archTIS (ASX:AR9) Q1 2027 Earnings Call

0:00 Good morning, everybody. As usual, we'll give a few of the late participants a chance to log in. We'll be with you momentarily. All right, why don't we get going? Well, good morning and welcome to ARC. This is Q1 FY27 quarterly report for the period ending September 30th, 2026. My name is Curt Muffelman. I'm joined by our CEO, Mr. Daniel Lai. This morning, we'll be reporting on how the business became leaner with higher margins following the Spiron integration. We'll cover the financials, our USDOD and broader defense momentum update, some product direction, FY27 priorities, and then take some questions. Dan, why don't I turn it over to you for some introductory comments and observations.

1:02 Thanks, Kurt, and welcome everybody to the quarterly webinar. Look, it's a strong result. Annual recurring revenue is $13.3 million. That's three times up through the comparative period. Revenue was up 140%. Gross margin is higher on 79%. Operating expenses fell 17%. taking us close to an operating cash flow of break even. Record receipts there of $5.3 million. And of course, operationally, we've had some success there as well. Obviously, there the USDOD closing the services contract, another great confidence builder there that USDOD is moving forward with us.

1:49 in looking towards that enterprise license deal. Australian Defence, $3.2 million in codency renewal with services for them to embed that further within their ecosystem and expand their licenses there over the next few years. Our US-EU alliance continues to be delivered. They're all obviously just coming back to work from their summer holidays, and that progresses well. We also did a partnership agreement with PECSIP, and for those of you that are following this more deeply, we'll understand where they're placed in that defence ecosystem for collaboration products. That's a very good partnership arrangement, and we're expecting to turn that dial on some revenue-generating opportunities in the near future. We've got FITS 143. Validation, so that just removes an encryption obstacle for operating with NIP Defense clients.

2:37 And of course, another award, Cyber Business of the Year and Security Innovation of the Year for the way that we approach AI. And last but not least, of course, the CBA extension, which we announced this morning, moving that $4 million tranche from the 31st of October to the 30th of April, 2027. So overall, they're the highlights for the quarter, and I think it's been a strong quarter.

3:02 I loved how you slipped in the CBA extension last, but not least. Let me run through the financial summary. So against prior quarter, you know, it's not really about efficiency. Gross margins are up to 79%, and we continue to see that being really the point that we want to target for. We'd love to break an eight as the first digit, but, you know, we're really happy with 79%. Operating expenses fell for the third consecutive quarter from $6.9 million to $4.4 million, so you can kind of see how we're operationalizing the business. And obviously, receipts at the $5-plus million really benefited from our annual seasonal renewals that fall in this quarter. The customer receipts were 5.3, which is a record, obviously. We've more than doubled the June quarter.

3:50 And that's the first receipts that exceeded operating payments since the Spiron acquisition. So we feel really good about where that is. Again, seasonality behind that. The quality of the receipts is important, really, as well, as the receipts came entirely from customers. There was no R&D tax incentives, grant income, or anything else. It was just straight customer receipts. And those receipts came from a million dollars of the renewed DOD with cogency contract that Dan talked about in his opening statements, and the renewals across all our product lines, including some growing enterprise customers, which we really will talk about in a little bit. Revenue for the quarter was $3.6 million, up 242% of $1.4, reflecting our continued shift in revenue mix. We're really pushing hard on high-value proprietary licensing, and that's pushing that almost 80% gross margin, which is up over 4% from 75% in Q1 of FY27. So you can really see where we're pushing that.

4:46 You know, the growth has been accompanied by a cost discipline. I think that's really what we want to push. We've talked about it, and you're starting to see the results of that. We're operating expenses declined each quarter since December, 25 following our cost reduction initiatives, and now we're at $4.4 million in Q1, 17% below last quarter and 25% below December 25, which is the first fully integrated quarter within Spirion. And I think you can also tell that by looking at where we are from staffing costs. Now, staffing costs fell 46% over the same period, from $5.7 to $3.1 million. And we really expect that to continue to climb. We're looking at ways of continuing the operationalized technology that's out there in the market to become more efficient and leaner, as well as looking at ways to continue to make sure that we have the proper synergies in place as we continue to evolve from the Spearion acquisition and the way that we position it.

5:44 ARR was 13.3 as of September 30th, more than three times the multiple of the prior comparative period, building up on that recurring base of 150 enterprise customers. We'll really focus on ARR through our U.S. defense, our federal licensing, including the pending U.S. DOD that Dan will talk about in a few minutes, new and cross-sell Spirion customers, which we've announced over the last couple of months, and through our new partnerships that are leveraging TDI, including Mattermost and Pexa. The company ended the quarter with cash of $2.3 million and unused facilities of half a million dollars for a total available funding of $2.8 million. So, I guess what I want to do is, and I'll have you chime in in a few seconds, but, you know, we look at October 1st being the one-year anniversary since the acquisition of Spirion, and obviously it comes with growing pains.

6:36 I've done 20 M&A deals previously, and You know, everyone has its own special growing pains alongside, and this one was no different. But the December quarter was really our full first quarter whispering on, and so it's really the right baseline that we can do this analysis on. And as we can see, receipts are up 236%. Operating payments or cash going out the door is down 29%. And as I said before, staff costs are down 46%. So those are some really good numbers that we're starting to really build the foundation off of. Operating expenses are a quarter lower, and gross margins, again, moved up to 79%. Really, the integration has done what it was meant to do. We created a larger customer base, a smaller, more efficient cost structure, while adding a stronger U.S. presence that will help support us in the U.S.

7:25 DOD opportunity coming forward. So, Dan, with that being the happy anniversary of Spirion, why don't you talk a little bit about what your thoughts on Spirion has been over the past year? Sure.

7:37 Yeah, look, it's been one really of opportunity, but what I would say is that it demonstrates that we're doing, executing the strategy that we had told the market that we would execute. You mentioned really about the diversification of the cost base, which is one of the reasons we acquired them. We wanted to take that lumpiness and some risk out of that revenue stream and then annual recurring revenue. We wanted an opportunity to cross-sell to customers that already have been investing in the data-centric security lifecycle and are looking for enforcement opportunities in their businesses. You know, we also looked at it from a position of complementary technology, which would help us build out a roadmap for our products into a platform to take to market that becomes a control plane for policy enforcement and ABAC and really put ourselves in a leadership position within the market, not just in Australia but in the US, which of course is the last part that you mentioned, which is we have now pivoted to the US in a meaningful way with an ARR engine room, which can sustain the way that we reshape this business and execute within that market, which is, again, a huge market. And, you know, I guess springboard of that USDOD opportunity and into the diversified verticals with a common story in terms of a technology platform that's leading in its category.

9:04 So that's really what we have been about. We've been very focused on it. The acquisition of Spherian has given us an opportunity to reassess how we do that and bring in new technologies to invest in the way that we do our product development and integrate that best of breeding to a platform and have the customer-led drive from people within the USDOD to make sure our products are market-ready, which is fantastic.

9:32 So as we move into that... Yeah, interesting. As you mentioned, the springboard into the U.S. DOD. I'm sure that 95% of the people here are interested in learning more about where we stand with the opportunity moving forward.

9:44 Well, it's probably most of them know that I also recently came and visited you, Kurt, and the customer over there in the U.S. in mid-October. So, look, what I can say is this. The U.S. Department of Defense with that $315,000 services contract is about getting us ready for being implemented successfully. and having the features and functions that they desire as they go through this process. We've already been tested. So these are additional things that they've asked for, and it's the second time they've done it. That gives me, and it should give our investors, great comfort that you don't go through this entire process over two years and continue to invest in a company that you're not going to support through a licenses agreement. Unfortunately, that's still with our partner, Copper River and DISA.

10:32 But what I can say is this. We are definitely across that bridge where DISA is the one now demanding, I mean, Department of USDOD is now demanding that actually contract gets moving. So I'm reasonably confident that we'll see this license come through in a reasonable time period. We've also executed across International Defence. We're still incumbent within the Australian Department of Defence. We're seeing expansion opportunities there. You know, I think that's really important. And, of course, the US-EU military alliance with that deployment over there. We're starting to demonstrate that we are the go-to company for collaboration and sharing of classified information amongst the allies.

11:18 And I think that's a really important theme in terms of that investment story. We are executing what we said we would execute. It takes time to win these deals. They're large, complex deals. We're not always in charge of them. But in terms of the value proposition to the company and the share price, it's a very strong story.

11:42 We're excited about that. have $4.5 billion of contracts associated with the U.S. DOD that are tied around data-centric security and where we go. So, you know, we're a piece of the cog, but we're an important piece of the cog, which is nice. And when you start to hear things such as, you know, the 60, a lot of 60 warfighter command production tests passed, I know we've talked about that the last few quarters, but that was brought up on the meeting last week, that people are really impressed by that, and organizations have not even come close to that 100% achievement.

12:30 So it would feel really good about it's not a question of if, it's a question of when. So we're really happy about that. So one of the things we want to talk about is talk a little bit about where we're going from a product standpoint. It's great to talk about the deals and the opportunities, but you hear a lot of what we're doing, and as we've come across one year of Spirion. We've come across a year and a half of directive. You know, we're coming up, I can't believe it, on six years of NC Protect. You start to look at where we are as a business from a product standpoint. And so we do not want to be positioned as a bunch of legacy products sitting in an environment, right? Most organizations across the enterprise have 85 different security products that they use in and out of their organization today.

13:17 So if you imagine that functionality or dysfunction that comes across a business. And so when we look at what we do, right, we look at how we become moving from, you know, best of breed of even a little bit of a legacy, given where we are, into this control plane that Dan mentioned, particularly around DSPO. And we're calling that data security policy orchestration. It's really about, you know, pulling together the solutions into a complete policy orchestration control plane that manages that across the entire environment of an organization. And we'll talk a little bit about that as we push through. But when we start to look at it, we start to look how we can actually bring the products together to build, again, this control plane that's built around the methodology of TDI. And so we look at DSPM or Data Security Policy Posture Management, and that's a multi-billion-dollar market out there today. You look at the likes of Big ID, Sierra.

14:20 Sierra has raised billions of dollars already and billions of dollars of market valuation in DSPM. We think we can take that to the next level, and TDI is the core, is that one policy engine. So, Dan, can you talk a little bit about the structure and the solution sets that we're bringing to market around that?

14:37 Yeah, look, I think previously we've simplified the data lifecycle to a few elements. That is the discovery, the labelling, the enforcement and the governance of data wherever it resides. Obviously with the advent and uptake of AI, you know, compartmentalising information and making sure it's context aware so that when I ask a question into AI engines, I get back the data sources that I'm entitled to see and it builds that up into a response that is context-aware of who I am, what my security clearance is, where I'm accessing it from, and what I'm entitled to see. And it removes the rest. That's the sort of stuff that we're now capable of doing in the DUTL platform.

15:24 ecosystem for our customers. And that's certainly something that we see as a really bright future. We don't think that, as Kurt said, people will want multiple different products. We think that they'll want one product to do all of that and connect those various data sources through to those various identities and manage that system. And that's really what we're building in the simplest of terms. How that goes to market is really there's those customers that need to solve that problem for data integration. We've got lots of data sets. We want to bring them together, and then we want to apply some sort of form of security around it. Then there's that market, which is we've got some data and we want to share it, either internally within our systems or externally to our other supply chain or our other partners. And, of course, then there's the example that I just gave you, which is something that we already do with a customer such as Biosat, about AI guardrails, about contextually aware where I can publish this information, what data sources I can go to, and of course that integration services about how we can do that for products such as Pexip and just OEM that out and wrap it out as a little solution set so they can do that for their products. And that's really our go-to market strategy. And now you can probably get a little bit of a better understanding of how those products come together to solve each one of those problems and how we take that to market. And of course, all of those issues are something that defence departments and supply chains have today and we will see that are coming up

16:55 more and more in the general commercial activities.

17:01 I think what it really does also is it starts to pull together a message that we can really bring to market around the core of TDI, around policy orchestration. And what we're doing is we're really bringing, you know, four, I would call, I'm not calling them modules, but solution sets where, you know, we know what data-centric security is through what we're doing with DoD. You've heard some of the components that we're talking about with secure collaboration across Microsoft Teams, Sovereign Platforms with Pexiv and Mattermost. We'll talk a little bit about AI in a second. I think the real key thing to partnering is this integration services. TDI is a very open architecture for us to work. And we really tie in things such as industry standards, such as ACP 240. We look at ZTDF and a couple of the others that are out there today.

17:49 And we have the building blocks to really resolve a lot of these challenges that just are not being solved out in the market today. So, We look at this architecture as a policy control plane, really being the ability for us to play with anybody that's out there in the security market in interacting and being that trusted data integration across the enterprise. And so one of those examples that we're talking about is the Sperian AI guardrails. As Dan mentioned, we won an award a couple weeks ago as Data Security Innovation of the Year. And with all the AI products out there today, to actually be named a Data Security Innovation of the Year product is quite, I thought that was a really good tip of the cap to it, Dan. So can you take everyone through kind of the AI guardrails as how we look at it today?

18:36 Well, typically, I don't want to get too technical here, but the AI is built up of principle three components. There's the large language learning models, which everybody knows about, your OpenAI, ChatGPT, you call it. There's the MCP and the RAG, which are two components. One's called the Retrieval Augmentation and Generating. That's where it pulls the data from multiple different data sources, generates it into an answer, and then applies it back to the LLM. The MCP is just what services can I call to actually do this? Do I need to use Word? Do I need to write a script? And when you bring all those components together, It's about where you inject yourself to provide that contextual access. TDI can do that.

19:21 And I think that what that means is we act as a gateway between those components. We inject ourselves either as the MCP or the RAG, and effectively we can become context aware. So before, when Daniel Lay asks the question, it says, who is Daniel Lay? What is he entitled to? What do I know about him? He's an Australian citizen. He's security cleared up to this level, and he's accessing it from his office. He then goes down and says, well, what information sets is he entitled to? What's the question he's asked? And I'll build the answer only from those entitlement sets. And where should I publish this information? Do I take it out into a public forum, or do I only store it in a location that is secure? Now, that is an incredibly powerful tool. opportunity in the market today.

20:07 We've already seen issues of security in terms of AI. We've got calls for guardrails to be implemented. And we have organizations that are already deploying this. So when Arcus looks at AI in total, we look at how can it increase our productivity, and you've seen that through our cost management structures and what we're doing there to reduce our cost base and our people costs and how we increase productivity. We look at where does it need to be within our products to improve the users, and the last one is what is the opportunity in the market? This is our opportunity in the market. And we've already initiated several proof of concepts for different commercially available OEMs that we want to look at in terms of how we can do this and take this to market early in the next year.

20:52 So, you know, this to us is a very exciting area, but it's stepping stones and we will build up on this based upon it. We talked a little bit about our customer journey earlier, and we're seeing that most customers' journeys start with, where is my sensitive information? What have I got? What should I be doing with it? It often starts with implementing that through Microsoft in my Microsoft environment, my M365, my SharePoint Online, my Teams. Then often these organizations have already leveraged Copilot in that framework and in their enterprise licenses. and they start enterprise-wide spreading out Copilot. We're seeing that in government. We're seeing that in corporations. We're seeing that... And, of course, then they're supplementing that with others such as Copilot and ChatGPT.

21:37 But what we are seeing is they need one place to put a policy to control it and control it. And that's the control plane that we are currently building. And that's the opportunity we see in the marketplace.

21:50 I hope that will be... Yeah, and that's the exciting part, because it leverages off of TEI, right? It uses that as the core foundation. Very similar to, you know, what we're doing with PECSIP these days. And so I was up last week up in Washington, not only meeting with USDOD, but I was fortunate enough to attend Advantage 26, which is put on by Everfox, which is a cross-domain provider. So I met with Dave Wadges, their CEO. There's about 300 different people there. offices from every piece of the armed forces there. And I'll tell you, most people were very familiar with who we were. It was interesting to walk around with the Arctis shirt on, people saying, hey, I know you guys. You're the ABAC guys. And we're known as the ABAC guys in U.S. defense. It's pretty neat to be walking around.

22:37 I also met with one of my old buddies, Teresa Carlson. Teresa used to run Microsoft Public Sector way back when. She is now the Corporate Vice President of Public Sector for Anthropic. So we had a really good discussion around what TDI can do in the anthropic markets and where that fits. But again, it goes to this extending the reach through partners. The two most recent announcements have been Mattermost and Pexip, which were really around securing collaboration within the MPE or the mission partner environment. And so it's a sovereign environment that really focuses on how do you take clearance-based video and chat and apply ABAC technology using TDI to see who can have permission into a meeting or actually if some sort of security clearance changes during a meeting, who gets bounced for the meeting. Very simple, very...

23:30 Simple use case around who can see and who can't, but it's very difficult to execute at a real-time dynamic aspect. And so that's why we're looking at these partnerships because we add that piece of policy control that leverages across the enterprise that really provides that trusted level of data integration for that. And alongside of that, we mentioned, you know, ACP240 and ZTDF. One of the things we look at is one of the reasons we also went down for our NISP and FIPS certification, just starting to look to validate some of the encryption technologies that we have out there, looking at ways of continuing to further partner to bring more solution opportunities into the market that are When we look at, you know, securing the DOD, if we can bring NC Protect, that's great. But then there's cross-sell opportunities in the Spirion, you know, talking to them about other solution sets around TDI and policy controls and the way that we handle that, talking about ACP 240 and FIPS and ZTDF and everything. So it's how do you build off the existing account that's out there, and it's through the extension of partners and what have you.

24:38 So I think that's really exciting the way we drive that. So with that, Dan, I think why don't we finish up with some priorities for FY27 and then we can open it up for questions.

24:50 Yeah, look, obviously, the priority is to close the USDOD deal. It's a transformative deal. It's why we've invested where we've invested. And, of course, it springs towards that sort of accelerated growth model that we are looking for and into those alliances that we know we want to achieve and we're already penetrating. So we also need that continued growth here in Australia and in Europe. We are doing that through partnerships in Europe and we're seeing lots of activity there and interest based off of the implementation that we've come and got with that alliance partner over there. We need to continue to invest in our roadmap. Obviously, TDI is the foundation of that and how we bring Transform from the best of breed to a platform company with a control plane in it which has a niche market and, you know, really provides value to those competitors in the marketplace.

25:44 And if we can do that, we have a space which we can really push through in terms of that growth. And, of course, we need to make sure that the experience product with our existing customer base, we start executing that cross-sell and up-sell, which we've started to demonstrate that we can do. And of course, we need to obviously maintain our fiscal discipline as we move forward. So the big news, of course, for this morning was that funding extension. I think that's been well received in the market. I think people, you know, have had a positive response to that. So let's jump across to the Q&As. Again, a pretty strong quarter results.

26:26 Yeah, it was funny. Yeah, the first question is, with a CBA loan deferral to April, what was the catalyst for the decision process? And basically, I'll sum it up in a few words. Why did it take the banks so long to confirm? As I looked at my iPhone at 4 a.m. this morning to make sure we had the notification from CBA as I finalized the 4C.

26:52 Well, it's really simple. Banks work at bank pace. They don't work at your pace. That's really the answer. Obviously, we always look at all of the things that we need to do. We have those in motion. It's not necessarily something we can just go out to the market and tell you until these things have been confirmed, and that was unfortunately the process. Would I have liked it to have happened several weeks earlier? Of course.

27:20 Great. Let's see. Here's an AI question. Australia in particular wants AI guardrails. What is preventing them from integrating ARK as soon as and later? Is it a bureaucratic process, simply too slow, or the underlying technology?

27:35 It's a little bit of all of those things. I think that people are still coming to grips with what the risks are. It has certainly been highlighted over the past three months and now they're starting to educate themselves about what is the best way of implementing those guardrails and how do they do that. I think that this is not going away anytime soon and that we're going to see investment in this over the next 12 months. But it's not something that a department can turn around and just click their fingers and get out there for an acquisition. They have formal processes. They have to have formal statements of requirements, risk statements, and go through budgetary processes. So, look, it's not like the commercial world where you can just, you know, someone's in charge and they can have a budget to spend. It is a process. But what you do know from all the market indicators is they are now looking for guardrails on how to maintain and do contextualised access and control that AI implementation so they get both productivity and security.

28:35 All right, let's talk a little bit about the U.S. DOD. Have you had any engagements here, one, two, three contractors and suppliers to the U.S. DOD, and you see them as an opportunity you'll pursue over the next 12 months? I'll take that one because I've been up in D.C., Three out of the last six weeks, and those are the exact people that I'm meeting with on a daily basis. Last week, it was not only the Everfox Advantage meeting with some of the brass and some of the larger data-centric security companies that are out there, but you see the tier one primes out there. We call them the Beltway Bandits. You have to do business with them in order to succeed that are out there. When Dan was up in the middle of October, beginning of the middle of October, we had quite a few meetings with the contractors and, again, typical meeting with the likes of the Microsofts, the Everfoxes, the large primes that are out there, the Pexips, the Metamos, the Copper Rivers, just making sure that the relationships are sound but also setting those breadcrumbs for what's next. People understand and see what's happening with the DoD.

29:40 You know, there was a good buzz when we walked around about that. People want to know what's next. And so if we have those relationships in place, I think we can start to procure those next steps much faster with a better foundation. And, again, it goes back to why we acquired Spirion. It provides a little bit of a foundation, a little bit more awareness, a little bit more depth and breadth into the market with U.S. developers, U.S. engineers, and U.S. team members here that help us bring that real strong presence of what we have in Canberra and Arctis in Australia over to the U.S. itself.

30:15 Kurt, I might just add to that. Obviously, through this process, we have worked with the incumbent system integrators in the USDOD and educated them on the product, trained them up, and we had a licence agreement some time ago to train them in the deployment of the product so they could prepare for deployment within the USDOD. That doesn't get unnoticed. Those large service providers such as LIDOS and GDIT also have accounts... quite significant accounts outside of the USDAW, such as the Department of State, FBI, etc., etc. So this is an incremental program of once you are successful and you have started to build up a reputation within there, that network growth effect can come quite smoothly because people want to know what you've done in which department, and they reference each other, and they have very similar environments and IT ecosystems.

31:13 As it relates to Sperion, do the people cost reductions create risk for scaling if you cannot find the right skills when needed?

31:23 Look, it's always a challenge. For us, what we've done over the past 12 months with the Sperion acquisition is cross-train everybody within the organization on the products, how they get implemented. But we also are training our staff on the ecosystems that these things go into, such as Microsoft Azure, et cetera, et cetera. That bit is building up a knowledge base of training materials so that as we bring partners and service providers on board, we have the material to help them scale up and provide them with the training around the product so that we have a scale and growth pathway in the ecosystem. We're acutely aware of that.

32:03 Yeah, and I don't think they'll be difficult in finding the right skills that are out there. I mean, Microsoft just offered exit packages to 65,000 people. And so we look at the business, obviously not at the Microsoft scale, but very similar, right? How do we leverage some of the AI technology to optimize some of the roles and responsibilities that are out there today within Arctis, right? We've done that across development and had some great success in seeing people really strong improvements in the productivity of the development team and the amount of just sheer code they can push out and the quality of code that can be reviewed by QA people that we don't need as many QA people anymore because AI is covering that off, right? We have that in the factory. When you look at synergies across Spirion, you don't need four or five IT people.

32:51 You don't need four or five accountants. We can start to leverage that and really start to tighten up how we really create efficiencies across the business through technology as well as synergies themselves. And we need to scale in the right place, right? And so it's looking at how do we look at partners, people that understand partnerships, how they understand integrations, integrations into third parties, things that are going to advance our DSPO from a policy orchestration perspective. That's going to advance where we go from AI. That's going to advance the relationships across DOD that we bring to the market. So, again, it's the right people, and I think we'll find the skills when and if needed. All right, Dan, let's see. Let's give you a technical one. How's that? Can ARCIS protection be spun up on virtual machines, images, dev test instances, etc.?

33:43 Yes. So that's the beauty of TGR being a foundation. It's a macro-micro platform. It can work on a Raspberry Pi. It can work in a deployed state. You know, when we... The beauty of being around for so long in the Department of Defense ecosystem and how they have every use case under the sun, and by understanding those use cases, you look for technologies that can address those use cases. You're not building technology looking for a problem. You're looking for technology that solves the problem and has that diversified ability to be deployed.

34:19 All right. I think we addressed this, but there's two questions about what evidence is there that cross-selling by Asperion is occurring.

34:29 Yeah, look, well, I think we've done that. We've put out a couple of announcements. I'm hoping we'll put out a couple more before the end of the year of demonstrations of that. Now, look, it's really easy to say we're just going to cross-sell and up-sell. I think that's at the heart of the question. It's really hard to do. And, you know, when you take on an acquisition, the first thing that you've got to do is make sure that your customer base has confidence in the new owners that they're going to continue to invest in their investments. And that's something that we've been very strong on and we have engaged with them. But we have also had to make sure that we're investing in that Spherian product to meet their needs because they're not going to buy Arctis' NC Protect unless we can demonstrate that we're still investing in the Spherian product and how they integrate together. So it's about building that program, that partnership with the customer, and being customer-led in all of those activities.

35:27 That takes a little bit of time. We've had 12 months to put ourselves into that position, and I think we've just started to see the seeds of us executing that. Long way to go, but we believe that the acquisition of that customer base that's already investing in this have done it for a reason, and that we can demonstrate to them that we're the right partner on that journey, and hence that strategy, that Kurt's been talking about where are you going and what are you building with these products? That's a really important story. And how do you help me as I evolve and adapt my business and also adopt AI? So it's important that we tick all those boxes along that story and that we continue to execute and deliver to keep them and maintain that faith.

36:10 All right. There's a couple of other technology questions. I don't really want to go into those because they get a little bit too deep. So if your question is not answered, please feel free to reach out to either Dan or me, and we're more than happy to respond. So the last question of the night, Dan, or the morning, I should say, why don't investors understand or what doesn't investors understand most commonly about Arctis? That's a great question.

36:33 It is. Look, there's a difference between – I think, potential and execution. I think we're now on the pathway of that execution. And as we execute, we reduce that risk of potential. And so I think there's an apprehension in the market waiting for this big fish to drop. And when that drops, that's the validation that I think a lot of investors will be looking at. And that's something that's one of the reasons the USDOD is on our priority list to close. because that level of validation gives confidence in the market for investors to look at us in a completely different light and particularly being in the US, in the world's largest defence department with that opportunity.

37:22 Some of you would have already done your own research. The number of licences that we close with this deal is only the beginning. Once you're actually inside have been through that entire accreditation process, the testing, the use cases, and build up that sort of reputation and value, you're on the pathway. And that's really important because you now have a moat against competitors coming in and trying to get you out. So it's a long lifetime value of the contract and it's a significant growth pathway. We know that, you know, we've spoken about the number of licenses being around that 100,000 mark. that the potential there is up to $1 million, $2 million, $3 million, $4 million.

38:09 It just goes on. And of course, then outside of that, then there's those other departments that I've talked about that reference the USDOD for being a secure environment and what products do they use to secure them, 365 environments. And it goes on. So I really think that they're waiting for that validation point.

38:28 I think from an investor perspective, I think one of the interesting things is we may be known amongst the couple of hundred shareholders that participate in these types of discussions and respond and what have you, but in the global economy, People really are not aware of who Arctis is. And that's no fault of, you know, investors or even Dan and I. It's a true fact that it's just very difficult and very costly as a micro-cap company to get the name out there. We've looked at taking a more aggressive approach by, again, getting on planes and going out and meeting with people, and it's starting to take effect. But, again, it's a big world out there. We're starting to really get some good traction in the U.S. from a defense standpoint within the confines of the Washington Beltway.

39:13 We need to get further out there. That takes time, effort, and money. You know, we want to make sure that we do it right. We want to make sure that we have the right referral and references in place before we just go out and spend money. We want to be very capital efficient about the way we do that. And that is just a natural effect of being an Australian micro-cap company. Same thing in Europe, right? We have very little footprint in Europe. We're just not going to get there until we get some traction in the U.S. itself. Right. And get some validation. So we've won at home within Australian defense. We feel like we're very strong there. Could we do more? Sure. You know, it is a matter of technology changes, geopolitical type of government, what have you. But we're pretty well known in where we are within Oz. We're getting better in the U.S., and that will just take the next steps that we continue to take. So from an investor standpoint, to me, it's all around awareness and what our business can bring to the market.

40:05 And by making these, you know, results that we've shown over the last quarter, making the headway from a revenue, an ARR, and from a capital perspective, you know, that's how we build the business going forward.

40:18 And with that, Dan, why don't I pass it to you for some closing comments? Look, again, I'm going to reiterate, we've had a very strong quarter. We've been very expense efficient. We continue those trends. We have started to demonstrate the evidence that we're executing the strategy and we do expect that to pay dividends. And now it's really about focusing on closing that U.S. DOD deal and making sure that we all have a pathway going forward to transform the company and really tackle that U.S. marketplace over the course of the next 12 months.

40:56 Fantastic. So for everyone, we have our annual shareholder meeting on November 13th. That will be virtual. You should have everything from an email as well as posted on the ASX. We will not be speaking to you until after the holidays. So Dan and I wish you and your family a happy holidays. And let's hope we have a nice Christmas present before the holidays. Great. Thank you very much. Have a great day. Thank you.

41:23 Thank you, everyone.