archTIS Ltd (ASX:AR9) has delivered a revenue of $1.8 million for the quarter ended 31 March 2023 (Q3), an increase of 107% from the prior comparative period (PCP).
The revenue was split across licencing of $0.9 million and services of $0.8 million as the Australian Department of Defence continues to invest in the expansion and enhancement of archTIS software solutions - Kojensi and NC Protect.
The growth in revenue was also underpinned by a number of international customer wins, resulting in annual recurring revenue (ARR) of $3.5 million in Q3, an increase of 67% from the PCP.
Significant decrease in costs
Operating costs for the quarter were $1.7 million.
The significant decrease in costs reflects a reduction of 38% from $2.7 million PCP and 17% from $2 million in the prior quarter.
Importantly, the drop in operating expenses reflects management’s commitment towards becoming cash flow positive.
archTIS ended the quarter with $4.8 million of available cash.
“We have expanded our international presence”
archTIS managing director and CEO Daniel Lai said: “archTIS continues to deliver revenue growth despite difficult global economic conditions.
“We have expanded our international presence with new customer sales into the US, Germany, France and South Korea.
“We have also maintained financial discipline through the reduction of our overall expenses as we move towards sustainable cash flow targets.
“Most importantly we have made significant strategic inroads this quarter by progressing a number of exciting proof of concept opportunities across all regions with national defence agencies and suppliers.
“Finally, the release of Australian Defence Strategic Review (DSR) validates our strategy and will present further opportunities in our ambition to become the preferred provider of secure collaboration and information sharing products to global defence agencies and industry."
Outlook
archTIS is on track for solid year-over-year revenue growth.
However, risks have been identified in the delivery to Australian Defence of $1.6 million in equipment revenue in the coming quarter that may affect the company’s ability to achieve the 60% revenue outlook statement provided earlier in the year.
The customer expects the order will be placed and fulfilled in FY24.
The impact to gross margins from the $1.6 million in equipment revenue is anticipated to be about $0.25 million.
Estimated year-end revenues is expected to be between $6 million - $6.5 million, representing YOY revenue growth of about 30% - 40%.
archTIS has maintained a targeted outlook for annual cash receipts of $9.5 million and a reduction in cash outflow of 50% from the prior financial year.
The broader outlook is positive, with strong customer engagement and a number of proof of concept engagements progressing with strong licencing opportunities pending their successful outcome.