REG - Intercede Group PLC - Acquisition of Authlogics Ltd

IntercedeAnnouncement

10/10/2022 07:16

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RNS Number : 2583C  Intercede Group PLC  10 October 2022

 Intercede Group PLC

("Intercede," "the Company" or the "Group'')

Acquisition of Authlogics Ltd

Gives Intercede capability to address the whole authentication pyramid and
increases addressable market by 10x

Intercede Group PLC (AIM: IGP), a leading supplier of Public Key
Infrastructure Credential Management Software, is pleased to announce the
acquisition of Authlogics Ltd ("Authlogics", the Acquisition"), a Multi Factor
Authentication ('MFA') and Password Security Management ('PSM') software
vendor, for initial consideration of £2.5 million (adjusted to approximately
£2.0 million after net debt and working capital adjustments) plus a further
deferred conditional and staged earnout payment of up to £3 million.

Acquisition highlights

·    Strong strategic rationale: acquiring IP that will significantly
expand Intercede's addressable market

·    Accelerates Intercede's ability to meet the requirements of new
regulatory standards

·    Authlogics run rate recurring annual revenue of £0.5m further
enhances Intercede's ARR

·    Initial consideration will be satisfied using Intercede's existing
cash resources

·    Acquisition expected to be earnings enhancing in the financial year
commencing 1 April 2023

·    As also announced today, Intercede is trading in line with management
expectations

Klaas van der Leest, CEO of Intercede Group, commented:

"The acquisition of Authlogics enables us to deliver on the strategic vision
that we have shared with investors of addressing the entire authentication
pyramid. We believe that the addition of the Authlogics products will allow us
to support our customers and prospects wherever they are in their
authentication journey, and to embrace a wider set of use cases. The deal also
increases our recurring revenue base.

We are delighted to welcome the Authlogics team to the Group, along with their
customers, partners and distributors."

FURTHER INFORMATION ON THE ACQUISITION

Background To Authlogics

Authlogics is a UK headquartered business based in Bracknell and was founded
in June 2015. A Multi Factor Authentication ('MFA') and Password Security
Management ('PSM') software vendor, Authlogics is the only business to cover
all three key authentication segments (password security management, password
breach database and multi factor authentication) with a seamless integrated
solution. The Company's award-winning products service over 50 customers with
44 annual recurring software contracts across the Finance, Government, Defence
and Healthcare sectors.

Authlogics primarily sells into the Middle East through a blue-chip global
partner network. Authlogics has a high degree of recurring revenue (more than
95%) and is expected to grow strongly over the next three years.

Authlogics revenue grew at a 61% compound rate between the financial
years ending 30 June 2018 and the 30 June 2021. In the year ended 30 June
2021, Authlogics made a small profit after tax of £8,000.

Whilst the Acquisition is primarily an IP deal, Authlogics had £0.5m of
annual recurring revenue ("ARR") as at 30 June 2022.

Strategic Rationale

Passwords remain pervasive throughout the cybersecurity market, despite the
majority of data breaches arising due to compromised password credentials.
Intercede has set out its strategic objective of supporting customers wherever
they are on their passwordless journey by broadening the footprint across the
authentication pyramid beyond our current position in the Public Key
Infrastructure Credential Management System ('PKI CMS') segment.

During this calendar year, the strategic rationale has sharpened following the
introduction of new regulatory standards (e.g. FIPS 201-3) in our core US
federal and defence markets. These new regulations allow customers and
prospects in these markets to begin to adopt technologies beyond PKI. The
addition of the Authlogics products will, in a single step, allow us to
address the entire authentication pyramid. This enlarges our addressable
market more than 10-fold, and these markets are predicated to grow
significantly over the next three years. We believe this enhanced combination
ranging from Passwords to PKI will give Intercede a significant competitive
advantage.

Furthermore, the PKI segment is complex and involves long sales and
integration cycles. The MFA and PSM markets are characterised by simpler sales
and integration cycles which should help with the Group's revenue visibility
going forward. Authlogics provides exposure to markets outside of Europe which
are less penetrated and provide Intercede with the opportunity to grow its
international footprint and deliver increased revenue growth over time.

The Acquisition creates a broader product portfolio for Intercede. This
portfolio is expected to grow to cover Single Sign On (SSO) and Ongoing
Authorisation products which will further enhance Intercedes' client offering.

Acquisition terms

Four of the current Authlogics staff will become Intercede employees,
including the two Authlogics founders.

Under the terms of the Acquisition, Intercede will pay:

·    Initial consideration of £2.5 million on a debt free/cash free
basis; plus

·    further deferred conditional and staged earnout payment of up to £3
million.

The deferred consideration is subject to achievement of significant revenue
growth targets on sales of Authlogics products by the enlarged Group in the
three years to 30 June 2025. The initial consideration of £2.5 million before
adjustments for net debt and working capital movement, will be satisfied using
the Group's existing cash resources. The non-contingent multiple on the
initial consideration is 5x ARR as at 30 June 2022.

The Intercede Board believe that the acquisition will be earnings accretive in
the financial year commencing 1 April 2023.

 

 

 

 

ENQUIRIES

 Intercede Group plc              Tel. + 44 (0)1455 558111
 Klaas van der Leest              CEO
 Nitil Patel                      CFO

 finnCap Ltd                      Tel. + 44 (0)20 7220 0500
 Simon Hicks/Fergus Sullivan      Corporate Finance
 Tim Redfern/Charlotte Sutcliffe  ECM

 

For more information visit: www.intercede.com (https://www.intercede.com/)

About Intercede

Intercede is a cybersecurity company specialising in digital identities,
derived credentials and access control, enabling digital trust in a mobile
world.

Headquartered in the UK, with offices in the US, we believe in a connected
world in which people and technology are free to exchange information
securely, and complex insecure passwords become a thing of the past.

Our vision is to make the highest levels of cybersecurity available to
organisations and consumers alike, solving complexity and scalability issues
by managing high volumes of digital credentials.

 

The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The information is
disclosed in accordance with the Company's obligations under Article 17 of the
UK MAR. Upon the publication of this announcement, this inside information is
now considered to be in the public domain.

 

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