Earnings call transcript: Plurilock Security sees growth in Q1 2025 with strategic expansion

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Overview

The earnings call shows strong financial performance with significant growth in critical services revenue and improved gross margins, indicating a positive shift towards higher-margin offerings. The Q&A section highlights management's strategic focus on services and expansion plans, despite some lack of clarity in guidance. The absence of a shareholder return plan is a minor negative, but overall, the positive financial metrics and strategic direction suggest a likely stock price increase of 2% to 8% over the next two weeks.

Key Financial Performance

Gross Sales Bookings $81,000,000 (up 15% from $70,000,000 in 2023) - Reflects increased demand and successful sales strategies.

Recognized Revenue $59,000,000 (flat year-over-year) - Shift to recognizing revenue over time rather than upfront aligns with long-term contracts.

Contracted Backlog $56,000,000 - New metric introduced to reflect the scope and duration of contracted business.

Critical Services Revenue $8,700,000 (up 152% from $3,400,000 in 2023) - Significant growth driven by increased demand for tailored cybersecurity services.

Gross Margins 13.1% (up from 8.5% in 2023) - Improvement driven by higher margin critical services and software offerings.

Gross Profit $7,800,000 (up 50% year-over-year) - Increased due to higher margins from critical services.

Adjusted EBITDA Improved by $2,900,000 - Reflects overall operational improvements and margin expansion.

Working Capital Improvement $2,200,000 - Result of operational efficiencies and revenue growth.

Total Balance Sheet Improvement $3,400,000 - Includes $1,200,000 conversion of convertible debt.

Cash Balance $1,400,000 - Following a capital raise of approximately $5.5 million.

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Operating Highlights

Critical Services Revenue: Critical Services business grew 152% year over year to $8,700,000, becoming a strategic priority due to its higher margin profile.

PlerLock AI: PlerLock AI is a proprietary SaaS platform focused on advanced security and identity protection.

Gross Sales Bookings: Gross sales bookings reached $81,000,000 for the year ended 2024, a 15% increase from $70,000,000 in 2023.

Contracted Backlog: Contracted multiyear backlog as of 12/31/2024 was $56,000,000, providing a meaningful indicator of future revenue.

Gross Margin Improvement: Gross margins increased to 13.1%, up from 8.5%, driven by the expansion in critical services.

Sales Organization Investment: Investment in strengthening the sales organization and adding new professionals to support demand.

Market Expansion: Expanding presence in the U.S. commercial market and deepening relationships with public sector clients.

U.S. Listing Strategy: Pursuing U.S. listing to realize higher valuation and address the value gap between Canadian and U.S. markets.

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Risk or Challenges

Cybersecurity Threats: The cybersecurity landscape has become increasingly complex, with state-sponsored attacks, AI-driven threats, and supply chain vulnerabilities putting pressure on organizations to act decisively.

Regulatory Compliance: The company is aligning itself with the Five Eyes countries and NATO allies to mitigate risks associated with changing US policies and tariffs.

Supply Chain Challenges: There is a broader trend of deglobalization affecting supply chains, particularly in technology and cybersecurity, which could impact operations.

Market Positioning: The company is focused on transitioning from hardware-centric sales to higher-margin software and services, which may present challenges in adapting sales strategies.

Economic Factors: Macro uncertainty and volatility in the market could affect operational resilience and growth.

Hiring and Talent Acquisition: The company is continuously hiring, which may pose challenges in maintaining quality and performance as the team expands.

Financial Performance: The company is focused on driving gross profit rather than revenue, which may affect short-term financial metrics.

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Guidance & Outlook

Business Segments: Plurilock operates three interconnected business segments: Solutions Division, Critical Services, and Plurilock AI. Critical Services, launched in February 2024, is a strategic priority due to its higher margin profile.

Growth in Critical Services: Critical Services grew 152% year-over-year to $8,700,000, indicating a strong demand for tailored cybersecurity services.

Shift to Software and Services: Plurilock is transitioning from hardware-centric sales to software and services, aiming for higher margins and recurring revenue.

Strategic Partnerships: Plurilock has established partnerships with leaders like CrowdStrike and Forcepoint to enhance market reach and credibility.

Expansion Plans: The company plans to expand its presence in the U.S. commercial market and deepen relationships with public sector clients.

Focus on NATO and Allied Jurisdictions: Plurilock is actively expanding into NATO and NATO allied jurisdictions, leveraging relationships with public sector institutions.

Revenue Expectations: Plurilock reported gross sales bookings of $81,000,000 for 2024, a 15% increase from 2023, with a contracted multiyear backlog of $56,000,000.

Gross Margin Improvement: Gross margins increased to 13.1%, up from 8.5%, driven by the growth in critical services.

Future Strategy: For 2025, Plurilock aims to continue executing its strategy, focusing on higher margin opportunities and maintaining disciplined investments.

Hiring Plans: Plurilock is constantly hiring to support its growth, particularly in critical services and sales.

Financial Position: Plurilock ended the year with a cash balance of $1,400,000 and raised approximately $5.5 million.

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Shareholder Return Plan

Shareholder Return Plan: Plurilock has not explicitly mentioned a shareholder return plan, such as a share buyback program or dividend program, during the call.

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Key Q&A

Q:Critical services ramping in the margins, are good. How should we model blended gross margins over the long term?

A:As our percentage of revenue becomes more weighted towards PLCS, we expect it to well exceed our traditional VAR offerings. If you were looking to model this out, I would take our services revenue, which is published in our financial results and do your own projections there.

Q:Do you anticipate hiring more sales and support staff? Would you be doing that now or later in the year?

A:We did make an investment this past spring. We are constantly hiring. As we find new talent, we’ll look to add those to the team.

Q:At what revenue level would you be EBITDA positive?

A:We don’t give forward guidance, but I would say if you’re modeling this out, look at our sales growth and how we’ve repositioned this business to be much more focused on services.

Q:What risks do you anticipate with respect to the change in US policy to protect US businesses, if any?

A:From our perspective, we have a U.S. operating subsidiary, and there’s very little cross-border activity. We’ve aligned ourselves with the Five I countries and NATO allied countries.

Q:Please explain your motivation to pursue interest in the US accounting convention, PCAOB. When do you roughly anticipate Pluriloc being listed on the Nasdaq?

A:PCAOB is an auditing standard. We’re not going to comment on which one is better. We need PCAOB audited standards to list on Nasdaq. Timing is not necessarily upon us to say when we’ll do this.

Q:Can you provide an example of a normal customer journey? How are you shifting them from hardware to software?

A:We have over 400 customer accounts. When we sell technology, we have opportunities to introduce our critical services. We’re also starting to get notoriety and name recognition, leading to new customer engagements.

Q:Review of Unclear Management Responses

A:Management avoided giving a direct answer regarding the specific revenue level needed to be EBITDA positive, stating they do not provide forward guidance. Additionally, the response about the timing of the Nasdaq listing lacked clarity, indicating it is not solely up to them to determine when this will happen.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

PLUR Transcript

Earnings call transcript: Plurilock Security sees growth in Q1 2025 with strategic expansion

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