Arqit Quantum Inc. Q2 FY2025 earnings call

Arqit Quantum Inc. has developed transformational technology to address weaknesses in current encryption due to quantum computing. The company is focused on large enterprises and government customers. In the telecom network vertical, a tier-one telecom network operator signed a three-year contract licensing NetworkSecure for resale. In the defense sector, a contract was signed with the US Department of Defense with its software embedded in a solution. There has been development of applications for symmetric key agreement encryption software, including confidential computing with Intel. The company has been disciplined in cost control, with headcount reduced and administrative expenses managed. Progress is being made in converting test and evaluation engagements into licenses, with near-term opportunities in telecom networks and an end-to-end test evaluation collaboration.

For the first half of fiscal year 2025, Arqit Quantum Inc. generated $67,000 in revenue, compared to $119,000 in the comparable period of 2024. Revenue from the Arqit SKA platform as a service and Arqit Network Secure products totaled $52,400, while professional services and maintenance revenue in support of contract activity was $14,500. Administrative expenses for the first half of fiscal year 2025 were $18 million versus $16.8 million in the comparable period of 2024. Operating loss for the period was $17.8 million compared to a loss of $16.6 million in the first half of fiscal year 2024. As of March 31, 2025, the company had cash and cash equivalents on hand of $24.8 million.

For the balance of the fiscal year, the key focus is converting concluded test and evaluation engagements into licenses, with near-term opportunities in the telecom network space. The commencement and hopefully completion of an end-to-end test evaluation collaboration is expected. Cost control will remain a priority. Revenue is expected to ramp as market awareness of quantum-safe encryption grows and the company's product is recognized.

Unforeseen delays in contracts closing or revenue recognition can adversely affect results. Foreign exchange changes can impact financials. The company faces obstacles in achieving its ambitious objectives with elastic timelines.

Q: The deals that closed at or near the end of the fiscal period, are they currently generating revenue today? And are these under multi-year contracts for the most part or shorter period?

A: The contract with the tier-one network operators is for three years, initial size minimizes risk and expects to grow as it signs up end users. The DoD contract is a one-year contract.

Q: What type of folks are you hiring for the sales team? What industries are they coming from? And how long does it take to get a new sales hire up to speed?

A: Early salespeople proved out use cases. Now hiring commercially available salespeople and those well-versed in verticals like telco and defense. First type operators figure out use cases and compliance, then others with vertical expertise.

Q: How should investors think about the monetization of the Intel partnership on confidential computing?

A: Intel is a great partner, enabling large enterprises and defense to use existing cloud and AI investments while protecting from quantum threat. Running on Intel TDX enclave makes it easy to consume.

Q: Do you expect any increase in OpEx to support new contracts signed towards the end of the period?

A: Headcount is down materially, currently sufficiently staffed for near term. Have a handful of budgeted open positions but no plans for meaningful headcount growth. Trailing monthly cash burn around $2.2 to $2.4 million expected to stay around that level.