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Arqit Quantum Inc. Announces Financial and Operational Results for the Fiscal Year 2022

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Arqit

Arqit

$20 million of revenue and other operating income for the fiscal year

Technology innovation expected to have positive impact on future results

Recent major channel partner announcements clarify path to success

LONDON, Dec. 14, 2022 (GLOBE NEWSWIRE) — Arqit Quantum Inc. (Nasdaq: ARQQ, ARQQW) (“Arqit”), a global leader in quantum encryption technology, today announced its operational and financial results for the full fiscal year 30 September 2022.

Recent Operational Highlights

  • Announced separately today that, as a result of further innovation in our technology, we no longer need to build or operate quantum satellites. Through technical innovation we have emulated the relevant quantum processes of creating and distributing random numbers in software form so that the QuantumCloud™ tech stack no longer requires satellite infrastructure.

    • The security proof of QuantumCloud™ was independently assured this year by the GCHQ Accredited Centre of Excellence in Cyber Security at the University of Surrey and PA Consulting. This demonstrated that Arqit’s software uniquely produces encryption keys at mass market scale which are provably secure and zero trust.

    • The security proof was a major determinant in the conclusion that the tech stack no longer requires satellite hardware. We expect that these changes to our technology strategy will result in a positive effect on our future results, with a portion of capitalised satellite costs recouped through the planned partial or total sale of the satellite system currently under construction, additional revenues through the licensing of our quantum satellite IP, and the elimination of future capital and operating expenditures associated with use of satellites as part of our core product offering.

  • Announced a series of major channel partner relationships which refocuses and accelerates our go-to-market strategy and is expected to drive growth through annual recurring revenues.

    • Arqit and Fortinet announced the integration of Arqit’s QuantumCloud™ with the Fortinet Fortigate series of Next Generation Fire Walls. This integrated solution enables unbreakable quantum-safe encrypted connectivity between customer locations keeping safe data both at rest and in transit. Fortinet has made the integrated product available to its global customers.

    • Arqit and Amazon Web Services Partner Network announced the integration of QuantumCloud™ with Amazon S3, an object storage service used by millions of customers of all sizes and industries that offers industry-leading availability, security and performance, and virtually unlimited scalability. Today, Amazon S3 contains more than 200 trillion objects. The integration of QuantumCloud™ with S3 will allow AWS customers to protect their data against attacks today and the future quantum threat.

    • Arqit announced that it has signed with Dell Technologies a “Dell OEM Engineered Solutions Pilot Agreement”. Arqit’s QuantumCloud™ software will be preloaded on selected Dell hardware devices, enabling Dell sales teams to sell the combined hardware and software as a single SKU to address existing and new customer needs. The initial target market is the US Federal Government, including the Department of Defense, the Federal Civilian Agencies and the Intelligence Community. Dell sales teams will be able to offer Arqit QuantumCloud™ software and Arqit sales teams will be able to offer Dell hardware and services in their sales portfolios.

  • Arqit’s symmetric key agreement technology has been selected as part of the potential technology solution for two U.S. Government programs of record. The contracts were expected to be signed in fiscal year 2022 but slipped into October. Revenue is expected to be booked in the current fiscal year.

  • Launched the first phase of a digital asset strategy focused initially on securing digital trade finance. Arqit has signed a contract with Traxpay GmBH, a leader in supply chain finance, to deploy our technology into Traxpay’s supply chain platform to secure supplier and buyer transactions. The U.K., Singapore and other leading trade finance nations have passed, or have pending, legislation authorizing digital trade finance documentation for use. Trade finance is a $17 trillion annual market which is supported by documentation which now can be digital and must be secured. We believe that Arqit has launched the first digital asset to be fully compliant with these new laws which emphasize necessary “tamper proof” cyber security.

  • Announced in partnership with Sovereign Cloud Australia Pty Ltd (“AUCloud”), a leader in sovereign infrastructure-as-a-service, the general availability of the Asia Pacific region’s first quantum safe symmetric key agreement software. Powered by Arqit’s QuantumCloud™, the service is available to governments and enterprises from AUCloud as a platform-as-a-service, enabling quantum-safe encryption capability for the Australian market and near-region customers.

  • Signed a contract with Nine23 Ltd, a cyber security solutions provider for U.K. regulated and compliant sectors, to deploy Arqit’s QuantumCloud™ symmetric key agreement software on Nine23’s U.K. Sovereign Secure Private Cloud infrastructure. Arqit and Nine23 will work together to address U.K. government and defence customers looking to improve the security of their infrastructure against cyberattacks. Service is available through the U.K. government G-Cloud 13 digital market place.

  • Arqit was recognized with two awards: the Innovation in Cyber Award for 2022 at The National Cyber Awards and the Cyber Software Company of the Year at the Cyber Security Awards.

Management Commentary

“In its first full year of commercial operation, Arqit has independently validated that its software is unique in delivering zero trust and quantum safe encryption at large scale and with great ease of implementation and as a result has secured a pathway to success by onboarding a number of major technology channel partners,” said David Williams, Arqit Founder, Chairman and Chief Executive Officer. “Through innovation and better understanding of how customers want to consume our products, our go-to-market strategy is maturing and we are able to enter the scaled execution phase with confidence.

“As we separately announced today, innovation in the delivery of replicated randomness to data centres globally has eliminated the need for satellite distribution within our tech stack. This development is not only expected to have a positive impact on Arqit’s future financial results, it allowed us to reconsider our role in building satellites for third parties, particularly government and military customers. Going forward for these customers, who are interested in the unique properties which the satellite distribution method offers in sovereign, on-premises control of key agreement and eavesdropper detection, we will license our patented ARQ19 satellite technology to build their own satellites and they will then purchase a QuantumCloud™ licence from Arqit. This provides further cashflow management benefits to the company while allowing government customers the benefit of supporting national industrial bases by constructing satellite assets themselves.

“The independent validation of our security proof in May of this year was a seminal event for the company. The security proof written by our own chief cryptographer Dr. Daniel Shiu was independently assured by the Centre of Excellence in Cyber Security at the University of Surrey and PA Consulting. We have provided confidential briefs of the independent assurance report to leading prospective customers and partners and have seen an acceleration of interest in our product by global technology vendors and governments as a result. Our recently announced partnerships with leading technology vendors have occurred sooner than we expected and we are hopeful of securing additional significant channel global partnerships during the current fiscal year. Although there is no certainty about the scale and timing of revenue ramp up of our new strategy, we anticipate that generating annual recurring revenues through channel partnerships with global vendors will ultimately result in more consistent and predictable results compared with selling enterprise licenses.

“The adoption and integration of our symmetric key agreement software into the products and solutions of such global players as Fortinet, Dell and AWS has clarified two major strategic questions – how customers want to consume our product and how to reach those customers. Generally, it is easier for end customers to consume our technology through integration with products that they already use and are now upgraded to become quantum safe. Partnering with such leading technology vendors allows end users to do just that. Our new technology partners have massive installed user bases that are addressable by integrated Arqit secured products. This represents a fast lane to reaching large numbers of potential end users of our product and building future annual recurring revenues.

“We prioritized a significant portion of our finite resources to capture this go-to-market strategy in fiscal year 2022, rather than focussing on the more tactical enterprise licence sales. Fulfilling the opportunity with channel partners will be a key focus for 2023. We will continue to generate enterprise licence sales with certain defence customers but the business model is now set for annual recurring revenue generation from our QuantumCloud™ platform-as-a-service integrated with major technology vendors.

“We remain excited about and committed to the government market. We had anticipated booking several government contracts in fiscal year 2022 which slipped into the current fiscal year. Being named as part of two U.S. Government programs of record points to broader adoption opportunities which we are actively pursuing. Our partnerships with AUCloud and Nine23 represent additional vectors for addressing government customers through infrastructure-as-a-service vendors.

“Whilst the macro environment is tough for most, this and the effect of war have extended sales cycles generally. However, the commitment of governments, companies and boards to maintain and increase cybersecurity budgets remains firm. We are also pleased to see the National Institute of Standards and Technology stating its belief that symmetric key agreement is the best form of post quantum cryptography. Our symmetric key agreement software is well positioned to deliver stronger, simpler encryption as a fundamental part of the zero trust strategy of the world’s biggest vendors, and the enterprises and governments that they serve.”

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 full fiscal year ended 30 September 2022 to prior…



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