Arqit Quantum Inc. (Nasdaq: ARQQ, ARQQW) (“Arqit”), a global leader
in quantum encryption technology, today announced its operational
and financial results for the first half of its fiscal year ending
(“FYE”) 30 September 2022.
Recent Operational
Highlights
- Signed an
enterprise licence with Virgin Orbit for QuantumCloud™ to protect
its launch and space solutions businesses, which we delivered on
and recognised revenue in the first half of FYE 2022.
- Signed an
enterprise licence with AUCloud, Australia’s sovereign cloud
infrastructure-as-a-service provider, for QuantumCloud™ to provide
quantum encryption services, which we delivered on and recognised
revenue in the first half of FYE 2022.
- Delivered
against milestones under a contract with the European Space Agency
as part of its Advanced Research Telecommunications Systems
program, and recognised project revenue in the first half of FYE
2022.
- Demonstrated and
announced significant progress in integrating
QuantumCloud™ software with the security products of a major
enterprise grade vendor.
- Announced that
Arqit and Blue Mesh Solutions Limited, a UK-based sensors and
Internet of Things (“IoT”) specialist, successfully completed and
demonstrated a quantum secure data communications service for
industrial IoT. The demonstration was associated with the UK
Government’s Department for Digital, Culture, Media and Sport
(“DCMS”) 5G Trials and Testbeds programme. Arqit previously
announced it is also working with DCMS on a program to secure a new
wideband solution for 5G cellular Open RAN platforms.
- Signed a
Cooperative Research and Development Agreement with the US Air
Force’s Research Laboratory to prove viable quantum encryption
services from a commercial platform to US Department of Defense
infrastructure for the US Air Force and wider Department of Defense
use cases.
- QuantumCloud™
release 1.1 launched in the first half of FYE 2022. The advancement
of QuantumCloud™ makes Arqit’s symmetric key encryption agreement
service more easily accessible to customers.
- An additional
145 patent claims on 5 patents were filed in the first half of FYE
2022, bringing Arqit’s total to 1,580 patent claims on 26 patents
filed or granted in the UK. Innovations continue in all elements of
Arqit’s tech stack with the objectives of simplifying the tech
stack, further enhancing security and reducing cost.
- Made significant
senior sales organisation hires in the US, Asia Pacific and Europe,
expanding geographic footprint and enhancing industry
relationships.
- Commissioned a
report which has been summarised publicly that confirmed the
results of an academic review of Arqit’s security proof conducted
by the University of Surrey, which is recognised as an Academic
Centre for Excellence in Cyber Security Research by the UK
Government’s National Cyber Security Centre. The report confirms
that Arqit’s symmetric key agreement technology generates
encryption keys which are zero trust and computationally secure and
describes it as “a significant advance in secure
communications”.
Management Commentary
“Arqit has made significant progress in the
commercialisation of our QuantumCloudTM product in the first six
months of this fiscal year,” said David Williams, Arqit’s Founder,
Chairman and Chief Executive Officer. “In the period we signed and
fulfilled contracts with leading enterprises in our key identified
market sectors, including Virgin Orbit and AUCloud. We also began
the process of demonstrating our stronger, simpler encryption in
demonstration projects with numerous customers. As a result of our
commercial sales and other activities, we are pleased to deliver
$12.3 million in revenue and other operating income for the
six-month period.
Our contract wins, other announced activity,
such as our participation in the UK Ministry of Defence
multi-domain integration project and UK 5G Open RAN, and
prospective customer dialogues confirm our belief that telecoms,
defence, financial institutions and IoT are the early adopter
markets that understand the issues with today’s public key
infrastructure and the future threat posed by quantum
computers.
Our symmetric key agreement service is
increasingly being recognised as a solution that meets the moment –
it is computationally light, quantum safe, available in the instant
needed as a single use key or in unlimited group sizes and does not
require changes to the existing AES256 encryption
infrastructure.
We are pleased to have hired a significant
cohort of new senior sales executives in the first half of the
fiscal year to complement our team. All have deep relationships
within their respective geographies and industry verticals. As our
focus is on driving sales, top sales talent is a must.
The confidence in Arqit is shared by our
investors. Today, we also announced that shareholders holding 105.9
million of the 108.6 million shares currently subject to lock-up
agreements that were due to expire in connection with this results
announcement were approached to voluntarily extend their lock-up
agreements until September. All approached shareholders agreed to
participate, which is a strong statement of support.
We will look to continue the momentum we have
created in H1 as we drive toward our fiscal year end in
September.”
First Half of Fiscal Year 2022 Financial
Highlights
Arqit commenced commercialisation and began
generating revenue in the second half of the fiscal year ended 30
September 2021. Therefore, comparison of our results for the six
months ended 31 March 2022 to prior periods may not be meaningful
for all financial metrics.
- Generated $12.3
million in revenue and other operating income.
-
QuantumCloud™ revenue totalled $5.3 million for the period
from four contracts, including Virgin Orbit and AUCloud which
represent the vast majority of such revenue.
- Other operating
income of $7.0 million resulted from Arqit’s project contract with
the European Space Agency.
- Administrative
expenses1 for the period were $26.6 million versus $5.5 million for
the comparable period in fiscal year 2021. Employee costs
represented a significant portion of the increase due to headcount
additions during the period. $10.1 million of the increase reflects
a non-cash charge for share based compensation.
- Operating loss
for the period was $14.3 million versus a loss of $5.5 million for
the comparable period in fiscal year 2021.
- Profit before
tax was $58.0 million; Adjusted loss before tax was $14.4 million2
which in management’s view reflects the underlying business
performance once the non-cash change in warrant value is deducted
from profit before tax.
- During the
period, 1,850,330 warrants were exercised with cash proceeds to
Arqit of $21.3 million.
- Ended the period
with a cash balance of $82.2 million versus a cash balance of $87.0
million as of Arqit’s 30 September 2021 fiscal year end.
1 Administrative expenses are equivalent to operating
expenses.
2 Adjusted loss before tax is a non-IFRS
measure. For a discussion of this measure, how its calculated and a
reconciliation to the most comparable measure calculated in
accordance with IFRS, please see “Use of Non-IFRS Financial
Measures” below.
Conference Call Information
Date: Thursday, May 12,
2022Time: 11:00 a.m. Eastern time (8:00 a.m.
Pacific time) Webcast Event: Link U.S.
dial-in: (877) 356-5689International
dial-in: (630) 652-5960Conference ID:
4652829
The conference call will be available via the
webcast link located in the Investor Relations section of Arqit’s
website at arqit.uk.
For the conference call, please dial-in 5-10
minutes prior to the start time and an operator will register your
name and organisation, or you can register here. If you have any
difficulty with the conference call, please contact Gateway at
(949) 574-3860.
A telephonic replay of the conference call will
be available after 2:00 p.m. Eastern time on the same day through
2:00 p.m. Eastern time on May 19, 2022.
Toll-free replay number: (855)
859-2056International replay number: (404)
537-3406Replay ID: 4652829
About Arqit
Arqit supplies a unique quantum encryption
platform-as-a-service which makes the communications links of any
networked device secure against current and future forms of attack
– even from a quantum computer. Arqit’s product,
QuantumCloud™, enables any device to download a lightweight
software agent, which can create encryption keys in partnership
with any other device. The keys are computationally secure,
optionally one-time use and zero trust. QuantumCloud™ can
create limitless volumes of keys in limitless group sizes and can
regulate the secure entrance and exit of a device in a
group. The addressable market for QuantumCloud™ is every
connected device.
Media relations
enquiries:Arqit:
contactus@arqit.ukFTI Consulting:
scarqit@fticonsulting.com
Investor relations
enquiries:Arqit:
investorrelations@arqit.uk Gateway:
arqit@gatewayir.com
Use of Non-IFRS Financial Measures
Arqit presents adjusted loss before tax, which
is a financial measure not calculated in accordance with IFRS.
Although Arqit's management uses this measure as an aid in
monitoring Arqit's on-going financial performance, investors should
consider adjusted loss before tax in addition to, and not as a
substitute for, or superior to, financial performance measures
prepared in accordance with IFRS. Adjusted loss before tax is
defined as loss before tax excluding change in fair value of
warrants, which is a non-cash expense. There are limitations
associated with the use of non-IFRS financial measures, including
that such measures may not be comparable to similarly titled
measures used by other companies due to potential differences among
calculation methodologies. There can be no assurance whether (i)
items excluded from the non-IFRS financial measures will occur in
the future, or (ii) there will be cash costs associated with items
excluded from the non-IFRS financial measures. Arqit compensates
for these limitations by using adjusted loss before tax as a
supplement to IFRS loss before tax and by providing the
reconciliation for adjusted loss before tax to IFRS loss before
tax, as the most comparable IFRS financial measure.
IFRS and Non-IFRS loss before tax
Arqit presents its consolidated statement of
comprehensive income according to IFRS and in line with SEC
guidance. Consequently, the changes in warrant values are included
within that statement in arriving at profit before tax. The changes
in warrant values are non-cash expenses. After this adjustment is
made to Arqit’s IFRS profit before tax of $58.0 million, Arqit’s
non-IFRS adjusted loss before tax is $14.4 million, as shown in the
reconciliation table below.
|
Six month periodended 31 March 2022 |
Profit before tax on an IFRS basis |
$ |
58,046,006 |
|
Change
in fair value of warrants |
|
(72,463,842 |
) |
Adjusted loss before tax |
$ |
(14,417,836 |
) |
The change in fair value of warrants arises as
IFRS requires our outstanding warrants to be carried at fair value
within liabilities with the change in value from one reporting date
to the next being reflected against profit or loss in the period.
It is non-cash and will cease when the warrants are exercised, are
redeemed or expire.
Other Accounting Information
As of March 31, 2022, we had $87.4 million of
total liabilities, $55.6 million of which related to our
outstanding warrants, which are classified as liabilities rather
than equity according to IFRS and SEC guidance. The warrant
liability amount reflected in our consolidated statement of
financial position is calculated as the fair value of the warrants
as of March 31, 2022. Our liabilities other than warrant
liabilities were $31.8 million, and we had total assets of $143.2
million including cash of $82 million.
Caution About Forward-Looking
Statements
This communication includes forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. All statements, other than statements of
historical facts, may be forward-looking statements. These
forward-looking statements are based on Arqit’s expectations and
beliefs concerning future events and involve risks and
uncertainties that may cause actual results to differ materially
from current expectations. These factors are difficult to predict
accurately and may be beyond Arqit’s control. Forward-looking
statements in this communication or elsewhere speak only as of the
date made. New uncertainties and risks arise from time to time, and
it is impossible for Arqit to predict these events or how they may
affect it. Except as required by law, Arqit does not have any duty
to, and does not intend to, update or revise the forward-looking
statements in this communication or elsewhere after the date this
communication is issued. In light of these risks and uncertainties,
investors should keep in mind that results, events or developments
discussed in any forward-looking statement made in this
communication may not occur. Uncertainties and risk factors that
could affect Arqit’s future performance and cause results to differ
from the forward-looking statements in this release include, but
are not limited to: (i) the outcome of any legal proceedings that
may be instituted against the Arqit related to the business
combination, (ii) the ability to maintain the listing of Arqit’s
securities on a national securities exchange, (iii) changes in the
competitive and regulated industries in which Arqit operates,
variations in operating performance across competitors and changes
in laws and regulations affecting Arqit’s business, (iv) the
ability to implement business plans, forecasts, and other
expectations, and identify and realise additional opportunities,
(v) the potential inability of Arqit to convert its pipeline into
contracts or orders in backlog into revenue, (vi) the potential
inability of Arqit to successfully deliver its operational
technology which is still in development, (vii) the risk of
interruption or failure of Arqit’s information technology and
communications system, (viii) the enforceability of Arqit’s
intellectual property, and (ix) other risks and uncertainties set
forth in the sections entitled “Risk Factors” and “Cautionary Note
Regarding Forward-Looking Statements” in Arqit’s annual report on
Form 20-F (the “Form 20-F”), filed with the U.S. Securities
and Exchange Commission (the “SEC”) on December 16,
2021 and in subsequent filings with the SEC. While the
list of factors discussed above and in the Form 20-F and other SEC
filings are considered representative, no such list should be
considered to be a complete statement of all potential risks and
uncertainties. Unlisted factors may present significant additional
obstacles to the realisation of forward-looking statements.
Arqit Quantum Inc.Condensed
Consolidated Statement of Comprehensive Income For
the period ended 31 March 2022
|
|
|
Unauditedsix monthperiod ended31 March 2022 |
Unauditedsix monthperiod ended31 March 2021 |
|
|
|
$ |
$ |
|
|
|
|
|
Revenue |
|
|
5,293,198 |
|
- |
|
|
|
|
|
|
Other operating income |
|
|
6,958,744 |
|
- |
|
|
|
|
|
|
Administrative expenses |
|
|
(26,600,441 |
) |
(5,451,222 |
) |
|
|
|
-------------------- |
|
-------------------- |
|
Operating (loss) |
|
|
(14,348,499 |
) |
(5,451,222 |
) |
|
|
|
|
|
Change in fair value of warrants |
|
|
72,463,842 |
|
- |
|
Finance costs |
|
|
(69,337 |
) |
(583,481 |
) |
|
|
|
------------------- |
|
------------------- |
|
Profit/(Loss) before tax |
|
|
58,046,006 |
|
(6,034,703 |
) |
|
|
|
|
|
Income tax credit |
|
|
- |
|
- |
|
|
|
|
----------------- |
|
---------------- |
|
Profit/(Loss) for the period attributable to equity
holders |
|
|
58,046,006 |
|
(6,034,703 |
) |
|
|
|
_________ |
|
__________ |
|
Other comprehensive (loss)/income: |
|
|
|
|
Items that may be reclassified to profit or
loss |
|
|
|
|
Currency translation differences |
|
|
258,483 |
|
192,840 |
|
|
|
|
__________ |
|
_________ |
|
Total comprehensive loss for the period attributable to
equity holders |
|
|
58,304,489 |
|
(5,841,863 |
) |
|
|
|
======== |
|
======== |
|
|
|
|
|
|
Earnings per ordinary share from continuing operations
attributable to equity holders |
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
|
0.48212 |
(0.1018 |
) |
Diluted earnings per share |
|
|
0.47999 |
(0.1018 |
) |
|
|
|
|
|
All of the Group’s activities were derived from
continuing operations during the above financial periods.
Arqit Quantum Inc.Condensed
Consolidated Statement of Financial Position As at
31 March 2022
|
|
|
Unaudited31 March 2022 |
Audited30 September 2021 |
|
|
|
$ |
$ |
ASSETS |
|
|
|
|
Non-current assets |
|
|
|
|
Property, plant and equipment |
|
|
7,892,432 |
|
198,848 |
|
Intangible assets |
|
|
29,995,735 |
|
18,235,034 |
|
Fixed asset investments |
|
|
32,790 |
|
33,685 |
|
Other receivables |
|
|
7,533,368 |
|
5,000,000 |
|
|
|
|
----------------- |
|
----------------- |
|
Total non-current assets |
|
|
45,454,325 |
|
23,467,567 |
|
|
|
|
----------------- |
|
----------------- |
|
Current assets |
|
|
|
|
Trade and other receivables |
|
|
15,614,706 |
|
3,292,310 |
|
Cash and cash equivalents |
|
|
82,158,484 |
|
86,965,789 |
|
|
|
|
--------------------- |
|
--------------------- |
|
Total current assets |
|
|
97,773,190 |
|
90,258,099 |
|
|
|
|
-------------------- |
|
-------------------- |
|
Total assets |
|
|
143,227,515 |
|
113,725,666 |
|
|
|
|
-------------------- |
|
-------------------- |
|
LIABILITIES |
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
|
|
18,945,166 |
|
17,068,656 |
|
Lease liabilities |
|
|
1,074,921 |
|
- |
|
|
|
|
-------------------- |
|
--------------------- |
|
Total current liabilities |
|
|
20,020,087 |
|
17,068,656 |
|
|
|
|
-------------------- |
|
--------------------- |
|
Non-current liabilities |
|
|
|
|
Trade and other payables |
|
|
3,753,957 |
|
2,459,413 |
|
Deferred tax |
|
|
- |
|
- |
|
Lease liabilities |
|
|
8,003,243 |
|
- |
|
Warrants liability |
|
|
55,574,590 |
|
128,038,432 |
|
|
|
|
-------------------- |
|
--------------------- |
|
Total non-current liabilities |
|
|
67,331,790 |
|
130,497,845 |
|
|
|
|
-------------------- |
|
--------------------- |
|
Total liabilities |
|
|
87,351,877 |
|
147,566,501 |
|
|
|
|
-------------------- |
|
-------------------- |
|
Net assets/(liabilities) |
|
|
55,875,638 |
|
(33,840,835 |
) |
|
|
|
========== |
|
========== |
|
EQUITY |
|
|
|
|
Share capital |
|
|
12,192 |
|
11,007 |
|
Share premium |
|
|
92,277,900 |
|
70,999,290 |
|
Other reserves |
|
|
166,803,775 |
|
166,804,775 |
|
Foreign currency translation reserve |
|
|
513,695 |
|
255,212 |
|
Share-based payment reserve |
|
|
10,436,665 |
|
303,476 |
|
Retained earnings |
|
|
(214,168,589 |
) |
(272,214,595 |
) |
|
|
|
-------------------- |
|
-------------------- |
|
Total Equity |
|
|
55,875,638 |
|
(33,840,835 |
) |
|
|
|
========== |
|
========== |
|
Arqit Quantum Inc.
Condensed Consolidated Statement of Cash
FlowsFor the period ended 31 March
2022
|
|
|
Unauditedsix monthperiod ended31 March
2022 |
Unauditedsix monthperiod ended31 March
2021 |
|
|
|
$ |
$ |
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
Cash (used in)/generated from operations |
|
|
(13,220,668 |
) |
(1,596,317 |
) |
|
|
|
----------------- |
|
----------------- |
|
Net cash (used in)/generated from operating
activities |
|
|
(13,220,668 |
) |
(1,596,317 |
) |
|
|
|
======== |
|
======== |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Capital expenditure on property, plant and equipment |
|
|
(608,540 |
) |
(88,549 |
) |
Capital expenditure on intangibles |
|
|
(12,883,645 |
) |
(4,187,694 |
) |
|
|
|
---------------- |
|
---------------- |
|
Net cash (used in) investing activities |
|
|
(13,492,185 |
) |
(4,276,243 |
) |
|
|
|
======== |
|
======== |
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Shares issued on exercise of warrants |
|
|
21,278,795 |
|
- |
|
Payments of lease liabilities |
|
|
(204,665 |
) |
- |
|
Payments of interest portion of lease liabilities |
|
|
(72,907 |
) |
- |
|
Proceeds from borrowing |
|
|
- |
|
14,372,969 |
|
Repayments of borrowing |
|
|
- |
|
(1,095,083 |
) |
|
|
|
---------------- |
|
---------------- |
|
Net cash generated from financing activities |
|
|
21,001,223 |
|
13,277,886 |
|
|
|
|
======== |
|
======== |
|
Foreign exchange on cash and cash equivalents |
|
|
904,325 |
|
97,910 |
|
Net (decrease)/increase in cash and cash
equivalents |
|
|
(5,711,630 |
) |
7,405,326 |
|
Cash and cash equivalents at beginning of period |
|
|
86,965,789 |
|
203,313 |
|
|
|
|
---------------- |
|
---------------- |
|
Cash and cash equivalents at end of period |
|
|
82,158,484 |
|
7,706,549 |
|
|
|
|
======== |
|
======== |
|
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