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

Greetings, ladies and gentlemen, and welcome to WISeKey International's Fiscal Year 2020 Financial Results 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 Holdings Ltd. to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. WISeKey International Holding Ltd. has provided this communication as of this date and does not undertake any obligation to update any forward-looking statements 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. Thank you. Sir, you may begin.

Thank you very much. Good morning to and good afternoon to everybody. So it's a pleasure for me to join this earnings call, the 2020 results, and walk you through the WISeKey deck, which will describe and summarize the activities during the year 2020. So for people that maybe have not been acquainted to WISeKey, WISeKey is a Swiss cybersecurity AI company. We are located in Geneva, Switzerland. The company through its entire life span has 22 years. It is a company that started with a strong focus on PKI, public key infrastructure, and evolved to becoming what is now today a IoT AI, cybersecurity platform where many processes can be conducted as a benefit from the trustworthiness and experience. In WISeKey, we have very complex cybersecurity projects. So we have 6 offices around the world, a strong focus lately in the United States. We have a very large ecosystem on technology installation. The cryptographic Root Key of WISeKey has been installed 5 billion times. This is in every mobile phone, every microcomputer, any device. We are also adding to that 1.6 billion secured chips, which are powering devices like drones, like connected cars, like traffic lights, like sensors, like routers. And in this year, at the beginning of this year, we acquired the AI company in Germany with the name arago, and I'll walk you through that in a few minutes. So the objective of WISeKey is to go from cybersecurity to data via AI and blockchain technology. Data is the oil of the digital economy and companies, and they will be -- position themselves as platforms, they will have a much better possibility to grasp. It's a huge opportunity ahead of us as the world is moving towards digital transformation. This digital transformation has been accelerated by the COVID situation. As we all know, COVID has been a case of accelerating the installation of sophisticated automation processes in hospital, governments, airports, hospitality industry, everybody is trying to cope with the challenges that COVID has brought to each of those industries. And one of the solutions is obviously moving into digital transformation and allowing those industries to become more resilient by implying and applying technology. So the market we serve is very decentralized. It's everything that connects basically to the Internet. There's going to be, in total, 3 trillion objects connected to the Internet in the next 10 years. We have now something like 500 billion objects connected already worldwide. Those objects are slowly getting security. At the beginning, connection to the Internet was not required to have security, and that's why we had so many hacks and utility power plants and other collapsing because hackers managed to get into those appliances in a very easy way. So WISeKey technology, we are able to protect these drones, wearable, connected cars, telcos, wireless applications, supply chain management, switches, routers, smart city, with concrete wins. For instance, in switches, companies like Cisco are using our technology. In areas like drone, companies like Parrot are using our technology. In wearable, we have 2.5 million watches now with a WISeKey certificate being embedded either inside a watch or outside of watch. Computers and anti-counterfeiting technologies are major drivers. The technology, as I mentioned before, the foundation is this trust process. Trust has become and is becoming the dominant force on the Internet. Companies with a trust model, which is superior to other trust models, will perform much better in the future. Trust was not necessary an asset a few years ago. People didn't pay attention to it. Now they do because all the violations, some personal data, companies, data mining, people collecting private data from social media. So there's a new concern of consumers and companies that trust needs to be embedded into the device, into the mobile phone into the process. Identities of people need to be protected through a robust identity management like the one that WISeKey is providing. And then -- and this is a very interesting uniqueness of WISeKey, that we also have the capability of designing next-generation semiconductors, which are used in those devices. Devices now that data, encrypted data to the cloud need to ensure that the data that goes to the cloud is encrypted, it's authenticated and it's the right data. So when AI takes over and AI uses that data for predictability analysis or evaluating performances or automation processes, higher is the quality of the data, better those AI algorithms functions. And this is the uniqueness of WISeKey with this arago integration is that the company now can convert that data analysis and knowledge automation into a major revenue generation for the future. The company has been making money traditional in this razor-and-blade model, which is, you sell IoT sensors, semiconductors as a hardware play. And then -- and there's kind of the razor approved. And then you have to, every year, in some cases, even every month, update the security of the device, you have to increase the software protection at the device level, you have to update the identity. And that becomes like the recurring revenue model. It is still a small revenue when you compare WISeKey to other company. And it's because IoT is still a new industry. As I mentioned before, only now, objects are getting connected to the Internet. And only now they are realizing that by getting connected to the Internet, they need to provide a higher level of security than what they have before. So this revenue will substantial increase in the future as new user cases are being designed. For instance, drones now need to be controlled by authenticated user only. So drones cannot penetrate a restricted zone like an airport or a military base. Army contracts are being done with drones, for instance, in the United States with the Parrot drone project, which requires a strong authentication and encryption of data from the drone down all the way down to the Earth station. WISeKey is also now, as it's been announced at the beginning of this year, in a strategic investment running a picosatellite IoT company where we are putting now our secure element inside. Because satellite, IoT satellites, which are low-cost satellites, less than $500,000 satellite that you -- including launching their satellite with space. And satellites are able to monitor any IoT device on Earth. So that means that you will be able to monitor containers traveling in the sea, you would be able to track IoT devices for agricultural research. So the combination between space, IoT -- picosatellites with IoT receiver devices makes a very interesting proposition when you are dealing with this new way of supervising devices from the space to Earth. So WISeKey is actually launching with SpaceX at the end of this year, the first, what we call, WISeSaT, which is the first IoT secures -- picosatellite will be orbiting and controlling devices that WISeKey will be securing on Earth. In terms of the IT automation, the landscape is pretty interesting. I mean arago, as I mentioned before, which is the acquisition that WISeKey made on controlling interest at the beginning of the year, this was a company that has received substantial investment. KKR invested $55 million in arago in 2014. And this company now is controlled by WISeKey, controlled in interest by WISeKey. And arago is one of the leading IT automation plays. Here, you see in this anagram in -- arago position very close to UiPath or Microsoft or Amelia or other leaders in this automation zone. Automation, it's going to be -- especially now in the United States with the new budget approved by the U.S. government to provide infrastructure development in the United States, there are $2 trillion being authorized by the U.S. government. And that means power plants, that means roads and that means bridges, all of that will need to connect to the Internet as IoT devices as you monitor real time the performances of that infrastructure. And that, obviously, it is producing a lot of data, that data with this automation capability can be analyzed. And companies can perform better without the need to recruit too many people. Automation, for instance, is a major cost reductor process when you are dealing with very large IT departments in banks or in telcos or when you are dealing with a very large financial accounting department. That's where HIRO, which is the algorithm, learns from the behavior and the performances of the person. And at the end of that learning process, the algorithm is actually as good as the person itself. So it is a way, obviously, to replace, what I will call, repetitive tasks and tasks where humans will not be as sophisticated as algorithm. Obviously, that has consequences in the manpower, but the good news is that those drones are being created in other new areas where WISeKey has activities, like I mentioned before, in the IoT space. The concern then of WISeKey is, as I say, as we gradually move, we want to learn how to monetize data. We are not yet monetizing data. And data is going to be the major driver of revenue on the digital transformation because everything related to workflow automation, business process automation, digital transformation, automated brand protection, automated identities and secure elements, all that is based on data. Data that can then be analyzed through AI and trust. And the trust component is what makes WISeKey unique. We are Swiss. We are neutral. We are a company that has been very focused from day 1. Due to my original -- I was working in the UN for many years. I was leading major IT projects in the UN. And the vision was that they will need a neutral platform. And what a better place to have this platform than Switzerland. Switzerland is also the country where you have the international bodies, the United Nations, you have WHO for health, you have IATA for airports, all the trust centers that are required to power this digital transformation, they are located here in Geneva where we are. Even [ Libra ] is located in Geneva. So that means that the geolocation of WISeKey being a Swiss cybersecurity company is a very good place to be. Obviously, Switzerland is a small country. Therefore, you don't have yet the size that you will have in the United States, and that is obviously reflecting our revenue. We are fixing that by creating presence in the United States, and we are through that presence integrating a lot of the resources that has been introduced until now. So as I mentioned before, knowledge automation breaks through current limitations, we are the next automation wave after robotic process automation, which is, as you know, has received a lot of hype in the market, but this is more substantial as it's based on an evolutionary model. It's not a revolution, it's an evolution of what other companies already do in their processes. We just launched last 3 weeks, actually, a new offer, our non-fungible token. WISeKey has done a huge investment since 18 months when we sold for $45 million cash and sold our SSL business to DigiCert that acquired the SSL business of WISeKey in Europe. And with that money, $45 million cash, we invested in a total new segment of WISeKey, which is now the underlying platform for non-fungible tuck-ins automation processes. So basically, what it is, is that WISeKey now is able to bring its unique technology, like identity management, to validate the Genesis and the authenticity of watches or painting of all the provenance, which is a major issue in the art business, where to ensure them the provenance of a very expensive object, it is being validated and being certified and digitally signed and includes digital synergies. So WISeKey technologies, like digital signature technology, like time stamping, like identity management, like digital certification, is used to convert all these documents that prove the provenance of a project of a -- of an object in the case of a watch. And that provenance is then embedded physically into the non-fungible token, the NFT, which is then minted into the blockchain. So once the watch or the real estate house or the painting or the luxury asset is being minted in the blockchain, users can check the provenance real time through a platform that WISeKey will be launching in June. And that will include our own cryptocurrency. So users will be able to enter into the platform with a very strong KYC compliance process to avoid underworld or money laundering to enter and use bitcoin or cryptocurrencies in order to be able to trade illegally in platform. So we are bringing our cybersecurity and trust experience to ensure that only clean trade happens in that platform. Then once you enter the platform with your KYC compliance process, you can then activate your wallet. The wallet will be synchronized with the WISeKey identity management process. And from there, users can go and trade NFT devices. So this is a new revenue model of the company. Not only we make money by charging a commission on all the transactions done, which has concluded successful several transactions like the one you see now here with Jacob watch. This is a very -- this is a $1 million watch. Jacob did an NFT, which 100% virtual watch, and then we did an NFT together with a physical watch, which is a very high-end watch of Jacob that the owner wanted to have the NFT associated with the physical watch. For this industry, it's very important because if you buy a $1 million watch, if you cannot, well, own the NFT yourself, so you can -- anytime you want to trade that NFT in an NFT platform, this brings a huge advantage for brands because not only you buy a watch, but you invest into the NFT value, potential value of that watch. We are receiving endless request from very high-end objects and they will be disclosed as we move forward in this NFT journey. We have been also approached by innovative thinking like architects developing projects like very expensive houses or hotels or develop them as an NFT project first or 100% virtual. And the user that will buy the NFT in our platform will then have the right to build the facility. So that will include all the permits, the land permit, that will improve the authorizations to build, that will include the design, everything through the NFT. So this is a reverse in the world as we know it now where we have to go and do things one by one until we get authorizations, and then we build. Here, all the authorizations that are being created before have been digitally signed, they have been added as part of the provenance process. And then once you are and you buy the NFT, all that deploys and is automatically executed through a smart contract. So this is the beginning of what we call the metaverse. The metaverse is the creation of a virtual environment that will mimic the physical environment that we live on daily basis. And the metaverse is the -- it is basically the expansion growth of companies like WISeKey. So without taking more time, and then I will give you some more closing remark on high growth, I would like to pass the floor now to Peter Ward, our CFO, and he will walk you through the 2020 financial and operational highlights. Thank you very much for your attention.

Thank you, Carlos. Good morning, good afternoon, ladies and gentlemen. As Carlos said, I'd like to just walk you through the operational highlights from 2020. In 2020, we did refocus our efforts and resources on the cybersecurity IoT market. And with a larger footprint in the U.S. and our operations in the U.S., in North America, now contribute the largest part of our revenues over the past year and then the last period. Share of the revenue from clients in North America increased to 56% of our total revenues compared to 43% in 2019 as we saw less impact of the COVID-19 on our U.S. clients. But we also were able to increase demand for our products from some of our telecommunications clients. We also maintained a strong liquidity position in 2020. Cash and cash equivalents at the end of December 2020 were increased up to $21.8 million compared to $16.6 million in 2019. This reflects the group's continued drive to maximize its cash reserves. The group entered into new funding arrangements during the year and continues to have funding arrangements with employees. At December 31, 2020, the facilities provide the opportunity to draw down over 52 -- over USD 62 million in total. We also maintained our investments in R&D, which is obviously extremely important for us in the businesses that we're in. R&D expenses represented 25% of the total operating expenses in 2020 compared to 21% in 2019. This reflects our engagement to act as a leader in the new cybersecurity developments in the future applications. We also expanded our sales force, our sales and marketing force, actually, to take advantage of higher demand for the strong security, for authentication and brand potation. Sales and marketing expenses were 31% of operating expenses, total operating expenses compared to 26% in 2019. We increased our staff costs by $1.2 million as a result of the expansion in our sales force with a new Chief Revenue Officer that we appointed in the year alongside new sales force in Europe, India and North America. Next slide. We -- actually, with regard to the G&A, we focused on a reduction there. We decreased G&A expenses by 32% or over $5 million in 2020 compared to 2019. The decrease is due to a decrease in stock-based compensation of $3.4 million year-on-year, following the grant of opportunities to our employees in recognition of past services to the group and a $1.7 million reduction in the legal and professional fees of the group as a result of the simplification of our legal structure as well as significant reduction on the ongoing level of external legal and consulting spend as we bring many of these activities in-house as possible. We also entered into M&A activity in 2020 and continue that in 2021 with the acquisition of arago, the leading AI company, which Carlos just described. This integrated WISeKey automation platform has a licensing revenue model that is expected to bring significant revenue synergies and strength of WISeKey's position in the fast-growing AI IoT market. Now the final slide, the 2020 results overview. We did actually see an impact of COVID in 2020. Revenues reduced from 4 -- to $14.8 million, down from $22.7 million in 2019. This combination of factors fit hit by delays of deliveries -- to deliveries as a result of the COVID-19 pandemic. Server clients delaying their deliveries beyond 2020 and into 2021. Others being impacted by border restrictions last 2019 included some one-off revenues as well. Initially, the group did not see a reduction in demand for its products as the pandemic evolved and more countries around the world implementing partial or fall down -- or lockdown borders. Some of its clients look to deferred delivery. Potential deliveries of semiconductor to clients in countries became impossible due to the controls influenced upon -- influenced by governments as other clients and sectors, such as the retail sector, look to delay their orders, which also was disrupted by the supply -- semiconductor supply chain. I'd also like to mention the expense of nonoperating expenses. That is a significant increase there where we had an impairment of one of our investments in warrants to an amount of $7 million. We believe that, that is the core business -- underlying business is okay with that evaluation, but the current situation with the liquidity position has given us cause to enter -- this is just another write-off, this is just an impairment. We also have foreign exchange losses of $2.2 million due to the strength of the Swiss franc and we report in U.S. dollars. We have interest expenses and financial charges of -- based on $1,000, a fair valuation adjustment of $0.5 million, which brings up most of the $13.5 million nonoperating expenses in 2020. And with that, I'd like to pass the floor back to Carlos.

Thank you very much, Peter. So as Peter said, last year was a weird year for everybody. Obviously, the fact that we have many -- our revenue concentrated on sensors, IoT devices and others and the fabs, we are a fabless company. So we don't obviously manufacture themselves, we design them. So many of those fabs have been basically shut down. There has not been operation on it. So our clients also suffer some of them. Some of them, they are logistic clients, and they have business being paralyzed. So it was a very strained year. Normally, it should have been a year of growth. We were actually EBITDA growing substantially in 2019, and we expect 2020 to be a year of growth until the situation with COVID. The company has made also strong investments in R&D, and we continue doing it. This is important because we are really going through the growth strategy process. And as Peter said, we got $7 million on this investment from Tarmin, which is a private company located in Boston, an American company, it's a data company. We made a strategic investment on -- against 22% of the ownership of this company. This company as any private company is not obviously yet in a strong financial situation, which led the video or auditors to write off the $7 million. So part of the $28 million is actually $7 million of that. But the good news is that this company is in the process of being sold for $150 million and WISeKey has 22% of that company. So that could be reactivated back again during 2021. In terms of our vision is that we want growth and we are -- we want to be the player in this window that is ahead of us, which is IoT, cybersecurity, AI. So this platform effect needs to be invested. So we are increasing substantially the U.S. presence. We recruit a Chief Revenue Officer in the United States. We have now -- in the process of recruiting a Chief Growth Officer that is going to be designed the U.S. growth strategy, which I am describing here, what we call the organic growth, through the new products and integration we just mentioned to you before in the presentation. We have done interesting joint ventures, some countries here, the legislation requires to have a joint venture in the country in order to be able to sell our technology in that country. One of them is India and Saudi Arabia. And as Peter mentioned, we have been investing a substantial amount of money on the acquisition. We invested $5 million cash in arago last year, and we're refinancing this company still during 2021, so it gets fully integrated into the WISeKey pipeline offering. So obviously, we are aggressive into the way we are expanding into this market, but obviously, very conscious also on the cash. Because cash is keen, especially in crisis like COVID. The good news in WISeKey has always at least 18 months of cash in the bank. So we have $21 million at the end of the year. This is actually -- would be even increased even further during the first 5 months of the year. Also good news is although revenues in Q1 has increased in relation to last year, so we have a growth process going on, this will be obviously, because we report every 6 months, reported in H1. But we see a year where I think we should be -- with the current situation despite -- and COVID is still there, still disrupting, we should be able to give an outlook around the $23 million, $24 million for the end of this year. So the -- as I say, for -- as an investment highlight, if anyone wants to invest money in this sector and you want to do it in a mid-cap company with valuations around $250 million, there are not many available. All the major companies already expanded to several billion-dollar markup. WISeKey is one -- maybe one of the last one with that type of IP and platform. We have had a very strong volume traded on the NASDAQ. We are trading something like 5 million ADRs per day. So this is an average of, let's say, around $10. This is $50 million per day of trading. That has increased substantially. One ADR is 5 B shares. We also increased our trading in the Swiss market. The share price of WISeKey has been always been depressed due to the fact that historically, we bought companies with shares, some of them with shares, and those shares become available, and they sold the shares into the market, which created an overhang. And WISeKey has also been using facilities to finance the growth of the company. And in some cases, those facilities are also being -- selling the shares in the market. So that creates some pressure into the share, which is by the fact that the volume is so big now is being absorbed pretty nicely in the last month. So we expect the share price of the company to continue progressing as we progress on our revenue and profitability, although it's a big question here whether profitability should be the target. There are obviously some very aggressive companies in our space like Palantir or 3ic and they say, "No, no. Now what it is, is growth and let's see profitability later." I think WISeKey should compromise between both. We don't want to have unnecessary debt or unnecessary liabilities on our balance sheet. We want to be lean. And that's why we maintain what I think is a very fair ratio between revenue and losses. So with that, I am on finalizing my presentation, I would like to open now -- return back to the moderator and open for Q&A. Thank you very much for your attention.

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

I had a question, maybe start with a clarification. So did arago contribute any revenue in FY '20 -- in your FY '20 results?

No. arago...

No.

I got it.

Sorry, yes.

arago started in January. So we are only consolidating from February on. arago has no revenue last year.

Okay. And then do you think you could give us any color in terms of the contribution that you're expecting from arago in fiscal '21?

Yes. It is a bit early to -- Andy, it's a bit early to tell. But AI company has very unpredictable revenue. And we are actually integrating this revenue into the WISeKey revenue because AI touches everything. arago didn't have historically very large revenue. This is a company like many AI start-up companies that they are fruit bearing between $5 million and $11 million revenue. So it's very early in the year because some of the clients of WISeKey actually are buying arago automation technology. But I mean to be on the safe side, we can say that they will contribute between $5 million and $10 million in revenue. It is still very unpredictable AI revenue. And AI companies don't make a lot of revenue, by the way, as you know, because you cover that space pretty well. So what we think is going to be the interesting part is that arago has assets like data. arago has terabytes of data that has been historically processed, and we are not monetizing yet. arago brings the capability of automating back the IoT process. So the sales is easier because when you go to a power plant and you say, "Hey, I want to send 1 billion chips in your facility." They see that as a cost. But if you go to them and say, "Hey, I want to automate your entire process. And by the way, having chips that sends secured data to your back end, data back end reinforces the quality of the data. Therefore, there's effectiveness of the entire process." Then they don't see that as a cost anymore. They see that as a reduction, actually. So it's an easier way to sell. And that's the process we are doing now.

Okay. And then I know the IoT revenue was down in fiscal '20, but what kind of growth do you think we could expect from the IoT segment in fiscal '21 now that the world is starting to emerge from the pandemic?

I mean the world is not yet out of the pandemic, especially in the infrastructural world, airports are still shut down and everything, which is high-end IoT securities is still -- and the word -- the fight between China and the United States on semiconductor is still very present. So we are not going to have a huge growth in IoT semiconductor this year. Maybe, as I say, I think we are around the 10%, 15% growth, that will be a good case scenario due to the complexity. But the good news is what is happening in the United States. I think somebody needed to make a big bet on infrastructure, and this is what President Biden just did with a $2 trillion infrastructure product. Actually, WISeKey is recruiting top people, which will be announced soon. That will be after those deals. Those are very large IoT deals because the United States entire infrastructure is going to be upgraded and it's going to be secure in order to avoid the hacks into electrical power stations and roads and things like that. So I will expect it's very difficult to document what that growth will mean. For that, I need to be a bigger footprint in the United States, but this is where we believe the growth is coming.

I think also, Andy, just on your point, though. We all serve a supply of -- the supply of the semiconductors is a limiting factor. We've got a lot of orders on the books that we are having to push out because of the supply situation. But -- so the actual growth has rebounded, but we're going to have to move it through the year because we don't have the physical suppliers and manufacturers.

Our next question comes from the line of Kevin Dede with H.C. Wainwright.

First up, Peter, could you just elaborate a little bit more on that last comment you made on the semiconductors? For Andy, I don't know how you're seeing the channel and how far you're pushing things back. Can you just give us a little bit more color on the timing?

Well, that's a moving target, Kevin. It's -- it really is. We're getting -- we're obviously pushing the manufacturers as much as we can. Our chips are particularly sophisticated chips. And we are seeing -- we've got orders now going out to be fulfilled into the second quarter of 2022 that we could ideally fulfill in 2021 if we have the product.

Wow. Okay.

And yes, Kevin, maybe I -- just something more on that, something very concrete. I mean what we are realizing in Q1 this year is that some of our major clients, including Cisco, is increasing substantially the number of microchips. So that means that they have delayed some of their process in 2020, and they are reactivating in 2021. So it's not that we lost the thing. It's just -- I mean it's getting postponed, right? Because those routers needs to go and you need to keep selling hardware. I mean it's not going to disappear, right? So we have a cyclical process here where some of our clients themselves has been paralyzed and suddenly, this is reactivated again. The good news is that this is coming in force. As I mentioned before, probably it has created a digital transformation momentum now where new players entering like we are selling now into drones. We didn't sold drones ever. And drones are being acquired now by the U.S. Army and by the French Army, which have made contracts with Parrot. And there, we are selling incrementally more. Areas like COVID, WISeKey has been very active on vaccination, identification and now putting microchips into vaccine because there's a lot of counterfeiting on vaccine, which is amazing, but it is actually happening. So there's new niches where this is coming. And obviously, as I mentioned, NFT, NFT requires authentication at the device level. So players are now thinking if I produce something of value, why don't just I trade my NFT at the generation of the object? So that would increment substantially the number of semiconductors that we're going to put there.

Okay. On that topic, could you just -- I mean I know you talked about securing satellites, but I lost the components that you're adding to that system. Is it just software that rides on the satellites and then your semiconductors go from the end point?

Yes.

Could you just like give us some of your insights on that?

Exactly. So -- exactly. So basically, those are picosatellites. So they're as big as a -- a bit bigger than a cigarette box. They are very tiny. And those picosatellites, they have a life of about a year. And after, they get burned in the atmosphere. So those picosatellites are -- what they do is capturing an authenticated signal from a IoT object that is anywhere in the world. So that could be a container. There's a big problem going on now in containers. There has been an announcement actually 2 days ago that some containers might have weapons. Like missiles can be now activated from commercial containers. So an inspection on containers is going to be something very big because this is a Homeland Security Issue, right? So if you put a microchip in the container with a transponder connecting through LoRa or Sigfox or one of the frequencies, then you can connect to the satellite. In the satellite, you have another microchip of WISeKey. That signal is recognized as an authenticated signal. So the satellite says, okay, I know this is an authenticated and trustworthy container. Or you can put a -- for the oil business, you have sensors in the pipeline detecting whether the pipeline is still functioning. And it's a major issue on the pipeline. Those sensors, rather of selling data through 4G or 5G to anywhere in the middle of the desert that they don't have infrastructure, they send data to the satellite. Agricultural use, for instance, some of the sensors are used to control the weather, whether it's too cold, I mean all that is now being shipped to space. So we are building our own secure version of a satellite. We made an investment in a start-up in Spain with the name FOSSA. And that investment has allowed WISeKey to create our own, what we call, WISeSaT, which is our own pico IoT satellite. This is not to send TV data or whatever. The only thing it sends is identity data. And that's the reason why they are so small because they can capture that signal.

Okay. And Carlos, did I understand or hear you correctly? You offer $22 million to $20 million to your sort of bouncing back to where you were in the 2019 and maybe $5 million to $10 million driven by arago. Did I understand that correctly?

Yes.

Yes. That's a bit our outlook. Yes. Around the $23 million, $24 million by the end of the year, including, let's say, $5 million could be more because, as I say, it's very -- this is a very strange year where every month is different. Look what's happening in India. That could happen back again in America or -- I mean until we are -- got everybody vaccinated and we go back to a normal life, it's going to be very [ what a shame ]. And this is going to be 5 years of lack of predictability, right? So yes, I think -- I mean, as I say, the company is still a European company, as you guys know, because you have been following the company for a while. My big play to go into the United States and do an IPO properly, we did an ADR 2, not an IPO, raise more money and then make the company much bigger. But this was in my program in 2020. Didn't happen. I mean we have 150 people working from home. We cannot even go to the offices. So imagine the disruption and all that creates, right? So that will happen as we move out of this pandemic. And yes, I think the company will be a very successful company once we enter big time in the United States. There is where the growth is in the segments. And we are -- Europe has some growth on identity now, there is a major play, there's projects on COVID, and we are being selected. We've just been selected by the government of Seychelles on tourists, to provide authentication to every tourist arriving into the country with a digital identity that certifies the vaccination, all the COVID tests in their mobile phones. So we have been very disruptive in the way of using this technology for solving concrete cases, right? But the acceleration will happen in '21 and, I will say, with a maturity, really a maturity end point in '22. That's my target.

Okay. You mentioned that most of the arago technologies are being embedded within the WISeKey security solution. Could you just give us maybe a couple of examples where you see that functionality helping you in the sales cycle?

Yes. For sure. So as you know, the WISeKey technology, both software and hardware, sits at the object level, right? So a drone, a server, a router, a connected car like we did with Daimler. So that object has this unique identifier, which is unique to the object. And that identifier has two functions. The identity function but also the encryption function, to encrypt the data that this object sends to the cloud. And that was the end of the journey for WISeKey. We just give the client, okay, here's a bunch of data. It's up to you to analyze the data in the way you want. And that was before we acquire arago. With arago now, we can -- HIRO, H-I-R-O, which is the automation algorithm, we can now collect all that data, structure that data in a way that it can be analyzed using artificial intelligence. And once you do that, you go back again to the client, let's say, Parrot, or, let's say, Daimler or any of those clients that they have been acquiring IoT. And you can tell to them, "Look, the good news is that we can now develop behavior analysis on the data. So we can help you to understand better how your cars connect, how your drones are performing, whether there has been a cybersecurity at 10 of your drone. We have identified the data. Here's the way we can analyze the data." So it allows them to have a better decision process based on their data. And this is a complex thing. I mean companies cannot do that alone. Companies, they don't even know what to do with their data anymore. There's a very big problem on companies collecting data for objects and other processes. And then they are completely panicked by the fact that somebody can steal that data. They don't have the cybersecurity required to protect that data. So this is the areas that we help. But in the future, this automation process on learning for an object, also they include the performances on automation is going to be critical. One example is the autonomous revolution in the United States, autonomous car, autonomous trucks, autonomous houses, autonomous highways. So everything which is autonomous requires automation first. So you cannot deploy an autonomous play as a company if your own company has not been automated first, right? So it is a platform play. It takes a while to put together because those are complex pieces that need to be put it together. But the good news is that WISeKey is already doing it. It's not yet visible on the revenue, and that's because they are long cycles. I mean you have to convince people. But because the new regulations are pushing into that direction, legal regulations of governments, and they are saying, before you connect to objects, you need to understand what your object is. And for that, you need WISeKey technology. So we expect to be a major source of revenue in the future. I know it's a bit frustrating when you talk about such an amazing use of the technology, and then you say, Hey, guys, you're making $80 million, $70 million now. So it does not really reflect the potential when you look at the revenue only because we are European and maybe Swiss, right? And this is a small country. When this will deploy is when we are able to bring that into the United States and plug into the big infrastructural projects.

Okay. Carlos, you -- did I also understand you correctly? You suspect that Tarmin will sell for $150 million? Could you give us a little more color on -- sorry, I just lost -- I lost track of what you said.

Yes. No. We invested -- this is a data company in Boston that have done major deals with banks. Nomura uses them. And I mean that -- those are petabytes of data process per day. This is a data company, right?

Yes.

And this company is in a very hot space. The only problem, they need funding. These are start-ups, basically. And they -- that's what we are doing now, either to increase funding base or to sell it to somebody that they will need that technology, which are -- there are many pretenders. And the -- we've invested $7 million in options, which, at that time, valuation was 22% of the company, and we will very likely recover at least or invest them for sure, but even much more, if we manage to sell it for much, much bigger. But the auditors we have, they are more traditional auditors. And basically, they are saying, okay, this is already 3 years. We don't see this company progressing. Therefore, we are not willing to maintain the $7 million value in your book is one of the reason now we got $7 million aggregated into the losses. But as soon as our transaction being done there, that will be recovered back, right? So that will be reinjected back again as soon as the transaction closes.

Okay.

Yes. Kevin, it's not...

So you do not...

It's not a write-off, Kevin. It's an impairment. It's...

Impairment, yes.

Oh, an impairment. Right. Okay. Do you -- I guess just sort of rephrase, did -- are you suspecting that sale to come shortly? Or so where do you think the company is in that process?

They're very close to sale. They have already -- from the information we got, they have already a buyer. They're just finalizing the transaction. It could happen any time. But anyway, we have been hearing that for a while. So just wait. Yes. But it's very close. Behind them, they also have a lender, a U.S. lender, which lend money to them, ExWorks. So both of them has -- and then they are getting the same information, and this is an imminent.

Okay. The annual report has a little bit of the geographic breakdown. And it looks like WISeKey suffered the most rate in Switzerland and the rest of Europe. And I was just wondering how we should think about that. I mean, clearly, COVID's been a disruption, but I was wondering if there were any particular contract that may be...

Yes. Here, just on the big part of the revenue was watches. As you remember, Hublot and others. And the Swiss are not selling watches during COVID, right? Nobody comes to Switzerland. And this was mainly a Chinese in market. So that -- we had a major reduction of the number of watches that we were certified. So we lost there. The good news is it's being replaced now in 2021 when you -- and if it's a deal with watches, so this will come back again. But there was -- this was one of the main -- together with small things, right? But this was the main one.

[Operator Instructions] Since there are no further questions left in the queue, I would like to turn the floor back over to Mr. Moreira for any closing remarks.

Thank you very much for the moderation and the support. And as I say, we will be moving forward on our strategy to bring the company as fast as we can to the United States. This is our target. That will happen before the end of the year. We will have a strong team there in the U.S., which will be announced gradually. The NFT platform is a major milestone. This is due in June. That will also include a cryptocurrency, and that is also a new source of revenue for the company because this is a revenue we didn't have, but now we're going to have transactional revenue associated. We are trying to figure out how that revenue will be integrated because this is obviously cryptocurrency, and this has specifications with the different accounting processes. By the way, I would like to thank everybody for your attention. We will maintain everybody informed. And if you need any information, you can come into our Investors website or contact Lena Cati at the Equity Group, we will be more than happy to continue informing you and answer whatever question you might have. Thank you for your attention and thanks for the moderation as well.

And with that, ladies and gentlemen, this concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.