Greetings, ladies and gentlemen, and welcome to the WISeKey International Holdings Full Year 2024 Financial Results Earnings Conference Call. As a reminder, this call contains forward-looking statements. Such statements involve certain known and unknown risks, uncertainties and other factors, which could cause the actual results, financial conditions, performance or achievements of WISeKey International Holding Limited to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. WISeKey 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. 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’s now my pleasure to introduce Carlos Moreira, Founder and Chief Executive Officer of WISeKey. Sir, please go ahead.

Good afternoon to all of you joining us today from Europe, and good morning to all of you joining us from the United States. I am joined today by our Chief Financial Officer, John O’Hara. I’ll start this call by providing highlights of the Company’s performance and subsidiary level initiatives for the full year 2024 and outlook for ‘25. Then John will provide a full report on our financial condition in greater details. Before I start, for all of you new to the WISeKey story, I would like to provide a short overview of the corporate structure. WISeKey is specialized in cybersecurity, digital identity, blockchain, Internet of Things, IoT solution and post-quantum semiconductor. As a computer infrastructure provider, WISeKey delivers secure platforms for data and device management across various industries, including finance, healthcare, defense and government. Leveraging its robust cybersecurity and public infrastructure, PKI, WISeKey insurers traditional encrypted communication and a strong authentication while also focusing on next-generation security throughout post-quantum cryptography. WISeKey holding company encompassing several specialized operational subsidiaries. Each subsidiary plays a crucial role in the WISeKey ecosystem, contributing throughout independent research development and expertise while integrating their technology into overall WISeKey platform. These are specifically SEALSQ, which was listed on the NASDAQ in May 2023 under the symbol LAES, which focuses on advanced semiconductor technology and post-quantum cryptography. WISeID offers Root of Trust and PKI services central to the WISeKey digital identity and encryption services. WISeSat offers a space technology division utilizing picosatellite for secure communication from the space. WISe.ART is the trusted blockchain and NFT segment of the group, offering secure digital asset solution and then SEALCOIN AG, which incorporates -- incorporated in 2024 in Switzerland develops the SEALCOIN platform and focuses on the decentralized physical Internet, DP. That say, ‘24 has been a pivotal year…

[Operator Instructions] Our first question comes from the line of Matt Galinko with Maxim Group. Please proceed with your question.

Just a couple for me. First, can you talk about -- maybe give us a little bit more detail about that pipeline number you offered as of April 15. How do you qualify the pipeline? How competitive do you think that will be contested? Just any more color you can provide around it?

Yes, sure. So, the pipeline, we obviously value everything based upon our estimated sort of size of the client opportunity, which is a constantly evolving constantly evolving number. When we first start off, we obviously don’t necessarily have the full visibility of the acquired volume. So, it does take an element of estimation in there, and we tend to take a very conservative approach. We also then split them between going from the most kind of speculative where we’ve identified an opportunity coming down to them when we’ve got through the qualifying of an opportunity into the design-in and design-win, of course, the design-win be in the stage where we have received our first purchase order from the client. As far as how competitive the marketplace is, it does depend a little bit. We believe that particularly in the TPM market and in the post-quantum market, it’s a market with significant barriers to entry then as the design and development of these chips is very expensive long-term process, and we believe there’s only a handful of competitors on the market for this work. And on the conversations, we’re having to date, we believe we are competitive on price. And certainly, we believe we are more flexible to specific client needs and more able to adapt our products than some companies who maybe want to who would require a higher volume before they would go down a slightly more bespoking route. So yes, as we’ve always found in the semiconductor industry, there will be competition from some of the usual names we do feel that the market is big enough to give us -- I think we’ve quoted elsewhere, we’ve set ourselves a target of capture between 10% and 20% of the TPM market over the next three to five years. And we believe we’re confident in our ability to do that.

Got it. And if I could maybe follow up a little bit on that. I think you mentioned expecting your first revenue from post-quantum capable chips in first quarter 2026. So, to the extent that -- I guess when will we -- what will you have visibility into kind of what volumes will look like when the product is ready for volume shipping. In other words, like of that pipeline, do you expect decisions to be made by like midpoint of this year of -- yes or no? Or is it a little more complicated than that?

So, you’re talking about client decisions, specifically the you’re asking about sort of when the clients will make their decisions.

Yes.

Yes. So certainly, we are already in active discussions. We are with clients where we have a strong relationship. We have given them kind of first-run samples. So, they are able to test and see how the products fit the more commercial launch with the sort of the final version will come in Q4. But we’re -- on some clients, we would expect to start to get that information between now and the end of the year, probably into sort of Q3 and Q4. There are elements where we are going through getting the certifications. So, depending on client requirements, some of them are happy just to know that we have applied for the certification and kind of believe that indicates that we will get the certification. Others want a way do we receive that, which means then we’re at the whims of the certifying authorities such as NIST and the FIPS certifications. So, we’d expect by the end of the year to have probably a pretty good site into the demand for 2026. And I would say, probably once we’ve gone through the half year and announced our half year results. So, we’re coming towards the end of Q4 when we announced the interim results. We’d expect to also have a good indication on the first half of 2026 as well. Yes -- but then, I suppose adding to that, there are obviously some clients where the process will take longer. So yes, it’s ever evolving beast.

Our next question comes from the line of Kevin Dede with H.C. Wainwright. Please proceed with your question.

Hi, Carlos and John, thank you for having me on the call, too. John, since you’re on a role, can we talk a little bit about margins in the second half in inventory levels? And what you think that portends for the first half of ‘25 in the second half of ‘25? If you look at margins yes. If you look at margins, they almost doubled, right, from the first half to -- or more than double from the first half to the second half inventory was cut in half. So, I’m kind of wondering, what happens to legacy product price in advance of the quantum-capable chip shipping at the end of the year? John O’Hara: So, as of today and certainly from all indications we’ve got from our suppliers because the legacy products aren’t -- whilst they are reducing in demand and so on, they’re not -- there are certain products where they are still required. So, we’re not seeing suppliers put pressure on to kind of -- to increase the prices to meet kind of to produce what’s becoming potentially sort of obsolete product. So, we don’t anticipate any significant adverse impact on our margin certainly over 2025. I think as a percentage, the margin was hit in 2024 by the fact that we had some -- there were some charges in our cost of sales that related to the related to kind of minimum production quantities and so on, which as we started reducing our old stock level to avoid having an obsolescence problem and to reflect the reduced demand in ‘24. It meant we did have to absorb some kind of one-off almost fixed cost of sales items that made our margin look worse than it truly was on an underlying basis. We do expect that to come back particularly in the second half of ‘25 and really pick back up to kind of the 2023 type levels?

Okay. I guess I’m a little... John O’Hara: So, you sorry, just quickly, I’m talking percentage margin there just to be.

No, no, no, no. Yes, I understand. But listen, as I ran the numbers, I was looking at sort of 21.5% in the first half of ‘24 bouncing up to 47.5%. I just -- I guess I’m having a hard time getting the dots to connect in my little brain. Do you suspect that you’ll be able to maintain pricing for the remaining chips that you have in legacy product through the balance of the year? John O’Hara: Yes, that’s what we’re currently expecting. Some of the legacy products will still continue beyond ‘25. So not everyone is end lighting at the same time. Obviously, there is always pressure from clients to squeeze costs as a standard in business. So yes, we would expect that second half margin to be something closer to the real number.

I see. Okay. Okay. That helps. With regard to the Swiss Army contract, I got the impression reading through the docs this morning that, that contract is live now and I guess, on the 17 or 18 satellites you have in your constellation. And I’m just wondering, how you see revenue flowing through the P&L for the balance of the year. John O’Hara: Yes, the development contract is live, and we are working with the Swiss Army on various tests and so on particularly around the technologies. For instance, I believe we announced around the SEALPhone and the secure communications, which we’re testing that to prove that it works with the satellites. Revenue-wise, we see that we’ve, therefore, got some contracts which will get relatively small revenues at this stage. We’re still at the early step of the project [indiscernible]. It won’t be in ‘25, it won’t be a game-changing number. Certainly, as I’m sitting here today, it’s still much more in the research and development phase where we’re working on proof of concepts together and kind of demonstrating the need, but there’s obviously quite a few hurdles to jump through, particularly when you’re dealing with the more public sector. So, we’re probably expecting that more to come through as we go into 2026 and beyond.

Carlos mentioned the fleet size or constellation size approaching 88 satellites. And I’m wondering if you’re -- at least as I understood previously, the idea was that WISeKey and WISeSat would work with partners to fortify that network and help subsidize the manufacture and launch. And I’m wondering, if you can give us any insight on to how you see those partnerships developing. And I guess, to that point, whether or not the Swiss Army is helping subsidize launch, manufacture and launch as well. John O’Hara: Yes. Unfortunately, I can’t go into too much detail on what exactly is within in the Swiss Army contract. And certainly, as we head toward the target of -- I think the actual target I’d say we’re looking to deploy a further 88 as Carlos said, over the next kind of three years. I mean the goal is there to get depends on where we go, but I think there’s sort of a goal to get somewhere around 100 in the constellation in total, which kind of then gets roughly to a live connectivity. So, the foster partnership is probably the best example of how we feel that works well, where there are satellites that we will launch together and that will be very much a WISeSat funded launch, whether that’s subsidized by our partners or whether that is paid for by us. And ultimately, obviously, the goal would be we’d be looking to get those fully subsidized to the extent possible. But then also, FOSSA themselves will potentially launch their satellites with other partners. And so, we have an agreement there where we look to share the technology and therefore, we have the kind of the access and the connectivity to their satellite constellation within our numbers. So, when we talk about the 17 satellites that have been launched, not some of those have been FOSSA launches, which are then secured by our technology secured by WISeSat, and we have the kind of the ability to connect to those. So, it’s a bit of a mix. And we’re looking to -- we’ve got two or three advanced conversations, I believe, we’ve already now. I believe we announced one a month or so ago with a partner to look to develop a similar kind of understanding and agreement.

A couple of questions on the IC’ALPS acquisition, please, John. One is what sort of revenue contribution do you expect? When do you think it will close? And what technology comes with that deal that fills a hole that you guys perceived existed in the SEALSQ quantum chip delivery. John O’Hara: Okay. So, we will announce more clear guidance on the revenue numbers when we close the deal. The target is we’ve we’re progressing through that. We -- as Carlos said, the item outstanding is in order to acquire a company in this sector in France, in particularly in the semiconductor sector, you need government approval. This is even though, obviously, WISeKey already owns one French company that’s gone from act. We still need to get the approval again because of the nature of the technology and to ensure that we’re not -- that we’re going to continue to support that industry in France. So that’s the main item. In short, the guidance is it can take anywhere between two and four months, and we started the application process about a month ago. So optimistically, we hope to get something before the half year, but it might fall into sort of July, maybe even August before we get that approval. It just depends on how fastly the wheels turn in the government there. The main area, and I’m happy to assure sort of a call with Bernard, you can probably explain this a lot more in depth than I can, but the main area, obviously, the IC’ALPS, they work in the full ASIC design and designing the hardware of the chips and so on. So, for instance, how we first developed our relationship with them was we worked with them on the design of our post-quantum chip, where they supported us particularly in the hardware side, I believe. And so yes, we feel it then creates a much more sort of full-scale solution that we can offer. So, we’re not just offering kind of to put to supply secure semiconductors, but we can also support clients with the full design as well, going from -- right from the A to Z of the project there. And we’ve already had one or two projects come across our desk where previously, we would have needed to find someone to subcontract a portion of the project to which then immediately it makes it a bit harder to come across as a credible partner. Now, we have that entire technology in-house. And we also hope that we’ve IC’ALPS on their side, were they’re currently presenting design projects to their clients, not only will they do the design, but now they will -- as they’ve tried -- as they have done on a couple of occasions, but they now have a much stronger support to offer both not just the design, but the supply and sale of the chips behind it.

So again, I just kind of wanted to distill it down from my little bring, John, it seems to me it’s more of a vertical integration. It gives you a little more flexibility in ASIC design. Is that fair? John O’Hara: Yes. Yes, I think that’s fair, yes. Yes.

I apologize for holding your feet to the fire on that and appreciate the offer to speak to Bernard about it. John O’Hara: Yes. Certainly, he would be a much better place to give exact details, but yes, I believe that’s a fair summary that you’ve made.

Okay. Well, I -- listen, I don’t know that I can handle going any deeper, but I really appreciate your take on it. The other thing that Interesting to me is the development of a transactional-based service right, on layer on top of the technology that you’re building with post-quantum and identification and WISeSat? And I’m wondering maybe you can offer a couple of, for instance, an example because it’s just hard for me, given none of this is tangible, it’s hard for me to imagine how that service would actually work and what problem you’re solving? John O’Hara: So, when you raise that question just to double check, so you’re talking about the SEALCOIN?

Exactly. Yes. Sorry, I left out the most important word. I apologize. Thank you for feeling my gap for. John O’Hara: I just wanted to double check before I went off down the wrong route on the answer. So, I mean the -- from our point of view again, there’s multiple potential sort of proof of concepts that we can work on, and there’s kind of interchange of data and information and so on. However, the most simple one that I will give because I confess I don’t have the best brand for when we go into this sector. But it’s down the route of if, let’s say, I have an electric car, and you have a cellular panel and then kind of the sort of the smart city concept, I would be able to charge my electric car against your solar panels against the electricity you’re producing. And it would automate the exchange of the tokens to make sure that you, therefore, receive the consideration for our -- for the electricity you generated and provided me with. So that’s kind of a very simple basis, but that kind of -- when you sort of scale that up into the smart city concept and the fact that you potentially have this sort of the entire city infrastructure to operate on a similar basis, that’s kind of where it becomes quite significant and quite powerful.

Do you think I’m wrong in assuming that given satellites or a global phenomenon that you’d be able to tie electric cars and they’re charging to sort of an international, I suppose I have to fill up my Tesla in the U.S. and then I have it shipped to Switzerland, I can charge it there? Is that kind of some of the thinking? John O’Hara: Yes, exactly, yes. It would be -- yes, cross-border would not have to be sort of limited to single geographies.

Perfect. Well, thank you so much, John, for entertaining everything. Congrats on in the fires burning. John O’Hara: Thank you very much, Kevin. Similar on the offer, with if you do want to have a further conversation around the technology behind SEALCOIN, I can put you in touch with Jonathan who is -- who leads that division. So just let me know.

We’ll do.

[Operator Instructions] Our next question comes from the line of Leo Carpio with Joseph Gunnar. Please proceed with your question.

I guess after that very detailed question and answer, I thought more of a general 50,000-foot question probably appropriate. Given all the technologies you have in your platform and capabilities, are you positioned to benefit from the general European rearmament trend that we’re seeing, and that holds spending of NATO for the next two to five years in terms of re-enhancing our capability, especially on secure communications and encryption?

Leo, thanks for the question. Yes. For a short answer, yes, we believe we are. And certainly, that is an avenue that we are trying to explore and progress down yet.

Okay. And then a quick follow-up. In terms of your satellite customers, who are they right now currently and you would envision in the next two years for.

So currently, obviously, we’ve announced that we’ve got the -- we have the project ongoing with the Swiss Army, and we also have a -- I believe we announced our partnership with RUAG as well. So those are our main partners at the moment where, like I say, we’re still very much in the sort of the development -- in the development phase and the proof-of-concept phase on those. From a growth point of view, we obviously believe those contracts will grow further than we’ve had conversations. I think as our financial state, we’ve had conversations and are working with various companies some sort of shipping companies for the tracking and the monitoring of goods. We’re working with sort of like cultural companies for the environmental data on there, communication and telecommunication companies, we believe would come there. And then back to the point you mentioned earlier on kind of a defense scale, we believe there’s a strong argument for having this kind of this neutral network that’s kind of Swiss own Swiss led. And so, we also believe there could be sort of government and defense interest, particularly across in the EU at the moment on that.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I’ll turn the floor back to management for any final comments.

Okay. Thank you, operator. So yes, I would just like to conclude by thanking everybody for joining us today on this call. Please do not hesitate to reach out to our Investor Relations team, if you would like any further information. And I’ll just wish you all a very good day. Thank you.

Thank you. This concludes today’s conference call. You may disconnect your lines at this time. Thank you for your participation.