Electro Optic Systems Holdings Limited

Thank you for standing by and welcome to the Electro Optic Systems 2026 half-year results. All systems are in a listen-only mode. There will be a presentation followed by a question and answer session. If you would like to ask a question via the phones, you need to press the star key followed by the number 1 on your telephone keypad. If you would like to ask a question via the webcast, please enter it into the ask a question box and click submit. I would now like to hand the conference over to Dr. Andreas Schwer, Managing Director and CEO. Please go ahead.

Good morning, good evening, ladies and gentlemen. My name is Andreas Schwer, Managing Director and Chief Executive Officer of Electro Optic Systems. I would like to give you our speech for the first half 2026 year results presentation and we are very proud to announce that the first half year has been exceptionally good. It has been a record year for Electro Optic Systems. Let's please move to slide number four. So the agenda looks like the following. We will first summarize the highlights of the first half year. I will put you then into the strategic context, what has happened in particular in the first half of 2026 with a focus on the high energy laser weapon business and then a very strong focus on the Mars update, Mars, our recent acquisition. We then have looked at the order book and I will give you an outlook on our business development, what will happen over the next few months I will then hand over to Clive Cuffell, our CFO, who will give you an overview about our financial performance down to division and level, some aspects on the cash flow, and then I will summarize the presentation by giving you a strategic outlook before we go to the question and answer session. Please move on. We are on slide number six. So to put you into the context, EOS is operating in a very strong market. The first half year has been exceptionally strong from a market perspective. The conflict in Ukraine but also in particular in the Middle East was helping us a lot to get more traction and to achieve the results which we have achieved. Part of that obviously was a strongly evolving partnership network. You might remember that part of our go-to-market strategy is to enter into partnerships with national champions in particular key and core markets. That has happened also in the first half of 2016. You could also demonstrate now in a quite impressive way that you can deliver. We can deliver on commercials. We can deliver in a highly operational excellence mode. So we could convert quite significantly our order book into revenue and we could operate in a very complex and demanding supply chain environment, an environment where www.optic-systems.com We have invested some years ago into a framework agreement with Northrop Grumman to secure us the supply of a very strategic component, the 30mm cannon. And that's one example why it's paying off now. We can deliver quicker than some of our competitors and that is giving us a strategic lead. So we expect the growth to be very sustainable and robust and we are very optimistic for the outlook over the next few months and years. So we are very positioned to capitalize on all those factors and all those framework conditions. Let's move on please. I would like to hand over to Clive to give you the highlights of the first half 2026 financials. So please Clive.

Thank you, Andreas, and good morning, everyone. So as this slide shows, it's been quite a positive first half in many respects. The revenue of $169 million, which was announced a few weeks ago, is an increase of almost 300%. on the comparable prior period. Gross margin at 58% continues a trend of positive development particularly in our remote weapons system business and we're extremely pleased that in the first half we are able to report an underlying EBITDA of 21 million Australian dollars. As we have said previously, we've been targeting profitability for some time. The strong markets combined with the order book and particularly the agility that Andreas mentioned has allowed us to achieve the revenue that has driven this positive EBITDA for the first half of the year. The cash position and the funding position of the business has never been better. At the end of June we had $256 million in the bank. We also had undrawn debt facilities of $30 million and in July after the end of the period we received the final tranche of the equity raise which was a further $30 million. So we are in markets as Andreas is about to explain that are very strong and the business is extremely well capitalised to deliver on that growth. The other highlight that I'll come back to later on is this morning we are announcing that our revenue outlook for the calendar year 2026 is now a range of $360 million to $400 million including the benefit of the Mars business Thank you, Clive. We are on page number eight.

So EOS is active in four segments following our strategic imperatives of becoming the number one global provider of integrated counter EOS solutions and secondly to become the worldwide leader outside EOS on space control, space warfare type of systems. In order to achieve that they're active in the following four domains, two of those domains are effector type of domains and the other two domains are system level type of domains. I start with the effectors. So we have been, we are and we will be a world leading supplier of kinetic defeat systems of remote weapon systems or remote weapon stations. This business is remaining very exceptionally strong and we expect a strong growth path. also over the next few months and years because of our high security in tracking and shooting the highest hit probability and I just want to remind everybody we have never lost any kind of competitive shooting event and that is the baseline of our business success in this particular business area. Our high energy laser batten business where we succeeded in 2025 with the first worldwide 100 kilowatt laser batten contract for export That is a domain where we expect a very substantial growth in the future. This is becoming a backbone of our business and that's an area where the competition is not that strong. There are only very few players on the market competing against electro-optic systems. I will come back on all those segments in a few minutes again. Most notably here is our recent acquisition of the company Mars. a company which was based at acquisition time in Monaco. We have transferred the company meanwhile to France, to Nice. They're active now with operations in France and in UK and in Saudi Arabia. And this pillar, which was always promising, it was promising from day one, is turning out to become an extremely positive growth. growth area for the business, we are now in a position to offer integrated counter UAS systems, turnkey systems for any kind of client, whether it's a military client or whether it's a client coming from the so-called Homeland Security area, such as operators of airports, commercial airports, power stations, and other critical infrastructure. So that is our business which is driven by MaaS and MaaS is backed by its own proprietary NIDAR AI driven command and control system, a system which is fusing any kind of sensor information and creating an integrated picture for the operator in order to decide automatically on which sensor, which effector should take over, which kind of intruder in order to protect the infrastructure in a hemispherical way. I will also come back on this a little bit later on. The fourth pillar of activity is our so-called space control system, our space business. where we are developing systems being able to interact with any kind of space object. Interaction could go that far that we are able to not only move space debris but also being able to blind satellites temporarily or also permanently if we can disable satellites from ground. That is a business which is coming sooner than we have expected and which we believe will become a very strong pillar as well a little bit later than the high-energy laser weapon business and the Mars business, but with the same level of potential in the future. And that's also a business where there is hardly any competition outside the US in a marketplace. Let's move on, please, on slide number nine. So let's recap the first mega-trend, the drone warfare. I cannot repeat this often enough that The appearance of the drone in the battlefield is causing a substantial change in the overall warfare scenario, and month over month we can see this in Ukraine, but also in the Middle East, that this kind of threat is dominating the airspace. It is creating a zone of up to 40 km, the so-called kill zone, in between the front lines, causing almost a standstill in ground-based operation. because of loitering ammunition, because of attacking kamikaze drones. This is becoming the threat scenario number one. And that's the reason why the defense number one, the defense priority number one will be on counter UAS in anti-drone battle systems. And that's exactly where UAS is active, where we put all of our efforts in and where we are so strongly positioned. Let's move on. Number 10. This anti-drone warfare is facing substantial problems. First of all, traditional defense systems, which are basically missile and rocket systems, are way too expensive. to defeat on a long term those kind of drones. Nobody can afford to shoot with little costing up to 3-4 million of US dollars of cost to shoot them against drones for a few thousand dollars. Not even the rich and wealthy Middle Eastern states can afford that long run. That's the reason why also those states are heavily investing into integrated counter UAS systems, such as ours, being able to offer with more affordable effectors to go against those ones with more affordable effectors. The second point is, traditional air defense is too inflexible. They are based on a few effectors only, effectors which cannot exchange that quickly, effectors which cannot interlock with those kinds of threats that quickly, and this kind of slow response, the traditional slow response, is not adequate anymore in this upcoming drone warfare. A warfare of the drones can be launched in your nearest vicinity, and giving only a few seconds to react. Such a short period of time which even requests you to give up on manual operation, to even give up on the human operator being in the loop, but instead of going to fully automated, to fully robotic type of defense operation. So those are the key changes in the field and we experience week-over-week changes to that one in Ukraine requiring adaptations of the defense strategy, adaptation of our effectors, which happens then mostly in the software area. Please move on. Slide number 11. So the EOS solution is now with the acquisition of MaaS that we can offer this kind of complete counter-throwing platform. And I want to remind everybody that EOS is active in particular in the Middle East with more than 60 installed bases. Means EOS is protecting more than 60 critical infrastructures in the Middle East successfully over the last few months. from being affected by and impacted by attacks of drones or missiles or rockets. We have shot down with our systems hundreds of Shaheed drones and dozens of missiles and rockets. If anybody needs a testimony, we can provide first-hand testimony from the top leaders of those countries there. And what makes us extremely proud is we seem to be the one and only customized and dedicated anti-throne platform. We are not competing in those markets with the traditional C4i platforms coming from the big OEMs such as, for example, Raytheon, Lockheed Martin or Thales. systems which have been developed in a very complex environment to operate very complicated systems such as PATRIOT or THAAD systems which are interconnecting the different domains, land, space, air and sea. That is an overkill for most of those applications. It's an overkill for what is demanded by the clients. for the client they are asking are flexible solutions, adaptive solutions to protect a single piece of infrastructure where a system which they can purchase for a much lower price is much more an appropriate solution. And this is exactly where MaaS is active, where MaaS has delivered since 2018 and 2019 and that's the reason why the US is now at the forefront of this mega-trend. Again, not only a trend to protect military installations, a trend to also protect commercial and home security type of platforms. That is all possible because of our hardware agnostic platform, MASC. Because of its history, it is an absolutely hardware agnostic provider of those solutions. They can integrate any kind of sensor, whether it's a radar, electro-optic, RF, acoustic or any kind of sensor and any kind of effector. Mars has integrated more than 160 different types of sensors and effectors. Nobody else has done this multitude of effectors. This is allowing us now to offer the client on the spot to use his existing portfolio of sensors to integrate in a very seamless way within no time and to offer our clients in very few days to set up a solution which is able to defeat those kind of drones even if they attack in large quantities in swamps. Our secret behind this is our AI driven algorithms. We have a software package which is extremely user intuitive and which is extremely flexible to handle complex type of threat scenarios. and the user intuitive capability is a key point allowing us to train operators within a few days. Everybody can operate those kinds of systems within no time thanks to the concept of operation, a concept which allows you to operate those systems either from traditional command control centers, war centers, but also from a simple platform like an iPad. It doesn't make any difference in terms of effectivity. It only depends on the customer preference, but it is extremely easy to operate. That's another key selling factor and it's absolutely at the state of the art on how to operate those kinds of platforms today and in the future. Let's move on to slide number 12. So this kind of operation of an integrated mask on the US system is following the following kind of action stream. The system is always continuously doing this data fusion from all those kinds of sensors I was just mentioning. It identifies any kind of intruder, any kind of object. It does then the identification to not only discriminate whether it's a hostile kind of threat, whether it's a drone or whether it's just a bird or a friendly force, It's doing the identification down to the type of detector. It can even identify the veterinary on those kinds of incoming threats, which is quite unusual. We are doing this by doing a kind of permanent comparison with a library, which is uploaded to any of those systems, and this kind of library is learning day by day and we give our clients permanent upgrades of those libraries. That's a very good after sales business to allow our clients to always be at the forefront of knowledge on what is potentially coming in and how to defeat those kinds of systems in the most efficient way. So this NIDA system is giving then recommendation to the operator to engage and it is proposing which type of effector should take out which type of intruder. again this can be done with man or with person in the loop or it can be done autonomously in the future that's our prediction it will be done more and more autonomously because there is no time for human interaction in many cases we will only have a few seconds for the decision making process requiring a fully automated robotic approach and then the system will decide by itself on the engagement and will shoot down those kind of drones that's the kind of Optic Systems Holdings Limited Optic Systems Holdings Limited with a 360 degree kind of war area or war zone or command center where the kind of control is happening. But again, it can go down to a simple iPad or laptop type of operation where you see everything on one single screen and the operator does not need anything else in order to fulfill more or less the same kind of job. What you can see on the right side, that's more the kind of setup for a nationwide operation or an operation where you interconnect several critical infrastructures to keep the overview on what's ongoing over a certain number of sites, more than one. So please move on. So slide number 14, Partners and Clients. This is a collection of partnerships which we have active. So you can see top notch, first class, Defense companies from all around the world, which are our proud partners, starting from Korean companies, European companies, top-notch American companies. We are partnering with them because they will appreciate our high-end performance, our first-hit probability, and our survivability in the battlefield. We have signed a couple of new partnerships, and I just want to highlight two of them. One is with BAE Systems, one of the world leading providers of defense systems. BAE Systems has decided to use for all of its future counter UAS applications our NIDA command and control software. That is an exceptional design and it shows that one of the world market leaders has done after a very thorough review of all the options on the global market, they've decided in our favor. They've decided that our NIDA system is the best of the best and that's the reason why we are together now and shaping up the future between DA Systems and Electro-Optic Systems. We also formed a partnership with the French-German group KNDS, one of the leading European groups in land systems, and we are a proud partner of KNDS in the area of thermal weapons systems, including its application in the anti-drone warfare. Those are just two examples of how we go into markets to minimize the time to market and to minimize the capital exposure. So let's move on, please. Hi, in a delayed pattern, we have signed the first contract in the middle of 2025. This contract is not only running according to schedule, we are about one year ahead of schedule. The client is extremely happy with our performance and as a result of that, he intends to place the first low rate initial production contract, so the first kind of serial production contract to EOS, much ahead of the delivery time of the first system. So we will deliver the first system not only in 2028 but towards the middle of 2027 which is a tremendous achievement and because of that we will enter with the client most likely into a contract for this low-end initial production contract ahead of even that point in time. That's underlining our capability and it's underlining that our investment into the setup of the first worldwide serial production facility of high-energy laser weapons in Singapore was the right decision to do. It puts us at the forefront at this very prestigious advantageous market and a market which will grow significantly over the next three years, where we can play now a very, very strong position. So the contract with the Dutch has had a value of 71 million euros, but you might recall that we are able to deliver in larger quantities systems at the price of down to 30 million euros. So that is giving the client a huge advantage because of the large-scale opportunity. As I was mentioning before, we passed successfully the so-called critical design review. That's the kind of standard review you have to pass in any kind of military procurement process. a strong quality stamp which we got by the client that they consider their system being ready for production now and that is a reason why we can increase or decrease the time scope delivered earlier than expected and the customers also considering to increase the scope of this standing contract by adding other features like navalization for example so all that again is a testimony of our quality even in delivery not only in development So please move on. So Mars has secured in 2026 contracts for more than 200 million Australian dollars and you might recall that we are very optimistic to be able to sign, for Mars, orders of up to 1 billion euro, which is around 1.6 billion Australian dollars of orders within the first 12 months. That's the reason why we've increased the cap in earn-out from originally 500 million euro to 700 million euro. So we are more confident than ever before that we can achieve those values. And this is the reason why the acquisition of MARS was a turning point for Electro Optic Systems. It is giving us not only the position of being able to compete against other brands in the delivery of turnkey solutions, but also to be able to significantly scale up our revenue base as the mass contract size usually is higher than if you sell just normal type of equipment, normal type of effectors. So mass from any kind of angle is a big success story for us already now. Please move on. So the order book, the unconditional order book we could manage to increase from last year 459 and end of 24, 136 to now more than 846 million Australian dollars. That is an exceptional success. and what makes us extremely optimistic it's not only the mask business coming on top of it it's also the laser business coming into play now and also our very kind of backbone and the so-called bread and butter business the vaporization business is picking up extremely successfully giving us a very optimistic outlook into the next future And if you look at the order book, this is driven currently very much by the Middle East. That is basically reflecting the actual geopolitical situation with a strong short-term delivery demand. We expect this to be more balanced in the next future. by European programs coming into play, also very significant programs and acquisitions coming into play, where we expect long-term to have a balanced order book with kind of one-third going to the Middle East, one-third at least going to Europe, and another third going to the United States and the rest of the world. So that gives us a more robust position in the market. We become less and less depending on a single client or a single region. Please move on. This is the order book. You can see here that we have added some more lines, some more lines of very substantial opportunities, large scale opportunities. Some of them, but not all of them, coming from the MaaS type of business opportunity. MaaS has so far been only active or predominantly active in the Middle East with its over 60 installations. What will come now? Very soon and much sooner than expected also, Mars will reach out to NATO countries, will reach out to European countries and most of you will have been informed that there was some days ago the first aggressive drone attack on a European airport. It was in Leipzig, Germany. where a drone with explosives on it was attacking an Antonov aircraft. It was the first time that a weapon system was really attacking in a direct manner on a commercial airport and Aircraft. That has caused lots of panic with most of European airport operators, also with many operators of other types of civil infrastructure all across Europe. We are over flooded by inquiries from those types of operators. We are now in very intense contact and dialogues not only with the Ministries of Defense across Europe but also with the Ministries of Interior, with the Homeland Security Ministries, with the police forces and all the commercial operators all across Europe and we expect this business to pick up in a much stronger way than we were ever expecting before. and thanks to Mars and thanks to our ability to deliver solutions which are also customizable for those kind of infrastructures where you cannot use missiles, where you cannot use cannon-based air defense, but where you can use laser weapons, that is, and where you can use interceptor drones. And our interceptor drone is a drone which is not based on an explosive forward, but which is just operating by the pure kinetic impact by hitting the attackers Those kind of effectors will play a dominant role with those kind of installations. So Mars is perfectly positioned to also go into those kind of markets, which is creating another layer of growth potential on the short run. And all that has not been expected when we were starting that position of Mars. That is the reason why we are more optimistic than we have ever been before. So please move on. Space is also getting more and more traction. I just want to highlight one country. The German government has decided and they have allocated a budget of more than 35 billion euros, which is more than 60 billion Australian dollars. for expenditure to defend and to protect their own space, their own military space infrastructure. A significant subprime of this 35 billion Euro budget is denoted for our type of capability to protect space-based assets by ground-based systems. This is giving us a strong outlook for our space business, so we believe that not only on the German example because other governments will follow this example that our space business will pick up business much earlier than we have ever expected before and we expect the space business to become very substantial not only beyond 2030 but even before 2030. That is again based on our capability to track in an unmatched position any object in space down to a single coin even in cislunar orbit combined with our ability to correct atmospheric distortions which nobody else can do outside US to this kind of extent and our ability now to combine our high energy laser weapon technology which we have available up to 150 kilowatts today in which we expect to scale up up to 300 kilowatts over four years to be able To combine all that together will allow us to engage against satellites from ground irrespective of the orbit of the satellite. So this is giving our kind of client a more decisive leading edge. That type of business is extremely sensitive. It will require localization and that's one reason. where we are able and prepared to localize not only this kind of space type of business in NATO countries such as Germany, we will also do that in any kind of request for laser for country-based type of business. And we can do that because we own all IP from A to Z. So let's move on please. We are coming now to the financial side. I would like to hand over to our CFO, Clive Huffabees.

Thank you, Andreas. So on the next slide is a little bit more detail on the financial results for the first half. Overall, the revenue of £169 million, which was announced a few weeks ago, as the chart on the right-hand side shows, that first-half revenue is the highest first-half revenue that EOS has ever achieved, and that reflects many of the market trends that Andreas has outlined. The chart on the bottom right sets out the diversity of our revenue stream and we are particularly pleased with the improvement in the geographic diversity of our revenue that was achieved. The company, as many people know, has done a lot of work to diversify the sources of geographic revenue over the last couple of years, and that is now translating into the financial results. The other things to highlight include Obviously, the underlying EBITDA of $21 million achieved during the period. The company, as I said earlier, has been focused on profitability coming from a scale for some time, and we're obviously pleased to see that being operationalized. The result includes a gross margin of 58%, as the table shows, and ignoring the very unusual one-time result of 76% last year, this 58% continues the positive trend that we've seen across different parts of our business, which is attributable not just to the strong markets that we're in, but also the pricing discipline and the execution discipline that we've been using. Establishing over the last few years in EOS The next page over on page 23 Shows a summary of the results between our different segments The defence segment at the top now includes the Mars business that also includes the results for high energy laser and for remote weapon systems. During the first half, more than 80% of the revenue in the first half came from our remote weapon system business, in particular selling the Slinger counter drone gun system that we have. In the space systems part of the business, as Andreas said, this is more of a significant future growth opportunity. We remain very positive on the outlook for this business and we will continue to make very modest investments from the company's perspective in this and continue to develop the European market in this area. Maybe just a couple of comments on the margin mix in the business. Over the next 12 months, we expect to see two or three things impacting margin in the business. In particular, the growth in high-energy laser weapon revenue that we expect to arise from the Dutch contract should have a positive impact on gross margin and EBITDA margins. On the other hand, the growth in the Mars business that we are expecting over the next 12 months as we've taken over ownership and that will have a lower gross margin but we still expect 20% EBITDA. So we're not providing guidance on margins overall but as we've indicated previously in our industry and in our business in particular we continue to aim for a 20% EBITDA margin overall. On the next page is the cash flow and as people who follow us for a long time know, cash flow is very important at EOS and it's been a strong focus for us over the last few years. Most of our business, remote weapon systems, laser weapons and space, we have always run these over the last few years to be cash flow positive. Our business is evolving a little bit with the acquisition of Mars. So as Andreas mentioned, Mars is a prime contractor which is a little bit different from an OEM manufacturer that our traditional business has been. So larger projects when you're a prime contractor can be a little bit lumpy. That said, I think it's safe to say that EOS will continue to be very disciplined in managing the cash flow and the profitability and the execution on prime contracts over the next 12 months in the same way that we've been careful with cash over the last two to three years. So over the next 12 months, we do expect to deploy capital, particularly in growing the Mars business. Some of that will be bank guarantees. Some of that will be working capital. And typically, we can sometimes see in the Mars business investments in the first few months of large contracts With the existing Mars order book, we may see a little bit of that over the next 6 to 12 months. The company is well funded. As mentioned earlier, we have more than $260 million in the bank at the end of June and $30 million of undrawn debt facilities, so a total of almost $300 million. So the company has all of the funding that it needs to grow the business in the way that Andreas has outlined over the next few years. We will continue the focus on scale and profitability and cash flow. Finally, naturally, we're obviously very pleased that the first half result has operationalized the growth that we've talked about over the last few reporting periods. The revenue outlook, as Andreas has indicated, is stronger than we previously expected. That's a factor of market growth. It's driven by our strategy to focus on counter drones. Townward Roan activity and it's obviously driven by the company's agility in the way that Andreas mentioned. Our ability to supply customers quickly has been a defining factor in our first half performance. So as a result of all of these things the full year growth outlook has been increased and the revenue that we are guiding for the full year as I mentioned including the Mars business. I'm going to hand back to Andreas now for some wrap-up comments for Q&A.

Okay. Thank you, Clive. So as you have seen, our business is very stable and robust. All of our segments are performing really well. We are extremely confident to increase our growth year over year and our revenue base year over year as the strategy is working out in a very nice manner. The decision to focus our strategy on the two pillars, counter drone and the so-called space controller, space warfare, is playing off now. We are very proud of having taken this kind of decision some years ago. We are in the middle of the military growth and we are a so-called new tech player in defense. We are not seen as a traditional player. We are not the metal bending company. We are the company working, being active in areas such as antitone business. AI technology software technology in high-tech technology such as laser and in this anti-satellite business those are all key drivers drivers which make EOS very attractive for clients for industrial partners and also for investors and this is giving us all the confidence to be able to execute this growth path again based on the mode weapon systems further much further pushed the with the AI enabled C2 command and control system capability by MaaS further pushed by our high energy laser weapon business then in a third step power space warfare type of capability this is the growth story which we have told you we will go through and if you please go to slide number 27 that's the kind of growth story which we will continue to be executed We are currently riding an exceptionally strong wave and we expect this wave to continue. We will benefit with all you together on that wave. And we, EOS, we want to remain your trusted partner in defense business. And to conclude my statements with my standard kind of closing statement, we always say what we think and we always do what we say. We continue on in this wave and in this context we are more than happy to receive your questions now. Thank you very much for your attention and looking forward to further collaborate with all of you.

Thank you. If you would like to ask a question via the phones, you will need to press the star key followed by the number 1 on your telephone keypad. If you would like to cancel your request, please press star 2. If you are on a speakerphone, please pick up the handset before speaking. If you would like to ask a question via the webcast, please type your question into the Ask a Question box and click Submit. Your first question from the phone comes from Owen Humphreys from Canaccord. Please go ahead.

Well done guys. Great set of numbers and looks like the pipeline's building strongly. Got a couple of questions here. One relates to the guidance upgrade here relating to Mars. How much of the upgrade relates to contracts you have not secured yet?

Thanks, Owen. I'll cover that one. The guidance that we have provided is entirely based on contracts that are secured. There are no amounts in the guidance that relate to future contracts that are not signed, and there are no amounts in the guidance relating to conditional contracts. So if we sign additional contracts over the coming weeks, there is the possibility that they would benefit 2026, albeit as time passes, naturally, that will be of limited benefit to 2026.

Does that cover that for you?

Yep.

The guidance in the second half of the core business is call it 110 mil. You've just done 170 in the first half. Is that related to supply constraints for the core business?

Yeah, thanks Owen. We've given guidance in total of 360 to 400, which obviously includes both businesses. The first half was especially strong, Owen. I think it's more a reflection of the lumpiness of some of our contracts, We are expecting, as you've indicated, that the core business may not be quite as strong in the second half as it was in the first half, although that's just more due to the timing of deliveries and other factors. And we continue to manage capacity and supply chain constraints, and we're very comfortable with our ability to grow over the next 12 to 24 months.

and just checking the notes of the account, it looks like you've put through a 77 mil security deposit. Just historically, can you guys give us a range of how much, when you sign a contract, how much is required up front for a security deposit? Not a number, maybe a range?

Yeah, thanks, Owen. That's right. In the detailed financial report, we have indicated that the company provided a guarantee to a potential future customer after 30th of June. Typically, in our industry, we can give guarantees to customers or prospective customers sometimes that our guarantees can sometimes be 5%, 10%, 20%, sometimes even higher relative to contract value. and just for context, the guarantee that was provided is in relation to an opportunity that is presently unsigned and unannounced and if it results in a material contract being signed, then naturally we would update the market immediately.

And then if you go to your business development update there, that's a new slide that's getting bigger to me, particularly the bottom three. Say you do sign a material contract, call it one of those big three there. How does the working capital nature go? I know most of the revenue comes in the first year, but with the procurement, what's the lead times between order and delivery and payment?

Thanks, Owen. Yeah, look, I think it's fair to say that we're, as Andreas has indicated, the outlook for the Mars business that we acquired is stronger than we expected, and some of that is shown on the bottom of slide 19. We see quite a lot of opportunities to grow that business, and we do think that there may be, on some opportunities, there may be some initial working capital investments that are modest and well within the funding position that the company has. I think as you know we did raise equity in the first half of the year and as a result balance sheet is very well positioned to support growth outlook including the operationalising of future opportunities such as those listed on page 19. So I hope that answers the question for you.

Well done guys. Great outlook for the next couple of years.

Thank you. Once again, if you'd like to ask a question, please press star 1 on your telephone or leave your name to be announced. Your next question comes from Baxter Kirk from Bell Potter. Please go ahead.

Morning, guys. Can you hear me? Yes. Yes. Yes. Yeah, great. Fair result and outlook there. This question's been partially answered, but I was just hoping to get an idea on future Mars orders. is the ramp-up in the contract that has been signed late last half to revenue, is that typical of future orders, that revenue ramp-up from signing to when it's actually being delivered? Or is that more reflecting the urgency there by the Middle East customer?

Thanks, Baxter. I'll answer that. Yeah, so we acquired Mars in May. It came with an order book of just over $200 million Australian dollars, most of which was signed in April and May. And in the Mars business, it is typical that 60% and 70% of the revenue, sometimes a touch more, is earned in the first 12 to 24 months of the contract period. and that's because usually contracts that Mars wins are involved in setting up new anti-drone systems to protect assets of the customers concerned. So the profile of having front-end loaded revenue that is earned over 12 to 24 months is normal and it is fair to say that there are urgent operational requirements particularly in the Middle East that are benefiting our business at the moment. That includes Mars and also there's some benefit in the first half for our remote weapons system business from urgent operational requirements. We do not expect the urgency in the market to diminish over the coming years because the trends that are giving rise to it are long term and we expect them to continue.

If you allow me to add one more point, I think it's important for the understanding. So the beautiness of the mask system again is to be able to act such as the toy Lego. So you can plug and play any kind of brick, one on top of each other, it's always working, it's all compatible. and as Mars has integrated more than 160 type of effectors and sensors over the last couple of years we can just use on the market whatever is available on short-term delivery whether it's a sensor in effector and we can combine this very easily allowing us to deliver much faster than other players which are only qualified for the usage of very few types of sensors and components and they are really required to wait for the delivery time for those kind of fuel centers and effectors. We are more flexible and we can use and integrate whatever is available short term. This is giving us a leading edge and allows us to convert orders into revenue much quicker than anybody else.

Yes, thanks for clarity. Just another question. I'm just looking at the market development order book pipeline. I'm curious to know whether the Abrams product integration, is that in that pipeline there, perhaps in the US Army follow-on opportunities?

Yeah, so page 19 lists the opportunities. What is listed there at the top of page 19 is the nearest of the US Army opportunities, which we've listed at $20 to $50 million and relates to some of the work that we've talked about before, like you mentioned. There are significant opportunities in the United States that are larger, than the 20 to 50 indicated here but they are a little bit further away so potentially more 27 and 26 but there are sizable opportunities there as we've indicated previously.

Yeah okay so this business development update pipeline slide it relates to sort of you know potential orders in the next 12 months would you say or 24 months?

Yeah, this is a selection of some of the most significant and the nearest opportunities. And yes, some of these we would expect to sign over the next 12 months and some will take a little bit longer. It's not exhaustive, I think, is what Andreas was saying. It's about that.

Yeah, not the exhaustive pipeline, as other companies are reporting. This is just a selection of some key elements out of our pipeline. And yes, the focus is on very short-term execution of contracts here. And to come back on your question on the U.S. Army, This could be the second phase of the pre-production contract phase, which we expect to get. We received the first pre-serial contract order last year. The second one, which is the one which you can see here in the pipeline, we expect to receive either towards the end of this year or beginning of next year. And then we expect the first high-volume serial contracts to come into play. towards maybe end of next year or 2028. That is then a substantially bigger one, and that goes then really into the high volume production to serve our weapon systems for this particular platform, which you have seen on one of the slides before.

Okay, thanks. And can you perhaps detail, you know, your localization and production capacity in the US? You know, obviously we're seeing drone tariffs come through, obviously not relating to counter drone, but could you just detail to what extent you've localised in the US?

Yeah, we are operating a facility in Huntsville, Alabama, which has the same kind of capacity as O1 in Australia. So we can produce there in one shift operation around 300 systems per year in two shift operation, up to five, 600 systems per year, depending on the product mix. again the same kind of quantity we can produce in Australia and with a new joint venture in the Middle East which we have recently signed with a company Gen5 which is government owned in that facility we will also be able to produce a couple of hundreds per year so capacity constraints we do not have with our current setup and we do not need to invest heavy capex in order to achieve that kind of growth so that is the situation for more weapon systems All what relates to the MaaS type of business is even easier to scale because our in-house value contribution to MaaS is software. So we just need to adopt the software case by case in order to scale the business. We don't need any kind of capex in order to do so. We just need to recruit some more software engineers. We need to increase the quantity of procurement managers and project managers because we need to purchase more products on the market. But again, that is not a question of building up internal production capacity. So the mass type of business is extremely easy to scale. I hope that answers your question.

Yeah, thank you, Andreas and Clive. I'll leave it there.

Thank you. There are no further phone questions at this time. We will now address any webcast questions. Your first question for the webcast comes from Amit Malik. Amit asks, What is the timeline for the German contracts and who are the other bidders in for it?

So I assume this question relates to the so-called UTF tender that is to provide up to 4,000 R-150 type of weapon systems on top of military logistics trucks. That is probably one of the biggest worldwide remote weapon system tenders over the next 10 years to come. So we are in the lucky position to be one of the three remaining contenders. We are not permitted to disclose further information on who are our remaining competitors. We can only tell you that we are very confident from the feedback we have received from the clients. that we are very well positioned in terms of quality of the product and also in terms of the price which we have delivered to the client. The client is now executing a one year of testing with a product. So everybody has to deliver five units which will be integrated on those platforms and tested extensively over one year. And we expect the clients to take a decision towards end of 2027. That would be also a multi-phase contract with a total volume of up to 4,000 systems. It's huge.

Thank you. Your next question comes from Glenn Maddock. Glenn asks, what is stopping Australian defence purchase of CUAS for protection of local airports and infrastructure?

Nothing is stopping the Australian government to do so. I mean, I want to remind we have been selected together with Leidos and other partners in a program called Landroof 156 that will be the backbone for any Australian anti-drone application, whether it's for the military domain, which was the primary planned purpose in the past, but now also Homeland Security type of operators have reached out to MOD and have declared interest in order to participate and to benefit from this program coming into a kind of production phase pretty soon. So we expect also Australia to be picked up in the domain but not to the extent as it will happen in Europe because of the threat scenario which is more imminent in Europe because of geopolitical framework conditions.

Thank you. Your next question comes from Mike C. Mike asks, has Nader from Mars been used in combat in the Middle East?

Yes, I was mentioned before with more than 60 active installations and it's in operation use since 2018. So that started after the Houthi rebels have attacked 2018 some Saudi Aramco oil refineries in Saudi Arabia. That was a starting point for Mars. to deploy those kind of systems in Saudi Arabia. Today we have in the entire Middle East more than 60 stations supporting more than 60 critical infrastructures and yes, we have been, we have been shooting down more than 100 Shahi drones and dozens of missiles and rockets and that is continuing day by day defending those kind of systems. That is making us unique in the marketplace because almost nobody else can or has this kind of stamp being battle proven as a dedicated counter UAS system.

Thank you. Your next question comes from David Tobias. David asks, can HELWA shoot down ballistic missiles?

Sorry, who can shoot down ballistic missiles?

Rather, can the high energy laser weapons shoot down ballistic missiles?

Okay, so it depends on the power level of the system. Yes, with 100 kilowatt systems, you are able to shoot down slow speed or low speed type of rockets, artillery shells and mortars in order to shoot down faster, bigger flying objects like a missile. you need to have higher power levels. That's one reason why we will go into the 300kW domain to be able to have a full C-RAM type of capability, which includes the missile segment, which will allow us to go against any kind of classical missile, not against hypersonic missiles, but classical missiles. But that's not our primary objective. Our primary objective is to become the anti-throne company number one, because that is the dominant threat on the battlefield. There are thousands more drones being launched against targets than missiles, and that's the reason why the 100 kilowatt market will be the dominant mass market over the next 10 years.

Thank you. Unfortunately, that does conclude our time for questions today. I'll hand the conference back to Andreas for any closing remarks.

So, ladies and gentlemen, thank you so much for being with us. Thank you so much for listening to this conference. I think the first half of this year is providing the evidence which we have promised to deliver for a long period of time. It's the evidence and proof point that our strategy is 100% right in putting all of our efforts into a strategy which is focusing on two pillars, two pillars of military warfare which are now turning out to be in the center of all actions in the future. We will execute exactly the strategy further on and as I was mentioning before, we will always say what we think and do what we say. We will provide 100% transparency and we are absolutely convinced that our growth path will be sustainable and stable to create more shareholder value. Thanks for being us and we are crossing fingers for another half year to come with great success.

That does conclude our conference for today. Thank you for participating. You may now disconnect.