WISeKey Announces First Half 2023
Financial Results
Reports 39% Increase in Revenue
and 69%
Increase in Gross ProfitSubstantial
Pipeline of New Business
Opportunities for All
Verticals
Conference Call
Scheduled for Monday, October 2 at
12:00 pm
ET (6:00 pm
CET)
GENEVA – September 29,
2023 – Ad-Hoc announcement pursuant to Art. 53 of SIX
Listing Rules– WISeKey International Holding Ltd.
(“WISeKey”) (SIX: WIHN, NASDAQ: WKEY), a leader in cybersecurity,
digital identity, and Internet of Things (IoT) solutions operating
as a holding company, today announced its first half 2023 (H1 2023)
financial results.H1 2023 Key Financial
Milestones
-
39%
revenue growth to
$15.1 million in H1 2023, as compared to $10.8 million in
H1 2022.
-
69%
increase in
gross
profit reaching $8.1 million
(53.6% margin) in H1 2023 as compared to $4.8 million (44.0%
margin) in H1 2022.
- Improved
profitability with operating loss decreasing by 11% from
$6.6 million in H1 2022 down to $5.9 million in H1 2023,
despite higher G&A expenses in relation to the spin-off of
SEALSQ Corps. and its Nasdaq listing.
- Continued
investments in R&D for the development of our
post-quantum chip and next generations and our new
revenue streams with $2.2 million invested during H1
2023.
Outlook for the full year 2023 and beyondIn the
second half of 2023, management expects revenue to remain at a
similar level as H1 2023, with an anticipated full year 2023
revenue increase of over 20% compared to full year 2022.
The Group has taken several initiatives to continue growing
revenue and strengthen net results. These initiatives include:
- Enabling companies to quickly and
easily get access to Device Attestation Certificates
(DACs). The service is provided by INeS, our managed “PKI
as a Service” platform without the necessity to invest and to
deploy any hardware infrastructure. Each manufacturer using the
platform can manage the security lifecycle of certificates and
devices in their own dedicated, cloud-based application. We will
also be offering our complete range of FIPS Certified Secure
Elements with pre-provisioning of keys and DACs ready for
authentication under Matter Protocol. This strong
value proposition will enable smart home device manufacturers to
achieve faster time to market through cost effective and simplified
design processes when designing Matter compliant smart home
products.
- The use of our technology with the
WISeSaT PocketQube
Satellite constellation to be deployed.
- The strengthening of our Sales
and Marketing team through new distribution
partnerships.
- Investment in
WISe.ART secure platform for NFT transactions and
other types of online authenticated transactions.
- The development of the
QUASARS project for the next generation,
post-quantum semiconductors.
- Planned investment in new equipment
to increase the production volume of
semiconductors.
However, management expects 2024 to be a transition year where
the focus of customer demand will shift to the next generation of
semiconductor products, which is likely to impair WISeKey’s growth
temporarily in 2024 before full production of the next generation
semiconductor products starts in 2025/2026.
WISeKey, a prominent holding company,
proudly operates through its four distinctive subsidiaries: SEALSQ
Corp, WISeKey SA, WISeSat.Space, and WISe.ART. Each entity uniquely
complements the vast technological portfolio of the parent company,
playing a pivotal role in different technology sectors. Amidst this
expansive structure, WISeKey has recently reported a promising
pipeline in new opportunities for IoT semiconductors
products.Strategic Investments and Growth
PlansWISeKey envisions a roadmap of furthering investments
in each of its subsidiaries. As each matures, WISeKey aims for
their independent Initial Public Offerings (IPOs), all the while
staying rooted in its core mission: securing the internet. The
diverse business model isn’t just an expansion strategy; it’s a
deliberate move to leverage the bustling cybersecurity market. By
making strides in a multitude of sectors - from digital identity,
blockchain, and quantum computing to space satellite technologies
and NFT platforms - WISeKey ensures it remains relevant and poised
for growth in the face of the Fourth Industrial
Revolution.SEALSQ: Riding the Semiconductor WaveOf
note, SEALSQ, one of its key subsidiaries generating for the moment
the largest part of its revenue, recently marked its presence in
May 2023 on the Nasdaq by listing its ordinary shares under the
ticker “LAES”. WISeKey retains a 90% stake in SEALSQ. In a
strategic move, SEALSQ has secured an initial tranche of financing
in the amount of $10 million, in the form of convertible notes and
warrants, which form part of a potential $20 million private
placement, earmarked for boosting production facilities and
fostering a new breed of quantum-ready semiconductors.The first
half of 2023 saw a significant spike in semiconductor revenue,
largely propelled by the growing thirst for semiconductors/IoT
products. With the looming threat of quantum computing, which
challenges many modern encryption algorithms, the urgency for
post-quantum semiconductors has skyrocketed. Other growth
stimulants in this segment include cutting-edge technological
progress, the rise of quantum-ready semiconductors, and robust
government support for post-quantum cryptography
research.WISeSat.Space: The Future of Satellite
CommunicationAnother feather in WISeKey’s cap is the
WISeSat.Space subsidiary, which is keenly focusing on the
burgeoning domain of space technology. With a vision to securely
tether assets through satellite communication, it employs
picosatellites, a move that underscores its cost-effective approach
to satellite deployment.The exploding demand for satellite
technology, as evident from the traction in IoT,
telecommunications, and navigation systems, heralds a promising
future for WISeSat.Space. The data harvested by these satellites
holds immense potential, offering invaluable insights across
sectors such as agriculture, logistics, and environmental
monitoring. With the capability to provide integrated solutions
coupled with cybersecurity and digital identification,
WISeSat.Space stands at the cusp of transforming satellite
communication services.WISeSat recently signed a strategic
agreement with the Swiss Army PLD Space and Fossa
Systems.WISe.ART: Secure trading platformsWISe.ART
is focused on the thriving NFT market, and provides a secure
platform for NFT transactions. Its integration with cybersecurity
and blockchain technologies offers a secure environment for NFT
creation, sale, and exchange, thereby positioning WISeKey to tap
into a lucrative and rapidly growing market.
Entering the NFT market allows WISeKey
to diversify its revenue streams and broaden its client base to
include artists, collectors, and investors. WISe.ART can monetize
its platform through transaction fees, authentication and
verification services, and premium subscriptions.
WISeKey’s foray into the NFT market
can bolster its brand as a leader in innovative digital solutions.
This could enhance its appeal across other business sectors,
potentially attracting more clients and driving higher revenue.
Additionally, WISe.ART could act as a gateway for users to explore
WISeKey’s other offerings, leading to greater adoption of its
cybersecurity solutions and contributing further to its revenue
diversification.
Conference Call
The company will host a conference call to
review its results on Monday, October 2, at 12:00 pm ET (6:00 pm
CET). If you wish to join the conference call, please use the
dial-in information below:
- Toll-Free Dial-In Number:
877-445-9755
- International Dial-In Number:
201-493-6744
A simultaneous webcast of the call may be
accessed online via the Investor Relations section of the company’s
website, https://www.wisekey.com/company/investors/.
The archived call will also be available on the
Investor Relations section of the company’s website.
Management Discussion & Analysis of Financial
Condition and Results of OperationsThe following
Management Discussion and Analysis ("MD&A") is intended to
provide a reader of WISeKey’s financial statements with a narrative
explanation from management's perspective of the financial and
other significant factors that have impacted and could impact the
company's performance.
Key Financial MetricsA summary of the key
performance metrics of the Group is set out in the table below:
US GAAP (Million US$) |
H1 2023 |
|
H1 2022 |
Net sales |
15.1 |
|
10.8 |
Gross
profit |
8.1 |
|
4.8 |
Operating
income / (loss) as reported |
(5.9) |
|
(6.6) |
Net income /
(loss) attributable to WISeKey as reported |
(7.0) |
|
2.4 |
|
|
|
|
Non-GAAP (Million
US$)* |
|
|
|
EBITDA |
(5.7) |
|
(6.5) |
Adjusted net
income / (loss) |
(6.4) |
|
(9.3) |
* See reconciliation to GAAP below
RevenueWISeKey revenue for H1 2023 was
$15.1 million, compared to $10.8 million in H1 2022,
which represents a 39% increase year on year.
This 39% increase in revenue is mostly attributable to our
semiconductors vertical under SEALSQ Corp. with revenue for H1 2023
of $14.8 million, compared to $10.7 million in H1
2022, due to the higher demand for semiconductors following the
shortages in the industry triggered by the Covid pandemic over the
last few years. However, now that the semiconductor supply chain is
back to normal, we anticipate that the semiconductor industry will
become more competitive.
We anticipate that the revenue increase rate over the full year
2023 will remain strong, over 20%, albeit not reaching the level of
H1 2023. Our customers are initiating their transition towards our
new product generation which shall bring them to tighten controls
over their inventory and order processing.
Revenue by regionOur operations
are global in scope, and we generate revenue from selling our
products and services across various regions. Our operations in
North America now contribute the largest part of our revenues
(55%), whilst our European market remains a strong contributor with
EMEA accounting for 32% of our revenue. Our focus remains on these
two regions, and we continue building our sales and marketing team
in these areas. In H1 2023, we also recruited an additional sales
member in Taiwan with the objective of increasing our presence in
Asia, as evidenced by the new Distribution Agreement with Holy
Stone Enterprise Co. Ltd, a Taiwanese semiconductor distributor,
announced in September 2023.
Our revenue by geographic region for the six month-period ended
June 30, 2023 and 2022 is set forth in the following table:
Net
sales by region |
6 months ended June 30, |
USD'000 |
2023 (unaudited) |
|
|
2022 (unaudited) |
|
North
America |
8,374 |
55% |
|
6,937 |
64% |
Europe, Middle
East and Africa |
4,773 |
32% |
|
2,221 |
20% |
Asia
Pacific |
1,956 |
13% |
|
1,615 |
15% |
Latin
America |
4 |
0% |
|
67 |
1% |
Total net sales |
15,107 |
|
|
10,841 |
|
Strong demand for our IoT products in
2023In 2022, the Group started the implementation of a
significant investment plan to increase its semiconductor
production capacity in response to customers’ expectations. We
anticipate that this will support a year-on-year increase in net
sales for WISeKey by over 20%.
Beyond 2023With its
WISeSat.Space subsidiary, WISeKey has started the launch of the
WISeSat picosatellites constellation which will enable the direct
connection of satellites to IoT devices for authentication wherever
they are in the world, through secure telecommunication means even
in remote, low connectivity areas. Management expects that this
will lead to a new revenue stream for WISeKey. This technology
allows for identification anywhere in the world and will rely on
our semiconductors’ technology coupled with our authentication
solutions.
SEALSQ’s R&D investment in post-quantum resistant technology
is also expected to generate new revenue from next generation
semiconductors starting in 2025/2026. However, management expects
2024 to be a transition year where the focus of our semiconductor
customer demand will shift to the next generation of products,
which is likely to impair our IoT segment growth temporarily in
2024 before full production of the next generation products starts
in 2025/2026.
Gross ProfitOur gross profit margin increased
by over 9 percentage points from 44% in H1 2022 to 53.6% in
H2 2023, whilst growth profit increased by a staggering 69% to
$8.1 million in H1 2023, in comparison with a gross profit of
$4.8 million in H1 2022. These good results are closely linked to
the 39% year-on-year increase in revenue between H1 2022 and H1
2023, and our ability to update our pricing strategy to absorb the
higher purchase costs caused by the shortage in semiconductor that
impacted our inventory in 2022.
However, with the semiconductor supply chain back to full
capacity, we expect that competitiveness will increase and our
gross margin will stabilize to pre-Covid levels as semiconductor
customers will no longer be willing to pay a premium to secure
their order and circumvent any shortages.
Operating Results WISeKey’s operating loss
decreased by 11% from $6.6 million in H1 2022 to $5.9 million in H1
2023 despite one-off listing-related expenses of $0.4 million
incurred in H1 2023 and expenses in relation to the newly created
Board and management services following the listing of SEALSQ Corp.
on the Nasdaq. We expect that our operating expenses will increase
in future periods as our strategy includes:
- the strengthening of our sales and
marketing team to expand our customer base both through new
industries and geographically;
- investment in our
satellite-operated technology and the launch of additional WISeSat
picosatellites to increase coverage and strengthen our offer of
authentication solutions anywhere in the world, even in low
connectivity areas;
- a capital expenditure investment
plan over five years started in 2022, aiming to increase our
semiconductor production capacity; and
- our R&D investment in relation
to the QUASARS project for the next generation, post-quantum
semiconductors.
Net Results The increase in net loss from
continuing operations from $6.6 million in H1 2022 to
$7.1 million for H1 2023 is mainly due to the
listing-related expenses of $0.4 million for the Nasdaq
listing of SEALSQ as well as additional investment in technology
and capital expenditure mentioned above.
Net results have switched from a net income of $0.8 million
in H1 2022 to a net loss of $7.1 million in H1 2023
mainly due to the $11.8 million gain on disposal of arago GmbH
disclosed for the six months ended June 30, 2022. However, the
receivable for the sale of arago GmbH was fully written off as at
December 31, 2022, which transformed the $11.8 gain on disposal as
at June 30, 2022 into a $15 million loss on disposal as at
December 31, 2022. Taking into account that write-off for the sale
of arago GmbH, the net loss of $7.1 million in H1 2023
compares well to a net loss of $26.1 million in H1 2022,
including $4.4 million generated by arago GmbH. With the sale
of this company, WISeKey has significantly reduced its cash burn
rate and fixed costs.
Liquidity and Capital ResourcesCash and cash
equivalents at June 30, 2023 was $14.1 million, compared to
$20.7 million at December 31, 2022. The most
significant sources of funding of the Group are financing
facilities, customer sales and research tax credits provided by the
French government. WISeKey intends to continue its efforts to
streamline its cost structure and reduce its cash burn.
Consolidated Income Statement of WISeKey International
Holding Ltd
|
Unaudited 6 months ended June 30, |
Year-on-YearVariance |
USD'000 |
2023 |
|
2022 |
|
|
|
|
|
|
|
|
Net sales |
15,107 |
|
10,840 |
|
39% |
Cost of
sales |
(6,924) |
|
(6,305) |
|
10% |
Depreciation of
production assets |
(84) |
|
240 |
|
-135% |
Gross
profit |
8,099 |
|
4,775 |
|
70% |
|
|
|
|
|
|
Other operating
income |
21 |
|
33 |
|
-36% |
Research &
development expenses |
(2,151) |
|
(1,699) |
|
27% |
Selling &
marketing expenses |
(3,887) |
|
(3,556) |
|
9% |
General &
administrative expenses |
(7,968) |
|
(6,156) |
|
29% |
Total
operating expenses |
(13,985) |
|
(11,378) |
|
23% |
Operating loss |
(5,886) |
|
(6,603) |
|
-11% |
|
|
|
|
|
|
Non-operating
income |
598 |
|
2,795 |
|
-79% |
Debt conversion
expense |
(484) |
|
(603) |
|
-20% |
Interest and
amortization of debt discount |
(119) |
|
(134) |
|
-11% |
Non-operating
expenses |
(896) |
|
(2,083) |
|
29% |
Loss
before income tax expense |
(6,787) |
|
(6,628) |
|
2% |
|
|
|
|
|
|
Income tax
income (expense) |
(322) |
|
(1) |
|
32100% |
Net
loss from continuing operations |
(7,109) |
|
(6,629) |
|
7% |
|
|
|
|
|
|
Income / (loss)
on discontinued operations |
- |
|
7,379 |
|
n/a |
Net
loss |
(7,109) |
|
750 |
|
-1048% |
Non-GAAP Financial MeasuresIn
managing the business on a consolidated basis, management develops
an annual operating plan, which is approved by our Board of
Directors, using non-GAAP financial measures including EBITDA and
adjusted net income. In measuring performance against this plan,
management considers the actual or potential impacts on these
non-GAAP financial measures from actions taken to reduce costs with
the goal of increasing our gross margin and operating margin and
when assessing appropriate levels of research and development
efforts. In addition, management relies upon these non-GAAP
financial measures when making decisions about product spending,
administrative budgets, and other operating expenses. We believe
that these non-GAAP financial measures, when coupled with the GAAP
results and the reconciliations to corresponding GAAP financial
measures, provide a more complete understanding of the Company’s
results of operations and the factors and trends affecting
business. We believe that they enable investors to perform
additional comparisons of our operating results, to assess our
liquidity and capital position and to analyze financial performance
excluding the effect of expenses unrelated to operations, certain
non-cash expenses related to acquisitions and share-based
compensation expense, which may obscure trends in the Company’s
underlying performance. This information also enables investors to
compare financial results between periods where certain items may
vary independent of business performance and allows for greater
transparency with respect to key metrics used by management.
These non-GAAP financial measures are provided in addition to,
and not as a substitute for, or superior to, measures of financial
performance prepared in accordance with GAAP. The presentation of
these and other similar items in non-GAAP financial results should
not be interpreted as implying that these items are non-recurring,
infrequent, or unusual. Reconciliations of these non-GAAP measures
to the most comparable measures calculated in accordance with GAAP
are provided in the financial statements portion of this release in
a schedule entitled “Financial Reconciliation of GAAP to non-GAAP
Results (unaudited).”EBITDA is defined as Operating income/(loss)
for the reporting period before depreciation and amortization for
the same reporting period.
Non-GAAP to GAAP
Reconciliations -
WISeKey International Holding
Ltd
Financial Reconciliation of GAAP to non-GAAP Results
(unaudited) |
6 months to June 30, |
6 months to June 30, |
(Million US$) |
2023 |
2022 |
Operating
income/(loss) as reported |
(5.9) |
(6.6) |
Non-GAAP
adjustments |
|
|
Depreciation expense |
0.2 |
0.1 |
EBITDA |
(5.7) |
(6.5) |
|
|
|
Net
income/(loss) attributable to WISeKey as reported |
(7.0) |
2.4 |
Non-GAAP
adjustments from continuing operations: |
|
|
Depreciation expense |
0.2 |
0.1 |
Listing-related professional fees |
0.4 |
- |
Gain from the divestiture of a business |
- |
(11.8) |
Adjusted net income/(loss) attributable to
WISeKey |
(6.4) |
(9.3) |
About WISeKeyWISeKey International Holding
Ltd (“WISeKey”, SIX: WIHN; Nasdaq: WKEY) is a global leader in
cybersecurity, digital identity, and IoT solutions platform. It
operates as a Swiss-based holding company through several
operational subsidiaries, each dedicated to specific aspects of its
technology portfolio. The subsidiaries include (i) SEALSQ Corp
(Nasdaq: LAES), which focuses on semiconductors, PKI, and
post-quantum technology products, (ii) WISeKey SA which specializes
in RoT and PKI solutions for secure authentication and
identification in IoT, Blockchain, and AI, (iii) WISeSat.Space AG
which focuses on space technology for secure satellite
communication, specifically for IoT applications, and (iv) WISe.ART
Corp which focuses on trusted blockchain NFTs and operates the
WISe.ART marketplace for secure NFT transactions.
Each subsidiary contributes to
WISeKey’s mission of securing the internet while focusing on their
respective areas of research and expertise. Their technologies
seamlessly integrate into the comprehensive WISeKey platform.
WISeKey secures digital identity ecosystems for individuals and
objects using Blockchain, AI, and IoT technologies. With over 1.6
billion microchips deployed across various IoT sectors, WISeKey
plays a vital role in securing the Internet of Everything. The
company’s semiconductors generate valuable Big Data that, when
analyzed with AI, enable predictive equipment failure prevention.
Trusted by the OISTE/WISeKey cryptographic Root of Trust, WISeKey
provides secure authentication and identification for IoT,
Blockchain, and AI applications. The WISeKey Root of Trust ensures
the integrity of online transactions between objects and people.
For more information on WISeKey’s strategic direction and its
subsidiary companies, please visit www.wisekey.com.
Press and investor
contacts:
WISeKey International Holding
Ltd Company Contact: Carlos MoreiraChairman
& CEOTel: +41 22 594 3000info@wisekey.com |
WISeKey Investor Relations
(US) Contact: Lena CatiThe Equity Group
Inc.Tel: +1 212 836-9611lcati@equityny.com |
Disclaimer:This
communication expressly or implicitly contains certain
forward-looking statements concerning WISeKey International Holding
Ltd and its business (including, without limitation, estimates of
business opportunities). Such statements involve certain known and
unknown risks, uncertainties and other factors, which could cause
the actual results, financial condition, performance or
achievements of WISeKey International Holding Ltd to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking statements. WISeKey
International Holding Ltd is providing this communication as of
this date and does not undertake to update any forward-looking
statements contained herein as a result of new information, future
events or otherwise.This press release does not constitute an offer
to sell, or a solicitation of an offer to buy, any securities, and
it does not constitute an offering prospectus within the meaning of
the Swiss Financial Services Act (“FinSA”), the FInSa’s predecessor
legislation or advertising within the meaning of the FinSA.
Investors must rely on their own evaluation of WISeKey and its
securities, including the merits and risks involved. Nothing
contained herein is, or shall be relied on as, a promise or
representation as to the future performance of WISeKey.
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