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Operator: Thank you for standing by, and welcome to the Electro Optic Systems 2025 Full Year Results. [Operator Instructions] I would now like to hand the conference over to Dr. Andreas Schwer, Group CEO. Please go ahead.
Andreas Schwer: Good morning, ladies and gentlemen. Welcome to our annual results presentation. I will go through the slide deck, which has been published on ASX this morning. Starting with Page #4 with the agenda. So we will go through the 2025 summary by highlighting the most important aspects of last year. I will give you some aspects in terms of market conditions. I will further explain our growth and expansion strategy. We will focus on the order book and the forthcoming sales pipeline before I will hand over to our CFO, Clive Cuthell, who will give you a detailed overview about our financial performance and the cash flow situation. At the end, I will take over again to lead you through our strategy and to highlight some further growth and strategic market opportunities. Let's switch to Page #5, please. The EOS leadership team is stable, the same as last year with one exception. We have added Lee Kormany. Lee is heading our Defense Systems Australia team. The other people you probably know from last year's presentation. So 2025 summary, Page #7. The markets are not only remaining strong, they are getting stronger and stronger month by month. Thanks to global tensions and some advancements on the technological side, we expect to benefit largely from those kind of superb market conditions. Our strategic focus is absolutely on 2 domains. One is the counter-drone business. We are aiming to become one of the globally leading anti-drone companies. And also, we want to become one of the world-leading space control or space warfare companies. EOS has enhanced its sales capability. We have added significant number of people, in particular, in Europe in order to increase our sales capability and the order book 2025 is a good testimony of that. We have also expanded in terms of geography. We have added new offices and operations in Europe, in France, in U.K., in the Netherlands and Germany to be followed soon. In terms of commercialization, we have succeeded in the high-energy laser weapon domain by EOS, becoming the first company worldwide to sign a 100-kilowatt high-energy laser weapon export contract. That is a breakthrough for EOS, and it's a breakthrough in the laser weapon world. And we are very optimistic to sign further contracts over the next years to come. We also have executed, in a very disciplined way, our M&A strategy. We have divested what is noncore to our business. So you might remember it was SpaceLink in 2022 and 2023. And now we have divested also EM Solutions because it didn't fit or it doesn't fit our long-term strategy. Instead, we have reinvested into something which is absolutely core to our business, into a C2 command and control company, MARSS, which also brings with it AI technology, AI algorithms, which you can easily put into our remote weapon systems and the laser weapons to further increase and improve the performance in terms of drone detection and classification. So all those things, we can tick the box and which makes us very optimistic in terms of future outlook. We move to Page #8. Let's have a look to the highlights of 2025. So the revenue was $128.5 million. It's down compared to '24 because of 2 aspects, obviously, because of the divestment of EM Solutions. and second, some of the major order intakes happened later than we wished to be in 2025. And that had obviously also an impact on the revenue in 2025. We expect in return all that to happen in 2026. The gross margin went up to 63%, which is very positive and very pleasing. The underlying EBITDA with minus $24 million is a result of our revenue, which went down. And you might remember our CFO saying that our breakeven is around AUD 200 million. So obviously, we expect this year to see a change there. If you look to the order book, I think that is the most important aspect here. We have signed last year 18 contracts totaling up to AUD 420 million order intake, which is a significant high number compared to the year before, where we only had $70 million, 6 orders in order intake. This is resulting in an unconditional order book of AUD 459 million, and this unconditional order book does not include the conditional order, which we have signed with a Korean client. Our cash position is very positive with more than $106 million plus the restrained cash sitting for bank guarantees and other activities, and that comes on top of $106 million. In terms of investments, we have opened quite recently our new high-energy laser weapon factory in Singapore, and I will come back at a later point in time on that particular subject. We've announced the acquisition of the C2 command and control company, MARSS, end of last year, beginning of this year. We have opened up facilities in the Netherlands, France, U.K. and Germany will happen also this year. Our total number of employees went up to 436 people. We remain extremely sensitive in terms of adding indirect costs to our organization to keep overall indirect cost and overhead low and to stay very competitive in terms of our pricing structure. Page #9. If you look backwards into 2025, the year was filled up with many positive events, obviously a little bit back-end loaded. I just want to highlight, again, in August, the landmark contract with the Dutch government for the first 100-kilowatt laser weapon, EUR 71 million. We have been successful in bidding with LAND 156, which by the dollar value now is not so large, but it has more than AUD 1 billion order intake perspective as we are now selected with our partners to be the solution provider for the anti-drone systems for Australia. We also signed the LAND 400 Phase 3 contract with more than $100 million in October and towards the end of the year, very important contracts with General Dynamics, one of our key clients, and one of them is opening up the big market towards the U.S. Army as we became the key supplier for the future Abrams main battle tank. I will also come back to that in a minute. So the market conditions are superb. The markets are growing as the budgets are growing. And as long as geopolitical tension continues to be high, we can benefit from that one. This statement is not new. But again, if you see how much budgets are growing over the last few months and how many governments have formally stated to go even higher, this is very promising for Electro Optic Systems. And again, that's the key reason why we want to expand into those markets, in particular, into the European market as in Europe, this super-cycle is extremely dominant. On this chart, again, you can see on the right side, the number of drone attacks, which is extremely growing. The number of missile strikes on Ukraine is rather going down. That has more or less a kind of price or cost structure rationale behind. The anti-drone business, as a consequence of that, will become predominant. The entire warfare situation in Ukraine has changed dramatically. The Ukraine war in the beginning was pretty much a kind of war on the ground between artillery forces on the left and right side. That has changed now drastically. It's now a drone and an anti-drone warfare where the front line is dominated by loitering ammunition falling down and destroying tanks which are high-value target destroyed by drones for a few thousand dollars only in terms of production cost. So this is the key reason why we believe that this drone or anti-drone warfare will be dominant not only in Ukraine, but will also play a dominant role in all the future conflicts to come. And that's the reason why we invest heavily into this kind of technology base and why EOS is well positioned to become a global leader in this particular type of business. Page #12, you can see the different types of effectors being able to defeat drones. You obviously need to have a layered response to tackle the different types of drones attacking your high-value assets. EOS is concentrating on the so-called hard kill. We're concentrating on hard kill as soft kill becomes less and less effective in military context as drones are more and more hardened. In the area of hard kill, EOS has by far the broadest product portfolio globally. Our product portfolio includes remote weapon systems. Here, we are one of the world market leaders. Nobody is as accurate as we are in terms of anti-drone performance on long range. We have added to our portfolio, end of last year, interceptor drones, drones which fly up, which kill the attacking drones by flying into them. That is a new type of effector which we are happily adding to our portfolio and which is predominantly of advantage in commercial or homeland security applications where you cannot use missiles, rockets or canon-based air defense systems. We have added now high-energy laser weapon and our actual architecture allows us to scale those weapons between 50 and 150 kilowatts. And I just want to remind everybody that there's only one other competitor to EOS in the global market. And so the overall competitive situation is very, very favorable to EOS. We have also added rocket systems and various types of missile systems on our multi-carrier platform, so we can offer the full range to be able to defeat any kind of incoming drone threat. And with the acquisition of MARSS and its NiDAR Command & Control system, we are now in a position to offer fully integrated solution. The command and control system is the brain behind any anti-drone system as it identifies the threat as it allocates the various effectors to the threat, and it's the key to make sure that you can defeat large quantities of drones or drone swarms. So now we are in a position as one of the very, very few bidders on the market to offer turnkey solution to any client in the military, in the homeland security and in the civil/commercial context, including operators of airports, for example. Let's move on to Page #13, please. Number 13 is not an exhaustive list of partners and clients. All those companies mentioned here are also clients of Electro Optic Systems. You can see very prominent names, big OEMs worldwide, OEMs which trust EOS, which trust our performance, our quality, our high-end products, and all of them have acquired our products. I just want to highlight one aspect. You can see on the right upper side, a prototype of the M1E3 Abrams main battle tank. This is the breakthrough landmark contract, which we have achieved by end of last year. Even if the dollar value is not so impressive, it is only the very first slice of something which will become very, very big. So after many years of absence from the U.S. Army market, we have succeeded now -- we have been selected by the U.S. government and by General Dynamics to become their sole partner to put our R400 Slinger weapon station in a very autonomous version on top of the Abrams tank, allowing this very important American platform to survive the threats of the modern battlefield. As the U.S. Army is operating thousands of those tanks and as many export clients around the world are operating Abrams tanks, we believe that the total market potential just for this type of integration installation will add up over the next 15 years to up to USD 3 billion. So that's the reason why this contract now, even if it's only the very first slice, is extremely important for Electro Optic Systems. We expect further slices to come in the course of the next years, and this will add up to those large numbers then. Let's move on. Slide #14 is a selection of some partnership agreements which we have signed in the course of the last year, very important ones. So Calidus is a very strategic partner in the Middle East for EOS, not only for remote weapon systems, we aim also partnership in the other product domains with Calidus to open and to secure, for example, the very important UAE market. We've signed, under recommendation by the British government, a partnership agreement with MSI, which opens for us the U.K. market and associated exports market. So MSI will produce our weapon systems under license. We've also entered into a teaming agreement with a world-leading KNDS company, which is this German-French multinational company. KNDS is also highly interested in the partnership with us. We can add up there or we can add and integrate their canons on our weapon stations. And KNDS in return is interested in producing our weapon systems, our remote weapon systems in France for the French market, for example. So very important to penetrate those European markets. And we most recently also signed a strategic partnership agreement with a Turkish company, Roketsan. Roketsan is also a very strong, very large company active in the missile domain today, which has decided to enter into the high-energy laser weapon domain. And with Roketsan, we are in a very comfortable position and very optimistic to conquer also the Turkish and associated export market with high-energy laser weapons. Page #15. So the high-energy laser weapon domain is, for us, the first strategic pillar of growth over and above a remote weapon system market, which is growing by itself. Again, irrespective of whether or not the Ukrainian conflict would come to an end, the remote weapon system market will continue to grow and the laser energy market -- the high-energy laser weapon market will be the first layer above that. As there's only very limited competition in our 100-kilowatt power domain, we expect that we can acquire a large chunk of the non-U.S. international market. In order to be able to serve those huge markets, we've opened up our first, and I think it's the worldwide first serial high-energy laser weapon production facility. It was opened on February 6, so quite recently. It is a 20,000 square feet capability, a factory which allows us to produce 20 laser weapons per year, and we have expansion potential to go up to 40 laser weapons per year there. But even if we can produce 40 laser weapons per year there, we expect that most of our clients will ask us to localize production in their home country. And here, our unique feature comes into play as EOS is the only company worldwide in the laser weapon domain, which owns all the IP relevant to do this kind of development and production. We can offer turnkey solutions, and we can localize the production in each client country, which none of our competitors is able to do so. That's the reason why we strongly believe into this kind of strategic growth area. To give you some update on where we are with the Netherlands contract, so the initial design approval, the first milestones, have been successfully passed. We have passed the so-called PDR on the system. We have passed the CDR on the laser itself, which is a very successful process and progress which we have achieved. The client is extremely happy. We are negotiating now with the clients to increase the scope of the contract and to accelerate the delivery time frame. The client is highly interested in signing further orders with EOS and to make EOS a strong partner -- a strong strategic partner of the Netherlands government. So this is very promising, and it's a world-class testimony of our quality and performance. If you look to the opportunities, our go-to-market strategy depends on the type of client, depends on the region. If you look to the NATO market, and in particular here, the Western European market, it's, in most of the cases, either a direct sale to a government or we go through partners and through teaming arrangements with the respective national champions. If you look to the Middle East, it's either direct sale or it's a partnering model with local producers. In many cases, it's governmentally owned companies. And if you look to other markets like the Korean markets, there are a range of other channels, depending on the specific local market conditions. So we have continued discussions and ongoing negotiations with many countries and many governments related to future high-energy laser weapon sales opportunities. Among those ones are Germany, France, Italy, Turkey, Saudi Arabia, the UAE, India, Korea, Australia and the United States. This list is not exhaustive, but it should give you a little bit of a perspective of how much this kind of weapon system is in demand and how much the market will grow in the future. And again, we are in the pole position because we have been the only company so far being able to sign a 100-kilowatt laser weapon contract to an export client. The conditions of the USD 80 million Korean laser weapon contract we have mentioned before, it's a highly conditional contract. It's not included in our internal planning. We have not spent any money on that one so far, but we expect that the conditions will be concluded in the course of the first quarter this year. But again, no guarantee is coming with that one. Page #16, space warfare, whereas we call our product line for high-energy laser weapons in the anti-drone business domain, Apollo, we have given our product family for space warfare, the name Atlas. Atlas comes in different configuration in fixed installations, like you can see here on the right side of this slide, or it comes in a mobile configuration. It comes in containers, which are coming on the backside of trucks. So the Atlas product range is designed in order to fulfill 3 dedicated missions. The first mission is to blind and dazzle satellite sensors to stop satellites from taking pictures and intelligence from the ground. That's very important in any kind of military context. The second mission is to disable or to defeat satellites. This kind of destruction capability comes by increasing the laser power. So if we include now our high-energy laser weapon capability, the 100-kilowatt effectors, into the kind of optical chain of our telescopes, it will allow us to do those kind of missions. And the third mission is obviously to move satellites and to move space debris. We can even cause atmospheric re-entry if we illuminate those satellites and space debris with our laser weapons. So this is giving our operators, our clients, a huge portfolio of more decisive capabilities. I want to highlight that there's not any other company outside EOS being able to offer this kind of competency and capability to any client. That's the reason why this will become a huge growth opportunity for EOS. And I'm very happy to announce also that we welcome frequently commanders from Tier 1 governments, commanders of space forces coming to Canberra, coming to our Mount Stromlo installation to visit and to witness what we can do in this kind of domain. Page #17. You might remember this slide from the last year. We always had 3 ticks. The tick on markets was there. The tick on product was there as we have launched many new products. We are highly innovative. And we can also tick now the right side of this slide, we can tick sales and marketing, and we can tick the order book as we have increased our order book from $136 million end of 2024 to more than $459 million by end of December 2025. Again, this does not include the USD 80 million order from this Korean client. So this is an extreme success last year. And again, we expect this year to be extremely positive in terms of order intake. We will continue putting focus on order book growth as this will be the baseline for any revenue growth in the future. Page #18. I don't want to go into all the details here. I mentioned some of them before. Important is really that our European footprint is creating now much more value, much more order intake. And if you really look to the development of the unconditional order book, this underlines our statements. It is very strong with $459 million, and we aim to realize about half of this order book value by revenue in 2026, plus all revenue coming in by new orders taking on board over the next few months to come. Page #19. This is an updated pipeline. This pipeline is extremely conservative. So if you go through that one, you will notice that we have not included here order intake for laser weapons in 2026, but we're obviously aiming for achieving order intake for laser weapons in 2026. But even if it would not come hypothetically, the pipeline is very strong and the foundation for a very strong year in terms of revenue is extremely high. So it's -- this contains order intake opportunities from all around the world. It is extremely diversified. It includes lots of opportunities from the Middle East, but also from North America and from Europe. And it should give everybody lots of confidence that the growth strategy of the company is intact, and we are in a very, very healthy and extremely positive outlook position. Page #20, a summary of the MARSS acquisition. MARSS is one of the very few companies in the market, which is offering a highly customized integrated anti-drone solution. It is a company which has fielded more than 60 systems around the globe, a company which is well established, a company which is world-leading in terms of user intuitive C2 systems, a company with which we have collaborated in the past for a long time. And our team always came back and said that the MARSS integration is the most easiest to be done. The MARSS user interface is the best one from a customer perspective. And with MARSS being part of our EOS portfolio once we have completed the deal in a few months or weeks from now, we are in a position to offer turnkey solutions to the client. And again, with this kind of capability, we have also the advantage of including all those AI algorithms into our weapon stations and into our laser weapons to make those weapon systems even more competitive and leading edge by being able to even better discriminate drones and to detect drones. So the transaction summary, we announced that on January 12, there's an upfront cash payment of USD 36 million, plus an earn-out in shares and cash. The earn-out will happen as the order intake is happening and as all those products and all those orders are extremely profitable, we expect that we can pay those kind of earn-outs by the order intake cash flow to come. So I would like to hand over now to Clive to go through the details of the financial results 2025. Clive?
Clive Cuthell: Thank you, Andreas. So for those that joined late, my name is Clive, and I'm the CFO and COO. I joined EOS 3 years ago in mid-'22, going on for 4 years. Revenue -- as this slide shows, revenue came in at just over $128 million. That is in line with what we said at the end of January, which was slightly above the guidance range that we issued at the end of the year last year. The lower revenue compared to last year really reflects the end of old contracts and the start of some new ones and a little bit of a gap in between. And obviously, there's been, as Andreas said, a big focus on growing the order book this year to underpin a position next year that hopefully will be more favorable. The gross margin was 63%. This includes 2 main things. One was the benefit of a contract that was finalized in the Middle East. That was already reported back in June, so that's not new news. The second thing that's perhaps more significant is there has been a continued improvement in the base gross margin in our business. We do not expect to achieve 63% gross margin going forward, but we do expect a continuation of the multiyear improvement in gross margin that we have seen consistently between '23, '24 and '25. So we are aiming for continued improvement in '26 on the historical levels, perhaps over 50%. The underlying EBITDA was a loss of $24 million, mainly driven by the lower revenue during the year. The gross margin benefit was offsetting some increase in operating expense as well. The EBIT was impacted by a number of items, including higher depreciation and amortization, a big chunk of which is customer-funded CapEx. We also had 2 nonrecurring items totaling $9 million. These are nontrading, 2/3 of this relates to the ASIC matter penalty in Australia, and the other 1/3 relates to some acquisition costs with MARSS that were expensed during the year. And there are some details in the back of the slide deck on these nonrecurring nontrading items. Finance costs improved. All debt was repaid in January 2025, and EOS today has no borrowings. The expense for finance costs includes the make-whole expense relating to the debt repayment that took place in January 2025. And the total net profit after tax includes the continuing operations, but it also includes the $91 million gain on sale that was recorded in January 2025 following the sale of EM Solutions that Andreas mentioned earlier. Maybe the other thing to note and highlight on this slide is that we have done an awful lot of work, as Andreas said, on revenue diversity. And the graph at the bottom right of the slide shows the split of revenue by geography, and as we said, an increasing emphasis on Europe, not just in the orders secured that Andreas mentioned earlier, but also flowing into revenue this year. So that work going to market in different ways in different parts of the world is going to continue as we -- and we expect the quality and the diversity of the revenue base to continue improving in future years. The next, Page 23, has the segment results for defense and space. The outcomes at segment level here are largely a result of lower defense revenue because of the gap in contract activity during the year. In the space business, pleasingly, that business continued to grow during the year. As Andreas said, this is really developing -- designing, developing and starting to commercialize new products, particularly in the space control area. And it's pleasing to see that Atlas system work includes customer-funded activity, which flows through the revenue line. As we said, a big focus on growing the order book during 2025. And we have said the order book of $459 million, our outlook for this year -- we've not issued revenue guidance, but we have said that between 40% and 50% of that order book of $459 million is what we're aiming to realize in 2026. And that should give you a little bit of a thumbnail sketch as to where revenue could end up. The next page has cash flow on it. Now the cash flow information was largely announced at the end of January already. So some of this is not new news. But as you can see, the operating cash flow was a net $24 million out the door. That's despite the lower revenue during the year. We did have some big receipts from the finalization of the contract in the Middle East. And also in the cash flow, we had the impact of interest in the operating cash flow -- the impact of the make-whole interest that I mentioned earlier. Investing cash flows, which was $130 million coming in, included the disposal proceeds on the sale of EM Solutions as well as some other items. Notably, the level of security deposits on bank guarantees also reduced during the year. which is a positive. Financing cash outflows included the repayment of debt of $48 million that occurred in January with the sale -- January 2025 with the sale of EM Solutions. Maybe just a couple of other things. Cash flow discipline is quite important to us at EOS. At the end of December, we achieved the highest yet, the highest ever position of cash received in advance from customers. So upfront payments from customers at the end of December were $42 million, which is up $18 million on the prior year. And that's because of a consistent focus on this item as we deal with customer contract negotiations at the signing stage. We continue to manage cash carefully. We do make targeted investments in inventory where we can get a source of competitive advantage from reducing long lead times as some of our competitors are not able to supply quickly. And if we make limited investments, we can really improve there. On the balance sheet, as we've announced previously, cash at bank $107 million at the end of December. And we have a committed term loan facility for $100 million with docs being finalized at the moment to help cash flow liquidity protection over the next 12 and 24 months, and particularly as we get into the MARSS acquisition and aim to realize a lot of the growth that we've been mentioning earlier. That's it on cash flow, and I'm going to hand back to Andreas now, who's going to talk a little bit more strategically.
Andreas Schwer: Thanks, Clive. Page #26, key strategic achievements. EOS will position itself as the leading counter-drone company worldwide, being able to serve any kind of client, whether it's military or nonmilitary. And in order to do so, we have also increased our portfolio in counter-drone effectors. So beside our R400 Slinger, we are at the last stage now to also include the R800 in anti-drone configuration to the field. And all those systems will be, in the future, equipped with AI-enabled C2 system coming from us, which allows us to be even more effective. I just want to mention one further contract, which we have not announced so far in the -- which we have not outlined here in the paper. It's the German UTF tender. It's probably one of the largest RWS tenders over the next 10 years to come. The German government wants to procure more than 3,000 systems and among -- and we've been among 13 bidders to bid for this first phase of the contract. The German government has down selected 3 bidders to go into the last round of selection, and we are proud to say that our partner Diehl and EOS, we are among those 3 last bidders in a very promising position. So we are very optimistic to make that happen in the course of this year and to announce an order intake on that one, not this year, but the final decision is probably to be made by the German government in 2027. So this is -- this will become then also the next landmark order intake. Again, it's more than 3,000 weapon stations. So that's underlining our growth strategy in remote weapon systems. And as we have now partnership agreements in place with local champions in Germany, in France, in U.K., those markets are widely open for us in the future. The high-energy laser weapon market is just starting now. And again, we are one of the very, very few contenders in this market, only one other company active in the 100-kilowatt domain. This is promising very healthy contracts, very profitable contracts in the future. And with our new laser innovation center, the worldwide first serial production laser center, we should be well positioned there. Space control, to be more commercialized, we have to complete our development on the mobile solution, the mobile Atlas solution, which will put us into a market which is just about to come. It will position us as the unique source outside U.S., and we will be very well positioned to let the company grow in space control then over the next 3 to 10 years. So Page # -- what is that, 27, our growth strategy. Again, we will have a very robust organic growth by RWS by enabling our weapon stations with the AI algorithms and with bringing further counter-drone variants to the market. This will be substantial for our further growth. And then, with the laser weapon and with the MARSS-enabled C2 systems, we'll be in a position to bump our revenues up significantly over the next few years. Before then, space control will kick in with very substantial revenues to become the world market leader in space warfare. So we will continue commercializing our IP assets, our huge inventory of IP and innovation. We will further put effort in developing software. We will continue investing into new features such as mesh network technologies to give our clients a leading edge over anybody else in the market, whilst obviously maintaining our strict capital discipline. So Page #28. The markets will remain very supportive. We are benefiting from a super-cycle. We are perfectly positioned with our counter-drone and space control business segments within those markets. And as our growth strategy and our go-to-market strategy in Europe is already proving that we are highly effective and highly successful, we are very well positioned. And again, with the inclusion of MARSS in our portfolio and our widened product range, we should be able to offer and to reach out to all the homeland security and commercial clients in the future as we expect that most of the airports, most of the civil and commercial infrastructure needs to be protected against drone attacks in the future. EOS wants to be in the middle of this kind of market to become the world-leading anti-drone company. Thank you, ladies and gentlemen, for your interest. We are ready now to answer your questions.
Operator: Your first phone question is from Baxter Kirk with Bell Potter.
Baxter Kirk: Andreas and Clive, can you hear me?
Andreas Schwer: Yes.
Baxter Kirk: You've mentioned commercialization of the stationary Atlas product from 2026 onwards. What would the initial contracts look like? Should we expect multiyear development contracts like the laser contracts and then followed by JVs? So how would that work?
Andreas Schwer: So the product in terms of stationary fixed asset product is available. We can duplicate our installation on Mount Stromlo. It's a fixed asset, which we are starting now to offer to the market, to clients. So a copy of this kind of system comes in for a price of around about USD 100 million. That is an asset which we can sell instantaneously. There is no further development needed. Development is still continuing for the mobile solution where we expect to be able to have a prototype ready by end '27, 2028.
Baxter Kirk: Okay. Great. And since the events that happened last year regarding the drone incursions across Europe, are you seeing an acceleration in procurement cycles, particularly for your counter-drone products?
Andreas Schwer: Yes, we can see a growing demand, but obviously, military procurement cycles are long lasting. It goes through a very complex capability definition process on the client side, followed by low quantity orders, and that is what we are seeing today. And as soon as low quantities are delivered, as soon as they have done the incorporation into their overall multilayered ConOps process, we can expect that large quantity orders will follow by that. It's the normal kind of cycle when you introduce a new weapon system to the market.
Baxter Kirk: Okay. So there's no sort of -- they're not skipping steps or anything, given the urgency of drone protection. It's just following normal procurement cycles.
Andreas Schwer: In most of the cases. Obviously, if there's an emergency demand like to support Ukraine, we can expect quick delivery and quick turnovers, same in the Middle East. So that is still the case. But predominantly the market of the future, the growth market will come through normal type of procurement cycles.
Operator: There are no further questions on the phone line at this time. I'll now hand back to address any webcast questions.
David Bert: Thanks. We have a number of webcast questions, and we'll try to get to as many of them as we can. There are some related questions, which I'll present relating to the 40% to 50% realization of the $459 million backlog. Could you talk a bit more about what sort of swing factors would affect that range and any weighting that you can provide as well?
Clive Cuthell: Thanks, David. So the order book is -- as we said, we're pleased. It's grown a lot to $459 million at the end of December. We -- obviously, we track the tenor or the rollout of that order book quite carefully for our internal management purposes. And today, we have guided that we are aiming for 40% or 50% of that order book to roll into calendar 2026. So that represents something like AUD 180 million to AUD 230 million. Now that's obviously the revenue that we're aiming for that could come from the existing order book. And obviously, on top of that, as Andreas mentioned, would be new orders received, particularly in the first half of the year that are capable of delivery before the end of the year. We do -- what are the factors that impact where we land in that range? Obviously, it depends on -- a little bit on order intake and whether we get short notice orders, but also it depends particularly on delivery. A large amount of delivery is within our control, but some of it involves very close cooperation with customers, but we've been working quite hard for several months now to lock in as much of that 2026 revenue as we can. So it does depend on -- more largely on delivery than on new orders being won. We have not issued revenue guidance. This guidance that we're issuing today in order book rollout is as far as we're going at this stage. But we can say that the revenue is as normal, is more likely to be weighted towards the second half than the first half of the year. And if that changes, we can -- we will be looking to keep the market informed. There is quite a wide range in analyst consensus out there that we are aware of. Some of the analyst numbers assume an exceptionally high level of order intake and I'm not -- being turned into revenue in 2026. I'm not sure that's quite right, but that's as far as we're prepared to go at this stage. So thanks for that question, David. Hopefully, that deals with the 2 or 3 questions that have been asked on this area.
David Bert: We have a couple of related questions on the Korean high-energy laser contract. Can you confirm if the deposit has been received yet? And if not, is there a deadline on when this contract would be terminated?
Clive Cuthell: Thanks, David. So we've been quite clear in our announcements that the deposit has not yet been received. That was a condition in the contract. And the second condition is for a letter of credit to be finalized, and we've also been clear in our announcements that, that has not occurred yet either. And I'll pass to Andreas for the second part of the question, which is how do we look at this?
David Bert: Yes. So is the South Korean contract exclusive? And if so, does the cash deposit have to be provided before -- between the 2 parties?
Andreas Schwer: So the South Korean contract, which is signed with a private party is not exclusive. We are in parallel also in discussions with the Korean government and end users. And yes, at any point in time, we can enter into contracts with the government in parallel.
David Bert: Another question relating to the high-energy laser facility. You mentioned that you can build up to 20 lasers per year. Why does the current order take up to 2 years to build?
Andreas Schwer: It takes more than 2 years to build because of the supply chain. Key components which we have to buy from the market have a long lead time. And that is the key reason as with any other weapon system you sell to the market that simply the delivery time line is usually between 2, 3, 4 years. We try to optimize this time line, and we are in negotiations with the client to bring the delivery forward. If everything works well, it could be as early as end of 2027, which is compared to the procurement of any other weapon system, quite a record time.
David Bert: Great. There are a number of questions about the German opportunity with Diehl. Could you just talk a bit more detail on -- and what sort of price points for the products?
Andreas Schwer: So the German UTF tender, which is about 3,000 systems, it's related to our R150 weapon station, which we do, and which we produce together with the German partner Diehl. It has a total market potential of more than EUR 1 billion.
David Bert: What are the next steps for the M1 Abrams tank integration opportunity?
Andreas Schwer: So the contract which we have signed end of last year was about to finalize the integration of the R400 Slinger and a very specific version on the Abrams tank. We expect that to happen in the course of 2026. We expect to get the next slice of orders in the course of this year, 2026, before then, large quantity orders will come in by 2027 onwards.
David Bert: Great. An analyst has asked, what are the expectations for capital expenditure in 2026?
Clive Cuthell: Yes. Thanks, David. So CapEx -- we don't provide guidance on CapEx, but historically, it has been -- typically it has been less than $20 million. I would emphasize that, within the amounts that we've had historically, very significant portions of our CapEx have been funded by customers under customer contracts with no net cash going out from the business. So we would expect to see that activity continue. We do make selective investments in opportunities where we see near -- modest amounts of development spending being required. But we are very judicious in terms of the level of investment risk we take around technical developments and the amount of money we put at stake, and that is going to continue. So that's -- I'd probably leave it at that, David.
David Bert: There's a question here on what kind of opportunities are in front of MARSS in terms of timing, value, type of end products and customers?
Clive Cuthell: Thanks, David. So we think the opportunities in front of MARSS over the next 2 to 3 years are exceptional because they provide a route to market in the counter-drone area. MARSS has a pipeline and it has an order book, and as one of the slides said earlier that our pipeline slide and our order book slide do not include any information in relation to the pipeline and order book of the MARSS business. They consistently look at a number of markets and different opportunities. And at the moment, they're looking at opportunities that include anything from EUR 20 million and EUR 30 million per bid to, in a few cases, bids that are much larger, stretching upwards, including EUR 50 million and EUR 100 million per bid. Now the lead time on sales in the MARSS business is -- which sells into defense and homeland security, a bit like us, the lead time is just as elongated in that business as it is in ours. But we are hoping that the business could achieve significant orders in '26 and '27 that could make a potentially very material difference to the EOS order book over the next 12 and 24 months. We are not expecting the MARSS order book to be dilutive to EOS margins in any way. And naturally, we are looking for the right cash flow profile on these orders. I think it's a bit too early to be more specific on the size of the order opportunities, but I'm just going to ask Andreas to make a couple of other comments about how we see the market overall for the MARSS products and the cross-selling opportunities.
Andreas Schwer: So the market opportunities are tremendous. Their home market was the Middle East or is the Middle East. And as you can see by the geopolitical tensions and the actual political threat scenario between Iran and the other GCC countries, we expect further push coming from that end. So we hope to be able to sign contracts over the next 12 months in a significant value to protect critical military and governmental infrastructure in countries like the UAE or Saudi Arabia. That is imminent. And again, politics is playing currently in our favor there. We also expect that we will be able to sign contracts in non-Middle Eastern markets, in European markets. But obviously, as we need to reach out now to NATO clients for the MARSS portfolio, which was not done before to a large extent, this will take a little bit more time. But yes, all the protection requirements for critical infrastructure in Eastern and Western Europe, MARSS is made for that. And we believe that, that market on the long run will be extremely substantial for EOS.
David Bert: Great. There's a question here about the recent news articles around the German government pausing of the Rheinmetall high-energy laser weapon contract. Can you comment further on this?
Andreas Schwer: Yes, sure. So we have to look a little bit backwards in history. So the German government has supported Rheinmetall and MBDA over the last 15 years with more than EUR 150 million subsidized R&D work to develop laser weapon technology. Today, Rheinmetall has reached a level of 20 kilowatts, and they have offered and agreed with the German MoD to get into a development contract to develop a 50-kilowatt solution in the course of the next 5 years for a total budget of EUR 500 million. That is a very tremendous amount of money. And when the German parliament -- so the German government became aware of the Dutch contract, which we have signed for a fraction of the price, and when they have asked us, would you be ready to deliver also to us, to Germany, we obviously said, yes, you can get twice the power for less than half the price in half the time. And with that, the kind of statement and obviously, by then consecutive interactions with leading stakeholders on the German government side, the parliament and the government has decided to stop the further procurement in a sole-source mode with Rheinmetall, but to have a detailed look instead on the EOS capability. And that is happening right now.
David Bert: A few questions have come through about what's the future product development pathway for our laser weapon project.
Andreas Schwer: So our current technology is scalable between 50 and 150 kilowatts. So we don't need to spend any more money to make that happen. But we are in negotiation with 2 governments and with one of them, we will hopefully sign this year, a contract to develop a 300-kilowatt laser weapon family. which is also scalable. This will enable us to offer to the market something which is not the best solution to kill drones, but which is also very capable to act as a so-called C-RAM type of effector. C-RAM means it can go against any kind of missile rocket and artillery shell. That is opening up an additional market for EOS. And we can also use those 300-kilowatt lasers to extend our space warfare capability to engage not only against satellites flying in low earth orbit, the low earth orbit is up to 1,000, 1,500 kilometers and it includes all the constellations such as Starlink, but the 300-kilowatt will also allow us to engage against higher flying objects such as [ GPS ] or GLONASS navigation satellites or even geostationary satellites, whether it's communication, intelligent satellites or what else. So that will give us the full portfolio.
David Bert: Great. I think that's all the questions that we have time for at this time. Thanks, operator.
Operator: Thank you. And that does conclude our conference for today. Thank you for participating. You may now disconnect.