Arqit Quantum Inc. Q4 FY2024 earnings call

Introduction - Andy Leaver stepped into the CEO role at an exciting time for Arqit, with the market for enhanced encryption moving towards the company. ### Market Trends - 2024 saw increased dialogue around quantum computing and encryption, with Gartner naming quantum computing and encryption as a major trend for 2025, and AWS launching Quantum Embark. ### Product and Market - Arqit's symmetric key agreement software is unique, and there's a significant market opportunity. Engagements with telecom network providers, government, and military markets are accelerating. ### Contracts - Engaged with 8 leading telecom network providers, had a seven-figure multi-year contract with a Middle East governmental agency executed before fiscal year end, and executed contracts with two defense contractors. ### Cost-Cutting - Undertaken cost-cutting initiatives, with budgeted monthly operating costs for fiscal 2025 reduced to $2.15 million per month, headcount reduced to 82 from 147, and workforce reshaped to prioritize sales, engineering, and customer fulfillment.

Arqit's revenue for the fiscal year was $293,000, down from $640,000 in the previous year. The revenue came from the SKA platform, with $293,000 in 2024, where $102,000 was professional services. The company shifted from perpetual licenses to operational licenses, which are expected to generate growing annual recurring revenue. The SKA platform revenue in 2024 was from 13 customers, compared to 7 customers in 2023 with $640,000 revenue, mostly from two perpetual licenses.

- Focusing sales efforts on markets with near-term revenue. ### - Appropriately allocating personnel and expenditures. ### - Budgeted monthly operating costs for fiscal 2025 are $2.15 million per month, and cost savings initiatives are ahead of budget. ### - Focusing on converting current engagements with prospective customers to operating licenses.

Q: On the 7-figure Middle East deal, can you discuss the revenue cadence?

A: The deal is taken ratably and should start being recognized in the current reporting period.

Q: Can you provide more color on additional government and enterprise contract opportunities in the region?

A: There are governmental and large enterprise interests, with some governments in the region proactive in enacting post-quantum encryption legislation, and Arqit is in good position to follow up on conversations.

Q: How is AI playing a part in the Quantum-Safe story?

A: AI is being looked at for remediation, to suggest conversational manner to fix network vulnerabilities and apply Arqit's technology.

Q: What other verticals are coming into focus in 2025?

A: Financial services, IP-rich organizations are in focus, with discussions around secure compute, data at rest/motion, and harvest now decrypt later concerns.

Q: How quickly will infrastructure costs be added back as revenue ramps?

A: Very little leverage is expected in the current fiscal year as the model suggests delivering expected revenue with current cost base.

Q: Is the recent raise included in the cash balance?

A: A little over $1.8 million from the raise landed in early October and missed the cutoff for recognition in the FY '24 financial period