archTIS Ltd (ASX:AR9, OTCQB:ARHLF) closed the June 2026 quarter with annual recurring revenue of $14.8 million, record full-year contracted sales and growing momentum across major defence programs in the United States and Australia.
The data security specialist reported fourth-quarter revenue of $3.5 million, up 92% on the prior corresponding period, while ARR increased 209% year-on-year across a diversified base of 225 customers.
Gross margin remained at 74% for both the quarter and full year as archTIS continued shifting its revenue mix toward higher-margin proprietary software licensing.
The quarter marked the first full reporting period following the Spirion acquisition, which has expanded archTIS’ North American reach and reduced its reliance on a small group of defence customers.
Record sales and broader customer base
Contracted sales reached a record $14.1 million for FY2026, representing a 65% increase from $8.6 million in FY2025.
On a pro forma basis, including Spirion sales before consolidation, full-year contracted sales were $16.6 million, up 94%.
Upselling and cross-selling emerged as a meaningful growth driver, contributing $2.7 million across 12 transactions and accounting for 19% of total FY2026 sales. This compared with just $200,000 in the previous financial year.
The acquisition of Spirion also helped transform the company from a defence-heavy business with around 60 customers into a broader operation serving 225 active customers across about 12 industry verticals.
Top-10 customer concentration fell from 68.5% to 32.3%, while Australian Defence’s share of revenue declined to 16.6% from a peak of 64.5% in FY2024.
Defence programs advance
A key operational milestone was the completion of final production testing of archTIS’ NC Protect platform by the US Department of Defense.
The software passed all 60 test cases, covering US personnel, releasable users and attribute-based access control data segregation scenarios, with no remaining technical barriers identified in the evaluated high-assurance environments.
archTIS has since advanced commercial negotiations for a potential enterprise licensing arrangement across a substantially larger US defence user base, although the timing and scale of any award remain subject to US government procurement processes.
Deployment also progressed under an existing contract with a US-European military alliance, where NC Protect is being implemented across multiple civil-military security domains.
The initial contract is worth about $416,000 for calendar 2026, with two option years potentially adding a further $805,000.
Australian Defence contract supports FY2027
Subsequent to the end of the quarter, Australian Defence awarded archTIS a $3.2 million contract covering the renewal of Kojensi Enterprise licensing and additional development, enhancement and maintenance services.
The 12-month contract began on July 1 and comprises $1 million in recurring software licence revenue and $2.2 million in services. Australian Defence also holds options to extend the agreement for up to two additional years.
archTIS said $1 million had already been received under the contract, helping support its funding position entering FY2027.
The company also signed a technical partnership agreement with secure collaboration software provider Mattermost during the quarter. The companies intend to explore integrated solutions for defence ministries, NATO allies and coalition partners.
Costs decline following Spirion integration
Operating expenses fell 11% quarter-on-quarter to $5.3 million, marking the second consecutive quarterly reduction as cost-saving measures introduced after the Spirion acquisition took effect.
Management expects expenses to continue declining as the company aligns its cost base more closely with recurring revenue and overall sales.
Operating cash outflow was $3.8 million, including $800,000 in one-off Spirion acquisition, restructuring and credit facility costs.
archTIS ended the quarter with $2.9 million in cash and a further $2.9 million in trade receivables, taking combined cash, deposits and receivables to $5.8 million.
Deferred revenue increased 40% to $8.9 million, providing greater visibility over FY2027 revenue.