Arqit Quantum Inc (ARQQ) 2022 Q4 法說會逐字稿

Good day and welcome to Arqit's 2022 Financial Fiscal Year Earnings Conference Call.

On today's call we will be referring to the 20-F and press release filed this morning that details the company's full Fiscal Year end 2022 results, which can be downloaded from the company's website at arqit.uk.

At the end of the company's prepared remarks, there will be a question-and-answer period for selected equity research analysts. Please note that those selected equity research analysts that would like to ask a question in the Q and A session will need to dial in to the call rather than joining through the webcast link. Finally, a recording of the call will be available on the Investors section of the company's website later today.

Please note that this webcast includes forward-looking statements, statements about the company's beliefs and expectations containing words such as "may", "will", "could", "believe", "expects", "anticipate", and similar expressions are forward-looking statements and are based on assumptions and beliefs as of today. The company encourages you to review the Safe Harbor statements, risk factors and other disclaimers contained in today's press release, as well as in the company's filings with the Securities and Exchange Commission, which identifies specific risk factors that may cause actual results or events to differ materially from those described in our forward-looking statements.

The company does not undertake to publicly update or revise any forward-looking statements after this webcast. The company also notes that on this call, it may be discussing non-IFRS financial information. The company is providing that information as a supplement to information prepared in accordance with International Financial Reporting Standards or IFRS. You can find a reconciliation of these metrics to the company's reported IFRS results in the reconciliation tables provided in today's earnings release.

And now, I'll turn the call over to David Williams, the company's Founder, Chairman and Chief Executive Officer. David?

Hello and welcome to Arqit's Fiscal Year 2022 Results Conference Call.

Before discussing Arqit's performance, I would like to reflect for a moment on the recent passing of our Co-Founder, colleague and friend, Andrew Yeomans. Andrew was responsible for early foundational patents at Arqit. He was a man of great intelligence, ethics and warmth and is dearly missed. We will honor his life and achievements by seeking to fulfill the promise which he saw in Arqit.

Promise is an appropriate word for Arqit's first full fiscal year of commercial operation. For the period ending September 30th, 2022 we generated $20 million in revenue and other operating income, compared to $48,000 for the prior fiscal year. However, revenue generation alone does not paint the appropriate picture of the promise, which we see for the business. Arqit has made great strides in our technology, business model and go-to-market strategy, announcing this week three hyperscale channel partners which validate our technology and give us access to large global customer bases. As a result, we believe we have now built a pathway to success.

In May of this year, the White House urged all organizations to prepare transition to post quantum cryptography. Also in May, the National Security Agency stated that symmetric keys are the recommended solution. We believe that Arqit is the only company in the world that can deliver zero trust cloud fulfilled symmetric key agreement at scale. Customers can now buy our product through three hyperscale channel partners; AWS, Dell, and Fortinet and other trusted partners. We're ready to deliver the requirements of the White House and others.

I stated on Arqit's 2022 Half-Year earnings call, that Arqit was improving its understanding of how customers want to consume the product. I also said that it's often the ease of implementation that is a major purchasing decision factor. We've learned that end customers largely want to consume our product through products and services that are already part of their technology architecture and therefore easy to implement.

Arqit's go-to-market strategy was in the short-term to be focused on direct enterprise license sales to be followed by the launch of a cloud-based platform-as-a-service. And in the fullness of time we expected that we would generate channel strategies and market access through leading global technology partners.

The assurance of our security proof by the GCHQ-accredited University of Surrey in May, accelerated the interest in our products by those leading technology vendors. As a result, we reoriented most of our finite sales and marketing resources during the year towards developing those relationships.

Whilst the shift in resources with to the detriment of realizing potential short-term enterprise license opportunities, we are delighted with the outcome. The integration of our symmetric key agreement software with the products of AWS, Dell, and Fortinet gives Arqit access to very significant global sales and marketing resources into very large existing customer bases.

Today's announcement of the integration with the Fortinet FortiGate series of firewalls, enables unbreakable quantum safe encrypted connectivity between customer locations, keeping safe both data in transit and at rest. Fortinet has launched the integrated product for all global customers and the joint proposition is to be found on both companies' websites.

Fortinet has consistently shipped more security appliances than any other vendor for nine consecutive years and as reported to have a greater than 35% market share. For end users, particularly the large existing Fortigate customer base, it makes the Arqit purchasing decision and the implementation of our software easy and seamless.

For Fortinet, the integration of our product is a potential sales differentiator, which we hope will help them to further drive unit growth and customer retention. For Arqit, the partnership provides us access to Fortinet's massive installed base and potential new customers, leverages Fortinet's global sales organization and is expected to result in annual recurring revenue.

Similarly, Arqit and Amazon Web Services announced the integration of QuantumCloud with Amazon S3, a cloud-based object storage service. The integration of QuantumCloud with AWS S3 will allow AWS customers to protect their data against attacks today and against the future quantum threat. AWS is the largest global cloud service provider with reportedly a market share greater than 30%, that's of an $83 billion global market.

The integration of QuantumCloud with S3 presents our products to a very large global customer base, as an easy to purchase and implement upgrade. For us it greatly accelerates potential customer reach, and joint marketing initiatives with AWS are beginning.

We also this week announced a partnering agreement and a joint sales mission with Dell Technologies to integrate Arqit's product into a range of products available to their U.S. Defense Department and other customers. This solution will be available through the Dell order fulfillment system and made available initially via Dell's federal and technical teams. We're very excited about the immediate opportunity which this partnership presents within the Defense Department and other federal department markets. We see additional broader opportunities with Dell across its business activities globally.

We believe that the prioritization and consummation of these channel partner relationships is potentially transformational for Arqit. We believe that these relationships and others which we are pursuing, represents a significant acceleration of our go-to-market strategy, bringing forward the date by several years the moment where we expected to be doing business with such fantastic hyperscale companies.

Two additional important initiatives gain traction for us in 2022. We recently announced that Arqit has signed a contract with TraxPay, a leader in supply chain financing solutions to deliver quantum safe digital finance instruments, enabling supply chain actors to conduct business more efficiently and securely. Financial institutions such as Deutsche Bank, DZ Bank, Nord LB trust TraxPay's financing solution and maintain strategic partnerships with that company.

Deployed directly into TraxPay's supply chain finance platform which has processed over EUR65 billion of supply chain finance to date, Arqit's trade secure service users distributed ledger technology, made secure by QuantumCloud to provide customers with referenceable digital promissory notes and digital bills of exchange, which are easier to manage than paper-based alternatives, unique, transferable and invariable.

What is driving the adoption of digital assets in this market is the U.K. government's upcoming electronic trade documents bill, which will legalize electronic transferable documents. Other leading trade jurisdictions around the world have also passed or will pass legislation enabling such advancements.

This opens up a potential $17 trillion global market for supply chain finance for digital assets. We believe that Arqit is the only company in the world to comply with the requirements of this legislation, namely that the digital asset must be tamper proof. Only Arqit has published a security proof demonstrating that it is provably secure.

Without such proof, no digital asset can be described as tamper proof. We believe that digital transformation in the financial services market is likely to accelerate at scale now that banks experimenting with private ledger technology should take note of the importance of quantum security.

We're very excited about the opportunity for digital transformation more broadly beyond trade finance. Finally, Arqit software has been selected by prime contractors as part of the potential technology solution for two U.S. government programs of record. The contracts were expected to be signed and billed in the fiscal year 2022, but billing slipped into the current fiscal year.

There are headwinds in the U.S. government contracting market as a result of continuing budget resolution and also international operational requirements. But despite those headwinds, we are delighted that months of effort by our commercial and technical teams has been rewarded by these important contracts.

Participation in these programs of record is important validation of our technology and represents what we believe to be just the beginnings of the opportunity within the United States and other government defense departments. These contracts and our Dell channel partnership set us up for potential future success in this very important marketplace.

In addition to the acceleration of our go-to-market strategy, innovation in our technology is resulting in changes to the financial profile of the company. We announced today, under a separate press release, that as a result of additional innovation, Arqit no longer requires satellite delivery of replicated randomness to data centers as part of the symmetric key agreement process at endpoints.

Arqit some time ago developed a terrestrial method of delivering this replicated randomness to data centers. The security of encryption keys created on the endpoint using our lightweight software agent is as strong with the terrestrial method as with the satellite method. The security proof work that we published earlier in the year satisfied us of this. Therefore, we've concluded that we do not require satellites and associated ground systems in the background of our technology stack.

The implications of this are as follows. We've commenced conversations to sell a partial or complete interest in our satellite system under construction with multiple parties. Some government customers, for very specific reasons, are interested in sovereign on premises control of key agreement, which comes with a concept called eavesdropper detection.

We will continue to fund the construction of this asset until a sale is agreed. If a sale becomes unlikely, we would discontinue construction. Arqit will build no further satellite infrastructure beyond this and intends to license its quantum satellite IP to subsequent customers with similar requirements. This would enable those customers to build their own domestic sovereign systems and we are seeing demand for this offering.

We expect that these changes to our technology strategy will result in a positive effect on future results with a portion of capitalized satellite costs recouped through the planned sale of the satellite currently under construction, additional revenues through the licensing of quantum satellite IP and the elimination of future capital and operating expenditures associated with use of satellites as part of our core product offering.

Arqit intends to continue to perform under its satellite construction contract with the European Space Agency and to recognize these related project incomes generated thereunder. We recently completed a new security proof demonstrating that the satellite technology has its own validated security, which is being shared with these new customers under NDA.

These are significant changes in our technology infrastructure. We believe that the changes simplify our business model by focusing on selling our symmetric key agreement software platform as a service.

The benefits of stepping away from hardware infrastructure are potentially significant from a financial perspective. The most important takeaway is that these benefits are achieved with no negative impact on the security of the keys created endpoints by our software and, of course, removes CapEx.

It's beyond doubt now that the world wants and needs stronger and simpler encryption. We believe and leading cryptographic experts have validated that Arqit symmetric key agreement software delivers just that. The partnerships which we have announced are further validation of our technology.

However, our promise is not fulfilled by merely having great technology and people. Our promise is fulfilled by getting our product into the hands of customers to secure their data. The acceleration of our go-to-market strategy offers Arqit a faster pathway to - three, are focused on fulfilling and maximizing the opportunities which these partnerships represent.

With that, let me turn the call over to Nick Pointon, our CFO, for a few remarks on our financials. Nick?

Thank you, David. We only commenced commercialization and began generating revenues late in the second half of our fiscal year 2021. Therefore, a comparison of our fiscal year 2022 results with the comparable period in fiscal year 2021 may not be meaningful across all financial metrics.

For the 12-month period ended September 30, 2022, we generated $20 million in revenue and other operating income from new QuantumCloud contracts and other activities. Our QuantumCloud revenues totaled $7.2 million for the period generated by five contracts. The bulk of the QuantumCloud revenue was generated by contracts with Virgin Orbit and AUCloud.

As David noted, the reorientation of much of our sales and marketing efforts to realize our announced channel partner relationships impacted our direct enterprise license sales activity in the second half of our fiscal year.

Other operating income for the fiscal year of $12.8 million resulted from Arqit's ongoing project contracts with the European Space Agency. Despite the announced shift in technology strategy, we expect to continue to perform going forward under our contract with ESA, realizing future other operating income.

Our administrative expenses equates to operating costs for those more familiar with U.S. GAAP. For the period, our administrative expenses was $72.2 million versus $14.6 million for fiscal year 2021. The material increase in expenses reflects significant post NASDAQ listing growth in our operating infrastructure costs and personnel.

Additionally, $22.9 million of the increase reflects non-cash charge for share-based compensation. Our employee base grew to 145 from 73 at the beginning of the period. Since the end of the fiscal year, we have undertaken a review of budgeted fiscal 2023 headcount and operating cost growth to align it with revenue and focus on our key partner initiatives.

As a result, we have provisionally capped fiscal year 2023 headcount at no more than 195 employees and have reduced non-employee budgeted costs by 8%. In total, we have reduced budgeted costs for the fiscal year 2023 by 18%. In addition, we will accrue benefits from the reallocation of certain employees to support our key partner initiatives and the deferral, reduction or elimination of costs from activities which are not deemed high priority at this time.

Operating loss for the fiscal year was $52.1 million versus a loss of $172.6 million for fiscal year 2021. As a reminder, the operating loss for fiscal year 2021 included a $155.5 million reverse acquisition expense associated with our transaction with Centricus.

We generated a profit before tax of $65.1 million. However, we generated an adjusted loss before tax of $52.3 million which in management's review reflects the underlying business performance once non-cash charge in warrant value is deducted from operating profit before tax -- sorry -- from profit before tax.

During the period 1,852,736 warrants were exercised, with cash proceeds to Arqit of $21.3 million. We ended the period with cash balance of $49 million versus a cash balance of $87 million as of fiscal yearend 2021.

Please note that we have filed today a universal shelf registration statement and an ATM prospectus supplement. The filings represent sound fiscal -- sorry, financial housekeeping, providing the company flexibility in corporate finance matters in the future.

With that, I'll turn the call back to David.

Thanks, Nick. The pioneering activities of our incredible team of engineers, innovators and commercial officers in fiscal year 2022 has created a pathway to success.

We have assurance that our product delivers as advertised. We better understand how customers want to consume our product. And now we have hyperscale channels through which to reach end user customers.

Secure in this knowledge, we must now focus on the hard yards of execution in 2023. Were pleased with all that we have achieved in the fiscal year and they're optimistic for our future.

So I now hand the call back over to the operator for Q&A.

Thank you. We will now begin the question and answer session. (Operator instructions). One moment for our first question. Our first question comes from the line of Scott Buck with H.C. Wainwright, your line is now open.

Hi, good morning, guys. Thank you for taking my questions.

David, the first one, how should we think about these channel partnerships converting to revenue?

Hi, Scott. So the Fortinet project is perhaps the most easy to understand. They are making available our software to the entire global customer base as an upgrade that will cost each individual customer base single digit percentage increases in the unit cost.

So it becomes very simple to model price times volume against the penetration of Fortinet's existing and future customer base. And we'll be walking you through that in a Capital Markets Day, which we're hoping to host in the near future.

AWS is very similar. They have commenced joint marketing with a specific cohort of their larger customers. And again, we can start to build a picture of likely penetration rates of those customer bases. And the price times volume metrics are quite straightforward.

We have, in fact, published our pricing on a British government cloud website. So for trade users of that portal, the Arqit pricing is now out there. So price times volume is becoming much easier to calculate.

These organizations have got enormous reach globally. And the penetration is likely to be in the 20% to 30% range, in our opinion over the medium to long-term. And this represents a potential to greatly fulfill our business plan without an enormous increase in Arqit direct sales and marketing costs.

With customers like Dell, we're focused more on a smaller number of government and defense projects. But each of those projects come with pretty significant tickets. I've already said that there are two programs of record that we're now working on. And those will we hope come with some very significant current year billings.

But once a product is certified and accredited by government users, one expects to see fairly rapid take up. So those defense customers will continue to have an enterprise license orientation, whereas the things like AWS and Fortinet will have an annual recurring revenue style of business.

We are working hard on signing a couple of other hyperscale channel partners to that style of business.

Great, that's very helpful. I'm curious, what is the level of product education, you've already provided the partners? And how should we think about, how that those sales channels begin to scale?

Well, you can see the joint proposition is now on Fortinet's own website, and it's in their partner portal. We've already been working in the last couple of months in a number of jurisdictions around the world with Fortinet salespeople directly. And there is already a list of customers that we're targeting jointly.

Similarly, the Dell and AWS teams in various departments have been educated on the product, know what it does, know how to sell it. And there are representations of this integration, currently being very actively proposed into those customer bases.

So, there's still more work to do to educate sales teams and distribution channels. But that work has certainly begun in earnest. And we're starting to see the prospects coming through the pipeline.

That's great. And are there any exclusivity arrangements in any of these partnership contracts that would meaningfully restrict your ability to sign additional channel partners?

No. We've engaged in no exclusive conditions whatsoever.

Okay. Great. And then I wanted to ask you a little bit about the work you're doing on the trade finance side. And obviously, that's a large market. I'm curious how far out are we from that becoming a meaningful revenue contributor?

We expect to bill our first revenues on that project during the current half year.

We initially plan to go to full launch around about spring next year based on the passage of legislation going through one particular government, but we've actually begun service planning already, because we encountered one very large global partner who wanted to start using the product before the legislation was even passed.

We haven't pitched that product to a single potential customer who said no yet. Every single potential customer we've pitched it to has said, yes. It has some very peculiar advantages, not just in its cybersecurity, but the way that the product has been created.

It improves the cash flow for the vendor of the product. And it reduces the risk for the bank that finances the invoice. So, it's really a win, win, win. So, we're expecting some, some billings certainly in the current financial year. It's a very large global market.

So, I'm really very optimistic about where we can go with that. But we've also already started talking to other styles of financial services organization about using this product in other areas of finance, such as insurance, for example.

I'm absolutely convinced now. Although we've seen the blockchain industry has had a rocky road, as a result, perhaps of experience in the unregulated spaces, but it seems now very clear that the regulated financial services market is adopting digital assets at scale.

And we're having some very interesting conversations as a result, as banks in all areas of financial services transformation realize that if their technologies are not quantum safe, they have no long-term future.

Yes. No, that makes a ton of sense. And then last one for me. David, any hesitancy you're seeing among potential customers just given kind of the rising level of macro uncertainty?

No, I don't see any particular effect of macro uncertainty other than as I said, in the U.S. Defense Department, there is a continuing resolution, which makes it harder for departments to create new budgets, and that's affecting everybody a bit.

And, of course, there are budgets being applied to the east, that weren't necessarily expected a year ago. But what we're seeing is that every organization now knows that it has to upgrade its encryption.

We've recently done some surveys ourselves, and all CISOs that we've spoken to are aware of the need to urgently improve their encryption. So, it's not as though we're starting in a mature market, which is then experiencing problems.

We're starting almost zero. It was only in May that the White House demanded that all organizations prepare for crypto transformation. So, this is a market which is growing from a low base and we are expecting it to accelerate very dramatically. So, no, I don't think macro is a particularly relevant effect for us.

Okay. Great. I appreciate your time this morning, guys. Thank you.

Thanks.

Thank you. (Operator Instructions).

Our next question comes from the line of Nihal Choksi with Northland Capital Markets. Your line is now open.

Yeah. Thank you for taking my call. So how long ago were the Dell, AWS and Fortinet relationships started and were they part of that $740 million pipeline signed a few months ago?

Yes, it's a good question. The relationships in their first iterations definitely began about 18 months ago. So we definitely had hopes and expectations before we came to market that those projects would come to fruition. I would say, however, that the engagement that we got from those companies did accelerate when we published the security proof in April this year.

We were able to generate independent validation that's uniquely amongst all companies in the world, Arqit Software produces keys which are zero trust and probably secure. And of course, that was backed up by the fact that the organization doing that assurance is a GCHQ-accredited Center of Excellence.

So it carried quite a lot of prominence and our friends at PA Consulting also did their own assessment. So that degree of independent validation placed under NDA into the hands of these customers actually helped us to educate those customers much faster. And so I think those engagements have really accelerated very noticeably since about May or June time when we had those first meetings.

Similar things are happening with a small number of other hyperscale vendors who perhaps may have had six months ago entrenched views or different opinions or simply didn't understand this. But we found that when we place the proof into the hands of their experts and when we deploy experts at Arqit such as Dr. Daniel Shiu, and Dr. Barry Childe, very quickly skepticism goes away.

So I feel optimistic that there will, as a result, be a number of other large corporations signing up to use our products during the current financial year. So yes, those companies were in our pipeline at the beginning, but they've most certainly accelerated in the last six months.

Understood. So, but were they actually part of that sort of $740 million pipeline that you guys started from the SPAC roadshow?

All of those companies were certainly on the pipeline of companies that we wish to do business with where we hope and expect to generate revenue.

Understood. And is your understanding of what the value of that pipeline for each of those changed since citing that initial $740 million pipeline?

Yes, it most certainly has. We've been able to engage with those companies over the last few months in a very high level of detail about the nature of the opportunity. So we have very specific pricing. We understand the likely volume of trade that we can imagine we can do with those companies.

For example, Fortinet have a very large installed base, we are able to gain access to detailed planning with our partners like Fortinet about which of their customers are likely to want to buy the product, do we know what we'll sell it for. So we're able to now build our own views of price times volume and penetration based on real world facts coming from detailed partnership discussions rather than an extrapolation.

So, yes, I think we have a more detailed view of how that's likely to pay out. Given that, I didn't expect that we would sign hyperscale partners until 2024. Given that we've already done it, I feel that I've got better visibility of the medium term of this business and as a result I have better confidence.

Got it. And breaking down that price times volume equation that you now have greater detail and confidence on what the price times volume is, how has that price changed from 15 months ago and volume changed from 15 months ago?

Well, if we go back a year and a half or so, we were originally imagining that we were selling enterprise licenses with fixed prices and we weren't, at that point, able to produce an annual recurring revenue style of price, we just didn't have the information. I think it's relatively well understood that an ARR style of revenue is to the advantage of a company like Arqit.

It's definitely better to have an ARR style of business than an enterprise license. When you set of fixed enterprise license, you tend to be giving away the farm for a modest amount of money. We thought we'd be doing that for a couple of years because we didn't expect to have success with hyperscale channel vendors.

An ARR style of business with the product being sold into a very, very large customer base in my opinion is likely to generate far superior financial outcomes as larger revenues in the medium to long-term that an enterprise license style of business. So this feels like an acceleration of our go-to-market strategy to me and it feels like my confidence is higher as a result.

Great. So you had $7 million in QuantumCloud for fiscal year 2022. What is actually to exit ARR for fiscal year 2022 on the ARR?

We haven't published that number. So I don't think I can give you that stat. We'll try and give you some deeper granularity when we do the Capital Markets Day, which we're looking to organize early in the new year.

Got it. Okay. And then what do you expect Arqit needs to do other than educating these partners 'sales teams to sell the Arqit solution in order to drive the customers of Dell, AWS and Fortinet to adopt the Arqit solution? What Arqit is going to be doing beyond just the education of their sales team?

So in some cases, we are involved in direct bids to large organizations in partnership with those companies. And that means visiting those very large organizations perhaps with our own technical experts to educate the end customer. And that's for typically very large contracts.

But for the vast majority of the ARR style of business, we have to support the channel. And what that means is, and I've been doing that myself, I think I've been in six countries in the last six weeks, visiting customers, doing large events, conferences and exhibitions where our partners are present, presenting and educating.

Finally, we have to make sure that all of the distribution channels of these hyperscale vendors are educated. So it's really about supporting the channels with marketing collaterals, with white papers, with information and research, making sure that we have sales people on the ground that can deal with queries. And we do now have sales people employed on the ground in Australia, in Singapore, in the Middle East, in several jurisdictions in Europe and in North America.

So, the sales people are typically supporting the key account managers of those large vendors directly as and when they're required.

But ultimately, certainly for Fortinet and AWS, this is a cloud fulfilled sale. This is customers being able to simply buy product in the marketplace, pick a box, make a payment and buy the software. So there is some channel management with sales, account managers having to be educated, but over time, we expect revenues to be driven by simple online fulfillment.

Got it. Okay. A couple more quick questions here. Just going back to the $7 million QuantumCloud. Is that all effectively subscription revenue or is some of that enterprise licenses were it's essentially a perpetual?

It's mainly enterprise license revenue. But some of those licenses, we are expecting to renew and continue and pay more.

Okay. So just to be clear then, when you say enterprise license revenue, is that term based or is it a perpetual arrangement?

Yeah. Typically an enterprise license is term based. But also what you find is that an enterprise license with some customers will begin at a tightly bounded range of utilization.

So for example, one might say, that the enterprise license grants the licensor the rights to use the service in a certain market, in a certain segment for a limited number of endpoint devices and a limited range of keys. And hopefully the customer expands their activity and needs to buy more.

Yup, got it, right. And then finally this $50 million ATM that you announced this morning, what share price range do you expect to be utilizing it? And what is your current cash burn rate?

We don't expect to be utilizing it anytime soon. I don't think we put any statistics in that document, that was something which our bank when we did our SPAC told us to do at the exiration of the first year of trading. So I think it was always planned that was something that was an ordinary course of business thing to do. So we haven't given it any more thought than that.

And cash burn rate?

Not a published statistic, I think. So I'm not sure I can give you any greater granularity on that one.

Okay, great, great. Thank you. Well, congratulations on these partnerships you have announced, they are indeed significant.

Thanks for following us Nihal, and thank you for your questions.

We have no further questions at this time. Now, I will turn the call back over to David Williams for closing remarks. David?

Thank you. It's been a really interesting year in which our business model has developed technically and commercially far faster than we imagined. We look forward to speaking with our investors and analysts again in 2023 and we appreciate your interest in the company and your support as fellow shareholders. Thank you.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect. Speakers, please stand by for your debrief.