Investor presentation January 2020 Disclaimer The information - - PowerPoint PPT Presentation

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Investor presentation January 2020 Disclaimer The information - - PowerPoint PPT Presentation

Investor presentation January 2020 Disclaimer The information contained in these slides and The Presentation is being supplied to you solely for your Services and Markets Act 2000 (Financial Promotion) Order 2005 The Company is under no


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Investor presentation

January 2020

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Disclaimer

The information contained in these slides and communicated verbally to you, including the speech(es) of the presenter(s) and any materials distributed at

  • r

in connection therewith (together, the “Presentation”) is confidential. Reliance upon the Presentation for the purpose of engaging in any investment activity may expose an individual to a significant risk of losing all of the property or other assets invested. If any person is in any doubt as to the contents of the Presentation, they should seek independent advice from a person who is authorized for the purposes of the Financial Services and Markets Act 2000 (“FSMA”) and who specializes in advising on investments of this kind.

The Presentation is being supplied to you solely for your

  • information. The Presentation has been prepared by, and is the sole

responsibility of Kape Technologies plc. (the “Company”). The directors of the Company have taken all reasonable care to ensure that the facts stated herein are true to the best of their knowledge, information and belief. No undertaking, representation, warranty or

  • ther assurance, expressed or implied, is made or given by or on

behalf of the Company or any of its respective directors, officers, partners, employees or advisers or any other person as to the fairness, accuracy or the completeness of the information or

  • pinions contained herein and to the extent permitted by law no

responsibility or liability is accepted by any of them for any such information or opinions. Notwithstanding the aforesaid, nothing in this paragraph shall limit or exclude liability for any representation

  • r warranty made fraudulently.

The Presentation has not been approved by the Financial Conduct Authority and does not constitute, or form part of, an admission document, listing particulars, a prospectus or a circular relating to the Company, nor does it constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer to purchase

  • r subscribe for any ordinary shares in the Company. Further, neither

the Presentation nor any part of it, or the fact of its distribution, shall form the basis of, or be relied upon in connection with, or act as any inducement to enter into any contract for the ordinary shares in the Company. The Presentation may not be copied, reproduced or further distributed, in whole or in part, to any other person, or published, in whole or in part, for any purpose without the prior written consent of the Company. The Presentation is being distributed only to, and is directed at, authorized persons or exempt persons within the meaning of the FSMA or any order made thereunder or to those persons falling within the following articles of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (S.I. 2005 (No 1529)) (as amended) (the “Financial Promotion Order”) made pursuant to section 21(5) of the FSMA: Investment Professionals (as defined in Article 19(5) οf the Financial Promotion Order); and High Net Worth Companies (as defined in Article 49(2)). Persons who do not fall within either of these definitions should not rely on the Presentation nor take any action based upon it but should instead return it immediately to the Company. The Presentation is exempt from the general restriction in section 21 of the FSMA relating to the communication of invitations or inducements to engage in investment activity on the grounds that it is made only to certain categories of persons. The distribution of this document in jurisdictions other than the United Kingdom may be restricted by law and persons into whose possession this document comes should inform themselves about and observe any such restrictions. In particular, neither the Presentation nor any copy of it should be distributed, directly or indirectly, by any means (including electronic transmission) to any persons with addresses in the United States of America (or any of its territories or possessions) (together, the “US”), Canada, Japan, Australia or the Republic of South Africa, or to any corporation, partnership or

  • ther entity created or organized under the laws thereof.

The Company’s ordinary shares have not been, and are not expected to be, registered under the United States Securities Act

  • f 1933, as amended, (the “US Securities Act”) or under the

securities laws of any other jurisdiction, and are not being offered

  • r sold (i) directly or indirectly, within or into the US, Canada,

Japan, Australia or the Republic of South Africa or (ii) to, or for the account or benefit of, any US persons or any national, citizen or resident of the US, Canada, Japan, Australia or the Republic of South Africa, unless such offer or sale would qualify for an exemption from registration under the US Securities Act and/or any other applicable securities laws. The Company is under no obligation to update or keep current the information contained in this Presentation or to correct any inaccuracies which may become apparent, and any opinions expressed in it are subject to change without notice. Neither the Company nor any of its respective directors, officers, partners, employees or advisers accept any liability whatsoever for any loss howsoever arising from any use of this Presentation or its contents

  • r otherwise arising in connection therewith. The contents of the

Presentation have not been verified by the Company or its

  • advisers. No liability is accepted by the Company or its advisers for

any information or opinions contained in the Presentation. The Presentation contains forward-looking statements. These statements relate to the future prospects, developments and business strategies of the Company. Forward-looking statements are identified by the use of such terms as “believe”, “could”, “envisage”, “estimate”, “potential”, “intend”, “may”, “plan”, “will” or variations or similar expressions, or the negative thereof. The forward looking statements contained in the Presentation are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, the Company’s actual results may vary materially from those expected, estimated or projected. Given these risks and uncertainties, certain of which are beyond the Company’s control, potential investors should not place any reliance on forward-looking statements. These forward-looking statements speak only as at the date of the Presentation. Except as required by law, the Company undertakes no obligation to publicly release any update or revisions to the forward-looking statements contained in the Presentation to reflect any change in events, conditions or circumstances on which any such statements are based after the time they are made.

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Kape’s journey to become a leader in the digital privacy space

2011 Company founded as Crossrider March Acquisition

  • f CyberGhost

September 2014 IPO on AIM May New management team appointed October Acquisition of DriverAgent

2011-15 2016 2017 2018 2019 2017

March Name change to Kape Technologies July Acquisition

  • f Intego

December Acquisition

  • f PIA

October Acquisition of ZenMate

H1 2018 500k paying subscribers H1 2019 1 million paying subscriberss H2 2019 > 2 million paying subscribers H2 2016 - Launch of a new strategic roadmap 3

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Kape today

* Adjusted EBITDA is a non-GAAP measure and a company specific measure which excludes other operating income and expenses which are considered to be one off and non-recurring in nature ** This is based on the average renewal rate and only calculates the first renewal period on a pre-formabasis for PIA and Kape combined as of 30 June 2019 *** Retention rates based on a pre-forma basis for PIA and Kape combined as of 30 June 2019 calculatedon a six monthly basis

OVER 2 MILLION

paying customers

$120 - 123 MILLION

in anticipated FY 2020 revenues

82%

subscription retention rate***

$98.8 MILLION

revenues to be recognised in future periods**

$35 - 38 MILLION

in anticipated FY 2020 Adjusted EBITDA*

  • c. 360

employees

Following completion of the Private Internet Access acquisition, Kape now has a truly global presence:

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Significant year-on-year growth

20 40 60 80 100 120 140 2015 2016 2017 2018 2019 2020E

Revenues

Kape* PIA

5 11 18 24 30 36 43 2015 2016 2017 2018 2019 2020E

Adjusted EBITDA

$m $m

*Excluding Kape’s discontinued operations

$120 - 123 million global revenues $35 - 38 million Adjusted EBITDA In the year ending 31 December 2020, we expect the pro-forma enlarged group to have:

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Core software products

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  • Restoro is a patented repair solution to fix PCs and Macs remotely; removes malware

and repairs computer software

  • Proprietary Driverfix solution scans computers for outdated drivers across all Windows
  • perating systems and devices
  • Intego is a leading Mac OS cybersecurity SaaS provider, with solutions including:
  • malware protection
  • firewall
  • anti-spam
  • back-up
  • data protection
  • parental controls
  • NetBarrier – two-way firewall
  • CyberGhost, ZenMate and PIA digital privacy applications are highly complementary

in their geographic focus

  • Our products safeguard personal information when browsing the internet through

unsecured networks and block malicious content providing a fully encrypted internet

  • Additional privacy products Kape has an interest in:
  • Plus Ultra – a software that speeds up internet connections
  • LibreBrowser – a completely private browser
  • Private.sh – a private and encrypted search engine based on proprietary

cryptography technology

  • Private Storage – a cloud based secured private storage solution

Digital Security Digital Privacy

  • We have built a core SaaS product suite over a number of years, with a primary focus on digital privacy and digital security
  • We want to make the internet a safe and accessible place for everyone
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The global privacy market - a fast growing billion-dollar market

Source: Cybersecurity Market by Solution, Markets & Markets, September 2018, Start-Up Nation Central: Finder Insights Series The State of the Israeli Ecosystem in 2018, March 2019

  • Fast growing internet penetration globally has increased the number of cyber attacks, resulting in

heightened concerns around data privacy

  • VPN market worth c.$24 billion and is expected to grow 50% by 2022
  • As more data breaches and cyber attacks occur, consumers are increasingly concerned about their

data privacy

  • Proliferation of mobile phone use and IOT devices is driving the need to protect users’ data -

research indicates that 48% of phishing attacks occur on mobile devices

Regional VPN Usage (Of All Internet Users) Global VPN Market

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Regulatory Changes

The Senate joint resolution to do away with FCC broadband privacy rules (S.J. Res. 34) passed through Congress and was subsequently signed by the President on April 3, 2017. Allowing internet service providers to:

  • Sell confidential data pertaining to how consumers use the internet
  • Share consumers’ information without consent
  • Not inform consumers or law enforcement in the case of a data breach that could put

consumer information at risk

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Growing public concerns for online privacy

8 They have little/no control over the data collected Potential risks of collecting data about them outweigh the benefits They are concerned about how use of the data collected They have very little to no understanding about what is done with the data collected

81% 81% 79% 59%

Regulatory changes and high-profile breaches have contributed to growing public concern for online privacy

High Profile Data Breaches With Identities Compromised… American Sentiment on Online Privacy

Lack of control Risk outweigh benefits Concern over data use Lack of understanding about data use

Source: Pew research center

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PIA – a transformational transaction

Private Internet Access is a leading privacy company specialising in the provision of secure, encrypted internet access

Transaction structure

  • Kape acquired LTMI, PIA’s holding company, from its co-founders Andrew Lee and Steve DeProspero for a total consideration of
  • c. US$95.5 million* and an enterprise value of c. US$127.6 million
  • The acquisition is being satisfied through c. $52.9 million in cash and 42,701,548 new Kape ordinary shares (equivalent to
  • c. US$42.6 million*); and also included the repayment of c. $32.1 million in debt
  • Consideration is being paid in three phases:
  • Payment upon closing of $32.9 million in cash and 11,648,059 shares (issued on 16 December 2019)
  • Year 1: $5 million in cash and 23,290,117 shares
  • Year 2: $15 million in cash and 7,763,372 shares

Funding the acquisition

  • A short-term debt facility totaling $40 million was put in place with Unikmind, with an interest rate of 5% margin over LIBOR, replacing LTMI’s existing debt facility
  • f $32.1 million. Unikmind also provided an additional debt facility of $20 million, to satisfy the deferred cash consideration, on similar terms, to facilitate timely

closure of the transaction

  • The balance from Kape’s own cash resources and operational cashflow generated in the first and second year following the acquisition

* Based on a share price of 77 pence on 18 November 2019

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EARNINGS GROWTH

The enlarged group is expected to generate consolidated proforma 2020 revenues of between $120-123 million and adjusted EBITDA of between $35-38 million

EARNING ACCRETION

90% earnings accretion anticipated in the year ending 31 December 2020

CASH GENERATION

LTMI is a highly cash generative business, generating c. $16.3 million of adjusted operational cash flow in 2018 with cash conversion of over 100% and expectations of ongoing strong cash generation

INTEGRATION UPSIDE

Expected immediate annual cost synergies of between $3.5-4.5 million to be achieved within 12 months following completion primarily in the infrastructure and back office functions

PIA – significantly earnings enhancing

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1.

EXPAND GLOBAL CUSTOMER BASE

The enlarged group services over 2 million paying subscribers, providing a significant global platform for continued growth

DRIVE FURTHER PRODUCT INNOVATION AND R&D

Kape’s enhanced product stack includes a suite of privacy-based software solutions focused on browsing, encryption and connectivity

LEVERAGE BRAND RECOGNITION

Positioned as a truly global leader within the fast-growing digital privacy sector and with a strong presence in North America

UTILISE UNIQUE TECHNOLOGY PLATFORM

Significant opportunity to leverage Kape’s proprietary technology platform to deliver continued strong organic growth

CONTINUE ACQUISITIVE EXPANSION

Leverage Kape’s success in integrating and growing SaaS products in the consumer privacy space to create a truly dominant brand

Kape’s ongoing strategic priorities

2. 3. 4. 5.

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  • 1. Expand global customer base

12 Main markets Office locations

Significant opportunity to build upon strong geographic presence

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  • Added further solutions at the forefront of the digital privacy space as part
  • f the PIA acquisition
  • Solutions provide a further growth engine through which to expand and

include:

  • Plus Ultra – a software that speeds up internet connection
  • LibreBrowser – a completely private browser
  • Private.sh – a private and encrypted search engine based on

cryptography technology

  • Private storage – a cloud based secured private storage solution
  • Kape has extensive R&D resources and expertise to further augment

existing solutions and drive their commerciality

  • Strong track record of releasing new iterations of our solutions in order to

broaden their application / target market

  • 2. Drive further product innovation and R&D

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  • 3. Kape to rebrand plc to incorporate PIA brand
  • PIA is one of the world’s leading digital privacy brands, with a particularly strong footprint in the US
  • Significant opportunity to leverage brand other markets and subsectors of the digital privacy market beyond

VPN

  • Kape Technologies plc will be rebranding in H1 2020 to adopt the PIA brand
  • Additionally, our other brands such as CyberGhost and Intego have strong brands in their respective

markets

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  • 4. Leverage unique technology platform

Kape drives its own user acquisition – no reliance

  • n third parties

Digital marketing coupled with increasing brand awareness User acquisition underpins buy-and-build growth strategy

User growth

Acquired Organic

Proprietary data driven automatic funnel Ongoing customisation of product Automatic personalisation of user journey

Highly efficient method of growing user-base

Optimised funnel ensures focused targeting

Retention is key to enhancing user LTV

Retaining users once acquired is key, with opportunity to up-sell/cross-sell 170 support personnel in Manila ensure top customer service

Funnel expertise Retention

Optimising the lifetime value of Kape’s customers

Extensive reach Highly efficient High value affiliate networks Referrals from existing users Direct to product Growing media presence Focus on usage and user experience Supporting users to enhance service Offering suite of products providing a complete user solution

  • Substantial potential to accelerate user acquisition by further implementing

Kape’s digital marketing expertise across product suite

  • Proven track record of success in acquiring solutions, integrating them and

accelerating user acquisition

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ROI growth driven by our market leading customer acquisition model

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Short payback period Recurring revenue Strong unit economics on performance marketing 0.84x After 1y 1.5x After 2y 1.9x After 3y 2.3x After 4y 2.7x After 5y 3.1x After 6y

  • Represents multiple of revenue generated relative to original

marketing investment by cohort

  • On average our payback period is 15 months
  • We continue to generate revenue from the initial marketing

investment for years to come

Cumulative revenue to performance marketing investment

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A de-risked revenue model with strong visibility

Note: Numbers include Zenmate, Intego and CyberGhost.

122.3 170.0 275.4 491.3 611.7 745.4 832.3 832.3

100 200 300 400 500 600 700 2014 2015 2016 2017 2018 2019

Subscribers by initial purchase year (‘000)

39% of new users 61% of existing users 2015 2016 2017 2018 2019 Creating a recurring revenue stream from existing cohorts

Launch of user acquisition activity

  • Strong increase in new subscribers
  • Subscriber renewals increasing year on year
  • Growth in retention rate as the cohorts mature

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Continued growth, combined group pre-forma P&L*

2017 2018 H1 2019 Revenue $ 88.5 $ 100.0 $ 54.7 Cost of revenue $ -12.9 $ -14.5 $ -9.2 Direct marketing expenses $ -34.5 $ -30.4 $ -14.9 Segment results $ 41.1 $ 55.1 $ 30.6 Segment Margins 46.7 % 55.1 % 55.9 % Operating expenses $ -24.2 $ -30.0 $ -14.5 Adjusted EBITDA $ 16.9 $ 25.1 $ 16.1 EBITDA % 19.0 % 25.1 % 29.4 %

*Numbers are based on combined pre forma Kape and PIA numbers

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Summary and outlook

  • A leading brand in the growing digital privacy and security space servicing over two million users globally
  • Kape has a suite of comprehensive privacy and security solutions with unique and growing reach
  • Highly cash generative and built on a robust SaaS model

✓ Group expects to generate consolidated proforma 2020 revenues of between US$120-123 million and Adjusted EBITDA of between $35-38 million

  • Significant opportunity to drive future growth through:

✓ Ongoing product development and R&D ✓ Leveraging global brand recognition ✓ Accelerating the implementation of Kape’s digital marketing expertise to grow user base ✓ Evaluating select acquisition targets in order to either bolster product stack or further broaden user base

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Thank you

For further information please contact: ir@kape.com