Consensus community valuation
Archtis provide software to protect data. They are a small company with a growing list of clients. The software can be used for internal staff and also for sharing with data securely with external organisations.
They have two products. NC Protect and Kojensi. NC Protect was recently acquired. From their website "NC Protect provides advanced data-centric security collaboration applications including Microsoft Office 365, SharePoint Online and on-premises, OneDrive, Teams, Yammer and Exchange emails, as well as Nutanix Files, Dropbox and Windows File Shares. It discovers, classifies and secures unstructured data including files, messages and chat content. Access and security are dynamically adjusted based on real-time comparison of user context and file content to make sure that users access, use and share files according to your business regulations and policies."
Archtis have partnership agreements with Microsoft. One of their rececnt sales was on the back of this partnership. Microsoft IP Co-sell
Archtis have developed Kojensi themselves. From their website "Sensitive and Classified Information Shared Securely. For Defence, Defence Industry and Intelligence who need the ability to share sensitive and classified information internally and with partners and clients, Kojensi is a proven and accredited platform for classified information collaboration and sharing that allows productivity while managing the compliance and security of information."
The company is founder led, although they aren't large. The CEO has 4.5%.
I've attached an image that shows the product overview and the revenue growth issued after q3.
I've been watching the business for a while not really knowing whether their product was resonating. The NC Protect purchase looks like a particularly astute one. It gives them a much lower entry point sale and takes them more mainstream.
Recent developments that have given me a greater confidence are the increasing sales, the increasing amounts and what I expect to be even more because of the consulting projects they have won. They won a cotract with Defence in May for $300k that is to finish before June 30 to help to help expand the use of NC Protect.
The most recent sale, announced last week, was for Kojensi with Dept Defence. "Total contract value is A$578,000(inc. GST)which includes$264,000 for an annual licenseand $314,000 for hardware and services. ". There's a good chance this will be long-lived since it includes hardware which I assume means it is on-premise. The risk is that this is small change for Defence and they could well be doing it as trial.
Huge tail winds for spending on security. Has contracts with 5 Aus Depts including Defence, Home Affairs and Health. Aus Govt cyber security strategy has $1.67B over 10 years. Defence has 15B over 10 yeaers for cyber and information warfare.
Last qtr they were $700k cash negative on $1.5M revenue. Expected revenue for q4 is $2.25M so that will make them break even without any increase in overheads. Management have not said anything about breakeven so perhaps costs will expand. But this means they are close. They have $12M cash in the bank.
Negatives
- many of their sales are for one year - not long term. I suspect this is because their clients are treading carefully. Sales in recent months have been for longer terms.
- they have capitalised development costs of Kojensi
I'm cautiously excited about their prospects. They have a $50M market cap. This is high for their current revenue but it is growing fast. I expect growth to be a bit lumpy.
I recently bought some.
