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AI-driven cybercrime surge: spotlight on emerging cybersecurity innovators

06:20, 24th May 2024
Victor Parker
Vox Sector Special

Unsurprisingly, cybercrime is on the rise. As more products, services, and critical infrastructure become digitised and connected to the cloud, opportunities for cybercriminals increase. With recent advancements in AI and general improvements in computing power, the cybercriminal's tool belt is more powerful and sophisticated than ever. Luckily, the same advancements are being utilised by cyber defense companies to protect their customers from ever evolving ransomware, denial-of-service, identity theft, malware, and many other attacks.

Some countries have observed much higher levels of cybercrime than others. A recently compiled World Cybercrime Index (WCI), published in the journal PLOS ONE, ranked countries by cybercrime activity. The data was gathered through a survey of 92 leading cybercrime experts from around the world. The UK ranked 8th on the list behind Russia, Ukraine, China, US, Nigeria and Romania in this order.

In addition to being a hotspot of cybercrime, the UK was found to be particularly vulnerable to cyber attacks in a report released by Microsoft and UCL in March 2024. The report found that 87% of UK organisations were vulnerable to cyberattacks, including 39% "at high risk", citing AI as the main culprit. Furthermore, the report estimated that cyberattacks currently cost the UK a staggering £87bn a year.

On a more positive note, the report identified £52bn that UK businesses and governments can save by using AI to bolster their cybersecurity. Fighting fire with fire in this way has been a defining characteristic of cybersecurity since the advent of computing, as ever evolving tools are used by both criminals and security systems in a cat and mouse game. As the tools become more powerful, so does the the need to keep up with the volume and nature of attacks.

Luckily, there is no shortage of companies that have taken on the task of maintaining and improving our security systems to keep up with the new generation of AI-enabled threats. In this review, we focus on 6 small and medium-cap players that have made headlines with product development and business performance in the ever expanding cybersecurity space, projected to grow at 10%+ CAGR until 2030.


Intercede (IGPFollow | IGP is a cybersecurity software company specialising in digital identities and protection of user credentials. As data breaches have become more common, IGP has seen increased demand for its products and services, driving the company's share price 60% higher in the last 6 months.

Recent trading updates from IGP have shown growing sales momentum, with the group's revenue guidance for FY24 now at £20m - a 67% increase from FY23's £12m, ahead of market forecast at time of issue. Profitability was also expected to increase to £5.6m. The group had a comfortable £17.2m in cash on March 31, 2024 - more than double last year's £8.3m, and no debt. Mktcap was last reported at £60.56m.

Intercede recently announced the newest iteration of its flagship multi-factor authentication MyID MFA product, version 5. The product delivers enhanced security features like FIDO passkeys, a streamlined user experience such as IDP offering a single sign-on solution across multiple platforms, an enhanced Windows desktop agent, and integration with Intercede's MyID CMS among others.

Orders for MyID MFA continue to climb, adding to a significant revenue backlog for FY25. Among recent orders are a US Federal Government contract for MyID CMS totaling US$3.45m, a US$1.0m license order for a new client in the US intelligence community, and a subscription renewal for MyID PSM for NHS Trust worth £0.19m. IGP also recently announced a new customer in the UK with a large aerospace and defence integrator, servicing a new deployment within HM Government for MyID CMS.

The group has strong momentum into FY25 with a growing pipeline and accelerated conversion of its existing pipeline, rising recurring revenues, new product development, and a robust balance sheet. Management has continuously upgraded its guidance over the past few trading updates, reinforcing the current strong trajectory.

Stock Chart | IGP

NCC Group

NCC Group (NCCFollow | NCC is a global cybersecurity and software escrow business. The company's two divisions 'Cyber' and 'Escode' - referring to its cybersecurity and escrow businesses respectively - have shown good momentum and resilience in recent trading, helping NCC toward its medium-term financial goals and sending NCC shares 23% higher in the past 6 months

The group most recently reported H1 2024 trading in line with expectations for revenue, gross margin and profitability. The recently rebranded Escode division (previously known as Software Resilience) saw continued revenue and profits growth, delivering another 2 consecutive quarters of year-on-year sales growth of +6.2%. Escode's positive performance has been driven by increased verification revenues and contracted price increases, as well as a robust client retention rate of 93%, all indicating steady long-term growth.

Escode should continue growing in H2, delivering a similar revenue increase to H1. While Technical Assurance Services - the largest part of NCC's Cyber business - has less forward visibility due to its nature, the group's Q2 2024 revenue exit rate underpins positive projections for H2 and FY24. Meanwhile, Managed Services (also in Cyber) delivered impressive revenue growth in H1, up 17.3%. If the current trajectory continues, the group should at minimum meet full-year expectations.

Stock Chart | NCC

Crossword Cybersecurity

Crossword Cybersecurity (CCSFollow | CCS is a technology company focused on cybersecurity and risk management software. CCS offers a range of enterprise security products and services in the form of SaaS and software solutions, consulting, and managed services. The company's areas of emphasis are cybersecurity strategy and risk, supply chain cyber, threat detection and response, and digital identity.

Crossword's strong recurring revenue model has yielded robust turnover growth in recent quarters as the group aims for profitability by H2 2024. Most recently, CCS reported a revenue increase of 15% in FY23, with continued growth in annual recurring revenues (ARR) to £2.5m. ARR accounted for 65% of total revenue in FY23, with revenue per client rising by 9%.

The company expects yet higher revenue growth to £7m in FY24 on the back of a robust sales pipeline, continued conversion, and margin improvement. CCS reiterated its ambitious FY24 guidance as it remained on track to deliver EBITDA and cash breakeven in H2 2024. Profitability will be bolstered by a targeted reduction of administrative expenses by half in terms of percentage of revenue in FY24 vs FY22.

CCS continues to innovate, driving scale and recurring revenues with an increasingly diversified product suite. The company made generative AI a focus in FY23 through a new "CyberAI" practice, and launched new products in ransomware and dark web protection. For its R&D efforts, CCS was included in the CyberTech100 list of the world's most innovative cybersecurity companies.

Crossword's M&A strategy has also contributed to recent positive performance. Following 3 acquisitions in FY1 and FY22, with the companies now fully integrated, cross selling and key account management have delivered organic growth. Last year's £2.62m fundraise helped support sales/marketing and product development, and a further working capital fundraise this year is expected to accelerate the drive to profitability.

Stock Chart | CCS

Shearwater Group

Shearwater (SWGFollow | SWG provides technology solutions and professional advisory services focused around the cybersecurity and regulatory requirements of its corporate clients. The company summarises its ambitious M&A strategy as "buy, focus, grow", aiming to deliver value through acquisitions that address core scaling issues faced by SME information security and cyber security companies.

Shearwater is split into two divisions, Software and Services. Both have seen increasing visibility since Q3 2024, though some longer-term expected contracts were delayed last year as SWG guided that its trading would be H2-weighted. Revenue in FY24 is forecast at £22.5m, with adjusted EBITDA returning to profit at just under £1m after a dip to -£0.2m last year amid challenging market conditions.

Notably, the group's balance sheet reflected strong cash generation in H2 with £5m in cash, up from £4m LY and £2m at the half-year. Thus, momentum is strong into FY25 amid a significant renewal schedule and a number of high-value contracts with blue chip customers in advanced negotiations. The first scheduled contract renewal of the year was recently signed, worth £1.4m with a British telecom. Also earlier in 2024, SWG announced a US$3.15m 3-year contract with a global bank and £0.84m 3-year contract with the Government.

Given the strong momentum and pipeline, we expect Shearwater to return to growth in FY25. At the moment, nearly half of SWG's market valuation is represented by its £5m cash position, leaving little value for what is a profitable company in an advantageous market position, with an effective portfolio in a rapidly growing sector.

Stock Chart | SWG


Eckoh (ECKFollow | ECK is a global provider of customer engagement data security solutions. The company helps brands manage personal data from customer enquiries and transactions safely, and become compliant with Payment Card Industry Data Security Standards (PCI DSS) and wider data security regulations.

Eckoh reported excellent trading recently for FY24 to March 31, 2024. Revenues came in at £37.2m, slightly below market forecast solely due to timing issues. On the other hand, profit was £8.3m, up 17% from £7.7m LY and ahead of market expectations. A higher proportion of cloud-based SaaS revenues and ongoing cost efficiency measures meant ECK saw a margin improvement as well as strong cash generation, resulting in an improved net cash position of £8.3m at year-end from £5.7m LY, also ahead of market expectations.

In H1 of last year, Eckoh won a record level of contracted business and the trend continued in H2, resulting in a record £52.6m orderbook for FY24, up 50% year-on-year. Momentum is strong as H2 orders more than doubled H1's, leading to £18.7m of new business won in FY24, compared to £14.4m in FY23. In North America - ECK's largest market - the company won a record level of renewals with $33.7m and $16.3m of total and new business respectively - 87% and 44% higher than FY23.

The group's ongoing transitioning of its clients to cloud-based solutions is having a positive impact on revenue visibility, which continues to increase. Recurring revenues in the key North America market grew by 11% YOY, and for the first time all new client contract wins were for cloud-based delivery, with the trend expected to continue. Eckoh's ARR now represents 83% of total revenue, a 5% increase on last year.

Stock Chart | ECK

Disclaimer & Declaration of Interest

The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.