Portfolio Update & Investor Presentation

RNS Number : 7464N

Tern PLC

25 January 2023

 

25 January 2023

Tern Plc

("Tern" or the "Company")

Portfolio Update

Investor Presentation

Tern Plc (AIM:TERN), the company focused on value creation from Internet of Things ("IoT") technology businesses, is pleased to provide an update on the recent activities of its portfolio companies.

Highlights

· Further significant progress across Tern's portfolio companies during 2022, with important year-on-year growth in the number of recurring revenue contracts.

· Device Authority continued its positive business momentum in 2022, with the business being particularly focused on growing recurring revenues from its software security platform, KeyScaler®.  Device Authorityrecorded a material increase in multi-year bookings and annual recurring revenues ("ARR") compared to those achieved in 2021.  This included new customer wins in the UK, the EU and US, as well as closing their firstKeyScaler® software as a service ("KSaaS") and 'Edge' contracts, following the release of new product capability.

· In December 2022, Wyld Networks launched its pioneering satellite IoT network service providing 100% global connectivity for the IoT. Wyld Networks has signed over 40 alliances with launch partners from a wide array of sectors and built a significant purchase order book for Wyld Connect units along with data service orders.  In aggregate, Wyld has announced orders of approximately SEK 53 million (approximately £4.2 million), that are anticipated to contribute revenue to the business in 2023.

· FundamentalVR made excellent progress in 2022 and was the first of Tern's investee companies to achieve a Series B growth equity financing round in August 2022, providing an initial £13.2 million, supported by new institutional investors.  This funding is supporting further global deployments of FundamentalVR's Fundamental Surgery platform for surgical training.

· Following Konektio's fundraise in December 2021 , the focus for Konektio in 2022 was on the completion of the productisation of the next release of its AssetMinder® platform, using a product-led growth model to incorporate new customer driven features.  During 2022, Konektio also released new AssetMinder® modules, expanded its sales organisation and further honed the organisation to add scale to the business.  Additionally, Matthew Scherba, a director of Tern, joined the Konektio executive team at the start of 2023 to assist with the development of the Konektio business, a secondment that has now been extended for an indefinite period.

· During 2022 Talking Medicines redefined its go-to-market strategy with a focus on selling to the larger advertising agencies who work on behalf of major pharmaceutical companies, where Talking Medicines seeks to be retained by those agencies to supply patient intelligence.  This strategy has successfully led to a number of global advertising agencies and networks engaging Talking Medicines for proof of concept and paid subscriptions, which is expected to lead to significant revenue growth in 2023.

Commenting Al Sisto, CEO of Tern, said :

"The goal of Tern is to help build companies, providing them with the capital and hands-on support they need, including introducing third party investors, so that they have the means to flourish and grow to the point where Tern can exit and deliver quantifiable returns to its shareholders.  Each of our companies is at a different stage in this journey and despite the continuing challenging macroeconomic environment, our optimism around the potential from Tern's investment strategy and our portfolio companies continue to grow.  We believe that each of our companies has, and continues to make, substantial progress towards the point where it will be appropriate for Tern to exit when the market conditions are right.

"However, as I have previously said, building great companies takes time and resources. As each company experiences increasing customer and market interest, it brings consequent challenges and opportunities.  In particular, the interest they are experiencing from a broader set of investors, the majority of whom have significantly greater financial firepower than Tern, sees such investors seeking to capture value from our companies, at the expense of Tern.  This recognition of value creation requires Tern to have the financial firepower to offer our companies more than just our hands-on approach in order to protect and enhance the Tern position for our shareholders.  We have therefore continued to strengthen our balance sheet with two fundraises in the latter part of 2022 and will continue to deploy these funds to protect our interests, strengthen our companies and assist their growth as we believe is appropriate to generate shareholder value.

"Our hands-on approach has been further demonstrated by the secondment of Matthew Scherba, a director of Tern, to the Konektio executive team.  Matthew's secondment has now been extended for an indefinite period so that Tern can directly assist with the development of the Konektio business.  We believe this will result in Konektio ultimately delivering a higher return for Tern shareholders and in the meantime reduces Tern's costs.

"The goal of our model, at the point any of our portfolio companies reach sufficient maturity and the market dynamics are appropriate, continues to be to provide our shareholders with continuous access to returns as we exit investments.  We are continually evaluating the future for our companies and will explore and exploit any appropriate exit opportunities as they are presented or can be originated."

Note: 'Tern's portfolio companies' or 'its companies' or 'our portfolio companies' or 'our companies': Device Authority Limited, Wyld Networks AB, InVMA Limited (trading as Konektio), FVRVS Limited (trading as FundamentalVR) and Talking Medicines Limited, which are companies Tern has interests in and excludes Push Technology Limited, in which Tern has a <1% holding and minimal influence.

Portfolio Company Update

Device Authority Limited ("Device Authority")

Holding: 53.8%

Device Authority is a global leader in securing machine identities and enabling 'zero trust' security policies for IoT. Device Authority's KeyScaler® software security platform is believed to be the only platform to automate and manage machine identities throughout their lifecycle, delivering automated device provisioning, authentication, credential management, policy-based end-to-end data security/encryption and secure updates and providing complete device, data and operational trust.

Device Authority continued its positive business momentum in 2022, with the business being particularly focused on growing recurring revenues from KeyScaler®.  Device Authority recorded a material increase in multi-year bookings and ARR compared to those achieved in 2021.  This included new customer wins in the UK, the EU and US, as well as closing their first KeyScaler® software as a service (" KSaaS") and 'Edge' contracts, following the release of new product capability.

New commercial agreements were signed in Device Authority's key sectors of automotive, industrial, healthcare and US Government, including a US$1.2 million agreement over five years, with a tier one automotive supply chain customer in December 2022, and further agreements to secure IoT machinery, healthcare devices, smart devices for utilities and electric vehicle companies in both the automotive and heavy machinery sectors.

The Virginia Innovative Partnership Corporation ("VIPC") project, in conjunction with Crossroads Innovation Group, which is focused on US IoT security standards securing IoT infrastructure, as announced on 16 March 2022, has been successfully built and deployed. Phase two of this project has commenced to extend demonstrator proof of concept to secure digital environments and critical infrastructure for US agencies, as well as in private sector organisations.  This combined solution approach, which includes multiple participants, aims to provide critical cybersecurity proof points across a range of technologies involved in the deployment of diverse IoT technologies and use-cases.

Device Authority's commercial partnerships with Entrust, Venafi and Microsoft have also continued to develop over the past year. The first KSaaS contracts were sold via the Microsoft Marketplace, and Device Authority was accepted into the Microsoft IP co-sell ready programme, providing both Microsoft and Microsoft partners with commercial incentives for selling KeyScaler®. Device Authority's global collaboration with Entrust has been focused on sales enablement and executing a joint go-to-market strategy targeting key customer accounts with an integrated joint offering for digital identity.  This partnership is expected to continue to develop in 2023 across the US, EU and APAC regions.

More recently, on 18 January 2022, Device Authority announced that it had partnered with CYFIRMA, a leading external threat landscape management platform company, based in Singapore to integrate CYFIRMA's rich, real-time threat data with Device Authority's KeyScaler® platform to provide the intelligence to automatically detect and remediate threats to edge networks, devices and applications.  The combined offering is designed to give enterprises end-to-end visibility of organisation-wide threats, risks and vulnerabilities, all from an outside-in perspective.

The release of the KeyScaler® 7 platform has introduced a robust new capability for Edge environments, providing fully automated identity lifecycle management, and a new 'Authorization Service Connector' enabling continuous validation of devices, a proactive best-practice security approach for achieving 'Zero Trust'.  This automates the provisioning and management of certificates for both online and offline Edge devices, including complex Nested Edge set-ups for industrial use cases, further aligning KeyScaler® with Microsoft's strategy of enabling companies to build more resilient supply chains by extending cloud capabilities to remote and offline settings.

Additionally, KeyScaler's enhanced 'Authorization Service Connector', introduced in 2022, provides a framework for continuous assurance and authorisation to support the new Software Bill of Materials requirement outlined in the White House Executive Order 14028, and to help organisations comply with the EU Cyber Resilience Act.  It enforces real-time authentication check-ins with external threat detection platforms to assess threat levels for devices, mitigates new threats, and helps remediate against critical vulnerabilities found in device software.

Device Authority has become a market leader in its field of IoT identity and access management, validated through independent market analysts in the 2022 SPARK Matrix™ for 'IoT Identity & Access Management'.  Additionally, ABI Research, in its annual 'Top Technology Companies' whitepaper, confirmed Device Authority as overall leader in 'IoT Device Identity Lifecycle Management', and a 'Top Innovator and Implementer'.

Wyld Networks AB (publ) ("Wyld Networks" or "Wyld")

Holding: 41.2%

Wyld Networks, quoted on the NASDAQ First North Growth Market in Stockholm, enables affordable connectivity across the globe in areas where wireless coverage is unavailable.  The company specialises in providing wireless connectivity between IoT sensors and Low-Earth-Orbit ("LEO") satellites with its Wyld Connect solution.

In December 2022, Wyld launched its pioneering satellite IoT network service, providing 100% global connectivity for the IoT. According to Wyld Networks' research only approximately 15% of the world's surface currently has access to the internet.  According to McKinsey, it is this lack of global connectivity that is holding back the growth of the IoT from adding US$ 2-3 trillion to the global GDP over the next ten years¹ .   Wyld Connect solves this problem by allowing businesses and governments to connect their IoT devices anywhere in the world using LEO satellites to collect data to improve their operational efficiencies and support their sustainability goals.  With the launch of the satellite IoT network service, Wyld can address in part the satellite IoT market demand, which according to a forecast by Rethink IoT, will be worth US$5.9bn by 2025.²

Wyld have signed over 40 alliances with launch partners from a wide array of sectors, including signing during 2022 with Agrology (USA), Snow Acres (Canada), TrakAssure (USA), Axceta (Canada), Instituto Constanta De Inovação (Brazil), Hazera (Israel), Treevia (Brazil), Constanta Industrial (Brazil), Brinja (Sweden), HartBR (Brazil), IMAE (Brazil) and DEWA (UAE). ATSS (Saudi Arabia), Khomp (Brazil), IoTMaxi (Brazil), British American Tobacco (Brazil), and Spider Digital (UAE, UK, North America and Bangladesh).

Additionally, Wyld Networks has partnered with Miromico, a Swiss IoT company, to resell Wyld Connect and focus on integrated circuits, electronic systems and software products to meet the growing demand for connectivity for the IoT.

On 8 December 2022, Wyld Networks announced that it had a purchase order book of approximately SEK 34 million (approximately £2.7 million) for both Wyld Connect units along with data service orders.  Since that date, Wyld Networks has announced two further significant orders of SEK 12.6 million (approximately £1 million) and SEK 6.29 million, (approximately £0.5 million) respectively.  Wyld Networks anticipates starting to convert its order book into revenue for the business in 2023, together with entering into additional partnerships and customer agreements, as it continues to solve the complex problem of connecting data at low power to LEO satellites and delivering that data to the customers that need it.

Sources:

¹   Agriculture's technology future: How connectivity can yield new growth   - McKinsey Center for Advanced Connectivity and the McKinsey Global Institute

²   Nanosats and new use cases will propel satellite IoT to $5.9bn by 2025 - Rethink IoT (rethinkresearch.biz)

FVRVS Limited ("FundamentalVR")

Holding: 16.58%

FundamentalVR delivers virtual reality ("VR") haptic 'flight simulators' for surgery creating a safe, measurable and repeatable space to refine skills.  FundamentalVR's goal is to transform the way surgeons prepare, practice and refine their skills.  It has built an immersive, surgical simulation application platform, Fundamental Surgery, to provide medical professionals with the opportunity to rehearse, practice, and test themselves within a safe, controllable space that is as close to real-life as possible.

FundamentalVR made excellent progress in 2022 and was the first of Tern's investee companies to achieve a Series B growth equity financing round in August 2022, providing an initial £13.2 million, supported by new institutional investors.  This funding is supporting further global deployments of FundamentalVR's Fundamental Surgical platform for surgical training.

Key successful deployments of FundamentalVR's technology in 2022 included with CMR Surgical, a global surgical robotics business, where its Versius Virtual Reality solution, produced in partnership with FundamentalVR, became the first soft-tissue surgical robotics system to offer virtual reality ("VR") training and was launched as part of CMR Surgical's 'Surgical Professional' education program.

FundamentalVR has continued to build out its platform capabilities and Tern believes it is unique in being able to offer customers a scalable range of VR solutions from standalone VR through to FundamentalVR's flagship patented HapticVR which enables full skills transfer.

The company's CollaborationVR system is increasingly being utilised by customers across the globe, allowing surgical experts to come together in virtual learning spaces without the need for physical travel. For example, FundamentalVR and Houston Methodist Institute for Technology, Innovation and Education (MITIE℠) recently announced the introduction of the MITIEverse™, an extensive collaboration and shared space learning environment.

FundamentalVR has been recognised globally as a leader in its field, being awarded the 'Best Mixed Reality Solution' at the AX Awards 2022 and nominated for 'Most Innovative Product', 'Best Education and Training Solution' and 'Best Mixed Reality Solution'. at the XR Awards, together with being nominated for 'Best Healthcare and Wellness Solution' at the AWE 2022 Auggie Awards.

InVMA Limited (trading as "Konektio")

Holding: 36.8%

Following Konektio's £2.125 million fundraise in December 2021, led by fund managers Foresight and Mercia, the focus for Konektio in 2022 was on further developing its AssetMinder® modular, industry 4.0, IoT (software as a service) SaaS platform and building an appropriate organisation to further scale the business.

During 2022 Konektio released new AssetMinder® modules, including 'Predict', to enable predictive analytics so that customers can minimise unplanned downtime, and 'Impact', which enables optimisation of customer maintenance schedules, allowing them to monitor high energy consumption processes and the environmental impact of their machines.  Konektio is experiencing strong demand for both modules.

To support this growth, Konektio has expanded its sales organisation, hiring key senior salespeople in Europe and the US.  Additionally, Matthew Scherba, a director of Tern, joined the Konektio executive team at the start of 2023, for an initial two-month secondment period, which has now been extended to be an ongoing secondment, terminable by either Tern or Konektio on four weeks' notice, to assist with the development of the Konektio business and the completion of the productisation of the next release of AssetMinder®.

Talking Medicines Limited ("Talking Medicines")

Holding: 23.8%

Talking Medicines is a data technology company using artificial intelligence, natural language processing and machine learning as social listening technologies to give patients a voice.  

In 2022 Talking Medicines redefined its go-to-market strategy with a focus on selling to the larger advertising agencies who work on behalf of major pharmaceutical companies, where Talking Medicines is seeking to be retained by those agencies to supply patient intelligence.  This strategy has successfully led to a number of global advertising agencies and networks engaging Talking Medicines for proof of concept and paid subscriptions, which is expected to lead to significant revenue growth in 2023.

Led by Talking Medicines' Chief Customer Officer, based in New York, who was appointed in Q1 2022, the Talking Medicines team has been focussed on the expansion of revenue within the advertising agency network groups through offering trials as a mechanism to win sales.  Clients trial the PatientMetRx® platform alongside their current solution to experience the difference.  Sign-ups to the trials have significantly exceeded Talking Medicines' management's expectations in recent months.

Through the trial undertaken, Talking Medicines has been able to demonstrate greater efficiency and effectiveness to its clients through its unique artificial intelligence classification models that curate the patient voice, with clients reporting on average an 80% time saving on data collection.

In 2022 PatientMetRx® was transformed from the display of a Patient Confidence Score™, providing a measure of brand health for medicines, to a platform with depth that allows advertising agency clients to create impactful patient-led messaging to win and retain business with their pharmaceutical clients.  Feature developments in 2022 have enabled clients to discover and measure patient insights across drugs and therapy areas of interest in a way that was not previously possible.

In 2023, Talking Medicines will be focused on establishing a repeatable commercial model based on the work it has done to date, including seeking subscribers for the artificial intelligence models that already classify the patient voice across a significant number of top drug brands.  Additionally, PatientMetRx 2.0 is in development, based on feedback from clients, which will seek to integrate prediction into the offering, based on the next stage of the company's artificial intelligence modelling. 

In December 2022, a leading US-based pharmaceutical marketing publication, PM360, announced that Talking Medicines was the winner of its 'Most Innovative Services to Advertising Agencies' award.

Online Investor Presentation and Q&A Session

Tern's management and management from certain of Tern's portfolio companies will be hosting an online presentation and Q&A session at 5 p.m. GMT on Tuesday 7 February 2023. This session is open to all existing and prospective shareholders.

Those who wish to attend should register via the following link where they will be provided with access details:

https://us02web.zoom.us/webinar/register/WN_BBh-OCkhT8C413sPS3Wsrw

Participants will have the opportunity to submit questions during the session, but questions are welcomed in advance and may be submitted to: [e-mail] .

Enquiries

Tern Plc Al Sisto (CEO) Sarah Payne (CFO)	via IFC Advisory
Allenby Capital Limited (Nominated Adviser and Broker) David Worlidge / Alex Brearley / Dan Dearden-Williams (Corporate Finance) Kelly Gardiner (Sales and Corporate Broking)	Tel: [phone]
IFC Advisory (Financial PR and IR) Tim Metcalfe Graham Herring Florence Chandler	Tel: [phone] [e-mail]

 

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