Earnings call transcript: CLSQ Q4 2024 reveals revenue decline amid strategic shifts

CLSQ, a leader in quantum cybersecurity, reported a significant revenue decline for the full year 2024, with earnings falling to $11 million from $30 million in 2023, representing a 63.47% decrease according to InvestingPro data. The company’s market capitalization stands at $316.34 million, with the stock showing significant volatility in recent months. Despite a challenging financial year, the company remains optimistic about its strategic investments and future growth potential. The earnings call highlighted CLSQ’s transition to quantum-resistant semiconductor technology and its strategic acquisitions aimed at bolstering its market position. InvestingPro analysis reveals the company holds more cash than debt on its balance sheet, with a comfortable current ratio of 6.0, providing financial flexibility for its strategic initiatives. For deeper insights into CLSQ’s financial health and growth potential, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

Key Takeaways

• CLSQ’s 2024 revenue fell sharply to $11 million, missing the forecast by $4.1 million.
• The company maintains strong cash reserves of over $90 million, providing financial stability.
• Strategic focus on quantum-resistant technology and global expansion plans.
• Significant investments in R&D and strategic acquisitions mark a shift towards future growth.
• The post-quantum cybersecurity market is projected to grow substantially, offering potential opportunities.

Company Performance

CLSQ’s performance in 2024 reflected a challenging year, with revenue dropping significantly from 2023 levels. The company reported a net loss of $21 million, highlighting the financial strain of its strategic investments. However, CLSQ’s strong cash reserves and capital raised during the year provide a cushion as it navigates its transition to quantum-resistant technologies. The company’s investments in R&D and strategic acquisitions aim to position it as a leader in the burgeoning post-quantum cybersecurity market.

Financial Highlights

• Revenue: $11 million, down from $30 million in 2023
• Net Loss: $21 million
• Cash Reserves: Over $90 million
• R&D Expenditure: Increased by 26% year-on-year

Outlook & Guidance

Looking ahead, CLSQ anticipates a significant revenue increase in 2025, driven by the commercial launch of its post-quantum chip in Q4 2025. According to InvestingPro forecasts, analysts do not anticipate profitability this year, though revenue growth is projected at 29% for FY2025. Discover 8 additional exclusive ProTips and comprehensive financial analysis by subscribing to InvestingPro. The company plans to continue its focus on strategic acquisitions, R&D investments, and expanding its semiconductor personalization facilities globally. The post-quantum cybersecurity market’s projected growth to $1.8 billion by 2025 presents substantial opportunities for CLSQ as one of the few companies capable of deploying this technology.

Executive Commentary

CEO Carlos Moreira emphasized the company’s strategic positioning in the quantum era, stating, "We are entering into this quantum era and we are early players on that area." CFO John O’Hara highlighted the long-term client relationships, noting, "Once clients are won, they will become clients for five, ten years." These comments underscore CLSQ’s focus on establishing a strong foothold in the emerging quantum cybersecurity market.

Risks and Challenges

• Revenue decline and net loss raise concerns about financial health.
• Competitive pressures in the post-quantum cybersecurity market.
• Certification process complexities and market normalization challenges.
• Dependence on successful execution of strategic acquisitions and partnerships.
• Potential delays in product launches and market adoption.

Q&A

During the earnings call, analysts inquired about the company’s market normalization challenges and the complexities of the certification process. CLSQ executives provided insights into pipeline conversion rates and emphasized the long-term "stickiness" of customer relationships, reinforcing the company’s strategic focus on building enduring client partnerships.

Full transcript - Sealsq Corp (LAES) Q4 2024:

Conference Moderator: Greetings, ladies and gentlemen, and welcome to the CLSQ Full Year twenty twenty four 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 can cause the actual results, financial condition, performance or achievements of CLSQ to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. CLSQ 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. These risks are also discussed in our filings made with the Securities and Exchange Commission.

Please be advised that our full year 2024 earnings release was issued on Thursday, 03/20/2025. Also, our Form 10 ks for the full year ended 12/31/2024, which was filed with the SEC on Thursday, 03/20/2025, can be found by visiting the Investors section of the CLSQ website at investors.clsq.com. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

It is now my pleasure to introduce Carlos Moreira, Founder and Chief Executive Officer of CLSQ. Mr. Moreira, you may begin.

Carlos Moreira, Founder and Chief Executive Officer, CLSQ: Thank you very much and good afternoon to all of you joining us from both Europe and good morning for everybody joining from The United States. So I will start this call by discussing the business highlights of the full year 2024. Then John O’Hara, our CFO, will provide an overview of our financial performance. Then I will close the prepared remarks by discussing our growth initiatives and also the outlook for 2025 and going forward. So we had a financial year 2024 with revenue of $11,000,000 It’s a bit disappointed about this reduction of revenue from the $30,000,000 we had in 2023, but actually reflects the company transition from traditional semiconductors, the legacy semiconductors that we were selling for many years to now the next generation quantum resistant chips, which is the next generation that we started to develop two years ago and we are reaching maturity now.

So we are still early stage on the post quantum market potential alongside the impact of market normalization following the semiconductor supply chain disruption that was caused by the COVID-nineteen pandemic. Also the excess inventory accumulation by customers in 2023 resulted in lower 2024 orders volume as clients utilize existing stock before making new purchases commitment. Basically, they are waiting to finalize the use of those stocks before we are able to deploy the next generation chip with them. Let’s say as we are preparing to take advantage on numerous growth opportunity, we have scaled Post Quantum security technology by investing $5,000,000 during 2024 with another $7,200,000 plans for 2025. So 2024 as previously discussed was a transformational year for CLSQ as we scale Post Quantum Security Technology, started the process to execute strategic acquisitions, raised over $80,000,000 in funding and expanded into high growth markets with a strong cash position, no bank debt or convertible loans and accelerating demand for a post quantum and quantum cybersecurity solution, we are very well positioned to drive sustainable long term growth and technology leadership in the quantum era.

Thus, we enter in 2025 on a very strong financial position as we are well positioned to execute a multifaceted organic growth investment and acquisition strategy. Demand for our post quantum and quantum cybersecurity solution should drive sustainable long term growth and technology leadership in the quantum era. We anticipate also a significant revenue increase in 2025 compared to 2024 due the steps we took to bolster our position in the market we serve on a global scale. I will discuss all these initiatives shortly, but I would like to emphasize how our combined bookings are now $6,800,000 reflecting strong year to year growth, while our projected contract pipelines over the next three years stands already at $93,000,000 The post quantum cybersecurity market driven by the need for securing systems against quantum computer attacks that they are becoming available within the next three to five years is projected to grow significantly with an estimated market size of $302,500,000 in 2024, which is then expected to reach $1,800,000,000 by 2025 at a CAGR of 44.2%. So due to the highly entry level barriers, we believe very few players will have the required expertise technology and IP to build quantum resistance security chips in the short term, which will position CLSKU as a leading player in this space, especially on a very high growth market, which is the TPM segment.

We believe that this factor positions CLSKU with stressing its market leadership and capitalize on emerging opportunities in post quantum security. So in terms of giving a financial year 2025 outlook, although it’s very early in the year to provide a definitive outlook number due to the major projects under discussion, TLSKU anticipate a significant revenue increase in 2025 compared to 2024. This growth is expected to driven by the integration of chip revenue in front of new sources of revenue and expansion in chip personalization services as announced during the year and the consolidated revenue for our planned investment. We expect the full impact of our growth to arrive in 2026 with the commercial launch of our new product scheduled for Q4 twenty twenty five. We anticipate that the growth in 2025 and beyond will be fueled by the increased demand of post quantum trusted platform models, what we call TPMs, the successful securing new large scale contracts with government and enterprise adopting post quantum cryptographic solution and this include also some of the new defense contracts and they have been negotiated now in Europe.

The growth in CLSK cybersecurity certificate and managed PTI services, which is a recurrent revenue on the software side and the consolidated revenue for strategic acquisitions, some of them being already announced since the beginning of the year. So the post quantum cryptography market driven by the need for securing system against quantum computer attacks is projected to grow significantly, as I mentioned before, by $1,800,000,000 So we believe that this factor positions CEOSQ to strengthen its market leadership and capitalize on emerging opportunity in post quantum security. I will now turn the call over to John O’Hara, our CFO, who will provide details on the 2024 financial results. So John, please go ahead. Thanks, Carlos.

As Carlos just mentioned, I

John O’Hara, Chief Financial Officer, CLSQ: will now go into a bit more detail on our FY ’twenty four financial results. Firstly, to highlight, we finished the year with an unprecedented balance sheet that was far stronger and debt free relative to previous years. Our cash reserves peaked at over $90,000,000 on 01/06/2025, which was up from the approximately $85,000,000

Carlos Moreira, Founder and Chief Executive Officer, CLSQ: at the end of ’twenty four, finding

John O’Hara, Chief Financial Officer, CLSQ: a solid foundation for investments, acquisitions and scaling production. We had a clean balance sheet at December ’4, showing no bank debt or convertible loans along with no overhanging warrants or in the elimination of the convertible debt and associated warrants in late twenty twenty four and the first day days of twenty twenty five. This significantly enhanced our ability to fund growth without dilution risks. We raised over $80,000,000 capital during 2024, leading strengthened capital resources to support our expansion into post quantum cybersecurity markets. Carlos has already mentioned FY 2024 revenue of approximately was approximately $11,000,000 down from $30,000,000 in 2023.

And this reflects the company transition from traditional semiconductors to next generation quantum resistant chips and the still early stage of the post quantum market potential alongside the impact of market normalization following the semiconductor supply chain disruptions caused by the COVID-nineteen pandemic. The excess inventory accumulation by customers in 2023 resulted in lower 2024 order volumes as clients utilize existing stock before making new purchasing commitments. As a final highlight point, we would like I’d like to highlight the research and development and strategic investments in post quantum security. We increased our research and development expenditure by $1,000,000 year on year, so a 26% increase against 2023, despite the reducing revenue year on year. This demonstrates the strategic importance of the development of our next generation cutting edge quantum resistant technology.

Our investments in research and development included the high costs associated with certification, which are treated as R and D expenses, emphasizing CLSQ’s commitment to staying at the forefront of post quantum innovation. The 7,200,000 we are planning for 2025 demonstrates our commitment to staying at the forefront of this post quantum innovation. All of this resulted in a net loss of $21,000,000 for the year, which is primarily due to the migration from traditional semiconductor products to post quantum semiconductor technologies and the associated reduction in demand for our products during the year. I’ll now turn it back to Carlos, who

Carlos Moreira, Founder and Chief Executive Officer, CLSQ: will provide additional details on our outlook and growth strategy. Carlos, please go ahead. Thank you, John. So as I mentioned before, we really expect the full impact of our growth to arrive in 2026, although we will see a improvement in our revenue in 2025 already. One of the reason of the 2026 timetable is that these new chips require certifications.

So the CLSQ post quantum TPM are aimed to achieve the highest potential level of security in the market with the NIS FIF 143 and the TCG two point zero compliance with positioning the company as a leading supplier for post quantum cybersecurity infrastructure at that level of security and certification. Also the providing compliance solutions to the European Union Cyber Resilient Act and The U. S. Cyber Trust mark for device manufacturing supporting the implementation of the next generation security mandates also the renewed ISO 2,007.1 and the ISO 9,001 certification at cross chip fabrication and PTI operation and lastly, the consolidation of revenue for strategic acquisitions. So let me provide a few additional details on those initiatives.

So as was announced at the beginning of the year, we have allocated a fund of $20,000,000 focused on investing in a backdrop engaging quantum computing and AI initiatives that could be integrated into all quantum growth map. So quantum is a very complex market. It requires many small components to fully integrated a quantum platform. And what we are doing is investing in companies that can accelerate this deployment. So one of them is Colibri, a French company, which provides state of the art quantum cloud computing services for industrial and scientific research applications.

So with this company now, we are able for instance to simulate a quantum attack on a cybersecurity infrastructure and see how we can with the TVM chips being able to mitigate that attack in real time. It also provides for organizations and they want to benefit from quantum computers without the need to enter into the complexity to operate a quantum computer to be able to plug and play in a managed quantum service. The second is exclusive negotiation. We entered to acquire 100% of IC Alt, a leading ASIC design and supply French company with revenue in areas related to the design of new chips. This is a mature company, which basically adds hundred people in Grenoble, which is a short distance between our development center in France, Southern part of France.

And it’s a company that has a strong client base and very strong expertise in areas such as AC design for the car industry. The third was just announced today with a 30% ownership of CLSKU on WICAN Group, which is a blockchain financial company used mainly by private banks here in Switzerland providing KYC on a blockchain. So a system that allows many and multiple banks to share the KYC compliant process by accessing the blockchain and verifying the identity of the bank holder. The same technology is now being expanding. It’s something we call KYO, which is not your object, which basically replicates the KYC by the object level.

So the verification of the object is done before the object can connect to the Internet. So let me move on the expansion of testing and personalization facilities on semiconductor production that has been announced during the last year and the beginning also of this year. So those are facilities that basically personalized semiconductor at national level. We expect to enter into a formal agreement to commence the construction of the first semiconductor personalization design center in Spain. And we are in the final stages for the approval process by the Spanish government entity responsible for the funding under the per T budgets, which the name is S.

E. T. So this government company, 100% owned by the Spanish government, allocates the budget in a share format with investors than they basically developed semiconductor facilities in Spain. In The U. S, we are expanding direct sales team with a target to enhance our sales pipeline and develop government partnerships in The U.

S. Available now to us through the semiconductor localization strategy in The United States with a goal to secure a large scale cybersecurity infrastructure projects. Some of them has been announced as we are looking into the possibility to establish those centers in Arizona as was one of the candidates and another now emerging now is New York. In The Middle East, we’re also working to finalize a joint venture to establish a quantum ready chip personalization center. In Asia Pacific, I just came from Singapore and we are in the same process to leveraging the infrastructure already available on semiconductor as we manufacture or semiconductors in Singapore to being able also to attach to it a personalization center.

And we are leveraging on its later partnerships with leading semiconductor distribution such as DGT, Symmetry, Okaia and other companies than they are adding to or increased sales. We have made significant progress in all of these initiatives and I am proud to say that we started 2025 on a very strong note with an improved backlog and a strong pipeline together with a very strong, as John just mentioned, financial position. So specifically, we have confirmed bookings of $6,800,000 as 03/20/2025, reflecting a strong year to year growth. Our projected contract pipeline is over $93,000,000 for the next three years with active discussion with 60 new post quantum TPM customers. It’s important to note that any customer that is running major infrastructure whether it comes from hospitality, whether it comes from hotels and client security whatever requires for airports, medical facility, government facility all of them they are now looking into upgrade their facility to TPN levels to be able to defend a quantum attack.

It will be too late if these organizations wait until the quantum computers are available to start defending their infrastructure. So the quantum resilient strategy will be soon be forced and not only a nice to have but a must to have in order to comply with many of the current cybersecurity criterias. So we have secured several significant new business on public key infrastructure for Mater, which is a certification process for homes and anything related to what is inside your homes, cameras, smart detectors, anything connects to the Internet. Those devices which are provided by IoT manufacturer, they are starting to be delivered together with our Volt four zero eight IoT Secure Chip. And companies like Toshiba and Landis and Gear are using this technology already and expanding the use in smart meters like the case of Landis and Gear and also on parking meters in the case of Toshiba in very large projects being announced during the year.

So our 2025 strategy is built around four key priorities. One is commercial launch of the post quantum chip. This is priority for us. As I mentioned before, there are only five companies in the world that they are able to deploy this technology. The entry level is very high and we are one of them and maybe one with the most mature technology and with a chip already operational to be tested in the following months.

Also the expansion of the chief fabrication partnerships to increase output and development of quantum resistant ASICs for specific larger client needs and or acquisition of ICL will accelerate big time as they are one of the leading ASIC providers. Executing targeted acquisitions, we expect to be able to complete the acquisition of IC Alpha as I mentioned before. Once we have the government approval as there is a requirement for companies and they are integrating crypto and high level security to have this government approval in France. So this is something will take few months, but we expect that to be finalized within the summer in 2025. And this will allow us to design new chips for our clients and will add, as I mentioned before, 100 top engineers to organizations together with an important amount of revenue, which we are qualified now will be communicated in the weeks to come.

Continue to invest in R and D with more than $7,000,000 has been allocated for 2024 and from May in $2,025,000,000 dollars This is actually a small amount for that level of security that those chips have and the design requirements. But the good news is that we already invested on them. So there’s no further investment beyond that revenue that investment that we are making that is required. So we are in a very strong position because normally this technology takes important investments that have already been achieved and done during the last years. So expanding and scaling the managed PKI, this is recurring revenue that can be added to the chip revenue and we are making good insights into the merger compliance process and IoT enterprise security.

So before closing, I would like to emphasize that CLXQ remains committed to leading the evolution of cybersecurity and semiconductor security ensuring trusted digital ecosystem for enterprise government and next generation AI applications. In terms of AI, we are training AI with the data that is collected by those semiconductors. There is important developments there. As everybody knows, AI requires good data and the data comes from the authenticated devices, the best quality possible data. We are not yet adding that into our revenue generation that will be add very, very soon.

And as we all know quantum computers will accelerate AI and that will have obviously consequences on many, many areas new areas and they will need to be considered in the future. So with that, I am finalizing my prepared remarks. I would like to open now the call for Q and A. And thank you very much for your attention.

Conference Moderator: Thank you. We will now be conducting a question and answer session. Our first question has come from the line of Matthew Galinko with Maxim Group. Please proceed with your questions. Thank you.

And I have

Carlos Moreira, Founder and Chief Executive Officer, CLSQ: a question and a follow-up.

Conference Moderator: Carlos, you mentioned 2025 revenue growth will come from new sources of chip revenue and chip personalization services. Should we understand that to mean that we’re not going to see a lot of 2023 customers coming back into 2025 revenue? Or are we going to see some level of normalization? Or what do you expect in terms of normalization in 2025?

Carlos Moreira, Founder and Chief Executive Officer, CLSQ: Yes. So basically there’s not really normalization per se because what is happening is as John say some of this customer which will be on the TVM as well customer will continue to be customers are sitting on a very strong inventory on the previous generation chips, right? During COVID time companies because they were concerned about the supply chain acquire a lot of chips and that’s one of the reasons we have $30,000,000 revenue on chips during that time. And this is actually being normalized now. We never know what’s going to happen as you know.

It’s just the situation in Taiwan and the Asian region is uncertain. And that could be at any time become again a very high growth on revenue because the company will start to buy chips. But this is one area on where 2025 we will still start to see normalization because those clients are coming back and new customers are coming back through the personalization center. The personalization center’s advantage is that they localize the technology at national level. So some clients that normally don’t buy chips if they are not being personalized at national level, they have now an option to become customers.

And that implies for instance in Spain, we have now companies and they are putting chips on solar panels on the new technology because they want to use their chip to secure the solar panel, but also to collect tokens and they are being able to exchange energy tokens between the solar panel and the smart meter. So those are new usages and they emerge at national level. The other aspects and companies that could buy more chips for the future, they are waiting for the new post quantum chip to be available. And we already have the chips. So the chip was demonstrated in New York at the NASDAQ event that we organized.

But as I mentioned before, that chip is now being tested and it has to go very strict certification process like FIPS compliance. And there’s nothing we can do there. I mean, we have to wait until those evaluations are finalized in order to be able to sell the chip because that’s part of their requirement. But the good news is that we are letting our clients to test the current chip, the post quantum chip as a way to accelerate the sales process. And as I mentioned before, we’ll start in Q4 this year and will strongly accelerate in 2025 in 2026, sorry.

So that’s the situation. I mean, it’s like you basically wait for the iPhone 17 to be in the market before you make a decision on upgrading from the 16. I mean, you just wait the next year. So we are in this kind of scenario on this technology. TPM is very new.

The post quantum chips are totally new concept in the market. That’s why CLSK if you see the progression of the quantum stocks and you compare that with the CLSK stock, you will see that they are progressing the same way. It’s just enough that one CEO says then this is going to be a thirty years time and the market crashes on quantum. The other says, no, no, actually we have already achieved like happened with Google and with Microsoft a quantum chip for the quantum computer. So that immediately brings the attention to the people of the post quantum chip, which is the defense of that quantum chip, right?

So it’s a very emotional market now. It goes up and down. But what is 100%, one thousand % clear is that we are entering into this quantum era and we are early players on that area and the technology is going to be growing and growing as the market is phenomenal.

Conference Moderator: Got it. I appreciate that color. My follow-up question is on the 2025 R and D spending that’s incrementally up from 2024. Is a meaningful portion of that in additional certification costs? And is that hitting 2025?

Or are you adding engineers? Or what is the can you explain a little bit more behind the ramp up in R and D spending?

Carlos Moreira, Founder and Chief Executive Officer, CLSQ: Yes. As you rightly say, it is actually the certification process is very expensive. Just for instance, a certification might be $2,000,000 And you have to do it per country, right? So you have to go market by market. The other element is what we call CLquantum.com, which is a platform that we are building with the IP that is being integrated into the platform, which is our platform from other companies.

So our model has been that that’s why we allocated a $20,000,000 investment fund to acquire and invest in startups that could integrate their technology into our quantum platform. So the first one was Colibri. As I mentioned, it’s a quantum cloud play, very niche. They are French also. This is a lot of this technology by the way is available in France.

Reason why other companies like Sandbox, AQ and others they started to acquire French companies, right? It’s very fragmented, but this is if you are able to put them integrating into the Quantum platform, you advance very fast. So this is part of the R and D as well to once we make the investment then you obviously bring need to recruit people and this is a very high level expertise area. So it’s expensive people that will help you to integrate that specific platform into the Sealed Quantum platform. The another example is IC ops.

IC ops is a $10,000,000 revenue company. They have very good client of ASIC. This company, as I mentioned, we have signed an exclusivity agreement to acquire them. Everything is being agreed to be acquired. Just waiting now for the French government to be able to go ahead.

And that will integrate 100 people around 80 engineers. Very specialized on ASIC. ASIC is the design for new chips around the customer specifications. And because we are integrating that into the quantum and post quantum back end, it will be basically the first Q ASIC first quantum ASIC developed and integrated into existing company. Those are companies like a car company that they want to develop their own chip.

And before we might not necessarily have everything they wanted to have. And now we can design a chip for them sur monsieur as you say in French, right? So those are the new areas where obviously we will require investment R and D investment to keep growing and keep adapting to the quantum requirements.

Conference Moderator: Great. Thank you. Thank you. Our next question is coming from the line of Mehul Shashki with Northland Capital Markets. Please proceed with your questions.

Mehul Shashki, Analyst, Northland Capital Markets: Yes. Hi. Thank you. Carlos, the $93,000,000 pipeline, typical duration of that contracts that are being discussed is three years. Is that correct?

Carlos Moreira, Founder and Chief Executive Officer, CLSQ: Yes, correct, three years.

Mehul Shashki, Analyst, Northland Capital Markets: Okay. And so what’s historically Seal SQ’s win rate of pipeline? I realize that historically the competitive landscape was probably a lot more intense than what the current post quantum cryptography markets landscape looks like right now, but

John O’Hara, Chief Financial Officer, CLSQ: at least

Mehul Shashki, Analyst, Northland Capital Markets: for some sort of anchor point that would be helpful.

Carlos Moreira, Founder and Chief Executive Officer, CLSQ: So maybe I’d like John to go into the first part. On the competition, as you rightly say, the fact then that we very early enter into the post quantum play And we also integrated not only the new quantum crypto, but also some of the other components brought by YSKY like a quantum loop key. We YSKY has developed a unique quantum root key that is now being used to digitally sign quantum CAs. Then they are able to issue quantum certificates and they can be embedded into the object with basically like a unique quantity identifier. So all that has put CLSQ in a very interesting and strategic position because we don’t have a competitor yet that integrates all those elements.

And I’d like John to cover the second part.

John O’Hara, Chief Financial Officer, CLSQ: Yes. So just quickly Michael, hi. Just quickly, I think, so on the pipeline is, as you might point out, that’s the pipeline valued over three years. But of course, there are some prospects in there where we believe that the project is going to take maybe until year two or even into year three before it comes online. So in that instance, the valuation attributed to it will only be for the final year.

It’s a free operational pipeline for us. And when we win clients in this domain, we tend to find that they become very sticky, so we keep them for a long period of time. So although we’re working on a free year pipeline there, we believe that once clients are one, they will become clients for five, ten years depending on how long products.

Carlos Moreira, Founder and Chief Executive Officer, CLSQ: And the way it works actually on post quantum chips is that a client will not necessarily take immediately a decision to put the chips everywhere in their ecosystem. They might start with one product and or hardware and then the scale like the case of Cisco, right? Cisco has acquired 175,000,000 microchips from us historically. And Cisco is actually one of the leading companies testing the post quantum chip. Obviously, once the chip is certified and they are happy, they will expand the usage of that chip into their entire ecosystem, right?

So this projection, as I say, revenue can ramp up very fast here as post quantum is going to be compulsory. I mean, in September year, there’s going to be regulatory moves by forcing companies to be quantum resilient compliant. Otherwise, their insurance premium will be increased and they might be in some cases not even able to sell their objects anymore. So this is becoming like the airbag in the car. You have it.

If not, you don’t sell the car. So we are moving towards that scenario. And then

John O’Hara, Chief Financial Officer, CLSQ: sorry, just to then come back and answer your actual question following that extra background information. So the pipeline obviously, we that includes clients at various stages. So it goes everything from where we have kind of identified an opportunity through to having the conversation. So sort of identified, qualified, design in and design win. And we apply different percentages to the livelihood with design win being where we’ve already received a purchase order to develop the initial product, at which point we apply around about say 50% success rate because once we start developing the proof of concept then generally we find that means we’ve been selected as the preferred supplier and then that reduces down to sort of I think 20% to 30% on design ins and so on and then we obviously weight the pipeline accordingly.

Mehul Shashki, Analyst, Northland Capital Markets: That’s very helpful. Thank you, John.

John O’Hara, Chief Financial Officer, CLSQ: No problem.

Conference Moderator: Thank you. I’m showing no further questions at this time. I would like to hand the call back over to Carlos Moreira for any closing comments.

Carlos Moreira, Founder and Chief Executive Officer, CLSQ: So thank you very much and thanks everybody for joining the call and your interest on CLSQ. So please feel free to contact us anytime you need more information. You have an investor site on clsq.com with all the information including the annual report. And we are available for any one to one call with investors or shareholders or anybody that will like to learn more about our development and company. Thank you very much for the moderation and organizing and Lina and Jan for organizing this call.

Conference Moderator: Thank you. This does conclude today’s teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your

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