SEALSQ Corp

Greetings, ladies and gentlemen, and welcome to the CLSQ first half 2025 financial results earnings conference call. As a reminder, this conference call contains forward-looking statements. Such statements involve certain known and unknown risks, uncertainties, and other factors which could cause the actual results, financial condition, performance, or achievements of CLSQ to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. CLSQ 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. These risks are also discussed in our filings made with the Securities and Exchange Commission. Please be advised that our first half 2025 earnings release was issued on Tuesday, September 9, 2025. Also, our Form 6-K for the six-month period ended June 30, 2025. which was filed with the SEC on Tuesday, September 9th, 2025, can be found by visiting the investor section of the CLSQ website at investors.clsq.com. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to introduce Carlos Morera, founder and chief executive officer of CLSQ. Mr. Morera, you may begin.

Thank you very much, Kevin. Good afternoon to those joining us from Europe, and good morning to those joining us from the United States. I will begin today the call by discussing our business milestone for the first half of 2025. Then I will provide our growth initiatives and outlook for the second half of 25 and beyond, and hand over to John to provide our financial performances of the year for the half of the year. So, 2025 was a transformative year. It has been a pivotal year for CLSQ as we accelerated our mission to deliver quantum resistance semiconductor solutions and secure digital infrastructure for our rapidly evolving global market. The first half of the year confirmed the strength of our strategy, the resilience of our operations, and the scale of opportunities ahead. As a fabulous semiconductor innovator, CLSQ designed and marketed secure microcontrollers, both up the shelf and custom designed, integrated within a vertical trust service ecosystem featuring a post-quantum route of trust managed by public infrastructure services and secure chip personalization. Our solutions protect industries such as IoT, energy, automobile, and smart homes, as well as sensitive application in healthcare, government, and defense. While the global embedded security chip market is projected to reach nearly 10 billion by 2028, suppliers offering certified secure products remain scarce. This created a significant opportunity for CLSQ, uniquely positioned to deliver both regulatory compliance and resilience against emerging threats, such as quantum computers. Our strength market recognition, bolstered by the urgent need for secure microcontrollers to defend against post-quantum threat, has attracted strong investors' confidence. Since November 2024, We have raised over $140 million in additional capital to accelerate our product roadmap, execute a strategic investment, and expand our growth pipeline. So in terms of the product and technology milestones, in the first half of 25, we achieved tangible progress on innovation and commercialization. The first one is with Quasar program, engineering sample of the QS7001, which is a post-quantum microcontroller delivered to initial partners in Q2 2025 for testing. Production samples and development kits are scheduled for Q3 2025 with initial revenue expected in 2026. It is important to mention here that we are one of the first companies in the world with that type of aggressive roadmap. And this can be transformed into a very important business opportunity and revenue generation in 2026. The QVOL TPM, which is a pilot customer sampling for QVOL TPM V183. It is expected in Q425, followed by V185 in Q126. Initial revenues are projected for 26. The Vault IC 408 secure macrocontroller, which is an advanced to FIPS 143 level 3 validation, has been confirmed by UL independent lab test, which is NIST review ongoing now. The MS6003 secure element launched with FIDO2 passwordless authentication to meet demand in the fast-growing authentication market. Also in SBOX, which is deployed for factory IoT identification injection and in larger scale project, ensuring compliance with MATER, which is the Homeland Certification for Home Appliances in the United States and the U.S. Cyber Trust Mark. Also the Quantum Root CA, very important development achieved during the first year, introduced by the Oiste Foundation as the first PQC integrated PKI system to safeguard IoT financial and defense infrastructure against quantum encryption. Commercial achievements. So, the commercial momentum mirror on technology progress. Revenue is on track to increase 59% to 82% in 2025 versus 2024, supported by a strong demand for PKI services, secure hardware, and custom ASICs. Or TPF engagement, more than double. from 35 customer at the end of 2024 to 82 customers by mid-25, validating the relevance of a roadmap. We also secure multi-year supply agreements with global leaders, such as the Ager Group, Dyson, MIWA, and Delta Door. Expanding collaboration with Landis and Gear, which is one of the leading providers of smart meters in the world, including PKI deployment for 30 million utilities users in Asia and for the development for the U.S. market. Smart meters is one of the potential hardware that can be in real trouble if they are not post-quantum ready, and this company is taking the right step to make resilient at the product level with our technology. Advanced on-car reader business in Asia with new customer committing to several hundred thousand annual units. Expanding our global footprint by opening a sales office in India and appointing distribution in Asia, Europe, and Turkey. So now talking about the strategic investment and partnership. So 2025 has also marked a transformational phase in our growth strategy. The ICOps acquisition, bringing 100 engineers to our staff force, in August 2025, we completed the acquisition 100% of ICOps, a French company located in Grenoble, which are ASIC design specialists, bringing, as I mentioned, 100 skilled engineers into the CLSQ force. These strengths are common and custom post-quantum AC capability for medical, automobile, and IoT industry, as this company has been provided this technology to leading health companies and automobile companies in Europe. All of them require new specialized generation of chips. Quantic Edge Security Facility, which executed a $40 million investment in Murcia, Spain, with $20 million from the Spanish government, which is sitting now in $18 billion of investment in semiconductor in Spain. And we were one of the first projects authorized by them with a $10 million investment from Wisekey and CLSQ and $10 million investment from partners localized in Spain like Odin and Protege. This facility aligned with the EU CHIP Act will focus on post-quantum RISC-V, RISC-V chip design and secure semiconductor personalization with revenue expected already in 2026. Quantum Investment Fund was launched, initially launched at 20 million in late 2024, which has been expanded to 35 million in March 25. The first investment was Colibri TD, a French quantum as a service company with whom we are co-developing a quantum simulation approach to improve semiconductor wafer yields, potentially increase yields from 50% to 80% and reducing per chip cost by up to 50% in order to be more competitive in the market. This quantum investment fund is now looking into other companies as our vision is that post-quantum technologies will merge very soon with quantum capability and quantum computer companies, creating major leaders in this sector. Therefore, the requirement of this aggressive roadmap and investment fund that has been created within the company We also invested, as has been discussed in the last call, in space technology. So we, in cooperation with YSAT, we have been deploying a constellation, which is now sitting on 22 satellites. And CLSQ has invested $10 million to expand or secure quantum-ready satellite constellations. So from the next launch of the satellites in November this year, we will have the capability of securing post-quantum connections from the space all the way down to objects on Earth, in what is going to be one of the first ever secure post-quantum communication connecting mobile phones with all satellites. With two launches completed already in 25, COSQ now has one of the largest constellations in Europe with 22 operational satellites with plans to scale to 102 satellites by 2027. A strategic project with the Swiss Army has been signed, and we are in full deployment with Iran requirements for the use of those satellites. Very strong year also in terms of research and development in order to maintain the leading age. We continue to invest heavily in research and development, allocating 4.7 million in the first half of 25 as part of the 7.2 billion full year budget. This underscores our commitment to leadership in post-quantum innovation and the commercialization of next generation chips. Also on the financial strength with a robust catch reserve of 121 million as June 30, 25, and actually 150 million at September 9, 25. So the company is sitting now 150 million dollars. that, combined with a strong balance sheet, positions CoSQ to capitalize on growing demand for post-quantum resilient technology, potentially looking to acquisitions and strategic investment in the post-quantum roadmap. We are all placed to drive commercialization to our new technologies while funding strategies growth initiative becomes available. In August 25, CLSQ unveiled Convergen, a forward-looking initiative integrating AI, quantum technology, and next-generation solutions. The market is converging. All technologies are getting exponential, and they are creating synergies between themselves. And there is a huge market opportunity to develop business model around this convergent opportunity. Convergence unified PQC aligned with NIST standard tokenization, advanced encryption, YSAT-22 satellite constellation, decentralized physical infrastructure network, VPN, and machine-to-machine integration. M2M communication. Its goal is to build a robust digital trust architecture for the group, protecting over 1.6 billion devices that is already in the market across healthcare, IoT, financial services, smart cities, and space infrastructure. So the outlook for 2025 is also promising revenues expecting to be in the range of 17.5 million to 20 million representing already a growth of 59% to 82% year-on. As you all know, the revenue on quantum computers is still small because the market is not yet ready, and people are now taking decision in investing in quantum technology. But one of the things that's coming first, even in quantum, is the post-quantum, and you need to build their own resilience at the enterprise level, government level, hospital level, airport level, so you are ready when those quantum computers arrive in three to five years to be able to defend their attacks. This includes contribution from IC-ALPS following the August acquisition, the Quantix-H security project, and renewed demand for traditional products. So, 2023. sorry, 2026, the growth will be fueled by a full year of IC-ALPS revenue, new personalization center project revenue, including Quantix H security, and the launch, and this is the most important part for the year, visibility of the old quantum resistant TPM. Initial estimate reflects 50 to 100% revenue growth year on year, which is unseen in this sector for the moment. Pipeline, so we have a very strong pipeline or business pipeline. It stands at 170 million in opportunities for 2026 to 2028, reflecting a surge in demand for quantum resistance security solution and sovereign semiconductor expertise. I will now turn the call to John O'Hara, or CFO, who will discuss in detail the financial results for the first half of 2025 and our guidance for the second half of the year as a complement of my information provided so far. Please, John, go ahead.

Good morning, good afternoon, everybody. Half won 2025 revenue. Our revenue of 4.8 million, which was consistent with the first half of 2024, was entirely in line with our expectations. It reflects the anticipated continued strategic transition period ahead of the launch of our new post-quantum technologies. And we expect the second half of the year to start to grow, as we'll come on to shortly. The gross profit was 1.6 million, and the gross profit margin increased by 15 percentage points from 19% last year to 34% this year. We do expect when the revenues return to a more steady, say, level and we grow further that that will settle somewhere around the 45 to 50% margin on our legacy, on our chip products, and with the margin from ICLs expected to be somewhat higher due to the nature of their revenue and their services. We had cash reserves of $121 million as of June 30th, 2025, which was up from $19 million at the same point last year and up from $85 million at the end of 2024. Our current estimate of our cash burn, this gives us sufficient cash for a long time now on our cash burn rate, and we therefore believe we've got a strong war chest to also take advantage of any investment opportunities, any M&A activity that might come our way. We invested $4.7 million in research and development in the first half of the year, and we continue to have over $7 million allocated as a budget for this area for 2025, which is up from $5 million in the prior year. And that's before we take into account the research and development activities of ICOs, which will also be consolidated in our second half results. As Carlos has already mentioned, for the full year 2025, we expect our revenue to be between $17.5 and $12 million. representing between 59 and 82% growth year-on-year, which is, therefore, noting a return to growth in demand for our current semiconductor products, as well as consolidating the revenue of IC-ALPS since acquisition. We also look forward for a strong 2026, as Carlos has also highlighted with some very early guidance, which will be supported by a new business pipeline of 170 million of identified opportunities for 2026 to 2028 across PQC, ASIC, and sovereign semiconductor markets. With that, we are finalizing the prepared marks. I will pass back to Carlos so we can open up the call for Q&A. Thank you for your attention.

Thank you, John. Just as an end of the call remarks before we move into Q&A, just to mention that 2026 is going to be a very important year for the quantum industry, and particularly post-quantum, as the regulatory and technology landscape is moving in our favor with frameworks such as the European Union Cyber Resilience Act, the U.S. Government Cyber Trust Mark, and the UK PSTI Act mandating secure identities, encryption, and lifecycle management. So governments and strategic institutions worldwide have published roadmap requiring PQC adoption within the decade. So as I mentioned before, this industry is emerging in industry. We are in quantum world. We were on the web in the year 2000. Major players then they have developed technologies and positions such as CLSQ will become automatically high demanded companies as they bring a concrete solution for a concrete problem. Insurance companies are already announcing that they will increase their insurance premium if you are not yet PQC compliant. Government regulations are putting regulations bringing companies and other government institutions to be PQC compliant. And that will be reflected obviously on valuations of companies as the entry level to become a PQC compliant and quantum company is still very high and requires hundreds of millions of dollars on investment. So with strong financial resources, then we have the proven innovation and a strategic investment in place. CLSQ enters the second half of 2025 with a very strong momentum and confidence. Our vision is clear to lead the world in quantum resilience, cybersecurity, and semiconductor innovation while we have a very proven quantum roadmap in place. So we thank our shareholders, employee partners, and customers for their continued trust and support as we scale CSQ into the next phase of growth. So with that, we are finalizing the remark. I would like to open now the call for Q&A. Thank you very much for your attention.

Thank you. We'll now be conducting a question and answer session. If you'd like to be placed into question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to move your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one. One moment, please, while we poll for questions. Our first question today is coming from Matthew Kalinko from Maxim. Your line is now live.

Hi. Thank you for taking my questions. Firstly, just if we could clarify a little bit on the full-year R&D budget, I think you mentioned it was around $7 million. I think, you know, for the first half reported $4.7 million. It seemed that you're tracking ahead of that. So was there anything unusual in the first half spending that, you know, would not repeat in the second half? Just, you know, kind of ignoring the impact of the consolidation of the acquisition that we might expect?

Yeah. Hi, Matt. I hope you're well. So, yeah. So, within the first half of the year, there was a bit of an expense, a one-off expense for some stock-based compensation that falls under R&D. So, that was the main.

Got it. Okay. And could you venture a guess for what kind of the annual R&D run rate, taking that out would be when you layer in the acquisition.

Please stand by. We appear to be having some technical difficulties. I do not hear your line.

Hi, sorry. Can you hear me now?

Matthew, I hear you, my friend. Carlos, would you mind saying a few words? I do not hear the speaker line. We do apologize for the inconvenience. Everyone, please stand by. Once again, ladies and gentlemen, we do apologize for the inconvenience. Please stand by. In the meantime, I'm going to play some music while we connect the speaker line. Just do not disconnect, everyone. We will be connected shortly, and we'll continue the Q&A session, okay? Please stand by.