Elsight Limited

Good afternoon, good morning, and good evening to everyone joining from around the world. Thank you for taking the time to be here. My name is Howard Digby, non-executive director of LSITE. With us on the call are our board and management, Amishafran chairman, Jim Landau, and David Furstenberg, non-executive directors. CFO, Dan, and our CEO, Yive, who will present today. Before we dive in, I'll direct your attention to the disclaimers on slide two. I won't read them in full, but I want to highlight the key points. This presentation is for information purposes only and does not constitute financial product advice. We will discuss forward-looking statements today. These involve known and unknown risks that could cause actual results to differ. A quick reminder on all our reporting, all figures discussed today are in US dollars, unless stated otherwise, and we operate on a calendar year basis. That makes it easy. We'll say 2025 or 2026, this year, last year. Regarding logistics, we will have a dedicated Q&A session at the end. However, you are welcome to submit your questions at any time using the Q&A button at the bottom of your screen. We'll address as many as possible during the session, and I may even group sort of light questions together. So it is now my pleasure to hand over to our CEO, Yoav Amitai. And I have to say, this is a quarter where the results speak loudly, but the strategic progress may speak even louder. Between a fifth consecutive record quarter, blue list approval landing in the same week as the largest US drone budget in history was announced and a new product already in the hands of Design Wind partners, there's a lot to cover. So over to you guys.

Thank you very much Howard and thank you everyone for joining us today. Good evening, good morning, good afternoon like Howard said. I want to start with the headline. I want to start from the top line. saying that the first quarter has showed us more than anything that we're in the right direction in terms of our strategy and where we're putting our effort in. It provided us with the fifth, like Howard mentioned, the fifth consecutive quarter that we are hitting our target and we are having an increase in the revenue. This quarter was $11.6 million in revenue, which is 12 folds than what we had in the first quarter of 2025. And that's supported by a big pipeline increase that we have. We had a profitable business model, which is creating cashflow positive. We have $64 million in cash in the bank. And like Howard mentioned, there are two main points that I want to put on the highlight. One is that we were included in the U.S. blue list, what we just announced yesterday. That's why one of the reasons why we put the presentation a little late, because knowing that will come before the presentation. I'll cover it in details in the presentation, what is the meaning of it, but I want to say, again, like Howard mentioned, that just come in a perfect timing when the largest U.S. drone budget in the history, and that's significant. We'll talk about it in the presentation. And second, about the soft launch of new product, specifically this quarter, the non-GNSS product, which is not yet an official launch, but as a soft launch with first design partner that we work with, start to feel the product, start to feel the value that it provides them in the actual field, and see what are the feedbacks that we're getting, and from here we will scale out. People many times ask me what excites me or what is exciting about L-Site. So regardless of all the, let's call it, all the natural or organic growth that is happening to us, which is not something we're taking for granted, we're working very hard to get there, All the new initiatives that we're doing, which include new product portfolio, expansion of the product, and not only the product in our case, but also doing it with a new business unit that we'll talk about it that's going after a net new market. Having everything we need and the perfect storm that is happening around us create a lot of excitement and everything that is related to the next new initiative, that's where we are seeing the growth coming. The faces haven't changed. We're still seeing that the vast majority of the revenue will come from defense or will be driven by defense because of the macro geopolitical environment we live in. So in the next, call it 24 months, That's where we're focusing. Having said that, and I'm not going to mention it a lot during this presentation, but I want to emphasize that we're doing a lot also in the commercial space. We have a lot of progress that is happening there. We are expecting the PATH-108 to start to be implemented basically, and that should accelerate there, but that's the medium long-term opportunity. When we're looking on what we have in front of us at the moment, seeing those budgets that I will talk about, seeing the level of excitement or the level of traction that we have with our existing offering and the new offering that we're bringing to the market, that's where we're seeing the growth of that's what we're looking to do next basically. And again, looking on this quarter that was ended about a month ago, more than anything, it was a great evidence of how substantial and strong the market is, how substantial and accurate our strategy is, and from here it will be to execute with everything that we have to continue this execution. Speaking of the quarterly increase and the chart, I think it tells a better story than anything I can say. If we're looking on the trajectory of the quarters and we'll look on what happens to us in the past, and also if we're looking forward, what is going to happen next? What we're seeing is not a lumpy project revenue. Many times in defense market, people, investors are afraid of lumpiness or the lumpiness nature of the business. I think what we are being able to show in the last, call it year and a half, is that it's not laundriness, it's something that is built of existing deployments with a lot of recurrent revenue part of it. We'll talk about that. Everything driven by our design win strategy basically means that every new customer that becomes a design win is a tip of an iceberg for us and they're going to many other customers of theirs. And how all of this is moving into production and scaling over time And again, even if we're looking forward, we are seeing how this trend will continue this quarter over quarter increase. Just for reference of numbers, the first quarter of 26 was 25% higher than the last quarter of 25, which is unprecedented in something that's growing so fast. In terms of number of customers, so the revenue came from tens of different customers. Eight of them was net new customers, so basically new design with new customers that were still onboarding, both in the commercial space and in the defense space. And that sets a very strong baseline for us to continue this growth and and to continue to push the numbers up. Looking a little in a high level about what happened in the industry, and I think that's something that we have mentioned in the previous presentation as well, but what we're seeing in the last two years is what's currently really happening or really taking structural shift, and it's not, again, not a cycle. People used to ask me, actually it didn't happen in the last couple of months, but people used to ask me how much of our revenue is conflict dependent. And my straight answer is that I think if something happened in the world in February 2022, when the Russians started the invasion into the Ukraine, is that the world understood that that can happen to the rest of Europe. It can happen in other places. We have seen during the first quarter, the first column, the last two months, all the Iran-U.S. conflict or war that is happening there. So we're not talking about a side deal that is hyper-something. We're talking about something much more structural. And when governments are talking to increase their budgets, when NATO is taking the target from 2% GDP to 5% GDP, when the U.S., is talking about or putting a request of $1.5 trillion of defense budget. If you're looking on 2025, the global defense spending hit $2.72 trillion, which was the highest increase since the Cold War. Those are trends that are not a cycle trend. Those are structural trends. that are changing, it include data like I mentioned, it include the EU committed for 800 billion euros under the rearm Europe, it include a lot of trends that we're seeing and happening and I think what's super interesting in that and I also talked about it in our previous presentation, is that the point is simple. Governments are buying at scale. They need solutions that work today. They are not looking anymore for 10, 20 years program. They are looking for commercial off-the-shelf costs, commercial off-the-shelf goods that can be deployed today or tomorrow. And that's exactly where LSID is playing, exactly in this field of ready-to-use products. capabilities, ready-to-use products that are off the shelf and can be adapted, whether we're talking again on commercial application, defense application in every domain, whether we're talking overseas, in ground systems, in aerial systems, that's where we are seated. If you ask me what is our broader view of L-Site in general, or what we're building in L-Site, we're moving from communication company to become the backbone of Uncrew's system, basically. So I think that today it's a very unique point in time that... super mature and huge market is going through disruption and we are coming to this disruption probably with the best time in the best place with a very strong value proposition and a lot of experience and today we're leveraging this experience to become this backbone, this infrastructure layer that every uncrewed system needs to manage to operate. And again, we're not talking about only connectivity. That's where we started. That's where we prove ourselves. But now we are expanding it to positioning, to videos, to some autonomy features. And that's where we are going to. Each step is driven by customer demand. It's not driven by us having wishful thinking of what we think the market needs, but actually inbound requests of why would you do this or do that. And obviously, we're trying to balance of what is right to invest in in terms of R&D spend and what is wrong. And based on that, we are expanding our portfolio. The way it looks like is on the left, what you're seeing is where we are today. doing mainly connectivity. You're all very super familiar with our resilient connectivity. I think we proved time and time again what is the value proposition and how strong is the value proposition of what we're bringing to the market. And on the right is where we're heading to. It's four-pillar platform covering connectivity, positioning, autonomy, video and sensor control. And basically, the idea is to have a whole product solution to create this to become the steel one that provide the OEMs and the end users all the capabilities together in one place. I'll talk about it in a higher level in a second, but I want to say that connectivity is already in production. Like you all know, we have more than 500,000 operational hours in the field. The positioning was soft launched in Q1, like I said, with the first design partners. We actually have already started to get feedback from actual customer usage. It's patent-pending and software-only. It means that for us to do up-sell or cross-sell into our existing install base does not require any additional hardware, just software upgrade, basically. It makes it much frictionless, let's call it. I won't say easy, but... Less friction to do these axles and crosshairs. When we're talking about video and autonomy, those are still in development. Some video features are already being used by our customers. And I also want to mention that not all of it will be developed internally in L-Site. Part of it, if we're seeing a company that have a good product in the autonomy space, for example, we will either join them, we will partner with them to do it the right way. And when we'll talk about later about growth opportunities and not only organic growth, but also inorganic growth, Those are the areas of what we're looking at, what will add us more capabilities in this frame, something that we know how to sell, we know how to take to our customers, and how to take to net new customers, and that's another element of what we're looking at in our strategy. Zooming out further a little bit about where we sit within the platform, and that's a little technical, but that's the broad vision of what we're doing. So every unmanned system, that matter if we're talking about aerial vehicle, ground vehicle, maritime robotics, that matter if we're talking about agriculture application or inspection or any defense application or homeland security, all of them have, generally speaking, four different layers. On the bottom line, there is the hardware layers. The other layer, which is the platform chase, it is the batteries, the flight control unit, the payloads, the engine, the edge computer, everything that is actual physical on the platform in the edge. On top of it, we have the platform OS. OS stands for operating system. We'll talk about it in depth in a second. Then we have the mission OS, and then we have the HMI, which stands for human-machine interface. L-Side is playing in the green platform OS and in the hardware we're not building drones, robots or boats at all. It's something that people are still asking us from time to time. When your drones will start flying or something like that, that's not our business. That's not where L-Side plays. LSAT is playing in the platform OS, and just to give you an example, in the mission OS or in the human-machine interface, there are companies like, for example, Andrew with their Lattice. All the primes have their product in this field. Another good example is Quantum System, Mosaic System. For those of you who are a little bit familiar with the ecosystem, those are the examples, but in the platform OS layer, there are not many competitors that are competing for this layer as a T1. And we found that there is a very tight relationship between all those different capabilities. And if they are done properly, a lot of the OEMs, the drone manufacturers, the robot manufacturers don't want to deal with this layer. If they can take a box, so to speak, a box that can be a virtual box that will solve this issue for them, that's something that they will take with two hands and the willingness to pay is very high there. Each one of those pillars, the navigation, The video sensor control, the communication, the autonomy have different challenges, have different addressable markets, but they're all very tightly connected. And that's how we are building them to be additional revenue stream, a more diverse revenue stream for ourselves. But we build it as a platform layer that every platform needs, regardless of who makes it, what mission it flies or drives in, or where it operates. They all need it, and that's the kind of, if you will, kind of the Intel inside model in its fullest expression. That's what we're going to. The way we're doing it in terms of business and expanding our team, we are seeing, or a quick word about execution in general. We built a team during the first quarter. We built a high-performance sales and business development team that actually started to deliver results. We onboarded five new sales executives in the U.S., Europe, Germany, UK, and the US. We have another one in the Middle East that we added in. We're moving manufacturing closer to our customers. We understand that we need to have closer manufacturing facilities, more closer to our customers. So it's something, additional initiative that we're doing to move part of our production to the US and Europe. We're not onboarding hundreds of people just to say that we're a big company. We're trying to bring the right people in the right time, in the right market, to make sure that we are as productive and as efficient as possible. We're also thinking about the long-term strategy and how we're leveraging our strengths and the tailwinds that we're seeing in the industry and not only here and now. I'm not saying yet to say that we're very cautious with our cash management. I want to say that we are in places where we feel that if we will put more dollars, if we will put a pedal to the metal to be more aggressive, we are doing it in full throttle. But we also, in the same time, we're also thinking long term and how we create a super profitable business on the long term and how we build it properly so the growth will be there, but we will maintain our profitable business model as ideology, basically. Thinking a little bit about the pipeline and pipeline number in general. On the top line, our $156 million in active pipeline, it's as of March 31st, something to mention. Today, obviously, the numbers are constantly moving. Now, I want to be clear about what this is, and I mentioned it in my previous presentation. These are real programs, real customers, real budgets. Those are not market commentary or wishful thinking. Those are real engagement that we have with the industries. The final breakdown, as you expected, we still have $12 million already contracted as a backlog from different customers. That is expected to be delivered in the very short term. On top of that, we have the $40 million in commercial discussion and the $72 million, the total of $72 million in evaluation in progress and below. Those are where we're feeling more confident more confidence and where we're understanding what are the processes or what needs to be done to execute this revenue. I'm not saying that it will happen tomorrow, but I do say that we have a better visibility there. And also, if we're looking on the top of the panel and everything we're doing there, it's all based on actual engagement with the industry. The important contact is this pipeline was built with pretty minimal sales and marketing investment. And now that we're scaling the team and we already started to see results from the five people that we onboarded, all of them have already supported this pipeline increase with net new opportunities. Part of them are already actually brought POs, purchase orders, and we're only in the first two months, two, three months of their work. So the beginning looks very, very promising in terms of both net new pipeline as well as converting this existing pipeline, which will still take a lot of work, but we have the right people and the right product to be able to convert it. Now, one thing that is super important to mention, I mentioned before the product expansion, the product portfolio expansion and everything we're doing there, this pipeline reflects Halo connectivity only. It does not include the positioning. It does not include the part of the ORA opportunities. It does not include the new business unit that we'll talk about in the future. Those are entirely additive for these numbers. And obviously, part of those that I mentioned are expected to generate revenue this year, in 2026. Again, like Howard mentioned, all the numbers that you are seeing here are in U.S. dollars. And as I said before, those numbers are as of end of March, so when we added the quarter, basically. I want to take you through the U.S. or in general our events or what happens to us in the U.S. market. Just yesterday we announced that the Halo was listed in the blue list. And again, it's coming at perfect timing when the U.S. are increasing their budget around those initiatives. And that's actually how those budgets are being allocated. It means particularly, specifically it means that now US military units can produce, can procure, sorry, Halo directly, bypassing the traditional multi-year government contract or long, very complex acquisition processes. The blue list is how those, like I said, those $75 billion in FY27 budget actually reach companies like ours. So that's a big, that's a big step tap stones for us. It doesn't mean that there is a short-term revenue implication for us. I had a lot of questions from yesterday's announcement. I do want to say that that reduced a lot of friction in the sales cycle, but I want to say that there is still a lot of effort that needs to be put there in managing us to take this and to leverage into actual sales. As I said, we do have the right team. We're seeing growing excitement and growing traction in the U.S. market. We're seeing that the timing of this blue UAS, which raised a lot of noise in the industry, obviously come in the perfect timing in terms of the new budget of, like I said, $1.5 trillion budget request, still not approved. $75 billion of it is going for a drone. $54 billion of it is going to the DAWJ, which is the Economist System Program alone. And just to understand, when I was talking about how fast the total addressable market is growing, these numbers, these $54 billion in 2027, expected in 2027, was $226 million just the year before. It means that we have a massive increase in demand, a massive increase in budget and actual contracts, and that, to put it simply, is... We got approved in the list exactly in the moment when the money started to flow in and the timing was just perfect for us. Another point to mention, Blue UAS in general is a program that companies can pay to play. Basically, a company can pay to become part of this process. They're going through all the qualification and all the certification as part of this process, ensuring the cyber, ensuring supply chain resiliency, ensuring NDAA compliance, everything that they are doing in the program, but they have to pay for it. I think that a very interesting point in our case is that the Blue UAS was funded for L-Site Halo or for L-Site in general by the U.S. DOW as part of the Project GI program. which I think it shows how important it is for them to have our capabilities and also it obviously should help us in reducing more the friction on the project GI program or the SOCOM OTA that we have or all the different initiatives that we already have in place that can become or that can accelerate the conversion of those programs into actual revenues. Taking it really broader than only the U.S. market, and we'll talk about it a lot, about what happened in the U.S. I mentioned in the blue list, I mentioned the SOCOM OTA access, which is another, it was a small line in our quarterly activity report, but that's, again, those are programs and processes that reduce friction from procurement. The reason they're happening is because we have so to speak, within the DOW that really wants our capabilities to be on their platform. And that's why it happened so fast for us. And again, I think that's a very strong signal of product market fit. In Europe, like I said, I was talking before about the NATO shift from 2% to 5% of GDP. The UK's new SDR, which wasn't approved yet, but what they call the 20-40-40 doctrine, which a lot of the budget should be allocated into uncrewed systems. The Germany drone wall, which is a combination of counter drone and drone systems that will be deployed there. The European in general have their 800 billion euros commitment for creating a lot of procurement activity and a lot of opportunities that we're actually starting to see in the market in terms of our customers and our end users. And now that we have our senior hires in the UK and Germany, like I mentioned, and we are onboarding a European manufacturer to be closer to our market, to be closer to reduce the friction of supply chain control, that set us in a very interesting spot there. Speaking a little bit about the rest of the world, I think that what happened during the first quarter, more than anything, looking on the Iran-US war that I mentioned before, I think it changed the whole thinking process of the GCC countries, which now understand that they're investing more. Actually, we're actually starting to see the flow of the program coming from them. creating their own defense capacities, let's call it, or creating their own forces that will help them to overcome if something will happen again in Iran. And that's new opportunities that are coming in. We have a person, we don't have a person on the ground in the GCC countries, that's something we're doing from our office in Israel, but definitely present a lot of interesting opportunities happening there. So having those five senior hires that I was talking about across all those regions. And now that we're building this commercial engine to match the product and to match the opportunity, that's where we sit right now. how we make money from all of it. In the end of the day, we're talking about business model and that's why we're here for. So the business model is pretty straightforward. We have on every system that we're selling, we have first the hardware sale, which is a perpetual fee basically for the hardware sale. That's the platform. And on top of that, there are two more elements, which are the all-site cloud or the software services and the data use services that are part of our offering as well. So every Halo unit generates all three revenue streams when the top two, the Halo product, the hardware product, and the all-site cloud is mandatory and the data usage is complimentary if the customers want to get it from us. And then where we are currently focusing a lot of our efforts is increasing the middle layer of the all-site cloud and software services for two main reasons. First of all, we believe that that's where we have a lot of value proposition to unlock for our customers in terms of capabilities. Those are the capabilities that I mentioned before of positioning, video, autonomy, and everything relates to that. And also, that's the layer where we have the highest margins and the recurrent revenue models that play into there. So if we're looking long-term and what will be the long tail of the sale that we're doing, that's where we're focusing at the moment. Speaking about recurrent revenue in general in the quarter, the recurrent revenue was $1.3 million, which is, again, 11 times higher than the corresponding period in 2025. It's almost 50% or a little more than 50% of the entire recurrent revenue in 2020 to execute this revenue. I'm not saying that it will happen tomorrow, but I do say that we have a better visibility there. And also, if we're looking on the top of the funnel and everything we're doing there, it's all based on actual engagement with the industry. The important context is this pipeline was built with pretty minimal sales and marketing investment. And now that we're scaling the team and we already started to see results from the five people that we onboarded, all of them have already supported this pipeline increase with net new opportunities. Part of them are already actually brought POs, purchase orders, and we're only in the first two months, two, three months of their work. So the beginning looks very, very promising in terms of both net new pipeline as well as converting this existing pipeline, which will still take a lot of work, but we have the right people and the right product to be able to convert it. Now, one thing that is super important to mention, I mentioned before the product portfolio and expansion and everything we're doing there, this pipeline reflects Halo connectivity only. it does not include the positioning it does not include the part of the aura opportunities it does not include the new business unit that we'll talk about in the future those are entirely additive for these numbers and obviously part of those that i mentioned are expected to generate revenue um this year in 2026. again like howard mentioned every all the numbers that you are seeing here are in us dollars um And as I said before, those numbers are as of end of March, so when we added the quarter basically. I want to take you through the U.S. or in general our events or what happens to us in the U.S. market. Just yesterday we announced that the Halo was listed in the blue list. And again, it's coming at perfect timing when the U.S. are increasing their budget around those initiatives. And that's actually how those budgets are being allocated. It means particularly, specifically it means that now U.S. military units can produce and procure, sorry, Halo directly, bypassing the traditional multi-year government contract or long, very complex acquisition processes. The blue list is how those, like I said, those $75 billion in FY27 budget actually reach companies like ours. So that's a big step forward. for us. It doesn't mean that there is a short-term revenue implication for us. I had a lot of questions from yesterday's announcement. I do want to say that that's reduced a lot of friction in the sales cycle, but I want to say that there is still a lot of effort that needs to be put there in managed to us to take this and to leverage into actual sales. As I said, we do have the right team. We're seeing growing excitement and growing traction in the U.S. market. We're seeing that the timing of this blue UAS, which raised a lot of noise in the industry, obviously come in the perfect timing in terms of the new budget of, like I said, $1.5 trillion budget request, still not approved. $75 billion of it is going for a drone. $54 billion of it is going to the DAWJ, which is the Autonomous System Program alone. And just to understand, when I was talking about how fast the total addressable market is growing, these numbers, these $54 billion in 2027, expected in 2027, was $226 million just the year before. It means that we have a massive increase in demand, a massive increase in budget and actual contracts. And that, to put it simply, is we got approved in the list exactly in the moment when the money is starting to flow in and the timing was just perfect for us. Another point to mention, Blue UAS in general is a program that companies can pay to play. Basically, a company can pay to become part of this process. They're going through all the qualification and all the certification as part of this process, ensuring the cyber, ensuring supply chain resiliency, ensuring NDAA compliance, everything that they are doing in the program, but they have to pay for it. I think that a very interesting point in our case is that the Blue UAS was funded for L-Site Halo or for L-Site in general by the U.S. DOW as part of the Project GI program. which I think it shows how important it is for them to have our capabilities and also it obviously should help us in reducing more the friction on the Project GI program or the SOCOM OTA that we have or all the different initiatives that we already have in place that can become or that can accelerate the conversion of those programs into actual revenues. Taking it really broader than only the U.S. market, and we'll talk about it a lot, about what happened in the U.S. I mentioned in the blue list, I mentioned the SOCOM OTA access, which is another. It was a small line in our quarterly activity report, but that's, again, those are programs and processes that reduce friction from procurement. The reason they're happening is because we have sponsors, so to speak, within the DOW that really wants our capabilities to be on their platforms. And that's why it happened so fast for us. And again, I think that's a very strong signal of product market fit. In Europe, like I said, I was talking before about the NATO shift from 2% to 5% of GDP. The UK's new SDR, which wasn't approved yet, but what they call the 20-40-40 doctrine, which a lot of the budget should be allocated into anchored systems. The Germany drone wall, which is a combination of counter drone and drone systems that will be deployed there. The European in general have their 800 billion euros commitment for creating a lot of procurement activity and a lot of opportunities that we're actually starting to see in the market in terms of our customers and our end users. And now that we have our senior hires in the UK and Germany, like I mentioned, and we are onboarding a European manufacturer to be closer to our market, to be closer to reduce the friction of supply chain control, that set us in a very interesting spot there. Speaking a little bit about the rest of the world, I think that what happened during the first quarter, more than anything, looking on the Iran-US war that I mentioned before, I think it changed the whole thinking process of the GCC countries, which now understand that they're investing more. Actually, we're actually starting to see the flow of the programs coming from them. creating their own defense capacities, let's call it, or creating their own forces that will help them to overcome if something will happen again in Iran. And that's new opportunities that are coming in. We have a person, we don't have a person on the ground in the GCC countries, that's something we're doing from our office in Israel, but definitely present a lot of interesting opportunities happening there. So having those five senior hires that I was talking about across all those regions, and now that we're building this commercial engine to match the product and to match the opportunity, that's where we sit right now. how we make money from all of it. At the end of the day, we're talking about business model and that's why we're here for. So the business model is pretty straightforward. We have on every system that we're selling, we have first the hardware sale, which is a perpetual fee basically for the hardware sale. That's the platform. And on top of that, there are two more elements, which are the all site cloud or the software services and the data use services that are part of our offering as well. So every Halo unit generates all three revenue streams when the top two, the Halo product, the hardware product, and the all-site cloud is mandatory and the data usage is complimentary if the customers want to get it from us. And then where we are currently focusing a lot of our efforts is increasing the middle layer of the all-site cloud and software services for two main reasons. First of all, we believe that that's where we have a lot of value proposition to unlock for our customers in terms of capabilities. Those are the capabilities that I mentioned before of positioning, video, autonomy, and everything relates to that. And also, that's the layer where we have the highest margins and the recurrent revenue models that plays into there. So if we're looking long-term and what will be the long tail of the sale that we're doing, that's where we're focusing at the moment. Speaking about recurrent revenue in general in the quarter, the recurrent revenue was $1.3 million, which is again, 11 times higher than the corresponding period in 2025. It's almost 50% or a little more than 50% of the entire recurrent revenue in 2025. So those numbers, as the install base grow, the recurrent revenue compounds, and that's how the structural shift in revenue quality, and that's why we are also focusing on this layer of the L-site cloud and additional services there to increase the average revenue per unit. In terms of margin, we were able to keep the blended margin in approximately 76% like we had before. And again, that represents the strength of our value proposition to the market. Speaking of the combination of the hardware and everything, I want to talk about manufacturing and supply chain, which investors tend to ask us a lot many times. First of all, we have today over $150 million in annual capacity, which is not our bottleneck. by no means, and it does not require any additional CapEx. The hardware is intentionally simple, that's why we designed it this way, so it will be relatively easy to qualify a new manufacturer that can produce it for us, and our IP sits in the software, which makes it much easier to protect again. We're onboarding a US and a European manufacturer for supply chain diversification and for customer proximity, and not because of the capacity that we are concerned about, but just to be closer to our customers. So all of these together compounds, that basically provide us the confidence that we will be able to ship units to our customers in full on time based on their growing demand. A brief important part about our data and everything that we're doing there. As I mentioned, today we have more than 500,000 flight hours. By the way, this number was the same in the previous presentation, not because it didn't change, because it's big enough for us to show the numbers and just not sharing it with also competitors and others, but obviously that's growing on a secondly basis. Even while we're doing this call, this number is growing all the time. So we have 500,000 flight hours and drive hours of operational data across diverse environments in different parts of the world. And it gave us one of the richest data sets in the UnCrew system space in general. Now, this data fits directly into our modeling, into everything that we're doing in the communication, positioning, autonomy, and also on the new business unit that I will talk about in a second. It's not just an historical record. That's a foundation of our future expansion and product. Every hour of the Halo operation that we can log makes our future products smarter and better, basically. And that's why that's a very interesting asset that we're holding. A brief update about the new business model, which is still in stealth mode. Like you all might know, we established this new business unit in July 25. During Q1, we advanced from early stage development to internal proof of concept of seeing the actual product working on simulated data sets. We began engaging new customers and design partners for these specific initiatives, and we're expecting to onboard our first paying customers during 2026. I want to be very direct about expectations here. The near-term revenue from this will be very modest. We're not expecting it to move the needle in 2026. But we're talking about super mature industry with a total addressable market of over $20 billion, according to different marketers. And as I said in previous presentation, the probability of us taking a market share, a relevant market share within this market is still in low probability because it's a brand, it's a completely new initiative. But if that's valid, if we can do that and if we can prove our value proposition, the revenue potential is much more than material and can become bigger than our existing product basically in market. So the reason we're not sharing more is because of the mode that we lack at the moment. If you'll ask me in the Q&A session, how do you protect against that? I will have very bad answer and that's why we're keeping it in stealth. So we're not creating competitors in this field. Once we will feel comfortable that we have good enough moat or deep enough moat that we dig around it, once we will feel that we have the right engagement with customers, that will be the time for us to come and say to the investor, this is the market we're going after, this is how we're going to do that, that's the competitive advantage that we're bringing to the market, and so on. But right now, unfortunately, and as you know, Elsight, We are trying to be as open and transparent as possible, but here we believe that that will affect the business performance, and that's why we keep it like that. I do want to say that the fact that it's in stealth mode does not prevent us from going to customers and speak with customers. We just don't want to put it in websites or in social networks or investors' presentations or anything like that, but we are definitely doing direct communication with potential customers. So let me close with where we are today and where we're going from here. On the left is everything we already achieved from record high revenue of $11.6 million in the quarter with still a thick backlog and pipeline that we're working to convert. Inclusion in the DOW blue list for rapid procurement, like I just mentioned during the presentation, in a perfect timing. Having $64 million in cash that will help us to press the pedal to the metal and to be aggressive where we think we need to be aggressive and maintaining the profitable and cash flow positive margins that we're working on, that's what we already have. Now, when we're looking into the future and executing this $156 million pipeline of opportunities, including expanding existing defense supply agreements, new defense customers, new design wind customers, obviously, follow on orders coming from the existing customer base that we have in a long term relationship with our DesignWin partners. Adding more product into our product portfolio like the NGNSS that I mentioned, having more product released during this quarter, doing more engagement through our global team, that's where we're going to. And the catalysts ahead are more tangible and more near-term than any point in the history of L-Site from the time I'm part of L-Site. And that's why we're so excited internally in the company, and that's why we're coming with – smile and greet every day that we're coming to the office to continue and push and make sure that we are keep pushing ourselves and pushing the market and pushing our customers to get to new places. I will end up with that and hand it over back to Howard for questions.

Thank you for walking us through what has clearly been an exceptional quarter, not just in terms of financial performance, but the way our strategic positioning has crystallized. We've received a number of questions already. Please, everybody, continue typing your questions into the Q&A section. I've also received some by email ahead of the session, which I'll work through as well. Let me just start, Yaev, with the first question. The team keeps picking off milestones after milestone, but eventually something must go wrong. My question is, what keeps you up at night, Yaev? What are the risks you are thinking about?

That's a great question. So as I said in previous webinars and when people ask me this question, Obviously, there are a lot of risks to the business like any other business and there are a lot of challenges that we're facing and we are, like I said, we're coming every day with a smile even though sometimes we get hit in the face. That's part of, that's the cost of running a business, I guess. But I would say what more than anything keeps me personally up at night is that there is so much happening in the industry at the moment. And we know what we know. We don't know what we don't know. And making sure that we're not leaving any opportunity on the table or making sure that if we need to be more aggressive with our sales and marketing efforts or developing new products and new capabilities that can generate even faster growth, That's what concerns me the most, what we don't know about, basically. Besides that, I'm feeling very, very comfortable with where we are at the moment and with how the future is look like.

Thanks, Jo. The next question is, with Halo now deployed on over 10,000 drones, can you tell me what new insights LSAT is learning from the battlefield?

Hmm. Um, That's happening all the time. I mean, the speed of iteration that is happening today and the speed of new capabilities that are coming are constantly happening. I think if what we're learning more than a lot is that our approach of not being dependent on single thread, whether we're talking about communication, that we're aggregating multiple type of networks from cellular to other networks, same in the positioning and the non-GNSF positioning, being rely on a single source of truth which can be a GPS signal or can be any other type of positioning. Those are not working anymore. To be successful in completing missions in today's front lines, you need to have choices, you need to have alternatives, and you cannot be dependent on single threat, which is great news for us because that's our long-term approach of how we're looking on our product development in general. We have seen it a lot. I think that Even if you're looking on today's new RFIs and RFPs that are going out in the market, some of them are public. You can look at them. There are starting to include capabilities like us, which means that there is an education going on. There is a market understanding of these are the right approach. And that's part of the lesson that we're learning. But again, that's a constant trend. kind of chicken and egg learning that we're having all the time. That's related to what I mentioned about the number of flight hours and what we learn from it.

Thank you. When you mention 300,000 unmanned systems in 2027, this is the USA, right? And 75 billion in TAM for uncrewed and counter drone. Actually, probably 54.6 billion in terms of autonomous systems, how much of this is applicable to ELS, given that we don't do FPV class drones, which is a significant part of these?

Correct. For those of you who are not familiar with the term, so FPV drones, or they're also called PBUS, those are the super small chip drones that are being manufactured in scale. The 300,000 drones unmanned systems, which are part of the drone dominance program, are those kind of drones. Those are the super small, relatively cheap drones. That's a very good question or it's a very good assumption to say that the Halo is not a great fit for these kind of drones for swap C, for size, weight, power consumption, and cost. Mainly the cost, by the way. We do have customers that are using the Halo in FPV, just the cost doesn't make sense because of what we charge for the Halo. If we're looking on this program in general, in the drone dominance program today, we have interface or engagement with all the companies that won, all the 11 companies who won the first gauntlet. The second gauntlet is scheduled at the moment to be this August, August 26th. And the next one will be in February 27th. And companies that went through defense gauntlet, it doesn't mean that they will win the second or the third. Now, looking on what are the requirements on this program, that's what I mentioned before, If you look on the drone dominance program today, on the next GaNLET, on GaNLET 2, they are requiring two main missions. One is indoor mission, the other one is outdoor mission. The outdoor mission should be in EW contested environment and should also operate for long distance. They put their 20 miles, the mission length of what companies need to achieve or to perform basically. Even further, If you look on the RFP or the RFI of this program, you will see specifically a line saying that the government expecting to have multi-thread network including LTE links. And that's obviously playing very good into our hands, into our offering. Now, we do have the Halo, we do have the Aura. We're also working on product that will be better fit for lower cost kind of product. We do want to maintain our margin, so that will require reducing capabilities, but we are working with those customers to be able to provide the right solution for this market. I do want to say, and it's a super good point, and I want to mention it now, that we might see it as we might need to do kind of a lost leader kind of approach, saying that let's give those companies to start with the halo, with a better price, something that will help us to put food at the door, but with the understanding that in the long term that they will go to this with the new capabilities or new product that will maintain our margin. So that's how we're looking at today. That's why I said that the Blue UAS came in the perfect timing for us. The submission are just starting two days ago. The submission for the second gauntlet just started two days ago. And that's where we are focusing at the moment in the U.S. market. Besides the Project GI that we have, besides the SOCOM interfaces that we have, the Drone Dominance Program is where we are focusing a lot of our effort at the moment. So it was a long answer for a short, sorry, a long answer for a short question, but I hope I addressed the point in the questions.

Yeah, in the Q4-25 presentation, I guess that's the last one, the commercial discussion segment of the pipeline showed 47.8 million, whereas in today's presentation, that figure is 40.6 million. Could you clarify the reason for this discrepancy? Or is it the way that the figures are?

The way the figures are, I want to point everyone to the notes in the bottom. The pipeline is cumulative. So the reason we change order backlog into actual revenue It means that the bottom line of what you see in here, if you guys can see my screen, the bottom line of what you see here, that was part of it, that was $22 million in the previous presentation. It means that $10 million went into revenue, so the 40 here was actually 50 because of this $10 million. These numbers are cumulative, okay? So this number includes this number as part of it. That's what you see here on the notes on the bottom. So that's how we explain all the numbers have increased. You can do the math afterwards or we can share the numbers. But that's how I explain the difference, which looks like a decrease, but it's actually an increase of the numbers there. I hope it was clear enough.

So the actual pipeline has grown. So you can see that the pipeline has grown from $137 million last quarter to... $156 million. Yeah, $137 million to $150 million now.

Each one of those buckets on the accept the order backlog, all the four buckets on the top have increased in the last quarter. It means that we add net new opportunities and we converted some of those opportunities down the funnel.

And so what's driving the top of the funnel expansion? Is it the expanded sales team or are you seeing inbound interest as well?

It's a combination. It's definitely a combination of the two. We are seeing a lot of inbounds. I was talking about the excitement and the traction that we are seeing coming from the market. Example like yesterday of Bing including the Blue UAS or having SOCOM OTA or all those projects that we're doing definitely creating inbounds. But we also, like I said, we are seeing net new opportunities coming from our new executive teams and new executive sales teams that are actually already generating not only, by the way, pipeline opportunities, they're already generating purchase orders, still small, But doing it in the first two, three months of your work as a salesperson, that's exceptional in many cases in our industry. I'm not talking about B2C industries. So we are feeling very comfortable there. And it's a combination of inbound and outbound activities that we're doing.

Yeah, I've got another question here about the numbers. I think you addressed part of this, but we'll go through it again. Yeah.