DroneShield Limited

Welcome to those joining the DroneShield investor call covering our 2025 annual results. I'm Oleg Vornik, the CEO and Managing Director of DroneShield, and joining me today are Carla Belenko, our Chief Financial Officer on my right, and Josh Bolo, our Head of Investor Relations on my left. Angus Bean, our Chief Product Officer, is unfortunately unable to join us today due to customer travel commitments overseas. We will aim to speak for approximately 15-20 minutes presenting the results followed by questions. Please submit your questions well in advance so we can start immediately with the questions following completion of the presentation. 2025 has seen a record revenue of about $260 million, about a Forex increase on the previous year. Importantly, it has been a profitable year for us of about $3.5 million profit, being also $33 million of underlying profit before tax, and importantly, having $15.9 million of net cash from operations. This reinforces our aim to have rapid growth as well as being profitable and operating cash flow positive moving forward. The pipeline has slightly increased from 2.1 to 2.3 billion in the last month since we presented the 4Q results and a lot of it was due to our increase in the Asia-Pacific pipeline specifically. The pipeline corresponds to about 295 deals. Great diversity of deals is how we have certainty of ongoing business where there's diversification across the stages of maturity, geography, products, customers, and other factors. Some of those deals are significant. There is about 18 deals over $30 million each, and our largest deal being about $750 million. Previously, we advertised this deal as about $800 million, but with being a European deal and the Australian dollar continuing to strengthen, the Australian dollar value of the deal has slightly reduced. DroneTool continues to be significantly well positioned to win in the exploding counter-drone market. We have 160 employees in about seven countries around the world, and that includes over 350 engineers. We continue to invest significantly in R&D in this rapidly evolving landscape, and it's about 70 million plus of R&D that we spend every year. And we continue to have significant cash balance of over $200 million to support our growth. To recap on top of what I was saying earlier about the record revenues, the SaaS is continuing to grow and our goal is to continue to ramp it up to the eventual aim of over 30% a year over the next five years. And the growth in SaaS will be reached through having multiple streams of SaaS over increasing amount of hardware in our space. We're familiar with some of the recent market commentary about some of the software companies that have been sold off. And the big difference in the DroneShield case is we have an integrated hardware and software solution where a lot of our IP is really deeply inside the hardware. as well as software. And the data we use for our software is not something you can easily just scrub off the internet. So when you're looking at the drone signal data, you have to collect it in a number of countries, often very sensitive situations. So very high IP that cannot be easily disrupted by the likes of ChatGPT. Along with the record revenue growth, we're seeing significant matching growth in customer cash receipts and big increase also in the committed and also recognized year-to-date revenues and cash receipts already going into 2026, a very strong start of the year. We talked briefly about the profit where the underlying profit before tax for 2025 has been about $33 million and then showing the significant operating leverage going forward. What I mean by that is with the roughly 65% gross profit margin as the revenues grow, that is going to outpace the growth in costs resulting in what we're aiming to be increasingly profitable position. And the bottom right-hand chart is the MPAT to EBITDA bridge. I'll leave it as red, essentially $36 million in underlying EBITDA with $3.5 million statutory MPAT. If there are any questions on that, happy to answer that. The sales pipeline. This has largely been covered when we presented about a month ago, so one change, as I mentioned, is the increase in our Asia-Pacific position, where a number of countries bordering China are significantly concerned about the Chinese drone threat, and we're continuing to see increase in demand there. But overall, to recap on the key themes, U.S., We believe we'll have a number of growth factors. So in addition to the military, where there is a trillion-dollar record defense budget for 26 and $1.5 trillion defense budget proposed for 27, we're expecting to see significant public safety market, not just with the safer skies scenario, legislation enabling police to take down drones but also significant funding applied ahead of the fifa world cup in june july and we expect to see meaningful sales between now and that time and also going forward importantly we believe the police will be a bridge towards the counter drone being seen less so strictly military type of solutions and more into the civilian solution so then increasingly deployed by critical infrastructure operators, airports, and even corporates. In Europe and UK, we have opened our sales office in Amsterdam, managing our local distributors around Europe, and both Europe and UK are driving our momentum significantly at the moment. underpinned by everything you're reading in the news about Ukraine and the general instability there. Europeans realizing they cannot rely on U.S. for their security. And being Australian is a great neutral position in terms of appealing for sales for both the European and the U.S. markets. In Australia, DroneShield has been selected on the panel for LEN 156, which you and we anticipate for there to be significant amount of business for us, even starting from this year and this $1.3 billion program. We have approximately $79 million in inventory as of 31st of December. That combines $26 million in finished goods as well as $53 million in raw inventory, which is largely the long lead items to ensure that we can deliver to our customers in a short amount of time. We have moved to an enterprise. to really push out on our goal of moving production from 500 million a year to 2.4 billion by the end of the year, which is underpinned by the new 3,000 square meter facility in Sydney, as well as our manufacturing hubs in the U.S. and Europe, which are being finalized as we speak. 2025 has seen inventory impairment of about 10.3 million, constituting two factors, the 8.5 million in finished goods, which substantively relates to DroneGun Mark IV outselling DroneGun Tactical. We believe it's a one-off situation because we essentially introduced two product lines with the Mark IV being the success to Tactical within a couple of years of each other, and we do not intend to introduce successor versions to the DroneGun Mark IV and RF Patrol, as we believe that at the hardware level, those are essentially as best as the technology can get within those form factors. And the future versions of those technologies will look entirely different. And therefore, we do not believe that similar sort of impairment is likely going forward. the $1.8 million in raw materials, so a lot of it was linked to us moving to the new ERP, and it's in line with FY24 and payment of $4.6 million. On manufacturing, as I mentioned earlier, we are expanding from $500 million a year to $2.4 billion, and that includes the European and the U.S. Assemblies. For those relatively new to our story, we have essentially two streams of products. You have the dismounted, being the RA patrol, body-worn drone detector, It's a hardware that has AI on the edge, so SAS software that lives inside of it that we do quarter the software updates on. And then there's DroneGun, which is what we've historically been most well-known for. In fact, those observing our news probably would have seen with Electronic Arts' major game adopting DroneGun as one of its key weapons. But, in fact, DroneGun has only been just under 20%, 19% of our revenues in FY25. And, in fact, the business is fundamentally moving towards being a diversified company with our on-the-moving fixed-side drone sentry system constituting just under 40%, and our air patrol being just over 40% of our revenues. And SentrySiv, the civilian-specific subscription-based product that we launched last year, I think, sector grows as well. Our SaaS strategy is separated into three streams. You have the device level SaaS, so today when you buy RF patrol drone CenturyX that comes with RF AI detection software, and then we're currently trialing the RF AI attack, which is AI-enabled defeat software that will be a paid product from about the middle of the year. Then we do AI that sits inside the cameras, and then also utilize third-party AI for radars, and, of course, Sentry C, which is our own SAS as well. And then the side SAS, so when you have a base or generally maybe a critical infrastructure facility, you'll be having a number of sensors, drone shield, and third parties stitched together by our drone Sentry C2. Or perhaps commanders with tablets with our Sentry C2 Tactical. And then our latest product that we introduced at the end of last year being our Drone Century C2 Enterprise, when you have an entire region or a country looking for patterns of drone incursions, drone attacks. So the idea, when I was saying earlier about the SAS getting to 30% of the revenues over the next five years being our goal, for example, you might be buying Drone Century X, and on that you might have our FAI detection software, and then our FAI defeats, you'll probably be pairing DroneSentry X with a camera that will come with our DroneOptID SAS, probably a radar as well, which will have its own SAS. It will probably sit on a base underpinned by DroneSentry C2 and potentially even in the region always seen by DroneSentry C2 Enterprise. So this is an example of how multiple SAS packages can apply to a single piece of hardware. Sometimes we get asked, what's a small company at the end of the world in Sydney able to do to compete against large defense players? And historically, when you think about defense, you think about perhaps U.S., Europe, Israel, maybe South Korea. You don't think about Australia. And we have been lucky to an extent of being in this game right from the start and deploying significant engineering force on this. And also being in Australia, we knew that we cannot sustain ourselves just with Australian markets, so we became an export business from day one. In fact, today, About 95% of our revenues are export, and I'm expecting the trend to be similar going forward. And so as a result of this truly global threat being the drone attacks, we developed distributors in about 70 countries around the world, and now we have active customers in dozens of countries around the world. And with that, over time, Australia also being a very good base for engineering, we developed solutions which are smaller, lighter, more effective for both detection and defeat, and also those relationships with end users around the world, Australia being a great country, again, in terms of the relationships. with these Western and Western Allied countries that feed us. Honestly, probably more information that we can do with in terms of rapidly changing our technology roadmap to adapt to the latest drone threat. So a number of commercial and technical differentiators. In terms of specific competitors, what we generally say is that within the niches of counter drone that we choose to compete in, we are the dominant player. So if you think about body-worn drone detection, our RF Patrol is, we believe, the leading product by number of units sold around the world. There are a couple others, so MyDefense has a product and Design has a product, but we believe that we significantly outsell them based on what we're seeing. And similarly, for handheld defeat, we believe DroneGuard is the best-selling product of its nature around the world. In the on-the-move detection defeat, the closest product to DroneSentryX would be a product that Air Environment has, but it's a pretty small part of their business, and anything in the long term, this tends to be a cooperative relationship. In terms of the C2 solutions, there are a couple of competitors, so we're listing D-Drone and Endural, but I think we have a number of unique differentiators on both of them, and we don't necessarily compete with Endural being a much higher cost and strictly military solution compared to DroneSentry C2. Last thing to add here is that the traditional defense primes are not competitors and really more customers because that is required to be successful in this cost asymmetric market. Cost asymmetric meaning if you've got a $500 drone, you can't really be fielding a $10 million solution. And so with that, we see the traditional primes as customers. On the corporate governance, many of you will be familiar with a lot of the media scrutiny we had at the end of last year. We have engaged Freehills, a Tier 1 legal firm, advisor to give us essentially gold standard in corporate governance. And with that, we have yesterday revealed a number of updates of our policies, the trading policy, disclosure policy, the medium shareholding policy, and others. And in my view, what has actually happened is the business has been growing incredibly quickly. So, on the indices front, for example, we joined all awards in March 24, ASX 300 in September 24, ASX 200 in September 25, and now, depending on how fast we grow, we might be knocking on the door of ASX 100. So, as a result, when you grow so quickly, policies, procedures can sometimes fall behind, and this was an opportunity for us to establish gold standard for this particular area, much like we are today. running really quickly, recapping our, changing our policies for a much larger business right across the company. We made a number of hires, so head of people and performance at the end of last year. Josh joined us in January this year, and also chief operating officer who joined us from a similar position from TALIS, where he brings a wealth of that high-end operational experience. The last slide, and then we'll turn to questions. And I encourage everybody, again, to please be asking us questions. So as we stand today, we are excited to be starting to launch the next generation of hardware across our product family. So this will be towards the second half of the year and into the 27. The counter-draw market continues to have very low saturation because you mines about 10 years ago really started having negative, that sort of nefarious impact from the start of the Ukraine war, so thinking about only five years ago, and counter-drone is a derivative of the drone market, so military started to buy or looking to buy in any meaningful quantities only in the last five years, and when you're selling to the government market, the wheels can grind slowly, right? And so as a result, I would say militaries have probably sunk 5% market saturation, civilian market has closed to zero, and therefore we have significant opportunity in front of us. The sales revenue we talked about is going from about 5% current to about 30% and continuing to expand our market share. So in addition to selling expand into training solutions, support counter drawn as a service, and other related initiatives to maximize, I guess, that ownership of the customer and providing the services to them. We talked about establishing of the European manufacturing facility and also in the U.S., and we believe that the next 12, 18 months we'll start seeing initial material sales in the civilian space, such as data centers, potentially airports, and other key customers. We're continuing to work on our processes and systems due to our rapid growth and in a very disciplined manner, looking at the opportunistic M&A. Now, there are no competitors that we'd like to buy, but we're always interested to look at emerging technologies counter-drone technologies in addition to what we may be doing in-house and we're really well positioned to assess what makes sense due to our understanding of the sector. And as we look over the next five years, we're looking to get to the target revenue of over a billion dollars a year. This might sound like a lot, but then we quadrupled our revenues last year alone, so that will hopefully give you some sense of our ambition. And also just the fact that the maturity of the market is still so early and the customers are going to be putting increasing orders, hopefully. Most of our revenues are from repeat customers, right? So people placing increasing orders as they get more comfortable with the idea of having counter-drill solutions and more budgets to go with it. probably the last point to say so with that we'll conclude the presentation part of that session and turn to any any questions okay the first question is how likely do we think Is it to sign a $750 million deal with Europe and do we have production to deliver on that deal timely? So it's not going to be trivial. We think that we're well positioned and it's the same customer who gave us a $62 million order in the middle of last year and smaller orders in addition to that. So we have an existing really good relationship with that customer. And the production capacity, so depending on how fast the customer wants to execute on the deal, if they say to us, go as fast as you can, I believe we should be able to deliver it in batches over perhaps under nine months. If the customer wants to stagger it, which is entirely possible in stages, it might be, say, over two years or so. So that's my best estimate at this stage. I think the next question, I'm trying to rephrase it, what is our announcement level for deals? So we continue our approaches of the past where approximately 10% of last year's revenue has been our announcement threshold. So for 26, it will be $20 million unless there is a strategic element to announce a smaller deal. So there's a question about 18 of the $30 million deals. When are we going to be announcing them? Well, hopefully once we win them, we will be announcing them. The next question is about, does DroneShow have plans to expand its drone technology into different domains, such as naval drones used in Ukraine conflicts, and do we see it as an area we could pivot to? Absolutely. So when you see us talking in our announcements about counter-drone, we actually refer to it often as CUXS, not CUAS, A being aerial. So, we consider drones being all domains, whether it's ground, naval, or flying machines. And the good news is that the technology that we use is equally valid for flying machines, swimming machines, and crawling machines, and we can be effective on all of those. The only time when the technology stops working is for the underwater drones, so UUVs, where our command and control is still effective, but for the detection, for example, you'll be most likely looking to use a sonar. So if we see more of that being where the market is heading, We would simply focus on integration of most owners and lead with our C2. But the vast majority, we believe, for the foreseeable future would be aerial ground and what we see in Ukraine, as you said, being the swimming drones. So I think the next question I might pass to Carla, our CFO. The January update referenced gross margin of 65%. The statutory FY25 number was 61% after the inventory impairment. Should we think of 65% as the normalized run rate?

Thanks, Oleg. Yes, so our average normalized run rate for the gross margin profit margin should be seen as 65%. There's obviously items that will affect this margin, and those items will be the percentage of system sales versus dismounted sales. Our systems carry a lower gross profit margin, and the reason for that is because of the external third-party componentry that is incorporated in the system, such as the cameras and the radars. Those items carry gross profit margins between 15% and 30%. Therefore, we do think a 65% average moving forward for our gross profit margin is our aim. Thanks, Sonia.

Thanks, Karl. The next question is about Bundeswehr, the German Army. Are they a customer of our products and do we have plans to supply the Bundeswehr? Yes, Bundeswehr is a key focus for us. And, in fact, if you follow the German defense market, there's a high-profile defense exhibition in Germany that is just concluding now that we're at. So, yes, it's very much a focus for us. Germany is a key European market. The next question is, what is our current penetration of Ukraine and neighboring NATO markets? So we have hundreds of detection and defeat systems deployed in Ukraine and continuing to add more. We have systems deployed in Poland and a number of other areas. So yes, absolutely. We are deployed, I want to say, probably with about 10 or 12 European NATO countries. plus obviously U.S. and Canada, as far as NATO is concerned. The next question is, is there a goal for the stock price? I mean, as high as possible, but unfortunately, I only get to influence it so much. How much revenue do we estimate currently comes from civilian buyers? Do we estimate a shift? So today, Almost all of the revenue comes from military, border security, and intelligence community, with a bit of public safety being police. I think the question was referring more to customers like airports and data centers. So today those are minimal, but we're starting to see green shoots of demand, and if you looked at our Total addressable market, we're estimating about 30 billion TAM total addressable market for the military and another roughly 30 billion for the civilian market. And we think over the next five years, our revenues will truly become more 50-50. And once the civilian market gets going, I think it can evolve potentially much faster than the military market has. Next question, given the continuous innovation in the industry, what gives us confidence that the inventory is sound and are we able to reduce the inventory risk in terms of moving to just-in-time manufacturing? So as I briefly mentioned, The inventory write-down this year was a bit of a unique situation, where we introduced two drone guns within several years of each other, and essentially our newer drone gun ended up cannibalizing some of the older drone gun sales. All the other way continued to sell drone gun tacticals, we just decided together with our audience to take a prudent approach and do the inventory write-down. Going forward, we don't many of our product lines today, but rather really different product form factors. So I don't expect for there to be cannibalization, meaning if you want to have a jammer in the shape of a gun that you're holding in your hand, I believe DroneGun Mark IV is kind of as good as it will get. So there will be better jammers, but there'll be backpacks that will need more space and so on. I don't believe that just-in-time manufacturing really works for this industry because some of our longest lead circuitry has a 25-week time. I don't believe it will change much because, again, of just complexity of the technologies that we're dealing with. And our buyers want to be able to fulfill small orders quickly, right? So our goal, which is largely in consultation with our sales force and customer expectations, is to be able to deliver orders in single digits of millions instantly. So you probably would have seen we did an announcement at the end of last year. We received an order about $5 million on the 30th of December, delivered it by the 31st of December, which was pretty incredible. Then the $62 million order we had in the middle of last year, we delivered within two months. And then the $750 million order, I talked about fulfillment in under nine months. So for that, you need to hold inventory. But we're pretty happy with the raw and finished inventory we're holding. Please remember that raw, as I was saying, is largely long lead time. well, they're not finished goods. And also keep in mind that, for example, Iraq Patrol and DroneGun and some other products we have have interchangeable parts that you can use in between the products. And we're trying to have as many interchangeable parts between product families as possible. What are our plans for increasing effective range and distance of our products? I guess it's the same thing, range and distance. So my first comment, somewhat flippantly, is that more is not always better. So, for example, for the detection, more range you get, often more false alarms you get, and our customers don't necessarily want to be able to see 20, 30 kilometers out, and at some point, physics kicks in as well, right? So a lot of our work with customers, if they're very new to counter-drone, is saying, okay, well, if you come with an expectation of detecting a proper missile, 200 kilometers away, there's nothing that will detect a small drone 200 kilometers away. So explaining that there is natural physics limitation to range. But a lot of it is just pushing the envelope of physics, right? So you're saying, okay, there's noise flow and radio frequency. How do you see through the noise flow? How do you How do you reduce the false alarms? There are quite a lot of parameters that you want to optimize. How do you detect never-seen-before drones? How do you deal with the Chinese drones, which are hiding behind other bits of noise, which are running away from you when you're trying to disrupt it? So there are a number of challenges in addition to distance, but that is ultimately why you have 350-plus engineers working on that problem with a lot of drone signal data and just continue to get information from drones from their customers. The next question is about, can we provide some more detail about the types of drone deployments by China, which are behind the concerns that our Asia-Pacific customers have? So, A well-publicized example, this has been dated about two years ago, has been of a Chinese drone landing on the deck of a Japanese naval ship. Now, you imagine massive embarrassment, loss of faith, loss of face, and so... That's an example, right? So small drones are buzzing over military facilities and just generally harassing both the civilian and the military targets. So this is what our Asia-Pacific customers are looking to protect against. Has DroneShield considered underwater drones? and drone capabilities, anti-drone capabilities and detection. Yes, so we actually first came upon the concept of underwater drones and what to do about them about five years ago. Those who have been following us for a while would have seen we introduced a partnership with a sonar company and Our job is our command and control, so DroneSentry C2. Again, remember, we're not a drone gun company. We have much more than that, so we make a command and control solution that various modalities of sensors plug into. And so we had a sonar compatible with our command and control system, started marketing it. It was five years ago. Not a single person bought one. Now, the conclusion we reached is that the market just wasn't ready for it, and my view is that the market is still not ready for it. underwater drones, but that threat is there, and underwater is significantly different, as I was just saying five minutes ago, to every other types of drones, or drones that crawl on the ground, or on the surface of the water, that fly in the air, because traditional physics of radio frequency in the air doesn't propagate well underwater. So you need sonar for the detection, and something else, be it nets, torpedoes, it depends really on score for the defeat. But our role in all of this will be providing a command and control solution, which also will protect against drones from the air and the ground and so on. Can we quantify the current order backlog and how much of the revenues expect to be awarded in this financial year? So if you look at the charts, we are sitting at a bit over $100 million in committed revenue this year and we recognize roughly about 20-ish or so. So that means the backlog of about 80 and virtually all of it is for this year. Plus, obviously, the revenue that we'll actually secure. Now, my controversial view is that I don't like backlog. Backlog means a customer has placed an order and is patiently waiting, or sometimes impatiently, waiting on delivery from us. My goal is to deliver goods under order as soon as possible to customers. So you find that big defense primes often advertise their backlog. So they say, hey, I've got a five-year contract. I'm going to deliver this and that over the next five years. And that is seen as a positive. Great, but in our industry, it's actually negative in the sense that you want to be rapidly delivering to customers and not making them wait. So the vast majority of the revenue I anticipate for 26 is not inside of that 80 or so million current backlog, but the new revenue that we'll earn and deliver and recognize from now before the end of the year. What likely drone threats exist or may exist that DroneShield does not have solutions for, for example, cable drones? So I think the person is referring to the fiber optic drones. So there's a slide in our presentation which talks specifically about why fiber optic drones are not a threat. So for example, we are effective against fiber optic drones because we offer a command and control solution that integrates with radars, which can detect anything that flies, including fiber optic drones, and also, depending on the customer, solutions like HPM that can take down those drones. But my view, that thing I said to many of you before, is that radio frequency is the backbone of drones, and Fiber optics exists very much around the edges with significant limitations. You think about flying a drone with 10 kilometers of fishing line attached to it, wrapping around trees, buildings, you fly a bit too quickly, you snag the cable. It's really very much an edge case and RF to drones, I believe, will be a bit like wheels on cars, like whatever cars will look like in 50 years, they'll probably have wheels on them because we've flattened our world and built a lot of roads. So similarly for how much was invested in radio frequency. Now, that's not to say there'll be new types of RF, which is like I was saying, the Chinese are now putting what was five years, five years ago, sensitive electronic warfare techniques into $5,000 drones designed to avoid detection and defeat. We're starting to see a slow rise of cellular-controlled drones, but tethered drones, I don't believe, have that much future, and our existing on-the-go and fixed-site solutions already have a way of dealing with them. The next question is, 28 million of our FY26 committed revenue is the SAS pipeline tracking to X of 25. So about 7% of SAS for FY26. How are we going to get an uplift to get it 30% by 2030? Great question. So I talked before about the three strands of SAS, the device level SAS, which has a bunch of elements to it, like the detection, defeat for the radio frequency to separate SASes, RFAI, RFAI attack, talked about drone OptID SAS, the radar SAS, the Sentry SIV SAS, and then the drone Sentry C2, and the C2 Enterprise. So today, out of the roughly four and a half thousand pieces of hardware deployed around the world, maybe only half actually receive SAS, the other half being drone guns, which don't require SAS by design. Going forward, as the technology continues to rapidly iterate, so hardware probably has a three-, four-year cycle, I would expect over the next five years for us to have tens of thousands of pieces of hardware, almost all of them receiving SAS. And not just one piece of SAS on every piece of hardware, but having, like an example I was giving with DroneSentryX, you have one piece of hardware, but then you might have RFAI. RFAI attack is part of a system. So it has a radar SAS, camera SAS, and the C2 SAS. So having multiple pieces of SAS maximizing But then also on top of that, I talked about the wallet share, right? So we're talking about the training and kind of drawn as a service. So there's quite a lot of elements that we are actively exploring with customers at the moment. The next question is about how do we see ourselves in terms of the World Cup this year in the U.S.? ? So we talked about the Safer Skies Act, which enables police and public safety officers more generally to use jammers to take drones down going forward. This, we believe, will really drive adoption of counter-drone technologies, those stadium venues. So we have a public safety team inside of our U.S. office run by Tom Adams, an ex-NBI guy, and we are actively engaging with a number of police agencies around the U.S. at the moment and believe we'll have meaningful sales from that between now and the World Cup. What countries or theaters of war are considered no-go for drone shoots? So pretty common sense, right? We would not work with Russia, China, North Korea, Iran. I mean, essentially, any country which is either prohibited or gray zone list by the Australian government, because we do need export licenses to sell, and we're all clear what those are. We've been working with the Department of Export Controls now since the beginning, and we basically would never shift to those countries. And the processes are very strict, right? I mean, even though our products are entirely safe for humans, so none of our products can hurt a human being or even a drone for that matter, the strictness of export controls is comparable to a proper weapon. So, for example, a guy who runs our shipping department is an Italian guy who used to be shipping torpedoes around the world on behalf of a... Italian defense prime and so it's the same strictness of the process in terms of them users entering into paperwork not to share our equipment with anybody else and ultimately this is not just between us and them but also involving Australian government so exceptionally strict control processes. What are some of the drone related verticals that look interesting to us from an M&A perspective? So we'll always stick with counter drone as we want to continue playing in what we know. There are technologies like high power microwave, which I find really interesting and it fits in our non-lethal but complementary to drone. vibration coming from drones. So essentially the way I see this is the equipment needs to be cost effective. It's hard to justify having a $10 million piece of equipment against $200 drones. It needs to ideally protect an area, not just 200 sort of meter range around it, unless it's super cheap so you can have mass volume of these things. And ideally non-ITAR because we want to have the market of all of the NATO and NATO allied countries. And the current AUKUS process in terms of Pillar 2 is streamlining a lot of that ITAR stuff between Australia, UK and the US, but ideally we want to be continuing to focus on non-ITAR technologies. The next question talks about how was our exhibition at Enforce Tech in Nuremberg. So I wasn't there myself. Angus, our chief product officer, was leading our delegation. We have a number of European team members who were at Enforce Tech, and the download I had so far has been an exceptionally positive meeting and helpful for our folks on Germany with Bundeswehr as well as the rest of the European market. So the next question is, why has DroneShield not introduced phantom shares to attract and retain talent and not put pressure on the share price? So the board regularly revisits what are the most appropriate structures. In my opinion, phantom shares are not an optimal structure, and so we haven't been introducing it, but this is something the board does review regularly what makes most sense. There are increasing reports of hybrid attacks at airports throughout Europe. What are our plans in that space? So we have had equipment deployed at airports. For example, you might have seen news articles with the Drone Century X at Copenhagen Airport a few months ago. I think airports more generally... struggle bureaucratically. So in some countries, like in Germany, actually, Bundeswehr has technically a lot of influence over what gets deployed at the airport. So it just becomes a kind of too many cooks problem where you have airport, you have the military, you have government more generally kind of all coming up with what's the most appropriate solution. But I think you're right in that the pressure continues to escalate on airports to deploy aircraft. counter-drone measures. As today, you mentioned you stop all flights for 15 minutes, 30 minutes, an hour, and that's a significant disruption. And the alternative is even worse, plane taking off and a drone blowing out an engine, right? So we are talking to downward regulators. We're talking to airports directly. We're talking to military. So the idea is that you just keep pushing, chipping away at the stakeholders until eventually you kind of break through and start deploying gear. The next question about a viewer saying they watched a terrifying video on Chinese robot advancement moving to RF control. So, I mean, robots can be seen as UGVs, unmanned ground vehicles, and this is very much part of our market. So UGVs, ground vehicles, UAVs, aerial vehicles or flying drones, and USVs, so unmanned. The physics is exactly the same in terms of how radio frequency, radars. Radars work a bit not so well close to the ground because you get a lot of ground clutter coming up, but radio frequency is generally pretty good. Have any shipping companies expressed interest in DroneShield to protect ships through conflict areas in Red Sea and Iran? Yes, we have some. shipping companies using our kit already. This normally needs to be a bit of a layered arrangement of government forces being on those ships and them having our kit, which ultimately links to if you, who can own, possess jammers. So low high seas essentially says, well, anybody can do anything. But then, of course, those ships need to come to harbor eventually. So security on it, they'll be able to use out here and some of them do. I'll pass the next question to Carla as it deals with the net profit margin. So I'll read out the question. I understand we're investing heavily to scale, which is importing reported net profit, but net margin is low. When do we expect net profit margin to material improvement and what level of margin do we believe is achievable in FY26 as we continue to scale?