archTIS Limited (AR9) Earnings Call Transcript & Summary

All right. Great. Well, good morning everybody, and welcome to archTIS' financial year results for the period ending June 30, 2024. I'm Kurt Mueffelmann, Global COO and U.S. President. Today I'm joined by our CEO, Daniel Lai; and for the first time, our CFO, Robert Andrew Burns. Today we're pleased to provide an updated overview of the company FY '24 results, and a preview of our FY '25 go-forward strategy. We will end the session with Q&A, which can be accessed through the webinar service. Now to kick things off, I'd like to turn the webinar over to Dan for some opening comments on the fiscal year.

Thanks, Kurt. Welcome and thank you for attending the presentation of archTIS' financial year results. I would like to take the time to reflect on the past year. Our tailwinds are strong and they're getting stronger. The expenditure by government on defense has grown rapidly, and it's being driven by geopolitical uncertainty, such as Ukraine, the Middle East, et cetera. It's also being driven by the threat of cyberattack and the need for defense departments, allied forces, and industry to collaborate and share on sensitive and classified information, which is now paramount. The defense market is in flux. The defense organizations and alliances are responding to this uncertainty, being driven by these geopolitical drivers. And examples of that are reports such as an alliance agreement, such as AUKUS, the defense strategic review, the defense industry and development strategy, the surface fleet review and the defense integrated investment plan. Now these reports are defining new alliances and strategy, as well as prioritizing defense expenditure. It's also identifying where they're not going to be spending money. The defense industry are really positioning themselves to respond to these reports and these new priorities. So archTIS has worked very hard over the past year to, despite this flux and uncertainty, position ourselves for growth in strategic opportunities that are well-funded moving forward. One outcome is clear, for any of these initiatives, that these reports all identify the address to challenge, solve the challenge of how to securely share digital information across traditional boundaries faster. And this includes the need to uplift the security of the defense industry. Examples of wins over the past year include the Australian Naval Infrastructure deal with Kojensi. Australian Naval Infrastructure oversee the redevelopment of the Osborne Naval Shipyard base, Australia's largest and most advanced shipyard. And they are now using Kojensi platform to share information across their supply chain, including preparations for Australian nuclear submarines. BAE, who are the largest defense prime in Australia and the U.K., have also had contracts with the Hunter class and Air Warfare Destroyers, both highlighted as critical deliveries in the surface fleet review. Now, an announcement of the Australian Defense will build industry capability, protected and secret for collaborating across industry, also gives us great opportunities moving into the future, and places us in a strong strategic position to win business with defense across defense industry. That has also been followed up by new announcements for collaboration and industry collaboration platforms to be developed in both the U.K. and the U.S. as they look towards integrating defense supply chains globally across archTIS. These strategic wins with BAE and Australian Naval Infrastructure, along with a lot of organic growth in the Australian Department of Defense, which is our traditional client, has driven our revenue up 54% over the past year, and puts archTIS in a strong position to continue its growth over the next year. We're also seeing traction in increased activity internationally, with proof-of-concepts initiated in both Europe, including NATO, and the U.S. We continue to gain traction with our strategic partners such as Microsoft and Fujitsu and a number of new opportunities in Japan. I also work in Copper River in the U.S. who deliver services to a number of U.S. government agencies. We've also been focused on managing our costs, decreasing our overall operating expenditure, and while still investing in research and development in our products. Finally, I'd like to thank our dedicated staff and welcome Andrew, who has strengthened the executive team. Overall, archTIS' financial year of '24 represented a strong year of growth, a focus on our financial responsibilities and strategic advancement, and I'm looking forward to what's going to happen over the next 12 months. I think it's an exciting period. Kurt.

Yes, great. Thanks, Dan. I think it would be good also when we start to look at, you know, this being an annual report, and looking at the participants, we have quite a few number of new people are looking to invest into archTIS. So I thought it would be good that if we really wanted to start to provide, again, a background of where we are. Since 2018 we've been a micro-cap. We've been a global provider of data-centric security solutions, and we provide secure collaboration of sensitive information. We'll go deeper into exactly what that is, because that gets to be a little bit of a mouthful. A vertical focus is primarily on coalition defense agencies and global defense industry providers, as Dan has outlined, with the wins from Australian Naval, BAE, and the likes of some of the others that he mentioned. We have 2 core products in Kojensi and NC Protect and we're validated by Tier 1 customers and through a really strong technology and distribution alliance with Microsoft. We also have a number of industry-based awards that demonstrate our product innovation to the market. We're part of the data-centric security space, which is a component of the real broader security space, which has experienced strong tailwinds. Last year, and Andrew will go into this deeper, we were able to generate $1.6 million of positive operating cash flow through strong revenue growth, which is up, as Dan said, 54%. We also had tight managerial controls over our expenses, which saw a 21% decrease, and that was led by our annual recurring revenue, which is a scorecard when we go through our business operations, of attending over 4 -- of reaching over $4 million for last year. So again, overall metrics have been pretty solid. As we look deeper into the core kind of corporate snapshot, we have 286 million shares outstanding with a market cap approximately $20 million to $21 million. Our board, founders, and executive management is tightly aligned with that of our shareholders, where 22% of our outstanding shares are being owned by that group. In fact, 3 of our top 5 shareholders directly fall into the Board, founder, and management alignment. So again, we're tightly aligned from management team into the requirements and needs of what the shareholders are. Top 20 shareholders hold just under 60% of the outstanding shares. Further information around our shareholder base is broken out in greater detail in the Annual Report, which we just posted about an hour and a half, 2 hours ago. It's quite a lot of reading, so hopefully, there'll be some good weekend reading for people. I know, Andrew and I and Dan are thrilled to get that out. It's quite a -- quite an endeavor to push that through. So without further ado, I'd like to turn it back to Dan and really talk a little bit about what archTIS does as a company.

Okay. Look, we provide trust to be able to allow people to use their information anywhere, any place, and ensure that their terms and conditions are respected on how they use that information. So what is the problem that we're really trying to solve in the marketplace? It's really that information must be shared securely between governments, coalition forces, and industry, and that must be done under strict compliance requirements. But the real key to this is not only is it classified information, which generally commercial organizations don't address, it's information that needs to be exchanged beyond organizational boundaries, which means it's not just about the network, it's actually about the data and securing that data itself. And I'll give you a great use case of how this is improving defense in defense supply chain. Chris Deeble, he's the head of CASG, stated that the fuselage for the F-35 took 8 weeks to develop. After they had created a digital twin, it took 8 days. That's the sort of productivity increases that these guys get from digitizing their ability to share classified information through the supply chain and bring capability to be faster. So what's our unique value proposition of our products? Well, we have unique policy-enforced data-centric security which protect that information wherever it goes, whether that's inside the organization or gets shared to another organization. And it's really about what you can -- who can do what that information, how they can access it, and how that data is treated under what terms and conditions. And that's very unique. So I can do one flick of a switch, and I can cut off an entire organization or nation or whether or not that's via the security clearances. So I -- I'm control of my data wherever it travels, whenever it travels, and I can make those changes to those conditions immediately and quickly, and that's all through a Zero Trust framework. So we're in a very unique position, and we really are leading that way in the defense and defense industrial space. Kurt.

Yes, thanks, Dan. And I think what's really neat about the product themselves is, you know, they're in real-life use, right? When you start to look at some of the customers that we have today, right, looking with King Abdullah Center for Atomic Research Energy, I was talking to them the other day, and they use our Secure Reader. They are very concerned about data leakage from people taking pictures with their mobile device. And so our core product, one of our core products, NC Protect, actually puts a dynamic watermark on every single document that is presented, and it's actually broken out by who's actually accessing that document, what type of level of classification is that document, what is the date and time. They've seen their data leakage drop over 98% over the last 3 years, just for the use of people being very concerned about copying or taking pictures of a secure or sensitive document and having their name splashed all over it. So that's a very simple use case, but the power of that and actually dropping data leakage by high 90 percentage rates, that's massive. So we really see those opportunities that are out there today. So thanks, Dan. Let's jump over to the financial results, and in April, we're fortunate enough to bring on Andrew Burns, a seasoned ASX CFO, onto our executive team. Andrew previously worked with Citadel group alongside our current chairman, Dr. Miles Jakeman, who was the CEO of Citadel at the time. Andrew, welcome, and I'll turn it over to you for the financial review of '24.

Thanks, Kurt. Sorry, people walking in and out of my office. As you can see, the year ended 30 June 2024, we had a great result. We've seen continued positive trends with all the key metrics within the business revenue, $9.8 million, which is an increase of 54% as we've mentioned previously, strong increases in both the license revenue, up $1.8 million and 58%, services revenue up $2 million and 72%. So overall, this is a compound annual growth rate of 45.4% since 2022. Revenue is obviously supported by our annual recurring revenue being greater than $4 million as at June 30, 2024, up 16% on last year. Operating expenses continue to be a focus of management, ensuring that we're effectively using the resources available and addressing those growth opportunities as they come through. You can see that we had a 21% decrease in our operating expenses for the period, mainly driven through management of staffing costs. We'll address cash a little bit later in the presentation. But as Kurt said, $1.6 million in cash from operating activities reflects a record receipts from customers of $12 million for the year. So from a profit and loss perspective, as mentioned on the previous slide, 54% increase in revenue. But add that along with lower proportional cost of goods sold, and you're seeing a gross profit increase to $5.8 million, up 79% for FY '24. The gross profit margins also increased to 60%, driven by the mix of license revenue and effective operational execution on the services contracts. Year-over-year, we've had a slight decrease in the R&D tax incentive, resulting in $1.8 million being recognized as other income. And as discussed, a strong result in operating expenses, down 21%, which all correlate into a positive EBITDA for the year. So on the balance sheet and cash flows. Cash is obviously a primary focus. You can see that we had a good result for the FY '24 with net cash outflows of only $300,000, no additional capitals raised. Operating and cash -- sorry, operating and investing cash outflows has been reduced from $5 million in FY '23 to $1.1 million during FY '24, showing strong commitment and effective cash management. So normally at this point, there's questions around what is our cash burn and when -- if and when you might look to raise capital. So to answer that, we don't expect to see any material change in our cash spending profile from FY '24. Our intention is that we will continue to drive operational cash through balancing the execution of our current opportunities and the continued investment in innovation and software products. We would potentially look to raise capital from strategic growth opportunities. But obviously, it's all dependent on the market and the timing of our operational execution. The intent still remains though, any new capital is the strategic growth opportunities. So from a balance sheet perspective, the key message here is the continued investment in our software assets. During the year, we've invested $2.7 million versus $2.1 million in FY '23. So with that, Kurt, I'll hand it back to you.

Great. Thanks, Andrew. Yes, we were pretty excited to see, when we were going through the audit, just really the numbers. Again, top-line growth, decreased operating, and positive operating cash. And that's what we've been talking about to the market the last 4 quarters and trying to deliver that. So we feel confident that we were able to maintain some strong metrics on that. So as we close out '24, let's start to turn our attention to FY '25. As Dan outlined in his kind of introductory comments, we have strong tailwinds and focus of strong market opportunity. I'll let him discuss kind of where we play in the markets and how we target what our focus markets are today.

Yes. Thanks very much, Kurt. So really, this is all about where is our greatest competitive advantage. And I think we see a 3-phased approach to the marketplace at the moment. With the security and risk management there, you can see that overall cybersecurity market is a large market. And these are just a few of the segments where we play in. But what's really key about this is where does data-centric security play in that. Not only has it got a $6 billion market of its own, it is the linchpin. When you start to add data-centric security with policy enforcement, it combines relationships between policy orchestration, data-centric security, and identity access management, cloud security, it ties all of these pieces together, which is why it is so critical. It doesn't just enable you to share your information, but it creates a very impenetrable pattern for security and Zero Trust across those market segments. And that's why it is very important to win this space. And that's why we're very focused on being the leader in the defense and defense industry space where we're seeing demand right now. Obviously, we want to expand it and reduce -- spread our risk over our client base, not just deal with defense agencies. So we moved into defense industrial base where we see a supply chain issue and compliance driving that business as well. And then we're looking to test that in other vertical markets as we grow over the next couple of years. So that's where we see our total addressable market at the moment, and that's what we're executing against. And that's why we're executing against it. There's barriers to entry. We are already trusted and is a trust relationship expansion and there's network growth in the market. And that's what we're highly focused on. Do you want to add anything, Kurt?

I'm sorry, Dan, I think it's also important to say what we don't do. When you look at the broader security market that's out there, right, it's vast. And when you look at components such as round as endpoint detection response, incident response, threat hunting, phishing attacks and what have you, right? We stay away from that. That's a very crowded, very competitive space, highly cost requirements to get into that space. And so we want to just make sure that we stay to our knitting and understand where our vertical markets are and really try to nail that down before we go into other market opportunities. Yes, we're opportunistic, and we'll take deals that come in. But when you start to look at the underlying governance around financial insurance or health care or the pharmaceuticals, it's much different than the defense space that we are today. And that's why we can really believe that we're really focused on that defense industry space when you get into things such as ITAR, CMMC, AUKUS, and everything. Those are really good strong tailwinds that are blowing around governance, policy enforcement around the data itself and the way that we can share that. So again, it's good to identify what our market is. But again, it's also good to identify what our market is not. So as we kind of carry that through, we look at our core business really being focused and directed around the licensing of recurring revenues. This consists primarily of enterprise and SaaS licenses that are initially purchased and renewed on an annual basis. And the real key to this model is not only driving new customer sales, but maintaining the existing customer base. We talked about it in the last quarterly results, that last year we had very limited customer churn or loss and actually demonstrated a 104% net revenue churn increase; that is existing customers purchasing more product and more -- creating more revenue than we lost from the drop of customer renewals. Very, very rare in the software space or in the licensing space, you see that. So that demonstrates the stickiness of our product. So generally, once we get a customer, we keep them and we keep them for a long time. Alongside of that comes the delivery of full capabilities, which includes implementation and development services that allow us to deploy and to execute on delivering our services and offerings. And lastly, we found and we've talked about this before, that we have ways to engage with customers where we actually require and perform initial services that identify the areas of the need and how archTIS can provide assistance moving forward. This generally leads to recurring components of licensing as well as the ongoing maintenance of services through managed services as well as ongoing enhancements to the product themselves. All licensing is built around our core products of NC Protect and Kojensi, which I'll actually have Dan take you through now.

Thanks, Kurt. Look, we really have 2 revenue-generating products in the market. The first one is NC Protect, and NT Protect is a comprehensive security solution that helps organizations protect sensitive information through dynamic access control, which means it's in real-time. That's what dynamic access control means. Every time you attempt to open a file, it checks, which is really the basis of Zero Trust. It looks for automates data and the classifications of that and this is in real-time protection. And it's all doing all of this while supporting regulatory compliance and enhancing operational efficiencies across the businesses in the securities layer. But really what it is, is a toolbox to apply data-centric security to that Microsoft business application suite. So those customers that are heavily invested in Microsoft for collaboration, and we know that Microsoft is the #1 company globally for collaboration tools. Then this is the product for them, and it applies that additional level of security that Microsoft doesn't provide itself. And does that, enhances that can be used in those classified information scenarios and organizations? That's why it's important. Kojensi itself, well, it's a highly secure collaboration platform, which is completely engineered and ready to go. It's designed to facilitate the sharing and management of classified information, and it's particularly [indiscernible] of government and defense and defense industrial base, where data security is really paramount. But I don't want to share my information with everyone. I want to keep sometimes my information, which I'm going to share with the partner organizations such as BAE, Lockheed Martin or Navantia, they want to share information, but they don't want to give their information away because they might be partnering today and competing tomorrow. And really, it's Kojensi which deals with that organization-to-organization sharing and creates a platform. And that's where we're really winning that space for defense industry supply chain. And we're seeing that growth across last year and we think we'll see growth into next year as well. Both products are award-winning, and both products have been validated by Tier 1 clients, including the Australian Department of Defense, Attorney General's Department, which we had another win with this year, BAE, Thales, Babcock, Australian Navy Infrastructure and Hanwha for example. So we're seeing real progress in these spaces, and we're looking for much further growth into next year.

So Dan, we just touched on our business model a little bit and talked about the way that we expand new customers and what have you. Can you talk a little bit about the network effect that Kojensi has when you start to look how you communicate between industry and government, but yet industry to industry?

Yes. Look, I think there's a couple of examples there. And SAP, I often use SAP because it's been such a good example. But we're also seeing that through [ NIH ] and Hanwha. And we're starting to see it with Babcock as well. So what we're seeing is that the Australian sovereign primes here, such as Babcock, BAE, they've got some problems there. I mean it's taken 12 months for the Air Warfare Destroyers to share information between the groups that built the ships, such as Lockheed Martin and Navantia to the companies which are going to sustain those ships, which is BAE. Now one of the reasons is they have to do this [indiscernible] because they don't trust one another with the information they're going to provide. It also needs to go then to defense to be cleared. Now having a digital platform, which everyone can agree to, that can happen almost instantaneously, where -- and you've given the example of the Secure Reader, I might provide information from Navantia to BAE, it in a Secure Reader where I know they can't download it, and now they can't take a picture of it, I know they can't print it. And that's enabling them to move digital information faster under those strict compliance requirements. Now BAE isn't just BAE Australia, it's BAE U.K., U.S., and Australia as well. And that's what SAP's doing as well. SAP is not only sharing information between Germany and the Australian subsidiary, but the Australian subsidiary to the Australian Department of Defense. And we're seeing that growth in Babcock. Babcock Australia is now sharing information with Babcock U.K. and they're starting to use that platform. Australian Naval Infrastructure was the example I gave previously, where they're sharing information across their entire supply chain to redevelop that shipyard to be a modern digital workplace environment for multiple vessels coming in there to be maintained and also preparing for foreign vessels to come into that space as well. So that's where we're starting to see that growth. And I must admit, over the last 12 months, we've seen some good organic growth in there, but we want to extend that growth into that international community to win our share of that market and start to stake our client as the preferred provider for industry sharing and collaboration.

Yes. Well, as you start to look about next year, I think it would be important to share where we have some of the market tailwinds building of large and targeted market, the building of the recurring revenue model that's driving more predictability, the added core technology offerings that are supporting our product innovation and most importantly, customer adoption, let's kind of look at '25. And Dan, how do you think we will strategically apply that to the coming year?

Well, really, our goals are really quite clear. We want to be the preferred platform provider of data-centric -- the preferred provider of data-centric security solutions to the defense market and the defense industry. We are seeing the gains in there. That's what the wins we're announcing. We've seen the growth in that space and maybe we all want it to be faster, but it is what it is. So we -- our job is to place ourselves strategically for that network growth effect and then let the market drive that on their behalf. And we are seeing that. As I mentioned before, I think there's been a lot of upheaval in the defense market. I think that paved the way over the last 18 months to understand where they need to spend the money and what they need to do. But I think the next 12 to 18 months, we're going to see them getting on with it. And I think archTIS has positioned itself very strongly as the preferred provider to solve those problems. And we're seeing that with organic growth within defense and with new activity and new opportunities. So I think that's really, really important. But we're not going to be successful just by doing that here in Australia. We are going to have to accomplish that in our global and overseas marketplace. And to do that, we need to make sure that we continue our product innovation. And we need to take -- and that's really where our services over the last 2 years has been really paramount in providing direct feedback about the client's problem and what they're willing to pay to have solved and where they're prepared to pay a premium. And where they're prepared to pay a premium, it doesn't just mean more dollars or higher gross margin. It means it's going to be a sticky solution because it's got classified information in there, and they don't change those systems over regularly. So that's really where that feedback comes in. But it's not just the clients. We're doing that with our strategic partnerships. You mentioned Microsoft. There's also Fujitsu, BAE, and NetApp providing us information and feedback into that product innovation. And we're seeing a couple of areas where we think we could make some broader inroads, particularly into structured data, where -- and that's been coming back from that engagement with KPMG on the one data defense program where we're seeing really what the nuts and bolts of that is and what the competition can and can't do. And we see opportunities in that space moving forward over the next 18 months as well. Market expansion, as I mentioned, we're not going to be successful just winning in Australia, but we do need to win in Australia because it's feeding that innovation, it's driving the product forward, but it's also a trusted reference into the alliance and the AUKUS arrangement. It's a trusted reference into Japan. It's a trusted reference into Singapore. So we need to win our market, but we need to be -- really be successful to supercharge this in those global markets and I think we're on the verge of starting that journey. And last but not least, we need to continue to be sustainable about our financials. We always need to take a strong look at our financials. We need to continue the strong financial growth that we've demonstrated over the last couple of years, and we need to shift the dial on our ARR. Now I know there'll be questions about that. And that really, we have moved the focus away from, let's get some data-centric security and sell the product everywhere to let's really highly focus on defense and defense industrial base. Why? Huge numbers of users. But yes, the deals take longer, but the payback and the reward for the effort is much higher. So that was a deliberate strategic decision and that's really what we're going for in that space. And it means also we can increase our gross margins. Finally, we will always keep a tight rein on our operating expenses. We need to make sure that we're being responsible fiscally for that to happen. And of course Andrew Burns is someone who will keep an eye on that for me and is very good at it. So what am I expecting next year? I'm really expecting that the foundations that we've built over the last 3 or 4 years, the turmoil of the market's understanding and the market driving towards understanding the need for data-centric security solutions is going to start to take traction. So I'm really looking forward to seeing a closing of a number of deals and our ARR accelerating over the next 12 months.

Great. Thank you, Dan. So at this time, we'll open it up to some questions. Let me just take a second to open it up and see what I can find in here.

All right. Hi team, congrats on a successful year. Really happy with FY '24. Can you please expand on the drop in year-over-year ARR growth and provide some outlook on ARR in FY '25? Andrew, maybe you want to hit on that? I'm not sure that's an accurate statement, but if you want to clarify that.

Yes, thanks, Kurt. The year-over-year drop, I'm assuming you're just saying the percentage drop. Obviously, we've continued to grow ARR. We're up over that $4 million mark at the moment. From an outlook perspective, out to FY '25, I think I'll just reiterate what Dan was saying. There is a focus on ARR as we're going through. We understand that and we fully intend to really drive through that ARR because it is a foundation of the license revenue coming through. It is higher margins as it comes through. But the focus from a defense and defense industry body, as Dan said, longer sales cycle times, the bigger deals and much stickier. Once we're in, you do not see that drop in ARR coming down or the churn that you see from some of the smaller deals.

Might just add to that, Andrew, that as I mentioned in my opening, there has been -- defense departments have been looking at what they're going to try and achieve strategically. So there has been a readjustment on where they're being focused. And that I think those gates are about to open on us and spending to solve the problems, which they have now committed to solving. And I think that's what we'll see in terms of an increase in ARR.

Well, Dan, the next question is probably your favorite question every quarter. Can you provide an update on where we stand with the POCs and what the timeline to delivering for customer announcements?

Look, I wish I had that crystal ball right in front of me. The one thing I can't control is when they sign on the dotted line. What I can control is how -- what products and the quality of the products that we put into the market, how we market that to the problem, how we engage with that customer base and earn their trust, and how we're responding throughout the POC. Now there are some POCs, which are still going. And why they're still going? Because they've had a taste of what we do and they've actually asked to look at other products that we have as well. But we are going through competitive processes in that POC. So we aren't the only ones. But we are getting strong feedback in all of them, and I look forward to the results of those POCs and where they lead to. I just can't tell you when it's going to happen. Unfortunately, that's out of my control. And you don't get to the point of having commercial conversations about what the value of those POCs are until you pass through the POC and you've been selected as the preferred provider. So I can't give you any indications on those things either. What I can say is this, and I'll reiterate what we just said, our shift to moving to focus on those areas is because there's high user numbers, there's greater network effect, the trusted reference to other departments and other defense organizations is very strong.

Here's an interesting one because I actually had this earlier in the day with the prospect. Microsoft seems to be talking about a lot of the same things you are, including CUI in the U.S. and ABAC conditional access components. How does archTIS benefit the already available capabilities?

Well, that's a great question. And, Kurt, you'll have a lot to say on that, I have no doubt. But I'll start by saying this. It's great marketing. So it's great marketing, and we do what they think they can do. And the reason they partner with us is because they know we actually get the results of their marketing. And I'll give you a good example of that. I had a call from Microsoft yesterday, they've been approached by a defense organization overseas and were asked to explain how they could do data-centric security from metadata tagging, discovery, tagging, enforcement. And they rang us and said, we need you to present to this organization, to tell them what you do because you are our partners that can actually deliver on this. So that's my only response to that. Kurt, do you want to add anything to that?

Yes. Listen, we talked about it in defining the market, right? There's a lot of the same vernacular being used day in and day out, right? And so when you talk about attribute-based access controls, what does that mean? Microsoft's come out with a new product called Entra personnel, which actually grabs personal data or personal attributes, right? So can they grab them in real time? No. Can they do things with it that we can do? No. So Microsoft provides that foundation and in a better together strategy and a better together go to market with their defense and intelligence agencies were able to come in and take what Microsoft's already put in place, take what customers has already bought, but it's still not a 100% correct for them. So we're able to take that leverage feature functionality. So when you look at things such as classified information in, right, how do we provide that? How do we look at that? We provide different tags and labels that Microsoft doesn't have the ability or the flexibility to do. So we sit on top of that and provide that next additional layer that organizations are looking to do, right? How do you look at something like Microsoft Purview, one of the really strong products they have out there? There are certain limitations around that. We were talking to a prospect today, and we ticked off probably half a dozen to 10 different or additional foundational aspects that we provide that really adds value to the Microsoft contract going from an E3 to an E5 license. So Microsoft is bringing us in because we help get them deployed. We get them to use the license, not just sitting on the shelf. And so that's where we're brought in for components like that. So it's a good relationship that we have. I think you'll see some more of that coming through in the coming year, particularly as we focus on that defense intelligence space across the globe, particularly across the coalition forces, where Australia is now a referenceable site. We've been able to introduce Australia to a number of different people within the different coalition forces across the U.S., across NATO, in areas that really provide and say, this is how archTIS has helped us. This is how they've extended the Microsoft functionality into what makes it more usable on a day-to-day basis. It shows how we can get more value out of our Microsoft license. That's where the functionality, that's where the relationship and partnership comes into play. So I guess there's a couple of questions on the NATO deployment. I'll actually hit that as well because that might be new for a few people. We obviously can't get into a lot of it. It's made us a pretty tight community, particularly what's going on these days. But NATO deploys Microsoft. They deployed different Microsoft collaboration networks. And so we take NC Protect in there and provide and enhance the Microsoft product, just like I talked about, within NATO. It's in its early stages. And so it's -- we've listed, we use a public bid, so we can list it as a customer, but we see a lot more growth coming out of that opportunity, not only with what we're doing today, but some of the product innovations that were coming out that they're helping us mold as we go into the future. Let me see, Dan, let me see if I have anything else in here. I think that is pretty much it. So why don't I turn it back over to you for a closing statement and then we can wrap things up?

Like I said, I think we've been very focused this year on putting archTIS into a position and aligned with the programs that are going to be moving forward, which are going to be well funded into the future. And I think now it's just about having that patience and focusing on the execution to make sure that we are -- can sort of take that potential and turn it into profitability. And that's really what we are focused on at the moment. So I'd like to thank all the staff for their wonderful efforts this year. It has been a hard year. They've been slugging it out. But I think that everybody in the company is very excited about the next 12 to 18 months. I've said it previously in the [ 4Cs ]. We generally are and I think that we are -- really want to be in charge of our own destiny moving forward over the next 12 months. And that's all about closing deals and focusing on increasing our ARR and our gross margins.

Great. Thank you. For those of you that could not attend, we will be actually grabbing a component of this and putting it up on the website, so people who need to review it again or to share it with other shareholders or other potential investors moving forward. So thank you very much for your time. Enjoy the rest of the day. And we really appreciate your efforts and coming with archTIS. Thank you very much. Have a great day. Bye-bye.

Thank you.

Thank you.