01 Quantum Inc. (ONE) Earnings Call Transcript & Summary

Good day, and welcome to our strategic growth plan presentation. My name is Brian Stringer. I'm the CFO for 01 Communique. Andrew Cheung, our President and CEO, is also present. And with us today are 2 guest panelists from PwC, Mr. William Gee and Mr. Samuel Sinn. So let's get started. First, I'd like to go through our disclaimer regarding forward-looking statements, and then I'll pass it over to Andrew to explain our growth strategy. Following which, there will be time for questions from the audience. Now this slide entitled Disclaimer is an integral part of our presentation. Please take the time to review it. To summarize, certain statements made today may constitute forward-looking statements, which involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the company or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such statements include statements regarding the business prospects of IronCAP, the future of quantum computers and their impact on the company's product offering. These forward-looking statements are made as of today, and the company assumes no obligation to update or revise them to reflect new events or circumstances. And now I'll turn it over to Andrew.

Thank you, Brian. Welcome, everyone, to this webinar. My name is Andrew Cheung, the CEO and President of 01 Communique. This webinar is to present our strategic growth plan and a joint business relationship enhancement with PwC China. Today is a very special monumental event for 01 and its investor following the issuance of our long-term strategic growth plan last night. My presentation today is centered around elaboration of what we said in the press release about our post-quantum cybersecurity business. We will also provide some video clips from our global partners, such as PwC China, a global leading professional services networks in the world; CGI, a global technology and system integrator with head office in Montreal; and Hitachi, a giant Tokyo-based technology provider. I will also reserve time at the end for question and answer. And this webinar is going to be recorded and available in our Investor Relation page on the website. As a quick recap of our announcement last night, Q-Day, the day when quantum computer render modern cybersecurity useless, is coming, and we have created what we believe to be the first-to-market enterprise-level cybersecurity software for the post-quantum world. Our patent-pending quantum safe cybersecurity product line, IronCAP engine and IronCAP X, are expected to drive our revenue growth. We have already secured some global partnerships and expecting to add more to our all-star roster throughout 2021 and beyond. Now that we have our game-changing enterprise-level IronCAP X cybersecurity, end-to-end e-mail encryption product to the global market, our business plan is targeting a fast revenue growth from 2021 onwards. IronCAP, which was uncrackable during a month-long hackathon last year, was developed by our exceptionally talented R&D team, led by our CTO, Sergey Strakhov; and our crypto scientist, Professor Bezzateev. In addition to IronCAP, Our remote access business unit is also generating revenue, helped funding some of the development of IronCAP. Our SaaS business model is enabling an exceptionally high profit margin. Now since most of you probably don't know our story, so let me give you a little bit history of our company. 01 Communique is not a start-up. We are a publicly listed company, selling remote access solution for many years to many large companies, such as Hitachi. During those years, we were closely monitoring the development of cybersecurity because, we can imagine as a remote access solution provider, if a remote access channel got hacked just once, the whole business will go down, too. That exercise gives us the opportunity recognizing the development of quantum computers very early almost 10 years ago. So our journey in post-quantum cybersecurity started about 5 years ago when we started following resources in developing quantum-state encryption. Now fast forward in 5 years, quantum computing is no longer a mystery, and the threat to cybersecurity is well-known. Now over $5 million invested, we are in an excellent position as a disruption for global post-quantum cybersecurity SaaS company, having a first-to-market advantage with patent-pending enterprise software. I guess similar to any paradigm-shifting opportunity, we are targeting a massive global total addressable margin. And the total encryption market expected by Gartner without even factoring Q-Day into their number is expecting to grow to $1.7 billion per year by 2024, and it is expecting to grow at a rate of 18.7%. We are first-to-market with verticals product that we believe has the potential to become the de facto solution for the post-quantum era. We have a well-defined go-to-market strategy using global partnerships, such as Hitachi, CGI, ixFintech and Nexusguard. We are in a financial inflection point providing an attractive entry point for investor, whereby Q-Day also represents a huge, massive catalyst for investors. Our early-day success has been evidenced by having a number of global partnerships, such as CGI, Hitachi, Nexusguard, ixFintech, as I mentioned before. And very importantly, about 2 weeks ago, we have entered into a partnership with PwC China. Part of this webinar today is an official joint press release -- joint business relationship announcement with PwC China, and we are very happy having 2 of the senior partners joining us as a panelist today: William Gee and Samuel Sinn. As mentioned earlier, quantum computer is no longer a mystery. And the threat to cybersecurity is very well-known. Quantum computer can simply be described as a superfast computer with million times the computing speed of conventional supercomputer today. And the excessive computing power is expecting to drive modern cybersecurity useless. This threat is no longer a problem of tomorrow because it is already here. As I mentioned, why it is here is because very simple that IBM in early 2019 has already announced the Model Q commercial availability. And then shortly after that, Google has also announced their quantum supremacy in October the same year. Shortly after that, Amazon allows the quantum computer to be used by the public through the cloud using the subscription to the bracket service. Now all these things are also culminated with just only 2 months ago, Honeywell, has announced another things that their quantum computer is doubling the speed of IBM and Google. Now this is only the known fact in open world, and frankly, we have no idea about what quantum computing technology is available on a national level other than the fact that many countries are also giving -- pouring billions and billions dollar into the development of quantum computing. Another fact is that hackers can simply grab your data in a week until they have got hold of a quantum computer and hack it, right? So in 2016, the NSA recognized the severity of quantum threat and then warning other organization and agencies to get themselves quantum-ready sooner than later. And IronCAP is designed to protect the whole marketplace, just to give you some examples, like e-mail, encryption, cloud storage, blockchain security, website security, IoT, 5G device security, password security, credit card financial transaction, the list just goes on. And this is echoed by Gartner's expectation, as I mentioned a little earlier, that the market will be expecting to grow to $1.7 billion per year by 2024. And this hasn't even factored the effect of Q-Day into their numbers, and it's expecting to grow at a rate of 18.7% per year. Now let me just give you some practical examples. For example, Visa and Master, they have a total of 2 billion credit cards in the world, and each require an X.509 quantum-safe certificate. That represents a $2 billion per year for IronCAP. Another example, like -- like the website, there are 170 million of active website in the world. And each also require an X.509 certificate, represents another market of $3.4 billion for IronCAP. Turning the example to e-mail, there are 730 million business e-mails in the world, and this represents another $7.3 billion market for IronCAP. So these things doesn't even include VPN, remote access, blockchain security, et cetera, et cetera. Our go-to-market strategy is very simple and clear. IronCAP is like a Tesla in the world of post-quantum cybersecurity industry, whereby we offer both the engine and the vertical solutions like a car. And we have already signed up some existing partnerships in the world, as how I mentioned before, and I think the vertical solution is also the key here. And we expect IronCAP X to be a global drive for adoption because in August 2019, we have already announced the engine. And a few months ago, we have just announced the IronCAP X, which is the world's first quantum-safe, end-to-end e-mail encryption product. The first release that we have announced was a free version for personal usage, whereby a business version will be announced in a few months, charging $100 per user per year. I think it doesn't take a rocket scientist to figure that we are employing a premium penetration model, whereby we're using the free version as a penetration method and making money in the business version. More vertical solutions are expected in the pipeline such as quantum-safe remote access solution, quantum-safe VoIP, et cetera, et cetera. I guess a demonstration worth a thousand words, so let me play a video to show how easy and powerful it is that IronCAP X can allow you to quantum-safe your e-mail encryption. Here it goes. [Presentation]

Well, thank you for watching. So beside our premium penetration model, we plan to grow by signing up partners to market IronCAP product line. We believe a minimum of 15 global partners is required to cover the whole world. We have several already in place, in addition to some smaller ones. We plan to complete this task within the next 18 -- 12 to 18 months. We're kind of like Gretzky, skating to meet the puck, and we anticipate Q-Day can come anytime between now and the next 24 months. Our goal is very simple. We want to be ready with our partners when everyone is desperately looking for quantum-safe solution, okay? I guess you have heard a lot from me, saying why you must be quantum-safe. Let's hear some words about -- from other global leaders. I'm very pleased that one of our mobile partners, CGI, with head office in Montreal, has provided a short marketing video about their post-quantum cybersecurity strategy. CGI is one of the largest global technology and system integrator with head office in Montreal. Here it goes. [Presentation]

Okay. Now let's swing to the other side of the world. Hitachi has provided us with a short clip to say a bit about our partnership. Our Chairman would like to especially thank for the effort in providing this clip during the COVID lockdown of the head office in Japan, so that the chief security specialist has to record the clip from home. [Presentation]

Now let's stay on that side of the world a little bit more. As I mentioned earlier, 2 weeks ago, we have entered into a partnership with PricewaterhouseCoopers in China. Today, we are very happy of having PwC China not only providing a video clip but also participating in person as a panelist for this joint business relationship announcement milestone. Our Chairman would like to say a few words as a token for our appreciation. [Presentation]

Well, thank you, Sam. We have now well-defined growth strategies for both our top line revenue and bottom line profit from 2021 to 2025. As indicated, growth will be supported by the free IronCAP X licenses to individuals, which is expected to accelerate adoption for the technology. Our goal is to become the global de facto solution in the post-quantum cybersecurity era. Over the next few years, we expect to continue investing in company infrastructure. This not only talking about sales and marketing but also R&D, finance and business processes. This investment will support the growth plan. Now that you understand our growth plan and long-term strategy, and now let's move to talk a little bit about some of the basic capital structure item for the company. We are publicly listed on the Toronto Stock Exchange Venture Board in Canada and recently upgraded to the QB market in the U.S. for easy access to the U.S. investors. We are currently operating on an annual loss of well under $1 million and expecting to generate breakeven result in 2022. As of now, we have about $1.2 million with no debt. In other words, we are very well-capitalized. And on the technology base, we are backed by a strong team with a total of over 70 years experience in cybersecurity. As mentioned before, our crypto scientist, Professor Bezzateev, is a well-known expert in the field of cryptography, especially quantum-safe cryptography. Our CTO, Sergey Strakhov, was his student 20 years ago, and I am the founding CEO of the company with over 25 years' experience in remote access technology, SaaS operations and cybersecurity. So before I take a pause and swing to R&D, let me give you a quick summary that we are at a tipping point where Q-Day is at least arriving, if not already there. IronCAP is a vaccine for this quantum pandemic. Our technology is patent-pending, already having public hackathon-proven and ready to roll out with global partnerships. We are well funded and expecting massive revenue growth between 2021 and 2025. So now let's swing to question and answer. Here it goes.

We were receiving a few questions as the presentation was going on. So I'll start with the first, from [ John Howard ]. And [ John's ] question is directed to PwC, and I'll direct it to William. And Samuel, feel free to chime in wherever you think necessary. It's a multipart question, William. And he's asking, when do you think Q-Day will come? How are enterprises in Asia preparing for Q-Day? And given this, what kind of joint activities are you contemplating with 01? And are the marketing activities with 01 limited to Asia and China? Or are they expanding beyond that?

Thank you, Brian. So let me take the first part, and I'll pass it to Sam for some of the remaining sections of the question. Let me just touch on the one component of your question, which is Q-Day. If I kind of think back to the NIST report, National Institute of Standards and Technology in the U.S., they issued a report about 4 years ago on quantum computing. And in that report, there's a comment saying that they predict that within the next 20 years or so, sufficiently large quantum computers will be built to break essentially all public key infrastructure that are currently in use. In the recently published World Economic Forum report on cybersecurity, emerging technology and systemic risk, it was noted that quantum computing will emerge in the next 5 to 15 years. Now as Andrew mentioned earlier, Google announced achieving quantum supremacy last October. And there was certainly last month when IBM announced its road map on quantum computing hardware, noting that by the end of 2023, that's 3 years from now, quantum processors with more than 1,000 cubits will be available. So as Andrew was mentioning earlier, Q-Day may be arriving, maybe already with us now. So whilst we may not have an exact date, we are seeing a compression in the estimated time line when quantum computers will become available. NIST, in their report, noted that it took the world some 20 years to deploy our current PTI infrastructure. And so we believe that significant time and effort will be needed to transition or migrate our current crypto system to a quantum-safe or quantum-resistant version. And therefore, we believe that whenever Q-Day will arrive, it is a risk and issue that organizations should pay attention to, especially for those that are relying on the use of cryptography to save their data and digital assets. I'll pass it to Sam to comment on the other parts of the question. Thank you.

Thanks, William. So in terms of the quantum security threat, we believe this is not limited to Asia but a global threat. And some organizations are taking a more proactive preparation than other. So the fact is that it takes time to convert an infrastructure to become quantum-safe. So that means you have to act way before Q-Day to be protected. And I'm from a PwC China firm. So in China, security is a top priority here to the organization locally. Because in China, there is a China Cybersecurity Law enacted a couple of years ago, so a lot of organizations are taking very serious to comply with the legal requirement in cybersecurity here in China. And thank you.

Now are the marketing activities of 01 and PwC limited to Asia and China? Or do you see this progressing beyond that?