Falanx Group Ltd (LON:FLX) Chief Executive Officer Mike Reid caught up with DirectorsTalk for an exclusive interview to discuss their annual results for the year-ended 31st March 2018.
Q1: Could you explain the background to the results today and what has driven the revenue growth?
A1: We’ve had a very solid year, we’ve undertaken three acquisitions, but the most important bit is we’ve had very strong organic revenue growth, the cyber revenue grew by 18% of which 96% of that is organic. The acquisition we did at the back end of the year, First Base, really, we only bought it in March and hence that’s had very little impact on our numbers.
The important bit since the year-end, our proforma revenue has grown from its £3 million that we announced today up to around £6 million and you’ll see the exciting bit, for me anyway, is that we hit EBITDA profitability in July.
So, it looks like the coming year is going to be very promising for us.
Q2: Now you’ve significantly increased your gross margin, how was this achieved?
A2: Well, the main impact on the gross margin, which moved from 20% to 31% to last year, is because we’ve got a better product mix. For those of your listeners that would’ve heard our presentations on things before, we’ve been introducing a monitoring product for our customers called MidGARD, that has got a recurring revenue line and also has got a significantly improved rate to margin around 60%-70%. So, the mix of our products has increased our gross margins significantly.
Q3: As we know, a key focus is to increase the recurring income, could you talk us through the progress being made here?
A3: I think, as a lot of people that know me, I just love recurring revenue, I view it as you earn money as you sleep and therefore I obviously enjoy that. Our recurring revenue is up from 55% to 62% and its main reason is really back to that revenue mix I identified just now. So, we’ve got a good amount of recurring revenue both from our cyber business and also our intelligence business so it’s all down to product mix.
Q4: With Falanx being an industry consolidator, what sort of companies are you targeting?
A4: Well, as I said earlier, we’ve successfully bought three in the year, two of those were technology, and I’ll talk a little bit about that later, and the third one was the one I just talked about also, First Base. We bought these companies really to either bolster up our technology side or increase our revenue and our product mix and we’ve also bought a fourth since year-end, Securestorm, which we announced only a few weeks ago.
We will continue to look for all value-enhancing acquisitions providing we can get them at appropriate prices that will complement our business lines or add to our technology. So, we will continue to look for acquisitions.
I think the other part that’s important really is that we are focussed in the coming months to our technology and whilst we bought two small companies, we will look to try and strengthen that as well as we go forward.
Q5: What would you say the outlook for the rest of the year and beyond looks like for Falanx Group?
A5: It’s very positive. First of all, we’ve got three new members that have come into the team to help us drive this forward, so we’ve announced, back in January, Ian Selby to be our Chief Financial Officer so he’s really focussed on getting us into the profitability that I talked about earlier. We’ve recruited Rick Flood who is our Chief Marketing Officer, he’s got a good sales and marketing background and we’ve also got Richard Morrell who is our CTO who understands more about technology than many people and is well known in the industry.
So, we’ve got a very solid foundation of people, we’ve got very good organic growth as you identified earlier and we’re in a very strong foundation. So, how do we grow our business?
We’re really looking to strengthen where we are with our partners, we sell a lot of our services through indirect customer bases, so this is called managed service providers. We have about 7 of those at the moment but we’re looking to really enhance that so that we can get to a far far greater customer base and outgrow the market so that’s the first area. The other area, which Dick Morrell is focussed on is on the technology side. We’ve got some exciting developments of MidGARD that are coming out soon which we hope our customers will enjoy and we know that they want them and it’s just down to us to deliver it.
So, our outlook is very positive, we’re looking forward to the coming year. There is a research note out about us from Progressive which I would encourage those that want to know a little bit more about us and want to see what they think the future is going to look like for us, that they read that they read that equity research note.