WISeKey Announces Full Year 2017 Preliminary Results and Early Adoption of Topic 606 Accounting Method
Full-year 2017 preliminary unaudited pro forma revenue of $54.3 million (including Quovadis as of January 1, 2017, up 395% from 2016, in-line with WISeKey’s guidance)
WISeKey outpaces market with record 2017 CyberSecurity and IoT revenue, up 395% from previous year; IoT Cybersecurity Adoption Soaring due to WISeKey’s Semiconductor products with embedded security which are immune to hardware bugs such as Meltdown and Spectre.
Full Year 2017 Highlights (prior to the adoption of Topic 606 accounting method):
Full-year 2017 preliminary unaudited pro forma revenue of $54.3 million (including Quovadis as of January 1, 2017, up 395% from 2016, in-line with WISeKey’s guidance).
Growth was driven by higher revenues from the Cybersecurity, IoT and Semiconductor business for new sectors requiring strong security on their semiconductors such as smart car, luxury, pharmaceutical and fintech industries.
WISeKey adopted US GAAP Topic 606 “Revenue from Contracts with Customers” as of January 1, 2017 with the objective of providing enhanced financial transparency ahead of its 2018 ADR II program on the NASDAQ.
Expands its customer base and ecosystem to over 3,500 customers.
Strong liquidity and financial position; improved operating performance resulted in cash of $12.0 million at December 31, 2017, up $6.8 million from December 31, 2016.
ZUG, Switzerland- January 12, 2018 – WISeKey International Holding Ltd (“WISeKey” or the “Company“) (SIX: WIHN) a leading Swiss cybersecurity and IoT company announced today its preliminary financial results for 2017. All 2017 figures in this release are unaudited and estimated due to the preliminary nature of the announcement.
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 has adopted Topic 606 “Revenue from Contracts with Customers” as of January 1, 2017 with the objective of providing enhanced financial transparency ahead of 2018 ADR II program on the NASDAQ.
In order to facilitate investors’ forward-looking comparability of its financial statements ahead of our ADR II program on the NASDAQ in the first half of 2018, Wisekey has decided to early adopt Topic 606 “Revenue from Contracts with Customers” as of January 1, 2017.
Topic 606 adoption results in deferring certain 2017-acquired-Quovadis stand-alone certificate revenue transactions, which will be recognized typically over 1- 3 years, against performance obligations that are key to the satisfaction of the customer, but merely require the operation of an already running IT infrastructure. For the 2017 transactions concerned by this change, revenue will be recognized ratably (from 2017 to 2020), depending on the timing and the validity of the issued certificate, rather than recognized immediately in 2017.
Topic 606 adoption will not impact reported Cash and Cash Equivalents and Net Cash Provided by Operations, since invoices for certificates remain payable at the beginning of the certificate validity period.
Topic 606 also requires WISeKey to provide enhanced disclosure on its revenue categories to describe how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Going forward, as part of increased disclosures WISeKey will also report on a Revenue] performance indicator which is defined as Revenue reported as per Topic 606 plus Deferred Revenues for certain stand-alone certificate transactions. This approach will closely match Revenue as it was previously defined and used by WISeKey, and management is planning to use it to monitor and report the Company’s growth as it provides a higher correlation with actual business performance.
The preliminary unaudited revenue for 2017 under Topic 606 is expected to amount to approximately USD 43.0 million, up 261% from 2016. The 2016 revenue is expected to remain unchanged.
Under the previous accounting approach Wisekey’s pro-forma 2017 revenue (including Quovadis as of January 1st, 2017) would have reached approximately USD 54.3 million, up 395% from 2016.
“WISeKey delivered exceptional historical results for the 2017, with revenue of $43 million under the new accounting approach, an increase of over 261% year-over-year reflecting the successful integration of the IoT and Cybersecurity assets into the Company,” said Carlos Moreira, WISeKey’s Founder and Chief Executive Officer. “We have noticed a strong demand across the combined product portfolio as the market for IoT – MicroChips associated with PKI and Cybersecurity, is increasing globally. Not only are WISeKey’s products immune to attacks by Meltdown and Spectre and similar hardware bugs, but our security solutions are designed precisely to make these kinds of attacks ineffective. We believe that the phenomenon of the two side-channel attacks wouldn’t exist if our embedded security solutions were implemented from the start in the CPU system of these devices.”
Following the Meltdown and Spectre attacks, to minimize the effect of these incursions, operating system developers are offering emergency patches for download. As per the United States Computer Emergency Readiness Team (US-CERT), due to the fact that the vulnerability exists in the CPU architecture rather than in the software, emergency patches offered by operating system developers may not fully address these vulnerabilities. Moreover, CPU performance may be diminished by up to 30 percent after a patch is installed. (https://www.us-cert.gov/ncas/alerts/TA18-004A).
We experienced substantial revenue growth with the combination of our IoT and Cybersecurity technology on new markets such as the smart automobile with our Secure Connected car technology. The WISeKey connected car solutions allow manufacturers to authenticate legitimate car components and enable owners to securely interact with the car’s smart features.
“In summary, our 2017 results are a validation of our vision and business strategy, and the successful integration of Vault-IC and QuoVadis along with the extension of the WISeKey Vertical Platform for Blockchain and AI. We continue to see strong adoption of products across our portfolio, with cybersecurity clients now acquiring chips and chip clients acquiring cybersecurity. This is a very encouraging indicative trend for WISeKey’s long term growth outlook as we expand the Company’s revenue models to fully capitalize on Blockchain and AI due to the enormous amount of data generated by these devices,” said Mr. Moreira.
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.
“Our 2017 revenue results reflect a period of strong execution, as we continue to demonstrate further expansion due to our synergy capture efforts. Over $6.5 million additional cash was generated in the period, with an ending cash balance of approximately $12.0 million, emphasizing the robust nature of the performance” said Peter Ward, WISeKey’s Chief Financial Officer.
WISeKey completed a debt raising transaction on April 3, 2017 whereby it obtained a $16.4 million secured line of credit facility for acquisition financing with maturity up to 18 months from ExWorks Capital, a U.S. private debt fund specializing in international trade and working capital financing. The ExWorks credit facility allowed WISeKey to complete the acquisition of 85% of the issued and outstanding equity interest of QuoVadis Holdings Limited, the holding company of the QuoVadis Group. The acquisition of QuoVadis represents a further key milestone in WISeKey’s growth strategy to consolidate the European Cybersecurity & IoT industry sector.
WISeKey is on its way to becoming the leading Cybersecurity Vertical Platform, by leveraging opportunities arising from efforts to consolidate the highly fragmented Cybersecurity industry, by focusing on cash-generating companies and smaller start-ups with innovative technologies on Cybersecurity, IoT, Blockchain and AI.
WISeKey’s strategy to evolve into a market leader in the IoT, Cybersecurity, AI and Blockchain market, implies a constant evaluation of potential add-on acquisitions, development of new IP and patents. In just one year, WISeKey has aggregated over 39 patent families (more than 200 patents in total) to its portfolio (https://www.wisekey.com/patents/) required to integrate the OISTE/WISeKey RoT into IoT embedded devices with problem-solving AI solutions.
For WISeKey, adding to its patent portfolio and intellectual property is key to ensuring that the company will remain a major player in the “DeepTech” sectors for years to come. Its patent portfolio allows WISeKey to distinguish itself from other companies that use commonly available technology; WISeKey focuses on integrating unique technology that is differentiated, protected and hard to reproduce due to tangible scientific discoveries and/or engineering innovations. The new patents cover a range of technologies for IoT and semiconductors, particularly those that help make enterprise-level computing services more trusted, reliable and secure. The most notable patent acquisition by WISeKey on IoT and semiconductors happened in 2016 when the company purchased 17 new IoT patents from Inside Secure, which at the time allowed WISeKey to create the first ever comprehensive trusted end-to-end cybersecurity platform for people and objects (IoT). Following this acquisition, WISeKey’s cybersecurity offerings includes certified hardware & software, system certification, provisioning and up to management of cybersecurity services.
A focus area of investment and the fastest growing segment for WISeKey this year is the IoT and Industrial Internet of Things (IIoT). Revenues generated by this segment continues to increase due to the new generation of IoT Chips, sensor-based identification, authentication and data and creating AI for analytically rich data sets. What has emerged during 2017, is only a glimpse into how the IoT and IIoT technology used in solving complex logistics, manufacturing, services and supply chain problems, can deliver the most value for WISeKey.
Following the successful establishment of WISeKey India as a Joint Venture continuously explores opportunities to expand geographically, especially in high growth Cybersecurity markets such as China, Saudi Arabia and the USA and is working on establishing WISeKey joint ventures to operate under WISeKey’s National Root of Trust including a localization of the technology in these markets. Of note, WISeKey India is already working in expanding the reach of WISeKey AI project, WISeAI, by integrating the WISeKey Indian Root of Trust and IoT embedded devices with problem-solving AI solution into WISeKey’s Vertical Platform.
Additionally, in 2017 WISeKey expanded its Blockchain and AI market activity with the establishment of Centers of Excellence in India, USA and Switzerland. Via these Centers of Excellence, WISeKey is cooperating with local participating companies on developing strategy, proof of concepts, policies, educational materials (including addressing all the distributed ledger capabilities across different Blockchain schemes: public, consortium and private), with industry verticalization and domain specialization (IoT, AI, encrypted transactions, messaging, etc.), underpinned by the best underlying technologies from startups, our key partners and from the community.
Another important area of development for WISeKey in 2017 was the use of AI at the chip level together with the WISeKey RoT which allows IoT to provide authenticated sensor data. Current IoT data do not provide value for their manufacturers unless it can be converted into actionable, contextualized information generated by IoT sensors fully identifiable. The majority of IoT devices are not built with embedded secured systems thus are very vulnerable to hackers. By integrating AI into the WISeKey RoT and Vertical Platform, objects can develop their own cybersecurity behavior, thus making smarter and safer decisions. IoT objects with this technology will learn from attacks, defend themselves and transfer this intelligence via the WISeKey Vertical Platform to other IoT objects peer to peer using a Blockchain.
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.
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.