Freelancer Limited

our Chief Financial Officer and Joint Company Secretary. Today, we'll talk about the summary of the 2024 results that we have released yesterday and talk about the outlook for the business. 2024 has marked a significant ongoing increase in the counter-drone requirements all around the world, settings, so talking about counter-terrorism and drones interfering with aircraft, for example. We'll start by talking about the financials for the business and then turn to the underlying themes, so I will turn to Caroline.

Thank you, Oleg. DroneShield's revenue reached a record $57.5 million in 2024, continuing our trend of year-on-year growth since its inception. Unlike 2023, which included a significant $33 million customer contract, the 2024 revenue was driven by smaller, consistent customer contracts, highlighting a shift towards a more stable model. For 2025, DroneShield is off to a strong start, having already recognized $18 million in revenue. Additionally, there is $34 million in revenue yet to be recognized, stemming from purchase orders that we've received but not yet delivered, as well as deferred subscriptions and warranties. This sets the company up for another solid year. DroneShield is continuing its focus on driving subscription revenue, which has seen a 100% increase from the prior year. DroneShield maintains a healthy cash balance of 250 million, which is being strategically invested to drive the development of our next generation products, and also the establishment of the necessary structures to operate a larger business. Cash receipts for 2024 are in line with revenue, whilst during 2023 a significant portion of subscription and warranties were deferred to be recognised in future periods. I'll hand over there to Oleg to speak about the pipeline. Thanks.

Thank you, Carol. There is $1.2 billion in pipeline that the business currently maintains, and that's across a range of geographies globally. US continues to be a significant contributor and the primary driver of our pipeline. However, we are seeing increasing contributions from Asia Pacific, and those following our news have seen a $12 million sale that we have announced last month. as well as other regions, for example, the roughly $8 million sale that we also announced in Europe last month. There are increasing opportunities in Australia. We are quite excited about the Land 156, the camera drone program to be rolled out across Australian Defence Force bases in Australia and also overseas that DroneShield is participating in. Last year, we took opportunity to significantly scale the size of the engineering capability of the business. We have grown roughly from about 90 staff at the end of 23 to approximately 275 staff today, including all the 200 engineers across a variety of hardware and software disciplines. Fundamentally, we are competing at the cutting edge of counter-drone technology globally against a very challenging diversity. What we often say is that we do not consider other counter-drone companies as our true competitors. manufacturers, which are starting to put significantly complex technologies specifically designed to avoid conventional counter-drone detection and defeat, which is why it's really important to have a substantial amount of ongoing research in the business. The products don't have to be perfect. The analogy we use is a little bit like a fence. People cut holes through fences, people climb over fences, but they still deter well over 95% of potential issues. However, the key is to continue to drive the development, which is why we're seeing quarterly software updates and hardware refreshes every two or three years. In addition to R&D, we are continuing to invest in our manufacturing capacity. All the products today are manufactured in Australia with two outsourced manufacturers around the country, as well as our own manufacturing capacity in our headquarters, which accounts for about 10 to 20% of the total. There are roughly three separate product families that we run, being the dismounted detection, dismounted defeat, and on the move, which is now combined with a fixed site for multi-sensor, multi-mission capability. In the on-the-move family of products, we both integrate third-party equipment and also being integrated by other parties into their overall suite of equipment. We do a variety of really complex technologies which link into our command and control system called Drone Sentry C2, which comes in a standard control room type environment, as well as the tactical configuration, which is in a form of tablet. And that is also expected to underpin our self growth in the future years. Today, the dismounted products correspond to being the backbone of our on-the-move fixed site capability, we expect the on-the-move family to contribute significantly to the total, creating a more balanced diversification of our revenues together with the third-party systems like radars, cameras, and also potentially kinetic defeat solutions, noting our partnership with The next slide is around geographic contributions, which I've briefly covered before. So US is our key market where we have approximately 20 people in Virginia and also using a number of third party distributors in addition to direct In the United Kingdom, we use a partnership with British Telecom, where we have already won a couple of contracts and looking forward to winning more transactions. So AUKUS, UK, US, Australia lines is important in ongoing work there. In Asia, we're seeing ongoing amount of work as essentially have a number of territorial conflicts and gray zone warfare between China and its neighbors. And we're working with a number of parties, including some very sizable opportunities. In fact, this is the area of probably largest In Europe, we have now our own dedicated team on the ground, mostly based in Denmark, who are covering that market. And we are going to continue adding salespeople to this diverse region as obesity geopolitics is continuing to drive increase in defense budgets, as well as overall counter-drilling demand over there. Australia is one of our two homes together with the US and we will continue expanding with land 156 as well as other opportunities in the region. In terms of other geographies, so we have now got boots in the ground in Mexico as well as in Emirates and we'll continue being busy in those markets. In Latin America, we're seeing significant use of drones across Mexico, Colombia, and also going right up to the southern border of the US. And governments are seeking ways to effectively mitigate those issues fighting drug cartels. that conflict or series of conflicts. And in UAE, so as those been following up for a while, remember our first multimillion dollar sale back in 2018 actually came from Middle East. And now we're continuing to build up on that legacy, which is what our on the ground presence in the region is about, both selling directly and also seeking to partner with large integrators in the region. And that completes our presentation. I'm looking at the questions and I don't actually believe we have any, which is unusual for one of our webinars. So those that have questions as of the end, please feel free to email us to investors. And we'll answer you best we can. Actually, one quick question that we just received, which is how the US tariffs on China impact drone shield supply chain. So because there are no, we don't sell anything from China to the US or anywhere else. So in that sense, we are not impacted by the tariffs. Just to give you a sense of how DroneShield products are manufactured, there's approximately 75 to 80% of Australian content within our products. And then the rest mostly around chips, batteries and so on. We go to And a couple more questions coming through now. So I'll answer them now. The next one is, do we have expected timeframe to bring company to profit? We do not issue guidance. So I will answer you indirectly in a way that is hopefully constructive. The current cost base of the business is just a little bit north of $5 million a month. So this is essentially salaries and supporting R&D materials for close to 300 people plus associated costs. The business has fairly significant gross margin, which is through basically highly differentiated nature of our products. And going forward, we would expect revenue to be significantly higher than what it was in 24. And you would have noticed that with the cost base as it was, we just had a small loss in 24. So at a high gross margin, even a relatively small increase in revenue would result in profit that, like I was saying, unfortunately we do not give guidance because it's a nascent industry and it's just a little too hard to forecast. Next is a related question. Can we further explain the reason behind the $1 million loss? So hopefully I just mentioned, we have made a significant investment in capability of the business going from about 90 people to approximately 275. And this will grow to about call it 330 over the next several months, mostly around engineering, but also operational sales capability. So that investment, on what was only a small increase in revenue is what's been driving a $1 million loss. Now, if you think about the revenue, so what we're finding is that there were probably a number of reasons why the revenue was only a relatively small increase. But as the industry matures, what we're finding is the customers are essentially in the style of our releases, where we're now regularly getting contracts in sort of that $10 million benchmark. So we expect a lot of that sales momentum to start coming into And in fact, most importantly, you would have seen as Carlos started by saying, we have essentially either recognized or have received purchase orders for 52 million in revenue already just two months into the year compared to 57 million for the whole of 2020. The next question is, when we say there are no direct competitors, do we compete with drone manufacturers? Well, sorry, when we say there are no direct competitors, how do we view counter drone suppliers like D-Drone, Engel, et cetera? So at the back in the appendix, you see a page that has as compared to other counter drone manufacturers and both D-Drone and N-Drone are listed there. So D-Drone we're finding is mostly playing in the non-military space. So that's civilian area, which is still a very nascent area, which is also why we haven't really been going there. We generally find that Going from military to civilian is easier than other way around because the expectations of quality are higher in the military space. The main thing you have to watch for is the price point, which is where modularity of our products comes in, where essentially, so long as you can have a number of different products that you can have different price points and locate them at different points of the facility, et cetera, and meet the expectations of the customer and incorporate third-party products like cameras and radars and so on, which we're able to do, that should meet the requirements of the customer. So now we are competing with D-Drone and other civilian suppliers in the emerging civilian market. So markets like airports, And as those markets mature, we expect them to become a significant contributor to our revenues. Endural, so a slightly different beast. Obviously, very large and a fast-growing company. They're doing a lot more than just counter drone and for us counter drone is essentially our full-time job so we would expect to either compete with them or have them as our customer depending on the situation but what I would say is the underlying theme with all this is from day one we said that we want to be the overarching supplier in just about every situation. So for example, Endural will not play in the civilian space while we go into the civilian space as well. We go geographically much wider than Endural. In fact, we're finding most of our US competitors tend to focus on just several niche markets. And a lot of them have to do with the US export compliance compared to the Australian export compliance. The process in Australia tend to be more streamlined. And so we're saying that we're doing a full range of detection and defeat across dismounted, on the move, fixed site, geographic diversification, and also what we believe is one of the largest and the oldest counter-drone engineering teams in the world. Now, why does the time matter? When you're using artificial intelligence to... detect and take down drones. You have to build very large data sets that support your artificial intelligence engines to basically accurately do the detection tasks. So when you're doing AI, actually writing algorithms is a relatively easy part. The much harder part is to having large, clean, well-tagged data sets. So that is where time is important. So your drones in the radio frequency background across Europe, Asia, US, Australia will all sound entirely different. So time in the market, understanding customer requirements is not something that can be done overnight and we're one of the oldest brand names in this industry. And everything I mentioned, by the way, up to now, what you'd call technical differentiators. When you think about commercial differentiators, it's having built our products in collaboration to the consumer space. What we say is that customers don't tend to buy Lockheed Martin, Joint Strike fighter planes off the internet and then leave Google feedback. It's a close confidential collaboration with the manufacturer. And that's what we see in the counter-drone space as well. And so those relationships then enable you to have the desired customer features inside of your products. and then in turn the customers buy into working with you over a multi-year period. The next question is, what is the timeframe of the Australian program? I believe that's referenced land 156 that we mentioned has the tender closed. When do we expect the contract to be issued? That information is confidential, so we can't comment, but you will see references to land 156 in the press that this program is expected to commence rollout in the next year or two. The next question is given the sales pipeline is tilting away from the US, what do we anticipate the revenue mix to be in FY25, presumably geographically? U.S. will continue to be a major contributor and will continue to grow. However, the point I was making earlier is that the other regions will also continue to grow significantly, most notably Asia-Pacific, Europe, and also Australia, of course. Although in Australia, the opportunities are a bit more binary, so specific to, for example, whether we're Windland 156. We believe there's going to be a more geographically balanced coverage. So in the past, like PM, we're looking at about 70% contribution from the US and I think from memory about maybe 10% from Australia and then 20% from everywhere else. This would be more balanced. It's difficult to say how much exactly, but that's exactly what we're seeking to achieve diversification across geographies and the product lineup. The next question is around the engineering numbers. So having grown to about 200 engineers, how do we think about managing group productively and how much more staff are we budgeting to add to the organization? So we're currently sitting at about 200 engineers out of approximately 275 people. will grow to approximately, at this point, the expectation is to grow to approximately 330 total staff, that's globally, but most of the growth will be within Australia and most of the additional 50 or so staff will be engineering hires. We were very careful in terms of how we hire. It's very easy to drop standards and we try to make sure that the new hires coming on are as good or better than the existing talent. And we search the market globally, not just in Australia. in a number of ways as we seek to attract world's best talent. Thankfully, Australia is a really good place to live. And at that point, we expect the, if the point was in regards to the cost, we expect to probably sit somewhere between five and a half and 6 million in terms of the cash cost of the business all up before revenue In terms of how the engineering team is managed, I think the classic management theory is that once you cross certain thresholds, being something like 30, 50, 100, 200, 300 people, the whole organizational structure tends to change. So we've been very cognizant of that in terms of how we do our internal communications. how we manage our roadmap and so on to make sure that we continue being productive, how we onboard people so they reach their peak productivity fastest. So there's a lot of thought that goes into this. The next question is around, what is the mix of military versus non-military tenders I would say approximately three quarters of the pipeline would correspond to military related which to me is generally intelligence, border security and so on. The next question is would we ever consider a line with other stocks. I think this is probably not, although these things are something that the board is regularly considering. My view is that the focus of the business should be on underlying business performance as opposed to having distractions. And also, and this is more of a philosophical point, I believe that reverse stock splits reduce liquidity. So that is not going to be necessarily great for share price either. The next question is, is the Trump administration going to have impact on our expected sales? So I guess really in between the lines of that question, that is, what is the current status of Ukraine negotiations likely to mean for our business? Ukraine has actually been not a huge contributor to our recent sales. Interestingly, as the US is now becoming more uncertain in terms of the military aid to Ukraine, there is a significant potential of European governments stepping up, depending on where those discussions go. And we're seeing that in our pipeline. But more generally, I don't think the global conflicts are going to go away. As I was saying before, we're seeing fairly full-on drone-based warfare in places like Mexico and Colombia. We're seeing a lot of tensions and a lot of it has in the Asia Pacific region around China. So we don't believe that all of this will suddenly go away and the world continues to be geopolitically a tense place for the foreseeable future. And drones will continue to be the choice of a lot of that technology, whether it's gray zone warfare or simply the choice of technology to conduct reconnaissance missions, to conduct payload delivery missions and with it, the need for counter drone equipment. The genie is out of the bottle now. And I think it's pretty factual that drones are going to be the future of war. And so with it will be the need for counter drone equipment. The other thing is there's a big difference between traditional defense technologies. So we're talking guns, helmets, and so on. drones and counter drone equipment. So helmets and guns and other similar things existed since, you know, very, very long time ago. So there's a world situation of those technologies and yes, war drives, war drive demand for that. But as you know, things have unflow that demand can also seize. With drones and counter drone, the market penetration for those technologies So even in the very likely case there's world peace tomorrow, military planners will be looking at Ukraine and Latin America and Middle East and Asia Pacific and saying, well, drones are clearly the choice of a strike and reconnaissance mechanism in the future. So we need a whole lot of drones and a whole lot of counter-drone equipment to stop the adversary doing that. So I don't think demand for counter-drone equipment The next question is, have we built enough capacity in the manufacturing expansion to be able to satisfy short delivery times? There's approximately 60 million in book value of inventory, which roughly corresponds to north of 200 million in sale value of the equipment that we have on the shelf. The equipment technically takes approximately four months to build, and most of it is lead times for our components. There is anywhere between 100 and 400 line items inside of most products that we make, working with dozens of different suppliers. So as mentioned at the start of the presentation, there is approximately a quarter of a billion dollars of book value, of sort of sale value of the equipment. There is... There is four months lead time for us to build more. Customers generally are happy to wait a period of time if there is a mega large order. And as mentioned up front at the start of the presentation, there is about $500 million us and the two outsourced manufacturers that we use. So we don't expect for that to be an issue, certainly in terms of getting to several hundred million of revenue per year. The next question is, why does DroneShield not have any kinetic defeat systems? So firstly, we do partner with basically fry electrics in anything that moves towards them, which is a form of kinetic defeat. We also believe that kinetic defeat is area of We have the likes of Comfort with their Crows remote weapon safety system that is used by a lot of the US Army. So it's a global market leader in the remote weapon station capability. There are emerging laser solutions. And for example, there's a great Australian company called AIM Defense that we'll be seeking to work with at the right time. And generally what we're finding is that because we're an integrator, a lot of our capability is driven by what our customers request. So far we're finding that soft defeat is actually a lot more ubiquitous. And also, like I said, there are plenty of people that make good hard defeat capabilities. So we didn't feel the need to go into that themselves. I believe that the future for a business like ours will be to be the best in individual technologies that we can be, being radio frequency-based sensing, smart jamming, and then for the rest, for us to be the best integrator that we can be. And that basically includes artificial intelligence, power and center fusion, how you provide your analytics, how you talk to other battle management systems and so on. So I think the next question I'll pass to Carla just to spare you guys listening to me. So the question is, can we provide a rundown of the intended R&D spent in FY25 and how much of it is expected to be expensed?