Greetings, ladies and gentlemen, and welcome to the SealSQ Full Year 2024 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 can cause the actual results, financial condition, performance or achievements of SealSQ to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

SealSQ 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 full year 2024 earnings release was issued on Thursday, March 20, 2025, also our Form 10-K for the full year ended December 31, 2024, which was filed with the SEC on Thursday, March 20, 2025, can be found by visiting the Investors section of the SealSQ website at investor.sealsq.com.

At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Carlos Moreira, Founder and Chief Executive Officer of SealSQ. Mr. Moreira, you may begin..

Thank you very much, and good afternoon to all of you joining us from both Europe and good morning for everybody joining from the United States.

So I will start this call by discussing the business highlights of the full year 2024, then John O'Hara, our CFO, will provide an overview of our financial performance then I will close the prepared remarks by discussing our growth initiatives and also the outlook for 2025 and going forward.

So we had a financial year 2024 with revenue of $11 million. It's a bit disappointed about this reduction of revenue from the $30 million we had in 2023.

But actually reflects the company transition from traditional semiconductors, the legacy semiconductors than we were selling for many years to now the next-generation quantum resistant chips, which is the next generation that we started to develop two years ago, and we are reaching maturity now.

So we are still early stage on the post-quantum market potential alongside the impact of market normalization. Following the semiconductor supply chain disruption that was caused by the COVID-19 pandemic.

Also, the excess inventory accumulation by customers in 2023 result in lower orders volume as clients utilize existing stock before making new purchases commitment, basically, they are waiting to finalize the use of those stocks before we are able to deploy the next-generation ship with them.

Let's say, as we are preparing to take advantage of numerous growth opportunity we scale Post Quantum's security technology by investing $5 million during 2024 with another $7.2 million plans for 2025. So 2024, as previously discussed, was a transformational year for SealSQ.

As we scale post Quantum security technology, started the process to execute strategic acquisitions raised over $80 million in funding and expanded into high growth markets, with a strong cash position, no bank debt or convertible loans and accelerating demand for post Quantum and Quantum cybersecurity solution, we are very well positioned to drive sustainable long-term growth and technology leadership in the Quantum era.

Thus, we enter in 2025 in a very strong financial position, and we are -- as we are well positioned to execute on multifacet organic growth, investment and acquisition strategy. Demand for our post Quant and Quantum cybersecurity solution should drive sustainable long-term growth and technology leadership in the Quantum era.

We anticipate also a significant revenue increase in 2025 compared to 2024 due to the steps we took to bolster our position in the market we serve on a global scale.

I will discuss all these initiatives shortly, but I would like to emphasize how our combined bookings are now $6.8 million, reflecting a strong year-to-year growth while our projected contract pipelines over the next three years stands already at 93 million.

The post-quantum cybersecurity market, driven by the need for securing systems against quantum computer attacks, then they are becoming available within the next 3 years to 5 years is projected to grow significantly with an estimated market size of $302.5 million in 2024, which is then expected to reach $1.8 billion by 2025 at CAGR of 44.2%.

So due to the highly entry-level barriers, we believe very few players will have the required expertise, technology and IP to build quantum-resistant security chips in the short-term, which will position SealSQ, as a leading player in this space especially on a very high growth market, which is the TPM segment.

We believe that this factor positions SealSQ to strengthen its market leadership and capitalize on emerging opportunities in post-quantum security.

So in terms of giving a financial year 2025 outlook, although it is very early in the year to provide a definitive outlook number due to the major projects under discussion, SealSQ anticipate a significant revenue increase in 2025 compared to 2024.

This growth is expected to be driven by the integration of chip revenue front of new sources of revenue, an expansion in chip personalization services as announced during the year and the consolidated revenue for our planned investments.

We expect the full impact of our growth to arrive in 2026 with the commercial launch of our new products as scheduled for Q4 2025.

We anticipate that the growth in 2025 and beyond will be filled by the increased demand of post-quantum trusted platform models, what we call TPM, the successful securing new large-scale contracts with government and enterprise adopting post-quantum cryptographic solutions, and this includes also some of the new defense contracts, and they have been negotiated now in Europe.

The growth in SealSQ’s cybersecurity certificate and managed PKI services, which is a recurring revenue on the software side and the consolidated revenue for strategic acquisitions, some of them being already announced since the beginning of the year.

So the post-quantum cryptography market, driven by the need for securing system against quantum computer attacks is projected to grow significantly, as I mentioned before, of -- by $1.8 billion. So we believe that these factors positions SealSQ to strengthen its market leadership and capitalize on emerging opportunity in post quantum security.

I will now turn the call over to John O'Hara, our CFO, who will provide details on the 2024 financial results. So John, please go ahead..

Thanks, Carlos. As Carlos just mentioned, I will now go into a bit more detail on our FY '24 financial results. Firstly to highlight, we finished the year with an unprecedented balance sheet that was far stronger and bank debt free relative to previous years.

Our cash reserves peaked at over $90 million on January 6, 2025, which was up from the approximately $85 million at the end of '24, providing a solid foundation for investments, acquisitions and scaling production.

We had a clean balance sheet at December 31, '24, showing no bank debt or convertible loans along with no overhanging warrants following the elimination of the convertible debt and associated warrants in late 2024 and the first days of 2025. This significantly enhanced our ability to fund growth without dilution risks.

We raised over $80 million of capital during 2024 being strengthen capital resources to support our expansion into post-quantum cybersecurity markets.

Carlos has already mentioned, FY '24 revenue was approximately $11 million, down from $30 million in 2023, and this reflects the company transition from traditional semiconductor to next-generation quantum-resistant chips and the still early stage of the post-quantum market potential alongside the impact of market normalization following the semiconductor supply chain disruptions caused by the COVID-19 pandemic.

The excess inventory accumulation by customers in 2024 resulted in lower 2024 order volumes as clients utilize existing stock before making new purchasing commitments. As a final highlight point, we would like -- I'd like to highlight the research development and strategic investments in post-quantum security.

We increased our research and development expenditure by $1 million year-on-year, so a 26% increase against 2023, despite the reducing revenue year-on-year. This demonstrates the strategic importance of the development of our next-generation cutting-edge quantum-resistant technology.

Our investments in research and development included the high costs associated with certifications, which are treated as R&D expenses, emphasizing SealSQ's commitment to staying at the forefront of post-quantum innovation. The $7.2 million we are planning for 2025 demonstrate our commitment to staying at the forefront of this post-quantum innovation.

All of this resulted in a net loss of $21 million for the year, which is primarily due to the migration from traditional semiconductor products, the post-quantum semiconductor technologies and the associated reduction in demand for our products during the year.

I'll now turn it back to Carlos, who will provide additional details on our outlook and growth strategy. Carlos, please go ahead..

So thank you, John. So as I mentioned before, we really expect the full impact of our growth to arrive in 2026, although we will see an improvement in our revenue in 2025 already. One of the reason of the 2026 timetable is that these new chips require certifications.

So the SealSQ Post-Quantum TPM are aimed to achieve the highest potential level of security in the market with NIST FIPS 140-3 on the TCG 2.0 compliance which positioning the company as a leading supplier for post-quantum cybersecurity infrastructure at that level of security and certification.

Also the providing appliance solutions to The European Union Cyber Resilience Act and the U.S. [Harbor Trustmark] (ph) for device manufacturing supporting the implementation of the next-generation security mandates.

Also, the renew ISO [27001] (ph) and the ISO 9001 certification across chip fabrication and PKI operation, and lastly, the consolidation of revenue from strategic acquisitions. So let me provide a few additional details on those initiatives.

So as was announced at the beginning of the year, we have allocated a fund of $20 million focused on investing in a startups engaged in quantum computing and AI initiatives that could be integrated into all Quantum roadmap. So Quantum is a very complex market. It requires many small components to fully integrated Quantum platform.

And what we are doing is investing in companies that can accelerate this deployment. So one of them is Colibri, a French company, which provides a state-of-the-art quantum cloud computing services for industrial and scientific research application.

So with this company now, we are able, for instance, to simulate a quantum attack on a cybersecurity infrastructure and see how we can with the TPM chips being able to mitigate an attack in real time.

It also provides for organizations that they want to benefit from quantum computers without the need to enter into the complexity to operate our quantum computer to be able to plug and play in a managed quantum service. The second is an exclusive negotiation.

We entered to acquire 100% of IC’ALPS, a leading ASIC design and supply French company with revenue in areas related to the design of new chips. This is a mature company, which basically adds 100 people in Grenoble, which is a short distance between our development center in France, in part of France.

And it's a company that has a strong client base a very strong expertise in areas such as ASIC design for the car industry. The third, we just announced today with a 30% ownership of SEALSQ on weekend group which is a blockchain financial company used mainly by private banks here in Switzerland, providing [KYC] (ph) on a blockchain.

So a system that allows many multiple banks to share the KYC compliance process by accessing the blockchain and verifying identity on the bank holder. The same technology is now being expanding is something we call KYO which is Know Your Object, which basically replicates the KYC by the object level.

So the verification of the object is done before the object can connect to the Internet. So let me move on the expansion of testing and personalization of facilities on semiconductor production that has been announced during the last year and the beginning also of this year.

So those are facilities that basically personalized semiconductor and national level, and we expect to enter into a formal agreement to commence the construction of the first semiconductor personalization and design center in Spain.

We are in the final stages for the approval process by the Spanish government entity responsible for the funding under the PERTE budgets, which the name is SETT. So this government company 100% owned by the Spain government allocates the budget in a share format with investors than they basically develop semiconductor facilities in Spain.

In the U.S., we are expanding direct sales team with a target to enhance our sales pipeline and develop government partnerships in the U.S. available now to us through the semiconductor localization strategy in the United States with a goal to secure a large-scale cybersecurity infrastructure projects.

Some of them has been announced as we are looking into the possibility to establish those centers in Arizona, as was one of the candidates and another now emerging now is New York. In the Middle East, we are also working to finalize a joint venture to establish a quantum-ready chip personalization center.

In Asia Pacific, I just came from Singapore, and we are in the same process to leveraging the infrastructure already available on semiconductor as we manufacture or semiconductors in Singapore to being able also to attach to it a personalization center.

We are leveraging on its later partnerships with leading semiconductor distributions such as DigiKey, Symmetry, OKAYA and other companies, and they are adding to or increased sales.

We have made significant progress in all of these initiatives, and I am proud to say that we started 2025 on a very strong note with an improved backlog on a strong pipeline, together with a very strong, as John just mentioned financial position.

So specifically, we have confirmed bookings of $6.8 million as marks 2025, reflecting a strong year-to-year growth. Our projected contract pipeline is over $93 million for the next three years, with active discussion with 60 new post-quantum TPM customers.

It's important to note that any customer that is running major infrastructure, where that comes from hospitality or whatever it comes from hotels and client security, whatever requires for airport medical facility, government facility, all of them, they are now looking into upgrade their facility to TPM levels to be able to defend a quantum attack.

It will be too late if these organizations wait until the quantum computers are available to start defending their infrastructure. So the Quantum resilient strategy will be soon be forced and not only a nice to have, but a must have in order to comply with many of the current cybersecurity criteria.

So we have secured several significant new business on public infrastructure [for matter] (ph), which is a certification process for homes and anything related to what is inside your home, cameras, smart detectors, anything connects to the Internet.

Those devices, which are provided by IoT manufacturers, and they are starting to be delivered together with our VaultIC408 IoT secure chip and companies like Toshiba, and Toshiba are using this technology already and expanding the use in smart meters, like the case of Landis & Gyr and also on parking meters in the case of Toshiba, in very large projects being announced during the year.

So our 2025 strategy is built around 4 key priorities. One is commercial launch of the post-quantum chip. This is a priority for us. As I mentioned before, there are only five companies in the world that they are able to deploy this technology.

The entry level is very high, and we are one of them and maybe one with the most mature technology and with a chip already operational to be tested in the following months.

Also the expansion of the Chief Fabrication partnerships to increase output and development of quantum-resistant ASICs for specific larger client needs and are acquisition of [IC’ALPS] (ph) will accelerate big time as they are one of the leading ASIC providers, executing targeted acquisitions.

We expect to be able to complete the acquisition of IC’ALPS, as I mentioned before, once we have the government approval as there is a requirement for companies than they are integrating crypto and high-level security to have this government approval in France.

So this is something we'll take a few months, but we expect that to be finalized within the summer in 2025.

And this will allow us to design new chips for our clients and will add, as I mentioned before, hundred top engineers to organizations together with an important amount of revenue, which we are qualifying now will be communicated in the weeks to come.

Continue to invest in R&D with more than $7 million has been allocated for 2024 and from $5 million in 2025. This is actually a small amount for that level of security those chips have and the design requirements, but the good news is that we already invested on them.

So there's no further investment beyond that revenue that investment that we are making that is required. So we are in a very strong position because normally, this technology takes important investments that have already been achieved and done during the last years. So expanding and scaling the managed PKI.

This is recurrent revenue that can be added to the chip revenue, and we are making good insights into the mature compliance process and IoT enterprise security.

So before closing, I would like to emphasize that SealSQ remains committed to leading the evolution of cybersecurity or some on semiconductor security, ensuring trusted digital ecosystem for enterprise, government and next-generation AI applications.

In terms of AI, we are training AI with the data that is collected by the semiconductor, there's important developments there. As everybody knows, AI requires good data, and the data comes from the authenticated devices, the best quality possible data. We are not yet adding that into a revenue generation that will be a very, very soon.

And as we all know, Quantum computers will accelerate AI. And that will have, obviously, consequences on many, many areas, new areas and they will need to be considered in the future. So with that, I am finalizing my prepared remarks. I would like to open now the call for Q&A. And thank you very much for your attention..

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first questions come from the line of Matthew Galinko with Maxim Group. Please proceed with your questions..

Thank you. And I have a question and a follow-up. Carlos, you mentioned 2025 revenue growth will come from new sources of chip revenue and chip personalization services.

Should we understand that to mean that we're not going to see a lot of 2023 customers coming back into 2025 revenue? Or are we going to see some level of normalization? Or what do you expect in terms of normalization in 2025?.

Yes.

So basically, there is not really normalization per se because what is happening is, as John said, some of this customer, which will be on the TPM as well, customers will continue to be customers are sitting on a very strong inventory on the previous generation chips, right? During COVID times companies because they were concerned about the supply chain, acquire a lot of chips, and that's one of the reasons we have a $30 million revenue only our chips during that time.

And this has actually been normalized now. We never know what is going to happen. As you know, it's just the situation in Taiwan and the Asian region is uncertain, and that could be at any time, become again a very high growth on revenue because the company will start to buy chips.

But this is one area where 2025, we will still start to see normalization because those clients are coming back and new customers are coming back through the personalization center. The personalization center advantages is that they localize the technology at national level.

So some clients that normally don't buy chips if they are not being personalized at national level, they have now an option to become customers.

And that implies, for instance, in Spain, we have now companies and they are putting chips on solar panels, the new technology because they want to use the chip to secure the sonar panel, but also to collect [tuck-ins] (ph) than they are being able to exchange energy tuck-ins between the solar panel and the smart meter.

So those are new usage that they emerge at a national level. The other aspects than companies and keep buying more chips for the future, they are waiting for the new post-quantum chip to be available. And we already have the chips. So the chip was demonstrated in New York at the NASDAQ event that we organized.

But as I mentioned before, that chip is now being tested and it has to go very strict certification process like FIPS compliance, and there's nothing we can do there. I mean we have to wait until those evaluations are finalized in order to be able to sell the chip because that's part of the requirement.

But the good news is that we are letting our clients to test the current chip, the post-quantum chip as a way to accelerate the sales process and as I mentioned before, we'll start in Q4 this year and will strongly accelerate in 2025 -- 2026, sorry. So that's the situation.

I mean it's like you basically wait for the iPhone 17 to be in the market, before you make a decision on upgrading from the 16, maybe you just wait the next year. So we are in this kind of scenario on this technology. TPM is very new. The post-quantum chips are totally new concept in the market.

That's why SealSQ if you see the progression of the quantum stocks and you compare that with the SealSQ stock, you will see that they are progressing in the same way.

It's just enough that one CEO says that this is going to be a 30-year time and the market crashes on Quantum, the other say is, no, no, actually, we have already achieved happened with Google and with Microsoft a quantum chip for the quantum computer.

So that immediately brings the attention to the people of the post-quantum chip, which is the defense of that quantum chip, right? So it is a very emotional market now. It goes up and down. But what is 100%, 1,000% clear, is that we are entering into this quantum era.

And we are early players in that area and the technology is going to be growing and growing as the market is phenomenal..

Got it. I appreciate that color. My follow-up question is on the 2025 R&D spending that's incrementally up from 2024, is the meaningful portion of that in additional certification costs? And is that hitting 2025.

Or are you adding engineers? Or what is the -- can you explain a little bit more behind the ramp-up in R&D spending?.

Yes. As you rightly say, it's actually -- the certification process is very expensive, just for instance, certification might be $2 million. And you have to do it per country, right? So you have to go market by market.

The other element is what we call SEALQUANTUM.com, which is a platform, that we are building with the IP that is being integrated into the platform, which is our platform from other companies.

So our model has been that -- and that's why we allocated a $20 million investment fund to acquire and invest in start-ups that could integrate their technology into our Quantum platform. So the first one was Colibri, as I mentioned, is a quantum cloud play, very niche. They are French also.

This is -- a lot of this technology, by the way, is available in France. Reason why other companies like Sandbox, AQ and others, they started to acquire French companies, right? It's very fragmented, but this is -- if you are able to put them integrating into the Quantum platform, you advance very fast. So this is part of the R&D as well.

So once we make the investment, then you obviously bring need to recruit people, and this is a very high level expertise area, so expensive people that will help you to integrate that specific platform into the Sandbox platform. Another example is IC’ALPS. IC’ALPS is a $10 million revenue company. They have a very good client of ASIC.

This company, as I mentioned, we have signed an exclusivity agreement to acquire them. Everything is being agreed to be acquired just waiting now for the French government to give us the go ahead.

And then we'll integrate 100 people around 80 engineers, very specialized on ASIC basically is designed for new chips around the customer specifications and because we are integrating that into the Quantum and post-quantum back end, it will be basically the first ASIC first quantum ASIC developed and integrate it into an existing company.

Those are companies like a car company, then they want to develop their own chip.

And before we might not necessarily have everything they wanted to have and now we can design a chip for them some, as you say, in French, right? So those are the new areas where obviously will require investment of R&D investment to keep growing and keep adapting to the quantum requirements..

Great. Thank you..

[Operator Instructions]. Our next questions come from the line of Nehal Chokshi with Northland Capital Markets. Please go ahead..

Thank you. Carlos, the [$93] (ph) million pipeline, typical duration of that contracts are being discussed is 3 years.

Is that correct?.

Yes, correct, 3 years..

Okay. And so what's historically SealSQ's win rate of pipeline. I realize that historically, the competitive landscape was probably a lot more intense than what the current post-quantum cryptography market landscape looks up right now, but at least for some sort of anchor point, that would be helpful..

Maybe I'll let John to go into the first part. On the competition, as you rightly say, the fact that we very early enter into the post-quantum play, and we also integrated not only the new Quantum and crypto, but also some of the other components brought by [whisky ] (ph) like Quantum Rootkey that has developed.

A unique quarter [Rootkey] (ph) is now being used to digitally sign quantum CAs, then they are able to issue Quantum certificates and they can be embedded into the object basically like a unique quantity identifier.

So all that has put SealSQ in a very interesting strategic position because we don't have a competitor yet that integrates all those elements. And I'll let John to cover the second part..

So just quickly, Nehal -- just quickly -- so on the pipeline, as you might point out as the pipeline valued over 3 years. But of course, there are some prospects in there where we believe that the project is going to take maybe until year two or even into year 3 before comes online.

So in that instance, the valuation attributed to it will only be for the final year. It's a pretty operational pipeline for us. When we win clients in this domain, we tend to find that they become very sticky, so we keep them for a long period of time.

So although we're working on a 3-year pipeline there, we believe that once clients are on, they will become clients that 10 years depending on long products. And the way it works actually on post-quantum chips is that a client will not necessarily take immediately a decision to put the chips everywhere in their ecosystem.

They might start with one product and -- or hardware -- and then they scale like the case of Cisco, right? Cisco has acquired 175 million microchips from us historically. Cisco is actually one of the leading company testing the post-quantum chip.

Obviously, once the chip is certified and they are happy, they will expand the usage of that chip into their entire ecosystem, right? So this projection as I say, revenue can ramp up very fast here as Post-Quantum is going to be compulsory.

I mean, in September this year, there's going to be regulatory moves by forcing companies to be quantum resilient compliance. Otherwise, their insurance premium will be increased, and there might be, in some cases, not even able to sell their object anymore. So this is becoming like the airbag in the car. You have it. If not, you don't sell the car.

So we are moving towards that scenario..

And then sorry, just to then come back and answer your actual question following the extra back information. So the pipeline, obviously, we -- that includes clients at various stages.

So it goes everything from where we have kind of identified an opportunity through to having the conversation, so sort of identified, qualified, design in and design win.

And we apply different percentages to the likelihood of design win being where we've already received a purchase order to develop the initial product, at which point we apply around about, say, 50% success rate because once we've started developing the proof of concept, then generally, we find that means we've been selected as the preferred supplier and then that reduces down to sort of, I think, 20% to 30% on design-ins and so on, and then we obviously weight the pipeline accordingly..

That’s very helpful. Thank you John..

[Operator Instructions]. I'm showing no further questions at this time. I would like to hand the call back over to Carlos Moreira for any closing comments..

So thank you very much, and thank you, everybody, for joining the call and your interest in SEALSQ. So please feel free to contact us any time you need more information.

You have an investor side on sealsq.com with all the information, including the annual report, and we are available for any one-to-one call when investors or shareholders or anybody that will like to learn more about or develop them and company. Thank you very much for the moderation and organizing and Lina and Jen for organizing this call..

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day..