SEALSQ Corp (LAES) Q4 2024 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call presents a mixed picture. Financial performance shows a significant revenue decline and net losses, but there is optimism with a strong projected contract pipeline and increased R&D investment. Shareholder return plans are positive with strategic acquisitions and investments. The Q&A section reveals some uncertainties, particularly in revenue normalization and R&D specifics. Overall, the sentiment is balanced, with strong future prospects tempered by current financial challenges and unclear guidance.

Key Financial Performance

Revenue $11 million, down from $30 million in 2023, reflecting a transition from traditional semiconductors to next-generation quantum-resistant chips and market normalization following supply chain disruptions.

Cash Reserves Over $90 million as of January 6, 2025, up from approximately $85 million at the end of 2024, providing a solid foundation for investments and acquisitions.

Net Loss $21 million for the year, primarily due to the migration from traditional semiconductor products to post-quantum semiconductor technologies and associated reduction in demand.

R&D Expenditure Increased by $1 million year-on-year, a 26% increase against 2023, emphasizing commitment to post-quantum innovation.

Combined Bookings $6.8 million, reflecting strong year-to-year growth.

Projected Contract Pipeline Over $93 million for the next three years, indicating strong future demand.

Funding Raised Over $80 million raised during 2024, strengthening capital resources for expansion into post-quantum cybersecurity markets.

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Operating Highlights

New Product Launch: SealSQ is preparing for the commercial launch of its post-quantum chip, scheduled for Q4 2025.

Investment in R&D: SealSQ plans to invest $7.2 million in R&D for 2025, following a $5 million investment in 2024, focusing on quantum-resistant technology.

Market Expansion: SealSQ is expanding into high-growth markets, including the U.S., Europe, and Asia Pacific, with plans for semiconductor personalization centers.

Projected Market Growth: The post-quantum cybersecurity market is projected to grow from $302.5 million in 2024 to $1.8 billion by 2025, with a CAGR of 44.2%.

Operational Efficiency: SealSQ has a strong cash position with over $90 million in reserves and no bank debt, enhancing its ability to fund growth.

Bookings and Pipeline: SealSQ reported confirmed bookings of $6.8 million for 2025 and a projected contract pipeline of over $93 million for the next three years.

Strategic Acquisitions: SealSQ is in the process of acquiring IC’ALPS, a leading ASIC design company, to enhance its chip design capabilities.

Investment in Startups: SealSQ has allocated $20 million to invest in startups engaged in quantum computing and AI initiatives.

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Risk or Challenges

Revenue Decline: SealSQ experienced a significant revenue decline from $30 million in 2023 to $11 million in 2024, attributed to the transition from traditional semiconductors to next-generation quantum-resistant chips and market normalization following supply chain disruptions.

Supply Chain Challenges: The semiconductor supply chain disruptions caused by the COVID-19 pandemic led to excess inventory accumulation, resulting in lower order volumes as clients utilized existing stock before making new purchases.

Market Transition Risks: The company is in the early stages of the post-quantum market, which poses risks related to the adoption and demand for new technologies, potentially affecting revenue growth.

Investment Risks: SealSQ plans to invest $7.2 million in 2025 for R&D, which may not yield immediate returns, especially given the long certification processes required for new products.

Regulatory Compliance: The company must achieve various certifications (e.g., NIST FIPS 140-3, TCG 2.0 compliance) for its products, which can delay product launches and impact revenue.

Competitive Pressures: The post-quantum cybersecurity market is expected to grow significantly, but competition may increase as more players enter the market, potentially affecting SealSQ's market position.

Economic Factors: The overall economic environment and market conditions may impact customer spending on cybersecurity solutions, influencing SealSQ's revenue projections.

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Guidance & Outlook

Investment in Post-Quantum Security Technology: SealSQ plans to invest $5 million in 2024 and $7.2 million in 2025 to scale post-quantum security technology.

Strategic Acquisitions: SealSQ is executing strategic acquisitions, including a planned acquisition of IC’ALPS, a leading ASIC design company.

Expansion of Semiconductor Personalization Centers: SealSQ is establishing semiconductor personalization centers in Spain, the U.S., and Asia Pacific to enhance production capabilities.

Partnerships and Collaborations: SealSQ is expanding partnerships with semiconductor distributors and entering joint ventures to enhance its market presence.

Focus on R&D: SealSQ increased R&D expenditure by 26% in 2024 and plans to allocate $7 million for 2025 to support the development of quantum-resistant technology.

Revenue Expectations for 2025: SealSQ anticipates a significant revenue increase in 2025 compared to 2024, driven by new product launches and increased demand for post-quantum solutions.

Projected Contract Pipeline: SealSQ's projected contract pipeline over the next three years stands at $93 million.

Bookings for 2025: Confirmed bookings for 2025 are $6.8 million, reflecting strong year-to-year growth.

Market Growth Projections: The post-quantum cybersecurity market is projected to grow from $302.5 million in 2024 to $1.8 billion by 2025, with a CAGR of 44.2%.

Long-term Growth Outlook: SealSQ expects the full impact of growth initiatives to materialize in 2026, with significant revenue contributions from new products and strategic acquisitions.

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Shareholder Return Plan

Shareholder Return Plan: SealSQ has allocated a fund of $20 million focused on investing in startups engaged in quantum computing and AI initiatives that could be integrated into their Quantum roadmap.

Shareholder Return Plan: The company raised over $80 million of capital during 2024 to strengthen capital resources for expansion into post-quantum cybersecurity markets.

Shareholder Return Plan: SealSQ has a clean balance sheet with cash reserves peaking at over $90 million, providing a solid foundation for investments and acquisitions.

Shareholder Return Plan: The company plans to invest $7.2 million in research and development for 2025, demonstrating commitment to innovation.

Shareholder Return Plan: SealSQ is in the process of acquiring IC’ALPS, a leading ASIC design company, which will enhance their capabilities and revenue.

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Key Q&A

Q: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?

A: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. During COVID times companies acquired a lot of chips, and that's one of the reasons we have a $30 million revenue only our chips during that time. The situation in Taiwan and the Asian region is uncertain, and that could become again a very high growth on revenue because the company will start to buy chips. In 2025, we will still start to see normalization because those clients are coming back and new customers are coming back through the personalization center.

Q: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?

A:The certification process is very expensive, just for instance, certification might be $2 million. 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. We allocated a $20 million investment fund to acquire and invest in start-ups that could integrate their technology into our Quantum platform. Once we make the investment, we 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.

Q:Carlos, the [$93] million pipeline, typical duration of that contracts are being discussed is 3 years. Is that correct?

A:Yes, correct, 3 years.

Q:What's historically SealSQ's win rate of pipeline?

A:The pipeline includes clients at various stages. 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.

Q:Review of Unclear Management Responses

A:Management's response regarding the normalization of customers returning in 2025 was somewhat vague, particularly in relation to the uncertainty in the Asian region and how it may affect revenue growth. Additionally, while they provided some details on R&D spending, the specifics on how many engineers would be added or the exact breakdown of costs were not clearly articulated.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

LAES Transcript

SEALSQ Corp (LAES) Q2 2025 Earnings Call Transcript

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The earnings call presents a mixed outlook. Financial performance shows stability with increased cash reserves and gross margin improvements, but revenue remains flat. Product development is promising with significant R&D investments and a strong pipeline, but execution risks and competitive pressures loom. The Q&A reveals management's evasiveness on some financial specifics, adding uncertainty. Despite positive regulatory drivers, the economic uncertainties and strategic execution risks balance the outlook, resulting in a neutral sentiment.

SEALSQ Corp (LAES) Q4 2024 Earnings Call Transcript

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The earnings call reveals a significant revenue decline and net loss due to transition challenges, despite future growth prospects. The absence of a share repurchase program and vague management responses in the Q&A further dampen sentiment. While there are positive factors like increased cash reserves and a strong contract pipeline, the immediate financial health issues and uncertainties around market adoption outweigh these positives, leading to a negative outlook.

SEALSQ Corp (LAES) Q4 2024 Earnings Call Transcript

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LAES Report

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