From Cybersecurity to Shareholder Nightmare—What’s Happening at Hub?
What's next for Hubb CyberSecurity?
Business Profile
Name: Hub Cyber Security Ltd
Size: $26 million
Industry: Software & IT Services
Average Volume: 2,034,770 shares
Price: $0.54
Exchange: Nasdaq
CEO: Mr. Noah Hershcoviz
What’s the Story Behind Hub Cyber Security?
Founded in 2017 by veterans of Israel's elite intelligence units, HUB Cyber Security Ltd. (Nasdaq: HUBC) is redefining cybersecurity by safeguarding organizations' most valuable digital assets through innovative confidential computing and secure data solutions. Leveraging military-grade "zero-trust" technology, HUB protects sensitive data—such as trade secrets, patient information, and financial data—even in compromised environments.
HUB significantly expanded its global presence by acquiring Comsec Global in 2021, gaining deep expertise in cybersecurity automation, compliance, and training across over 30 countries. Central to its growth strategy is the groundbreaking Secure Data Fabric (SDF) platform, which integrates and secures data efficiently and cost-effectively, making it ideal for highly regulated sectors like finance and healthcare.
Publicly traded since March 2023, HUB is dedicated to innovation and strategic expansion worldwide, highlighted by its recent acquisition of BlackSwan Technologies. With operations across the US, Israel, UK, Germany, and beyond, HUB Cyber Security is uniquely positioned as a leader in the rapidly evolving cybersecurity landscape.
Source: Hub Security Investor Relations Presentation
How Do Hub Cyber Security Make Money?
HUB Cyber Security specializes in protecting organizations' most sensitive data through innovative cybersecurity solutions. Their business model revolves around providing cybersecurity software, services, and products primarily to enterprise customers across various industries, including finance, healthcare, and transportation.
Hub Cyber Security primarily generates its revenue from two main sources: its Secured Data Fabric platform and legacy IT services.
Key components of their revenue model include:
Recurring Subscription Revenue: The majority of their revenue comes from long-term subscriptions to their cybersecurity software and the advanced Secured Data Fabric (SDF) platform. This subscription-based model ensures predictable, recurring income.
Secured Data Fabric Platform (SDF): A high-margin, rapidly growing solution designed to securely unify data from multiple sources, significantly reducing costs and compliance complexities. The SDF platform is central to their strategic growth, targeting industries with strict regulatory demands.
Legacy IT and Cybersecurity Services: Providing professional cybersecurity services and advanced IT solutions, generating stable, recurring revenue streams from global blue-chip clients like Boeing, Visa, and Lockheed Martin.
Strategic Growth through Partnerships and Acquisitions: HUB has enhanced its market position through strategic acquisitions like Comsec Global and partnerships with industry innovators such as BlackSwan Technologies, further expanding capabilities and global reach.
By emphasizing subscription-based recurring revenue and strategically shifting toward the high-margin SDF platform, HUB Cyber Security is positioned for sustainable profitability and continued growth.
Source: Hub Security Investor Relations Presentation
Hub Cyber Security Solutions
HUB’s SDF represents a streamlined, secure, and economically attractive alternative for enterprises looking to efficiently manage and protect their distributed data.
Source: Hub Security Investor Relations Presentation
Source: Hub Security Investor Relations Presentation
Does Hub Cyber Security Have a Big Competitive Advantage Around the Business?
Hub Cyber Security Ltd. (HUBC) stands out in the cybersecurity industry due to its innovative Secure Data Fabric (SDF) platform, designed to protect critical data securely and efficiently manage large-scale data challenges. Leveraging visionary leadership, HUB strategically focuses on this high-margin platform, promising exceptional growth with industry-leading profitability. The company's advanced AI-driven technology uniquely solves the complexities of managing vast, fragmented data, making it particularly attractive to heavily regulated sectors such as banking and finance. HUB’s Secure Data Fabric clearly differentiates itself through its seamless integration, strong security measures, and rapid deployment capabilities, setting a high standard that competitors find difficult to match. Additionally, the significant barriers to entry in HUB’s target markets protect its leading position, supporting long-term, scalable growth.
Competitive Landscape
Hub Cyber Security Ltd. (HUBC) specializes in innovative cybersecurity solutions, particularly its advanced Secure Data Fabric (SDF) platform. HUB strategically prioritizes this platform due to its high margins and significant growth potential, especially appealing to regulated industries like banking and finance.
HUB’s AI-powered technology excels at managing extensive, fragmented data securely and efficiently, differentiating it from major industry competitors such as Palo Alto Networks, Qualys, Check Point Software, Fortinet, IBM, Cisco, Palo Alto Networks, Fortinet, Zscaler, and VMware. Despite intense competition, HUB’s unique capabilities in consolidating and protecting sensitive data provide significant value to industries requiring stringent data compliance and security.
Does Hub Cyber Security Generate a High Return on Capital?
Hub Cyber Security is still in its early growth phase, prioritizing scale over short-term profitability—a strategy that explains its deeply negative ROIC (-94.2% to -14.9%) as the company aggressively invests in expansion. This suggests capital is being deployed for growth rather than immediate returns, though the inefficiencies raise concerns about long-term capital discipline.
On the flip side, ROE has skyrocketed from -926.2% to 82.6%, signaling that shareholder returns are improving, likely due to restructuring, cost optimization, or revenue scaling. While the numbers paint a volatile picture, the company appears to be in a classic “sacrifice profits for scale” phase, betting on future dominance.
The key question: Will Hub Cyber Security’s bold growth play translate into sustainable profitability, or is it burning capital without a clear path to strong returns? High risk, high reward—watch this space.
HUB's acquisition of BlackSwan aims to solidify its position as a leading provider of secured data fabric solutions. The combined companies will address a market opportunity believed to exceed $12.91 billion, with significant growth anticipated in 2025 and 2026.
Source: Hub Security Investor Relations Presentation
Does Hub Cyber Security have a Favourable Long Term Growth Potential to Reinvest Its Capital to Scale and Grow?
The confidential computing market is projected to grow from $9.04B in 2024 to $1.28T by 2034 at a CAGR of 64.1%. HUB is positioned to benefit if it successfully scales.
The global cybersecurity market, valued at $245.62 billion in 2024, is set to grow at 12.9% CAGR, fueled by AI-driven cyberattacks, IoT vulnerabilities, and cloud adoption. Cybercrime costs are expected to hit $14 trillion by 2028, making digital security a top priority.
HUB Cyber Security’s acquisition of BlackSwan strengthens its position in AI-driven secured data solutions, particularly for the financial industry. The deal expands HUB’s global footprint, client base, and technological capabilities, with a $500M+ market opportunity ahead.
The transaction is structured as a stock-for-stock acquisition, with BlackSwan shareholders receiving 31% of the combined entity. BlackSwan’s AI-powered technology is designed to reduce the total cost of complex financial systems by 50% while ensuring compliance with global regulations
AI is revolutionizing both defense and attack, cutting breach times from weeks to under an hour by 2026. State-sponsored cybercrime is escalating, with North Korea’s $1.5 billion crypto heist and deepfake scams stealing millions through AI-generated video calls. Meanwhile, China, Russia, and Iran deploy AI-powered disinformation to influence elections.
Breaches are costly—$4.88M on average, $9.77M in healthcare, and $6.08M in finance—and often go undetected for months. With 97% of cyberattacks targeting the U.S. and U.K., cybersecurity spending is set to hit $271.91B by 2029, led by the U.S. at $88.2B.
The stakes have never been higher. The question isn’t if a breach will happen, but when. Are we prepared?
The global confidential computing market is set for explosive growth, skyrocketing from $9.04 billion in 2024 to a massive $1.28 trillion by 2034—a staggering 64.11% CAGR. As cyber threats escalate and industries demand ironclad data protection, businesses are shifting to secure, encrypted processing environments.
With data security now a top priority, confidential computing isn’t just the future—it’s becoming a necessity. The question is: Who will lead this trillion-dollar revolution? : Increasing AI-driven cyber threats and demand for data security solutions create opportunities but also require significant R&D investment and HUB need to raise a lot of more money to capitalise on this opportunity.
Is Hub Cyber Security run by exceptional management with high inside ownership?
Source: PR Newswrite
Noah Hershcoviz joined HUB Security as Chief Strategy Officer and Board Member on October 4, 2023, before rising to CEO. With 0.8% ownership, valued at $313.02K, and 277,000 shares, he brings deep financial expertise and a sharp execution focus. His background in M&A at Ernst & Young (EY) and investment banking has given him a proven track record in leading IPOs, mergers, and acquisitions, consistently outperforming market benchmarks.
Known for his entrepreneurial mindset and global business vision, Hershcoviz is steering HUB Security’s strategic direction, driving innovation, growth, and transformation in the cybersecurity space. His leadership is set to position HUB Security as a dominant force in the industry.
Source: Hub Security Investor Relations Presentation
*63% of employees would recommend Hub Cyber Security to their friends.
Source: Glassdoor
Has Hub Cyber Security Created Value for Shareholders in The Past?
This chart paints a stark contrast between HUB Cyber Security (HUBC) and the Vanguard S&P 500 ETF (VOO). While the S&P 500 has nearly doubled (+99.3%) since 2020, HUBC has collapsed by 97%.
HUBC’s relentless downtrend suggests severe dilution, financial struggles, and market distrust, whereas the S&P 500 continues its long-term wealth-building trajectory. This highlights the importance of investing in strong, resilient companies — HUBC remains a high-risk, speculative bet, while the broader market keeps delivering.
Can Hub Cyber Security Operate With Minimal Capital Reinvestment?
HUB Cyber Security operates in a capital-intensive industry where continuous investment in research and development (R&D) is crucial to stay ahead of AI-driven cyber threats. The company is up against well-capitalized competitors like Palo Alto Networks, Fortinet, Cisco, and Microsoft, all of which have deep pockets for innovation and market expansion. While HUB is working to reduce costs and optimize operations, its current financial position—marked by ongoing losses—suggests it may struggle to scale without significant reinvestment. Unlike its larger peers, which can sustain aggressive R&D spending, HUB’s ability to operate with minimal capital reinvestment is limited, making profitability a challenge unless it secures steady revenue growth and external funding
Does Hub Cyber Security Valuation Provide a Margin of Safety?
HUB Cyber Security is a company in transition, with ambitious goals in the cybersecurity space but ongoing financial challenges. While it aims to scale its Secured Data Fabric (SDF) platform, its lack of profitability and significant losses raise concerns about its current valuation.
Key Valuation Ratios:
EV/Sales: 1.4 → The company is valued at 1.4 times its revenue, suggesting a relatively low valuation compared to high-growth tech firms. This could indicate undervaluation if growth materializes, but also reflects investor skepticism about profitability.
EV/Gross Profit: 16.3 → The company trades at 16.3 times its gross profit, meaning investors are paying a high multiple despite negative net earnings. This signals expensive valuation for a loss-making company.
Price-to-Sales: 1.32 → The market values HUBC at 1.32 times its revenue, suggesting modest growth expectations compared to industry leaders like Palo Alto Networks or CrowdStrike.
HUB Cyber Security is burning cash and unprofitable, making its valuation heavily reliant on future execution. Competing against cybersecurity giants like Microsoft, Cisco, and Fortinet demands continuous R&D investment, further straining cash flow. Adding to the risk, HUBC has relied on stock issuance to stay afloat, increasing shareholder dilution. With Nasdaq compliance issues looming, a potential delisting could shake investor confidence, making this a high-risk, high-reward bet in the cybersecurity space.
HUBC’s valuation suggests high risk but also potential upside if it successfully scales its cybersecurity solutions and achieves profitability. However, without a clear path to sustainable margins, investors should weigh the risks of further dilution and operational hurdles before investing.
Does Hub Cyber Security Have A Strong Balance Sheet?
HUB Cyber Security remains financially challenged, with negative cash flow ratios and insufficient earnings to cover debt obligations. However, strong growth trends in operating cash flow (+40.9%) and interest coverage (+91.7%) indicate gradual improvement. While liquidity risks persist, the company is making steady progress toward financial stability. The key question: Can HUBC sustain this momentum and turn the corner to profitability? It looks tough given the financial trouble the company is in.
Operating Cash Flow / Total Debt: This ratio is negative at -0.5, indicating that the company's operating cash flow is not sufficient to cover its total debt. However, the growth rate of 40.9% suggests improvement over time.
Interest Coverage Ratio: The interest coverage ratio is also negative at -0.9, which means the company is not generating enough earnings before interest and taxes (EBIT) to cover its interest expenses. The significant growth of 91.7% indicates that the company is making progress in improving its ability to cover interest expenses.
Free Cash Flow / Total Debt: Similar to the operating cash flow ratio, this is also negative at -0.5, indicating that free cash flow is not sufficient to cover total debt. The growth rate of 40.9% is a positive sign of improvement.
Goodwill / Total Assets: The goodwill to total assets ratio is 8.3%, which is a moderate level. This indicates that a portion of the company's assets is tied up in goodwill, which is an intangible asset.
Claymore Capital Pty Ltd has agreed to provide HUB with $13.5 million in long-term convertible notes, which will be used to fully fund HUB's settlement obligations. This financing structure is highly advantageous to HUB, as it requires no cash outlay and allows the company to preserve liquidity and focus on expansion and market growth.
Does Hub Cyber Security Have A Superior Track Record of Earning Growth Above The Market?
Despite periods of rapid expansion, particularly in 2021 and 2022, HUB Cyber Security Ltd.’s financial performance has been inconsistent. The negative EPS and recent revenue declines suggest that the company is struggling to maintain its earlier growth trajectory. Given this mixed track record, HUB Cyber Security Ltd. has yet to establish itself as a market outperformer, raising concerns about its long-term financial stability.
EPS Growth: HUB Cyber Security Ltd. has experienced significant fluctuations in EPS growth, with a notable increase in 2022. However, EPS remains negative, indicating that the company is still operating at a loss and has yet to achieve profitability.
Revenue Growth: The company’s revenue has been highly volatile, witnessing a surge in 2021, followed by a decline in subsequent years. While 2022 saw strong revenue growth, this momentum has since weakened.
Is Hub Cyber Security Profit Margin Attractive?
For the twelve months ending June 30, 2024, HUB Cyber Security Ltd. reported a profit margin of -39.0%, marking an improvement over previous periods but still firmly in negative territory. This indicates that the company continues to spend more on operations than it generates in revenue, posing a challenge to long-term financial sustainability. While the trend shows fluctuations, the consistent negative margins highlight ongoing difficulties in achieving profitability. Without a clear path to cost efficiency and revenue stabilization, the company remains in a financially vulnerable position.
Is Hub Cyber Security Stock Options Tied To Management Performance Rather Than Organisation Performance?
Stock options are partially tied to management performance, with annual evaluations and corporate goals playing a role. However, discretionary decision-making by the CEO and board allows some stock options to be granted independently of organizational success. The use of vesting schedules suggests that stock options also serve as a retention tool, further diluting their direct connection to company-wide financial performance.
HUB Cyber Security Ltd. accounts for stock-based compensation as an expense, impacting its bottom line.The company reported $7.1 million in stock-based compensation in 2023, down from $10.5 million in 2022.Recognizing stock options as an expense aligns with industry best practices and ensures financial transparency.
While HUB Cyber Security Ltd. incorporates performance-based elements into its executive compensation, stock options are not exclusively tied to overall organizational performance. Instead, they serve multiple purposes, including executive incentives, retention, and discretionary rewards. Meanwhile, stock-based compensation is appropriately treated as an expense, impacting the company’s financials.
Hub Cyber Security has heavily diluted shareholders, increasing shares outstanding by approximately 475%, from 3.6M in 2020 to 20.9M recently. As an unprofitable company, HUB must finance its operations through debt or equity, and it's actively utilizing both methods, notably raising funds through significant equity issuance and debt financing.
Main Risks & Hurdles Hub Cyber Security's Faces
Net Losses: HUB has consistently reported net losses, including $86.6M in 2023, $80M in 2022, and $13.4M in 2021.
Going Concern Warning: Its auditors have raised doubts about its ability to continue operating due to high debt and negative cash flow.
Debt Obligations: The company has $82M in outstanding debt, some of which is in default, leading to risks of asset seizure or liquidation.
Fundraising Needs: HUB needs to raise additional capital to sustain operations but may face challenges due to its financial position.
Internal Investigation: Allegations of misappropriation of company funds by a former executive have led to legal disputes and regulatory scrutiny.
Weak Internal Controls: The company has identified material weaknesses in its financial reporting, which could impact its ability to provide accurate financial data.
Geopolitical risks due to the Israel-Hamas war and potential economic impacts.
Nasdaq compliance risks, as future performance must meet required thresholds.
Management Experience: Leadership has limited experience managing a publicly traded U.S. company, which may contribute to operational inefficiencies.
BlackSwan Technologies, Inc., one of the companies they acquired, was known for not paying their employees' salaries.
HUB Cyber Security settled lawsuits with Dominion Capital and Oppenheimer for $7.5 million, down from $16.6 million. Claymore Capital provided $13.5 million in convertible notes, allowing HUB to settle without immediate cash outlay.
Conclusion
HUB Cyber Security presents a high-risk, high-reward investment opportunity. While the cybersecurity sector offers strong tailwinds, the company’s financial distress, legal battles, and stock dilution make it a speculative play. Investors should closely monitor its ability to raise capital, regain Nasdaq compliance, and execute its growth strategy before making an investment decision. In addition, management has limited experience managing a publicly traded U.S. company, which may contribute to operational inefficiencies.
SCC’s View: Closely Monitor
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Risk Disclosure: This content is for informational purposes only and does not constitute investment advice. Investing carries risk, including potential loss of principal. Always consult with a professional financial advisor to evaluate your risk tolerance and financial goals before making any investment decisions.
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