Shearwater Group plc (SWG) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Shearwater Group plc Interim Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question it received in the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to turn to CEO, Philip Higgins. Good afternoon to you, sir.

Thank you, and good afternoon, everybody, and welcome to today's presentation. Firstly, I'm delighted to be able to introduce you to Jonathan Hall, our new CFO. Jonathan will be presenting with me today. But Jonathan, maybe you want to just quick intro of yourself and a bit of your background.

Thank you. Yes. So as Phil says, relatively new to Shearwater. I've been in post around 3 months now. Not new to the AIM market. I spent a number of years with a company called Gfinity plc, with the world's first listed esports business. And subsequent to that, a year in an interim role at MindGym plc, another AIM listed business. Prior to those, I was Finance Director of Saracens Rugby for 5 years. And going back even beyond that, I qualified with Arthur Andersen and spent about 7 years in the management consultancy business as well.

Thank you, Jonathan. And let's move on to today's events. So starting off, I just want to give a little bit of an overview of -- for those who are unfamiliar with the Group. At Shearwater, we provide cybersecurity, managed security and advisory, professional advisory services to our corporate clients and their end users. We have two multi-award winning divisions. One of them is our Services division, where we have Brookcourt Solutions who provide high-level cybersecurity solutions to the corporate marketplace and to the government and SMEs. Next door with that, we have our Pentest company, who are multi-award winning and well renowned for their Pentest skills, where they provide purple teaming, red teaming and testing facilities for our corporate clients. On the other side of the fence, we have our Software company and headed up by SecurEnvoy. We have -- they develop and produce our own IP-based software, identity and access management and DLP. They started off with a multifactor authentication, and then since they developed into a hybrid cloud and to a cloud. And we're glad to have them on board. A year ago, what we actually did, we actually consolidated our GeoLang company into SecurEnvoy to actually gain the efficiencies and the synergy savings from that happening. We also did the same thing with our consulting company, Xcina, and we brought that into Brookcourt. We're now experiencing obviously greater efficiency savings there. And collectively, between us, we cover our businesses over 50 countries across the globe. Moving on. So there is a strong market position. Cybersecurity is not an option anymore. It's a necessity. And in some instances, it's a legal requirement. It's ever increasing complexity. And what we're actually seeing is an opportunity for us to work with -- continue to work with our blue-chip customers. We're providing them unique specialized technologies that deliver their needs today. It's important for us to stay in front of the curve to actually keep those customers content and happy. A lot of our client base has been with us for multiple years. And within Brookcourt alone, we have clients are going back and right back from the start, major banks, and they're still with us today. And we differentiate ourselves in the marketplace by being not setting the mundane, so to say, the off-the-shelf technologies. What we do is specialize in key dark-web cyber investives and softwares, also AI-based softwares which allow us to protect the networks for our client base. These types of things actually keep us in front of the curve. It's because of that, which allows us to actually develop these blue-chip organizations and also to win new ones. We believe we are market leading in that position, and we will continue to actually invest in that space. Coming on to our numbers, just to give you a little bit of a rundown. And Jon will give you a more in-depth breakdown of these later on in the deck, but just to steal some of the thunder, revenue has increased from GBP 10.5 million to GBP 11.3 million over in comparison to the last year. And net cash has improved from GBP 3 million, up from GBP 2.2 million. Adjusted EBITDA is down. In H1, what we did, we decided to take a tactical deal, which had a lower margin with the opportunity to get deeper and wider into a particular client account. We did that as a tactical strategy. I'm glad to say since that we -- post period end, we've actually won a second deal. These were multimillion-dollar deals that we actually posted out on an RNS. And I'm glad to say that our strategy has worked, and now it's given us an opportunity to develop deeper and wider into -- with more profit into a particular client. Some of the other things of note really, on this slide. Obviously, our business is made up of new client wins and business renewals and repeat activities. I'm glad to say that, obviously, as and when the more sizable ones come available, we do make the announcements where we possibly can. One of those most recent ones was the $12.8 million deal, which we announced on -- with this -- with the original publication of our interims. Now a lot of people have been saying, why don't you make more announcements? Well, we do. I mean that deal admittedly wasn't signed until Tuesday evening. So it was a late entry to our submission. And one thing we're doing also is, we actually -- and I'll come into a little bit more detail later on. We're actually integrating more AI into our portfolio, and I'll talk about that a little bit later, and also talk about a little bit more in detail about our software development and the integrations that we've been doing there. On the closing point on this slide, though, we do remain confident in our strategy, and we are seeing some positive movement and improved conditions for us, particularly with some delayed projects that we had historically. Moving on to our Services side. To give you a little bit more in-depth detail as to what we're doing there. Within the Services division, it represents about 90% of our revenues, and it's driven significantly by contract renewals, large-scale multiple-year contracts from blue-chip clients. We're very strong in the telco and financial sector. We've been very heavy in that area for a very long time now. But very recently, obviously, we've made an announcement to where we won a position on the G-Cloud 14. That's a very important step forward for us. Historically, we hadn't invested the time, but we took the strategic direction to spend time and effort in bidding for the government. And I've got a little bit more detail on the next slide, which I will take you through shortly. So in the first half of the year, we secured a number of key wins. We also help -- because of the -- where we've actually brought in Xcina into Brookcourt into the Services side of the business. What it did allow us to do is get greater efficiencies. And what we're seeing now is also stronger cross fertilization from Brookcourt accounts into our Xcina accounts and into our Pentest accounts. So I'm glad to see that, that is moving well. We also expanded some of our AI-based offerings. So a lot of our vendor partners, they deliver to us technologies. It's the latest cutting-edge technologies. And a lot of people now, as you can imagine, are moving into a more AI-based offering. One thing we're also doing internally to actually help pick up on our EBITDA is to actually create more service-based business ourselves and to get more throughput of our business. So we've actually now developed our own AI-based tool inside Brookcourt, which will allow us to actually increase the throughput of our activities in bid response, bid risk writing and so forth without having to increase the head count. And obviously, if it's successful there, we will then roll it out further into the wider group. Moving on to a little bit more detail on to the public sector opportunity. So as I mentioned, we took a strategic direction decision to get involved with the U.K. government. And back in October '23, we were fortunate enough to actually win a proposal for a 2-year deal, and it was for, what's known as CTI, so it's a cyber threat Intel feed. It's one where we believe it's a market leader. We don't have many players in that space. And we were fortunate enough to win this particular contract is for a very large division of the U.K. government. In '24, we took another slightly smaller deal, but nevertheless significant of the same technology set inside the U.K. government. And as you can appreciate, this now gave us a good momentum to actually then respond to the G-Cloud 14 bid requirements. And what that gives us is a platform where central and local government and charities can actually buy from pre-credited and pre-approved suppliers. Now we are one supplier in that chain, and we are specializing in all our offerings. All of our company products and services are actually included in there. We've got over 30 offerings on that platform, and we're now starting to see opportunities come through, and we'll be responding to those. And hopefully, if we're fortunate, we'll be able to make further announcements later in the year. As we move through with the G-Cloud 14 position, we will be obviously looking to invest additional resources to actually help support our activities in that space. Moving on, a little bit about Software and what's been going on there. Now obviously, we're very excited to share the continued success with the Software. Revenues of GBP 1.1 million with H1. And obviously, we've been spending a lot of time and effort on the development. The Software started off as a two-factor authentication many years ago. And since then, the guys have been working really hard. And we've made several announcements along the way. But now we're glad to say that we offer a multifactor authentication in not only on-prem but also in private cloud and also in the cloud. And the important thing to note is that a lot of our competitors out there in this space only develop their software for the cloud. And we're seeing an uptick in the on-premise activities, some government departments, some private organizations, they're opting to actually go back to the data center. So we're not going to shelve with that technology. We'll continue with our investment in that and for years to come. So in terms of the expansion of that opportunity. We are also looking at the AWS in the states. So this is a -- the procurement path in the U.S. is slightly different to the U.K. And there's an opportunity for us to put our software on the AWS Marketplace. This will be in front of corporate America, allowing them to easily purchase our software. It's a common practice at the moment. We see it with many of the manufacturers over there, where they're actually -- the corporation's pre-deposit cash, and it allows them to easily purchase softwares as they need it. So that's something we're going to be launching in H2. So that's something to look forward to. On our Data Discovery side, we have been busy there also. We've been leveraging the AI, and we've now also got some Data Discovery for a database. And with the AI, we've actually increased the security opportunities with inside the product set. So this is a technology that we're moving ahead with. Both of these -- there's our Access Management and Data Discovery are both unique technologies. So we're looking for growth in those two areas during the H2. Moving on. Right now, I can introduce you to Jonathan once again, and he's going to take you over to -- take you through our financials. Jon?

Thank you. So Phil has given you some of the context of these already. So I will just pick out the key points and if any further questions we can pick up on those once we've finished the main bulk of the presentation. Revenue was up 8% in the period, up from GBP 10.5 million to GBP 11.3 million. But I think, the thing that probably stands out most is that the, despite the increase in revenue, adjusted EBITDA, which is our principal measure of our operating profit, was down from GBP 0.6 million profit in the first half of last year to GBP 0.4 million loss in the first half of this year. There are a couple of reasons for that, but it's principally driven by a drop in the gross margin down from 30% to 22% year-on-year. The things lying behind that: Firstly, there was a slight change in the mix, and in particular, the growth of the business was driven out of the Services side of the business and in particular, out of the Brookcourt side of the business. And even within our Services side of the business, there was a slight reduction in the Pentest side of the business, which tends to be the higher margin where we're letting out our own engineering team to conduct the penetration testing on the clients. So there's a slight mix effect. More fundamentally though, Phil also mentioned, we took a decision in the first half of the year to enter into a lower than typical margin with one material clients around a $4 million deal at a lower-than-normal margin. It was something we went into eyes open, and we did it to open up that account, it was an account we dealt with in the past, but nothing of that kind of scale. And what you have also seen since the start of H2, we've had a really positive start to H2. We've announced two large deals, one of those for about GBP 3.7 million was a second contract with that client. So that tactical decision we took in the first half of the year to open up that account, I think, has proved to be the right thing, and we're starting to see growth in that account and a second contract that will come into H2 at a higher percentage margin. Underlying OpEx, very consistent year-on-year, 3% up. We did in the first half of last year have a ForEx gain on the retranslation of our -- some of our forward contract balances, which didn't repeat. But the underlying OpEx was relatively consistent year-on-year. So we've got revenue growth. We do have an adjusted EBITDA, but as I say, adjusted EBITDA loss. But say, we started H2 strongly. And I think we can see a clear pathway through to our year-end number, and we feel confident about delivering good revenue growth and good profitability in the second half of the year. In terms of how that breaks down between the two segments of the business. At the moment, the Services part of the business is around 90% of our business. So the narrative I've given you around the business is really the narrative for the Services side of the business, which you'll see on the left-hand side of that slide. In terms of the Software side of the business, performance has been fairly resilient year-on-year, as Phil mentioned, particularly around the on-premise side of the multifactor authentication, Access Management software. We've fallen just a little bit the wrong side of a couple of the roundings here. Revenue was down just over GBP 30,000 year-on-year, and the adjusted EBITDA was within, I think, GBP 24,000 year-on-year. So fairly consistent performance with that Software side of the business has dropped off a little bit over the last couple of years. We feel like that's leveling out now. And again, we feel positive with some new features having been launched in the first half of the year. We'll be talking about sort of growth from that H1 revenue number during the -- between the second half of the financial year. In terms of the lower half of the income statement, not too much to pull out, relatively clean picture. Depreciation and Software amortization up very slightly with some of those new features we've been working on the Software side of the business, having got into the market in the first half of the year. In the first half of last year, where there were some exceptional items -- some exceptional restructuring items, nothing similar in the first half of this year, so relatively clean on the lower half of the P&L. And in terms of the cash flow, we have a healthy cash position, a healthy balance sheet, GBP 3 million of cash at the half year, up from GBP 2.2 million at the same point last year. We have an R&D tax credit, which had -- of GBP 300,000, which had fallen into the first half last year. HMRC actually dug into that a little bit more this year, passed it all, and we've subsequently been paid that money actually sooner that came through at the start of November, so it has fallen into H2. So we go into H2 with a healthy cash balance. And H2 is typically from both an EBITDA and a cash generation perspective where the business does slightly more of its volume. So again, we're looking forward to cash generation during H2.

Thank you, Jon. I've got a couple of slides here for you before questions. So just to -- this slide here is just take you through our strategic direction. So we're anchored by four key pillars in the business. So obviously, we want to become a leader in the future cybersecurity. And we've to achieve that, obviously, by pioneering new advancements in the solutions and bringing those to market for our corporate clients and developing our software. So obviously, we're going to stay invested in our software, and we're going to continue with that for now. We're going to be focusing around organic growth at the moment. We're using our cash and our reserves at the moment to provide the services and the facilities that our business need and to actually advance and grow, so to give them scale. Also, we're going to differentiate our offerings. Obviously, we're focusing very much around the cybersecurity space and professional advisory and obviously the production of our own IP. We're going to continue with that. And we're not -- we're going to expand our client base and expand our geographies and how we deliver that business. But what we're not doing is obviously dipping our toe into the more commoditized market of general IT. And also, we're going to be looking for that delivering sustainable growth. One of the things that we suffered from historically is the project-based business. And what we've seen is large opportunities come in. We're fortunate enough to win them, and we announce them, and then that could be a multiyear deal, which would land in the year 1. What we're trying to do now is obviously smooth those out so that when we win these multiple year deals. So the one that we've recently announced for the $12.8 million, for example, that one was -- this year, we will take $3.5 million of that on the books, and the outlining numbers will be spread over the remaining 4 years of the contract. What we're trying to do is actually smooth that line and give you, so to say, a more sustainable growth in a more consistent format. And we're looking obviously to build our client base. I'm glad to say that the $12.8 million that was one was a new client, and we've had a lot of success this year, we're winning new clients. And because we've got the ability to actually keep all those clients for a long time, we'll be looking for, obviously, future opportunities from them. When you look at where are we with our original vision, obviously, was to do buy and build. Today, at the moment, it is very much around the organic growth to actually build up the consistency and confidence with the shareholders and actually bring back hopefully some value on our share price. It's still our long-term goal there to where it makes sense to make a tactical acquisition, and that would be obviously either the market consolidation inside the Services division or feature and product enhancing for our Software division. Either way, what we'll be looking for would be organizations that are cash generative and give instant shareholder value. Moving on just to what the outlook looks like. So to -- I mentioned a little bit about the $12.8 million deal that we just signed. The starting -- both of these deals, the GBP 3.7 million you see there and the $12.8 million, we were expecting those in H1. They did slip. So we do still see some headwinds. A lot of those -- there are some delays about deals being signed. These are big deals. They do take a lot of signatures to actually get them out of the organizations. And as I say, we were planning on those and coming in, in H1. They slipped into H2, which has given us a great platform to work from for H2 period. So it does give us a lot of confidence in actually moving through that our performance will be robust during this period. We also achieved the G-Cloud status. And this is an area that is to say that we're investing in. We're fortunate enough to work from a good strong platform. We got an opportunity for business renewals later in the year and into next year. And we've also got opportunity in front us at the moment, which we will bid for. And we'll be spending more time and effort and resource in that space to hopefully grow that part of the market. So the outlook for us remains strong. We're very pleased with the opportunity in front with us. The market in global cybersecurity is growing. As I mentioned, it's not an option nowadays. It's a necessity. And only the other day, it was mentioned in the press that the Russians have the ability to actually take down our utility companies. And the good thing is, obviously, even the utility companies now are having to spend money in the cybersecurity space, and some of those tools and software sets that they're looking for are things that we can help them with and provide. So we have been obviously spending a lot more time trying to actually address those needs. If you look at the opportunities moving forward, would be -- it's very much obviously business as usual, growing the company base and looking for the new opportunities, building deeper and wider into our existing clients, cross-fertilizing with the rest of the group wherever we can. I'm glad to say that when we do that, we do see an awful lot of repeat business coming back through, particularly on the consulting side of the business. And we're going to focus on our organic growth. We're going to get that momentum moving again. And I'm glad to say that H2 is typically our stronger part of the year. And so we're looking forward to seeing the results come through during this time. And all in all, I think we're very focused on driving that pipeline right across the Group, getting those new wins. And where we can, where it makes sense, we will make more announcements on those. Now that we've got a good start to the H2, it does allow us to give us a good set of results moving forward. And it does allow us to actually give you those announcements as and when. And with that, I think that concludes the formal part of today. And I would like now just to hand back and open up for any questions. Thank you.

[Operator Instructions] We have received a number of questions, and I'll just dive in with the first one here, which reads as follows. Given your cash reserves, will you consider paying a dividend?

Shall I take that because it comes on the financial side. And if you don't mind, because I can see the next question is coming up as well, I might tackle that together with the next one, which says, might you consider buying back some shares with your surplus cash to boost the share price? Because I think those two questions are very much related. With the cash we have at the 30th of September, which we sustained since the start of the -- since the end of the period of around GBP 3 million, that's not yet at a level where we'd look at doing either of those things. It's important for us to be able to show a very healthy working capital position, both for our own resilience because sometimes certain contracts will have working capital requirements. It's important we're able to meet. And also because we deal with very prestigious blue-chip clients, and it's important we can show them a strong balance sheet. If we are able to generate the cash, which we think we might be able to through the second half of this year, then we reach a closing position around the year-end, which might give us a little bit more flexibility and more working capital than would need for simply day-to-day management of the process. I think of the two options are outlined there, the idea of buying back shares would probably be more attractive, but that's not sort of a Board policy or decision. But I think our sense of the Board is that there is real value in the share price at the moment and that would send a message to the market that we believe in that. The decision we have to make at that time is whether that's the best use of the cash or whether there are growth opportunities that would actually provide a sort of more long-term shareholder value. So not quite just yet, but we're also not going to let the cash just sort of stockpile and sit on it and not work for shareholders.

We'll move on to the third question then. Do you have plans to actually raise share price by posting company news?

Yes, it's a short answer. So obviously, historically, we've announced large deals we will continue to do. So when we do get a number of slightly smaller deals, and there's an opportunity to add those to an RNS news feed. We certainly will, we'll collect them together and try and provide those. The deals that we announced during -- at the beginning of the week. It was literally signed and it's within sort of 8 hours. We've actually had to edit the presentation, edit the RNS feed and actually squeezed it in. So we are turning these around as soon as we get them and when it makes sense to do so, but we will do endeavor to actually try and do more.

Next question here. What key trends in the cybersecurity market do you see driving future growth? And how is the company positioned to capitalize on them?

Well, the trends, we've obviously seen an awful lot in the press, and that does spur on some clients to actually make choices. We're seeing a lot more compliance requirements demanding activities and actions. We're also seeing things from -- even from the insurance companies that if you want cyber insurance, there are certain things you must do. And we're very aware of all of those drivers and those pressures on corporate business. And it's not just the large banks and retail outlets. This is now moving further down the stack. And we're looking to actually capitalize on some of those the mid-sized companies. We have an awful lot of large Fortune 350 and 500 clients, leading banks, leading telcos. We have a number of those, and we want to step down and try and capture that second-tier market of the slightly smaller company of around about 1,000 employees. A lot of our big corporates at the moment, they're anywhere of up to 400,000 employees. So you can appreciate those contracts there are heavily negotiated. And there is a richer fabric of opportunity in that Tier 2. So we'll be looking to keep our eye on the movement, the trends that are developing. We're very aware of what's in front of us. I do use our advisers. I've got Marcus Willett, ex Deputy Head of GCHQ and Lord Reid, who worked for Tony Blair in government. Both of those individuals are actually working and helping me to the movement to work further and deeper into the government, and understand how the government work. Believe it or not, it's not an easy place. So we are making all the actions to actually try and improve our position and gather more business that way.

Can you elaborate on which customers you're working with more predominantly, and the scale of opportunity you see working with government departments?

I can't really give you names of -- we sell cybersecurity and managed security services. So it will be unfair of me to label them. But needless to say, we do deal with high street banks. And I'm sure some of you are using them. We provide everything from cyber threat feeds, to personnel, to audit points and secure email, endpoint protection, AI-based identity access management. We deliver an awful lot to it. We have very strong in the telcos as well. We have a number of the telcos in this country. There, we are delivering advanced packet monitoring. So we're monitoring everything that goes through the network. They're doing it for compliance. They're doing it for quality of service and also they're doing it for security reasons as well. And we're lucky to have actually carved out a position of expertise in those areas. And we are attracting more plays in there. The recent deal that we just won was a global telecoms company. A lot of the announcements you see are from telcos and finances. They are all different companies. They're not all the same one. But we also do an awful lot with the retail side of things. So the opportunities moving forward is obviously to get deeper and wider into all of those organizations but also to attract more. So we're incentivizing the team to actually go out there, and we're also recruiting additional sales staff to go out and win.

And the next question here, with the developments made in Software, what sets you apart from your competitors that aid the customer's buying decision? [Technical Difficulty] Ladies and gentlemen, please bear with us. It looks like we just lost the team in the room. Please bear with us, while I just reconnect the team. Ladies and gentlemen, please do you just hold on, just while we reconnect. Phil, you're back with us? Can you hear me?

Yes. We can.

Okay. The room link, it's just coming back in now. [indiscernible] reconnect. Phil, I can't see you in the room. [indiscernible] please bear with us.

Hello?

Okay. Phil, sorry, I think we lost you momentarily there. We were out of question. If I just read it out, we'll get straight back into it. With the developments made in Software, what sets you apart from your competitors that aid the customers' buying decision?

Okay. So what I'm saying is that obviously, people like Microsoft are our direct competitor. And they develop with inside very well for Microsoft. What they don't do is, obviously, there's -- a lot of their time and effort spent in the cloud. One of the things that we have seen is obviously an uptick in our on-premise. And what we were expecting was as we developed our private cloud and our clouds platform offerings. We're expecting to see people from the on-prem to migrate naturally into the cloud, some did. But what we also saw was an uptick in on-prem. So we've continued that development. And so there's not many companies out there that are investing in on-premise, private cloud and cloud authentication. We are. So we're hoping to actually carve out a little bit of an opportunity there from our software side. Does that answer your question?

We'll just move on to the next one now. What could revenue get to over the next 3 years?

Should I take that?

Yes, maybe it's a...

I think -- well, firstly, I got to say, we're sitting in the office of Nomad and they do you get a little strict with us if we start giving out sort of our own management projections that aren't sort of numbers that are in the market. I think what we can say is through organic growth, we see significant potential on both sides of the business. For the numbers in the market have us doing strong double-digit revenue growth this year. And I think that's something we think we can sustain, and we'll do that profitably. And then if we do that and we continue to generate cash, that then gives us the chance to go in and strategically add things to the group, which builds us up into a much more material group, but I don't want to commit to a number that sort of sits outside of the forecast that are in the market at the moment.

What risk from proposed U.S. tariffs does the group face?

When you look at technology, I mean, it's a good question. I mean, obviously, there's a change of guard next year. But when you look at technology, the U.K. would import more foreign-based technology then it actually produces itself, unfortunately. There's not many software companies SecurEnvoy is one of them. [ Homegrown ] won two Queens awards for development and export. But as I say, we do import more U.S.-based technologies than possibly we export. So I'm not seeing that to be too much of an issue moving forward. I'm sure it will be discussed. I'm sure there will be some concessions. But to be honest to you, it's a wait and see. At the moment, our U.S. market is not -- we're looking to actually step further into the U.S. market and develop further. So we would obviously have the cost in any of those tariff increases. And that could be in the way of either price increases or it could simply be a case of the supply chain itself is more streamlined, more efficient and it could be natural savings that we receive there. But we're hoping, obviously, the quality of revenues we received from SecurEnvoy are very good. So it's certainly not going to put us off that investment.

A question here from John. Do you bid for government contracts as a stand-alone contractor or as part of a wider partnership/group?

Some of the prerequisites is that because they run compliance and they're obviously looking for your accreditations and your standing into the marketplace, they -- some contracts do not allow you to have third-party partners come in. We're obviously allowed to present technology and buy technology and present it that way. But if we were outsourcing to a bunch of consultants, for example, they don't like it. So it has to be part of the group of companies. We are bidding and we're obviously going for what we consider as the lower-hanging fruit. We're not purposely going after every single contract. And we're going after the ones that we believe that we have the best possible chances of winning. The ones which we can deliver ourselves using our technology partners that we've been working with for a long time. They are the sort of opportunities we're after.

And we've got one final question here. Given the niche project nature of the business, can the revenue line really grow sustainably? Truly the model should not be about margin expansion.

No. I mean we've -- as I said, we did have a tactical change in H1, where we look for this particular deal to actually expand our position with the client. A lot of these clients that deal with because they're Tier 1 firms, they're big, these contracts, some of them are domestic, some of them are international, they're multiple years, they're repeated time after time. And historically, when it was an appliance-based computing, we used to deliver something, and that was the end of our obligations. And obviously, now what we've been doing is trying to actually bring in more service around those the new method of Software-as-a-Service or subscription-based computing, and wrap more of our own in-house services around that, which should smooth out the line. We're not going to walk away from any big project that lands on our doorstep. We can obviously going to do that. But as I say, there is the every effort there to try and smooth it out. As I mentioned previously, the $12.8 million we've done that to -- we're taking $3.5 million of that this year. That will get delivered this fiscal. And the rest of it will be rolled out within the next 5 years. So that one is an example of what we're trying to do.

That's great. Phil, Jonathan. Thank you very much for answering those questions. We have had a number of questions through today, and the company will follow up with any additional responses where possible in writing on the platform. But just before redirecting investors provide you with their feedback, which is particularly important to the company. Phil, could I just ask you for a few closing comments.

Certainly can. First of all, I'd like to thank the people today for actually joining us as shareholders. It has been a tough journey, but we have made some very good positive movements, and we are obviously -- we're through a lot of the headwinds. We still do have some challenges, and we are very confident about H2 performance as being a strong one. We do have a good start to the year with -- or this half of the year. And we can see a pathway through to the year-end numbers. We have a strong cash position, very healthy balance sheet. And we will continuously to drive and look for that shareholders value and actually increasing those positions. As I say, we are confident in delivering a strong performance in H2. But rest assured, as and when we do win sizable and new opportunities, we will try and give more of that feedback through RNS to shareholders. And I think that really sort of -- the journey starts now for us, and we're now pushing forward for what will be, hopefully, an exciting H2.

Phil and Jonathan, thank you once again for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order the management team can better understand your views and expectations. This is going to take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of management team of Shearwater Group plc. I would like to thank you for attending today's presentation, and good afternoon to you all.

Thank you. Thanks.