Arqit Quantum Inc. Q4 FY2022 earnings call

• Technology progress: Arqit made strides in technology, business model, and go-to-market strategy. Announced three hyperscale channel partners. - Channel partnerships: Integrated with Fortinet, AWS, and Dell. With Fortinet, integration enables unbreakable quantum safe encrypted connectivity; with AWS, integrated QuantumCloud with S3; with Dell, partnering to integrate into products for U.S. Defense Department and others. - Trade finance: Expect to build first revenues in current half year, with full launch around spring next year. - Government contracts: Arqit Software selected for U.S. government programs of record, though billings slipped. - Technology strategy change: No longer requires satellite delivery of replicated randomness, commencing conversations to sell satellite system, and intends to license quantum satellite IP.

For the 12 month period ending September 30, 2022, Arqit generated $20 million in revenue and other operating income. QuantumCloud revenue totaled $7.2 million for the period, generated by five contracts. The bulk of the QuantumCloud revenue came from contracts with Virgin Orbit and AUCloud. The absolute revenue from QuantumCloud was $7.2 million, contributing a significant portion to the total $20 million revenue, though the exact percentage contribution isn't specified but QuantumCloud was a key segment.

• Provisionally kept fiscal year 2023 headcount at no more than 195 employees and reduced budgeted costs by 18%. - Expect to build first revenues from trade finance project during current half year. - Hopes for significant billings from defense projects with Dell and others as product gets certified and accredited by government users.

• Macro uncertainty could affect U.S. Defense Department contracts due to continuing budget resolution. - Uncertainty in the adoption timeline despite positive market signals for trade finance and encryption solutions.

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

A: Fortinet's project is easy to understand with price times volume against penetration; AWS and Dell have similar models with potential for annual recurring revenue.

Q: What is the level of product education provided to partners and scaling of sales channels?

A: Joint propositions are on partners' websites, sales teams are being educated, and prospects are coming through the pipeline.

Q: Any exclusivity arrangements in partnership contracts?

A: No exclusive partner conditions.

Q: How far out is trade finance from being a meaningful revenue contributor?

A: Expect first revenues in current half year, full launch around spring next year.

Q: Hesitancy among potential customers due to macro uncertainty?

A: No particular effect seen other than U.S. Defense Department budget issues, but market for encryption upgrade is growing from a low base.

Q: How long Dell, AWS relationships started and their position in pipeline?

A: Relationships began about 18 months ago, accelerated since security proof publication.

Q: Value of pipeline change since initial mention?

A: More detailed view of price times volume based on partnership discussions.

Q: What Arqit needs to do beyond educating partners' sales teams?

A: Involved in direct bids, support channels with marketing collaterals, have salespeople on the ground, and expect revenues from online fulfillment.

Q: Nature of $7 million QuantumCloud revenue (subscription vs perpetual)?

A: Mainly enterprise license revenue, some expected to renew.

Q: Share price range for ATM and cash burn rate?

A: No immediate plan to utilize ATM, cash burn rate not specified.