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RNS – Acquisition of Authlogics

Intercede Group PLC

(“Intercede,” “the Company” or the “Group”)

Acquisition of Authlogics Ltd

Gives Intercede capability to address the whole authentication pyramid and increases addressable market by 10x

Intercede Group PLC (AIM: IGP), a leading supplier of Public Key Infrastructure Credential Management Software, is pleased to announce the acquisition of Authlogics Ltd (“Authlogics”, the Acquisition”), a Multi Factor Authentication (‘MFA’) and Password Security Management (‘PSM’) software vendor, for initial consideration of £2.5 million (adjusted to approximately £2.0 million after net debt and working capital adjustments) plus a further deferred conditional and staged earnout payment of up to £3 million.

Acquisition highlights

• Strong strategic rationale: acquiring IP that will significantly expand Intercede’s addressable
• Accelerates Intercede’s ability to meet the requirements of new regulatory standards
• Authlogics run rate recurring annual revenue of £0.5m further enhances Intercede’s ARR
• Initial consideration will be satisfied using Intercede’s existing cash resources
• Acquisition expected to be earnings enhancing in the financial year commencing 1 April 2023
• As also announced today, Intercede is trading in line with management expectations

Klaas van der Leest, CEO of Intercede Group, commented:

“The acquisition of Authlogics enables us to deliver on the strategic vision that we have shared with investors of addressing the entire authentication pyramid. We believe that the addition of the Authlogics products will allow us to support our customers and prospects wherever they are in their authentication journey, and to embrace a wider set of use cases. The deal also increases our recurring revenue base.

We are delighted to welcome the Authlogics team to the Group, along with their customers, partners and distributors.”


Background To Authlogics

Authlogics is a UK headquartered business based in Bracknell and was founded in June 2015. A Multi Factor Authentication (‘MFA’) and Password Security Management (‘PSM’) software vendor, Authlogics is the only business to cover all three key authentication segments (password security management, password breach database and multi factor authentication) with a seamless integrated solution. The Company’s award-winning products service over 50 customers with 44 annual recurring software contracts across the Finance, Government, Defence and Healthcare sectors.

Authlogics primarily sells into the Middle East through a blue-chip global partner network. Authlogics has a high degree of recurring revenue (more than 95%) and is expected to grow strongly over the next three years.

Authlogics revenue grew at a 61% compound rate between the financial years ending 30 June 2018 and the 30 June 2021. In the year ended 30 June 2021, Authlogics made a small profit after tax of £8,000.

Whilst the Acquisition is primarily an IP deal, Authlogics had £0.5m of annual recurring revenue (“ARR”) as at 30 June 2022.

Strategic Rationale

Passwords remain pervasive throughout the cybersecurity market, despite the majority of data breaches arising due to compromised password credentials. Intercede has set out its strategic objective of supporting customers wherever they are on their passwordless journey by broadening the footprint across the authentication pyramid beyond our current position in the Public Key Infrastructure Credential Management System (‘PKI CMS’) segment.

During this calendar year, the strategic rationale has sharpened following the introduction of new regulatory standards (e.g. FIPS 201-3) in our core US federal and defence markets. These new regulations allow customers and prospects in these markets to begin to adopt technologies beyond PKI. The addition of the Authlogics products will, in a single step, allow us to address the entire authentication pyramid. This enlarges our addressable market more than 10-fold, and these markets are predicated to grow significantly over the next three years. We believe this enhanced combination ranging from Passwords to PKI will give Intercede a significant competitive advantage.

Furthermore, the PKI segment is complex and involves long sales and integration cycles. The MFA and PSM markets are characterised by simpler sales and integration cycles which should help with the Group’s revenue visibility going forward. Authlogics provides exposure to markets outside of Europe which are less penetrated and provide Intercede with the opportunity to grow its international footprint and deliver increased revenue growth over time.

The Acquisition creates a broader product portfolio for Intercede. This portfolio is expected to grow to cover Single Sign On (SSO) and Ongoing Authorisation products which will further enhance Intercedes’ client offering.

Acquisition terms

Four of the current Authlogics staff will become Intercede employees, including the two Authlogics founders.

Under the terms of the Acquisition, Intercede will pay:

• Initial consideration of £2.5 million on a debt free/cash free basis; plus
• further deferred conditional and staged earnout payment of up to £3 million.

The deferred consideration is subject to achievement of significant revenue growth targets on sales of Authlogics products by the enlarged Group in the three years to 30 June 2025. The initial consideration of £2.5 million before adjustments for net debt and working capital movement, will be satisfied using the Group’s existing cash resources. The non-contingent multiple on the initial consideration is 5x ARR as at 30 June 2022.

The Intercede Board believe that the acquisition will be earnings accretive in the financial year commencing 1 April 2023.

Intercede Group plc                                                                                                          Tel. + 44 (0)1455 558111
Klaas van der Leest                                                                                                                      CEO
Nitil Patel                                                                                                                                        CFO

finnCap Ltd                                                                                                                         Tel. + 44 (0)20 7220 0500
Simon Hicks/Fergus Sullivan                                                                                                    Corporate Finance
Tim Redfern/Charlotte Sutcliffe                                                                                               ECM

For more information visit: www.intercede.com

About Intercede

Intercede is a cybersecurity company specialising in digital identities, derived credentials and access control, enabling digital trust in a mobile world.

Headquartered in the UK, with offices in the US, we believe in a connected world in which people and technology are free to exchange information securely, and complex insecure passwords become a thing of the past.

Our vision is to make the highest levels of cybersecurity available to organisations and consumers alike, solving complexity and scalability issues by managing high volumes of digital credentials.

The information contained within this announcement is deemed to constitute inside information as stipulated under the retained EU law version of the Market Abuse Regulation (EU) No. 596/2014 (the “UK MAR”) which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. The information is disclosed in accordance with the Company’s obligations under Article 17 of the UK MAR. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Trusted by Governments and Enterprises Worldwide

Where protecting systems and information really matters, you will find Intercede.  Whether its citizen data, aerospace and defence systems, high-value financial transactions, intellectual property or air traffic control, we are proud that many leading organisations around the world choose Intercede solutions to protect themselves against data breach, comply with regulations and ensure business continuity.