DUG Technology Ltd

Thanks everyone for joining us for our FY26 half one results presentation. So we're going to get underway now. We've got a pretty good quorum in. We're going to run through the presentation first and then we'll open up to the floor for questions at the end. Over to you Matt.

Yeah, good morning everybody. It's great to be with you and to present these results this morning. Let's get going. So the numbers are starting to reflect the Malaysian Software as a Service and HP as a Service contract that we signed last year. So that came on a little earlier than we expected, so that's terrific. We have had a record half-year financial performance, hitting over $40 million in revenue and a significant, a very significant uplift in the EBITDA. And we're really seeing the service business continue to deliver and NPF WA imaging really being at the forefront of that for us. And the pleasing thing is that, well, that revenue is coming out of our new offices now. So just looking at some nice graphs, the revenue as we touched on is up 40%. And again, you can see that we've got some really nice year-on-year-on-year growth pattern coming through. And we certainly have no reason to expect that to stop any time soon, that growth pattern. EBITDA is up. The first half of 25 was not a great year. And so that... is not very representative of what the business can do. So it's a really nice result and tells us, you know, starting to show what the business can actually deliver. And super pleasing, the cash is really up. And this is, make notice at the end of January, we're at 21 million US, all the numbers are US dollars, of course. And so we've got a lot of cash in the bank relative to what we often have. And so hopefully that puts to bed any thought that we're going to need to raise money because we're cash generative. We won't be spending money. So services revenue, which underpins everything, is up 30%, which is super. and uh software revenues up 16 so again both of these are year-on-year growth and of course the hbc revenue expects very significant growth given the malaysian signing um of course the ebitda was normalized because of a ongoing court case which is which is still in play and uh It's been sort of an interesting result with me, the party, really winning. This is our timeline, just a quick look at it. And so, you know, in 24, we opened our Abu Dhabi office. Or more what we did in 24 was we put a leader into country and we started hiring people. We actually opened that office, which is pictured on the screen here, opened in 25. So we really, but we had an office, temporary office there up to that point in time. And Rio de Janeiro opened last year and is really delivering really well. And so that's the latest of the new offices. And we're not seeing any reason to open any further offices at this time. So everything that we do in DAG and everything we've ever done in DAG is all related. And it's all about this key component. key offering around numeric physics, you know, data processing. And if you're processing data, then you need software, and that's why we've written our own software and have done from day one. And you need high-performance computers, and that's why we've been building high-performance computers from day one. And then you need a business, and that's what we've been, you know, R&D, generating software, generating algorithms, running high-performance computing. So it's all part of doing the same thing, and including NOMAD, which is just HPC in a container, which we needed ourselves for countries where we can't take the data out of the country and we don't want to open a traditional data centre. So all of these things are related, but we're going to look at it in terms of these three areas, imaging, software, and the HPC backbone. So in terms of imaging, we're leading, we believe, the world in elastic NPFWI imaging. We're significantly ahead of our competition. We started on it a lot earlier. We believed in it very early on and we got a team on it and we've been pursuing it for a long time now. And we're increasing our team and we're getting after it more and more. So Although others are now offering NPFWI, they're a long way behind where we're at. And it is really delivering. And Elastic is just fantastic technology because we go from field data straight to the Elastic Rock properties. And the Elastic Rock properties are very important for oil companies and other companies to look at what the rocks and fluids actually are. MultiClient has been new and has been a really terrific addition to our offerings. Again, it's based on what we do. We earn a lot of, you know, it's around our service offering. We've got partners doing it, and you would have seen that Equatorial Guinea is a new project which is looking really well. Software is the heart and soul of everything, you know. It's so important. It's not stuff that can be developed rapidly. It takes years and years. You know, everybody, just as a sidetrack, you know, everyone looks at NVIDIA. I had this discussion about NVIDIA and saying, you know, and everyone's going, how good is the hardware? The main thing about NVIDIA is their software. What separates NVIDIA from AMD is their software toolkit. It isn't the hardware so much. It's the software. And software is so important, and software cannot be reproduced overnight. It takes years and years of really strong temps. So we're seeing this accelerate, the software. We're using the software for our own services. We're selling the software on top of our HPC, and we're also selling the software for use in on-prem. It's also used for interpretation and as well as we're selling it to competitors, if you like, that use the software to compete against us. which is really nice because they're often picking up work that we actually don't want. It's a bit smaller than really moves the needle for us, or there might be other reasons why it just doesn't quite fit us. So that model is working really well, and we've really got a strong roadmap ahead for software, which fits into our strategic business model. And then there's the HPC, which has been exciting. You've seen the deal we did in Malaysia. And just having strong expertise in HPC is really important. And now, of course, it's very important for AI. And we should touch on our AI strategy while we're at it because we've had a very strong AI strategy for a long time now. You know, machine learning was in the first ever code we wrote. So it predates that approach. in terms of our expertise and what we've been working on in our own individual lives before we came into Doug. AI is part of our imaging toolkit. AI is part of our business. We've rolled out AI in our finance teams, in all our different commercial teams, and we're pursuing an active AI role as things are really moving rapidly in that space We've also got AI Toolkit coming out in, or is out in our software where we can help users of the software progress really much more rapidly with their interpretation and other things. So AI is extremely important to us. And of course, AI runs on the big computers and on the NVIDIA chips in particular that we've just purchased. So we're really excited about how we can transform or how Doug is being transformed by our AI capabilities. And then there is all our immersion cooling, which is the backbone of how we do compute, and Doug has been very important for us. We are, of course, our map now shows that we've got a really nice geographic spread. from the middle east to asia to london can't call it europe anymore i guess to the americas including rio de janeiro which is the new office which is really really kicking those um and of course we've got our global fiber that varies a little bit how we do it um over time that connects all our offices except for Abu Dhabi, by the look of it. We need to update our map with Abu Dhabi, Dan. And Rio. They're all on that fibre, by the way, everybody. We just haven't updated the map. So now I'll hand over to Dan for financial performance.

Thanks Matt. Hey everyone. So I guess starting off at the top on revenue, services was a really great result. So just to provide context there, 30% both on same half last year. You know, that was really driven by good order book, good productivity, and the teams really getting through projects. So that's a really exciting result for us. And it doesn't include anything from Epic. So that number is kind of Epic exclusive or non-inclusive rather. And so it's a really great underlying, you know, performance. When we moved down into software and HPC, we had pretty good growth in both of those business lines, you know, excluding Epic. And then what we've had through the Q2 was, I think as we framed it, an earlier than anticipated ramp up. And so what ended up happening was we were able to, firstly receive some storage equipment sooner than we were expecting and then we also managed to mobilise equipment from the US and what that allowed us to do was to combine with existing equipment in KL and get the project started earlier than we were originally anticipating. And so that's driven a lot of the growth now in what we're seeing in software and HVC and really helps the overall revenue growth. So through employee benefits, we've got a little bit of growth through there as we kind of ramp up in Brazil and we ramp up in certain regions where we're getting, you know, that underlying services growth. And so what we're seeing is adding headcount but not adding headcount at the same speed as we're growing the top line revenue, which is significant. what we've been pretty consistent with over the last few years and what we expect to continue going forward. Other expenses, we had a 48% increase inclusive of the MP2. It's around 25% increase if we ignore that provision for the normalised EBITDA. So what we're seeing in other expenses is we've got a big part of the step up is related to Seagal. So for Seagal, our partner in the Epic deal, we've got their portion or their cost for delivery coming through other expenses. And so that's come through in this half as we've managed to keep the project off earlier. And then we've also just got a general step up in IT facilities and some subcontracting as we got that project up and running. And so when we get down to EBITDA line, we've got normalized EBITDA, so excluding the one-off provision, up 161%, which... was a really great result for the team. And the 34% EBITDA margin, I think, is a really great stake in the ground. And so what we're seeing now is the result of Epic and software and the growth in revenue, you know, and not the same growth in our cost base. And we're just getting really great operating leverage come through the business. So as we move a little bit below there, depreciation amortization lowered in the quarter, lowered in the half rather. And so what we're seeing there is some of the equipment that we purchased a few years ago starting to roll off and have been fully paid for. A lot of the EPIC equipment was delivered in late December, early January. So we'll start to see that coming through the accounts in the second half, both through depreciation and finance expense. So to move on to the balance sheet, we had cash of 14.3 at the end of the quarter. We had really good receipts through January. So as we disclosed earlier, 31 January cash balance of 20.7 came off the back of really good receipts through January. And so what that meant was with the 14.3 of cash at 31 December, we had net debt of 0.3. We'll bring those new assets online and the new asset financing online. We'll see it come through in the second half. So that number will shift a little bit, but it's a really great result. And it's just an indication of the kind of performance of the business. Trade and other receivables was up. That's as we started to issue our first EPIC invoices which got paid in January. So we're seeing that number kick up at the end of the year and that's then come through to cash. Contract assets rose. We've just got a few more milestone projects in certain regions and then also some e-invoicing timing. So the e-invoicing is just creating a balance that carries through the end of month, but it gets reversed in the first week of the following month. So it's creating a sort of temporary increase in the contract assets balance, which makes it seem a little bit overstated. Contract liabilities is up. That's a result of the EPIC contract where we're able to invoice for the full year in advance. And so as we start to recognise that revenue from EPIC, we'll be slowly pulling that contract liability balance down each month. Trade and other payables is up. As I mentioned earlier, a lot of the new equipment was delivered right at the tail end of December and so we've got that coming through the books here. But that will all be settled with the financings all settled, and we'll see that all kind of correct itself through the second half. And then finally, the provisions, as discussed, there's further detail in the MP2 matter in the release we made yesterday, but we've got that provision coming through our provisions in our current liabilities, and so that's driving the change there. on the cash flow is a really good result once again so 7.4 million in cash generated from operating operating activities really driven by higher receipts from customers so it was a really great result and good cash flow for the quarter. As we mentioned, cash flow from investing and general capex is probably a little bit lower than people expect, but it's just a timing. So what we've talked about in the past with the epic capex will come to bear in the second half. And so we'll see that full year number kind of be in line with expectations. And similar for financing. Once we get the financing, we'll come through the books as the equipment kind of goes on to financing in the second half as well. So hand back over to Matt to wrap this up.

So last slide here. So the Malaysian contract is underpinning the profitable growth in the HPC and software sectors. We're still dining out on the best in class seismic imaging, and we certainly don't see that changing over the next 12 months or even 24 months as we strive to get that better and better and better. It's different, a little bit different now for us. We're now really focused on efficiency, productivity. and quality. And so efficiency is just making it run through the... I mean, this is an incredibly complicated code, right? And so just keep working on to get it running through the machines faster. Keep working on making it faster for people to run. So efficiency is machines, productivity is people. And just make sure that the results always come out looking fantastic. So just little tweaks to the algorithms here and there. So our focus is on that now as opposed to adding features to the software, adding new things that the software can do. And that's a real milestone to get to that point, whereas all of our competitors, of course, are scrambling to try to develop this from the ground up. And established regions are continuing to grow. So London and Houston and Asia are continuing to grow. But the new emerging geographies like Abu Dhabi and Rio especially are really growing. are really looking good and will grow significantly from here. Thanks very much, everybody.

So thanks, everyone. We'll shift into questions. So if you have a question, please raise your hand and then I'll give you the floor. So first, cab off the rank, Branko.

Yeah, can you hear me all right?

Yep, loud and clear.

All good. Well, appreciate your time. Just first question for me, just around the Middle East. I'd be interested in any feedback you've received from both Aramco and ADNOC, just noting those trials that you had progressing last time we spoke.

The trials have gone super well. Aramco just last week or the week before at a conference in the Middle East stood up in the conference when one of our competitors was having a go at us and trying to muddy the waters and just said, these guys are so far in front of everybody else, it's not funny. So ARAMCO relationship is very strong and we're looking at taking that to another level and it just takes time. There's a lot of work going on in ARAMCO with the legal and contractual and so forth. ADNOT project has really, really hit its traps. The results look great and there's actually a paper coming out in a conference in June in Europe and um with those great results where we in both of these projects we've done done things with the code with the technology that no one's ever done before in the world so everyone's pretty surprised and and uh uh and it's worked really well so um so it's a middle east is a slow burn but it's it's really really solid momentum towards a very significant business Rio, on the other hand, was a really fast burn. Bang, bang, big projects coming through.

No, that makes sense. And just to stay on the same topic, is this something we can expect to receive an update on in the next six to 12 months in terms of another contract win? I assume you want to target one of the larger contracts that are outstanding in the region?

Well, we'd hope so. We certainly... The pipeline is very significant in that region, so... We're certainly working hard towards that end.

I appreciate that. And the final question for me was just on the services awards. It did seem that they slowed in that second quarter, about $8 million to $9 million, but I was just interested in, I guess, the pipeline of work you are seeing, noting that revenue line for the services division keeps growing, which is nice to see.

The pipeline is the biggest it's ever been. I know we keep saying that quarter after quarter, but it really is – We have thought about how we could wrap it up just for our internal use because it's lumpy and it's all over the place but it's huge, which is why we don't let it out because it's sort of very difficult to understand but it is huge and it is growing. It has been disappointing but it just happens in our business where you have a couple of months where your wins are a little lighter than what you would hope, the pipeline keeps growing and suddenly it's a a downpour and you win a whole bunch. And you remember that from July wins of $18 million a couple of years ago when suddenly it had been quiet, quiet and then woof. And so, you know, everybody's feeling good about what's happening in the industry. So we're confident.

No, that makes sense. Appreciate your time.

Thanks, Branko. Caleb, over to you.

Thanks, Dan. Hey, Matt and Dan, just on the revenue and order book, maybe some colour on the split between production and exploration revenue and whether you're still seeing that growth in 4D seismic.

Yeah, we've just won another big 4D seismic project and we're talking to the super majors now about 4D projects. So we're solidly entering that production space with a significant amount of our revenue Now, I don't actually know what it would be. When I say significant, I'm talking maybe 20%, not more, but it's growing. So we're solidly in that production window and we expect to win more and more of that work.

And that will be more sort of recurring revenues type of style compared to exploration work, would it?

Yeah. Classically, the 4D projects are repeated every 12 months. Just to make sure everyone's in on the picture here, If you've got a reservoir like Gorgon in the northwest shelf here and you can see the fluids, then you shoot with baseline seismic before you start producing the fluids and then every 12 months you shoot seismic again and you can see the fluid movement where you've produced oil, where you haven't produced oil and you can shape how you do your drilling campaigns to maximise getting the oil and gas out of the ground with minimum cost. Wells cost all the money, seismics much less expensive. So that's what 4D is for, and that's why 4D is very important to us to get into that space. But it's only the top companies do 4D because you've got to have the best technology and you've got to be very reliable.

Thanks, Matt. And on the EPIC contracts, so the Patronus, CapEx and Compute, that doesn't really arrive till this quarter. And so can we kind of interpret that as you still have some headroom in sort of your Compute in the US before you say it's too far, say 20%, 30% revenue growth before you need to order another large chunk?

We've actually put in more Compute into the US over the last quarter. And we're just enjoying that for the moment and we'll see how we go. There are some very, very significant projects in the pipeline. And so, yeah, it's an interesting time where we're watching utilisation very carefully.

And I think just to clarify, that computer that's gone in is the computer we've talked to previously, which we purchased simultaneously with purchasing the EPIC equipment.

Yep. Thanks, guys. That's all from me.

Thanks, Caleb. Locky.

Hi, Matt. Hi, Dan. Congrats on a strong second quarter. Just one of the things was you obviously had some significant growth in the U.S. Can you just clarify? So is that growth, is that based on work done in the region? Just because I know previously you had, I guess, a customer relationship in the Middle East that was, I guess, based in the U.S. So is that revenue coming for work done in the U.S.? Or is it just based on where the customer is? And just what are you seeing specifically in the U.S.? ?

So that big Middle East customer, the work from them has dwindled a little. There is still work from them, but a new project from them has actually been done in the Middle East now, in Abu Dhabi. So there's not a lot of revenue in the last 12 months from that client. They're very happy with the work. They just ran out of seismic data, reprocessed it all. They're actually acquiring a new survey that we expect to process over the next... 12 months, 18 months. So a lot of that work in the Middle East is from, sorry, work in Houston is from the Americas. A little bit of it is from Asia. But as you said, it's about where clients want the processing to be done based on where they live, where their head office is, where their technical people is, for example. But Houston's more and more America's focus just at this point in time.

Perfect. And can you also just talk us through what you're seeing in terms of like the multi-client sales? Because I know you came out with the announcement when I scrubbed the wedding of the Sarah Walk deal. So just kind of any insights you're seeing in terms of your multi-client business that you're developing?

It's going really well. I think this – this financial year is going to be a very breakthrough time for multi-client from what we're seeing. And the Equatorial Guinea project is very exciting. And the thing I would point out about it is that it is fully underwritten. So we're not risking anything with that project. It's a very good project.

Perfect. That's all from me.

Thank you. And the assets we have in Australia are still selling, so we've still got sales going through on these multiplied assets in Australia, which is quite amazing.

Perfect. Thanks, guys.

Thank you. Jack, over to you.

Morning, gents. Great set of numbers. Obviously a great expansion in the EBITDA margin. How do you see that run rate going forward on a full year basis? Now, are we sitting in the mid-30s or potentially even higher than that?

No, I would be very happy if we finished the year with a 34% EBITDA. You know, it could slide higher. It may well, but, yeah.

I don't really have what to say about it. I'm dead at the minute. Sure. Thanks, James. Alan.

Yeah, hey guys, sorry, just one, sorry if I missed it before, but on CapEx, can we just frame how you think about the maintenance CapEx on our look forward and just for the full year, 26 noting CapEx shift to the second half, broadly speaking, how we should frame CapEx second half?

Yeah, so typically maintenance CapEx for us falls in the range of one to three million you know often falls around that two million mark for us and so that's just money going to maintaining the data center replacing little broken parts here and there but we're pretty maintenance capex light um as a general rule and so we don't see a step change in that going forward um one of the nice things is that you know new equipment's more powerful and and the cost you know per performance we're seeing is really really good and really competitive and so that um you know lightens the load as well on a maintenance complex perspective as equipment starts to age

And I think this is noted CapEx for the EPIC project and a couple others. I mean, we're sort of looking to the 14, 15, 16 milli CapEx in aggregate. Is that correct?

Yeah, that's correct, Alan.

Helpful. Thanks.

Edward.

Hi, Matt. Hi, Daniel. How are you? Hey, Edward. Good. Just a quick question. You did have on the radar a few years ago to build a data centre in Western Australia. You were going to build a carbon neutral data centre. Is that still on the cards or has that been completely shelved or...?

It's still in the looking for a – it's really we've moved on from it because we didn't see the enterprise part of our HPC business accelerate like we thought it could. We've still – we've let the option to lease that land lapse now. We're still talking to the West Australian government because they're still very keen on it. We've been asked a lot of questions from the federal government about what's going on, and we just keep saying until you change the manner in which HPC is funded in Australia, then really the HPC industry is dead. And so that's what's ongoing there.

Thank you.

So we have a few questions then through the chat. So an update on Doug Nomad is progressing, it's going well. We're still working on the strategy and how we approach it there. And so one of the big areas of focus for us and the big opportunities that we're seeing making the most of, as Matt talked about, the HPC expertise we have and the software. And so we're working on a lot of opportunities and there's a lot of exciting stuff happening where we're looking at providing a kind of bundled solution. So we're providing you know, the container itself, the computer that goes in it, the software that runs the computers, as well as our process and emitting software on top. And so there's a lot of exciting opportunities there, and that's what we're kind of working through at the moment.

And we have a number of proposals out for that.

And then on the... On the Doug Kool side, you know, I was over in the US at the end of last year visiting with BAC and attending a few conferences and we're really happy with how they're going about it. It's just a long sales cycle and the industry is pointed to And so there's a bit of, you know, there's legwork that needs to be done there. But we're really happy with how they're going about it and the work that they're putting in. We think they're pursuing it. So we still think there's a big opportunity there because of all the benefits that come from aversion. But there is some headwinds with the industry just being, you know, predominantly directorship at the moment. And, you know, they need to put in a lot of work to kind of shift it. I wouldn't comment on that one.

It's a great margin on that project, but we don't want to talk about individual margins on individual projects.

What we've talked about in the past is it's margin accretive to our existing business, and I think we've seen that come through this quarter, this quarter, this half, as we get the revenue down. So can't get more specific than that, but we're seeing it as margin accretive, and that's coming through the financials.

There are no cool royalties or they're very minor. It is a tough sell for them at the moment. It is a lot slower, but there are significant headwinds with the Director chip and the NVIDIA chips and so forth. NVIDIA are not, I've said this before, NVIDIA are not that keen on At the moment, on the chips being immersed, although we've immersed all the chips and we point that out to them that they run fine. And so that's an ongoing discussion and one VAC are picking up on as well.

Great. Well, thanks for attending, everyone. If you have any further questions, feel free to send through to Investor at Dunk. And otherwise, thanks for your support and thanks for attending.

Thanks, everybody.