Corero Network Security plc (NYA1.F) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Corero Network Security plc Interim Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where as it is appropriate to do so on the Investor Meet Company platform. Before we begin, we would like to submit the following poll. And if you give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from Corero Network Security plc. Carl, good afternoon, sir.

Good morning. Good afternoon to those all present. This is a great time to talk through our H1 results from 2025, and we have a prepared presentation to go through. Of course, we have some safe harbor conversations around forward-looking statements. But today, what we'll be reviewing is the H1 results and the outlook for us moving forward as a company. So the -- for those of you not familiar with Corero Network Security, we are a security company by far, but in a very specialized area of security that focuses on this notion of protecting companies from outages that have been endured from a cyberattack, essentially filtering cyberattacks so that companies can continue to proceed electronically and over the Internet as per their operational norms. That is typically called DDoS protection, but not only. In that world, we have been an innovator at DDoS protection for over -- well, over 10 years and have been advancing our innovations to the point where we are now recognized independently as one of the biggest innovators in the space. We'll talk more about that later. Our business has enjoyed very strong 25% annual recurring revenue growth year-on-year and a very strong customer retention rate, reaching industry heights of customer retention. This has been something that we've been able to keep for years in the customer retention rate and the ARR growth is accelerating. We're evolving our business beyond this notion of distributed denial of service attacks to all attacks that focus on availability concerns that have led us to add to the portfolio of products in our company over the last 12 months, resulting in very serious and powerful total contract value contributions to the business in the first half and continued momentum as we now are proceeding in the second half. As part of the continued strategy that we put in place for 2025 and for thereafter, beyond innovation and new products, we have taken a very strong ability to expand our global reach with footprints and sales hubs in LatAm, in Singapore or South Asia Pac and in the Middle East with a hub in Dubai. All of these strategies have been contributing, and we'll talk about those more later, but we're well positioned to take advantage of growth as time goes on. So just a real quick overview of the first half accomplishments. We've had a lot of very wonderful deals that came through, some of them new customers, some of them existing customers, some of them add-on business and so forth. And I won't read them one by one to you, but you can see the names of the customers here. A couple of the most notable deals is the $1.5 million expansion deal with TierPoint for web application firewall technology, which would be the very first time that Corero has sold a Layer 7 capability, and we sold it to an existing customer, a very large data center in the United States. Another most notable deal with Forte Telecom of $1.2 million, expanding our relationship we have there. As you recall, we have 2 large partners in Brazil, Forte being one of them. That now represent together roughly 10% of our business, whereas 18 months ago, we had roughly 0 business coming from Brazil. It has been a tremendous success factor for us, and we continue to move forward. Another notable contribution in the business is the Cooper University Health Care, which bought our core product called Zero Trust Access Control, which is a variant of distributed denial service that focuses on different availability problems resulting from bot attacks. This new capability was not only a new product sale for us in a new area, but it's also an enterprise account in the United States. Cooper University Health is the largest health care system provider in Southern New Jersey, the State of New Jersey and the United States. I think we move on from there. So I'll hand it over to Chris, our CFO, here, who will be going through the next set of slides on finances.

Good afternoon, and good morning, everybody. So these are the H1 financial numbers in terms of the highlights. We've mentioned earlier the 25% growth rate in ARR. So we exited the half as $21.6 million of annual recurring revenue. What that means in terms of the actual revenue that we've recognized in the half, really, there's 2 things that have happened in the first half of 2025. So quarter 1 was relatively soft for us in terms of orders. I think it's an industry trend that we've seen largely linked to, I guess, U.S. tariffs really and the uncertainty that came towards the end of quarter 1. We saw the impact in terms of delayed customer buying and customer decision-making. Now order intake, we saw a rebound in Q2, and we saw a nice growth versus Q2 2024, but not sufficient to close that gap from the Q1 shortfall. The other major scenario that we saw coming through quarter 2 was the traditional CapEx upfront license purchasing that was kind of a heavy part of our business. Customer buying behavior has moved away from that and moved more towards SaaS buying and kind of OpEx buying. We do think there's an element of this that's linked to the tariff uncertainty and customers moving away from tangible asset purchases that could be subject to tariffs. Notably our hardware is not subject to tariffs. But as a general trend, we're seeing -- there's one example, for instance, of an existing customer who we upsold a significant size deal in Q2 that we announced. And this customer has bought from us for a number of years perpetually on a CapEx basis. And following what happened in Q1, the purchase they made from us in Q2, they actually moved from this legacy CapEx purchasing to SaaS and OpEx buying. Now, what that means is if we sell the same dollar value of orders with a CapEx deal, we would typically recognize somewhere in the region of 70% of that deal upfront and the remaining maintenance element of that deal would be recognized over the term of the contract. With the SaaS purchasing, all of that revenue is recognized on a flatline basis across the typical 3-year term. So what it means is revenue that we would have taken in period has now been spread over a typical 3-year term with the customer. This has had a knock-on impact in terms of EBITDA with the reduction in revenue. But pleasingly, gross margin has maintained its high levels of 91%. So typically, whether we sell on a CapEx or an OpEx basis, it has no impact on gross margin, high gross margin, whichever way we sell. So just double-clicking on that shift that we've seen in terms of the customer buying sentiment. So as we said, customers -- they've definitely moved more away from kind of upfront CapEx purchasing to a SaaS purchasing model. So as I said, that has reduced how much revenue we've recognized in the H1 2025 period. But on the flip side, that has increased our annual recurring revenue dollar value, meaning that more revenue going into 2026 and beyond is already secured. This can only be beneficial for the future of the company. If you look at our 2024 annual report, we break down the revenue split between point-in-time revenue and annual recurring revenue. Now for 2024, 40% of our revenue was at point in time. So 40% of our revenue that we need to go out, sell, find again in 2025 just to get to flat. In H1 2025, we saw that percentage reduced to 29%, which is why there's a lower revenue recognition in the period, but it also reduces the risk that we have of having to go and find that revenue in 2026 just to stay flat. And we enter the first of -- well, we entered the 1st of July 2025, but also the 1st of January 2026 with a higher annual recurring revenue number and more revenue secured for the future years. This is also going to help the business from a forecasting perspective now that we're moving more towards the ARR model, which was always the goal of the company. It's just in H1 2025, it moved faster than we expected, which is why we've seen this reduction in revenue versus our initial forecast. So highlight stats then just showing the trends. You can see on the left-hand side, the continued growth of the ARR. There's a slide later on that kind of shows you the stark contrast in H1 2025 of how that's grown. Revenue, as we said, a slight reduction versus H1 2024. The outlook that we gave in our recent trading update, we reduced our revenue expectations for the full year based on the soft Q1 and this move from CapEx revenue recognition to ARR. Within that forecast, we've essentially held our H2 internal budget, our internal focus as is. We've come out of that softening and that uncertainty in Q1. We had a strong Q2, and we expect that momentum to continue through Q3 and Q4. So a couple of things to pick up on this slide that details some of the revenue breakdown. I think, first of all, if we go to the right-hand side, which charts the ARR growth over the previous 5 years, you can see we've constantly had steady ARR growth typically because every time we sell a CapEx deal, there's a 100% uptake of maintenance services, which contribute to ARR. And in more recent years, our SaaS product has been very well received. You can see 2024 going into 2025, the stark increase in the line there, which really represents the shift in buying sentiment away from CapEx towards the SaaS model. A couple of quick stats on the left-hand side. You'll see that U.S. sales is roughly 73% of our business. That is reducing. So whilst it's still a high number and a validation of our technology in one of the most difficult markets to sell. That was up towards 80%. But with the strategy to open sales hubs around the globe, particularly in Latin America and particularly in Brazil, we've seen significant growth over the past 12 months. So that reliance on U.S. revenue is slowly decreasing as we increase our sales around the globe. And then in the pie chart, you'll see there that the dark blue section, that's our point-in-time revenue, which, as I mentioned, for 2024 was 40% and for the first half was down to 29%. So a lower reliance on one-off revenue to find to secure for future years.

All right. So there's a number of aspects that drive our business that essentially have people come to our storefront and buy our product portfolio. One of them is pretty predictably the size of the threat and the escalation of the threat. And the threat landscape for cyberattacks rendering companies out from various types of cyberattacks has done nothing, but increase the last 20 years and accelerate over the last year. Here are some examples on the slide of just some kitchen table names that have gone down associated directly from cyberattacks that we're focused on taking them down. And these are the problems that we solve with our technology stack. What we've had is the largest threat size happen within the last 4, 5 months. We've had the most sophisticated threat attacks happen, and they're attacking essentially every single industrial target. Any company that must have their business up and running for a second, a minute or continuously is at risk for cyberattacks that would render them out. So you can think of companies such as software companies that are delivering Software as a Service such as an Uber or a Netflix or a managed services company or even a health care company, a financial services company, obviously, these are all very, very big. You're probably familiar with a lot of the attacks. There's been AI companies that have gone down, security companies that have gone down, massive cloud platform companies that have gone down. There is no real industry that is immune to these attacks. And this is driving an addressable market for what we do so that today, the addressable market is already $4 billion, of which Corero can reasonably address somewhere between $2 billion and $2.5 billion of that addressable market with what we do. There's a belief that the $4 billion by independent analysis will rise to $10 billion over the next roughly 10 years. In addition, as we talked about, we have begun the process of very active innovation, launching new products, which also have adjacent market -- addressable markets, which continue to add to our available share of attacking a market for customers and being able to address solutions. So why are people picking Corero? Essentially, it's easy, it's cost effective, and we do the job the best, right? So most of the legacy products that are in this space were not designed for this problem. They were -- if you pick almost any one of the companies that are out there that are doing very large business or have large market share, they have come into this business from what once was different business models that they had and different technology stacks. So said another way, they didn't create their business from scratch trying to solve this problem. Corero is one of the few companies, maybe the only company of note that has focused on this problem from day 1. And as a result, our tools, technologies, our automation, our flexibility, our pricing and our available options, software, hardware and integrations are at industry high standards and are the most desirable in the industry. The only biggest problem that Corero has essentially is the size company that we are and that in the marketplace, many companies, maybe most companies are not aware of us being an eligible option while they're buying the solution or procuring solutions. Next slide. Yes. So what are we doing to be able to overcome our fundamental problem of market awareness and fundamental problem of addressing the available market space with increased sales. Well, we've taken on 4 essential strong initiatives to be able to capture more market share and capture more addressable market. The first was over 18 months ago, we put in place a program, which continues to bear fruit today of expanding our global footprint. We went from 8 salespeople direct in our business model to 16 today. These are outside direct selling people, of which most of those 16 are actually new. Of the original 8, there's only 2 that continue on today as outside sales personnel. So we have essentially 14 brand-new salespeople, and we've also invested in alliance and channel partnerships and individuals to be able to manage those partnerships throughout the world. We've added global footprint, as I mentioned, in different geographies, added to those selling hubs with partners and language support and cultural support. We're investing much more, obviously, in the salespeople, the processes, the content and the marketing to be able to make sure that we can actually support and provide air cover, if you will, in the region. This presence of these individuals and of the language support and the cultural support and the partner support are absolutely vital for us being able to have realistic selling motions around the world. At the same time, we put a strong initiative in place to make sure that we can both keep our current customers happy as we always have, upsell initiatives to those current customers with new products -- we didn't have prior additional products that we could actually offer to our very happy customers. Today, we have more-new product that we can sell to clients. And we put processes and customer success people to be able to husband our customers and make sure that they're satisfied with what we're doing. And we're obviously accelerating our market competitiveness, both with innovation and with our pricing options in the marketplace. Today, we're essentially the only product that offers a capital expense for what we do. Most of the other service providers today have really moved on to OpEx models, which we also obviously leverage. So we have many different ways we go to market. Essentially, you can consume our product any way you would like. So this has been validated, and I'm happy to be able to bring this to you by an independent analyst group called QKS or SPARK Matrix report. The QKS Group publishes approximately yearly a report on our space. They're a company that does independent analysis, technical analysis of industries, especially in security, where they evaluate all the manufacturers of solutions and how do they compete against each other. This is the first year that Corero fancies itself in the leadership quadrant. So we had a very large movement year-on-year. In addition, we are the -- been identified as the only emerging innovator of the entire group. And you'll take a note here that there are very, very large companies that are not leaders, and there are very, very large revenue companies in this space that are really laggards as we move forward. So Corero is well positioned to be able to be for selection to be an alternate for people that are actually buying or replacing their DDoS solutions. So what does the outlook look like, especially since we had some softness in H1? I would imagine that's a looming large question in many people's mindsets. Management remains confident that our plans that we put in place in the beginning of the year, although we had softness in Q1, and we had a change in the mix, which were both unplanned as part of our plans, beyond those challenging -- those challenges to our original plan, we remain with our original plan. And now here we are halfway through, if not more, of the third quarter, we feel resolute that we'll be able to continue to hit our revised estimates that we proposed -- posted. And we feel very, very confident that our solutions are both executing well in the marketplace that we're gaining and gathering momentum, that our sales cycles are reducing and becoming more predictable, and we feel very strong that we have the proper people, technology, product, pricing and gaining wherewithal in the marketplace as an eligible option. So this concludes our session here today, the prepared session. I would love to solicit questions from the crowd. We have some already that have been submitted, which we'll work through. But I thank you for your attendance, and I look forward to any questions, comments, concerns that you might have.

Perfect. Carl, Chris, if I may just jump back in there, thank you very much indeed for your presentation this afternoon. [Operator Instructions] I just like to remind you that a recording of this presentation along with a copy of the slides and the published Q&A can be accessed via investor dashboards. And guys, you can see that we have received a number of questions throughout your presentation this afternoon. And thank you to all of those on the call for taking the time to submit their questions. But guys, at this point, if I may just hand back to you just to read out those questions and give your responses where it's appropriate to do so. And if I pick up from you at the end, that would be great. Thank you.

Great. Thank you. Okay. Great. Thank you, everybody, for your questions. Let's jump in then. The first one is, has the Juniper relationship changed following its acquisition by HPE in June?

So I'll begin there. Of course, that has been big news in our world. We have 3 alliance partners, as we affectionately call them, which essentially are original equipment manufacturers of our technology and represent a fairly healthy share of our selling. Juniper is one of those alliance partners, and they have undergone an acquisition with HPE, which is most-louded in the news, you're probably familiar with it. It did provide for some distraction in the early part of the year, and I think it also provided for some lethargy in our initial H1 results. But post-acquisition, it's clear that HPE will continue on with the relationship and are quite excited about it. There's a lot of underlying plans being made as a unified organization heading into 2026. But I can tell you that no part and no time since I've joined the company 20 months ago, have we had a better, more organized, more energetic and more gathered pipeline together. I believe that we are better together and so do they. We had published a reinitiation of our relationship back in, I believe it was the March time frame, the first -- early spring. And that has ignited the entire relationship once again. So we're really excited actually about what's happening at Juniper. You probably come to understand that the Juniper name will deprecate as we head into next year, and it will become HPE Networking. And as a result, going forward, you'll hear us talking about HPE Networking as they change their name.

Okay. Thank you, Carl. The next question then is, was the downgrade to the full year number simply a feature of the adoption of DDPaaS or general weakness in your end markets? I'll take that one. So the -- as we mentioned, there was a relatively soft Q1, which not a result of weakness in the market itself, but typically a response to the uncertainty in the general economic environment driven by the U.S. tariff uncertainty. As we say, we rebounded in Q2 in terms of orders, but with this mix away from capital purchases to our DDPaaS offering. So yes, our downgrade for the full year is a combination of the 2. So the in-period revenue recognition this year is lower than we anticipated because more of that order intake is being bought over a SaaS basis and will be recognized over the next 3-year period. And as we say, we've held our forecast for H2, but we don't think we'll be able to -- at this stage, we don't think we'll be able to recover that softened Q1. So yes, largely driven by the move to DDPaaS, but at the same time, accepting the fact that we won't recover the Q1 softening.

I'll take the next question that says, how quickly do you think the shift towards DDPaaS can translate into revenue growth and profitability? We took action straight away, recognizing the mix. Just to recall what we had said, our mix historically was 60% OpEx, 40% CapEx. We had planned the year that way. Coming out of the first half, we were 71% OpEx, a pretty significant change and 29% CapEx. We've remodeled the business. We've adjusted our OpEx costs inside the business to be able to address to be able to address the P&L accurately around the change in mix. And as a result, you should find that the knock-on effect will become muted, and we will continue to build a very admirable P&L. At the same time, that we're looking to keep the growth rate on ARR in the mid-20s, if we can. And of course, we're already in the early 20 million, and we should expect to depart 2025 with a very healthy ARR number, probably mid-20s.

Okay. The next question. Should investors and indeed analysts simply focus on ARR as the key metric for accessing Corero’s -- it says accessing. I think it means assessing Corero's success. That's up to individual analysts, I guess, to look at. But for us as an organization, we do see ARR as the key metric fundamentally for 2 reasons. It's -- if we can grow our ARR at a handsome rate as we have done in the first half, a, it gives us secured revenue for future years. It also helps us to forecast the business. We have greater visibility of the future revenues of the business, helps us to plan costs and investments accordingly as well. I would say we've always had the goal of trying to increase ARR as a percentage of our total revenue. H1 took us slightly by surprise at the pace that it's moved towards it. But we see it as only a positive. If we can move our ARR number, which we think we can do in a relatively short period of time to cover our costs, any deal above that then goes straight to the bottom line as profit. So that's why we see the real benefit of the shift to ARR moving forward.

So the next question is about, will you continue to invest in sales and marketing? And do you have the right combination of people and partners to meet your growth ambitions? This is probably a question that never gets totally stated or answered, I think, in our world as we continue to address how the world evolves. I would say our ambitions to continue to grow salespeople are low because we think we have a very strong set of selling people, and we think we have the right requisite salient of salespeople in the regions. But we will continue to add to the support of the salespeople, most notably will be channel and channel organization. So you should expect us to see and make very decent news around adding channel and reseller motions into the environment. Having said that, we don't expect costs as a percentage of sales to fundamentally change. We will be adjusting different attributes of our business to make sure that we're responsible in the way that we add the different capabilities onto the business.

Okay. Then the next question says, what is the sales pipeline for H2 and 2026 looking like?

So H2 has looked -- as we mentioned, we took a responsible look at our H2 relative to the H1 softness and wanted to understand if we needed to call down our -- both our internal goals and external goals in terms of our total contracting forecast. But the pipeline was great, and we felt committed to it. And as we move through Q3, we're finding that we were correct in our assumptions. So we remain confident in what our original plan was for the second quarter. And if you take a look at some of the news articles that we've published, either RNSs or otherwise, you'll find some wonderful pearls there to take a look at. Most notably, the Akamai relationship is back on its track, and you saw that we did a deal in Europe with a major banking concern for roughly $600,000 to us in the relationship. What's notable there is that there are a lot of firsts in that. It was the first deal with Akamai in Europe. It was the first deal with a bank for Corero. So we normally -- our normal target market was Tier 2 and Tier 3 service providers, and now we're expanding that aperture to many more geographies and many more industries. So -- and banks have a have a habit of being pack animals when they procure solutions such as this. So this opens up broader and bigger opportunities across the board for us. It was also our first sale under the DORA Act, which is a directive by Europe for critical infrastructure companies to be able to be resolutely required to make investments, improve investments to resolve resiliency through tool acquisitions and onboarding from cyberattacks. Said simply, the DORA Act is a new act that requires critical infrastructure to have made the appropriate investments to make sure they don't go down from cyberattacks. So the long and short of it is both through the number of deals, the size of deals, the industry amounts, the amount of alliance pipeline, the amount of deal activity, the amount of deal activity per person and in region, we feel extremely strong with where we stand at the moment and feel resolute that we'll be able to make the revised expectations that we placed.

Okay. Next question says, with ARR now at $21.6 million, what is your medium-term target penetration of recurring revenues as a percentage of total sales? Okay. I mean it would be easy to say that we'd love to keep increasing the percentage of total sales and move towards 100% because that would be the best place for me as the CFO to be able to future predict where our revenues are going to be. The truth is, there are still customers out there who want to buy on a CapEx basis. And as Carl mentioned earlier, not many of our competitors offer that as a purchasing option to customers. So as a differentiator, it helps us to still attract customers by offering that model. What I would say is, in terms of medium-term targets that we've set ourselves, the immediate obvious target is for our annual recurring revenue to cover our OpEx. Any deal above that then flows through to the bottom line and is EBITDA positive. And then I guess the secondary goal would be to have the same effect so that from a net profit perspective, we're covered by our annual recurring revenue. We believe that on the current growth rates that we're projecting, we can get to there in the medium term.

So the next question is, can you please talk about the impact of tariffs on your business? Tariffs have not a direct impact on our business in so much as we are not subject to tariffs. Having said that, tariffs have impacted, I believe, everybody's business in a couple of very serious ways. And I think -- I believe led to some of the softness in Q1, whereas many customers, including long-standing customers of Corero changed their buying habits from CapEx to OpEx from tangible assets to intangible assets. I think fundamentally on a philosophy change that they didn't want to be subject to tariffs should in the future tariffs terms and conditions change, that they would be on a long-standing relationship of intangible asset procurement and acquisition, which I think precipitated this change in our mix on product. And I think has also led to some delay in decision-making as people try to get it all sorted. So those are the biggest impacts on tariffs. I would say that going forward, many companies that are making CapEx products only will probably be impacted as this continues to escalate between countries and regions. And the -- also not just tariffs, but the transportation and shipping costs associated with hardware has gone up dramatically, and it's becoming a cost -- it's really driving a lot of costs into the processes. So going forward, I think you should come to expect that tariffs will actually do nothing but precipitate an as-a-service OpEx purchasing model for us as we move forward with it.

Okay. The next question then, regarding the expanded partnership with Juniper, can you quantify the potential uplift in addressable market from accessing Juniper's Tier 1 telco customers?

Juniper and Corero go to business together like true partners where they have opportunities to be able to talk with and add solutions to their Tier 1 telco providers, they are doing so. And I think if you're familiar with that business, most Tier 1 providers have a relationship with Juniper as they have acknowledged some of the best networking gear in the world. So as a result, we have access to many Tier 1 providers in the world. You will see for the first time from Corero, probably this quarter news that we have had Tier 1 accounts that have selected us that have come to understand that we're an eligible option. And much like the banks, as we suggested that Tier 1s take notice when other Tier 1s change operational providers, and we believe that's going to arc a tremendous amount of capability to us. We are in test, proof-of-concept tests in approximately half a dozen Tier 1 operators around the world, of which I would say 50% are directly responsible through the partnership with Juniper. So it has led to very strong pipeline capabilities and will lead to, I'm confident, very strong business in the future.

Okay. Next question says, do you split revenue by renewals versus new business? We don't. There's a number of reasons why not. One of them actually is, many of our customers are service providers, managed service providers who are growing and growing with Corero. And so actually differentiating between what's the renewal and what's the growth with that customer is often a little bit obfuscated. What I can say, though, is on top of the 98% customer retention that we have, in this period alone, we upsold around 60% of those customers through renewal, kind of demonstrating really that the customer base that we have continues to grow in their own business. And so their continuing need to grow their DDoS solution with Corero expands as well.

The next question is, would your technology have been able to prevent the recent attacks on JLR, Jaguar Land Rover, which has caused enormous problems. Have you approached JLR to say that you have a solution? I'm not familiar with the particulars of the JLR attack, and I'm also not familiar with whether or not our sales team has engaged the JLR organization for a solution. But I can tell you this. There's 2 things that is growing. One is we have a growing set of confidence that if your company went down as a result of a cyberattack that we will have at least some form and shape a solution that can contribute to the successful keeping you up. The second piece is we now understand through independent analysis, and it's quite broad and it's becoming well aware that ransomware attacks can be started first from a DDoS attack. So in other words, there's a growing body of evidence that DDoS attacks can preclude, I should say, preempt a ransomware attack, and they do it so that it mutes your defenses by overwhelming your defenses with a lot of traffic while there's an insertion of a ransomware software that goes into the environment. So said another way, it's becoming obvious that a DDoS solution combined with a ransomware solution is needed to have comprehensive ransomware protection. And that's a focus we're going to be focused on as we round out into 2026. But it's clear that there's many more buyers that have not yet selected a proper DDoS solution who might be at risk for ransomware as a result.

Okay. The next 2 questions are quite long, and I'm actually going to combine them because they're a little bit similar. So traditionally, Corero has been a working capital positive in the first half of the year and working capital negative in the second half of each year. In H1 2025, the working capital inflow was more modest. So what is the trend likely to be in H2 2025? And then the follow-up question below is talking about the overdraft position and where we are in terms of confirming that. So if you look at the history of Corero, which, as we said in previous years was much more weighted to upfront CapEx deals. If you take 2024, for instance, we sold $5 million-plus deals in the first half of last year that were CapEx by nature. So 5 deals where there was a large inflow of revenue at the point of time, but also these deals we would invoice at point of sale as well. So a large inflow of cash in the first half of the year with CapEx deals. And that's typically what we used to see. So we'd see CapEx deals done in the first half of the year, typically, as customers were using their CapEx budgets to make sure they were -- and then we'd see a bit more OpEx buying in the second half of the year. As we mentioned that, that level of CapEx buying in the first half of 2025 has reduced. So that level of invoicing at the point of sale has reduced as we now invoice over the term of the contract. So the cash reduction that you've seen since the end of 2024 is not an increased cash burn. It's this delayed timing of cash inflows from customers now as the invoicing profile changes with this change in mix. Now, to kind of protect ourselves against that, we have this overdraft facility with our banking partner that essentially is just its final paperwork that's going through, a lot of compliance around these kind of things, as you can imagine, and maybe took a little bit more time to get the paperwork done than we first imagined. I don't see -- the current forecasts don't project that we will need to use the facility this year or into next year. It's more a protective measure for any timing differences around kind of customer payments and inter-month differences. We will start to generate cash again through the middle of next year as the ARR growth really takes effect. And the way that we've reforecast the business, we've kind of rebased it now on the ARR perspective. And we've really leaned into this lower reliance on CapEx deals and tried to build the business forecast on this going forward. If we have any sizable CapEx deals that come in outside of the forecast, which will still happen. We still anticipate that to happen. We just want -- we've changed the business projection to stop relying on these large lumpy deals each year and more to rely on opening the year with a higher ARR business. So as these extra CapEx deals will come in, they should be a nice top-up to cash and revenue rather than a reliance to get back to the starting position for the year.

So the next question is about the change in the CTO and whether or not we'll be looking for another CTO. And the short answer is, Ashley has been with the company for a long time and has done an amazing job grooming a next-generation set of individuals that we feel confident that we can distribute various functions and processes from the office of the CTO between myself and a few other key executives, and we'll live on with that -- with those office processes and procedures and technology distributed amongst a few other individuals. So the short answer is we don't look to replace that position in the near term or throughout 2026.

Okay. We're nearing the end of the questions now. Of the $10.9 million in H1 2025, what was the ARR revenue and what was the growth rate over H1 2024? So the growth rate in the ARR itself was 25%. And as mentioned, the previous 60-40 split from 2024 has now moved into a 71-29 split into H1 2025. So 71% of that revenue now is ARR. ARR being our DDPaaS, our SaaS offering, our service and maintenance that we have 100% attachment rate onto our software licensing. And we do have some 1-year deals that renew at 100% every year, a much smaller portion of that as well that rolls into our ARR number.

Next question is on the non-subscription deals. Are you signing term licenses or perpetual? Fundamentally, we have moved years ago to term licenses. I would say, from time to time under some strange parameters or requirements, we will sign a perpetual license under certain conditions. But our fundamental normal go-to-market is term licenses.

And typically, a 3-year term license. We have some instances where we might sign a 1 year and sometimes where we might sign a 5. Typically, a 3, averages out to about 3.

Perfect, guys. If I may just jump back in there, and thank you very much indeed for being so generous of your time and addressing all of those questions that came in from investors this afternoon. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation just for you to review. But Carl, perhaps before really now, just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that would be great.

Yes. I would encourage everybody that's listening to our results and to what we have going on in the company and taking another fresh look and eyes at the company. What you have before you is a cybersecurity company that is innovating at a breakneck pace with product and portfolio that's coming out that represents growing market share and capability with execution behind it with [indiscernible] revenue stream that's in the mid-20s million that's growing 20 -- mid-20%, so 25% that is executing above their industry competitors that's addressing a market that's easy -- that has easy budgets to go after. And I would suggest that the market valuation versus that mix is quite attractive right now. We're excited about the new team that we have in place. We have new selling leaders. We have new channel leaders. We have a new refreshed set of product and portfolio, which you have before you is essentially a resurgent business.

Perfect. Carl, Chris, thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of the management team of Corero Network Security plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.