archTIS Limited

Good morning, everybody. As usual, we'll give a few of the late participants a chance to log in. We'll be with you momentarily. All right, why don't we get going? Well, good morning and welcome to ARC. This is Q1 FY27 quarterly report for the period ending September 30th, 2026. My name is Curt Muffelman. I'm joined by our CEO, Mr. Daniel Lai. This morning, we'll be reporting on how the business became leaner with higher margins following the Spiron integration. We'll cover the financials, our USDOD and broader defense momentum update, some product direction, FY27 priorities, and then take some questions. Dan, why don't I turn it over to you for some introductory comments and observations.

Thanks, Kurt, and welcome everybody to the quarterly webinar. Look, it's a strong result. Annual recurring revenue is $13.3 million. That's three times up through the comparative period. Revenue was up 140%. Gross margin is higher on 79%. Operating expenses fell 17%. taking us close to an operating cash flow of break even. Record receipts there of $5.3 million. And of course, operationally, we've had some success there as well. Obviously, there the USDOD closing the services contract, another great confidence builder there that USDOD is moving forward with us. in looking towards that enterprise license deal. Australian Defence, $3.2 million in codency renewal with services for them to embed that further within their ecosystem and expand their licenses there over the next few years. Our US-EU alliance continues to be delivered. They're all obviously just coming back to work from their summer holidays, and that progresses well. We also did a partnership agreement with PECSIP, and for those of you that are following this more deeply, we'll understand where they're placed in that defence ecosystem for collaboration products. That's a very good partnership arrangement, and we're expecting to turn that dial on some revenue-generating opportunities in the near future. We've got FITS 143. Validation, so that just removes an encryption obstacle for operating with NIP Defense clients. And of course, another award, Cyber Business of the Year and Security Innovation of the Year for the way that we approach AI. And last but not least, of course, the CBA extension, which we announced this morning, moving that $4 million tranche from the 31st of October to the 30th of April, 2027. So overall, they're the highlights for the quarter, and I think it's been a strong quarter.

I loved how you slipped in the CBA extension last, but not least. Let me run through the financial summary. So against prior quarter, you know, it's not really about efficiency. Gross margins are up to 79%, and we continue to see that being really the point that we want to target for. We'd love to break an eight as the first digit, but, you know, we're really happy with 79%. Operating expenses fell for the third consecutive quarter from $6.9 million to $4.4 million, so you can kind of see how we're operationalizing the business. And obviously, receipts at the $5-plus million really benefited from our annual seasonal renewals that fall in this quarter. The customer receipts were 5.3, which is a record, obviously. We've more than doubled the June quarter. And that's the first receipts that exceeded operating payments since the Spiron acquisition. So we feel really good about where that is. Again, seasonality behind that. The quality of the receipts is important, really, as well, as the receipts came entirely from customers. There was no R&D tax incentives, grant income, or anything else. It was just straight customer receipts. And those receipts came from a million dollars of the renewed DOD with cogency contract that Dan talked about in his opening statements, and the renewals across all our product lines, including some growing enterprise customers, which we really will talk about in a little bit. Revenue for the quarter was $3.6 million, up 242% of $1.4, reflecting our continued shift in revenue mix. We're really pushing hard on high-value proprietary licensing, and that's pushing that almost 80% gross margin, which is up over 4% from 75% in Q1 of FY27. So you can really see where we're pushing that. You know, the growth has been accompanied by a cost discipline. I think that's really what we want to push. We've talked about it, and you're starting to see the results of that. We're operating expenses declined each quarter since December, 25 following our cost reduction initiatives, and now we're at $4.4 million in Q1, 17% below last quarter and 25% below December 25, which is the first fully integrated quarter within Spirion. And I think you can also tell that by looking at where we are from staffing costs. Now, staffing costs fell 46% over the same period, from $5.7 to $3.1 million. And we really expect that to continue to climb. We're looking at ways of continuing the operationalized technology that's out there in the market to become more efficient and leaner, as well as looking at ways to continue to make sure that we have the proper synergies in place as we continue to evolve from the Spearion acquisition and the way that we position it. ARR was 13.3 as of September 30th, more than three times the multiple of the prior comparative period, building up on that recurring base of 150 enterprise customers. We'll really focus on ARR through our U.S. defense, our federal licensing, including the pending U.S. DOD that Dan will talk about in a few minutes, new and cross-sell Spirion customers, which we've announced over the last couple of months, and through our new partnerships that are leveraging TDI, including Mattermost and Pexa. The company ended the quarter with cash of $2.3 million and unused facilities of half a million dollars for a total available funding of $2.8 million. So, I guess what I want to do is, and I'll have you chime in in a few seconds, but, you know, we look at October 1st being the one-year anniversary since the acquisition of Spirion, and obviously it comes with growing pains. I've done 20 M&A deals previously, and You know, everyone has its own special growing pains alongside, and this one was no different. But the December quarter was really our full first quarter whispering on, and so it's really the right baseline that we can do this analysis on. And as we can see, receipts are up 236%. Operating payments or cash going out the door is down 29%. And as I said before, staff costs are down 46%. So those are some really good numbers that we're starting to really build the foundation off of. Operating expenses are a quarter lower, and gross margins, again, moved up to 79%. Really, the integration has done what it was meant to do. We created a larger customer base, a smaller, more efficient cost structure, while adding a stronger U.S. presence that will help support us in the U.S. DOD opportunity coming forward. So, Dan, with that being the happy anniversary of Spirion, why don't you talk a little bit about what your thoughts on Spirion has been over the past year? Sure.