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WISeKey International Holding Ltd (WKEY) (H1 2024) Earnings Conference Call Highlights:…

  • Revenue: $5.2 million for the first half of 2024, compared to $15.1 million for the first half of 2023.

  • Semiconductor sales: $4.8 million in the first half of 2024, compared to $14.8 million in the first half of 2023.

  • Gross profit margin: Decreased from 53.6% in the first half of 2023 to 21.5% in the first half of 2024.

  • R&D expenses: $2.9 million in the first half of 2024, representing 19% of total operating expenses.

  • General and administrative costs: $8.3 million in the first half of 2024, an increase of $0.4 million from the first half of 2023.

  • Net loss: $15.5 million in the first half of 2024, compared to a net loss of $7.1 million in the first half of 2023.

  • Cash and cash equivalents: $26.3 million as of June 30, 2024, compared to $15.3 million as of December 31, 2023.

  • Financing: $20 million from stock purchase agreements with L1 Capital and Anson Investor Fund.

  • Sales North America: 60% of net sales in the first half of 2024.

  • EMEA sales: 23% of net sales in the first half of 2024.

  • Sales Asia Pacific: 17% of net sales in the first half of 2024.

Release date: October 2, 2024

For the complete transcript of the conference call, please see the full conference call minutes.

Positive points

  • WISeKey International Holding Ltd (NASDAQ:WKEY) is undergoing a strategic restructuring to become a computing infrastructure company focused on cybersecurity, digital identity, blockchain, IoT solutions and post-quantum semiconductors.

  • The company has diversified its activities into specialized subsidiaries such as CLSQ for semiconductor technologies and WISeSat.Space for space technology, strengthening its focus and growth potential.

  • WISeKey invests in high-growth potential companies such as WISeSat.Space, which is expected to become a significant revenue generator by 2025.

  • The company secured $20 million in additional funding for its CLSQ semiconductor business to expand manufacturing facilities and develop post-quantum semiconductors.

  • WISeKey has a strong liquidity position with $26.3 million in cash and cash equivalents as of June 30, 2024, indicating financial stability and the ability to fund strategic initiatives.

Negative points

  • WISeKey's revenue was $5.2 million in the first half of 2024, a significant decrease from $15.1 million in the same period in 2023, primarily due to a decline in semiconductor demand.

  • The company's gross profit margin decreased from 53.6% in the first half of 2023 to 21.5% in the first half of 2024 due to high inventory costs and fixed costs.

  • WISeKey reported a net loss of $15.5 million for the first half of 2024, compared to a net loss of $7.1 million for the first half of 2023.

  • The CLSQ semiconductor industry saw revenue decline from $14.8 million in the first half of 2023 to $4.8 million in the first half of 2024, reflecting lower demand and high customer inventory.

  • The company is facing satellite launch delays with SpaceX, impacting the schedule of its WISeSat.Space projects.

Q&A highlights

Q: Could you provide further details on the restructuring efforts at WISeKey? A: Carlos Moreira, CEO, explained that the restructuring includes granting autonomy to various verticals within WISeKey, such as WISeSat.Space and CLCOin, allowing them to raise funds independently. This approach reduces the need for WISeKey to dilute its shares and positions these industries for potential IPOs in the future.

Q: Does funding these industries still impact WISeKey's balance sheet? A: Yes, Carlos Moreira has confirmed that while WISeKey remains the majority shareholder, the financing of these industries is consolidated in WISeKey's financials. However, the restructuring allows for external investment, as seen with WISe.ART and CLSQ.

Q: Can you elaborate on the satellite launch schedule and customer interest for WISeSat.Space? A: Carlos Moreira noted that the next satellite launch depends on SpaceX's schedule, with some delays pushing the launch back to January. WISeSat.Space has partnerships with companies such as the Swiss Army and port authorities for tracking and tracing solutions and is exploring additional launch options with European and other international partners.

Q: What are the prospects for CLSQ's return to growth and how does the shortfall impact this? A: Carlos Moreira emphasized that CLSQ's growth is expected to resume as customers use up their existing inventory and switch to the new Quasar chip. The market for TPM chips is large and WISeKey aims to capture 10% of this market due to the need for post-quantum security solutions.

Q: How does WISeKey plan to leverage its diverse portfolio for future growth? A: Carlos Moreira emphasized that WISeKey's strategy is to combine stable revenues from its semiconductor business with high-growth potential companies such as WISeSat.Space and CLCOin. This approach ensures financial resilience and positions the company for long-term success in cybersecurity, IoT and blockchain.

For the complete transcript of the conference call, please see the full conference call minutes.

This article first appeared on GuruFocus.

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