Arqit Quantum Inc. Q4 FY2023 earnings call

• Strategic pivot in Dec 2022 to focus on software product sold via sales channels, now with 15 channel partners (up from 5).
• Productized specialized applications: Arqit NetworkSecure (embedded in Juniper and Fortinet firewalls, first sales executed), Arqit TradeSecure (benefiting from EDTA in UK, first transactions progressing), Arqit WalletSecure (to be offered by major financial services company).
• Undertook cost reduction actions in 2023, reducing headcount from 170 in H1 to 147 by end of year, lowering administrative expenses.

For the 12-month period ended 30th September 2023, Arqit generated $5.6 million in revenue and other operating income. Revenue from QuantumCloud product was $639,968 from 6 channel partners. Administrative expenses in fiscal 2023 were $55.2 million vs $71.0 million in 2022. In 2022, revenue from discontinued operations (satellite-related) was $20.0 million, with QuantumCloud product revenue $7.2 million and $12.8 million from ESA contract. Revenue from symmetric key agreement products in 2022 was concentrated, with 65% from a single Virgin Orbit license.

• Confidence that channel partnerships' maturity will lead to cash flow breakeven in relatively short time.
• Optimism about sales across product offerings, channel partners, and geographies as partnerships mature.
• Hopeful about announcing new partnerships with large technology companies in the short term.

• Uncertainty around transactions for satellite asset, with no assurance of consummation.
• Reliance on channel partners maturing which is not guaranteed, and progress may be slower than anticipated.

Q: How are you thinking about the anticipated ramp in revenue in '24 as these relationships mature versus your current cash balance? Do you have enough runway to get you at least meaningfully closer towards the operating breakeven?

A: We have confidence that the scale of our channel partnerships and their increasing maturity offers the ability to get towards cash flow breakeven within a relatively modest time period, and our current cash balance gives us comfort.

Q: Are you still having meaningful discussions with other potential partners? Could we see announcements over the next few months on that end?

A: Yes, working with several very large technology companies with detailed software integration work in progress and go-to-market strategies under discussion; hopeful of announcements in the short term.

Q: On the satellite business, are there other potential strategic opportunities besides just an outright sale that could help you at least partially monetize those assets?

A: Working with several potential partners interested in cooperating to monetize satellite technology, though no certainty deals will fruition, but working hard for an elegant outcome.