Tesserent Limited (ASX:TNT) Managing Director Keith Glennan discusses network security technology and the acquisition of Blue Reef.
Natalie MacDonald: Hi I’m Natalie MacDonald for the Finance News Network. Joining me from Tesserent Limited
(ASX:TNT) Managing Director Keith Glennan
Keith, welcome to FNN.
Keith Glennan: Thanks Natalie; it’s great to be here.
Natalie MacDonald: Keith can you start please by giving us an introduction to Tesserent?
Keith Glennan: Tesserent’s a managed security company so we deliver the security, firewall, web-filtering, email filtering for our customers; we deliver it all as a service, we look after all of the software, the hardware and the support.
Natalie MacDonald: Thanks Keith, now to your business in more detail can you explain your different offerings starting with managed network security services?
Keith Glennan: So for managed network security we will either deliver that on the customer’s network, in our cloud, in a hybrid on the data centre but we will sit down with the client, we will work with them to understand their requirements, we will configure a solution and then we will own that 24 hours a day, seven days a week. We will manage that for them and we will deliver the outcomes as they change their requirements we will change the configuration but it’s managed, monitored, maintained by us 24 hours a day.
Natalie MacDonald: And also software licensing?
Keith Glennan: So for software licensing we’ve got partnership deals with a number of partners around the world who take our core software offering then they use that to manage the security of their customers in the way that we do it for our customers in Australia. We licence it for them, so we licence to the UK, we licence to Hong Kong, we licence into Korea; so we have partners around the world that will run their managed security business on our platform.
Natalie MacDonald: Thanks Keith; now to your acquisition of Blue Reef, what do they do and how will this compliment your offering?
Keith Glennan: So we have a number of customers already in the education vertical; it’s a really important market for us and Blue Reef is a specialist in education. So they have about 150 customers, purely education focused so they have a very deep understanding of the education market. There are some things in the cyber security area that you can imagine with students, a lot of sensitive data, duty of care, so their specialists in understanding those requirements; it really compliments everything that we are already doing in that space.
Natalie MacDonald: And what are the considerations and terms of the purchase?
Keith Glennan: We’re paying just under $3.6 million for all of the assets of the business. $1 million of that is in cash so half a million up front and two transactions of $250,000 over the next 12 months, and about $2.6 million in shares.
Natalie MacDonald: And will the transaction be EPS accretive in FY16?
Keith Glennan: Well there is only seven weeks left in FY16 so we’re only going to be able to recognise those remaining seven weeks of the year but yes, the transaction will be earnings accretive.
Natalie MacDonald: Now let’s take a look at the finances, Tesserent listed in February raising approximately $7 million; where are the funds going and what is the company’s long term strategy?
Keith Glennan: So, we retired some debt; there was $1.3 million of debt in the business that we retired. We wanted to operate on a debt free basis, really our priorities are expanding our sales and marketing, some infrastructure investment to grow our cloud delivery and ongoing research and development.
Natalie MacDonald: What were the highlights from 1H16 and expectations for the full year also?
Keith Glennan: We closed some really good deals in the first half of this financial year. We implemented a $1.5 million deal over three years for one of our biggest customers, we consolidated our technology and I guess a lot of the work for the first part of this financial year was really around getting the IPO done. We completed that in mid February and that’s really the platform for growth going forward.
Natalie MacDonald: Last question the Keith, where would you like to see the company this time next year?
Keith Glennan: That’s a good question. We’ve got aggressive growth goals, obviously we’ve done this acquisition which increases our headcount, increases our customer reach. We’ve got opportunities, both ourselves and through the Blue Reef acquisition into Asia, into the US. We’ve already got a good customer base in the UK, so we’re certainly looking to expand on all of those things. As we said in the prospectus, part of our strategy is that we expect to be acquisition driven, this is a very acquisition driven space and we’d like to keep going the way we’re going.
Natalie MacDonald: Keith Glennan, thanks for the update.
Keith Glennan: Thank you Natalie.
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