WISeKey International Holding AG (WIHN) Earnings Call Transcript & Summary

Greetings, ladies and gentlemen, and welcome to the WISeKey International Holdings Fiscal Year-end and Fourth Quarter 2019 Earnings Conference Call. As a reminder, this conference call contains forward-looking statements. Such statements involve certain known and unknown risks, uncertainties and other factors, which could cause actual results, financial condition, performance or achievements of WISeKey International Holding Limited to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. WISeKey International Holding Limited is providing this communication as of the date and does not undertake any update -- excuse me, undertake to update any forward-looking statement contained herein as a result of new information, future events or otherwise. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Carlos Moreira, Founder and Chief Executive Officer of WISeKey. Mr. Moreira, you may begin.

Thank you, Jessie, and thank you, everybody, for joining today the WISeKey Full Year 2019 Earnings Conference Call. Today is a difficult day for everybody, everybody in the world, so really appreciate your presence with us today in the call. I am joined by Peter Ward, our Chief Financial Officer. And during this call, I will discuss the achievements during 2019, our growth opportunities, and then Peter will provide an overview of our financial results of the year. After that, Peter comments, we will also open the call for questions. So as you will have been seen on our reports and press releases, 2019 was a very interesting, and I will say, disrupt year for WISeKey, not only because the IoT industry it's being disrupted itself, I mean, WISeKey is progressing in a very disruptive cycle of technology, where many brands, many organizations, many governments are moving into a full digital strategy. And we believe then that WISeKey has the critical assets in terms of technology to satisfy the needs of these new demands on this [Technical Difficulty]. So to recap itself first on WISeKey technology, WISeKey, it's a cybersecurity company, very strong DNA, 21 years' experience in solving cybersecurity critical issues both for government, private sector organizations, international organizations, the UN, the International Court and many other very international lobbies. And they are using WISeKey cybersecurity technologies to do very basic functions, such as securing their e-mail, securing their website, securing their mobile connection, securing their access controls, securing their KYC compliance through digital identities and so on. So this building block of cybersecurity has been essential for building the company we have now, which, as you know, in 2016, did a listing on the SIX Swiss Stock Exchange in May and December last year -- December 4 last year, we follow-on by doing an ADR too in the NASDAQ. The other important components of the WISeKey platform is IoT devices. So the cybersecurity components of the software needs to be embedded into a device. So the device is secure. One of the problems we are facing on IoT is that many devices are getting hacked. I was interviewed by Yahoo! Finance on their Ring hack, where the press asked me, why it was so easy to hack a device such as Ring. And the question is always the same. Those devices do not have anything in that device and allow us to insert a unique identifier, a dual factor authentication key. And that's what WISeKey solves with our microchips, with a VaultIC and the NanoSeals. We are able now to embed into any device, connect to the Internet, a HSM, hardware secure model, which is a very tiny piece of hardware that is embedded, certainly into the device and then we put the key, which is issued by our PKI platform. So when the data is transferred from the device to the cloud and further analyzed by artificial intelligence software, we know 100%. And the data comes from the device and that the data is secured data and it's trusted data. As you know, the Internet is full of fake data and that applies also to IoT devices. And then during 2019, we did a very strong push in Blockchain because we realized that putting that identity of the device in a ledger was a much more efficient way to access the identity in a decentralized way. I mean, one of the burdens of IoT, and that's why, IoT does not scale very fast is that if you keep the data and the identity on centralized databases, that is only available to a restricted number of users, it is very difficult to make a global verification of that device. So during 2019, WISeKey has been very focused on really building that platform effect, which is not available and is now being used by 3,500 clients, which they have different needs. We have clients and they are coming from the medical sector. They need to digitally tag their medical products, the agnostic. Now what's going on with the coronavirus, it's a very clear thing, you need to identify digital attacks, certify and transfer data in a very secure way. So this technology is used for pharmaceutical sector. We also been developing this technology for connected cars. We signed in January 2019 a major deal with Daimler, that allows them to use our software to reinforce their operating systems in cars, i.e., you have read on the press the other day, which is something, by the way, I refer last year, during that call, the -- it will be so easy to accelerate a car, a connected car, like happened with Tesla. If a hacker can get into the OS and being able to control the OS from outside the car. So we do provide technology that makes that impossible, as the acceleration of the car is decentralized and segregated from the operating system. So if you hack the operating system, you don't have the second key that allow you to accelerate the car. And we have been selling this technology to the car industry. We have data, a major inside penetration into illicit trade. Illicit trade is $1 trillion problem in the world, growing to something like $4 trillion. It is a major loss for brands as the brand damage is very high when they have products that they have been sold in the dark web. Illicit trade is contributing to major regions of the society. So we have been teaming with companies like PMI for the illicit trade certification of the cigarettes, which contributes something like 15% of global illicit trade. WISeKey has been a thought leader into convincing brands that they need to put security on their objects and products, so they reduce the risk of being counterfeited. That is bringing a very interesting business model for WISeKey because we are still on this cycle and this is why the revenues are not yet what people will expect to be is because we are yet on the cycle of putting security at the object level. This is the current, where I gave myself 5 years from 2018 to 2023 and where we say that the first phase will be to put international regulations, put international standards. So IoT objects and they are getting connected to the Internet will be forced to have a level of security of the object with a micro [Technical Difficulty] certification and identity that will make that object trusted by the cloud or the platform that they are connecting to. And this is a low-hanging fruit, but it is tedious because you have to go brand by brand. And only now, brands are starting to realize and this needs to happen. And by the way, the fact that many countries, like in the United States and also in Europe, they are putting legislation, then force the companies and they're connecting objects to the Internet to have that level of security as a certification. It makes, obviously, the sale much easier. But for the time being, it has been a painful process because brands did not want to pay for. They just didn't care. They just say, "Look, I don't care. I connect my product to the Internet. What is the risk? It's not my risk. It is the risk of the consumer." So this is changing and now brands are willing to make that investment. The second part, and I think that that's a major success of WISeKey. We also convinced the brand that this is another benefit on this operation. It's not only cybersecurity aspects, but it's also the fact that brands can engage with their customers. So it's a customer-facing technology because once you have the identity into the object, the next thing you need to do with an app is to peer your app, your mobile phone with that object and establish a one-to-one relation. So there is a way for brands to engage with consumers. Brands, when you put an object connected to the Internet, that brand does not have any relation with the consumer. So this is a benefit brands are realizing and marketing department inside brands are realizing that naturally this is a new way of investing their marketing budgets, is by securing the object, but at the same time, creating the interactions with the clients and getting customers adding into their CRMs. And the third area where this technology, and this is what I believe is going to be the cycle between 2020 to 2021, is the data. WISeKey has not been yet monetizing the data we create and we produce. But we have now 1.2 billion objects already with our microchips and identity being sold internationally in the last years. We are revisiting this community by saying you are producing a very high-quality data because that data comes from an authenticated object. That data has value. Data is the oil of the digital economy. And we are teaming with organizations such as Microsoft. We have done a partnership agreement with Azure Microsoft, and other partnership agreement in 2019 with Oracle, IBM Watson. And we are now testing how that data then goes into those clouds that can be analyzed, can be performed using artificial intelligence, so we can develop new revenue models for the company, such as providing predictability analysis on object performances and so on. So WISeKey is a data-rich company. And as you know, data-rich companies are the ones very high demand because the AI algorithms and company has been -- they have been paying huge amount of money to make AI acquisitions. But if an AI data company does not have data, the AI cannot perform. And if the data they received the AI algorithm is tech data or low-quality data is garbage in garbage out, the analytic capability of the AI will not be exploited. So WISeKey has become in 2019 a platform. Obviously, that took some decisions that we have to take in the company because we are still a mid-cap company growing, but we needed to invest into developing the platform. We needed to invest in developing new microchips. One of the obstacles we had into the market is that some brands were saying, "Hey, pay $0.20 per a microchip is too high. We want to pay what we normally pay for an RFID tag." Although it's nothing to be compared. An RFID tag does not provide the same quality and security and possibility of transmitting data than NFC chip. But anyway, we develop actually a NanoSeal. There has been a major investment in the company during 2019. They also registered 20 new patents in the United States. And NanoSeal now nearly reaches the same level of pricing of RFID, with all the advantages I've just mentioned before. So the other thing we did is that we look into the entire offering of WISeKey after assuming and absorbing the acquisitions we made in the last 3 years. We didn't want to be on SSL certificates. This was an area that was producing a lot of cash. It was doing nearly 50% of our cash. So it was a big sacrifice to sell that. But at the same time, we realized that SSL is going to become like a commodity. And it's going to be like a e-mail in few years. People will not pay any more for SSL, and we didn't want to have that asset into the company. We also didn't want to have expensive debts than we had in 2019. So what we did is we managed to approach DigiCert and we sold the SSL business of WISeKey QuoVadis which was the company we acquired the year before. And we carved out this SSL business and we sold that for $45 million cash, which obviously was an important cash investment into the company because that allow us to put more resources into R&D, invest $6.4 million into the development of new products and integrated this platform effect that I mentioned. WISeKey has now no debt. We also paid the ExWorks debt which was a very expensive debt for us. And in the course of that, we made a substantial profit, which has contributed to the first time this year where WISeKey has a cash position of $16.6 million by the end of 1999 (sic) [ 2019 ] and a net income of $7.5 million, making the company profitable. Obviously, we are still -- and again, this is a philosophical discussion sometime between different views of investors and then they want profitability or they want growth. There is no such a single profitability yet on IoT. And this is a reality. And even the big players are not able to make yet profits on IoT. And the basic reason is that the number of objects still connected. They are not critical enough to start to produce profit. I mean, we are only connecting now mobile phones, some devices, some of the smart detectors, phone alarm system like Ring and others. But this is a very small number of what is going to come, which is 1 trillion objects to be connected to the Internet by the year 2030. So companies working in this space, their main focus is to get into the market, to use the window that we're going to have, which is a 5 years window where this industry is going to scale and be a major player in that industry. And that has been the decision of WISeKey. Obviously, the company also had, and Peter will come back later on that, some operational losses because we invested a lot on the NASDAQ virtual legal fees and noncash activities, which Peter will describe later. So if you compare WISeKey with our listed company in IoT in the United States, you will see that all financials are pretty solid, and we are ending the year in a very strong way. The critical part for me, as I said before, is growing and making substantial growth. And I think we have now all the assets required in this company to make a quantum leap in what concerns the possibility of solving the problem not only 1.2 billion devices then -- they have already on microchips but a much larger number. And we are also looking into -- again, when I talk about platform, I talk about a B2B aspect of the platform, means WISeKey dealing with other communities and other brands, and they are integrating their products into our platform, but also to consumers. Because as you know, we all know, consumers are every time being hacked and their personal data being compromised and their identities being extracted from very hostile social media platforms. And again, WISeKey has -- this is an area we don't make any money because people are not yet willing to pay for that, but it's going to come. We have now a very powerful Identity Management, PTI, with the name WISeID that basically allows you to issue your digital identity, store your digital identity in a secure device, and right of giving that digital identity and the data then that digital identity generates to a platform, such as Facebook, Google or Amazon, you are using that digital identity to single sign-on on those platforms, but maintaining the ownership of your identity because we added Blockchain technology attached to that identity. You can also now -- and this is very new in the market is you can monetize and tokenize your consent. So the consent of you to give your data or identity to a platform that will make money on you, you are -- with the WISeKey technology, you have the possibility now to charge for money. So okay, you want my identity, you want to know my behavior, you want to make money on me, I want to be part of the benefit the new platform make on me. And that is something which is going to substantially been growing. For the time being, it's a service we provided for free. But as we are moving forward, brands are realizing that the identity of their consumers are better in their hands, and with the help and the consent of the consumer then via a Facebook or third-party platform. Currently, now, the model works is that a brand that wants to engage with the consumer has to go and has to pay to Facebook or a Amazon-type of platforms in order to reach other consumers or technology disintermediate that process or technology allows the consumer to be directly engaged with a brand with a very strong identity, which allows them to engage. And areas on where we apply that is in soccer, football clubs, Real Madrid. We are using that into events, concerts. I mean, the engagement between brand and consumer is going to explore in the years to come because now there are some limitations that makes very difficult to these very dominant platforms to keep making money and controlling that identity. That cases like eIDAS Regulation in the European Union on GDPR. So the -- we believe during the 2020, we didn't want to make projections yet because the situation is so terrible in the market and nobody is able to make any projection. We don't know what is going to happen here. But I personally believe that despite what is going on, the world is going to enter into the Fourth Industrial Revolution, may be faster. I think what is happening here with this coronavirus, it's actually testing the resilience of many countries, and we are going to reach the decision and the conclusion that countries need to move faster into the Fourth Industrial Revolution in order to protect all of ourselves because we are in a globalized world. And just in not one country not doing it properly, then that exposes the rest of the world. So the Fourth Industrial Revolution is exactly what I just described now, right? The companies needs to have those critical digital assets that we already have the protection, the patents, so we can become a major platform for the future. I believe that WISeKey is a mini platform yet in terms of revenue. People will say, "Okay, but you are only making $25 million, what is the big deal there?" But as I said before, $25 million divided by $0.20 divided by number of objects. There are many objects starting to pay those $0.20. And because this is getting bigger and the ecosystem of IoT is going to accelerate, that will scale up very fast. Another aspect where WISeKey solved, which is very unique, is that some countries wants to handle that digital identity and that cryptographic Root Key and that IoT play at national level. So WISeKey established joint ventures. We entered in partnership with a Saudi joint venture with Juffali Group, which is the largest importer of cars in Saudi Arabia and for the Middle East. They import BMWs, Mercedes Benz, and they wanted to connect all these cars and the consumers of those cars with our technology to Saudi clouds. We are working on then also on digital identity for the country itself, under the 2030 program on making Saudi Arabia one of the most connected countries in the world. And this has been replicated as well in other joint ventures. Those joint ventures are controlled by WISeKey. We license our technology. They sell the technology and we consolidate the revenue. And they will be mainly activated during 2020. The -- we had last year discussions on WISeCoin. I just want to give an update on that. So WISeCoin was -- is a technology that allows you to tokenize your consent. As I mentioned before, at the beginning, we were thinking to do an STO on that that before we entered into the NASDAQ listing because the STOs are still very regulatory disputed models, still around the world. And because there were some delays also in the Swiss Stock Exchange to allow us to do an STO, we decided not to do the financial part, which is the STO but just develop the token part, the tokenization part. So we are putting WISeCoin in a standby to see what is happening in the regulatory aspect and we are just developing the token part, which is what I described before, tokenizing the consent on the digital identity. The company in 2019, also, was very present in the international arena. We've been thought leaders in many big forums such as the FII in Saudi Arabia, the World Economy Forum, the Munich Security Conference where I personally as a speaker had been eventualizing on the need of moving once for all into the digital identity platform environment. This is not yet the case as you know, digital identity has been a complex deployment, only now because there are so many hacks and there are so many -- people don't realize. Now that you have multibillion dollar cybersecurity hostile companies out there now becoming very big, getting very well-funded with very strong technology skill, then they are making money, destroying values of other company. So this is a new battlefield where you need to use the same weapons that the bad guys are using against us. So investing money in cybersecurity is essential. And we had been successfully eventualizing around the world to make that investment and convince CEOs and Board of Directors to further invest in cybersecurity and IoT. The aspect related, I just mentioned, but I think it's an important point to be highlighted, the data component. WISeKey had a business model, as I mentioned before, like a razor and a blade, means that we sell the chips or we team with somebody that had chips. We can also work with ARM or NXP and others, if the client wants, we don't impose our chips, and we then bring the software part. Because the cryptographic Root Key of WISeKey is now in 4.3 billion devices. So this is growing organically and exponentially. We are able now to basically connect all devices on earth now through the cryptographic Root Key on WISeKey, which is already inside a device. So that means that we are into Apple iOS, into Android, into browsers in China, browsers in Europe, browsers in the United States. We can now with this Root of Trust, cryptographic Root Key, establish a trusted session from the device all the way to the cloud. And we don't want to do cloud ourselves, at least not for the moment. So we are teaming with very big companies like Oracle, Microsoft and IBM, in bringing that data to their clouds and for us to being able to start to monetizing the value of that data. So this is my presentation. I am very confident. As I mentioned, I think maybe speaking about the stock, just a few seconds, we had last year a very difficult year in what concerns to stock. And it's not really related at all to the performance of the company to the country because the company has never been stronger and in a better position than it has been in 2019. It is only due to the fact that we had a major overhang. I mean, we -- WISeKey made acquisitions, I know those acquisitions were paid cash and shares. We locked the share part during 1 year. But obviously, that -- the lock-up of that period expired last year. So suddenly, those acquisitions generated something like 3 million, 3.5 million overhang shares and they were sold into the stock without the possibility for us as a company to react because there is a limitation. So we organize a buyback program. But as you know, there's a limitation of what you can absorb through a buyback program. And we didn't organize a block trade because it was very difficult to do it during the year. So this is something that in 2020, we're going to be focusing a bit more. The stock is very unpredictable. Today, it was 40% up. But yesterday, it was minus 25%. So it's very hard. We are waiting until this is going to stabilize, and then start to introduce WISeKey now that we are in the NASDAQ, 2 institutional investors in the United States and all -- other places around the world, and they are investing in IoT, and they want to take a bit longer view on the time they're going to stay in the company. IoT is not a company that you invest in January and you sell in May. You need to stay during the time of growing cycle of the company, thinking that these companies are essential for the digital economy. Companies like WISeKey solved very complex problems. And the only thing could happen in those companies to become very successful in the future. So we had to handle that complexity. We believe and our opinion is always very bullish in what we believe the stock should be. Remember that WISeKey was a $7 stock when we did it in 2016. And now we are at $1. So obviously, when we did the listing in 2015, the company has $3 million revenue and a very small technology base that has been incremented by this acquisition, the revenue has been expanded. So obviously, we should be in much better valuation and position to where we are now. The views of the company is also -- and again, this is 2020 activities, but we are looking into potential acquisitions. The company has cash. The company have access. There is no debt, so we can establish on strategic acquisitions. We are looking into the market of IoT companies and do not, then they have maybe a very large client base on lower tech, and we are just incrementing that tech with our technology and bringing this type of serialization. Imagine an RFID company that has already millions of clients using RFID. And suddenly, these clients are asking to be upgraded to a more active chip technology, like the one we are using from passive chip technology. So WISeKey is looking into acquisitions and obviously, continue our growth acquisition. Again, we want to be much bigger, not to we would dilute shareholders. The objective is not to dilute shareholders any further. So that will be only done the moment that we recover back again the valuation then we believe we should have and we find good opportunities in the market with the current climate and potential crisis that is going to be subsequently to the sellout of the last days, there's going to be many possibility or consolidation on that space everywhere in the world. So with that, I would like now to transfer the call to Peter Ward, so he can cover the financials, and then we're going to open the call for Q&A so you can ask us whatever questions you deem appropriate. Thank you very much for your attention. Peter, the floor is yours.

Okay. Thank you, Carlos. As we announced earlier this week, for the first time since its creation, WISeKey achieved a positive net income in financial year '19 -- 2019 of $7.5 million. This net income position is derived from the $31.1 million gain on the divestiture of the QuoVadis group. WISeKey had acquired QuoVadis in April 2017 to strengthen its certification activities. However, when DigiCert approached WISeKey to buy the certification business because it needed to be European compliance, we reviewed this opportunity carefully. WISeKey's negotiations with DigiCert were successful, with a purchase price of $45 million, which resulted in a gain of $31.1 million and a net cash inflow of $40.9 million, which includes $4.5 million as restricted cash. The first $2.5 million of tranche of restricted cash was paid to WISeKey in January 2020. This cash inflow allowed WISeKey to repay the $25.3 million outstanding debt to ExWorks Capital in January 2019. And as a consequence, all WISeKey collaterals and leans providing as a security for the ExWorks Capital debt were released. It also improved the cash position of the company throughout the year, with a cash and restricted cash balance of $16.6 million at December 31, 2019, compared to $9.8 million at December 31, 2018. For the full year 2019, WISeKey's revenue from continuing operations was $22.7 million. This compares to $34.3 million in 2018. The sale of QuoVadis removed a large portion of our total non-GAAP revenue in comparison with 2018, approximately $19 million, but we strongly believe that this divestiture remains a positive change for WISeKey's strategy to transform the company into an Identity Management, IoT and Blockchain service provider. It is important to note that although our full year 2019 revenue was lower than full year 2018, WISeKey's enhanced position as a vertically integrated Identity Management, IoT and Blockchain service provider and the razor and blade hardware-software revenue model has positioned us well to take advantage of massive opportunities in the IoT market, and further increase revenue and improve profitability. The decrease in revenue from continuing operations by $11.6 million from 2018 is largely linked to 3 factors. The impact of the sale of QuoVadis, with the absence of cross-selling opportunities. For example, opportunities to sell other products and services of the group to existing customers of their diversed entities and the reduction of our sales team. Secondly, our IoT activities are adversely affected by the overall downturn in the semiconductor industry worldwide. This downturn linked to the political and trading tensions between the U.S. and China, for example, underwriting threat of protection as vulnerabilities in emerging markets has affected all IoT and microprocessor companies, according to the semiconductor industry association. And midyear global semiconductor sales were down approximately 15% compared to 2018 globally. And the third point. One of our products, the old generation of microprocessors used in the past for electronic payments in the U.S. market is reaching the end of its life. The decrease in revenue from continuing operations affected both our main markets in Europe and in North America. Our 2019 gross profit decreased to $9.5 million from our 2018 gross profit of $16 million due to the long manufacturing cycle of our IoT activity. And in order to reduce the lead time to our customers, we started the manufacturing cycle early. Also, the excess inventory at our clients at the end of 2018 resulted in reduced volumes -- volume orders for the first half of 2019 on a very short notice and did not allow us to adapt our manufacturing cycle. As a result, our cost of sales was heavily front-loaded in the first half of 2019, while deliveries were pushed out for the second half of the year. As a consequence, our gross profit margin improved over the year. It was for the first half of 2019, 39%, and in the second half, we saw a strong recovery with a gross profit of 45% when the order intake picked up again. We expect this trend to continue in 2020 but remain prudent as the order intake from existing customers has not yet returned to 2018 levels. To a lesser extent, our gross profit was also impacted by the new production -- product introduction costs of our IoT segment. Our total operating expenses from continuing operations increased by 20% or $4.9 million from $25 million to $30 million. Most of this increase relates to the grant in financial year 2019 of a significant number of employee stock options in recognition for past services to its employees, which increased the stock-based compensation charge by $3.7 million year-on-year. This is a noncash charge. The rest of the increase is due to WISeKey's investment strategy to expand into new lines of business and new regions. During the year, we increased our R&D effort with $6.5 million invested to develop new products and create business opportunities in cybersecurity, IoT, Microprocessor, Blockchain and AI, which repositions WISeKey as a global IoT player. Selling and marketing expenses increased by $2.2 million due to a $1.3 million charge in stock-based compensation. And higher expenses related to the expansion of our sales force in Europe and North America. We note that our general and administrative expenses have actually decreased by 6% year-on-year if we exclude the impact of stock-based compensation. And this despite large legal and professional fees in financial year 2019 due to WISeKey's listing on the NASDAQ on December 4, 2019. So if we remove the stock-based compensation year-on-year, we actually reduced by almost $800,000. The main components of the G&A costs are 39% of the costs are related to staff-related costs. We have legal and professional fees of 23% of the total of $3.6 million, we have rental and general office costs of 10% or $1.5 million. The stock-based compensation, again, as I mentioned before, $3.4 million or 21%. And then some smaller expenses relating to customer contracts and losses on other operating G&A costs. The EBITDA for the WISeKey Group was a loss of $19.2 million, mainly due to a decrease in our gross profit by $6.5 million and the increase in our stock-based compensation by $2.4 million, again, noncash basis. I just already mentioned, we ended the year with a strong cash and cash equivalents position, which together with restricted cash increased to $16.6 million in December 2019 from $9.8 million in December 2018. We also reduced our debt positions by repaying in full, the line of credit with ExWorks Capital in the amount of $25.3 million. This substantially improved financial position as it paved the way for significant investments in growth initiatives in 2020 and beyond. This concludes my presentation. So I hand the floor back to Carlos.

So I would like to thank Peter and all the participants on this call. And if you have -- I transfer back to the moderation. So if you have any questions for both me or Peter.

[Operator Instructions] Our first question comes from the line of Andrew Nowinski with D.A. Davidson.

So just wanted to start off with a coronavirus question. As more employees are forced to work from home due to the outbreak, are you seeing deals getting pushed out or at the very least sales cycles lengthening?

Yes, this is actually a very good question, and we are assessing now. Thank you for your question. So I mean, we see both as an opportunity and the other side a potential threat. We don't believe that for a moment we have not seen any IoT clients or brands taking any decision not to continue increasing. I think as I mentioned before, cybersecurity and IoT, secure IoT normally grow during crisis. I remember when the tsunami was there or issues, all those crisis, international crisis, alerts people about the need to be connected, securely connected and being able to have products then they are not being hackable because one thing that people don't realize, in those crisis the hackers get very active, and we need to stop that action to destroy the value of -- further destroy the value of companies. On the other side, what we are realizing, and actually, this is amazing. We just did a launch in Times Square a WISeID 3 days ago, is that there is very strong demand for people working from home. Actually, I'm doing this call from home as all of our staff has been sent to home in the last 2 days. The spread of the virus in Switzerland is very, very high and is getting a bit out of control. So what is happening is that in order for you to connect from your house back to your work even if you're using video conferencing or you are using anything in some type of functions, like you need to digitally sign a document, you have to secure a payment or you have to give an instruction to your CFO to conduct a payment, you need a digital identity. This is the only technology that is binding. And if you don't digitally sign your e-mail and digitally sign the PDF file, let's say, that allows you to secure a payment, this payment can be fake and would not even be recognized in court. So I believe this kind of crisis are going to decentralize the workforce from being trusted buildings and trusted locations, where everybody knows each other, to being able to work remotely, where you will have to authentic yourself before you can enter into a secured perimeter, which is exactly what WISeID technology does. So we're going to see during 2020 a very interesting opportunity in selling this technology to many companies, and they are still not using additional certificate on their e-mails. This is amazing how many companies still are sending e-mails, assuming that because I get an e-mail for you, you are the person you say you are, you could be, obviously, taking your identity and ask me to execute a transaction on your behalf, and then we figure out that this transaction was not you. So the identification of people is going to become a major market. And this kind of crisis accelerate that. So I don't anticipate -- we already had eventually a potential danger is that part of our semiconductors are done in Asia, in Taiwan, in Singapore, in Thailand, but also in France. So I mean, the diversification of locations where we can manufacture our semiconductors, VaultIC and the NFC chips is pretty well distributed in case, then we have some problems in those locations.

That's great. And I can certainly appreciate the uncertainty with regard to how this plays out and your reasons for not providing a 2020 outlook. But I'm wondering, you talked about having a 5-year plan to get revenue growth back on track. Could you maybe just provide any more specific goals for 2020, that we should focus on in terms of where you are in that 5-year plan?

Yes. So I mean, what I say in my presentation at the beginning is that, our revenue is pretty predictable because we are the number of objects than we are connecting is growing 20% per year, 20%, 30%. This is the average IoT growth industry in normal times. I mean, that can be obviously disrupted by issues like that happened this year. So normally, the projection will be the same type of growth. WISeKey should be growing around 20%. The -- but this is only on the current technology offering. Means we are making money out of the -- selling of the microchips, selling of the Identity Management licensing software and the recurring revenue generated by the cybersecurity. [Technical Difficulty]

Ladies and gentlemen, please standby. We are currently experiencing technical difficulties. The conference will resume momentarily. Ladies and gentlemen, we thank you for your patience. Your conference will now resume.

Yes. Sorry, I am back. For some reason, I was disconnected. Sorry, I don't know when because I thought I was still on the call, when I disconnect. Your question was about the 2020 visibility.

Yes, that's right.

Yes. So I -- where did I stop? Sorry, I was -- I kept speaking. I didn't know. I didn't realize that...

I think you said, right around 20% growth is what you were alluding to.

Okay, okay. So yes, so what I was saying is that the -- that's the normal growth in the WISeKey as we are today with the IoT technology, with the microchips, with the identity. What I mentioned in the continuation of my call before was that we are also now able to monetize the data, the data that we produce, which has never been sold by the company. And now we are in industries like the car industry, with connected car technology, industries like the pharmaceutical, with the clients we have. Luxury, we have a very strong footprint in luxury, being able to connect luxury products to the Internet. That is producing a lot of data and that data has huge value for the brands that we are securing. So what we are testing now in cooperation with Oracle, Microsoft and IBM because those are the partners we work in providing them the data, so the AI can analyze data, it's -- one will be the revenue model that we will apply for that data. So this is still work in progress. I think this is going to be ready in 2020. This is going to aggregate substantial revenue, and this is going to be growing in the next 3 years, which are part of the 5-year growth strategy that I brought. We also -- part of the potential growth in 2020 is the activations of the joint venture. So there is revenue coming from Saudi Arabia, as we are also now technically fully operationally in Saudi Arabia as we are fully operationally also in China, although China has an obvious situation. But WISeKey, during 2019, started to deploy the additional identity through the combination of the WISeKey cryptographic Root Key and the 360 browser, which is a dominant browser in Asia, in China, in particular, with something like $600 million. So although that is -- we're charging money for that downloading, for Root Key, that is generating the possibility of interconnecting our digital identity with localize apps like WeChat or other platforms. So I will say that we are confident about 20%, 22% growth is to be much higher if we are able to deploy the data component of our revenue strategy. Also, the fact that WISeKey is still very much a European company, a Swiss company. We are obviously moving big time into the United States. We already opened presence in Silicon Valley. We have a new team, which is going to be recruited in the United States, a sales organization in place. That is going to accelerate as well of deployment in the United States. A lot of the IOT, cybersecurity clients prefer to deal with a localized player. They don't like to buy technology from somebody in Switzerland, and they would like to have a more local presence. Obviously, more capability of being in the country is essential for further revenue generation.

That's great. One last question, and I'll jump in the queue. As your model is shifting more towards a recurring revenue stream, which is clearly a positive trend, I would imagine that shift could put some pressure on your cash generation, given that those deals, you typically collect less cash upfront on a recurring revenue deal. And then you also noted that the SSL business that you sold was driving about 50% of your cash generation. So is there any concern with regard to your working capital needs as you try to drive this shift more towards a recurring revenue model?

Yes. We are sitting on 2 years cash in terms of the operations because as I say, Peter explained, the -- we're actually not burning that much. For a company of the size of WISeKey, a lot of the cash that was used last year which was mostly for nonrecurring activities such as listing and legal fees for the NASDAQ ADR process, which will not be the case. I mean, we don't need to reinvest much more into the technology. The technology is very solid. We have technology innovation, which lasts at least 3, 4 years. Our focus is 100% now revenue generation. And because the number of products then they are being already tagged with our technology, I mentioned 1.2 billion of those products. Those are video cameras, those are drones, those are spare part from cars. I mean, there's a lot of -- of those products than they are already tagged by WISeKey. Then they are becoming active products because that's the next thing happens. Once you have a chip of WISeKey, you want to connect the chip to the Internet and start to interact with the cloud. Then we can sell more software. The software is the more razors we sell, more blades are required, right? So that will allow us to increment the recurring revenue as we are activating the ecosystem already of devices already connected. We are also, in some cases, because the NanoSeal -- the NanoSeal is a major breakthrough for the company, right? Because NanoSeal competes in price with RFID. And the RFID industry is a multibillion-dollar industry. I mean, this is a very large industry in supply chain, food tracking, medical product tracking, logistics, access control into buildings and what we are doing is gradually replacing those nonactive, nonsecure, very low-tech sensors with VaultIC as large NanoSeal, which is a much robust, NFC capability, in some cases, they can even produce all the kind of sensors. We also launched -- this is 2020, but it was developed in 2019 last year, is the IoT technology that allows -- we did a partnership with ON Semiconductors. And we have now an IoT device that allows to send GPS positioning data, temperature -- so it act as an ITO (sic) [ IoT ] beacon that is around $5, the beacon, then you can put into containers and semi on -- semi -- ON Semi is a very large company, as you know. And they are now using our microchips into those devices and our software as well. So that's going to create a very interesting revenue model for 2020 because this is a very well-established market of, let's say, you are a container company, you want to check the temperature of your container, the food inside, you want to geolocalize real-time to see -- to make sure that the container has not left the trusted route, all this technology it is required. And this exactly what this does. And that, again, generates more data. So we are also progressing in the potential use of this identity and microchip embedded into other more complex and sophisticated products.

[Operator Instructions] Our next question comes from the line of Yi Fu Lee with Oppenheimer.

I just have one quick one for Carlos, and one quick one for Peter. The first one is related to the international expansion. We have seen investments made in Saudi Arabia, India and most recently in China and Hong Kong. I was wondering if you could comment, Carlos, on like the $30 million facility that by long state investments. What are some of the priority areas of focus to deploy this capital or invest in this capital?

Yes. Thank you very much for your question. So in this joint venture, the model of the joint venture is that WISeKey brings the technology. So we localize into the country the cryptographic Root Key. Some cases, you need to have an agreement with the government, like a case in China or the case in Saudi Arabia, as they are very strong on anything related to cryptographic Root Key. I mean, they have their own national authenticated CAs, certification authority, many of them, they are government bodies. And you have to be interoperable. So what we do? We go to the country, and we say, look, your products cannot have only a Chinese identity because you want to send that to the world. So in some cases, people will not trust you, like the case of Hauwei and all the issues related to not trusting a Chinese crypto into a device. So we would say, we can help you. We are a Swiss company, international company. We have our cryptographic Root Key internationally recognized. If we come into your country and we dual sign your CA, we digitally sign the National Chinese CA with the cryptographic Root of WISeKey, it will facilitate into operability of whatever product China will produce, okay? So that's how the things begin. And this is the same thing in India, the same thing in Saudi Arabia and in other countries. The key aspect of it is because this is strategic for the countries. Countries do not want to outsource that outside the country. They want to have a local player in the country because there is, obviously, the reason why it's on dominant social network platforms cannot be in the country. In China, for instance, because the Chinese don't like to have their identities being extracted outside the country and that happens basically everywhere in the world. So in our model, what we do is create a joint venture. The Chinese invest in the joint venture, we don't have to put money on the joint venture. We bring our technology and we take control of the joint venture. They invest in the joint venture, and this is the $30 million that you are making reference. So that is money goes into the joint venture. The joint venture needs to buy services from us. So WISeKey is the one providing to the joint venture all the tools, so the joint venture can become operational in the country. And so basically, it's part of the revenue for us. And then the joint venture moves and start to deploy our technology, so we get further revenue and consolidation on whatever technologies need for in the country. Because it's a national joint venture, it's easier than to team with telcos, with banks, with IoT, actually, in the case of longest state, $30 million, exactly that. I mean, the idea -- this is a fund that has invested in a lot of IoT companies in Shenzhen. And those companies, they have produced localized products, and they are not internationally certified, they're not trusted. And we are just adding that layer of trust and security on the top of those products and we're basically selling the technology. In Saudi Arabia, it's the same thing. We are working with Juffali Group, which is a very big conglomerate and they have investments in telcos, in car, I mentioned before, in financial service organization, and through the joint venture, we are able to localize our technology and be able to generate further revenue and profitability for the company.

And just one follow-up for either Peter or you as well, Carlos, on the $16 million cash balance, can you give us some ideas of how you plan to allocate this -- areas of interest in terms of investments that you wish to deploy this capital? That's it from me.

You mean on the current cash that we have?

Yes. On the current cash balance because it's just -- it's probably your strongest cash balance we've seen. Yes.

Yes. So we are -- I mean, because like we did on last year, after we divest from SSL technology, we were conscious that this will reduce our revenue. But we also knew that this SSL revenue will go away in any case, after -- I don't believe SSL is going to be a business in 4, 5 years because now platforms like Amazon and others that are embedding SSL capability in their platform. So why you're going to have to buy an SSL outside of platform, right? So we realized that this was a business that we didn't want to be, and we realized that somebody else wanted. It was great because the player that acquired that business is a dominant player in SSL. So they have other ways to monetize that. And then we -- with the cash, this cash has been used to increase our sales organization. And this is where the continuation this year is going to be the same. It's going to open presence, I mentioned, open presence in the United States, reinforce our sales organization in the United States and have proximity with our clients because many of our IoT clients are -- they are asking for that. And I will give you an example. I mean, WISeKey sales, something like $7 million on security to a very big player in the United States and use that to secure their hardware. And this player can scale that 10x, if we are able to provide a localized service because that that hardware this player produce is a very sensitive hardware, which is used by military, defense and government. So they need to have 100% local presence. So this is where we're going to be using cash is to localize sales at national level and being able to increase or sale a process with our clients. What is very exciting on this technology is, normally clients, and this is not reflecting in the revenue here, but clients who start, let's say, that you are a very big motor company or a pharmaceutical company, you start to connect only 1 or 2 of your products. You don't take the decision, "Okay, I'm going to connect my entire production." You start to connect and because you are part of the digital transformation cycle this company has. So they say, okay, like in the case of Daimler, we're going to connect only that series of cars, and we're going to test how that works. And once we are happy and everything is connected and producing data, and then we extend it -- then we extend the project to the entire fleet. So that $25 million that we have, it has a huge potential of growth because they are in areas that all of them they are growing. I mean, there's not going to be a situation where they're going to decide not to continue connecting objects to the Internet. To be contrary, they're going to connect more and more. So the beauty -- because we are so decentralized, the revenue is decentralized by so many clients, we have the possibility by just reinforcing our sales organization to increase creating revenue without the need even to bring more clients.

It appears we have no additional questions at this time. So I'd like to pass the floor back over to management for any additional concluding comments.

So thank you, Jessie, very much, and thank you, everybody, for your presence on this call. WISeKey will be, as we are a Swiss company, we report every 6 months in Switzerland. So the next audited review will be done in H1. So for the call, we'll be there. We're going to be providing updates, quarterly updates because now we are in the NASDAQ. And we look forward to continue the discussions with you. And if you have any requests, questions, Peter and I or even going to our investor website, where we are maintaining all the documentation required. So I would like to thank Jessie and Lena to organize this call, Peter and everybody joining. Thank you very much, and be safe on the current climate. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time.