Business Update & Financial Guidance

7 November 2024

NARF INDUSTRIES PLC

('NARF', the 'Company', or the 'Group')

Business Update & Financial Guidance

Growing traction for "Social Cyber" platform drives updated business model

Narf Industries plc (LSE: Narf), the cybersecurity group specialising in high-end threat intelligence and critical infrastructure security, is pleased to provide an update on the commercialisation of its AI-Powered Social Cyber Solution ("Social Cyber") and financial guidance.

OVERVIEW

·    Continued progress in accelerating the Social Cyber platform towards commercialisation.

·    Re-aligned team focused on early concept demonstrations of Social Cyber to drive a joint venture opportunity.

·    First Social Cyber contract for $1.3 million announced ahead of schedule (see RNS dated 27 August 2024)

o  This contract is helping to support product development.

·    Concept demonstrations and first Social Cyber contract win resulting in:

o  Engagement with wider group of Government Systems & Solutions ("GS&S") customers and potential for recurring annual revenue.

o  Interest amongst major cybersecurity systems integrators and service providers to form a joint venture to commercialise Social Cyber with a more lucrative Software as a Service ("SaaS") revenue model.

OPERATIONS UPDATE

In February 2024, Narf announced that its AI-powered Social Cyber platform had been recognised as a leading candidate within its R&D portfolio for commercialisation. The Company subsequently shifted its strategic focus, reallocating resources to address the rising demand for cybersecurity solutions specifically targeting vulnerabilities in the open-source software supply chain. This adjustment was underscored by the April 2024 discovery of a backdoor in XZ Utils (see RNS dated 1 May 2024), which highlighted the critical need for enhanced security in open-source software.

The Company is pleased to report that its change in strategic direction to focus resources on the development of its Social Cyber platform has progressed in a balanced and positive manner and is being achieved within its existing capital resources. Narf remains financially stable while positioning itself for the significant upside that its Social Cyber platform promises.

Social Cyber Resource Allocation

An earlier-than-expected $1.3 million Social Cyber contract award for work with the Air Force's Platform 1/Iron Bank has helped offset part of the Company's planned resource allocation for the development of its Social Cyber platform. This external funding has directly supported its product development, allowing the Company to stretch its internal resources further, while staying on track with its development timeline.

Government Traction with Social Cyber Platform Opportunity

The reallocation of resources toward the Company's Social Cyber platform required a shift of focus from other government programmes, making it crucial that the Company should gain meaningful traction for its Social Cyber platform within its government customer base. The Company is pleased to report that this traction is building on the back of the Platform1/Iron Bank contract and that the Company's Social Cyber platform is beginning to generate opportunities that over the next 12 months are projected to surpass those it would otherwise have achieved from government contracts it set aside.

Social Cyber Spin-Off

With solid traction among government customers and having demonstrated the AI technologies and capabilities within its Social Cyber platform, the Company is seeing interest from industry partners regarding potential investment, expanding market opportunities and the acceleration of commercialising Narf's Social Cyber platform with a more lucrative Software as a Service ("SaaS") revenue model. The Company therefore believes it is on track to achieving its objective of entering a joint venture partnership with strategic partners in early 2025.

FINANCIAL GUIDANCE

The Company has experienced some budget funding delays from its U.S. government clients in respect to existing contracts and the granting of some new contract awards until the budget was finalised. These delays, combined with rising awareness of threats to the global open-source software supply chain, provided the Company with the capacity to accelerate the development and commercialisation of its Social Cyber platform. 

With the U.S. budget now approved, the Company expects to receive a number of new contract awards in the coming months. Additionally, it has expanded its government client base by partnering with established defence and intelligence contractors, which have strong government relationships and will help mitigate similar government budget approval risks in the future.

Narf projects that revenue for the year ending 31 March 2025 will be not less than $5 million, with the Company broadly at cash flow break-even at the FY end. For the following year ending 31 March 2026, the Company anticipates revenue of not less than $8 million, having fully navigated any impact from last year's U.S. budget delays.  This guidance does not include a significant contribution from our Social Cyber platform development, and we would be disappointed not to see some incremental revenues from this platform over the next financial year. 

Steve Bassi, President and CEO of Narf Industries said: "We are continuing to make good progress in targeting new opportunities in the area of Social Cyber and extending the capabilities to create a new generation AI Powered DevSecOps platform (see below).  This is expanding our government opportunities and driving  growing interest from strategic partners as we work to finalize our joint venture in early CY25."   

ABOUT NARF'S SOCIAL CYBER PLATFORM

Narf's Social Cyber platform introduces a groundbreaking approach to integrating security earlier in the software development lifecycle, addressing a critical need in development operations ("DevOps") environments where security often takes a back seat to speed and efficiency. Traditionally, security checks occur late in the pipeline, creating delays and vulnerabilities that disrupt workflows and require costly reworks. Narf's Social Cyber platform changes this dynamic by embedding advanced instrumentation and observability ("I&O") into the pipeline itself and providing AI powered real-time threat detection and proactive risk management without slowing down development. This approach not only ensures a more secure software supply chain but also allows DevOps teams to maintain the agility and pace they rely on, making Narf's Social Cyber platform a valuable asset for organisations seeking seamless, early-stage security integration.

For further information visit www.narfgroup.com or contact:

About NARF Industries plc

Narf Industries (LSE: NARF) is a U.S. based leading provider of cybersecurity research, solutions, and services to government entities. With a steadfast commitment to protecting national security and critical infrastructure, it offers comprehensive expertise in addressing the evolving cyber threats faced by its clients.