WISeKey Announces Audited Consolidated Financial Results for FY 2017 and Q1 2018 Preliminary Revenue
|Record revenue driven by strong growth from the Cybersecurity, IoT and Semiconductor business segments|
Reaffirms its FY 2018 revenue guidance of US$60 million
The Company will host a conference call on Tuesday, April 17th at 3:00 pm CET (9:00am ET)
ZUG, Switzerland- April 16, 2018 – WISeKey International Holding Ltd (“WISeKey” or the “Company“) (SIX: WIHN) a leading Swiss cybersecurity and IoT company announced today its audited consolidated financial results for FY 2017.
2017 was an important building year for WISeKey. During the year, not only did we significantly increase our revenue and improve our financial position, we also expanded our product offerings, increased our geographical footprint, enlarged our customer base and set the stage for continued growth in 2018 and beyond.
FY 2017 Financial and Operational Highlights
Reported record FY 2017 revenue of $43.1 million, up 292% as compared to FY 2016 revenue of $11.0 million. Growth reflects the successful integration of the Cybersecurity, IoT and Semiconductor business segments and was driven by higher demand for strong security in industries such as smart cars, luxury products, pharmaceuticals and financial technology and also IoT chips as WISeKey reached 1 billion chips production milestone.
WISeKey adopted US GAAP Topic 606 “Revenue from Contracts with Customers” as of January 1, 2017 with the objective of providing enhanced financial transparency on the deferred revenue component in the balance sheet.
Reduced FY 2017 losses by 35% to $24.3 million, as compared to losses of $35.9 million for the same period of last year. Of note, the majority of losses reported in 2017 were related to QuoVadis’ acquisition cost, paid in cash and shares. The Non-US GAAP adjusted operational losses for FY 2017 were reduced from $6.9 million to $5.0 million.
| U.S. GAAP
|Operating Loss, as reported||(13.5)||(36.2)|
|Net Loss attributable to WISeKey, as reported||(24.3)||(35.9)|
|Adjusted Operating Loss||(5.0)||(6.9)|
|Adjusted Net Loss attributable to WISeKey||(3.2)||(4.9)|
Achieved strong liquidity and financial position; cash of $12.2 million at December 31, 2017, compared to $5.2 million at December 31, 2016.
Increased its R&D effort with $7.4 million spent during the year to develop new IP, patents and products to create business opportunities in cybersecurity, IoT, Microprocessors, Blockchain an AI.
Aggregated over 39 patent families (more than 200 patents in total) to its patent portfolio, some of them on critical sectors such as Microchip designs and Cybersecurity algorithms.
As part of its M&A strategy, acquired 85% of QuoVadis from private equity firm ABRY and One Communications Ltd. (formerly known as KeyTech) for $15.0 million cash plus 1,110,000 newly issued Class B Shares of WISeKey (issued from its existing authorized capital). WISeKey has the right to purchase and QuoVadis’ minority shareholders have the right to sell, the remaining 15% stake in QuoVadis in May 2018 (based on QuoVadis’ performance in FY 2017, and at the election of WISeKey this can be completed either in cash or against new Class B Shares, which would be capped at 946,000 Class B Shares).
Strong Growth Expected to Continue in 2018
We started 2018 on a very strong note due to the new razor and blade cybersecurity business model which is accelerating the commercialization of our semiconductor products with embedded security. WISeKey’s razor and blade business model uses a strategy that involves selling highly secure and tamperproof microchips (or “razor” products) at very competitive rates, enabling the inclusion and promotion of the higher margin cybersecurity products and services (or “blade” services) thus bundling a very attractive combination of core security components. Thus, for FY 2018, we expect revenue to continue to increase and reach approximately $60 million (under the new accounting approach), which represents an increase of approximately 39% as compared to FY 2017.
Q1 2018 preliminary non-audited revenue increased by 100% to $14.0 million, as compared to $7.0 million in Q1 2017.
FY 2018 revenue are expected to be $60.0 million, an increase of approximately 39% as compared to FY 2017.
Recently WISeKey introduced WISeCoin, a Cryptocurrency platform for Connected Object crypto payment, secured by WISeKey Microprocessor and Digital Identities, which represent a new revenue segment for the company.
WISeKey’s PKI technology continues to be in high demand by companies, helping them to facilitate compliance with the new European General Data Protection Regulation (GDPR) and ePrivacy laws.
Carlos Moreira, CEO of WISeKey, commented, “2017 was a year of significant growth for WISeKey and our performance is an indication of the successful integration of Quovadis and VaultIC businesses into WISeKey’s platform. Our combined portfolios allowed us to focus on the development of a vertical platform and expand our customer base, while our global go-to-market strategy provided us with significant cost synergies to enhance our profitability. Revenue acquisition activities have strengthened in geographic markets in which we have a strong presence already, while we continue to fine tune our go-to-market efforts in new geographic markets.”
Peter Ward, CFO of WISeKey, noted, “Due to our disciplined and focused execution strategy, reinforced by the Quovadis and VaultIC resources team, we were able to drive strong financial results throughout 2017. Although WISeKey’s FY 2017 GAAP results were impacted by acquisition related accounting expenses associated with the QuoVadis integration, our non-GAAP net operating loss was $3.2 million, i.e. a 35% reduction compared to FY 2016.”
Conference Call & Webcast
Carlos Moreira, CEO and Peter Ward, CFO will host a conference call on Tuesday, April 17, 2018, at 3:00 pm CET / 9:00 a.m. ET) to discuss these results, recent business developments and growth initiatives. A Q&A session will follow the prepared remarks.
Interested parties may participate in the call by dialing:
United States & Canada: 877 445-9755
Switzerland(fixed/mobile): 0 800 835 525 / 0 800 891 374
France: 0 800 912 848
Germany (fixed/mobile): 0 800 182 0040 / 0 800 184 4713
United Kingdom: 0 800 756 3429
To access the call, please dial-in approximately five minutes before the start time.
The call will also be simultaneously webcast over the Internet via the following link http://www.investorcalendar.com/event/27777 and such link will also be made available in the “Investor Relations” section of WISeKey’s website http://wisekey.com/investors/ .
2017 Annual Report
Additionally, investors may download FY 2017 Annual Report from WISeKey’s website at https://www.wisekey.com/investors/reports/annual-reports/.
Non-GAAP Financial Measures
In managing WISeKey’s business on a consolidated basis, WISeKey management develops an annual operating plan, which is approved by our Board of Directors, using non-GAAP financial measures. In measuring performance against this plan, management considers the actual or potential impacts on these non-GAAP financial measures from actions taken to reduce costs with the goal of increasing our gross margin and operating margin and when assessing appropriate levels of research and development efforts. In addition, management relies upon these non-GAAP financial measures when making decisions about product spending, administrative budgets, and other operating expenses. We believe that these non-GAAP financial measures, when coupled with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of the Company’s results of operations and the factors and trends affecting WISeKey’s business. We believe that they enable investors to perform additional comparisons of our operating results, to assess our liquidity and capital position and to analyze financial performance excluding the effect of expenses unrelated to operations, certain non-cash expenses related to acquisitions and share-based compensation expense, which may obscure trends in WISeKey’s underlying performance. This information also enables investors to compare financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management.
These non-GAAP financial measures are provided in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The presentation of these and other similar items in WISeKey’s non-GAAP financial results should not be interpreted as implying that these items are non-recurring, infrequent, or unusual. Reconciliations of these non-GAAP measures to the most comparable measures calculated in accordance with GAAP are provided in the financial statements portion of this release in a schedule entitled “Financial Reconciliation of GAAP to non-GAAP Results (unaudited).”
Well positioned for the future
WISeKey’s ability to authenticate, protect and remotely manage millions of networked, automated devices and equipment, using its semiconductors and cybersecurity, is becoming pervasive – from the factory floor, to the hospital operating room, to the residential home – everything, from automobiles to assembly robots, refrigerators to watches and wearables to wine bottles, is connecting and communicating via the Internet.
The IoT security landscape is still evolving even as the IoT adoption is likely to pick up. Early movers in this space, such as WISeKey, stand to gain big, since Root of Trust (“RoT”) is required for secure communication over IoT. WISeKey is well positioned to generate operational synergies from cross-selling opportunities in the space through its expanded offerings by integrating chips, SAP’s HANA and other key technologies. WISeKey’s OISTE Root is unique among publicly trusted Roots with its affiliations with Economic and Social Council of the United Nations (“ECOSOC”) and the Non-commercial Users Stakeholders Group (NCSG), ensuring geopolitical neutrality and data sovereignty.
This is a key differentiator for the company vis-a-vis its competitors. This is especially important as the WISeKey RoT serves as a common trust anchor, which is recognized by operating systems (OS) and IoT applications to ensure the authenticity, confidentiality and integrity of on-line transactions. We believe these features could be vital in creating significant business opportunities with various governments, international bodies, industrial companies which are wary of foreign government oversight and centralization of data on servers outside their jurisdiction.
Also, multinational corporations that need to comply with International Standards on the deployment of their IoT infrastructure are ideal candidates for WISeKey Trust Model. Amidst the threat of increasingly sophisticated data and online identity thefts, WISeKey’s robust solutions should ensure data protection for its customers including individuals, enterprises & their IoT objects and government organizations.
Unique Swiss cryptographic Root of Trust for the Internet of Things market
RoT is the basis for a global end-to-end security solution. RoT serves as a common trust anchor, which is recognized by the operating system (OS) and applications, to ensure the authenticity, confidentiality and integrity of on-line transactions. With the certificates signed by this cryptographic RoT, embedded in the device, the IoT product manufacturers can use Public Key Infrastructure (“PKI”) technologies to secure interaction among objects and between objects and people.
Launched a secured Internet of Things
The solution, called WISeKeyIoT is a scalable framework, offering digital Public Key Infrastructure (PKI) certificates for connected devices, protected in certified tamper resistant silicon chips, as well as an outsourced or on-premises certificate management system, with device life cycle control functions and security enforcement entities. The digital PKI certificates can be signed by the publicly trusted root, owned by OISTE (https://oiste.org/) and operated by WISeKey.
IoT is a very promising new business segment for WISeKey, with an estimated 50 billion devices expected to be connected by 2020, while the world’s population is estimated to grow to 6.8 billion; thus, there will be more than 7 devices per person connected to the internet by 2020 (Cisco, n.d.). As a result, a huge and increasing amount of data will be interchanged between connected devices and back-end servers, allowing companies to provide users with new types of exciting applications, which will be designed to offer increased control over the use of resources: improve efficiency in power grids, optimize processing of information in industrial environments, provide better and higher quality healthcare services and personalized experience for shopping or leisure, among others.
This is only possible though, if the data can be trusted. The IoT business case will collapse if, over time, hackers get access to devices, change the way they operate, intercept and modify data, or bring down systems by executing Distributed Denial of Service attacks through the devices on a network.
It is therefore crucial to implement security features in the system from scratch. Not only in the back-end system, using the PKI technologies proposed by the framework WISeKeyIoT, but as well as in the otherwise vulnerable connected objects in the field, made secure through the tamper resistant chip technology, all part of the WISeKey framework.
Customer adoption for IoT Cybersecurity services continued to accelerate in 2017, reaching more than 3,500 customers across all regions at the end of 2017 (more than doubling year-over-year), mainly due to our integrated vertical trusted platform which combines a range of chips with software applications that cater to our customers’ security and business needs. Our software application offerings include proprietary technology developed by the Company such as RoT and Public Key Infrastructure (“PKI”), which are offered as standalone products, as well as part of our fully integrated Vertical Trusted Platform that enables WISeKey’s clients to manage their digital identity, information, and communications through a seamless process. We enable our clients to easily adapt to a continuously changing landscape of services designed specifically for their needs, without compromising their digital security. The rapid growth and proliferation of internet based devices, as well as people’s dependence on them for personal and business needs, precipitated the connectivity of digital devices. However, such connectivity creates numerous opportunities to alter or manipulate digital footprints. We believe that our integrated products provide the most comprehensive solution to fill these gaps in cybersecurity and data protection. The core of WISeKey’s Vertical Trusted Platform is based on our Cybersecurity SaaS business, also known as managed PKI services, and on our Semiconductor chips.
WISeKey ISTANA PKI platform allowed WISeKey to enter the Connected Car industry in 2017 by offering manufacturers a secure way to validate the authenticity of different vehicle components. Certificate-based security also protects onboard communication between vehicle components and enables secure over-the-air software updates. Additionally, authentication certificates can be used by employees, dealers and suppliers to access car components to diagnose mechanical/technical issues and update software, from any location. Finally, the ISTANA PKI platform allows users to securely interact with a car’s smart features using smartphones and other devices. Currently, WISeKey is working with several smart car manufacturers and its ISTANA PKI platform is already active in several large-scale projects. A recent example is a strategic contract signed with a leading European automobile manufacturer, cementing its role in the Connected Car industry. WISeKey’s total identifiable 5-year ISTANA revenues from the car manufacturing industry are expected to be in excess of $30 million, of which approximately $7.0 million are expected to be realized in 2018. WISeKey experienced substantial revenue growth with the combination of IoT and Cybersecurity technology on new markets such as the smart automobile with our Secure Connected car technology. The WISeKey security for connected car solutions allow manufacturers to authenticate legitimate car components and enable owners to securely interact with the car’s smart features.
WISeKey technology is now used by major players integrating our IoT and Cybersecurity on their platforms with Microsoft and IBM already deploying large scale projects with our company.
WISeKey is using its own cryptocurrency WISeCoin as a method of payment between connected objects. WISeCoin uses the latest blockchain technology and works as part of payment system using WISeKey Blockchain-as-a-Service (“BaaS”) technology offerings. To empower a seamless cryptocurrency enabled for IoT connections, WISeCoin is supplemented with highly secured solutions such as biometrics-driven hardware wallets, integrated exchange platforms, MicroChips Blockchain enabled semiconductors, and NFC-based contactless payment solutions. WISeKey’s objective with WISeCoin is to become an emerging powerhouse in the global cryptocurrency market by supporting the development of economies built on Blockchain technology.
The WISeCoin development team inherits WISeKey Semiconductors R&D and expertise with more than 25 years’ experience delivering secure hardware modules, semiconductors, RoT, Crypto keys, crypto wallets and digital identities that protect sensitive data for governments and private corporations in 75 countries. Among other applications, WISeKey’s chips are widely used by global telecommunication, manufacturing and healthcare organizations as well as by bank cards. The same certified technology is now available in WISeCoin embedded VaultIC lightweight hardware security modules. WISeCoin VaultIC chips’ cryptographic security is a powerful anti-counterfeiting tool used to identify and authenticate any item online using a contactless Near Field Communication (NFC) technology through an Android or Apple iOS based smartphone.
WISekey Blockchain technology has triggered innovations in many countries since its introduction in 2016. Today, cryptocurrencies have become a global phenomenon, so much so that even central banks are trying to create their own cryptocurrency systems. To this end, WISeKey is helping private and public customers around the world to create their own cryptocurrency with WISeCoin, a cutting edge Blockchain identification platform for people and IoT objects, a revolutionary design and state-of-the-art cryptographic security system.
To empower a seamless cryptocurrency enabled economy, WISeCoin is supplemented with highly secured solutions such as biometrics-driven hardware wallets, integrated exchange platforms, MicroChips Blockchain enabled semiconductors, and NFC-based contactless payment solutions. WISeKey’s goal with WISeCoin is to become an emerging powerhouse in the global cryptocurrency market by supporting the development of economies built on Blockchain technology. IoT Cryptocurrency Smart Payment solution allowing connected objects to pay with WISeCoin. The IoT CryptoCurrency Smart Payment allows the ability for connected objects secured by WISeKey Semiconductors to pay other connected objects using WISeCoin.
WISeKey has tested the technology on connected cars allowing a connected car secured by WISeKey to pay for electricity, gas and parking through the integration of WISeCoin crypto wallets at the Secure Element Chip level.
WISeKey (SIX Swiss Exchange: WIHN) is a leading global cybersecurity company currently deploying large scale digital identity ecosystems with a patented process. WISeKey’s Swiss based cryptographic Root of Trust (“RoT”) provides secure authentication and identification, in both physical and virtual environments, for the Internet of Things, Blockchain and Artificial Intelligence. The WISeKey RoT serves as a common trust anchor to ensure the integrity of online transactions among objects and between objects and people. For more information, visit www.wisekey.com.
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Press and investor contacts:
| WISeKey International Holding Ltd
Company Contact: Carlos Moreira
Chairman & CEO
Tel: +41 22 594 3000
| WISeKey Investor Relations (US)
Contact: Lena Cati
The Equity Group Inc.
Tel: +1 212 836-9611
This communication expressly or implicitly contains certain forward-looking statements concerning WISeKey International Holding Ltd and its business. Such statements involve certain known and unknown risks, uncertainties and other factors, which could cause the actual results, financial condition, performance or achievements of WISeKey International Holding Ltd to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. WISeKey International Holding Ltd 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.
This press release does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, and it does not constitute an offering prospectus within the meaning of article 652a or article 1156 of the Swiss Code of Obligations or a listing prospectus within the meaning of the listing rules of the SIX Swiss Exchange. Investors must rely on their own evaluation of WISeKey and its securities, including the merits and risks involved. Nothing contained herein is, or shall be relied on as, a promise or representation as to the future performance of WISeKey.
WISeKey International Holding AG
Supplemental Non-U.S. GAAP Financial Information
U. S. GAAP – Non-U.S. GAAP Reconciliation
Following is a description of the adjustments made to US GAAP financial measures:
Intangible impairment and amortization
Merger and acquisition-related legal fees and professional fees
Amortization of debt discount
The Company encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand its business. Non-GAAP financial results are reported in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
|Operating Loss, as reported||(13.5)||(36.2)|
|Adjusted Operating Loss||(5.0)||(6.9)|
|Net Loss attributable to WISeKey, as reported||(24.3)||(35.9)|
|Adjusted Net Loss attributable to WISeKey||(3.2)||(4.9)|