DroneShield Limited (DRO) Earnings Call Transcript & Summary

Good morning, everyone. I'm Melanie DroneShield's Chief of Staff, here with Angus Bean, our CEO. Welcome to DroneShield's Investor Webinar for the launch of RfRecon. This is a flagship addition to our next generation of counter-drone solutions. Thanks for joining us at short notice. We wanted our investors to be among the first to hear about this important milestone in our product and solutions road map. One housekeeping point before we get into the details. Today's webinar is a short form session focused specifically on the RfRecon launch. DroneShield's interim results for the period ended 30 June 2026 are scheduled for release in a few weeks' time, and that will provide a broader opportunity to update investors in the company about operational and strategic progress. We will host a separate investor call at that time, which will include live Q&A, so we won't be taking any questions today. Just before we begin, please take a moment to read the important notices and disclaimer on this slide. Today's presentation may contain forward-looking statements, which involve inherent risks and uncertainties and should be read alongside our continuous disclosure announcements lodged with the ASX. This presentation is for information purposes only and does not constitute investment advice. With that, let's talk about why we built RfRecon. Over to Angus.

Thanks, Mel, and great to have you with me this morning. Thanks, everyone, for joining, and good to be speaking to you again. If we can just go to the next slide, please. So we're really excited about RfRecon. This is a product that we have been thinking about and architecting now for several years, and it is such a credit to the team and the whole organization that today, we are able to launch this product. And as Mel mentioned, we wanted our investment community to be one of the first to receive an update on the progress that we've made at the organization. So what I would like to start off with is updating everyone on the threat environment and the threat environment is changing. It is very clear that drones and uncrewed systems are operating well outside traditional allocated frequency bands, things like the ISM bands. Increasingly, we're seeing software-defined radio technology develop at an exponential pace, leading to additional challenges in terms of radio frequency detection, tracking and mitigation. Not only this, we're seeing a significant increase in the number of complex signals that are existing in these environments and the complexity of those environments is increasing. If we take our recent deployments into the FIFA World Cup, for example, some of the most complicated and complex radio frequency, but also operational environment that the company has experienced. It's really critical to understand that radio frequency detection is a core layer of counter-drone protection. And this is not changing. This is not going away, and the market as a whole is increasing substantially. Swarming, teaming, these types of technologies is where the future of drone technology is going. And all of those are fundamentally underpinned by the use of radio links. So radio frequency remains a core part of what we would describe and what we have been describing over the last couple of years as a layered counter-drone defensive solution. It's also important to understand that radio frequency detection and mitigation in a lot of scenarios is the only practical solution to be deployed. So we see this, again, not only in the military context, but certainly in the emerging commercial context as well. As I started off with, we have worked tirelessly over the last 4 years to develop this platform. I still remember the original whiteboard session that I had with the engineering team where we sat down, we looked at where the technologies were going and the result today -- sorry, today is the result of those original sessions we had almost 4 years ago. Those operational challenges, I'm very pleased to say this product was, with great foresight built to close the gap. And it should be noted, as we have spoken previously in our investment community, this is the first of our next-generation platforms. So you'll see -- you'll continue to see additional solutions from us throughout '26 and through '27. We go to the next slide that we got. Before we deep dive into the product itself, I think it's really important to understand the technology layer, okay? So we recently, in the last 2 weeks, announced the arrival of our third-generation RfAI model. RfAI is something that we have been developing since the early days of the company where we started off with a really simple correlation RF detection mechanism. We then translated that, started to use some really basic machine learning technology back in the 2016, 2017 and beyond. And over the years, we've refined that into RfAI, Gen 2, where we were able to expose that model to massive amounts of data and get a really phenomenal RF detection and classification engine. In the last 2 weeks, we announced RfAI Gen 3 and this detection engine and classification and tracking solution underpins a lot of the next-generation platforms you'll see from us in the future. So what is the big leap forward here? And RfAI V3 is really about building a model that is far more about RF intelligence than it is about purely RF detection. It's about building a machine learning model that understands the principles of RF and understand its environment and can learn over time. It's about being able to detect signals, record and then eventually classify those signals on the device over time. And we have a really significant R&D and technology road map built on RfAI V3, but also our next-generation hardware platforms. This is really a new chapter for DroneShield technology, and we'll continue to refine that as we roll out our quarterly Software-as-a-Service updates. So not only do we have a technology road map, but we also have the commercial pathway to make sure that we are funding that research and development. So let's talk about the solution. DroneShield, we are really well known for our hardware and mission-ready solutions. As many of you know, we have over 5,500 devices now deployed all around the world, and our hardware is one of the things we constantly get great reviews and compliments on from end customers. And this product, I would say to you, will be no different. As you can see, the product in front of us this morning, really, this product is about understanding the whole spectrum, and we'll deep dive into some of those specs in a second. What's really important for me, though, is that this is not a specialized electronic warfare officer only tool. This is a product that can be used from everyone from the local security guard all the way through to those special forces operators. This is a product that's really easy to use and provides great intelligence to the operator and does not require a 4-year degree in electronic warfare. We have massively expanded the hardware solution that we've built before right down to the chip layer where we are using the latest of our partners' chip design and software-defined radio technology. We've done things like build direction finding into the hardware from the day one. We have an in-built GNSS positioner so that the product can be set up and deployed for long periods of time and know where it is and also support things like On-the-Move vehicle convoy protection. We have ultra-wideband technology built into this product like we've never seen before. As well as a lot of situational awareness hardware, things like WiFi and Bluetooth, ADS-B, AIS, all built into the hardware of the design from day one. And I'd like to congratulate and thank the entire DroneShield R&D team with over 350 engineers, developers and designers. Many of those have touched this product over the last few years, and I would like to thank them for all their efforts bringing this product to market. So what is so special about the RfRecon? And you'll see the numbers on the screen there. We are talking about ultra-wideband technology. We are talking about 100 megahertz all the way, fully continuous through to 7.125 gigahertz, that is a vast amount of the RF spectrum that this product is able to do. We are not talking about individual slivers of the RF spectrum between that. We're talking about the full frequency band coverage that this product will be able to be tuned towards and detect threats within. This product is ready to deploy from day one. The product itself has been designed for military standards and will receive the certifications for military standards that are required by many of our end users and is fully interoperable, again, day one with a lot of the open standards that military and security organizations use around the world for things like data transfer and security. Just touching on security. Again, something we've doubled down our efforts on. We have a great security team now who have been involved on the whole journey as we brought this product to market. So we have things like full Zeroisation of the hardware technology as well as the most advanced hardware encryption built into the device. This product specifically is designed to work in a layered solution, as we mentioned. So it can work with things like RF jammers as well as the cyber solutions as well as potentially a hard kill solution as well. But also they -- this solution can be networked together. So you can have a number of these solutions in the field all providing direction finding and can do things like tracking in -- with multiple devices. One thing that we are really focused on and you'll continue to hear from us at DroneShield about is our understanding of multi-mission. The reality is the products that we develop need to support more than one operational scenario in the future. And so we're seeing a blend of the three traditional scenarios we have built product for being dismounted, on the move and fixed site. And this product specifically and quite amazingly can translate all the way through those core mission scenarios in one product. So we really understand the multi-mission aspects of this product. And as you will also see in the months to come, we will release a number of accessory kits that will make each of those missions even more capable, again, using this base hardware that we're developing and launching today. But not only are we multi-mission, the threat is multi-mission. So in this product design, we have also considered, and this is the first product we've really spent a lot of time considering how to counter not just uncrewed aerial vehicles, but uncrewed land and surface vehicles as well, but including things like AIS tracking directly into the device for the maritime environment was critical. Again, this product will be able to be utilized from everything, from a critical infrastructure supplier all the way through to our mostly special forces operators around the world. In the dismounted format, it becomes fully integrated with things like ATAK, which is the Android tactical Awareness Kit so that the dismounted operator can see where they are on the map, see the lines of bearing to the potential threats and track themselves and the target in real time. Vehicle, critical component for us and a number of our most recent sales, we've seen a really significant uptick in the Vehicle On-the-Move, convoy protection and Littoral interest from customers. And so this product, again, fits really nicely into that product category as well. Rapidly deployable. This product is ready in minutes. There are no complex fasteners or screws that need to be -- or could be lost. The whole product simply clicks together and is ready and operational in just a few minutes. And fixed site. So we're seeing, again, an increase in base protection, long-term protection, data centers, a lot of interest there. And so this product is very applicable to those longer-term fixed site applications as well. So really excited to have a product that can translate either all the way through or to be sold into any of those channels. We have started through a pretty -- pretty interesting process. We have started rolling this product out for some field trials with some of our key end users. So far, the feedback has been really encouraging, and it's great to see the engagement that we're having with some of our Tier 1 operators around the world. In terms of the core messages for our investment community, we -- again, we have stayed with our product positioning. We want to position product at the low end of the high end, meaning the product is a very, very capable high-end solution that can be sold to Tier 1 operators, but it's not so exquisite or not so expensive that it can't be operated and rolled out at scale. And so that's where we've targeted the price point and the positioning for this product. We'll also be increasing the percentage of recurring revenue based on this product. So traditionally, DroneShield has offered a SaaS product that supports the product over the next few years of around 10%. We'll be increasing that to 15% moving forward with this product. The first year, it should be noted, is included in the price of the hardware. As I mentioned, the feedback has been encouraging. We have a clear commercial pathway now for this product as well as several years of R&D technology road map well out ahead of us that we will continue to build on this hardware platform into the future. It's early days with those end users, we have -- we will have a production batch available towards the end of the year, but there is potential for revenue to be -- to show up in the second half of '26. And we will continue to provide updates to the market as and when we need to. So that's it from my side. I thank everyone for joining this morning. It's been great, and we're really excited about RfRecon, again, the first of our next-generation platforms to hit the market. Back to you, Mel.

Thank you, Angus. Thanks, everybody, for joining today's session. As you just heard, RfRecon represents the next chapter of DroneShield's RF sensing capability. It's built on over a decade of sustained investment for the company and is designed where the threat is going, not where it's been. As announced to the market, DroneShield's interim results are scheduled to be released on Wednesday, the 26th of August. We'll host an investor call at 9:00 a.m. Sydney time on Thursday, the 27th of August, which will include a live Q&A component. If you would like to submit questions in advance, please send them to investors@droneshield.com, and we will aim to address them during that call. Thanks for joining us, and enjoy the rest of your day.

Thank you.