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

Greetings, ladies and gentlemen. Welcome to WISeKey International Full Year 2021 Financial Results Earnings 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 Ltd. to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. WISeKey International Holding Ltd. is providing this communication as of this date and does not undertake 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. You may begin.

Thank you very much, and good afternoon to all of you joining from Europe, and good morning from the United States. So just to mention that last year 2021 was a very transformative year for WISeKey. As you recall, the entire industry -- the semiconductor industry has been disrupted during the carbon situation, as all the supply chain logistics was paralyzed in many countries, and we do source our microchips from Asia, from Taiwan in particular, and Thailand. And we had obviously the situation where many of our clients will not -- was not able to deliver them due to the shortage, but this is being recovered. Despite that situation, we managed to deliver a $22.3 million in revenue, which is -- it compares to about 2020 with a 51% growth in the company. We could have even delivered more. We have about $5 million to $7 million that was not able to be cash in due to the fact that we could not deliver the client, but the good news is that we managed to recover that in 2022. Just as I recall the audience, WISeKey operates now 3 verticals: one is the traditional vertical, which is our security. We have 23 years' experience in running cybersecurity projects. That includes identity management with our own cryptographic Root Key, which is a dominant one, something like 5 billion devices have now the WISeKey cryptographic Root Key embedded. Those are browsers, operating systems, some documentation tracking devices, everything which basically dematerializes can be embedded with the Root Key or WISeKey. This Root Key is at the same level of companies like Symantec, Verisign and others. Then we have the other vertical, which is IoT is a very fast-growing vertical. This is where our main revenue generation came from, which is the possibility of embedding semiconductors into devices, devices as laptops, smartphone, routers, modern drones, gaming console have a necessity to be secured by those chips. In the United States, we have a very powerful demand for those chips now as more things are getting connected to the Internet. And if you don't secure the object with that technology, the object becomes a threat. It means that hackers can hack unsecured objects and through that object, get into the infrastructure. So new sectors emerging with revenue in 2021, an increase in 2022 are from the health sector. We managed to enter into this sector, which is now realizing the danger of not securing the objects. Imagine a pump insulin being hacked in a hospital or scanners or life supporting equipment being hacked by the hackers and basically stopped to function. That basically has death and life consequences. So liabilities are -- insurance companies are now requesting that this technology is available in the product even before the covering the insurance part of the product. In that area, WISeKey is very big. We have 1.6 billion secure chips already embedded in high-tech products. And those chips are slowly being connected to the Internet. Not all of them, they are connected to the Internet. Many of those devices are not yet connected to the Internet, but the manufacturers are all of them moving towards connecting devices to the Internet because this is the best way to monitor the performance of device, the security of device, the monitoring system of the device. And this is an area which is growing very fast, actually on that specific area in 2022, WISeKey has seen very strong demand from main clients in the United States. Then they are increasing their request for a microprocessor over 170% of the previous request. So for us, obviously, being in the United States this year, it's going to be a major priority and the company is working towards that. The company has also a very strong year in what we call the combination of cybersecurity, IoT and NFTs, although some people have concerns about the NFT expansion. Actually, our stock was influenced by many stocks because when we announced the NFT last year, our stock progressed enormously and then decrease it because there was a high speculation in the market especially on investors on NFT companies. But we are not the traditional NFT company that just put an NFC on a marketplace. We are the security company that NFT plays used in order to ensure that the objects are -- they are not hackable, cannot be replaced or stolen from platforms. In the last weeks, there have been announcement on very large platforms, trading at $10 billion that they are losing NFTs, and they are getting hacked. In the case of WISeKey, we ensure as a cybersecurity company that those NFTs that we are now publishing and selling in a platform with a name WISe.ART are secure because they include our cybersecurity, our identity management. And in some cases, like the case of bringing physical art to the metaverse, we're also now able to digitally tag the original -- actually yesterday, just as an information, WISeKey launched a NFT with Spanish museum that the NFT with our technology, a very famous letter from Christoph Columbus when they discovered America, and that letter was valued, by Christoph, for $100 million and they wanted to create an NFT of that letter. And obviously, they want to be sure that the technology they will use will be a technology that will not be possible to hack or replicate. It's a lot of fake copies on NFT. So WISeKey entering into the NFT will allow objects to connect directly to the blockchain and being able to build directly from the original. So imagine a painting that will have a microchip of WISeKey installed that painting will immediately establish a NFT meeting process in our WISe.ART platform. And with that, that object can be immediately on sale through what basically, we call the digital twin of the object. This obviously accelerates also the deployment of microchips because more NFTs, you're going to be able to roll into the platform, more chips you are going to be selling, more identities are going to be collected. And WISeKey also, through the NFT vertical, is able to generate a different revenue model than just selling technology microchips or cybersecurity, as we are getting 20% of the value of every NFT sold in our platform, and we return 80% to the artists or the Museum or whoever has the ownership. This sector is also evolving in other areas. We are seeing now NFTs for industrial properties, intellectual property, real estate, luxury watches. So the other NFT is actually becoming dominant. And we believe that we are entering into -- in the fourth industrial revolution, we are entering into the NFT of everything And where every single object will have an NFT minting on the blockchain because that's the best way to certify it and verify that the object is actually a genuine object. We're also looking into the possibility of using NFT technology for identity management. This is very unique. Today, Elon Musk has announced that Twitter wants to be the platform that will verify and authenticate everybody on earth, that's a huge consequences for neutrality and ownership of your identity. You don't want a platform to do that. So the model of WISeKey is much more human-centric is that you want your identity, you want the control of that identity and with that identity, if you create an NFT, with that identity in the blockchain, everybody -- anyone can verify that identity without the need of you compromising the ownership of that identity with a platform. So the -- as I mentioned before, the company is still investing, although we announced an EBITDA loss of $20.7 million, a lot of that loss, U.S. GAAP accounted loss is actually investment we made in areas such as artificial intelligence and also in areas such as picosatellites. So WISeKey launched, we invested last year, but we launched this year, January this year, our own satellites. We have now 12 satellites in orbit and we're going to have 88 before the end of the year. We are launching satellites again in June. And those picosatellites are IoT satellite tracking devices. So basically, what they do front space, they are able to track the identity that is a story in the microchip either directly from the object, which could be a agricultural object. Imagine a tree and you want to track or vineyard, then you want to track a humidity, temperature, where there has been some damage, all that traceability comes from a space. Those speaker satellites collect the signal of the identity of the object and send that information to control centers, then they can use that information to assess. So this is being used now in areas such are controlling pipelines in case the pipeline breaks in the distance of the pipeline that signal is captured by the satellite. Those satellites were launched with SpaceX so that make it possible to launch the satellite because those are much cheaper, obviously, those satellites a few years ago, would cost you $100 million, maybe to send 5 satellites, now it costs $200,000 per satellite and the price is going down. We have many clients, and they are approaching us to say, "Hey, can we add into the WISe -- we call that WISeSaT" constellation of satellites means that they will be able to use the satellite for their need, while they share the connectivity with our needs as well. So this become like a collective approach to use those satellites. We expect that to become a major growth area to WISeKey. We have invested a lot on R&D. We have developed new chips like the VaultIC292, which is -- increases the security and the VaultIC408 which is a new FIPS compliant, 140-3 Level 3, which is the highest level of certification. Those very high-end chips are used for critical missions like drones. WISeKey provide chips for instant drone manufacturer with a very strong presence in Europe and the United States with the name Parrot. This drone manufacturer actually sells the drones to the U.S. Military and also to the French Military and they require that kind of chip in order to ensure that the security of the drones are maximized and nobody can hack. We are also investing -- we did a lot of investment last year, but especially this year in what we call post-quantum cryptography that they are resistant against quantum and crypto analysis because Quantum is coming. We are in 3 years in a quantum era. And we need to anticipate the future of subsecurity threat. So working in collaboration with the American National Institute of Standards and Technology and the European Union Agency for cybersecurity, we are now in the process of generating our own post-quantum chip. That will be a chip that would have a much higher resilient that the current one. As you know, the cyber war going on now between Russia and the rest of the world is a high concern because the critical infrastructures have been threatened now. This is not only hacking your data, this is hacking a hospital, hacking the electrical grid, and we need to secure it so that they are not being able to be compromised. And this is the area where WISeKey is making an important development. We also invested into an AI company with the name arago, the part of investment was done to integrate the arago AI capability into the IoT capability. Arago does many things, including automation, which were less interesting for WISeKey because that diversifies too much our offering. So what we -- basically focus was to integrate the HIRO, H-I-R-O, which is a human interface AI algorithm into the IoT back end of WISeKey, which we call the high-end ES, which is the software that runs all the IoT operation. And the reason why is because we generate a lot of data. And this data has potential value when you analyze that data through AI as you can detect on vulnerability issues. You can also anticipate threats, you can also provide data analysis and provide a much better support to our clients. So we developed a joint product with in a WISeAI. WISe, by the way, means World Internet Security. And this AI is being now fully integrated. We just announced and I give that as all of that happened just recently, we just announced that WISeKey is selling the of 51% of arago as we didn't want to own the entire company and we already provide the cash that we got from the sale to reinforce or semiconductor, IoT and NFT play, which we believe is unique in the market, we believe is the one that will allow the company to grow much faster and better. We are disappointed, and I make that point because obviously I've got several calls with the current valuation of WISeKey in the stock market I mean it makes absolutely no sense. WISeKey has nearly more cash than valuation. And the 1 -- I mean, there are many factors for the -- many of them, you know them already because this is the entire sector suffering that. The EV, the enterprise value is nearly nil for companies, mid-cap companies. We expect this to be corrected very soon. Hopefully, once the war is over. We also had 2 years of COVID in the middle that obviously put a lot of pressure on the stock. And we have made acquisitions and those acquisitions -- part of that has been done with shares. So all that has created an overhang on the stock, which has decreased tremendously. But companies like WISeKey should be trading at 6x revenue, we are trading a onetime revenue. So you see the potential upside there and we are trying to correct that, and we will be providing very concrete actions in the next weeks before General Assembly. So we will be presenting to the shareholders a plan of recovering the evaluation of WISeKey and present a very powerful 3 years to 5 years plan, where you can see WISeKey becoming a major leader in the areas that I just mentioned. So without taking any longer of your time, I would like to pass the call to Peter Ward, our CFO, who will provide details on the 2021 financial results. Peter, please go ahead.

Okay. Thank you very much, Carlos. Yes, I will give you some more information on the financials that we've performed. As you can see, 2021 was a very positive year for WISeKey with revenues growing by, as Carlos mentioned, 51% from 2020 to reach $22.3 million in 2021 and finishing with a very strong liquidity position with a total cash balance of $34.4 million at year-end. The cash and cash equivalents together with restricted cash of December 31, 2021, was $34.4 million compared to $21.8 million in 2020. This reflects the group's continued drive to maximize cash reserves and ensure that it has sufficient liquidity to be able to support its operations and investment strategy such as its investment in arago and the development of its WISe.ART NFT platform. This has also been essential for the investment in arago in February 2021 when we acquired 51% controlling interest, as Carlos mentioned. Arago's original cost structure was very heavy, and WISeKey's management has invested resources to streamline it and to resize it in line with its revenue activities. In total, WISeKey invested around $7.5 million in arago's operations in 2021. The group also entered into new funding arrangements with L1 Capital and Anson during the year and continues to have funding arrangements in place with the fund of Yorkville. As of December 31, 2021, these facilities provide the opportunity to draw down up to $5 million for L1 Capital, up to $5.5 million for Anson and up to 50 -- just over USD 50 million for Yorkville. So this illustrates the capacity of WISeKey to find funding for its future investment and M&A strategy. Now going back over to the revenue side. Again, it was a very positive year for WISeKey with revenues growing 5%. Indeed, 2021 has seen a strong decrease in demand as our customers were cautiously delaying their purchasing decisions to gauge the impact of the pandemic on their own market. This trend is now completely reversed, and we have had a very healthy backlog of customer orders since 2020, which actually exceeds our current annual production capacity. The group is making investments in the supply chain to increase its capacity for 2022 onwards in order to meet the strong demand. The acquisition of arago in 2021 in February also contributed to the revenue increase of $4.6 million additional AI revenue. In parallel with our revenue increase, we have also showed substantial improvement in gross profit with a gross profit margin of 41% compared to 37% in 2020. Our IoT segment has been impacted by higher supply costs caused by the worldwide shortage of materials and components. However, our strong partnership with our customers has allowed us to increase our selling prices to take into account the majority of these higher supply costs. And we continue to focus on making our cost base leaner, which also contributed to the improved gross margin. Most of our revenue is generated in North America, which is why WISeKey has developed a sales team in the U.S. and are still looking to strengthen its presence in this area. We're also working to develop new revenue streams with our WISeSaT constellation of picosatellites, allowing for identification and remotes to low connectivity areas and our WISe.ART NFT platform we've built an authentication of digital identities, which makes it one of the most secure NFT marketplaces and platforms. The group's operating loss increased by $8.2 million year-on-year, going from $18.5 million loss in 2020 to an operating loss of $26.7 million in 2021. This is mainly due to the consolidation of arago's results since February, with arago's operating expenses totaling $7.2 million for the 11 months through December 2021. Although we remain attentive to reducing our cost structure, we are also committed to investing in both our sales and marketing operations to develop our sales force and also R&D of new products such as post-quantum cryptography and development of our WISe.ART NFT platform to ensure that we maintain our technology edge and respond to the evolution of the demand in our markets. We also note that we have a significant noncash expenses in 2021, such as stock-based compensation of $3.8 million and higher M&A-related expenses due to the acquisition of our 51% interest in arago. For our group being technology-driven, the level of our R&D expenses reflects our engagement to act as a leader in new cybersecurity developments and future applications. We expect our R&D expenses to remain a significant portion of our overall expenditure as the group continues to invest in new products. Our 2021 R&D expenses included expenses related to the development of further applications for our new and existing products and technology such as our new WISe.ART NFT platform, VaultiTrust, WISeID and NanoSeaIRT. WISeKey continues to strengthen its sales and marketing team. We recruited 3 new members for our U.S. sales team in 2021 and doubled the size of our new [indiscernible] in comparison to 2020. These investments in sales have started to bear fruit with the backlog of customer orders totaling $39 million at the end of the start of 2022. Our G&A expenses increased by $8 million in 2021 compared with 2020. The increase is due to 3 main factors: a $4.7 million additional G&A expenses from the consolidation of arago since February; stock-based compensation of $2.5 million recorded in G&A in comparison with only $200,000 in 2020 and an increase of $600,000 in medium professional fees of the patent in relation to the acquisition of a controlling interest in arago. The group made a net loss of $24.1 million in 2021 in comparison to a net loss of $28.9 million in 2020 and a net decrease of the loss of $4.8 million. The variance was mainly due to the one-off credit of $5.6 million in nonoperating income, corresponding to the reclassification of the fair value adjustment on the convertible loan with the arago acquisition. We also note that the net loss of $7.1 million in 2021 added as a result of the consolidation of arago was offset by a one-off $7 million impairment charge in relation to investment in [indiscernible] recorded in 2020. As discussed earlier, the main highlight is the liquidity reserve of the company has been able to build with a total cash balance of $34.4 million, referring to the balance sheet. As far as receivables are concerned, despite the 51% increase in revenue, our day sales outstanding, DSO, which is the average number of days that it takes a company to collect the payment for the sale has actually decreased from 64 days to 49 days in 2021. This shows a good quality of our additional sales and our ability to negotiate favorable payment terms, thanks to strong customer relationships. We've also reduced our days sales of inventory from 110 days to 96 days in 2021, which shows that the revenue growth has not impacted our inventory management processes with a long manufacturing cycle in the semiconductor industry, especially as our products are highly tailored. We expect our inventory to remain at relatively high levels with $2.7 million at the end of 2021 compared to $2.5 million at the end of 2020. Finally, on the liability side, our total convertible notes liability was $9 million at the end of December 2021 compared to $9.3 million at the end of 2020. The convertible notes outstanding at the year end 2021 related to the L1 announcement -- L1 Capital announcement facilities with respectively $3.1 million and $5.9 million outstanding. We also note that the deferred income tax liability of $2.9 million at the end of 2021 related to the acquisition of our 51% interest in arago, with the sale of arago, this liability will disappear. So with that note, I finalize my presentation. I would like to return now to Carlos or the moderator for further questions.

Thank you very much, Peter. So if there's any question, I'll turn back again to the moderator to process with the question.

[Operator Instructions] Our first question is from Matthew Galinko with Maxim Group.

Congratulations on the close of the year. On the capacity on the IoT segment. You talked about, I think, trying to expand that internally as well as sourcing, but you need to source externally. Can you talk about what your capacity is to deliver on the order flow that you're generating today and the demand that you're seeing today?

Yes. Mike, nice to talk to you again. So as I mentioned, the money is coming actually from the United States. There is where we are seeing with existing clients that they are just increasing substantially the number of objects connecting to the internet, that has already our technology. So those are clients that they are already loading our chips into their hardware and now they are increasing the number of hardware themselves they are selling. So this represents 170% increase and they are coming from different sectors. They're coming from, for instance, Cisco. Cisco is one of them, and this is public information. So we announced last year that we have reached already 100 million chips sale to Cisco. Cisco -- because Cisco is the plumber on the Internet, basically, is there -- if everything goes through Cisco routers, the number of routers are increasing because the cybersecurity concerns are increasing as well. So that is a normal growth there. In order for us to cope with that demand, implies 2 things. One is maintaining the supply chain as active as possible, and this does not always depend on us. So look what is happening now with Apple and China with all the boats locked into Shanghai port, so we are lucky and we don't have anything in China. Everything don't we have seen in Asia and Taiwan and have for a moment, any major issues there, although COVID is affecting them as well. But for the moment, that's not affecting us. So we should be able to cope with this increase in demand. The other factor is that WISeKey is actually pushing the European Union. And actually even in the United States, the possibility of creating capability both in the United States and in the European Union to manufacture IoT chips. This is not -- I mean, it's a very large investment, obviously, that WISeKey cannot do alone because we are talking about hundreds of millions of dollars, but it's an investment that needs to happen. Otherwise, United States and Europe will be subject to all sorts of potential risk in the future. if something goes wrong in Asia or in China or in Taiwan or Taiwan invades -- China invades Taiwan, I mean this kind of thing. That will obviously be a very dangerous situation. So the European Union has launched what they call the E-chip Act. So the E-chip Act is a $34 billion investment by the European Union in companies that have microchip technology. So we're obviously lobbying with them to say, okay, we are this company. We have manufacturing capabilities, and we would like to expand our reach. We are both in Europe because Switzerland is not a member of Europe. So there, we are in France with WISeKey semiconductor, and we would like to expand our capabilities also in the United States, and we are looking in the same way with the U.S. government. So this is going to be something that we need to observe because, as I say, microchip is affecting everybody, including if you buy a BMW car now you have to wait 6 months. Why? Because they don't have enough chips. And this is something that is also a big opportunity for WISeKey because if you're trying to buy now chips from our competitors like ARM or NXP, you have to make a $20 million order. Otherwise, they don't even take care of you. In our case, they can come in with a $1 million order, right? So we are collecting these customers, and they don't have the possibility of getting served in the other competitors. So that's the situation.

Got it. And maybe on that last point that you made about picking up kind of some of those million-dollar orders, how many of those are out there? I think you referenced 1 million or 1.3 million a week of new orders per week.

Correct.

So how much of those million orders are out there that you can continue to go after versus sort of those 20 million orders? And do you at some point, if you're able to expand your capacity, are you able to go after those $20 million orders? Or is this environment kind of unique? And once supply chains are a little more fluid than it's going to be tougher to take market share again.

No. Actually, the -- I mean Cisco could go directly to a very big player, right? The reason they do with us is because we serve them better, and we have been providing a better service to them than even the big players. The 1.3 is not necessarily a small accounts. Those are actually large accounts that they want to every month, they allocate a number because we have to distribute the amount of chip we have in production with demand. The demand is much higher now than the production, right? But because we are diversifying, we have now possibility of manufacturing in Taiwan. For instance, we didn't have before, we are going to have a possibility of manufacturing also in the United States very soon. And this is part of my plan for this year and next year is to have more localized manufacturing capability, either or a facility or somebody else's facility where we are teaming. Those IoT chips are very highly specialized chips. They are not many. I mean, there's only 5 companies in the world that have that type of technology. On the big players like ARM and NXP and others, they are more into the high-end chips that are not IoT chips. They are more like connector chips or hardware computer chips and things like that. So this market of IoT, it's market just started about a few years ago, we didn't have things connected to Internet before. But it's growing very fast. This is the fastest growing market. I mean, those chips are very low cost. We are talking about millions of chip than they are ranging from $1 to $10, $30 depend where you're putting the chips on the specifications of the chip. But what I mentioned in my presentation, I think this is a big opportunity is that chips can also run NFT. So you can do an NFT before you do the chip, right? So if a client say, "Hey, I have my entire supply chain. I want to provide identity to all the objects I produce because I want to have inventory on the cloud." You don't even need to put chips at that point, you just say, okay, let's issue an identity for every option that you have, let's create an NFT. And gradually, not for the all objects for the new options, but you're going to be manufactured, we impose that we're going to add in new chips. So you can also go and sell the software part of it without the need of depending on the chip.

Got it. That's very helpful. Last question for me before I jump back in the queue. Just on the sale of the AI stake. I apologize, but I couldn't quite understand if that's already closed? Or what's left in the process to close that transaction?

Yes. So the transaction is based on German Law because this is a German company. And we saw basically in German Law -- in German Law, the moment the transaction becomes binding is when you sign with the notary and you verify the signatures and all. So that has been done. And this is where we announce that because at that moment, it's material information, and we do have to have an SEC filing and an announcement. So that is done. So that means that the transaction is binding, is operational. Now WISeKey is in the process of doing KYC on the money itself. We are now in Europe. I'm sure also in the United States, but with the Russian situation, you have to look very much in detail about every single transaction and that takes few days more. So we should be able to announce very soon the finalization in terms of getting the cash -- getting the money. And this will be announced within days as soon as we do -- our lawyers do all the verification work.

Our next question is from Kevin Dede with H.C. Wainwright.

Could you just give us a little more insight on the satellite initiative. How are you packaging that? What sort of investment did you have to make? I mean, when I say packaging, I mean how are you presenting it to potential customers? Are you using or partnering with other enterprises, do you guys actually own the satellite? Is it a consortium? Just some more detail on that, so we can understand the business case a little bit better.

Absolutely. So the story of that is that there is a company, a start-up company in Madrid in Spain run by very young team, they're under 20, actually, it's an amazing team that developed a hardware solution with a name Fossa, F-O-S-S-A, which is a very tiny hardware satellite. So basically, they developed the satellite component. And this company came to us as a way to say, we have this project to launch, a picosatellites, the IoT satellite. But obviously, we are very small, and we don't have security, and we want to be sure that those satellites are robust enough in terms of cybersecurity to do what we intend to do with this IoT tracking. Obviously, when we invested on them. So WISeKey acquired 15% of that company through an investment that we made. And then we inject further cash as a way to create what we call the WISeSaT, which is -- we actually added our microchips into the satellite, so the satellite has now the possibility of storing a digital identity, which is a unique key that is the one that encrypts the data between the satellite and the receptor. The receptors are antennas then you will put, let's say, that you have a pipeline and you want to put hundreds of thousands of chips to monitor the pipeline consistency that there has not been any leak or any issue in the pipeline. And each of them has an antenna, micro antenna, which connects to the satellite. And through that antenna, you check all the time, the chips in an IoT play. So this is done also in agricultural project. We did our project in Spain with olive trees. They want to track and trace olive trees furnished space. And why this space is because the space is much cheaper than 5G technology. The only option you have to do the same thing is by putting 5G antennas, which are very expensive, and it's a lot of pushback in many countries because they are concerned about the consequences of 5G antenna on the human health. So satellite is becoming a total options to that. So that's what we did, right? We put the chip -- we then worked with the SpaceX to send the satellite because we have to send it to orbit -- we did send in January, that was an amazing experience. And this was sent at the same time than Musk -- Elon Musk was sending StarLinks. So those satellites are sent at the same time. And now we have our own constellation of satellites. I, obviously, as a company, we don't want to be a satellite company. The reason we did that is that, we can go now to our clients, then they want to track their objects. For instance, we have clients in the agricultural area, but also in solar panels, they want to analyze solar panel if they're not functioning in a very big solar panel installation or you have cargo in the middle of the ocean, you want to monitor the cargo. The cargo containers to be that the container has not been open. Integrity of the container has not been compromised. So we are putting satellite in all these new places. Because those satellites are tracking those devices. And we offer our clients the possibility of launching co-branded satellites with us. So let's say, the FedEx wants to track parcels and they don't want to launch their own satellite, need to develop their own satellite because that will be time consuming. So we can team with companies like that, they -- we give them the satellite, we give them the technology, we give them the managed service and they finance the operation of launching a satellite. Launching a satellite, picosatellite is around $100,000 to $200,000 per satellite. The lifetime of a satellite is 3 years. After 3 years, they decompose in the atmosphere. So you have a 3-year window to basically amortize the investment. But as I mentioned before, the other option is 5G and 5G is very expensive because you have to build antennas and all that. So it is much more competitive if you are doing IoT traceability. And I think it's going to be the future. It's also a way for WISeKey to enter into the space. For technology companies you need to have a space strategy because in the future, a lot of the hardware is going to go to space, including cybersecurity. On the satellite, for instance, we are working on R&D now with Microsoft has acquired 1 satellite to do -- Microsoft R&D is actually looking into the satellite operations and they are looking into the possibility of using. We also are looking into the possibility of teaming with drone companies because we already secured drone companies, so drone and satellite plays very well. Anyway, it's going to be a major use. Another new user satellite, by the way, is the possibility of putting nodes or blockchain nodes in the space. Blockchain nodes cost a lot of money to be maintained and secure on earth because people can walk in and hack, whether bringing a node at the satellite level and convert this satellite into a node, a blockchain nodes is actually much more secure and cheaper and those are new potential use of this technology. You will see a lot of usage of this technology expanding. Actually, WISeKey is hosting the financial time investing satellite event in London in June -- sorry, the June 5th. And the entire industry is there to trying to learn how to use the space for technology, traditional usage as IoT.

So Carlos, are you marketing WISeSaT separately or with partners such as SpaceX and Fossa or is it -- are you pretty much trying to do all the heavy lifting yourself?

No, no. We wanted to create the satellite. So the satellite is there. Fossa now is still manufacturing that satellite. We don't want to move that expertise from them. They are the one improving the satellite, manufacturing a satellite. We do all the security layer and the software layer to connect the satellite with our processes like identity verification, PTI. Actually, we did the welfares with the Blue Shield where we issue an NFT that was minted using IT that was sent from the satellite. So those are the amazing thing that we did just to prove then you could use the satellite as a way to activate an NFT. And this was launched at the NASDAQ event opening bell that we organized that captured a lot of attention. So we don't want to be a hardware satellite manufacturer. We want to be the cybersecurity IoT player for hardware. We are not -- obviously, is part of our agenda to use a because we are also investors in Fossa, but we could use anybody. I mean, anyone that now sees that technology and say, "Hey, I have satellite, I would like to enable those satellite with the WISeSaT technology developed by WISeKey, we will enter into relations as well with them.

Can we talk a little bit more about cybersecurity and particularly your investment and quantum proofing the network. Can you talk a little bit about some of the investments you're making there and when do you think they'll get to market?

Yes. So I mean, Quantum is not so much selling Quantum itself, but selling the new generation of post-quantum chips. So the idea is that the chips will be threatened by Quantum Computers once they arrive into the market because Quantum will be able to break a lot of the existing crypto and the only chips that they are going to be able to survive the environment is chips that have already a post-quantum capability means that they can resist a quantum computer attack -- cyber attack because there is a technology into the chips that is already designed to provide that type of defense. So this is what they call the post-quantum technology that is embedded. And we are dealing with very big players. I mean, this is a consortium of companies. We cannot disclose yet because it's not being announced, but those are very big consortiums of companies that they are all very concerned about Quantum technology because their business could die if quantum arrives. So this is a big investment from our side, but it's also a consortium investment. WISeKey is teaming with very -- I am actually organizing in the endeavors in a few days, the 25th, an event with the [ TechCore ], which is the Microsoft TechCore Group, which is a very large consortium of companies that was initialized by Microsoft and now it's everybody Cisco and SAP, all the major companies, which is going to be mainly discussing about this issue, right? How we can make our security resilient to quantum attacks. And as we are in a solid war situation now on a daily basis due to the situation with Russia, the attacks are very, very nasty attacks and you need to bring your technology to that level. So this is -- we are still small, so we could put more money into that, but obviously then we are accused and we lose too much money. So this is the cash and egg situation because you need to keep investing in this type of high-end technology in order to make revenue, right? So this is an area where WISeKey is going to inject a substantial amount of money. The good news is that we are still in a very strong cash position, and -- but the good news as well is that those chips will sell for a much higher price with higher margins. higher quantities, right, because post-quantum chips are going to be required everywhere. You won't have 1 object without the needle having those chips.

Well, from what little I know, Carlos, the -- they're trying to use like a lattice design, but it's very compute-intensive. I imagine the tech guys are all over that. I'm just kind of wondering what do you think the timeline is?

So for post-quantum cryptography that is resistant against Quantum cryptoanalysis, which is what it is now. The time is now. This is the top concern now of the American National Institute of Standards and Technology list, right, and it's a list-compliant process. So that is now. What you're saying is more in the back end is the computer itself. When are you going to have -- to be honest, it's very vague. Some people say that some governments already have that computer. People are saying that China already have that computer. Some companies like Google and others are very close to have 1 or maybe they already had it. the question is not when you want to have those computers. The question is going to be when those computers used by a hostile player are going to be able to harm others, right? And that's why you need to go into dispose quantum cryptography movement for making your devices resilient against crypto analysis. Quantum crypto analysis is a very powerful software function that basically with endless capabilities, they cryptoanalyze your deficiencies in your infrastructure, right? So imagine a massive CPU analyzing JPMorgan failures, right? And once they detect the failure attack those failures with the same massive power or computing power. So this is an area that cybersecurity companies need to focus immediately. And WISeKey is doing it. I mean we have already 3 years of post-quantum analysis. And that's why the big players are coming to talk to us because they -- although we are small, but we are very, very strong on that. And I have an amazing team in France, working on this.

So of the 3 main revenue drivers, cybersecurity, embedded semis and the NFT combo work you're doing with IoT. Which one do you think will be the largest drivers of revenue this year?

So it still is the embedded Microchip technology because I mean we are benefiting from the fact that we have very good customers, and they are all of them increasing the number of connected devices. I mentioned Cisco, Medtronic, Parrot all of them, the way it works is at the beginning, they say, okay, we want to test the -- our devices connected, we're going to order, I don't know, we produce 10 million drones, but we're going to start with 1 million of them, right? That's the way it works. But then when they realize the benefits they have in terms of increased security and also the benefit they have in terms of marketing because if you Google Parrot WISeKey, you will see they made a huge fuss about the fact that they are cybersecured by WISeKey because they need to bring that type of reassurance to their clients and their clients, as I mentioned before, is the U.S. Military, right? So this is going to keep growing. The NFT, actually, I don't see the NFT as a separated revenue to see how much money are you making on NFT. NFT is an incentivation to buy more embedded semi chips because you want to do an NFT from the object. So it's a new way to approach the brand. So for instance, when we go to talk to luxury brands before the major argument was counterfeiting and things like that, to be honest, not many of them pay attention to that. But they do pay attention to bring them to the metaverse. And that's a new -- okay I understand the value of my watch to have a metaverse NFT present. And therefore, I am willing to buy your chips because your chips are going to be able allow me to be on the metaverse directly from the device. So this is the new trend. We also -- we will also make money on the platform itself because, as I mentioned, we get 20% of all the revenue. Those platforms are very OpenSea is trading at $10 billion, right? And OpenSea just got hacked last week and it's getting hacked nearly every week now because I guess they are not really a cybersecurity-conscious infrastructure. They are just a platform, they are learning now the consequences of doing NFT trading and auctioning in a platform without having the cybersecurity knowledge and experience that WISeKey has. So -- but despite that, look at the difference, I mean, they are trading at $10 billion, look how much we are trading, right? So the market does not necessarily understand yet and the investor community doesn't understand yet the uniqueness, the NFT brings for cybersecurity company. And this is the message we want to send. More NFTs are going to be there. More, we are going to be growing on both of the other 2 verticals, which is embedded Microchips and cybersecurity on the chips.

Peter, just 2 questions for you quickly, please. So I wouldn't take everybody's time. I think you mentioned $7.5 million investment in arago. Could you kind of sum up all the investment that you made there? I mean is that $7.5 million the total? And then what was the agreed sale price for that 51% that you owned?

Yes. I mean the $7.5 million was essentially the carrying costs of the daily sort of weekly sort of cash burn that we have over the period. So because they, again, are also doing R&D development work that they don't actually see progressing in sales. And so that was in addition to the original $5 million that we used to acquire them in the 51%. And I don't know if we can actually give you the price yet, but it is certainly a multiple -- it's certainly a multiple of that.

Well, you're hosting another call and I think, 1.5 weeks or something. So maybe at that point, we can talk about a little bit more.

Well, absolutely, yes. I mean we would expect something to happen. Well, we were expecting something to happen confirmation-wise today, but I would imagine middle of next week, we will be announcing something.

Understood. And then what was the average share count for 2021? I know it's in your documents, but I just couldn't pick it out easily.

Yes. It's not a number that I have in my head, actually. But I mean -- No, I don't.

I'll circle back with you. Not a problem. Okay. Thank you very much. Thank you, Carlos, for all the detail. I really appreciate hearing that. And thanks for entertaining my questions, gentlemen. Good to talk to you both.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing comments.

Okay. So thank you very much for your questions and for the audience. WISeKey has all those reports in our WISeKey investor website. We will be keeping informing and we will soon announce the general assembly of the company. So you are all invited to access also remotely as we will organize this year, again, to cover situation remotely. So thank you very much for the moderator and for Lena or IR in New York for organizing this. All the best.

Thank you. This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.