archTIS Limited (AR9) Earnings Call Transcript & Summary

All right. Great, everybody. Thank you so much for attending the archTIS third quarter investor presentation. My name is Kurt Mueffelmann. I'm the Global COO and U.S. President, and I'm joined by Daniel Lai, our Managing Director and Chief Executive. Today, we're excited to announce our Q3 quarterly updates. And again, it's welcome in the morning. Good evening to our U.S. investors. And hello, it's early 2 a.m. for some of the U.K. investors that I met last week in London. So really happy to have everybody here. So what I'd like to do is introduce Daniel, and Daniel will take you through some of the updates around the quarterly highlights. We'll go through some of the details of the quarter results and go through some customer technology and sales and put some outlook into the Q4 updates. Daniel?

Thanks very much, Kurt, and welcome to everybody who has joined us once again for our quarterly update webinar. Highlights. Really, we're talking -- I'll go quickly over these highlights, and we'll get into a little bit more detail with these as we go through the session. Record licensing revenue and gross margins. Again, quarter-on-quarter licensing revenue has been breaking records for us. That's in triple digit growth for us, and we're striving to make sure that, that occurs in all aspects of the business. Award-winning recognition across both product lines, that is Kojensi and NC Protect. We're very proud to receive a number of awards across the Cyber Excellence Awards in the U.S., which are [indiscernible] products, particularly NC Protect which was the second year running across multiple categories, won gold and silver rewards across there -- across about, I think, 7 categories. Continuing key customer wins and renewals. This is a very important indicator for the business, not only winning new business particularly in the defense industrial base, which we've been targeting very heavily, but also expanding our licenses across the defense industrial base with existing customers and renewals. Of course, there was the big win there for us, which was in the system integration consortium by -- led by KPMG for the Australian Department of Defence. That got announced by Andrew Hastie, the Minister for Defence Industry and Cyber. And that obviously has been announced that, that is part of a $515 million program moving forward for data integration and data strategy for the OneDefence program in the Australian Department of Defence. The first phase of that is about $233 million. And when we have finalized the details of that in terms of our component of that, we will obviously make that announcement. Expansion of our licensing footprint to SAP. I know that a number of our investors have seen on Twitter the announcement that SAP are looking for a system administrative for the Kojensi platform. What we can say about that is, obviously, they continue to expand their licenses and use it and extend that globally. And of course, continue the Microsoft co-sell extension of the pipeline. Great results there, and that is across not just any particular territory, but across all territories. Renewed all major customer contracts, Office Australian Information Commission, Attorney General, et cetera. So with a very low churn rate. So that's all been exceptionally positive. We've done a number of things in the corporate space, including removing obstacles to sell to the entire U.S. federal government by becoming -- extending through partners for our GSA approval process, and that's essentially a compliance obstacle to be able to sell to this U.S. Federal. Finalized our Cipherpoint acquisition consideration, escrow released, important to have finished that process with Cipherpoint. More importantly, on the product side of that is integration of that with NC Protect and opening that European market up for us to allow us to do third-party encryption into that European market, which is hotting up exponentially now with the issues in the Ukraine and Russia. Of course, always focused on risk and risk management and being a cybersecurity company, named the new Chief Security Officer in terms of Nick Main. We take that very seriously. Kurt, do you want to give them an update on...

Yes. I think it's important. So part of the quarter is always introducing new investors from a standpoint of who is archTIS. So as we have a number of new investor prospects on the call joining us, we just want give you a quick update on who we are from at a glance standpoint. So when we look at the share price between $0.16 and $0.39, obviously, we think we're of exceptional value at this current time with an enterprise value in the low $40 million range. When we look at the outstanding shares, a little bit more than 250,000 shares. The daily volume is 376,000. I think what's interesting is that we have approximately $10 million currently on the balance sheet. But since inception, we've raised $25 million. So you look at the capital efficiencies, and that's starting to prove through to the consistency of the operating expenses that we'll talk about in a little bit as well as where we can drive the opportunities of the business going forward. But when you look at the breakout of the organization, we look at institutional investors a little bit, under 11% right now. And that comes and goes based upon investor and institutional investment profiles. We would love to have more institutional investors. But until we get up to a larger market cap, we're going to really push kind of the heavy family offices and large retail investors along the way. But we have a lot of interesting conversations going on as it relates to institutions showing interest in the company, being interested in the core technologies around attribute-based access controls. The big thing to point out, though, is that how aligned management and the Board is to the shareholders, where we have almost 20% of either founders, executives or Board as a component of our total shares outstanding. So a real alignment between the 2. And then lastly, really tightly held, where our top 40 shareholders own just a little bit under 50%. So when you look at that, there's some really good metrics there that a lot of the investors like. We just have to grow a little bit further and get the scale to be into their investment profile that we're looking at. And so when we look at that from an investment standpoint, most of the experienced people on the call and long-time valued investors and shareholders are. We are part of the ASX as well as the U.S. OTCQB. And we look at what we do from a data-centric standpoint, which is a little bit different than what other organizations, security vendors and security services firms who are out there today. So data-centric security is targeted at a $10 billion market -- from a $10 billion market up to 2026 and has a 23% CAGR. And so really, when you look at kind of the turmoil that's going on over in the Ukraine, that's carrying across from the cyber attacks, they're really looking about how to protect intellectual property, protect the crown jewels of an organization. And so we do that through both our kind of core technology products of Kojensi and NC Protect. And we really have strong products in that. I was doing some analysis earlier for the Board meeting the other day. And when we look at kind of the employee spend from where our investments are, yes, we're investing heavily in sales and marketing, but product innovation is still a lead metric for us as we drive the business forward. We'll talk about that a little bit more in depth, but over 60% of our total costs are focused on development and product management, really driving those technologies because we really are a technology-driven focused product company. We're trying to move away from the services. We will look at it from an opportunistic standpoint if it supports where the business is going. But top line licensing, top line annual recurring revenue really is where we're going. And we really do that with the strong protected areas around information. We have a very strong kind of deep domain expertise into defense and intelligence. And we can really mine that very strongly where we see some strong success. We've just had a large cyber trade show over here in Washington, D.C. over the last 2 days. It goes 1 or 2 more days. So really seeing fantastic conversations going. And again, I know there's some patience around looking for that first U.S. deal, but we feel that there's some good momentum coming. When we look at kind of how we're positioned from a market share perspective, obviously, we still have that global presence with our corporate offices over in Canberra, U.S. presence and then also London and Frankfurt, Germany as well picking up those Cipherpoint components as well as some of the customers. I'll talk a little bit about the top line licensing growth, the strong ARR growth, the margins, which we're really excited about. But I think the thing that's really setting the foundation for us is the Microsoft relationship and how we're making headways really deeper and deeper into Microsoft. Not only are we working with their worldwide defense and intelligence teams, but working very closely with their public safety and justice team. And that's carrying across and having spin-off effects into manufacturing, light industrial as well as financial services. So we're really happy about that. And we also have some really strong customers. You'll hear a lot about churn rates and recurring revenue. We feel that this is a very, very sticky product. And I believe last quarter we were at 0.1% of the churn rate. This quarter, we were less than 1% of a churn. So really, really strong ways of driving that forward. And we do have a really strong team really across the globe, both from a product, from a sales management and from an executive standpoint as we move forward. So Dan, why don't I kind of turn it back to you and have you take the call through some of the Q3 updates from a high level? And then I'll jump into the financials themselves.

Well, again, I guess the highlight there is the licensing revenue up 92% on the previous prior comparative period. I'll get that out. And the recurring revenue up 50%. Obviously, we're a little bit disappointed by that figure. We thought we could have stretched that. I think as we're coming out of the COVID isolation and -- and part of that was actually occurred for the first time here in Australia, and we did a number of road shows with our key investors in Melbourne, Sydney and Canberra, on each visit. So that's a good sign as well that the world is opening up and getting back to a little bit of normality. Gross margin is very high, 78.5%. Look, we've always targeted over 70%. I think that's an excellent margin rate to be looking at. Obviously, as we increase, that's going to be cumulative in terms of the profit and the revenue that we earn driving that profit. So that's a good target. And I'm glad that we're exceeding that at the moment. Will it stay at that level? Kurt's already alluded to that we were looking at a number of strategic services where we need to and we can drive for future annual recurring revenue licenses of both Kojensi and NC Protect. And again, EIM, or the Enterprise Information Management, the KPMG winning for OneDefence is an example of that. And that's exactly what we expected to do for us. Strong cash position at the end of the quarter, $9.8 million in the bank. Some people start saying you need to be watching that. We are watching it. We're consistent with our operating expenses. We have levers to pull if we need to rein that in. But the biggest, most optimistic thing I can tell you right now is we have a positive Q4 sales outlook, which supports our optimism for that accelerated annual recurring revenue growth. It has been a difficult year. We are very frustrated with the -- where we would like to be and where we are today. But I can see certainly the positive signs that that's going to be a good strong Q4 for us now, and I expect that, that momentum will lead into the next financial year. And why are we positive about that? Let's have a look at some of the details as we go forward.

Yes, I think so. When we look at the quarter, during the reporting period, the company delivered the highest quarterly licensing revenue in its history of $783,000. So that was up 92% from the PCP, and the record-breaking licensing revenue obviously delivered that 70%-plus gross margin, another historical high for the company. Licensing growth was really highlighted and continues to be driven by our ARR, which is up over the $2.1 million stage and was a 50% increase from a prior period, supported by a recognition of a onetime licensing fee that we had through a partner opportunity. So we're really excited about that top line revenue. Revenue growth was 7% from the prior quarter. It was down 32% from the prior quarter from the services standpoint as we continue to leverage more profitable licensing sales or opportunity aligning them from services-based revenue streams. So we're really focusing on that whole top line licensing that's driving that top-end gross margin, higher returns and that predictability for the business. We maintained our operating expenses at a similar level to prior quarters with net operating cash flows for the quarter of $2.7 million. That was comprised of staff and contractors, administrative and corporate costs, advertising and marketing, product manufacturing and operating costs. We also included $100,000 of director fees and wages. And really, the key activities continue to be to drive product innovation, drive technology, drive adoption into key markets and verticals and continue to make those investments in sales and marketing across the entire business. And as I said, we finished really strong with the $9.8 million of available cash. I want to highlight kind of on the right-hand side really the trend that we're seeing at the top line licensing revenue. So we put together this trend over the last 7 trailing quarters. And you can really see where we're taking this. And I think 2 things really stood out for me as I did the analysis behind this. One, the low customer churn rate of under 1%. So when you talk about 2.1, 2.2 and looking at a strong fourth quarter finishing from ARR standpoint, that becomes revenue for next year that's almost locked in. And so the predictability of where we're taking the business, yes, it's a slower growth rate of where we want to be from an ARR standpoint. But as you start to look in the out years, the out year has become much more predictable and where we want to take the business. So that's really led to -- if you look at where we were year-to-date from March 31, 2021, versus where we are today at the end of March 31, 2022, we're ahead of a triple-digit growth rate right now from a licensing standpoint. So again, that continues to spin off gross margin, and it continues to give us an investment in capital and billings as we take it forward. So we're really happy about the way that licensing is continuing the trend. And as Dan indicated, we think we have really good opportunities coming into the traditionally seasonal heavy year-end within the Australian government as well as more corporate enterprises across Asia. That carries into a seasonal year-end for September 30 into the U.S. government and then follows on with most U.S. corporations having their year-end December 31. So we're starting to follow the cycle, and we feel good about where that cycle is going as we take it through. But we really can't do that without our customers. And so when we talk about that, we need referenceable customers. And so we have very strong references out there today. And just some of the wins that we had just in this month -- this quarter alone, really a lot of real key, again, logos that carried across. So financial institutions and the different use cases of creating information barriers to separate registered reps from nonregistered reps and the rest of the business, multi-manufacturing -- multinational manufacturing company, protecting intellectual property across the entire R&D teams. That's a 4,000-user license, which is a great win for the company. A leading U.S. health insurance provider protecting personal health information and protecting the information that transcends between the doctors out in the field as well as with their patients. Dan briefly mentioned SAP as we continue to look at that and how to expand. And that's the beauty of SAP and the Kojensi and the way we can add continuous from a geographical standpoint as well as users and then a number of strong APAC wins. So Dan, maybe you want to take the audience through the APAC wins and some of the things that we're doing there as well.

Yes. Look, I think the SAP is just, again, another one of those notches which says the strategy is working. So for us, SAP and those defense global industrial-based providers and system integrators has always been that sell-through, sell-to strategy. And that's certainly what we're seeing. SAP recently has expanded that globally. We've seen the investments they're making with the way that they're recruiting for administrators for the product. That's leading into a whole range of new opportunities for us. But also here in Australia, the defense industrial base in Australia. We had a strong win with an aviation provider which is global. We've had managed services providers for state government. And we're running a whole range of different proof of concept with a different number of sales opportunity, which I think, again, lead to strong results in Q4 and moving on to the next financial year as well. But from our perspective, the evidence is there that the strategy is working and that we are getting those gains and those wins, and the metrics are speaking for themselves.

Yes. I think when we look at the sales strategy, right, and so this last quarter, I was -- I met with all the big sales people kind of the first time ever. If you really think about it, we came out of the Australian holiday season, and we really didn't get released into the public and could not get into Australia until the end of February. And that's very similar with a lot of the European countries. So it was a pleasure to get out and finally meet the salespeople face to face after having the Zoom meetings and the team meetings over the last couple of months. So when we met with them, we really talked about kind of this 3-tiered approach, really how we have to be very strong from a direct sales standpoint. And we can't just go out with this splatter mentality where we can sell everything. I always say the best thing about our product is we can sell it to anybody. But also the worst thing about our product, particularly a company at our early stage, is trying to sell to everybody. So we really, really want to focus on certain verticals and really nail down the use cases and provide value in sticky environments as we can see through the churn rates, through the customer satisfaction levels, through the references that we're getting for customers. So from a direct sales standpoint, we focus on coalition defense agencies. So again, U.S. Australia, Canada, the U.K., big places that I've been visiting the last couple of weeks and really getting those conversations going. As I mentioned in the opening, defense and intelligence and public safety and justice, really key areas, a lot of similar use cases out there, and that carries across into the U.S. large defense industrial base and the contractors that are out there. There are very certain specific use cases around using CUI and ITARs around how defense agencies can store and share and classify information. Those are defined use cases where we're one of the only solutions in the world that can deliver that, so we're really focused on that. And then yes, we'll take in opportunistic vertical sales and target account management towards key areas that we see. But again, we're really focused on that key area around defense and intelligence. And that also ties in very closely with our Microsoft co-sell opportunities. we're able to go out, we're able to go in and register deals either that we source. Or as we get out there, we're seeing more and more of Microsoft actually sourcing deals for us and bringing us in. We're invited to participate in the June time frame with Microsoft at Eurosatory, which is one of the largest defense shows in the world. And so we're going to be working jointly hand in hand with Microsoft. And you'll see a lot of the Kojensi and a lot of the NC Protect components within the Microsoft messaging that's going to lead up to that show. That also gives us the ability when we register these deals to go in, identify the field reps and go in hand-to-hand with them and really to provide that joint go-to-market, both from an activity standpoint, from a sales and from a procurement standpoint. And then lastly, we have that focused channel aspect. We continue to bring on new channel partners. Matt Kluken, our Vice President, is off to Singapore in the May time frame, and he has a number of meetings over there, again, meeting with Microsoft and defense to stay with that kind of core, but also focused on different channel partners out there. So we're meeting with NTT Data, who is a Cipherpoint partner over there. A couple of other partners that Cipherpoint had that we were not aware of. So really opening that up. Dan, any comments on the sales focus there?

No, no. I'm very happy with the way that the sales focus has been directed. I have seen movement with the partners and the channel. It's about cranking that machine on. And over Q4 and next year, we just want to make sure that we're having wins, which is one of the big things, difficult for us to do given the space that we're in, in terms of security.

Yes. I know there's always challenges about getting news out on the ASX into the public domain. We work in the most highly sensitive and classified areas of government, and that it's very difficult to go out there and announce award wins. So we have the flexibility to announce some of these during our 4 Cs, but it's just not a practice we're going to come out with where we talk about deals because we just don't have permission to. People hold and organizations hold their security near and dear to their hearts, so they do not want anybody knowing what systems they're using, what sort of protocols, what sort of components around attributes that are being driven. So again, we hold that close. So we provide as much information as we can that we're allowed to under the ASX guidelines. But I think the area that's really been really kicking in is our CMO. Irena Mroz has been doing a really good job in gaining that kind of market share. We continue to see much more activity around inbound opportunities. And they're not just opportunities, but they're also leads coming in, organizations, downloading white papers, taking an interest in learning more about attribute-based access controls, getting out there, looking at thought leadership, looking at subject matter experts that we have across the organization and getting them in front of people. So we're really starting to see that. Just so far in this year, we've already had 15 bylined articles. And that really provides that, again, that credibility that we know what we're talking about. We have that technology. We augment that with the customer referrals, where customers will even get on phone calls and start to drive that. That's just starting to crank up again. So we're really happy about that. And then as Dan said, having that third-party validation of gold and silver awards, not only for NC Protect, which won last year in the 2021, but we're starting to see Kojensi really pick that up from a data security platform standpoint and really driving that. So we're really happy about what's going on in there and gaining that. And if you look at the 4 Cs, we're not spending millions and millions of dollars. If you look at other companies of our size that may have gone out there and raised $50 million to $100 million, they're spending millions of dollars a quarter on getting this type of mind share that we're getting. So from a use of proceeds, from a capital efficiency, we're being very efficient in the way that we drive these opportunities going forward.

So part of that, which I think that it's really important to emphasize is that, that mind share in terms of that Zero-Trust movement, the data-centric security movement, we've been having great success, as Kurt mentioned, with the marketing campaigns, for a very low cost. And it's the quality of the attendees that have been attending that and the leads that we're getting through that we're very excited about. Technology driving sales. This is something that I just want to spend a little bit of time on. The Microsoft -- we've all talked about Microsoft over a number of quarters now and what that can mean for the company and that we're getting that mind share in there. We're seeing opportunities brought to us by Microsoft. The product, NC Protect, has been evolving to meet the requirements there, including the Cipherpoint acquisition, and being asked to do encryption and open up the European market for us. The Cipherpoint staff that we've brought on board there from Germany, the announcement recently of the 2% GDP increase in defense expenditure in Germany, they're all very good signs for us. Azure marketplace continues to work for us. We have made a number of certifications and announcements for the Azure marketplace. NC Protect recently has been deemed to be able to be sold in the U.S. government space with our FedRAMP approval, which is fantastic. Kojensi, on the other hand, we're launching -- we've been working very hard to make sure that Kojensi can be launched into the U.S. as soon as possible from an on-premise perspective and also as a SaaS platform to target that defense industrial base. We have had great success here in Australia, which we now intend to export over that and start making sure that we're ready to approach that market as aggressively and as quickly as possible. We've invested heavily in a microservices architecture for Kojensi, but more importantly, that international trades and arms regulation for controlling security assets that we're seeing this global expenditure increase worldwide for defense expenditure. That is incredibly important to us, and we've been very successful in that. I think we've dropped.

Yes, the Zoom meeting crashed. So I'm just pulling it back up now. There we go.

As I mentioned, that encryption product, that merger with Cipherpoint is not only producing new products, but it's opening new marketplaces, which our marketing campaigns have been able to reach and fed into that lead program and our pipeline.

I think the -- sorry, Dan, there's a gap here with the Microsoft -- the actual Teams Zoom platform crashed. So hold on, wait one second and let it catch up. Sorry. So I think the real sleeper in here is really this Teams integration. Generally, you hear when we talk about Microsoft in relationship to NC Protect. When you start to look at what Microsoft is going down, and I was speaking with one of their workplace intelligence people the other day, they're looking to make Teams that really source of everything. They're making it for desktop. They're making it e-mail, they're making it the way that you can communicate to the world by inviting guests and what have you. They have this open development framework that allows us to consume and put things such as Kojensi and other structured data components directly through Teams. So that's creating that intelligent workspace for an organization that actually can take NC Protect through the attribute-based access controls and consume other applications, including Kojensi. So we're really looking at ways of how do you take that top secret and protected layer and be able to have some level of integration into Teams, keeping that information separate, but yet still keeping them accessible to people through one UI or one through way of accessing it. And so Microsoft is very interested in these concepts and the way that we drive those opportunities. So it's pulling in those different sources through the similar application itself. So it's really an interesting kind of way of incorporating both our products into the main solution going forward. And it's really about that whole initiative around Kojensi and combining those feature sets. We have a number of features coming out that can bring some of the features around NC Protect into Kojensi. So the secure viewer, a dynamic watermark that really keeps people from taking pictures of sensitive and classified information with their mobile devices and getting it out there, tying back into things such as ITARs from an import/export perspective and then creating a much more functional microservices architecture that really increases the efficiency and productivity of our development team. So we're really happy about the things that are taking place, and you'll see a lot of that come out over the next couple of months.

Yes. So plenty to be excited about.

Great. So when we look at kind of where -- this is a slide that's been up there probably for the last 3 quarters. And it's really just a confirmation of where we think we're going. And the numbers are starting to bear through, particularly on the licensing side. The customers that are coming in are focused on defense opportunities. There's been conversations that we're having in the U.S. Fed, leveraging those successes. The key partnerships with Microsoft and the continuous product innovation that we're seeing, when we start to look at that across the board, it's being validated by the strong ARR growth that we're seeing. Again, record licenses that we've ever had within the company itself, the 78% gross margin. That's a direct result of that. Our pipeline within Microsoft co-sell opportunities in excess of $10 million right now, that goes back to the hard work and the groundwork that's been done in the early days with the Microsoft relationship. And now we have to start to deliver that into actual -- from opportunity into deals themselves, which we're anxious to see in the future. And that product -- continuous product innovation, the whole KPMG system award really is all around the work that the team has done around ABAC and how we focus on those attribute-based access controls in a Zero-Trust environment. Those aren't throwaway words. A lot of people are using the throwaway words out there today, but that's what we built our technology foundation on. And that's one of the keys that are driving organizations like KPMG and pushing us through some of these large awards and interesting opportunities that are going to allow us to shape future policy, future direction and future technology selection. Dan, anything on that?

Yes. I'd just like to probably say a couple of things. One of the things that we said we do 18 months ago, which we've been working very hard to achieve, is infiltrating and getting a very strong position in the Australian Department of Defence. We mentioned several times that they've got $15 billion to spend over the next 10 years in information and cybersecurity. These programs have worked, such as the KPMG OneDefence system integration role, are very, very influential about how those dollars are going to be spent in the future. One of the things that they are looking for is embracing Zero-Trust security and ABAC across the department and how do they do that in a data-centric security approach. And this gives us the opportunity to influence and bring our expertise to the benefit of that. That opportunity then opens up greater opportunities in overseas markets, gives us the credibility to walk through the front door. So why invest now? Well, I think we have done an exceptional job at building up the infrastructure to crank this over in extremely difficult circumstances. However, I'm not using that as an excuse. We continue to grow the business. We continue to break the record numbers in terms of license revenue. I think that bringing in the next quarter opportunities and closing that business will place the company for having a very successful year in a difficult period of Omicron, COVID and other things. But also an uncertainty. What that has been able to give us is the opportunity at a great value price at a very cost-efficient way. I think the value is exemplary for what we have achieved. I also think that the opportunities as we ramp this up are going to pay those dividends and see that return on investment I think the company is in an exceptional position. I think we said this last quarter. We'd rather be where we are today than where we were 12 months ago. But more importantly, from my perspective, not only as the Managing Director, but as a significant shareholder, I'm very optimistic about where we're headed. And I think that we're just fine-tuning where we need to be and I'm very looking forward to the next 3 months, 6 months and 12 months of the business growing.

Thank you very much. Yes. No, thank you very much. So what we'd like to do is open it up to questions. [Operator Instructions] Please feel free to type in any questions that you have. We have a couple of them already coming in.

So I know one of the things that -- when I was down in Australia, everybody was talking about the election. So Dan, you've alluded to a very strong Q4, what weight does -- Zoom is just driving me nuts today. Apologies about that. What weight does Q4 have? And what is the implications of that around the election itself?

Yes. Look, that's a great question. I'm not concerned by the election at all. One, there's a couple of reasons. The deals that we're focused on closing in the pipeline for Q4 have been deals that have already been given budget approval. And that cannot be gazumped by the election, no matter which way it goes. This is money that's been spent and have been approved for expenditures. So we'll be focused on that aspect of the business. Obviously, the outcome of the election in terms of defense and cybersecurity, those areas are completely bipartisan in terms of the expenditure. But I want -- what I think we will see is a stronger focus on whichever government gets elected, given that not only the issues that are happening in the Ukraine at the moment and Australia's continued support of the Ukraine, but also what's happening in the Solomon Islands.

Yes, I thought it was interesting. One of the things when I was in Australia, I was taken into one of the defense areas. And we actually watch some of our own products and software being loaded up on servers that were going up on to mobile jeeps that are being taken out into the war fighters war front, which I thought was really cool that our stuff is out there, I mean, right on the tip of the spear of where people are using it day in, day out, making sure that the world's most -- protecting the most sensitive data out there today really coming up with what archTIS does at its core. So really happy to see that. And it was just a cool experience to see. Jumping on to the next question. Do you have an estimated time frame on the KPMG consortium to be finalized?

Yes. Look, the consortium is obviously working to a unique financial year commencement, but what's really important about that -- and we're obviously working hand in glove with them, and we'll release that information when we can ascertain. How we see this working is essentially initially as a services proposal. And from that services proposal, we'll provide that advice to the Australian Department of Defence of how they would implement that data-centric security and a number of proof of concepts over different tranches of work will then be initiated. So we see consulting work initiative in a very influential position and that leading to technical implementations and then licensing sales are through that process, but do not underestimate the strategic value of that.

All right. Great. Next question. You can see the continued trend "it is in the pipeline." You should talk to my salespeople. Although you have executed on some of the pipeline, it would be great to have transparency on either missed opportunities, the monetary value or when do you think those opportunities are going to close. I mean -- I think that one of the things we talk about is that we do not lose many opportunities. We lost an RFP.

Maybe that's a metric we should be bloody presenting.

We lost an RFP about 2 months ago, but we really weren't suited for it, and so it was not built for us. And through my career, I've always said that not all good business -- not all business is good business, and sometimes it's better to walk away. So yes, we stepped away from that. And we had discussions with salespeople around it. It just wasn't -- it just wasn't down our alley. We've seen a lot of stuff pushed, that is correct. Who would have thought that, again, you walk in, COVID hit. Hopefully, it's done with. We're seeing better trends, but there are a lot of things that are coming along that are results of that. People have been scared about it. Budgets have been pushed. Budgets have been decimated in certain areas. People have other priorities about keeping -- making sure that people keep their jobs. And it sounds funny, but security is not always the top of mind for every business that's out there today. I think it should be. And most of the world agrees with us, but there's some interesting buying and procurement decisions out there today. So when we talk about it, is it in the pipeline? I think the last thing that I'll bring out from a sales standpoint is we've traditionally said that Q4 is our strong selling season. That's when we know a lot of the pipeline comes to fruition based upon just the budget cycles that have come through in the key areas that we're pushing on. Dan, I know you're involved with the day-to-day from an Australian standpoint, so would you like to comment?

Yes. I think there's 2 words. One is frustration. I think that we feel the frustration and certainly, Kurt, and I do as significant shareholders, but we also have the privilege of seeing -- being inside the business. And I guess, we're just as frustrated for you as we are for ourselves. The second word I would use is close. Things are getting much closer. I don't want to use and continually sound like chicken little saying it's in the pipeline, it's in the pipeline. I agree with the shareholders that the measure of success is the rate of closure and what we can announce in the stock market and the demonstration of the ARR and the revenue increase. And we all know that. What I would say is that, as I said, frustrated and close are the 2 words that I would use. And we just have to bide our time and obviously adhere to all the appropriate rules and regulations of the ASX and in the meantime get our heads down and our bums up and make sure that we close what we are generating in the pipeline. What I can tell you is the indication from the pipeline and the activity that we are seeing is we're looking forward to Q4, and we're looking forward to Q1 next year and ongoingly. We think that the market conditions are favorable. We do not think that anything has changed in the fundamentals or the themes, and we think that that's going to provide us strong, sustainable growth in the next 12 months.

Great. There's been a couple of questions, so I'm going to try to consolidate them in. Then there's questions around what's the perceived discrepancy between reported revenue for the quarter and receipts recorded for the quarter and the difference between Q2 and Q3 receipts. So let me kind of come in and explain that from a software standpoint. So when we bill our products, we generally bill 1 year in advance. Because January and for the most part of February were very slow, we came out of calendar '22, very, very slow. So most of our deals were on the back end. So when you have 30- and 45-day net terms with the organizations, that means that generally cash will not be received into the coming quarter. So we expect stronger Q4 cash receipts than we have. However, the revenue is a continued track. As you saw the track from the trailing 7 quarters, revenue was spread out over that 12-month period. So you're going to always get a natural discrepancy between where the revenue is for the quarter versus cash receipts. And the other difference that I want to point out is in Q2 we also received a significant cash infusion from the ATO R&D cash rebates as we put that in. That was done at the end of June, and then we got and received that during the Q2 time frame. So that showed a very strong cash receipts for the Q2 period that was higher and above what we would generally see across those other opportunities from a cash receipt perspective. But again, whether it's ARR, that has to be spread over a period of time. Services from a revenue standpoint can only be recognized upon the completion of the services. So there's always a general discrepancy between the 2. But again, you have to remember that cash is not revenue from a software standpoint. We do not run on a cash perspective as it relates to revenue and carrying through to our EBITDA. We're well aware, cash receipts were low. But we feel, again, with Q4, some of the sales coming in as well as some of the sales at the end of Q3, cash will be in a much stronger position as we move forward. Let me see if I can find one more here, Dan, because that was actually a couple of them. How about, where are we in terms of the Nexium Defense Cloud Edge?

So we're doing several things on the Nexium Cloud Edge. Thales has taken that globally, as we have mentioned before, we have established a demonstration environment for them to be able to present that to their clients. We have trained -- been training them up on some of those demonstration capabilities. But that has also led to a number of other opportunities. But as we have always said, defense industrial base selling to other governments is a process that does take time. Those deals are usually -- and I think if you remember the diagram where we talked about government, they're a 12-month deal, they usually are. But once they come in, they're very, very sticky. So we are working and partnered with Thales. We are continually educating them on how to sell it and vice versa. And the Nexium program, don't forget, it's not just archTIS. There's a number of other products in that suite, which they're also working on. So look, I think it's moving ahead as well as can be. Obviously, we would like to see it perform and the test of the performance is bringing in deals. But certainly, we were working very closely with them here in Australia and Canada and the U.K. and the French headquarters.

Great. Awesome. All right. Great. I know we're coming up on the time frame that we've allocated. So Dan, would you like to provide any closing comments?

Now, look, I think overall, the quarter has been a very active quarter. I think that we have done substantial things, particularly in the product space, in the sales team establishment, building up the pipeline and getting those relationships there. I go back to my previous comments. It is a little bit -- we are frustrated by the activities. But I think given the terms and the conditions of the marketplace, I think we've done exceptionally well. Anytime that you get a record-breaking licensing revenue figure, I think you should take it. So look, we expect to ramp up the performance in the next quarter.

Excellent. Great. Well, thank you very much. We will be issuing the recording of this within the next 24 to 48 hours, and we will be posting that on to our website. So thank you very much for your time, and please feel free to reach out with any further questions. Thank you very much, and enjoy the rest of the day.

Thank you.