Arqit Quantum Inc.

Good day, and thank you for standing by. Welcome to the RCIT conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. On today's call, we will be referring to the press release file this morning that details the company's first half of fiscal year and 2022 results, which can be downloaded from the company's website at ARQIT.UK. At the end of the company's prepared remarks, there will be a question and answer period for selected equity research analysts. Please note that those selected equity research analysts that would like to ask a question in the Q&A session will need to dial on the call rather than joining through the webcast link. Finally, a recording of the call will be available on the investor section of the company's website later today. Please note that this webcast includes forward-looking statements, statements about the company's beliefs and expectations containing words such as may, will, could, believe, expect, anticipate, and similar expressions are forward-looking statements and are based on assumptions and beliefs as of today. The company encourages you to review the safe harbor statements, risk factors, and other disclaimers contained in today's press release, as well as in the company's filings with the Securities and Exchange Commission, which identifies specific risk factors that may cause actual results or events to differ materially from those described in our forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after this webcast. The company also notes that on this call, it may be discussing non-IFRS financial information. The company is providing that information as a supplement to information prepared in accordance with International Financial Reporting Standards, or IFRS. You can find a reconciliation of these metrics to the company's reported IFRS results in the reconciliation tables provided in today's earnings release. And now, I will turn the call over to David Williams, the company's founder, chairman, and chief executive officer. David?

Thank you, Carmen. Hello, I'm David Williams, and I'm joined by our chief financial officer, Nick Poynton. welcome everyone to ARCIT's half-year results conference call. While this is not our debut earnings call, it is an important milestone as it represents our first full period of commercial operations since our NASDAQ listing in September of 2021. We're pleased with our results for the six months ended March 2022. Compared with a nominal prior year revenue, We've generated $12.3 million in revenue and other operating income for the first six months of our fiscal year 2022. While we're pleased with the financial results, we are perhaps more excited about what the period suggests for our future prospects. As a young company, we're on a journey. We are growing in our development of our technology. We're growing in our understanding of the application and use of our product. We're growing in our understanding of how to sell our product and we're growing as an organization to meet the market opportunity which we see in front of us today. There is one thing about which we are absolutely certain. The needs today for stronger, simpler encryption to address current security threats and the threats of tomorrow. Whether it is in conversation with enterprise customers, governments, or regulatory bodies, the awareness of the need for focus and action to proactively address the issue is becoming profound. Last week, the White House issued a national security memorandum in which it urged U.S. government departments to prepare for the quantum threat and noted that symmetric encryption is presently regarded as a suitable upgrade path. This is the very technology that ArcIT uniquely has transformed. ArcIT is positioned to benefit from the tailwind of the market imperative for improved security and does so with unique technology. ARCIT sells a symmetric key agreement software platform. Quantum safe keys can be generated by endpoints using a lightweight software agent with zero trust in the instant needed and practically unlimited group sizes to secure data and communications channels. Symmetric key encryption has always been the benchmark for cryptographic security. Its drawback has been its distribution inefficiencies. Arquette solves that problem. This is crucial since the algorithms required to use symmetric keys are already standardized and widely understood. Thus, Arquette's technology represents a reimagining and greatly more usable version of an existing standard, which means that customers do not need a costly replacement cycle to use Quantum Cloud, as our products already fit into many existing standards and protocols. Last week, the National Security Memorandum on Promoting United States Leadership in Quantum Computing While Mitigating Risks to Vulnerable Cryptographic Systems said that by December 2023, agencies maintaining national security systems shall implement symmetric key protections. ARCIT fits that category, and most competitors do not. To more easily demonstrate and evidence the unique quantum safe capabilities of Arquit's technology to customers, we submitted Arquit's security proof to the University of Surrey for review. The University of Surrey is widely recognized as an academic center for excellence in cybersecurity research by the UK government's National Cybersecurity Center. We announced the results of the review yesterday. The review concluded that Arquit's symmetric key agreement technology generates encryption keys which are zero trust and computationally secure, and declared that our technology represents a significant advance in secure communications. ARCIT continues to innovate. Last week, we were informed that a fifth patent family was granted by the UK Intellectual Patent Office. During the six-month period ending March, ARCIT submitted 145 additional claims in five new patent families, bringing our kits total to 1,580 patent claims and 26 patent families filed or granted in the UK. We hope to be able to discuss some of the key innovations which are under development in the near future. Innovations in the queue could potentially make our technologies more efficient, save costs, and increase product features. Our success with customers in the first half and announced demonstration initiatives confirm that we have targeted the right industry segments. We continue to focus on defense, telecoms, financial services, and the Internet of Things. We continue to develop potential use cases for our products and how to take them to market. For example, our partnership with Blue Mesh, funded by the UK government Department for Culture, Media and Sport, to demonstrate a quantum secure data communication service over a widely standardized protocol called MQTT for industrial IoT is a fine example. The applicability of the product is broad. We can take what we learn from the demonstration and seek to monetize it across a range of industrial IoT applications. We described another compelling use case through our social media channels this past Monday. A major cybersecurity vendor, an ARCIT, jointly demonstrated the first quantum secure firewall at the Cyber UK security event hosted by the UK National Cyber Security Center. It is clear to us from this demonstration that a quantum safe firewall is a compelling and broadly applicable use case, and also that leading hardware and security vendors are increasingly forward thinking about meeting the quantum threat and are open to incorporating innovative third party technologies. Over the past six months, we've grown in our understanding of our value proposition and how to position it with customers. From the perspective of the customer, it is often the ease of implementation that is a major purchasing decision factor. Our QuantumCloud product can be integrated into existing security architectures to provide the benefits of symmetric de-encryption without the need to rip and replace. Our product is compatible with the AES256 symmetric encryption algorithm, which is widely used today. Quantum Cloud can wrap a client's existing architecture, providing the benefits of symmetric key encryption, while permitting the client to evolve its underlying architectures over time. We believe emphasizing ease of implementation will be an important sales differentiator as we move forward. In terms of sales opportunities, we see significant potential client demand in both the enterprise and government markets. We've expanded our sales team significantly since September with in-country coverage now for all of our major target markets internationally. Our focus is on the prioritization of the customer opportunities best able to deliver significant near-term results. We must marshal our resources effectively to maximize results. We're pleased with our announced first half results. We expect to build momentum from our first half performance Continued success in the commercial sector and meaningful announcements in specific industry verticals such as telecoms and defense are anticipated in the second half of our fiscal year. With that, let me turn over the call to Nick Poyton, our CFO, for a few remarks on our financials. Nick. Thank you, David.

As we only commenced commercialization and began generating revenue late in the second half of our fiscal year 2021, A comparison of our current half-year results with a comparable period in the fiscal year 2021 may not be meaningful across all financial metrics. For the six-month period ended March 31, 2022, we generated $12.3 million in revenue and other operating income from new Quantum Cloud contracts and other activities. Our Quantum Cloud revenue totaled $5.3 million for the period generated by four contracts, The bulk of the quantum cloud revenue was generated by contracts with Virgin Orbit and AU Cloud. It is our expectation that the scope of these contracts will expand in the future. Other operating income of $7 million resulted from ARCIT's ongoing project contract with the European Space Agency. Our administrative expenses equate to operating costs for those familiar with US GAAP. For the period, our administrative expenses were $26.6 million versus $5.5 million for the compatible period in fiscal year 2021. The material increase in expenses reflects significant post-listing growth in our operating infrastructure costs and personnel, reflecting a 35-person increase in headcount to 109 employees during the period. Additionally, $10.1 million of the increase reflects a non-cash charge for share-based compensation. Operating loss for the period is $14.3 million versus a loss of $5.5 million for the comparable period in fiscal year 2021. We generated a profit before tax of $58 million. However, we generated an adjusted loss before tax of $14.4 million, which management's view reflects the underlying business performance once non-cash change in warrant value is deducted from profit before tax. During the period, 1.85 million warrants were exercised with cash proceeds to ARCIT of $21.3 million. We ended the period with a cash balance of $82.3 million versus a cash balance of $87 million as of the end of fiscal year 2021. ARCIT believes it has sufficient financial resources to meet its funding needs. As our revenue and contract base increases, providing us with a deeper data set from which to draw conclusions, we expect to provide KPIs to give constituents a better understanding of the business. With that, I turn the call back to David.