WISeKey International Holding AG (WKEY) Q2 2025 Earnings Report, Transcript and Summary

Greetings, ladies and gentlemen, and welcome to the WISeKey International Holdings 2025 Interim Financial Results Earnings Conference Call. As a reminder, this conference call contains forward-looking statements. Such statements involve certain known and unknown risks, uncertainties and other factors, which could cause actual results, financial condition, 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. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce Carlos Moreira, Founder and Chief Executive Officer of WISeKey. Mr. Moreira, you may begin.

Good afternoon to all of you joining us from Europe and the United States. I am joined today by our Chief Financial Officer, Mr. John O'Hara. And I'll start this call by providing highlights on the company performance and also on the subsidiary level initiatives for the first half of 2025. I will disclose the growth opportunities since the beginning of 2025. And moving forward, and then John will provide commentaries on our financial conditions in greater detail. Then we will open the floor to Q&A. I would like to provide now a short overview of the corporate structure. So WISeKey is a Swiss cybersecurity company created in 1999, which I am the founder. As a computer infrastructure provider, WISeKey delivers secure platforms for data and device management across various industries, including finance, health care and government, leveraging its route of trust technology and public infrastructure PKI. WISeKey is expanding its legacy technology into the quantum realm, building on the case of expertise in securing digital identities and enabled trusted communities, WISeKey continues to safeguard traditional encrypted communications and provide strong authentication services to governments, enterprises and consumer worldwide. At the same time, WISeKey is pioneering the transition toward the next generation of security through the post-quantum cryptography, what we call PQC. This dual approach ensures that existing infrastructures remain protected today while preparing them for a future where quantum computers will challenge conventional cryptographic standard, it is being projected and this will happen in 2030. So we have only a few years to get ready. By integrating PQC into semiconductors, IoT and digital identity solutions, WISeKey is setting the foundation for a quantum resilient digital ecosystem, ensuring continuity of trust and privacy in the post-quantum era. So WISeKey operates also as a holding company, encompassing several specialized operational subsidiaries, each subsidiary plays a crucial role in the WISeKey ecosystem contributing through independent research and development and expertise while integrating their technology into the overall WISeKey platform. This businesses are no longer operating as a separate businesses, but as a single interconnected ecosystem, what we call the convergent effect. Specifically, these companies are SEALSQ, which is well known now as it is a listed company on the NASDAQ under the symbol LAES, which focus on advanced semiconductor technology and it's coming with a world first in November of a post-quantum chip. WISeID, which offers Root of Trust and PKI services central to the WISeKey digital identity and encryption services and ecosystem. WISeSaT, a newcomer also in the last year, which offers space technology using and developing and securing picosatellite for secure communications from the space. We also have WISe.ART, it's the trusted blockchain and NFT segment, offering secure digital asset solution. And lastly, we have SEALCOIN AG, which is incorporated -- which was incorporated in 2024 and is developing the SEALCOIN platform and is focusing on a decentralized physical Internet with a soon-to-come token with name QAIT. In regard to the first half of 2025 has been a decisive step forward in the execution of WISeKey Quantum convergence strategy. So the WISeKey Quantum convergence strategy launched last year has the combining existency of combining different assets like proven identity, security methods with emerging quantum safe technologies to ensure a smooth transition into the post-quantum era. It maintains the protection of current infrastructure while -- sorry, classical cryptographic capabilities while progressing, integrating post-quantum cryptography, what I call PQC and quantum resilient algorithm. This strategy relies on a hybrid model, where traditional and quantum safe algorithms work together, guaranteeing backward compatibility with avoiding disruption. By applying this convergence across semiconductor, IoT, satellite, digital identities and blockchain network, it ensures that the trust and privacy remains intact. As quantum computers advances, the essence of quantum convergence is the bridge today of security with tomorrow challenges, enabling a resilient and future-proof digital ecosystem. This quantum convergence is now beginning to show its financial potential as each component drives value creation for the others, enabling WISeKey to multiply revenues, diversifying them and starting to reduce the dependency of any single line of business and to capture new recurring income streams. The foundation of this quantum conversion strategy lies in SEALSQ, which I mean before -- I mentioned before, is a major player on that ecosystem and one of the most secure and secure manufacturing capability of post-quantum chips, which is going to be released in November 2025 is a world first, the first post-quantum chip with the capability of protecting against quantum attack, so this is positioned to be the world first secure chip to embed NIST-standard quantum-resilient algorithm, the ML8-KEM CRYSTALS-Kyber on ML8-DSA-CRYSTALS-Dilithium which are the NIST standard quantum resistant algorithm that had been available for companies like SEALSQ to implementing their hardware devices. WISeKey control through its 52% of the voting rights of SEALSQ as of June 30, 2025. The Quantum Shield QS7001, which is the chip aims to secure critical applications such as cryptocurrency transaction but also defense system, healthcare infrastructure, airport security and IoT devices against future quantum computing threats. As quantum computer advances towards what we call the Q day when Quantum computers will break traditional encryption like electric curve cryptography, ECC, RSA, the QS7001 chip addresses vulnerability in systems such as Bitcoin and other blockchains that could be hacked with this new computing capability provided by Quantum. Current ECC base algorithm, including ECDSA are susceptible to quantum attack that could compromise public keys and expose funds. The quantum shield QS7001 integrates Lattice-based quantum resistant cryptography to provide secure key storage, efficient signing and key exchange operation, optimized for hardware wallet called storage and IoT devices. It also offers a migration framework with hybrid cryptography and tools to transition assistance system to quantum safe standards with minimal disruption. The chip is launched as an open hardware platform to hold personalized customer firmware, enabling full flexibility for all kinds of application. SEALSQ also plans to launch the trusted platform module version of the QVault TPM in H1 2026. While it's very few competitors only integrate post-quantum cryptography through hardware accelerators that supports PQC via software implementation, SEALSQ QS7001 embeds this quantum resistant algorithms directly at the hardware level. This approach delivers enhanced efficiency, which is around 10x faster, side-channel protection and tamper resistance without relying on software layers aiming to provide a more robust foundation for long-term security at high-stake environment. So the conversion does not stop at connectivity. Each secure device will in time be able to transact autonomously between themselves within a SEALCOIN ecosystem from which WISeKey holds 75% of the corporation created. This is creating four revenue stream through transaction fees on trusted IoT changes. Earlier this year, WISeKey proved the potential of this model with a world first space-based cryptocurrency transaction, showing, demonstrating how satellites, chips and the blockchain can combine the power on entire new digital ecosystem or new generation of WISe.ART platform, which WISeKey is owning 87.5% of the Corporation and remainder is held by The Hashguard (sic) [ Hashgraph ] Group, the Hedera blockchain company which is a pioneering Swiss-based work 3.0 technology company. So this platform adds a fifth layer by extending this infrastructure into tokenized assets generating transaction revenue from authenticated trading on both digital and physical assets. Together, this creates a diversified yet fully integrated monetization model where every element from chip to satellite to blockchain to marketplace reinforces and extends the other. So for shareholders, the value of this model lies in scalability and resilience. Hardware sales generating media revenue, while OSPT services, satellite subscription and blockchain transaction and tokenization provide recurring income streams that we expect will grow with adoption. This means that each customer or partner engagement has a compounding effect, a defense contractor, let's say, adopting SEALSQ chips could also become a client for OSPT services or it can also be a subscriber for WISeSat connectivity, a participant in the SEALCOIN transaction and potentially a user of WISe.ART for tokenized asset management. It is important to note that only few companies in our sector can offer this level of vertical integration and horizontal interoperability and monetization. So this sets us apart from most of our competitors and makes the DNA of WISeKey. Another key point are the strategic partnership in which WISeKey is building further enhancement in shareholder value by creating new addressable market, such as the Quantix Edge Security initiative in Spain, which actually has been announced this morning as a finalization company with a participation of the Spanish government invested in that company EUR 20 million, on which WISeKey is also investing together with SEALSQ EUR 10 million. And this company has already a committed revenue of EUR 25 million over the next 3 years for the company. So this is already a very concrete example on how this verticalization works, how you can create what we call decentralized value by bringing the technology at national level. So this is the -- this company is at the heart of semiconductor sovereign strategy in Europe. which is supported by public funding and demand for secure microelectronics. Also, our collaboration with the Swiss Army, which is already 3 years going, demonstrate that our convergence model is not just theoretically but already being deployed to deliver ultra secure sovereign communication, such as connecting mobile phones with our satellites and being able through those mobile phones to secure the communication directly with the satellite and to exchange the keys that they are required to ensure that both devices end-to-end are secure and authenticated or protected. And also our HUMAN-AI-T initiative, which we launched with the United Nations, extends our leadership-based technology into AI global governance, which although is not directly related to revenue generation, it is required in order to ensure that countries of the world can benefit through the AI revolution without the need of dependencies. So those initiatives are strengthening our brand, creating influence over standards and laying the foundation for future trust services where AI must rely on secure chips, authentication of data and tamper-proof transaction. So as WISeKey moves into the second half of 2025, our focus is on scaling execution. Here, I give you a few milestones. We are approaching the commercial launch of SEALSQ’ in Q4 2025. The date actually is now around the 22nd of November as a world first, which will -- which we expect will trigger new revenue growth in 2026 and beyond, as already communicated during the earnings call of SEALSQ, where these projections were disclosed. We're also expanding the WISeSat constellation to increase coverage and open new subscription. Now we have 22 operational satellites in orbit. We are testing real time those satellites on a daily basis by connecting devices to the satellite with a new launch, which is due in November, again, with SpaceX, which will include the new generation chip and will coincide with the world's first launch of VaultIC, the new generation chip for post-quantum capabilities. So we are also bringing SEALCOIN and WISe.ART from the pilot stage to commercial deployment, establishing new transactional base income stream. And we are strengthening OSPT footprint to ensure that every chip produced by SEALSQ had rapidly personalized and integrated into this global infrastructure. For shareholders, the message is loud and clear. WISeKeY convergence strategy is designed to create multiple layers of monetization from each customer relationship recurring revenue stream that compound over time and strategic partnerships that are open to us creating a new market while derisking the execution. So with $170 million robust pipeline of revenue opportunity at September 8, 2025, for the period '26 to '28, a very strong balance sheet and increased global recognition of a role of the intersection of quantum security, space connectivity, blockchain and AI, WISeKey is building a business designed to scale, resilience and long-term shareholder value. So WISeKey is not just adopting to a technology change. Actually, WISeKey is shaping it. We are building new world's sovereign trusted digital infrastructure that the world increase is dependent on as currently the move is to centralize technology in some few countries and few players, which creates a dependency issue. So for investors, this represents a unique opportunity to participate in the creation of a company positioned not only to grow revenue but to define the architecture of digital trust for the decades to come. With that, I will now turn the call over to John, who will provide further insights into our first half 2025 financial highlights. So John, please go ahead.

Thank you, Carlos. As Carlos mentioned earlier, WISeKey performance in the first half of 2025 is in line with our expectations. While the company is executing on its strategy moving towards next-generation semiconductors, space connectivity, transactional IoT and blockchain laying the foundation for sustainable long-term growth. For the first half of 2025, revenues grew slightly by $0.1 million to $5.3 million, which was entirely in line with our expectations reflecting the continued transition period, which is coming in ahead of the industry-wide strategic shift towards post-quantum and IoT-driven technologies. As in slide here, I would highlight that with the second half growth is already -- we've got very -- all our orders for the second half booked out at the SEALSQ level. And we actually now have roughly a 300% higher backlog of book orders for 2026 than we had at the end of 2025. So we already have much more confidence in the figures going ahead in the continued growth. Our operating losses did increase by $30.2 million to $27.3 million, but this was largely driven by a one-off stock-based compensation charge at the SEALSQ level of $10.1 million. in addition to increased investment in research and development and an increase in the general and administrative costs as a result of an investment in the infrastructure of the company to support developing verticals. The increase in the operating losses is partially offset by an increased nonoperating income due to a one-off gain on the settlement of the ExWorks loan, which we recognized a $3.7 million one-off credit as we settle for far less than the out held on our balance sheet and interest earned on our cash deposits of $1.6 million. This results in a net loss of $22.3 million for the 6 months to the end of June '25, which has increased by $6.8 million in comparison with the same period last year. As I just mentioned, we continue to invest in research and development, which for the first half of the year totaled $5.8 million, focusing on the development of SEALSQ's next-generation quantum resistant chips, the SEALCOIN transactional IoT platform, the WISeSaT expansion and Constellation and the launch of the WISeSaT 3.0 platform. Our strong balance sheet and cash balance of $124.6 million as at the end of June, will allow us to accelerate technological development and to execute strategic investments that expand our capabilities, strengthen growth pipeline and position-wise get the forefront as the transition to quantum resilient security solutions. A brief word on the outlook. We expect strong growth in the second half of the year with full year revenues expected to be in the range of $18 million to $21 million. This growth is driven by the expected return to growth in the demand for SEALSQ's traditional semiconductor products, the consolidated revenue of IC'ALPS, a subsidiary of SEALSQ since the completion of the acquisition by SEALSQ on August 4, 2025, as well as the continuing development of the revenue streams of our other business divisions. We look forward to reporting our progress in the coming months. With that, this concludes our prepared remarks. I would like to now open now the line to Q&A.

[Operator Instructions] Our first question comes from the line of Matthew Galinko with Maxim Group.

And congrats on getting the Quantix deal done. Can you maybe touch on the contribution from Quantix. I think the press release said a relatively even revenue recognition of $20 million over 3 years. Is there anything we should think about for margins on that project revenue? And is there potential for product revenue on top of the project revenue?

Just to clarify, it's $25 million over 3 years. So margins in that, yes, it's -- they vary a bit because some of it is equipment and plants as we install the equipment in Murcia. So some of that will be lower margin than our traditional semiconductor work, but then other elements will relate to professional service type arrangements, the expertise of our staff, the installation of IP. So it would run, we would expect at a higher margin, something much closer to what our -- well, as a margin level, would be very high because some of these staff are already currently employed by us. But yes, we start to be somewhere in the sort of the more traditional margin range. Then yes, as the PR also hopefully highlighted, we were also agreeing that we will be looking to allow them to sell our next-generation semiconductors and other products directly beforehand so that we don't kind of lose momentum or lose too much time. So yes, we would hope that there will be product revenues coming through whilst the center is still under sort of construction.

Yes. Maybe, Matt, this is Carlos. So just maybe to develop a bit further on that point. So this deal is actually a very important deal because this is the first personalization center that we sign, right? So the logical to personalization center is that many countries now they are getting concerned about the dependency on semiconductors and they want to have some kind of control on that process. And they start with injecting the keys, although the chips might come from whatever Taiwan, Singapore, whatever, but they want to inject the keys at national level. And those are the machines that John just mentioned. So there is going to be a full transfer of knowledge, equipment, licenses, IP, royalties in order for them to be able to do that. So this is -- and that includes obviously a building ultra secure facility, which we just came actually. We were there yesterday. So we were visiting that facility. So parallel to that, there is going to be -- this investment is a private partnership with the Spanish government SETT. So SETT is sitting in EUR 18 billion, actually, to develop semiconductor capabilities in Spain. So they are investing in Cisco, got EUR 300 million in Barcelona to develop a plant. There are many companies around the world, and they are coming to Spain due to the fact that the government is willing to co-invest with companies, and they would like to develop semiconductor capabilities at national level. Which is okay, right? So they put $20 million, we put $10 million and another start-ups in Murcia, Spain put another $10 million. So obviously for us is we recover our investment, because we have $25 million commitment over the next 3 years. But in the plus of that, as John said, we're selling immediately the semiconductors even before the center is fully operational to the market, and Spain is a high user of IoT, the electrical solar power plants, all that requires IoT connectivity. It requires authentication, required chips on solar panel the agricultural business, which is huge in that area, they are using IoT sensors to monitor water irrigation. So there's a lot of very interesting new applications that we are adding to the ones that we already do with these new generation chips. In plus of that, because SETT is an investor in many other companies, not only us, it creates an ecosystem right? Because the companies where they are also investing, they are creating synergies with other companies that like us now. So we are entering into new agreements like we signed with OdinS and TProtege. Those are local companies, and they are very highly specialized in a specific sector that then we can also bring to other countries. As we are currently negotiating actually, similar experience of those personalization centers in several countries, like including the United States in Arizona, where we are also advancing, also in India also in South Korea, there was last week at MoU signed with the major of civil and many countries are coming to us to say, wow, we really want to use your technology, not only because it's unique, nobody has it in terms of having this post-quantum chip. But in plus of that, you are maybe the only company in the world that is willing to help us at a national level; other companies, they rather centralize this technology, right? So this is creating a very interesting ecosystem for us. And as I mentioned during my introduction, that creates huge synergies with the rest of the companies WISeKey Group has, right? Because once you have those chips deployed at national level, then the next thing is connectivity, then is where the WISeSat satellite makes a lot of sense because we already concrete test on how to connect the satellites directly with sensors, then they are located into IoT devices or device-to-device communication or mobile-to-satellite communication. So that is a totally new industry emerging, and actually WISeSaT is booming, thanks to that, right? And then you have the tokenization, which is also a very interesting technology world first, which is letting machine to pay each other with SEALCOINS, right? So imagine a satellite buying data for another satellite and getting paid with SEALCOINS or a connected car buying data from a plug, electrical plug and do that directly through the car connection to the plug without the need to pay with Visa, MasterCard, right, intermediaries. So this is a very complex technology. People sometimes don't grasp the complexity that we are dealing here. But the good thing is the company is really making a huge progress, right? As each of those verticals are evolving. And they are creating, as I mentioned, this convergence synergy, which is what I believe is going to be the breakthrough in revenue here, is that once you build a very large microchip infrastructure, they start to want to be connected, they start to be transactional. And that creates a very new stream of revenue for the company in the years to come.

Appreciate the answer, Carlos, and John, a lot of color and very helpful to see how everything is coming together. I guess in the follow-up, you talked about the $170 million I think the 3-year business pipeline on the SEALSQ press release and conference call, and you repeated it here. Can you talk about how significantly, the TPM is represented in the pipeline versus some of the other applications of what you're working on? Or is TPM kind of a major component of that?

It's a mixture between the three, it is a mixture between the QS7001, which is the new chip. And that chip is basically upgrading the existing security of existing chips. So clients, and they are on the legacy chips and they are buying 5 million, 10 million of those chips per year. They want to upgrade now. As you know, out of the $170 million, an important piece is the design wins that the company already have with some of our clients, right? And they are then they are getting concerned now on the new legislation in the United States, but also in Europe actually now, that by 2027, the White House actually there's going to be in a few days, I guess, in a few weeks is going to be White House, similar to what happened on AI. It's going to be on quantum and regulation of quantum, that says companies needs to be quantum resilient already before 2027 and then by 2030, legacy systems will not be authorized anymore in critical infrastructures, right? So because the risk will become huge because everybody is now kind of in agreement and Quantum day arrives in 2030. And if you wait until 2027 to start to get ready for it, it's going to be too late, right? So this regulatory push is making, obviously, and you see that on the evaluation of some Rigetti, IonQ, the wave and SEALSQ, you see that happening now. I mean companies that they are in this quantum realm, they are getting a very strong valuation because it's actually easy to project in the next 10 years, what will be the revenue and the valuation of these companies if that momentum happens and because this is a regulatory type of movement now. It's going to happen. I mean there's no way that companies will not do it because their insurance premium will increase and then the clients who will get concerned on their products are now PQC ready and things like that. So part of the $170 million comes from that. The other priority comes from the TPM, as you say, and that is a bit later on the year. And the rest is coming actually from the centers because in every center that we built, the price is between $40 million to $100 million, depending the country, right, in the United States is a $100 million project. And you need to -- and even in some cases, we might want to invest together with investors to show that we are really serious about it, and this is important to us because we provide the licensing, the technology, the chips, the machines and everything. It becomes also revenue for the company. So this is the breakdown of the $170 million. What is happening now is that clients then they are being using the VaultIC. So VaultIC has been sold already historically 1.6 billion times. So it's a massive community of companies using already our technology. Some of them on a legacy environment, they are now considering to move into post Quantum, like yesterday, we announced a Taiwanese company that is doing ledger technology for storage of Bitcoin, Hashkey storage, and everybody is getting concerned that once Quantum arrives, the blockchain can be compromised. And therefore, people can lose all the bitcoins. And we signed a deal with them where we PQC enabled those devices. They are testing on a small group of devices, but obviously, the normal step is the entire production is going to be PQC ready next year. And I'm sure you're following as analyst the PQC addressable market, which is getting bigger and bigger, because we have, for the time being, we don't really have a clear competitor on PQC. I mean, the possibilities are projecting very high revenue. It becomes very realistic. Very big company. One question I get all the time, say, "Oh, how can you do that?" And I don't know, one of those multibillion-dollar chip manufacturing company don't do it? And the reason is that these are very large companies, and it's very hard for them to defocus from the current technology to just develop a PQC technology play and that takes 3 to 5 years to do it, right? So this is the years we have that we can conquer the market or at least take as much as possible of the addressable market.

Carlos. Great color on that. Maybe just last one for me before I jump back in the queue. You touched on commercializing WISe.ART with the 3.0 release and maybe in conjunction with WISeCoin -- SEALCOIN. Can you touch on maybe how you kind of what's the path to commercializing that piece of the business? And what can we expect for that in 2026?

So WISe.ART we developed, originally, the concept was that if you have a microchip into an object and that object is secure within microchip and authenticated, let's say, a spare part of a car or a drone or a hardware device, you can create digital twins of this part. And then on the metaverse or being able to regenerate the car, right, transfer directly from the original into the digital twin environment where engineers can play with the digital twin without touching the car. So that still is the design. And obviously, it's a very early business and the people are not doing that yet. The technology is what 3.0 is a complex technology. You have to put an identity on every spare part. And that identity needs to be storing a secure element, secure element injected into the object. The object then generates the digital twin and so on. So we found that art was the easiest way to start. And actually, we were very successful in art. We have now 1,000 of artist and we have thousands of pieces of arts than they have been dematerialized. But then you have these NFT collapse during the last 2 years, NFT companies like OpenSea and others, they just totally collapsed. We have suffered a bit of the misunderstanding of the market and say, "Oh, WISe.ART is an NFT platform," which is not. So we are basically reeducating the market to really see the potential with WISe.ART, which is becoming less maybe art, it is more like industrial generator of digital twin components to be analyzed on a digital environment. And then the SEALCOIN becomes the payment method or whatever you need to do between those devices. I mentioned before it is the machine to machine. So our objective is both companies actually WISe.ART, WISeKey in the identity management. They were very close to create that identity relation. And then we have, as I mentioned, plans to bring SEALCOIN as an exchange. So SEALCOIN will soon be on a topic change. We will give more information soon about that. And that will obviously create a huge amount of potential new diversification of revenue. Also WISeKey acquired 22% of WeCan. So WeCan is another blockchain company that develops -- we did it through the direct investment on SEALSQ. That was the model which we chose at that time. But as we all know, WISeKey controls the interest of SEALSQ. So both companies are working with WeCan in a KYC compliance using blockchain. So this is a very interesting project where you can basically bring web your technology to the financial sector and simplify the process of customers or banks to provide KYC compliance processes and registration. So you see the technology is converging, and that's the beauty. I think in 3 years, you're not going to be talking so many companies, so many products, you're going to be talking really bring Web 3.0 technology and simplify the process of customers of banks to the financial sector and simplify the process of customers of banks to provide KYC compliant processes and registration. So you see the technology is converging, and that's the beauty. I think in 3 years' time, you're not going to be talking so many companies, so many products. You're going to be talking really on Web 3.0 cybersecurity, which is what it's all about and connectivity. And obviously, you need to start somewhere. And the way to start this is by creating those specialized, very focused companies, and they are solving one specific problem. But once this problem is solved, it creates a lot of synergies with the rest of the ecosystem.

[Operator Instructions] Mr. Moreira it seems there are no other questions at this time. I'll turn the floor back to you for final comments.

So thank you very much for your help in organizing this call. And thank you very much to Matt and the analysts and they have been following us and also, obviously, our shareholders and investors, that they might be joining the call. If you didn't have the possibility to join, this call has been recorded. We also have, obviously, all the presentations available on our website. And John and I are here available for any further questions you might have. Thank you very much for your attention, and have all a great day.

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