Falanx Cyber Security Limited share price, company news, analysis and interviews

Falanx Group plc (LON:FLX) Independent Non-Executive Director William Kilmer caught up with DirectorsTalk to discuss his background, the importance of cybersecurity, how he sees the industry evolving and how his knowledge and background will benefit the company.

Q1: William, first off, congratulations on your new role at Falanx Group. Could you just give us a brief background to yourself?

A1: I’ve been characterised as both an investor and an operator so played on both sides of the table from the tech industry, which has really been where I’ve been my entire life. I’m currently with an investment platform called GALLOS which focus on investment and building companies in the cybersecurity space.

From the investment side, I also was a former Managing Partner at C5 Capital which was a London and Washington DC based investor in cybersecurity. My cybersecurity background really started at Intel Corporation, where I was previously the Managing Partner there, investing in a gamut of different technologies but it’s really where I started to notice the great need for cybersecurity, and it peaked my interest.

On the operating side, I’ve previously run several cybersecurity or data analytics companies that were start-ups that subsequently were acquired. Interestingly enough, I actually ran, as an interim CEO, a cybersecurity managed security services provider based in London called, ITC Secure.

So, most of my work has been in the US, UK and throughout Europe, and for the last 15 years, I’ve really focused on cybersecurity, it’s such a main sector for me.

Q2: You mentioned that you’ve been a founder and CEO of several cybersecurity and data analytics companies. How important is the need for cybersecurity?

A2: Cybersecurity’s always been important but I think it’s really never been more important than it is right now.

Most of us focus on technology as being a key element but I think we’re really transitioning right now to a critical phase in cybersecurity where we’ve now become less focused on technology and more thinking about the cyber posture of an organisation and taking a more holistic point of view. From my perspective, the cybersecurity viewpoint in the UK has really adopted that and maybe been at the forefront, thinking about cyber basics and how organisations really present themselves, protect themselves and that really goes down to the employees.

I think now we’re seeing even more management involvement, even at the Board level is critical for an organisation to be safe, and given the threats that we’ve seen in the market today, particularly from what we would look at as bad actors, outside of our normal sphere that are in more authoritarian regimes, that are enabled and even encouraged and incentivised to attack organizations today.

It’s just critical that every organisation think top to bottom on how they protect themselves.

Q3: How do you see the industry evolving over the coming years?

A3: I think this industry’s always evolving. We think we’ve gotten to the right level of protection with the right types of products that we’re providing but the fact of the matter is the cybersecurity industry is based on our technology industry overall, which is a constantly changing landscape.

So, what are we seeing right now?

Number one is that with technology evolving, there’s going to be more need in the market. We’re seeing a higher use of personal data in our transactions and the things that we’re doing when we think about what’s coming in the future, more personalised digitalisation, for example, the metaverse, we’ll see more issues around data being a key thing. Inside an enterprise, we’re seeing what we call their attack surface, the area that can be attacked by bad actors growing, whether it’s their social media presence, more digital assets that they’re using so those two things are not really helping us in terms of the industry being more protected.

The other thing that we’re seeing that is a real evolution in this market is just the need for good quality individuals. There’s a severe talent gap that’s out there today that is really driving the need for the cybersecurity industry to be innovative and so I think with that, we’re seeing maybe three really evolving themes over the near future:

• One is how do you de-risk that human element? At the end of the day, organisations are run by people, people are fallible and what we see is that most of the attacks that are out there have some sort of human element of it. I think as an industry, we’ve got to be able to comprehend and figure out how to manage that.
• Two is how do you really quantify the risk for particularly a business, but also for government organisations in a way that leaders can understand and know how to respond to? That’s an area that I think we’re continuing to see evolve, where we’re able to start talking more in a business language, what are the potential losses to an organisation, how would it impact a new product launch or their customers?
• Third is really innovation around automation and using in particular AI to not just identify problems, but also to figure out how to solve them. I think we’re going to see more and more technology supplementing and improving the position of those talented people that are in the cybersecurity industry to help them make better decisions or maybe even take some of those decisions off of their plate.

So there’s a lot of really exciting things that are happening in the market today.

Q4: Now, we talked earlier about your knowledge and extensive background in the sector, but how will that benefit Falanx Group?

A4: I think it’ll help in several ways. Number one, I’ve sat in the seat of running a cybersecurity managed services provider in the past, so I know a little bit about the operations and how it should look, the types of products that they should be running and really being able to balance that operational element.

Two is I have pretty extensive technology and in particular product experience. So, one of the things I’m really excited about with Falanx is being able to help them think about some of the new services that they can provide, how they can take products and turn them into services that will help organisations that are missing that talent gap, how they can run those and help them to manage the risk.

Third is from my experience of being out there with the end users, the CSOs of organisations, the business leaders, I think I get a good perspective of what their limitations are and what their real needs are as organisational leaders on how to protect themselves.

So, I’m really looking forward to the opportunity to work with them, this is a critical gap in the market that they’re trying to fill, and I think really the managed security space in particular is we’re really going to see a high amount of growth over the next few years. So,  I think it’s a bright future overall for the industry.

Falanx Group (LON:FLX) Chief Financial Officer Ian Selby caught up with DirectorsTalk for an exclusive interview to discuss the disposal of Assynt, becoming a pure play cyber security business, reasons for selling Assynt & what the proceeds will be used for and what investors can expect over the next 6-12 months.

Falanx Group protect, defend, and inform businesses in the face of growing political and cyber risks. This week the company announced that it’s entered into an agreement to dispose of its Assynt Strategic Intelligence division for an estimated cash consideration of £4.6 million to Cross Atlantic Solutions. Joining me today to discuss the news if CFO Ian Shelby.

Q1: Ian, you’ve announced that you’ve entered into an agreement to dispose of Assynt Strategic Intelligence division, could you just talk us through the highlights?

A1: What we’re doing is we’ve sold it for an enterprise value of £4.6 million and a cash to a buyer with US investors.

Assynt is very much a standalone business, before we were two separate businesses, we had our core Cyber division which is ongoing and then the Assynt Strategic Intelligence business and we had alluded to, in recent RNS’s of Cyber being the core. We’ve now consummated the change in our structure and our strategy to address this market.

So, last year, Assynt did revenues of about £2.1 million and did £100,000 positive of adjusted EBITDA so if you look at those, we sold it for over twice revenue at about 46 times historical EBITDA so they’re strong multiples.

Q2: Falanx has now become a pure play cyber security business, how will this impact the company?

A2: We see cyber security as a very high growth market, we’ve seen today about a FTSE250 company getting a vicious cyber attack on it this year. The threat is only ever-increasing and now we’re focussed on one sector where we’re really well positioned and of course, with a much stronger balance sheet and cash resources behind this, to address it.

You’ll have seen in our full year statement last week that the Cyber division, its profitability is much improved, it’s now profitable, last year it lost about £400,000 so it’s going in the right direction.

Furthermore, we’ve got service enhancement, we’ve got Triarii our monitoring service and launched, as of Monday this week, we have f:CEL, our entry point enterprise cyber security risk assessment tool. We’ve now got partners in line with this, we’ve got N-Able which is spun-out of Solar Winds in July of this year, that’s got 25,000 service providers and about 500,000 end user customers.

So, we can see that we’ve got a good market to go after that and we really believe this is a growth opportunity and having the net proceeds around means we can fuel and accelerate things.

Q3: Could you just summarise the reasons behind selling the division and what the company intends to do with the proceeds of the disposal?

A3: Before, the company was set into two separate divisions with very little crossover. You have the Cyber division which is largely SME’s and the Assynt division which is some of the largest corporates in the world and there’s very little crossover between the two and historically, there hasn’t been, completely different organisations. Therefore, you were never going to get synergies in essentially a £5 million business but it was split into two separate businesses, as it was in the previous financial year.

This will mean that all management focus is on one division and it’s well financed and in a good position to grow.

What we’re going to be doing with it, get investing in the channel, grow sales and marketing, all obviously very controlled, service enhancement, service delivery, focussing on that so we can really expand the business. That’ll clearly be in a very measured cost controlled way of doing it and making sure we get the right returns on it.

Also, we will look to do M&A within the sector and only stuff we know where we can make it earning-enhancing.

Q4: Mike Read mentioned that amongst the Falanx Group directors, there’s a confidence about the company’s future, what can investors expect over the next 6-12 months?

A4: We’ve all got skin the game, we’ve all bought shares in the company and we’re all absolute believers in it.

We are now focussed on a single business, that’s the difference so all the attention is now on Cyber. We are well financed, we can make some investments we need to further grow revenue and support revenues growth into the future.

We’ve got two new recurring revenue product/service streams on board with Triarii and now, of course, with f:CEL so we’re going to be looking grow our recurring revenue base further and obviously that generates revenue in a very predicable ongoing basis.

We will look at M&A opportunities but clearly, only things that can be earnings-enhancing.

Falanx Cyber Defence Ltd, part of the Falanx Group Ltd (LON:FLX) Managing Director Rick Flood caught up with DirectorsTalk for an exclusive interview to discuss joining the SolarWinds Technology Alliance Programme, what services they will be offering and what this means for the company.

Q1: Now we saw earlier that Falanx Cyber Defence has joined the SolarWinds Technology Alliance Programme. Rick, can you tell us a little bit more about who SolarWinds are?

A1: For anybody who doesn’t know who SolarWinds are, they are a US-based listed software company, they probably have a market, if you check today, probably in the region north of $6 billion so pretty significant.

They offer a range of technical programmes to enable people to manage their IT infrastructure predominantly, which of course, as we all know, has developed to be not just managing IT but also managing security over the recent sort of years.

Q2: What is the Technology Alliance Programme then?

A2: The Technology Alliance Programme, or TAP as they call it, is specific to one part of the business. When you look at SolarWinds, there are two elements to it, one that they call CORE, which offers software really to the enterprise end of the market, and then there’s the SolarWinds MSP business, which offers, through MSP’s or managed service providers, the ability to service their customers with all of these products I mentioned earlier.

The TAP programme, in itself, is a group of pre-approved partners by SolarWinds who offer services and products that complement their own portfolio and is specifically targeted at the MSP community, through TAP, to enable them to better serve their customers.

Q3: So, what services will you be rolling out to the network?

A3: Well, in fact, it’s pretty much everything that we offer.

So, depending on what people know, we offer a range of services from offensive to the defensive strategies, cyber security on the offensive side, it’s all very ethical as you would expect, but that could be emulating a criminal to try and attack somebody, through to the defensive strategies, which include our recently announced Triarii platform and support not only from that but also specific solutions currently in the SolarWinds portfolios. For example, they’ve got something called SentinalOne EDR, which is an endpoint protection service or solution, we can offer a sub-service behind that. So, everything that we offer will be going through the TAP programme.

The most significant elements or components of this is that this gives us direct access. We’ve been working with SolarWinds for the last couple of years on the security side of their offering, and what the TAP programme enables us to do is to now work directly with all of their community, wherever they are in the world. We’ve previously announced that they’re in the region of 22,000 MSP’s servicing many, many customers, more than that, globally.

Q4: What does all this mean for Falanx then?

A4: As far as we’re concerned, as I say, we’ve been working with SolarWinds for a couple of years and we’ve been using a product of theirs called Threat Monitor. Earlier this year, we decided that we would develop their own additional services, which we’ve previously announced called Triarii, which is an enhancement to the Threat Monitor service.

We’re delighted that SolarWinds have endorsed that by adding it to their portfolio through the TAP programme and in addition, what we should see is an acceleration of the pent up demand that we’ve created over the last two years.

We’ve run a number of events together where we’ve advocated security into the MSP community and, in doing so, we’ve created a lot of demand which we haven’t been able to fulfil from a variety of reasons. This announcement should start to unblock that and already in the last couple of weeks, we’ve seen a significant uptick in inbound interest from their MSP community so we’ve really excited about it.

Falanx Group Ltd (LON:FLX) Chief Executive Officer Mike Reid caught up with DirectorsTalk for an exclusive interview to discuss their annual results for the year-ended 31st March 2018.

Q1: Could you explain the background to the results today and what has driven the revenue growth?

A1: We’ve had a very solid year, we’ve undertaken three acquisitions, but the most important bit is we’ve had very strong organic revenue growth, the cyber revenue grew by 18% of which 96% of that is organic. The acquisition we did at the back end of the year, First Base, really, we only bought it in March and hence that’s had very little impact on our numbers.

The important bit since the year-end, our proforma revenue has grown from its £3 million that we announced today up to around £6 million and you’ll see the exciting bit, for me anyway, is that we hit EBITDA profitability in July.

So, it looks like the coming year is going to be very promising for us.

Q2: Now you’ve significantly increased your gross margin, how was this achieved?

A2: Well, the main impact on the gross margin, which moved from 20% to 31% to last year, is because we’ve got a better product mix. For those of your listeners that would’ve heard our presentations on things before, we’ve been introducing a monitoring product for our customers called MidGARD, that has got a recurring revenue line and also has got a significantly improved rate to margin around 60%-70%. So, the mix of our products has increased our gross margins significantly.

Q3: As we know, a key focus is to increase the recurring income, could you talk us through the progress being made here?

A3: I think, as a lot of people that know me, I just love recurring revenue, I view it as you earn money as you sleep and therefore I obviously enjoy that. Our recurring revenue is up from 55% to 62% and its main reason is really back to that revenue mix I identified just now. So, we’ve got a good amount of recurring revenue both from our cyber business and also our intelligence business so it’s all down to product mix.

Q4: With Falanx Group being an industry consolidator, what sort of companies are you targeting?

A4: Well, as I said earlier, we’ve successfully bought three in the year, two of those were technology, and I’ll talk a little bit about that later, and the third one was the one I just talked about also, First Base. We bought these companies really to either bolster up our technology side or increase our revenue and our product mix and we’ve also bought a fourth since year-end, Securestorm, which we announced only a few weeks ago.

We will continue to look for all value-enhancing acquisitions providing we can get them at appropriate prices that will complement our business lines or add to our technology. So, we will continue to look for acquisitions.

I think the other part that’s important really is that we are focussed in the coming months to our technology and whilst we bought two small companies, we will look to try and strengthen that as well as we go forward.

Q5: What would you say the outlook for the rest of the year and beyond looks like for Falanx Group Ltd?

A5: It’s very positive. First of all, we’ve got three new members that have come into the team to help us drive this forward, so we’ve announced, back in January, Ian Selby to be our Chief Financial Officer so he’s really focussed on getting us into the profitability that I talked about earlier. We’ve recruited Rick Flood who is our Chief Marketing Officer, he’s got a good sales and marketing background and we’ve also got Richard Morrell who is our CTO who understands more about technology than many people and is well known in the industry.

So, we’ve got a very solid foundation of people, we’ve got very good organic growth as you identified earlier and we’re in a very strong foundation. So, how do we grow our business?

We’re really looking to strengthen where we are with our partners, we sell a lot of our services through indirect customer bases, so this is called managed service providers. We have about 7 of those at the moment but we’re looking to really enhance that so that we can get to a far far greater customer base and outgrow the market so that’s the first area. The other area, which Dick Morrell is focussed on is on the technology side. We’ve got some exciting developments of MidGARD that are coming out soon which we hope our customers will enjoy and we know that they want them and it’s just down to us to deliver it.

So, our outlook is very positive, we’re looking forward to the coming year. There is a research note out about us from Progressive which I would encourage those that want to know a little bit more about us and want to see what they think the future is going to look like for us, that they read that they read that equity research note.