WhiteHawk Limited (WHK.AX) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning. My name is Terry Roberts, CEO and Chair of the company. I begin today by acknowledging the traditional custodians of the land on which we all meet today and pay my respects to their elders, past, present and emerging. I would like to note my fellow directors who are here with us, Mr. Phil George, Non-Executive Director; Ms. Melissa King, Non-Executive Director; Mr. Kevin Kye, Company Secretary; Mr. Gary Sherwood from RSM Australia, the company's external auditors. The format of this meeting will comprise of 2 parts. We will start first with the formal business of the meeting. Once we have completed the formal business of the meeting, which will be relatively short, we will give you a presentation on the company. After which we will get into the progress over the past year and an outlook of the business in 2024 and ahead. Visitors and media are reminded that while we welcome you at this meeting, it is a shareholder meeting, and you may not make comments or ask questions at this time. For shareholders, there will be opportunity to ask questions. [Operator Instructions] Voting procedures. All resolutions will be decided by way of a poll. Shareholders, proxies and attorneys participating in the Annual General Meeting will be able to vote using the live voting platform supported by the company's registry, Automic, between commencement of the meeting and closure of voting as announced by the Chair during the meeting. The results of the meeting will be published via the ASX announcement platform after the meeting. Please refer to the notice of the meeting for links to live voting. Should you have any issues and/or not being able to access live voting, please contact company's registry, Automic, via [email protected], for telephone 1 (300) 288-664. I advise that we have a quorum, and I declare this meeting open and live voting is now open. Notice of this Annual General Meeting has been given to shareholders in accordance with the company's constitution, the listing rules of the Australian Securities Exchange Limited and the Corporations Act. A copy of the notice of the meeting has been lodged with the ASX and dispatched to all shareholders. I table the notice of meeting dated for April 2024, which is taken as read. I will disclose to the meeting how many proxies have been received for each resolution and we'll invite questions prior to declaring passing of the resolution at the end. We will now turn to the business of the meeting. Receipt and consideration of financial statements and reports for the period ended 31 December 2023. This agenda item is intended to provide shareholders with an opportunity to raise questions on the consolidated financial statements, the directors' report and the auditor's report on the performance of the company generally. No written questions to the auditor under Section 250PA of the Corporations Act were received by the cutoff date, 5 business days prior to this meeting. I will now turn to the resolutions to be considered. Resolutions to be considered at the meeting, I will follow the procedure for conducting shareholder meetings described in the company's constitution. Resolution 1, adoption of remuneration report, nonbinding resolution. Under the Corporations Act, the company must put the adoption of its remuneration report to the vote at the Annual General Meeting and must allow the shareholders a reasonable opportunity to ask questions about or make comments on the remuneration report, which was included in the company's annual report for the year ended 31 December 2023, lodged with the ASX on 28 March 2024. Although the vote to adopt the remuneration report is advisory only, it must still be put to the members at this Annual General Meeting. The resolution before you is to consider, and if thought fit, to pass the following resolution as a nonbinding resolution. For the purpose of Section 250R, paren 2 of the Corporations Act and for all other purposes, approval is given for the adoption of the remuneration report as contained in the company's annual financial report for the financial year ended 31 December 2023. I now disclose to the meeting how many proxies have been received concerning this resolution and how the proxy votes are to be cast on the resolution. In total, 40,004,180 valid proxies were received, of which 36,000 -- I'm sorry, 36,010,795 boats were in favor of the resolution. 1,807,742 were against the resolution. 2,185,643 discretionary and 112,644 abstained. Resolution 2, reelection of Director, Brian Hibbeln, ordinary resolution. The resolution before you is to consider, and if thought fit, to pass the following resolution as an ordinary resolution. That for the purpose of clause 15.2 million of the Constitution listing rule 14.5 and for all other purposes, Brian Hibbeln, a director, retires by rotation, and being eligible, is reelected as a director. I now disclose the meeting how many proxies have been received in concerning this resolution and how the proxy votes are to be cast on the resolution. In total, 65,000 -- I'm sorry, 65,286,918 valid proxies were received, of which 62,344,736 votes were in favor of the resolution. 720,539 votes were against the resolution and 2,221,643 discretionary. 122,644 abstained. Resolution 3, approval to issue free attaching placement options, ordinary resolution. Resolution before you is to consider, and if thought fit, to pass the following resolution as an ordinary resolution, that for the purpose of listing rule 7.1 and for all other purposes, approval is given for the company to issue up to 44,444,445 options on the terms and conditions set out in the explanatory statement. I now disclose to the meeting how many proxies have been received concerning this resolution and how the proxy votes are to be cast on the resolution. In total, 62,147,189 valid proxies were received, of which 58,085,770 votes were in favor of the resolution. 1,723,109 votes were against the resolution, 2,338,310 discretionary and 166,979 abstained. Resolution 4, approval to issue lead manager options to Alpine Capital, ordinary resolution. Resolution before you is to consider, and if thought fit, to pass the following resolution as an ordinary resolution. That for the purpose of listing rule 7.1 and for all other purposes, approval is given for the company to issue up to 17,777,778 options on the terms and conditions set out in the explanatory statement. I now disclose to the meeting how many proxies have been received concerning this resolution and how the proxy votes are to be cast on the resolution. In total, 65,240,583 valid proxies were received, of which 61,094,959 votes were in favor of the resolution. 1,807,314 votes were against the resolution. 2,338,310 discretionary and 168,979 abstained. Resolution 5, approval to issue options to Viaticus capital, ordinary resolution. The resolution before you is to consider, and if thought fit, to pass the following resolution as an ordinary resolution, that for the purpose of listing rule 7.1 and for all purposes, approval is given for the company to issue up to 12,500,000 options on the terms and conditions set out in the explanatory statement. I now disclose to the meeting how many proxies have been received concerning this resolution and how the proxy votes are to be cast on the resolution. In total, 34,771,873 valid proxies were received, of which 27,620,833 votes were in favor of the resolution. 4,812,730 votes were against the resolution. 2,338,310 discretionary and 19,583 -- I'm sorry, 19,583,895 abstained. Resolution 6, ratification of prior issue of shares to Lind Partners, ordinary resolution. The resolution before you is to consider, and if thought fit, to pass the following resolution as an ordinary resolution. And for the purpose of listing rule 7.4 and for all other purposes, shareholders ratify the issue of 14,800,000 shares under terms and conditions set out in the explanatory statement. I now disclose to the meeting how many proxies have been received concerning this resolution and how the proxy votes are to be cast on the resolution. In total, 65,240,583 valid proxies were received, of which 61,147,845 votes were in favor of the resolution. 1,754,428 votes were against the resolution and 2,338,310 discretionary and 168,979 abstained. Resolution 7, approval of 7.1A mandate, special resolution. Resolution before you is to consider, and if thought fit, to pass the following resolution as a special resolution that for the purpose of listing rule 7.1A and for all other purposes, approval is given for the company to issue up to that number of equity securities equal to 10% of the issued capital of the company at the time of issue, calculated in accordance with the formula prescribed in the ASX listing rule 7.1A.2 and otherwise on the terms and conditions set out in the explanatory statement. I now disclose to the meeting how many proxies have been received concerning this resolution and how the proxy votes are to be cast on the resolution. In total, 65,271,918 valid proxies were received, of which 60,948,270 votes were in favor of the resolution. 1,983,004 votes were against the resolution. 2,340,644 discretionary and 137,644, I'm thinking that should say abstained. We'll double check on that. By now -- yes, I'm sorry. This is abstain. I now invite for any questions on the resolutions of the meeting. If you have not submitted proxy votes and/or required to submit the votes, the live votes, please do so now as voting will close 5 minutes from now I now. [Voting]

I declare the meeting closed. No questions were submitted, and we will now commence the informal portion of the meeting. So welcome to the informal portion of the meeting. We're excited to give you an update on where we are and where we're going. Next. So as many of you know, I've been in the cyber intelligence arena a long time since the late 1990s. And I must admit, I have never seen such a stark report and testimony coming from the FBI as we received this -- earlier this year. It's -- they've been able to prove, along with the rest of the U.S. federal government that there are state actor campaigns that have been conducted over the past year and continue up to now across the U.S. and allied critical infrastructure sectors at a level that we have never seen previously. Next. It -- these are the most -- the recent reports from all of last year, mapping to U.S. critical infrastructure sectors. But remember, these are only those that are openly reported. We still believe that a vast majority of cyber events are never reported, either because the victim doesn't know that root level access on their networks has been obtained or that data, their data has been copied and is being sold on the dark web. Next. So there's 3 major trends that we're seeing and that, frankly, WhiteHawk solutions map to addressing. We've been doing, and I'm going to go into some of the work that we've been doing on the critical infrastructure sectors in the U.S. But this is the way, putting in place continuous risk and threat monitoring is a way of getting a baseline of what state sponsored attacks are going on, where the gaps and vulnerabilities are and how to address those in a time-effective but also continuous way. Supply chain attacks, you'll remember that we pivoted to supply chains over 4 years ago because we saw it as a way of providing our risk monitoring and automated assessments at scale, and also because this is a vector that many cyber criminals use to get at large industry and government entities. And then AI-driven threats, we have definitely seen -- with the advent of generative AI, seen a dramatic uptick in cyber criminals and state actors using AI in their attacks. So one of the themes that we've been focused on with our clients and with our leads is that traditional cybersecurity can't keep up with AI offense. You have to put in place AI defense. And as you know, AI and machine learning have been central to our platform and our approach and that of our partners from the very beginning. So we continue to partner with cutting-edge, next-generation data sets and AIML analytics. Two of our newest partners are in the quantum encryption arena. And so we are continuously working to stay abreast of best-in-breed in this space and be able to bring this and adapt it so that we're providing risk and threat visibility to our clients. And this delivers these capabilities at speed. All of this is moving at the speed of software, and so it cannot be a manual self-assessment, traditional cybersecurity approach to keep up and to stay ahead. Next. So as you know, we started with basic cyber AI. We now have been going to an intermediate and advanced and more predictive. We conducted our predictive analytics, research and development initiative with Peraton last year. And with the kind of opportunities that we're going after near term, we will be able to access the data sets at scale so that we can work towards a cyber risk and threat generative AI approach. We received actionable and prioritized analytics that we then provide to our clients. And the idea being that our clients don't have to spend their time on risk and threat and maturity and compliance visibility, that they can use their limited resource to focus on risk mitigation, which then gets you to resilience. Next. So our clients' objectives continue to be, hey, they've got to meet the regulators. They've got to be compliant, but they also have to be secure, and they have to keep it within a cost threshold. So we'll always keep that in mind. And our solutions map to those requirements of maturity and resilience for enterprises, singular companies and organizations across supply chains and across the critical infrastructure sectors. And the beauty is, is that we're using the publicly available data sets that our partners bring to us and then the analytics that we bring to bear across that. And then, of course, engaging with clients via virtual consoles. So our focus is on SaaS solutions with higher margins and low threshold of manpower requirements. Next. So many of you have been with us since the very beginning. In 2018, when we first listed on the Australian Stock Exchange, we were coming to this model so that we could get the funding to deliver on the business plan and the architecture plan that we had to construct an online cloud-based platform and then start to support clients. In 2020 to 2022, we really focused on honing 2 major product lines: our cyber risk program, which is across an enterprise; and our cyber risk radar, which is across a portfolio of companies or organizations or supply chains, and being able to prove these both in government and industry. In 2022 to 2024, we put the sales partnerships in place with Amazon Web Services, TransUnion. And we responded to large U.S. federal government proposals with D&B and Peraton. So you're probably asking, well, what happened to those? Well, those kind of literally millions of dollars to billions of dollars of contracts take a couple of years to work. And so what's exciting is we are now awaiting those U.S. federal contract award decisions in the second and third quarter of this year. I just got an update from Peraton today that one of those, which we noted in our quarterly that is supply chain risk management across the U.S. Veterans Administration is still on track to be awarded at the end of May, so we should have a decision by then. The other major contract that we have also discussed in our quarterly is focused on supply chain risk management tools and solutions as a contract vehicle across the U.S. federal government, and that is still on track to be down-selected by the June time frame. So both of those are still very much in play. But also this year, we've just put in place new reseller agreements with Carahsoft, which is the largest federal commercial IT and cyber solution distributor. And we're kicking off a sales and marketing campaign with them this month and next month. And then we just had our webinar. We've registered with CAUDIT which is across Australia, New Zealand and some Asian colleges and universities, a total of 60-plus universities. And we spoke to 45 of them yesterday during a webinar with our partner, hyprfire, out of Perth, and we're able to generate a handful of leads out of those discussions yesterday that we're following up on. On the financial side, our contracted revenue for 2023 was missing the $1.2 million contract because that contract was awarded in December and is now being paid on a monthly basis as opposed to upfront across 2024. Next, so what of our business objectives. Obviously, recurring revenue and margins to the next level, at the federal and state and local level with our continued partnership with Peraton. 25% of Peraton's work is at the state and local level. So they're a perfect partner if the client needs services that Peraton provides, and we provide the solutions. But now we have the Carahsoft contract vehicle available to us and their entire account management and sales team nationally across the U.S. and Canada. So when state and local clients want just the solution, then we have that access now via Carahsoft. Again, this is just kicking off this month and next month. So we're looking forward to seeing what the impact of that is. And then we want to build upon the critical infrastructure risk assessment proof of value that we have been doing at the state and local level, both in the U.S. and in Australia. And I'm actually following up on some of those conversations this week and next in Perth and in Melbourne. And then we have been growing our consulting firm, formal and informal business partnerships. We really like those because it allows us to focus on our automated assessments. And then the consulting firms, they're doing the engagements with the clients and the manpower intensive work. And so it is proving to be an effective approach. Next. So just mapping those discussions to our actual sales channel strategy, the consulting firms, we've added and I am meeting with BCG in Melbourne next week. We added Lockhaven Solutions out of Chicago and 8 Degrees East is out of Zurich and Bern, Switzerland. And then with the partnerships on IT and cyber solution distributors, we've mentioned Terasoft which is a $2 billion a year in revenue company, CAUDIT, AWS. CGI Federal, I had not mentioned. They are a distributor across Department of Defense and the U.S. intelligence community. And then, of course, we're integrated with Dun & Bradstreet public sector. Our systems integrators for the federal government side, Peraton on the large industry partner and GuRooIT on the small business side. It gives us the flexibility to go for some opportunities that are reserved for small business, and GuRooIT has been a very effective and agile partner in this space for us. And then sector-wide campaigns. I mentioned we kicked off our first water campaign across the Colorado water systems with the National Cybersecurity Center. At the state and local level, we have a contracting process with the state of Georgia and with Colorado. And then we kicked off a new campaign on the cyber liability insurance sector side. We had done this a few years ago, but we found that the insurance sector wasn't ready. So now we're reengaging, because our platform and our assessments are a very effective approach for using during the underwriting process and then to put our services in place once a policy has been awarded to help that business client to become resilient. And then in election security side, we're having conversations. And then on the educational side, we talked about our new registration with CAUDIT, our current client at Georgetown University and Cyber Florida. Next. On our corporate snapshot, yes, we are very focused on bringing up that share price for everyone to the value of everyone. As you remember, that price went down, frankly, artificially as the result of the tech downturn last year. So with these new contract award possibilities this summer, we have worked an IR campaign so that we can get the news out and get the value back in the shares that you now all hold. Next. So our leadership team remains the same. Thank goodness for Soo Kim, who retains an amazing, both development and cyber technical team. Next. With the reelection of Brian Hibbeln, our Board remains consistent where we have the right combination of background and skill sets so that I get a broad perspective from each of them that is very complementary and very effective at keeping me honed with multiple insights, connections and body of knowledge. Next. I'm sorry, next. Yes. And with that, we'll conclude this portion, and I am open to questions. If there are no questions, feel free to reach out to me. I'm always responsive to our investors. You're so important to us. And I want to stay engaged with each of you. I'm actually meeting some of you in Perth and in Melbourne, both the rest of this week and next week and really appreciate your continued support. Stay tuned for some news this summer. Thank you so much.