Operator: Good afternoon, and welcome to the Beeks Financial Cloud Group PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll, and I would like to hand you over to Gordon McArthur, CEO. Good afternoon, sir.
Gordon McArthur: Thank you, and welcome, folks. I will come back again, and then we go to Q&A. We will crack on. Just a quick summary of the year. We had a record year in terms of financials. It was a bit of a tale of two halves. I think we flagged that H1 where we had signed a load of deals very late in the half that did not allow us to deploy the infrastructure that we had signed and therefore recognize the revenue. But we see that flowing in H2. So we were always fairly comfortable at H1, despite what looked like not great numbers. And we covered that again in the previous presentation. So pleasingly, we had a good H2. We recognized all the revenue that we had signed in H1, and we signed some material deals in H2.
Gordon McArthur: Fraser McDonald will cover the in-depth financials, but a high level, GBP 40 million turnover. Underlying EBITDA, GBP 16 million, it is up 18%. And we made significant investments this year. A lot of focus this week has been on our cash position, and we will cover that as we go through. But we signed some major Exchange Cloud platforms, probably did more revenue share Exchange Cloud platforms in one year than we will ever do again going forward. So that was part of the significant investment we made. Also that and the network that we have newly announced on Monday, both an anti-DDoS network and a wide area network. So Exchange Cloud has done really well in terms of signing of new logos. So we are now up to eight exchanges globally. Kraken and ASX moving into OpEx breakeven, and then going beyond that. So encouraging early signs.
Gordon McArthur: We've got a few more that have just gone live. We signed Thailand about five or six weeks ago, so that will flow through. Launched Market Edge Intelligence, our AI and ML trade operations platform, signed some materially large deals in H2 last year. There will be more of that to come as customers adopt to go forward. We've got a strong pipeline going into this year. Our Q1 is always the summer months, so notoriously slow for us. I think we're ending some Mondays, some decent Q1 revenue, which we will pick for H1 as opposed to last year. ACMRR grew 15%, which is really the underlying health of the business. That is sitting at GBP 34 million going forward. So an introduction to Beeks. What do we do?
Gordon McArthur: Again, a lot of you guys have probably been on these calls for years, so I will run through this. We have a variety of products now. We announced another two on Monday, so our Beeks network and our Sovereign AI offerings. Going forward after this presentation, they will be in there. We have a range of products catering to various segments of our market. Private cloud has been the growth engine of the business since IPO. We sign lots of deals every month, anywhere between GBP 1,000 and GBP 20,000 a month, rolling monthly commitments, anything a bit more bespoke. Bespoke has multi-year commitments attached to it. That is still very much part and parcel of us going forward. What you will see is an overall percentage, as the group continues to get bigger, that percentage of overall revenue, private cloud will decline.
Gordon McArthur: It will still grow, but the newer products will become a more material part of the business going forward. I think you've seen that in the percentages over the last couple of years. Proximity Cloud was our first new product that we built maybe four or five years ago now. That is for a standalone organization to run their own internal workloads, trading workloads. It is per cabinet priced. TCV is anywhere between GBP 1 million to GBP 5 million, cannot get much bigger than that, depending on the size of the organization. That was the core. Exchange Cloud then pivoted from that.
Gordon McArthur: Exchange Cloud is really the same underlying technology that Proximity Cloud runs on, but Exchange Cloud is a multi-homed environment that we sell or white label to various exchanges around the world who then house that in their own data centers and effectively become the cloud, and sell that via their own contracts to their end members. Our commercial relationship is with Exchange. As I say, we have now eight exchanges globally and we've got some more in the pipeline. That will become a material part of the business as we-
Operator: Apologies, ladies and gentlemen, while I just reconnect Gordon. Ladies and gentlemen, please do just bear with us while we just reconnect the guys.
[Unknown Speaker]: Ladies and gentlemen, please just do bear with us. We are just waiting for the presenters just to reconnect. Apologies for the slight delay. Do bear with us, ladies and gentlemen. We do have the presenters just reconnecting, so do bear with us a couple moments more.
Gordon McArthur: Hi, folks.
[Unknown Speaker]: Hi, Gordon. Can you hear us okay? Just bear with us one second, Gordon. Gordon, if you can hear us, there are some dial. Can you hear us there, Gordon? Thank you for bearing with us, ladies and gentlemen. We are just trying to get Gordon to reconnect now. Gordon, if you can hear me, there are dial-in details in the invitation. That would just simply be the phone line if you have that to hand. Ladies and gentlemen, thank you very much for your patience. We are just trying to reconnect the presenters who have had an internet outage locally. So do please bear with us. We are just trying to reconnect them. I will give you an update very shortly, and thank you very much for your patience. Thank you, Gordon, for just clicking on that link. Let us just bring you through. Thank you very much indeed.
[Unknown Speaker]: Hi, Gordon. Can you hear me okay?
Gordon McArthur: Hi, folks. Can you hear me okay?
[Unknown Speaker]: I can. Hi, Gordon. Can you hear me?
Gordon McArthur: Yeah. Can you hear me?
[Unknown Speaker]: Yeah, I can hear you now, sir. Do you want me just to turn off the camera just to preserve your bandwidth?
Gordon McArthur: Yeah, I don't think there's a bandwidth issue. I think they've just done something to the police car.
[Unknown Speaker]: No problem. I'm just going to try and reconnect Fraser as well. Just bear me one second, and then what I propose is that there we go. Hi, Fraser. Can you hear me as well?
Fraser McDonald: Yes.
[Unknown Speaker]: I don't know what slide you're up to, but of course, you can renavigate back to the slide and then allow you to take it from there. Thank you everybody for your patience. We'll be in the background, Gordon, in case there's any other issues.
Gordon McArthur: Thank you. Sorry, folks. Me and Fraser McDonald are in the same location overseas, and our internet seems to have dropped. I do not know where we dropped out, but I will crack on to slide 6. I will overrun a little bit if need be, so apologies. So investment case. The business IPO'd 8 years ago now. We were turning over GBP 4 million when we IPO'd. We are now up at 40. EBITDA has grown every year as well. So we have tenfold increased the revenue of the business. Similar story with EBITDA. So we have a track record of growth. We have done what we said we were going to do when we IPO'd. The whole point of it was to try and tackle the tier 1 market. Now we have more than 30 tier 1 financial institutions that we contract with directly and indirectly.
Gordon McArthur: Clients stay with us for a long time, right? We have just a 1% churn annually. So when we win clients, they become very, very sticky. The market is still moving to the cloud, right? As we have evolved products and built products, our latest product is a Sovereign AI offering, which we will talk about in a little bit. We are on the right side of IT in terms of where people are directing their spend and where the strategic initiatives are moving to. Recurring revenue grew to GBP 34 million, up 15% on a constant currency basis. Most of that is now underpinned by, or a large chunk of that is underpinned by multi-year contracts. I think it was almost the largest increase in ACMRR we have ever had. Certainly one of the highest.
Gordon McArthur: A lot of our business comes from extra spend from existing clients that we win. So that GBP 34 million of recurring revenue is existing clients. The gap between that and what we will do in new revenue, about 50% of the new business we sign is genuine white space wins and then another 50% is growth from existing clients. We innovate as an organization. We do not do debt-fueled M&A. We build IP into our organization. We build products. We have kind of shied away from any meaningful M&A and really used the money to invest in our products in the last 12 months into contracts that will become revenue streams for the next 10 to 15 years. That drives the pipeline going forward. If I look at our product development over the last 4 to 5 years, we are miles ahead of any competitor.
Gordon McArthur: We are very good at building products that solve problems for our customers. The latest two that I mentioned, Monday, we will continue that route, and we will continue to do that. We are an IP company. We come up with ideas, and we build products on the back of them. Globally, we have grown. A lot of some of the contracts we have won in the last few years have been in South America, which is a new territory for us. So we have expanded headcount in Central and South America to match that growing opportunity. North America has always been a strong area for us. TMX, sixth largest exchange in the world, new revenue share Exchange Cloud client, just gone live a few months ago. Africa, our big client there is JSE, has been eminently successful.
Gordon McArthur: I think the latest rounds of clients moving onto Exchange Cloud, about 20% to 25% of all the flow going onto the exchange now comes from our infrastructure. A huge success story has meant that we have won business from clients in South Africa, outside of South Africa on direct contracts, and we hope that gets replicated with all our other Exchange Cloud deals we have won. In APAC, ASX, Thailand, the recent announcements, the team are in Thailand this week actually with an exchange. I was meant to be there, but obviously doing an investor roadshow, so that will roll out over the next few months. We win, and we do very well in emerging markets, but Europe and America are still the lion's share of our revenue. I have kind of covered a lot of this.
Gordon McArthur: We have got a lot of slides, so I am going to skip through this. We have now got 8 exchanges globally that are using the Exchange Cloud platform. We still have both models, both classic model and more recently over the last few years, has been revenue share. The revenue shares are performing as we would expect them to. I know if you look at the financials, it is not a huge portion of our revenue from the last year, but really that was only really Kraken, and Kraken has been successful. Kraken contributing to that. Again, there will be a higher revenue portion this year, but some of the revenue shares will still not be live and revenue generated by June. Things like Thailand, if it launches March, you are not going to see much revenue in a year from them.
Gordon McArthur: I am guiding investors to look at 2.5 to 3 million ACMRR addition every year incrementally every year as we go forward from our revenue shares. Yeah, roughly where I expect us to be. If we sign more exchanges, obviously we will increase that a little bit, but 3 million ACMRR, and these are, again, to reiterate this, because I think there is a real lack of understanding here. These are 10 to 15-year engagements. Johannesburg is the first client. They will renew with us in the next year or so, because it has been so successful and so much of the flow. We are now a very important part of this relationship we have will extend for a long period, and that should match all our other exchanges. Again, a little bit on the revenue share.
Gordon McArthur: We made a conscious decision, and again, to go over why we made decisions to do this, shortened sales cycles a lot. Actually more profitable for us on long term. Okay, we invest the initial CapEx. I think there has been a lot of chat about how much we have spent here, but we spent maybe GBP 3.5 million on Exchange Cloud upfront infrastructure deployments, and I would do that every year. I have got no regrets. That will lead to 10 or 15 years of multi-million pound revenue streams for us going forward. In the general scheme of things, it is not a huge amount of money. Okay. It depleted the cash balance, but we will return to cash positive this year. Very little debt in the company. We have got some asset finance that we use for some infrastructure.
Gordon McArthur: I understand the cash balance looks a little bit low, but that is as bad as it will get, and we will be cash generative this year, and that will increase going forward. I am fairly relaxed about it, and the honest answer is if we get three other revenue share Exchange Cloud clients in the next year that wanted to do the same thing, I would do the same thing. It is just part of our business. We are an infrastructure company, and some things we need to invest in advance. Edge Intelligence, I think we are pretty honest. We built a product, it was not until we got it into the hands of customers and got their data flowing through it that we know whether it was going to work and do what we expected it to do. Thankfully, it has exceeded our expectations and that of our clients.
Gordon McArthur: Late in the year, we signed a $4.8 million commitment with a very large bank, and that was phase I. We are already working on phase II with that bank, and it has been very well received. The software is running in multiple locations and giving them real business insight and real value. That has been a very good first engagement. Then we signed an exchange operator who was looking at predicting and forecasting infrastructure capacity requirements going forward. Again, live, client happy with it, and then a smaller one with a financial services organization in London. Edge Intelligence has gone well. Pipeline is strong, and we will continue to build on the back of it. We hope to have more wins announced over the coming year on Edge Intelligence and hopefully an expansion with the banking question.
Gordon McArthur: Again, all our deals come down to timing, and it depends how quickly they move to go into phase II. I am going to hand over to Fraser here.
Fraser McDonald: Thanks, Gordon. Good afternoon, everyone. Fraser McDonald, CFO of Beeks, and I will be covering the finance slides. Gordon has touched on this already, but those that follow us would have followed us at the interims. We did flag at the interims that despite the numbers that we released, it actually was a good half in terms of signings, but as Gordon mentioned, we did not deliver those products until the second half. We knew we were going to be second half-weighted. We always are a second half-weighted company as a recurring revenue, but more pronounced than it has ever been. I thought it would be helpful just to put up some of the H2 progression that we said we are going to do, and we did deliver.
Fraser McDonald: The shape of the year was really driven by when the deployments went live because we can only obviously recognize the revenue when Proximity Cloud, Exchange Cloud, Analytics actually go live, and most of that landed H2, actually towards the end of H2. H2 revenue was up. It was GBP 25 million, which was up 73% on the first half, and 26% on H2 this time last year. Again, you can see the impact on the margins. The gross margin going from 30% to 47% in H2 as we delivered that hardware and licenses into the customer deployments. Then again, obviously profit going in the same direction, H2 with that GBP 12 million up. Up over half on this time last year, and from an H1, a small loss. We delivered, as we said we would in H2, which was obviously pleasing.
Fraser McDonald: Just going on to the next slide. We are a recurring revenue business, and we have still got about 70% of our revenue as recurring, which is still the foundation of the group and still one of our most important metrics that we measure the business by, as Gordon McArthur mentioned. The graph on the right, our Annualised Committed Monthly Recurring Revenue is up 13%, or 15% if you take currency fluctuations out of it, to just under GBP 34 million, which gives a strong visibility going into the current year. Infrastructure as a service, our private public cloud, again, good steady growth in that part of the business and still the core of the group, still around 70% of the overall revenue. Proximity Cloud and Exchange Cloud, another good year. It contributed just over GBP 9 million of the 40, so just under 25%.
Fraser McDonald: You will note that we have point in time against point over time for Proximity Cloud and Exchange Cloud. The point in time revenue is actually down slightly to just over GBP 9 million from 10, but that is really driven by the change to the exchange rev share model. Under the classic contract, had we deployed those revenue share contracts, we would have recognized another GBP 3 or 4 million because it is a fixed price that we have to take about half up front. But because it is revenue share, we do not book that up front, which is actually, as Gordon McArthur explained, the reasons we are doing it is not for revenue recognition, but that is an added benefit. That will actually come through as recurring revenue over time.
Fraser McDonald: You can see year on year, our over time revenue more than doubled from just under GBP 1 million across Proximity Cloud, Exchange Cloud to over GBP 2 million a year. As we look into FY27 with the four revenue share models growing, we expect that to really add to that Annualised Committed Monthly Recurring Revenue. Two of those exchanges are now live and profitable. Kraken really took up the majority of that revenue recognition, being the first one to go live. ASX just went into monthly profitability just at the year end. When we talk about monthly profitability, what we mean by that is does the customer billings offset the CapEx investment, which they are both at that level now. Kraken is above and ASX is just slightly above.
Fraser McDonald: Uptake in line with what we hoped and expected, which is obviously positive. And then another good year for analytics, obviously, as Gordon said, with three of those contracts signed and delivered in the year. So really good year for analytics in the business. And that included, obviously, a tier 1 bank as part of that. So again, just looking at the overall metrics in the year, as Gordon said, best ever year, GBP 40 million revenue. We are now 10 times our IPO levels, and we have been pretty consistent over that period to deliver that growth. All the margins moving in the right direction. I will talk a bit about EPS and cash. Gordon touched on it. But all the other key metrics, as I said, really going in the right direction. We get asked quite a lot about operational leverage when we expect to see that kick in.
Fraser McDonald: You are seeing a bit of it this year. So our admin costs grew 5% against 11% revenue growth, and EBITDA margin was 2.5 percentage points to 40.3%. And as we scale the business, we believe that there is more operating leverage still to come. Gross margins held at just over 40%, and you will know that we had an extra GBP 1.5 million of depreciation charge. So we always build capacity ahead of revenue, but we still maintained that gross margin level at just over 40%, which we have been fairly consistent with over the last number of years. Underlying EPS flat, that is really mainly due to the swing in the tax. So we had a GBP 600k tax charge against the GBP 200k credit last year.
Fraser McDonald: So if you take tax out of it, that is worth about 1.1p of EPS, and really the pretax underlying PBT, profit before tax, is up 15%. Again, Gordon has covered part of this, but in terms of the cash, so this is the biggest year we have ever had in terms of investment. We invest ahead of revenue. So our net cash went from GBP 7 million to GBP 600k. That was a deliberate choice, and we are comfortable with it. We do generate cash as a business. Our cash generation was GBP 17.8 million operating cash flow before working capital, which I will come onto. So we do generate cash and that deliberate investment. So just almost GBP 8 million of CapEx, almost half of that went on those revenue share contracts, which, as Gordon said, is a 10 to 15 year annuity from the customer. So we would do it again.
Fraser McDonald: And the Beeks network, which again, was about GBP 1 million. So significant investment in the year. We invested in stock ahead of some of the well-publicized component price increases, so our stock at year-end was built up to just under GBP 4 million, so GBP 3.7 million of stock that we will use for current year deployments. And one of the big numbers on our balance sheet to call out is our contracted cash still to come, which is the far right of the chart. So just under GBP 18 million. So effectively, that is contracted revenue with the CapEx already made on those investments, and that GBP 18 million will come through free cash flow over the next four years. Effectively, that is accrued income on contracts where we have to recognize the revenue in advance. And that does not include the four revenue share contracts still to come.
Fraser McDonald: As we look forward, as Gordon says, we anticipate the free cash flow to start significantly increasing across the business over the next couple of years as these revenue share contracts fill up, as the customers come on board. This should be the lowest point because we start a revenue share from zero, right? When it is a replacement CapEx in 4 or 5 years, we will be starting from full rack. This should be the low point of the actual cash position. Then again, our balance sheet, we still have very low levels of debt. As Gordon says, we are 0.3 times our EBITDA.
Fraser McDonald: We have an RCF facility in place of GBP 5 million should we need it, if we do have to further finance some of these investments ahead, but we are looking to do some of these revenue share deals with cash in advance as well. There will be a mixture. I guess in terms of our 2027 cash drivers, really the key ones are the collection of the contract assets. We will not invest as much in stock. We will run some of that down, and then the revenue share income from these contracts as they grow with the CapEx already investment having been made. All right. Back to you, Gordon.
Gordon McArthur: Thank you, Fraser. I will turn my camera on again, so we will see how we go. New product offerings. The network, we first did this to increase our anti-DDoS protection, right? About a year and a half ago, we got a pretty major DDoS attack into New York. We get pretty big capacity into New York and various other sites, but it made us take stock of where we were from an anti-DDoS point of view. We see them all the time, right? We mitigate them regularly all the time. But this one was at a scale we had never seen before. We eventually had to make an investment to ensure that as DDoS attacks get bigger, we had enough capacity globally to mitigate these.
Gordon McArthur: We made a decision with the board to invest about GBP 1 million in CapEx and some OpEx to increase our defenses globally, across all of our sites. We have done that now, so we can handle even the largest attacks. As a byproduct of that, it allowed us to build out a bit of a wide area network that we can plug connectivity into that. Our partner, IPC, is still a big part of that, and we bought some undersea cable capacity to add on to the core IPC capabilities. The DDoS stuff is not revenue generating. It more allows us to sleep at night and the clients. But the wide area network will bring some incremental revenue.
Gordon McArthur: I think the much more interesting one from a potential new revenue point of view is the Sovereign AI offering that we announced on Monday in partnership with OmniPhi. A startup that is in beta production. They are agentic AI for trading capital markets. I have been a beta tester on the platform. The reason I started Beeks is I build my own algos. I have done for 20 years. I understand how difficult it is to do it. It takes months of designing an algorithm, specifying it to your developers, getting the code, testing it, changing it, getting it back tested, optimizing it. All of that takes months. I have been playing with the OmniPhi platform, which is an LLM and a back-end model built solely for capital markets. I have got five new algos trading in the space of 2 months. It has blown my mind.
Gordon McArthur: It is an LLM. The OmniPhi guys have a really good retail offering that they are going to be launching in Q1. I think we jointly, with OmniPhi and Beeks, when you add our solutions together, it actually really resonates with our institutional clients. It is a very similar story to Beeks. We started in the retail world, and we pivoted into Tier 1 financial world. Proximity Cloud was always a CPU-based deployment model. We have now got a GPU-enabled version of Proximity Cloud. That allows us to put AI infrastructure into client sites, right. Banks, brokers, exchanges, all the big guys are not really allowed to put market data into ChatGPT and Claude. There is so much customer-sensitive information in there. It just breaks all the security protocols and privacy protocols.
Gordon McArthur: There is an AI demand in trading, but at the moment it is very difficult to be met. We put together a Sovereign AI offering, and the interest in it, even in the very early stages, is more than all of our previous product launches combined. Beeks Sovereign AI, powered by OmniPhi. To go back to the OmniPhi thing, I set a challenge. I said, "I want to trade. I want you to build me a syllabus trading strategy, trading CME futures, risk 2% per trade, be flat at the end of the day, and give me some options." I did not think it would work, right. It came back with five different strategies. "Here they are. Here is the back tests. Here is the walk forwards. Here is the Monte Carlo analysis. Which one do you like?" I picked one.
Gordon McArthur: I said, "Okay, let us optimize it." Spent a couple of days optimizing it, and then, "Okay, build the deployment code and go trade it against this broker." It was done in a week. That would take me months. Hugely beneficial for the buy side, right. Even institutional buy side who are looking. It found the alpha for me. That is the bit that is really interesting, right. It found the alpha. I did not design the algorithm.
Gordon McArthur: When you put that onto GPU-enabled Proximity Cloud, with our analytics capturing clients' market data and order flows, with OmniPhi sitting on top of it, able to make AI-type number crunching and decisions for institutions, we think we have got a real unique offering to the market where we will provide. Because the model, and this is one of the key things, because it's only a trading model, you do not need a ChatGPT or Claude-like model that's trying to answer every question that everyone in the world's going to ask. The models can be relatively small. We can run the model on the GPU infrastructure within the Proximity Cloud. The data is never leaving the bank or the exchange environment. It's a local AI that understands trading. Nothing else out there that does this. Anthropic do not do it. ChatGPT do not do it.
Gordon McArthur: It's all gone up into these centralized models where who owns the data, it's a bit of a gray area there. It's a bit of an area of concern. A really interesting one, and the level of meetings we've booked, and the sales team have booked, and the incoming we've had in the last 36 hours dwarfs all of our previous product releases combined. The OmniPhi guys have been really good to work with. We've taken a strategic stake in the business. They're going to be live for the retail offering in Q1. We're building out that institution offering with a lot of interest from both existing and new clients. I've got real high hopes for that, and if we get that right, this is going to be a very material revenue stream for the business going forward.
Gordon McArthur: This year ahead, we get strong visibility into the year, GBP 34 million run rate. The revenue shares, a couple of them are now live, revenue generating, a couple of them still to go. They will make a contribution. The big challenge we've got is, and it does not really sit well with the public markets, right, is timing of deals. Some of these bigger deals, some of these bigger financial institutions move very slowly, especially with what we're doing. This is mission critical infrastructure that we build and support, right. We can not force people to work to our timelines, even with commercial offers, right. The biggest challenge we have is timing of deals, and you've seen it in H1 last year, right, where they were late in and we had to deploy it.
Gordon McArthur: For the first time, and this is on the back of some of our larger investor feedback, is we've put a range out in the market, GBP 43 million to GBP 48 million. It's quite a wide range. We understand that. We get that. That will narrow as we go through the year. That's a symptom of us not in the early start of the year, looking at timings of the deals over the next 12 months. EBITDA margin will increase between 30% and 42%. As we go through the year, we will hone that down, and hopefully, as contracts come in, we will be more accurate in where we're going to end up for the full year. I think that's us, in terms of the formal presentation. I know we were probably over an hour, but there are a lot of questions.
Gordon McArthur: In the past quarter, I suggested a price we would sell the company. This still remains the case, and has the price changed at all? Yes, it still remains the case. Sorry, Fraser today has now dropped, if you join me. It still remains the case. Has the price changed at all? Not really, but I am not going to go into it any more than that. What is the biggest opportunity for Beeks going forward the next 5 years? The fact that we have got a track record, the fact that we have got so many MSAs now with tier 1 organizations, the fact that we have got unique products in the marketplace, we genuinely have. We are the best in the industry at releasing products and building products. I have got no qualms about saying that at all. We just need to exploit some of these products we have got in clients.
Gordon McArthur: If seeking upfront hardware payments is a tactical pivot from a pure revenue share model, does shifting this capital funding onto clients then lengthen the sales cycle? Yes, it does. We have got one Exchange Cloud contract that if it was a revenue share would have been done a year ago, but we are insisting on CapEx upfront. Yes, that is why we introduced revenue share. We were comfortable to take the commercial risk because it shortens the sales cycle and it gets these things out the door even quicker. But that is the rub, right?
Gordon McArthur: I think the criticism that we spend cash on this stuff, okay, well, we will go back to more classic contracts, but it elongates the sales cycle massively because you are asking clients to go and budget for millions and millions of pounds of CapEx, and exchanges really do not like CapEx spends, so that is just the nature of the beast. With share-based payments flat at GBP 2.5 million annually and suppressing statutory EPS, what is your roadmap to reduce this option runway? None. No, none. It is part and parcel of our compensation to our staff. It drives behavior. It is a few percent per annum of dilution. I do not think it is material, but it is a material driver for our staff, so.
Fraser McDonald: It will become less material as our profits increase, so it is a bigger percentage just now, but it will become smaller. But it is also dependent on the share price issued. So whilst the volume might change, the volume will stay the same, the price will be higher.
Gordon McArthur: I think we've always been very clear that it is I've never read my share. I've had zero share options as part of since we've been an IPO. I retain my shareholding, but I have never given myself a single share option. It's given to staff, and it drives behavior, so it will remain. We've been very clear on that.
Fraser McDonald: Next one. With net cash at GBP 8.6 million and a focus on converting current contract assets into cash, how much financial headroom do you have to grow? Are you actively pausing or slowing down your customer acquisition to avoid overstretching your working capital? No, we will never do that. As I said earlier, we are expecting to be free cash positive this year. We will use asset finance. We have a debt facility that we can call on, but we can, if we need to come back to the market. But we would never pause or slow down customer acquisition. We are reasonably well funded. We have access to capital. We won't slow down our growth.
Gordon McArthur: Commit to outlining a clear five-year plan, including revenue targets during this. No. I can't do five-year crystal ball gazing. I think that's No.
Fraser McDonald: I'll have the next one. Can you describe the return you see on Proximity and Exchange Cloud deals? How much CapEx is a GBP 1 million TCV deal? How long does it take to pay back on cash? What do you expect return on a five-year deal? Yeah, so I think they're all a wee bit different, but broadly for GBP 1 million Exchange Cloud deal will be 25% to 30% CapEx. Depending on the compute, it's a wee bit different, but that's a kind of guideline across Proximity and Exchange Cloud. Margin levels around about, our gross margin is 40%, and we'd like to do a bit better, but we'll be consistent in terms of that.
Gordon McArthur: Headcount. You have grown through headcount to 115. Where would you like to end the year, if you can find the right people? We will increase it a little bit. We have not had any real material increase in headcount for the last few years, right? It has kind of been around these levels. We have opened a Filipino technical center of excellence to mirror the NOC in Glasgow. It just has become increasingly difficult to get high-quality engineers who want to work night shifts in the UK. Our customer base is truly global, so we have started our first tranche of Filipino staff has started in Manila to do APAC hours support. So we will be up to about 15 by the end of Q1 over there, but not material difference. Edge Intel just going to share any feedback on the go-lives, how happy are our clients.
Gordon McArthur: I think we have done that. It has gone really well. What size of business do you see it as being as a standalone in 3 years' time? We have been asked that a lot in the roadshow. 3 years, again, crystal ball gazing, it is very difficult. GBP 10 to 20 million run rate business for the next 3 years, we would hope. Please can you explain in layman's terms what the new products do? I think we have already done that. Are the revenue share exchange contracts scaling to plan? Again, covered. Has progress with Kraken prompted further crypto exchanges down the pipeline? We are not really focusing on crypto at all. Kraken has been a great contract. They are a very institutional type exchange. Most of them focus on retail. Kraken are kind of top tier in terms of how they view their infrastructure a lot on the market. So at Crypto, we do not.
Gordon McArthur: We will stick to the more classic asset classes. Will the GBP 9 to 14 million of revenue that you need to find on top of the ACMRR largely be from Proximity Cloud and software solutions? Yeah. Hopefully some of the new stuff that we have announced, although how much will we get that in the year, I do not know. But yeah, that is the reality. Proximity Cloud, Exchange Cloud, revenue share additions, and analytics and Edge. JSE is a poster child for Beeks. They are. I mean, we have got a great relationship with JSE. Are other exchanges developing to be a similar success? Yeah, again, I think we have covered, right? Some of them have started strong. Some are more commercially aggressive with it than others, right? Depends on various factors. But as I said, the exchange of revenue share is progressing as we progress.
Gordon McArthur: Given that signed Exchange Cloud contracts will only add GBP 3 million to ACMRR, why does your corporate broker Canaccord only have GBP 3 million total revenue growth? I do not think they do. I think Canaccord are at 45, 46, which is-
Fraser McDonald: 46
Gordon McArthur: 46. I am not quite sure that is an accurate question. Would you be prepared to raise funds by way of share offer to keep the upfront sales investment going along with a retail offer? Absolutely not, zero intentions of doing an equity raise. We have got bank debt if we need it. We do not think we need it, but zero plans are coming to market for equity to increase the cash balance.
Fraser McDonald: There is one on the guidance as to our, we obviously for the first time put a range in our forecast. The question around is, it is quite a wide range, which mitigates the possibility of not hitting the range. Why? It is difficult, right? You notice the difference between H1 and H2 when we sign and deliver, and because we have this upfront element, particularly with Proximity Cloud, if we sign or deliver it on 30 June or 1 July, it can have a massive swing, which fundamentally does not impact our business. But from a market point of view, it obviously does with expectations. That is the main reason that we put the range out, because we have this potential lumpiness when it comes to delivering and signing.
Gordon McArthur: It is not trying to mitigate a miss. Crystal ball gazing is difficult. As an investor, I would ask you to tell me what your portfolio is worth in 12 months time to 2%, and if you do not, then you have missed. That is what we get asked. What is the approach to accommodate the price escalation for chips and compute? It is a raw material. It goes into our pricing, right? We take raw materials and then we add our margins for support, et cetera, on top, so it is not eating away at our margins even though the prices are increasing.
Fraser McDonald: Exchange commissions.
Gordon McArthur: Well, you need to enhance the hardware with a 15-year. Yeah, we do. Right. This is an exchange contract question. We are talking about 15 years. The initial contract we sign is 5 years. At the end of that 5 years, we go to the exchange and say, "Do you want to continue?" Sorry, after 4 years, "Do you want to continue? If you do, we will refresh all the hardware. We will pay the CapEx again, but you extend the contract for another 5 years." If you look at that 15-year cycle, then there will be 2 or 3 hardware refreshes in there. As this develops, you have the opportunity to lengthen. What is the optimal contract length? We like 5 years. You talked previously about a European exchange to possibly close by year-end. Is that still in play? We hope so.
Gordon McArthur: But again, we are at the mercy of budget and board signing off, but we still hope so. Please discuss the decision-making process behind when to use asset-backed finance, when to use cash, when to use capital.
Fraser McDonald: We look at the bank balance. In reality, we look at what we have coming up over the next quarter, and we want to maintain a reasonably healthy bank balance. That is the real decision. How much do we need over the next 3 to 6 months, and do we need a buffer? That is really the main reason.
Gordon McArthur: I am looking through it very much. There are a couple of questions about Nasdaq. I do not know how the intention to cover this. We no longer have a contractual relationship with Nasdaq. As CapEx and new contracts impact heavily on cash flow, is there an optimal number of new contacts in each accounting period you are willing to undertake? No. We will take as many as we can. Re the exchange that would have signed a year ago, why are you only willing to sign them with the old model? Is it worry that they may not market Beeks well enough to clients? If it is a big exchange, would it make more sense to do a revenue share? Listen, we have made a decision that we are going to ask clients, or we are going to mandate some clients to put some skin in the game.
Gordon McArthur: No matter what way we go here, we get criticized for being all revenue share and putting all the cash up front, then, why don't we go revenue share to shorten the sales cycle? I don't know how we went here.
Fraser McDonald: I think there's one about our infrastructure hardware in terms of how we write it off. I think that's the question. Five years we have for our hardware. We write that off over 5 years or so.
Gordon McArthur: Do the forecasts incorporate potential revenue contributions for the new products? No, we've not put anything in. New products are hard, because you don't know when. With the OmniPhi and Sovereign AI stuff, we're building out the proof of concept labs for the clients to come and test them. So, a big bank, a big exchange will take some time. A smaller buy-side firm could move quicker. But no, to answer the question, there's nothing in the forecast. What drives you to get up, out, and win? God. Money. Hopefully, a ton of money. No, listen, going back to the share option thing, there seems a criticism. Our staff work very hard. Our staff have built the business. This is not Gordon Roach. It's everyone around the world that contributes and they contribute, and they work very hard.
Gordon McArthur: One day, they're going to get paid and rewarded with a very nice exit that will hopefully change their financial futures. So that's what makes me. I like the stuff we do. Building new products is interesting. Constantly challenged to find new stuff that helps our customers. Helping our customers, the feedback we get from the customers, the whole driving. But also building the business. I think I've done. So listen, apologies for the connectivity issue out here, folks. Me and Fraser are not in the UK, so we were beholden to an internet router abroad, so apologies. But, yeah. Thanks for your time, and yeah, we'll talk to you again in 6 months.
Operator: That's great. Thank you for updating investors today. Could I please ask investors not to close the session as you will now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This may take a few moments to complete and I-
