Newmark Security plc (NWT.L) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Newmark Security plc Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and will publish those responses where it's appropriate to do so on the Investor Meet Company platform. Before we begin, we would just like to submit the following poll. And as usual, if you could 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 Newmark Security plc. Marie-Claire, good morning.

Good morning. Well, good morning, and I am Marie-Claire Dwek, CEO of Newmark Security, and I'm delighted to be here again at our investor meet. Today, I'll give you an update on our growth plan. And as we release our midyear results, I'm very happy to share the progress we've made in the direction of travel for the second half of the year, which continues to be exceedingly positive. By the way of introduction, for those of you who don't know us, Newmark Security plc is a global leader in secure people data solutions for human capital management systems, often referred to as HCM, trusted by some of the world's largest enterprises and software providers. In the simplest terms, we are about powering people flow going in and out of the workplace by combining intelligent time clock devices. For those of you unfamiliar with the term a time clock, it's a robust network device that monitors employees passing in and out of the workplace, supporting secure identification via Edge pin, biometric or mobile credential, which records start, end times, breaks and other work events. It then transmits these to a time and attendance or HM software and is designed with fixed locations, for example, building entrances or production floors where employees naturally pass ensuring consistent auditable time capture. We combine these devices with secure cloud-based software control and end-to-end people data management. All in all, our technology captures, manages and powers this people flow from identity and access time and attendance, bridging the gap between physical and digital workplaces with speed, security and compliance. Our integrated solutions enable efficient workplace monitoring for management while protecting employees across the world. Here are 9 key investor highlights that will give you a good feel for the strength of our proposition and our strategic focus. Number one, we're a market leader in an all-in-one people data capture solutions. Two, our secure cloud-based software control creates high-value advantage as both a key competitive edge and a barrier to entry. Thirdly, offering compliant people data management drives long-term customer value with complete peace of mind. Four, we've delivered 10 years of consecutive year-on-year growth in HCM revenues, especially in the U.S. Our operations drive sustainable high margins with hardware-enabled enterprise SaaS model, integrated solution select subscriptions. Six, we've developed a lean scaling platform, leveraging an in-house IP and remote service model. Seven, we operate in a large and growing market driven by innovation in software and AI through human capital management. Eighth, we're accelerating growth with clear growth levers via HCM and direct end-user partnerships and with our latest tablet extension. Nine, our scaling continues to focus on recurring revenues with a redoubling strategy of continued double-digit growth trajectory in ARR in the context of our 5-year strategic plan. As a quick tour of our latest headlines, we're focused on accelerating go-to-market activities that are clearly working, growing HCM, direct-to-end user and tablet revenues. In HCM, we continue to trade strongly, and we're in advanced discussions with 3 new North America enterprise HCM businesses, including ADP. We've laid the all-important foundations for our direct-to-end-user channel with market leaders, Oracle, Workday and SAP and are seeing early signs of success, signing a new D2E multi-territory partnership with a major global home furnishing store and our Synerion North American agreement extended to global coverage. And some of you may have heard in my previous update, we extended our product mix with a new tablet-enabled mobile workforce management solution, and we're winning customers, generating recurring revenue and building towards a very strong H2. Our achievements this year are already adding up, as always, helped by some profile raising initiatives, including recent articles in Business Quarter and Forbes. And for those of you who don't know us already, let me give you a short history. For over 30 years, Newmark has been an innovator of high-value products and services in enterprise security. And with headquarters in the U.K. and U.S., today, Newmark has a strong presence across North America, the U.K. and Europe, with over 60% of our People and Data Solutions revenues coming from the U.S. business. During this time, we've had to adapt our business as our client needs, technology solutions and a wider society trends have changed. In our first decade, we built the company of today, making acquisitions of Safetell, Grosvenor Technology and Custom Micro. In the second decade, we had some success adapting to the changing landscape and making a shift from the physical security into our technology-led solutions. And whilst we still have our well-established brand, Safetell, providing complementary solutions in the physical security, manufacturing, installing and servicing products like auto doors, entrance controls and retail protection screens, this last decade has seen us transform Newmark into a people-led data business, providing solutions for human capital management and the HCM software space. Today, we're best known for our Grosvenor Technology or our GT brand. This is our people data business that partners with companies who need an efficient way to capture, manage and power the people flow going in and out of their physical workspaces. Since 2018, we've been growing rapidly in the U.S. and Europe, driving digital subscriptions and services. This is being accelerated by our increasing AI investments that mean organizations are prioritizing trusted sources of data. And this is where GT People Data Solutions play a critical role, bridging that gap that exists and allowing us to sell hardware and software through long-term enterprise subscriptions. Sorry, just trying to change. Why focus on HCM time and attendance. It remains the critical and unmovable link between the people in our business and the systems that run in. Our people data capture solutions are the apex of this fast-growing market, linking the 2. So we benefit from the growth and the enterprises and the business that are increasingly deploying sophisticated HCM solutions as well as the software companies that supply them. We bridge the gap between them both. And as we like to say, as they grow, we grow. As I've already mentioned, HCM systems are increasingly being configured and enhanced for the new era of AI automation. So our secure and compliant people data solutions are growing in demand, especially now that we've achieved SOC 1 and SOC 2 international security certifications. The data is compelling. According to a 2024 market growth report, the time and attendance system market was 3.1 billion in 2024 and nearly 3.4 billion in 2025 and is projected to exceed 6 billion by 2033 with a CAGR of 7.5%. Increasing adoption of cloud-based attendance systems and workforce automation is driving this growth with over 60% of midsized companies in North America adopting such solutions in 2024. North America dominates contributing about 40% of the global market share due to advanced workforce management practices and the high digital adoption. Cloud-based deployment is a key segment, representing nearly 48% of the total implementations in 2024 and thanks to its scalability and remote access benefits and AI-powered attendance analytic tools are increasingly being used to optimize the workforce scheduling. To put our value proposition in context, let me give you a more detailed description of the problems we solve. The common challenge for our primary clients, both HCM Capital management software providers and the enterprises they support is knowing how to manage resources, people more effectively. And nowadays, it's all about data. For example, data that helps identify employees and tells employers when they're in and not in the building. This is the heart of time and attendance systems, a major tech investment growth category, which has come a long way since the days of manual punch cards. Nowadays, time clocks need to biometrically verify the identity of thousands of people clocking in and clocking out of the workplace almost instantaneously, whilst at the same time, linking directly with the systems that run these companies so their workforces can be managed with absolute precision. We call this people flow, and it's arguably the most important workflow category in any organization with physical workplaces unless it's entirely run by robots. We bridge the gap that exists between the physical world occupied by real people in an organization and a digital world where systems and increasingly AI needs to operate. This all delivers efficiencies, security and manages business risk. This is why companies value what we deliver and allows us to sell hardware and subscriptions that produce great value for them and return great values for us. And as you'll see, our subscriptions are growing rapidly and so are our revenues. In terms of growth, it's important to recap for those who haven't already heard it. Our core GT business strategy consists of 3 layers with 3 initiatives aimed at accelerating growth at each level. The first layer is driving revenue growth, where we continue to seek, build and expand strategic HCM partnerships across the industry to open new sales channels and drive growth. In 2025, our partner, Workforce Software, was acquired by ADP, one of the large leading employee management solutions companies, whilst Paycor was acquired by Paychex, a global payroll company and HR solutions business. We're excited by the scaling opportunities we can now introduce a far broader range of customers to our products and services. Similarly, our largest European partner, Protime, completed several acquisitions to expand into new European territories, presenting the opportunity to become their sole time clock provider. The growth opportunity is really material. And we've recently signed a new partnership agreement with Legion, the AI workforce software specialist and HCM introduction partner. By actively working to displace incumbents with competitive pricing with our high-quality devices and services right across the market, we are increasingly targeting full share of wallet. In North America, the demand for our GT and our lower-cost GT4 Lite has been particularly strong with orders for the latter helping to displace our main low-cost clock competitor from China. The second layer is margin growth, which continues our strategy of increasingly high-margin recurring revenue by attaching services to all new business. This includes pushing services to every existing partner to ensure they take advantage of our constantly advancing software. In fact, every customer in North American region, with the exception of one, now has attached recurring revenue. This revenue has grown at over 100% compounded annual growth. This is where we're already beginning to see the early impact of launching GT Tablet to extend beyond hardware and more of that to follow. The third layer is all about scaling quality innovation, where we continue to invest in selling directly to end-user channels by partnering with the world's leading HCM platforms, Oracle, Workday and SAP. Through well-established global market channels, we aim to unlock enterprise customers and larger orders for our GT Time products and our per employee subscription model. More of this on the next slide. The graphs on the right-hand side show the trajectory of growth to the end of 2025. To build the picture, I'd also like to share this updated graphic to show our impressively packed and growing blue-chip customer list. This is who we served, operating in key industry sectors as a trusted and a proven enterprise security player. The right-hand block is our focus now and shows our demonstrable success growing new relationships with leading software vendors, mainly based in the U.S., and also in Europe. Partnering with these vendors continues to be the primary focus of our accelerating growth activity. These are the software houses that make the HCM systems running people, the human capital in almost every company in the world. They are the major organizations in themselves with huge list of customers across every industry, and they give us a much faster access to them rather than trying to go to each one of them ourselves. By unlocking access to multiple clients through these partnerships, this avoids the need to mobilize large direct and sales forces, giving us a much more efficient way to scale. As you've heard, our award-winning solutions provide the complete physical to digital data capture solutions for secure people data. As the leading industry's trusted brand for an all-in-one solution, we combine proprietary hardware, software and data to help unlock workforce productivity and remove a major human capital protection challenge. We have an innovative 5-year road map designed to serve customer needs, always constantly advancing. Our solutions combine intelligent time clock hardware devices with secure cloud-based software control and fully compliant people data management. With the acceleration of AI adoption across enterprise, we can offer high-quality products as fully integrated solutions to rapidly enable the advancing strategies. Our range of products manage competitive pressures and customer needs, offering low cost through our premium offering, which allows us to see off competition from low-cost manufacturers in places like China. This device subscription model means services come attached. All our devices are connected via GT Connect, our own proprietary software that brings devices, data and services together in one secure cloud platform. This means revenues from each subscriptions continues to grow. Our remote services mean our costs can be managed and contained as we grow whilst offering support for every connected device anywhere in the world. So we can quickly and efficiently diagnose issues and securely manage customer configurations anytime in the cloud. With over 45,000 connected subscriptions controlling millions of monthly clock-ins, this is clearly an essential workplace technology that removes a major security and compliance headache for organizations. In order to grow distribution, access more customers and reduce barriers to entry, we've been working on our direct-to-end user proposition with some of the world's leading software partners as well as our software tablet proposition. Here are just a few key highlights of the progress we've made. During the second half of the year, our people data business gained Oracle integration status following a successful testing of our clock and cloud-based software. Since then, the sales pipeline has been building, and we expect to secure our first Oracle customer this year. Our Workday integration is also progressing well. With design approval recently granted, we are now on the Workday marketplace, which enables us to help build pipeline over the remainder of the year. In addition, we've completed integration with SAP earlier than anticipated, and we've already been successful achieving our first sales with further pipeline activities building well. This is a very exciting opportunity for Newmark, unlocking additional growth with interest building strongly at global trade show events with Oracle, Workday and SAP. And as you heard earlier, GT Tablet extends people and data solutions past world where -- to the edge of our customer operations with our first software-only mobile workforce management solution. With similar functionality to fixed devices, now in tablet compatible form, GT Tablet lists existing customer tablets through our secure cloud platform, GT Connect and GT Services, it includes additional mobile features such as crew clocking and geo stamping. GT Tablet has also been launched on Google Play Store and will be coming soon to iOS App Store in May with our HCM partners already onboarding, it's achieving the first sale. We're in the process of engaging and boarding several other interested parties and anticipate this will be an important incremental source of recurring revenue in the future. To put this strategy and our success, it's already achieving in context, let me give you an update on the key financials as we approach the midyear point. Going to hand over to Paul, our CFO, to give you some key headlines and details.

Thanks, Marie-Claire. So I'm pleased to confirm that the group has made a good start to the current financial year and strong revenue growth for the first half of FY '26, which has had a positive impact on profitability. Group revenue is up 13% year-on-year to GBP 11.6 million. Gross profit margin increased by 1.3 percentage points to 39.4% and adjusted EBITDA doubled to GBP 1 million adjusted after adding back GBP 100,000 of Safetell restructuring costs. Strong commercial momentum has continued at Grosvenor, the group's People Data Solutions business. HCM revenue is up 20% to GBP 7.9 million. HCM annual recurring revenues increased by 30% year-on-year to GBP 3.9 million as of October 2025. Monthly device subscriptions for GT Connect and other GT Services are up 30% to over 45,000. The business recorded its first D2E sale by Synerion with the order book building. And as Marie-Claire said earlier, we've recently signed a partnership agreement with Legion, the AI workforce software specialist, as an HCM introduction partner as one example of this. The business also recorded its first GT Tablet sale. This mobile workforce management solution is gaining customer interest and pipeline is building strongly here, too. We also signed a new 5-year agreement with Protime to continue supplying GT Connect cloud services, clock hardware and OEM access control equipment, giving us confidence and visibility of an expanding European opportunity as they continue to grow. Safetell, the group's physical security business is rebounding from a series of delayed installation contracts last year. Some of these contracts have been fulfilled during the current first half, with others expecting to be completed during the remainder of the financial year. Safetell revenues is up 3% year-on-year to GBP 2.5 million, with service revenues growing substantially by 43% to GBP 1.8 million, representing 71% of the first half of FY '26 income for the division. And Safetell's salary cost base has been reduced by around 15% through the restructuring of the operations team as part of the strategic review we've been undertaking. Moving on then to H2. As in previous years, the company expects performance to be weighted to the second half of the year. H2 has started strongly, and we currently expect both divisions to surpass the prior year second half revenues and operating profits. Although some of you may have already seen this chart, to understand our transformational journey, I just wanted to show you the trajectory of our 5-year numbers to 2025, which is continuing in FY '26. As you can see in Chart 1, the top line revenue for the overall business has experienced 4 years of consecutive year-on-year revenue growth, rising from GBP 17.6 million to GBP 23 million in FY '25. This is an impressive 31% year-on-year growth overall, representing a 7% compound growth year-on-year. And you can see this trend continue as we reach the halfway point of FY '26. Although this masks the true story, if you look a little deeper, you'll see what makes Newmark such a compelling investment case. With the numbers on Chart 2, you'll see this growth is fueled by our People Data division in Grosvenor Technology, supported by the initiatives described earlier. Here, revenues grew from GBP 9.7 million to GBP 14.4 million in FY '25, achieving a far more attractive 12% compound growth rate over the same 5-year period and again, with a continued upward trend in FY '26. And the driving force behind this growth is subscriptions in our HCM services and clocks, solutions increasingly used by major retailers and large employers. If you look at Chart 3, you'll see the number of subscriptions has grown from nearly 6,700 in 2021 to over 45,000 in our latest results. And in most cases, we're now generating a bundle of hardware, software and warranty revenues from each device. In fact, our compound growth in subscriptions over the last 5 years has been running at 57% per year and annual recurring revenues growing from GBP 150,000 in 2021 to over GBP 3.6 million in 2025. This is an even more impressive 121% compound growth rate with growth continuing in FY '26 and more to come in the months and years ahead.

Thank you so much, Paul. So in summary, up to the half year, we've seen overall growth in group sales and profitability with strategic growth in the people data solution with new HM partnerships at the heart of the story and continued growth in annualized recurring revenues. As a characteristic of our business model, we continue to invest heavily in R&D in Q1 to drive benefits through to H2 and beyond. We're developing our direct-to-end user channel, building pipeline through partnerships with world-leading HCM platforms, Oracle, Workday and SAP and their broader ecosystems, targeting significant growth in North America already and achieving our first sales with Synerion. Innovation at Newmark continues to keep us at the forefront of our industry. With the GT Tablet launch on Play Store and coming soon on iOS App Store, achieving early success with our first sales contract signed and pipeline building strongly. Safetell is also performing well as our strategic review continues. As I said at the beginning, strategic focus on key initiatives in HCM, driving partnerships, D2E and tablet opportunities positions the group for an exciting growth ahead. We've had a great start to 2026, and the future of Newmark continues to be extremely positive. And that concludes my presentation, and I look forward to your questions.

Perfect. Marie-Claire Paul, if I may just jump back in there. Thank you very much indeed for your presentation this morning. [Operator Instructions] I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can all be accessed via your investor dashboards. Marie-Claire, Paul, as you can see there, we have received a number of questions throughout your presentation this morning. 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 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.

Thank you very much. So the first question is, what is the status of the strategic review of AC and Safetell? Those are both being carried out diligently, and I know we've been discussing them for a while, but I hope to come to the market shortly with the outcome of both of those. And we are working on it at the moment. It's announced that ADP was acquired as a customer. Has there been any progress with Paychex? And what's the status of Workday, Oracle and SAP? So the first bit, ADP, yes, they've onboarded as a customer, and we look forward to seeing sales in the second half of the year, which will give us a lot of momentum going forward. And now Paychex purchased Paycor, and all orders are coming through Paychex. So that's going to be growing as well, and they've already onboarded as a customer. So we're very excited about that, too, and I sort of discussed that in the presentation. And what is the status with Workday, Oracle and SAP? As I said, we made our first sales with SAP. We've recently sort of gained status with Workday and building pipeline on all of these platforms, which gives us another route to market. The next question is, are there any new customers for HCM in Europe besides Protime? And what does the pipeline look like here? So we're building pipeline. We have some end users. We have some very large retail customers. But clearly, the focus sort of the growth is more in the U.S. where customers are much larger and much more sizable. But we continue, and we have a team in Europe that grow and are delivering those. The next question is, why is the appointment of a second independent director taking so long? We recently announced David Marks who has joined our Board, and we hope to be announcing very shortly our second non-independent director. But of course, that takes time because there's some diligence and some reviews that need to be taken place before we can announce, but we hope to come back to you very shortly on that. With monthly device subscriptions now over 45,000, what is the average revenue per device? And how do you see ARPU evolving? Paul, can I hand you over on that one, please?

Yes. We obviously have a mixture of our metrics for device subscriptions. Some are per clock or per device, some are per PEPM, per employee per month. So it's a mixed bag. So we don't actually calculate an ARPU as a traditional SaaS business because we're a little bit more complex user case there. And how do we see the users or the average user base going? Well, it all depends on how we're growing. Now we're dealing with major customers. So there could be price discounting as we grow and grow for our customers, but we believe with the fixed cost nature of the business, even if we apply discounting as lots of SaaS businesses do on higher volumes, that we will still incur increasing margins as we scale this side of the business.

Thank you, Paul. I like the positive statement with the group historically second half weighted. The Board notes that H2 FY '26 has started strongly and currently expect both divisions to surpass H2 '25 revenues and operating profit. That's absolutely true. And we'll be excited to sort of as the second half completes to be able to make such announcements as we go forward. And the next part of that statement, can I interpret as we exceed second half of '25 EPS number plus 11.7 in H2 '26, Paul?