large org organizations to guide our kind of strategy there and a product road map, and then a lot of technical challenges still to be overcome. Can we do it at the scale that's needed still to be answered? And can we ensure the accuracy at scale?

8:38 So that's gonna be the next six or seven months of work until we get it into version one of our product. But this is how we build products historically. You know, Exchange Proximity Cloud is we have an idea. We go and talk to our clients about it. If they verify it's useful, then we, you know, we work with them to try and productize it, and and edge intelligence will be doing nothing to the the journey that we did with proximity and exchange. So the three parts of the business, private cloud, still a big part of the business. Dell continues to grow every month, and these are, you know, smaller, sometimes month to month, sometimes annual deals, sometimes twenty four month deals where a client will buy a level of compute from us, some shared networking. Sometimes it's completely dedicated networking.

9:29 We, you know, we we basically build a bespoke private client for a client. It can be anywhere between one to twenty k a month type deals. We've got some very large clients in there,

9:40 and that has always been the majority of our revenue, you know, since we IPO ed. As proxy exchange build, you know, we we expect that they will be able to take over as the main drivers of percentage revenue for the group. Proximity Cloud was our first foray into a dedicated cabinet that we deliver to clients. Single use platform for use for a bank, broker, investment manager, whoever wants it, they will use it to run their internal workloads. And we've had some success in that. We've seen our biggest

10:17 biggest deal ever last year around proximity cloud for for large bank that is currently rolling out. And pipeline for that has continued to continues to grow. So single use platform, rack based end to end training infrastructure. Exchange cloud is very similar to proximity cloud. The only difference is it's multihomed. So multiple clients can exist securely in the same rack so we can effectively break up the infrastructure in that cabinet and assign it to multiple clients, and nobody can see or be affected by the other clients' trading activities. The you know, approximate cloud is gonna one to 5,000,000, can be a bit can be bigger.

11:08 Exchange cloud over the period, you know, ex Exchange cloud is very much a land and expand type of contract. Right? And I and I think we're gonna go on to Jesse again in the next slide. So, you know, is materially bigger as we go through the contract as we, you know, we use to start off with couple of cabinets, and then that that could go materially. Just a quick overview of some of the figures. So all point in the right direction. Again, you know, historically, we've always gone between 2030%. K. Year on year, this was kinda in line And from a revenue point of view, EBITDA up 25% and PBT up 37%. Positive net cash again.

11:58 And 75 to 76% of our earnings are on a monthly recurring basis. So, you you know, there's a it's not best quarter not best half ever. Sorry. No. By no means a worse. Very solid performance for the business.

12:15 This shows our exchange cloud footprint, right, as it continues to grow. And we hope to color in more of this map over the next year to two years. So we started the GSE. ICE were actually the very first ones to license it in the ICE Global Networks division, and GSE were the first to put it in their core data center. You know, with the tier one exchange, we have made announcements that that was Nasdaq, and I'm sure there's gonna be a lot of questions here, but we are still under NDA. I'm not gonna be able to talk much about it. It's proceeding as planned, but we are still under NDA. So limited in what we can say.

12:58 Mexico is actually the largest exchange clear deal to date, signed in February. They are going for production and Doctor in the primary and secondary data centers, and that will that's that's kind of rolling out at the moment. We are building that in Glasgow and shipping it out over to Mexico in the next few weeks to get that live and before the end of the financial period. And emerging markets is so sorry. Just to finish this. So cracking first foray into crypto, you know, very short sales cycle on on the revenue shared deal model. So it's usage based, and I think we've got more slate to cover as we as we go through that.

13:49 So for the last twelve months, I've been talking much more about emerging markets. You know, emerging markets, you know, are where we are focusing our attention with Exchange Cloud. It might be, kind of opposite to where people would naturally assume, but some of the emerging markets are operationally difficult for Western companies to operate in and to trade in. Some of the biggest growth rates in exchanges in fact, all of the biggest growth rates percentage wise, volume wise, in exchanges are in emerging markets. So there's a lot of companies want to trade in India and Saudi Arabia and Mexico and Malaysia and Philippines, but they don't have entities there. They don't have import licenses.

14:34 They don't have staff there. So there's a there's a pipeline of demand. There's operational difficulty, and that is where we actually see the biggest opportunity. I think last year when we talked about this, I thought it was about parity between developed and emerging. The the more we've gone into this this year, I mean, the pipeline that we've got, the emerging markets are probably gonna be the dominant source of revenue for BEEKS going forward, which, as I say, is probably opposite to what you would think, but there's growth potential there. You know, a lot of the developed exchanges have got a lot of the market participants signing. And pick up As we sell into the developed markets, we will pick up business and hardware refreshes and growth and new participants, but there's a backlog of demand for emerging markets.

15:35 There's certain exchanges that I could probably fill 10 or 15 cabs in immediately if we can get Exchange Cloud launched in emerging markets, and that's material source of revenue for us. So, you know, look at look as we go forward, look for us to make more announcements in and around the emerging markets as well as the developed ones. But that's a kind of map, and as I say, by the time next year, we'll hopefully present it, and there's a lot more glue in there. This is GSE slide that I I think we presented last year, but it's a really powerful slide, and and it's worth it over again. So GSE are, you know, I think twenty eighth largest exchange in the world, largest in Africa by a long way. We signed them a couple years ago, and and we thought overall, the contract will be worth, you know, 2 to 5,000,000 at a push over the total contract period.

16:31 We've underestimated that substantially. Right? And, you know, GSE have extended a number of times, and we'll continue to do that. Pipeline's still significant with new new people work capacity, and they're getting towards, you know, the limits of their existing capacity. So we fully expect expect GSE to continue to extend. We put out we're putting in a Doctor data center at the moment. That is a secondary data center. Banks cannot just have primary. They need a feel over if there is a an issue in the primary data center. So that gives us a second site to to work with. So, you know, as, you know, as we get more mature with GSE, and I I spend a lot of time down there with the clients, with the exchange themselves, we fully expect GSE to spend between 15 and 20,000,000 once we get into the kind of fourth or fifth year of that that contract.

17:29 So that shows you the landing and expand opportunity with they've been doing the GSE of the service, you know, one of the smaller exchanges globally. It shows you what the potential is for some of the developed markets and some of these emerging markets in terms of revenue over the the the contract period. And we fully expect after the initial contract period with Jesse, they will extend. You know, we we look at these as fifteen to twenty year kind of deployments.

17:58 So the new revenue share model. So we've been thinking about this for the last year. And I think what finally pushed it over the line for us was Mexico. So Mexican exchange was about a year and a a year just a year and a bit of you know, maybe it was just under two years of of of sales cycle. A large part of that sales cycle was waiting for them to get budget unlocked. So they had decided they're gonna go forward with the platform. They built a business case. They've been approved by the project team.

18:39 Then they have to make a submission into next year budget cycle to get the money to sign the contract with us. Right? So, you know, their budget and cycle was, you know, January through December.

18:55 If we'd taken that away and, you know, the revenue share model had been there, we would have been live in Mexico, and we we probably would have been extending the contract already. So we've had a material delay because of budget constraints of the exchange. Mexico is a a a a big deal. Right? So one of our biggest deals we've ever done, so it's not an insignificant spend for them. So that was done in the classic model, and it'd be charged 20 k a month or 25 depending on what it is. 20 to 25 k per month per cabinet over multiple years, and that's what we commit to. That's what they say. The new model and and I'm I'm Faiza will talk about the revenue rec on it as well. The new model, we're and we're not throwing away the old model.

19:45 The new model is we're saying a rolling thirty day contract, no long term commitment, don't pay us anything on day one, but we will take a percentage split of that revenue, fifty fifty, whatever it is. Not gonna make it available to everyone. And in certain situations, without going to stuff that's been, you know, potentially sensitive, if the exchange commit to certain activities with us, we will allow that revenue share model. So over the period of the contract, we will make more money because when a cabinet's full, we are probably getting about a third of the revenue at the moment on a full contract, whereas we will get half or there or thereabouts

20:36 when a a con a cabinet is filled under the revenue share model. So just to kinda it's very long winded, very new on Stripe, you know, brings in sales cycles. No need for budget approval. No need for executive steering group approval. No need for board approval. You know you know, materially easier for an exchange to commit to.

20:59 Materially more profitable over the term of the contract for us. There is a lag until that that they they are full, the the the cabinets are full. But once they're full, it makes us more money. We have got a level of commercial risk, but, again, we're thinking of the stuff that may be commercially sensitive. We can lift and shift that environment if we if it's not performing right, if there's no demand there. So it's not like we we deploy the infrastructure that we're written off. We can move it to another data center in another location if we wanted to. Because I don't know if you wanna touch about the revenue rec Yeah. Sure. Good afternoon, everybody. Yeah. I think so, you know, the the the revenue, the accounting is very different under the two different models.

21:47 As Gordon says, we're doing this for commercial reasons, but it does have a difference in in the accounting. So on the traditional model, we take about half of the the contract value upfront on day one. Okay? So if you looked at results over the last couple of years, you'll see we've got now we've got point in time. We've got point over time right now. Going back before Proximity and Exchange Cloud, we always had this nice recurring revenue profile, which is smooth and always kinda going upwards. So, you know, the the the the revenue share model, what that does

22:15 is it pushes it back into a monthly recurring rate. So, and it's really because, you know, two things. One is there's no there's no contract value in day one. So in day one, we will get potentially zero. Right? Whereas before, there's an actual contract value. So the accounting is very different.

22:34 So, you know, we've had to, you know, we've to reflect that in some of the in some of the forecast because we've always assumed historically, there's there's this upfront element. However, we're doing it for the right reasons, and, commercially, it's better, as Gordon said. So the cost, you know, the cost is exactly the same. So this is purely accounting. And if you take the fact that we're you know,

22:54 we we've assumed in this in this slide here that it will potentially take a year to to get to full capacity. If if it does that, we get about a third more revenue overall, but straight to profit because the the the cost is exactly the same. And so, you know, as we get as we deliver more of these, we'll become, you know, a bit more, with how we forecast it. You know, will it take three months, six months, nine months, twelve months to to get to full capacity? We don't know yet, but, you know, we will we will get better at predicting that as we as we deliver more.

23:25 Thank you. So, again, you know, we're kinda showing we're investing in the the sales team and for the significant investment in the sales team, and we'll continue to hire to tackle these emerging market areas. So Adam Bradley joined as head of APAC. Invested in some London resource, Swatch, who's the head of presales over in New York to support Jerry. So the the sales team is the direct sales team that are targeting the exchanges and banks and brokers has grown substantially. We're very it's a very nuanced and involved sale. So we're very picky about who we employ in that sales team because you have to you have to have domain knowledge. You have to write contacts. You have to be able to understand and articulate at various various parts of exchanges and banks or value propositions. So, you know, we we hire the what we believe are the right people in the right areas.

24:32 I I kinda jumped for, you know, pre jumped to some edge intelligence slides. So, you know, that kinda goes in. As I said, like, you know, the first thing we're looking at is anomaly detection, but we've got a bunch of use cases as we add on AI modeling and AI forecasting into the the core middleware that we've already built. Got we've got a number of customers working with us as we did in proximity in exchange cloud to shape the requirements. Right? And and we kinda tend to give the if if they then want to buy, they kinda get a bit of a a sweetheart deal as being a as a a development partner. But we try and target the bigger ones, right, that that we can capture. If you do the if you can do the the monster accounts then, especially this because a lot of the problems here is scale.

25:20 If you can do capture and and model the bigger accounts, then the the smaller ones become easy. So so kinda launching next year, we have invested in it. You know? So we we have started to articulate it into the market. And then, hopefully, by the end of the calendar year, we are starting to see some signs of revenue flowing in the edge intelligence world, which gives us another revenue stream to go after. We hand over to Fraser to talk more in detail about financials. K. Thanks, Gordon. So as Gordon says, you know, we've we've got a, you know, a decent a decent set of results in terms of sales growth. Right? So, you know, looking back since IPO and over the last five years, we're typically around the 25 to 30%. So, you know, we're maybe slightly at the lower end of that in this this half, but, you know, still still relatively consistent. And a big a big driver of that, as as Gordon mentioned at start, was proximity cloud cloud growth in the period. Right?

26:22 So that was around between proximity exchange, about 20% of the of the overall revenue. And, you know, as we look forward, we we expect that trend to, you know, to continue upwards. The deal sizes are, as Gordon says, the the the large UK bank that was delivering the period, influenced that that that growth, but the the size of the deals, in those products are a lot higher and, you know, they're they're driving the growth there. You know, slightly lower in terms of the the the ACMMR, that stands for annualized committed monthly recurring revenue. So, you know, not not quite as, you know, a bit more modest in terms of the growth there, 7%, which is certainly quite low. We did flag in the the results that we had some, higher churn in our our our legacy business, you know, historic part of the business.

27:11 It's about less than 10% of the overall business. Again, and the reason for that, we we we changed, software provider, through for for very good commercial reasons. And as part of that project, you know, a lot of these legacy clients took took upon, you know, that that situation to clear out some of their historic estate. So,

27:34 bit of a one off, not expected to recur, and, you know, didn't impact overall profitability because of that, you know, better software license charge that that that we've now got going forward. So so that's that that's in terms of, recurring revenue. So, again, you know, pleasing to see that the the profit is going in right direction. So as Gordon says, you know, we've we've had 25% growth in EBITDA, 37% growth in profit, and improved profit profit margins again. Now that's in

28:06 spite of some of that churn and also the the market edge intelligence that that we're investing in during the period we're expensing. So, you know, we're able to, you know, grow margins a percent or two while still investing. So, you know, the the profit's going in the right direction. Staff is largely unchanged. You know, we we we we changed the headcount slightly. We've invested in sales, as Gordon says, but we also we also looked at some of the the the software development team. And we, you know, we that that's got some natural attrition as we've had a new set of software who's streamlined some of the processes in there. So we'll get a bit more efficiency out of that, which is good, and but also capitalizing a bit less that as well because we've we've now got established products.

28:55 So, again, profit margin is still improving, with those going on as well. So, and as we look forward, particularly around Exchange Cloud and in terms of the different model, we believe that there's there's quite a bit in terms of leverage that we still get. And if you look at the the forecast, you know, we're forecasting higher profitability and we're, you know, we're comfortable based on what we know that that that that's that's gonna transpire. Again, you know, profit's one thing, cash another. So over the last eighteen months, you know, we have started generating cash. So, you know, cash is going in the right direction as well. Upping cash flows up over 20%, to 5,800,000. The the sort of the the the reduction in the net receivable payables, there's kind of two main drivers for that.

29:44 Part of that is the upfront element of Proximity Cloud where, you know, we take the revenue upfront, but we we collect the cash over time. So, you know, there's a bigger accrued income increase, but that will that will start unwinding over the next number of years. So, you know, flipping back the other way. And then I think, you know, we mentioned in the in the results, we first, we've got a delayed post year end payment of just over 1,200,000 early January. So, you know, not ideal, but not not nothing on toward on that other than, you know, internal process and and and and, you know, it was paid early January. So in reality, our cash should have been, you know, at least 1,200,000 higher at the end of the period. We continue to invest. So PP and E, so that's infrastructure. So that's the cost of our, you know, putting the the infrastructure into the data centers. We we utilize a bit

30:30 of our existing inventory. So 1,200,000, excluding stock, which reduced by about 1,000,000. So, you know, we'll always have that cost our in our cash to put that infrastructure out there. And then the intangible assets is the cost of our development team. We've re repaid some debt in the period. So, you know, the the the balance sheet is in as good a position as it's ever been since IPO. We're generating cash. We have money in the bank, and we have low levels of debt. And, you know, we expect that that that trend to to continue. Okay. Alright. Back to me. So, you know, as I say at the top of the call, we've, you know, we've kinda maintained our 20 to 30% top line growth.

31:17 You know, the business is thirteen years old. It's going every single half year since it's existed. So, you know, I think we've got a a good track record of delivering. Now, you know, we've been in public domain for seven years, I think. So, again, you know, we we fail within our our kinda expected area of of growth. But, you know, the businesses, as Fraser said, you know, the the well, the big thing was getting to cash generative, cash positive. We are there now. We we expect that to continue to increase. Gives us the ability to invest where we want. We don't have to unlike some of our old school MSP competitors, we're not using all of our free cash to pay, my private equity owner's interest payments.

32:04 So we are available. We we can invest and innovate within the business, and I and I think we're building up a track record of being a company known for innovation, in the space. There isn't a lot of it, but that's where we'll focus and continue to innovate going forward. You know, we we're not a big M and A player. You know, people have followed us for a while. We do look at stuff occasionally. We may we may or not do something small. I don't think we're looking for a big material m and a opportunities. There's more bolt on feature function where we would struggle to build ourselves because there's only so much we can do. So but being cash generative helps that as well. We got a lot you know, with the exchanges, you know, we can I when we sign an exchange, their sales team are effect is effectively selling our services?

33:01 We've got very strong relationships with IPC, our biggest our biggest partner. We have a lot with them in terms of joint bids. We have a customer of theirs. We have customer of ours, so we've got good partnership. And we really are the market's coming to us. Right? I think proving that we have deployed this infrastructure now. It works, adds value to exchanges, and banks and brokers, whether it be proximity or exchange. We have we build the product. We innovated. We we, you know, we come up with the idea, but the market is certainly coming to us. So we're in a we're in a good position. The business is financially strong, and we've got a record of a track record of delivery, which is worth this week gold.

33:50 So going forward, what we focus now apart from revenue recognition discussions, which is not really something we want to continue having ever again, the current year is convert the convert the proxy exchange like pipeline is substantial. We've got more equity exchanges in the final rounds of negotiations, continue to invest in edge intelligence to get that ready, and continue to innovate. Right? You know, as I say, we have a substantial software team. We have ideas within the business of other features, products we want to develop, and continue to automate rather than throwing people at problems.

34:41 We need to automate the systems more. I mean, we've been doing that. You know, I was telling another institutional investor this morning before I come down. Some of the senior tech team were showing me a a diagram of, you know, how long does it take for the network team to build that approximately cloud. Because as we or exchange cloud doesn't matter. As we have to deploy more, we need to get better and faster doing them. And the first few we did took us 250 man hours to build that network. The the last one we did did took twenty five. So that is us automating and innovating around the technology map that we've got. So by doing that, not having to continually employ people, that will drive that operational leverage and drive the bottom line.

35:32 Last slide, and then we're gonna q and a. We're in the right place. Right? The the market is coming to us in terms of cloud computing and exchanges and banks. As we've been seeing for the last two years, exchange cloud is our main driver as edge intelligence comes on. Does it become as big an opportunity? We don't know yet. We genuinely don't know. But the initial conversations we're having are very, very promising. But like any new product, as you build it, you don't know until you've you know, you get customer signing check. Kraken is a great win for us for some revenue share, and it really be interesting to see it's a bit it's really unknown for us because it is crypto and it is the first revenue share deal we've done. So we'll try and keep the market updated.

36:19 I know there's a lot of nervousness after the the change in revenue recognition model and and what what what's happened with the numbers, you know, that connect into the the next twelve months. That will wash out as as the the revenue share deal will start to become more profitable with uptake. So so we will try and keep the market updated of how these revenue shares deals are progressing. Pipeline, as I say, is strong for Exchange Cloud, and we hope to make more announcements. When I when I I say short term, short term in Exchange land is not is not days or weeks. Right? So but, you know, we are various days of pipeline from, you know, final MSA clauses to doing the initial business case to submit to the the the steering groups and what have your various exchanges. So very strong.

37:15 And, yeah, we're excited. Right? I I you know, this, you know our job as a director of the company is to look at the long term health of the business. Like, what's the long term what's the right thing to do in the long term? Forget the, you know, the noise that surrounds any short term change. I know the market does not like change. However, we're in a better position than we've ever been. Right? The the opportunity is bigger than it's ever been. We continue to grow our total addressable market. I can't quantify that before anyone asks. I'd be I never can because no one no one covers our our our niche market. So so business is great position. The team is stronger than it's ever been. Couple of really exciting senior technical hires that we'll we'll announce in next few weeks.

38:03 Continued investment in the sales team to drive the new products that we develop. So, yeah, it it's been a it was an an okay period in the first half, and we need to get ahead and deliver the second half and continue to win more business. So I think that is us. So thanks for listening, folks. Final call. Look at q and a. And apologies. There might be some questions in here that I cannot answer, so bear with me. Alright. First question. Has there been any changes in the amount of exchanges around the world making inquiries since you announced your contract? Yes. We are now getting incoming, right, which we never got before.

38:56 I'm not really going to because it's commercially sensitive. Right? And I'm sure I'm sure our competitors always listen to these calls anyway, so I'm careful what I say. But we are getting inbound from some of the most interesting exchanges in the world. So, yeah, the more and more we exchange the more and more we sign, the more pervasive and easy it comes to sign other ones. And then it's linked to the second one. Is there any sign of due diligence speeding up? Yeah. One of the one of the exchanges that we hope to announce next told us intent you know, they they they were not doing late touch due diligence, but because of some of the previous announcements that we've made, they are making certain assumptions that some of some of the the bits and pieces they may look at and spend time on have have been done. So yeah.

39:48 Yeah. I'll pick next one up. So once a customer buys the BKS Exchange cloud system, is there any follow-up revenue in following years not including expanding the system? I e, is there an ongoing rental payment or service fee? So I think on that one, so, ultimately, you have it doesn't the the revenue recognition doesn't always equal cash. Right? So on the traditional model, you have this half upfront and then the remaining contract value spread over the contract term. Right? But that's purely revenue. That doesn't necessarily mean cash. So most most exchange cloud, proximity clouds are on a monthly recurring basis. Right? So this change is really only revenue as opposed to as opposed to cash. Again, someone, please explain the financial impact of the change to revenue sharing model for change.

40:39 So I think that was a pre submitted. I think I think we probably answered that sort of thing. Yeah. There are suggestions that you're offering might be not be unique. Can you give the name of direct competitor in the niche market? I mean, where are the suggestions? I don't how's unique? I'm sure the competitors are looking at building similar stuff, but track record means everything. Right? And so yeah. I think be aware you give an explanation for the late payments eventually. It's it's a big existing client who's been with us for many years. They just missed a payment run. What can I do to that for you, please? Yep. So regarding the move to shared revenue, retaining hardware ownership model over what's up, you know, the hardware cost be depreciated.

41:34 So I so we depreciate our our hardware over five years, which is appropriate. We got the proximity exchange clouds, and they would, you know, they would get replaced, but there would be no change to that. Hold on a second. And then what are the risks now associated with owning that hardware in terms of obsolescence? Again, you know what? You know, historically, we've always done that and, you know, infrastructure changes, but, you know, we're not seeing a a risk in on that type of hardware. Well, the new revenue model applied to existing customers. No. And there is no swapping between the two when you pick. When the customer picks which model they want and they might not both might never be offered, then you're on it forever. Right? You can't have a client who says, you know, we'll do revenue share until we prove it and it fills up, then you take less. So absolutely not. I mean, I wish we'd done GSE and revenue share. They're they're they're delighted with them. Does new revenue model mean higher cash outflow for BEEKS initially?

42:33 No. Not necessarily. So just now so the cost for us is the same. So the cost of that hardware, it then becomes dependent on how quickly that rack fills up in terms of, you know, what the payback period is just now. So, you know, we are going from a fixed fee to a, you know, a a variable fee. So at this point, you know, the honest answer is we don't know. Right? If it takes six months to fill the rack, it will pay back quicker. If it takes fifteen months to fill the rack, it will it will pay back a bit longer. So, you know, we we don't quite know. It's a bit of an unknown just now. Well, BKS have to fund CapEx when your deal is under revenue share model, and what you need to is additional funds. No. There is no difference. Right? We all the old model is 20 k a month. We buy all upfront. We still buy it all upfront. We only get we just charge 50% or whatever the percentage need is as and when that revenue comes in. We are not and we will not be raising money for any operational things going forward. If we had to do m and e and we didn't have the money in the bank, then we would look at it, but we are not in the market for raising more funds.

43:41 Does Oh, do you want to go? Yep. Does the new revenue model need, reported revenue growth will be materially lower in FY '26 before recovering in '27? It's a big These days, I've been fighting about this for weeks fighting about this for weeks. So Yeah. We're in a very difficult position where looking out in the next twelve months, it is difficult for us to forecast, you know what I mean, kind of, whatever, because we're we're meant to there's a seismic change in our in our in our commercial model, right, for the right reasons. Right? It means we make more money over the long term. It means we make more money quicker. So we've we've we've really struggled with how do we forecast accurately. It's hard enough. Right? You you crystal ball gazing twelve or eight twenty four months in advance is very difficult.

44:31 Right? And I know, you know, we want we we thought could we have, you know, a more material range? We we expect we expect to go back to normal in 2027 in terms of, you know, MRC growth. We've always been a monthly recurring revenue company. Right? That's much more valuable rather than one off stuff. So as we get back to MRC, as we've got experience in what happens with these revenue shares and the reality, then we'll be able to forecast. But we we we fully expect that, you know, back in, you know, when we're gonna be 2027, we'll be back into the normality of where we've always been in terms of percentage growth on ACMR. It obviously becomes harder as we get bigger to maintain the percentages. Right?

45:18 But this new revenue share model should take a year to wash out, and then we become more profitable. For Kraken, exchange 30,000,000 users. Based on your financial modeling, how long do you envision it to cover your costs? That's a good question, Andrew. Don't have a clue. Like, 13,000,000 users, but you gotta understand. I and I don't know. I I I'm guessing here, but probably 12 and a half million of them are trading crypto on their phones. Right? And where where we come in is, you know, market making, buy side, sell side, algorithmic trading. You know, we had you know, a mom sitting at home buying 0.01 of a Bitcoin on a phone is not interested in our services. Right? So Kraken's Exchange Cloud. Kraken is an exchange. As we put in the RNS, they have licensed Exchange Cloud. So it's an Exchange Cloud.

46:14 To achieve through your expectations requires a good growth in h two versus h one. What makes you comfortable about achieving this? So, yeah, two two things. So we we're always second half weighted. You know, recurring revenue means you always deliver more in the second half than you do in the first half. You know, we we, you know, we see what the first half number is and what the second half number is, you know, things like the the Mexican exchange that that that we signed, that that's due you know, that we're planning to deliver into h two. Again, that's on the old model, so you have the upfront element, and then there's other proximity clouds in the pipeline, to be delivered in the second half. So, yeah, we we, you know, we obviously have to be comfortable with what's out there in terms of forecast, and, you know, we we have that pipeline to support it in the second half. But, you know, we've we've still got to deliver it, so it's, you know, it's gonna be a challenge, but, you know, we we we get the gap.

47:05 The Gordon Sea Mexico was largest exchange lead client, larger than us, like, some some more detail we get. Mexico is the largest initial exchange cloud order we've ever had. Significant order. Right? So, again, like, I I I I would I try and be as open as honest as possible, but there is some commercial confidentiality we need to retain. Right? So, yeah, that Mexico is the biggest initial order received from the exchange thing. Assuming we can expect the temporary dips in metrics such as gross margin due to the revenue sharing model, Maybe short term, you know, depending again on how quickly racks fill up. However, you know, year one, you know, year two, year three, year four, year five, that's where we we expect higher gross margins. Right? So whilst there may be timing and there might be, you know, such a small transitional impact, ultimately, we believe it's a better margin overall at a gross margin level. So, you know, wouldn't wouldn't expect it to be a significant drop, other than a a bit of timing.

48:13 Why is this top of major fintech services providers such as PEEKO or even Amazon or Mac? I can't I don't I think you can put PEEKO in the same sentence as Amazon or Microsoft. Nothing. Nothing. So this is this is asking about competing. Yeah. Yeah. There's nothing to stop anyone trying to compete with us. There's nothing to stop me trying to compete with Starlink. Like like but it's track record of delivery. Right? You gotta understand there is billions and trillions of dollars going through the platform when we put Exchange Cloud in and it becomes mature. We've now got track record of delivery. People know it works. People know it's scalable. People know it's secure. So I'm sure our competitors out there are trying to build stuff.

49:02 I'm sure they are because they don't innovate. Right? They just copy. But that's what having the having the use cases of track record delivery is everything. And Amazon and Microsoft, we are kinda lucky because, well, it's a big opportunity for us. It's too small for them. We're kinda we're kinda we're kinda shady from the hyperscalers. They would they would have to reengineer entire platforms to to go and do multicast and proper team stamping and all that stuff. And it's the opportunity is just not big enough for them to do that. Let's be honest with you. Let's be with you. Seems that I'm gonna take this. It seems the majority of profits are absorbed by share based payments. What prospects are there for shareholder benefits given that we're just in a share price for better?

49:54 I mean, right, you know, us. We we have been honest about this from day one. Share based payments are used to ward drive behavior of staff. This is not a CEO reward scheme. Right? What what benefits are there for shareholders going forward to consider the share price at full method? The share price is also up 500%, Richard, so only do that since IPO. Can you give a give a reminder of how defensible you're compared to the position as other than being first mover? I I think I've done that. Track record of delivery, is everything in our world. Where customers have a very large customer base such as tracking cracking. Can you deliver on the first day the ability to service all of the customer base? Nope. I can't give 13,000,000 users a platform, but I'm not I'm not saying that's what we did.

50:52 What is the contract period referenced in the GSE slate? I mean, typically, the it's a four year contract for for GSE. Because it's the only platform out there that don't why sorry. Why did Kraken choose BEEKS? Because it's the only platform out there that does cloud based colocation on a multi home platform. I'm not gonna talk sorry. Julian's wanting me to talk about competitors. Who's our main competitors and what differentiates. I don't talk about competitors. Apologies.

51:39 Sorry. What add on products do exchanges want that BEEKS can address? Sorry. This is add on products. I think there's lots of questions that keep coming in, so keep skipping. Once you have that trusted supplier status of these big exchanges, how do they build it from there? I mean and does the rev share put more emphasis on the BEEKS to run and explain sell the product to end customers? We we don't really have add on services, land and expand, and and getting multiple cabinets in the data center. We will maybe make some m and a acquisitions to to bolster out extra add on services, but no. Does your M and A share model put more emphasis on BEEKS to explain the product to end customers? We are the presales arm of the exchange. We do not expect, whether it's month one or month 60 of the contract, the exchange to do the presales architecture and sizing on infrastructure.

52:36 That's what we do. So the new model has no change on that whatsoever. We we're effectively the exchange identify the customer. We have a joint collaboration sizing and infrastructure rightsizing for the customer, and then that that gets deployed. So we'll we'll you know, it doesn't matter what the commercial model is. I think the question is what time frame do the GSE numbers relate to? So we when we talk about that slide, it's it's total contract value, and it is typically over four years. And are we expecting to retain them for the next fifteen to twenty? Yeah. So so what you got so, again, like, once at the end of the contract, the exchange has got 30% of their trading volumes coming from our platform.

53:25 What do they do? Do they say, you're on your own again, mister customer? I'm not providing a service again that we're making money that your life's easy for. So I'm I'm being a bit facetious. Right? But there is there would be it would it would be very strange for the exchange to just say after four or five years we're throwing this out, and customers, you need to stop trading and won't deploy on infrastructure again. I think next one, there's a there's a question, I think, on the the revenue note that rest of the world revenue drops period to period. That that the reason for that is you've got last year with an upfront element of GSE, whereas, this period, there's the recurring element only. So we when looking at revenue, we tend to do it from a a product point of view rather than a location. You know, we have to disclose location for statutory reasons, but, actually, you know, if a customer is based in US and taking infrastructure in London, you know, where where would you want to see it?

54:15 But, you know, we tend to look at revenue from a product as opposed to a a geographic location. The thirty day rolling contract paid for revenue sharing, does this speak to your confidence that customers won't leave? There's more that they will fill them. Right? Customers customers have changing infrastructure requirements. Like, we have customers that go out to the markets, that go bust, that get acquired. Know, if and if you do a if you do a thirty day contract with an exchange and one of their end users goes out the market, then, you know, we we put we we we refresh the hardware and and the the next client gets it. Right? So so, no, the the thirty day period is more we are now confident now with the, you know, with the right marketing this will fill. So that's that's why we're confident it's not about the customers' knowledge. Right?

55:04 Why would you not offer certain exchanges in your revenue stream, Myrtle? Scale. If we don't think they can scale to where we actually make money, then we wouldn't offer it. Or if you know, it needs to be a marketing plan behind it. Right? How much con competition is in the Exchange cloud space? If none, how long do you think for appears, do you think? Don't know. I can't took I I again, I don't have a crystal ball. I don't know what our competitors are doing. I mean, they are you know, a a few of them have copied us before and looking at low level stuff. I'm sure a few of have tried copies again, but whatever.

55:50 Like, it's we've got track record of delivering. You know, it took us years to find a client who would take a risk on our platform, a calculated risk. So yeah. Yeah. You know what? Do you worry about our competitors? Worry about hyperscalers, right, because they're obviously huge, but I don't know. I just think that's the opportunity small for us. Our old school MSP competitors are all drowning on the mountains of private equity debt, so they're not exactly innovative. That's us, I think, folks. So, yeah, timing was good as well. A lot of question. Perfect. Gordon Fraser, thank you very much for answering all those questions from investors. Of course, company can review all the questions submitted today, we will publish a response out on the investment company platform.

56:41 Just before redirecting investors, provide you with their feedback, which is particularly important to you both. Gordon, could I just ask you for a few closing comments? Yeah. Sure. So, yeah, you know, it's been a it's been an interesting week, folks, and I know a a few of you that have followed us for for a while. Nothing goes in a straight line. Right? So the company is in a better position than we've ever been in. We have a stronger team, stronger pipeline, more commercial models to leave our deals, and we'll continue to do that. You know, we we we have an exciting couple years ahead. Ultimately, everyone knows we will sell the business, and we are moving towards getting to valuations and revenue and profit levels where the values become, you know, where we are where we're looking at. So, you know, we're in a good place.

57:31 And, yeah, we're excited for the next couple years ahead. Gordon Fraser, thank you once again for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback, and the the management team can better understand your views and expectations. It's only a few moments to complete, which will be greatly valued by the company. On behalf of the management team of BEEKS FINANCIAL CLOUD GROUP PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.