Earnings call transcript: Zero One Communique outlines quantum-safe innovations in Q2 2025

Zero One Communique, known for its quantum-safe encryption technologies, has maintained steady revenue compared to last year, as disclosed in its Q2 2025 earnings call. According to InvestingPro 's detailed research reports, available for over 1,400 US equities.

Zero One Communique's strategic focus on quantum-safe technologies and its robust financial position highlight its preparedness for future challenges and opportunities in the rapidly evolving cybersecurity landscape.

Full transcript - 01 Communique Laboratory Inc (ONE) Q2 2025:

Brian Stringer, Chief Financial Officer, Zero One Communique: Okay. Let's get started. Good morning, and welcome to our second quarter results and an update on our business. I'm Brian Stringer. I'm the chief financial officer for Zero One Communique.

With me on the call today is Andrew Chung. He's our president and chief executive officer. Andrew, if you could turn to next slide, please. The agenda today, will be a presentation by Andrew who'll give you an update on our results and also an update on our business. It'll be followed by a q and a.

And I think by now, everybody understands, how to do a how to submit a question, using Zoom. If you look at the bottom on q and a, if you just click it and type the question, we'll receive it, and then I will present it to Andrew at the end of the presentation. I'll moderate the q and a. And now before we get started, I just point you to our disclaimer. This form's part of the presentation, and if you take a brief look at it.

And now I'll pass it over to Andrew, and Andrew will give you our business presentation. Over to you, Andrew.

Andrew Chung, President and Chief Executive Officer, Zero One Communique: Thank you, Brian. Hello, everyone. How are you doing? I'm Andrew Chang, the president and CEO of Zero One Communique. I guess, three months is a long time in our industry.

A lot have happened since then. First, IBM made an announcement of the expectation of a full scale, fork tolerant, quantum computer. We have, completed another round of, strategic financing followed by the announcement of a co development project with, Hitachi. So I will give you all the details, later. Our value proposition is very simple.

I won't go into the details about how, what computer, quantum computer is and how it works. And all I want to say is that their excessive computing power is going to render the encryption technologies currently used to protect the world of Internet totally useless. The world called this q date, the date when, hackers are using quantum computers to do the dirty works. This means literally everything under the sun will be vulnerable, including the likes of email, financial, cryptocurrencies, AI, etcetera, you name it. They all need to be protected against QDay, and we, with the iNCAT product, are the leader in protecting them against the inevitable q date.

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I guess timing is everything that, like, you know, any kind of overnight success basically has seven six or seven years in the build. We have been promoting for a long time about the quantum safety for many years, but the world has only been kinda wake waking up by the Google Willow chip's announcement in December about six months ago. We have been, talking to a lot of potential customers for, like, almost two years, and they were mostly watching but without commitment. But then the Google announcement, seems to be a game changer, and these people starting to move since then. The good example, was the announcement we had with Hitachi just, several days ago, was a typical example, and and this is, giving us a huge endorsement of our technology.

We have many other similar opportunities around the world currently in in discussion, some in in earlier stage, some in more advanced stage. I guess the reality is that quantum threat are accelerating at unprecedented pace. Only two months after the White Hot announcement from Google in December about this is is is willow shipped, Microsoft announced its Majorana one, platform, which is the first quantum chip powered by topological core that allows scaling up to 1,000,000 kilobits on a single chip. Now this combined with the Google error correction they announced in in six months ago was a real game changer. And shortly after that, Continuum, which is the quantum arm of Honeywell, announced that they will release a new version later in 2025.

They haven't done it yet. They said later 2025, we'll release a new version of quantum computer that will will be about 1,000,000,000 times faster than the previous version. So, obviously, IBM is not sitting still. Earlier this month, they announced their latest road map, which is calling for the release of Lune later in 2025 and then Kookaburra in 2026, followed by a full scale, thought tolerant quantum computer by 2029. Now full scale, thought tolerant quantum computer really means a guarantee of q day on or before 2029.

And there are many other players in the world, don't forget, you know, including national players in Russia and and China who don't announce their road map. I am fully expecting a kind of like a deep sea alike event coming out soon, out of nowhere on the most unexpected way, the most unexpected day that they have created a supercomputer, super quantum computer beating everyone. And whether this is coming from The US, China, or whoever is not important. What's important is that the world must prepare for this to happen or it would be a disaster for those who have listened to some self serving irresponsible comments saying that quantum computers are decades away and caught unprepared. And I keep saying that, frankly.

I I I I I believe it is misleading listening to business leader commenting on q day because their comment tends to be self serving. I believe what we should be paying more attention is what the government says. Let's see what The The US and our government says about the q day. Fundamentally, q day is not a a a problem of tomorrow, but today's problem, maybe even a yesterday problem. First of all, the the executive office of the US president told their agencies to be mindful about the fact that QDay is today's problem because hackers can download the data now and simply wait until they got hold of a full scale quantum computer and decrypt them.

This is the infamous HNDL harvest now decrypt later attacks. And two months later, The US secretary of commerce, Howard Ludnick, made a a public comment saying that the world of cybersecurity will be totally broken if we don't act immediately. And finally, while the the the ink is still wet, our county government also says during the g seven meeting that quantum technology is a priority topic. Okay? So these are just some notable examples out of out of many, many, many more.

And our business model is very simple. We have two parallel revenue generators. The first one is direct marketing of our own QuantumSave end user product on a recurring subscription basis. The the the the industry called it SaaS, software as a service. We are way ahead of our competitors that in addition to the encryption engines, we have two quantum safe end user product commercially available with a third one in the pipeline.

The first one is the world first quantum safe email security product, and the other one is the world first quantum safe remote access product. Now the third one is a crossover between AI and quantum safety, which will be commercially ready sometimes in 2026. I will talk about this a little bit later and, especially that this kind of priming that we we likely will make a an official announcement or demonstration in the very, very near future. And the second revenue generator is to help our partners achieving their quantum safety conversion journey. The latest announcement with Hitachi was a typical typical example of this whereby we are charging a onetime development fee plus an ongoing revenue share.

We're currently in, some late stage, discussion with many similar or larger opportunities around the world, across different fields spanning from financial, cryptocurrencies to energies, digital signatures, etcetera. And we're simply using our end our our ion cap engine as a mean to help them achieving their PQC journey by charging a fee, as I said, plus ongoing revenue share. And it doesn't need a rocket scientist to figure that the market size, that we focus on are extremely huge. So using exactly the same example, I'm going to to give you some some sense about the the the the size of it. Even the smaller one being QuantumSafe remote access has a market size of 500,000,000 annually.

And then QuantumSafe email is a single math as they are about 7,900,000,000 business email addresses worldwide. So let's say 1% is serious email oriented and pay 2% paying $2 per month for quantum safety, and that market size is already 1,500,000,000 annual. The AI is even more crazy expected by market and other market analysts to be reaching 3,600,000,000,000.0 by 2034. And we'll be using our proceed from the licensing, part of the business to fund the marketing of these three enormous, markets, the the SaaS market. And our licensing side of business is also, like, the concept is is simple and is sizable too.

The best part of it is that there is no marketing cost associated with that. And, again, the recent announcement of the Hitachi project is a typical typical example in this, you know, in this side. And we collect development fee plus an ongoing revenue sharing, which can become big and recur and recurring recursive. There are too many industries that we we can serve, ranging all the way from energy to banks, to cryptocurrencies, digital signature, etcetera. So needless to say, the revenue sharing in the cryptocurrency can be also enormously, comparable to, the direct SaaS market also.

The licensing side of, our business, really relies on partners. K? And, we perfectly understand that, large enterprises, banks, or or or governments likely won't won't work directly with us being a small company. So that's why we we chose to sign up with large big name partners around the world who also believe in quantum threat. So we spent the last few years and successfully signed up these people that we will simply become the SME, subject matter experts, so that when they are helping their customers in their PQC conversion, we are the company behind them in charging fees.

So in the last two, three years, as I said, we have signed up a lot, around the world. The the more notable one would be, like, CGI in our backyard, Thales in France, PwC, and Hitachi in in in in Asia. Right? So they are aside from from from these things, I like to also bring you to to the attention about the the latest activities within this this quarter. So the first to to highlight again was the the the agreement with Hitachi where whereby we are receiving one time development fee plus ongoing revenue share with a mandate to convert their remote access product to become quantum safe.

Unlike VPN, their product, their remote access is a a application level zero trust, remote access so that even a hacker who managed to hack a crack into the accessing clients, the corporate network that that they are remotely accessing will still remain safe because there is no network layer, trust involved here. So let alone that it is also, the quantum safe. So the onetime development fee is good and profitable, but the upside is really lying in the the revenue sharing arrangement. But the most significant value to us, really is the industry endorsement, you know, that we have a large company with big name, taking a long time scrutinizing, the technology and chose, to work with us. And we we we have been in discussion, as I said, with them for almost two years.

And finally, maybe partly triggered by the Google announcement in December in December, several months ago, the decision, the the discussion was, accelerated. Another highlighted, activities this quarter was, a QuantumSafe AI marketplace. I guess last quarter, I managed to, briefly talk about that after filing our US patent. This invention is, simply revolutionary. As in AI, the biggest business market is not LLM like, ChatGPT, but special purpose AI model.

Let me give you an example. What is the the the special purpose AI model? You will expect to feed some credit card transaction, for example, into ChatGPT and then that ChatGPT would tell you giving you a a prediction whether this transaction is likely a fraud or valid. That's the job of a special purpose AI model designed solely for credit card fraud detection. And other special purpose AI model does example would be, like, provided by pharmaceutical company, giving advice to health provider like a hospital using patient data and give advice on how and what to use, you know, for the the for the drugs.

Right? Another example can also be network traffic hacking activities detection. So you can see that in all of these kind of special purpose AI would involve a lot of privacy because the data feeding in is highly likely to be very, sensitive and and and very personal. So that's why, you know, this huge market hasn't been, you know, exploded, as of yet. For example, Visa, you know, would never want to feed their credit card transaction into a third party credit card detection AI model for the same same reason.

And even in the reverse, for the AI model vendor would also don't want their customers to have a direct access to the to the AI model because once the AI model are unencrypted, so if they they they get hold of the AI model, they can copy, you know, the in no time similar to how DeepSea using the the the the open LLM from JetJet GPT and just build on top of it. Right? So so what we have been working hard since 2024, you know, was inventing a technology that can prevent this problem from happening, you know, so that the the we are encrypting both the user data and the AI model in a manner that is quantum safe and and and so that the the they are not exposing to each other while can serve AI prediction operations. So this is not only revolutionary, but but will also greatly enhance the adoption of special purpose AI with a market size of multi, multi billion dollars. Actually, you're reaching trillion level.

And we have accelerated, in the commercialization process and are very confident that we can, kinda showcase a public demonstration on the on on something like credit card transaction detection within a short period of time. Our activities, I guess, is squarely reflected, by our quarterly, financials. Revenue was recurring, which is more or less the same as last year. After closing a new financing in January, we managed to accelerate on a few fronts such as new new patent applications in AI platform. We also spent extra about 200,000 in this quarter to to to achieve, you know, all these additional activities.

While we have zero debt, we have slightly more than 800,000 in cash while adding another 500 about half a million after the latest private placement earlier this month. And we have also increased our IR activities, in order to create more investor awareness to our stock. Our focus from the second quarter, or or I would say second half of twenty twenty five onward will be towards building quantum safe solutions with kind of like revenue related to quantum safe solution by expanding our r and d and sales and marketing act activities. So I I'd like to reserve a little bit more time, for for question, this time. So in closing, I would say that, again, time timing is everything.

So riding the momentum created by q one and q two, we have more PQC projects in advanced stage discussion. We are also expanding the email support beyond Outlook users and accelerated the AI marketplace development with revenue expected to accelerate into the q three and and beyond. I also expect 2025 to be kinda like to be to be to be exciting year for zero one, and and it's going to be a massive year for us. I I I I couldn't think of a a better way because, like, really, that, it seems to be ignited by the by the Google announcement in December that, you know, everything seems to have ignited in 2025. So so we believe it's going to be a massive year for us.

I'm sure that you will be, having a lot of questions, so I'm gonna take a quick pause here to reserve more time, for question and answer, this time. And as mentioned at the beginning by Brian, I'm sure that, people are familiar with Zoom, the q and a feature, so, please, make use of that. And, Brian, as usual, will moderate your questions, accordingly. So over to you, Brian.

Brian Stringer, Chief Financial Officer, Zero One Communique: Okay, Andrew. I do have some questions that have already come in. Please feel free to continue sending them. The first question, Andrew, has to do with our AI marketplace. Can you elaborate on the time frame for your AI marketplace?

When can we expect to see it, and who do you envision as your first customers?

Andrew Chung, President and Chief Executive Officer, Zero One Communique: Thank you, Brian. This is kinda, like, loaded, but all related to to AI AI marketplace. I can understand why people are interested in that because this is this is a very big opportunity for for zero one. For the most part, as I said, for the most part of 2024, we have been working on this, but we we we kept ourselves in a in a stealth mode. As I as we have not filed a patent, we cannot talk anything about it.

Otherwise, the patent application could be in jeopardy. So, what we have, filed in in in March, only several months ago, was exactly the technology that would allow this to happen. So with this, you know and we are, we are completing a, a demonstration, like, the proof of concept demonstration based on the patent pending technology. So as I mentioned briefly, a little bit earlier, I am very confident that we will have a we'll conduct a demonstration of the technology and and make a likely an announcement official announcement of the the the commercial development very shortly. I I I couldn't put a date on it, but but I have confidence that it's very, very shortly we will be making that kind of announcement.

And and and I am also expecting the commercial availability to be sometimes in 2026, likely around the second quarter or something like that, plus or minus.

Brian Stringer, Chief Financial Officer, Zero One Communique: And, Andrew, the second part of that question was who do you envision as your customers for?

Andrew Chung, President and Chief Executive Officer, Zero One Communique: Like, customers like, this is the the AI marketplace is kinda like like an eBay or Amazon that bridging the customer and the users. So the sorry. Bridging the the the the vendor and the users. So in this case, say in in in Amazon, the the vendor is a seller of some product, and the buyer is the buyer of the product. So in the AI marketplace, the the seller is the AI model vendor.

You know, there are tons of AI models vendor around the world, credit card fraud detection, medical advice, network traffic, facial recognition, you know, the audio text detection or whatever, you know, you name it. There are tons of them. And, and and they all worry about, the model being being being copied. And then the user of these, vendors are also worry about data being being looked at, you know, which is very confidential. So the so we expect the the customer so the so called customer is a long winded answer.

The so called customer would be the, first of all, the vendors to to list, the to allow them to list their model on a platform to be to be sold, say, how much per use or whatever. And then the and then the the the the the user who come into the platform will search for the AI model, put in some keywords exactly the same way how you search for something you like in Amazon or eBay. And then, you'll find the the model you like. And then based on the the the fees, based on the user comment, based on whatever, and you choose one to use and you pay, and then we take a take a cut. So the so the first you know, I wouldn't I wouldn't say, like, who will be the first customer that but but we expect, like, like, a lot of AI model vendors would would start listing.

You know? Listing fee is zero. So the listing, the the AI model on our platform, and then the user will start coming to to search for whatever they need without worrying about disclosing their sensitive data. And we, being the middleman, would just take a cut similar to how eBay and and Amazon take a cut from the the fees charging charging the the the users and, before depositing into the the vendor's account. So yeah.

So, that's kinda like a long winded answer, but, you know, that's that's that's what I am envision.

Brian Stringer, Chief Financial Officer, Zero One Communique: Thanks, Andrew. The next question has to do with investor relations. It says you have been spending money on investor relations or started to, which is good. And thank you. Can you elaborate a bit on what is being done to increase shareholder value with the new IR firm, and what is your plan going forward?

Andrew Chung, President and Chief Executive Officer, Zero One Communique: Again, the the IR activities is is is very important alongside with, product marketing. We have been relatively quiet in the last two years simply because, you know, the the market is everyone knows about quantum. Everyone talks about quantum, but hasn't received attention. But then since, as I said, since the the alarm clock, triggered by Google in in December, the world attention, has the wicking has been wicking up. And then since then, we believe, with all these activities that are going on, is is the best time for us to start spending money on on IR.

So the step one was sign signing up with the OKO to, provide IR activities, mainly to to to to increase the awareness of, our our company to the investors world, related to quantum. A lot of people likes the quantum sector and would like to know where are the the the hidden gems. They're looking for the hidden gem, and zero one is a typical hidden gem because we are seriously undervalued. The the the market cap is only $45,000,000. And compared to all these, market size that we are we're we're going into and the opportunity that we have signed up and will be signed up and doing it in the in the near future is is is really tiny.

So so so that's why we have decided to it is the best time now to, to start investing in IR to increase awareness of of the company moving forward.

Brian Stringer, Chief Financial Officer, Zero One Communique: The next has to do with partnerships. And it's a simple question. Are there more to come, and what is the progress on those that you have signed up?

Andrew Chung, President and Chief Executive Officer, Zero One Communique: As I I think during the presentation, I have mentioned about that already. We we have been talking to a lot of these people in the last two years, but they are watching. You know, they are they they understand the the the need for quantum safety, but they are watching. They they they are the the the message around the world is very mixing and confusing. You know?

You you hear some people saying that quantum threat is here already. QDay is here already, but then you also hear a lot of people saying, hey. You're you're fifteen years, twenty years away. So they decided to wait. And then and then as I said, the alarm clock seems to have went out in in in December, six months ago, and suddenly all these people that we were talking to are waking up.

And some wake up, like, faster than other. And the typical example was a Taji starting to to to re reengage in in the discussion, and we signed the agreement and and made the announcement. And some we are in in in in discussion right now, and some are in very late stage discussion, and some just started. So a lot of things are are happening as we speak. So, I have no complaint about that.

This is very busy, and I wish we have forty eight hours a day. So, yeah, that's that's how I I I feel.

Brian Stringer, Chief Financial Officer, Zero One Communique: We've got a couple more questions, Andrew, which I'd like to get to. This one has to do with cryptocurrencies. And there's two questions here. I'm gonna combine them. The first is if Bitcoin or any other currency gets cracked by a quantum computer, what will be the result?

The second part of that, another question, which is the same area. Can you elaborate on the opportunity in the crypto market and explain how your technology would work to address issues in this market and the timing of when you expect these when you expect to see evidence that zero one will be a player in this market?

Andrew Chung, President and Chief Executive Officer, Zero One Communique: First of all, yes, this is very, very loaded question. First of all, I I have to say that, the short answer is, whether, a quantum threat will have a negative effect or crack these cryptocurrencies? The short answer is absolutely yes. K. And the the cryptocurrency is based on elliptic curve.

The whole cryptocurrency concept is based on elliptic curve. The public the the the the key pair. The public key is the address, and the private key is the signature that you you you sign your your transaction. And and this has been assumed to be safe because it has been safe, you know, in the last fifty years. And only with the when when when Satoshi invented whether it's he, she, or they, when Satoshi invented Bitcoin in 02/2009, no one talks about the quantum computer.

We recognize quantum computers already at that time, but no one talked about quantum computer. It was still, you know, at least a decade away, at at that time. So, so he never, recognized the the the threat, but the threat is is real. So if the the signature can be forced by reversing from your your wallet address, the whole thing is toasted, basically. And so from a technical point of view, it's not easy, you know, to to fix because this is the fundamental bedrock of it's like you have a building, and there is a there is a layer at the very bottom that is vulnerable.

You know, if you deal with it, the whole thing would collapse. It's very difficult to to to be done. And that's why you hear a lot of people either they are saying that we will be doing something on it, but but that's nothing. Or they would say, this is decades away. Don't worry about it.

Kicking the can down the road. Right? And I I am holding the the the same comment since day one that it is is a problem that they have to deal with it. And if they are not QuantumSafe before q day, I can guarantee that it will be correct. Like, your wallet would would become zero one day when you when you wake up if it is not not quantum safe.

So so as a matter of fact, you know, we have been talking to a lot of partners in the the sectors that are well, not considering or or actually having plans to to do something converting coins to become quantum safe. And, I have to also say that we we are a technology company. We we build technology. Okay? We build product, but we are not a cryptocurrency marketing company.

You know, we are not Binance. We are not Bitcoin. We we know we we have to partner with someone in that industry, and we provide the technology for them. Again, you know, like, if you remember, this form squarely into our second revenue generator, which is that we are providing the technology helping other helping the the cryptocurrencies player, for a fee and, revenue sharing of the the token the the QuantumSave token in order to help them, market the QuantumSafe token. And we are in in some some, very some are early stage, some are very, very late, advanced stage discussion, in that sector at this point as we speak.

Brian Stringer, Chief Financial Officer, Zero One Communique: Thanks, Matthew. And there's several questions, but I'm cognizant of time. So I'm gonna, this will be the this is the final question we'll table today. And for those of you who have other questions outstanding, please don't hesitate. Give myself or Andrew a call or an email, and we'll respond.

Andrew, the last question today has to do with q day. And, since Andrew, I know zero one is not a quantum computer, but I expect when q day comes, Zero One will certainly benefit. What is your personal opinion as a guy knowledgeable in technology and quantum on when q day is coming? So it's asking for your personal opinion.

Andrew Chung, President and Chief Executive Officer, Zero One Communique: Yeah. Personally, I I believe, the commercial q day commercial q day there are two q day. One is commercial q day. One is national q day. Okay?

I'm not gonna comment on national q day because I don't know. You know? Like, you know, if we likely the the the national level technology, like, from the NSA or c the FBI, whatever, usually, they have some special equipment that they contract their, vendors, to do it. So with this, they usually are about three to five years ahead of the the commercial, level. So, so there's a chance that National Q Day has already arrived two years ago at least.

Okay? So, but then I I'm not only going to focus on commercial Q Day because as I said, I don't have, provable data in the National Q Day. It's only my my my my own personal guess. But for commercial q q day, there are all kinds of writings on the walls already. And a few months ago, I would just still say that, you know, it is a belief that is coming in a few years.

And then but then the the IBM announcement maybe a week and a half ago really conforming to to my belief. IBM says, as earlier put up in in my presentation, IBM says they are expecting a full scale, fault tolerant quantum computer by 2029. Okay? Full scale, fault tolerant quantum computer can guarantee the q day. And and so that means from IBM's road map alone, q day is the latest 2029.

And and and all the the other competitors are going to strive to beat IBM. And, again, we fully expect some people who never, publish their their quantum computer road map such as those people in in Russia or China, they could have have have one coming up, you know, all of a sudden out of nowhere. So so if if I were to put, a guess, I would take that, the the gap between now and 2029, cut it cut it in half. So sometimes, around '20 late twenty twenty six to, late twenty twenty seven, within that twelve months of time, very likely, you know, something would happen and would would would have a quantum computer allowing queue date commercial queue date to happen. Right?

So so that's my my best guess, you know, from deriving from all the writings on the wall.

Brian Stringer, Chief Financial Officer, Zero One Communique: Thank you, Andrew. And that wraps it up for today. I'll turn it back to you for closing comments, Andrew.

Andrew Chung, President and Chief Executive Officer, Zero One Communique: K. Yeah. Thank you again, Brian. So, thank you everyone for joining our corporate update. I am, again, as I said, I I'm fully expecting 2025 to be a very, very massive year for us, so I couldn't wait for the next meeting in about three months.

So so hopefully, to see you again in three months and giving you more good news and more update on the on the development of the company. Again, thank you very very much for joining.

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