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

Welcome, Paul, probably Marie-Claire as well. Yes, there we go. Welcome, both of you. Good to see you. We got a long show, but it's always -- you can probably tell everyone as well, you enjoy coming to the physical shows, which is great.

Very much so, yes. [indiscernible]

Yes, we're going to try and hold 1 or 2 more of those this year. After COVID, it was difficult. We had to have webinars. I think the world is full of webinars now, but nothing quite beats meeting everyone face-to-face. So there we go. Anyway, you're going to tell us about you, Newmark.

I'm going to do that. And Paul, would you just make us full screen? Perfect. Thank you so much. Thank you, David. Great to be here this evening. And yes, I really enjoy the physical events very much so face-to-face. Yes. But in light of that, we are here tonight virtually. Apologies virtually, and so I look forward to presenting. So today and tonight, I'm going to give you an update on our growth plan as we've released our midyear results. And 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 way of introduction, for those of you who don't know us, Newmark 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 is a robust network device that monitors employees passing in and out of the workplace, securing secure identification via badge, pin, biometrics or mobile credentials, which record start and end times, breaks and other work events. It then transmits these to time and attendance or HCM software and [designed] at fixed locations, for example, building entrances and production floors where employees naturally pass in securing consistent auditable time capture. We combine these devices with secure cloud-based software control and end-to-end people data management. Our all-in-one technology captures, managing and powers people from identity and access to time and attendance, bridging the gap between physical and digital workspaces with speed, security and compliance. Our integrated solutions enable efficient workplace monitoring for management while protecting employees across the world. I'd like to give you 9 key investor highlights that will give you a good feel for the strength of our proposition and our strategic focus. We're a market leader in all-in-one people data capture solutions; two, our secure cloud-based software control creates high value advantage as both competitive edge and a barrier to entry; thirdly, offering compliant people data management drives long-term customer value with a complete peace of mind. Four, we've delivered 10 years of consecutive year-on-year growth in HCM revenues, especially in the U.S.; five, our operations drive sustainable high margins with hardware-enabled enterprise SaaS models, integrating solution subscriptions. Six, we've developed a lean scaling platform, leveraging in-house IP and a remote service model; seven, we operate in a large growing market, driven by innovation in software and AI for human capital management; the eight point is we're accelerating growth with clear levers via HCM and direct to end user partnerships and with our latest tablet extension; ninth, our scaling continues to be the 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 an 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 are advancing discussions to three new North American 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 DTE multi-territorial partnership with a major global home furnishing retailer, and our Synerion North American agreement extended to global coverage. As some of you may have heard in my previous update, we extended our product mix with a new tablet-enabled mobile workforce management solution. We are winning customers, generating recurring revenues and building to 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 quarters and Forbes. Now for those of you who don't know us, 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 the U.S., today, Newmark has a strong presence across North America, the U.K. and Europe, with over 60% of our People Data Solutions revenues coming from U.S. business. During this time, we've had to adapt our business as our core client needs, technological solutions and wider society trends have changed. In our first decade, we've built a company of today, making acquisitions of Safetell, Grosvenor Technology and Custom Micro. In our second decade, we had some success adapting to the changing landscape and making the shift from the physical security into our technology-led solutions business. And whilst we still have our well-established brand Safetell, providing complementary solutions in the physical security space, 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 secure solutions for human capital management and the HCM software space. Today, we're best known for our Grosvenor Technology or 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 workplaces. Since 2018, we've been growing rapidly in the U.S. and Europe, driving digital subscriptions and services. This has been accelerated by the increasing AI investments that mean organizations are prioritizing trusted sources of data, and this is where GT People's Data business play a critical role, bridging the gap that exists and allowing us to sell hardware and software through long-term enterprise subscriptions. Why focus on HCM Time & Attendance. It remains the critical and unmovable link between the people in business and the systems that run them. Our people data capture solutions are at the apex of this fast-growing market, linking the two. So we benefit from the growth of them, enterprise and business that increasingly deploy sophisticated HCM solutions as well as software companies that supply them. We bridge the gap between them both as we like to say, as they would grow, we grow. And as I've already mentioned, HCM systems are increasingly becoming configured and enhanced with a new era of AI and automation. And so our secure and compliant people data solutions are growing in demand, especially now 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 systems 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 attendant systems and workforce automation is driving growth, with over 60% of midsized companies in North America, adopting such solutions in 2024. North America dominates contributing around 40% of the global market share due to the advanced workforce management practices and high digital adoption. Cloud-based deployment is a key segment, representing nearly 48% of total implementations in 2024, thanks to its scalability and its remote access benefit and AI-powered attendant analytic tools are increasingly being used to optimize workforce scheduling. To put our value proposition into context, let me give you a more detailed description of the problems we solve. The common challenge for our primary clients both human capital management software providers and the enterprises they support is knowing how to manage resources, people and more effectively nowadays, it's all about data. For example, data that helps identify employees and tells employers when they're in and out of the building. This is at 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 to their workforces can be managed with absolute positions. We call this people flow, and it's arguably the most important workflow category in any organization with a physical workplace and unless it's run entirely by robots. We bridge the gap that exists between a physical world occupied by real people and organizations and the digital world, where systems and increasingly AI needs to operate. This all delivers efficiencies, security and manages businesses. This is why companies value what we deliver, and this allows us to sell hardware and subscriptions that produce great value for them and great returns for us. As you'll see, our subscriptions are growing rapidly, so are our revenues. In terms of growth, it's important to recap. For those of you who haven't already heard, our core GT business strategy consists of three layers in initiatives aimed at accelerating growth at each level. The first layer is driving recurring growth, where we continue to seek, build and expand strategic HCM partnerships across the industry to open new sales channels and drive growth. In FY '25, our partners' Workforce Software was acquired by ADP, one of the world's leading employee management solutions companies, whilst another while Paycor was acquired by Paychex, a global payroll and HR solutions company. We are really excited by the scaling opportunities as 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 opportunity to become their sole time clock provider. The growth opportunity is material. We've recently signed a new partnership with Legion, the AI Workforce software specialists as an HCM introduction partner. By actively working to displace incompetence with competitive pricing for our high-quality devices and services right across the market, we're increasingly targeting full share of wallet. In North America, demand for GT4 and lower-cost GT4-Lite has been particularly strong with orders for the latters helping to displace our main low-cost competitors in China. The second layer is margin growth. We continue our strategy of increasingly high margin recurring revenues 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 just one is now attached to recurring services. This revenue has grown at over 100% compound annual growth. This is where we're already beginning to see the early impact of launching GT Tablet to extend beyond hardware, more of that to follow. The third layer is all about scaling quality innovation, where we continue to invest in selling directly to end users by partnering with worlds 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 with our per employee subscription models, more of this on the next slide. The right-hand graph shows the trajectory of growth to the end of 2025. To build the picture, I'd also like to share this updated graphic to show you our impressively packed and growing blue-chip customer base. This is who we've served operating in key industry sectors as a trusted and proven enterprise 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 our primary focus of accelerating growth activity. These are software houses that make their HCM systems running people, the human capital in almost every company in the world. They are major organizations in themselves with huge list of customers across every industry. They give us a much faster access to them rather than trying to go to each one ourselves. By unlocking access to multiple clients through these partnerships, this avoids the need to mobilize large direct 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 world's trusted brand and leading 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 customers' needs. We're always constantly advancing our solutions and 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 every enterprise, we can offer high-quality products as fully integrated solutions to rapidly enable their advancing strategies. Our range of products manage competitive pressures and customer needs offering low cost through to premium offerings, which allows us to see off competition for low-cost manufacturers from places like China. This device and 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 revenue from these subscriptions continues to grow. Our remote services means our costs can be managed and contained as we grow while 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 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 software-only tablet propositions. Here are just a few of the key highlights and the progress we've made so far. During the second half of last year, our People Data business gained Oracle integration status following the successful testing of our clock and our cloud-based software. Since then, the sales pipeline has been building, and we expect to secure our first Oracle customers this year. Our Workday integration is also progressing well. With design approval recently gained, we are now on the Workday marketplace, which will enable us to build pipeline over the remainder of the year. In addition, we completed our integration with SAP earlier than anticipated and have already been successful achieving our first sales with further pipeline activities building well. This is an 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 Data Solutions past hardware to the edge of our customers' operations with our first software-only mobile workforce management solution. With similar functionality to fixed devices, now in a tablet form, GT Tablet links existing customers' tablet through a secure cloud platform, GT Connect and GT Services, it also includes mobile features such as crew clocking and geo stamping. Geo tablet is now launched on Google Play Store and will be coming to iOS App Store in May with one particular HCM partner already onboarding and achieving their first sale. We're in the process of engaging and onboarding several others and anticipate this will be a very important incremental source of recurring revenue. To put this strategy and the success we've already been achieving in context, let me give you an update on the key financials as we approach the midyear point. I'm going to hand over to Paul, our CFO, to give you some of the headlines and the details.

Thanks, Marie-Claire. So I'm pleased to confirm that the group has made a good start to the current financial year with strong revenue growth in 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 to grow with groups People Data Solutions business. HCM revenue is up 20% to GBP 7.9 million. HCM annualized recurring revenue 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 [indiscernible] sale via 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...

Oh, sorry, could you just change slides. Just move on a slide.

Apologies [indiscernible] on the slide. So we're talking about the sale on Synerion. Moving on then. So 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 DT 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 expected to be completed during the remainder of the financial year. Safetell revenues, you can see, 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 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's second half revenues and operating profits. Although some of you may have already seen this chart, to understand our transformational journey, I just want to show you the trajectory of our 5-year numbers to 2025, which is continuing 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 growth, rising from the GBP 17.6 million to GBP 23 million in FY '25. This is an impressive 31% growth overall, representing 7% compound growth year-on-year. And as you can see, this trend is continuing as we reach the half year point of FY '26, although this masks the true story. Look a little deeper, and you will 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 initiative described earlier. Here, revenues grew from GBP 9.7 million to GBP 15.4 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 to 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 have grown from nearly 6,700 in 2021 to over 45,000 in our latest results. And in most cases, we are now generating a bundle of hardware, software and warranty revenues for each device. In fact, our compound growth in subscriptions over the last 5 years has been running at 57% per year, with annual recurring revenues growing from GBP 150,000 in 2021 to GBP 3.6 million in 2025. This is an even more impressive 121% compound growth rate, with growth continuing FY '26 and more to come in the months and the years ahead.

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

Lovely, thank you both. Sounds positive to me. But John has a question here. Is any consideration being given to getting a broker that will onboard forecasts for the market so that private investors can see them.

So I don't think it's up to the broker changing brokers. It's when we're ready to deliver forecast. And we're not quite there yet, but as the business becomes less project-driven and less lumpy, I think at some point in the future, we'll be able to deliver forecasts, and we would like to, when we're quite ready to sort of have certainty on the numbers.