HUBC

Thank you for joining us for Hub Cybersecurity's Second Half 2024 Financial Results Conference Call. Joining us on the call today is Noah Herskowitz, CEO of Hub, Lior Davidson, CFO of Hub Cybersecurity. Today's event is being recorded and will be available for replay through the webcast information provided in the press release. Finally, I would like to call your attention to the customary Safe Harbor disclosures regarding forward-looking information. The conference call today will contain certain forward-looking statements, including statements regarding the goals, strategies, beliefs, expectations and future potential operating results of Hub Cybersecurity. Although management believes these statements are reasonable based on estimates, assumptions and projections as of today, these statements are not guarantees of future performance. Time sensitive information may no longer be accurate at the time of any telephonic or webcast replay. Actual results may differ materially as a result of risks, uncertainties and other factors, including, but not limited to, factors set forth in the company's filings with the SEC. Hub undertakes no obligation to update or revise any of these forward-looking statements. With that said, I would now like to turn the event over to Noah Herskowitz, CEO of Hub Cybersecurity. Noah, please proceed. Thank you.

Thank you, Ben. Thank you for attending. Thank you all for attending our second half 2024 earnings call. During today's call, I will highlight our recent accomplishments that demonstrate our continued execution in offering our clients a unifying data fabric embedded in military grade security environment. In addition, we will speak about some of the operational efficiencies the new management team has achieved in our effort to turn around Hub and provide shareholder value. I will also discuss our plan to grow our top and bottom lines further while managing our capital efficiency, I mean. Finally, we will discuss the financial results for the second half of 2024. But before that, I wanted to provide a broad overview of Hub and the opportunities that we believe will drive growth for the company going forward. Hub Cybersecurity is an exciting story to share, not just as a pioneer in the secured data fabric market, but as a company that has successfully navigated challenges and emerged stronger and determined. We don't just manage data. We help organizations govern it, secure it, and operationalize it all while meeting the most aggressive regulatory standards in the world, and the market is responding. We're already seeing significant growth in our pipeline, especially from financial institutions and public infrastructure provider in Europe and North America. In March, Hub was awarded a EUR 20 million engagement by the Bank of San Marino to modernize its entire digital banking infrastructure. We expect to deliver in full this year, reinforcing both our profitability trajectory and our market share expansion To support this growth, we are scaling our US presence, opening new office in New York City to support demand across North America, and aggressively hiring world class talent with deep domain expertise in cybersecurity, data infrastructure and public sector compliance. And there's more to come. This is just the beginning. Over the past year, we've made bold decisions to streamline operations, focus on high margin recurring software business and reposition the company for sustainable and scalable growth. At a high level, Hub operates two synergetic business units. The Secured Data Fabric platform, our primary growth engine, a proprietary SaaS solution built to serve financial institutions, enterprises, and regulated public sector environment, the premier professional services and cyber consultancy, our heritage services business, which provides a stable revenue base and maintains long standing trusted relationships with elite clients. These two are not isolated. They work hand in hand to strengthen our fabric platform, delivery and credibility, accelerating adoption and expanding our market footprint. This integrated model is a force multiplier, combining deep advisory trust with cutting edge secure data infrastructure. Let me start with reviewing our secured data fabric platform, which embodies the future of Hub security. This innovative proprietary technology addresses the growing complexity of data management in today's financial and enterprise environments. Financial institutions are facing what I will describe as their winter is coming moment. Data volumes are exploding, infrastructure costs are rising, and regulators are accelerating their expectations for real time audible compliance. The gap between what enterprise have, which is fragmented systems, static reports, and what they need, which is real time governance, AI driven risk intelligence, is getting wider by the month, actually, by the day. That's the space we're focused on. Our platform automatically consolidates data from diverse silos into a unified, scalable, and secure system. It enables our clients to navigate and cross reference data pools within ease, meet and exceed regulatory compliance standards, lower the cost of ownership for those standards, and protect sensitive information with our proprietary military grade cybersecurity. Unlike traditional solutions which require costly, time consuming, and risky data migrations, our approach overlays a software layer that securely fetches data in real time. This not only reduces the manpower and operational costs required in consolidating data from separate silos, but also minimizes the chances of external security threats to our customers. Our competitive edge lies in what we believe is our unmatched combination of advanced technology and industry specific expertise. At the core of our offering is a confidential compute capability, leveraging military grade encryption to protect data whether in transit, at rest, or during processing. Traditional data lake solutions fall short in providing this level of protection. Our advanced security safeguards even the most sensitive information against the bridges, while fully complying with the latest global data protection and cybersecurity regulations, a critical requirement for companies in the financial services sector worldwide. Since the deployment of our secured data fabric, we've seen remarkable demand for the product. It's evident that the markets recognize the value we bring, and I foresee steady growth in market penetration sector by sector as we continue to execute our strategy. Our premier professional services and cyber consultancy group remains a cornerstone of Hub's operations. This is a trusted advisor business. Obviously, I'm talking about right now the second business unit, our premier professional services. So this is a trusted adviser business staffed with over 270 skilled professionals that delivers ICT software and cyber defense solutions to some of the world's most sensitive environments. What makes this business powerful is its trust capital. Many of our clients' relationships go back decades, some as far as the early 1990s. These relationships are not just recurring, they are strategic. They give us privileged access, long term visibility, and a platform to introduce our secured data fabric into large, complex organizations. We believe this business not only underpins our cash flow, but gives us a major competitive advantage in winning new software deployment within high various sectors. Now there is a revival story here. Let me now walk you through what we've done operationally over the last 18 months, a complete strategic and financial reset. I'll start by the restructuring and the efficiency part. We exited underperforming segments. We reduced overhead and restructured contracts that offered volume without value. This strategic discipline enabled a significant turnaround in our gross margin profile, improving over 1000 basis points year-over-year in the second half of 2024. We've reduced legacy liabilities by over 17 million and secured new financing on favorable terms. We're strengthening our financials. We've delivered the business and now free with cleaner balance sheet, still work to be done, which positions us better to win larger public and financial sector contracts where financial stability is paramount. Despite legacy noise, our blue chip client relationships not only helped, they deepened. This trust allows us to now shift from project based execution to recurring software delivery and long term platform adoption. Now on the leadership part and commercial validation. So our US expansion is well underway, supported by a newly established headquarter and a senior leadership team with deep expertise in national security and public sector engagement. In March, we secured a landmark EUR 20 million engagement with the Bank of San Marino to lead its digital banking transformation, a mandate that validates Hub's ability to deliver at the highest level of regulated finance. We're on track to fully execute this contract in 2025 and are actively pursuing additional opportunities of similar scale. A successful deployment would represent a significant more than doubling our top line revenue, and our team is fully committed to delivering with precision, speed, and executional excellence. This turnaround story is not just about the ability to navigate adversity. It's about positioning Hub Security as stronger, more focused company ready to capitalize on the imminent opportunity ahead. We're on a mission to make every transaction safer, let those who entrust us with our world class solution know that they can depend on us. Since becoming CEO, a key focus has been building the right team to drive our growth strategy. Hub has recruited top tier talent, bringing industry experts to share our vision, the exact talents needed to execute our market penetration effort. In recent months, the company has announced John Rogers as President of the Americas region, Renah Persofsky as Chairperson, and Shlomo Bibas as the newest member of the Board. These executive appointments reflect our commitment to innovation, operational excellence and client success. The combination of our technology, market demand and exceptional talent we've brought on board gives me great confidence in our ability to expand our footprint and strengthen our competitive position. In closing, Hub Security is emerging stronger, leaner and more focused. Our two complementary business units, the stable foundation of our professional services business and the high growth potential of our secured data fabric platform position us for long term success. Since taking on the role of the CEO in December 2023, I've been inspired by the resilience of our team and the market's response to our innovative solutions. We have put the past behind and have shown that through this all, we continue to make the business world a safer place. Large global companies depend on us, and we take this responsibility seriously by synchronizing every unit to support our secured data fabric, we've created a powerful engine, transformation is not just a revival story. It's a testament to our commitment to driving value for our clients, shareholders and stakeholders. Let me now hand over to Lior Davidson, our CFO, to walk you through our performance in detail.

So thank you, Noah. The financial results for the full year 2024 will be provided in detail within our Form 20F. In the next couple of minutes, I would like to provide some color on key areas of our financial results as well as the outlook on certain areas where I can. I would start with the revenue for the second half of 2024 was $13.8 million compared to $17.6 million in H2 2023, the respective period. The change basically reflects the company's deliberate strategic pivots to optimize its business mix. Hub has proactively extended our magic segments including certain area within its IT services inside the consultancy division, basically or mainly in order to concentrate its core high value offering. This realignment underscores Hub’s commitment to enhancing profitability and building a more resilient foundation for sustainable long term goals. At the same time, for the full year of 2024, Hub has generated $39.6 million in revenue, which is relatively down from $42.7 million in 2023. As per the gross margin, so the gross margin has improved significantly to 25.6% in H2 2024, up by 15.4% compared with H2 2023. This improvement highlights the positive impact of Hub strategic realignment towards higher margin business segments. Despite a leaner revenue basis, the company's sharpened focus has enhanced overall profitability and established a strong foundation for sustained financial performance going forward. For the full year 2024, the gross margin were 17.1% which reflected strong improvement of 1.8% for the full year of 2023. We are replacing volume with value. This shift basically is expected to accelerate in 2025 as more of our businesses shift towards platform software. Regarding the operating expenses, so the total operating expenses for H2 2024 is an aggregated to $14.7 million which reflects a significant 29% reduction compared to $20.9 million in the respective periods of H2 2023. This sharp reduction underscores management discipline approach to cost control and operational efficiencies because Hub continued its transition towards a more focused higher margin business model. Once again, for the full year 2024, the total operating expenses declined roughly 60% year-over-year due to the aforementioned expense rationalization as well as IPO related expenses recorded in H1 2023. The operating loss in H2 2024 was $11.1 million which reflect a significant improvement of 38% compared with the prior year period. This meaningful progress reflects the benefits of streamline operations and a more efficient organizational structure, reinforcing the positive impact of the company's strategic realignment. The full year operating loss has been improved by over 66% year-over-year, dropping from $77 million in 2022 to only $26 million in 2024. Now I'll spend a couple of sentences on the balance sheet with your permission. So the cash and cash equivalent at the end of the year was $3.1 million, liability rose to $108 million from $83 million driven largely by a warrant liability tied to a fund raising round that also enhanced our equity profile. Our working capital deficit is being actively managed through successful restructuring and aggressive pay down strategies. At the same time, we also converted a significant portion of outstanding convertible debt into equity, further deleveraging the business and reducing interest burden.

Thank you to the entire management team. We have some questions for you. First, can you speak about your competitors and the advantage you have over them? Can you elaborate a bit on the product on your product versus theirs?

We unify compliance, AI analytics, and security in one real time platform for a fraction of the cost. Our competitors often take years to implement. It cost billions to deploy and maintain and are highly vulnerable to cyber attacks. That's a very important, component. Once deployed, many require extensive involvement from data engineers to process manually and massage the data to achieve meaningful analytics outcome. Hub secured data fabric can be implemented in just a few months with deployments and maintenance costs that are relatively low as we are a pure software technically. It is powered by military grade cybersecurity, ensuring robust protection. Once deployed, our AI platform enables near real time analytics generation requiring minimal to no manual intervention and leveraging advanced technology from for maximum efficiency. Well, so we do not require our clients to replace any current solution. No forklift approach using the lingo. Rather, have secured data fabric. Our platform can be added as a layer above existing infrastructure, i.e., our fusion approach, removing the need for large CapEx investment and lengthy replacing of existing tech infrastructure. We're making the system better by enhancing every aspect of it.

Hub has historically been a services and a hardware company, but it seems like, you're moving towards a more software centric company with AI driving the data fabric component. Can you explain the software versus hardware segment of the business?

Hub has undergone a strategic evolution. While hardware and services were historically significant part of our business, we've transitioned to focus on high margin software driven solution that align with our long term growth objectives. So our secured effort followed by proprietary AI integrates advanced data analytics with our deep cybersecurity expertise to address both the security for us- priorities of the CISO, but the broader operational needs of our clients. With a trusted relationship cultivated across hundreds of clients, and that's the professional services that we've discussed before, we are positioned to engage early and deliver solutions that drive resilience and business growth.

How do you see the long term margin profile of the company? And looking ahead, which business unit, the Secured Data Fabric or IT services do you consider to be the main vertical for Hub?

Our long term margin profile reflects our commitment to disciplined management and operational efficiency. Historically, our IT services business has delivered margins in the range of 15% to 20%. Through deliberate efforts to streamline operations and exit lower margin services, we've shifted focus to higher value opportunities, achieving improved margin of 30% to 40%. That's even into the professional services business. Right? We have the 15% to 20% range, and we have higher margins of the 30% to 40%. Our secured date fabric, on the other hand, is a software centric business with margins in the 80% to 90% range, aligning with our strategic direction. That's the product, the secured data fabric component of the business. Looking ahead, the data fabric segment is poised to be the primary growth driver for Hub, significantly outpacing IT services as a percentage of the total revenue. That's the change of the blend. This shift is already well underway, and we anticipate a marked transformation in our business mix starting already in 2025.

Can you talk about the main regions you're currently focused on and elaborate a bit more on your launch into the US?

So our current focus is on Israel and the European Union. As you know, we have an Amsterdam, office. We have a London office. We have a Polish office. We have a German office. We've seen strong demand, particularly from leading financial institutions adopting our Secured Data Fabric platform. And this demand has solidified our position in Europe and underscores the scalability of our solution. Looking ahead, the US represents a significant strategic opportunity. We've already observed great demand in the EU, and we anticipate even more in the US. Hubs US based executives are actively engaging with potential clients, and we are targeting our first signed contract in 2025. Our initial focus will be on the transportation sector. It seems to have, like, a pretty advanced stage client there. The transportation sector is a high priority vertical where our platform can address critical needs in security, compliance, and data integration. Over time, we plan to expand further into additional industries, obviously, the same financial sectors that we saw demand in Europe. Same goes with the US. We're building our momentum and leveraging our proven expertise to drive sustainable growth and beyond. As a side note, I would like to add, we are not necessarily after the next giant bank. I mean, we see huge demand in the smaller boutique banks, where we can leverage our success with the current European clients.

Can you provide some more detail on the quality of your current revenue stream?

The composition of our revenue has fundamentally shifted, as I mentioned. In 2024, over 60% of the revenue came from long-term recurring contracts across financial services and critical infrastructure. These are high quality relationships with long sales cycles, embedded integrations and high retention, very different from transactional, one off projects that which were strategically exited. Our professional services business continues to grow steadily with expected 15% to 20% year-over-year growth. That's a very steady and conservative growth in the business that we foresee. Hopefully, we can even overachieve, but 15% to 20% is something that we already foresee driven by long term, long standing clients like Boeing and others. But the most significant evolution is our platform business, the secured data fabric, that is now contributing a growing share of our top line, and it's built around a SaaS model, with strong margins, sticky compliance use cases, and high cross sell potential. We're not just delivering software. We are solving a systematic data fragmentation and compliance fatigue across global institutions. The shift is already visible in our early 2025 bookings, and we continue to drive operating leverage and predictability across our revenue base. Looking ahead, we foresee multiple deployments on the scale, same scale of the San Marino engagement, over the coming quarter, what we call the Hub 360 approach, a full stack modernization combining secure core infrastructure with our data governance platform. We're targeting a minimum of, like, five to ten new clients in the SaaS based compliance category alone. These are long term relationships with annual contract value in the range of $500,000 to $1 million range, similar to our existing Tier 1 clients with high TCV recurring and positioned for continued expansion.

I'll talk about gross margins a bit. What is driving the strong gross margin improvements in the last 12 months?

So it's a mix of strategic exits from lower margin contracts and integration of like the AI led software offering from Blackstone, the company that we've just announced acquiring a couple of months ago. Obviously, better pricing discipline. We now have an 80/20 revenue structure focused on high efficiency services.

Can you speak about Hub's commitment to compliance and transparency, going forward?

Yeah. We've waited with this one to the end. Yeah. Absolutely. And let me be direct. Whatever came before does not reflect who we are today. We've rebuilt with an institutional grade mindset. Compliance and transparency are embedded in our governance, our leadership culture, and our day to day execution. We have implemented follow-up board oversight, strengthened internal control, stocks and the like, and align our financial reporting and operational cadence to meet the expectation of world class partners and long term investors. We understand that in our space, cybersecurity, defense and regulated financial infrastructure, credibility is everything. We operate accordingly and we're approving it quarter after quarter.

Okay. It looks like we are out of time. Many thanks to everyone for participating on today's call, and we look forward to speaking with you all again.

Good morning, and welcome to the HUB Cyber Security’s First Half 2024 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ben Shamsian with Lytham Partners. Please go ahead.

Good morning, everyone and thank you for joining us for HUB Cyber Security's first half 2024 financial results conference call. Joining us on today's call is Noah Hershcoviz, CEO of HUB. At the conclusion of today's prepared remarks, we will address some questions that were sent to us by investors, as well as questions we believe are important to us. Today's event is being recorded and will be available for replay through the webcast information provided in the press release. Finally, I'd like to call your attention to the customary safe harbor disclosures regarding forward-looking information. The conference call today may contain certain forward-looking statements, including statements regarding the goals, strategies, beliefs, expectations, and future operating results of HUB Cyber Security. Although management believes these statements are reasonable based on reasonable estimates, assumptions and projections as of today, these statements are not guarantees of future performance, nor shall be taken as such. Time sensitive information may no longer be accurate at the time of any telephonic or webcast reply. Actual results may differ materially as a result of risks, uncertainties and other factors, including, but not limited to factors set out in the company's filings with the SEC. HUB is under no obligation to update or revise any of these forward-looking statements. With that said, I would like to now turn the call over to Noah Hershcoviz, Chief Executive Officer of HUB Cyber Security. Noah, please proceed.

I'm pleased to be conducting our very first financial results conference call. I look forward to holding these calls going forward to update you on our progress. During today's call, I will highlight our recent accomplishments that demonstrate our continued execution in offering our clients unifying data fabric embedded in a military-grade security environment. In addition, we will speak about some of the operational efficiencies that new management team has achieved in our effort to turn around HUB and provide shareholders value. I will also discuss our plans to grow our top and bottom lines further, while managing our capital efficiency. Finally, we will discuss the financial results for the first half of 2024. But before that, with this being our first call, I wanted to provide a broad overview of HUB and opportunities that we believe will drive growth for the company going forward. HUB Security is an exciting story to share, not just as a pioneer in the Secure Data Fabric market, but as a company that has successfully navigated challenges and emerged stronger and determined. Over the past year, we've made bold decisions to streamline operations, focus on high-margin business and position ourselves for sustainable growth. At a high level, HUB operates two complementary business units: our Secure Data Fabric platform, our main product [SaaS] (ph), which serves as primary growth engine and transformative solution for financial institutions and enterprises; and second, our legacy professional services and cyber consultancy business, provide a stable revenue stream with strong long-term relationship with blue chip clients like Visa and Boeing that goes back several decades. These two businesses are not siloed, but synergetically aligned with every unit working together to create the most advanced Secure Data Fabric platform in the market. This integrated approach enhances our technological capabilities and ensures seamless delivery and unparalleled value for our clients. Let me start with our secured data fabric platform, which embodies the future of app security. This innovative technology addresses the growing complexity of data management in today's financial and enterprise environment. Banks and other institutions are under immense pressure to manage vast amount of data from multiple sources, comply with increasing regulations and safeguard against escalating security threats. Our platform automatically consolidates data from diverse silos into a unified scalable and secure system. It enables our clients to navigate and cross-reference data pools with ease, meet and exceed regulatory compliance standards and protects sensitive information with our proprietary military-grade cybersecurity. Unlike traditional data lake solutions, which require costly, time-consuming, and risky data migration, our approach overlays a software layer that securely fetches data in real time. It not only reduces the manpower and operational costs required in consolidating data from separate silos, but also minimizes the chances of external security threats to our customers. Our competitive edge lies in what we believe is our unmatched combined combination of advanced technology and industry-specific expertise. At the core of our offering is a confidential compute capability, leveraging military-grade encryption to protect data whether in transit, at rest, or during processing. The additional data lake solutions fall short in providing this level of protection. Our advanced security safeguards even the most sensitive information against breaches, while fully complying with the latest global data protection and cybersecurity regulation, a critical requirement for companies in the financial services sector worldwide. Since the deployment of our Secure Data Fabric, we've seen remarkable demand for the product. It's evident that the market recognizes the value we bring and foresee steady growth and market penetration sector by sector as we continue to execute on our strategy. Our legacy professional services and cybersecurity consultancy business is a cornerstone of HUB's operations, staffed by over 300 professionals delivering advanced software development, cybersecurity and ICT services. These services are critical to fortifying the critical information and assets of some of the world's most prestigious companies. What truly sets this business apart is the trusted advisor relationship we have been cultivated with our client base. Many of these relationships span decades with some going back as far as the 1990s. This enduring trust is a testament to the quality, reliability, and innovation we bring to our clients, which includes global blue chip names like Visa and Boeing. Our legacy professional services business puts us in a key position as a trusted advisors to the customers we've served and we believe that it will provide HUB with plenty of opportunities to cross-sell our Secure Data Fabric solution as well, platform into some of the most prestigious organizations worldwide. 2024 has been a year of major transition for HUB Security, we've taken bold decisive steps to reposition the company for long-term success. Restructuring and efficiency, as we closed our underperforming businesses, reduced headcount and streamlined operations to focus on our core strength in higher-margin businesses. These actions have resulted in a leaner, more agile organization with a clear path to profitability. We've also been strengthening our financials by significantly reducing liabilities. We’ve improved our balance sheet and created greater flexibility for strategic investment in high-margin business like our Secure Data Fabric platform. With regards to client retention and expansion, despite past challenges, we've maintained and even strengthened our relationship with blue-chip clients. As mentioned, we believe that this trusted relationship built over decades will be key to driving our Secure Data Fabric business as well. Our Secure Data Fabric platform has already been validated and endorsed by a leading financial services firm. The revival story is not just about the ability to navigate adversity. It's about positioning HUB Security as a stronger, more focused company ready to capitalize on the immense opportunities ahead. We are on a mission to make every transaction safer. Let those who trust us with our world-class solution know that they can depend on us. Since I became CEO, a key focus has been building the right team to drive our growth strategy. HUB has recruited top tier talents bringing industry experts who share our vision. The exact talents needed to execute our market penetration effort. These executive appointments reflect our commitment to innovation, operational excellence, and client success. The combination of technology -- the combination of our technology, market demand and exceptional talent we've brought on board gives me great confidence in our ability to expand our footprint and strengthen our competitive position. In closing, HUB Security is emerging stronger, leaner and more focused. Our two complimentary business units, the stable foundation of our professional services business and the high growth potential for a Secure Data Fabric platform position us for long-term success. Since taking the role of CEO, I've been inspired by the resilience of our team and the market's response to our innovative solution. We've put the past behind and have shown that through this all we continue to make the business world a safer place. Large global companies depend on us and we take the responsibility seriously. By synchronizing every unit to support our Secure Data Fabric, we've created a powerful engine for growth. This transformation is not just a revival story, it's a testament to our commitment to driving value for our clients, shareholders and stakeholders. Thank you for your time today. Let's move directly to the financial update before opening the floor for questions. The financial results for the six months ended 2024 will be provided in detail within our form of 20F. I will aim to provide some color on key areas of financial results as well as an outlook on certain areas where I can. Revenue for the six months ended June 30, 2024 was $15.7 million compared to $25 million for the same period in 2023. The decline in revenues of $9.3 million or 37% is mainly driven by terminated and less profitable contracts in our professional services business. With regard to gross margin, our gross profit margin for the six months ended in June 30, 2024 improved to 9.5% compared to the negative 7.9% for the same period. The significant improvement reflects the effective management of operations and efficiencies implemented during the year, as well as absence of one-off costs that were recorded in the first half of 2023. Operating expenses, total operating expenses for the six months ended in June 30, 2024 was $16.5 million, a roughly 90% decline compared to $57.5 million reported for the same period in 2023. We expect operating expenses going forward to be on a yield level of around $18 million. G&A expenses decreased in 63% or by $22 million for the six months ended in June 30, 2024. Compared to the same period in 2023, the significant decline is due to more efficient and effective management of operations and overall reduction in the headcount of the group as well as not having all the one-off expenses as we did last year, mostly related to the reverse merger into the SPAC. Sales and marketing expenses declined by 43% or $2 million as compared to 2023. The decrease in S&M is due to one-off expenses recorded in 2023, as well as overall reduction in the group headcount. R&D expenses for the first half of 2024 declined by 77% or $2 million as compared to the same period in 2023. Other expenses for the first half of 2024 declined by roughly $14.3 million, 100% improvement compared to the first half of 2023. The reduction is solely associated with the entry recorded was subjected to the SPAC merger. Cash flow. The decrease in cash of $2 million is due to a mix of reasons. While our financing activities generated $8 million in cash this year, our cash outlay for operating expenses was $10 million. We believe that a large chunk of this cash outlay will prove itself in 2025 in the form of increasing business and revenue.

Thank you, Noah. We have some questions that were sent to us by investors. First, I want to start with, can you talk about your competitors and the advantages that you have over them? You mentioned Palantir. Can you elaborate on your product versus theirs?

Yes, Palantir is one of the competitors or one company that we see in the market. Our competition and our competitors often take years to implement, cost billions to deploy and maintain, and are highly vulnerable to cyberattacks. Once deployed, many require extensive involvement from data engineers to process manually and massage the data to achieve meaningful analytics outcome. HUB Secure Data Fabric can be implemented in just a few months. With deployment and maintenance costs that are relatively low, as we are pure software. It is powered by military-grade cybersecurity, ensuring robust protection. Once deployed, our AI platform enables near-real-time analytics generation, requiring minimal to no manual intervention, and leveraging advanced technology for maximum efficiency. We do not require our clients to replace any current solution, so no forklift is required. Rather, HUB Secure Data Fabric can be added as a layer above existing infrastructure, moving the need for large CapEx investments and lengthy replacing of existing tech infrastructure. We're making the system better by enhancing every aspect of it.

Okay, thank you. We have another question. HUB has historically been a services and hardware company, but it seems like HUB is moving towards a more software-centric company with AI driving the data fabric component. Can you explain the software versus hardware segment of the business?

Yes, sure. So HUB has undergone a strategic evolution. While hardware and services were historically a significant part of our business, we've transitioned to focus on high-margin software-driven solution that align with our long term growth objective. Our Secure Data Fabric powered by proprietary AI integrates advanced data analytics with our deep cyber security expertise to address both the security priorities of the CESL and broader operational needs of our clients. With a trusted advisor relationship cultivated across hundreds of clients, we are positioned to engage early and deliver solutions that drive resilience and business growth.

Okay, thank you. Another question regarding margins. How do you see the long-term margin profile of the company and looking ahead which business unit, the Secure Data Fabric or the IT services you consider to be the main vertical for HUB?

Great question. So our long-term margin profile reflects our commitment to disciplined management and operational efficiency. Historically, our IT services, or what we call the professional services business has delivered margins in the 50% to 20% range. Through deliberate efforts to streamline operation and exit lower-margin services, we've shifted focus to higher-value opportunities, achieving improved margins of between 30% to 40%. Although our Secure Data Fabric, on the other hand, is a software-centric business with margins in the 80% to 90% range, it's like pure SaaS in essence, aligning with our strategic direction. Looking ahead, the Data Fabric segment is poised to be the primary growth drive for HUB. You should expect to see this in the blend of revenues, significantly out-passing the professional services and percentage of the total revenue. This shift is already well underway. And as I mentioned, we anticipate a marked transformation in our business mix trials starting in 2025.

Okay, thank you. We have another question. The theme of big data seems like a perfect storms for a HUB’s Data Fiber product. What are the main drivers behind the demand for HUB’s product and how does big data play into this?

So demand for Data Fabric product is fueled by the explosion of AI-driven data, overwhelming traditional systems, rising regulatory pressures, requiring secure solutions -- secured solutions and high cost of maintaining legacy -- of maintaining the legacy systems, right? So dealing with data is expensive. Highly regulated sectors are spending billions on compliance and data management. They need efficient, scalable solution like ours to reduce the cost of ownership while meeting their demanding requirements of the regulator, right? By breaking down data silos and enabling real-time insights, we're addressing critical needs and delivering significant value to this industry.

Okay, thank you. We have another question on your customer base. Can you elaborate on HUB's secure data customer base and what it's currently being used for?

Yes, sure. HUB Secure Data Fabric is a platform that’s designed to address the critical challenges of managing and unifying massive volumes of fragmented data. While we are currently working with leading European banks on KYC processes and exploring expansion into other products like transaction monitoring and the like, we're supporting a top -- we're supporting top European asset manager with like data integration and analytics and it's just the beginning. Those are all just the beginning. Banks and financial sectors are just the low-hanging fruits for us and key focused in demonstrating our ability to quickly establish leadership in highly regulated markets. However, we are not limited to KYC or banking, the FinTech company in essence. Our pipeline includes industries like payments, tourism, ESG and healthcare, any sector technically that is grappling with large scale data and regulatory pressures. Looking ahead, my priority as CEO is to position HUB as a fully channel ready leader poised for scalable growth and market expansion by the close of 2025.

Okay. It looks like we don't have any further questions. Thank you everyone for participating in today's call. We look forward to speaking to you all again.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.