Arqit Quantum (ARQQ) - 2021 Q4 - Annual Report

Fiscal Year 2021 Results Overview Management Commentary Arqit's FY2021 was transformative, marked by commercial launch, NASDAQ listing, and over $130 million in revenue contracts - The company launched its business after four years of development, creating technology to solve current and future encryption problems posed by quantum computers[2] - The NASDAQ listing in September provided Arqit with enough capital to fund its business plan and launch its full commercial service[2] - Customer billings commenced in Q4 2021, and over $130 million in revenue contracts were announced with significant global corporations and governments[2] - The company is initially focusing on a channel strategy targeting defence, financial services, telecoms, and IoT to generate early revenues[3] Fiscal Year 2021 Operational Highlights Arqit achieved significant FY2021 operational milestones, including QuantumCloud™ launch, key agreements, and expanding its IP portfolio - QuantumCloud™ Release 1.0 was launched in July with full commercialization in September[4] - Signed key agreements and contracts with leading global organizations, including BT Group, Sumitomo, Northrop Grumman, Dentons, Juniper Networks, and Babcock[4][5] - Formed an international federation of G7 companies and government organizations to provide private instances of Arqit's technology stack[5] - Increased its filed patent portfolio to 1,435 patent claims on 21 pending or allowed patents[6] Fiscal Year 2021 Financial Highlights Arqit's FY2021 financial highlights include significant NASDAQ proceeds, substantial cash, and a reduced adjusted loss before tax Key Financial Metrics for Fiscal Year 2021 | Metric | Value (USD) | | :--- | :--- | | Net proceeds from NASDAQ listing | c. $96 million | | Cash and cash equivalents | $86.9 million | | Loss before tax (IFRS) | $271.7 million | | Adjusted loss before tax (Non-IFRS) | $15.6 million | Fiscal Year 2022 Outlook and Recent Developments Arqit anticipates strengthening demand in FY2022, with planned QuantumCloud™ releases, a 2023 satellite launch, and recent new agreements - The company believes its product is superior to alternatives like Post Quantum Algorithms, which are not definitively quantum safe and are difficult to implement on small devices[8] - QuantumCloud™ Release 1.1 is scheduled for February 2022, and Release 1.2 will launch by the end of 2022. The first satellite is planned for a 2023 launch[10] - Since the fiscal year-end, Arqit has announced new agreements with Blue Bear Systems Research Ltd. and NEOM, with more contract announcements expected in the near term[11] Financial Disclosures and Reconciliations Use of Non-GAAP Financial Measures The company uses 'adjusted loss before tax,' a non-IFRS measure, to monitor ongoing financial performance by excluding non-recurring and non-cash items - Adjusted loss before tax is a non-IFRS measure used by management to monitor ongoing financial performance[12] - This measure excludes non-recurring items (reverse acquisition expense, Nasdaq listing expense) and a non-cash expense (change in fair value of warrants) to better reflect standard operations[12] IFRS and Non-GAAP Loss Before Tax Reconciliation The company reconciles IFRS loss before tax to non-GAAP adjusted loss, adjusting a $271.7 million IFRS loss to a $15.6 million adjusted loss Reconciliation of IFRS to Non-GAAP Loss Before Tax (Year ended 30 September 2021) | Description | Amount (USD) | | :--- | :--- | | Loss before tax on an IFRS basis | (271,729,101) | | Reverse acquisition expense | 155,459,939 | | Change in fair value of warrants | 98,090,070 | | NASDAQ listing expense | 2,589,611 | | Adjusted loss before tax | (15,589,481) | - The reverse acquisition expense is a non-cash, non-recurring charge representing the premium paid for obtaining the public listing[14] - The change in fair value of warrants is a non-cash expense required by IFRS, and NASDAQ listing expenses are non-recurring[15] Other Accounting Information As of September 30, 2021, Arqit reported $114 million in assets, $87 million cash, and $148 million in liabilities, with $128 million from warrants Balance Sheet Summary (as of September 30, 2021) | Item | Value (USD) | | :--- | :--- | | Total Assets | $114 million | | Cash (included in Total Assets) | $87 million | | Total Liabilities | $148 million | | Warrant Liabilities | $128 million | | Other Liabilities | $20 million | Company Information and Disclaimers About Arqit Arqit provides QuantumCloud™, a quantum encryption Platform-as-a-Service, enabling networked devices to create secure, zero-trust encryption keys against cyberattacks - Arqit supplies a quantum encryption Platform-as-a-Service (PaaS) named QuantumCloud™[17] - The product enables any networked device to download a software agent to create secure, one-time use, zero-trust encryption keys to protect against attacks, including from quantum computers[17] Caution About Forward-Looking Statements This section contains a standard legal disclaimer on forward-looking statements, highlighting risks and uncertainties that could cause actual results to differ materially from expectations - The communication includes forward-looking statements that involve risks and uncertainties, and actual results may differ materially from current expectations[18] - Key risk factors include disruption from the business combination, ability to maintain stock listing, converting pipeline to revenue, successful delivery of technology, and enforceability of intellectual property[18]