Beeks Financial Cloud Group (LSE:BKS) — Results for the year ended 30 June 2020

0:02 Good afternoon, ladies and gentlemen, and welcome to the BEEKS FINANCIAL CLOUD GROUP PLC Results for the Year Ended June 30. Throughout the presentation, investors will be in listen only mode. Questions are encouraged and mode.

0:19 The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your Investor Meet company dashboard. I'd also like to remind you that this presentation is being recorded. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Gordon McCarthy, CEO and Fraser McDonald, CFO of BEEKS FINANCIAL CLOUD GROUP PLC. Good afternoon.

0:47 Good afternoon, Paul. Good afternoon, folks. Thanks for joining. So as Paul said, we're going to run through some slides, and then there's some questions that have come in already, and we can open up towards the end for any relevant questions. So

1:05 for those that don't know me, my name is Gordon MacArthur. I'm the CEO and founder of BEEKS. I started the business ten years ago and still very much actively involved. Good afternoon, everyone. I'm Fraser MacDonald. I'm the CFO. I've been CFO for the last two years, and I've been with BEEKS for four years now. Prior to that, I've had various roles, largely in technology for the last thirteen years with Serco and our Head of Financial. And prior to that, worked in various industries across different sectors for the last twenty years in accounting rules. So I think before we kind of jump into the slide, I wanted to just kind of give a high level summary of what our thoughts were on the last year. So I think and the results, I think we call it a solid year. Think looking back, I think using the terrible phrase, there was a bit of a game of two halves.

2:00 I think first half was excellent. We seeing some large transactions. The business performed very well. I think we announced two of our largest of our transactions in January of this year. And then all things were running along nicely until COVID decided to interfere a little bit, I think. So I think second half was okay. I think the the challenges that we had with getting some of the bigger contracts live meant that some of we left a little bit of revenue on the table. I think that, you know, some of the big deals consisted in a lot of new global deployments. And given the fact that our engineers couldn't travel to get these sites live, everything just took a lot longer than we hoped to get from that contract signature to to fill billing of some of the big material contracts that we signed.

3:08 Thankfully, that has now all been finished. And the big contracts in January are pretty much 100 billing. And actually, Open Banking one, seen the contract extension towards small contract extension towards the end of the year. So I think we had some impact on the time between signature and billing due to the constraints we had with COVID. We also saw a period of about eight to ten weeks where at the height of the volatility, people were not the stock markets were collapsing and then shooting back up again. There was a lot of people that just had to take their eyes off of new projects.

3:55 All chain, you get stopped because people were ensuring that their systems were coping as best they could with the unprecedented levels of volatility that the market saw. So we had an eight to ten week period where nothing really disappeared in terms of new business savings, but they just were delayed. Right? We had a couple of months where we were a lot of customers are still talking to us, but a lot of customers were into no change, no project type functions at the height of volatility, which again kind of pushed a little bit of more of the economy, the ACMMR type revenue that we look at the key metric.

4:40 I mean, deals that we're saying that we'd be saying in April, May time probably wouldn't have put a huge amount of revenue onto the full year because we've only had one or two months of counting, but I'd say that they kind of deflected from the kind of monthly committed recurring revenue. I think looking at it, we're glad that, that seems to now have been a temporary issue. Usually, July and August are very slow months for us because the city of London and Wall Street basically stopped project function and that's some appeared where everyone's in holiday. We've actually seen the busiest July and August that we've ever had.

5:28 And I think that's a result of a lot of the projects that were that were in delay fees kind of coming into fruition and and and happening. So we we expect that our Q1 is gonna be the best Q1 we've ever had. So it really looks like that was a a temporary measure that has not followed on since the campaign of COVID. But what the long term look, if you go back in the mail, a lockdown and fuel financial market meltdown, you might see that again, but it's very difficult for us to tell. So I think a little bit disappointing that some of the contracts slipped, but I think overall, the business delivered tenth year of existence, tenth year of profit growth, tenth year of revenue growth.

6:21 And the team has worked under very difficult circumstances to ensure that we've delivered for our customers. We've kept the platforms alive during the level of volatility that we've seen. So it's been a difficult year, a strange year and a year of investment as we'll talk about as we go through the slides. So on to second slide. We are now up to 18 data centers globally. So the yellow and blue dots are our global data center locations around the world. This is a well seen map as people have been following us for a period. The black dotted line is our way data network, which connects up all of our data centers point to point.

7:09 So we put seven new data centers live over the course of the last twelve months, which is more than we put live in the previous three years put together. So a huge amount of work and deployments all in the back of customer demand and customer wins. And we'll talk about them as we go through. We are anywhere in the region between three fifty to 400 cross connects at the moment. That continues to grow, will continue to grow and as part core part of our USP.

7:46 So we've got a very good geographical spread now. I wouldn't expect to see anywhere near the same amount of locations for the future twelve months as we've seen for the past. There are not that many areas of the map and financial exchange data center that we do not cover still outside of the equity space, which we're not majoring in. But we've got a very good coverage map there.

8:14 So we're on to Slide three. So the company's changed its strapline or marketing strapline, if you want to call it that, to build, connect, analyze. And you know, this is a result of our Velocimetrics acquisition like four months ago now. So the the legacy businesses as as was, I e, public cloud infrastructure as a service footprints in the financial data centers. So we still have the range of compute options that we always have. We've added certain parts to that in terms of bigger compute nodes. But the classic business model of deploying their cloud infrastructure and financial services data centers as the build component is still there. The connect component is the connectivity piece and that is the new three fifty to 400 cross connects and direct connections we have globally across all of our footprints.

9:13 And then the new part is analyze and that's with our new analytics play on the back of the Velocimetrics acquisition that we are going to in short order rebrand to BEEKS analytics. So BELL, Connect, Analyze and that is us moving to more of a one stop shop for larger Tier one organizations where we can build you a compute stack, we can connect you to whoever you want and we can give you a level of trade analytics and latency monitoring analytics to control that environment. We will talk about that as we go through. So the business model is still the same, 96% of our 94%, sorry, of our revenue is monthly recurring.

10:00 We're up to 18 international data centers and the institutional customer count is now two forty two, just below two fifty. We've started breaking out now our revenue by products. So the nice circle chart there shows overall as a percentage of revenue where that comes from and breaking it down by geography as well. Is there any questions that we can happily talk them through?

10:31 So our strategy remains the same. I think one thing I would like to kind of pull out is on the back of some of the bigger wins. I mean, BKS classically have built public cloud environments. And when I mean public cloud, that means clients share infrastructure. So the network that we put in and anywhere in New York data centers and the classic public cloud is a shared network, shared amongst all the clients that sit underneath it. If you buy a virtual machine, you're on shared infrastructure. If you buy a dedicated server, you've got that compute node that's dedicated to you, you're still attached to the network. We are finding more and more opportunity in what we call the BKS private cloud. So if you look at the two big announcements from January, both of the deals we're building a private cloud for clients.

11:25 IPC, who we can now reference and talk about, and we've got in the slides later. And the open banking client that we're not still not allowed to put in public domain. The main difference between public and private cloud is a private cloud still uses that BKS technology stack that we have always used, the years of experience in that we're known for. But we build out that infrastructure solely and exclusively for the use of a single tenant client. So if you look at the IPC deployment, that is a global private cloud deployment for IPC across nine data centers around the world, and there is no shared resources within that implementation. And the reason it's important is the bigger clients, the tier one banks, exchanges, brokers prefer private cloud environments because it gives them a much more fine grained control over the security setup.

12:23 They can guarantee performance and it satisfies the risk and compliance departments much more. So again, we'll talk a little bit more about private cloud as we go through some of the slides because we see that as a bigger a more growing opportunity for us over the next twelve to twenty four months.

12:42 So I'm not major on this slide. If people on the call have been following us for some time, this is really looks at our performance since IPO. So I think we're nearly 70% revenue growth over the few years we've been on market. Our monthly recurring revenue that we use as our probably most important KPI is up 62% and our EBITDA is up 44% over the couple of periods that we've been on market. And then finally, we talk about an organic Tier one customer wins and the amount of acquisitions we made there as well. So as I say, people have been following us for a period, they'll the numbers won't be a surprise. So Slide five.

13:30 It's been a big year of investment for us and we actually call it a kind of year of people. I was the seven new data centers, we have the 45% increase on the actual physical capacity that we put online. So again, we put more capacity online this year than the previous three years combined. Some of it is already utilized with some of the deals that we've signed, some of it is sitting waiting for both the pipeline that we've got and hopefully some of the contract extensions that we're expecting. The company headcount has almost doubled over the last twelve months. Part of that is the acquisition of LosiMetrics that came with 10 or 11 people. But we've invested quite heavily in headcount to scale up to meet the demand of some of our larger clients.

14:24 We've invested in product management functions. So previously, I don't think you would say we built a classic product, but we've got some big product releases that we're looking at over the next twelve months. So we've been building out that product management function, information security. We hired a CISO, Head of Information Security, and he's building a security team. Again, hugely important in our area. And then we announced a few weeks ago that we had obtained ISO 27,001 accreditation after a year of effort and investment to do that. And those of you who are not familiar with the certification, that is a certification on IT security process methodology and implementation.

15:13 So I think previously we'd already talked in previous presentations that not having ISO 27,001 had been a bit of a prohibitive to us because when you answer a when you're submitting a proposal or you're doing an RFP for a bank, one of the first questions are, do you have ISO 27,001 or SALT two, which is the kind of U. S. Equivalent, a bit bigger. I mean, you had always had to say no and it opened up four hundred secondurity questions that you had to go through and it was just a big negative mark against it. So Graham, who's laid out from our side with input from Paul and the rest of the team, we're glad that after twelve months of investment, we have the 27,001 certification that is live for two years and then you get audited every year after that. And the plan is we're going to go for the SOC two certification over the next twelve to eighteen months again, which is a bit more U. S. Focused and again a higher level of certification.

16:24 So into Slide six. So finally, we're allowed to call out some of the wins that we the kind of tier one that we classify the wins and we'll go through a couple of these. So Admiral Insurance, one of the biggest insurance companies in UK and Europe, we have had their system live for quite some time now. And again, it was a kind of break from normal implementations that we do. So we are connecting Admiral's data centers from Cardiff and Swansea, where the call centers and the legacy infrastructure resides and connecting into the BKS cloud in LD4 and then in London LD4 and we then connect them on and provide them managed resilient connectivity to both our cloud, Google, Microsoft Azure and AWS.

17:17 So they have a cloud first strategy where they are moving a lot of the legacy infrastructure into the cloud and they're using us to enable that for them. So insurance, I don't think is ever going to be a massive part of our business, but was really our first win in the hybrid cloud connectivity space. And since we've done it, we've had many more smaller engagements of a similar nature. And a lot of the implementations we do now take some BEEKS cloud infrastructure, but as part of it, they also connect to need to connect to public cloud environments like AWS or Azure or whatever. There's no one cloud fit all fits all strategy for the large investment banks or brokers or mainstream banks. People are splitting up workloads across different cloud providers depending on their requirements.

18:17 So we're seeing much more of those hybrid cloud connectivity engagements coming in. So IPC on Slide seven, that is the $1,000,000 a year annualized deal that we announced in January at the time we were under NDA, but we are now allowed to talk about it in the public domain. So IPC might not be classed as a Tier one by people out of financial services. But IPC are a very large US tech company to provide the voice infrastructure. So if anyone's worked in a trading floor and you see pictures of a trading floor and you see dealers on these huge, big tight systems where they're taking and receiving voice calls and lots of that still goes on.

19:07 IPC provide these systems and they archive and store all the voice calls and allow people to work from home, traders to work from home, which have been particularly relevant over the last few months. And really are the dominant player in that industry. So their clients are the biggest banks, the biggest investment managers in the world. So IPC commissioned us in January to build a global private cloud platform for them, as I mentioned before, across nine data centers globally, where instead of having on premise systems, IPCs do Connects as Unity product will reside on the BEEKS private cloud and that will be a cloud based system.

19:53 So the first annual the first million dollar a year deal that we signed was for the first seven or so clients. Six have been fully deployed with one in transit at the moment. But we hope that and believe that there's many more clients to come over IPC have a couple of 100 customers in their old on premise solution. Not all of them will move over to the private cloud that we provide. Some will use internal resources. But we really hope that, that $1,000,000 a year contract becomes much more significant in the short to medium term. And the relationship is very strong. IPC are we're looking to make some joint announcements, not RNS, price sensitive stuff, but more announcements on the partnership between BEEKS and IPC over the next few weeks and few months where they're very happy with what we've done, and we are moving that relationship up a notch.

20:58 So we hope to arrange something around that in the short to medium term.

21:06 Slide eight. Unfortunately, we can't use the bank's name, but we wanted to use this as an example and just to pull out what Velocimetrics does. Right? So VelociMetrics is a software product that will change, but it really has two different areas to it. So it's been the domain of that, the very biggest financial institutions, exchanges and banks. It's expensive stuff. And what it does is for this particular UK bank, one of the biggest UK banks,

21:44 they use it to capture all of their equities trading information across the three main equities trading hubs globally. What that means is every trade that goes through the equities desk is stored in fine grained detail in an archive and a packet capture system. So that as the bank gets a query on a trade from a regulator, from a client, they say I want to pull this particular trade from three weeks ago, Velocimetric stores to a packet level detail what has happened from that entire trade flow. So they can explain if there's an issue with the trade, whether it be the bank side, customer side, technology side, or if there's not, they can prove there's not.

22:33 So hugely important to satisfy method demands, risk and compliance demands, etcetera, etcetera. The second part of it is it provides real time analytics on the transaction system. So it's constantly set and monitoring the speed of trade flows through the entire bank's system and will flag up if there's latency increases beyond certain parameters, if executions are starting to slow down, if particular from an FX customer, if a particular FX cost has stopped ticking. So it gives real time analytics to the banks, IT professionals to show that there's a problem in their environment somewhere.

23:27 And it will pinpoint where that problem is. So hugely powerful stuff, hugely expensive stuff and has been classically sold as a software product that's bundled on very big servers and delivered to the bank for them to house and their own data center space and their own environment. And I think we, again, we've not made any secret of this. None of this is price sensitive or we wouldn't be talking about it. But the one of the reasons for us buying them was to put their software offering on top of their infrastructure offering to come up with a SaaS based product. So we why is it important? So it will bring the price point down significantly.

24:12 So we can use it to access some of the smaller institutions that maybe couldn't have afforded the multimillion pound that this would cost to put in 10 locations around the world. And it gives quicker time to market, so quicker time to value. So one of the problems banks have is how slow they are to move. So even after they buy this stuff, it can sometimes take six, nine, twelve months to get it implemented, to get them seeing value from it. By offering it as a SaaS product we are the bank simply has to cross connect to the BEEKS infrastructure environment and the financial data centers. We have done a lot of the preconfiguration. We have the system live. There is some tuning, there is some work still to be done, but we can shrink that implementation time down dramatically.

25:03 And with all the banks, they are looking for our cloud solutions, they're looking for SaaS based solutions. They do not their preferred deployment model as long as you can satisfy the security concerns, they are looking for outsourced cloud based solutions. So we've got high hopes over the next twelve to eighteen months. As really one of the only probably the only SaaS vendor who will allow external clients to connect and consume that service, we've got high hopes for that product as we go forward. And I'll talk about some more product releases later on. But if you go to Slide nine, I'm going to hand over to Fraser. Afternoon again, everyone.

25:49 Okay, I'm on Slide nine now. I'll talk you through the P and L and income statement for the year. And I think as Gordon says, we had a very good first half and second half probably a bit slower than we would have liked. And I guess for us, the first half is always more important. We're not 94% recurring revenue model. If you're saying stuff earlier in the year, you get eight or nine months of revenue as opposed to two or three months if you're saying it in the second half. So actually, having a good start to the year gave us a really good start. And ultimately, 27% revenue growth throughout the year, given some of the challenging circumstances in the second half, I think we've got to be relatively happy about, as Gordon said, some of the delays in some of the Tier one deployments in the second half cost us a wee bit. And we also had slightly higher churn levels at this lower end of the market, not significant, but in terms of some of the volatility in the markets during the kind of height of the pandemic meant that a couple of the smaller businesses that we have in our books went out of business. So one of idle for us, but again, a slight decrease in revenue.

27:01 And the churn was about 2% as opposed to 1% a month for the final quarter. In terms of that split, that 27%, about 15% of that was organic growth, with the remainder coming from 300,000 roughly for VelociMexix, a couple of months' worth of revenue there. And then the CNS acquisition, the small retail acquisition we made back in May 2019 contributed a full year. So again, that helped with our revenue growth as well. In terms of gross margin, you'll see similar to last year, slightly ahead. And just to call out a couple of things in there. The first thing again, and we talked about this at interims, we changed our useful life asset and depreciation cycle this year from four years to five years.

27:49 And as I said, we were transparent about that interims. And again, looking back, we had infrastructure as a service company. A high degree of our spend is on capacity and infrastructure. So it's important that we get that useful life correct and accurate. And having those the foresight, we've been trading for ten years. We know that we get six or seven years useful life, sometimes more out of that kit. So we decided to realign that. And again, that's similar to what other companies in our industries are doing. So we were looking to label the playing field there. But again, that gave us a couple of percent in terms of gross profit, so that helped. We also got some better pricing across our third party supply chain, again, because of our bigger scale, enabled us because of the volume that we are putting through some of our providers. We got some better pricing. So that helped the gross margin this year as well. And then the other side of that, Gordon mentioned, have had a year of growth. So we put seven new data centers onto our estate.

28:51 And as we put those data centers in, we always go in with an anchor customer. So we've never been a if we build it, they will come type mentality organization. So we do get revenue into those new data centers. However, there is usually about twelve month OpEx breakeven target for us. So as we expand those data centers, that has a slight negative impact in gross margin, which is why overall, it's only up 1%. And then in terms of how that's all flowing through to the bottom line, GBP 1,300,000 to 1,400,000 PBT is still 8% growth, which again, I think given some of the investment that Gordon talked about in terms of capacity and also headcount, then we've got to be relatively happy with that. The headcount increases of MAID have been more on the front office of sales, marketing, software development, so actually staff that will ultimately make the business money.

29:47 In terms of our network operation staffs or engineers, we've actually only gone from, I think, to 12. So in terms of our automation strategy, we've not had to have a huge increase in spend in the back office support functions, which again is pleasing. And I think overall, if you look at our operating margins, you can see we're sort of operating profit at the mid to high teens percentage is really where we should be at.

30:15 Okay. And then again, next slide. Gordon mentioned we have put more capacity on the ground than we have for the last few years combined. And again, that's a result of a few things, customer growth and we always do go into those new territories with an anchor customer. But we put if you look at overall capacity, we've gone from under 30 racks to over 50. So there has been quite a big increase throughout the year. And I think the other key thing to draw out now is there is quite a bit of unused capacity across that estate. So the yellow box, as you see, is capacity that we still have to fill up. What that means is actually in terms of the additional OpEx requirements for that capacity is low.

31:02 So that is in terms of potential additional gross margin across our current footprint.

31:11 And again, just coming on to cash. So as you'd expect with the recurring revenue model, our operating cash flows are healthy and have grown. If you look at the overall net cash from operating activities is about 23% up on last year. And if you exclude there's an IFRS 16 adjustment through there. So again, healthy growing operating cash flows. If you look at that, what we've done with that, we have pretty much reinvested that all back into the business. And as the custodian of the cash in the business, I do always have to keep reminding myself that I was spending money on capacity is a good thing because it shows we are growing. In terms of this year, it's been an unusually high amount of spend. I think there's a few things that the Tier one customer that Gordon talked about, which is $1,000,000 annualized has a higher degree of CapEx investment, similar model

32:06 as we have, and it's normally roundabout GBP 5,000 to GBP 6,000 of CapEx spend for GBP 1,000 of recurring revenue. But because of the scale of that, Tier one obviously has an additional upfront spend. So again, it's higher spend, but it's a good model and it's still a five to six month payback. Then I think a couple of other things to call out, the new geographies as well. When we go into a new geography, it requires a CapEx investment. In terms of the start of COVID, we had some slight concerns over supply chain, where we thought there may be an unavailability of this space. So we spent an extra couple of 100,000 there just to be prudent. So ultimately, have generated more cash and we have reinvested that in the business. And as we look forward, I think in terms of our operating cash flow, again, we would expect that to continue to grow along with our customer growth.

32:59 I think in terms of data center expansion, we will not, as Gordon said, expect a similar level to last year. That will be a bit smaller. But ultimately, higher Tier one or extra deployments will require additional CapEx. But we're still relatively low in terms of our gearing. We have about onethree debt to equity and bigger Tier one deployments requiring extra CapEx will be a good problem to have for us. And we will look to see in terms of if we do have potential additional cash to raise, how we would decide to do that. Okay. I'll just hand you back over to Gordon. Thanks, Fraser. So I think as I said earlier, the year of people last year.

33:46 This year, we are viewing it as a year of product. And and that's a that's a new area for us because we are trying to productize and and release, you know, a combination of infrastructure and software based products to the market. So as I as I mentioned, Velocimetrics will be shortly brand rebranded as BEEKS analytics, and we are hoping to make our

34:15 first launch of the version one of the SaaS products in the next few weeks. We have a number of our existing BEEKS clients that are potentially interested in the solution. I'm working on it with this in the preproduction run. So, again, I'm not I'm not seeing anything that's going to be price sensitive here. So hopefully, that will happen in the next couple of weeks. Velocimetrics, we have a V10 release, so version 10 of the product. I think Velocimetrics suffered previously because like BKS pre IPO, they were they had no external investment. They were a bootstrap company.

35:01 We went into it with our eyes open knowing that there was some things that we needed to fix the product that needed our level of investment. And we've been doing that for the last three or four months.

35:14 We've built the development team, more importantly, the testing team and the product team. So we think around January time, the Version nine is the current version of the product V10. For that end to end, where we still sell the software on the big box that goes into a bank's data center, there's still demand for that, always will be. That will be our first product release and under BEEKS ownership, probably at the turn of the year. Then the second the last two, network automation and stand alone BEEKS private cloud, I'm going to bundle into one. So I think that's probably our most significant opportunity at the moment. So kind of talked through what the difference between public and private cloud was previously.

36:02 And we are one of probably in a unique position in our world where we have got all this decade long experience about building these public cloud environments. We've now got an analytics offering that we can bundle in. So we have the component parts of an end to end private cloud solution, right? And we are trying to productize that. So if you look at IP, the IPC deal, the open banking deal and there's been a number of smaller ones since then, we are building bespoke private clouds at the moment. Right? When a customer will come in with their individual demands and we are kinda putting component parts together, the compute, the network, firewalling, the analytics.

36:50 What we're doing over the next six to nine months is putting that all into our product. Right?

36:58 Where we will pre we will pre install interacts in the Glasgow Data Center, all of the infrastructure from compute nodes all the way up to the network, all pre cabled, all in a data center rack that we can wheel into a customer data center, an exchange data center, a customer space. But the important thing that we're doing is building an orchestration layer, a software layer that allows that end to end management of all the components in the rack. So from the low latency switches down to the compute nodes, including the analytics in there as well. So a one stop shop web portal based on our existing technology that a customer can manage themselves.

37:48 And that's the key difference. So the absolute biggest of the big are still have issues with MSPs or service providers having access to data. Not that the thing just causes compliance headaches. So, you know, a lot of a lot of these big guys have got twenty, thirty, 40 racks of infrastructure and data center. And this private cloud offering will allow them to have a BKS private cloud, low latency private cloud, connectivity rich environment with analytics and their own environment that they manage themselves via one stop shop GUI. So they don't have to go down into the Avista command line interface. They don't have to go down into the velocity of the appliance. They manage it all themselves.

38:49 So it means our network engineers are not doing the configuration, the management, the support at the domain of the customer. And we are going to pre configure it all, send it to a customer data center, they power it and they plug it on, and it all comes alive and it's managed via the portal. It's going to be between GBP 8,000 to GBP 10,000 per month per rack depending on what level of compute or analytics you need. And customers may want one rack, of course, some of the bigger customers may want up to twenty, thirty, 40 racks. And the management interface will manage the entire resource stack across the private cloud that we build for them. But that's the key thing, right? They're effectively getting our tried and trusted technology and an environment controlled owned and managed by themselves.

39:43 So that's a big, big piece of work. We are six, nine months away from the MVP, but it's using all the constituent parts that we've got. And we don't believe that any of our competitors are anywhere near being able to offer this as a competitive service. So needs to be network automation in it. There needs to be analytics automation in it. There needs to be you know, server deployment automation in it. And and these constituent parts are all being netted together by our ever growing software development team and our product managers. So some big product releases, I mean, we've not there's an investment there, but it's not as if we're building our stuff from scratch, right?

40:32 We need to build some environments test environments, but we're not saying we're going to go and invest 5,000,000, $67,000,000, million pounds of product and hope it sells. We are more being a bit clever on how we knit it all together and make it more suitable for larger, more security conscious financial institutions. Okay. So the last few slides and then we can move on to question q and a. So I'll I'll kinda go through these. So VMX has given us another avenue of opportunity. It's given us another part to our portfolio as allowing us to put some really market differentiated products together over the next year. So if you look at and I think I spoke to a couple of our big institutional investors when the acquisition happened, a 1.6 upfront cash and share and then a total consideration of 4.3.

41:38 It doesn't look like the biggest deal in the world, but strategically, it's actually really important for us. We've got some investments in the product, but to do, but if you can get that right, it opens up a lot of doors for us. Go into the current financial year with a really fast start. I think COVID has a temporary stop in decision making, but it's actually if there's a winner to be called out of COVID, I think people understand that cloud technologies and cloud scalability is probably one of the big winners. I think a lot of the bigger institutions are looking at the cloud strategy and trying to fast forward how they move some of the business critical trading and non trading applications into cloud providers.

42:27 So in general, I think it's we're in a good market segment. Financial services continues to be relatively unaffected by COVID and being in cloud computing within that segment is probably as good a place as we could hope. What a second lockdown or whatever brings, we don't again, we don't really know like anyone really knows what that means. But we started the year fast. We've got a we've got a a great pipeline bill than we've ever had and it's nice date to us to execute on that opportunity progress. That's it. So I'm not gonna go to the appendix as I think we've moved back to going to the Q and A. Fantastic.

43:16 Gordon Fraser, thank you very much indeed for updating investors there. Ladies and gentlemen, do please continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. Just while the company do take a few moments to review those investor questions submitted already, I'd like to remind you that recording of this presentation, along with a copy of the slides and the published Q and A, can be accessed via your investor dashboard in the Investor Meet company platform. Before I hand back to Gordon Fraser, I'd like to remind you that your feedback is important to the company. Immediately after the presentation has ended, you will be redirected to the opportunity to provide feedback in order the company can better understand your views and expectations. Gordon Fraser, perhaps before we look at some of the questions submitted during the live event, I wonder if you could go through a couple of the pre submitted questions from investors, if that's okay?

44:03 Sure. Great. I will start with the first one, if that's all right. And I'll just read out the few we have here, and we'll go from there. First question, how large is the opportunity, open bracket, from a revenue perspective from Tier one customers? How much of the revenues would come from Tier one customers from the next two to three years? Good question. I mean, we've been asked that a lot, but it's incredibly hard to quantify. I mean, we are aware of deals in our world out of the from one bank that are on the order of magnitude of GBP 15,000,000 to GBP 20,000,000 a year from one bank. When you look at big multi site deployments and market data and connectivity. So, you know, it's it's massive.

44:52 Can I give a a figure on it? I I I can't. Financial services are incredibly you know, even the references that we have slowly taken a year to persuade clients allows to talk to them. Financial services by the very definition do not want any publicity on any of that stuff. So yeah, I mean, I think we'll deal, maybe phase two of a deal. No one goes with a big bang. Here is an entire trading platform. It's more like the IPC type of scenario where we've been given seven clients, important clients, but seven clients nonetheless out of 100. And then gradually, they will save larger and larger commitments. And that's the way the bigger institutions work. You get given a kind of smaller piece of the pie and day one is a new supplier.

45:38 And as you deliver, they'll let you get a chance to land and expand. So in terms of how much of the revenue would come from Tier one customers, I mean, I think we're going be 12% at the moment. I think more importantly, we are moving away from the month to month side of things. Are 85%, 90% of our revenue is month to month. It causes us problems from a forecasting point of view. It just makes life more difficult. So we are moving to multiyear deals. So I have an ambition that we get to between 50% to 60 of our revenue as multi year committed within the next couple of years. So whether it's a Tier one bank or it's a big liquidity provider, it's more important as a business that we've got longer line of sight on contractual commitments. So we are that's what we were driving.

46:37 Fantastic. Thank you very much indeed. Next we've got here, who are you displacing and winning new clients? And who are you competing against? Perhaps can you give some examples of new wins? I know you've given some of those in the presentation. Yeah. So it's mostly in house IT systems. So it's not like we are competing with other cloud vendors. You know, a lot of that stuff is still setting in client owned data centers where they are all madly struggling around to get out of. So 90% is either a client and then to new geography or then moving a legacy application from a data center or an in house solution out into the cloud.

47:27 There's not a huge amount of vendors in our space. So it's not you maybe go to RFP with a couple and we're involved in some of that. But the majority of our new opportunity is this move to the cloud where legacy IT systems, specifically in financial services are still in their infancy of moving out of big customer owned infrastructure into the cloud. Fantastic. Thank you. And last one we've got pre submitted. What are the key catalysts to increase revenue this year? And can you cross sell to your existing clients again in some of these points you've covered, but if there's anything else to add, that'd be great? Yeah. I think I've covered that. I mean, know, the IPC deal is a is a good example. Right? You know, that's you you know, we have a we have an eye on new logo wins, which are hard for and take a long time and especially with the delays we've seen over the pandemic.

48:29 But we have significant land and expand opportunity in a Tier one customer to be one. Both legacy BKS clients and the loss of metrics comes with their own set of customers where the software is really highly embedded and they have real deep relationships and there's significant cross sell opportunity there. But yes, I mean, land expand and continue winning new logos is where we will drive revenue. That's great. Thank you very much. I know I haven't given you perhaps a great amount of time just to look at the Q and A that's come in, in the live meeting. But if you could just perhaps scan through that and where possible to respond, if you could just read out the question, that would be fantastic. Thank you. Yes. So first question is why not consider a listing in The U.

49:15 S. Given the deep discount in the shares of trading at with on aim? We've never really considered it, to be honest. I think, you know, I you know, we the director of the company, I'm sure that we listed company thinks our shares are undervalued. The flip side is some of the valuations in America seem to be a little bit bubbly at the moment. So from fuel logistics point of view, I the UK listing, UK company, the significant overhead from management team on managing that as a UK listing to swap that into US would would be a bigger drain on our time. And I think our size, shape, and scale means it's yeah. It's not something we're looking at short order at all.

50:09 Fraser, do wanna talk about the capacity? Yes. I think the question, how quickly do you see filling the additional capacity? Again, it depends. So we we have put quite a bit of capacity on the ground, but, you know, a couple of big additional Tier one engagements and that will start filling up quite quickly. So it's quite a difficult one to predict that. We are constantly front loading in capacity. We never want to be in a position where customers demand and we don't have the footprint or the capacity to satisfy that demand. So as I say, it's quite a tricky one to answer. It depends on how quickly we grow that top line. It's not an issue for us. We're always trying to to front load. So it's probably not a great answer, I'm afraid, but it's a difficult one.

51:01 Third question, what proportion of revenue do you see the hybrid cloud contributing? Do you have a target? No. We don't we don't put hard and fast targets on it. And it's difficult, you know, so a typical engagement now is some infrastructure and some hybrid cloud connectivity. And we don't really hide off between exchange connectivity or so these big public cloud vendors are just an endpoint for us. So we don't like we don't have a revenue recognition policy on what portion of our revenues connecting to LMAX in London or CME in Chicago, same way we wouldn't break out that who's connecting to AWS and how much we charge them for it because all we see there is an endpoint in our network.

51:53 So we don't do it, I'm afraid. And then next question, the big strategy has evolved with the velocimetric and hybrid cloud proposition, what next? So I think I covered that in the product roadmap. So SaaS version of Velocimetrics and private cloud product, the standalone BEEKS private cloud products are two big pieces of work that we are in the process of developing and releasing to the market. So hopefully that answers that. Ali, by the evaluation high for a small company, what do you intend to do to bring it down? I'm not sure there's 53% stakeholder.

52:40 I'm gonna do anything to bring the the value of the the organization price down. I'm not really sure. That's a great question, to be honest. Next question. Your move to provide bespoke private credit solutions for us. Very important. We are our competitors in that area and how long will it take them to catch up. So there really is only us and one other competitor right there that's got the infrastructure and analytics capability. I'm not really going naming them and I really don't really given a competitor of any publicity. This is not stuff you can just build quickly.

53:28 I mean the Velocimetics product is a ten year old product. To build it from going up, it would take a couple of years. Our orchestration platform, we've been working on it for two point five to three years. So plugging it all together as a significant piece of work, it never made building the component parts. So it's difficult to say exactly how long it would take a competitor to do it. And like the public cloud environments we build, none of our old school classic competitors have really tried to do that themselves, right? People put cloud in some of the messaging, but no one is none of our competitors have that ability to go on to a web portal and deploy infrastructure and deploy connectivity.

54:21 So I don't see any of our competitors making even the noises of building the component parts, never mind pulling it all together. So it's a difficult one to answer. But yeah, I don't know. I'm going do the next one. So I think the questions around margins and operating profit percentage falling. And yes, if you look at the P and L statement 2018, twenty nineteen, twenty, you can see that there's a bit of a trend there. I think really so I think if I take 2018 first, one of the things is we were not fully on the LSE at that point. And there is a bit of a cost associated with being listed in terms of having to retain a nomad, having to pay legal fees, having to pay for to get your PLC accounts audited.

55:14 So I don't think I think 2020 is probably a bit unrealistic. If you look at 2019 to 2020, yes, absolutely, there is a reduction, which I think I mentioned earlier. Ultimately, we have invested quite a bit over the year. And if you add that to the fact that we had a bit of extra churn and a bit of delay in some of the second half of the year, that 3% PBT margin reduction though in terms of quantum is about two fifty ks. So it's not huge and actually a bit more revenue, a bit less churn then we would probably similar to last year. We should be at the sort of high to mid teen operating profit margins. If we are not, we need to be asking ourselves questions. Ultimately, our pricing we are not in a hugely price sensitive market. We live and die by our service provision. So if we start seeing some of that margin come into a level that we're not comfortable with, then we would look at that. But again, in terms of how we're looking into the next year, with that level of investment this year not being as significant as it was last year and with the increased revenue coming through in terms of our AC MMR exit and then getting that revenue delivered, we'd expect to see those margins coming back up again.

56:27 All right. So last question from Ray. With the VMX acquisition, how are we ensuring that we do software development properly? Think it's kind of summarizing the question. Good question, mate. So a few things. We have been building our own software at BEEKS for a number of years. The self-service portal as output from our software development team. Velocimetics are a mature software organization. They've been building software product for ten years. My back when I was at IBM, I spent four years advising customers as part of the IBM National Software Development Tooling process and best practice. So that's an area that I am a little bit familiar with.

57:17 So these are not this is not just going into software from a cold start. We have had an in house development team for a number of years, not seeing it's perfect. I don't think any software development process is. I think streamlining and improving that is a never ending work item. But we've got some really good people in house and we're supplementing that with experienced engineers. And we ask everyone who comes in new with fresh eyes to have a look at overall processes and procedures. And we're fairly small and open organization, so people can contribute and we have an open forum and an open suggestion forum for how we build better software product, but it's not a new 40 for us.

58:12 Or a SOC two investment aimed at satisfying a particular client. No, no. I think if you kind of look at the rankings and where these accreditation set, so ISO 27,001 is an absolute must have. SOC two is a bit more stringent. It's a bit stricter. It's much more prevalent in The U. S. So I thought that kind of UK, European type regulatory framework. SOC is the kind of U. S. Equivalent, but stricter. So not particularly for one client, but we get asked, do you have ISO 27,001 or SOC two? We want to be in a position where we answer both as yes.

59:01 Fantastic. Of course, was going to say you've done a great job. So thank you very much to both of you for that. That's very kind indeed. Just before we redirect investors for feedback, perhaps I could just ask you just to wrap up before we do so. Yes. No, listen, thank you folks for joining us. Hopefully, we try and be as open as we can around our performance, trying to be honest with our investors with our sales. But thanks for joining. Myself and Fraser are always usually around by Alma if you need anything else or you've got any questions following up, I'm happy to help. That's great. Thanks again, guys, for updating investors today. If you access the meeting from our website, the feedback page will appear just a few seconds after the end of the webinar. If you come in via the link in the email, it'll ask you just to log in to submit your feedback.

59:58 So therefore I would like to say thank you very much to Gordon Fraser, BEEKS FINANCIAL CLOUD GROUP PLC. That concludes today's presentation. Thank you very much indeed for attending today.