Theon International Plc (THEON) Earnings Call Transcript & Summary

Hello, everyone. I'm Nikos Malesiotis, Head of Investor Relations at Theon, and it's my great pleasure to welcome you all today here to our very first Capital Markets Day, both those being here in person and also those attending virtually because we have more than 200 people in total. We are truly delighted by the level of attention this event has attracted. It's a testament to the growing excitement around Theon, and we will work hard to prepare a day that's insightful and hopefully will keep the attention high from start to finish. Let me briefly walk you through the agenda. Today's program is structured into 3 sessions, each separated by short coffee breaks to recharge and connect. After the final session, we'll open the floor to your questions, giving you the opportunity to engage directly with the leadership team. And for those attending in person, we'll wrap up the day with a dinner where conversations can continue in a more relaxed setting. So now if you look to the next slide, you'll see why this moment is so important for us. We IPO-ed in February 2024 and nearly 2 years after the placement, we are very, very proud to say we've addressed and we have delivered consistently on the promises we've made. Christian Hadjiminas, Theon's Founder and CEO, will soon take the stage to explain how and take you through all these various exciting developments on the past 19 months, from growth and profitability to the expansion of our capabilities. But that is just the beginning. Joined by key executives from across Theon, we'll also share what's next, the evolution of our strategy and the opportunities ahead. In addition to Christian, you'll also hear from Philippe Mennicken, Deputy CEO and Business Development Director; Dimitris Parthenis, our Group CFO; George Papageorgiou, our newly appointed CEO of Theon Sensors, our Greek subsidiary, who is also leading the post-merger integration efforts; Dimitris Mandridis, CTO and Head of Optical Engineering; Nikos Vassiliadis, Director of Electronics Department. And last but not least, we're especially honored to have with us Michael Murray, President and CEO of Kopin, who will share our common vision for the future; and Sebastian Vreemann, presenting virtually, Kappa optronics, a company we believe will play a pivotal role in our future growth. So I won't keep you any longer. I would like to invite Christian to the stage, who will take us into the heart of today's event. Christian?

Good afternoon, everyone. How are we doing? Good, good. Usually, the token American is before the bar, but this time they put me just before the bar, so I appreciate that. But firstly, thank you, Christian. Thank you to the team at Theon. I'm truly grateful and quite frankly, humbled to present here at your inaugural event in this beautiful country and the nation's capital. Since joining Kopin 3 years ago, we've been on a transformation plan that has been very aggressive, maybe not as aggressive as the transformation plan that Theon is on. But essentially, we've retrenched and refocused the company to focus on defense applications. At our heart, we're a semiconductor company that focuses on defense markets that really truly need vision beyond imagination. So when you think about Theon, every single microdisplay that goes into a Night Vision Goggle or Thermal Weapon Sight is critical technology to this company. And that's something that we've been building for over 30 years. Some of the other markets that we focus in on are visual acuity systems like the IVAS program as an example. We also have a franchise building F-35 helmets, microdisplays that go into those helmets that we've been doing for many years, also automotive weapon sights. One of the interesting things about Kopin, we also build the training and simulation modules for these technologies in America. Now before I explain a little bit more about Kopin, I want to tell you a little story about how we got here and importantly, why I think it will matter to all of you. Over a year ago, I met Christian, I think, at AUSA, and we discussed the trajectory of the market and the need for more strategic partnerships and technology collaborations that truly matter to both companies. Moreover, the need for domestic and sovereign supply chains and technology developments is critical for both countries and both nations. As I listened to Christian's vision for the future, I quickly realized this relationship will be a synergistic one. From there, a significant transformational relationship was formed, centered around the advancement of microdisplay technologies and optical solutions that Theon will empower vision beyond imagination in the most critical of times. The new Kopin fits within the strategy very well actually, as we are now the only North American company that designs and builds 4 different types of microdisplays in the United States and in Europe. These technologies are the right display for the application versus our competitors that only choose to develop one technology and then force their customers to adapt to that technology. We're also the only company in North America that is currently building a monochrome MicroLED, and I'm going to come back to that technology and why that is so important, not only to Theon's future, but Kopin's future in the United States and NATO. Moreover, we've actually invented a fifth type of microdisplay. It's actually called NeuralDisplay. This technology is the world's first bidirectional human-in-the-loop AI-enabled microdisplay that looks directly back at your eye. The reason why this is so critical, it allows people, while in the battle of war, still looking at the field to control a drone and operate a drone just with your eye. And the sensor within the microdisplay looks back at your eye and you're able to control that drone. We demonstrated this for the first time in AUSA this year. This technology was affirmed and our road map was affirmed recently by the United States Army and the Secretary of Defense through what's called an International Based Analysis and Sustainment Award (sic) [ Industrial Base Analysis and Sustainment Award ] under the Secretary of Defense. So the IBAS award that we just received was $15.4 million to develop a sovereign color microLED for the U.S. Army by the U.S. Army. So this is critical for a number of different reasons. Not only will we be developing the technology in the U.S., but we'll also be funded to actually build this technology in the United States for the first time ever. That will cost tens of millions of dollars, which the U.S. government will be investing into Kopin Corporation directly to build that technology. This investment will take place most likely at the end of 2026 into 2027. And this is critical technology not only for the United States, but also NATO and our allies, and I'll get to why in a moment. So the why behind the color microLED is critically important to understand. Most investors that I talk to in the United States don't quite understand why this technology is so important. The reason why color microLED is disruptive in the vanguard of technology is threefold. One, human beings do not do well under stress, trying to remember symbology. Is a square good, a triangle bad and a diamond unsure? When you're getting shot at, those are very difficult things to remember. But the human brain can actually remember green is good, red is bad and yellow, I don't know. So color is critically important. Unfortunately, friendly fire is a common place in the battlefield as well as the training field. And in high-stress environments, mistakes happen with the best veterans in the world that are trained to be the best. Second, this technology offers a more robust physical device with 50x more brightness and contrast than any given OLED in service today. That brightness is critically important for day and nighttime strategies. As you can see here, this is actually a daytime strategy, and you can barely take note of the note of the words that are put here. This is critical technology for daytime as well as nighttime applications. Finally, the combination of ultra-low power color microLED displays are important because batteries replace bullets. You don't want your war fighter having big batteries to haul around in the rucksack. This is great technology that is critical for our war fighters and our allies, but more critically and more importantly, China already has it. They have instrumented their allies with this technology. And for the first time ever, the asymmetric battlefield is favoring them, not us. Therefore, that is why the U.S. government has put their seal of approval on Kopin Corporation to develop this technology with the Army, for the Army for applications that are like the next generation of Thermal Weapon Sights, certainly the next generation of Night Vision Goggles and Soldier Borne Mission Command applications. This one technology opens up a $1 billion serviceable available market to Kopin just in the United States. With the support of and partnership with Theon, we'll deliver similar technologies here in Europe for European, Southeast Asian and NATO countries alike. Customers will receive tariff-free sovereign-manufactured Theon equipment using our technology through our Dalgety Bay, Scotland location. Theon will have early access to this technology, creating a significant advantage for Theon, not only in the market, but also from a price perspective. We'll deliver this technology to Theon through the global market, selling either devices, application-specific solutions or suboptimal. We'll take a look at other specific solutions that we can deliver to the market like our DayVAS and DarkWAVE strategy, which you see here. Again, I'm thrilled to be part of the next phase of Theon's evolution and together, we'll deliver solutions that enable this vision beyond imagination for the most critical of times, which will allow our troops and allies to see their adversaries before they're seen, which will provide better mission outcomes and most importantly, ultimately, save more lives. So we're very appreciative to be here today, and we want to thank Christian and the team and congratulate on the new award and certainly congratulate Ioannis and the team for all the great work that they've done. So thanks very much for having us today.

Welcome, everybody, here and online. My name is Dimitrios Mandridis and I serve as Theon's CTO, Chief Technology Officer and Head of Optical Engineering. I'm pleased to introduce the first part of Theon Sensors' technical presentation, after which Dr. Vassiliadis, the Director of Electronics, will present the second part. Theon is at its core, an R&D-driven company with strong organically developed expertise and capabilities built over time. We have achieved the competencies needed for product development by consistently investing over the years in the key disciplines, optics, mechanics, electronics and software engineering. Theon fully utilize the manufacturing capability space by designing systems using the latest and most advanced manufacturing techniques while relying on suppliers for the production of the subcomponents. We get security of supply by having at least suppliers for each part, of course. All incoming components are thoroughly inspected by a quality control department before reaching our production floor. Final assembly takes place at Theon facilities where lenses, mechanical parts and electronics are all integrated into the finished products. Each product then undergoes rigorous testing and adjustments, ensuring the high standards of quality that Theon is known for. Let's start with a brief history of Theon Sensors product portfolio, followed by some of our upcoming products in THEON NEXT, our vision for 2030. Theon was founded in 2009 -- sorry, 1998, and its first product addressed legacy armored vehicles, where a family of image-intensified night vision periscopes was designed with its first export to the Australian Defence Forces in 2004. Multiple variants of this product family have been designed and sold to a variety of customers with minor sales even to this day. The night vision periscopes, familiarized Theon with the technology and use of night vision image intensifiers, which was capitalized by the design of a family of night vision weapon sights in 2008. This product family was expanded in 2012 when DAM?N MR and LR were designed, while Theon recently designed DAM?N Mk2. The most important decision in Theon's history -- sorry, came in 2011 when Theon designed its first night vision monocular with its revolutionary helmet mount. It caught Europe by surprise, and ARGUS became the preferred option for monoculars selling to Sweden, the Netherlands, Denmark, UAE, et cetera. A few years later, Theon designed dedicated binoculars, MIKRON -- MIKRON and NYX followed -- which followed and became the best sellers as they superseded in technical specifications, the dominant U.S. goggle at the time, selling to Germany, the U.S. Marine Corps, OCCAR, et cetera. In 2012, Theon ventured into the digital products world with its first product, URANIA, a camera solution designed for the CV90 vehicle of BAE Systems in Sweden. The digital portfolio was expanded in 2014 when Theon launched a new line of products by developing its first thermal weapon site followed by a full family of stand-alone and clip-on sights. Theon listened to its customers and the shift in preference by the advanced armies to thermal against intensified vision as thermal vision easily detects and de-camouflages human-related activities. This was followed by the second-generation THERMIS Mk2 family of sights. We have seen a lot of success in the past years with sales to U.K., Belgium, et cetera. They also evolved into a few tailor-made products that were co-developed with prime defense contractors such as Aimpoint to serve the anti-tank weapon market as the night vision accessory to their popular Fire Control System. Accelerated by the IPO 2 years ago, Theon launched a new product line named A.R.M.E.D., Augmented Reality Modular Ecosystem of Devices, to cater the needs of the future or modern soldier. This line addresses the modern soldier requirements for interconnectivity, situational awareness, multispectral imaging, et cetera. It features daytime and nighttime augmented reality products that integrate data from the Battle Management System. Central to this product line is a soldier-borne minicomputer that processes and augments the data, projecting it to the user's unobscured eye. THEA is the head-up display for daytime use, while for nighttime use, you can either choose ORION or IRIS-C. Both of those products -- sorry, the THEA and the minicomputer will be supplied Rheinmetall Electronics next year for the Future Soldier program of the German Army. Theon again turned their attention to vehicles by developing a thermal periscope for legacy vehicles called THERMON. And at the same time, expanding the R&D team to develop TALOS, a family of ISR systems. These systems integrate off-the-shelf multispectral cameras, laser rangefinders and optionally stabilized pan and tilts, which have already been sold to a couple of customers already. This concludes the overview of the past products that we developed until the beginning of [ 2005 ], while on the next slide, we'll show the current developments and the future. It is with great excitement that I share with you Theon's current and future developments as well as THEON NEXT, our vision for the unification of all man-portable equipment. All upcoming products combine organic expansion of the portfolio based on Theon's 28 years of experience in electro-optics with technologies that are inorganically added through our strategic investments. On this and the following slides, we will demonstrate how our investments seamlessly integrate into what we call THEON NEXT Vision. Firstly, our oldest product line of vehicle and ISR products, which was until recently relied on commercially off-the-shelf components is now radically expanding. We are deepening our ISR design capabilities by integrating the expertise of ShockEOS, as we already described. Together, we are currently developing 2 stabilized pan and tilts, multispectral systems to meet the growing demand of vehicle manufacturers for stabilized and AI-enabled observation and targeting optronics. This will feature bespoke thermal and day cameras on a new pan and tilt stage. Simultaneously, Theon Sensors is also developing a multispectral optronics box for a remote weapon application that employs a unique architecture, which significantly reduces cost. Theon's acquisition of Kappa completes our offerings in the modern armored vehicle department, adding 360-degree peripheral camera systems and video distribution systems. New R&D synergies with Kappa will certainly follow with our new partners. Theon will continue to expand our most popular product lines. This includes our night vision monoculars, binoculars and sights as well as our thermal weapon sights. We plan on introducing new products such as multispectral sights and cooled sniper sights, among others. But let's now talk about THEON NEXT, which comes -- which brings together organic growth and new partnerships. During this year, Theon Sensors introduced a new product family based on a new technology block, the ballistic calculator. The first product in this line is an upgrade of the THERMIS Mk2, thermal weapon sight, combining the ballistic calculator that was organically developed with environmental sensors to deliver a true dislocated reticle to the operator, making into a Fire Control System. As discussed, we expect Fire Control Systems to get increasingly adopted in the man-portable business and Theon is ready to engage. THEON NEXT focuses on the needs of the modern soldier, targeting the IdZ, the German Army's Future Soldier program and other customers. We aim to expand our product portfolio by incorporating cutting-edge technologies such as waveguide optics, low light CMOS images, ultra-wideband and mixed reality components. And we are currently working on several exciting new products, including the DARK-I for rear projection on a night vision goggle, THEA second-generation and a visual augmentation system, or VAS. Kopin's microLED displays and various mixed reality expertise will play a pivotal role into bringing these products to life. And of course, the FCS and AR technologies will merge with ISR, adding new capabilities. Now let's dig into Theon's main product families to give a little bit more information on how the products are developed and how strong is the in-house development expertise. The products are now being presented on their core technologies. Firstly, let's see the image intensified or analog products. They are comprised of 25 variants for Theon for various night vision monoculars, binoculars, night vision weapon sights, having different field of views, sizes, mounts, battery packs, et cetera. In this category, Theon have always performed 100% of the optical design, mechanical and electronics design while integrating any commercially available image-intensified tube, the component that amplifies the light. This has traditionally given Theon full control of customization of the developed goggles, while optimization of the various design parameters and cost led to their worldwide success. Most of Theon goggles are what we call tube-agnostic. They can accept tubes from any of the 4 tube manufacturers of the Western world. To secure the supply of the image-intensified tubes, as we already discussed, Theon has commercial agreements with Elbit Systems of America and L3Harris, the 2 U.S. suppliers, while recently invested in the 2 European suppliers and now Theon owns 60% of Harder Digital, and we are in an agreement to purchase 9.8% of Exosens. The THERMIS and THERMIS Mk2 families of thermal weapon sights have undergone development for over the past decade. These products represent Theon's response to the evolving requirements of advanced military forces, which favor thermal vision systems due to the clear advantages in night operation, effective camouflage penetration and reliable performance integrated environments. Theon possesses 100% in-house capabilities for designing the optics, the mechanics and the electronics. Regarding the electronics, Theon maintains full organic capability, designing all sensor readout electronics, image processing units and input-output interfaces within the organization. This ensures complete control over product design and enables Theon to provide fully customized solutions tailored to the customer requirements. Moving forward, let me present Theon's ISR solutions. Theon entered this market 4 years ago, as we discussed, when we created a dedicated R&D team. We developed TALOS ISR, an optionally stabilized pan and tilt electro-optical solution based on mostly commercial off-the-shelf components. TALOS has already started making sales while it's greatly contributed to organic increase in knowledge and testing infrastructure at Theon. As discussed earlier, Theon decided to accelerate the path to a wider range of ISR products, ones that we have fully in-house developed components by investing in ShockEOS. Since last year, Theon -- the combined R&D of Theon and ShockEOS have been developing 2 new product solutions that address the armored vehicle market. They are 100% designed in the group for the optics, mechanics and software with AI-enabled capabilities. It's too early to disclose more information on this, but we expect prototypes in 2026 that will be evaluated by the first customer. We expect this market to grow, as we discussed, as there is a vast increase in the armored vehicles requirement in Europe and elsewhere, and we are fully engaging with this technology segment. This year, Theon entered the Fire Control Systems segment as well. The demand for increased efficiency among modern soldiers continue to grow, and FCS solutions address this need by allowing fewer personnel equipped with advanced fire control technology to produce a greater impact in the field, thereby reducing both material and human resources required. And FCS differs from traditional marking methods where soldiers rely on ballistic reticles and must estimate their own target distance without any accuracy. That results in decreased marking precision at longer distances. The Fire Control System utilizes a laser rangefinder to determine the target distance while also measure the environmental conditions that affect the projector trajectory. Thus, they automatically calculate the correct ballistic solution and provide to the operator a simplified reticle, which significantly reduces their cognitive load and improves success rates over extended distances. At Theon, we have integrated a state-of-the-art laser rangefinder with an in-house developed ballistic calculator and the sensor suite to form our own Fire Control System module. This advancement was first implemented through the upgrade of the THERMIS Mk2 into an FCS-enabled product. Currently, the prototype phase -- currently, it is in the prototype phase and the ballistic calculator has demonstrated excellent field performance with comprehensive customer evaluation scheduled within this year. As we discussed already, we expect also this segment to have the greatest increase in demand and fee and plan to address it with multiple products that are coming up in the next few years. Thank you for your attention, and I will now pass the torch to Dr. Vassiliadis.

Thank you, Dimitris. Good afternoon, everyone. I hope that you are not already tired, but I will try to make it quick. My name is Nikos Vassiliadis. I'm the Director of Electronics, responsible in leading the research and development of electronics, hardware and software, including the integration of sensors and computer vision at the edge. And I would like to thank you from my side for attending Theon's Capital Markets Day. Today, I would like to give you Theon's approach to capture the digital dismounted soldier space. I will first walk you on current state of the A.R.M.E.D. ecosystem to address the space, to address the digital soldier requirement. And then I will go through our new initiative, the A.R.M.E.D. NEXT to even expand further the capabilities of the soldier for 2030 and beyond. But what is A.R.M.E.D.? A.R.M.E.D. stands for Augmented Reality Modular Ecosystem of Devices. It's not just a product as it has been already presented, but it is a concept, a complete ecosystem that it is being designed to advance the capabilities of soldiers operating in complex environments. Modern digital soldier, modern war fighters are facing 3 main challenges. First, they need to operate -- to have the visibility to operate in low visibility in adverse condition environment. Then they need to be connected to the -- up and down to their command and control and management chain and of course, being constantly aware of what is going on around them, so they have a situational awareness of their environment. A.R.M.E.D. addresses all 3. How it does that? A.R.M.E.D. is built on Theon's proven electro-optical systems. So for example, here that we demonstrate that we depict A.R.M.E.D. on one side, we have all the existing electro-optical systems, the digital, but also the night vision systems that have been already presented. The Orion Fused Binocular, the IRIS-C and the MIKRON device and of course, all our line -- the complete line of THERMIS weapon sights. This list is constantly evolving, and we have already introduced systems like the THEA daytime see-through AR display. And within these ecosystems, they are all interoperable between them. The electro-optic devices are now augmented by computing devices that have the capabilities to run applications, collect the digital imagery from the sensors, from the systems, fuse them not only together, I mean, the imaging sensors, but also fuse them with critical information that represents the environment and then send it to be projected to the user at real time. This approach results into an ecosystem modular and interoperable. Customers can come now to Theon and select based on the tactical requirements and the organization of their forces, select and cherry-pick the right equipment for their application, while at the same time, they can -- the war fighter can seamlessly change from nighttime to daytime configuration back and forth in the field. Beyond the core features, A.R.M.E.D. supports new applications developed by Theon, third parties or even the customer itself. These apps enable advanced functionalities like AI-based object classification, gesture recognition and video streaming up and down the [indiscernible], up and down the C2 of the system for a complete situational awareness of all the Battle Management System. This flexibility ensures that A.R.M.E.D. can evolve with mission needs and technology trends. But A.R.M.E.D. is not just a concept. It's already operational. Among others, a lot of demonstrations and a lot of users that have acquired instances of the A.R.M.E.D. systems, 2 notable examples are the recently announced OCCAR and IdZ contracts. So in the context of the OCCAR tender, for example -- contract, for example, the German and Belgian forces are equipped, they opted -- they decided that for their operational capabilities, they would like to equip with the MIKRON with the clip-on, the IRIS-C thermal clip-on attachment together with the localization and computing Smart Battery Pack module. This system now is connected with the Battle Management System that each of these forces are using. This is taken care completely by Theon supporting the user. Now these 2 users do not only have night vision fused with thermal imagery, but they have augmented reality. So we are collecting all the information from the Battle Management System, pick only those that are very critical for their current tactical requirements and then we represent them as partially aligned information with the environment. So now the user has not only enhanced vision, but absolutely knowledge of what is going on, where are the friendly forces, where are the enemy forces, where are their points of interest. And this information is active, is connected to the -- up and down to the Battle Management System. So it's always live and providing value to the user. In the context of the IdZ now, the user has selected to get the see-through augmented reality display together with our even more advanced Smart Gateway, which now has more computational capabilities. And through that, through custom applications that we developed for the Smart Gateway, the system get connected with the IdZ infrastructure. So now whatever is happening to the IdZ system, we can create live video fused that they are being projected to the user via the THEA see-through display. But not only this, although the IdZ for now got these 2 components, since all these systems, as I already told you, are interoperable between them, they are enabled for the future to select at any point, any other electro-optical instrument to augment their capabilities. So to sum it up, A.R.M.E.D. delivers modularity, adaptability and operational value. It's a future-ready ecosystem designed to keep soldiers connected, informed and effective in the most demanding environments. So again, Theon is committed to advance the A.R.M.E.D. ecosystem with new equipment and capabilities and our road map that has been already presented by Dimitris reflects that commitment. However, I'm excited to share our next big step and vision for 2030 and beyond, what we are calling A.R.M.E.D. NEXT. So this initiative is not just an upgrade. It's a response to evolving technology, market dynamics and direct feedback from users, customers and Future Soldier program where we are already in and getting information from this. The continuous advancements in sensors, AI and augmented reality, combined with this operational feedback that we got, highlights the need for a more holistic, modular, like we already were modular, but keep this modularity and future-proof solution. A.R.M.E.D. NEXT builds on the foundation of A.R.M.E.D., but pushes the boundaries to deliver enhanced capabilities for modern systems. So the capabilities that A.R.M.E.D. NEXT brings to the table are -- can be summarized. One, we need increased lethality by seeing first and acting first for the user. To achieve this, digital day, night and thermal imagery is fused into a single unified display for faster decision-making. Second, enhanced situational awareness by overlaying critical mission data, but this time also AI identified threats in real time. Third, we -- the user needs increased survivability using sensors, not only to detect what it is on the user's field of view, but also to detect rear and flank activity, giving soldiers a full spatial awareness. Command and control on autonomous devices. Soldiers can view live streams from drones or robotic units directly on their visor, enabling their remote control. And finally, we need to integrate the headborne system, the A.R.M.E.D. NEXT with more and more headborne devices like audio headsets for a holistic headborne solution. So to achieve this vision, we are pursuing both organic and inorganic growth and as has been already presented again and again. Organically, Theon's R&D is expanding its power and expertise in key areas like multispectral sensors, advanced optics, now AI and AR, VR, NXR applications and software and hardware platforms. Organically, Theon is forming strategic alliances, supplier agreements and targeted acquisitions to accelerate innovation. We already spoke about that. Innovation, which pursues to develop the A.R.M.E.D. NEXT modules as they are being depicted in the slide. Excuse me that the slide is AI-generated, but this is a very new concept. We are constantly working on that and unfortunately, I cannot disclose more real-world images. Now about the modules, if we could quickly run through them and how we are approaching their design and development. First of all, the ballistic helmet, which efficiently mounts all different modules and efficiently routes the cabling, which is becoming more and more. Here, we are collaborating with Tier 1 suppliers from the field to address that. Then the vision enhancement suite where day, low light and thermal imagery is produced to enhance users' visions and rear cameras are used for threat detection. This module is based on Theon's long-term technology and know-how. Now the headborne computer on the back of the head, which is also the power module, provides advanced computing capabilities like AI, modular batteries and secure wireless interfaces. This module is also based on Theon's technology and know-how. However, we have expanded by integrating Alereon's ultra-wideband technology, a military-grade wireless interface that enables us to transfer wirelessly imagery from connected weapon sights directly to the computing system and from there to the projector. So this way, the user now can see around the corner without being exposed or can even engage target without need to raise the weapon at the soldier height. It was to be mentioned that the ultra-wideband module through the alliance we had with Alereon is already manufactured and delivered out of Greece to sustain -- to keep secure the supply chain. So A.R.M.E.D. NEXT offers an immersive AR experience through our collaboration with VARJO. We have already mentioned that we enable synthetic environments for training, collaboration of different users in the field and mission simulation. The digital audio headset is also integrated as a key module on the system. This way, audio is available to the BMS up and down the command chain while also it can be used and is being used for AI-based human-machine natural communication. Finally, the VARJO, our next-generation see-through AR glasses provide large field of view, high resolution and night-to-day visibility to enhance the capabilities and situational awareness of the user while being thin and lightweight to reduce user fatigue. Theon is carrying over the design and development of the AR glasses, while the collaboration and placement in coping dissipates the availability of high brightness microLED display to increase the daylight capabilities of the system. To sum it up, the A.R.M.E.D. NEXT is designed to deliver unmatched situational awareness, survivability and connectivity. It's a modular future-ready system that empowers soldiers to operate smarter and safer. This is Theon's commitment to innovation and operational excellence. Thank you.

So thank you all. I suggest we have a 15-minute break. The last session will be much shorter. I promise, 10-minute break, okay? And we'll return for the financial part and also questions, okay? Thank you. [Break]

So welcome back, everyone. I'm thrilled to see today so many familiar faces. I will try not to take too much of your time. I guess there are plenty of questions to follow this session. So let's continue today's presentation with an overview of Theon's financial performance. Our results reflect a disciplined approach to growth, underpinned by a robust balance sheet and prudent capital allocation. We have consistently delivered profitable growth, maintained a strong backlog and ensured that every investment, minority or majority, supports long-term value creation. Our lean cost structure and efficient use of capital have enabled us to deliver on our commitment to shareholders. Before proceeding to our financial metrics, it is important to highlight here that due to the upcoming share capital increase, the one that we have already announced will support the acquisition of 9.8% in Exosens. So this share capital increase will be done through a rights issue, and there are several associated regulatory constraints. And because of this, we have prudently decided not to provide any profit or margin guidance at this stage. Guidance for 2025 and 2026 will be provided to the market once the share capital increase is concluded. Moving on to our backlog. As of today, we report a soft backlog of EUR 700 million, reflecting the addition of a recently announced order from a European NATO country. As a reminder, soft backlog includes both confirmed orders and secured projects, which are waiting for some final ratification or signing. This backlog is distributed across various regions with particular emphasis, of course, on Europe. The composition of orders indicate ongoing demand for night vision, while there is an observed shift toward thermal and A.R.M.E.D. products. Of this total backlog, 19% is scheduled for delivery in 2025, 46% in 2026 and 35% in 2027 and beyond. Additionally, there are options amounting to EUR 720 million that our customers may exercise at their discretion. I remind you here that historically, all such options have been fully exercised. And not only that, but we have seen in many cases that existing customers are tapping into existing, into previously, let's say, finalized contracts and adding more and more quantities. So we have a very good confidence that these options are going to be exercised in the near future. The evolution of our key financials demonstrates our ability to scale profitably. Revenue has grown from EUR 143 million in 2022 to EUR 352 million in 2024. We have revised our guidance for 2025 from EUR 410 million to EUR 430 million range to EUR 435 million to EUR 445 million range, while our target for 2026 is set to a range between EUR 570 million and EUR 590 million. Our top line midterm target is to grow by at least 15% per year organically. EBIT and EBITDA have followed a similar upward trend, underscoring our operational discipline and focus on value creation. Midterm target is to achieve a mid-20s operational profitability as per historical numbers. Our investment strategy is both ambitious and disciplined. With a demonstrated history of efficiently allocated capital, we prioritize capacity expansion and the acceleration of R&D activities, all contributing to substantial organic growth. Capital expenditures increased from 2.6% of revenue in 2022 to just under 5% projected for 2025. R&D expenditure remains in the area of 1.2% to 1.4%, enough though to efficiently support our new product development objectives. Our immediate focus is on further increasing Harder Digital's production capacity, advancing technological innovation with a special emphasis in AI through internal efforts and strategic alliances and investing in our new platform facility in Athens. All CapEx and R&D initiatives are closely integrated with our key growth strategy to ensure optimal returns on every euro invested. I want to emphasize the strength of our balance sheet, which is a cornerstone of our financial strategy. Historically, firm maintained a net cash position fueled by our strong cash generation. To facilitate upcoming M&A activities in addition to utilizing our IPO funds, the company has entered into a 5-year EUR 300 million senior facility agreement. Through this facility, we have already refinanced our shorter-term working capital facilities and will partly finance the investments in both Kappa and Exosens. I remind you here, for those who haven't seen the respective announcements, that there is also an accordion option attached to this facility for an extra EUR 100 million. So this means that we have enough firepower to fund all our future M&A plans with no additional equity raising apart from the one that has already been announced around Exosens. Although our pro forma leverage ratio will peak at 2.9x, we target to bring this down to healthy levels, well below 2.5x and maintain a prudent midterm approach. Our capital allocation strategy is designed to balance disciplined growth with strong financial stewardship, ensuring we create long-term value for our shareholders. Our top priority remains the pursuit of bolt-on acquisitions that strengthen our core operations and deliver synergies. We will also seek strategic minority investments that offer a clear and executable path to majority ownership, enabling us to build a relationship with high potential businesses and give access to key technologies. Again, emphasis on bolt-on. So we're talking about acquisitions in the range of EUR 30 million to EUR 40 million each. Our second priority is the allocation of capital toward production capacity expansion and research and development. These investments will support increased demand, enhance efficiency and drive innovation across our product and technology portfolio. By reinforcing our operational capabilities and sustaining our pipeline of new offerings, we aim to secure long-term growth and resilience in an evolving market environment. We will maintain a prudent capital structure, ensuring ample liquidity and financial flexibility to support these priorities while continuing to deliver stable returns to shareholders through a consistent dividend policy. In 2025, as promised in the IPO, we distributed 40% of our net income. In 2025, 35% -- sorry, in 2024, it was 40%; in 2025, 35%, and we expect dividends to keep growing in absolute numbers. Each capital decision will remain guided by a disciplined focus on total shareholder return, integration excellence and strategic fit. Now looking ahead, our guidance and target remains strong, yet adjusted to the new realities of our business. For 2026, we are targeting revenue of EUR 570 million to EUR 590 million. And this, of course, will be fueled by our existing backlog, but also the exercise of the options that we expect to happen in the next months and also, of course, orders that are going to be received from now until the year-end. CapEx is going to be in the area of EUR 30 million and a dividend payout ratio between 20% and 30% of our net income. We appreciate that this is a bit lower than what was guided right after the IPO, but the company is targeting total shareholder return for its investors. For the midterm, we guide for a more than 15% organic growth and a mid-20s profitability. We revised upwards our CapEx guidance to around 4% of our revenue to support our growth even faster. Payout ratio will remain between 20% and 30% of our net income. Lastly, our effective tax rate going forward is estimated at 23% to 24%. With this, I will give the floor back to Nikos to coordinate the following Q&A session. Thank you.

Thank you, Dimitris. So I suggest before giving the microphone to those attending here in person to address a series of questions we have received from those virtually. So this group of questions is around our upcoming share capital to finance part of the Exosens deal and it's about also the upcoming M&A opportunities we have, size, sector and things like that.

Okay. Let me try to -- although Dimitris covered a lot of those points that were raised, which I'm aware of, let me clarify the following. First of all, we don't plan to have another capital increase than the one we have decided to do. We have enough ammunition to do those smaller-sized acquisitions that I talked to you about and Dimitris has talked to you about. I also want to say that, again, because we participate in this capital increase that has already been announced as being an anchor investor, okay, as a sizable size, we are not -- we are constrained. We cannot disclose more specific guidance for midterm, correct, Dimitris? So we are constrained on that, but our targets remain the same as they have been from what I described to you in the IPO. Also, I want to clarify something that we do not plan to have any other -- for the next year or so, we don't plan to have any other acquisition of shares of Exosens because also a lot of people ask us about that. What I was referring to earlier is basically, we are -- after the approval of the acquisition of 10% by -- for Exosens on the beginning of January, we will make all the necessary steps to strengthen our relationship, and we have a lot of good ideas in mind. But we -- for us, it is -- we believe it's an amazing opportunity. And the move that we did with Exosens was really cemented our relationship. We see a lot of potential, and it's a different way to have a commercial relationship and a different relationship to have a commercial relationship and to be the only strategic partner. So we don't plan to increase the stake right now. We don't plan to have any other capital increases. I don't know what other points?

I think it's enough for now. If there are any follow-up questions, we're happy to address them.

Yes. Are we online? I mean...

Yes, of course. Also with regards to the type of issuing, I don't know if you want to cover it, the way of raising money or we need to ask Antonios.

Antonios, please. Antonios Gkiokas is our Chief Legal Officer, and he will explain also the constraints that we have.

Good evening to everyone, and thank you for joining us here. The process that we will follow for the upcoming capital markets issuance will be through a rights offering. Why is that? Because given that we have our majority shareholder having an anchor position in the process, we have the regulatory and corporate requirements under Cyprus law, which have driven this decision to go through a rights offering instead of a similar process. So we're actually moving for a share capital increase, would be at the -- around the previous ranges between EUR 130 million to EUR 150 million, I would say, not more than that. And a sizable portion will be underwritten and covered by our majority shareholder. Therefore, it's a totally driven decision on regulatory and corporate requirements under Cyprus law, which take us through a rights offering.

Also with regards to timing...

And this also gives us the space and timing that we can implement this transaction as per the legal and regulatory requirements. And happy...

I want to stress -- I don't know if -- I want to stress that we want to do this capital increase as soon as possible. We do understand that it has an effect on us. But as I said, we have to follow regulations, and we have already said about in January, but we make every effort to do it much earlier than that. If we didn't have the regulatory, we would have already done it. So that's it. Any more questions? Yes.

Usama from ABN AMRO, ODDO BHF. I just have one small question with regards to the THEON NEXT. So I do understand that the market is trying to digest the current M&A strategy and the way of financing it. In the medium term, market has a view on it, maybe negative, but you say in the long run, it is going to work fine. I want you to war game slightly on the -- on what has happened in the last 2, 3 weeks with Anduril's release of the EagleEye platform. I do understand that you're the market leader in night vision and you can sell it immediately to already clients. Do you see a strong chance of disruption from Anduril's product, especially in the U.S. market? Or do you still see it as an opportunity? I know maybe it's a little bit out of the time picture...

I don't like to comment on specific companies, but I think maybe Dimitrios or Nikos, you would like to address that?

Is it -- Okay. Well, yes, all those recent developments were a pleasant surprise -- not a pleasant surprise, but it was exciting news for us. We see where the technology is going. However, those are developmental products, and they will take time. Remember, about 7 years ago, the first IVAS program was also a big developmental program. And 7 years later, it actually sat down and was retendered to those 2 companies. So we believe that traditional image intensified night vision goggles will not be out of the picture for a long time. And there are multiple technical reasons for that. The reason is that they consume very, very little power with just a single battery that you put in a toy, they last for 20 or so hours. A battery in those modern system will take you, I don't know, 10 minutes of run time. So power is just the most important parameter and of course, resolution and low light performance, which is intensified. So we are not, let's say, worried that much that goggles will be substituted. However, we do see a new segment -- product segment opening up those vast systems. And that's why we will be following -- we are actually following already, but we don't see this as competition to the goggles. We see it as a parallel market for a virtual mixed reality system.

[ Theodore Varelas ] from Pantelakis Securities. You very kindly showed us the breakdown of the opportunity of EUR 6 billion by region. I would like to clarify what is the time frame for this EUR 6 billion opportunity, please?

Yes. Thank you for the question. It depends on the region. For instance, in the Far East, it's -- we don't expect any major movements that is an actual issue of tender. We know the exact requirement. We know the exact -- more or less tender that will come out, okay? For instance, in Asia, which is the most far away. And we believe it's going to be like 5 to 7 years delivery or maybe earlier in the Far East, but we don't expect anything to come out before 2027. I mean there will -- there could be -- when we're talking about the big countries like Japan, Korea, Taiwan is a different story. They have a different path that will come earlier. But on the other ones that we discussed, like Europe, it's immediate imminent. I cannot use another more short-term word. The U.S.A. is also the more programs like Kopin is involved. We are also involved. By the way, you need to understand that in the States, we have a shutdown, which prohibits people from announcing things and -- which means that we have also, for instance, aside from what Kopin is working, we also have another program that we are being awarded to another U.S. partner. And we cannot say anything because it's a shutdown. So there's no -- you need to get permissions and things like that. So regarding also the buy note in the States -- I'm talking region by region to answer your question. Regarding the buy note, again, they have been too down selected, but we are in one of them, one option. We are ahead of the others in terms of having an actual product. But as Philippe said, the mood right now in Washington is very U.S.-made, U.S. produced, U.S. design, U.S. everything, okay? And we are obviously addressing this as we speak. But we have other imminent decisions in the States like the National Guards where -- as Philippe said, there are 4 major clients in the U.S. I cannot say more, but we are already covering 3 of them, okay? Now about the other, as I said, Europe is yesterday, and I'm sure Q4, you will see a lot of European orders, let's put it this way, very imminent. And MENA is a little bit more slow process, but we're going to have a more smooth release of tenders of opportunities. Now remember, in the Middle East, in some countries, we are now like one-way street supplier, okay, in some of the major countries we stated earlier. So this is a continuous and predictable cycle in the Middle East for us, okay?

Can I just...

Yes, please, please, please.

Can you just help us understand, is this just night vision or platforms also on...

For instance, in Middle East, platforms are -- as we speak right now, there are specific opportunities that we're pursuing as an example. The same thing happened in Europe, and that's why we had the announcement yesterday, which for us, at least, it's a breakthrough. The -- in the countries now -- this is a very good question actually because in all of the regions that I mentioned earlier, I was referring more to the traditional business. We have the night vision business. Now for the other, because there's something new like the Thermal IRIS and now everybody knows that we are the main supplier in Europe. For the other products, the A.R.M.E.D. products, the demand is much faster. That's why we think we're going to exceed -- not we think -- we know we're going to exceed 20% of this mix of products into our portfolio. I think you were second, and then I will take...

Lasse from Berenberg. Can you give a view on -- you mentioned the 30% penetration in Europe. What is your view on how long that takes until we get to full penetration? I guess what's the runway you still have to keep growing at the pace that you're growing?

I will let Philippe answer that...

Question to me?

Yes, it's not...

Difficult to answer with an exact time line. We estimate we're at around 30% today. It's never going to be 100% or it may be, who knows, but we would be rather conservative to see that it's going to end up at 70%, 80% at some point. Now if you look at the math and the numbers that need to be delivered, we're talking about a huge quantity, I think we will soon see that certain countries will really move towards the goal of, if not 100%, but really go up to 60%, 70%, 80%, 90%. And then I would guess that other countries will soon follow because you always need a leader basically to make the first step to really go for it and then other countries will follow not only because it's the right decision to do the equipment sold with this capability, but also because they will realize if they don't move now, they will be -- they have to go to the end of the queue because at some point, there's only a limited capacity and a limited supply of tubes. So to answer your question, how long it's going to take? I don't know. But I think we will see probably in the near future that things will move faster towards this direction, at least in certain countries, and my personal belief is that other countries will follow.

Philippe, I would like to add about Europe because we're talking about Europe right now. We said something earlier, and I will stress it again, maybe it was not fully understood. I mean, Philippe said that, the safe mechanism, for instance. The safe mechanism, what is it? Is -- it provides financing. It's financing. It's not subsidies, right? Very, very low interest financing, right, which allows countries that have joint procurements to tap into that. The effect of that -- and that's why Philippe was saying earlier, the effect for that for us is amazing. And then I will answer your question also to complement what Philippe said. It's amazing because a lot of countries are rushing to the same institutions that we have been dealing with to get the same product and take advantage because you cannot use a safe mechanism if it's not a joint procurement, okay? And this, whatever we have done in some of the institutions in Europe, it's considered to be a joint procurement. Now so -- and that's why a lot of this demand that Philippe is saying has -- also has moved. We've seen that with specific countries, especially in the South that they are rushing to take advantage of this financing and we want to place the orders now. The problem is -- and again, that justifies fully. That's why we are so excited about the Exosens. That in itself, it's -- what it means, it means because given our projections, already, those countries will not be able to get their goggles in '26 and '27. But given those, as an example, safe mechanism, they will place the orders now for '28, '29. They will get some in '27, '28, '29. But those mechanisms have made people to rush to buy now, but we have the problem with the capacity. And if you have heard about Exosens' recent increase, which is not as big as it was because it was already announced a part of that. It's in response to also, if I'm allowed to say, what we are encouraging them to do given what we see in the market. So the answer to your question through a long way is very simple that contracts will be placed now, but the deliveries will be spread out to the future, that is '27, '28 as Exosens as well as Harder Digital ramp up their capacity on that.

And maybe how do you balance pushing Exosens to increase capacity versus, I guess, to some extent, it's in your interest that the market remains tight in terms of supply. So how do you kind of balance that?

We are -- how can I say, we are like a mirror of our end user, okay? And this is why our relationship with Exosens is good. If the end user tells us, please, you need to speed up and everything and given a specific opportunity we have in front of us because end users are serious, right, and the countries we are dealing here in Europe, they're all very serious. So if the end user asks you, we have this specific requirement, right, and you see that there's not enough capacity to cover that, what you're going to go. You're going to go to your supplier like Exosens or Harder Digital, although there are different type of tubes, and you're going to ask them to increase the capacity. So it's the capacity -- what I'm trying to tell you, the capacity increase that we are pushing, sometimes our suppliers is directly related to specific opportunities that cannot be fulfilled given the availability that we know today.

And capacity increase is as well an expensive sport, and it takes time. So you don't want to invest millions and millions in creating a huge capacity. And then after 5, 7 or 10 years, you have overcapacity. So yes, it is in line with what we see in the markets and what we suggest or what we discussed with Exosens as well our own capacity increase on Harder Digital, but it has to be done in the proper way. And don't panic and invest in investment doesn't create something huge, which in the end of the day is not -- doesn't bring any return on investment.

Yes. And let me remind again everybody that Exosens, that's why it's an amazing opportunity for us, it's the only producer of 16-millimeter tubes. Neither Harder Digital nor the Americans produce 16 millimeters. And right now, our biggest clients in Germany, for instance, and Saudi Arabia, they're all using 16 millimeters. And that's why it's very important for us to have this strategic stake because we -- it gives us the -- if you want, the leverage like any other shareholder, but the only strategic shareholder to push the company in the right direction or to encourage it, I should say.

Apologies, one question related to this one, to this point, is whether we have any plans to add -- to create new type of tubes in Harder Digital on top of the 3G 18-millimeter tubes?

No. The answer is no. Right now, we don't plan to do that. I think Exosens is doing a very good job now that we have long-term agreements. And again, we've stressed that we have a long-term supply agreement with Exosens that is almost -- not almost, it's automatically renewable, okay? And we will exercise that shortly, okay? We will exercise that shortly. And once we are approved in January, we will work with Exosens and its ownership to forge even closer ties between us.

Maybe just one more -- can I ask one more? Yes. I know you can't give formal margin targets for next year because of the -- I guess, the rights issue. But I mean, is there any reason to believe that margin should be materially different to this year just based on product mix or something you're doing with Kappa Optronics or anything like that? Because I know some people in the market might interpret it as not giving guidance means there's something happening, but...

No, no, no. It's -- I wish we could give you -- it would be only good news for us to give you guidance for that. But regulatory, we cannot do that. We just cannot do that.

As we said before, this year, we have 90% analog of traditional night vision and 10% digital. And next year, we see that's going to be 80-20. And what we said before on the digital, we see even higher margins. So just think about it, that shouldn't...

And plus, we don't see right now any pressure on our prices for the 90%. We don't, because there is more demand than supply. No more questions for you. You have to use your colleague to...

You covered some of my questions. So thanks. So I have, unfortunately, also several questions, but I'll limit it to three. So let's continue with margins. So we know that in portable night vision and VGs, you are dominant. In digital, thermal margins are higher, and hopefully, that's going to be increasing contributor to the revenues. But we -- what we don't know, but -- and you are the new entrant in this is platform optronics, which is more crowded, more sophisticated. As far as I know, for gimbals using drones, you need also stabilization technology. And although there isn't a perfect peer, we know where HENSOLDT's optronics or platform optronics margins are. We have some idea about Elbit in their ISTAR segment, and this is not...

They are low. They are low -- so again, I don't want to comment on other companies. I mean -- but your comments, yes, so you say that they are low.

Yes. So what's your view on the medium term? Let's not talk about 2025, 2026, with your ambitions to penetrate platform optronics and as this becomes a revenue contributor, isn't it going to be margin dilutive for you? That's my first question. The second one is shorter. You touched upon the big opportunity in Asia Pacific. As far as I know, Japan, not South Korea, will become the third largest spender?

Who?

Japan.

Japan, yes, absolutely.