21 March 2023

Kape Technologies plc 

("Kape," the "Company" or the "Group")

FULL YEAR RESULTS FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2022

Record financial performance, delivering sixth consecutive year of high double-digit growth

Pro Forma Adjusted EBITDA exceeding management expectations at $176 million

Kape Technologies plc (AIM: KAPE), the digital security and privacy software business, announces its audited results for the twelve months ended 31 December 2022 ("FY 2022").

Financial Highlights

●     A record financial performance across FY 2022 driven by significant organic growth across digital privacy, security, and content divisions and robust market tailwinds

o  Revenues of $623.5 million, an increase of 170.3% (2021: $230.7 million)

o  Strong recurring revenue contribution at 86.8% of total revenue (2021: c.92% on a pro forma basis)

o Pro Forma Adjusted EBITDA up 125.6% to $176.0 million (2021: $78.0 million), exceeding management expectations

o  Increase of 140.7% in Fully Diluted Adjusted Earnings Per Share to 55.6 cents (2021: 23.1 cents)

o  Strong cash generation; adjusted operating cashflow increased by 275.1% to $165.5 million (2021: $44.1 million) 

o  Operating profit up 161.6% to $100.1 million (2021: $38.3 million)

o  Profit after tax up 203.2% to $70.9 million (2021: $23.4 million)

●     In September 2022, the Company completed a significantly oversubscribed capital raise of £190.1 million.

●     Secured modified debt facilities of $425.0 million in November 2022

o  Included existing lenders and two new banks

o  Adjusted leverage at the end of the period is now below 1x

o  Generating c.$20 million in net debt reduction and c.$8 million in savings on financing costs

Operational Highlights

●     Kape now serves over 7.4 million paying customers globally, a 12% increase from the previous year

●     Integration of ExpressVPN exceeded expectations, not only accelerating our growth but strengthening the capabilities of our entire digital privacy division to deliver market-leading privacy products

●   The Company realised $9 million of synergies in FY 2022 and expects to realise the full planned operational synergies of $30 million in FY 2023

●   Unveiled new products and features across key brands, underlining the Group's commitment to digital innovation and consumer privacy, including the ExpressVPN Aircove, a groundbreaking Wi-Fi6 router with built-in VPN

●   Secured a number of new partnerships to expand distribution footprint, including an agreement with Remote to provide the Group's industry-leading brands with access to the business' global customer base to support greater privacy protection in the remote work sector

Post Period-end and Outlook

●    The Group has made a strong start to FY 2023, driven by ongoing cross-sell initiatives and well-established customer acquisition methodologies

●     After overperforming in 2022, the strong start to 2023 underpins the Board and management team's confidence in the future performance of the Group.

●     Supported by the capital raise in September 2022, robust balance sheet, and proven track record of acquiring and integrating businesses, Kape is well positioned to explore potential M&A opportunities in 2023 to complement the Group's organic growth, which is directly in line with its ambitious buy-and-build strategy.

Ido Erlichman, Chief Executive Officer of Kape, commented:

"Kape delivered an outstanding performance in 2022, delivering our strongest year to date.

Over 7.4 million paying subscribers globally now consider Kape their company of choice in the digital privacy and security space, up 12% from the previous year.

The need for greater digital privacy and security has been key, as more and more individuals are recognising Kape's brands as household names in the digital privacy arena.

Kape has delivered consistent profitable growth, executing on our strategic objectives year over year for six years in a row. We believe we are in a perfect position to capitalise on the growing demand in the markets in which we operate, through organic growth and strategic M&A activity."

Enquiries:

About Kape

Kape is a leading 'privacy-first' digital security software provider to consumers. Through its range of privacy and security products, Kape focuses on protecting consumers and their personal data as they go about their daily digital lives.

Kape has c. 7.4 million paying subscribers, supported by a team of over 1,400 people across ten locations worldwide. Kape has a proven track record of revenue and EBITDA growth, underpinned by a strong business model which leverages our digital marketing expertise.

Through its subscription-based platform, Kape has fast established a highly scalable SaaS-based operating model, geared towards capitalising on the vast global consumer digital privacy market.

www.kape.com

Chairman's Statement

After six consecutive years of high double-digit revenue growth, 2022 has been another strong period for Kape, and the most successful year to date.

During this time, Kape has been transformed into one of the leading platforms in the consumer digital privacy and security space, with over 7.4 million subscribers enjoying Kape's products as they become a household name across Europe, America, and Asia. We have seen digital privacy grow in priority for individuals, as their digital footprint expands, and we believe this trend will continue to accelerate. As we continue to aggressively grow our product reach, we are in a premium position to provide best-in-class products to assist our customers in managing their digital identity. 

Our teams have been busy across the year, delivering strong organic growth across all our segments, to deliver revenue at the top end guidance and exceeding our proforma Adjusted EBITDA estimates, following the full integration of ExpressVPN, our largest acquisition to date. We also secured additional growth capital from our investors and secured a substantial long-term debt package for the business.

The integration of ExpressVPN was expertly delivered during the year, surpassing all expectations and strengthening our digital privacy division capabilities to deliver market-leading privacy products. Concurrently, Kape's Digital Privacy, Security, and Content divisions all delivered strong organic growth. The Digital Content Division has seen accelerated growth since joining the Group, and continues to provide Kape with unrivalled market insight, enabling the continued enhancement of our product suite and underpinning R&D, marketing, and advertising strategies.

In October 2022, we completed an oversubscribed £190.1 million equity raise. This is testament to our overarching business strategy and global reputation as a leading pure-play digital security and privacy provider, as well as demonstrating the support from investors to pursue our M&A strategy, where we have a successful record of executing accretive acquisitions to support our strong organic growth.

Additionally, we expanded our teams in Asia and Europe, two key growth geographies for the Group, recruiting new employees to facilitate the acceleration of our R&D and sales and marketing efforts across the territories. We also rolled out a range of innovative products and features across the year, including Threat Manager, Parallel Connections, custom DNS and the award-winning ExpressVPN Aircove router - the world's first Wi-Fi 6 router with a built-in VPN.

Board Changes

We welcomed Dan Pomerantz, co-founder of ExpressVPN, as a Non-Executive Director in 2022. Dan is also an executive of the Company in his capacity as the General Manager of its Digital Privacy Division. Dan's extensive experience building products and brands at scale, together with his business acumen and financial knowledge, will be invaluable as Kape looks to enter the company's next phase of growth and expansion.

Environmental, Social, and Governance

After a tumultuous year for environmental, social and governance ("ESG") issues at a macro level, it's never been more important for us to do our part. At Kape, our commitment to ESG underpins all of the work we do to ensure the digital privacy and safety of people online.

In 2021, we launched our corporate ESG framework. We continued this positive ESG momentum in 2022, responding effectively and prudently to the challenges our organisation faced to ensure we remain on track to deliver a sustainable and resilient future for Kape, our employees, our stakeholders and the communities we serve.

Most notably in 2022, we introduced a range of new ESG policies and procedures, including Kape's Code of Conduct, Modern Slavery Statement and Anti-Sexual Harassment Policy. We also published a new online trust centre and expanded our volunteering and donation efforts to support individuals and NGOs during times of crisis.

We were pleased to have launched our 'Women at Kape' Employee Resource Group ("ERG"). Equality in the workplace is everyone's responsibility, and the launch of this ERG reflects our commitment to building an inclusive and equal workplace culture by ensuring issues impacting female and LGBTQIA+ employees are raised and addressed. As we continue through 2023, we intend to expand our ERG activity to ensure we're accounting for the diverse requirements of our teams.

Further, as we continue to expand our scale and global reach, sustainability is increasingly becoming an integral part of our commercial strategy. The introduction of our new carbon footprint measurement and green office initiatives ensures that Kape's business operations reflect a responsible approach in our efforts to help the world transition to a low-carbon economy.

Significantly, Kape jumped two rating points for ESG with MSCI, the organisation responsible for measuring and modelling environmental, social, and governance risk to provide critical insights into company behaviours.

Behind all our ESG work, we're empowering people across all levels of our organisation with a better understanding of ESG, so that they can recognise how their day-to-day activities and the work they do contributes to achieving our collective ESG targets. For the board in particular we've provided focused training on ESG as well as delivering ongoing ESG knowledge-building activities. 

Important issues lie ahead for the environment, and Kape is taking every action to ensure it remains focused on playing its part on the sustainability front. Overall, we're proud of our ESG progress this year, and look forward to advancing our ESG agenda in 2023 and beyond.

Offer for Kape

On 13 February 2023, Unikmind Holding Limited ("Unikmind"), Kape's majority shareholder, announced a cash offer to acquire the entire issued share capital of Kape not already held by Unikmind at a price of $3.44 for each Kape share, equivalent 285 pence per Kape Share based on the Announcement Exchange Rate ("the Offer").

The independent Directors (being all of the Directors save for Pierre Lallia) view is that the Offer does not represent the full value of Kape. The Offer was received after a previous proposal by Unikmind of 265 pence was rejected by the independent Directors. Unikmind stated it intends to seek a delisting of the Company regardless of the outcome of the Offer, hence the Independent Directors believed that it was in the interests of shareholders for the Company to grant Unikmind a partial standstill release from the NDA Standstill to allow Unikmind's proposal to be presented to Kape shareholders for their consideration.

On 6 March 2023, Unikmind posted their Offer Document to Kape shareholders, noting that the Offer Document Exchange Rate meant the Offer price of $3.44 for each Kape Share was worth 288 pence per Kape Share as at 6 March 2023.

On 20 March 2023, the Independent Directors wrote to Kape shareholders with their views on the Offer.

Summary and Outlook

Across 2022, we have seen digital privacy and cybersecurity continue to dominate both the political and business agendas. Actions taken by various governments to expand censorship and erode the cybersecurity landscape have continued to highlight the need for companies like Kape.

With an increasing number of corporations and consumers acknowledging that online freedom and protection is imperative to their daily lives, Kape finds itself ideally placed to capture new business and strengthen its position in an ever-growing privacy and security market.

After overperforming in 2022, Kape has made a strong start to 2023, underpinning the Board and management team's confidence in the future performance of the Group.

I would like to express my sincere gratitude to all Kape employees for their continued dedication and tenacity, in helping to make 2022 Kape's most successful year to-date. The substantial progress achieved during the year could not have been accomplished without their unwavering commitment to the Group's mission.

Looking ahead, we continue to focus on expanding and innovating, both through evolving our product portfolio to ensure we're responding to nascent sector trends, and through improving our operational efficiency to further accelerate the Group's organic growth. Boosted by our capital raise, robust balance sheet and proven track record of acquiring and integrating businesses, we are well positioned to explore potential M&A opportunities in 2023 to complement the Group's organic growth, which is directly in line with our ambitious buy and build strategy.

Don Elgie

Non-Executive Chair

20 March 2023

Chief Executive Officer's Review

Introduction

Kape delivered an outstanding performance in 2022, recording its strongest year-to-date.

Over 7.4 million paying subscribers globally now consider Kape their company of choice in the digital privacy and security space, up 12% from the previous year.

Kape delivered a record financial performance across FY 2022, achieving revenue of $623.5 million (2021: $230.7 million), up 170.3% year-on-year or 18.9% organic growth on a proforma basis with recurring revenue contributing 86.8% (2021: c. 92% on a proforma basis). Additionally, we grew Pro Forma Adjusted EBITDA² by 125.6% to $176.0 million (2021: $78.0 million). We reached 94% adjusted cash conversion along with significantly growing our subscribers; this year alone we have added 791,000 new subscribers to our customer base. 

Six and a half years after setting our new strategic direction and gradually achieving milestone after milestone, we have created significant equity value for all stakeholders in excess of $1.5 billion, it is a testament to the success of our strategic journey and we appreciate the continued support from all our investors.

Our significant progress and financial success are best articulated in the following chart⁵:

Market Dynamics

The global digital privacy software market is forecast to grow to $25.8 billion by 2029, expanding at a CAGR of c. 40%³. Despite the cost-of-living crisis, consumers continue to view digital privacy and security as a priority and are willing to pay more to ensure they receive best-in-class services. Given that remote working has been adopted by a large number of individuals across the globe, the importance of dependable digital protection has increased substantially, and is now central to consumers' business and leisure activities.

20-45-year-olds constitute 70% of the market, and this demographic continues to underpin the fast-paced growth in the privacy market, together with the rise in individuals worldwide owning multiple IoT devices.

For consumers, owning a broader range of IoT devices means purchasing premium digital privacy protection, such as those Kape offers, which not only provides greater value per device, but is a necessity to comprehensively safeguard their digital lives.

Buy, Build and Grow

A key highlight of 2022 was the seamless integration of ExpressVPN into the wider Group. This acquisition was our seventh consecutive buy, build and grow deal in the last seven years, realising our vision to help millions of people around the world to live more secure and private digital lives.

Kape today is a top-tier digital privacy platform that serves millions of subscribers worldwide. When we embarked on our strategy six and a half years ago, we had no subscribers, yet after our continued growth, today we serve over 7.4 million paying subscribers worldwide.

In 2022, as we progressed in the integration project with ExpressVPN, we were able to deliver c. $9 million in operational synergies, representing $30 million in annualised cost savings, reflecting our successful know-how and M&A track record to date. This transaction extended our reach to the premium part of the digital privacy market and enhanced our customer lifetime value, accelerated our R&D timeline and expanded our marketing reach. Management expects to realise further synergies in 2023.

We are delighted that ExpressVPN's management and employees have joined the Group, demonstrating their confidence in our business model and growth strategy. These highly know-how and innovative individuals have brought a wealth of digital privacy and security experience to Kape, boosting our product development and market reach capabilities across the globe.

Product Development

Kape has progressed to become an established player in the digital security and privacy space. Alongside our growth from existing products, the Group has recognised its potential to spearhead innovation in the industry. In H2 2022, our ExpressVPN brand launched its award-winning Aircove router - the world's first Wi-Fi 6 router with a built-in VPN. Designed for individuals seeking to safeguard their families with a VPN, Aircove was introduced in September 2022 and has already generated strong sales traction in the US, complementing ExpressVPN's highly innovative software.

Other products and features launched this year include a beta password manager ExpressVPN Keys, which has been gathering momentum as users welcome a broader range of privacy and security tools. We have also introduced end-point protection for PC for Private Internet Access customers with our Privacy First Anti-Virus solution for PC. We continue to focus on rolling out the features across all of our key brands in the year ahead.

Financing

Kape completed an oversubscribed and upscaled c. £188 million placing and c. £2.1 retail offer in H2 2022. We were delighted to receive such strong support from new and existing institutional shareholders, including blue-chip investors from the UK, US, Europe and Israel. This injection of capital is a strong endorsement of our strategy. It will enable the Group to capitalise on potential acquisition opportunities whilst further supporting organic growth initiatives.

Additionally, we entered into an agreement for Modified bank facilities with our existing lenders Bank of Ireland, Barclays, Citizens Bank, BNP Paribas, Citi Commercial Bank, and Leumi Bank, as well as two new banks, HSBC and Credit Suisse, who have joined the enlarged syndicate. Replacing the existing debt facilities, by paying early the deferred consideration of the ExpressVPN acquisition, Kape immediately realised approximately $19.9 million in net debt reduction and approximately $8 million of savings on financing costs from terminating the underwriting commitment.

 Key Performance Indicators

Significantly, Kape delivered strongly across its KPIs in 2022, demonstrating the resilience of the Group's SaaS business model. Kape's highly scalable model not only underpins the profitability and earnings predictability of the Group, but also our growth potential.

Growth Drivers

Kape has delivered consistent profitable growth, executing on our strategic objectives year over year for six years in a row. We believe we are in a perfect position to capitalise on the growing demand in the markets we operate in. We remain committed to delivering on our future growth aspirations and capitalising on strong market tailwinds, with the following key pillars continuing to drive our accelerated growth:

●    Reach: Over 7.4 million paying subscribers globally, providing significant opportunity to generate further cross-sell and upsell momentum.

●   Go-to-market capabilities: With the leading brands in the space, including ExpressVPN, and Webselenese's unparalleled market insight, Kape benefits from a robust platform which facilitates the optimisation of CAC and retention rates.

●   Strong product portfolio: Expert solutions at the pinnacle of sector innovation, with high levels of recurring revenues and a growing global R&D team to help realise product development potential.

●    M&A: Proven track record of acquiring market-leading businesses, delivering increased synergies and greater market penetration.

Outlook

The global demand for cutting-edge digital security and privacy products is stronger than ever, and we recognise the pivotal role Kape has in safeguarding businesses and consumers from existing and emerging cyber threats. We remain focused on delivering on our strategic priorities to further consolidate our position as a market leader in digital privacy and security.

On behalf of the management team, I would like to share my deepest thanks to our hugely talented global team for their drive and determination throughout FY 2022. Without their continued support and diligence, our focus on building a world-class digital security and privacy provider trusted by millions across the globe would never have been achieved.

Ido Erlichman

Chief Executive Officer

20 March 2023

¹ Adjusted EBITDA is a company-specific measure which is calculated as operating profit before depreciation (including right-to-use assets amortisation), amortisation, exceptional or non-recurring costs, other operating income/(expense) and employee share-based payment charges.

² Proforma Adjusted EBITDA is a non GAAP measure, it's the Company Adjusted EBITDA after adding back deferred contracts costs fair value accounting adjustment following ExpressVPN consolidation.

³ https://www.fortunebusinessinsights.com/data-privacy-software-market-105420

⁴ Retention rates are calculated on a six-month basis.

⁵ Excluding Kape's discontinued operations (2018-2020)

Chief Financial Officer's review

Revenues for the year to 31 December 2022 increased by 170.3% to $623.5 million (2021: $230.7 million), or 18.9% on a proforma basis. The increase in revenues is a result of an increase in Kape's subscriptions base of 12% to c.7.4 million (2021: c.6.6 million) as well as twelve months' contribution from ExpressVPN. Pro Forma Adjusted EBITDA increased by 125.6% to $176.0 million (2021: $78.0 million). Operating profit increased by 161.6% to $100.1 million (2021: $38.3 million) mainly due to twelve months' contribution from ExpressVPN and Webselenese compared to half month and ten months in 2021, respectively.

Adjusted cash flow from operations attributable to the current financial period was $165.5 million (2021: $44.1 million), which represents a cash conversion of 94.0% from the proforma Adjusted EBITDA (2021: 56.6%). The increase is a result of a growing percentage of customers that continue to use Kape's products after the end of the initial subscription period. As 31 December 2022, the Group's cash balance was $251.6 million (31 December 2021: $27.0 million) and net debt was $119.8 million. 

On 3 October 2022, the Company completed an oversubscribed capital raise, issuing a total of 71,762,618 new ordinary shares of US $0.0001 each ("Ordinary Shares") subscribed for by investors, at an issue price of 265 pence per share. The net proceeds after issue costs from the share issuance were $213.1 million (c.£188.2 million).

On 12 September 2022, the Company announced that it had entered into an Early repayment agreement with the ExpressVPN founders to pay the deferred cash consideration in advance of the contractual dates in the purchase agreement.

On 2 November 2022, the Company announced it had entered into an agreement for Modified bank facility with its existing lenders Bank of Ireland, Barclays, Citizens Bank, BNP Paribas, Citi Commercial Bank, and Leumi Bank, and two new banks, HSBC and Credit Suisse, who joined the enlarged syndicate. This Modified debt facility replaced all Kape's existing loan facilities, including the Deferred Consideration resulting from the ExpressVPN acquisition and the Deferred Consideration Facility arrangement with TSNLI. As a result, the Company realised $19.9 million of cash saving following the Cash Deferred Consideration early repayment and approximately $8.0 million of savings on financing costs from terminating the underwriting commitment, in addition, the early repayment resulted in a gain of $17.2 million.

The debt facility comprises a $275.0 million senior secured term facility (the "Modified Term Facility"), a $150.0 million revolving credit facility (the "RCF") and an uncommitted $75.0 million facility (together the "Modified Debt Facilities"). Bank of Ireland is the agent bank. The Modified Debt Facilities have a four-years term with an option to extend the term by up to an additional one year. The Modified Term Facility will be amortised on a quarterly basis across 48 months starting December 2022, and a bullet payment on 2 November 2026 and will carry an opening Margin of 2.75% above Applicable Reference Rate per annum.

Segment Result

The segment result has been calculated using revenue less costs directly attributable to that segment, comprises cost of sales and direct sales and marketing costs. Segment cost of sales comprises payment processing fees and infrastructure costs of the Group's privacy products. Direct sales and marketing costs are mainly user acquisition costs.

During the period, the Digital Privacy segment has seen continued growth with a 337.9% increase in revenue to $512.6 million (2021: $117.1 million), 14.25% on proforma basis, and a 388.3% increase in the segment result to $363.6 million (2021: $74.5 million). Proforma base revenue growth was driven by subscriber base growth of 10.6% to 6.5 million and maintaining a strong healthy retention rate. Proforma Adjusted Segment result is calculated by adding back the Proforma Deferred contract costs expenses adjustment related to the ExpressVPN acquisition. The decrease in proforma adjusted Segment margin is attributed to the higher cost to serve of ExpressVPN's premium product. When comparing the period ending 31 December 2022 to 31 December 2021 on a full proforma basis (as ExpressVPN is part of the Company for twelve months for the period ended 31 December 2021), the Proforma Adjusted Segment margin is slightly increased by 1.44%.

During the period, revenue from the Digital Content segment was $71.4 million and segment results were $14.4 million. On a proforma basis, excluding revenue that was generated from Kape brands, revenue for the twelve months ended 31 December 2022 has significantly increased by 90.3% compared with the period ended 31 December 2021. The revenue growth has been driven by revenue generated from new verticals introduced during the last twelve months, $31.6 million, while supported by continued growth of 6% on a proforma basis from old verticals. The segment margin decreased to 20.2%. Usually new verticals attribute lower margins during the initial period until the organic traffic is established and the acquired sources are fully optimised.

During the period, revenue from the Digital Security segment grew by an increase of 3.8% to $39.5 million (2021: $38.1 million). The slight increase was driven by a 15.9% growth in revenue from Intego's Endpoint security products and offset by a revenue decrease of 9.8% from the PC performance products. The Company is not investing further in the PC performance products activity and Digital Security future growth will derive mainly from Intego's Endpoint security products and new security products.

Adjusted EBITDA

Adjusted EBITDA for the year to 31 December 2022 was $283.7 million (2021: $86.0 million). Adjusted

EBITDA is a non-GAAP company specific measure that is considered to be a key performance indicator of the Group's financial performance. Adjusted EBITDA is calculated as operating profit before depreciation (including right-to-use assets amortisation), amortisation, exceptional or non-recurring costs, other operating income/(expense) and employee share-based payment. Proforma Adjusted EBITDA is calculated by adding the proforma deferred contract costs expenses adjustment related to the ExpressVPN acquisition. As these are non-GAAP measures, they should not be considered as replacements for IFRS measures. The Group's definition of these non-GAAP measures may not be comparable to other similarly titled measures reported by other companies. Such amounts are excluded from the following analysis:

The Proforma Adjusted EBITDA for the year to 31 December 2022 was $176.0 million (2021: $78.0 million) and margin of 28.2% (2021: 33.8%). The decrease in the Proforma Adjusted EBITDA margin is attributable to the lower EBITDA margin of ExpressVPN slightly offset by the cost synergies savings following the acquisition on December 2021 and the decrease of the Digital Content segment margin following the investment in new verticals, as explained above.

In 2022, as we progressed in the integration project with ExpressVPN, we were able to deliver c.$9 million in operational synergies, representing $30 million in annualised cost savings, reflecting our successful know-how and M&A track record to date. Management expects to realise further synergies in 2023. The percentage of Management, general and administrative cost and indirect sales and marketing costs out of revenues decreased from 6% to 5% and 8% to 7% respectively, while research and development costs increased from 3% to 5%.

The increase in costs is mainly due to ExpressVPN and Webselenese's twelve months contribution compared to half-month and ten months in 2021, respectively.

Operating Profit

A reconciliation of Adjusted EBITDA to operating profit is provided as follows:

Increase in depreciation and amortisation is driven by $124.0 million (2021: $11.1) amortisation charge of Webselenese and ExpressVPN acquired intangibles assets.

Exceptional or non-recurring costs in 2022 are comprised of non-recurring staff costs of $0.8 million, $0.9 million termination costs of Onerous contract and $2.1 million professional services and other business combinations related costs.

Profit before tax

Profit before tax was $92.9 million (2021: $32.7 million). Finance costs net of Finance income of $7.2 million comprised mainly of $10.5 million of interest on debt facilities (2021: $3.3 million), expenses of $3.0 million due to unwinding of discounting on deferred consideration expense (2021: $0.9 million), $7.0 million full amortization of the Shareholder facility revolver issuance cost following the termination of the Shareholder facility (2021: $0.1 million) and $10.2 million of commitment fees on the TSNLI revolving facility related to the ExpressVPN acquisition until the point the facility was terminated (2021: $3.6 million), this slightly offsets with $8.9 million net foreign exchange profit and $17.2 million gain on early payment of Deferred Cash Consideration resulting from the ExpressVPN acquisition.

Profit after tax

Profit after tax was $70.9 million (2021: $23.4 million). Tax expenses for the period are $22.0 million (2021: $9.3 million), the tax charge derives mainly from group subsidiaries' residual profits. Since the amortisation of acquired intangibles and share-based payment charges are not tax-deductible in several of the jurisdictions in which the Company operates, management believes it is appropriate to examine the effective tax rate out of Proforma Adjusted EBITDA rather than profit before tax. The effective tax rate out of Proforma Adjusted EBITDA increased to 12.5% (2021: c.11.9%).

Cash flow

Cash flow from operations was $161.3 million (2021: $35.5 million). Adjusted cash flow from operations after adding back one-off payments was $165.5 million (2021: $44.1 million), which represents a cash conversion of 94.0% from the Proforma Adjusted EBITDA. The increase is a result of growing percentage of customers that continue to use the Kape's products after the end of the initial subscription period.

Tax paid in the period was $6.3 million (2021: $3.3 million). The increase was mainly due to Israeli tax prepayments that were paid in 2022 by Group subsidiaries.

Net cash used in investing activities was $364.9 million (2021: $465.9 million), mainly comprises $325.0 million for the early repayment of the Deferred Cash consideration resulted from ExpressVPN acquisition (see Note 8), $20.0 million related to the six-month anniversary of completion of ExpressVPN acquisition, $15.4 million (2021: $5.3 million) capitalised development costs and $2.9 million (2020: $2.4 million) purchase of fixed assets. As a result of the Deferred Cash Consideration early repayment the Company saved cash $19.9 million of cash outflow.

Net cash generated from financing activities was $434.5 million (2021: $411.0 million) included $213.0 million net proceeds from the capital raised completed on 3 October 2022, a drawdown of $180.5 million and $93.6 million of the Modified Bank facilities (Term loan and Revolving facility, respectively) completed on 2 November 2022, $4.5 million resulted from debt issuance cost related to the Modified bank facilities, $13.8 million commitment fees payment of the Shareholder facility revolver facility (2021: $Nil), repayments of long-term loan principal interest payments of $21.9 million and $4.6 million , respectively (2021: $11.8 million and $1.9 million, respectively), $1.7 million (2021: $0.9 million) has been received following the exercise of employee share options and $8.2 million (2021: $2.8 million) were paid for the Group's leases. As a result of the termination of the Shareholder revolver facility the Company saved cash outflow of $1.4 million for the period ended 31 December 2022 and future cash outflow of $6.0 million for 2023.

Financial position

At 31 December 2022, the Company had cash of $251.6 million (31 December 2021: $27.0 million), net assets of $1,172.9 million (31 December 2021: $863.5 million) and net debt of $119.8 million (2021: net debt of $457.5 million). At 31 December 2022, trade receivables were $26.9 million (31 December 2021: $38.4 million).

In November, the Company signed a Modified Bank facility for Term Facility of $275.0 million (2021: $120.0 million), Revolver Facility of $150.0 million (2021: $80.0 million) and uncommitted facility of $75.0 million and completed the early repayment of the deferred cash consideration along with termination of the Shareholder revolver facility.

Kape is well positioned to support and invest future growth as a result of the Company's capital structure modification together with the $213.1 million capital raise completed in October 2022.

The Adjusted Leverage (as defined in Note 10) of the Group is c. 0.68 (2021: 2.88).

Oded Baskind

Chief Financial Officer

20 March 2023

Consolidated statement of comprehensive income

For the year ended 31 December 2022

 

Consolidated statement of financial position

As of 31 December 2022

Consolidated statement of changes in equity

For the year ended 31 December 2022

*amounts below 1 thousands