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

Thank you for standing by, and welcome to the Electro optics Systems 2026 Half Year Results. [Operator Instructions] I'd now like to hand the conference over to Dr. Andreas Schwer, Managing Director and CEO. Please go ahead.

Good morning, good evening, ladies and gentlemen. My name is Andreas Schwer, Managing Director and Chief Executive Officer of Electro Optic Systems. I would like to give you our speech to the first half 2026 year results presentation, and we are very proud to announce that the first half year has been exceptionally good. It has been a record year for Electro Optic System. Let's please move to Slide #4. So the agenda looks like the following. We will first summarize the highlights of the first half year. I will put you then into the strategic context what has happened in particularly in the first half of 2026 with a focus on the high energy laser been business and then a very strong focus on the MARSS update, MARSS, our recent acquisition. We then have a look to the order book, and I will give you an outlook on our business development, what will happen over the next few months. I will then hand over to Clive Cuthell, our CFO, who will give you an overview about our financial performance down to divisional level, some aspects on the cash flow, and then I will summarize the presentation by giving you a strategic outlook before we go to the question-and-answer session. Please move on. We're on Slide #6. So to put you into the context, U.S. is operating in a very strong market. The first half year has been exceptionally strong from a market perspective, the conflict in Ukraine, but also and in particular, in the Middle East, was helping us a lot to get more traction and to achieve the results, which we have achieved. Part of that obviously was a strongly evolving partnership network. You might remember that part of our go-to-market strategy is to enter into partnerships with national champions in particular, key core markets. That has happened also in the first half of 2026. You could also demonstrate now in a quite impressive way that we can deliver. We can deliver on commercials, we can deliver in a highly operational excellence mode. So we could convert quite significantly our order book into revenue. And we could operate in a very complex and demanding supply chain environment, an environment where internationally, lots of challenges where we faced but we delivered according to customer requirements, urgent customer requirements, we could deliver in very short delivery time frames, quicker than most of our competitors and this could be done because of some strategic investments, which we did in the past, some of you might remember, we have invested some years ago into a framework agreement with Northrop Grumman to secure the supply of a very strategic component the 30-millimeter canon and that's 1 example why it's paying off. Now we can deliver quicker than some of our competitors, and that is giving us a strategic lead. So we expect the growth to be very sustainable and robust and we are very optimistic for the outlook over the next few months and years. So we are well positioned to capitalize on all those factors and all those frame work conditions. Let's move on, please. I would like to hand over to Clive to give you the highlights of the first half 2026 financials. So please, Clive.

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

Thank you, Clive. We are on Page #8. So U.S. is active in 4 segments, following our strategic imperatives of becoming the #1 global provider of integrated counter U.S. solutions and secondly, to become the worldwide leader outside the U.S. on space control, space warfare type of systems. In order to achieve that, we are active in the following 4 domains, 2 of those domains are effect or type of domains and the other 2 domains are system-level type of domains. I'll start with the effectors. So, we have been, we are and we will be a world-leading supplier of kinetic defeat systems of remote weapon systems or remote weapon stations. This business is remaining very exceptionally strong, and we expect a strong growth path also over the next few months and years because of our highest accuracy in tracking and shooting the highest hit probability. And I just want to remind everybody, we have never lost any kind of competitive shooting event. And that is the baseline of our business success in this particular business area. Our high-energy laser but business where we succeeded in 2025 with the first worldwide 100-kilowatt laser latent contract for export. That is a domain where we expect a very substantial growth in the future. This is becoming a backbone of our business, and that's an area where the competition is not that strong. There are only very few players on the market competing against Electro Optic Systems. I will come back on all those segments in a few minutes again. Most notably here is our recent acquisition of the company, MARSS, a company which was based at the acquisition time in Monaco. We have transferred the company meanwhile to France, to nice they're active now with operations in France and in U.K. and in Saudi Arabia. And this pillar, which was always promising. It was promising from day 1 is turning now to become an extremely positive growth area for the business. We are now in a position to offer integrated counter UAS systems, turnkey systems for any kind of client, whether it's a military client or whether it's a client coming from the so-called homeland security area, such as operators of airports, commercial airports power stations and other critical infrastructure. So that is our business, which is driven by MARSS and MARSS is backed by its own proprietary neither AI-driven command and control system, a system which is using any kind of sensor information and creating an integrated picture for the operator in order to decide automatically on which sensor which effector should take over, which kind of insurer in order to protect the infrastructure in a hemispherical way. I will also come back on this a little bit later on. The fourth pillar of activity is our so-called space control system, our space business where we are developing systems being able to interact with any kind of space object interaction could go that far that we are able to not only move space debris but also being able to blind satellites temporarily or also permanently, we can disable satellites from ground. That is a business which is coming sooner than we have expected and which we believe we become a very strong pillar as well a little bit later than the high energy [indiscernible] business and the MARSS business, but with the same level of potential in the future. And that's also a business where there is hardly any competition outside the U.S. in the marketplace. Let's move on, please, on Slide #9. So let's recap the first megatrend, the drone warfare. I cannot repeat this enough that the appearance of the drone in the battlefield is causing a substantial change in the overall warfare scenario. And month-over-month, we can see this in Ukraine, but also in the Middle East that this kind of threat is dominating their space. It is creating a zone of upper 4 decimeter the so-called kill zone in between the front lines causing almost a standstill in ground-based operation. because of loyalty and ammunition because of attacking camicarsid drones. This is becoming the threat scenario number one. And that's the reason why the defense #1, the defense Biotin will be on counter U.S. in anti-drone weapon systems, and that's exactly where ES is active, where we put all efforts in. And there, we are so strongly positioned. Let's move on. #10, this anti-drone warfare is facing substantial problems First of all, traditional defense systems, which are basically missile and rocket based systems are way too expensive to defeat on the long term, those kind of drones. Nobody can afford to shoot with missiles costing to USD 3 million, USD 4 million of costs. So southeast Jones for a few thousand dollars, not even the rich and wealthy, the Middle Eastern states, can afford that long run. That's the reason why also those states are heavily investing into integrated counter U.S. systems such as ours being able to offer more affordable effectors to go against with more for value factors. The second point is traditionally a defense is too inflexible. They are based on a few effectors only affect us, which cannot exchange that quickly effectors, which cannot interlock with those kinds of threats that quickly this kind of slow the bonds, the traditional slow response is not adequate anymore in this upcoming 1 warfare their drones can be launched in your nearest vicinity and giving only a few seconds to react. Such a short period of time, which even request you to give up on manual operation to even give up on the human operator being in the loop but instead of going to fully automated to fully robotic type of defense operation. So those are the key changes in the field and we experience week-over-week changes to that one. in brain requiring adaptations of the defense strategy adaptation of our effectors, which happens mostly in the software area. Please move on Slide #11. So the EOS solution is now with the acquisition of MARSS that we can offer this kind of complete counter-growing platform. And I want to remind everybody that EOS is active, in particular, in the Middle East with more than 60 installed bases, means U.S. is protecting more than 60 critical infrastructures in the Middle East successfully over the last few months from being affected by and impacted by attacks of drones or whose missiles or rockets. We have shut down with our systems, hundreds of [indiscernible] drones and dozens of misses and rockets. If anybody needs a testimony, we can provide first-hand testimony from the top leaders of those countries there. And what makes us extremely proud is we seem to be the 1 only customized and dedicated anti-drone platform. We are not competing in those markets with a traditional C4I platforms coming from the big OEMs such as, for example, Ration Lockheed Martin or Thales systems, which have been developed in a very complex environment to operate very complicated systems such as patriot or [indiscernible] systems, which are interconnected different domains, land base Air & Sea. That is an overkill for most of those applications. It's an overkill for what is demanded by the clients. What a Glinda asking or flexible solution, adaptive solutions to protect a single piece of infrastructure where a system which they can purchase for a much lower price is much more an appropriate solution. And this is exactly where MARSS is active where MARSS delivered since 2018 and '19. And that's the reason why U.S. is now at the forefront of this megatrend. Again, not only a trend to protect military installations, trends to also protect commercial and homemade security type of platforms. That is all possible because of our hardware-agnostic platform, Mark because of its history is absolutely hardware agnostic provider of those solutions. They can integrate any kind of sensor, whether it's whether it's in RADAR, electrooptic RF, acoustic or any kind of sensor and any kind of effect or MARSS integrated more than 160 different type of sensors sinifactors. Nobody else has done this multitude of effectors. This is allowing us now to offer the client on the spot to use his existing portfolio of sensors to integrate in a very seamless way within no time and to offer our clients in very few days to set up a solution, which is able to defeat those kind of drones even if they attack in large quantities in swarms. Our secret behind is our AI-driven algorithms. We have a software package, which is extremely user-intuitive and which is extremely flexible to handle complex type of threat scenarios and the use it -- intuitive usage capability is a key point, allowing us to train operators within a few days. Everybody can operate those kind of systems within no time, thanks to the concept of operation, a concept, which allows you to operate those systems either from traditional combined control centers, war centers but also from a simple platform like an iPad, it doesn't make any difference in terms of effectivity, it only depends on the customer preference, but it is extremely easy to operate. That's another key selling factor and it's absolutely at the state of the art on how to operate those kinds of platforms today and in the future. Please move on, you go to Slide 12. So this kind of operation of an integrated MARSS count System is following the following kind of action stream. The system is always continuously doing this data fusion from all those kinds of sensors I was just mentioning, it identifies any kind of intrude any kind of object. It does then the identification to not only discriminate whether it's a hostile kind of threat, whether it's a done or whether it's just a bird or a friendly force. It's doing the identification down for the type of effect up, it can even identify the repay on those kinds of incoming threats, which is quite unusual. We are doing this by doing a kind of permanent comparison with a library, which is uploaded to any of those systems. And this kind of library is learning day by day, and we give our clients permanent upgrades of those libraries. That's a very good aftersales business to allow our clients to always be at the forefront of knowledge on what is potentially coming in and how to defeat those kinds of systems in the most efficient way. So this NiDAR system is giving them recommendation to the operator to engage, and it is proposing which type of effect or should take out which type of intruder. Again, this can be done with men or with person in the loop or it can be done autonomously. In the future, that's our prediction it will be done more and more autonomously because there is no time for a human in the action. In many cases, we will only have a few seconds for the decision-making process requiring a fully automated robotic approach. And then the system will decide by itself on the engagement and we show down those kind of drones. That's the kind of circle of operation. It is a state of the art. It is what the customer is needing. And this is how we are operating day by day. And again, U.S. has a better proven system. That's quite unique in anti-drone warfare. This is showing you just illustrating you how such kind of operating center could look like. This is the kind of high-end solution with a 360-degree kind of war area or war zone or command center where the kind of control is happening. But again, it can go down to a simple iPad or laptop type of operation where you see everything on one single screen and the operator does not need anything else in order to fulfill more or less the same kind of job. What you can see on the right side, that's more the kind of setup for a nationwide operation or an operation where you interconnect several critical infrastructures to keep the overview on what's ongoing over a certain number of sites, more than 1. So please move on. So Slide #14, Partner and clients. This is a collection of partnerships which we have active. So you can see top notch, first-class defense companies from all around the world which are our broad partners from -- starting from green companies, European companies, top North American companies. We are partnering with them because they all appreciate over high-end performance, our first hit probability and our survivability in the battlefield. We have signed a couple of new partnerships. And I just want to highlight 2 of them here. One is with BAE Systems, 1 of the world leading providers of defense systems. BAE systems has decided to use for all of its future counter U.S. applications, our NiDAR command control software. That is an exceptional result, and it shows that 1 of the world market leaders has done after a very thorough review of all the options on the global market they have decided in our favor. They have decided that our NiDAR system is the best of the best. And that's the reason why we are together now and shaping up the future between BA systems and Electropic systems. We also formed a partnership with the French German group, KNS, 1 of the leading European groups in land systems, and we are a proud partner of K&S in the area of remote Debon Systems, including its application in the Antion warfare. Those are just 2 examples of how we go into markets to minimize the time to market and to minimize the capital exposure. So let's move on, please. delay that. We have signed the first contract in the middle of 2025. This contract is not only running according to schedule. We are about 1 year ahead of schedule. The client is extremely happy with our performance. And as a result of that, he intends to place the first low-rate initial production contract. So the first kind of serial production contract to U.S. much ahead of the delivery time of the first system. So we will deliver the first system, not only in 2028, but towards the middle of 2027, which is a tremendous achievement and because of that, we will end up with a client most likely into a contract for this low red initial production contract ahead of even that point in time. That's underlining our capability and it's underlining that our investment into the setup of the first worldwide cell production facility of high net laser weapons in Singapore was the right decision to do. It puts us at the forefront at this very prestigious advantages market and a market which we grow significantly over the next 3 years where we can play now a very, very strong position. So the contract with Dutch has had a value of EUR 71 million, but you might recall that we are able to deliver in large quantities system systems at a price of down to EUR 30 million. So that is giving the client a huge advantage because of the large-scale opportunity. As I was mentioning before, we passed successfully the so-called critical design review. That's the kind of standard review, you have to pass in any kind of military procurement process. That is a strong a strong quality stand which we got by the client that they consider their system being ready for production now. And that is the reason why we can increase or decrease the time scope delivered earlier than expected. -- and the customers also considering to increase the scope of this standing contract by adding other features like nebulization, for example. So all that, again, is a testimony of our quality even in delivery, not only in development. So please move on. So MARSS has secured in 2026 contracts for more than AUD 200 million. And you might recall that we are very optimistic to be able to sign for MARSS orders of up to EUR 1 billion, which is around AUD 1.6 billion of orders within the first 12 months. That's the reason why we've increased the cap in earn-out from originally EUR 500 million to EUR 700 million. So we are more confident than ever before that we can achieve those values. And this is the reason why the acquisition of MARSS was a turning pound for Electro Optic Systems it is giving us not only the position of being able to compete against other brands in the delivery of turnkey solution, but also to be able to significantly scale up our revenue base as the MARSS contract size usually is higher than if you sell just normal type of equipment, normal type of effectors. So MARSS from any kind of angle is a big success story for us already now. Please move on. So the order book, the unconditional order book, we could manage to increase from last year, EUR 459 million and end of 236 million to now more than EUR 846 million Australian dollar. That is an exceptional success and what makes us team optimistic. It's not only the mass business coming on top of it. It's also the laser business coming into play now and also our very kind of backbone and the so-called bread and butter business, the vegetation business is picking up extremely successfully giving us a very optimistic outlook into the next future. And if you look to the order book, this is driven currently very much by the Middle East. That is basically reflecting the actual geopolitical situation with a strong short-term delivery demand. We expect this to be more balanced in the next future by European programs coming into play, also very significant programs and acquisitions coming into play where we expect long term to have a balanced order book with kind of 1/3 going to the Middle East, 1/3 at least going to Europe and another 1/3 going to the United States and the rest of the world. So that gives us a more robust position in the market, we become less and less depending on a single client or a single region. Please move on. This is the order book. We can -- you can see here that we have added some more lines, some more lines of very substantial opportunities, large-scale opportunities some of them, but not all of them coming from the MARSS type of business opportunity. MARSS has so far been only active or predominantly active in the Middle East with its over 60 installations. What will come now very soon and much sooner than expected. Also, MARSS will reach out to 2 countries with reach out to European countries, and most of you will have been informed that there was some days ago, the first aggressive drone attack on European Airport. It was in LisicGermany, where Toni explosive on it was attacking an Antonov aircraft. It was the first time that weapon system was really attacking in a direct manner on a commercial airport and aircraft. That has caused lots of panic with most of European airport operators, also with many operators of other type of civil infrastructure all across Europe. We are over-flooded by virus from those type of operators. We are now in very intense contacts and dialogues, not only with the ministries of defense across Europe, but also in the Ministries of interior with the home and security ministries with the police forces and all the commercial operators all across Europe, and we expect this business to pick up in a much stronger way than we have ever expecting before. and thanks to mask and thanks to our ability to deliver solutions, which are also customizable for those kind of infrastructures where you cannot use missiles where you not can use cane-based air defense but where you can use laser weapons. That is a very intercept of zones and our Interceptor 1 is a drone, which is not based on an explosive forward, but which is just operating by the pure kinetic impact by hitting the attackers. Those kind of effectors we play a dominant role with those kind of installations. So MARSS is perfectly positioned to also go into those kind of markets, which is creating another layer of growth potential on the short run. And all that has not been expected when we were starting the acquisition of MARSS. That is the reason why we are more optimistic than we've ever been before. So please move on. Space is also getting more and more traction. I just want to highlight 1 country -- the German government has decided and they have allocated budget of more than EUR 35 billion, which is more than AUD 60 billion for expenditure to defend and to protect their own space, their own military space infrastructure, a significant subline of this EUR 35 billion budget is denoted for our type of capability to protect space-based assets by ground-based systems. This is giving us a strong outlook for our Space business. So we believe that not only on the German example because other governments will follow this example that our space business, we pick up business much earlier than we have ever expected before. And we expect the base business to become very substantial, not only beyond 2030, but even before 2030. That is, again, based on our capability to track in an unmatched position any object in space down to a single coin even in this Luna orbit combined with our ability to correct atmospheric distortions, which nobody else can do outside is to this kind of extent and our ability now to combine our high-energy laser weapon technology, which we have available up to 150 gigawatts today, in which we expect to scale up to 300-kilowatt over 4 years -- we'll be able -- you combine all that together will allow us to engage against satellites from ground irrespective of the orbit of the satellite. So this is giving our kind of client a more decisive leading edge. That type of business is extremely sensitive if we require localization and that's 1 reason why we are able and prepared to localize not only this kind of space type of business in naval countries, such as Germany, we will also do that in any kind of request for laser for contract-based type of business. And we can do that because we own all IP from A to Z. So let's move on, please. Yes, coming now to the financial side, I would like to hand over to our CFO, Clive Cuthell, please.

Thank you, Andreas. So on the next slide is a little bit more detail on the financial results for the first half. Overall, the revenue of $169 million, which was announced a few weeks ago. As the chart on the right-hand side shows that first half revenue is the highest first half revenue that EOS has ever achieved. And that reflects many of the market trends that Andreas has outlined. The chart on the bottom right sets out the diversity of our revenue stream, and we are particularly pleased with the improvement in the geographic diversity of our revenue that was achieved during the half the company, as many people know, has done a lot of work to diversify the sources of geographic revenue over the last couple of years, and that is now translating into the financial results. The other things to highlight include, obviously, the underlying EBITDA of $21 million achieved during the period. The company, as I said earlier, has been focused on profitability coming from scale for some time, and we're obviously pleased to see that being operationalized. The result includes a gross margin of 58% as the table shows. -- and ignoring the very unusual onetime result of 76% last year. This 58% continues the positive trend that we've seen across different parts of our business. which is attributable not just to the strong markets that we're in, but also the pricing discipline and the execution discipline that we've been establishing over the last few years in EOS. The next page over on Page 23 shows a summary of the results between our different segments. The Defense segment at the top now includes the MARSS business, but also includes the results for high-energy laser and for remote weapon systems. During the first half, more than 80% of the revenue in the first half came from our remote weapon system business, in particular, selling the Slinger counter drone gun system that we have. In the Space Systems part of the business, as Andreas said, this is more of a significant future growth opportunity. We remain very positive on the outlook for this business and we will continue to make very modest investments from the company's perspective in this and continue to develop the European market in this area. Maybe just a couple of comments on the margin mix in the business. Over the next 12 months, we expect to see 2 or 3 things impacting margin in the business, in particular, the growth in high-energy laser weapon revenue that we expect to arise from the Dutch contract should have a positive impact on gross margin and EBITDA margins. On the other hand, the growth in the MARSS business that we are expecting over the next 12 months as we've taken over ownership, -- and that will have a lower gross margin, but we still expect 20% EBITDA. So we're not providing guidance on margins overall. But as we've indicated previously, in our industry and in our business, in particular, we are aiming -- we continue to aim for a 20% EBITDA margin overall. On the next page is the cash flow -- and as people who followed us for a long time know, cash flow is very important at U.S. and it's been a strong focus for us over the last few years. Most of our business, remote weapon systems, laser weapons and space -- we have always run these over the last few years to be cash flow positive. Our business is evolving a little bit with the acquisition of MARSS. So as Andreas mentioned, MARSS is a prime contractor which is a little bit different from an OEM manufacturer that our traditional business has been -- so larger projects when you're a prime contractor can be a little bit lumpy. That said, it's -- I think it's safe to say that U.S. will continue to be very disciplined in managing the cash flow and the profitability and the execution on prime contracts over the next 12 months in the same way that we've been careful with cash over the last 2 to 3 years. So over the next 12 months, we do expect to deploy capital, particularly in growing the MARSS business, -- some of that will be bank guarantees, some of that will be working capital. And typically, we can sometimes see in the MARSS business investments in the first few months of large contracts. And with the existing MARSS order book, we may see a little bit of that over the next 6 to 12 months. The company is well funded. As mentioned earlier, we had more than AUD 260 million in the bank at the end of June and AUD 30 million of undrawn debt facilities, so a total of almost AUD 300 million. So the company has all of the funding that it needs to grow the business in the way that Andreas has outlined over the next few years. We will continue to focus on scale and profitability and cash flow. Finally, naturally, we're obviously very pleased that the first half result has operationalized the growth that we've talked about over the last few reporting periods. The revenue outlook, as Andreas has indicated, is stronger than we previously expected. That's a factor of market growth. It's driven by our strategy to focus on counter drones, kind of drone activity, and it's obviously driven by the company's agility in the way that Andreas mentioned, our ability to supply customers quickly has been a defining factor in our first half performance. So as a result of all of these things, the full year growth outlook has been increased and the revenue that we are guiding for the full year, as I mentioned earlier, is a range of AUD 360 million to Aud 400 million, including the MARSS business. I'm going to hand back to Andreas now for some wrap-up comments before Q&A.

Okay. Thank you, Clive. So as you have seen, our business is very stable and robust. All of our segments are performing really well. We are extremely confident to increase our growth year-over-year and our revenue base year-over-year as the strategy is working out in a very nice manner. The decision to focus our strategy on the 2 pillars, counter zone and the so-called space controller space warfare is playing off now. We are very proud of having taken this kind of decision some years ago. We are in the middle of the military growth, and we are a so-called new tech player in defense. We are not seen as a traditional player. We are not a metal-bending company. with the company working and being active in areas such as anti-drone business, AI technology, software technology in high-tech technologies such as laser and in this antisatellite business. Those are all key drivers which make U.S. very attractive for clients, for industrial partners and also for investors and this is giving us all the confidence to be able to execute this growth path, again, based on the more depend systems. -- further -- much further push with the AI-enabled C2 command control system capability by mass, further pushed by our high-energy laser weapon business, then in third step by our space warfare type of capability. This is the growth story, which we have told you we will go through. And if you please go to Slide #27 -- that's the kind of growth story which we will continue to be executed. We are currently writing an exceptionally strong wave and we expect this wave to continue. We will benefit with all you together on that wave. And we -- U.S., we want to remain your trusted partner in defense business -- and to conclude my statements with my standard kind of closing statement, we always say what we think -- and we always do what we say and we continue on in this wave. And in this context, we are more than happy to receive your questions now. Thank you very much for your attention and looking forward to further collaborate with all of you.

[Operator Instructions] Your first question from the phone comes from Owen Humphries from Canaccord.

Well done, guys. -- set of numbers, and it looks like the pipeline is building strongly. I got a couple of questions here. One relates to the guidance upgrade here relating to MARSS how much of the upgrade relates to contracts you have not secured yet.

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

Yes, the guidance in the second half of the core business is, call it, $110 million. You've just done $170 million in the first half. Does that relate to supply constraints for the core business?

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

And just checking the notes to the account, it looks like you've put through a $77 million security deposit. Just historically, can you guys give us a range of how much would you sign a contract, how much is required upfront for a security deposit, not a number, maybe a range?

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

And then if you go to your outlook or your business development update there, there's -- that's a new slide that's getting to pick up to me, particularly the bottom 3, say you do sign a material contract, call it, 1 of those big 3 there. How does the working capital nature go? I know most of the revenue side comes in the first year, but with the procurement, what's the lead time between order and delivery and payment?

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

[Operator Instructions] Your next question comes from Baxter Kirk from Bell Potter.

Great result and outlook there. This question has been partly answered it, but I was just hoping to get an idea on future mass orders. Is the ramp-up in the contract that has been signed late last half to revenue, is that typical of future orders that revenue ramp up from signing to what is actually being delivered? Or is that more reflecting the urgency there by the Middle East customer?

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

Well, if you allow me to add 1 more point, I think it's important for the understanding. So the butine of the mass system again is to be able to act such as the toy legal. So you can block and play any kind of brick 1 on top of each other. It's always working. It's all compatible. And as MARSS has integrated more than 160 type of effectors and sensors over the last couple of years, can just use on the market whatever is available on short-term delivery, whether it's a sensor in effector and we can combine this very easily allowing us to deliver much faster than other players, which are only qualified for the usage of very few types of sensors and components and they are really required to wait for the delivery time for those kind of few centers and effectors. We are more flexible and we can use and integrate again, whatever is available short term. This is giving us a leading edge and allows us to convert orders into revenue much bigger than anybody else. .

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