DUG Technology Ltd

Welcome ladies and gentlemen to Doug's interim financial statements for the FY25 year. Today we have Matt Lamont, founder and managing director and Daniel Lamont, who's acting CFO joining us. They're gonna take us through the financials. Just a bit of housekeeping, your research analysts are free to ask questions at the end. You can do so via the Q&A function or by raising your hand and you can ask them live. And you can ask those as you go along the way. Handing over to Dan and Matt.

Thanks, Dave. Let me share the presentation. It's my pleasure to be with you again today with Dan. And I think it's exciting times for Doug, although the results are not quite what everyone would have hoped for. We're really excited. So let's get on with it. So the highlights of the year is the Audible. It's now growing again and it's growing on the back of the MPFWI. Very strong forward momentum. The software revenue is up 22%. I've been sort of talking about that over the last few releases, saying that we're really excited about software and finally we're starting to see that deliver and I think we'll continue to see that accelerate. Revenue was down a little bit as we flagged it six months ago. We were going to be flat and unfortunately we ended up slightly down on flat. But an EBITDA was soft, but we've been investing a lot because it's sort of like being... two worlds for us, you know, very disappointing on the, on the share price side, but internally everybody can see what's happening. Everybody knows our technology. You can see our customers and our excitement and everything that's going on. And so it's, it's been a funny, funny six months in that regard in such excitement and, and drive and everyone's facing forwards internally, but, but it's uncertainty in the share market. Um, And the Elastic MBFWI projects do look really good. We have eight that are underway, a couple that are nearly finished, and we've had follow-on awards now. So it's going great. It really is. You know, just rethinking who we are and how we get that message across. Again, we are numerical physicists. You know, we're global physicists. We work for those global technology leaders in several different ways. We've made breakthroughs in geoscientific computing, in algorithms like elastic multi-parameter FWI, first in the world by far. We work on the most complex of data. We work geographically all over the world. We've got some of the best supercomputing facilities and some of the most energy efficient cooling systems for data. You know, to sell, to maximise our growth, we have to sell across the entire planet. And so we're now Open Abu Dhabi, so we're now on five continents and we're committed to delivering what we do globally. We're global to our core. So just as a reminder, services is where we do turnkey projects for mostly oil and gas companies, but also for companies carbon capture and storage for wind farms and for several other things. But most of the majority of the revenue comes from oil and gas. And that's where the Elastic NP-FWI revenue mostly comes from. It does come from software as well. The software is in 40 odd countries. It is around big data analysis, big data storage, big data mining. And yeah, we're really proud of the software. It's a modern, broad software suite that sets it apart in the industry. HPC as a service, although in its own right is disappointing and we've been relying on just a few clients and as they change internally, the one we lost that affected the results in oil and gas didn't go anywhere else. They just changed their policy on what work they were doing internally. But it supports and is a key part of the whole software story as well. Multi-client, this is a change. We've been doing multi-client for a number of years, a long time. We work for 12 multi-client companies. The change now is just that we all have our own multi-client assets. We've taken risk on multi-client projects before, but now we will have our own multi-client assets ourselves. It's a really big market and a really profitable market, and one perhaps we should have changed our strategy in a little while back. Doug Nomad, we're really excited by it. We haven't sold any, but we're very excited. It is genuinely mobile data centers or genuine edge data centers. It's different to... What's it different to, Dan? It's different to modular data centers. You know, modular data centers is what you'll see most everywhere else are like dongers. You know, you take them to a mine site and you get a builder in and he sets them up on stumps and then you get a plumber in, you get an electrician in and so on and so forth. And ultimately, a month later, you have a data center that's ready to go and it's very good and useful and a good thing to do. Ours are different. Ours you can turn on while they're on the back of the truck if you've got the power. You can sling it under a helicopter turned on. You can put it in the back of a Hercules turned on. It uses our immersion cooling. It's very cool, but it is differentiated. It isn't the same thing. It's genuinely mobile. And then, of course, there's the BAC licensing of our... of our patent and there's a really cool movie that they've put out about how that fits into what they do. And we'll highlight that link to you a bit later on. You've seen this slide before. It's our geographic spread. So you can see orange are the countries we've worked in. So we've worked most everywhere. They're genuinely global. And then there's our offices and our compute facilities. Of course, the new one on the block is Abu Dhabi. And then our dotted line is our global fiber, where we transport data and access to supercomputers and so forth around the globe. But one of the highlights, I sort of touched on it a little bit in that the excitement that is within Doug, because we can see the position that we're in and our guys are getting those interactions with clients. And because of that, and because we believe that we can have a period of sustained growth, we've been investing strongly for quite a while now. very strongly in the, in the elastic multi-parameter FWI pilot projects. They've taken a lot, you know, we rolled out a big chunk of technology and initially you get little issues and things you didn't expect and you work your way through that, which is why the pilot projects are important. But the results have been really great. Um, they're not, they're not, I think I expected incremental results for one or two reasons. We're not seeing incremental results. We're seeing quite startlingly better results. Middle East is important. We're getting access to some really big opportunities there now. And I think that's going to grow into a pillar in the Doug world. Again, if you see what you have, the aspirations that we have for sustained growth and the belief that we have that we can do it. and become a very significant player in the market, then you need the business development to support that. And that's what we've been putting in place. You need the conferences, you need the travel, you need the interactions. And so we've been investing in that strongly. Our R&D team is exceptional. You know, you don't lead the world in technology and license out your patents unless your R&D team is exceptional. And so it's made up of one percenters, what I like to call one percenters, and they're hard to hire. We've had a bit of a really great year last year. They're hard to hire, they're slow to hire, but we actually hired five last year, which is quite incredible. That's a fabulous year. And then in infrastructure, we raised money, as you're aware, to do the infrastructure upgrade, but an infrastructure upgrade was already underway as well. That is now complete and that gives us 20% headroom. And I think we'll talk about the other, the further infrastructure to finish off the rest of the room is now underway. Well, the planning for it is underway. The goalposts moved a little bit. The new computers are just so... energy rich, they're using so much power that they produce a lot of heat. And so we're having to up the ante on how much power we're providing to that new part of the data center and how much heat rejection we're putting into that new part of the data center. I'll pass now to Dan to do the financial slides.

Perfect. Thanks, Matt. So I think we touched on revenue at the top. So revenue is down 4%. We had services down 3% through the half. But we had a really good result through January with $13.4 million of awards, giving us a closing order book of $42.2 at 31 January. And this really sets us up for a strong FY25 half two. Software revenue was up 22%, which Matt's touch was a great result for the team and driven by customer renewal rates, success licensing our processing imaging toolkit, which is something that's relatively new for us as a business. and increased adoption in the offshore wind market, which is companies using our software to decide where they're going to place offshore wind turbine pylons. HPC as a service revenue fell 46% on the half, which as Matt touched on was a disappointing result, it's really important to highlight that the HPC as a service offering really helps us drive software sales. So the two together really interlock and work well for us as an overall offering to the market. we had employee benefits increased by 10% in the period. So a large part of this was due to the hiring of the technical team in the Middle East, which occurred mainly through July and August, 2024. And so those costs were carried through the period along with some relocation and training costs. We also undertook a restructuring initiative during the half relocating shared services from Australia to Malaysia and right-sizing some other teams. So that was a 0.7 US cost to us in the half with annualized savings of 0.9 moving forward. We had other expenses fall by 7%. So important in this fall was no third party computer. So over calendar year 24, we've had the arrival of our new Intel and then our new AMD computers, including some that arrived in July 2024. And this has given us great capacity to remove the need for third party computer. We see these new computers come through in the depreciation and finance expense lines with the step up there being associated with the new hardware and then the associated asset financing that goes with it. So at 31 December, we had 17.3 million of cash on hand and 24.3 million in debt. So this debt is predominantly asset financing, but contains some other smaller amounts as well. So that left us with net debt of 7 million for the period. Obviously in October 2024, we had the successful capital raising. So we raised 31.4 million Aussie. So just giving a brief update on how those projects are going and the use of funds. So we raised 19 million for the data centre infrastructure upgrades that Matt referenced earlier. So these upgrades are progressing through design and planning stage at the moment. We've had six and a half million for the Middle East expansion. So we've hired the team there. We found the office and the fit outs underway now. So it's working and moving along well. And Doug Nomad, we raised 3 million for. So we've had an early sales and engineering teams have been put in place. We've established the Malaysian supply chain. And we've also attended a lot of really key industry conferences there. is contract assets. And so what we're seeing as we move into new jurisdictions and we work with different organisations is we have less of an ability to negotiate payment terms and payment cycles. And so what we're seeing now is a lot of our new contracts are coming through as milestones rather than monthly progress billing. So what we had at 31 December was just a few of these milestones lining up such that it caused a material uptick in the contract assets at the end of the calendar year. So most of these material milestones are due to be unwound in the first quarter of this calendar year. We also have PP&E that's flat over the period and it's just worth highlighting there that we had the last delivery of AMD nodes in July 2024, so while we had some depreciation come through the books, that number's flat due to those machines arriving. So into cashflow payments to suppliers rose and it's mainly a timing thing as opposed to anything else. So the third party compute that we utilize over FY24, we were able to negotiate payment terms that stretched over a 12 month period. So we had the last of those payments come through an FY25 half one, albeit that we used the third party compute in FY24. We also had 6 million of cash invested over the period. And so the most of this is related to the final delivery of the AMD nodes that I referenced earlier in July 24. And then also the first round of infrastructure upgrades that Matt referenced. So then the final big item through financing is the 19.7, which I touched on earlier, which is the USD equivalent net of fees that was raised in that October 2024 capital raising?