Earnings call transcript Q2 2023

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Operator

Good day, ladies and gentlemen. Thank you for standing by. On today's call, we will be referring to the press release issued this morning that details the company's first half of fiscal year end 2023 results, which can be downloaded from the company's website at arqit.uk. At the end of the company's prepared remarks, there will be a question-and-answer period for selected equity research analyst. [Operator Instructions]

the the be company's of Investors on recording of section website a call available will the Finally, later today. this and of such are based that the today. similar expressions believe, note webcast assumptions statements statements, and forward-looking Please and forward-looking statements expect, company's anticipate, beliefs may, and expectations as words on are containing will, could, includes about beliefs as well to factors today's identifies encourages may you Exchange review in as and press those events or disclaimers company Harbor and risk actual differ the cause filings The statements, specific company's materially described in other contained release, Securities statements. that with from as the our Safe in results to risk the factors which Commission, forward-looking

update publicly in information or company providing be company Standards or to undertake that revise IFRS. webcast. forward-looking discussing The as after call, not to International does notes non-IFRS a company also prepared it statements Financial The is Reporting accordance information on with this that this may information. any financial The supplement

You these the results reported IFRS release. tables metrics the today's of can reconciliation a company's in provided to in find reconciliation earnings

And to the Founder, David? David and call the company's Officer. now, Chief Williams, Executive turn Chairman I'll over

David Williams

to Thank an results. half The of for important development discuss period phase our you earnings of joining call Arqit. was first the fiscal XXXX in the

modest, in the global company. business foundation our during is evolution the the model, to the and revenue partners, channel of technology major for result which market sets the going While through the we headline period, future implemented specifically identified

engagement the the go-to-market the step strategy, strongly channels through end The are and pleased strategy in messages believe we're the were the in of partnerships encouraged channel have with from for today's built by First pivot experiencing with correct prospective we're generated, through customers. well. of of that key revenues the subsequently one and the inquiries We're implementation sales channels announced December these speed that these we call company. we was through

the increasingly is that that quantum to it period is prepare upgrade scalable which use following Importantly, advance a corporation service. the deliver of now them White can by today, a national to cloud gave to and Arqit protect emergence House there instructing mature recognized favorable. an well is are data It is and by the so to customers world only the new evidence strong directing as encryption symmetric necessary that encryption addressable of security in believe we computers, market organizations lead to our lead, for in

level Arqit's enterprise direct tech sale was initial strategy stack complete the on instances go-to-market The satellites. set originally focused sales licenses which QuantumCloud private included of of and

to which base this But to cost took software an easy time we to scalable, standards low had a revenue a as impact. approach implement. tech in our result of service the need stack for we our remove customer a software As for tech platform the stack to craft, is in resulted and of with innovation, from and marketing customers use, which The XXXX. target satellites managed based all landed

we're As major with a December, in several channel result, additional technology we and in announced partners channel global partners. discussion

we first Our channel partner and is license revenue months licenses of infrastructure for to pay the channel we in enterprise control. preparing of now, promoted physically that third them specific improved, whereby early service few benefit after model enterprise organizations price were of and for sale some full greatly a come revenues party in rely infrastructure a we run do for This announcing of sales, we will is a a opinion, volume a to software paid consumption through. cloud the Whilst business upfront. enterprise method who government to just mainly onto partners, is want After those applicable with specific model. delivered to generated strategy customer's our expected not XXXX, on significant the from

sales Although. we we have be problems are the projects, it to clear down long, very slowed technologies. now engaged and budgetary seems in of a cycle government that and number found new in of have government acquisitions defense

consumption for and major vendors is Dell or should symmetric initial be frictionless. makes Our PaaS key like partner, expect December, parties. globally When relationships making whom the which is sales We agreement channel the encouraging product sales at product security cloud and product Arqit level, additive merely solves the to government is and specific AWS, These customer firewall, software been can integrated complementary symmetric customer delivers Arqit has unique consume of Ease and easy a end focus elaborated ‘XX a responses. is the on architecture PaaS agreements already both solution. beneficial in to its existing is simpler. needs first yielded with key Arqit to of global Arqit technology to motion crucial partners have adoption additional using rapid embedding and products relationships Fortinet, efforts completely evolutionary the both our and new driving IT technology of half announce the hence an shortly. in an we a the for offering. it develop focused a to announced software decision its into buying fiscal it and to upgrade the Traxpay to infrastructure makes that partners quite of

an to the the making shortly time partners our new half period. partners. orders Quantum purchase to of our resources Crucially, made further in opposed enterprise through platform end includes use which in licenses the of service of the product our The we basis We since saw those customers in complex. we through Since financial cloud That closing engagement. more through are activating easy fulfilled year, a the first been we've received channel December. our launch realized makes education of has results significant and to of and simple customer relationships. consume channel as available first from our relatively the and on refinements to additional commencing before This to progress Since use end applications. as sale it the announcement standpoint, on scalable our a salesforce partnerships Cloud channel the partners any focused integration December,

It pads require applications In require now integrate no use. skills into their IT customer resources for specialized customer does integration still which specialized by to the we architectures. a two to customer specific answer the specialist to opportunities, built virtually or

be operating this several NetworkSecure with or application, We boundary. used quantum other create that PaaS to it to first safe a network vendors of products. The network into via a firewalls the most devices vendors’ can integrate connector standardized adapts so product already have styles

of technologies embeds assets. trend is designed companies digital to regulated TradeSecure, into use. assets PaaS are a blockchain services regulated second, The financial the which digital significant There now evolutions for for use

finance The assets came to first trade to identified markets market Arqit number the represent first finance Traxpay use product new a interest By opportunity importers. took partnership the M⁠L⁠E⁠T⁠R with from and TradeSecure of laws for trade Arqit has with in and digital for the make which lawful documents. to it Germany, banks

$X.X in annual enable in bill According direct global of to billion new McKinsey, an lading alone billion trade. $XX costs and could electronic save

digital document market entire is trade the So large.

recently a first in Arqit said partners. is delivering with government we release compliance rules, press a product world believes in with as MLETR its

sales the significant partners, As the in product our for number symbiotic we've the a of end partner sales power integrations. a user new last joint marketing generated of two level of a of leads The result and efforts channel channel inquiry various months, and demonstrates with nature relationship.

encouraged partnerships said the of and we're by the these implementation of speed pleased As engagement. by earlier, prospective customer I

back license a sign generation revenue modest many said, new resources the to and We steps the to forward. step do strategy, XXXX are Defense US but one the enterprise government the we pursue customer, opportunities government pursuit the the as we with That we not pivot focus selective our in will as enterprise and seeing to we in clearly enterprise the impacted regard did strategy in direct market. take license direct during sales continue go-to-market period, of a price on did pivot in emphasize better period

took of that under Arqit December We quantum for is satellite partnership market There also innovation or services. in requires technology, in satellites through licensing Arqit result longer construction. sell decision monetize satellite a our stack. as a the or announced hardware the its technology in no to

requires likely to a more working which capital, found a the be level product of and However, resourcing, specialized is users, space defense access larger government company. in to space or

feedback the entire As generated is to on the business. announced December, today, based appetite buy in perhaps initiated potential search from there satellite in partners partner

will conditions in transaction of cannot for both that be result that during the satellite business development, While process engineering business software assets includes Mindful hired certain, an and business appropriately of of the and retain. a team. the customer revenue structure pace the to the advisor global period business satellite of in potentially selling cost Arqit has construction, business. the satellite would assist satellite actions took contracts, focus The and and better our Arqit capitalization. to macro disposal scale under an patents, we

and following highlight, partner reduction branded operating NetworkSecure to financial the implemented the TradeSecure. newly of align with end strategy and will program on Pointon we channel Nick focus the our applications the cost expenses As period, our a operational

The Striking the positions. future right for it's necessary is in cost the reduction difficult, scale of terms XX business. but operational of elimination program the included the balance of

strategy. funding to period support of million $XX raised go-to-market the to implementation also We the our capital of provide in

in never our position balance first partner to began cash With program cash in cost of in ourselves the and which balance half. channel provides sufficient on strategy. with cost we our million budgeted partnership million, a is of welcome, base reduction our runway reasonable commencing the coupled dilution focus us monthly focus a revenues, to While of July our put with on $XX.X $X.X a channel growth

We change our strategy. strategic to decision important go-to-market made an

XXXX The of reflects effects decision. first of half fiscal that the

partnerships revenues that the books. first with the place, activated strategy However, in we on and strategy exited period the from

major embrace regarding also The structure market appropriate a cost focused period evident base, moved scale capitalization. it to take and important to to our partners market of forward We look at our found and decisions took with to demand we product, we growth. signals are cost more channel a has

With Nick me our that, CFO, Pointon, let few our to financials. call over the turn a remarks on for

Nick?

Nick Pointon

David. you, Thank

contracts ended in operating million we and For March income other the month activities. generated $X.X XX, XXXX, period QuantumCloud revenue six from new and other

generated we XXXX, For in million. the $XX.X period comparable

generated Our periods QuantumCloud for the revenue $XX,XXX by two contracts. totaled

Revenue new is became channel second recognized While fully to additional as our channel activated half to represents in significant, in late NetworkSecure architect from contract fiscal revenue under the magnitude QuantumCloud new first the the our through was .We sold year. channel product recognize the of the the expect the our the one revenue firewall note period contracts from fact important of not revenue of is partnership.

US. licenses. major $X.X software QuantumCloud licensed and a from The with period in our for symmetric use the defense specific contractor evaluate Government period key which for million other the two was the enterprise for XXXX agreement contract in period was to comparable cases. revenue

the As our period implementing and is resulted Other our reporting was partnerships. negative ongoing release in from remarks, the primarily $X.X in mentioned for in million, responsible Agency between Space project month licenses periods. six direct income pivot enterprise sales to satellite. the for with press of strategy Arqit’s our in European variance the of operating away development Arc contract from associated a shift go-to-market and with our David's resulting This activating channel

with going ESA. announced forward the Should satellite realize business, sell will satellite we expect with our infrastructure, technology realizing under from our no which other longer requires operating our income contract perform continue Despite to in element, operating future we our other contract longer no income. we the to ESA innovation

movements a charge compensation Headcount in the million XXX for for familiar comparable period, September the period equate were offset with increased employee XXXX. Our costs exchange comparable US operating the for rates. million were based expenses $XX Administrative GAAP, period versus expenses $XX.X foreign period administrative the those in from XX, $X year to $XX million our a for XXX period XXXX. expenses for during the versus fiscal more costs to million favorable administrative by charge at share High in primarily for included XXXX. noncash

month, cost the the development of have to a been cost better at approximately cost align reporting XXX from forma reduction These our actioned the XX positions operating monthly operating pro Earlier The for July operational market monthly included reduction end as XXX we business resulted for reduction this cost to revenue has a million initiative in approximately XX% focus. elimination employees budgeted previously initiative initiative a across cost to of cost decrease actions period. in significant the reduction implemented structure of in $X.X costs all $X.X with compared The commencing company. budgeted cost million. reductions and functions stage the initiative our

period loss variance for the lower loss revenue a versus was and with other and periods associated for bankruptcy. combined million. with of $XX.X receivables year million the fiscal $XX.X a XXXX. The affects a the generated assets first We Operating loss million contracts loss the million $XX.X of operating impairment of before income, primarily operating tax on Virgin half between trade Orbit in $XX.X

ordinary However, an in tax we of In raised in loss gross million from warrant view shares. tax. we underlying from in performance once the February, non-cash issuance generated deducted million proceeds before loss reflects which $XX.X before adjusted the million, value change XX management's is business of $XX

a versus fiscal end $XX.X we a cash balance with entered million XXXX. September cash of Arqit’s of balance million $XX.X result, XXth the period year As as a of

our Orbit filed for is unsecured in noted release presently to earnings which market the largest As bankruptcy. Virgin creditor

approximately claim our Regardless, Orbit of have a have a moving in pace some forward. should full of the not million weeks $XX recovery for ahead. a impact and potential on Orbit to of going will The be have taken or of believe we material at our Virgin process as bankruptcy claim. the all and the bankruptcy is We the do claim possibility forthcoming some provision clarity Virgin operations business

I the that, With back turn to call David.

David Williams

on partners noted symmetric the to technology partnerships as fiscal brief channel call through go-to-market execution. three evidenced at December, product of I channel months go-to-market. earnings be year the major there Nick. agreement which by end successfully announced you, Thank XXXX about global the a strategy, pleased our probe we've prospective since vendor first and current new was we're would A we was with in encouraged In end the our key in activated partner our which new We're channel working with focused with momentum of and a sales increasing of and number through required. significant with and We're engagement are work partners and the revenues. the coordination currently customers. this channel speed partnerships the activity was additional are expected by seeing achieved.

hand for I over call the back Q&A. now to operator the

Operator

Instructions] [Operator

Buck line Scott with And from our coming question Wainwright. the first of H.C.

Scott Buck

begin questions. revenue? these Hi. Good some really give ramp afternoon, everyone. how channel partners bit you little can Thank my color you for more when us taking of around David, expect and a to to you

David Williams

as purchase have since that announced subsequently period Yes. we Hi, Scott. The with first in channel service December coming revenues partners and already that committed and generated the platform for have others the multiple from multiple the orders partners. a revenues increased have end

momentum and partnership these activation So the relationships. growing of is channel we're of with speed pleased

think purchase is is partner channel months easy we're sign getting implement. signature I channel to from from through a product coming a multiple through revenues seeing three just that orders the And first partners. several

good sign So I a feel that there's of momentum.

Scott Buck

given cash what helpful. the have orders. runway you that’s And have about purchase are here, so thinking million you sheet? additional those on visibility balance How $XX revenue. the the in do Great, With you or

David Williams

one. Nick answer that I'll let

Nick Pointon

$XX.X our at end cash fiscal our $X.X period indicated we the hand the monthly of at cash had earnings in million recent burn release that million. on we've of and that was Well,

We also cost July should that million our indicated be $X.X onwards. monthly about cash from

business guess So the on XXXX. that a cash to I additional extend revenue finally, on that alone, into this will satellite Obviously, generation have that. suggest could injection. And operating the in cash monetization we would only meaningful of work cost well point, result

all we reasonable position. think cash So together, bringing that have I

Scott Buck

Nick, that's helpful. really

value about On is what for unit? we the operating think the satellite, should that potential how

David Williams

whether in precisely apply we're potential may not So know will a transaction to close. what a or position bidders

funding well that the of and data that for now completed millions project to approximately tens commercial million from performance invested in we've assets of the previously R&D contracts room cash lifetime the $XX access binding consider may Also, the the as subject satellite dollars construction. have However, of under over announced, have bidders worth of we and customers. receipt

expected, got world little engineering very of of a a procurements Quantum a patented We governments announced strong that have the than also team. we've And number we Satellite world think finally, later and technologies around systems. leading

includes European XXX which Which Union IRISS apparently is worth the million. project, EUR

seems that which sheet is company to serve for we've partners by it technology. this delivered demand. demand has customers. government they value see the and resources It'll is a there that got themselves balance the invested So better But right be those evident those to the and

Scott Buck

that Great, cost savings David. satellite That's sell you're helpful. up follow And able a additional unit? operating there. to is the What potential quick if

David Williams

engineering The to division base, people were headcount satellite operating costs to amounts would it represent a team further so out and that reduction of XX material in current go. the

Operator

question coming Deutsche with Shelton Bank. next our line And Jim of the from

Jim Shelton

guys, for Hey, my thanks question. taking

the good to of the of the you top Just current the up satellite mean pick I in uncertainty potential as reduction doesn't future to burn cash with for I'm just around up business, and that dilution help kind But expect. CapEx, and given that the as trying line see the the I satellite to investors initiatives. terms if regards it's cost square top in guess further ramping with line Thanks. quick

David Williams

we've expressed We expect on it. announced in the any for process make the a It's see of sell now an parties there satellite from the intention who've today, that advisor, some material you'll months. don't business, project. conducting our which are to we've And interest appointment to been number that of satellite and CapEx

proceed, that the which on expect context is in per we've Therefore, should the making any on announced in of considered million resources were the the business expressed So reasonable view, $X.X cash our if a have, to, that month. CapEx costs operational today only sale we've be addition. reduced not make we some we optimism for material have sale to satellite not we value. the to reason in Even for would

Operator

further And at sure we time. I'm have no this questions

turn I'll David remarks. call closing to David? the back Now for over Williams

David Williams

and you We Thank closely much, us company and this appreciate year. And operator. you. Thank very your for you all your investors as following thank the support in shareholders. fellow analysts interest

Operator

Ladies Thank gentlemen, concludes you. for today's this and participating. conference. Thank you

disconnect. may You now

Arqit Quantum (ARQQ) 17 May 232023 Q2 Earnings call transcript