archTIS Ltd (ASX:AR9) has delivered strong first-half financial year 2021 results, with its key financial metrics and foundational contract wins setting the groundwork for continued growth in the second half of the 2021 financial year.
The recently concluded merger of Nucleus Cyber and a significant Australia Defence contract win, combined with additional archTIS Kojensi sales put the company in a strong position to continue to deliver solid revenue and licensing growth with improving gross margins.
Following the $8.4 million capital raise in the half-year, the company is also in a strong financial position to provide for expansion and investments in sales, distribution and marketing in key regions over the coming periods.
Annual recurring licensing model
archTIS chairman Miles Jakeman said: “archTIS had a very strong first half of the year that was highlighted by revenue growth, recurring licensing and improved gross margin.
”We are well-positioned to execute on the board strategy of increasing customer adoption on a global basis through an annual recurring revenue/software licensing model that drives significant margin and predictability over the coming quarters to create shareholder value.”
Expansion of sales distribution
ArchTIS managing director and chief executive officer Daniel Lai added: “I’d like to personally thank and congratulate our staff and customers on a strong first half to 2021.
“Our prior half-year successes will allow us to leverage and drive significant investments towards the expansion of sales distribution and identified market growth opportunities across the next six months and beyond.
“Our global mission to safeguard the world’s most valuable information is playing out in all regions.”
The financial performance and operating highlights in the first half include:
- Total revenues of $1,111,763 delivered vs $242,877 in comparative period, up 358%;
- Recurring revenues of $459,235 vs $100,843, up 355% on comparative period;
- Gross Margin of $809,946 vs $118,041, up 585% on comparative period;
- Strong financial position to support future growth initiatives with cash balance of $12,104,531 as at 31 December 2020 following the $8.4 million capital raise;
- Landmark Australian Department of Defence contract awarded with a value of $4.2 million; and
- Transformational Nucleus Cyber merger completed in December 2020.
Awareness of cyber threats
Revenue and margin growth have been driven through the successful commercial execution of a number of opportunities in archTIS’ key target market sectors which include defence, intelligence, the defence industry and research and development institutions.
All of these sectors are high-risk targets of cyber-attacks and have strong requirements to share and protect sensitive and classified information.
Increasing awareness of cyber threats, combined with stringent compliance requirements, is driving organisations to look for accredited platforms like Kojensi, that can solve these problems.
This need has been exacerbated by the rapid move by organisations to establish work from home capabilities outside of the enterprise domain.
Revenues during this period included renewals of key customers, as well as the introduction of new customers, such as Northrop Grumman, and the delivery of a number of successful trials in the R&D and Intelligence sectors.
Operating expenses are expected to increase over the coming quarters predominantly driven by investments in global sales distribution, market awareness and lead generation.
The company ended the half in a strong financial position with a cash balance of just over $12 million, which includes the $8.4 million capital raise to new and existing institutional and sophisticated investors conducted during the half-year.
The Australian Federal Government’s Department of Defence ‘2020 Force Structure Plan’ which committed about $15 billion over the next decade to cyber and information warfare capabilities, which included a key focus area in collaboration amongst government, business and the community to address cybersecurity is set to benefit archTIS.
With the acquisition of Nucleus Cyber complete, archTIS is now well placed to expand into the global cybersecurity market.
Important company goals for the balance of the fiscal year to June 30, 2021, include:
- Expand global sales distribution capabilities:
- Establish a multi-geography, global presence in APAC, the Americas and Europe, Middle East and Africa (EMEA)
- Create a US-based Federal and Defense focused business unit to leverage existing Australian successes and relationships across key government agencies including Defence and Intelligence as well as the Defence Industrial Base of Northrop Grumman, BAE, Raytheon, Lockheed, Leidos, Thales and others
- Continue to drive the key strategic alliances across Microsoft field sales and channel partners through the Nucleus Cyber IP Co-sell arrangement;
- Create market awareness, lead generation and demand for attribute-based access controls;
- Pursue high-margin licences to drive annual recurring revenue (ARR) via cross-platform technologies associated with both award-winning products of Kojensi and NC Protect;
- Develop, maintain and validate leading-edge product technology and strategies to leverage existing rich feature sets required by key markets and use cases;
- Drive operational efficiency through tight system integrations between archTIS and Nucleus Cyber; and
- Explore global product and market expansion opportunities to enhance capabilities, market distribution and increase shareholder value.