Arqit Quantum Stock

On today's call, we will be referring to the press release issued this morning that details the company's first half of fiscal year 2026 results, which can be downloaded from the company's website at arquitgroup.com.

The equity research Pityearchinally, a recording of the call will be available on the Investors 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 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 the company's filings with the Securities and Exchange Commission, which identify 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. And now I'd like to turn the call over to Andy Lever, the company's Chief Executive Officer. Andy?

Thank you, and thank you for joining our first half of fiscal year 2026 earnings call. When we spoke in December, reflecting on fiscal year 2025, I said that 2025 have been a year of momentum in the realization of the need for enhanced cybersecurity to address the coming threat to data security posed by quantum computers at scale. Governments were taking their concerns public, some mandating road maps to enhance cryptographic postures for governmental agencies and encouraging enterprises to take action as well. I noted that from Arqit conversations with governments and enterprises, it was no longer a question of if organizations need to upgrade their cryptographic security posture, but when they will upgrade their posture. What has become clear in the first half of our current fiscal year is that when is becoming now.

While in my view -- while that is my view based on our deep understanding of the threat, let me cite the view of some leading players in the quantum and security space. Google has been aligned with the U.S. National Institute for Standards and Technology, or NIST, time line for migration to post-quantum cryptography, which calls for the deprecation, meaning the market of removal of unsafe cryptography by 2030 and complete disallowance by 2035. On March 25, Google advised that cryptographic systems migrate by 2029.

Google's accelerated time line was the result of research, which it published that demonstrated quantum computers will be able to break elliptical curve cryptography, the kind of cryptography that protects things like crypto wallets with 20x fewer qubits engaged than previously projected. That moves the time field from 2035 to by 2029. That is a serious migration time line compression.

Also, Cloudflare, on April 7, it pulled forward its advice to migrate by 2029 as well. Cloudflare's revision was based on Google's published research, but also research published by Oratomic on March 30. Oritomic concluded that by leveraging advantage in high-rate quantum error correcting codes, efficient logical instruction sets and circuit design, Sure's algorithm can be executed at cryptographically relevant scales with as few as 10,000 reconfigurable atomic qubits. That is a shockingly low estimate of the computational resources needed to crack RSA. And finally, IonQ on its May 6 earnings call, CEO, Nicola DMathy stated, based on our public road map, we expect to achieve the logical qubit count required to challenge RSA 2048 encryption and the 2028 to 2029 window. If IonQ is correct, migration to a post-quantum security posture by 2029 may be too late. The urgency to migrate to post-quantum cryptography is heightened by 2 factors.

Firstly, protecting your existing data against Harvest Now Decrypt Later attacks. Any data that is stolen today, even if protected with current encryption technology is vulnerable to exposure when a quantum computer sets to work on a later date. Any data that is sensitive or has a shelf life should be secured with post-quantum encryption now. Secondly, migrating to post-quantum cryptography involves analysis, planning and execution across the entire data and communication architecture of an organization, which requires time. If Google, Cloudflare and IonQ are correct, and we think they are, then time is of the essence. Arqit's product set is well positioned to enable an end-to-end migration to a post-quantum cryptographic security posture from assessing the current risk inherent in an organization's network architecture to implementing software-based post-quantum cryptographic solutions, which are compliant with NIST and NSA standards. Our encryption intelligence risk analysis tool gives organizations complete visibility into all encryption technologies and use across the network, automatically identifying weak points and vulnerabilities, including those susceptible to quantum attacks. This is a critical step in developing our migration strategy. Understanding why encryption is in use, where and what it is protecting allows CSOs and CTOs to scope their risk and develop a game plan to upgrade to post quantum cryptography.

Our software base post-quantum encryption solutions allow organizations to upgrade now protect and against Harvest Now Decrypt Later attacks and when quantum computers arrive at scale. Our solutions are graphically agile, which gives cells and CTO's flexibility to mix and match QAs that's post quantum algorithms and symmetric key photography. Being software-based and lightweight, our encryption solutions can be flexibly deployed at any level of a network architecture from servers down to small edge devices. -- no new hardware devices are required and it can be implemented quickly with completed deployments in as few as a couple of days. So leading industry players are now saying the time for post-quantum cryptography is here, arguably saying we have the products to meet that need. Where do we stand in capturing growing market demand for post-quantum migration?

We acquired our encryption Intelligence product in 2025 and announced commercial rollout in January of this year.

We are actively directly meeting the solution to end customers a marketing campaign targeted approximately 450 organizations in process and engagement to date has been strong.

On May 18, Aged executed its first encryption intelligence contract supporting PQC migration planning. On May 19, Arqit signed its first partnership agreement with a European specialist cybersecurity provider for Arqit Encryption intelligence solution.

Feedback about Encryption Intelligence products has been favorable, and the breadth of prospective customer engagement has been highly encouraging. The product delivers high utility for organizations, giving deep network encryption visibility and risk assessment, a critical first step for CECL and CTOs on their PQC migration journey. Based on the pipeline of sales opportunities, we expect additional contract wins during the balance of the fiscal year.

Our software-based encryption solutions led by Network Secure product is gaining traction. Sparkle, a Tier 1 Italian network operator licensed our product to create a quantum secured network as a service.

It is seen takeoffs offering, most neatly with the financial institution. This is important for several reasons. One, it demonstrates the efficacy of our encryption in a real-world use case securing critical data and communication in transit. Two, it demonstrates the applicability of our cryptographic solutions for the financial service industry, which we believe is a significant market opportunity and three, and finally take up of Sparkle's network as a service offering means consumption of its volume defined license with Arqit.

We wish Sparkle much success and would welcome Spark's need to upsize its license. And we expect that to be the case as Sparkle just yesterday announced the commercial availability of its quantum safe interconnect, which is secured by Arqit across 20 Equinix international business exchange data centers in Europe. The Americas and Asia, where Equinix managed solutions are offered. Sparkle's quantum safe Internet is now available to enterprises, carriers and hyperscalers seeking quantum safe protection for their cross-site VPNs, hybrid in-structure and distributed multi-cloud environments.

Sparkle indicated that it expects to expand the offering across the broader Equinix ecosystem. To paraphrase Joe Crawford, VP of Equinix Managed Service, it is innovative "Integration of next-generation security directly into the environment where dense ecosystem of customers build and scale their digital infrastructure." This is an exciting for Sparkle and Arqit.

In regards to other telecom network operators recently Arqit, core technology to deliver a quantum secure wide-area network to help protect AMK Travel Group from the future risks presented by quantum computers, including the threat presented by Harvest Now Decrypt Later.

AMK owns a portfolio of premier travel brands, including Abercrombie and Ken, Crystal and Cox & Kings. AMK's brands provide travel adventures in more than 100 countries across the world and rely on the secure global networks key customers, employees and travel partners connected. Colton Arqit will now keep AK Travel Group customers and the customers' data and communications protected from the quantum threat.

Large telecommunications networks are a significant opportunity for our encryption solutions, and we're engaged in late-stage dialogue and demonstrations with several, including one in the U.S. However, our encryption solutions are broadly applicable beyond Tier 1 telecommunications networks.

The lightweight software nature of our product allows deployment of all layers of the network and almost any device regardless of size or power.

Our solution is also a crypto agile and that it can be mixed and matched with other cryptographic modalities, including post-quantum algorithms. The flexibility of our software encryption solutions has been manifested in our activities with defense organizations implementations range from the defense contract or securing communications of Government's Defense research network to a defense contractor securing tactical control of drone platforms for a European Ministry of Defense from large networks to small devices.

It takes time to win contracts in the government and defense space. That said, we are making tangible process we believe a renewal and upsizing of our largest U.S. defense-related contract is imminent, further establishing a track record which we can build upon. Also on May 1, a partner which is the leading technology and innovation solution provider to the aerospace and defense industry renewed and upsized its contract with Arqit by almost 90%.

And Together, we bid into contracted opportunities to military organizations with a heavy emphasis on Europe. Our opportunity set in the government and defense market is the strongest it has ever been. The breadth of demonstration and bid activity is significant. We expect further progress in this key target market and expect to see further results in the second half of the fiscal year.

We continue to grow our go-to-market partnerships. During the first half of the fiscal year and more recently, we've added 3 new partnerships to grow our opportunities in the telecommunications market and just this week signed our first partnership agreement for Arqit's Encryption Intelligence Solution.

Specifically, we announced a strategic collaboration with Six Wind to deliver highly scalable quantum safe encrypted virtual private network, or VPN Business Services. Six wind products enable telecom service providers and enterprises to build and manage efficient, scalable, secure and sustainable networks.

Secondly, a strategic collaboration with RAD to deliver a joint quantum safe encryption solution for telcos enabling them to offer quantum safe business services such as site-to-site and site-to-cloud VPNs as well as data center interconnect or DCI.

RAD is a global leader in networking edge solutions. Further, Arqit was selected to join the Tomory portfolio as a scale of partner, a joint venture between Vodafone Group and Techniport, Luxembourg's national tech incubator to more Street's ecosystem brings together innovative young companies and scale their technology solutions across Vodafone's global ecosystem. AGT is the first quantum security company to join the portfolio. And finally, on May 19 Arqit signed a partnership agreement with the European specialist cybersecurity provider for Arqit encryption Intelligence products.

Our product will be the cornerstone of strategic PQC migration activities within Financial Services. Go-to-market partnerships drive product awareness and are an important source for lead and bid generation they are a force multiplier market. We expect to see revenue opportunities come through these partnerships. From my vantage point, the important factors for success are converging. Those vectors are market need the right products and customer traction. The need to migrate to a post quantum cryptographic security posture has significantly increased with rapid advancement in quantum computing, leading industry players are now sounding the alarm. We are no longer the modest voice raising awareness, big industry risers are in full cry. We have the right products to enable CCs and CTOs to understand their current cryptographic security posture and upgrade to quantum encryption. We are seeing product take-up in our key markets of telecommunications and government and defense.

Circling back to my remarks from our fiscal year and 2025 earnings call. The key message was that the momentum was building in the market and for the company in 2025. The first half of fiscal year 2026 has seen the continuation and amplification of momentum.

We're excited about the building demand for post-quantum cryptography and we believe in the products and solutions, which we offer with continued focus and hard work, our expectations are up and to the right momentum to continue.

With that, let me turn the call over to Nick Poynton. Thank you, Nick.

Thank you, Andy. For the first half of fiscal year 2026, Arqit generated $623,000 in revenue as compared to $67,000 in revenue for the similar period in fiscal year 2025. The variance between periods resulted from revenue under a contract with the customer in the Middle East that commenced late in the first half of fiscal year 2025 and revenue under 11 contracts in the period versus 6 in the first half of fiscal year 2025.

Revenue for the period represents the second consecutive reporting period of growth. With a small data set, it gives credence to Andy's comments when we reported in fiscal year 2025 results that our revenue had troughed as of March 2025 and our expectation is for growth going forward.

As I noted, we executed under 11 contracts in the period. For comparison, we executed under 7 for fiscal year 2025 and 2 of the 11 contracts have or are expected to imminently renew and be upsized. 3 of our 11 contracts were in the telecom sector and 8 for government, defense and enterprise organizations.

Our administrative expenses equates to operating costs for those more familiar with U.S. GAAP. Administrative expenses for the first half of fiscal year 2026 rose from $20.2 million for the 6 months ended 31st March 2025 to $33.9 million for the 6 months ended 31st March 2026. The variance between periods resulted from an increase in employee-related costs and share-based compensation stemming from a higher head count during the period partially offset by a decrease in property costs as a result of the termination of Arqit previous office lease arrangements and a decrease in foreign exchange expenses.

Administrative expenses for the period includes a $12.7 million noncash charge associated with share-based compensation versus 800 to 2,000 charge for the comparable period in 2025. Operating loss for the period was $33.7 million versus a loss of $20 million for the first half of fiscal year 2025. The variance in operating loss between periods primarily reflects higher revenue more than offset by an increase in administrative expenses for the period. For the period, loss before tax from continuing operations was $33.1 million. For the first half of fiscal year 2025, loss before tax from continuing operations was $19.5 million. The variance between periods is primarily due to increased administrative expenses and lower finance income.

As of a 31 March, the company had cash and cash equivalents of $28.9 million. However, our cash balance as of 20th of May was $35.9 million. In addition, there are in the money warrants outstanding with an exercise expiration of September 2026, which we expect will exercise and provide approximately $13.5 million of additional liquidity to the company.

On a personal note, this is my last earnings call with Arqit, as I will be stepping down as CFO at the end of the month. It has been my pleasure working with the ACI team for the past 5 years and building the business, which I believe has a bright future.

Rob Russell will be stepping into the CFO role. Rob is a seasoned finance executive with deep expertise spanning investment banking, private equity and SaaS scale-ups and more recently served as Chief Financial and Operating Officer at virtual stock where he played a central role in the company's successful exit in 2025. Rob began full time as CFO on May 1, following 2 months working part time to ensure continuity ahead of assuming the CFO role. I'm confident that this measured transition leads the company's financial stewardship in excellent hands.

With that, I will hand the call back to Andy.

Thank you, Nick. On behalf of the company and Board, I would like to thank you for your service. You've been instrumental in building the instructure which every company needs to operate and succeed. It's largely the behind-the-scenes work, which is critical and efficient to creating a successful organization. We wish you well in your future endeavors. Thank you again. And now I'll hand the call back to the operator for Q&A.

[Operator Instructions] And our first question comes from the line of Troy Jensen from Cantor Fitzgerald.

Congrats on all the momentum. Maybe start off here with the 1 for Andy. I'd just be curious your thoughts on the sense of urgency around kind of QD and just relating that to the slowness that it seems that we've seen in the adoption currently? Any thoughts would be helpful.

Yes. Thanks, Troy, and thanks for joining the call. Appreciate the question. So I think as I mentioned in my opening comments, we are seeing obviously some of the very big players in the market, so notably Google, Cloudflare are all pulling forward their predictions of cryptographically relevant quantities becoming available.

And Likewise, at the same time, we've seen the estimates of the number of cubits required to break shores algorithm is coming down also at the same time. Hence, the revision of those time lines coming forward, I think what's really interesting is today, which literally has happened just before our earnings call is we've seen people like -- the Wall Street Journal and others reporting that the U.S. government is taking an active interest in investment into quantum companies.

If we're so believe it's kind of in the region of $2 billion. To me, I see that as -- are we now looking at Quanta computing being almost like national infrastructure and the strategic importance of that and at the same time, aligning that with the needs for organizations, be the defense public sector or commercial to actually be ready for the long talk about QDa, which looks like it's getting closer and closer I believe now, and you'll see from our inception intelligence tool, we now have the ability to quantify where are your weaknesses, what are the threats and what you need to do urgently to really remedy some of that, but also lay out a time line to move to a full Quantum Secure landscape in an organization.

I think right now, I liken it a little bit to the original build-out of the Internet. So you're seeing a lot of the infrastructure providers. So we just talked about people like Equinix, infrastructure provider telcos, which are providing the cabling. The ground-up security -- quantum security of infrastructure is happening. And at the same time, defense regulated industries and also IP-rich industries are also leaning into this thinking that they need to get going.

So. As I said in my comments, I feel -- I really feel like -- last year was the year of quantum, this is year of quantum security. It actually goes for like quantum security.

Yes. Interesting. I agree with you on the sense of urgency and it just feels like we need to have an inflection in some point, right, for all these governments and to those corporations are going to get kind of quantum ready. But what are your thoughts on like the milestones that are the catalysts that we need to watch to investors in the near term here?

Can you just repeat the last bit? I missed the very last bit of the question.

Yes. The milestones that we need to kind of watch to really see when this catalyst on this inflection is going to come in the near term? I mean I'm assuming it's just the technical milestones that continue to happen from the quantum companies. But your thoughts on kind of the next catalyst for you guys?

Yes. I think just to comment on the quantum availability side. I don't believe that there's going to be a day where somebody says, "Hey, we've brokerage. We view shores algorithm with broken existing encryption, that could be any time in the next 2 years according to what Cloudflare and Google are talking about or kind of in that time frame. I think for us, it's this recognition. I think a lot of people thought for a while, hey, this is like just moving to a new form of encryption and hey, we just kind of move on. You think about the previous way that we're securing things with certificates. It was built for a different age. It was built for a very different level of compute power, memory, storage, et cetera.

And I don't think people quite understand that it's a bigger job, especially with the amount of data that's machine-generated now. So that's why we made a thing talking there about all the way from centers to the edge. You think about how many edge devices there are now, which are producing the masses of data I think for us, when we use encryption intelligence to say, where do you start and how do you ensure that you are safe on the perimeter working into the core and then how do you allow to plan to make sure you can migrate the whole organization.

I'm not sat here now saying is my local supermarket worried about being quantum safe, they will be eventually, but I think that urgency is definitely, like I said, in the more defense, public sector infrastructure providers, those are the ones that are feeling in today and feeling kind of the need to get on top of that.

All right. Makes sense. And then 1 other question or it's probably a multi-point question. Just on finances here. So the warrants that you just talked about, $30 million raise, just what's the share count that's going to come with that. Are there other warrants with outstanding excuse me? And can you just talk about your cash position and the cash burn would be possible here?

Well, let me turn to Nick first to start that question, and I'm sure Rob got some thoughts on that as well.

So I think I'll just hand over the cash part of that answer to Rob while we look at the warrant.

Great. Thanks, Nick, thanks for the question, Troy. So as Nick said earlier, we closed the half year with $29 million of cash in the bank. Today, we have in excess of $35 million -- that translates to more than 14 months of runway and then add on top of that, the $13.5 million worth of warrants, which you've mentioned that heavily in the money, and they expire in September, so before the fiscal year-end. So what does all of that translate to, we feel very comfortable with our cash position. We believe it gives us more than enough cash to meet our commercial objectives, especially in a market that we believe is moving towards us for the reasons that Andy has outlined.

Just real quick. I won't miss the warrants just jump in. So the -- on the -- the warrants expiring in September 24, that equates to 5.4 million shares?

Any other outstanding on -- there are other outstanding warrants. I think these are covered in the 20-F in some detail. and expire over the next 2 further years. The last 1 is expiring in September 28.

Okay. Great. Good looks.

Thanks, Troy.

[Operator Instructions] And this does conclude the question-and-answer session of today's program. I'd like to hand the program back to Andy Leaver for any further remarks.

Thank you, Jonathan. And again, thank you, everybody, on the call for joining us today. Or if you're listening on replay, we look forward to speaking with you again following the close of our 2026 fiscal year. Thank you.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

On today's call, we will be referencing to the press release issued this morning that details the company's full fiscal year 2025 results, which can be downloaded from the company's website at arqitgroupgroup.com. [Operator Instructions].

Finally, a recording of the call will be available on the Investors section of the company's website later today. Please note that this webcast include forward-looking statements. Statements about the company's beliefs and expectations concerning 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 in the company's filings with the Securities and Exchange Commission. which identify 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. And now I'd like to turn the call over to Andy Leaver, the company's Chief Executive Officer. Andy?

Thank you, and thank you for joining our fiscal year 2025 earnings call. From my vantage point, fiscal 2025 was a year of building momentum. The issue, which Arqit's products and services address specifically the crop weaknesses in encryption and the future threat posed by Quantum computers moved up the risk register of enterprises and governments around the world. It was a year of building momentum for the company as well. Momentum in prospective customer engagements across our key markets, momentum in revenue and momentum in contracted backlog coming into fiscal year 2026.

Fiscal year 2025 was also a year of broadening our product and service footprint. Our acquisition of Amplify's Encryption Intelligence product risk advisory services broadens our engagement with current and prospective customers to address the migration journey to impose quantum cryptographic posture from beginning to end. Innovative collaborations with Intel and Sparkle broaden our product solution sets to include confidential computing, which is an exciting emerging market opportunity and quantum secure communications across the optical transport lab.

Finally, the year was marked by further building upon our successors, specifically replicating past successes in the telecom network sector and defense sectors with additional contract wins. The need for an enhanced cryptography is ever increasing, particularly with each new announcement of advances in quantum computing capability.

Organizations are increasingly aware of the need to address the issue. We have seen the change in the market from awareness of the issue to action to address. The level of action is uneven across within market segments. However, it is no longer a question of if organizations need to upgrade their cryptographic posture, but when they will upgrade their posture.

Arqit recently was invited to present to a leading U.S. securities industry regulatory organization about the rise of quantum computing and the thoracic poses the cybersecurity for the financial industry. One of the most interesting questions posed was, what can we as a regulatory body do to support and encourage a transition to post quantum security. From Arqit's perspective, the invitation to present and the question has demonstrated the increasing urgency, which is being felt across key market sectors to move to a post-quantum encryption posture.

Many government security agencies and regulatory bodies across the globe are mandating or encouraging the migration to post-quantum cryptography. Some are even imposing deadlines. Top-down pressure plus increased awareness of the issue at the CTO or CISO level within organizations is driving increased action to address the issue.

As a result of this market trend, Arqit's marketing programs and announced successes, we have seen increased activity with prospective customers. The first step with prospective customers is a demonstration of test engagement. In the first 2 months of this fiscal year, we have already signed 12 demonstration and test engagements. The pace of engagements is running well ahead of fiscal 2025. We believe this is the best barometer of building market migration towards the post-quantum cybersecurity preparedness and it signals increasing awareness of Arqit's key agreement encryption platform as a compelling solution.

We have a proven solution to address the weaknesses of today's encryption and the threat posed by quantum computers However, we recognize that as an organization that once the migrate to a post quantum encryption posture needs to understand its current cryptographic landscape, its risk exposure before we can take steps to upgrade its encryption architecture. We lacked an important capability, namely risk advisory tools to help our organizations take the first important step to understand its risk.

In May, we acquired Amplified product portfolio, IP and innovations team specializing in encryption risk advisory and AI analytics. And [ BlueBay's ] Encryption Intelligence Risk analysis tools, which we acquired give organizations complete visibility into all encryption technologies in use across the network, automatically identify weak points and vulnerabilities, including those useable quantum attacks.

The Encryption Intelligence risk analysis tools offer CISOs and CTOs and on-ramp for their post-quantum migration. They cannot address issues which they cannot see. Encrypt Intelligence shines a light on the problem while a revenue opportunity in and of itself, Encryption Intelligence is also a sales lead generator for our symmetric key encryption solutions.

Our Encryption Intelligence product, combined with Arqit Quantum encryption technology delivers a comprehensive proposition to identify and mitigate cyber risk exposure for both current and fuge quantum threats. Arqit can help organizations detect, protect and comply.

What I mean by that is, firstly, we can help organizations detect their cryptographic risk exposure through the use of incretion intelligence. Secondly, we can help organizations, enhance and protect their networks and IT infrastructure through use of our quantum safe, symmetric key agreement encryption solutions. And thirdly, organizations can migrate to impose quantum encryption posture based compliance with cybersecurity guidance from leading governmental agencies and trade groups as our Encryption Intelligence tools map against leading security agency recommendations and our encryption solutions meet all such recommendations including the national security agencies commercial solutions for classified symmetric key management requirements.

While a concise multi phrase detect, protect and comply captures the essence of what we do and the value proposition which we offer customers. Adding encryption intelligence to our port portfolio is an important broadening of our offering to assist clients in their end-to-end migrations.

Another important point to a broadening of our product portfolio was the announcement of our collaboration with Intel to bring symmetric key cryptography into the trusted domain created by Intel's TDX on glove. What that means to the less [ technician ] climb these workloads can move between on-premise and cloud environments, which are secure and confidential. Hence it is called Confidential Computing.

The security of workloads in process and transit is a vital importance to CTOs and CISOs confidential computing is increasing in importance. It is an element of the rising market focus on trust and data sovereignty. Trust and sovereignty of the words we are here regularly in our engagement with existing and prospective customers.

Data sovereignty is the concept that data is subject to the laws of the country or region where it was generated. It's an issue, which is complicated by the continued movement of data and workloads to the cloud, which often transnational. This particularly important is issue in the European Union. Recent materials announced by Deutsche Telekom, British Telecom, Orange focused on their sovereign cloud or network architecture initiatives. Arqit's collaborative solution with Intel and its Intel TDX and a significant applicability to the trust and sovereignty issues confronted by organizations seeking to comply with data sovereignty laws.

We expect to have additional announcements of our offerings and go-to-market strategies targets to the confidential computing and data sovereignty market in this fiscal year. Arqit believe this market represents a meaningful opportunity for the company, and we have a strong partner in Intel with whom to attack it.

While we have broadened our product offering with encryption intelligence and our activities with Intel, we remain focused on building on our recent successes, specifically in the telecom and government and defense markets.

In the telecom market, we signed a 3-year contract with Sparkle, a Tier 1 network operator enabling to offer a quantum secure network as a service. Building upon our relationship, we just recently announced in partnership with Sparkle that is a demonstrated embedding Arqit's encryption technology directly into the optical transport layer, validating the sensitive data could be secured at the physical network layer without compromising performance. This demonstration opens the door for additional quantum secure product offerings for network end users.

In addition to activities with Sparkle, Arqit signed additional license agreements or contracts with RSG Telecom and its affiliate fabric networks. Our engagement with prospective large telecom network operators is strong. We expect to replicate our success with Sparkle, RSG and Fabric with other network operators as we have the blueprint, which should shorten implementation times for prospective customers.

Likewise, in defense, whether militaries or defense contractors, we are built upon our recent success. Our previously announced initial Department of War contract in partnership with a large IT vendor has been a validated event. Since the announcement, we've signed several additional defense-related contracts including one for integration into unmanned battlefield assets. There is significant opportunity in the defense market we have undertaken multiple demonstration and test engagements usually as part of a solution set with partners with U.S. and foreign military organizations and defense contractors.

While sales cycles in defense can be slower than other markets, we believe that this market will present -- will represent a large percentage of our revenue over time. In that regard, we've increased and realigned our U.S. operations and personnel to drive our efforts to capture more of this market where the U.S. military, national security or government.

So circling back to my introduction, we are experiencing the market momentum to take action to address the weaknesses in today's encryption and the threat of quantum computers, prospective customer engagements are accelerating we broadened our product offering to provide a comprehensive solution to detect, protect and comply.

We also broadened our product offering to be a first mover in quantum secure confidential computing and data sovereignty. And finally, deepen our success in key network operator and defense markets. Our efforts are beginning to come through in our results, which Nick will talk about in a moment. I will say, we believe that fiscal 2025 represents a trough year from a revenue perspective, the company grew revenue materially in the second half of the year as compared to the first half.

We ended the fiscal year with executed contracts that represent $1.2 million in revenue that could be recognized in fiscal year 2026. We expect to build upon that foundation through 2026. As momentum in the marketplace for quantum safe solutions grow, so as our conviction, organizations are starting the migration journey we can assist in the assessment of risk exposure, and we offer a provably secure symmetric key encryption solution.

We like our position in the marketplace to capture the demand we are building. We are excited about our prospects for 2026. Thank you.

And with that, I will turn it over to our CFO, Nick Pointon.

Thank you, Andy. For the fiscal year 2025, Arqit generated $530,000 in revenue as compared to $293,000 in revenue for fiscal year 2024. The variance between periods resulted primarily from the commencement in March of our previously announced multiyear contract with a customer in the Middle East.

In 2025, we generated revenue from 7 licenses for our SK platform and Network Secure Solutions and professional services. This compares to 13 licenses for fiscal year 2024. While our revenue for the fiscal year is modest, our full year result does not reset -- does represent a material improvement from the prior year and a material sequential improvement from the first half of fiscal year 2025 to the end of the period.

Recall, our first half of 2025 revenue was $67,000, while the second half of the year saw a revenue accelerate to $463,000. The acceleration in second half revenue benefited from, amongst other factors, commencement of revenue generation from our multiyear contract in the Middle East, which, as previously reported, had been delayed. It also reflects the commencement of our multiyear contract with Sparkle.

In keeping with Andy's theme of momentum, we previously reported that we ended fiscal year 2025 with $1.2 million of contractual revenue, which may be recognized in fiscal year 2026. While we are still speaking in modest nominal dollar terms, the trajectory of our prospective customer discussions, licensing activity and now revenue is all moving in a positive direction.

Revenue from the SKA Platform as a Service and Arqit Network Secure products totaled $476,000. Professional services and maintenance revenue in support of contract activity was $54,000 for the period. For fiscal year 2024, a Market SKA Platform as a Service and Arqit Network Secure, contracts revenue totaled $191,000 and professional services and maintenance and support of contract activity was $102,000.

Our administrative expenses equates to operating costs for those more familiar with U.S. GAAP. Administrative expenses for fiscal year 2025 were $34.7 million versus $25.4 million for fiscal year 2024. The variance between periods was primarily due to a reduction in foreign exchange gain resulting from strengthening of the British pound against the U.S. dollar. Employee and property costs saw material reductions year-over-year.

Arqit's headcount as of 30th September 2025 was 91 employees as compared to 82 as of 30 September 2024. Administrative expense for the period includes a $5.6 million noncash credit associated with share-based compensation versus a restated $0.6 million noncash charge for fiscal year 2024. Operating loss for the period was $38.5 million versus a loss of $26.9 million for fiscal year 2024.

The variance in operating loss between periods is primarily an increase in administrative expenses and recognition of an exceptional item for the outstanding class action lawsuit in the period. We previously announced that an agreement in principle has been reached regarding a settlement of the lawsuit.

For the fiscal year, loss before tax from continuing operations was $36.5 million. For fiscal year 2024, loss before tax from continuing operations was $37.4 million. The variance between periods is primarily due to an improvement in currency translation differences. As of 30th September 2025, the company had cash and cash equivalents of $36.9 million.

With that, I turn the call back to Andy.

Thank you, Nick. A final thought. Nick perhaps had advanced when he noted that the trajectory of key measures prospective customer engagement, signed contracts, revenue, backlog are all moving in a positive direction. From my perspective, that is a function of the market beginning to take serious action towards migrating to a post-quantum encryption posture. It's also a function of recognition that Arqit symmetric key agreement encryption platform offers a proven solution today. We're very excited about the market for our products in fiscal 2026.

The hard work of the entire Arqit team is beginning to bear fruit. We expect to build upon the momentum that we experienced in 2025.

Thank you again. I'll hand the call back over to the operator for Q&A.

[Operator Instructions]. Our first call from today will come from the line of Scott Buck of H.C. Wainwright & Company.

Andy, I'm curious, is there -- or was there a particular catalyst that's helping drive the higher level of demonstrations and activity here in the last couple of months, either something external or maybe some change in the selling process?

Scott, good question. Thank you. So I kind of look -- when I kind of laid out where we're seeing business, I would say kind of thematically, what you're seeing is the news flow on Quantum and the advances in Quantum this year, this calendar year 2025 have been huge. And I think when you see -- some of the larger players -- sorry, like IBM and Google when they talk about their hyper computers and achieving quantum supremacy. And then you also see some of the smaller pure players, which we see a lot, by the way.

I think their advances have gotten people to say, "Hey, we can see now that Quantum is moving very quick, and we're still actually in the Europe quantum. " So that's the first thing that they're seeing, I would say, thematically, I think also then what we're also seeing is you'll see specifically within the telecom factories a larger awareness because of -- I talked about in my notes earlier that in some cases, governments in other cases, regulatory bodies, saying to people, this needs to be on your risk register and this is something you need to look at.

And I think that's driving a lot of organizations starting with telco to say, "Hey, we need to have a position on this, and we need to understand the potential impact and how we can mitigate against that impact. " So on one side, it's hugely excited about quantum arriving in the way that it is because it's a force for good. We all know the benefits of Quantum but in a bad access hands, now people are starting to be aware of what the consequences of that are.

I would just leave you with 1 other thing as well. I think it's very well publicized now the threat of what's being called Harvest now Decrypt later, which is people having their information hacked and stolen today to be decrypted later when quantum computing becomes available in a more meaningful way. If that information has a shelf life or has any sort of validity going into the future that he put that organization of risk.

And I think people are saying, "Hey, we need to guard against that now rather than wait for more and more evidence in terms of the availability of quantum computers. " Hopefully, that helps, Scott.

No, that's very helpful. It sounds like the market is coming to you guys rather than you having to change and any of your kind of internal selling procedures to grab more attention, which is great. I also wanted to ask about encryption Intelligence. What does the sales cycle look like there versus the legacy product. I would imagine it's significantly shorter and maybe a driver of revenue here in the near term.

Yes. We're really pleased with the acquisition we made of in encryption Intelligence. For us, this is something that ability to one, in a sales cycle, show an organization, the cryptographic landscape ensure where they have potential weaknesses and potential problems in their network, but also identify that against existing regulatory body guidance, but right behind that is we obviously want organizations to use this as an ongoing tool as well to keep themselves safe against any new attacks.

So we're seeing, starting particularly with telco operators, then leaning into this and saying, "Hey, this is something that we'd like to use on an ongoing basis. " So we're in discussion now with a number of telco operators, not just to do an initial check on their network, but also then on an ongoing basis for them to use the tool.

I'd like the fact now that we can be very specific about what the threat is and be very deterministic about what we can do to help them mitigate against that potential attack and vulnerability I think this year, as I said, being the euro quantum, we just have a lot more inbound on that side as opposed to before where we were talking about in the market, the market feels like it's a lot more educated and they only is coming to us.

Yes. No, that makes sense. I'm curious, Andy, are there additional kind of bolt-on or tuck-in opportunities similar to that asset purchase you made back in May that might make sense to I don't know either bring in some additional revenue or expand the potential customer footprint?

Yes. That's a really good question,. I talked about what we're seeing, particularly with data sovereignty and confidential compute. And I think those 2 areas are really coming to the fore now, particularly as you think about a lot of organizations are now thinking about and that kind of detect, protect, comply. Where is my data going, how do I need to think about complying against local regulation and then how do I protect it? So anyone that sits on the periphery of really the Detect, Protect comply around data sovereignty and confidential compute will be great tuck-ins for us.

I think anything around particular tech components of that would be interesting. And we've looked at a few different areas already in terms of people that are delivering components of it, but are obviously missing the deep intellectual property that we have around the quantum safe part of it as well. So absolutely, we've been looking at the market.

Great. And then if I can squeeze one more in, and this is probably for Nick. Curious, should we anticipate any change in OpEx for fiscal '26? Or can you support the anticipated growth in the business with this kind of current level of OpEx spend?

Yes. So we are -- our plan is very much to maintain the cost control that we benefited from in FY '24 -- and to keep the -- sorry, 25 and to keep the same level in FY '26, so $2.5 million per month or is our sort of target maximum cash spend per month that we anticipate ahead, and we believe we can deliver the year ahead within those constraints.

Our next question will be coming from the line of Troy Jensen of Cantor Fitzgerald.

Congrats on all the great progress here. Maybe, Andy, for you to start with, can we just touch on competition, it seems like 6, 12 months ago, there was really nobody -- the traditional security vendors talking about post-mortem security and now I hear them upgrading there. algorithms and whatnot. So curious, is that just mainly software-based competition? Or just curious if you could touch on the competitive dynamics.

Yes, sure. I mean I think to to in line with what we're seeing in interest and activity within the market. And of course, there's going to be people that are going to look at this as something that they want to lean into as well. So we absolutely see a few different competing ideas. In terms of how people view this and how they want to deliver it. Just to kind of shine the spotlight back at us for a second. We've been at this for over 5 years. We've got 25 patents. We spent a lot of money deeply thinking about this problem. And believe that we've got something very unique. And just to kind of quote a phrase, the gold standard was always some metro key agreements, which have been used for a long, long time by governments, military, federal defense, et cetera., because that's what they trust and having a pure software solution that allows you to model that without hardware without having to think about distributing keys and also the fact that it's not mathematical anything the mathematical obviously want to compute very, very easily.

We believe that we've got something that's very light, very flexible goes all the way to the edge of the network. And extends itself into those kind of data sovereignty and also trusted domain conversations that we've been having. So hey, I'm sure there are people that will come along with slight different views. We just want to make sure that we make it as as frictionless and easy as possible what we're doing, and that's what we just keep building on.

Perfect. Great answer. And then Andy, also for you, just if you look at the success lately, it seems like it's been telco and government. I'm curious, can you just talk about the corporate science like this is something financial organizations and a variety of different kind of corporate American companies you'd be looking at?

Yes. That's a really good question, Troy. And -- we -- so I kind of feel like it's building a bit like the OSI stack if people know what that is kind of from the physical level of words, as I talked about optical transport layers and things like that. The very basic so, "hey, let's protect the actual fundamentals of how things are connected together. " And I feel like now we're getting into the kind of more operational layers I feel like anybody that is regulated is critical infrastructure.

He is heavy in intellectual property of people that are starting to talk to us and I mentioned that we've done a briefing to a regulatory body in my prepared remarks. And you can see that now they're building their guidance saying, hey, this is obviously a threat to regulated financial industries.

They're ones we're talking to at the moment. So we're seeing the people that are actually operating some of the infrastructure and thinking about how to protect that and also to protect against bad actors and then anybody that's doing anything that's rich in IP that they've got long development cycle. So you could think about farmers, life sciences, chemicals companies, they're the people that want to protect their IP as well.

Because obviously, if there's a harvest now decree later, that's got a long shelf life because they're years into development of that, so those are the industries we're seeing coming along next and starting to have conversations with them the secure compute really leans into financial services as well, obviously, being a regulated industry. So we see those kind of going hand in glove really. Hopefully, that makes sense.

Thank you. And there are no more questions in the queue. I would like to turn the call back over to Andy for closing remarks. Please go ahead.

Thank you. And again, everybody, thank you for joining us today. We look forward to speaking with you again following the close of our 2026 first half results. We really appreciate your interest in the company. Thank you again for your attendance.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for your participation. You may now disconnect. Speakers, please stand by for your debrief.