Electro Optic Systems Holdings Limited (EOS.AX) Earnings Call Transcript & Summary

Good morning, everybody. We are just going to wait a few seconds for everybody to get into the room, and we will start the call in a moment. Okay, everybody. Good morning. It is 8:00 a.m. here in Canberra. And this morning, we've made 2 announcements on the Australian Stock Exchange this week, one on Monday and one on Wednesday. They covered -- on the Monday announcement covered a new order that we received for $20 million and the Wednesday announcement related to the acquisition of the Interceptor business. So today's call is to provide you a little bit more information about these and just an update on the High Energy Laser landscape. So Andreas is going to talk through some materials. So we have some slides that will shortly be filed on the Australian Stock Exchange. They will appear on the screen and they will be distributed just after the call with the filing on the ASX. So Andreas, I'm going to hand over to you. We will talk through some slides, and then there will be Q&A available at the end. Please feel free to put questions into the chat box. And then David, who's on the call from our team will help moderate the questions at the end. So with that, Andreas, over to you.

Thank you very much, Clive. So my name is Andreas Schwer, Managing Director and Chief Executive Officer of Electro Optic Systems. Today, we have a very remarkable day in the history of the company. It is very remarkable because we did an acquisition of a product, Clive was mentioning an interceptor drone product, which is extremely strategic for us and which fills up a gap in our product portfolio, which will become of extreme importance in the future. Why that? It's not only because of the range gap, it's because of the capability of our type of interceptor drone, which is helping our clients to defeat large quantities of drones attacks in large swarms. That is something which is today the biggest kind of threat scenario where you need to have a highly versatile multilayer defense system. And there are only a few effectors on the market, which could cope with this kind of mass attack problem. The laser weapon is one of that. Any other kind of system, whether it's rockets, missiles or canons have limitations in terms of the number of kills per minute. But our type of interceptor drone is unique because you can simply launch as many as you want at the same second at the same time. I will come back to all those arguments in a minute. Just have a review quickly on our kind of product focus. So EOS is focusing on hard kill solutions. So we have in our portfolio now remote weapon systems. We are the world market leader in canon-based air defense with our benchmark system, which is called Slinger. We have the High Energy Laser Weapon in our portfolio. We only started recently with the commercialization, and we have had recently the first announcement of the world's first 100-kilowatt sale and several more to come over the next months and years in the subject. And we have obviously in our multipurpose remote weapon system platforms, also the opportunity to integrate 70-millimeter rocket systems, which are also quite affordable and quite effective over long ranges. And now we are adding to this the interceptor drones. So those drones, which are launched from ground and flying into the attacking drones and killing them by a hard kill. That is very interesting. And there are multiple options on the market from different vendors. We believe that we have acquired with this particular kind of design, one of the leading ones because they are optimum in terms of cost and efficiency. And I will tell you in the next few minutes why we are absolutely sure that this is a big differentiator on the marketplace. So you can see we have a broad portfolio. There's nobody in the market with this kind of broad portfolio, and that gives us the confidence why EOS will become the leading anti-drone company worldwide. I think we are on a good track. And we will show you over the next months and years that we will develop into this position to be undisputed leader in this domain. Let's move on. So our interceptor, how does it differentiate? So our interceptor is a high speed, high agility and a full autonomous type of interceptor. Why is high speed required? High speed is required in order to be able to shoot down drones, which are flying at high speed, not only Class 1 drones, not only quadrocopters, but even Shahed type of drones flying also at a similar level of speed. With 290 kilometers per hour, our drone belongs to the absolute fastest flying objects. And by that, we have the highest probability of kills against fast-moving objects. We can -- we have a high agility. Why do we have high agility? Our drones are navigated and controlled by AI. Embedded AI software on the drone, which allows you to predict movement patterns, dynamic patterns of the targets and with this kind of prediction being able to have a higher kill rate and also a much higher range than most of the other systems. We are offering this kind of product in 2 versions, a medium range and a short range. The short range is very small with 30 centimeters of wingspan, which you can easily integrate on the side arms on launching tubes on remote weapon stations. And the medium range one has 70 centimeter of diameter and the range of 5, maybe even more kilometers. So it is quite a long-range type of weapon system. And it comes in our system at a very low price, very low recurring price. So our target is to offer those kind of systems to the market for less than USD 10,000 per piece. Just for comparison, some of our competitors or most of our competitors with similar type of attack drones offering the system to the market for $50,000, $60,000 per piece. So we are much more affordable. And by that, being able to defeat swarms at very low cost. The system is battery driven. There's no kind of fuel on board. The kill mode is hard kill by impact. So we have a titanium nose. And by the sheer kinetic power, it's destroying its target. If it's a small target, it can fly on and you can hit even a second or third target. If it's a large target like a Shahed drone, it will instruct also itself. There is no warhead included, but optionally, we can include a high explosive fragmentation warhead if you want, with the proximity fuse, allowing us to have a diameter of kill or kill zone of more than 10 meters in diameter. But in its basic version, it has no chemicals on board, no fuel, no explosives. And by that, it is easy in terms of any kind of safety and security mechanism to handle on ground. That is also a very significant differentiator. So this is our product, how it looks like. Let's move on. So we have 2 versions. Again, we have the short range with 1 to 2 kilometers and the long range or medium range with 5 kilometers. The medium range cannot only kill 1 Class 1 and 2 UAVs. We also believe that we can kill Class 3 UAVs if they are not flying at maximum speed. We believe that this is something which will make a difference because most of the interceptors can only kill small Class 1 drones. One aspect which is extremely important, which I didn't mention before, it's our system are operated in a fire-and-forget mode. So you do not need to have an operator which is connected with some goggles on their eyes connected to the drones and is leading or guiding the drone into its target, that's not required here. We can do that optionally, but the drone is fired. It's locked on the target by the command and control system. And once it's fired, you forget about it, you can concentrate on other items and it's finding its way autonomously into the target. Why is that important? It's important because you don't need 100 operators to operate 100 interceptor drones to fly into 100 attacking drones. You just need one operator and the fleet will operate by itself. That is a key differentiator in the future to be very effective in mass attacks. And it has, again, low collateral damage potential because there is no explosive onboard, no chemical, no, nothing. You can use those kind of drones in any kind of nonmilitarized zone in civil, in urban areas or around airports. That's also an important factor that us. now becomes also able to better equip with anti-drone systems, civil installations in the future. It's an absolute dual-use type of product with a very, very low cost per kilo. Next one. Let me show you over the next few slides how this thing is operating. You can see here on ground some launch boxes, the systems will be launched in a vertical way out of those boxes, you can install as many boxes as you want. We expect that an airport in the future will be equipped with between 50 and 100 of those drones. So the investment per airport is around about $1 million or means $1 million of investment of CapEx for critical infrastructure. Each country has list of identified critical infrastructures in the range of [ EUR 300 million to EUR 500 million ]. That means per country, we have a kind of sales potential of [ EUR 300 million to EUR 500 million or U.S. dollar ] roughly to give you an impression of what the market size is for this type of product. So it's launched through those kind of boxes. Let's move on in a second. So you see they're coming in a vertical way out of the boxes. Again, fire-and-forget, you don't need to be online with them anymore. They're fully autonomous. They acquire the target, the targets which have been instructed to them with the coordinates when they are launched. And thanks to their infrared seeker head and thanks to the AI imaging and the onboard intelligence, they are able to identify the target, again, to predict their movement patterns and to directly fly into the targets. Let's move on. I mentioned fire-and-forget. Again, the range is about 5 kilometers in terms of altitude. We are sure that we can make at least 2 kilometers of altitude. That is the kind of ceiling below which most of the drones are operating today. And again, the speed of 290 kilometers per hour is almost unmatched in this type of market and makes a big difference in the future. Let's move on. So in the terminal phase, obviously, we are flying into the target. It's either one-on-one or if the client decides to have a warhead, an explosive warhead in it with a proximity fuse, we only need to get in the kind of vicinity of 5, 6 meters to the target, and that's enough to kill the drone. That is the next stage, but we believe most of the clients will go for the standard version with a normal kind of titanium nose and with a kinetic impact one by one, hard kill, okay? So depending on the target, our drone, the interceptor drone might continue its fight, its operation and can go against the second or a third target. If it's -- if the target is a larger drone, a Class 2 drone, we expect that in most of the cases, our drone will be destroyed as well. We will lose it and it is designed for that particular purpose. That's the reason why we try to keep the cost very low, and with less than $10,000 sales price, we are almost -- we are unmatched in the market for this type of interceptor drone. There's nobody being able to offer in hard kill impact drones at this price level. So let's talk about intellectual property. That was one key reason why we have decided to acquire this particular product. It comes not only as a piece of hardware. It comes with very high sophisticated software, software with, again, libraries, libraries of drones, catalogs, which have not only visible and infrared images of all the kinds of drones being operated in the market, but also acoustic and electromagnetic libraries. With all those libraries and with our AI software, which is embedded in this very small onboard computer system, we are able to achieve a kind of tracking, a kind of detection and a kind of hit rate, which is unmatched in the market. All that is proprietary with sensor fusion target classification capabilities, we are probably the leading edge in this kind of upcoming market segment. There are only very few competitors on the market. And again, most of the competitors are operating interceptor drones, which are kind of quadrocopter, flying at very low speed and most of them are using a kind of net in order to capture the target. Only very few of them are able to impact the target and to kill it by impact because of the minimum speed. We can do that because of our 290 kilometers per hour maximum speed. The hardware is very sophisticated. So it's a titanium nose. We have a composite airframe. So it's extremely lightweight. It is a very clever architecture. And again, that's allowing us to keep the production cost extremely low, lower than $10,000 if ordered in larger quantities. Let's move on. I would like to hand over to Clive to give you some aspects of the transaction summary and to explain why we believe that from a commercial perspective, this deal was really highly attractive to EOS.

Yes. Thanks, Andreas. So a couple of comments. We have said previously that we are looking for the right kind of acquisition. This is an interceptor, but it's also quite heavy on software -- uses a lot of software and AI to make it very effective. We have said that we're going to use a disciplined approach when we assess acquisitions, and that's what we've done here. We believe this is a very low-cost acquisition for what it is. There are advanced technologies like this in defense that are changing hands for relatively high prices, and we wanted to find something that was at the appropriate stage of development and had the right investment characteristics. So we think it's a good size. The business we're buying is based in the U.K. The total investment is just under about AUD 10 million. And we expect a further 12 to 24 months of development. This product is an advanced prototype at this time. It is flying and it is in demonstration. So the business has a very significant demonstration that's doing next month in the United States under some customer-funded work that it's been doing. And we're very impressed with the technology that we've seen. We've assessed this opportunity as much faster and lower risk than the option to develop this in-house. And we see that we may invest as much as $10 million over the next 3 years or so in this product, although it will be significantly less than that if we can secure the next rounds of customer funding that this business has been working on. So that's -- we think that's a fairly modest investment with $10 million upfront and a bit more potentially over the next 2 to 3 years. The cash will come from EOS existing cash reserves. So there's no borrowing or need for funding in relation to this. The transaction has been signed, and it will complete following customary approvals and conditions. And in terms of revenue, we're not looking for any revenue from this, obviously, in 2025, but [ years ] nearly out. In 2026, there is the possibility for some revenue from customer development funding. And we think commercial launch with meaningful sales is more likely to be in 2027, although naturally, we are aiming a little bit earlier than that in-house. We do see the launch pattern for this as being similar to some of our more recent product launches. So our Slinger product was launched in 2023 and has been enormously successful with small batch initial orders and is well on its way to a rapid growth curve. The High Energy Laser contract that we announced took a significant amount of time to negotiate and is now being commercialized. So we see this piece of -- this opportunity as something that EOS is quite good at, is commercializing advanced technology, selling into militaries. In this case, we expect to sell into the dual-use market with civil application, as Andreas said. So I'm going to hand back to Andreas just now. We're now going to talk about our other opportunities as well, the Slinger and High Energy Laser area, and Andreas will touch on these. And then we will come back to questions at the end. So if you have questions, please put them in the chat box and David will moderate at the end. So thank you, Andreas.

Thanks, Clive. And one point before we move into Slinger. So Clive was mentioning, this is a U.K.-based business. And what does it mean for EOS? It means that it ticks also another box. We told you that we want to target and we want to strengthen our footprint and position in Europe. In Europe means predominantly in some core countries like U.K., France, Germany, maybe Poland. And here, we can tick the U.K. box. So we will use this entity in U.K. to become EOS U.K. and to also do other businesses to our other business lines activities in the U.K. over the short and medium term. So also from that perspective, it was highly attractive to us. But let's talk now a little bit about Slinger. I mean you have heard a lot in the past. Slinger is moving forward. Slinger is becoming more and more the kind of baseline in the market. Obviously, procurement programs coming up following the normal type of pattern, which is slow and coming in smaller and medium-sized quantities before customers go into large volume orders. We have here announced this week one order for $20 million, which is one of those customers ordering the next batch and testing it and then hopefully going also in the large quantity orders. It's extremely important because it's another client using Slinger in its fleet. So that is just one further success. We have ongoing discussions with various clients outside and inside Europe. Most of them follow this kind of procurement pattern. And we hopefully will be able in the next future to announce further sales for Slingers in the marketplace. Let's move on. This is our 100-kilowatt Apollo laser weapon system, and now we can talk only about the client. In the beginning, I was only allowed to say it's a NATO client. It is the Netherlands. The Netherlands government has decided to play a leading role, if not the leading role in the European future laser weapon business because they believe this is a strategic niche, which will become a very big business in the future. And the Dutch industry is not in the forefront in any military technology. And here, they believe they could become the leading nation in the laser weapon business. And they have decided after going into kind of worldwide check on who can deliver this kind of capability, they have selected finally to go with [ U.S. ], which is a very great success for us, and we will become the partner for also future acquisition programs. The first sales was for EUR 71 million. It included lots of nonrecurring, as I was mentioning in previous investor calls. The recurring price for this kind of 100-kilowatt laser weapon system is for low quantities between USD 45 million and USD 50 million. If you order in large quantities, it can go down to USD 25 million to USD 30 million. So it's becoming very affordable. We are in negotiation with a couple of clients. Those negotiations are progressing and not only for small quantities, some clients want to order in medium and even larger quantities. So we are very optimistic to sell and to sign further contracts in the course of next year. There's not too much competition in the 100-kilowatt class. We have only one competitor in the global market, which is an Israeli company. What plays in our hand is we own all the IP, which our competitor does not have, and we can sell and we can license and we can transfer IP into any kind of client country to satisfy localization and transfer of IP requirements, which makes it extremely interesting. So laser weapons are also ideal for drone -- for swarms of drones to defeat them. Why? Because our laser weapon, they have been optimized to kill up to 20 and sometimes even 30 drones per minute. This kind of kill rate is unmatched, normal kind of launch of platform missiles, rockets or canon-based air defense system like our Slinger cannot handle more than 4 to 5 drone kills per minute. So here, we are then a factor of 5, 6 higher. You might ask us, why do you now have interceptors killer drones in your portfolio? Because we believe in the future, critical infrastructure like an airport might have 1 or 2 laser systems. So they can kill 50 or 60 drones per minute. But if those drones are launched in the vicinity of an airport, you don't have a minute of time, maybe only 10, 20 or 30 seconds. That means the 2 lasers can only bring down 10, 20 drones and there are still maybe quite a number of drones left over. So what to do with that, how to shoot them down. And here, our very affordable interceptor drone comes into play. And if an airport has 50 or so installed, they can shoot down 50 drones in one instance. And that makes the interceptor drone so important for our kind of hybrid installation. That was the key driver for us to invest very little money into a very strategic business line. So overall, we believe that with the laser weapon as we are almost the only company in the market, plus the Interceptor business where there's almost nobody with this kind of capability, we will be best positioned to become the leading player in the anti-drone business. On this slide, we've modified it slightly compared to the past. You can see here now the current power levels of different consortia operating on the market or trying to develop something. You can see again the United States being leading in terms of power levels, but very much restricted in terms of export. So we do not bother too much on U.S. competition. Our main competition is from Israel, where we have a company which is working and operating on a 100-kilowatt level. They have shared IPs. So nobody of them in a stand-alone mode can export those kind of systems. They need to agree all among themselves. So it's 3 companies and the government needs to say yes. And so far, the Israeli government has not allowed any export of IPs or to start a foreign-based production, which we can do. On France, they have just received a 50-kilowatt contract for EUR 100 million -- rather about EUR 130 million as I remember. We are in close contact with this consortium. We are in contact also with the French government, and there is a certain likelihood that we will join this and localize our IP also in France in cooperation with this consortium to become a member of the French laser market in the future. In Germany, we have also approached the German government. You might have read some articles in the press. We have offered for the German Navy our 100-kilowatt system for a fraction of the price a German consortium has asked for. So we are optimistic also to have a very competitive position in an upcoming tender in the German market. And the German laser market will be by far the biggest one in Europe. In the U.K., a consortium is working on a 50-kilowatt solution. They want to bring the 50-kilowatt to market by 2028. Again, we are already here with 100-kilowatt and more. So we also believe that we have a solid standing in case there's an open tender coming up on the U.K. market. The Chinese competitors are power-wise at the same level, but we know from our clients, they are testing and they even feel that some Chinese system, the beam quality is very, very bad. And that's the reason why the Saudi Arabian client has taken off service. They have decommissioned the Chinese systems because of bad performance. And we hope that in the Middle East, again, where the UAE and Saudi have tested those kind of Chinese systems and they're highly disappointed. We believe that in the Middle East, we have a great chance to sell many of our laser weapons in the future. And we have the 100 to 150-kilowatt class ready for production. We have sold the first unit. And we are negotiating with a client a fully funded development program for a 300-kilowatt version. If we are successful in the acquisition of this program, we will have a 300-kilowatt laser ready for production in about 3 to 4 years from now. And this will cement our market-leading position because nobody outside U.S. is working in this power domain. If you get this, this will give us a leading-edge position for at least 10 years. And with 300-kilowatt, we do not only have a laser weapon, which is good for anti-drone warfare. With 300-kilowatt, we can have a fully CRAM type of defense system. That means we can shoot down rockets, some missiles, artillery shells and mortars. So it's a highly versatile laser system. I can tell you one of our client, which was focusing in the beginning on a large fleet of 100-kilowatt systems, he already indicated to us in the course of this week [indiscernible] by Airshow that he wants to have the majority of this large volume order he is looking forward, and most of the systems should be 300-kilowatt laser systems. A 300-kilowatt laser system, the acquisition cost of that one is beyond USD 100 million to give you an idea of what it means for us revenue-wise. So I think we are in an extraordinary good competitive situation on the laser weapon side. So please move on one slide. So we're coming to the outlook. So we have a very solid remote weapon system business where we will add one after the other in terms of contracts for Slinger, but also for ground to ground remote weapon systems application. As we mentioned before, we believe that we can triple or quadruple our today's revenue base on weapon stations over the next 3 to 5 years. So it will be a kind of $400 million to $500 million business, annual business in that period of time. But the bigger change we expect from the High Energy Laser Weapon business where we believe that given the competitive edge we have today that we can achieve a kind of market share of around about 50% in the non-U.S. market and an annual revenue base of between $1.5 billion and $2 billion in about 3 to 5 years from now. We didn't touch on Space Control. Space Control is a combination of the application of High Energy Laser Weapons, the same portfolio we have just discussed with our capability of adaptive optics and the highly sophisticated capability of building high aperture telescopes. This is a business which comes much faster than expected because of the U.S. Golden Dome program. And we also have got inquiries from various European nations. We have welcomed recently also the leading commanders from all the major European countries in Australia at our facility, and we expect another visit from a high-level French delegation in the course of December at our facility. So this is coming earlier than expected, and we expect the first revenues to come into play by 2027, so much earlier than expected. And this business from a size perspective, I believe it will be larger than the laser weapon business because the Space Control or Space Warfare business with the ability to shoot satellites from ground will be more decisive, even more strategic. And that will add up on top of the numbers I have given you before, but again, it comes later into play. So overall, EOS is in a very solid position. We have a tremendous market outlook. We will operate our business in a very traditional conservative, disciplined way. We are extremely aware of the cost situation and we keep our dollars, our pennies together. As you can see with this acquisition of the Interceptor, we pay only a little bit of money to get a huge quantum leap in terms of additional capabilities into the company, and that's our basic principle of operation. We will continue like that to invest customer funding like the [ EUR 300 million ] -- the 300-kilowatt laser weapon development program we are negotiating will be fully customer funded. We want -- we do not want to use shareholders' money for all those kind of activities. And we will stick to this kind of principle and only invest in a modest amount like the $10 million Clive was mentioning before in the completion of this Interceptor business. The big dollars for the big development programs will come from clients or third parties. With this kind of outlook, maybe Clive, you want to add some more points on the financial side, on the commercial side.

Yes. Look, I think the order book for our business is at the highest level it's been for several years. That is not an accident. We're in an industry that is growing very strongly. We have products that are demanded in the marketplace, and we have now got a sales team in place that is capable of securing orders that generate significant returns. We are going to continue to be disciplined with our capital, as Andreas said. We are going to continue to execute contracts in a way that is cash flow positive and profitable. And we're just going to continue to run the business the way we've been doing it for the last 3 years and to continue to grow it in a disciplined way. So that is all we were going to cover in this presentation. We want to have the facility for questions. So if people have got questions, please put them into the chat box. David, do we have any questions that have come through.

We do have a number of questions. Thanks, Clive. So first question I have is from Tim. He asks, do you see risk of cannibalization from -- on your laser weapon or Slinger market from the interceptor?

So I take this question. No, we don't think so because the kind of operation mode is different and parties will only use those kind of interceptor drones if they believe the threat scenario has a significant element of large drone swarm attacks. Otherwise, it will not come into play. We still believe that the laser weapon is indispensable as the canon-based air defense. At the end, it's the mixture depending on the threat scenario and depending on the types of drones attacking. And if, for example, the threat scenario is characterized by very large drones, the laser weapon is more effective than this interceptor. If you talk about civil installations, people will tend more towards those type of interceptors. If the threat scenario is driven by small Class 1 or quadrocopters, then people will tend more towards those kind of interceptor drones. So it depends case by case. There is little to no cannibalization from our perspective.

That's great. Another technical question Michael asks, does interceptor have the ability to return a home once it's been deployed?

Yes, we could program it in a way that it returns back home, but we believe that in most of the cases, the first hit would also mean it's a destruction of the interceptor drone. It is designed and kept low in price in order to do this type of mission. We will see with the first kind of qualification tests in what is the kind of probability of survival. If there is a significant number, we will program them in a way that they return back to the home base, but we don't expect that to happen too often.

Great. Baxter asks, who do you see as your key competitors in the interceptor space? And how does EOS' interceptor differentiate from these?

Yes. So there's -- I do not want to mention the concrete competitors here. So there are companies from Israel selling their type of systems for $60,000 a month. So we are 6x cheaper than them. There's a company in Germany who is also in developing also their prices beyond EUR 50,000. So it's significantly more expensive than ours. There's a best product, which is even more expensive from the market. And there are some products which are cheaper, but they are flying at much lower speed. They are quadrocopter type of drones and do not show as a kind of competitor to our type of application. So we believe we have by far the best value for money proposition for our clients with this product. That was one key driver for our decision to buy this technology because it's quite a unique design.

Clive, perhaps one for you. Peter asks, can you comment on the influence on profitability in the near future regarding this recent news?

That's a great question. So we think the impact on profitability in 2026 will be minor. We do not think this will be significantly accretive or dilutive to margins in 2026. We do think this will open up significant new markets for the company in time. As Andreas said, this is a low collateral damage solution. That is very significant in nonmilitary markets and in urban areas. So while we don't think this is going to have a significant accretive or dilutive impact to margins in 2026, we see significant absolute growth opportunities in 2027 and 2028. And it may also allow us to more access to markets that we wouldn't get into for our remote weapon systems and laser weapons as well. It's a comprehensive layered suite of products. So thank you.

Owen asks, we see that you are broadening your product portfolio. Can you talk through the investment case? For example, how many units are required to get return on your investment? What does the contract profile look like, et cetera?

Yes. So maybe an example for the interceptor. So as Andreas said, the target price is under USD 10,000 per unit. If one airport wants 100 or 500 of these, that's a revenue basis of $1 million to $5 million. We think the margins on these sales would be quite high, certainly as high as our existing margins, which are 50% gross margin. So we think per airport at $1 million to $5 million of revenue at a 50% margin, you do not need very many sales to individual sites in order to achieve a significant return on investment. So we think that this acquisition is a very low-cost investment compared to the pieces that some of these projects are changing hands at in the market, particularly in transactions where PE are buying and selling. The vendor is keen to focus on their core business and invest proceeds in their core business. And for that reason, we think we've been able to secure a very attractive price for this investment. And we think the returns are going to be very compelling over time, particularly as we get into 2027 and 2028.

So if I may add some points here. So Clive was mentioning [ $3 million to $5 million or euro ] of investment of CapEx per critical infrastructure. Again, per country, we have 300 to 500 pieces of critical infrastructure. So you can see that is the market potential per country. So it's adding up a lot. That is a direct benefit, but there's also lots of indirect benefit. Having this kind of effect in our portfolio makes us more the kind of one-stop supplier, the turnkey solution supplier for an integrated counter-UAS system. And we believe we get into markets which otherwise we would not be able to access. And with the kind of indirect impact, collateral impact, we will be also able to sell more Slingers and to sell more laser weapons into certain markets. So that obviously has a huge knock-on effect and additional benefit for the company.

Yes. I might -- David, I might answer the other part of Owen's question. I think in terms of CapEx for manufacturing, we do not envisage investing significant amounts of capital to set up manufacturing this product and there are options for contract manufacturer and there's options for customer funding for manufacturer for this product. I have to say the smart part of this project -- product is the software and the technology, and that's what really creates the value and that exists already. So we don't see a big investment burden on that front to answer Owen's question.

Yes. There's a follow-up question from Ken on that, basically acknowledging that a large part of the competitive advantage is in the software and the AI models for these interceptor products. The question is, how is EOS planning to continue to stay ahead in this domain?

So we obviously want to -- so we acquire a company with some very clever software engineers who have developed those kind of AI algorithms. We want to use this kind of capacity and capability not only for the interceptor drones, but also to use that kind of software code for our fire control software for remote weapon systems. So that is part of our storyline to develop the next-generation weapon stations to have the leading edge in terms of detection, identification and tracking. So there's huge synergy potential. We will have the same kind of algorithms in the interceptors as in the lasers as in the weapon stations, the same kind of software, the same kind of engineering capability behind.

Troy asks, are there any earn-outs or contingent payments with this recent acquisition? Perhaps one for Clive.

Yes. No, the total investment here is EUR 5.5 million. There is no earn-out. We do -- we always want to retain and motivate senior managers, and we will obviously be working to make sure we do that, particularly with the very skilled engineers in this company. But there's no earn-outs or deferred or contingent consideration.

Troy also asks, have militaries globally concluded that kinetic hard kill systems are the ultimate solution to the canon drone defense? Or will soft kill still play a part?

So maybe I can answer that one. I mean most of the soft kill companies have now announced to go into hard kill. Also a prominent Australian company has announced last week to look into hard kill. I mean that should answer the questions. And if you read into any kind of military report from Ukraine, that is underlining the trend that soft kill is becoming less and less effective in the military context, not in urban and civil, but in the military context. That's the reason why we believe that this interceptor drone is probably one of the best solutions, and it's considered by most of the militaries as one of the most promising anti-swarm type of effectors if it's cheap. And if you look what does it mean cheap, we got an answer from the German procurement agency. They say our threshold price for purchasing this is EUR 15,000. If it's higher, we don't look at it. If it's lower, it's becoming super attractive. So we believe with USD 10,000, we are significantly below and should be quite a good offer or value for money for all of our clients. And again, the invitation by the U.S. Army to participate to trials in the U.S. where they have only invited a handful of companies is underlining the superiority of this type of technology.

Great. Okay. A few just more general questions. So Thomas asks, what is the status of the manufacturing facility for High Energy Laser systems? Is it on track?

It's on track. We will formally inaugurate our new facility in Singapore in the course of the Singapore Airshow beginning of February, and you will hear and see that also in the press. We will also publicize some pictures.

Yes, we -- it's time for an advert, Andreas. We -- when we open the manufacturing facility in Singapore, we will be arranging an Investor Day in early February, and we will communicate details of that before Christmas, but it will be first week of February.

Another just more general question. Ken notes the increasing advances around fiber optic drones on the battlefield. Are there risks of drones being applied with some sort of anti-laser material, for example, [ reflected ]?

Yes, that is coming. And by the way, we are testing those kind of things also in our laser test tunnels. So under contract by some clients, they are coming with drones being coated with very specific materials such as tantalum, for example, or palladium. And we do those kind of tests. And I mean, I cannot disclose all the details, but I can tell you, it's not helping. So it takes a little bit longer, 10% to 15% more time to go through all those materials, but not more. It could only have a significant impact if you spray on wall thicknesses, which are so thick, so large that the weight of the drone would go up too much and the payload capacity would go down too drastically. So today, there is no way to defeat -- no way to protect the drones against lasers.

Great. One more question on the Slinger. Does the Slinger system have the ability to fire rounds that exploit on proximity to the drone?

Yes, we have it. We have different types. So our Slinger with a small 30-millimeter round has so-called proximity round. So it's a round which has an infrared seeker head in each bullet, measuring the distance of a target and exploding usually 2 meters ahead of the target, creating this kind of cloud of particles destroying the target. And for the R800, we have so-called programmable ammunition. That means the ammunition is programmed before it leaves the barrel, because of the laser range finder, it understands and it's programmed to explode after a certain period of time depending on the speed of the round and resulting in the same kind of impact. That means an explosion a few meters ahead of the target. Yes, we have that. It's state-of-the-art. It is common practice in the counter-UAS kind of based air defense.

Maybe just 1 or 2 final questions. So Jasper notes, this is our first small bolt-on acquisition in our M&A strategy. Are there any other areas or capabilities which we are considering M&A as well?

I'll take that, David. Thank you. I mean we have said that we are interested in software and AI. We'll continue to think about that. There's always a question whether you do stuff in-house, whether you partner with people or whether you acquire. I think what we've announced yesterday demonstrates that EOS has a disciplined approach to acquisitions. We are -- we've been disciplined in every other aspect of our business for the last 3 years, and we're going to continue to do that with acquisitions. And there'll be -- we are interested in the areas that I've just mentioned. So thank you.

A final question perhaps for Andreas. Rheinmetall has just announced that they have a laser system for the German Navy. Why do you believe that [ yours ] gets a chance to compete against the German system beside the cost factor?

Because we have a qualified 100 to 150 class technology available for production and ready to be delivered within 2.5 years or 2 years even after contract signature. Rheinmetall [ has a 30-kilowatt ] and has proposed a development to get to 50-kilowatt, maximum 60-kilowatt over a period of time of 5 years with a risky development program, a development program which costs the German government EUR 502 million to purchase 3 50-kilowatt lasers at the end. So we've offered to the German Navy 3 100-kilowatt systems to be delivered in 2.5 years for the price of [ EUR 150 million ]. So it is less than half the price for twice the power in less than half the time. We have had talks with the leadership of the German Navy. We have discussions ongoing with the German government. And I can tell you that they are all highly interested in our solution, and we expect to get a fair chance in this German contest.

Great. That covers most of the questions. Andreas, would you like to wrap it up for us?

Okay. So again, I want to thank you for the interest in Electro Optic Systems. I think that what we've shown you today is a very good and classical example of how we want to operate our business. We are very pragmatic. We are very cost concentrated, and we want to keep our dollars together. We invest only if we see a crystal clear business case. We have now a strategic portfolio of effectors together, which allow us to be seen as a kind of turnkey one-stop shop provider for most of the clients. We will continue on this track and our target will remain the same, and we will strictly follow our strategy to become the anti-drone company #1 and to become the worldwide leading company for Space Warfare. The connecting element between the 2 will be our High Energy Laser Weapon business, where our clear target is to become the #1 outside the U.S. as well. We are on the good track, and we will keep you updated on the progress over the next few weeks and months. And we want to thank you for your loyalty in the company as existing investor and your interest to become a future investor. Thanks a lot for being with us.