Arqit Quantum Inc. Q4 FY2022 earnings call

• Company Reflection: Acknowledged the passing of Co-Founder Andrew Yeomans and his contributions to Arqit's foundational patents. - Revenue Growth: Highlighted the significant increase in revenue from $48,000 in fiscal year 2021 to $20 million in fiscal year 2022. - Channel Partnerships: Announced integrations with AWS, Dell, and Fortinet. Integration with Fortinet's firewalls enables unbreakable quantum-safe encrypted connectivity. AWS integration with QuantumCloud and S3 provides access to large customer bases. Partnership with Dell for U.S. government programs. - Trade Finance and Government Contracts: Signed a contract with TraxPay for quantum-safe digital finance instruments. Selected by prime contractors for U.S. government programs, though billings slipped into the current fiscal year. - Technology Innovation: No longer requires satellite delivery for symmetric key agreement, leading to potential sale of satellite assets and licensing of quantum satellite IP.

For the period ending September 30, 2022, Arqit generated $20 million in revenue and other operating income, compared to $48,000 in the prior fiscal year. QuantumCloud revenue totaled $7.2 million for the period from five contracts. Other operating income was $12.8 million from Arqit's ongoing project contract with the European Space Agency. Administrative expenses were $72.2 million for fiscal year 2022, up from $14.6 million in 2021. Operating loss for fiscal year 2022 was $52.1 million, better than the prior year's $172.6 million operating loss.

• Channel Adoption: Expect to build first revenues from trade finance during the current half year, with full launch around spring next year. - Headcount and Costs: Provisionally kept fiscal year 2023 headcount at no more than 195 employees and reduced budgeted costs by 18%.

• U.S. Government Contracting: Headwinds in the U.S. government contracting market due to continuing budget resolution and international operational requirements. - Macro Uncertainty: While macro uncertainty isn't a major deterrent, the U.S. Defense Department's continuing resolution impacts some aspects.

Q: How should we think about these channel partnerships converting to revenue?

A: The Fortinet project has an easy-to-understand pricing model with price times volume against Fortinet's customer base penetration. AWS and Dell also have straightforward price times volume metrics, with potential for significant market penetration.

Q: What is the level of product education you've already provided the partners?

A: Work to educate sales teams and distribution channels has begun, with prospects already in the pipeline. Joint propositions are on partners' websites, and direct engagement with salespeople is ongoing.

Q: Is there any exclusivity arrangements in any of these partnership contracts that would meaningfully restrict your ability to sign additional channel partners?

A: No, there are no exclusive partner conditions.

Q: How far out are we from the trade finance side becoming a meaningful revenue contributor?

A: Expect to build first revenues on the trade finance project during the current half year, with full launch around spring next year.

Q: Any hesitancy you're seeing among potential customers just given kind of the rising level of macro uncertainty?

A: No particular effect of macro uncertainty is seen, as the market is growing from a low base with organizations urgently needing to upgrade encryption.