HUB Cyber Security Ltd. Q4 FY2024 earnings call

• Hub has two synergetic business units: the Secured Data Fabric platform (primary growth engine, proprietary SaaS) and Premier Professional Services and Cyber Consultancy (heritage services business).
• Secured Data Fabric platform addresses data management complexity, enables real-time governance, AI-driven risk intelligence, and is implemented in months with low costs. Can be added as a layer above existing infrastructure.
• Premier Professional Services provides stable revenue base and trusted relationships. Over the past year, Hub streamlined operations, focused on high-margin recurring software business, and repositioned for growth.
• Secured a EUR 20 million engagement with Bank of San Marino to modernize digital banking infrastructure, expect to deliver in 2025. Scaling US presence with new NYC office and hiring world-class talent.
• Over the past year, made bold decisions to streamline operations, focus on high-margin recurring software, and reposition for sustainable growth.

Hub Cybersecurity operates two synergetic business units. The Secured Data Fabric platform, the primary growth engine, is a proprietary SaaS solution. The Premier Professional Services and Cyber Consultancy is the heritage services business. For the second half of 2024, revenue was $13.8 million compared to $17.6 million in the same period of 2023. Full-year 2024 revenue was $39.6 million, down from $42.7 million in 2023. Gross margin in H2 2024 was 25.6%, up from 15.4% in H2 2023. Full-year 2024 gross margin was 17.1%, an improvement from 15.3% in 2023. Total operating expenses in H2 2024 were $14.7 million, a 29% reduction from $20.9 million in H2 2023. Full-year 2024 operating expenses declined roughly 60% YOY due to expense rationalization and other factors. Operating loss in H2 2024 was $11.1 million, a 38% improvement YOY.

• Expect to fully execute the EUR 20 million Bank of San Marino engagement in 2025, reinforcing profitability trajectory and market share expansion.
• Scaling US presence with new office in NYC to support North American demand.
• Shift towards higher margin software-driven solutions, with anticipation of margin improvement in 2025 as more business shifts towards platform software.
• Targeting multiple deployments on the scale of the San Marino engagement over the coming quarter, including the Hub 360 approach for full stack modernization.

Q: Can you speak about your competitors and the advantage you have over them?

A: We unify compliance, AI analytics, and security in one real time platform for a fraction of the cost. Competitors take years to implement, cost billions, and are vulnerable to cyber attacks. Hub's platform can be implemented in months, has low maintenance costs, powered by military grade cybersecurity, and can be added as a layer above existing infrastructure with no forklift approach.

Q: Hub has historically been a services and hardware company, but moving towards software centric. Explain software vs hardware segment.

A: Hub has transitioned to focus on high-margin software-driven solutions aligning with long-term growth objectives. Secured Data Fabric with proprietary AI integrates advanced data analytics and cybersecurity expertise to address security and operational needs of clients, leveraging trusted relationships from professional services.

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

A: Long-term margin profile reflects commitment to disciplined management and operational efficiency. IT services historically had 15%-20% margins, but shifted to higher value opportunities with 30%-40% margins. Secured Data Fabric is software-centric with 80%-90% margins and poised to be primary growth driver, outpacing IT services as percentage of total revenue by 2025.

Q: Main regions focused on and US launch?

A: Current focus on Israel and EU. US is strategic opportunity, targeting first signed contract in 2025, initial focus on transportation sector, then expand to other industries, leveraging success with European clients in smaller boutique banks.

Q: Quality of current revenue stream?

A: Over 60% of 2024 revenue from long-term recurring contracts in financial services and critical infrastructure. Professional services expected 15%-20% YOY growth. Secured Data Fabric platform contributing growing share of top line, SaaS model with strong margins, sticky compliance use cases, and high cross-sell potential. Targeting five to ten new SaaS-based compliance clients with annual contract value $500,000-$1 million.

Q: Driving gross margin improvements?

A: Strategic exits from lower margin contracts, integration of AI-led software offering, better pricing discipline, 80/20 revenue structure focused on high-efficiency services.

Q: Commitment to compliance and transparency?

A: Rebuilt with institutional grade mindset, compliance and transparency embedded in governance, leadership culture, and day-to-day execution. Implemented follow-up board oversight, strengthened internal controls, and aligned financial reporting to meet expectations of world-class partners and investors.