HUB Cyber Security (Israel) Ltd. Q4 FY2024 earnings call

• Hub has made strategic pivots to focus on high margin recurring software business and reposition for sustainable growth.
• Secured a EUR 20 million engagement with the Bank of San Marino to modernize digital banking infrastructure.
• Scaling US presence with new office in NYC and hiring world-class talent.
• Streamlined operations, exited underperforming segments, reduced overhead, and improved gross margin by over 1000 basis points year-over-year in H2 2024.
• Converted convertible debt to equity, deleveraged the business, and strengthened financials.

Hub Cybersecurity operates two synergetic business units. The Secured Data Fabric platform is the primary growth engine, a proprietary SaaS solution. The Premier Professional Services and Cyber Consultancy is the heritage services business. In the second half of 2024, revenue was $13.8 million compared to $17.6 million in H2 2023. Gross margin improved to 25.6% in H2 2024, up from 15.4% in H2 2023. For the full year 2024, revenue was $39.6 million (down from $42.7 million in 2023) and gross margin was 17.1% (an improvement from 2023). The Secured Data Fabric platform is the key growth driver, while the Professional Services business provides a stable revenue base.

• Shift towards higher margin business segments expected to accelerate in 2025 with more platform software.
• Targeting growth in the US, initially focusing on the transportation sector, with plans to expand to other industries.
• Anticipating multiple deployments similar to the Bank of San Marino engagement in 2025, aiming to significantly expand top line revenue.

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. Our competitors take years to implement, cost billions, and are vulnerable to cyber attacks. Hub's Secured Data Fabric can be implemented in months with low costs, powered by military grade cybersecurity, and doesn't require replacing current solutions.

Q: Hub has historically been a services and a hardware company, but it seems like you're moving towards a more software centric company with AI driving the data fabric component. Can you explain the software versus hardware segment of the business?

A: Hub has transitioned to focus on high margin software driven solutions. Our Secured Data Fabric integrates advanced data analytics with cybersecurity expertise, aligning with long term growth objectives. While hardware and services were historically significant, the focus is now on software-led, high margin offerings.

Q: How do you see the long term margin profile of the company? And looking ahead, which business unit, the Secured Data Fabric or IT services do you consider to be the main vertical for Hub?

A: Long term, margins are expected to improve with the shift to higher margin business segments. The Secured Data Fabric is poised to be the main growth driver, significantly outpacing IT services in revenue percentage starting in 2025.

Q: Can you talk about the main regions you're currently focused on and elaborate a bit more on your launch into the US?

A: Current focus is on Israel and EU. In the US, we're scaling presence, opening NYC office, targeting first signed contract in 2025, initially focusing on transportation sector, with plans to expand to other industries.

Q: Can you provide some more detail on the quality of your current revenue stream?

A: Over 60% of 2024 revenue came from long-term recurring contracts in financial services and critical infrastructure. Professional services business expected to grow 15%-20% year-over-year. Secured Data Fabric platform is a growing share with SaaS model, strong margins, and high cross-sell potential.

Q: Can you speak about Hub's commitment to compliance and transparency, going forward?

A: Compliance and transparency are 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 partners and investors.