LONDON, UK: Intercede Group PLC (AIM: IGP), a leading supplier of Public Key Infrastructure Credential Management Software, announced the acquisition of Authlogics Ltd, a Multi Factor Authentication (‘MFA’) and Password Security Management (‘PSM’) software vendor, for initial consideration of £2.5 million 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 market
· 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 Intercede Group, along with their customers, partners and distributors.”
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.