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Velpic and NowForce collaborate to address global security issues

Velpic has just signed its first NowForce client in Australia.
An illustration of the tools Velpic uses in providing education and incident management
The global security industry is valued at $220 billion

Velpic Ltd (ASX:VPC) was active on all fronts in 2017, and there is early evidence in 2018 that the initiatives undertaken by the group are starting to pay dividends.

During the last 12 months Velpic has raised capital, restructured its existing operations, acquired a stake in a complementary business and delivered record revenue growth.

Velpic appears poised for a strong year in 2018 with NowForce, the group with which it established a partnership, having just signed its first client in Australia.

NowForce represents a step change for Velpic

The partnership deal with NowForce is transformational for Velpic as it expands the company’s product offering and addressable market, while also offering recurring revenues.

From an operational perspective, the company’s partnership with NowForce positions it to generate revenues from the security industry.

READ: Velpic secures first client from NowForce partnership in ASX-listed Threat Protect (ASX:TPS)

Velpic’s chief executive officer Russell Francis said: “Security is a growing concern for many businesses and the community in general.

“Companies need to have the tools to proactively protect their staff and clients and respond to incidents that are time critical.

“From terrorist attacks to campus security to accidental injury and asset protection, security has never been more topical or critical.”

Optimising security brings people and technology together

Indeed, whether it be organising a political event, managing a 50,000-person crowd at a football match or safely looking after the welfare of teachers and children in a school, the need for the highest standard of security has never been greater.

Providing optimum security involves having the right people with the best technology and that is where the rubber hits the road in the partnership between Velpic and NowForce.

LMS remains integral to Velpic’s future

To appreciate the significance of the partnership one has to fully understand Velpic’s established business prior to the NowForce deal.

This centred on the company’s learning management system (LMS) technology.

Velpic developed a unique online platform that provided a scalable, cloud-based training, induction and education solution for businesses.

This area of the company’s operation is performing well and has been enhanced by the collaboration with NowForce.

Francis said: “Transformational deals and partnerships like the NRL (National Rugby League) and NowForce, on top of growing annualised committed monthly revenue (ACMR), with a significantly lower cost base, puts Velpic in a very strong position for 2018 to take the business to the next level.”

Velpic LMS

The LMS platform allows companies to create their own training lessons and distribute them to staff and contractors.

They can then access the Velpic platform on all devices including mobile phones and tablets.

The cloud-based platform has global potential and it has been embraced by large corporates, as well as organisations operating in the government sector.

Its clients include News Corp (ASX:NWS), Alcoa Corp (NYSE:AA), Mineral Resources Limited (ASX:MIN) and Coffey International, an engineering and construction group.

Velpic’s technology and services are suited to industries such as the mining sector because they allow staff operating in remote areas to access training material.

However, the potential applications of Velpic’s technology extend beyond these areas with its diversification highlighted by its client base.

This includes the Australian and New South Wales rugby administrative bodies and the Small Business Commissioner for New South Wales.

Recurring revenues provide income predictability

A blue-chip client base provides a substantial degree of certainty when it comes to contracted revenue hitting the bottom line.

Arguably of more significance though is the fact that a substantial proportion of Velpic’s revenues from its LMS business are of a recurring nature.

ACMR more than doubled in 2017 from less than $400,000 in January to $800,000 in December.

This was accompanied by substantial client growth with numbers increasing from about 60 to 110.

The year-on-year growth in recurring revenue was just as compelling, increasing from $75,000 in the December quarter of 2016 to nearly $200,000 in the December quarter a year later.

Importantly, only one quarter since September 2016 didn’t reflect an increase in recurring revenue, and the trendline indicates that the level of growth has accelerated in the last 12 months.

The beauty of the Velpic LMS model is that it has a relatively fixed cost base, resulting in a large proportion of revenues dropping to the bottom line.

Consequently, if ACMR growth levels continue the company could generate proportionately stronger compound annual earnings growth relative to revenue accretion.

What NowForce brings to the table

While Velpic’s LMS business provided relatively healthy industry diversification, the acquisition of a 5% stake in NowForce and the establishment of a distribution agreement has strengthened this aspect of its business.

In terms of industry exposure, the partnership has provided Velpic with opportunities in the $220 billion global security sector.

NowForce has a suite of technologies that includes cloud-based computer-aided dispatch and mobile response systems that improve the management of critical situations.

This technology reduces response times, increases situational awareness and improves communications and security in public safety situations.

NowForce has an expanding blue-chip client base and partnership model that has seen its rapid adoption, particularly in the US.

In that region, it is being used by multinationals, federal agencies and a number of North America’s largest universities where security has become a high priority issue.

Velpic chosen as exclusive distributor

In terms of the partnership agreement, Velpic has been appointed by NowForce as its exclusive distributor in Australia and New Zealand.

A top-tier Australian university with more than 28,000 students and 1,800 staff has purchased NowForce to manage campus security as the deal was consummated.

This could be just the tip of the iceberg as Ibis research recently valued the Australian and New Zealand security industry at about $9 billion.

Velpic combines to provide a full-service security solution

Velpic saw the global security industry as a good fit with its existing business given the crossover of technologies and clients.

Servicing the security industry typically focused on incident management in isolation, whereas the integration of Velpic and NowForce will create a full-service solution.

This first-mover product has the added functionality of training those who respond to incidents, as well as potentially educating people affected by traumatic incidents.

Successfully bringing this product to market could be a game changer for both companies, once again reinforcing the potential for Velpic to rerate in 2018. 

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