Hub Cyber Security Ltd. Q2 FY2024 earnings call

• Restructured and streamlined operations by closing underperforming businesses, reducing headcount, and focusing on core strengths in higher-margin businesses.
• Strengthened financials by significantly reducing liabilities, improving the balance sheet, and creating flexibility for investment in the Secure Data Fabric platform.
• Maintained and strengthened relationships with blue-chip clients, leveraging long-standing trusted partnerships to drive growth of the Secure Data Fabric business.
• Recruited top-tier talent to build a team aligned with the growth strategy, emphasizing innovation, operational excellence, and client success.

HUB Cyber Security operates two complementary segments. The first is the Secure Data Fabric platform, which serves as the primary growth engine with high-margin potential. The second is the legacy professional services and cyber consultancy business, providing a stable revenue stream. For the first half of 2024, total revenue was $15.7 million. The Secure Data Fabric platform is positioned as the key driver for future growth, while the legacy professional services business has seen a decline in revenue due to terminated underperforming contracts. The Secure Data Fabric platform is a high-margin offering, and the legacy services contribute a stable revenue stream but have decreased in recent periods.

• Operating expenses are expected to be around $18 million going forward.
• The Secure Data Fabric segment is poised to be the primary growth driver, with a significant shift in the revenue mix starting in 2025, outpacing the professional services segment in total revenue percentage.
• Anticipate continued investment in the Secure Data Fabric platform as a key strategic initiative for long-term success.

• No specific risks explicitly detailed in the transcript, but general risks include market competition, regulatory changes affecting data security and compliance, and execution risks related to scaling the Secure Data Fabric platform.

Q: Can you talk about your competitors and the advantages that you have over them?

A: Yes, Palantir is a competitor. Our solution can be implemented in a few months with relatively low deployment and maintenance costs, uses military-grade cybersecurity, and does not require replacing existing infrastructure. Their solutions typically take years to implement, cost billions, and are highly vulnerable to cyberattacks.

Q: How do you see the long-term margin profile and which business unit is the main vertical?

A: Long-term margins reflect disciplined management. Legacy professional services historically had margins in the 50%-20% range, but through streamlining, margins have improved to 30%-40%. The Secure Data Fabric has margins in the 80%-90% range. The Secure Data Fabric is the main vertical for future growth, with a significant shift in the revenue mix starting in 2025.

Q: What are the main drivers behind the demand for HUB’s product and how does big data play into this?

A: Demand for the product is fueled by the explosion of AI-driven data overwhelming traditional systems, rising regulatory pressures requiring secure solutions, and the high cost of maintaining legacy systems. Big data requires efficient, scalable solutions like ours to break down data silos and enable real-time insights, addressing critical needs in highly regulated sectors.

Q: Elaborate on HUB's secure data customer base and usage?

A: HUB's Secure Data Fabric is used by leading European banks for KYC processes, top European asset managers for data integration and analytics, with a pipeline including industries like payments, tourism, ESG, and healthcare, addressing sectors grappling with large-scale data and regulatory pressures.