Israeli cybersecurity software company Kape Technologies plc (TASE: KAPE) has reported its financial results for the first half of 2020. Controlled by the Teddy Sagi Group, Kape's revenue grew 97% in the first half of the year to $59 million - and grew 12% in pro-forma terms, without the results of PIA, which was acquired by Kape in December 2019.
US company PIA, which specializes in providing encrypted solutions for digital information, was acquired for $127.6 million in cash and shares in late 2019 and for Kape represents a major leap forward on its way to becoming one of the world's three leading players in providing solutions for Internet privacy - at a time when there is a constant rise in cyber attacks worldwide and a growth in online personal data.
The company said, "The ongoing global growth in demand for privacy solutions and cyber security on the Internet continues to increase Kape's subscriber base. Despite the worldwide slowdown and uncertainty created by the coronavirus, Kape is very well positioned to enjoy this continual growth in the online privacy and cyber security solutions market."
Another figure that illustrates that Kape is benefitting from the acquisition of PIA is the strong growth in repeat revenue (income from subscribers and returning customers) - 140% to $50.8 million. This growth has substantially improved the ability of the company to forecast ahead. In addition, revenue from existing customers grew to $106.6 million compared with $98.8 million at the end of 2019.
Following these results, Kape's management says that it is progressing towards the upper range of the expectations that were set in the past: realizing annual synergies of $3.5-4.5 million. "The integration of PIA within Kape is moving ahead swiftly and is expected to be completed during the second half of 2020, and the company is on the way to achieve a 40% reduction in PIA's monthly operational costs during the third quarter of the year," the company said.
Kape, which specializes in consumer security solutions has two product divisions: the first is for online privacy solutions; and the second is end-point protection against malicious software.
The report shows that organic revenue growth (without PIA's results) in the online privacy sector in the first half of 2020 represented 47% of revenue, amounting to $17.9 million compared with $12.2 million in the corresponding period of 2019. Adjusted EBITDA rose 185% to $16.4 million, and adjusted EBITDA margins rose to 27.8% from 19.4% in the corresponding half of 2019. In the first half of the year the company also completed raising a $70 million long-term bond from Citibank, Barclays and Bank of Ireland.
During the first half of 2020, Kape implemented a number of launches of important products in both the digital security and online privacy protection sectors such as an end-points security solution developed by Kape for Windows users, the Wireguard protocol, and the new VPN protocol, which provides customers with reinforced encryption and Kape is the first in the industry to install it in its products.
Kape CFO Moran Laufer said, "The first six months of 2020 have been significantly productive for the company both in terms of operations progress and in terms of financial performance. The widespread uncertainty created by the coronavirus around the world has strengthened the need for security solutions based on quality software. Therefore, we are continuing to focus on accelerating our R&D efforts in order to ensure that Kape's package of products will continue to stay ahead of its rivals with the privacy and digital security of our customers remaining our top priorities."
Laufer added, "As we expected, when we signed the deal, the acquisition of PIA has sped up the company's progress and the merger between the teams of the two companies has been smoothly completed to form a leading global company. In the second half of the year, we will continue to focus on implementing in practice our growth strategy and we are looking to the future with full confidence."
In the wake of the results for the first half of 2020, Kape's board of directors feels certain that the company will meet the annual guidance provided by management at the time of the acquisition of PIA: revenue of $120-123 million and adjusted EBITDA of $35-38 million.
Kape is currently trading at a price of £1.87 per share, giving a market cap of $400 million, reflecting a rise of 160% over the past year. Kape operates in 160 countries and has 380 employees. Kape's development center is in Israel in the Azrieli Sarona tower in Tel Aviv.
en.globes.co.il - on September 15, 2020 © Copyright of Globes Publisher Itonut (1983) Ltd. 2020