Arqit Quantum Inc. Q2 FY2023 earnings call

• David Williams discussed the pivot in go-to-market strategy using major global technology channel partners, with first revenues from channel partnerships realized near the end of the financial period and further purchase orders since. - Progress with NetworkSecure and TradeSecure applications to make the product easier to consume. - Implemented a cost reduction program eliminating 20 positions, reducing monthly operating costs to $3.2 million. - Raised $20 million in capital during the period. - Nick Pointon detailed financials, administrative expenses reduction, impact of Virgin Orbit bankruptcy with a $12.2 million impairment, and expected continued performance under ESA contract unless satellite business is sold.

For the six month period ended March 31, 2023, Arqit generated $2.6 million in revenue and other operating income. QuantumCloud revenue totaled $19,000 from two contracts. Other operating income was $2.6 million primarily from the ongoing project contract with the European Space Agency. Administrative expenses were $25 million, operating loss was $34.6 million. Comparable period in 2022 had revenue of $12.3 million, with QuantumCloud revenue $5.3 million from two enterprise licenses.

• Momentum is growing with channel partnerships, as first revenues have been generated and purchase orders are increasing. - Cash runway is reasonable with $41.5 million cash on hand and monthly cost of $3.2 million commencing July, with potential cash injection from satellite business sale. - Focus on increasing sales momentum through current and expected new channel partnerships.

• Virgin Orbit bankruptcy resulted in a $12.2 million impairment on trade receivables and contracts assets. - Uncertainty around the sale of the satellite business, as disposal would affect future other operating income from the ESA contract.

Q: Can you give more color around how and when you expect channel partners to begin to really ramp revenue?

A: The channel partners announced have generated first revenues and revenues have increased since period end with multiple purchase orders. Momentum is growing with first revenues coming just three months from signature showing product is easy to implement.

Q: With additional purchase orders and visibility in revenue, how are you thinking about cash runway given $40 million on balance sheet?

A: Nick Pointon responded that with $41.5 million cash on hand, monthly cash cost of $3.2 million from July onwards, cash is well into 2024; monetization of satellite business could bring additional cash injection.

Q: What is the potential value for the satellite operating unit?

A: Arqit has invested ~$53 million in satellite assets under construction, has binding contracts worth tens of millions from customers, and there's demand for quantum satellite systems. Bidders have shown interest in the satellite business.

Q: Given uncertainty around satellite business, how does that square with cash burn and potential dilution?

A: David Williams stated they don't expect material CapEx on satellite project, intention is to sell satellite business with advisor appointed and parties interested; even if sale doesn't proceed no material CapEx expected, cash resources should be considered with reduced monthly operating costs of $3.2 million