Elsight Limited

Everybody, I'd like to welcome you all to all our investors in Australia and good morning to those joining from abroad. I'm Howard Digby, non-executive director at L-Site. I'll be your host for today's session as we review what has been a truly transformative fourth quarter and full year for the company. So before we dive into the results, I direct your attention to the disclaimers on slide two. Look, I won't read them in full, but I want to highlight the key pillars of this. Information purposes only. This presentation provides an overview and is not financial product advice. And as to forward-looking statements, we will discuss our expectations and targets today. These involve known and unknown risks that could cause actual results to differ. Look, on the financial context and some housekeeping here, a quick reminder on our reporting. All figures discussed today are in US dollars, unless stated otherwise, and we operate on a calendar year basis. So when we say Q1, it's the quarter that we're in at the moment, finishing in March. And today we are focusing on the record-breaking Q4, the Q4 that we've just had, the full unaudited 2025 annual performance and our future plans. And regarding the logistics for today, we will have a dedicated Q&A session at the end. However, you're welcome to submit your questions at any time through the presentation. Simply use the Q&A button. Can you see that at the bottom of your screen? And we will address as many as possible during the session. So it is now my pleasure to hand over to our CEO, Yoav Amitai, to walk through the perfect storm we are seeing in the market and how our site is positioning itself as the future backbone of uncrewed systems. Yoav, over to you.

Thank you, Howard. And thank you, everyone, for joining us today. I'm super excited as always to share with you our results, but today I'm even more excited to share with you L-Site's next phase of growth. 2025 was not just another year of growth for L-Site. It was the year we reached our inflection point. We're no longer a company talking about potential. We are a company delivering on performance. And today, I'll walk you through the perfect storm driving our market. The record-breaking numbers we've just reported are why the next chapter will be the time we cement our position as the future backbone of uncrued industry. As said, 2025 was a breakout year for L-Site, but I want to be very clear from the start. What we all have seen is the foundation, not the peak. I recently find myself saying and writing to many asking me that we're just getting started. Some people laugh hearing this from a company that just grew the revenue by 11 fold over the previous year. But I truly believe this is our reality. The business, the markets we're in, the programs we're part of, and the pipeline we are only now moving into scale. Let's start with the why. What we're seeing and what we're witnessing is a fundamental shift in global defense and commercial robotics. It's the iPhone moment for the uncrewed industry. Look at those maps on these slides. Ten years ago, drones were a niche luxury for a few advanced military, and today they are a primary requirement. We're seeing NATO countries move their defense target from 2% GDP to 5% GDP, and that's not only there, that's a global trend. Not only that governments today are investing more in the defense spending, a lot of these budgets are allocated specifically for uncrewed systems. There even more for that. The most important trend is the shift towards COTS, known as commercial off the shelf technology. Government no longer have 10 years to develop a radio. They need solution that works today at scale. Let it sink for a moment. The speed of war and the speed of commercial delivery have converged. This is the perfect storm that L-Site was built for. And this is why this moment in time is where L-Site should and need and will scale. Perfect storm like this don't create hundreds of winners. They usually create a small number of category leader. And we're in those moment in time when giant companies emerge. Elfsight is uniquely positioned to become one of these as we are in right in the spot and right in the center of this perfect storm that we're talking about. We're not selling a feature or capability. YellowSide is enabling mission completion. We're empowering uncrewed systems to safely and effectively complete their mission while ensuring unauthorized entities are kept at bay. We're taking our 500,000 drive and flight hours of experience and applying it to more product, into more domains, and this is what will position us as the core backbone of this new industry that is emerging. YellowSide is going to be the future backbone of the uncrewed industry. But before we talk about future and how we're going to do that, let's look at our performance first. the numbers for 2025 are quite frankly unprecedented. We hit approximately $23 million in revenue for the full year. And to put that into perspective, this is an 11-fold increase over 2024. Importantly, we start in 2026 with already $22 million in confirmed order, which is 96% of our total 25 revenue. We reached profitability this year, proving that our model has operational leverage and a great outcome. We ended the year with $59 million in cash, and this is a massive strategic asset. It means we can execute our 2026 plan and push harder and faster. LSAT is one of the very few companies in our space that isn't just selling a vision. We are actually selling hardware, software, and capabilities at scale with super high profit margin and a profitable business model that create this business so interesting. Speaking about hardware, we're not factory constrained business. Capacity scales ahead of the event and not behind it. We develop global manufacturing capabilities through contract manufacturers, which means it does not require additional capital investment. We're not doing it only to expand our production capacity. We're also doing it to be closer to our customers, to serve them where they need us, to make sure that we have all the local customers. existing presence to be able to serve our customers in the best way and that's why we're doing those developments. I want to pause here for a moment because I think this slide is super important and it has changed. For those of you who follow us will notice that the cumulative pipeline today stands at 137 million dollars compared to the 157 million we showed previously That reduction is not a deterioration. It's the opposite, actually. During Q4, we converted approximately $10 million of pipeline into recognized revenue. That exactly what this funnel is supposed to do. Our focus during the quarter was deliberately on execution, delivering contracts, building our global sales team, and pushing existing opportunities down the funnel, which we did with great success. We optimize for moving opportunities down the funnel rather than just increase the top line size. What the slides really show is conversion discipline. With our expanded sales force now hired across the US and Europe, we're entering the next phase, converting existing opportunities faster while adding net new opportunities at the top of the funnel. Just to remind you all, this pipeline isn't based on headlines or market commentary. It's built on actual active programs we're already engaged with and part of, and we are seeing how we accelerate those conversion from the top of the funnel down to the bottom line, which then makes it much better visibility and much higher probability to convert it into actual revenues. Speaking of team expansion, we are fortunate to recruit top talent recently. The reason we could bring them in is due to our product unique value proposition, our brand name in the industry, and the vision we all share together. We're not just expanding our global footprint, we're doing it also locally with discipline. We're making sure we are recruiting people where and when we need them and not just bringing in headcount that will make us less efficient. We also added a new strategy function that looks at the long-term growth, ensuring we succeed not only here and now, but also years to come while seeing big trends and big movements in the market, making sure that we're analyzing correctly and we're being prepared for them correctly. Speaking about expansion, this is how we do it. This marks a super special, important transition point in L-Side history. We started as a connectivity company and that remains our core. Everything we do still starts there. But over the last 18 months, we've become so deeply embedded into our customer's mission that they are stop asking only about links. They are asking about the whole mission and how we can enable them and help them complete their mission. This transition is driven by customer pool. I want to make it very clear. We're not moving away from connectivity. We're building on top of connectivity. That expansion is happening along three main dimensions. Capabilities, moving towards a broader mission-enabling product and not only connectivity. Geographies, like I said, expanding our local manufacturing to support partners where they operate and have the right business development folks and salespeople with boots on the ground closer to our customers and end users. And domain expansion, the air, land, and maritime environment to make sure we are getting more into these domains. The common denominator isn't the vehicle, it's the need for communication and resilient mission completion in contested environments. We're taking a proven core and extending it responsibly into more features, more capabilities, more geographies, more domains. I want to take you through how this expansion we've been discussing across geographies, domains, and products translate into actual larger serviceable available market for L-Site. This is not a total addressable market slide. This is our serviceable market, which means areas where we already have the right tools to compete. On the left, you see our current SAM, roughly $250 million. This reflects what we already do today, high reliable connectivity for BVLOS and CRUD system, primarily in defense and regulated commercial use cases. This is a market where we know well we're executing in and where we already converting into actual revenue. The first step in SAM expansion comes from adjacent capabilities and broader operational scope. not only chasing new customers, but by adding more capabilities like positioning and mission enabling software on top of Halo, and by supporting additional operational domain like land and maritime systems, we expand the value we deliver within the same programs. At the same time as program scale across territories, our footprint expand geographically. Following customer into new regions, that combines more customers, more domains, more territories, and more capabilities per system, expand our serviceable market into the multi-billion dollar range. Looking further out, as these capabilities mature into a unified platform, L-Side moved from being a connectivity component to a mission stack layer. At that point, the sum expand again, not because we assume market dominance, but because the scope of what we can reliably service increases. This include more system per customer, more mission types, and higher software and service content per deployment for every system we're selling. What's important here is that this expansion is layered and disciplined. each step built on existing deployments, proven technologies, and active customer's demand. We're not assuming new markets, suddenly open, we're extending our role in markets we're already part of. So when you look at the SAM expansion, it's really a reflection of execution, expanding where we are operate, what we enable, and how much value we deliver permission, all anchored into the SAM. To give you some examples of how it's looked like and how it came to those numbers, when you look at the defense budget in Sweden, Germany, in Japan, in the UK, in the US, you see exactly where those same figures come from. This expansion is really a reflection of execution and from global trends that I described before of how governments today are putting more budgets into defense and how they allocate those budgets into uncrued systems. Now let's talk about the product expansion in more depth. Everything on this slide follows one rule and one rule only. If it doesn't threaten our core position in enablement, we do not pursue it. We're expanding horizontally and not vertically. This means higher value per system for the same customers and procurement path And importantly, we're doing this from a position of profitability and cash strengths and not forced diversification. We're expanding from communication only to more comprehensive communication, to autonomy feature, to video and sensors and positioning. And by that, we will be able to provide our customers with more comprehensive solution. And it's all built on our long experience and brand name that we have in this industry. And that's how we're going to grow it. A key part of our growth is our relationship with the OEMs. We often get asked, don't the big defense prime build this themselves? The answer is they don't want to. They want to focus on the airframe and the sensors. They want to buy the backbone from a specialist. We are the Intel inside for uncrewed system. We are in their competitors. We are their most critical partners. We helping them excel in front of their end customers to perform their mission and to provide them with the best technology available up there. Our go-to market strategy is focus. In the US being local is requirement for defense work human. In Europe, the shift in defense posture is structural and not cyclical. We've invested in local teams and regional execution, not just distribution, and we're also building the necessary flexibility in the organization to react to other territories and opportunities and not be locked on those markets only. In this moment of time, like we have in front of us, we must be adaptive and react quickly And we need to make sure we have all the tools we need to be able to execute on opportunities that come across us. A good example for that localization and this adoption is the project GI that we announced during the last quarter. I want to spend a moment on it because I think that is often misunderstood by a lot of the audience we have here on the line today. The DIU is not a pilot program for innovation theater. It's a structured pathway into operational adoption and procurement. Advancing to phase three means Halo has demonstrated reliability in contested environment and is moving through final fielding and testing. This phase is funded and aligns with real procurement timelines. That's actually put us in a very strong position within the US DoD, which is obviously the biggest market of where we're playing. Now how we monetize all these great features that I was talking about. Every Halo deployment start with hardware. We used to think that the hardware is a bug of ours, but now we understand that it's a big feature of ours because that's provide us the food at the door to be able to do, to put more capabilities and more features and product into the same platform. But that's only the entry point. On top of the hardware sits mandatory software and cloud services that every single hardware that we're selling have built into it as a long tail of every sale that we're doing. As our portfolio expand, more value move into the software layer. That's basically where all of what I just described is sits. This is where software layers, where margin are higher and revenues are recurring. Most of the new development and capabilities I mentioned earlier are getting exactly to this line. The beauty of it is that we don't only sell it to net new systems. We can also upgrade upsell and cross-sell to already deployed units as it's only software features that sits on the same platform, on the same hardware platform. And that's a big leverage point that we're seeing. And that's how we started to deploy beta versions to first customers. Speaking a little bit about how we leverage all the experience and all the deployments that we have in the field. This slide is about how our platform supports AI, not how we brand ourselves. AI only works if the underlying data is reliable and structured. With 500,000 operational hours, we have a data set that reflects real missions, not simulation, which is growing on an hourly, daily, and monthly basis in different parts of the world with different partners and different use cases. We built AI feature weights at operational value, not where it's at buzzwords. Alongside our core business that I described so far, as we updated the market a couple of months ago, we've established a parallel business unit currently operating in stealth. It is built on our core competencies, connectivity and data fusion, but addresses a separate $20 billion adjacent market. This is structured so it does not distract from the core business. We will be able to share more as we pass milestone, as we feel that we have a good enough mode and protection around the IP, the technology and the customer base. And as we have all of those, we will start to share more information. This is optionality with discipline. Looking ahead, our focus is execution. continuing to convert the pipeline, expanding sales productivity, and releasing additional software capabilities like I mentioned. Each milestone is designed to build on what's already deployed. And we're doing it with a pragmatic approach, making sure that we put more efforts only in vectors that we're seeing actual success. We are expecting to expand our existing customer base, We're expecting to expand what we're doing with already existing customers. And we also expecting to have the first design partners for the new business unit that I just described. In summary, L-Site is uniquely positioned in this market. We combine a proven product in real life deployments, experience, capital discipline, very efficient business model and deep customer relationship and integration. That combination is difficult to replicate. And this is why we feel that L-Site is in such a great position. have demonstrated that we can execute and we know how to execute at scale, convert opportunities into actual revenues and performance, and do so in highly profitable margin, while expanding our role across missions, geographies, and domains. I will say it again, we believe we're only getting started. The energy level and excitement inside a company is something I can't even describe in words here. People are working seriously around the clock and around the globe to deliver those opportunities. We literally have, while I'm speaking today, people in three different continents working with different customers in different trade shows and conferences to bring net new opportunities. So to close, 2025 marked a clear inflection point for LSI, not just in growth, but also in maturity. The opportunity ahead is significant, but what gives us the confidence is not the size of the market, it's our position inside the market and our past performance of execution. With that, I'll hand it over back to Howard and we'll open the session for questions. Howard, back to you.

Thank you, Yoav. for sharing the update on Q4 and our prospects for Elside Ahead. We've received a number of questions already. Please type in your questions in the Q&A section. I've also received some questions from people by email as well. I hope to cover them as well. I hope to get through all your questions today. Can I start with, you have the first question, is when will you receive cash from the $22 million in additional contracts that have been delivered in first half of 2016?

Sure. So just to remind you all, when we're talking about our business model or in general, the way we're working with customers, today we're charging 40% upfront. It means that it's included in this $22 million that we have announced to the market of backlog. 40% of the cash is already in our account. So when we're saying that we have backlog, that's only after we get the advance payment of those programs. So the answer is it's already in our account. It's actually already in the account from the last 4C. So you see it in the last report we put out last week.

Thank you. Another question about that backlog. The order backlog contains, does it only contain hardware sales or recurring revenues as well?

No, so the back, the way we're looking on the backlog, that's net new sales. That's not, does not include any recurrent revenue coming from previous years and also not, not taking into account the following recurrent revenue that will be generated from those net use. Just to have, to let everyone know how we structure or how we recognize revenue in general. When we have a program that works for a year, for example, we recognize it month by month. So every quarter will recognize the portion of the total year. That's also correct for the booking. So what we put on the booking, that's a net new, and that does not include recurrent revenue or AIR coming from previous years.

So just to clarify for everybody, that $22 million, that doesn't include the recurrent revenue. The recurrent revenue will be added to our numbers afterwards.

Correct.

The year. Okay. So a question about 2025 revenues. A similar kind of question, really, in a breakup sense. How much of 2025 revenues, FI25 revenues, are from the all-site cloud business? So what portion of the sales are ARR?

Yeah, that's exactly connected to what I just said before about how we recognize the video. In 2025, you can see it on the quarterly report we put out last week, $2.6 million was from recurrent services, which is the all-site cloud, basically, and all the services that are attached there. When we're looking on the numbers, I would say that we are expecting 2026 to be much higher because in 25, as you all know, we started to scale rapidly the deployment of new product that we're putting out. And because of how we recognize the revenue over time, like I just mentioned, we do expect to have a very big jump in the recurrent revenue during 2026 because sales that was already done in 25. But just to answer directly the question in 25, The ARR was $2.6 million, and we are expecting it to grow, actually already growing in 26 because of the reasons, because the way we recognize the revenue.

I've got a question here about the 2025 results and also looking forward at the opportunity funnel. So what does that represent in number of active clients?

So in terms of DesignWin, that's in general, I will talk about the DesignWin concept. I'm not sure I covered it enough during the presentation. Our old approach, our old go-to-market approach is what Intel stated in the 70s DesignWin. It means that every OEM, every platform manufacturer that's starting to use our systems, we want them to use all our features, software features, hardware features, and so on. We want them to do all the compliance and certification based on our product. And the reason being is because we want the stickiness level of the product to be the highest possible. So for us, every new design win, it's basically a tip of an iceberg that as long as they ship out units for their clients, we will get POs because we're part of the bill of material and we are in the heart of the systems, as I said during this presentation, and those partnerships and those relationships with the OEMs are just getting better and better as we scale and as we deploy more systems with them. To answer the question directly, in 2025, the revenue came from 92 different design wind customers, means that they have different OEMs. Each one of these can make multiple type of drones or the same type of only one type of drone or a robot, but that's came from 92 design win partners. We have more than 110 total. Today, I would say that we're more focused on the Pareto of the industry, meaning that the big OEMs that create the vast majority of the platforms out there and not necessarily onboarding net new. Having said that, I would say that we're still investing a lot in small startups and new innovations that are coming or that we're seeing in the ecosystem. The reason being is because we want to be as widely exposed as possible to this market. By the way, not only in the defense market, it's the same in the commercial market as well. So when the commercial market will start to see the same scale that we're seeing in defense or When a small defense startup that come with a new innovation will start to sell their product, we will make sure that we're with all the winning horses. And that's why we are investing there and not only on the very big one. But like I said, most of our efforts and focus is going to the parade of the industry, which is very clear in our case.

Okay, so just to clarify, the Pareto meaning the 80-20 rule, but don't forget the long tail, as you have said. If you have any, let me put in a little plug here, if you have any drone companies that you're invested in or you're close to that can shortcut and vastly improve their development process when it comes to communications and their performance, please introduce them to us. Another part of this same question, so same questioner, Yaev, was what change... Talk market expectations, do you see, with regard to the civil use of drones and a recent drive, for example, the US, to work out a regulatory path?

So we do see a progress there, for example, in the U S the part one Oh eight, which helps a lot in. Designed a framework and there is already a clear timeline of where, when and where and how it will be started to be executed and started to be in place. I would say that I said it over the presentation. I'll say it again. When we're looking into the future in the, at least in the last 18, 24 months, we are seeing that the defense market, because of the macro politics and because of the geopolitical environment in the world today. the defense market is growing much faster. I do think that as many other technologies that was initiated in defense world, like the GPS or actually the internet that we're doing this call over, Then it's shifting over the commercial market and become bigger in the commercial market. And I do see this process happening also in the uncrewed system market. Not only drone, by the way, it's same for sidewalk robotics or maritime robotics. But I think that it will take time until we will get there. Having said that. Taking our last announcement that we have done around drone as a first responder, DFR program that we are part of, that started to have meaningful revenue. That was a nice number of less than half a million dollars. It's not very big, but it's starting to get there. I think it's super interesting, and we definitely cannot ignore it. It's something that we are looking at and making sure that we're there having our brand recognition in the civil or commercial market as well, and not only in the defense. But Speaking of actual revenue split, I do think that a lot of it will come from Homeland Security and defense marketing in the foreseen future.

Now, I've got two questions about manufacturing. And the first question, I'm going to ask both of them. First question is a kind of if you just tuned in now question, because the answer is an awesome one. Are you up to date with the production of your hardware? And the second question, so you'll probably answer that. I can see the smile on your face. The second question jumps off from that. While L-Site currently has plenty of spare manufacturing capacity, given current growth rates, existing capacity could potentially be utilised within the next two years. What are the costs and timeframes associated with potential, say, doubling of manufacturing capability?

So I try to address it during the presentation, but I think those are good points. I'll start with the point that we used to think in LSI that hardware is bug and not a feature. We wanted to look to be software, pure software solution. Hardware is hard. There is timelines there. It's more expensive sometimes and so on and so forth. In our case, because we're active in the physical world, we're not active in the software space, which is pure internet space, all virtual. having hardware on both those platforms provide us a very strong feature and very high level of stickiness within those products. So hardware become a feature and not a bug. And that's part of why we can do this expansion of product portfolio, like I just mentioned, because we have the access for those platforms, unlike many other software company to look for hardware to run the software on. So that's one part. The other part of my answer or the other part of the question, I would say that We are designing all the hardware that we're doing, and that includes the Halo, that includes the Aura, which we can talk about. That includes all the hardware that we have in our pipeline or in our roadmap today. We are designing it in a way that will be super simple to manufacture. We will put more effort on the engineering side, so the manufacturing will be simple. We'll be able to do it In every contract manufacturer worldwide that is doing electronic, there is nothing special in terms of the manufacturing process. And that results in super easy upscale in manufacturing capacity and being able to do that. Going to the question of how much it costs us, Since we are working with contract manufacturers, we don't have a steady cost of production lines. We utilize them only when we actually need them in terms of having orders or need to be deliveries or need to do production and so on. And it's also very helpful if we want to scale or reduce the scale of the production. For us, it's literally sending an email saying that we need more capacity. And like I said, during the presentation, one of the reason why we are opening new lines outside and in other regions is because, not because of capacity, more so because of being closer to the customer, because of localization that we're seeing globally, and because of these reasons, not only because of capacity. So just to answer directly today, We are very comfortable with our production capacity, with our lead time that we're providing to our customers. I think our customers see it as one of our advantage that we can provide them with what they order very timely, very quickly versus other hardware components that they have on board. And we don't have a lot of costs that is on the shelf there. It's literally our contract manufacturer that are doing it for us. And that's an approach. That's how we develop every hardware that we're having. So that's super important to notice and to mention. We're not expected to have any L-site production facility whatsoever, nowhere in the world. I always say to people here in the company or in general, people who ask me, if General Electric or those kind of companies are using contract manufacturer, who we are to do our own manufacturing. And I don't think, we want to focus where we're good at and not where we're not. And manufacturing is definitely not our job.

Yeah, the question is, as L-Site expands its product lines beyond connectivity solutions, how will the company maintain a competitive advantage in each market it participates in?

So markets here, that's an interesting question. Market here can be different segment. It can be different domain, like I mentioned, the aerial, ground, maritime domain, and it can be different product line. I think what we're doing in this development or this expansion of our product portfolio is basically provide a different approach to many of the OEMs, which, like I said, were solving the issues that they don't want to tackle or they don't want to deal with. And we are coming as a T1 basically providing them with all these solutions. And we highly believe that there is a very strong synergy between all those solutions. Like I said, during the presentation, we're building on top of the connectivity and not replacing the connectivity. We think that the synergy between connectivity, positioning, autonomy, and video and sensors is so deep and related to each other that it's strange that there is not a lot of companies that are dealing with all those different components or all those different elements together. I think our competitive advantage or our competitive edge will be exactly on this point of how to make a whole product approach that basically provide all the solution in one place and they complement each other. So I think it will make our value or competitive edge stronger and not weaken it.

Going back to the core product, I guess this is questions about how many drones do you expect your system to be on when you exit 2026?

That's a good question. I would say I will just put it as a plug number. I would expect to be tens of thousands of drones. Not getting too much into details because we are trying not to combine prices and quantities. There are a lot of people or there are a lot of competitors out there and we're trying to save some of the numbers, which we think is part of our assets. But I can comfortably say that that will be tens of thousands of drones in 2026.

And some of those drones aren't coming back either, I think.

Yeah.

Now, another question is, I'd love to understand what is left to complete the third stage against the DIU. I guess generally about the status that we have in our US market.

Yeah, so those of you not familiar with the DAU, DAU is the Project GI announcement that we have done during the last quarter. That's a three-stage, basically, process. We started in the first stage. There were 140 companies that were competing. That was a paper analysis. The second stage was reduced to only 12 companies that were competing with new innovation or new technologies. product or drone capabilities, let's call it. And from there, only six companies was chosen to the actual project GI, the phase three of the project GI. Now, LSIT is first and foremost, the only communication platform that is in those six companies. We're the only one actually that is not a pure platform, which is super interesting. The phase that we're currently at, the third phase, it's actually already, it's first of all, already funded. It's not that we're doing anything for free there. We already got a nice amount of money to participate and to provide them with first units that they can take and start deploying in real life or in real deployments on their side. They are deploying it in different theaters around the globe as the Americans are working globally and not only within the U.S. continent. And what we're currently, the stage we're currently at is that we are working with them to onboard them basically on all the capabilities and features. It's moving transfer information and knowledge from our teams to their teams. We literally have our team there this week as well, working with the end users, with the actual units. It's a SOCOM unit that is running this experiment or this program. And basically the timeline there is that should be concluded by the end of March. This phase should be concluded by the end of March. And from there, we should expect to start to have procurement after we conclude the third phase. So that's how the program works. I would expect to see first revenue coming from this project something like a quarter after the project concludes. So let's call it towards the end of the second quarter or during the third quarter of the year, we are expecting to start to see revenue coming from this project specifically.

Are there any risks that could affect revenues and margins from tariffs?

As of today, we're not exposed too much to tariffs. As I said during the presentation, we are open a manufacturing facility in the US. We already have a US company with all the employees that are in the US are employed by the US entity, which have its cage code and all the different certification and compliances to be certified for different kinds of DOD projects. And it's the same for the tariffs. We are expecting to have during the first half of the year, we are expected to have the first production batch done in the U.S. by a U.S. manufacturer, and then we're not at all exposed to tariffs. So the answer is absolutely not. We are not seeing any risk there in terms of that.

What sort of R&D spend do you plan to spend to realise the new serviceable, addressable markets, Sam, that you are targeting? And do we need to do some M&A?

On the first part, it mostly had come. That's how we spend on R&D today. We are growing the team a little bit, but like I said, during the presentation, we're not onboarding tens or hundreds of people. We are, our approach or our vision is to build a super efficient and super profitable business and not just super large organization. I think in today's world, of AI agent and tools that every developer, every good developer can become a superhuman or super developer. That's how we utilize it. And we're spending a lot of the spendings on headcount and talent basically to bring the right people and to develop all those capabilities that I mentioned to get to this serviceable, addressable market. In terms of M&A, I would say that the answer is definitely yes. Our market is super fragmented market. There are a lot of small companies, smaller than us. We are also small, but smaller than us that have super interesting technologies out there. And we definitely looking on those kind of activities as well. We are, as I said, we're looking for companies that will complement or will be connected to our vision and to have high synergy with what we're doing. And as long as it's helped to enable mission, as long as it's create an interesting technology, as long as we can translate into revenue, Those are the opportunities we're looking at in terms of inorganic growth or inorganic development or product portfolio development. So we don't necessarily need to do it, but we are definitely looking at that as one of our growth engines.

Are you able to comment on the timeline of this? Or is it just open-ended? This is the next question.

The timeline of the M&A?

The M&A kind of activities.

So we are looking on a couple of targets that are interesting already. Those processes can be long, as everyone knows here on the line today. I would expect, I won't expect anything to happen in the first quarter of the year, but definitely looking further, that's something that we are expecting to start to see moving, a movement there on this front. But I would say, I'll say in general, our strategy to M&A, we're not going to buy revenue, we're going to buy value and we're going to buy something that we know how to take the synergy and to leverage it. We're not just buying revenue of low profit. I think one of the LSite's strongest assets is our profit margins that we're working. We want to make sure we keep those profit margins. And to do that, we need to look on technologies or companies that have super interesting technologies with super strong competitive edge.

Thank you. How likely is it that phase three of DIU is successful? And I guess you've addressed this before, but what do you think are chances of success? And is this, and you've already commented that would likely with success contribute to revenues probably this year, right? Yeah.

So far we getting very positive and good feedbacks, both when we are out in the field with, with the end users there, or also when we're doing our weeklies with there, there is like a weekly update is happening there on a weekly basis. We're getting very positive feedback and updates from there. I think that we are positioned in a very good spot to get to the next phase. And I already spoke of how that will unfold into actual revenue. So that's the best I can say.

Okay. Two questions here. One can lead on to the other. A broader question is, the first question is, are there any geographical areas where you run into licensing or connectivity hurdles? And the broader question, this could be one of them, but what negative events can affect L-Site?

So the first part, the answer is yes. There are a lot of places where you do need to have local certification and local licenses. I'm not talking about frequency licenses. That's important to mention. Many RF radio frequencies, radios that require RF or frequencies licensed, that's become super hard hurdle. For us, it's not the case. LSAT is not actually creating a new infrastructure, as you all probably know. We're utilizing existing infrastructure, so that does not require us to do licensing, but it does require sometimes to do certification for some networks. Over the years, we invested a lot of capital in being certified for different networks in different parts of the world. I think today it's more than a million dollars accumulated that we invested over the last five years. So the halo and all the systems that we are developing will be certified. But I don't see it as necessarily as a hurdle for us. We're just going to a new region, a new area and start to operate there. And in terms of the other part of the question, I think it's part of our, it's actually part of our unique value proposition, being places that have connectivity issues and have strong or have sophisticated EW environment or contested environment, that exactly where L-Side is located. with champions. So that's actually good for us and not bad. And about the negative effect that can affect LSI, there are probably many negative effects that can affect us. I will answer it from risk perspective or what I see as or what keeps me awake at night, maybe. I would say that LSI today, it's in, like I said, in the middle of a perfect storm happening around us. There is a massive disruption happening currently in the market we're active in. We came into this Storm with a lot of experience with a very strong brand recognition. We in a very strong position and exposure to this market, but I'm all constantly thinking my job, part of my job. And I said to our employees, part of my job is to be paranoid and think what we're not doing and what we can do more to make sure that we are becoming this giant company that I mentioned in the presentation. I truly think that the disruption that you are seeing at the moment is the time when huge companies are created and outside we have a willing or we want or we will become one of those giant companies. So to ask me what keeps me up at night is what we don't know and what are the opportunities that we're not going after more than any other risk that I'm looking at in terms of events that can happen and a lot can happen. for the good and for the bad. But I think we built the company with a lot of built-in resiliency, both in the team and the business model and the market that we're, or the way we're go to market. And I'm feeling very comfortable in where we are at the moment in terms of that.

Yoav, how long would it take to expand into new environments like land and marine? Does the solution technique need to be tweaked or is it basically the same?

First of all, I must say that we are already active in those fields. When I said it, we want to expand more. It's making sure that we're getting to more places, more use cases in these fields, but we are active in both aerial land and marine applications already. If it requires different tech or tweak to the technology, in most cases, the answer is no. In the end of the day, those uncrewed systems require the same set of capabilities. Sometimes there are small tweaks, but when we're moving from air to land to maritime, in most cases, that does not require R&D customization, I will call it. It more require configuration that can be done by our professional services team or by the customer themselves depend on their technical competencies. It definitely does not require R&D customization on our side so far from what we've seen so far.

Bershin, are you considering expansion to search and rescue beacons, both defense and civil, or our customers, I guess?

Yeah, not sure whomever asked the question what he meant or she meant by beacons, but we do have customers that are using our systems for search and rescue. As of now, it doesn't seem like a very big market at the moment. Obviously, that can grow, but we do have customers that are using our systems for search and rescue applications.

Yeah, and if you've just tuned in now, this is essentially saying that we are, the Halo solution at least, is agnostic to industry. And if there's a civil or defence application where you need this reliable connection confidence and spectrum superiority, then it could suit any vertical. Another question, what about different types of carriers and unmanned systems? Is it basically the same solution with slight configuration tweaks? It's a similar kind of thing.

Carriers, I guess it means different OEMs or different kind of platforms. I think we used to have slide like this to explain it. Maybe we need to bring it back. The Halo is one size fits all. By the way, it doesn't matter if we're talking about commercial application or defense, if we're talking about aerial vehicle or ground vehicle or maritime, it's one size fits all in terms of the software feature and the hardware configuration. Inside of that, obviously, different companies or different customers can use different configurations. They can do it themselves. But in terms of the flexibility that the product provides, it's specifically designed for uncrewed systems, but between aerial, ground, and maritime, it's pretty much the same. The reason we specifically designed it for that is, I used to say it in the past, I'm still saying it today, sorry, is that We want to create those aha moments for our customers. We want the customers that first time seeing it. And I used to tell this story that we saw time and time again when we're coming to a new customer for integration or whatever. And for us, it's another day in the office for the customer is the feeling of this epiphany moment saying that, where have you guys been? This is the product I was looking for. The only way to do it is by being focused on what we want to achieve and what is the pains and the problems and knowing the pains better than what our customers know their own pains. This is how we get there. And this is, I think, why we have the success that we have is being in love with the problem we're solving and not necessarily with the solution we're providing.

And stepping back, you get a context for everybody. L-Site wasn't necessarily formed as a company to create solutions in the drone market. It was about this resilient communication. And when Yoav mentions focus, one of the key things we can be proud of as a team is the focus, focus. And this industry is what we've focused on. But at the beginning, L-Site had all the possibilities. And there's so many other verticals we could be in, which may give you some hints about the future of the company, but... This is the focus that's created the results. I've got maybe a couple more questions. There's a question here about the margins and the operating leverage, because you talked about this a little bit, but we've got very high gross margins of approximately 77% with this record revenue. As you scale into 2026 and your product mix shifts more towards the backbone portfolio and recurring software services, should we expect these margins to expand further or is it 77 to 80% the sort of long-term steady state we can expect?

Definitely we should expect those margins to go higher. Like I said, we are investing today in those software features that that's where a lot of margin is created. Even though the margin on our hardware is super high as well, adding more on the software side with the same cost structure, I think that's what will bring our margin to even higher places. I said it before, I mentioned it before. Sorry. I mentioned it before, our margins, I think the margin in L-Site is one of our core assets. And the reason we have it is because of the competitive edge or the superior technology that we're providing to our customers. And we definitely looking to expand it and we are expecting it to grow. If you compare previous quarter to this quarter, We increased the revenue, sorry, the margin from 82% to 90% on the software stack. And that's because of these activities and we are expecting to do more of it.

Yeah, I have a question about Aura because we haven't really talked about this much. You've discussed the expansion of the portfolio from pure connectivity into positioning and autonomy. Can you provide more colour on your early market reception for the Aura product and how it differentiates itself in the US and European defence markets compared to traditional tactical radios?

Yeah, so Aura, first of all, like we said in the announcement, that's initiated in a program that we're part of with a big prime that is creating not only, by the way, radios for uncrewed system, but also that should go for any kind of communication for defense forces. I think what it provides is the same capability we have in the Halo, but in a smaller four-factor, really reducing terms of performance and capabilities because we needed to have A lower cost product. Like I said, we wanted to keep the same margin. So we had to reduce some of the capabilities there. We're getting great feedback from the first production batch that we already shipped on the back end of last year. And we are expecting it to grow. I think it's another... component within the portfolio of our product, showing that we have different flavors for different type of capability or use cases. And this is why we came up with the Aura. Overall, we get good feedback for it. And that will be part of everything I said today here in terms of broadening our portfolio, not only in the communication space, but also in the other spaces that I mentioned.

Got two more questions here. Hopefully we can fit them in if you don't mind going a minute over. As you finish up that question about the Aura product, if you're an analyst and you're looking at the size of the market, especially if you're focusing on defence, you'll probably look up and find that communications is a very, very large and significant portion of defence spending, in some calculations up to 11%. So have a look at that. A question I've got about serviceable available market growth. Slide 17 shows a significant jump in your serviceable addressable available market to $5 billion in 2026 and $10 billion by 2028. How much of this growth is dependent on the release of new products like Aura versus simply expanding with your existing Halo design win customer base?

A lot of it is related to the new product that we're going to deploy into the, to put into the market. By the way, part of it is connectivity and providing a wider connectivity solution, I will call it. But definitely going, like I said, to more geographies, go to more domains and have a wider product portfolio. That's how we increase our serviceable addressable market. And the fact that we're not talking in TAM and we're talking in SAM, total addressable market, but serviceable addressable market, It's to be more precise and to make sure that these numbers are numbers that we can go after and it's not including services or actual platform or that's actually the layer of what we are targeting and where we are active in. And that's why we were talking about those numbers or those figures and not talking about total times, which are not necessarily relevant for us. But it's definitely driven by both development of new product geographies and going deeper into more domains.

I've got a question. How quickly do systems become out of date or obsolete? Is it quick? How quickly are you, if it's quick, how quickly are you able to update the systems?

So in general, I would say that in the drone space, and that's sometimes true in the commercial and the defense, but if I'll try to give an average, a drone lifespan will be between three to five years. Once it's went through all those years and that's a super vibrant and super harsh environment, the customer or the user will have to replace the entire thing. And that's when they update their hardware. I would say that today we have Halos that are out in the field for more than six years already, operating on different drones and different robots. So we are very comfortable with that. In terms of life, there are components that are getting to end of life. We are good until 2032 in terms of that. And obviously, if we will get there with the same set of hardware, we will find replacements. We're feeling very comfortable in terms of the lifetime value of the Halo.

Well, we've come to the end of the session. I've got one last question. It's just a specific one about your supply chain. And everyone's noticed that the memory market seems to be a significant price increase in global memory. Given your capital-like manufacturing model and the simplified hardware design of Halo, how is L-Site mitigating these supply chain costs to ensure your hardware margins remain protected?

I will start by saying that I think that will go and will be more challenging over time because seeing what the U.S. are currently doing with not being able to buy any Chinese components, thankfully we are already there, but I think those supply chain challenges will only get worse over time, not for L-side in general in the electronic market, But on our side, I must say that we're not feeling very much these lead times constraints or these tensions because of how we run our supply chain. I want to remind you for those of you that with us since COVID, when there was a crisis for chips at all over the world, we were able to get through that by having those very, very steady and resilient supply chain, I would say. In terms of margin and cost, we do see some increase in prices on the component. I think we have a lot to do there. yet in terms of until it will actually affect our gross margin. And obviously, as the prices will continue to increase there, or if the prices will continue to increase there, that will be also rolled down to our price of our product, and we will keep the same margin. Our customers are very well educated in terms of cost and production cost and component cost and so on. So I don't think that will hurt our margin or gross margins in general.

That's the last question, Yav. Thank you very much for the presentation. And thank you to all of you attendees for your questions and your support. On behalf of the board, I want to congratulate Yav and his team on a fabulous job and the work they're doing to set this company up and our investors for a strong future. Thank you again, everybody. And good afternoon. Good morning.