archTIS Ltd (ASX:AR9) has received very strong demand resulting in binding commitments from investors for a placement, raising gross proceeds of around $8.4 million via the issue of 25,454,545 million shares at 33 cents per share.
Funds will be used to accelerate sales and marketing as well as to build and execute the strong pipeline across the newly combined Kojensi and Nucleus Cyber businesses.
archTIS is well funded following this capital raising, with $13.5 million cash at bank and the company continues to show good progress with existing and new customer contracts.
"Pleased to see strong demand"
archTIS chief executive officer Daniel Lai said: “archTIS appreciates the continued support from shareholders.
“We were very pleased to see such strong demand from new investors and long-term holders, and are delighted to welcome additional quality institutional investors to the register.”
The issue price represents a 15% and 13.7% discount to the volume weighted average price over the last five and 10 trading days respectively prior to November 10, 2020.
amicaa and MST Financial acted as joint lead managers to the placement.
Lai said: “This capital will further strengthen the archTIS balance sheet and provides the company with the runway it requires to fully leverage the transformative acquisition of Nucleus Cyber.”
Funds raised will be used to:
- Accelerate sales and marketing across the combined archTIS and Nucleus Cyber businesses, including cross-selling Attribute Based Access Control into the global Microsoft channel opportunity;
- Leverage the USA Nucleus Cyber team to market Kojensi into the North American market;
- Further execute the technology roadmap for Kojensi and NC Protect relative to customer requirements;
- Commercialise new products, including DataKloak, to protect Big Data from unauthorised access; and
- Invest in Nucleus Cyber.
Nucleus Cyber acquisition
On October 29, 2020, archTIS agreed to acquire global information protection business Nucleus Cyber for total potential consideration of up to A$9.75 million in archTIS shares.
archTIS believes this is a transformational acquisition that leverages its core capabilities, expands its offering into the Microsoft product suite, creating new sales and distribution channels globally.
The newly expanded product offering creates increased revenue diversity, scale and a platform for accelerated growth that is expected to generate cross-selling opportunities between the client bases.
Completion of the transaction remains subject to finalisation of standard documentation and shareholder approval and is expected before the end of 2020.
Microsoft gateway opportunity
Nucleus Cyber recorded A$819,000 annual recurring revenue in FY20 at over 130% year-on-year growth from its high-margin, annual subscription-based software platform across a wide range of sectors including government and defence, financial services, healthcare, pharmaceuticals, energy and manufacturing.
The recent co-sell agreement with Microsoft provides a gateway for easy integration into the world’s largest provider of digital collaboration business products, Microsoft.
Microsoft will actively promote and sell Nucleus Cyber Protect product throughout the Microsoft field sales and channel resellers.
The acquisition of Nucleus Cyber offers unique opportunities for growth across Microsoft’s Teams, Office 365, SharePoint and Exchange products globally both on premise and in the cloud.
Contract wins and renewals
During the September 2020 quarter, the company secured more than A$5 million of contracts and renewals, including:
- A landmark $4.2 million contract with Department of Defence of which $1.5 million has been received in October and November 2020 to date;
- Renewal of two software maintenance and services contracts with Government agencies to the value of $400,000;
- Renewal and upgrade of the Kojensi contract with the Attorney General’s Department for a further 20 licences;
- Information Security Services contract with KPMG for an Australian Commonwealth National Security Agency to the value of $400,000;
- First Nucleus Cyber licence sale to 12th Level, who specialise in big data, analytics and artificial intelligence (AI) to solve complex data integration for organisations including the Australian Department of Defence; and
- Bailey Abbott signed as a Kojensi Reseller for South Australia with a focus on the Space and Defence Industry, as well as Government more broadly.