archTIS Ltd (ASX:AR9) has delivered a quarter highlighted by increased revenue growth and reduced cash outflows, with the company’s annual recurring revenue (ARR) rising 116% to $3.5 million in Q2’FY23 compared to Q2’FY22.
During Q2’FY23 (quarter ending 31 December 2022), total revenue was $1.1 million for the global provider of software solutions for the secure collaboration of sensitive information.
Licencing revenues increased 30% to $0.8 million in Q2’FY23 compared to Q2’FY22 as the company continues to focus on leveraging more profitable licensing sales.
60% revenue growth expected in FY23
archTIS managing director Daniel Lai said: “archTIS delivered a quarter that was highlighted by increased revenue growth and reduced cash outflows as we aim to become cash flow positive.
“The quarter was not without its challenges as the global technology and supply chain slowdown has deferred several licensing sales opportunities and delayed the start of some engagements.
“However, we continue to feel confident about our overall FY23 position for 60% revenue growth and a reduction in overall cash outflows by 50% compared to last year.”
archTIS has confirmed its financial outlook guidance provided at the beginning of the financial year for both a minimum of 60% year-over-year revenue growth; and cash receipts in excess of $9.5 million which will halve the cash burn from the prior financial year.
The company has recognised $2.35 million in revenue for the first half of the year, with an additional minimum of $5.3 million of committed revenue for the second half of the year.
Increasing cash flows
archTIS has received $6 million in cash receipts through the first half of the year from customer receipts and the ATO tax rebate payment.
In moving toward becoming cash flow positive in CY23, archTIS is on target to achieve its objective of lowering cash burn from the prior fiscal year by 50% or greater.
In FY22, the company had a net cash burn of $10.7 million. Through the first two quarters of FY23 the cash burn is $1.75 million.
With lower projected go-forward operating expenses based upon the reduction in staff in Q2’22 and the projected cash receipts, the company is currently on track to achieve its 50% cash burn reduction objectives.
archTIS global COO and US president Kurt Mueffelmann said: “We remain focused on operational excellence as we push toward our key revenue growth and cash objectives for FY23.
“As highlighted by our mid-quarter $2.5M targeted annualised reduction in staff and expenses, like other technology companies, we continue to adjust the business to meet the current global economic conditions.
“We remain dedicated to becoming cash flow positive by the end of CY23.”
Defence remains a key strategic focus
Lai added: “The Australian Department of Defence remains a key strategic focus.
“One of the highlights has been the KPMG OneDefence initiative which has driven over $1.2M of contracts in the last 90 days (revenue yet to be realised) and will provide additional opportunities for further services and licensing revenue.
“This has placed us in the position that we are under contract to convert another $5.3M (NYSE:MMM) in revenue by 30 June 2023.
“Furthermore, our relationship with Defence provides key referenceable use cases for expansion into other global defence and coalition forces.
“We continue to see increased traction with Microsoft (NASDAQ:MSFT) as their preferred partner solution for ABAC (attribute-based access control) security particularly in the US and Canadian Defence and Defence Industrial Base (DIB) sectors.
“This puts archTIS in a strong position to execute against its stated outlook for the remainder of the fiscal year.”