Kape Technologies - Final Results
21/03/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230321:nRSU5983Ta&default-theme=true
RNS Number : 5983T Kape Technologies PLC 21 March 2023
21 March 2023
Kape Technologies plc
("Kape," the "Company" or the "Group")
FULL YEAR RESULTS FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2022
Record financial performance, delivering sixth consecutive year of high
double-digit growth
Pro Forma Adjusted EBITDA exceeding management expectations at $176 million
Kape Technologies plc (AIM: KAPE), the digital security and privacy software
business, announces its audited results for the twelve months ended 31
December 2022 ("FY 2022").
Financial Highlights
● A record financial performance across FY 2022 driven by
significant organic growth across digital privacy, security, and content
divisions and robust market tailwinds
o Revenues of $623.5 million, an increase of 170.3% (2021: $230.7 million)
o Strong recurring revenue contribution at 86.8% of total revenue (2021:
c.92% on a pro forma basis)
o Pro Forma Adjusted EBITDA up 125.6% to $176.0 million (2021: $78.0
million), exceeding management expectations
o Increase of 140.7% in Fully Diluted Adjusted Earnings Per Share to 55.6
cents (2021: 23.1 cents)
o Strong cash generation; adjusted operating cashflow increased by 275.1% to
$165.5 million (2021: $44.1 million)
o Operating profit up 161.6% to $100.1 million (2021: $38.3 million)
o Profit after tax up 203.2% to $70.9 million (2021: $23.4 million)
● In September 2022, the Company completed a significantly
oversubscribed capital raise of £190.1 million.
● Secured modified debt facilities of $425.0 million in November
2022
o Included existing lenders and two new banks
o Adjusted leverage at the end of the period is now below 1x
o Generating c.$20 million in net debt reduction and c.$8 million in savings
on financing costs
Operational Highlights
● Kape now serves over 7.4 million paying customers globally, a 12%
increase from the previous year
● Integration of ExpressVPN exceeded expectations, not only
accelerating our growth but strengthening the capabilities of our entire
digital privacy division to deliver market-leading privacy products
● The Company realised $9 million of synergies in FY 2022 and expects to
realise the full planned operational synergies of $30 million in FY 2023
● Unveiled new products and features across key brands, underlining the
Group's commitment to digital innovation and consumer privacy, including the
ExpressVPN Aircove, a groundbreaking Wi-Fi6 router with built-in VPN
● Secured a number of new partnerships to expand distribution footprint,
including an agreement with Remote to provide the Group's industry-leading
brands with access to the business' global customer base to support greater
privacy protection in the remote work sector
Post Period-end and Outlook
● The Group has made a strong start to FY 2023, driven by ongoing
cross-sell initiatives and well-established customer acquisition methodologies
● After overperforming in 2022, the strong start to 2023 underpins
the Board and management team's confidence in the future performance of the
Group.
● Supported by the capital raise in September 2022, robust balance
sheet, and proven track record of acquiring and integrating businesses, Kape
is well positioned to explore potential M&A opportunities in 2023 to
complement the Group's organic growth, which is directly in line with its
ambitious buy-and-build strategy.
Ido Erlichman, Chief Executive Officer of Kape, commented:
"Kape delivered an outstanding performance in 2022, delivering our strongest
year to date.
Over 7.4 million paying subscribers globally now consider Kape their company
of choice in the digital privacy and security space, up 12% from the previous
year.
The need for greater digital privacy and security has been key, as more and
more individuals are recognising Kape's brands as household names in the
digital privacy arena.
Kape has delivered consistent profitable growth, executing on our strategic
objectives year over year for six years in a row. We believe we are in a
perfect position to capitalise on the growing demand in the markets in which
we operate, through organic growth and strategic M&A activity."
Enquiries:
Kape Technologies plc via Vigo Consulting
Ido Erlichman, Chief Executive Officer
Oded Baskind, Chief Financial Officer
Shore Capital (Nominated Adviser & Broker) +44 (0)20 7408 4090
Simon Fine / Toby Gibbs / Mark Percy / James Thomas / Iain Sexton
Stifel Nicolaus Europe Limited (Joint Broker) +44 (0) 20 7710 7600
Alex Price / Brad Topchik / Alain Dobkin / Richard Short
Vigo Consulting (Financial Public Relations) +44 (0)20 7390 0237
Jeremy Garcia / Kendall Hill
kape@vigoconsulting.com
About Kape
Kape is a leading 'privacy-first' digital security software provider to
consumers. Through its range of privacy and security products, Kape focuses on
protecting consumers and their personal data as they go about their daily
digital lives.
Kape has c. 7.4 million paying subscribers, supported by a team of over 1,400
people across ten locations worldwide. Kape has a proven track record of
revenue and EBITDA growth, underpinned by a strong business model which
leverages our digital marketing expertise.
Through its subscription-based platform, Kape has fast established a highly
scalable SaaS-based operating model, geared towards capitalising on the vast
global consumer digital privacy market.
www.kape.com
Chairman's Statement
After six consecutive years of high double-digit revenue growth, 2022 has been
another strong period for Kape, and the most successful year to date.
During this time, Kape has been transformed into one of the leading platforms
in the consumer digital privacy and security space, with over 7.4 million
subscribers enjoying Kape's products as they become a household name across
Europe, America, and Asia. We have seen digital privacy grow in priority for
individuals, as their digital footprint expands, and we believe this trend
will continue to accelerate. As we continue to aggressively grow our product
reach, we are in a premium position to provide best-in-class products to
assist our customers in managing their digital identity.
Our teams have been busy across the year, delivering strong organic growth
across all our segments, to deliver revenue at the top end guidance and
exceeding our proforma Adjusted EBITDA estimates, following the full
integration of ExpressVPN, our largest acquisition to date. We also secured
additional growth capital from our investors and secured a substantial
long-term debt package for the business.
The integration of ExpressVPN was expertly delivered during the year,
surpassing all expectations and strengthening our digital privacy division
capabilities to deliver market-leading privacy products. Concurrently, Kape's
Digital Privacy, Security, and Content divisions all delivered strong organic
growth. The Digital Content Division has seen accelerated growth since joining
the Group, and continues to provide Kape with unrivalled market insight,
enabling the continued enhancement of our product suite and underpinning
R&D, marketing, and advertising strategies.
In October 2022, we completed an oversubscribed £190.1 million equity raise.
This is testament to our overarching business strategy and global reputation
as a leading pure-play digital security and privacy provider, as well as
demonstrating the support from investors to pursue our M&A strategy, where
we have a successful record of executing accretive acquisitions to support our
strong organic growth.
Additionally, we expanded our teams in Asia and Europe, two key growth
geographies for the Group, recruiting new employees to facilitate the
acceleration of our R&D and sales and marketing efforts across the
territories. We also rolled out a range of innovative products and features
across the year, including Threat Manager, Parallel Connections, custom DNS
and the award-winning ExpressVPN Aircove router - the world's first Wi-Fi 6
router with a built-in VPN.
Board Changes
We welcomed Dan Pomerantz, co-founder of ExpressVPN, as a Non-Executive
Director in 2022. Dan is also an executive of the Company in his capacity as
the General Manager of its Digital Privacy Division. Dan's extensive
experience building products and brands at scale, together with his business
acumen and financial knowledge, will be invaluable as Kape looks to enter the
company's next phase of growth and expansion.
Environmental, Social, and Governance
After a tumultuous year for environmental, social and governance ("ESG")
issues at a macro level, it's never been more important for us to do our part.
At Kape, our commitment to ESG underpins all of the work we do to ensure the
digital privacy and safety of people online.
In 2021, we launched our corporate ESG framework. We continued this positive
ESG momentum in 2022, responding effectively and prudently to the challenges
our organisation faced to ensure we remain on track to deliver a sustainable
and resilient future for Kape, our employees, our stakeholders and the
communities we serve.
Most notably in 2022, we introduced a range of new ESG policies and
procedures, including Kape's Code of Conduct, Modern Slavery Statement and
Anti-Sexual Harassment Policy. We also published a new online trust centre and
expanded our volunteering and donation efforts to support individuals and NGOs
during times of crisis.
We were pleased to have launched our 'Women at Kape' Employee Resource Group
("ERG"). Equality in the workplace is everyone's responsibility, and the
launch of this ERG reflects our commitment to building an inclusive and equal
workplace culture by ensuring issues impacting female and LGBTQIA+ employees
are raised and addressed. As we continue through 2023, we intend to expand our
ERG activity to ensure we're accounting for the diverse requirements of our
teams.
Further, as we continue to expand our scale and global reach, sustainability
is increasingly becoming an integral part of our commercial strategy. The
introduction of our new carbon footprint measurement and green office
initiatives ensures that Kape's business operations reflect a responsible
approach in our efforts to help the world transition to a low-carbon economy.
Significantly, Kape jumped two rating points for ESG with MSCI, the
organisation responsible for measuring and modelling environmental, social,
and governance risk to provide critical insights into company behaviours.
Behind all our ESG work, we're empowering people across all levels of our
organisation with a better understanding of ESG, so that they can recognise
how their day-to-day activities and the work they do contributes to achieving
our collective ESG targets. For the board in particular we've provided focused
training on ESG as well as delivering ongoing ESG knowledge-building
activities.
Important issues lie ahead for the environment, and Kape is taking every
action to ensure it remains focused on playing its part on the sustainability
front. Overall, we're proud of our ESG progress this year, and look forward to
advancing our ESG agenda in 2023 and beyond.
Offer for Kape
On 13 February 2023, Unikmind Holding Limited ("Unikmind"), Kape's majority
shareholder, announced a cash offer to acquire the entire issued share capital
of Kape not already held by Unikmind at a price of $3.44 for each Kape share,
equivalent 285 pence per Kape Share based on the Announcement Exchange Rate
("the Offer").
The independent Directors (being all of the Directors save for Pierre Lallia)
view is that the Offer does not represent the full value of Kape. The Offer
was received after a previous proposal by Unikmind of 265 pence was rejected
by the independent Directors. Unikmind stated it intends to seek a delisting
of the Company regardless of the outcome of the Offer, hence the Independent
Directors believed that it was in the interests of shareholders for the
Company to grant Unikmind a partial standstill release from the NDA Standstill
to allow Unikmind's proposal to be presented to Kape shareholders for their
consideration.
On 6 March 2023, Unikmind posted their Offer Document to Kape shareholders,
noting that the Offer Document Exchange Rate meant the Offer price of $3.44
for each Kape Share was worth 288 pence per Kape Share as at 6 March 2023.
On 20 March 2023, the Independent Directors wrote to Kape shareholders with
their views on the Offer.
Summary and Outlook
Across 2022, we have seen digital privacy and cybersecurity continue to
dominate both the political and business agendas. Actions taken by various
governments to expand censorship and erode the cybersecurity landscape have
continued to highlight the need for companies like Kape.
With an increasing number of corporations and consumers acknowledging that
online freedom and protection is imperative to their daily lives, Kape finds
itself ideally placed to capture new business and strengthen its position in
an ever-growing privacy and security market.
After overperforming in 2022, Kape has made a strong start to 2023,
underpinning the Board and management team's confidence in the future
performance of the Group.
I would like to express my sincere gratitude to all Kape employees for their
continued dedication and tenacity, in helping to make 2022 Kape's most
successful year to-date. The substantial progress achieved during the year
could not have been accomplished without their unwavering commitment to the
Group's mission.
Looking ahead, we continue to focus on expanding and innovating, both through
evolving our product portfolio to ensure we're responding to nascent sector
trends, and through improving our operational efficiency to further accelerate
the Group's organic growth. Boosted by our capital raise, robust balance sheet
and proven track record of acquiring and integrating businesses, we are well
positioned to explore potential M&A opportunities in 2023 to complement
the Group's organic growth, which is directly in line with our ambitious buy
and build strategy.
Don Elgie
Non-Executive Chair
20 March 2023
Chief Executive Officer's Review
Introduction
Kape delivered an outstanding performance in 2022, recording its strongest
year-to-date.
Over 7.4 million paying subscribers globally now consider Kape their company
of choice in the digital privacy and security space, up 12% from the previous
year.
Kape delivered a record financial performance across FY 2022, achieving
revenue of $623.5 million (2021: $230.7 million), up 170.3% year-on-year or
18.9% organic growth on a proforma basis with recurring revenue contributing
86.8% (2021: c. 92% on a proforma basis). Additionally, we grew Pro Forma
Adjusted EBITDA(2) by 125.6% to $176.0 million (2021: $78.0 million). We
reached 94% adjusted cash conversion along with significantly growing our
subscribers; this year alone we have added 791,000 new subscribers to our
customer base.
Six and a half years after setting our new strategic direction and gradually
achieving milestone after milestone, we have created significant equity value
for all stakeholders in excess of $1.5 billion, it is a testament to the
success of our strategic journey and we appreciate the continued support from
all our investors.
Our significant progress and financial success are best articulated in the
following chart(5):
Market Dynamics
The global digital privacy software market is forecast to grow to $25.8
billion by 2029, expanding at a CAGR of c. 40%(3). Despite the cost-of-living
crisis, consumers continue to view digital privacy and security as a priority
and are willing to pay more to ensure they receive best-in-class services.
Given that remote working has been adopted by a large number of individuals
across the globe, the importance of dependable digital protection has
increased substantially, and is now central to consumers' business and leisure
activities.
20-45-year-olds constitute 70% of the market, and this demographic continues
to underpin the fast-paced growth in the privacy market, together with the
rise in individuals worldwide owning multiple IoT devices.
For consumers, owning a broader range of IoT devices means purchasing premium
digital privacy protection, such as those Kape offers, which not only provides
greater value per device, but is a necessity to comprehensively safeguard
their digital lives.
Buy, Build and Grow
A key highlight of 2022 was the seamless integration of ExpressVPN into the
wider Group. This acquisition was our seventh consecutive buy, build and grow
deal in the last seven years, realising our vision to help millions of people
around the world to live more secure and private digital lives.
Kape today is a top-tier digital privacy platform that serves millions of
subscribers worldwide. When we embarked on our strategy six and a half years
ago, we had no subscribers, yet after our continued growth, today we serve
over 7.4 million paying subscribers worldwide.
In 2022, as we progressed in the integration project with ExpressVPN, we were
able to deliver c. $9 million in operational synergies, representing $30
million in annualised cost savings, reflecting our successful know-how and
M&A track record to date. This transaction extended our reach to the
premium part of the digital privacy market and enhanced our customer lifetime
value, accelerated our R&D timeline and expanded our marketing reach.
Management expects to realise further synergies in 2023.
We are delighted that ExpressVPN's management and employees have joined the
Group, demonstrating their confidence in our business model and growth
strategy. These highly know-how and innovative individuals have brought a
wealth of digital privacy and security experience to Kape, boosting our
product development and market reach capabilities across the globe.
Product Development
Kape has progressed to become an established player in the digital security
and privacy space. Alongside our growth from existing products, the Group has
recognised its potential to spearhead innovation in the industry. In H2 2022,
our ExpressVPN brand launched its award-winning Aircove router - the world's
first Wi-Fi 6 router with a built-in VPN. Designed for individuals seeking to
safeguard their families with a VPN, Aircove was introduced in September 2022
and has already generated strong sales traction in the US, complementing
ExpressVPN's highly innovative software.
Other products and features launched this year include a beta password manager
ExpressVPN Keys, which has been gathering momentum as users welcome a broader
range of privacy and security tools. We have also introduced end-point
protection for PC for Private Internet Access customers with our Privacy First
Anti-Virus solution for PC. We continue to focus on rolling out the features
across all of our key brands in the year ahead.
Financing
Kape completed an oversubscribed and upscaled c. £188 million placing and c.
£2.1 retail offer in H2 2022. We were delighted to receive such strong
support from new and existing institutional shareholders, including blue-chip
investors from the UK, US, Europe and Israel. This injection of capital is a
strong endorsement of our strategy. It will enable the Group to capitalise on
potential acquisition opportunities whilst further supporting organic growth
initiatives.
Additionally, we entered into an agreement for Modified bank facilities with
our existing lenders Bank of Ireland, Barclays, Citizens Bank, BNP Paribas,
Citi Commercial Bank, and Leumi Bank, as well as two new banks, HSBC and
Credit Suisse, who have joined the enlarged syndicate. Replacing the existing
debt facilities, by paying early the deferred consideration of the ExpressVPN
acquisition, Kape immediately realised approximately $19.9 million in net debt
reduction and approximately $8 million of savings on financing costs from
terminating the underwriting commitment.
Key Performance Indicators
Significantly, Kape delivered strongly across its KPIs in 2022, demonstrating
the resilience of the Group's SaaS business model. Kape's highly scalable
model not only underpins the profitability and earnings predictability of the
Group, but also our growth potential.
31 Dec 31 Dec
2022 2021
'000 '000
Subscribers (thousands) 7,364 6,573
Retention rate(4) 83% 81%
Deferred income ($'000) 168,342 155,856
Revenue ($'000) 623,483 230,665
Operating Income ($'000) 100,093 38,258
2022 2021
$'000 $'000
Adjusted EBITDA 283,689 86,042
Proforma Deferred Contract expenses adjustment (107,688) (8,016)
Proforma Adjusted EBITDA(1,2) 176,001 78,026
Cash flow from operations 161,311 35,489
Exceptional and non-recurring cash outflow 4,215 8,636
Adjusted cash flow from operations 165,526 44,125
% of Adjusted EBITDA 58.3% 51.3%
Proforma Adjusted EBITDA 176,001 78,026
% of Proforma Adjusted EBITDA 94.0% 56.6%
Growth Drivers
Kape has delivered consistent profitable growth, executing on our strategic
objectives year over year for six years in a row. We believe we are in a
perfect position to capitalise on the growing demand in the markets we operate
in. We remain committed to delivering on our future growth aspirations and
capitalising on strong market tailwinds, with the following key pillars
continuing to drive our accelerated growth:
● Reach: Over 7.4 million paying subscribers globally, providing
significant opportunity to generate further cross-sell and upsell momentum.
● Go-to-market capabilities: With the leading brands in the space,
including ExpressVPN, and Webselenese's unparalleled market insight, Kape
benefits from a robust platform which facilitates the optimisation of CAC and
retention rates.
● Strong product portfolio: Expert solutions at the pinnacle of sector
innovation, with high levels of recurring revenues and a growing global
R&D team to help realise product development potential.
● M&A: Proven track record of acquiring market-leading businesses,
delivering increased synergies and greater market penetration.
Outlook
The global demand for cutting-edge digital security and privacy products is
stronger than ever, and we recognise the pivotal role Kape has in safeguarding
businesses and consumers from existing and emerging cyber threats. We remain
focused on delivering on our strategic priorities to further consolidate our
position as a market leader in digital privacy and security.
On behalf of the management team, I would like to share my deepest thanks to
our hugely talented global team for their drive and determination throughout
FY 2022. Without their continued support and diligence, our focus on building
a world-class digital security and privacy provider trusted by millions across
the globe would never have been achieved.
Ido Erlichman
Chief Executive Officer
20 March 2023
(1) Adjusted EBITDA is a company-specific measure which is calculated as
operating profit before depreciation (including right-to-use assets
amortisation), amortisation, exceptional or non-recurring costs, other
operating income/(expense) and employee share-based payment charges.
(2) Proforma Adjusted EBITDA is a non GAAP measure, it's the Company Adjusted
EBITDA after adding back deferred contracts costs fair value accounting
adjustment following ExpressVPN consolidation.
(3)
https://www.fortunebusinessinsights.com/data-privacy-software-market-105420
(https://www.fortunebusinessinsights.com/data-privacy-software-market-105420)
(4) Retention rates are calculated on a six-month basis.
(5) Excluding Kape's discontinued operations (2018-2020)
Chief Financial Officer's review
Revenues for the year to 31 December 2022 increased by 170.3% to $623.5
million (2021: $230.7 million), or 18.9% on a proforma basis. The increase in
revenues is a result of an increase in Kape's subscriptions base of 12% to
c.7.4 million (2021: c.6.6 million) as well as twelve months' contribution
from ExpressVPN. Pro Forma Adjusted EBITDA increased by 125.6% to $176.0
million (2021: $78.0 million). Operating profit increased by 161.6% to $100.1
million (2021: $38.3 million) mainly due to twelve months' contribution from
ExpressVPN and Webselenese compared to half month and ten months in 2021,
respectively.
Adjusted cash flow from operations attributable to the current financial
period was $165.5 million (2021: $44.1 million), which represents a cash
conversion of 94.0% from the proforma Adjusted EBITDA (2021: 56.6%). The
increase is a result of a growing percentage of customers that continue to use
Kape's products after the end of the initial subscription period. As 31
December 2022, the Group's cash balance was $251.6 million (31 December 2021:
$27.0 million) and net debt was $119.8 million.
On 3 October 2022, the Company completed an oversubscribed capital raise,
issuing a total of 71,762,618 new ordinary shares of US $0.0001 each
("Ordinary Shares") subscribed for by investors, at an issue price of 265
pence per share. The net proceeds after issue costs from the share issuance
were $213.1 million (c.£188.2 million).
On 12 September 2022, the Company announced that it had entered into an Early
repayment agreement with the ExpressVPN founders to pay the deferred cash
consideration in advance of the contractual dates in the purchase agreement.
On 2 November 2022, the Company announced it had entered into an agreement for
Modified bank facility with its existing lenders Bank of Ireland, Barclays,
Citizens Bank, BNP Paribas, Citi Commercial Bank, and Leumi Bank, and two new
banks, HSBC and Credit Suisse, who joined the enlarged syndicate. This
Modified debt facility replaced all Kape's existing loan facilities, including
the Deferred Consideration resulting from the ExpressVPN acquisition and the
Deferred Consideration Facility arrangement with TSNLI. As a result, the
Company realised $19.9 million of cash saving following the Cash Deferred
Consideration early repayment and approximately $8.0 million of savings on
financing costs from terminating the underwriting commitment, in addition, the
early repayment resulted in a gain of $17.2 million.
The debt facility comprises a $275.0 million senior secured term facility (the
"Modified Term Facility"), a $150.0 million revolving credit facility (the
"RCF") and an uncommitted $75.0 million facility (together the "Modified Debt
Facilities"). Bank of Ireland is the agent bank. The Modified Debt
Facilities have a four-years term with an option to extend the term by up to
an additional one year. The Modified Term Facility will be amortised on a
quarterly basis across 48 months starting December 2022, and a bullet payment
on 2 November 2026 and will carry an opening Margin of 2.75% above Applicable
Reference Rate per annum.
Segment Result
Revenue Segment result
2022 2021 2022 2021
$'000 $'000 $'000 $'000
Digital Privacy 512,575 117,042 363,575 74,450
Digital Content 71,433 75,581 14,402 38,271
Digital Security 39,475 38,042 15,233 14,609
Revenue 623,483 230,665 393,210 127,330
The segment result has been calculated using revenue less costs directly
attributable to that segment, comprises cost of sales and direct sales and
marketing costs. Segment cost of sales comprises payment processing fees and
infrastructure costs of the Group's privacy products. Direct sales and
marketing costs are mainly user acquisition costs.
Digital Privacy
2022 2021
$'000 $'000
Revenue 512,575 117,042
Cost of sales (46,206) (13,370)
Direct sales and marketing costs (102,794) (29,222)
Segment result 363,575 74,450
Segment margin (%) 70.9 63.6
Proforma Deferred Contract expenses adjustment (107,688) (8,016)
Proforma Adjusted Segment result 255,887 66,434
Proforma Adjusted Segment margin (%) 49.9 56.7
During the period, the Digital Privacy segment has seen continued growth with
a 337.9% increase in revenue to $512.6 million (2021: $117.1 million), 14.25%
on proforma basis, and a 388.3% increase in the segment result to $363.6
million (2021: $74.5 million). Proforma base revenue growth was driven by
subscriber base growth of 10.6% to 6.5 million and maintaining a strong
healthy retention rate. Proforma Adjusted Segment result is calculated by
adding back the Proforma Deferred contract costs expenses adjustment related
to the ExpressVPN acquisition. The decrease in proforma adjusted Segment
margin is attributed to the higher cost to serve of ExpressVPN's premium
product. When comparing the period ending 31 December 2022 to 31 December 2021
on a full proforma basis (as ExpressVPN is part of the Company for twelve
months for the period ended 31 December 2021), the Proforma Adjusted Segment
margin is slightly increased by 1.44%.
Digital Content
2022 2021
$'000 $'000
Revenue 71,433 75,581
Cost of sales - -
Direct sales and marketing costs (57,031) (37,310)
Segment result 14,402 38,271
Segment margin (%) 20.2 50.6
During the period, revenue from the Digital Content segment was $71.4 million
and segment results were $14.4 million. On a proforma basis, excluding revenue
that was generated from Kape brands, revenue for the twelve months ended 31
December 2022 has significantly increased by 90.3% compared with the period
ended 31 December 2021. The revenue growth has been driven by revenue
generated from new verticals introduced during the last twelve months, $31.6
million, while supported by continued growth of 6% on a proforma basis from
old verticals. The segment margin decreased to 20.2%. Usually new verticals
attribute lower margins during the initial period until the organic traffic is
established and the acquired sources are fully optimised.
Digital Security
2022 2021
$'000 $'000
Revenue 39,475 38,042
Cost of sales (2,784) (2,602)
Direct sales and marketing costs (21,458) (20,831)
Segment result 15,233 14,609
Segment margin (%) 38.6 38.4
During the period, revenue from the Digital Security segment grew by an
increase of 3.8% to $39.5 million (2021: $38.1 million). The slight increase
was driven by a 15.9% growth in revenue from Intego's Endpoint security
products and offset by a revenue decrease of 9.8% from the PC performance
products. The Company is not investing further in the PC performance products
activity and Digital Security future growth will derive mainly from Intego's
Endpoint security products and new security products.
Adjusted EBITDA
Adjusted EBITDA for the year to 31 December 2022 was $283.7 million (2021:
$86.0 million). Adjusted
EBITDA is a non-GAAP company specific measure that is considered to be a key
performance indicator of the Group's financial performance. Adjusted EBITDA is
calculated as operating profit before depreciation (including right-to-use
assets amortisation), amortisation, exceptional or non-recurring costs, other
operating income/(expense) and employee share-based payment. Proforma Adjusted
EBITDA is calculated by adding the proforma deferred contract costs expenses
adjustment related to the ExpressVPN acquisition. As these are non-GAAP
measures, they should not be considered as replacements for IFRS measures. The
Group's definition of these non-GAAP measures may not be comparable to other
similarly titled measures reported by other companies. Such amounts are
excluded from the following analysis:
2022 2021
$'000 $'000
Revenue 623,483 230,665
Cost of sales (48,990) (15,972)
Direct sales and marketing costs (181,283) (87,363)
Segment result 393,210 127,330
Indirect sales and marketing costs (45,322) (19,687)
Research and development costs (31,635) (8,176)
Management, general and administrative cost (32,564) (13,425)
Adjusted EBITDA 283,689 86,042
Proforma Deferred Contract expenses adjustment (107,688) (8,016)
Proforma Adjusted EBITDA 176,001 78,026
The Proforma Adjusted EBITDA for the year to 31 December 2022 was $176.0
million (2021: $78.0 million) and margin of 28.2% (2021: 33.8%). The decrease
in the Proforma Adjusted EBITDA margin is attributable to the lower EBITDA
margin of ExpressVPN slightly offset by the cost synergies savings following
the acquisition on December 2021 and the decrease of the Digital Content
segment margin following the investment in new verticals, as explained above.
In 2022, as we progressed in the integration project with ExpressVPN, we were
able to deliver c.$9 million in operational synergies, representing $30
million in annualised cost savings, reflecting our successful know-how and
M&A track record to date. Management expects to realise further synergies
in 2023. The percentage of Management, general and administrative cost and
indirect sales and marketing costs out of revenues decreased from 6% to 5% and
8% to 7% respectively, while research and development costs increased from 3%
to 5%.
The increase in costs is mainly due to ExpressVPN and Webselenese's twelve
months contribution compared to half-month and ten months in 2021,
respectively.
Operating Profit
A reconciliation of Adjusted EBITDA to operating profit is provided as
follows:
2022 2021
$'000 $'000
Adjusted EBITDA 283,689 86,042
Employee share-based payment charge (23,614) (5,224)
Other operating (expense)/income (1,525) 947
Exceptional and non-recurring costs (3,764) (9,850)
Depreciation and amortisation (154,693) (33,657)
Operating profit 100,093 38,258
Increase in depreciation and amortisation is driven by $124.0 million (2021:
$11.1) amortisation charge of Webselenese and ExpressVPN acquired intangibles
assets.
Exceptional or non-recurring costs in 2022 are comprised of non-recurring
staff costs of $0.8 million, $0.9 million termination costs of Onerous
contract and $2.1 million professional services and other business
combinations related costs.
Profit before tax
Profit before tax was $92.9 million (2021: $32.7 million). Finance costs net
of Finance income of $7.2 million comprised mainly of $10.5 million of
interest on debt facilities (2021: $3.3 million), expenses of $3.0 million due
to unwinding of discounting on deferred consideration expense (2021: $0.9
million), $7.0 million full amortization of the Shareholder facility revolver
issuance cost following the termination of the Shareholder facility (2021:
$0.1 million) and $10.2 million of commitment fees on the TSNLI revolving
facility related to the ExpressVPN acquisition until the point the facility
was terminated (2021: $3.6 million), this slightly offsets with $8.9 million
net foreign exchange profit and $17.2 million gain on early payment of
Deferred Cash Consideration resulting from the ExpressVPN acquisition.
Profit after tax
Profit after tax was $70.9 million (2021: $23.4 million). Tax expenses for the
period are $22.0 million (2021: $9.3 million), the tax charge derives mainly
from group subsidiaries' residual profits. Since the amortisation of acquired
intangibles and share-based payment charges are not tax-deductible in several
of the jurisdictions in which the Company operates, management believes it is
appropriate to examine the effective tax rate out of Proforma Adjusted EBITDA
rather than profit before tax. The effective tax rate out of Proforma Adjusted
EBITDA increased to 12.5% (2021: c.11.9%).
Cash flow
2022 2021
$'000 $'000
Adjusted EBITDA 283,689 86,042
Proforma Deferred Contract expenses adjustment (107,688) (8,016)
Proforma Adjusted EBITDA(1,2) 176,001 78,026
Cash flow from operations 161,311 35,489
Exceptional and non-recurring cash outflow 4,215 8,636
Adjusted cash flow from operations 165,526 44,125
% of Adjusted EBITDA 58.3% 51.3%
Proforma Adjusted EBITDA 176,001 78,026
% of Proforma Adjusted EBITDA 94.0% 56.6%
Cash flow from operations was $161.3 million (2021: $35.5 million). Adjusted
cash flow from operations after adding back one-off payments was $165.5
million (2021: $44.1 million), which represents a cash conversion of 94.0%
from the Proforma Adjusted EBITDA. The increase is a result of growing
percentage of customers that continue to use the Kape's products after the end
of the initial subscription period.
Tax paid in the period was $6.3 million (2021: $3.3 million). The increase was
mainly due to Israeli tax prepayments that were paid in 2022 by Group
subsidiaries.
Net cash used in investing activities was $364.9 million (2021: $465.9
million), mainly comprises $325.0 million for the early repayment of the
Deferred Cash consideration resulted from ExpressVPN acquisition (see Note 8),
$20.0 million related to the six-month anniversary of completion of ExpressVPN
acquisition, $15.4 million (2021: $5.3 million) capitalised development costs
and $2.9 million (2020: $2.4 million) purchase of fixed assets. As a result of
the Deferred Cash Consideration early repayment the Company saved cash $19.9
million of cash outflow.
Net cash generated from financing activities was $434.5 million (2021: $411.0
million) included $213.0 million net proceeds from the capital raised
completed on 3 October 2022, a drawdown of $180.5 million and $93.6 million of
the Modified Bank facilities (Term loan and Revolving facility, respectively)
completed on 2 November 2022, $4.5 million resulted from debt issuance cost
related to the Modified bank facilities, $13.8 million commitment fees payment
of the Shareholder facility revolver facility (2021: $Nil), repayments of
long-term loan principal interest payments of $21.9 million and $4.6 million ,
respectively (2021: $11.8 million and $1.9 million, respectively), $1.7
million (2021: $0.9 million) has been received following the exercise of
employee share options and $8.2 million (2021: $2.8 million) were paid for the
Group's leases. As a result of the termination of the Shareholder revolver
facility the Company saved cash outflow of $1.4 million for the period ended
31 December 2022 and future cash outflow of $6.0 million for 2023.
Financial position
At 31 December 2022, the Company had cash of $251.6 million (31 December 2021:
$27.0 million), net assets of $1,172.9 million (31 December 2021: $863.5
million) and net debt of $119.8 million (2021: net debt of $457.5 million). At
31 December 2022, trade receivables were $26.9 million (31 December 2021:
$38.4 million).
In November, the Company signed a Modified Bank facility for Term Facility of
$275.0 million (2021: $120.0 million), Revolver Facility of $150.0 million
(2021: $80.0 million) and uncommitted facility of $75.0 million and completed
the early repayment of the deferred cash consideration along with termination
of the Shareholder revolver facility.
Kape is well positioned to support and invest future growth as a result of the
Company's capital structure modification together with the $213.1 million
capital raise completed in October 2022.
The Adjusted Leverage (as defined in Note 10) of the Group is c. 0.68 (2021:
2.88).
Oded Baskind
Chief Financial Officer
20 March 2023
Consolidated statement of comprehensive income
For the year ended 31 December 2022
2022 2021
Note $'000 $'000
Revenue 2,3 623,483 230,665
Cost of sales (48,990) (15,972)
Gross profit 574,493 214,693
Selling and marketing costs 2c (232,554) (108,580)
Research and development costs (40,399) (10,865)
Management, general and administrative costs (45,229) (24,280)
Depreciation and amortisation 5 (154,693) (33,657)
Other operating (expense) /income (1,525) 947
Total operating costs (474,400) (176,435)
Operating profit 4 100,093 38,258
Adjusted EBITDA 4 283,689 86,042
Employee share-based payment charge (23,614) (5,224)
Other operating (expense) / income (1,525) 947
Exceptional or non-recurring costs 4 (3,764) (9,850)
Depreciation and amortisation 5 (154,693) (33,657)
Operating profit 100,093 38,258
Finance income 26,133 5,580
Finance costs (33,352) (11,179)
Profit before taxation 92,874 32,659
Tax charge (21,956) (9,273)
Profit for the year 70,918 23,386
Other comprehensive income:
Items that may be reclassified to profit and loss:
Foreign exchange differences on translation of foreign operations - 1
Total comprehensive Income for the year 70,918 23,387
Total profit for the year attributable to Owners of the parent:
Continuing operations 70,918 23,386
70,918 23,386
Earnings per share attributable to the ordinary equity holders of the company:
Basic earnings per share (cents) 7 19.2 9.6
Diluted earnings per share (cents) 7 18.8 9.4
Consolidated statement of financial position
As of 31 December 2022
2022 2021
Note $'000 $'000
Non-current assets
Intangible assets 5 1,351,995 1,480,686
Property, plant and equipment 6,714 5,794
Right-of-use assets 18,234 23,757
Deferred contract costs 2c 160,576 50,698
Deferred tax asset 1,974 2,466
Long-term deposit 613 -
1,540,106 1,563,401
Current assets
Inventory 537 70
Deferred contract costs 2c 81,463 35,791
Trade and other receivables 38,904 54,213
Cash and cash equivalents 251,559 26,984
372,463 117,058
Total assets 1,912,569 1,680,459
Equity 6
Share capital 43 36
Additional paid in capital 1,099,530 883,337
Share to be issued - 1,350
Foreign exchange differences on translation of foreign operations 773 773
Retained earnings 72,529 (22,003)
Total equity 1,172,875 863,493
Non-current liabilities
Contract liabilities 2b 14,084 10,885
Deferred tax liabilities 81,717 64,369
Long term lease liabilities 10,396 16,984
Deferred and contingent consideration 11 - 168,950
Loans and Borrowings 10 338,214 97,830
444,411 359,018
Current liabilities
Trade and other payables 91,813 80,919
Contract liabilities 2b 154,258 144,971
Short term lease liabilities 8,143 7,912
Deferred and contingent consideration 11 8,285 199,337
Onerous contract liability - 741
Loans and Borrowings 10 30,604 19,554
Current tax liability 2,180 4,514
295,283 457,948
Total equity and liabilities 1,912,569 1,680,459
Consolidated statement of changes in equity
For the year ended 31 December 2022
Share Additional paid in capital Retained earnings
capital Foreign exchange differences on translation of foreign operations
Share to be issued Total
$'000 $'000 $'000 $'000 $'000 $'000
At 1 January 2021 22 273,358 1,350 772 (46,746) 228,756
Profit for the year - - - - 23,386 23,386
Other comprehensive income:
Foreign exchange differences on translation of foreign operations - - - 1 - 1
Total comprehensive profit for the year - - - 1 23,386 23,387
Transactions with owners:
Share based payments - - - - 5,224 5,224
Exercise of employee options (note 6) - 939 - - - 939
Share issuance net of transaction cost (note 6) 8 348,382 - - - 348,390
Issue of equity share capital (note 6) 6 260,658 - - - 260,664
Acquisition of treasury shares (note 6) - - - - (3,867) (3,867)
At 31 December 2021 36 883,337 1,350 773 (22,003) 863,493
At 1 January 2022 36 883,337 1,350 773 (22,003) 863,493
Profit for the year - - - - 70,918 70,918
Other comprehensive income:
Foreign exchange differences on translation - - - - - -
Total comprehensive profit for the year - - - - 70,918 70,918
Transactions with owners:
Share based payments - - - - 23,614 23,614
Exercise of employee options (note 6) - 1,747 - - - 1,747
Issue of equity share capital (note 6) 7 213,096 - - - 213,103
Issue of equity share capital from treasury (note 6) * 1,350 (1,350) - - -
At 31 December 2022 43 1,099,530 - 773 72,529 1,172,875
*amounts below 1 thousands
Consolidated statement of cash flows
For the year ended 31 December 2022
2022 2021
Note $'000 $'000
Cash flow from operating activities
Profit for the year after taxation 70,918 23,386
Adjustments for:
Amortisation of intangible assets 5 143,814 29,066
Amortisation of right-to-use assets 8,964 3,895
Depreciation of property, plant and equipment 1,915 696
(Gain)/ Loss on sale of property, plant and equipment (89) 378
Loss/ (Gain) on sale of intangible assets 5 345 (485)
Profit from lease modification (25) (848)
Tax Expenses 21,956 9,273
Profit from Forward contract - (5,580)
Interest expenses, fair value movements on deferred consideration 10,11 33,379 10,331
Share based payment charge 23,614 5,224
Gain from bank loan modification (660) -
Gain on early payment of Deferred Cash Consideration (17,213) -
Unrealised foreign exchange differences (788) (269)
Operating cash flow before movement in working capital 286,130 75,067
Decrease /(Increase) in trade and other receivables 7,262 (13,784)
(Decrease)/Increase in software licenses inventory (467) 54
Increase in trade and other payables 12,751 12,246
Decrease in onerous contract liability (688) (688)
Increase in deferred contract costs 2c (155,550) (33,955)
Increase in Long-term deposit (613) -
Increase/ (Decrease) in contract liabilities 12,486 (3,451)
Cash Inflow from operations 161,311 35,489
Tax paid (6,274) (3,345)
Cash generated from operations 155,037 32,144
Cash flow from investing activities
Purchase of property, plant and equipment (2,949) (2,444)
Proceeds from sale of property, plant and equipment 217 2
Intangible assets acquired 5 (392) (794)
Disposal of intangible assets 5 342 1,261
Cash paid on business combination, net of cash acquired 8,11 (346,679) (464,149)
Proceeds from Forward contract - 5,580
Capitalisation of development costs 5 (15,418) (5,326)
Net cash used in investing activities (364,879) (465,870)
Cash flow from financing activities
Payment of leases (8,216) (2,839)
Cash outflow from Currency Option Transaction, net (1,450) -
Proceeds from Shareholder loan 10 - 85,000
Proceeds from modification of loans 10 180,455 85,000
Proceeds from RCF 10 93,644 8,207
Debt issuance costs 10 (4,479) (2,690)
Shareholder facility revolver issuance cost 10 - (7,125)
Shareholder facility revolver commitment fees 10 (13,762) -
Repayment of interest on Shareholder loan 10 - (1,275)
Repayment of Shareholder loan 9,10 - (85,000)
Repayment of interest on loan 10 (4,566) (1,934)
Repayments of long-term loan 10 (21,875) (11,818)
Payment of purchase of own shares 6 - (3,867)
Proceeds from issuance of shares, net of transaction costs 6 213,016 348,390
Proceeds from exercise of options by employees 1,720 939
Net cash generated from financing activities 434,487 410,988
Net increase/ (decrease) in cash and cash equivalents 224,645 (22,738)
Revaluation of cash due to changes in foreign exchange rates (70) (190)
Cash and cash equivalents at beginning of year 26,984 49,912
Cash and cash equivalents at end of year 251,559 26,984
Notes to the consolidated financial statements
1 Basis of preparation
The financial information provided is for Kape Technologies Plc and its
subsidiary undertakings (together the "Group", "the Company" or "Kape") in
respect of the financial years ended 31 December 2022 and 2021. The Company is
incorporated in the Isle of Man.
The financial information has been prepared in accordance with UK adopted
international accounting standards (collectively IFRS).
The preparation of financial statements in compliance with adopted IFRS
requires the use of certain critical accounting estimates. It also requires
Group management to exercise judgement in applying the Group's accounting
policies.
The results shown for the year ended 31 December 2022 and 31 December 2021 are
audited. The consolidated financial information contained in this announcement
does not constitute statutory accounts. Statutory accounts of the Company in
respect of the financial year ended 31 December 2022 were approved by the
Board of directors on 20 March 2023 and will be delivered to the shareholders
in due course. The report of the auditors on those accounts was unqualified
and did not contain an emphasis of matter paragraph.
Going concern
The Directors, having considered the Group's resources financially and the
associated risks with doing business in the current economic and geo-political
climate, believe the Group is capable of successfully managing these risks.
The Board has considered the current trading performance, financial position,
liquidity of the Group and business plan as provided by management which
includes the rate of revenue growth, EBITDA margins, costs, cash conversion
ratio and capital expenditure. The cash flow forecast prepared by management
for assessing going concern extends to 31 March 2024 ("the going concern
period"). Management's base case forecast is aligned with the management's
forecast for the year ending 31 December 2023. The going concern assessment is
based upon the business and operations as of the date of signing these
financial statements. No assumptions or modelling has been performed for any
future impact that may arise from the outcome of the announcement by Unikmind
Holdings Ltd ("Unikmind") of a cash offer to acquire the entire issued and to
be issued share capital of the Company not already held by Unikmind (see note
12, Subsequent Events).
The Group holds a strong liquidity position with Cash balance of $251.6
million (31 December 2021: $27.0 million), with the increase from prior year
explained by the placement completed in October 2022 ($213.1 million), strong
Cash flow generated from operation ($155.0 million), proceeds from
modification of Debt facility partially offset by the early repayment of the
Deferred Cash Consideration related to ExpressVPN acquisition.
The Group has in place debt facilities comprising a $275.0 million senior
secured term facility, a $150.0 million revolving credit facility and a $75.0
million uncommitted facility. The term facility includes 48 quarterly capital
repayments of $6.875 million and bullet payment on 2 November 2026. As at 31
December 2022, the Group had drawn down $103.2 million on the revolving credit
facility and $nil on the uncommitted facility. The debt facilities are subject
to the following financial covenants.
· The ratio of EBITDA to Net Finance Charges ("Interest Cover") shall
not be less than 4.0x in respect of any Relevant Period.
· The ratio of Total Net Debt on the last day of the relevant period to
Adjusted EBITDA in respect of that Relevant period ("Adjusted Leverage"),
shall not exceed 3.0x.
The Debt Facility replaced all Kape's previous loan facilities, including the
deferred consideration facility arrangements put in place with TS Next Level
Investments Limited (an affiliate of Unikmind Holdings Limited, the Company's
majority shareholder) at the time of the acquisition of ExpressVPN (the
"Deferred Consideration Facility").
Based on management's base case forecast the Group is able to meet liabilities
as they fall due and operate within financial covenants throughout the
forecast period.
In addition to the base case, management also considered sensitivities in
respect of potential stress tests, a reverse stress test and the mitigating
actions available to management. The modelling of the downside scenarios
assessed if there was a significant risk to the Group's liquidity and covenant
compliance position. These scenarios make assumptions on revenue declines and
costs saving from freezing planned recruitment, capital expenditure reductions
and other general operating costs.
Under the stress tests the Group is still able to meet liabilities as they
fall due and operate within financial covenants throughout the forecast
period.
The reverse test was used to find what would be the level of EBITDA and
consequently the cash burn that would lead to a breach in the Group's
financial covenants before the end of the going concern period. The
financial covenants would be breached only if revenues from new users declined
more than 70% or revenues from Renewals declined more than 35% below
management's base case. As a result of completing this assessment management
considered the likelihood of the reverse stress test scenario arising to be
remote. In reaching this conclusion management considered:
● Cash collection is strong and bad debt risk is limited as clients
typically pay for services upfront.
● Flexible cost base - a significant portion of the Group's costs
are discretionary in nature.
● The contract liabilities balance is growing (an increase of +8%
compared to the balance at 31 December 2021) supporting attractive future
revenue growth and good future revenue visibility. The contract liabilities
balance as of 31 December 2022 of $168.3 million includes $154.3 million to be
released into revenue in the following 12 months. Whilst this has no future
cash impact, it supports the Directors confidence in forecast EBITDA utilised
in bank covenants test.
● We continuously monitor and invest in market needs. In the year to
31 December 2022 the Group continued its strong investment in technology
capability and innovation demonstrated by the increase of research and
development expenses by 274.0% compared to the comparative period.
● The cash conversion of the Group is trading strong with level of
85-100% and expected to remain in this range due to billing profile of the
Group and Cash generated from recurring revenue.
The Directors continue to carefully monitor the current macroeconomic
environment, and its impact on the operations, revenues and growth plans of
the Group.
The Directors have also considered the conflict in Ukraine, and whilst the
impact on the Group is currently deemed minimal, the Directors remain vigilant
and ready to implement mitigation action in the event of an impact on
operations. The Group has no employees or operations in Russia or Belarus and
revenues from Russia and Belarus are less than 1% of Group's revenues for the
year ended 31 December 2022.
The Directors continue to carefully monitor the current macroeconomic
environment, and its impact on the on the operations, revenues and growth
plans of the Group. The Group has not seen any significant impact on renewals
and new users from the impact on consumers of the impact of rising inflation.
The Company operates a multi brand strategy which allows us to capture a wider
price range across the competitive landscape. The Group is mostly
significantly exposed to inflationary cost rises from staff costs and
Infrastructure services. The Group seeks to manage these by the flexibility of
the Group to change and work with different providers and utilize the Group
ability to recruit talents within few locations. As noted above, the Group has
Debt Facilities that are subject to variable interest based on the underlying
Applicable Reference Rates.
The Directors are also not aware of any significant matters that occur outside
the going concern period that could reasonably possibly impact the going
concern conclusion.
Having performed the assessments as detailed above, the Directors have a
reasonable expectation that the Group will have adequate financial resources
to continue in operational existence over the relevant going concern period
and have therefore considered it appropriate to adopt the going concern basis
of preparation in the consolidated financial statements.
Adoption of new and revised standards
New standards impacting the Group that were adopted in the annual financial
statements for the year ended 31 December 2022, and which have given rise to
changes in the Group's accounting policies are:
● IAS 37 (Amendment Onerous Contracts - Cost of Fulfilling a Contract).
clarifies that the direct costs of fulfilling a contract include both the
incremental costs of fulfilling the contract and an allocation of other costs
directly related to fulfilling contracts. Before recognising a separate
provision for an onerous contract, the entity recognises any impairment loss
that has occurred on assets used in fulfilling the contract.
● Annual Improvements to IFRS Standards 2018-2020 (Amendments to
IFRS 1, IFRS 9, IFRS 16 and IAS 41.
● References to Conceptual Framework (Amendments to IFRS 3). Minor
amendments were made to IFRS 3 Business Combinations to update the references
to the Conceptual Framework for Financial Reporting and add an exception for
the recognition of liabilities and contingent liabilities within the scope of
IAS 37 Provisions, Contingent Liabilities and Contingent Assets and
Interpretation 21 Levies. The amendments also confirm that contingent assets
should not be recognised at the acquisition date.
● Property, Plant and Equipment: Proceeds before Intended Use (Amendments
to IAS 16) The amendment to IAS 16 prohibits an entity from deducting from the
cost of an item of fixed asset any proceeds received from selling items
produced while the entity is preparing the asset for its intended use. The
proceeds from selling such samples, together with the costs of producing them,
are now recognised in profit or loss.
The adoption of these standards did not have a material impact on the Group's
financial statements.
2 Revenue
2022 2021
$'000 $'000
Sale of Digital Privacy software solutions 512,575 117,042
Sale of Digital Content and software distribution services 71,433 75,581
Sale of Digital Security, malware protection and PC performance products 39,475 38,042
623,483 230,665
Revenues from the provision of Digital privacy solutions are generated from
the Digital Privacy CGU, revenues from Digital Content and software
distribution services are generated from Digital Content CGU and revenues from
software and SAAS products offering security, malware protection and PC
performance are generated from the Digital Security CGU.
(a) Disaggregation of revenue
The following table presents our revenues disaggregated by the timing of
revenue recognition in accordance with our reporting segments:
2022 2021
(USD, in thousands) (USD, in thousands)
Digital Privacy Digital Content Digital Security Total Digital Privacy Digital Content Digital Security Total
Revenue recognised over a period 472,064 - 6,234 478,298 80,180 - 5,375 85,555
Revenue recognised at a point in time 40,511 71,433 33,241 145,185 36,862 75,581 32,667 145,110
Total 512,575 71,433 39,475 623,483 117,042 75,581 38,042 230,665
(b) Contract liabilities
The company has recognised the following revenue-related contract liabilities:
31 December 2022 31 December 2021
(USD, in thousands) (USD, in thousands)
Contract liabilities 168,342 155,856
Significant changes in relation to contract liabilities
The following table shows the significant changes in the current reporting
period which relate to carried-forward contract liabilities.
Significant changes in the contract liabilities balances during the period are 31 December 2022 31 December 2021
as follows:
(USD, in thousands) (USD, in thousands)
Contract liabilities balance at the beginning of the period (155,856) (36,594)
Business combination - (122,713)
Revenue recognised that was included in the contract liability balance from - 13,397
Business combination
Revenue recognised that was included in the contract liability balance at the 144,971 29,095
beginning of the period
Increase due to cash received, excluding amounts recognised as revenue during (157,457) (39,041)
the period
Contract liabilities balance at the end of the period (168,342) (155,856)
Current Contract liabilities (154,258) (144,971)
Non- Current Contract liabilities (14,084) (10,885)
Management expects that 91.63% (2021:93.0%) of the transaction price allocated
to the unsatisfied contracts as of 31 December 2022 will be recognised as
revenue during the next annual reporting period ($154,258 thousands), 6.75%
and 1.59% ($11,357 thousands and $2,675 thousands) will be recognised in 2024
and 2025 financial years, respectively. The remaining 0.03% ($52 thousand)
will be recognised during the following financial years.
(c) Assets recognised from costs to obtain and fulfil a contract
Significant changes in relation to assets recognised from costs to obtain and
fulfil a contract
31 December 2022 31 December 2021
(USD, in thousands) (USD, in thousands)
Current Asset recognised from marketing cost to obtain a contract 70,713 33,618
Non-Current Asset recognised from marketing cost to obtain a contract 159,941 50,201
Current Asset recognised from fulfilment cost to fulfil a contract 10,750 2,173
Non-Current Asset recognised from fulfilment cost to fulfil a contract 635 497
Significant changes in the deferred contract costs balances during the period
are as follows:
Balance at the beginning of the period 86,489 52,534
Amortization recognised during the period - marketing costs (86,577) (38,853)
Amortization recognised during the period - fulfilment cost (28,948) (5,631)
Increases due to cash paid - marketing costs 233,412 72,161
Increases due to cash paid - fulfilment cost 37,663 6,278
Balance at the end of the period 242,039 86,489
The amortization of marketing costs to obtain a contract of $86.6 million
(2021: $38.9 million) are included in total Sales and marketing expense of
$232.5 million in period ended 31 December 2022 (2021: $108.6 million).
Management expects that 30.7% of the Asset recognized from marketing cost to
obtain a contract as of 31 December 2022 will be recognised as Selling and
marketing costs during the next annual reporting period ($70,713 thousands),
26.7% will be recognised in 2024 ($61,592 thousands) and 42.6% ($98,349
thousands) will be recognised thereafter.
3 Segmental information
Segments revenues and results
The Group's reportable segments are strategic business units that offer
different products and services. Operating segments are reported in a manner
consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker has been identified as the
management team including the Chief Executive Officer and the Chief Financial
Officer. The Group operates three reportable segments:
· Digital Privacy - comprising virtual private network ("VPN") solutions
and other privacy SaaS products.
· Digital Content - comprising digital platforms which provide
reviews and content.
· Digital Security - comprising software and SaaS products offering
security, endpoint protection and PC performance.
Year ended 31 December 2022
Digital Privacy Digital Content Digital Security Total
2022 2022 2022 2022
$'000 $'000 $'000 $'000
Revenue 512,575 71,433 39,475 623,483
Cost of sales (46,206) - (2,784) (48,990)
Direct sales and marketing costs (102,794) (57,031) (21,458) (181,283)
Segment result 363,575 14,402 15,233 393,210
Central operating costs (109,521)
Adjusted EBITDA((1)) 283,689
Other operating (expense)/income (1,525)
Depreciation and amortisation (154,693)
Employee share-based payment charge (23,614)
Exceptional or non-recurring costs (3,764)
Operating profit 100,093
Finance income 26,133
Finance costs (33,352)
Profit before tax 92,874
Taxation (21,956)
Profit for the year 70,918
Exceptional or non-recurring costs in 2022 are comprised of non-recurring
staff costs of $0.8 million, $0.9 million termination costs of onerous
contract and $2.1 million professional services and other business
combinations related costs.
Year ended 31 December 2021
Digital Privacy Digital Content Digital Security Total
2021 2021 2021 2021
$'000 $'000 $'000 $'000
Revenue 117,042 75,581 38,042 230,665
Cost of sales (13,370) - (2,602) (15,972)
Direct sales and marketing costs (29,222) (37,310) (20,831) (87,363)
Segment result 74,450 38,271 14,609 127,330
Central operating costs (41,288)
Adjusted EBITDA((1)) 86,042
Other operating (expense)/income 947
Depreciation and amortisation (33,657)
Employee share-based payment charge (5,224)
Exceptional or non-recurring costs (9,850)
Operating profit 38,258
Finance income 5,580
Finance costs (11,179)
Profit before tax 32,659
Taxation (9,273)
Profit for the year 23,386
Exceptional or non-recurring costs in 2021 are comprised of non-recurring
staff costs of $6.0 million which comprise of $4.4 million one-off bonus award
to the management team for the acquisition of ExpressVPN, $0.9 million
employer cost related to management share option exercise, $0.6 million
employees onerous contract termination costs and $3.9 million professional
services and other business combinations related costs.
(1) Adjusted EBITDA is a company-specific measure which is calculated as
operating profit before depreciation (including right-to-use assets
amortisation), amortisation, exceptional or non-recurring costs, other
operating income/(expense) and employee share-based payment charges as set out
in note 4.
Assets and liabilities by reportable segment
Total assets and liabilities per segment are not regular provided to the chief
operating decision maker and as such no segment disclosure for assets and
liabilities has been disclosed.
Information about major customers
In 2022 and 2021 there were no customers contributing more than 10% of total
revenue of the Group.
Geographical analysis of revenue
Revenue by residence of the recording subsidiary:
2022 2021
$'000 $'000
Europe 147,257 143,965
Asia 414,190 20,466
US 62,036 66,234
623,483 230,665
Geographical analysis of non-current assets
2022 2021
$'000 $'000
US 185,083 198,864
Singapore 1,013,739 1,124,335
France 5,588 5,690
Romania 14,253 12,954
Germany 4,696 5,904
Israel 146,139 149,580
UK 560 154
Other 6,885 12,756
Total intangible assets, right-to-use assets and property, plant and equipment 1,376,943 1,510,237
4 Operating profit
Adjusted EBITDA
Adjusted EBITDA is a company-specific measure which is calculated as operating
profit before depreciation (including right-to-use assets amortisation),
amortisation, exceptional or non-recurring costs, other operating
income/(expense) and employee share-based payment charges.
As these are non-GAAP measures, they should not be considered as replacements
for IFRS measures. The Group's definition of these non-GAAP measures may not
be comparable to other similarly titled measures reported by other companies.
Adjusted EBITDA is calculated as follows:
2022 2021
$'000 $'000
Operating profit 100,093 38,258
Depreciation and amortisation 154,693 33,657
Other operating expense/(income) 1,525 (947)
Employee share-based payment charge 23,614 5,224
Non-recurring costs:
Non-recurring staff costs 752 5,969
Professional services related to business 2,087 3,881
combination
Termination cost of Onerous contract 925 -
Adjusted EBITDA 283,689 86,042
Other operating expense in 2022 is comprised mainly of $1.3 million expense
from deferred consideration Fair value movement through profit and loss and
$0.3 million loss from disposals of Cryptocurrencies, this partially offsets
with $0.1 million gain from fixed assets disposals.
Operating profit has been arrived at after charging:
2022 2021
$'000 $'000
Exceptional or non-recurring operating costs
Non-recurring staff costs 752 5,969
Professional services related to business combination 2,087 3,881
Termination cost of Onerous contract 925 -
3,764 9,850
Auditor's remuneration:
Group audit and Parent Company (BDO) 398 304
Audit of subsidiaries (BDO) 389 270
Audit of subsidiaries (non-BDO) 80 -
Amortisation of intangible assets 143,814 29,066
Depreciation 1,915 696
Amortisation of Right-to-use assets 8,964 3,895
Employee share-based payment charge 23,614 5,224
Operating costs
Operating costs are further analysed as follows:
2022 2022 2021 2021
Adjusted Total Adjusted Total
$'000 $'000 $'000 $'000
Direct sales and marketing costs 181,283 181,283 87,363 87,363
Indirect sales and marketing costs 45,322 51,271 19,687 21,217
Selling and marketing costs 226,605 232,554 107,050 108,580
Research and development costs 31,635 40,399 8,176 10,865
Management, general and administrative cost 32,564 45,229 13,425 24,280
Other operating expense/(income) - 1,525 - (947)
Depreciation and amortisation 16,704 154,693 7,612 33,657
Total operating costs 307,508 474,400 136,263 176,435
Adjusted operating costs exclude share-based payment charges, exceptional or
non-recurring costs, other operating expense/ (income) and amortisation of
acquired intangible assets. See note 3.
5 Intangible assets
Capitalised
Internet Domains Software Development
Intellectual Property Trademarks and Brand Customer Lists Goodwill Costs Non-Compete Cryptocurrencies Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2021 72,264 46,908 31,302 133,181 325 11,700 - 277 295,957
Additions - - - - - 5,326 - 794 6,120
Disposals - - - - - - - (776) (776)
Acquisition through business combination 170,332 110,426 332,458 658,952 - - 4,291 - 1,276,459
At 31 December 2021 242,596 157,334 363,760 792,133 325 17,026 4,291 295 1,577,760
Additions - - - - - 15,418 - 392 15,810
Disposals - - - - - - - (687) (687)
At 31 December 2022 242,596 157,334 363,760 792,133 325 32,444 4,291 - 1,592,883
Accumulated amortisation
At 1 January 2021 (40,722) (11,769) (8,352) - - (7,165) - - (68,008)
Charge for the year (8,445) (5,575) (11,145) - - (3,021) (880) - (29,066)
At 31 December 2021 (49,167) (17,344) (19,497) - - (10,186) (880) - (97,074)
Charge for the period (38,429) (10,379) (88,109) - - (5,825) (1,072) - (143,814)
At 31 December 2022 (87,596) (27,723) (107,606) - - (16,011) (1,952) - (240,888)
Net book value
At 1 January 2021 31,542 35,139 22,950 133,181 325 4,535 277 227,949
-
At 31 December 2021 193,429 139,990 344,263 792,133 325 6,840 3,411 295 1,480,686
At 31 December 2022 155,000 129,611 256,154 792,133 325 16,433 2,339 - 1,351,995
Business Combinations
On 5 March 2021, the Group acquired 100% of the share capital of Uma Capital
Ltd and Ani Ariel Ltd, the owners of Webselenese Ltd ("Webselenese"), a
digital platform which provides independent and highly valued consumer privacy
and security content to millions of users globally via market leading review
sites.
On 15 December 2021, the Group acquired certain assets, liabilities and
service entities together comprising the ExpressVPN business ("ExpressVPN")
from Access Global Limited and its subsidiaries ("Access Global"), ExpressVPN
is one of the most recognised brands in the digital privacy space and the
Acquisition creates a premium digital privacy and security player best
positioned to serve the growing demand for digital privacy.
During the measurement period the Company recorded adjustments to assets and
liabilities assumed, an increase in the value of trademark and technology of
$5.5 million and $26.2 million, respectively, and a reduction of the customer
list value by $32.1 million, as well as a reduction in the deferred tax
liabilities of $5.5 million. The net effect of these adjustments was a
corresponding $5.1 million increase in goodwill. See Note 8.
Goodwill acquired in a business combination is allocated at acquisition to the
cash generating units (CGUs), or group of units that are expected to benefit
from that business combination. ExpressVPN was allocated to the Digital
Privacy group of CGUs. Digital Privacy is the group of CGUs that is expected
to benefit from the synergies of the business combination and represents the
lowest level in the Company at which the goodwill is monitored for internal
management purposes.
Impairment
The Group tests goodwill annually for impairment, or more frequently if there
are indications that goodwill might be impaired. The recoverable amounts of
the CGUs are determined from value in use calculations. Goodwill allocated to
the Digital Privacy group of CGUs has a carrying amount of $681.5 million
(2021: $681.5 million), the Digital Content CGU has a carrying amount of $98.9
million (2021: $98.9 million) and the Digital Security group of CGUs has a
carrying amount of $11.7 million (2021: $11.7 million).
The key assumptions for the value in use calculations are those regarding the
discount rates, growth rates and expected changes to selling prices and direct
costs during the period.
For the Digital Privacy group of CGUs, the recoverable value has been
determined from value in use calculations based on cash flow projections for
the next five years from the most recent budgets approved by management and
extrapolated cash flows beyond this period using an estimated growth rate of 3
per cent (2021: 3 per cent). This rate does not exceed the average long-term
growth rate for the relevant markets. If the growth rate was decreased by 2
percentage point the recoverable amount would still exceed the carrying value.
The rate used to discount these forecast cash flows is 13.5 per cent (2021: 14
per cent). The change with the discount rate is attributed to a change with
the group of CGUs Risk Premium and Risk-free rates.
If the discount rate was increased by 7 percentage points the recoverable
amount would still exceed the carrying value. There is no reasonably possible
change in assumption that would give rise to an impairment.
For the Digital Content CGU, the recoverable value has been determined from
value in use calculations based on cash flow projections for the next five
years from the most recent budgets approved by management and extrapolated
cash flows beyond this period using an estimated growth rate of 3 per cent
(2021: 3 per cent). This rate does not exceed the average long-term growth
rate for the relevant markets. If the growth rate was decreased by 2
percentage point the effect on the recoverable amount would still exceed the
carrying value. The rate used to discount these forecast cash flows is 16 per
cent (2021: 15 per cent). The change with the discount rate is attributed to a
change with the CGU Risk Premium and Risk-free rates.
If the discount rate was increased by 9 percentage points the recoverable
amount would still exceed the carrying value. There is no reasonably possible
change in assumption that would give rise to an impairment.
For the Digital Security group of CGUs, the recoverable value has been
determined from value in use calculations based on cash flow projections for
the next five years from the most recent budgets approved by management and
extrapolated cash flows beyond this period using an estimated growth rate of 3
per cent (2021: 3 per cent). This rate does not exceed the average long-term
growth rate for the relevant markets. If the growth rate was decreased by 2
percentage point the recoverable amount would still exceed the carrying value.
The rate used to discount these forecast cash flows is 13.5 per cent (2021: 17
per cent).
If the discount rate was increased by 4 percentage points the recoverable
amount would still exceed the carrying value. There is no reasonably possible
change in assumption that would give rise to an impairment.
6 Shareholder's equity
2022 2021
Number of Shares Number of Shares
Issued and paid-up ordinary shares of $0.0001 431,274,804 358,747,494
Movement in shareholder's equity
Additional paid in capital Total consideration
Ref Ordinary shares
Number $'000 $'000 $'000
At 1 January 2021 222,297,716 22
Webselenese acquisition (a) 12,123,769 1 28,548 28,549
Share issuance (net of fees) (b) 76,543,209 8 348,382 348,390
ExpressVPN acquisition (c) 47,782,800 5 232,110 232,115
At 31 December 2021 358,747,494 36
Share issuance (net of fees) (d) 71,762,618 7 213,096 213,103
Consideration shares (e) 764,692 * - -
At 31 December 2022 431,274,804 43
* amounts below 1 thousands
(a) On 26 March 2021, the company issued total of 12,123,769 ordinary shares
of $0.0001, as part of Webselenese acquisition to Webselenese's founders and
two senior members of staff. Webselenese's founders share consideration is
subject to lock-up periods, of which 50% until the first anniversary of
closing, 25% until 18 months from closing and the remaining 25% until the
second anniversary.
(b) On 1 October 2021, the company issued a total of 76,543,209 new ordinary
shares of $0.0001 each were subscribed by investors, at an issue price of
337.5 pence per Placing Share. Total issue costs amounted to $2,636 thousands.
The Net amount proceeds after issue costs from the share issuance is $348.4
million.
(c) On 16 December 2021, the company issued total of 47,782,800 ordinary
shares of $0.0001, to Peter Burchhardt and Dan Pomerantz, ExpressVPN's
co-founders, representing approximately 13.6% of the enlarged issued share
capital of Kape. The share consideration is subject to lock-up periods, of
which 50% until the first anniversary of closing, 25% until 18 months from
closing and the remaining 25% until the second anniversary, as further
disclosed in Note 8.
(d) On 3 October 2022, the company issued a total of 71,762,618 new ordinary
shares of $0.0001 each were subscribed for by investors, at an issue price of
265 pence per share. The amount proceeds from the share issuance is $213.1
million net of issue costs of $2.4 million.
(e) As part of the LTMI Holdings acquisition in 2019, the Company undertook
to issue 42,701,548 new ordinary shares ('Consideration Shares') to be paid in
three phases. LTMI co-founders Andrew Lee and Steve DeProspero would each been
entitled to be issued 19,247,723 Consideration Shares, representing
approximately 10.4% of the enlarged issued share capital of Kape, of which
5,250,363 were issued on completion, 10,498,020 were due to be issued on the
first anniversary of completion and 3,499,340 would have been issued on the
second anniversary of completion. On 28 October 2020, the Company and LTMI
Co-founders have reached an agreement with respect to the repurchase of the
Initial Consideration Shares and their right to receive the Deferred
Consideration Shares by the Company, for a total consideration of
approximately $72.5 million. Out of which, $52.7 million were paid for the
deferred share consideration and $19.8 million paid for the Initial
consideration shares and recognised as treasury. On 6 November 2020, the
Company completed the transaction. The balance of the Consideration Shares,
being 4,206,102 in aggregate, are to be issued to four senior executives of
PIA, of which 1,147,333 were issued on completion, 2,294,077 were issued on
the first anniversary of completion and 764,692 were issued on 5 January 2022.
Treasury shares and company's Employee Benefit Trust
As at 31 December 2022, the Company holds in the treasury total of 3,502,933
of ordinary shares of $0.0001 par value (2021: 9,800,809) and company's
Employee Benefit Trust holds 4,000,000 (2021: Nil) ordinary shares. During
2022, 2,297,876 of ordinary shares of $0.0001 par value were transferred out
of treasury to satisfy the exercise of options by the company employees (2021:
1,540,482), 4,000,000 of ordinary shares of $0.0001 par value were transferred
out of treasury to the company's Employee Benefit trust as part of a jointly
owned equity shares award to members of the executive management, and Nil
(2021: 901,823) of ordinary shares of $0.0001 par value were transferred into
treasury following surrendering of share by the Group's Executive Directors
when exercised while utilising the net cashless exercise and indemnification
from PIA share consideration ESCROW.
Dividends
No dividend was declared in 2022 and 2021.
Reserves
The following describes the nature and purpose of each reserve within owner's
equity:
Reserve Description and purpose
Additional paid in capital Share premium (i.e. amount subscribed or share capital in excess of nominal
value)
Retained earnings Cumulative net gains and losses recognised in the consolidated statement of
comprehensive income
Foreign exchange Cumulative foreign exchange differences of translation of foreign operations
Shares to be issued Deferred share consideration
In accordance with Isle of Man Company Law, all of the reserves with the
exception of share capital are distributable.
7 Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of ordinary shares
outstanding during the year.
2022 2021
cents Cents
Basic earnings per share:
From continuing operations 19.2 9.6
Total basic earnings per share 19.2 9.6
Diluted earnings per share:
From continuing operations 18.8 9.4
Total diluted earnings per share 18.8 9.4
Adjusted basic 56.9 23.8
Adjusted diluted 55.6 23.1
Adjusted earnings per share is a non-GAAP measure and therefore the approach
may differ between companies. Adjusted earnings have been calculated as
follows:
2022 2021
$'000 $'000
Profit for the year 70,918 23,386
Post tax adjustments:
Employee share-based payment charge 24,397 5,546
Exceptional or non-recurring costs 3,410 8,968
Amortisation on acquired intangible assets 122,171 24,217
Other operating expense/(income) 1,473 (852)
Gain on early payment of Deferred Cash Consideration (17,213) -
Finance expenses/(income) on deferred consideration for business combination, 4,500 (3,640)
lease liabilities, forward contract and currency option transaction
Adjusted profit for the year 209,656 57,625
Number Number
Denominator - basic:
Weighted average number of equity shares for the purpose of earnings per share 368,719,684 241,960,504
Adjustments for calculation of diluted earnings per share:
Impact of potentially dilutive shares related to employee options 8,183,989 7,002,360
Denominator - diluted
Weighted average number of equity shares for the purpose of diluted earnings 376,903,673 248,962,864
per share
The Company holds shares in treasury and in the Company's Employee Benefit
Trust. These are excluded from the weighted average number of ordinary shares
for the purposes of calculating EPS as they are not outstanding. The Deferred
Consideration Shares issuable to the sellers of PIA, of which 764,692 were
issued on 5 January 2022, are included for the full period in calculating the
weighted average number of shares outstanding as solely the passage of times
means they are not contingently issuable shares.
The difference between weighted average number of Ordinary shares used for
basic earnings per share and the diluted earnings per share 8,183,989 (2021:
7,002,360) being the effect of all potentially dilutive shares derived from
the number of share options granted to employees.
8 Business combinations
(a) Acquisition of Webselenese Ltd.
On 5 March 2021, the Group acquired 100% of the share capital of Uma Capital
Ltd and Ani Ariel Ltd, which are the owners of Webselenese Ltd
("Webselenese"), a digital platform which provides independent and highly
valued consumer privacy and security content to millions of users globally via
market leading review sites, and Gclid Ltd ("Gclid") assets, owed reviews
website.
No changes have been recorded to the fair value of identifiable assets and
liabilities acquired, purchase consideration and goodwill, as previously
disclosed. As summary of the acquisition is included below:
Acquiree's carrying amount before combination
Fair value
$'000 $'000
Fixed assets, net 255 255
Trade and other receivables 7,257 7,257
Deferred tax asset 615 615
Cash and Cash equivalents 3,087 3,087
Right of use assets 509 591
Brand - 25,829
Customer lists - 10,927
Non-compete - 4,291
Technology 1,224 12,993
Trade and other payables (2,887) (2,887)
Lease liabilities (554) (591)
Deferred tax liability - (6,185)
9,506 56,182
Fair value of consideration
Cash 119,160
Shares 28,548
Deferred and contingent cash considerations 7,357
Goodwill 98,883
Net cash outflow on acquisition of business
2021
$'000
Cash consideration 119,160
Cash and cash equivalents acquired (3,087)
116,073
Webselenese was acquired for a total consideration of $155.1 million
(including the acquisition of Gclid assets) to be satisfied by combination of:
● A payment upon closing of $119.2 million in cash.
● Issuance of 12,123,769 ordinary shares of $0.0001, to Webselenese's
founders and two senior members of staff. Webselenese's founders share
consideration is subject to lock-up periods, of which 50% until the first
anniversary of closing, 25% until 18 months from closing and the remaining 25%
until the second anniversary.
● Deferred cash consideration of $2.99 million for the excess
working capital of Webselenese at the closing date. The consideration was
settled 90 days after closing.
● Contingent consideration of $2.6 million which depends on Gclid's
assets performance, see note 11.
● Deferred cash consideration of $1.76 million which represents the
excess income tax advances that were paid by Webselenese before the
acquisition date. The Company paid $1.6 million of the consideration during
2022. The consideration balance as of 31 December 2022 is $0.1 million (2021:
$1.9 million).
(b) Acquisition of ExpressVPN
On 15 December 2021, the Group acquired certain assets, liabilities and
service entities together comprising the ExpressVPN business ("ExpressVPN"),
ExpressVPN is one of the most recognised brands in the digital privacy space
and the acquisition creates a premium digital privacy and security player
best-positioned to serve the growing demand for digital privacy.
New information about facts and circumstances existing at the acquisition date
may be obtained within one year of the acquisition date that would give rise
to measurement period adjustments. These adjustments may be made to the
provisional fair values of assets and liabilities previously recognized or may
result in the recognition of additional assets and liabilities, and they are
applied on a retrospective basis with comparative prior periods revised in
subsequent financial statements to include the effect of those adjustments.
As disclosed in last year's Annual Report, the value of the identifiable net
assets of ExpressVPN had only been determined on a provisional basis due to
the proximity of the acquisition to the year end and due to an independent
valuation being carried out on certain assets not being finalised when the
2021 financial statements were issued. During the year ended December 31,
2022, the Company recognised measurement period adjustments, as follows:
(a) Trade receivables reduced by $3.8 million and trade payables increased
by $3.3 million, with a corresponding net increase in goodwill of $0.5
million.
(b) Recognition of additional right-of-use assets and lease liabilities,
with no impact in goodwill.
(c) An increase in the value of trademark and technology of $5.5 million and
$26.2 million, respectively, and a reduction of the customer list value by
$32.1 million, as well as a reduction in the deferred tax liabilities of $5.5
million. The net effect of these adjustments was a corresponding $5.1 million
decrease in goodwill. As a result, a decrease of $0.1 million was recognized
within the amortization of intangible assets which was slightly offset by
increase of $0.05 million of Deferred tax charge.
Details of the final fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill, are as follows:
Change in fair value
Provisional fair value Final Fair value
$'000 Ref
Fixed assets, net 2,214 2,214 -
Trade and other receivables 20,747 16,979 (3,768) (a)
Deferred Contract costs - - -
Cash and Cash equivalents 509 509 -
Right of use assets 7,245 9,122 1,877 (b)
Trademark 79,082 84,597 5,515 (c)
Customer lists 353,592 321,531 (32,061) (c)
Technology 131,145 157,339 26,194 (c)
Trade and other payables (43,242) (39,896) 3,346 (a)
Contract liabilities (122,713) (122,713) -
Lease liabilities (7,245) (9,122) (1,877) (b)
Deferred tax liability (60,270) (54,819) 5,451 (c)
361,064 365,741 4,677
Fair value of consideration
Cash 334,539 334,539 -
Shares 232,115 232,115 -
Deferred cash consideration 359,156 359,156 -
Goodwill 564,746 560,069 (4,677)
Net cash outflow on acquisition of business
2022 2021
$'000 $'000
Cash consideration - 334,539
Cash and cash equivalents acquired - (509)
Deferred cash consideration early settlement payment 345,132 -
345,132 334,030
ExpressVPN was acquired for a total consideration of $925.8 million to be
satisfied by combination of:
● A payment upon closing of $334.5 million in cash ("Initial
Consideration"). The cash element of the Initial Consideration is subject to
adjustment for net cash or debt in the two corporate service entities being
acquired as part of the hybrid asset and share acquisition.
● A payment on or before the six-month anniversary of completion, of
$20.0 million. The payment was completed during the period ended 31 December
2022.
● A payment on the first anniversary of completion of $172.5 million in
cash and on the second anniversary of completion of $172.5 million in cash
(the "Deferred Cash Consideration"). The Deferred Cash Consideration was not
subject to performance or other conditions and its payment by Kape was secured
by way of a charge over the shares in the Buyer. The fair value of the
Deferred Cash Consideration as of the acquisition date was $359.2 million. On
September 12, 2022 Kape has signed an agreement (the "Prepayment Agreement")
that permits early settlement of the deferred consideration for the
acquisition of ExpressVPN. On November 2, 2022 the Company fully repaid the
Deferred Cash consideration capturing cash discount of $19.9 million and
finance income of $17.2 million.
● Issuance of 47,782,800 ordinary shares of $0.0001, to Peter
Burchhardt and Dan Pomerantz, ExpressVPN's co-founders, representing
approximately 13.6% of the enlarged issued share capital of Kape. The share
consideration is subject to lock-up periods, of which 50% until the first
anniversary of closing, 25% until 18 months from closing and the remaining 25%
until the second anniversary.
The acquisition agreement contains customary warranties for a transaction of
this nature, given by the selling entities in favour of the Buyer and certain
limited warranties given by the Group. In addition, the Acquisition agreement
contains certain indemnities to the Buyer in respect of a limited number of
specific issues identified by the Group. The warranties and indemnities are
each subject to certain limitations. The co-founders of ExpressVPN have
personally guaranteed to the Buyer the performance by the selling entities of
their obligations in respect of the Acquisition. The Group has guaranteed the
performance by the Buyer of certain of its obligations in respect of the
acquisition.
Peter Burchhardt has the right to appoint one non-executive director to the
Board of Kape. This right will continue for so long as the ExpressVPN
co-founders, their close family members and their respective wholly owned
companies, taken together, hold at least 5% of Kape's ordinary shares, subject
to certain anti-dilution protections. Mr Burchhardt exercised this right in
September 2022 by nominating Mr Pomerantz as a Non-Executive Director which is
also employed by Kape Group in an executive capacity as the General Manager of
its Digital Privacy Division
An amount of $10.8 million of the Consideration Shares will be held in escrow
for 24 months from completion of the Acquisition to provide security for
claims under the Acquisition documents which are agreed or determined in
favour of the Buyer.
9 Related party transactions
The Group is controlled by Unikmind Holdings Limited ("Unikmind") incorporated
in British Virgin Islands, which owns 54.8% of the Company's shares as at 31
December 2022. The controlling party, Unikmind Holdings Ltd, has redomiciled
from the British Virgin Islands to the Isle of Man. Mr. Teddy Sagi is the sole
ultimate beneficiary of Unikmind Holdings Ltd. The Company believe that all
Related party transactions were made on an arm's length basis.
(a) Related party transactions
The following transactions were carried out with related parties:
2022 2021
$'000 $'000
Revenue from common controlled company 208 -
Technical support services to end customers and administration services (25) (271)
provided by common controlled company
Office expenses to common controlled companies (85) (44)
Amortisation of Right-to-use assets with common controlled companies (983) (410)
Interest expenses from lease liabilities to common controlled companies (56) (24)
Other operating income from lease modification to common controlled company 24 38
Software fees provided by common controlled company (28) (32)
Issuance cost amortization for Shareholder Deferred Consideration Facility (6,982) (144)
(Note 10)
Shareholder Deferred Consideration Facility commitment fees (Note 10) (10,156) (3,606)
Office subleasing to a common controlled company 54 -
Interest expenses from shareholder short-term loan (1,275)
Debt issuance costs on short-term shareholder loan - (850)
(18,029) (6,618)
On 5 March 2021, Kape entered into a binding commitment letter with TS Next
Level Investments Limited ("TSNLI"), "), an affiliate of Unikmind, under which
TSNLI committed, subject to limited conditions, to provide to Kape the Bridge
Loan of up to $120.0 million in aggregate. The Bridge Loan carried a fixed
coupon of 6.0% per annum payable on funds drawn and an arrangement fee of
1.0%. The Bridge Loan was subordinated to Kape's existing bank facilities and
was repayable no later than 31 December 2021. On 2 June 2021, Kape fully
repaid the Bridge Loan and its accumulated interest.
On 14 September 2021, TSNLI has entered into binding commitment letters with
the Group ("Deferred Consideration Facility"), subject to limited conditions,
to make available to Group, if required, loan facilities of up to $345.0
million in aggregate in connection with Kape's obligation to pay ExpressVPN's
Deferred Consideration. Furthermore, Refinancing Facility of up to $130.0
million provided until the Group achieved the club of banks consent to the
acquisition.
The Deferred Consideration Facility also carried an arrangement fee of 1.5% of
the total commitments, paid in December 2021 following the completion of
ExpressVPN acquisition, and a commitment fee accruing at the rate of 3.50% per
annum on undrawn commitments, payable on the earlier of the commitments being
cancelled or utilised. Should Kape find an alternative source of financing to
fund the payment of the Deferred Consideration or to refinance the Deferred
Consideration Facility, the commitment fees will only be payable pro rata for
the period during which the commitment under the Deferred Consideration
Facility is in place.
On 12 September 2022, the Company entered into an Early repayment agreement
with the ExpressVPN founders to pay the deferred cash consideration in advance
of the contractual dates in the purchase agreement.
On 2 November 2022, the Company entered into an agreement for Modified bank
facility (see Note 10). This Modified debt facility replaced all Kape's
existing loan facilities, including the Deferred Consideration resulting from
the ExpressVPN acquisition and the Deferred Consideration Facility arrangement
with TSNLI. As a result, the Company terminated the Deferred consideration
facility from TSNLI and paid the pro-rata Commitment fees up to that date. As
of 31 December 2022, the Company paid all the obligations to TSNLI.
(b) Receivables owed by related parties
2022 2021
Name Nature of transaction $'000 $'000
Parent company Unpaid share capital 10 10
Companies related by virtue of common control 144 40
Other
154 50
(c) Payables to related parties
2022 2021
Name Nature of transaction $'000 $'000
Companies related by virtue of common control 6 74
Other
Companies related by virtue of common control Accrued commitment fees - 3,606
6 3,680
(d) Right-to-use assets and Lease liabilities to related parties
2022 2021
$'000 $'000
Right-to-use assets 7,428 5,313
Lease liabilities (7,415) (5,346)
10 Loans and Borrowings
Term facility Revolving credit facility Shareholder loan
$'000 $'000 $'000
At 1 January 2021 35,176 1,560 -
Cash movements: - - -
Bridge Loan - - 85,000
Term Facility 85,000 - -
Revolving credit facility - 8,207 -
Debt issuance costs (2,186) - (850)
Repayment of loan (11,818) - (85,000)
Interest paid (1,844) (90) (1,275)
Non-cash movements:
Interest expenses 3,117 204 1,275
Debt issuance costs - - 850
Net foreign exchange - 58 -
At 31 December 2021 107,445 9,939 -
Current liability 19,554 - -
Non-Current liability 87,891 9,939 -
Cash movements:
Term Facility 180,455 - -
Revolving credit facility - 93,644 -
Debt issuance costs (3,969) (1,615) -
Interest paid (3,470) (1,096) -
Repayment of loan (21,875) - -
Non-cash movements:
Interest expenses 7,576 2,926 -
Net foreign exchange - (482) -
Gain on loan modification (169) (491) -
At 31 December 2022 265,993 102,825 -
Current liability 29,417 1,187 -
Non-Current liability 236,576 101,638 -
Shareholder loan
On 5 March 2021, Kape has entered into a binding commitment letter with TS
Next Level Investments Limited ("TSNLI") under which TSNLI committed, subject
to limited conditions, to provide to Kape the Bridge Loan of up to $120
million in aggregate. The Bridge Loan carried a fixed coupon of 6.0% per annum
payable on funds drawn and an arrangement fee of 1.0%. The Bridge Loan was
subordinated to Kape's existing bank facilities and was repayable no later
than 31 December 2021. On 2 June 2021, Kape repaid the Bridge Loan in full and
accumulated interest following closing of a bank debt facility as described
below.
Shareholder Deferred Consideration Facility
On 14 September 2021, TS Next Level Investments Limited ("TSNLI"), an
affiliate of Unikmind, has entered into binding commitment letters with the
Group ("Deferred Consideration Facility"), subject to limited conditions, to
make available to Group, if required, loan facilities of up to $345 million in
aggregate in connection with Kape's obligation to pay ExpressVPN's Deferred
Cash Consideration. Furthermore, Refinancing Facility of up to $130 million
provided until the Group achieved the club of banks consent to the
acquisition.
The Deferred Consideration Facility also carried an arrangement fee of 1.5% of
the total commitments, paid in December 2021 following the completion of
ExpressVPN acquisition, and a commitment fee accruing at the rate of 3.50% per
annum on undrawn commitments, payable on the earlier of the commitments being
cancelled or utilised. Should Kape find an alternative source of financing to
fund the payment of the Deferred Consideration or to refinance the Deferred
Consideration Facility, the commitment fees will only be payable pro rata for
the period during which the commitment under the Deferred Consideration
Facility is in place.
On 12 September 2022, the Company announced that it had entered into an Early
repayment agreement with the ExpressVPN founders to pay the deferred cash
consideration in advance of the contractual dates in the purchase agreement.
On 2 November 2022 following entering a Modified Bank Facility the Company
terminated the Deferred consideration facility from TSNLI and paid the
pro-rata Commitment fees up to that date, $13.8 million (see Note 9).
Bank loan
(a) General
On 28 May 2021 the Company agreed with Bank of Ireland, Barclays Bank PLC,
Citi Bank, Citizens Bank, BNP Paribas and Leumi Bank, to replace the
existing bank facilities and Shareholder loan with a Modified senior secured
bank facilities of up to $220 million. The bank facilities comprise a $120
million senior secured term facility, a $10 million revolving credit
facility and a $90 million uncommitted acquisition facility. Bank
of Ireland is the agent bank. These bank facilities had a three-years term
with an option to extend the term by up to an additional two years. 50% of the
Term Facility will be amortised on a quarterly basis across 36 and the rest
was to be paid at a lump-sum payment.
On 15 December 2021 the Banks, have given its consent to the ExpressVPN
Acquisition and extended their revolving credit facility to Kape from $10
million to $80 million. The revolving credit facility can be utilized
according to Kape's needs.
On 2 November 2022, the Company has entered to an agreement for modified bank
facilities with its existing lenders Bank of Ireland, Barclays, Citizens Bank,
BNP Paribas, Citi Commercial Bank, and Leumi Bank, and two new banks, HSBC and
Credit Suisse, who will join the enlarged syndicate. This Modified debt
facility replaced all Kape's existing loan facilities, including the Deferred
Consideration resulting from the ExpressVPN acquisition and the Deferred
Consideration Facility arrangement with TSNLI (see Note 9).
The modified debt facility comprises a $275.0 million senior secured term
facility (the "Modified Term Facility"), a $150.0 million revolving credit
facility (the "RCF") and an uncommitted $75.0 million facility (together the
"Modified Debt Facilities"). Bank of Ireland is the agent bank. The Modified
Debt Facilities have a four-years term with an option to extend the term by up
to an additional one year. 40% of the Term Facility will be amortised on a
quarterly basis across 48 months starting December 2022, and a bullet payment
on 2 November 2026. The Modified Debt Facilities carry an opening Margin of
2.75% above Applicable Reference Rate per annum. The Company paid arrangement
fees of 0.75% for the Modified Term Facility and the RCF, $3.2 million.
Term Facility
The term facility comprised from $94.5 million remaining from the existing
term facility and net proceeds of the Modified Term Facility of $176.5 million
after deducting commissions and other direct costs of the Term Facility.
Commissions and other direct costs of the Term Facility have been offset
against the principal balance and are amortised throughout the loan.
The Term Facility carries an interest rate of 3 months Applicable Reference
Rate, which is USD SOFR or EUR EURIBOR or GBP SONIA, (as of the beginning of
the relevant period) plus an opening Margin of 2.75% per annum.
The applicable Margin is linked to the Adjusted Leverage, tested at the end of
each quarter for the preceding 12 months, with a range of 2%-3% per annum.
The applicable margin as of 31 December 2022, is 2.75% (2021: 2.75%) and the
effective interest rate, after considering debt issuance, cost is 7.72% (2021:
3.866%).
RCF
A $150.0 million revolving credit facility, that carries a commitment fee for
the unused facility of 35% of the applicable Margin and interest rate as of
the Term Facility for the used facility. As of 31 December 2022, the total
credit facility drawn amount is $103.2 million.
(b) Security
The Modified Debt Facilities are secured by first ranking security over all
assets (including material Intellectual Property) of Kape Technologies Plc
("Parent") and her material subsidiaries ("Obligors") and over the shares in
all Obligors (other than the Parent).
(c) Loan Covenants
The Group is required to comply with the following financial covenants:
● The ratio of EBITDA to Net Finance Charges ("Interest Cover") shall
not be less than 4.0x in respect of any Relevant Period.
● The ratio of Total Net Debt on the last day of the relevant period
to Adjusted EBITDA in respect of that Relevant period ("Adjusted Leverage"),
shall not exceed 3x. Under some condition agreed with club of bank, the
Company Net leverage can reach up to 3.5x due to acquisition spike for a
period of 6 months following acquisition.
As of 31 December 2022, the Group has met the financial covenants as follows:
● Interest Cover: 8
● Adjusted Leverage: 0.68
The Group has been fully compliant with debt covenants through the period.
Fair Value
As of December 31, 2022, the fair values are not materially different from the
carrying amount of the Bank Loan, since the interest payable is deemed to be
market rate.
Interest
For the year ended 31 December 2022 the difference between the interest
expense and the interest paid is mainly due to the interest payable balance of
$4.3 million and difference between the effective interest rate to the nominal
interest rate of the loan.
11 Deferred and contingent consideration
DriverAgent Acquisition Private Internet Access Inc acquisition - deferred cash consideration Private Internet Access Inc acquisition - deferred assets consideration Total
Webselenese acquisition ExpressVPN acquisition
$'000 $'000 $'000 $'000 $'000 $'000
At 1 January 2021 192 14,302 247 - - 14,741
Deferred consideration payments - (10,714) - (3,332) - (14,046)
Non-Cash deferred consideration proceeds - - (247) - - (247)
Arising from business combination (see note 8) - - - 7,357 359,156 366,513
Fair value movement through profit and loss (140) - - 370 - 230
Unwinding of discount - 696 - 42 170 908
Foreign Exchange movements - - - 188 - 188
At 31 December 2021 52 4,284 - 4,625 359,326 368,287
Current - 4,284 - 4,625 190,428 199,337
Non Current 52 - - - 168,898 168,950
Contingent consideration payments - - - (472) - (472)
Deferred consideration payments - - - (1,547) (345,132) (346,679)
Fair value movement through profit and loss (52) - - 1,434 - 1,382
Early settlement discount - - - - (17,213) (17,213)
Unwinding of discount - - - 63 3,019 3,082
Foreign Exchange movements - - - (102) - (102)
At 31 December 2022 - 4,284 - 4,001 - 8,285
Current - 4,284 - 4,001 - 8,285
Non Current - - - - - -
(a) Acquisition of DriverAgent intangibles
In October 2016, the Group acquired the intellectual property of PC
maintenance software product, DriverAgent, from eSupport.com, Inc for a total
consideration of $1.2 million. As for 31 December 2022, the consideration
balance is $Nil (2021: $0.05 million).
(b) Acquisition of Private Internet Access Inc
On 13 December 2019, the Group acquired 100% of the share capital of LTMI
Holdings ("PIA"). LTMI is the holding company for Private Internet Access Inc
("PIA"), a leading US-based digital privacy company with strong position in
the data privacy services. PIA was acquired for a total consideration of
$130.1 million (including the $5.7 million to PIA phantom shareholder) and an
enterprise value of $162.3 (including $32.2 million for repayment of PIA's
existing debt), to be satisfied by a combination of $85.0 million cash and
issuance of 42,701,548 new Kape ordinary shares to be paid in three phases:
● A payment upon closing of $65.0 million in cash of which $27.1
million to PIA founders, $5.7 million to PIA phantom shareholder and $32.2
million for repayment of PIA's existing debt, and 11,648,059 Consideration
shares.
● A payment on the first anniversary of completion of $5.0 million in cash
("Deferred cash consideration"), 23,290,117 Consideration shares and Company
owned cars ("Deferred assets consideration").
● A payment on the second anniversary of completion of $15.0 million in
cash ("Deferred cash consideration"), 7,763,372 Consideration shares and
Company owned cars ("Deferred assets consideration").
On 28 October 2020, the Company and the LTMI Founders reached an agreement
with respect to the sale and purchase of the Initial Consideration Shares and
their right to receive the Deferred Consideration Shares, for a total
consideration of approximately $72.5 million. On 6 November 2020, the Company
completed the transaction. As of 31 December 2020, the Company holds the
Initial Consideration Shares in Treasury.
On 6 January 2022, the Company issued 764,692 new ordinary shares following
the second anniversary of completion. As of 31 December 2022, the share
consideration balance is $Nil (2021: $1.35 million).
As of 31 December 2022, the deferred consideration balance included $4.3
million (2021: $4.3 million) of deferred cash consideration. The balance is
expected to be paid on the year ending 31 December 2023.
(c) Acquisition of Webselenese
On 5 March 2021, the Group acquired 100% of the share capital of Uma Capital
Ltd and Ani Ariel Ltd, which are the owners of Webselenese Ltd ("Webselenese")
and assets from Gclid Ltd, a digital platform which provides independent and
highly valued consumer privacy and security content to millions of users
globally via market leading review sites, as further described in Note 8. The
acquisition consideration included the following deferred and contingent
considerations:
● Deferred cash consideration of $2.99 million for the excess
working capital of Webselenese at the closing date. The consideration was
settled 90 days after closing.
● Gclid will receive 8% from EBITDA resulted from Gclid assets sold.
The Company can acquire the royalties right at any point, in amount equal the
last 12 months EBITDA multiple by 5.5. As of the acquisition date the fair
value of the contingent consideration was $2.6 million. The Company paid $0.5
million during 2022. As of 31 December 2022, the contingent consideration fair
value is $3.9 million (2021: $2.7 million).
● Deferred cash consideration of $1.76 million which represents the
excess income tax advances that were paid by Webselenese before the
acquisition date. The Company paid $1.6 million of the consideration during
2022. The consideration balance as of 31 December 2022 is $0.1 million (2021:
$1.9 million).
(d) Acquisition of ExpressVPN
On 15 December 2021 (the "Closing date", "Completion"), the Group acquired
certain assets, liabilities and service entities together comprising the
ExpressVPN business ("ExpressVPN") from Access Global Limited and its
subsidiaries ("Access Global"), ExpressVPN is one of the most recognised
brands in the digital privacy space and the Acquisition creates a premium
digital privacy and security player best positioned to serve the growing
demand for digital privacy, as further described in Note 8.
ExpressVPN was acquired for a total consideration of $925.8 million to be
satisfied by combination of:
● A payment upon closing of $334.5 million in cash ("Initial
Consideration"). The cash element of the Initial Consideration is subject to
adjustment for net cash or debt in the two corporate service entities being
acquired as part of the hybrid asset and share acquisition.
● A payment on or before the six-month anniversary of completion, of
$20.0 million. The payment was completed during the period ended 31 December
2022.
● A payment on the first anniversary of completion of $172.5 million in
cash and on the second anniversary of completion of $172.5 million in cash
(the "Deferred Cash Consideration"). The Deferred Cash Consideration was not
subject to performance or other conditions and its payment by Kape was secured
by way of a charge over the shares in the Buyer. The fair value of the
Deferred Cash Consideration as of the acquisition date was $359.2 million. On
September 12, 2022 Kape has signed an agreement (the "Prepayment Agreement")
that permits early settlement of the deferred consideration for the
acquisition of ExpressVPN. On November 2, 2022 the Company fully repaid the
Deferred Cash consideration capturing cash discount of $19.9 million and
finance income of $17.2 million.
● Issuance of 47,782,800 ordinary shares of $0.0001, to Peter
Burchhardt and Dan Pomerantz, ExpressVPN's co-founders, representing
approximately 13.6% of the enlarged issued share capital of Kape. The share
consideration is subject to lock-up periods, of which 50% until the first
anniversary of closing, 25% until 18 months from closing and the remaining 25%
until the second anniversary.
12 Subsequent events
(a)
Offer for Kape Technologies plc (https://otp.tools.investis.com/clients/uk/kape1/rns/regulatory-story.aspx?cid=940&newsid=1667700&culture=en-GB&val=638142926103924768)
Unikmind Holdings Ltd ("Unikmind") under Rule 2.7 of the City Code on
Takeovers and Mergers (the "Code") has made a cash offer to acquire the entire
issued and to be issued share capital of the Company not already held by
Unikmind at a price of $3.44, being equivalent to 285 pence per Kape share
based on the exchange rate of £1:US$1.2058 as at 21:59 UKT on 10 February
2023 as derived from data provided by Bloomberg ("Announcement Exchange Rate")
(the "Offer").
Unikmind first approached the Company on 9 December 2022 with a proposal to
make an offer for the
Company at 265 pence per share. Having carefully considered this proposal, the
Independent Directors
rejected it as offering insufficient value to shareholders. However, the
Independent Directors did agree, on
Unikmind entering into a non-disclosure agreement ("NDA") which, inter alia,
included a standstill provision
precluding Unikmind from buying Kape shares in the market until the earlier of
(i) the date on which Kape
announces its full year results for the twelve months ended 31 December 2022
and (ii) 31 March 2023 ("NDA
Standstill"), to provide to Unikmind access to certain limited information
about the business and its prospects
in order to encourage a higher offer from Unikmind.
On 13 January 2023, Unikmind made a revised proposal to the Independent
Directors at the amount equivalent of 285 pence per ordinary share. In light
of the stated intention of Unikmind to seek a delisting of the Company
regardless of the outcome of the Offer, and the ability of Unikmind to acquire
further Kape shares without constraint once the NDA Standstill expires, the
Independent Directors believe that it was in the interests of shareholders for
the Company to grant Unikmind a partial standstill release from the NDA
Standstill to allow Unikmind's proposal to be presented to Kape shareholders
for their consideration.
(b) Silicon Valley Bank Collapsing
On Friday, March 10, 2023, Silicon Valley Bank was closed by the California
Department of Financial Protection & Innovation and the FDIC was named
Receiver. No advance notice is given to the public when a financial
institution is closed. The FDIC has created the Deposit Insurance National
Bank of Santa Clara (DINB) to facilitate the resolution of Silicon Valley
Bank. To protect the depositors, the FDIC created the Deposit Insurance
National Bank of Santa Clara (DINB) to allow depositors access to their
insured deposits and time to open accounts at other insured institutions.
The Company held immaterial cash balance with Silicon Valley Bank and all was
withdrawn to other bank accounts.
Shareholder information and advisors
Shareholder information, including financial results, news and information on
products and services, can be found at www.kape.com (http://www.kape.com) .
Independent Auditor Corporate Legal Advisors
BDO LLP Bryan Cave Leighton Paisner LLP
55 Baker Street Adelaide House
London W1U 7EU London Bridge
London EC4R 9HA
Nominated Advisor and Joint Broker Joint Broker
Shore Capital & Corporate Limited Stifel Nicolaus Europe Limited
Shore Capital Stockbrokers Limited 150 Cheapside
Cassini House London EC2V6ET
57 St James's Street
London SW1A 1LD
Investor Relations Registrars
Vigo Communications Computershare Investor Services (Jersey) Limited
Sackville House Queensway House
40 Piccadilly Hilgrove Street
London W1J 0DR St Helier
Jersey JE1 1ES
Registered Office
Sovereign House
4 Christian Road
Douglas
Isle of Man IM1 2SD
Stock exchanges
The Company's ordinary shares are listed on the AIM market of the London Stock
Exchange under the symbol "KAPE". The Company does not maintain listings on
any other stock exchanges.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR JBMMTMTMTMMJ